Document:

Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is
entered into effective as of the
         day of
            , 2009,
between EPIQ SYSTEMS, INC., a Missouri corporation (the “Company”), and                                                       
(the “Indemnified Party”).

 

WHEREAS,
to induce the Indemnified Party to provide services or to continue to provide
services to or at the request of the Company, the Company wishes to provide in
this Agreement for the indemnification of, and the advancing of expenses to,
the Indemnified Party to the fullest extent (whether partial or complete)
permitted by Missouri law and as set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the Company and the
Indemnified Party hereby agree as follows:

 

1.                                      Basic
Indemnification Arrangement.

 

1.1                                  Indemnity.  If the Indemnified Party was, is or becomes a
party to or witness or other participant in, or is threatened to be made a
party to or witness or other participant in, a Claim (as defined below and
including but not limited to any Claim related to the action styled Alaska
Electrical Pension Fund v. Tom W. Olofson, et al, Defendants, and Epiq Systems, Inc.,
Nominal Defendant) by reason of (or arising in whole or in part out of) an
Indemnifiable Event (as defined below), then the Company shall indemnify the
Indemnified Party to the fullest extent permitted by Missouri law or the Company’s
Articles of Incorporation and Bylaws, as the same now exist or may hereafter be
amended (but only to the extent any such amendment permits the Company to
provide broader indemnification rights than the law or the Articles of
Incorporation and Bylaws permitted prior to such amendment), as soon as
practicable, but not later than 30 days after written demand is presented to
the Company, against any and all Expenses (as defined below) of the Claim.  If so requested by the Indemnified Party, the
Company shall advance (within five business days after the request) any and all
Expenses to the Indemnified Party.  The
Indemnified Party agrees to repay all Expenses advanced by the Company to the
Indemnified Party if it is determined in a Claim that the Indemnified Party is
not entitled to indemnification pursuant to this Agreement or otherwise.  Repayment of advanced Expenses will be made
without interest thereon and on terms that are reasonably acceptable to the
Company and the Indemnified Party.  For
purposes of this Agreement, the phrase “determined in a Claim” or “determined
in the Claim” means a decision by a court, arbitrator, hearing officer or other
judicial agent having the requisite legal authority to make that decision,
which decision has become final and from which no appeal or other review
proceeding is permissible.

 

1.2                                  Claim.  “Claim” means any threatened, pending or
completed action, suit or proceeding, any inquiry or investigation, or any
appeal therefrom whether conducted by the Company or any other party, that the
Indemnified Party in good faith believes has led or might lead to the
institution of any action, suit or proceeding, whether civil, criminal,
administrative, regulatory, investigative or other and any counterclaims in
connection therewith.  Claim shall not
include an action by or in the right of the Company if the Indemnified Party is
adjudged to be liable to the Company unless and only to the extent that it is
determined in the Claim that, despite the adjudication of liability but in view
of all the circumstances of the case, the Indemnified Party is fairly and
reasonably entitled to indemnity for expenses that the court deems proper.

 

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1.3                                  Indemnifiable
Event.  “Indemnifiable Event” means any
event or occurrence arising from or related to the fact that the Indemnified
Party is or was serving the Company in some capacity, including without
limitation, as a director, officer, employee, or agent of the Company or of any
direct or indirect subsidiary, or any corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan, or other enterprise
related to the business or activities of the Company or its direct or indirect
subsidiaries, or by reason of anything done or not done by the Indemnified
Party in any such capacity if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.  An “Indemnifiable Event” does not include (i) any
proceeding initiated by the Indemnified Party (other than in the Indemnified
Party’s capacity as an officer or director of the Company) against the Company
or any current or former director or officer of the Company, unless the Company
has joined in or consented in writing to the initiation of such action, or (ii) any
proceedings arising from the purchase and sale by the Indemnified Party of securities
in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended.

 

1.4                                  Expenses.  “Expenses” include reasonable attorneys’ fees
and all other reasonable costs, expenses and obligations actually incurred and
paid or payable in connection with investigating, defending, being a witness in
or participating in (including on appeal), or preparing to defend, any Claim
relating to any Indemnifiable Event. 
Expenses also include judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges actually
incurred and paid or payable in connection with or in respect of any Expenses)
of any Claim relating to any Indemnifiable Event.  Expenses also include Additional Expenses as
defined in Section 3 below.

