Document:

Exhibit
10.8

 

PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT

 

THIS PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”)
is made this 30th day of April, 2010 by LIQUIDITY SERVICES, INC., a corporation
organized under the laws of the State of Delaware (the “Borrower”) in favor of
BANK OF AMERICA, N.A., a national banking association, its successors and
assigns (the “Lender”).

 

RECITALS

 

A.            Borrower has applied to the Lender for a revolving
credit facility in the maximum principal amount of Thirty Million Dollars
($30,000,000) and, as part of that revolving credit facility, a letter of
credit facility in the maximum principal amount of Ten Million Dollars
($10,000,000) (collectively, the “Credit Facilities”), which is to be advanced
pursuant to the terms of a Financing and Security Agreement of even date
herewith by and between the Borrower and the Lender (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the “Financing Agreement”).

 

B.            As a condition precedent to making
advances under the Credit Facilities, the Lender required that Borrower, secure
the payment and performance of all of the Obligations by the execution of this
Agreement.

 

C.            All defined terms used in this Agreement
and not defined in this Agreement shall have the meaning given to such terms in
the Financing Agreement.  As used in this
Agreement, the singular number shall include the plural, the plural the
singular and the use of the masculine, feminine or neuter gender shall include
all genders, as the context may require.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein contained, the Borrower and the Lender hereby
agree as follows:

 

ARTICLE I

SECURITY

 

Section 1.1             Collateral.

 

As security for the prompt and full payment and
performance of all of the Obligations, and as security for the prompt and full
performance of all of the obligations of the Borrower under this Agreement and
all of the Obligations under the Financing Agreement and all of the other
Financing Documents, whether now in existence or hereafter created and whether
joint, several, or both, primary, secondary, direct, contingent or otherwise,
the Borrower hereby pledges, assigns and grants to the Lender a first priority
security interest in, assignment of, and lien on, the following property of the
Borrower (collectively, the “Collateral”), whether now existing or hereafter
created or arising:

 

(a)           all rights, title and interest in and to and as a
member of Surplus Acquisition Venture, LLC (the “LLC”) under the LLC’s operating
agreement as the same may 

 

 

have been or may be
amended, supplemented, restated, or otherwise modified at any time and from
time to time (the “Operating Agreement”);

 

(b)           all rights as a member of LLC to receive from LLC any
and all cash and non-cash distributions (regardless of how such distributions
are classified and including any and all distributions-in-kind and liquidating
distributions), profits, losses, income, revenue, returns of capital,
repayments of any loans made by Borrower to the LLC (including interest and
fees with respect to such loans), and any and all development, management and
similar fees payable by the LLC to Borrower of any kind or nature whatsoever,
together with any and all other rights and property interests including, but
not limited to, accounts, contract rights, instruments and general intangibles
arising out of, under or relating to the LLC and/or the Operating Agreement;

 

(c)           all other or additional equity or debt interests,
other securities or property (including cash) paid or distributed in respect of
the LLC by way of any spin-off, merger, consolidation, dissolution,
combination, reclassification or exchange of equity interests, asset sales, or
similar rearrangement or reorganization; and

 

(d)           all proceeds and products (both cash and non-cash) of
the foregoing, whether now or hereafter arising under any of the foregoing.

 

Section 1.2             Rights of the Lender in the Collateral.

 

The Borrower agrees that with respect to the
Collateral the Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code, as well as those provided by law and/or in
this Agreement.  Notwithstanding the fact
that the proceeds of the Collateral constitute part of the Collateral, the
Borrower may not dispose of the Collateral, or any part thereof, without the
prior written consent of the Lender.

 

Section 1.3             Registration of Pledge.

 

The Borrower agrees, by Notice of Pledge in
substantially the form attached to this Agreement as Exhibit A, to
notify the LLC immediately of the pledge, assignment and security agreement
under this Agreement and issue the Initial Transaction Statement in
substantially the form attached to this Agreement as Exhibit B.  The Borrower hereby authorizes and directs
the LLC to (i) make, following written notice to do so by the Lender
(after the occurrence of an Event of Default), direct payment to the Lender of
any amounts due or to become due to the Borrower with respect to the Collateral
and (ii) comply with all instructions originated by the Lender without
further consent by the Borrower.  The
Borrower acknowledges that the Lender has control over the Collateral within
the meaning of Section 8-106 of the Uniform Commercial Code.

 

Section 1.4             Rights of the Borrower in the Collateral.

 

Until the occurrence of an Event of Default (as
hereinafter defined), the Borrower shall be entitled (a) to vote all
ownership or equity interests, (b) to give consents, waivers and
ratification to any and all actions of the LLC requiring member approval, and (c) to
receive all cash and non-cash distributions which may be paid on account of the
Collateral and which are not otherwise prohibited by the Financing Agreement,
this Agreement or any of the other 

 

2

 

Financing Documents.  Any cash distribution payable in respect of
the Collateral which represents, in whole or in part, a return of capital or is
paid in violation of this Agreement, the Financing Agreement or any of the
other Financing Documents shall be received by the Borrower in trust for the
Lender, shall be paid immediately to the Lender and shall be retained by the
Lender as part of the Collateral.

 

The Borrower covenants and agrees that no distribution
or other benefit with respect to the Collateral shall be received by or for the
benefit of the Borrower, and no vote shall be cast or member’s consent, waiver
or ratification given or action taken by the Borrower in its capacity as a
member of the LLC, which would violate or be inconsistent with any of the terms
and provisions of this Agreement or the Financing Agreement or which would
materially impair the position or interest of the Lender in the Collateral or
dilute the percentage of the equity interests in the LLC pledged to the Lender.

 

Section 1.5             Obligations Hereunder Primary.

 

The obligations and liabilities of the Borrower under
this Agreement shall be primary, direct and immediate, shall not be subject to
any counterclaim, recoupment, set off, reduction or defense based upon any
claim that the Borrower may have against the Lender or any other obligor and
shall not be conditional or contingent upon pursuit or enforcement by the
Lender of any remedies it may have against any other person with respect to the
Obligations.

 

Section 1.6             Authorization to File Financing Statements.

 

The Borrower hereby authorizes Lender to file financing statements,
without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Lender’s interest or rights in the Collateral hereunder.

 

Section 1.7             Waiver of Restrictions on Transfer of Collateral.

 

The Borrower hereby unconditionally, irrevocably and
expressly waives any restrictions to the transfer or assignment of the
Collateral as provided for in the Operating Agreement as well as any other
provisions therein which may limit or restrict the assignment as set forth in
this Agreement.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

To induce the Lender to make the Credit Facilities
available to the Borrower under the Financing Agreement, the Borrower
represents and warrants to the Lender, as follows:

 

Section 2.1             Percentage Ownership.

 

The ownership interests assigned as part of the
Collateral represent one hundred percent (100%) of the ownership interests of
the LLC.

 

3

 

Section 2.2             No Amendments.

 

The Operating Agreement provided to Lender has not
been amended, modified, restated, substituted, extended or renewed.

 

Section 2.3             Operating Agreement.

 

The Borrower has furnished the Lender with a true and
complete copy of the executed Operating Agreement.  The Borrower hereby agrees that the execution
of this Agreement shall constitute the approval of the majority of the members
required under Section 9.1 of the Operating Agreement.

 

Section 2.4             Title to Properties.

