Exhibit 10.27

 

MANAGEMENT SERVICES AGREEMENT

 

This MANAGEMENT SERVICES AGREEMENT (this “Management Agreement”), dated as of
January 1, 2003 is made by and between Rite Aid Corporation, a Delaware
corporation (the “Company”), and Leonard Green & Partners, L.P. (“LGP”).

 

WHEREAS, the Company desires to obtain from LGP, and LGP desires to provide,
certain investment banking, management, consulting and financial planning
services on an ongoing basis and certain financial advisory and investment
banking services in connection with major financial transactions that may be
undertaken from time to time in the future;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto hereby agree as follows:

 

1.         Retention of Services.

 

1.1      General Services. Subject to the terms and conditions hereof, the
Company hereby retains LGP, and LGP hereby agrees to be retained by the Company,
to provide management, consulting and financial planning services to the Company
on an ongoing basis in connection with the operation and growth of the Company
and its subsidiaries and affiliates during the term set forth in section 3.1 of
this agreement (the “General Services”).

 

1.2      Major Transaction Services. Subject to the terms and conditions hereof,
the Company may retain LGP, and if requested LGP hereby agrees to be retained by
the Company, to provide financial advisory and investment banking services to
the Company, its subsidiaries and affiliates in connection with major financial
transactions that may be undertaken from time to time in the future (“Major
Transaction Services” and, together with the General Services, the “Services”).

 

2.         Compensation.

 

2.1      General Services Fee. In consideration of the General Services, the
Company shall pay LGP an annual fee payable in cash equal to One Million Dollars
($1,000,000.00) payable monthly in advance in equal monthly installments.

 

2.2      Major Transaction Services Fee. In consideration of any Major
Transaction Services provided by LGP from time to time, and subject to the
provisions of the immediately following sentence, the Company shall pay LGP
normal and customary fees for services of like kind, taking into consideration
all relevant factors, including but not limited to the complexity of the subject
transaction, the time devoted to providing such services and the value of LGP’s
investment banking expertise and relationships within the business and financial
community. The amount of such fees shall be approved in accordance with any
applicable procedures set forth in the charter documents or

 

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financing agreements of the Company and shall be subject to the prior approval
of the Board of Directors of the Company.

 

2.3      Expenses. In addition to the fees to be paid to LGP under sections 2.1
and 2.2 hereof, the Company shall pay to, or on behalf of, LGP, promptly as
billed, all reasonable and documented out-of-pocket expenses incurred by LGP in
connection with the Services rendered hereunder. Such expenses shall include,
among other things, reasonable fees and disbursements of counsel, travel
(including aircraft) expenses, word processing charges, messenger and
duplicating services, facsimile expenses and other customary expenditures.

 

3.         Term.

 

3.1      Termination. This Management Agreement shall terminate immediately
following the payment of the Company’s obligation under Section 2.1 hereof on
the second (2nd) anniversary of the date hereof (the “Termination Date”); unless
otherwise mutually agreed in writing by the Company and LGP.

 

3.2      Survival of Certain Obligations. Notwithstanding any other provision
hereof, the obligations of the Company to pay amounts due with respect to
periods prior to the termination hereof pursuant to Section 2 hereof and the
provisions of Section 5 hereof shall survive any termination of this Management
Agreement.

 

4.         Decisions/Authority of Advisor.

 

4.1      Limitation on LGP Liability. The Company reserves the right to make all
decisions with regard to any matter upon which LGP has rendered its advice and
consultation, and there shall be no liability to LGP for any such advice
accepted by the Company pursuant to the provisions of this Management Agreement.