 

2.                                      Notification
and Defense of Claim.

 

2.1                                  Notification.  Promptly after receipt by the Indemnified
Party of notice of the commencement of any Claim, the Indemnified Party will,
if a claim for indemnification in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, the failure to notify the Company will not relieve the
Company from any liability which it may have to the Indemnified Party under
this Agreement if the omission does not materially adversely prejudice the
rights of the Company.  In addition, the
Indemnified Party shall give the Company the information and cooperation as the
Company may reasonably require, subject to reasonable claims of privilege or
other basis for nondisclosure by the Indemnified Party.  No notification is required by this Section 2.1 with respect to any named defendant in the
action styled Alaska Electrical Pension Fund v. Tom W. Olofson, et al,
Defendants, and Epiq Systems, Inc., Nominal Defendant.

 

2.2                                  Defense.  With respect to any Claim as to which the
Indemnified Party notifies the Company of the commencement thereof, the Company
will be entitled to participate therein at its own expense.  Except as otherwise provided below, to the extent
that it may wish, the Company will be entitled to assume the defense of the
Claim, with nationally recognized litigation defense counsel reasonably
satisfactory to the Indemnified Party. 
After notice from the Company to the Indemnified Party of its election
to assume the defense of the Claim, the Company will not be liable to the
Indemnified Party under this Agreement for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided below.  The Indemnified Party shall have the right to
employ counsel in the Claim, but the fees and expenses of counsel incurred
after notice from the Company of its assumption of the defense thereof shall be
at the expense of the Indemnified Party unless (i) the employment of
counsel by the Indemnified Party has been authorized by the Company, (ii) independent
legal counsel approved by both the Company and the Indemnified Party reasonably
concludes that there is or is likely to be a conflict of interest between the
Company and the Indemnified Party in the conduct of the defense of the Claim,
or (iii) the Company shall not in fact have employed counsel to assume the
defense of the Claim, in each of which cases the

 

2

 

reasonable
fees and expenses of nationally recognized litigation defense counsel for the
Indemnified Party shall be borne by the Company.  The Company shall not be entitled to assume
the defense of any Claim brought by or on behalf of the Company or as to which
counsel shall have reasonably made the conclusion provided in clause (ii) above.

 

2.3                                  Settlements.  The Company shall not be liable to indemnify
the Indemnified Party under this Agreement for any amounts paid in settlement
of any Claim made without the prior written consent of the Company.  The Company shall not settle any Claim in any
manner that would impose any penalty or limitation on the Indemnified Party or
result in a finding of wrongdoing against the Indemnified Party without the
Indemnified Party’s prior written consent. 
Neither the Company nor the Indemnified Party will unreasonably withhold
their consent to any proposed settlement.

 

3.                                      Indemnification
for Additional Expenses.  The
Company shall indemnify the Indemnified Party against any and all expenses
(including reasonable attorneys’ fees) (collectively, “Additional Expenses”)
and, if requested by the Indemnified Party, the Company shall (within five
business days after the request) advance Additional Expenses to the Indemnified
Party, which are or may be incurred by the Indemnified Party in connection with
(a) any request by the Indemnified Party for indemnification or
advancement of Expenses under this Agreement, or (b) any claim asserted
against or action brought by the Indemnified Party for (i) indemnification
or advance payment of Expenses by the Company under this Agreement or any other
agreement or under the Company’s Articles of Incorporation or Bylaws, now or
hereafter in effect relating to Claims for an Indemnifiable Event or (ii) recovery
under any directors’ and officers’ liability insurance policies maintained by
the Company.

 

4.                                      Partial
Indemnity, Etc.  If the
Indemnified Party is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses of a
Claim, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify the Indemnified Party for the portion thereof to which
the Indemnified Party is entitled. 
Moreover, notwithstanding any other provision of this Agreement, to the
extent that the Indemnified Party has been successful on the merits or
otherwise in defense of any Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, the Indemnified Party shall be indemnified against
all Expenses incurred in connection with the successful defense of that Claim
or Claims.

 

5.                                      No
Presumption.  For
purposes of this Agreement, the termination of any Claim by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
the Indemnified Party did not meet any particular standard of conduct or have
any particular belief or that it has been determined in a Claim that
indemnification is not permitted by applicable law.