 

The Borrower has good and marketable title to the
Collateral.  The Borrower has legal,
enforceable and uncontested rights to use freely such property and assets.  The Borrower is the sole owner of all of the
Collateral, free and clear of all security interests, pledges, voting trusts,
agreements, liens, claims and encumbrances whatsoever, other than the security
interest, assignment and lien granted under this Agreement.  The ownership interests assigned as
Collateral are subject to no outstanding options or other requirements with
respect to such interests.

 

Section 2.5             Perfection and Priority of Collateral.

 

The Lender has, or upon execution and delivery of this
Agreement and recording of the financing statements executed by the Borrower,
will have, and will continue to have as security for the Obligations, a valid
and perfected, first priority, lien on and security interest in all of the
Collateral, free of all other liens, claims and rights of third parties
whatsoever.

 

Section 2.6             LCC Interests.

 

None of the pledged ownership interests of the LLC are
in certificated form.

 

ARTICLE III

COVENANTS

 

Until payment in full and the performance of all of
the Obligations and all of the obligations of the Borrower hereunder or secured
hereby, the Borrower covenants and agrees with the Lender as follows:

 

Section 3.1             Delivery of Collateral.

 

Borrower will not allow any of the ownership interests
of the LLC to become certificated without the Lender’s prior written
consent.  If Lender provides such consent
and the ownership interests of the LLC are certificated, the Borrower shall
deliver immediately to the Lender any certificates representing ownership
interests in the LLC, and all instruments, items of payment and other
Collateral received by the Borrower and executed irrevocable, undated and blank
membership powers, substantially in the form attached to this Agreement as Exhibit C,
for all of 

 

4

 

the assigned LLC
interests.  All Collateral at any time
received or held by the Borrower shall be received and held by the Borrower in
trust for the benefit of the Lender, and shall be kept separate and apart from,
and not commingled with, the Borrower’s other assets.

 

Section 3.2             Defense of Title and Further Assurances.

 

The Borrower will do or cause to be done all things
necessary to preserve and to keep in full force and effect its interests in the
Collateral, and shall defend, at its sole expense, the title to the Collateral
and any part thereof.  Further, the
Borrower shall promptly, upon request by the Lender, execute, acknowledge and
deliver any financing statement, endorsement, renewal, affidavit, deed,
assignment, continuation statement, security agreement, certificate or other
document as the Lender may reasonably require in order to perfect, preserve,
maintain, protect, continue, realize upon, and/or extend the lien and security
interest of the Lender under this Agreement and the priority thereof.  Borrower shall pay to the Lender upon demand
all taxes, costs and expenses (including but not limited to reasonable attorney’s
fees) incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument mentioned
aforesaid.  Borrower hereby irrevocably
appoints the Lender as its attorney-in-fact, with power of substitution from
time to time, to take such actions as are described in this Section as
well as any other action which Borrower is required to take under this
Agreement or under any of the other Financing Documents.

 

Section 3.3             Operating Agreement.

 

Borrower shall cause LLC to obtain the Lender’s written consent before
amending, modifying, restating, substituting, extending or renewing the
Operating Agreement.  Borrower shall not
sell or transfer any membership interest in the LLC without the Lender’s prior
written consent.

 

Section 3.4             Compliance with Laws.

 

The Borrower shall comply with all applicable Laws and
observe the valid requirements of Governmental Authorities, the noncompliance
with or the non-observance of which would reasonably be expected to have a
Material Adverse Effect.

 

Section 3.5             Protection of Collateral.

 

The Borrower agrees that the Lender may at any time
take such steps as the Lender deems reasonably necessary to protect the Lender’s
interest in, and to preserve the Collateral. 
The Borrower agrees to cooperate fully with the Lender’s efforts to
preserve the Collateral and will take such actions to preserve the Collateral
as the Lender may in good faith direct.  All
of the Lender’s expenses of preserving the Collateral, including, without
limitation, reasonable attorney’s fees, shall be part of the Enforcement Costs.

 

Section 3.6             Certain Notices.

 

The Borrower will promptly notify the Lender in
writing of any Event of Default and of any litigation, regulatory proceeding,
or other event which would reasonably be expected to have a Material Adverse
Effect.

 

5

 

Section 3.7             Books and Records; Information.

 

(a)           The Borrower shall maintain proper books and records
in which full, true and correct entries are made of all dealings and
transactions in relation to the Collateral and which reflect the lien of the
Lender thereon.

 

(b)           The Borrower agrees that the Lender may from time to
time and at its option (i) require the Borrower to, and the Borrower
shall, periodically deliver to the Lender records and schedules, which show the
status of the Collateral and such other matters which affect the Collateral, as
well as copies of Borrower’s tax returns and filings; (ii) verify the
Collateral and inspect the books and records of the Borrower and make copies
thereof or extracts therefrom; (iii) notify any prospective buyers or
transferees of the Collateral or any other Persons of the Lender’s interest in
the Collateral; and (iv) disclose to prospective buyers or transferees
from the Lender any and all information regarding the LLC, the Collateral
and/or the Borrower.

 

Section 3.8             Disposition of Collateral.

 

The Borrower will not sell, discount, allow credits or
allowances, assign, extend the time for payment on, convey, lease, assign,
transfer or otherwise dispose of the Collateral or any part thereof.

 

Section 3.9             Distributions.

 

The Borrower shall receive no dividend or distribution
or other benefit with respect to the LLC, and shall not vote, consent, waive or
ratify any action taken, which would violate or be inconsistent with any of the
terms and provisions of this Agreement, the Financing Agreement or any of the
other Financing Documents.  The Borrower
authorizes and directs the LLC to make all distributions and other payments
constituting a part of the Collateral directly to the Lender upon written
request of the Lender, without any additional authorization by the Borrower,
after the occurrence of an Event of Default (as hereinafter defined).  In the event any distribution or other
payment constituting a part of the Collateral is received by the Borrower after
the occurrence of an Event of Default, the Borrower shall immediately remit
such distribution or payment to the Lender, together with any necessary
endorsement or assignment.  All amounts
received by the Lender in accordance with this Section 3.9 shall, at the
Lender’s option, be held as additional collateral for the Obligations or
applied to the repayment of the Obligations, in such order and manner as the
Lender may determine and without regard to the existence of an Event of
Default.

 

Section 3.10           Liens.

 

The Borrower will not create, incur, assume or suffer
to exist any lien upon any of the Collateral, other than liens in favor of the
Lender.

 

Section 3.11           Taxes.

 

The Borrower shall cause the LLC to pay all taxes and
similar charges imposed upon or assessed against the LLC or any of the LLC’s
property prior to the date on which penalties are attached thereto.

 

6

 

Section 3.12           Insurance.

 

The Borrower shall cause the LLC to maintain adequate
insurance with respect to the LLC’s property in conformity with prudent
business practices.

 

ARTICLE IV

DEFAULT AND RIGHTS AND REMEDIES

 

Section 4.1             Events of Default.

 

The occurrence of any one or more of the following
events which continues beyond any applicable cure period shall constitute an “Event
of Default” under the provisions of this Agreement:

 

4.1.1        Default under Financing Agreement.

 

An Event of Default (as that term is defined in the
Financing Agreement) shall occur under the Financing Agreement.

 

4.1.2        Default under this Agreement.

 

Borrower shall fail to duly perform, comply with or
observe any of the terms, conditions or covenants of this Agreement.

 

4.1.3        Breach of Representations and Warranties.

 

Any representation or warranty made in this Agreement
or in any report, statement, schedule, certificate, opinion (including any
opinion of counsel for Borrower), financial statement or other document
furnished by Borrower or its agents or representatives in connection with this
Agreement, any of the other Financing Documents, or the Obligations or the
other obligations secured by this Agreement, shall prove to have been false or
misleading when made (or, if applicable, when reaffirmed) in any material
respect.

