REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into effective as of the 30th day of November, 1999, by and among
Rackspace, Ltd., a Texas limited partnership (the "Company"), and the persons
set forth on Exhibit A attached hereto (such persons being referred to herein
as the "Investors" and individually as an "Investor").
W I T N E S S E T H:
WHEREAS, each Investor owns Units of Limited Partners Interest
("Units") in the Company or has options to acquire Units in the Company as set
forth below; and
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), each have options to
acquire Units in consideration for their agreement to forego salary during the
period of January 1, 2000 through April 30, 2000, and in addition, Elmendorf
has the option to acquire 119,047.619 Units from ▇▇▇▇▇▇▇ ▇▇▇ (all of such
options to acquire Units are referred to as the "Options")
WHEREAS, the Company has agreed to provide the Investors with certain
registration rights with respect to the Registrable Securities in return for
certain commitments from the Investors contained herein.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. As used in this Agreement, the
following definitions shall apply:
"AFFILIATE" means a Person who directly or indirectly
controls, is controlled by, or is under common control with, the Person
referred to. For this purpose, "control" means the ability to direct or cause
the direction of the management or affairs of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"COMMISSION" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
"FAMILY AFFILIATE" means, with respect to any Investor, (i)
a natural Person who is a spouse, lineal descendent or spouse of a lineal
descendent, or any trust or family trust of which
-1-
the Investor or any of such Persons is the trustee or a beneficiary (ii) a
corporation, partnership, limited partnership, limited liability company or
other business entity if and for so long as the Investor holds, directly or
indirectly, equity securities or interests in such entity having the right to
elect a majority of the members of the board of directors or other governing
body or to otherwise manage the affairs of the entity.
"HOLDER" means any holder of outstanding Registrable
Securities; provided, however, that for all purposes under this Agreement, the
holder of any Registrable Securities shall be deemed to be the Holder of the
Registrable Securities into which such Registrable Securities are then
convertible.
"PERSON" means any natural Person, any unincorporated
organization or association, and any partnership, limited liability company,
corporation, estate, trust, nominee, custodian or other individual or entity.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments thereto
filed or required to be filed, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means: (i) the Units held by the
Investors as of the date of this Agreement, including any additional Units
acquired by the Investors by exercise of any preemptive rights or rights of
first refusal, (ii) the Units, if any, issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, pursuant to the Options, and (iv) any
securities of the Company issued or issuable, directly or indirectly, in
respect of by way of exchange for such Units held by the Investors, together
with any other securities which are issued with respect thereto by way of any
stock split. stock dividend, recapitalization, reorganization, or similar
event: provided, however, that Registrable Securities shall not include any
Registrable Securities which have previously been registered or sold to the
public or which are eligible for sale to the public under paragraph (1;) of
Rule 144 as defined below.
"REGISTRATION DATE" means the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public, or the date on which the Company first becomes subject
to the registration requirements of Section 12(b) or Section 12(h) of the
Securities Exchange Act, whichever first occurs.
"REGISTRATION EXPENSES" means all expenses incurred by the
Company in complying with registration obligations hereunder, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of not more than one counsel chosen by
the Holders who are the holders of a majority of Registrable Securities being
registered, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company). Registration Expenses shall not include fees of counsel
-2-
for the Holders other than of one counsel as set forth above or Selling
Expenses as defined below.
"REQUISITE HOLDERS" means Holders of not less than 50% of
the Registrable Securities; except in the case of a Demand Registration for
the first registered offering of the Company's securities it means holders of
not less than 40% of the then outstanding equity securities of the Company.
"RESTRICTED SECURITIES" means the securities of the Company
required to bear the legend set forth in Section 2 hereof.
"Rule 144" means Rule 144 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time
to time.
"RULE 145" means Rule 145 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time
to time.
"RULE 415" means Rule 415 promulgated under the Securities
Act, or any similar successor rule, as the same shall be in effect from time
to time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, as shall be in effect at the time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended, and the rules, regulations and interpretations
promulgated thereunder.