 

6.                                      Nonexclusivity.  The rights of the Indemnified Party hereunder
shall be in addition to any other rights the Indemnified Party may have under
the Company’s Articles of Incorporation or Bylaws or rules, pursuant to
resolutions or determinations of the Board of Directors, under an insurance
policy or policies, under applicable law or otherwise.  To the extent that a change in applicable law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company’s Articles of
Incorporation or Bylaws and this Agreement, it is the intent of the parties
that the Indemnified Party shall enjoy by this Agreement the greater benefits
so afforded by the change.

 

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7.                                      Liability
Insurance.  To the
extent the Company maintains an insurance policy or policies providing
liability insurance, the Indemnified Party shall be covered by the policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company employee.

 

8.                                      Subrogation.  In the event of payment under this Agreement,
the Company shall be subrogated to the extent of the payment to all of the
rights of recovery of the Indemnified Party, who shall execute all papers
required and shall do everything that may be necessary to secure the recovery
rights, including the execution of documents necessary to enable the Company
effectively to bring suit to enforce those rights.

 

9.                                      No
Duplication of Payments.  The
Company shall not be liable under this Agreement to make any payment in
connection with any Claim made against the Indemnified Party to the extent the
Indemnified Party has otherwise actually received payment (under any insurance
policy, the Company’s Articles of Incorporation or Bylaws or otherwise) of the
amounts otherwise indemnifiable hereunder.

 

10.                               Miscellaneous
Provisions.

 

10.1                            Dispute
Resolution.  Although
the parties may agree on a case-by-case basis to submit to arbitration any
specific dispute or controversy between the parties arising out of or in
connection with this Agreement as to the construction, validity, interpretation
or meaning, performance, nonperformance, enforcement, operation, or breach,
neither party hereto shall be bound to arbitrate any matter under this
Agreement in the absence of an additional written agreement signed by each
party relating to the arbitration of any specified matter.

 

10.2                            Entire
Agreement.  This
Agreement supersedes all prior documents, understandings and agreements, oral
or written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter hereof, except that that this
Agreement shall not limit the Undertaking to repay advanced expenses made by
the undersigned on or about _____________ , 2008, with respect to the
action styled Alaska Electrical Pension Fund v. Tom W. Olofson, et al,
Defendants, and Epiq Systems, Inc., Nominal Defendant.

 

10.3                            Successors and
Assigns.  This Agreement is binding upon
and shall inure to the benefit of the parties and their respective heirs,
personal and legal representatives, estate, spouse, and successors or assigns
(including any direct or indirect successor by purchase, merger, consolidation,
liquidation or otherwise to all or substantially all of the business or assets
of the Company).

 

10.4                            Severability.  If any one or more provisions of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then, if possible, the illegal, invalid or unenforceable provision
will be modified to the extent as is necessary to comply with the present or future
laws and the modification shall not affect any other provision hereof, provided
that if the provision may not be so modified the illegality, invalidity or
unenforceability will not affect any other provision, but this Agreement will
be reformed, construed and enforced as if the invalid, illegal or unenforceable
provision had never been contained herein.

 

10.5                            Notices.  Communications and other notices given under
this Agreement will be deemed delivered when (i) personally delivered, (ii) on
the third business day following deposit in the U.S. mail, first class, postage
paid, or (iii) on the date of actual delivery by a national overnight
courier service, and addressed to Indemnified Party at the address listed on
the signature page to this Agreement

 

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or
at such other address as the Indemnified Party shall specify to the Company in
a notice given pursuant to this Section, or to the Company, as follows:

 

Epiq
Systems, Inc.

Attn:  Legal Department

501
Kansas Avenue

Kansas
City, KS  66105

 

10.6                            Choice of Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri, without regard
to principles of conflict of law.

 

10.7                            Headings and
Captions.  All
headings and captions used in this Agreement are for convenience only and shall
not be construed to either limit or broaden the language of this Agreement or
any particular section.

 

10.8                            Counterparts.  This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties, but
all of which, when taken together, shall constitute but one agreement binding
upon all of the parties.

 

10.9                            Third-Party
Beneficiaries.  This
Agreement is not intended to confer upon any non-party rights or remedies
hereunder.

 

10.10                      Binding
Agreement.  This
Agreement shall be deemed effective and legally binding upon the parties when
it has been executed and delivered by all parties.  This Agreement shall inure to the benefit of
the parties and their respective successors and permitted assignees.

 

10.11                      Interpretation.  The parties acknowledge and agree that (i) each
party and its representatives has reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision, (ii) the
rule of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement and (iii) the terms and provisions of this Agreement shall be
construed fairly as to all parties and not in favor of or against any party
regardless of which party was generally responsible for the preparation of this
Agreement.