 

4.1.4        Failure to Comply with Covenants.

 

The failure of Borrower to perform, observe or comply
with any covenant, condition or agreement contained in this Agreement.

 

4.1.5        Liquidation, Termination, Dissolution of
LLC.

 

The LLC is dissolved either pursuant to the provisions
of its Operating Agreement, by operation of law, or in any other manner,
voluntarily or otherwise; the Operating Agreement of the LLC is terminated
pursuant to any of its provisions or by operation of law, or amended or
modified in any manner; member of the LLC sells, assigns, mortgages, pledges,
hypothecates, transfers, encumbers, permits to be encumbered or otherwise
disposes of any or all of his, her or its interest in the LLC or withdraws
voluntarily or involuntarily (by operation of law or otherwise) from the LLC;
any new member is admitted to the LLC, in each case, without the prior consent
of the Lender.

 

7

 

Section 4.2             Remedies.

 

Upon the occurrence of any Event of Default, the
Lender may at any time thereafter exercise any one or more of the following
rights, powers or remedies:

 

4.2.1        Accelerate Obligations.

 

The Lender may declare all or any portion of the
Obligations to be immediately due and payable, without notice to Borrower and
without demand, protest or notice of protest or dishonor.

 

4.2.2        Legal Proceedings.

 

The Lender may proceed to protect or enforce the
Lender’s rights by an action or actions at law or in equity or by any other
appropriate proceeding, whether for the specific performance of any of the
covenants herein contained or of any other agreement contained herein, or for
an injunction against the violation of any of the terms hereof, or in aid of
the exercise or execution of any right, remedy or power granted herein or by
law.

 

4.2.3        Uniform Commercial Code.

 

The Lender shall have all of the rights and remedies
of a secured party under Title 9 of the Uniform Commercial Code and other
applicable Laws and in connection therewith may exercise all or any of the
rights, powers and remedies of a secured party under Title 9 of the Uniform
Commercial Code.  Any notification of a
sale or other disposition of all or any part of the Collateral required
pursuant to Section 9-504 of Title 9 of the Uniform Commercial Code shall
be deemed commercially reasonable if sent in accordance with Section 5.1
(Notices) at least ten (10) days prior to the sale or other disposition.  Upon demand by the Lender, the Borrower shall
assemble the Collateral and all books and records and make it available to the
Lender, at a place designated by the Lender. 
The Lender or its agents may without notice from time to time enter upon
the Borrower’s premises to take possession of the Collateral and all books and
records, to remove it, or otherwise to prepare it for sale, or to sell or
otherwise dispose of it.

 

4.2.4        Sale or Other Disposition of Collateral.

 

The Lender may sell or redeem the Collateral, or any
part thereof, in one or more sales, at public or private sale, conduct by any
officer or agent of, or auctioneer or attorney for, the Lender, at the Lender’s
place of business or elsewhere, for cash, upon credit or future delivery, and
at such price or prices as the Lender shall, in its sole discretion, determine,
and the Lender may be the purchaser of any or all of the Collateral so sold.

 

Further:

 

(a)           Each purchaser of all or any portion of the Collateral
(including the Lender) at any such sale shall hold the Collateral so sold,
absolutely free from any claim or right of whatsoever kind, including, without
limitation, any equity or right of redemption, of the Borrower, which the
Borrower hereby specifically waives, to the extent it may lawfully do so, all 

 

8

 

rights of redemption,
stay or appraisal which the Borrower has or may have under any rule of law
or statute now existing or hereafter adopted.

 

(b)           Any written notice required by law of any sale, public
or private, of all or any part of the Collateral shall be deemed in all
circumstances to have been given in a commercially reasonable manner if sent at
least ten (10) days prior to such sale by mail to the Borrower at the
address for the Borrower set forth in Section 5.1 (Notices).  At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels.  The Lender shall not be obligated to make any
sale pursuant to any such notice.  In
case of any sale of all or any part of the Collateral for credit or for future
delivery, the Collateral so sold may be retained by the Lender until the
selling price is paid by the purchaser thereof, but the Lender shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Collateral so sold, and in case of any such failure, such Collateral may
again be sold under and pursuant to the provisions hereof.  The Lender, as attorney-in-fact, pursuant to Section 3.2
(Defense of Title), may, in the name and stead of the Borrower, make and
execute all conveyances, assignments and transfers of the Collateral sold
pursuant to this Section.  The Borrower
shall, if so requested by the Lender, ratify and confirm any sale or sales by
executing and delivering to the Lender, or to such purchaser or purchasers, all
such documents as may, in the judgment of the Lender, be advisable for the
purpose.

 

(c)           If any consent, approval, or authorization of any
Governmental Authority or any Person having any interest therein, should be
necessary to effectuate any sale or other disposition of the Collateral, the
Borrower agrees to execute all such applications and other instruments, and to
take all other action, as may be required in connection with securing any such
consent, approval or authorization.

 

(d)           The Borrower recognizes that the Lender may be unable
to effect a public sale of all or a part of the Collateral consisting of “securities”
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable federal and state Laws.  The Lender may, therefore, in its discretion,
take such steps as it may deem appropriate to comply with such Laws and may,
for example, at any sale of the Collateral consisting of securities restrict
the prospective bidders or purchasers as to their number, nature of business
and investment intention, including, without limitation, a requirement that the
Persons making such purchases represent and agree to the satisfaction of the
Lender that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any
thereof.  The Borrower covenants and
agrees to do or cause to be done promptly all such acts and things as the
Lender may request from time to time and as may be necessary to offer and/or
sell the securities or any part thereof in a manner which is valid and binding
and in conformance with all applicable Laws.

 

4.2.5        Specific Rights With Regard to Collateral.

 

In addition to all other rights and remedies provided
hereunder or as shall exist at law or in equity from time to time, upon the
continuance of an Event of Default, the Lender may (but shall be under no
obligation to), without notice to the Borrower, and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of 

 

9

 

the Lender or in the name
of the Borrower or otherwise, for the use and benefit of the Lender, but at the
cost and expense of the Borrower and without notice to the Borrower:

 

(a)           direct any person or entity obligated to make payments
or distributions directly to the Lender;

 

(b)           compromise, extend or renew any of the Collateral or
deal with the same as it may deem advisable;

 

(c)           make exchanges, substitutions or surrenders of all or
any part of the Collateral;

 

(d)           copy, transcribe, or remove from any place of business
of the Borrower all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lender, make such use of the Borrower’s places of business as
may be reasonably necessary to administer, control and collect the Collateral;

 

(e)           demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;

 

(f)            institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;

 

(g)           settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;

 

(h)           endorse or sign the name of the Borrower upon any
items of payment, certificates of title, instruments, securities, powers,
documents, documents of title, or other writing relating to or part of the
Collateral and on any proof of claim in bankruptcy against an account debtor;

 

(i)            take any action and execute any instruments which such
attorney-in-fact may deem necessary or advisable to accomplish the purposes of
this Agreement;

 

(j)            take control in any manner of any cash or non-cash
items of payments comprising the Collateral;

 

(k)           subject to obtaining all necessary consents,
approvals, and authorizations, if any, required by applicable laws, cause the
Collateral to be transferred to the Lender or to the name of one or more of the
Lender’s nominees and thereafter exercise as to such Collateral all rights,
powers and remedies of owners;

 

(l)            collect by legal proceedings or otherwise all
distributions, interest, principal payments, and other sums now or hereafter
payable on account of the Collateral, and hold the same as Collateral, or apply
the same to the expenses incurred by the Lender in such legal proceedings or to
the Obligations, the manner and distribution of the application to be
determined by the Lender in its sole and absolute discretion;

 

10

 

(m)          enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement, or any other
agreement relating to or affecting the Collateral and in connection therewith
deposit or surrender control of such Collateral thereunder, and accept other
property in exchange therefor and hold or apply such property or money so
received in accordance with the provisions hereof;

 

(n)           take any other action necessary or beneficial to
realize upon or dispose of the Collateral; and

 

(o)           upon written instructions to the LLC, the Lender or
its designees shall be entitled to become a member in the LLC in the place and
stead of the Borrower and shall be entitled to exercise and enjoy all rights
and privileges pertaining thereto, including without limitation, the right to (i) participate
in the management and administration of the LLC’s business and affairs, (ii) require
information regarding or an accounting of LLC transactions and (iii) inspect
the LLC’s books.

