RACKSPACE HOSTING, INC. - S-1/A - 20000519 - PART_II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by us in connection with the sale of common stock
being registered under this registration statement. All amounts are estimates
except the SEC registration fee and the NASD filing fee.
SEC registration fee........................................ $16,152
NASD fee.................................................... 7,000
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent fees......................................... *
Total................................................. $ *
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following discussion assumes that our reorganization has occurred.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was our director, officer, employee or agent may, and in certain cases
must, be indemnified by us against, in the case of a non-derivative action,
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) incurred by him as a result of such action, and in the case of
a derivative action, against expenses (including attorneys' fees), if in either
type of action he acted in good faith and in a manner he reasonably believed to
be in or not opposed to our best interests. This indemnification does not apply,
in a derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to us, unless upon court order it is
determined that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity for
expenses, and, in a non-derivative action, to any criminal proceeding in which
such person had reasonable cause to believe his conduct was unlawful.
Article VI of our Certificate of Incorporation provides that no director
shall be liable to us or our stockholders for monetary damages for breaches of
the director's fiduciary duties to the fullest extent permitted by the DGCL.
Reference is made to Section 8 of the underwriting agreement to be filed as
Exhibit 1.1 hereto, pursuant to which the underwriters have agreed to indemnify
our officers and directors against certain liabilities under the Securities Act
We intend to enter into Indemnity Agreements with each director and certain
of our officers, a form of which is filed as Exhibit 10.1 to this registration
statement. Pursuant to these agreements, we will be obligated, to the extent
permitted by applicable law, to indemnify these persons against all expenses,
judgments, fines and penalties incurred in connection with the defense or
settlement of any actions brought against them by reason of the fact that they
were our directors or officers or assumed
certain responsibilities at our direction. We also intend to purchase directors'
and officers' liability insurance in order to limit our exposure to liability
for indemnification of directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our inception in December 1998, we have issued and sold unregistered
securities in the following transactions:
(1) On December 29, 1998, we issued 999,000 limited partner interests to our
founders and an entity affiliated with our executive officers. We also
issued 1,000 general partner interests to our general partner.
(2) On September 29, 1999 we issued 1,904,760 limited partner interests to an
entity affiliated with our executive officers upon the conversion of
outstanding indebtedness under a promissory note in the approximate amount
of $1.1 million.
(3) On November 30, 1999 we issued an aggregate of 2,766,667 limited partner
interests to entities affiliated with our executive officers and other
purchasers in a private placement for an aggregate purchase price of
$5.8 million. The purchase price for the limited partner interests consisted
of cash in the approximate amount of $4.6 million, a promissory note for
$750,000 and the conversion of principal outstanding under a promissory note
in the amount of $500,000. On November 30, 1999, we issued warrants to
Trango Capital, LLC and The Hamilton Companies LLC for 380,952 and 238,095
limited partner interests, respectively, for an aggregate exercise price of
$800,000 and $500,000, respectively. We also effected a 10-for-1 limited
partner interest split incident to this private placement.
(4) Commencing on January 1, 2000 through April 30, 2000, Graham Weston, Morris
Miller, Pat Condon and Dirk Elmendorf exercised their right to forgo salary
in exchange for options to acquire additional limited partner interests.
Pursuant to an agreement, these individuals have elected to forgo salary
during this four-month period, and receive options to acquire 47,956 limited
partner interests at $.01 per limited partner interest.
(5) On January 17, 2000 we issued 238,095 limited partner interests to an
investor pursuant to the exercise of a warrant for an aggregate purchase
price of $500,000. Effective the same date, we also issued 119,047 limited
partner interests to an investor for $250,000.
(6) On January 1, 2000 we issued options to two of our executive officers for an
aggregate of 271,672 limited partner interests at $2.10 per limited partner
(7) On February 15, 2000 we issued to our employees options to acquire an
aggregate of 107,171 limited partner interests at $3.33 per limited partner
interest. In addition we issued options to one of our executive officers for
an aggregate of 54,054 limited partner interests at $3.33 per limited
(8) On March 27, 2000, we issued an aggregate of 1,952,297 limited partner
interests to investors in a private placement for an aggregate purchase
price of $11.1 million. We also issued warrants for limited partner
interests. The limited partners of Tailwind Capital Partners 2000, L.P., an
investor in this private placement, are employees of Thomas Weisel Partners
LLC, an underwriter in this offering.
The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (1) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering or (2) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15, except as described in (8) above.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NUMBER DESCRIPTION
1.1* -- Form of Underwriting Agreement.
3.1^ -- Certificate of Incorporation of Rackspace.com, Inc.
3.2^ -- Bylaws of Rackspace.com, Inc.
4.1^ -- Specimen Stock Certificate.
5.1* -- Opinion of Brobeck, Phleger & Harrison LLP.