 

IN WITNESS WHEREOF, the undersigned have
executed this Indemnification Agreement as of the date first set forth above.

 

	
   

  	
  EPIQ
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNIFIED
  PARTY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

5rax10-1.htm

    
      

      

    

    
       

      Amendment
Number One

      to
the

      Economic
Development Agreement

      between

      The
State of Texas

      and

      Rackspace
US, Inc.

      

      July
24, 2009

      

       

      This
Amendment number one (“Amendment”) is by and between the State of Texas
(the “State”), acting by and through the Office of Economic Development and
Tourism, a division within the Office of the Governor (“OOGEDT”), and Rackspace
US, Inc., a Delaware corporation d/b/a Rackspace Managed Hosting
(“Rackspace”).  The State and Rackspace are hereinafter referred to
either individually as the “party,” or collectively as the
“parties.”  The Effective Date of this Amendment is July 24,
2009.

       

      Recitals

       

      Whereas,
the parties hereto entered into that certain Economic Development Agreement
dated effective August 1, 2007 (the “Agreement”); and

      

      Whereas, since entering into the
Agreement, Rackspace has invested over $70 million at the Walzem Road facility
and has created  529 new jobs in the State of Texas; and

      

      Whereas,
due to the current global economic recession and banking crisis, the parties
recognize that the job creation commitments in the Agreement are no longer
feasible and are therefore desirous of amending the Agreement to provide
additional time for job creation and other matters, while at the same time
protecting the assets and investments of the people of Texas;

      

      Agreements

       

      Now,
therefore, in consideration of the mutual promises herein, the parties
agree as follows:

       

      I.           Section
1, State of
Texas Commitment, is deleted in its entirety and replaced with the
following:

       

      1.           STATE
OF TEXAS COMMITMENT

       

      Grant of Funds from the Texas
Enterprise Fund. The State agrees to pay cash from the Texas Enterprise
Fund to Rackspace in an amount not to exceed Twenty-Two Million Dollars
($22,000,000) (the "Funds"). The Funds are composed of a Basic Fund amount of
Eight Million Five Hundred Thousand Dollars ($8,500,000) and Option Fund amounts
of up to Thirteen Million Five Hundred Thousand Dollars ($13,500,000).  The Option Fund amounts described below
under Option A, Option B and/or Option C will be paid promptly after Rackspace’s
exercise of said options in accordance with the terms and conditions set forth
herein.  In no event shall the
total of all Basic Fund and Option Fund amounts paid by the State to Rackspace
exceed Twenty-Two Million Dollars ($22,000,000).  The Basic Fund amount and Option
Fund amounts are more fully described as follows:

      

      
        	
                a)  

              	
                (BASIC) i. Five Million
      Dollars ($5,000,000) of the Funds
      will be paid to Rackspace as soon as practicable following
      execution of this Agreement, provided that all
  necessary

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 

              	
                documents
      for disbursement
      of the funds have been provided to the State as required and Rackspace
      provides evidence of creating at least Four Hundred Seventy-Five (475)
      Employment Positions by December 31, 2008 (it being understood and agreed
      that the said $5 million has been received by Rackspace and the 475
      Employment Positions have been created);
and

              

      

      

      ii. Three Million Five Hundred Thousand Dollars
($3,500,000) of the Funds will be paid to
Rackspace as soon as practicable following receipt of evidence from
Rackspace of creating at least Seven Hundred Fifty (750) additional Employment
Positions no later than December 31, 2012, in
addition to the 475 Employment Positions referred to in subparagraph a.i. above
for a total of 1,225 Employment Positions.

      

      
        	
                b)  

              	
                (OPTION
      A).  At Rackspace’s sole
      option, Rackspace shall have the right to receive an additional
      Five Million Five Hundred Thousand Dollars ($5,500,000) as soon as
      practicable following receipt of
      evidence from Rackspace of
creating:

              

      

      

      
        	
                i.  

              	
                at
      least Eight Hundred Seventy-Five (875) additional Employment Positions no
      later than December 31, 2013, in addition to
      the 1225 Employment Positions required to receive the Basic Fund amount
      for a total of 2,100 Employment Positions.
  