 

4.2.6        Application of Proceeds.

 

Any proceeds of sale or other disposition of the
Collateral will be applied by the Lender to the payment of the Enforcement
Costs, and any balance of such proceeds will be applied by the Lender to the
payment of the Obligations and the other obligations secured by this Agreement
in such order and manner of application as the Lender may from time to time in
its sole and absolute discretion determine. 
If the sale or other disposition of the Collateral fails to fully
satisfy the Obligations and the other obligations secured by this Agreement,
the Borrower shall remain liable to the Lender for any deficiency, if and to
the extent the Borrower is liable for the payment or performance of the
Obligations under the provisions of any of the Financing Documents.

 

4.2.7        Performance by Lender.

 

If the Borrower shall fail to perform, observe or
comply with any of the conditions, covenants, terms, stipulations or agreements
contained in this Agreement or any of the other Financing Documents, the Lender
without notice to or demand upon the Borrower and without waiving or releasing
any of the Obligations or any Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of the Borrower, and may enter upon the premises
of the Borrower for that purpose and take all such action thereon as the Lender
may consider necessary or appropriate for such purpose and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender, but at the cost and expense
of the Borrower and without notice to the Borrower.  All sums so paid or advanced by the Lender
together with interest thereon from the date of payment, advance or incurring
until paid in full at the highest rate of interest charged under the Note and
all costs and expenses, shall be deemed part of the Enforcement Costs, shall be
paid by the Borrower to the Lender on demand, and shall constitute and become a
part of the Obligations.

 

11

 

4.2.8        Other Remedies.

 

The Lender may from time to time proceed to protect or
enforce its rights by an action or actions at law or in equity or by any other
appropriate proceeding, whether for the specific performance of any of the
covenants contained in this Agreement or in any of the other Financing
Documents, or for an injunction against the violation of any of the terms of
this Agreement or any of the other Financing Documents, or in aid of the
exercise or execution of any right, remedy or power granted in this Agreement,
the Financing Documents, and/or applicable Laws.

 

Section 4.3             Costs and Expenses.

 

The Borrower shall pay on demand all reasonable costs
and expenses (including reasonable attorney’s fees), all of which shall be
deemed part of the Obligations, incurred by and on behalf of the Lender
incident to the preparation of and in connection with this Agreement, any
collection, servicing, sale, disposition or other action taken by the Lender
with respect to the Collateral or any portion thereof.  Such costs and expenses shall become part of
the Obligations.

 

Section 4.4             Receipt Sufficient Discharge to Purchaser.

 

Upon any sale or other disposition of the Collateral
or any part thereof, the receipt of purchase money by the Lender or other
Person making the sale or disposition shall be a sufficient discharge to the
purchaser for the purchase money, and such purchaser shall not be obligated to
see to the application thereof.

 

Section 4.5             Remedies, Etc. Cumulative.

 

Each right, power and remedy of the Lender as provided
for in this Agreement or in any of the other Financing Documents or in any
related instrument or agreement or now or thereafter existing at law or in
equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Agreement or in the other Financing Documents or in any related document,
instrument or agreement or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the exercise by the
Lender of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the Lender of any or all such other
rights, powers or remedies.

 

Section 4.6             No Waiver, Etc.

 

No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents or of any related
documents, instruments or agreements, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach, or preclude the Lender
from exercising any such right, power or remedy at any later time or times.  By accepting payment after the due date of
any amount payable under this Agreement or under any of the other Financing
Documents or under any related document, instrument or agreement, the Lender
shall not be deemed to waive the right either to require prompt payment when
due of all other amounts payable under this 

 

12

 

Agreement or under any
other of the Financing Documents, or to declare a default for failure to effect
such prompt payment of any such other amount.

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1             Notices.

 

All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement shall be given as set forth in the Financing Agreement.

 

Section 5.2             Amendments; Waivers.

 

This Agreement and the other Financing Documents may
not be amended, modified, or changed in any respect except by an agreement in
writing signed by the Lender and the Borrower. 
No waiver of any provision of this Agreement or of any of the other
Financing Documents, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing.  No course of dealing between the Borrower and
the Lender and no act or failure to act from time to time on the part of the
Lender shall constitute a waiver, amendment or modification of any provision of
this Agreement or any of the other Financing Documents or any right or remedy
under this Agreement, under any of the other Financing Documents or under
applicable Laws.

 

Section 5.3             Cumulative Remedies.

 

The rights, powers and remedies provided in this
Agreement and in the other Financing Documents are cumulative, may be exercised
concurrently or separately, may be exercised from time to time and in such
order as the Lender shall determine and are in addition to, and not exclusive
of, rights, powers and remedies provided by existing or future applicable
Laws.  In order to entitle the Lender to
exercise any remedy reserved to it in this Agreement, it shall not be necessary
to give any notice, other than such notice as may be expressly required in this
Agreement.  Without limiting the
generality of the foregoing, the Lender may:

 

(a)           proceed against the Borrower with or without
proceeding against the LLC or any other Person who may be liable for all or any
part of the Obligations;

 

(b)           proceed against the Borrower with or without
proceeding under any of the other Financing Documents or against any Collateral
or other collateral and security for all or any part of the Obligations;

 

(c)           without notice, release or compromise with any
guarantor or other Person liable for all or any part of the Obligations under
the Financing Documents or otherwise; and

 

(d)           without reducing or impairing the obligations of the
Borrower and without notice thereof: (i) fail to perfect the lien in any
or all Collateral or to release any or all the Collateral or to accept
substitute collateral, (ii) waive any provision of this Agreement or the
other Financing Documents, (iii) exercise or fail to exercise rights of
set-off or other rights, or 

 

13

 

(iv) accept partial
payments or extend from time to time the maturity of all or any part of the
Obligations.

 

Section 5.4             Severability.

 

In case one or more provisions, or part thereof,
contained in this Agreement or in the other Financing Documents shall be
invalid, illegal or unenforceable in any respect under any Law, then without
need for any further agreement, notice or action:

 

(a)           the validity, legality and enforceability of the
remaining provisions shall remain effective and binding on the parties thereto
and shall not be affected or impaired thereby;

 

(b)           the obligation to be fulfilled shall be reduced to the
limit of such validity;

 

(c)           if such provision or part thereof pertains to
repayment of the Obligations, then, at the sole and absolute discretion of the
Lender, all of the Obligations of the Borrower to the Lender shall become
immediately due and payable; and

 

(d)           if affected provision or part thereof does not pertain
to repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part
thereof only shall be void, and the remainder of this Agreement shall remain
operative and in full force and effect.

