Warrant - Rackspace Ltd., Macroweb LC, Trango Capital Capital LLC
WARRANT
This Agreement (herein the "AGREEMENT") is entered into effective the
30th day of November, 1999 (herein the "EFFECTIVE DATE"), by and between
RACKSPACE, LTD. (herein "RACKSPACE"), a Texas limited partnership whose sole
general partner is Macroweb, LC, a Texas limited liability company, and
TRANGO CAPITAL, L.L.C., a Texas limited liability company (herein "TRANGO").
WHEREAS, Rackspace is in the business of offering web-server hosting
services through the leasing of internet servers, bandwidth, connectivity and
administration of all aspects of servers; and
WHEREAS, Trango is the sole general partner of First Inning Investors,
L.P., a Texas limited partnership (herein "FIRST INNING"); and
WHEREAS, contemporaneous with the execution of this Agreement, First
Inning is investing One Million Three Hundred Thousand and No/100 Dollars
($1,300,000.00) in Rackspace (herein the "FIRST INVESTMENT"), which
investment is being made, in part, in consideration for the agreement of
Rackspace to provide to Trango a warrant to make a substantial additional
investment in Rackspace, all as provided herein;
NOW, THEREFORE, in consideration of the premises herein set out, and Ten
Dollars and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Rackspace and First Inning agree as follows:
1. OPTION TO INVEST.
Trango will have the option (but not the obligation) to acquire all (but
not less than all) of the Option Interest (as hereinafter defined) in
consideration for the payment to Rackspace of the Purchase Price (as
hereinafter defined) (herein the "OPTION TO INVEST"). If Trango exercises
such Option to Invest, it shall acquire the Option Interest through a new
limited partnership to be formed, of which Trango will be sole general
partner, which will be pursuant to a limited partnership agreement on
substantially the same terms as the Agreement of Limited Partnership of First
Inning, with the limited partners being one or more of the Limited Partners
of First Inning and/or Melvin Lachman, the specific limited partners and the
percentage of ownership of each shall be determined by Trango, in its sole
and absolute discretion (herein "FIRST INNING II").
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2. EXERCISE OF OPTION.
The Option to Invest may be exercised by Trango providing to Rackspace
written notice of the exercise by Trango of such option (herein the "NOTICE OF
EXERCISE") at any time from the Effective Date hereof through 5 p.m., CST, on
December 31, 2001 (herein the "OPTION PERIOD").
3. PURCHASE PRICE.
The Purchase Price for the Option Interest is Eight Hundred Thousand and
No/100 Dollars ($800,000.00), to be paid by First Inning II to Rackspace at the
Closing (as hereinafter defined).
4. OPTION INTEREST.
4.1 For purposes of this Agreement:
(a) The interest acquired by First Inning for the First Investment,
as subsequently altered by virtue of any merger, exchange or dilution for
other investment in Rackspace (or its successor-in-interest), if any, is
herein referred to as the "INITIAL INVESTMENT";
(b) The OPTION INTEREST, as that term is used in this Agreement,
shall be an interest equal to 61.5385% (that is, $800,000 DIVIDED BY
$1,300,000) of the then Initial Investment (that is, of the same quality
and character of investment in the same entity [e.g., undivided limited
partnership interest, or shares in corporation, or membership interests in
a limited liability company] but only 61.5385% of the equity interest
represented by the First Investment at the time of exercise of the Option).
4.2 In consideration for the payment of the Purchase Price by First
Inning II as herein provided, at the Closing, Rackspace will transfer and
assign the Option Interest to First Inning II, free and clear of any liens or
encumbrances.
4.3 The Option Interest will have all of the rights and privileges
generally available to other Limited Partners of Rackspace.
5. CLOSING.
The Closing shall occur at the offices of Rackspace within ten (10)
business after the Notice of Exercise is delivered by Trango to Rackspace.
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6. SALE OR MERGER.
6.1 In the event that, during the Option Period while Trango has not yet
exercised the Option to Invest, all or substantially all of the ownership/equity
interests (i.e., undivided limited partnership, or shares in a corporation, or
membership interests in a limited liability company, as the case may be) in
Rackspace, or all or substantially all of the assets of Rackspace, are to be
sold, then Rackspace will provide to Trango not less than fifteen (15) business
days prior written notice of such sale and the terms and provisions of such sale
(herein the "NOTICE OF INTENT TO SELL"), and Trango will be entitled to exercise
the Option to Invest prior to consummation of such sale, and the Option Interest
acquired by First Inning II will participate fully and ratably (that is, with
all other ownership/equity interests) in such sale; provided, however, if Trango
fails to exercise the Option to Invest within such 15 business days and
consummate the purchase of the Option Interest within such 15 days, then the
Option to Invest will lapse and be of no further force and effect.