              

      

      

      
        	
                c)  

              	
                (OPTION B).  At Rackspace’s sole option, it shall
      have the right to receive an
additional:

              

      

      

      Five
Million Two Hundred Fifty Thousand Dollars ($5,250,000) as soon as practicable
following receipt of evidence from
Rackspace of creating:

      

      
        	
                i.  

              	
                at
      least Nine Hundred (900) additional new employment positions no later than
      December 31, 2014, if OPTION A was exercised, in addition to the 1,225 Employment Positions
      required under the Basic Fund amount and the 875 Employment Positions
      under Option A for a total of 3,000 Employment Positions;
      or

              

      

      

      Ten
Million Dollars ($10,000,000) as soon as practicable following receipt of evidence from Rackspace of
creating:

      

      
        	
                 ii.  

              	
                at
      least One Thousand Seven Hundred Seventy-Five (1,775) additional
      Employment Positions no later than December 31, 2014, if OPTION A was not
      exercised, in addition to the 1,225
      Employment Positions required under the Basic Fund amount for a total of
      3,000 Employment Positions.

              

      

      

      
        	
                d)  

              	
                (OPTION
      C).  At Rackspace’s sole
      option, Rackspace shall have the right to receive an additional Two
      Million Seven Hundred Fifty Thousand Dollars ($2,750,000) as soon as
      practicable following receipt of
      evidence from Rackspace of
creating:

              

      

      

      
        	
                i.  

              	
                at
      least One Thousand (1,000) additional new employment positions no later
      than December 31, 2015, if both OPTION A and OPTION B(i) were exercised,
      in addition to the 1,225 Employment
      Positions required under the Basic Fund amount, the 875 Employment
      Positions under Option A, and the 900 Employment Positions under Option
      B(i), for a total of 4,000 Employment Positions;
  or

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Three
Million Five Hundred Thousand Dollars ($3,500,000) as soon as practicable
following receipt of evidence from Rackspace of creating:

      

      
        	
                 ii.  

              	
                at
      least One Thousand (1,000) additional Employment Positions no later than
      December 31, 2015, if only OPTION B(ii) was
      exercised, in addition to the 1,225 Employment Positions required under
      the Basic Fund amount, and the 1,775 Employment Positions under Option
      B(ii), for a total of 4,000 Employment Positions;
  or

              

      

      

      Eight
Million Dollars ($8,000,000) as soon as practicable following receipt of
evidence from Rackspace of creating:

      

      
        	
                iii.  

              	
                at
      least One Thousand Nine Hundred (1,900) additional Employment Positions no
      later than December 31, 2015, if only OPTION A was exercised, in addition to the 1,225 Employment Positions
      required under the Basic Fund amount and the 875 Employment Positions
      under Option A, for a total of 4,000 Employment
      Positions.

              

      

      

      Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) as soon as practicable
following receipt of evidence from Rackspace of creating:

      

      
        	
                iv.  

              	
                at
      least Two Thousand Seven Hundred Seventy-Five (2,775) additional
      Employment Positions no later than December 31, 2015, if neither OPTION A
      or OPTION B was exercised, in addition to
      the 1,225 Employment Positions required under the Basic Fund Amount, for a
      total of 4,000 Employment
Positions.

              

      

      

      

      Should
Rackspace decide to exercise any or all of
the options set forth in Paras. 1 (b)-(d) it shall do so by providing written
notice of its intent to do so no later than in the annual compliance report for
the previous year.  In the event an option is exercised, Rackspace
shall provide evidence of the creation of the requisite employment positions set
forth in the option being exercised in the annual compliance report for that
year.

      

      The
format for submitting evidence of job creation will be in sufficient detail for
the State to confirm the asserted job creation. Rackspace must request each
disbursement in writing.

      

      II.           Sections
2.a., b. and c., Rackspace
Funding Conditions, are deleted in their entirety and replaced with the
following:

      

      2.           Rackspace
Funding Conditions

      

      Rackspace
must meet all of the following “Funding Conditions”, or will be subject to
liquidated damages and/or repayment in accordance with the
Agreement.  The Funding Conditions are as follows:

      

      a.  Expansion in Windcrest,
Bexar County, Texas.  Rackspace commits to establishing the
Walzem Road facility in Windcrest, Bexar County, Texas by December 31,
2012.  Rackspace will construct leasehold improvements to meet its
needs.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      b.  Job Target
(BASIC).  Rackspace commits to meeting a job target of (i)
creating a total of at least One Thousand Two Hundred Twenty-Five (1,225)
Employment Positions by December 31, 2012, in Texas and of (ii) maintaining
these Employment Positions through December 31, 2021.  Rackspace also
commits to the following job creation schedule:

      

      
        	
                (i)  

              	
                475
      Employment Positions by December 31, 2008 (“2008 Job Target”);
      and

              

      

      
        	
                 
      (ii)  

              	
                1,225
      Employment Positions by December 31, 2012 (“2012 Job
    Target”).