 

Section 5.5             Assignments by Lender.

 

The Lender may, with the consent of the Borrower,
sell, assign or transfer to or participate with any Person or Persons all or
any part of the Obligations, and each such Person or Persons shall have the
right to enforce the provisions of this Agreement and any of the other
Financing Documents as fully as the Lender, provided that the Lender shall
continue to have the unimpaired right to enforce the provisions of this
Agreement and any of the other Financing Documents as to so much of the
Obligations that the Lender has not sold, assigned or transferred.  In connection with the foregoing, the Lender
shall have the right to disclose to any such actual or potential purchaser,
assignee, transferee or participant all financial records, information,
reports, financial statements and documents obtained in connection with this
Agreement and any of the other Financing Documents or otherwise; provided that
each such recipient shall have executed and delivered to the Borrower a
confidentiality agreement containing substantially the same terms as Section 8.21
of the Financing Agreement.

 

Section 5.6             Successors and Assigns.

 

This Agreement and all other Financing Documents shall
be binding upon and inure to the benefit of the Borrower and the Lender and
their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Lender.

 

14

 

Section 5.7             Applicable Law.

 

This Agreement, shall be governed by the Laws of the
State, as if each of the Financing Documents and this Agreement had each been
executed, delivered, administered and performed solely within the State.

 

Section 5.8             Headings.

 

The headings in this Agreement are included herein for
convenience only, shall not constitute a part of this Agreement for any other
purpose, and shall not be deemed to affect the meaning or construction of any
of the provisions hereof.

 

Section 5.9             Entire Agreement.

 

This Agreement is intended by the Lender and the
Borrower to be a complete, exclusive and final expression of the agreements
contained herein.  Neither the Lender nor
the Borrower shall hereafter have any rights under any prior agreements but
shall look solely to this Agreement for definition and determination of all of
their respective rights, liabilities and responsibilities under this Agreement.

 

Section 5.10           Counterparts.

 

This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same institute.

 

Section 5.11           Waiver of Trial by Jury.

 

BORROWER AND THE LENDER HEREBY JOINTLY AND SEVERALLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND THE
LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS
AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE
COLLATERAL.  THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.

 

This waiver is knowingly, willingly and voluntarily
made by Borrower and the Lender, and Borrower and the Lender hereby represent
that no representations of fact or opinion have been made by any individual to
induce this waiver of trial by jury or to in any way modify or nullify its
effect.  Borrower and the Lender further
represent that they have been represented in the signing of this Agreement and
in the making of this waiver by independent legal counsel, selected of their
own free will, and that they have had the opportunity to discuss this waiver
with counsel.

 

Section 5.12           Liability of the Lender.

 

The Borrower hereby agrees that the Lender shall not
be chargeable for any negligence, mistake, act or omission of any accountant,
examiner, agency or attorney employed by the Lender in making examinations,
investigations or collections, or otherwise in perfecting, 

 

15

 

maintaining, protecting
or realizing upon any lien or security interest or any other interest in the
Collateral or other security for the Obligations.  Except for willful misconduct or gross
negligence, the Lender shall be under no liability for, and the Borrower hereby
releases the Lender from, all claims for loss or damage caused by (a) the
Lender’s failure to perform or collect any of the Collateral, or (b) the
Lender’s failure to preserve or protect any rights of the Borrower under the
Collateral.  The Borrower agrees that the
duties of the Lender with respect to the Collateral shall be solely to use
reasonable care in the custody and preservation of the Collateral in Lender’s
possession, which shall not include any steps necessary to preserve rights
against prior parties.  In the event the
Lender enforces or seeks to enforce any of the rights of an owner of the LLC
under any of the Collateral, the Borrower shall immediately reimburse the
Lender for such costs and expenses (including actual attorney’s fees reasonably
incurred) so incurred and payment of such sums shall be secured by this
Agreement.

 

[SIGNATURES
APPEAR ON THE FOLLOWING PAGE]

 

16

 

IN WITNESS WHEREOF, the Borrower has caused this
Agreement to be executed and delivered, as of the day and year first written
above.

 

	
   

  	
  LIQUIDITY SERVICES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James M. Rallo

  
	
   

  	
  Name: James M. Rallo

  
	
   

  	
  Title: Chief Financial
  Officer & Treasurer

  

 

[Signature Page to Pledge, Assignment and Security
Agreement]ex10-1.htm

RACKSPACE HOSTING INC

RULES

OF

THE RACKSPACE HOSTING INC 2010 HM REVENUE & CUSTOMS UK APPROVED

SUB-PLAN

Approved by the Administrator on: 28 January 2010

Approved by HM Revenue & Customs on: 10 March 2010

HM Revenue & Customs reference no: X105385

PricewaterhouseCoopers LLP

1 Harefield Road

The Atrium

Uxbridge UB8 1EX

Tel: 01895 522000

Fax: 01895 522020

  

  

  

THE RACKSPACE HOSTING INC 2010 HM REVENUE & CUSTOMS UK

APPROVED SUB-PLAN

 

	
Rule

	 	
Page Number

	 
	
1. General

	 	 	2	 
	
2. Establishment of Sub-Plan

	 	 	2	 
	
3. Purpose of Sub-Plan

	 	 	2	 
	
4. HM Revenue & Customs approval of Sub-Plan

	 	 	2	 
	
5. Rules of Sub-Plan

	 	 	2	 
	
6. Relationship of Sub-Plan to Plan

	 	 	2	 
	
7. Interpretation

	 	 	2	 
	
7.1. Definitions and Interpretation

	 	 	2	 
	
7.2. Interpretation

	 	 	4	 
	
8. Companies participating in Sub-Plan

	 	 	4	 
	
9. Grant of Options

	 	 	5	 
	
9.1. General

	 	 	5	 
	
9.2. Contents of Award Agreement

	 	 	5	 
	
9.3. Duration of Plan

	 	 	5	 
	
9.4. Options non-transferable

	 	 	5	 
	
9.5. Persons to whom Options may be granted

	 	 	5	 
	
9.6. HM Revenue & Customs limit (£30,000)

	 	 	5	 
	
9.7. Foreign Currency Options

	 	 	6	 
	
9.8. Scaling down

	 	 	6	 
	
10. PERFORMANCE GOAL

	 	 	6	 
	
10.1. Imposition of Performance Goal

	 	 	6	 
	
10.2. Nature of Performance Goal

	 	 	6	 
	
10.3. Performance Goal can no longer be satisfied

	 	 	6	 
	
10.4. Substitution, variation or waiver of Performance Goal

	 	 	6	 
	
10.5. Notification of Participants

	 	 	7	 
	
11. EXERCISE OF OPTIONS

	 	 	7	 
	
11.1. Material Interest

	 	 	7	 
	
11.2. Procedure for exercise of Options

	 	 	7	 
	
11.3. Transfer of Employer’s NIC

	 	 	7	 
	
11.4. Issue or transfer of Plan Shares on exercise of Options

	 	 	8	 
	
11.5. Death

	 	 	8	 
	
11.6. Exercise of options by leavers

	 	 	8	 
	
12. EXCHANGE OF OPTIONS

	 	 	8	 
	
12.1. Circumstances in which Exchange can occur

	 	 	8	 
	
12.2. Periods allowed for exchange of Options

	 	 	9	 
	
12.3. Meaning of “equivalent”

	 	 	9	 
	
12.4. Application of Sub-Plan to New Option

	 	 	10	 
	
12.5. Disapplication of Section 20(c) of the Plan

	 	 	10	 
	
12.6. Rights attaching to Plan Shares

	 	 	10	 
	
13. ADJUSTMENT OF OPTIONS

	 	 	10	 
	
13.1. HM Revenue & Customs approval

	 	 	10	 
	
13.2. HM Revenue & Customs approval of amendments

	 	 	10	 
	
14. EXERCISE OF DISCRETION BY COMPANY

	 	 	10	 
	
15. DISAPPLICATION OF CERTAIN PROVISIONS OF PLAN

	 	 	11	 

  

- 1 -

  

THE RACKSPACE HOSTING INC 2010 HM REVENUE & CUSTOMS UK

APPROVED SUB-PLAN

APPENDIX

1. General

This appendix to The Rackspace Inc 2007 Long Term Incentive Plan (“the Plan”) sets out the rules of The Rackspace Hosting Inc HM Revenue & Customs UK Approved Sub-Plan (“the Sub-Plan”).