6.2 In the event that during the Option Period while Trango has not yet
exercised the Option to Invest, Rackspace contemplates a merger or exchange
which will result in the then owners of the ownership/equity in Rackspace
receiving ownership/equity in any other entity, then Rackspace will provide
to Trango not less than fifteen (15) business days prior written notice of
such merger or exchange and the terms and provisions of such merger or
exchange (therein the "NOTICE OF INTENT TO SELL"), and Trango will be
entitled to exercise the Option to Invest prior to consummation of such
merger or exchange, and the Purchase Price paid by First Inning II will be
taken into consideration in valuation of the assets of Rackspace in
determining the valuation to be used in such merger or exchange, and the
Option Interest acquired by First Inning II will participate fully and
ratably (that is, with all other ownership/equity interests) in such sale or
exchange; provided, however, if Trango fails to exercise the Option to Invest
within such fifteen (15) business days, the Option to Invest will NOT lapse
prior to the end of the Option Period and the Option Interest will be in the
proportionate interest (i.e., 61.5385%) of the interest received and
thereafter held in exchange for the Initial Investment.
7. ACCESS TO BOOKS AND RECORDS.
From the Effective Date hereof until the expiration of the Option Period:
(a) Trango (though its designated representative or agent) will be
provided access from time to time to the books and records of Rackspace
during normal business hours, and upon not less than 48 hours prior written
notice, for the purpose of determining the financial condition of and value
of interests in Rackspace; and
(b) Rackspace will provide to Trango copies of all unaudited and/or
audited operating statements and financial statements (monthly, quarterly
and/or annually) as Rackspace shall prepare or have prepared for the
benefit of its management, lender(s) or partners.
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8. REPRESENTATIONS AND WARRANTIES OF RACKSPACE.
8.1 Rackspace does hereby make the following representations and
warranties to Trango, and will again at the Closing make the following
representations and warranties to Trango:
8.1.1 Rackspace is a limited partnership, duly formed and validly
existing and in good standing under the laws of the State of Texas.
8.1.2 Rackspace has all of the requisite authority to execute,
deliver and carry out the terms and provisions of this Agreement and other
documents to be executed and delivered by and pursuant to this Agreement.
8.1.3 Rackspace is not in default under any agreement to which it
is a party (including, without limitation, its partnership agreement), the
effect of which will materially adversely affect performance by Rackspace
of its obligations pursuant to and contemplated by the terms of this
Agreement, or its operations or the value of its assets or the value of
partnership interests therein.
8.1.4 There are no actions, suits or proceedings pending, or to
the current actual knowledge of Rackspace, without duty of independent
inquiry, threatened against or affecting Rackspace or its General Partner,
before any court or any governmental, administrative, regulatory,
adjudicatory or arbitrational body or agency of any kind which will
materially adversely affect the performance of Rackspace of its obligations
pursuant to and as contemplated by the terms and provisions of this
Agreement or the operations of Rackspace, or the value of partnership
interests therein.
8.1.5 Neither this Agreement nor any document, financial
statement, or financial information furnished by Rackspace to Trango, at
the time furnished, contains, or will contain, any untrue statement of
material fact or omits the stated fact material thereto or to this
Agreement.
8.1.6 Rackspace has good and marketable title to all of its assets
and interests in assets, whether real, personal, mixed, tangible, or
intangible, which constitute all of the assets and interests in assets that
are used in the business of Rackspace, and all those assets are free and
clear of restrictions on or conditions to transfer or assignment, and free
and clear of mortgages, liens and pledges, charges, encumbrances, claims,
conditions or restrictions, except for (i) those disclosed in financial
statements of Rackspace which have been previously delivered to Trango,
(ii) any lien for current taxes not yet due and payable, and (iii) possible
minor matters that, in the aggregate, are not substantial in amount and do
not materially detract from or interfere with the
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present or intended use of any of these assets or materially impair the
business operations of Rackspace. The above notwithstanding, with respect
to the intellectual property rights held by Rackspace, no warranty is made
other than, Rackspace is not aware of any facts which indicate that
Rackspace's use of such intellectual property infringes the rights of any
third party.