              

      

      

      c.  Job
Target (OPTION A).  In the event Rackspace is
able to increase employment to a level of 2,100 new employment positions
by December 31, 2013, Rackspace may qualify for an additional Five Million Five Hundred Thousand
Dollars ($5,500,000) as provided for in Section I, paragraph b (OPTION A), of this Agreement.  If Rackspace elects to exercise Option A,
Rackspace will maintain these employment positions through December 31,
2021. The Job Target for Option A will not become
an employment commitment until such time as Rackspace exercises Option A and
receives the funds associated therewith.

      

      d.  Job
Target (OPTION B).  In the event Rackspace is
able to increase employment to a level of 3,000 new employment positions
by December 31, 2014, Rackspace may qualify for up to an additional Ten Million Dollars ($10,000,000)
as provided for in Section I, paragraph c (OPTION B), of this Agreement.  If Rackspace elects to exercise Option B,
Rackspace will maintain these employment positions through December 31,
2021.  The Job Target for Option B will
not become an employment commitment until such time as Rackspace exercises
Option B and receives the funds associated therewith.

      

      e.  Job
Target (OPTION C).  In the event Rackspace is
able to increase employment to a level of 4,000 new employment positions
by December 31, 2015, Rackspace may qualify for up to an additional Thirteen Million Five Hundred Thousand
Dollars ($13,500,000) as provided for in Section I, paragraph d (OPTION C), of this Agreement.  If Rackspace elects to exercise Option C,
Rackspace will maintain these employment positions through December 31,
2021.  The Job Target for Option C will
not become an employment commitment until such time as Rackspace exercises
Option C and receives the funds associated therewith.

      

      f.  Employment
Positions.  For the purposes of this Agreement, “Employment
Positions” shall be defined as jobs meeting all of the following
criteria:

      
 

       (i) New
full-time employment positions in the State of Texas with Rackspace,
and

      

      
        	
                (ii)  

              	
                With
      an average annual gross compensation of at least $56,000 per year
      (excluding benefits as of August 1, 2007), adjusted upward by 2% per year
      over the term of the Agreement to take account of inflation beginning in
      2012.

              

      

      

      At least
two-thirds of the Employment Positions shall be created in Windcrest, Bexar
County, Texas. The remaining one-third of the Employment Positions may be
located anywhere in Texas. Employment Positions will only be counted as new
employment positions for purposes of this Agreement if they are above the total
number of employment positions with Rackspace in the State on August 1, 2007 (the
“Threshold”).  The parties agree that for purposes of this Agreement,
the Threshold shall be 1,436.  The individual Job Targets defined in
Sections 2.a-e may be referred to collectively as the “Job Target.”

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                III.  

              	
                Section
      3.b., Liquidated
      Damages, 
      is deleted in its entirety and replaced with the
  following:

              

      

      

      3.           Liquidated
Damages

      

      b.  Job
Target.  As set forth in Section 2 above, annually during the
term of this Agreement through 2021 Rackspace must deliver to OOGEDT an Annual
Compliance Verification demonstrating that it has met the Job Target for the
year just ended.  The consequences to Rackspace of satisfying, failing
to satisfy or exceeding the Job Target are as follows:

      

      i.  Compliance With Job
Target.  If Rackspace provides a satisfactory Annual Compliance
Verification that demonstrates that it has met the Job Target for that year,
then Rackspace will be deemed to have met its obligations for such preceding
year and no damages are due.

       

                     
ii.  Failure to Meet
Job Target.  If Rackspace provides an Annual Compliance
Verification that demonstrates that it has not met the Job Target for that
year for the Basic Fund amount and any options
which it has exercised, then OOGEDT may require Rackspace to pay
liquidated damages on a per job basis for every Employment Position by which it
is short that year in accordance with the Clawback Chart, Attachment A. In no
event shall the amount of damages exceed the amount of the Funds granted
pursuant to this Agreement, plus interest at the rate of 3.4% per
year.