2. Establishment of Sub-Plan

Rackspace Hosting Inc (“the Company”) has established the Sub-Plan under Section 32(iv) of the Plan, which authorises the Administrator to establish sub-plans to the Plan.

3. Purpose of Sub-Plan

The primary purpose of the Sub-Plan is to enable the grant to, and subsequent exercise by, employees and directors in the United Kingdom, on a tax favoured basis, of options to acquire shares in the Company under the Plan within the provisions of Schedule 4.

4. HM Revenue & Customs approval of Sub-Plan

The Sub-Plan is intended to be approved by HM Revenue & Customs under Schedule 4 ITEPA 2003.

5. Rules of Sub-Plan

The provisions of the Plan, in their present form and as amended from time to time, shall, with the modifications set out in this appendix, form the rules of the Sub-Plan. In the event of any conflict between the provisions of the Plan and the Sub-Plan, the Sub-Plan shall prevail.

6. Relationship of Sub-Plan to Plan

The Sub-Plan shall form part of the Plan and shall not be a separate and independent plan.

7. Interpretation

7.1. Definitions and Interpretation

In this Sub-Plan, unless the context otherwise requires, the following words and expressions have the following meanings:

7.1.1. Acquiring Company means a company (including a New Holding Company) which obtains Control of the Company in the circumstances referred to in Rule 12;

7.1.2. Approval Date means the date on which the Plan is approved by HM Revenue & Customs under Schedule 4;

7.1.3. Associated Company has the meaning given to that expression by paragraph 35(1) of Schedule 4i;

7.1.4. Close Company has the meaning given to that expression by section 989 of ITA 2007, and paragraph 9(4) of Schedule 4ii;

  

- 2 -

  

7.1.5. Company means Rackspace Hosting Inc incorporated in Delaware;

7.1.6. Consortium has the meaning given to that word by paragraph 36(2) of Schedule 4iii;

7.1.7. Control has the meaning given to that word by section 995 of ITA 2007;

7.1.8. Eligible Employee means an individual who is:

	
(a)  

	
an employee (other than a director) of a Group Member or

	
(b)  

	
a director of a Group Member who is contracted to work at least 25 hours per week for the Group (exclusive of meal breaks);

 

and who, in either case:

	
(i)  

	
is not eligible solely by reason that he is a non-executive director of a Group Member; and

	
(ii)  

	
does not have at the Grant Date, and has not had during the preceding twelve months, a Material Interest in a Close Company which is the Company or a company which has Control of the Company or a member of a Consortium which owns the Company.

7.1.9. Employer’s NIC means employer’s national insurance contributions liability;

7.1.10. Exercise Price means the amount per Plan Share payable on the exercise of an Option determined in accordance with Rule 6(e)(i) of the Plan, but shall not be less than the Market Value of a Plan Share on the Grant Date;

7.1.11. Grant Date means the date on which an Option is granted to an Eligible Employee determined in accordance with Section 23 of the Plan;

7.1.12. Group means the Company and its Subsidiaries from time to time, and “Group Member” shall be interpreted accordingly;

7.1.13. ITA 2007 means the Income Tax Act 2007;

7.1.14. ITEPA 2003 means the Income Tax (Earnings and Pensions) Act 2003;

7.1.15. Key Feature means a provision of the Plan or Sub-Plan which is necessary in order

to meet the requirements of Schedule 4;

7.1.16. Market Value means notwithstanding Section 2(s) of the Plan,

	
  

	
(a)

	
in the case of an Option granted under the Sub-Plan, if at the relevant time the Plan Shares are listed on the New York Stock Exchange the closing sale price of a Plan Share on the New York Stock Exchange for the the Grant Date of the Option;

	
(b)  

	
if paragraph (a) does not apply, and for the purposes of Rules 7.1.10 and 9.6, the market value of a Plan Share as determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 by the Company and agreed in advance with HM Revenue & Customs on the Grant Date or such earlier date or dates (not being more than thirty days before the Grant Date) as may be determined by the Company and agreed with HM Revenue & Customs; and

 

  

- 3 -

  

	
(c)  

	
in the case of an option granted or award made under any stock option plan other than the Sub-Plan, the market value of an ordinary share in the capital of the Company determined under the rules of such plan for the purpose of the grant of the option or the making of the award.

7.1.17. Material Interest has the meaning given to that expression by paragraphs 9 to 14 of

Schedule 4iv;

7.1.18. New Option means an option granted by way of exchange under Rule 12.1;

7.1.19. New Plan Shares means the shares subject to a New Option;

7.1.20. Performance Goal means a performance goal imposed as a condition of the exercise of an Option under Rule 10.1 and as substituted or varied in accordance with Rule 10.4;

7.1.21. Plan Shares means ordinary shares in the capital of the Company which satisfy the conditions in paragraphs 16 to 20 of Schedule 4;

7.1.22. Share Certificate means legal documentation certifying ownership of a specific number of shares in the Company;

7.1.23. Schedule 4 means Schedule 4 to ITEPA 2003;

7.1.24. Subsidiary means a company over which the Company has Control;

7.2. Interpretation

In the Sub-Plan, unless otherwise specified:

7.2.1. words and expressions not defined above have the same meanings as are given to them in the Plan;

7.2.2. the contents and rule headings are inserted for ease of reference only and do not affect their interpretation;

7.2.3. a reference to a rule is a reference to a rule of this Sub-Plan;

7.2.4. the singular includes the plural and vice-versa and the masculine includes the feminine; and

7.2.5. a reference to a statutory provision is a reference to a United Kingdom statutory provision and includes any statutory modification, amendment or re-enactment thereof.

8. Companies participating in Sub-Plan

The companies participating in the Sub-Plan shall be the Company and any Subsidiary which has been nominated by the Company to participate in the Sub-Plan.

  

- 4 -

  

9. Grant of Options

 

9.1. General

An Option shall be granted under and subject to the provisions of the Plan as modified by this Sub-Plan.

9.2. Contents of Award Agreement

An Award Agreement shall be in such form of document as the Administrator may determine from time to time, provided that it shall state all of the following which the Administrator shall determine at the Grant Date:

	
·  

	
the Grant Date;

	
·  

	
the number of Plan Shares subject to the Option or how that number may be calculated;

	
·  

	
the Exercise Price or the method by which the Exercise Price will be determined;

	
·  

	
when the Option will ordinarily become exercisable, and the number of Plan Shares over which the Option may then be exercised;

	
·  

	
how the Option may be exercised;

	
·  

	
that the Option is granted in accordance with Schedule 4; and

	
·  

	
any Performance Goals or other conditions applicable to the Option.