10.1^ -- Form of Indemnity Agreement by and between Rackspace.com,
Inc. and each of its directors and executive officers.
10.2^ -- Lease Agreement between Rackspace, Ltd. and Santa Clara Land
Company dated February 22, 2000 for the premises located in
San Antonio, Texas.
10.3^ -- Confidential Anti-Dilution Agreement by and among Rackspace,
Ltd. and the investors named therein dated November 30, 1999
and Amendment thereto dated February 22, 2000.
10.4^ -- Credit Agreement between Rackspace, Ltd and Exeter
Financial, LC dated December 29, 1998.
10.5^ -- Support Agreement dated December 29, 1998 between Rackspace,
Ltd., Morris A. Miller, Graham M. Weston, Richard Yoo, Dirk
Elmendorf and Patrick Condon and First Amendment thereto
dated November 30, 1999 and Second Amendment thereto dated
February 22, 2000 and as amended by Exhibit 10.21.
10.6^ -- Employment Agreement between Rackspace, Ltd. and Richard Yoo
dated December 29, 1998.
10.7^ -- Employment Agreement between Rackspace, Ltd. and Dirk
Elmendorf dated December 29, 1998.
10.8^ -- Employment Agreement between Rackspace, Ltd. and Patrick
Condon dated December 29, 1998.
10.9^ -- Asset Purchase and Sale Agreement dated December 29, 1998
between Cymitar Technology Group, Inc., Richard Yoo, Dirk
Elmendorf and Patrick Condon.
10.10^ -- Transfer Agreement between Rackspace, Ltd., Richard Yoo,
Dirk Elmendorf and Patrick Condon dated December 29, 1998.
10.11^ -- Agreement of Limited Partnership of Rackspace, Ltd. dated
December 29, 1998, First Amendment dated September 29, 1999,
Second Amendment dated November 30, 1999, Third Amendment
dated February 22, 2000 and Fourth Amendment dated
March 27, 2000.
10.12^ -- Warrant between Rackspace, Ltd. and Trango Capital, LLC,
dated November 30, 1999.
10.13^ -- Registration Rights Agreement dated November 30, 1999
between Rackspace, Ltd. and the securityholders named
therein and Amendment thereto dated February 22, 2000 and
as amended by Exhibit 10.21.
10.14^ -- Promissory Note dated November 30, 1999 between Beaulieu
River Capital LC and Rackspace, Ltd. for $750,000.
EXHIBIT NUMBER DESCRIPTION
10.15^ -- Second Financial Commitment between Rackspace, Ltd. and
Exeter Financial, LC dated September 29, 1999.
10.16^ -- 1999 Unit Option Plan.
10.17^ -- Form of Unit Option Agreement for Stock Unit Plan.
10.18* -- 2000 Stock Incentive Plan.
10.19* -- 2000 Employee Stock Purchase Plan.
10.20^ -- Promissory Note dated December 29, 1998 between Exeter
Financial, LC and Rackspace, Ltd. for $150,000.
10.21^ -- Agreement of Existing Partners of Rackspace Ltd. to
Facilitate Public Offering dated March 27, 2000 and form of
First Amendment thereto dated as May 10, 2000.
10.22^ -- Warrant between Rackspace, Ltd. and Norwest Venture
Partners, dated March 27, 2000.
10.23^ -- Warrant between Rackspace, Ltd. and Sequoia Capital
Franchise Fund dated March 27, 2000.
10.24^ -- Warrant between Rackspace, Ltd. and Sequoia Capital
Franchise Partners dated March 27, 2000.
10.25* -- Employment Agreement between Rackspace, Ltd. and Graham M.
Weston, dated May 1, 2000.
10.26* -- Employment Agreement between Rackspace, Ltd. and Morris A.
Miller, dated May 1, 2000.
10.27^ -- Employment Agreement between Rackspace, Ltd. and Lew
Moorman, dated April 26, 2000.
10.28^ -- Form of Registration Rights Agreement between Rackspace,
Ltd. and the security holders named therein, dated
November 30, 1999.
10.29+** -- Marketplace Agreement between Rackspace, Ltd. and Red Hat,
Inc., dated May 12, 2000.
10.30* -- Employment Agreement between Rackspace, Ltd. and Lanham
10.31* -- Employment Agreement between Rackspace, Ltd. and Andrew May
10.32* -- Employment Agreement between Rackspace, Ltd. and John J.
21.1^ -- List of Subsidiaries.
23.1^ -- Consent of KPMG LLP.
23.2* -- Consent of Brobeck, Phleger & Harrison LLP (Included in
24.1^ -- Powers of Attorney.
27.1^ -- Financial Data Schedule.
+ Filed herewith.
* To be filed by amendment.
^ Previously filed.
** Confidential treatment has been requested on portions of this document.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or the related notes.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the DGCL, our Certificate of Incorporation, our Bylaws, the underwriting
agreement or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
We hereby undertake that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.