Section 2. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. If, at any time after the
first to occur of (i) 180 days following the Registration Date or (ii) the
third anniversary of this Agreement, the Company shall receive from the
Requisite Holders a written request that the Company effect the registration
under the Securities Act of the resale of Registrable Securities held by such
Requisite Holders (a "Demand Registration"), then the Company shall:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) use its best efforts to effect, as soon as
practicable, the registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested and if the Company is then eligible to use
-3-
such a registration) of the Registrable Securities which the Company has been
so requested to register, together with all or such portion of the Registrable
Securities of any Holders joining in such request as are specified in a
written request received by the Company within 20 days after the Company mails
such written notice in accordance with the registration procedures set forth
in Section 7 hereof; PROVIDED, HOWEVER, that the Company shall not be
obligated to take any action to effect any such registration under the
Securities Act:
(A) after the Company has effected one such registration
pursuant to this Section 2 which have been declared or
ordered effective and pursuant to which securities have been
sold; or
(B) if such request is for a shelf registration pursuant
to Rule 415 of the Securities Act and is in connection with
the first registration statement filed by the Company.
Subject to the foregoing clauses (A) and (B) the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, and in any event within 120
days, after receipt of the request or requests of the Requisite Holders;
provided, however, that if the Company shall furnish to such Holder a
certificate signed by the president of the Company stating that in the good
faith judgment of the board of directors of the Company, it would be seriously
detrimental to the Company or its shareholders for such registration statement
to be filed on or before the date filing would be required and it is therefore
essential to defer the filing of such registration statement, the Company
shall have the right to defer such filing for a reasonable period not to
exceed 90 days. The Company's right to delay such registration as set forth in
the previous sentence may only be exercised one time during any twelve month
period.
(b) PRIORITY ON UNDERWRITTEN DEMAND REGISTRATIONS. If the
Requisite Holders so elect, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an underwritten
offering. In such event, if the managing underwriter or underwriters of the
Demand Registration advise the Company and the Requisite Holders in writing
that the total amount of Registrable Securities requested to be included in
such offering would exceed the maximum amount of securities which can be
marketed at a price reasonably related to the current fair market value of
such securities without adversely affecting such offering (the "Underwriters
Maximum Number"), the Company will be required to include in such registration
to the extent of the Underwriters Maximum Number: first, the Registrable
Securities requested to be included in such registration by the Holders
thereof, allocated pro rata among such Holders on the basis of the number of
Registrable Securities requested to be included therein by each such Holder;
and second, any equity securities requested to be included in such
registration by the Company and any other holders of such securities,
allocated as determined by the Company subject to any agreements between the
Company and any such holders.
(c) SELECTION OF UNDERWRITERS. The managing underwriter or
underwriters to be used in connection with such registration shall be selected
by the Requisite Holders holding a
-4-
majority of the Registrable Securities being registered. The Company shall
have the right to approve the selection of any such underwriters, which
approval shall not be unreasonably withheld.
(d) UNDERWRITING AGREEMENTS. The Company shall (together
with all Holders selling Registrable Securities) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by a majority in interest of the Requisite Holders, and each
Holder selling Registrable Securities shall participate in such underwriting.
(e) WITHDRAWAL FROM UNDERWRITING. If any Holder of
Registrable Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Requisite Holders. The Registrable Securities
and/or other securities so withdrawn shall also be withdrawn from
registration, and such Registrable Securities shall not be transferred in a
public distribution prior to 90 days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require. If by the withdrawal of such Registrable Securities a greater number
of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion and manner used in determining
the underwriter limitation in this Section 2.
(f) INCLUSION AS A DEMAND REGISTRATION. For purposes of this
Section 2, a registration will not count as a Demand Registration until it has
become effective; provided, however, if the Requisite Holders withdraw their
Registrable Securities (whether before or after the effectiveness of such
registration), such demand will count as a Demand Registration for purposes of
this Section 2 unless the Requisite Holders pay all of the Registration
Expenses associated with such attempted registration.
(g) RIGHTS OF OTHER SECURITIES HOLDERS JOINING DEMAND. In
order for the Requisite Holders to make a Demand Registration that would
result in the first public offering of the securities of the Company, it will
be necessary to have other equity securities holders of the Company (as
selected in the discretion of the Investors) join the Investors in making such
demand. In such event, the holders of Company securities joining the Investors
in that Demand Registration shall be entitled to participate in that
particular registration on the same basis as the Investors.