 

4.2      Independent Contractor. LGP shall act solely as an independent
contractor and shall have complete charge of its personnel engaged in the
performance of the Services. As an independent contractor, LGP shall have
authority only to act as an advisor to the Company and shall have no authority
to enter into any agreement or to make any representation, commitment or
warranty binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company,

 

5.         Indemnification.

 

5.1      Indemnification/ Reimbursement of Expenses. The Company shall (i)
indemnify LGP and its respective affiliates, and the partners, directors,
officers, employees, agents and controlling persons of LGP and its respective
affiliates (collectively, the “Indemnified Parties”), to the fullest extent
permitted by law, from and against any and all losses, claims, damages and
liabilities, joint or several, to which any Indemnified Party may become
subject, caused by, related to or arising out of the Services or any other
advice or services contemplated by this Management Agreement or the engagement
of LGP pursuant to, and the performance by LGP of the Services contemplated by,
this Management Agreement, and (ii) promptly reimburse each

 

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Indemnified Party for all reasonable costs and expenses (including reasonable
and documented attorneys’ fees and expenses), as incurred, in connection with
the investigation of, preparation for or defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party and whether or not such claim, action or proceeding
is initiated or brought by or on behalf of the Company and whether or not
resulting in any liability.

 

5.2  Limited Liability. The Company shall not be liable under the
indemnification contained in Section 5.1 hereof to the extent that such loss,
claim, damage, liability, cost or expense is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from LGP’s bad
faith or gross negligence. The Company further agrees that no Indemnified Party
shall have any liability (whether direct or indirect in contract, tort or
otherwise) to the Company, holders of its securities or its creditors related to
or arising out of the engagement of LGP pursuant to, or the performance by LGP
of the Services contemplated by, this Management Agreement, except to the extent
that any loss, claim damage, liability, cost or expense is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from LGP’s bad faith or gross negligence.

 

6.         Miscellaneous.

 

6.1      Assignment. None of the parties hereto shall assign this Management
Agreement or the rights and obligations hereunder, in whole or part, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Subject to the foregoing, this Management Agreement will
be binding upon and inure solely to the benefit of the parties hereto and their
respective successors and assigns, and no other person shall acquire or have any
right hereunder or by virtue hereof.

 

6.2      Governing Law. This Management Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts made and performed within the State of New York without regard to
principles of conflict of laws.

 

6.3      Severability. If any term, provision, covenant or restriction of this
Management Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, illegal, void or unenforceable.

 

6.4      Entire Agreement. This Management Agreement contains the entire
agreement between the parties with respect to the subject matter of this
Management

 

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Agreement and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date of this Management
Agreement.

 

6.5      Further Assurances. Each party hereto agrees to use all reasonable
efforts to obtain all consents and approvals and to do all other things
necessary to consummate the transactions contemplated by this Management
Agreement. The parties agree to take such further action and to deliver or cause
to be delivered any additional agreements or instruments as any of them may
reasonably request for the purpose of carrying out this Management Agreement and
the agreements and transactions contemplated hereby.

 

6.6      Attorney’s Fees. In any action or proceeding brought to enforce any
provision of this Management Agreement, or in which any provision hereof is
validly asserted as a defense, the prevailing party, as determined by a court of
competent jurisdiction, shall be entitled to recover reasonable and documented
attorneys’ fees in addition to any other available remedy.

 

6.7      Headings. The headings in this Management Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

 

6.8      Amendment and Waiver. This Management Agreement may be amended,
modified or supplemented, and the waivers or consents to departures from the
provisions hereof may be given, provided that the same are in writing and signed
by each of the parties hereto.

 

6.9      Counterparts. This Management Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall he deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

IN WITNESS WHEREOF, the parties have executed this Management Services Agreement
on the date first appearing above.

 

 

RITE AID CORPORATION

 

 

 

By:

/s/ John T. Standley

 

Name:

John T. Standley

 

Title:

Senior Executive Vice President

 

 

 

LEONARD GREEN & PARTNERS, L.P.

 

 

 

By:

LGP Management, Inc.

 

 

 

By:

/s/ Jonathan Sokoloff

 

 

Jonathan Sokoloff

 

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