9.3. Duration of Plan

An Option may not be granted earlier than the Approval Date.

9.4. Options non-transferable

Notwithstanding Section 14, an Option shall be personal to the Eligible Employee to whom it is granted and, subject to Rule 11.5, shall not be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Participant purports to transfer, charge or otherwise alienate the Option.

9.5. Persons to whom Options may be granted

No Option may be granted to an individual who is not an Eligible Employee on the Grant Date.

9.6. HM Revenue & Customs limit (£30,000)

An Option may not be granted to an Eligible Employee if the result of granting the Option would be that the aggregate Market Value of the shares subject to all outstanding options granted to him under the Plan or any other share option scheme established by the Company or an Associated Company and approved by HM Revenue & Customs under Schedule 4 would exceed £30,000 or such other limit as may from time to time be specified in paragraph 6 of Schedule 4. For the purpose of this limit, shares subject to an option which has been exercised, lapsed, renounced or otherwise become incapable of being exercised shall be disregarded.

  

- 5 -

  

9.7. Foreign Currency Options

For the purpose of the limit contained in Rule 9.6, the United Kingdom sterling equivalent for the market value of a share on any day shall be determined by taking the spot sterling/US Dollar exchange rate for that day as shown in the Wall Street Journal.

9.8. Scaling down

If the grant of an Option would cause the limit in this Rule 9 to be exceeded, such Option shall take effect as an Option over the maximum number of Plan Shares which does not cause the limit to be exceeded. If more than one Option is granted on the same Grant Date, the number of Plan Shares which would otherwise be subject to each Option shall be reduced pro rata.

10. PERFORMANCE GOAL

10.1. Imposition of Performance Goal

On the grant of an Option, the Administrator may impose a Performance Goal under Section 12 of the Plan, and any further condition on the exercise of the Option that the Administrator determines to be appropriate under Sections 6(e)(ii) and/or 16 of the Plan.

10.2. Nature of Performance Goal

The Performance Goal and any further condition imposed under Rule 10.1 shall be:

10.2.1. objective;

10.2.2. capable of being fulfilled within the period of ten years from the Grant Date; and

10.2.3. such that, once satisfied, the exercise of the Option is not subject to the discretion of any person; and

10.2.4. set out in, or attached in the form of a schedule to, the Award Agreement.

10.3. Performance Goal can no longer be satisfied

If the Administrator determines that the Performance Goal or any further condition imposed under Rule 10.1 has not been satisfied either in whole or in part in relation to an Option and can no longer be satisfied either in whole or in part, the Option shall lapse immediately either in whole or as to such part as the Administrator determines in its discretion.

10.4. Substitution, variation or waiver of Performance Goal

If an event occurs which causes the Administrator to consider that the Performance Goal or any further condition imposed under Rule 10.1 subject to which an Option has been granted is no longer appropriate, the Administrator may substitute, vary or waive the Performance Goal or the condition under Section 4(b)(ix) of the Plan in such manner (and make such consequential amendments to the Rules) as:

10.4.1. is reasonable in the circumstances; and

  

- 6 -

  

10.4.2. except in the case of waiver, produces a fairer measure of performance and is not materially more nor less difficult to satisfy and the Option shall then take effect subject to the Performance Goal or the condition as so substituted, varied or waived.

10.5. Notification of Participants

The Administrator shall, as soon as reasonably practicable, notify each Participant concerned of any determination made by it under Rule 10.3 or of any substitution, variation or waiver of the Performance Goal or a condition made by it under Rule 10.4 and explain how it affects his position under the Sub-Plan.

11. EXERCISE OF OPTIONS

11.1. Material Interest

An Option may not be exercised if the Participant then has, or has had within the preceding twelve months, a Material Interest in a Close Company which is the Company or which is a company which has Control of the Company or which is a member of a Consortium which owns the Company.

11.2. Procedure for exercise of Options

The amount due on the exercise of an Option shall be paid in cash or by cheque or banker’s draft and may be paid out of funds provided to the Participant on loan by a bank, broker or other person. Notwithstanding Sections 6(e)(iii) and 6(f) of the Plan, the amount may not be paid by the transfer to the Company of Plan Shares or any other shares or securities. The amount may be paid by “cashless exercise” in accordance with Section 6(f) of the Plan provided HM Revenue & Customs have agreed this in advance. The date of exercise of an Option shall be the date on which the Company receives the amount due on the exercise of the Option.

11.3. Transfer of Employer’s NIC

The Administrator may, at its discretion, impose requirements for the payment by the Participant of all or any part of the Employer’s NIC which may arise as a result of the exercise of his Option. Such requirements shall be specified on the Grant Date and shall be a condition of exercise of the Option, provided that the Administrator may waive these requirements. They may include in particular, but not by way of limitation, a determination that the Option

may not be exercised unless the Participant has beforehand paid to the Company (or the Group Member which employs the Participant, if different) an amount sufficient to discharge all or any part of the Employer’s NIC. Alternatively, the Participant may, by agreement with the Company or the Group Member (as the case may be), enter into some other arrangement to ensure that such amount is available to them or it (whether by authorising the sale of some or all of the Plan Shares subject to his Option and the payment to the Company or the Group Member (as the case may be) of the requisite amount out of the proceeds of sale or otherwise). Where this is the case the Option shall not be treated as exercised until the Company or the Group Member (as the case may be) determine that such arrangements are satisfactory to it.

  

- 7 -

  

11.4. Issue or transfer of Plan Shares on exercise of Options

The Company shall, as soon as reasonably practicable and in any event not later than thirty days after the date of exercise of an Option, issue or transfer to the Particiapant, or procure the issue or transfer to the Participant of, the number of Plan Shares specified in the notice of exercise and shall deliver to the Participant, or procure the delivery to the Participant of, a Share Certificate or book or electronic entry in respect of such Plan Shares together with, in

the case of the partial exercise of an Option, an Award Agreement in respect of, or the original Award Agreement endorsed to show, the unexercised part of the Option, subject only to compliance by the Participant with the rules of the Sub-Plan and to any delay necessary to complete or obtain:

11.4.1. the listing of the Plan Shares on any stock exchange on which Plan Shares are then listed;

11.4.2. such registration or other qualification of the Plan Shares under any applicable law, rule or regulation as the Company determines is necessary or desirable; or

11.4.3. the making of provision for the payment or withholding of any taxes required to be withheld in accordance with the applicable law of any foreign jurisdiction in respect of the exercise of the Option or the receipt of the Plan Shares.

11.5. Death

Notwithstanding Section 6(f)(iv) of the Plan, if a Participant dies before the tenth anniversary of the Grant Date, his personal representatives shall be entitled to exercise, to the extent the Options have vested on the date of his death, his Options no later than the end of the twelve month period following his death. To the extent the Option is not so exercised, the Options shall lapse immediately.

11.6. Exercise of options by leavers

Notwithstanding Section 6(f)(ii)-(v) of the Plan the period during which the Option shall remain exercisable following termination of employment shall be stated in the Award Agreement and may not thereafter be altered.