      

       iii.  Exceeding Job
Target.  If an Annual Compliance Verification filed by
Rackspace demonstrates that it has exceeded the Job Target for that year, then Rackspace will be
deemed to have exceeded its obligations, and will receive a “Surplus Job Credit”
for each extra Employment Position that it has maintained above the Job Target for that year.  Rackspace
may utilize any earned Surplus Job Credits in following years as
follows:

      

      A.  Rackspace
may expend a Surplus Job Credit in lieu of paying liquidated damages on a per
job basis (for example, if Rackspace owes liquidated damages in the amount of
$126,300 for 100 Employment Positions lacking in a particular year, Rackspace
may discharge this amount by expending 100 Surplus Job Credits it has earned in
prior years); or

      

      B.  Rackspace
may apply Surplus Job Credits toward meeting the remaining Job Target for future
years, in accordance with whichever option has been agreed upon by Rackspace and
OOGEDT, such that if Rackspace accumulates enough Surplus Job Credits it will be
deemed to have fulfilled all of its obligations under the Agreement, and will be
released from the Agreement early (for example, if Rackspace never exercises any
of the possible options and has accumulated at least 1,225 Surplus Job Credits
by December 31, 2020, then it may apply these Surplus Job Credits forward to
fulfill its Job Target for 2021, and may thereby fulfill its obligations and be
released from the Agreement one year early).

       

      C.  The
clawback amounts shall vary based on any options exercised by
Rackspace.  The Clawback Chart, Attachment A, shall be used when
determining the amount of liquidated damages owed by Rackspace, as
applicable.

       

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                IV.  

              	
                Section
      6.d., Term, is
      amended to change the termination date to January 31,
  2022.

              

      

      

      
        	
                V.  

              	
                Section
      7.h., Notice, is
      amended to update the address for notification to Rackspace as
      follows:

              

      

      

                            Alan
Schoenbaum

                            General
Counsel

                            5000
Walzem Road

                            San
Antonio, Texas 78218

                            Phone:  210-312-4721

                            Fax:  210-312-4848

      

      
        	
                VI.  

              	
                All
      terms and conditions of the Agreement not in conflict with this Amendment
      shall remain in full force and
effect.

              

      

      

      

      

      

      [Rest of the page left intentionally
blank. Signature page follows.]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      The
parties have caused this Amendment Number One to the Economic Development
Agreement to be executed by their duly authorized representatives as of the date
first specified above.

      

      

      
        The
State of Texas Rackspace
US, Inc.

      

      

       

      

      /s/ Rick
Perry                                                                /s/ Alan
Schoenbaum                                                                

      Governor
Rick Perry

      Sr. Vice-President and
General Counsel

                                                                      [Title]

       

       July 24,
2009                                                                July 16, 2009 

      Date                                                                                              
Date

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Attachment
A

      Clawback
Chart

      

      
        	
                Option

              	
                Agreement
      Section

              	
                Grant
      Amount

                 

              	
                Total
      Jobs

              	
                Clawback
      Penalty

                (per
      job)

              	
                Payback
      Term

                 

              	
                Interest
      Rate

                 

              
	
                Basic

              	
                1.a.i
      and 1.a.ii

              	
                $8,500,000

              	
                1,225

              	
                $1,263

              	
                15
      years

              	
                3.4%

              
	
                A

              	
                1.b.i

              	
                $14,000,000

              	
                2,100

              	
                $1,230

              	
                15
      years

              	
                3.4%

              
	
                B

              	
                1.c.i

              	
                $19,250,000

              	
                3,000

              	
                $1,218

              	
                15
      years

              	
                3.4%

              
	
                B

              	
                1.c.ii

              	
                $18,500,000

              	
                3,000

              	
                $1,205

              	
                15
      years

              	
                3.4%

              
	
                C

              	
                1.d.i

              	
                $22,000,000

              	
                4,000

              	
                $1,129

              	
                15
      years

              	
                3.4%

              
	
                C

              	
                1.d.ii

              	
                $22,000,000

              	
                4,000

              	
                $1,138

              	
                15
      years

              	
                3.4%

              
	
                C

              	
                1.d.iii

              	
                $22,000,000

              	
                4,000

              	
                $1,133

              	
                15
      years

              	
                3.4%

              
	
                C

              	
                1.d.iv

              	
                $22,000,000

              	
                4,000

              	
                $1,172

              	
                15
      years

              	
                3.4%

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