Section 3. PIGGYBACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Whenever the
Company proposes to register the sale of any of its equity securities under
the Securities Act other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any similar form then in effect, the Company shall give
written notice thereof to each Holder as soon as practicable (but in any event
at least 30 days before such filing), offering such Holder the opportunity to
register on such
-5-
registration statement such number of Registrable Securities as such Holder
may request in writing, subject to the provisions of Section 3(b), not later
than 20 days after the date of the giving of such notice (a "Piggyback
Registration"). Upon receipt by the Company of any such request, the Company
shall use reasonable efforts to, or in the case of an underwritten offering,
to cause the managing underwriter or underwriters to, include such Registrable
Securities in such registration statement (or in a separate registration
statement concurrently filed) and to cause such registration statement to
become effective with respect to such Registrable Securities in accordance
with the registration procedures set forth in Section 7 hereof If the
Company's registration is to be effected pursuant to an underwritten offering,
Registrable Securities registered pursuant to this Section 3 shall be
distributed in accordance with such offering. Notwithstanding the foregoing,
if at any time after giving written notice of its intention to register its
equity securities and before the effectiveness of the registration statement
filed in connection with such registration, the Company determines for any
reason either not to effect such registration or to delay such registration,
the Company may, at its election, by delivery of written notice to each Holder
(A) in the case of a determination not to effect registration, relieve itself
of its obligation to register the Registrable Securities in connection with
such registration or (B) in the case of a determination to delay registration,
delay the registration of such Registrable Securities for the same period as
the delay in the registration of such other equity securities. Each Holder
requesting inclusion in a registration pursuant to this Section 3 may, at any
time before the effective date of the registration statement relating to such
registration, revoke such request by delivering written notice of such
revocation to the Company (which notice shall be effective only upon receipt
by the Company); provided, however, that if the Company, in consultation with
its financial and legal advisors, determines that such revocation would
materially delay the registration or otherwise require a recirculation of the
prospectus contained in the registration statement, then such holder shall
have no right to so revoke its request.
(b) PRIORITY IN PIGGYBACK REGISTRATION. Notwithstanding the
foregoing, with respect to any primary registration that is underwritten and
with respect to which the managing underwriter or underwriters advise the
Company of an Underwriters Maximum Number, then the Company will so notify all
Holders requesting inclusion in such registration and will be required to
include in such registration, to the extent of the Underwriters Maximum
Number: first, any equity securities that the Company proposes to sell for its
own account (up to the Underwriters Maximum Number); second, the Registrable
Securities requested by Holders to be included in such registration allocated
pro rata with any other holders of equity securities having piggyback
registration rights on the basis of the number of securities requested to be
included therein by each such holder; and third, to the extent that the
Underwriters Maximum Number has not been filled by the application of the
preceding clauses, any further equity securities that the Company proposes to
sell for its own account and/or any equity securities requested to be included
in such registration by other holders of such securities, allocated as
determined by the Company subject to agreements between the Company and any
such holders.
(c) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is in the form of an underwritten offering, the managing underwriter or
underwriters and any additional investment bankers and managers to be used in
connection with such registration shall be
-6-
selected by the Company (subject to any separate agreement with the holders on
behalf of which a secondary underwritten offering is being made). The
selection of such underwriters shall also be subject to the approval by the
Holders participating in such underwritten offering holding a majority of the
Registrable Securities being registered, which approval shall not be
unreasonably withheld.
(d) UNDERWRITING AGREEMENTS. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company, and each
Holder selling Registrable Securities shall participate in such underwriting.
(e) WITHDRAWAL FROM UNDERWRITING. If any Holder or other
holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to 180 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
(f) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
Section 4. MARKET STANDOFF. If the Company at any time shall register
the offer and sale of shares of Common Stock to the public under the
Securities Act (including any registration pursuant to Sections 2 or 3), the
Holders shall not sell publicly, make any short sale of, grant any option for
the purchase of, or otherwise dispose publicly of, any Registrable Securities
(other than those shares of Common Stock included in such registration
pursuant to Sections 2 or 3) without the prior written consent of the Company
for a period designated by the Company in writing to the Holders, which period
shall begin not more than 10 days prior to the effectiveness of the
registration statement pursuant to which such public offering shall be made
and shall not last more than 180 days after the effective date of such
registration statement. The Company shall obtain the agreement of any person
permitted to sell shares of stock in a registration to be bound by and to
comply with this Section 4 as if such person was a Holder hereunder.