8.1.7 Rackspace has not relied upon any representations or
warranties, written or oral, express or implied, by Trango or its agents,
and neither Trango or its agents have made any representations, written,
oral, express or implied, to Rackspace, as to the past, current or future
value of the Option Interest.
9. REPRESENTATIONS AND WARRANTIES OF TRANGO.
9.1 Trango does hereby make the following representations and warranties
to Rackspace, and will again at the Closing make the following representations
and warranties to Rackspace:
9.1.1 Trango is a limited liability company duly formed and
validly existing and in good standing under the laws of the State of
Texas.
9.1.2 Trango has all of the requisite authority to execute,
deliver and carry out the terms and provisions of this Agreement and
other documents to be executed and delivered by and pursuant to this
Agreement.
9.1.3 Trango is fully satisfied that it has received such
access to the books and records of Rackspace as it requires, as well
as such other information pertaining to Rackspace, and its operations
of current and potential competitors, as it deems necessary or
appropriate, in evaluating the acquisition of the offered interests
other than access to the financial information as provided for herein.
9.1.4 Trango has not relied upon any representations or
warranties, written or oral, express or implied, by Rackspace or its
agents, and neither Rackspace nor its agents, have made any
representations, written or oral, express or implied, to Trango, as to
the present, current or future value of the Option Interest.
9.1.5 All representations of First Inning and its limited
partners as contained in the subscription agreement of even date
herewith between First Inning and Rackspace are true and correct in
all material respects.
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10. MISCELLANEOUS.
10.1 There are no brokers in this transaction, and no commissions will
be due and owing upon the consummation of the transactions contemplated in
this Agreement.
10.2 The parties hereto agree that they will execute and deliver or
cause to be executed and delivered, such additional agreements and
instruments that shall be reasonably required and necessary to carry into
effect the purpose of this Agreement.
10.3 All notices or other communications with the parties hereto shall
be required or permitted to give hereunder shall be deemed given, when
delivered or if and when mailed by certified mail, return receipt requested,
postage prepaid, addressed to the party to whom given at the address set
forth below, or such other addresses which may be designated by written
notice served on the other party, or by hand delivery, to the address below,
or by telecopy to the telecopy number provided below:
RACKSPACE: Rackspace, Ltd.
111 Soledad, Suite 1100
San Antonio, Texas 78205
Attention: Mr. Graham M. Weston
Telecopy: (210) 892-4329
FIRST INNING: Trango Capital, L.L.C.
970 Isom Road
San Antonio, Texas 78216
Attention: Mr. Quincy J. Lee
Telecopy: (210) 804-4394
10.4 Captions and arrangements used in this Agreement are for
convenience only, and shall not affect the interpretation of this Agreement.
10.5 This Agreement has been made and entered into and is performable in
Bexar County, Texas, and shall be construed under the laws of the State of
Texas, and venue shall be in Bexar County, Texas.
10.6 Any provision of this Agreement held by a Court of competent
jurisdiction to be invalid or enforceable shall not impair or invalidate the
remainder of the Agreement, and the effect thereof shall be confined to the
provision held to be invalid or enforceable.
10.7 This written Agreement constitutes the entire and complete
agreement between the parties hereto, and it is expressly understood that
there are no verbal understandings or agreements which may change the terms,
covenants, conditions herein set forth, and that no modification of this
Agreement and no waiver of any terms and conditions herein shall be effective
unless made in writing and duly executed by all of the parties hereto.
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10.8 The terms, conditions and obligations of this Agreement shall inure
to the benefit of and shall be binding upon the parties hereto and their
respective heirs, legal representatives, predecessors, successors and assigns.
10.9 This Agreement may be executed in multiple counterparts, each of
which shall be an original, but all of which shall constitute one document.
It shall not be necessary that all parties hereto be signatory to the same
counterpart.
10.10 Each party shall pay all costs and expenses incurred or to be
incurred by it in negotiating and preparing this Agreement and in closing and
carrying the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date hereinabove set out.
RACKSPACE:
RACKSPACE, LTD.,
a Texas limited partnership
By: MACROWEB, LC, a Texas limited
liability company, Sole General Partner
By: /s/ Graham Weston
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Its: manager
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FIRST INNING:
TRANGO CAPITAL, L.L.C.,
a Texas limited liability company
By: /s/ Quincy J. Lee
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Quincy J. Lee, Manager
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