12. EXCHANGE OF OPTIONS

12.1. Circumstances in which Exchange can occur

If a company (“the Acquiring Company”) obtains Control of the Company as a result of:

12.1.1. making a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have Control of the Company; or

12.1.2. making a general offer to acquire all the shares in the Company of the same class as the Plan Shares; or

12.1.3. a compromise or arrangement sanction by the court under Section 899 of the Companies Act 2006 (“Companies Act”) or other local legislation which HM Revenue & Customs agrees is equivalent; or

  

- 8 -

  

12.1.4. an Acquiring Company becomes bound or entitled to acquire Plan Shares under Sections 979 to 982 of the Companies Act or other local legislation which HM Revenue & Customs agrees is equivalent

a Participant may, at any time during the period set out in Rule 12.2, by agreement with the Acquiring Company, release his Option in whole or in part in consideration of the grant to him of a new option (“New Option”) which is equivalent to the Option but which relates to shares (“New Plan Shares”) in:

12.1.5. the Acquiring Company;

12.1.6. a company which has Control of the Acquiring Company; or

12.1.7. a company which either is, or has Control of, a company which is a member of a Consortium which owns either the Acquiring Company or a company having Control of the Acquiring Company.

12.2. Periods allowed for exchange of Options

The periods referred to in Rule 12.1 are:

12.2.1. in the case of Rules 12.1.1 and 12.1.2, the period of six months beginning with the time when the person making the offer or proposed acquisition (as the case may be) has obtained Control of the Company and any condition subject to which the offer or proposed acquisition is made has been satisfied;

12.2.2. in the case of Rule 12.1.3 the period of six months from the date of court sanction; and

12.2.3. in the case where a person becomes bound or entitled as set out in Rule 12.1.4 within the period during which the Acquiring Company remains bound or entitled.

12.3. Meaning of “equivalent”

The New Option shall not be regarded for the purpose of this Rule 12 as equivalent to the

Option unless:

12.3.1. subject to the discretion of the Administrator as to whether the Performance Goal or any further condition imposed under Rule 10.1 should continue to apply to the New Option or be substituted, varied or waived under Rule 10.4, the New Option will be exercisable in the same manner as the Option and subject to the provisions of the Plan as it had effect immediately before the release of the Option;

12.3.2. the New Plan Shares satisfy the conditions in paragraphs 16 to 20 of Schedule 4; and

12.3.3. the total market value, immediately before the release of the Option, of the Plan Shares which were subject to the Option is as nearly as may be equal to the total market value, immediately after the grant of the New Option, of the New Plan Shares subject to the New Option (market value being determined for this purpose in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992); and

12.3.4. the total amount payable by the Participant for the acquisition of the New Plan Shares under the New Option is as nearly as may be equal to the total amount that would have been payable by the Participant for the acquisition of the Plan Shares under the Option.

  

- 9 -

  

12.4. Application of Sub-Plan to New Option

In the application of the Sub-Plan to the New Option, where appropriate, references to “Company” and “Plan Shares” shall be read as if they were references to the company to whose shares the New Option relates and the New Plan Shares, respectively, save that in the definition of “Administrator” the reference to “Company” shall be read as if it were a reference to Rackspace Hosting Inc.

12.5. Disapplication of Section 20(c) of the Plan

References in Section 20(c) of the Plan to assumption or substitution of the Options, shall be disapplied for the purposes of the Sub-Plan to the extent that they conflict with the provisions of this Rule 12. If an exchange of Options in accordance with this Rule 12 is not offered by the Acquiring Company, and an assumption or substitution under Section 20(c) of the Plan does not satisfy the requirements of paragraphs 26 and 27 of Schedule 4, the Option shall become exercisable in accordance with Section 20(c) of the Plan. The period allowed for this shall be 30 days from the date that the Participant is informed that no exchange is offered. If it is not possible to effect an exchange of Options in accordance with this Rule 12, the Option shall become exercisable in accordance with Section 20(c) of the Plan.

12.6. Rights attaching to Plan Shares

Notwithstanding Sections 6(c), 4(b)(v) and 18 of the Plan, all Plan Shares issued in respect of exercise of an Option shall, as to voting, dividend, transfer and other rights, including those arising on a liquidation of the Company, rank equally in all respects and as one class with the Plan Shares in issue at the date of such issue save as regards any rights attaching to such Plan Shares by reference to a record date prior to the date of such issue.

13. ADJUSTMENT OF OPTIONS

No adjustment or amendment of an Option as a result of Section 20(a) of the Plan shall be made under this Rule 13 unless the adjustment is permitted pursuant to paragraph 22(3) of Schedule 4.

13.1. HM Revenue & Customs approval

An adjustment shall not have effect until the adjustment has been approved by HM Revenue & Customs.

13.2. HM Revenue & Customs approval of amendments

Notwithstanding Section 35(a) of the Plan, an amendment to a Key Feature which is designed to apply to Options granted under the Sub-Plan shall not have effect at a time when the Sub-Plan is approved by HM Revenue & Customs, until the amendment has been approved by HM Revenue & Customs under Schedule 4.

14. EXERCISE OF DISCRETION BY COMPANY

In exercising any discretion that it may have under the Sub-Plan, the Administrator shall act fairly and reasonably.

  

- 10 -

  

15. DISAPPLICATION OF CERTAIN PROVISIONS OF PLAN

The provisions of the Plan, where no such rights may be granted, dealing with:

	
·  

	
 Full Value Award;

	
·  

	
 Incentive Stock Options;

	
·  

	
 Other stock or cash awards;

	
·  

	
 Performance Shares;

	
·  

	
 Performance Units;

	
·  

	
 Restricted Stock;

	
·  

	
 Restricted Stock Units; and

	
·  

	
 Stock Appreciation Rights.

The following provisions of the Plan shall not apply to this Sub-Plan:

	
·  

	
 Dividend Equivalents;

	
·  

	
 Exchange Program;

	
·  

	
Modifications under Section 4(b)(v) and (ix) of the Plan;

	
·  

	
References to mandatory surrender of Options in exchange for cash under Section; 25(c)(ii) of the Plan;

	
·  

	
Section 4(b) (xii) of the Plan;

	
·  

	
Sections 21(b) (ii) and (iii) of the Plan, save that the Company may sell deliverable

	
·  

	
Shares on Participant’s behalf having a Fair Market Value equal to the minimum statutory amount required to be withheld; and

	
·  

	
Section 36(b) of the Plan, save to the extent allowed by the Exchange Act (or other Applicable Laws);

shall not form part of, and no such rights may be granted under, the Sub-Plan.

  

- 11 -

  

 

i An “Associated Company” would be a company which has control of the Company or is under common control. Control for these purposes means the following:

• control through voting power

• control through share capital or through issued share capital

• control over the income of the company or

• control over the assets of the company.

ii A close company is a company which is under the control (as defined in paragraph i above) of five or fewer participators (eg shareholders) or of any number of participators who are directors. There are attributed to a participator all the rights and powers (eg shares, voting power) of, inter alia, a company which he controls or of an “associate” (eg relative) of his. Ordinarily, a company is excluded from being a close company if it is non-UK resident or 35% of the voting power in the company is held by the public and its shares have been listed, and the subject of dealings, on a recognised stock exchange within the preceding 12 months. However, for the purpose of the material interest test (see paragraph iv below), this exclusion does not apply with the result that the normal definition of a “close company” is extended.

iii A company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than 75% of the other company’s ordinary share capital and each of which beneficially owns not less than 5% of that capital.

iv A person has a “Material Interest” in a company if he, either on his own or with one or more associates, or if any associate of his with or without such other associates:

	
·  

	
is the beneficial owner of, or able, directly or through the medium of other companies, or by any other indirect means to control, more than 25 per cent of the ordinary share capital of the company; or

	
·  

	
where the company is a close company, possesses, or is entitled to acquire, such rights as would, in the event of the winding-up of the company or in any other circumstances, give an entitlement to receive more than 25 per cent of the assets which would then be available for distribution among the participators.

- 13 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}]]