Section 5. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with the one Demand Registration and the Piggyback
Registrations shall be borne by the Company. All Selling Expenses relating to
securities so registered as well as all Registration Expenses relating to
Demand Registrations and Piggyback Registrations not required to be borne by
the Company shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf.
-7-
Section 6. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 2 or 3 hereof to use its best efforts to
effect promptly the registration of Registrable Securities, the Company shall:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective as
provided herein;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and current and to comply with the provisions of the Securities Act
with respect to the sale of or other disposition of all Registrable Securities
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the intended method of disposition
of the prospective seller or sellers of such Registrable Securities, but for
no longer than one hundred eighty (180) days subsequent to the effective date
of such registration in the case of a registration statement on Form S-1 (or
any similar form of registration statement required to set forth substantially
identical information) and for no longer than one hundred twenty (120) days in
the case of a registration statement on Form S-3; provided, however, that (i)
such period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis,
such period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415 permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the
registration statement, the incorporation by reference of information required
to be included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement;
(c) Furnish to each prospective seller of Registrable
Securities such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
of such seller;
(d) Notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing, and at the request of any
-8-
such seller, prepare and furnish to such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or approved for
quotation on any inter-dealer quotation system on which similar securities
issued by the Company are then listed or quoted;
(f) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and
a CUSIP number of all such Registrable Securities, in each case not later than
the effective date of such registration;
(g) Use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Holder may reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable any
Holder to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder; provided, however, that the Company will not
be required to qualify generally to do business, subject itself to general
taxation or consent to general service of process in any jurisdiction where it
would not otherwise be required to do so but for this paragraph (g);
(h) Use its best efforts to cause such Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to enable each Holder holding such Registrable
Securities to consummate the disposition of such Registrable Securities;
(i) Subject to the execution of confidentiality agreements
in form and substance satisfactory to the Company, make available upon
reasonable notice and during normal business hours, for inspection by each
Holder holding such Registrable Securities, any underwriter participating in
any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any Holder or underwriter (collectively,
the "Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with such
registration statement;
(j) Use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;
-9-
(k) Use its best efforts to obtain from its counsel an
opinion or opinions in customary form;
(l) Issue to any underwriter to which any Holder holding
such Registrable Securities may sell shares in such offering certificates
evidencing such Registrable Securities;
(m) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act;
(n) In connection with any underwritten offering pursuant to
a registration statement filed pursuant to Section 2 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale-of
Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so
requests the underwriting agreement will contain customary contribution
provision; and
(o) Use its best efforts to take all other steps necessary
to effect the registration of such Registrable Securities contemplated hereby.
Section 7. INDEMNIFICATION. In the event any of the Registrable
Securities are included in a registration statement under this Section:
(a) The Company will indemnify each Holder, each of such
Holder's officers and directors and partners (and each partner's officers,
directors and partners) and such Holder's separate legal counsel and
independent accountants, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained, on the effective date thereof, in any registration
statement, any prospectus contained therein, or any amendment or supplement
thereto, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers, directors and partners (and each partner's officers,
directors and partners) and such Holders' separate legal counsel and
independent accountants and each person controlling such Holder, each such
underwriter each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or
-10-
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained, on the effective date thereof,
in any such registration statement, any prospectus contained therein, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, and will reimburse the Company, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement or
prospectus in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of any such Holder hereunder shall be limited to an amount equal
to the proceeds to each such Holder of Registrable Securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this
Section (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8 to the extent such
failure is not prejudicial No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
-11-
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(d) If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred
to herein, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party with respect to such loss, liability, claim, damage or
expense in the proportion that is appropriate to reflect the relative fault of
the Indemnifying Party and the Indemnified Party in connection with the
statements or omissions that resulted in such loss, liability, claim, damage
or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and the Indemnified Party shall he
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, and the parties, relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Section 8. INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the
Company such information regarding such Holder or Holders and the distribution
proposed by such Holder or Holders as the Company may request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Section.
Section 9. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock
of the Company, the Company shall use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act,
beginning 90 days after (i) the Registration Date, or (ii) the Company issues
an offering circular meeting the requirements of Regulation A under the
Securities Act;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act (at any time after it has become subject to such
reporting requirements); and
(c) Furnish to any Holder promptly upon request a written
statement as to its compliance with the reporting requirements of Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the
general public), and of the Securities Act and the Securities Exchange Act (at
any time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession
of or reasonably obtainable by the Company as
-12-
a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
Section 10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted under this Agreement may be
assigned to a transferee or assignee in connection with the transfer or
assignment of shares of Registrable Securities (i) to a Family Affiliate of
the Holder, (ii) to Affiliates of the Holder, (iii) to the Company, (iv) to
Persons to whom the Registrable Securities are transferred by reason of the
Holder's death or involuntarily by operation of law, (v) pursuant to a
transfer approved by the Company in its sole and absolute discretion, or (vi)
to Persons to whom the Registrable Securities are transferred in accordance
with the transfer restriction provisions, if any, in the limited partnership
agreement, regulations, bylaws or other documents or agreements of Holder;
provided, however, that the Company is given written notice thereof.
Section 11. SUBSEQUENT PURCHASERS. Without the affirmative of the
Holders of at least 66-2/3% of the Registrable Securities, the Company shall
not grant to any purchaser of the Company's securities any demand registration
rights, or any piggyback registration rights that, with respect to
underwriters cutbacks, would be inconsistent or in conflict with the
provisions hereof. Moreover, for so long as the holders of the Registrable
Securities are entitled to exercise the registration rights described herein,
they shall receive the benefit of any and all registration rights granted by
the Company to any other person who is as of the date of this Agreement
securities holder in the Company (or any affiliate of such existing securities
holder) which are more favorable than the registration rights granted to the
Investors herein.
Section 12. TERM. This Agreement and all rights granted to the
Investors hereunder shall expire on the seventh anniversary of the date on
which the first registration statement by the Company for an offering of its
securities to the general public is declared effective by the Commission.
Section 13. MISCELLANEOUS.
(a) NOTICES. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient if contained in a written
instrument delivered in person or by nationally recognized overnight courier
or duly sent by First Class certified mail, postage prepaid, or by telecopy
addressed to such party at the address or telecopy number set forth below or
such other address or telecopy number as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
-13-
If to the Company: Rackspace, Ltd.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Investors: Those addresses set forth next to
each Investor's name, as set forth
in EXHIBIT A
(b) ENTIRE AGREEMENT; AMENDMENTS. This Agreement represents
the entire agreement of the parties hereto, and supersedes any other
agreements among the parties with respect to the subject matter hereof. The
terms and provisions of this Agreement may not be modified or amended, or any
of the provisions hereof waived, except pursuant to the written consent of the
Company and holders of a majority of the Registrable Securities.
(c) ASSIGNMENT. This Agreement may not be assigned by any
party without the prior written consent of the other parties, except by a
Holder in accordance with Section 10 above. Any assignment which contravenes
this Section shall be void AB INITIO.
(d) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute
but one agreement.
(e) HEADINGS: INTERPRETATIONS. The headings of the various
sections of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of this Agreement. Whenever the
context requires, references in this Agreement to the singular number shall
include the plural and, likewise, the plural number shall include the
singular, and words denoting gender shall include the masculine, feminine and
neuter.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
the principles of conflicts of law thereof.
(g) SEPARABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and other
applications thereof shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the date first above written.
-14-
COMPANY:
Rackspace, Ltd.
By: Macroweb, LC, general partner
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Member
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Member
INVESTORS:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Trout, Ltd.
By: Knightsbridge, L.C.,General Partner
By:
--------------------------
-15-
Its:
-------------------------
Macroweb, LC
By:
-----------------------------------
Member
--------------------------------------
▇▇▇▇▇ ▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
By:
----------------------------------
Its:
----------------------------------
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
By:
----------------------------------
Its:
----------------------------------
-16-
EXHIBIT A
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Trout, Ltd.
Macroweb
Elmendorf
▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
-17-
