DATED14 June 2010

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RACKSPACE LIMITED (registered number 03897010)  a company incorporated in England and Wales whose registered office is at 4 The Square, Stockley Park, Uxbridge, Middlesex, UB11 1BA ("Company"); and

David Kelly of Fulmer Dell, Off Windmill Road, Fulmer, Bucks, SL3 6HF

1.1  

In this Agreement (including the Schedule), unless expressly stated to the contrary, the following expressions have the following meanings:

Board

the Board of Directors of the Company from time to time, and any committee of the Board duly convened by it;

CEO

the Chief Executive Officer of the Group Company from time to time;

Competitor

any business which sells or provides (or will sell or provide once operational), products or services in competition with the Products or Services;

Confidential Information

 

Includes but is not limited to:

(a) unpublished price sensitive information relating to securities listed on a stock exchange (including details of business development projects, proposed acquisitions, sales, joint ventures or disposals involving the Company or any Group Company);

(b) lists and contact details of customers, and details of contracts with customers and/or of their requirements;

(c) business plans and policies, marketing strategies, sales reports and research results;

(d) lists and contact details of suppliers, and details of contracts with suppliers;

(e) financial reports, budgets, trading statements and pricing lists, pricing structures and/or pricing strategies;

(f) technical information and know-how relating to the processes and operations devised, owned or used by the Company and/or its Group Companies which is not in the public domain including, but not limited to, unpublished inventions, designs, computer programmes, research activities, formulae and ideas;

(g) source codes and computer systems;

(h) personnel information, including the identity of employees, officers, and consultants employed or engaged by the Company or any Group Company, or any other professional information regarding such personnel; and

(i) any document marked "confidential" (or similar), or any information which the Executive has been told is confidential or which he might reasonably expect the Company (or any Group Company) would regard as confidential;

Customer

any person, firm or company who at any time within the period of 12 months immediately preceding the Termination Date was a customer or client of the Company or any Relevant Group Company, being a person, firm or company with whom the Executive dealt personally on behalf of the Company or any Relevant Group Company; or

for whose account the Executive had overall responsibility during the said period of 12 months

Group Company

any company which from time to time is a parent or holding company of the Company or a subsidiary of the Company (both as defined by section 736 of the Companies Act 1985) or a subsidiary of a holding company (as defined), or any company where not less than 25% of its ordinary share capital is owned by the Company;

Handbook

the Company’s Employee Policy and Procedure Handbook from time to time;

Immediate Relatives

wife, common law spouse or civil partner, children, brothers, sisters, cousins, aunts, uncles, parents, grandparents and those same relatives by marriage;

Intellectual Property

all intellectual and industrial property rights, including patents, rights in registered and unregistered trade marks (including domain names), rights in registered and unregistered designs, utility models, trade or business names, confidential information, know-how, database rights, topography rights, passing-off rights, and copyright (including moral rights), performer protection rights or other industrial, intellectual or commercial rights (including rights in any invention, discovery or process), and applications for registration of any of the foregoing, and the right to apply therefore, in each case in any part of the world;

Intellectual Property Rights

all present and future right title and interest whatsoever whether legal or beneficial anywhere in the world in any and all Intellectual Property;

Key Person

a person who is or was at any time during the 12 months immediately preceding the Termination Date:

(a) an employee, director or consultant of the Company or a Relevant Group Company; and

(b) a person with whom the Executive personally dealt; and

(c) employed in the capacity of manager or in a more senior capacity, or engaged as a consultant in an equivalent capacity;

Personal Data

any data which relates to the Executive who can be identified from that data and other information in the possession of or likely to come into the possession of the Company and any Group Company and includes any expression of opinion about the Executive, and any indications of intention of the Company or any Group Company or a third party concerning the Executive;

Processing

obtaining, recording or holding Personal Data or carrying out any operation and includes organising, adapting or altering Personal Data, retrieving, using or consulting Personal Data, disclosing Personal Data by transmission, dissemination or otherwise making the data available or destroying the Personal Data;

Products or Services

any products or services of a kind sold or supplied by the Company or by any Relevant Group Company within the period of 12 months immediately preceding the Termination Date, and with which the Executive was substantially concerned or for which he was responsible at any time during the said period of 12 months;

Prospective Customer

any person, firm or company who has been engaged in negotiations with the Company or any Relevant Group Company with a view to purchasing or contracting in relation to products or services supplied by the Company or Relevant Group Company within the period of 12 months immediately preceding the Termination Date, being a person, firm or company with whom the Executive personally dealt or for whom he was responsible on behalf of the Company or any Relevant Group Company during the said period of 12 months;

Relevant Group Company

a Group Company to which the Executive has rendered substantial services in the period of 24 months immediately preceding the Termination Date;

Restricted Area

any territory or country:

(a) in which the Company or any Group Company has operated in the period of 12 months immediately preceding the Termination Date and continues to operate as at the Termination Date, and in which the Executive has been concerned or active on behalf of the Company during the period of 12 months immediately preceding the Termination Date; or

(b) in relation to which the Company or any Group Company with a view to commencing operations in that country or territory, has prepared a business plan in the period of 12 months immediately preceding the Termination Date and where the Executive has been responsible for or involved in the preparation of such plan during such period;

the Regulations

the Working Time Regulations 1998;

Sensitive Personal Data

information concerning the Executive's race, ethnic origin, political opinion, religious beliefs or beliefs of a similar nature, sexual life, physical or mental health or condition, trade union involvement or the commission or alleged commission by the Executive of any offence and any proceedings relating to that offence or alleged offence;

Termination Date

the date on which the Executive's employment with the Company terminates.

1.2  

References to statutes or statutory provisions shall be construed to include references to those statutes or provisions as amended or re-enacted (whether with or without modification) from time to time or as their application is modified by other provisions (whether before or after the date of this Agreement) and shall include any statute or provision of which they are re-enactments (whether with or without modification) and shall also include any orders, regulations, instruments or other subordinate legislation under the relevant statute or statutory provision.

1.3  

The headings in this Agreement are for ease of reference only and shall not in any way affect its construction or interpretation.

1.4  

The Schedule forms part of this Agreement and shall be construed and have the same full force and effect as if expressly set out in the main body of this Agreement.

1.5  

Unless expressly stated to the contrary in this Agreement, the words and phrases “other”, “including” and “in particular” shall not limit the generality of any preceding words or be construed as being limited to the same class as the preceding words where a wider construction is possible.

3.1  

The Executive's employment under this Agreement will commence on 14th June 2010 (“the Commencement Date”)

3.2  

No previous employment of the Executive shall count as part of the Executive's period of continuous employment with the Company.

3.3  

The date of the start of the Executive's period of continuous employment with the Company is the Commencement Date.

4.1  

Subject to clause 23, either party may terminate the Executive's employment by giving to the other not less than six months' notice in writing.

4.2  

The Company may at its absolute discretion terminate the Executive’s employment with immediate effect by paying basic salary, bonus and all benefits in lieu of notice. The Company may elect to pay any monies under this clause in one lump sum or in instalments (without interest) on those days which the Executive would have received his salary pursuant to clause 9 had he remained in employment for the duration of his notice period.

5.1  

During his employment the Executive shall (alone or jointly with such others as the Board may from time to time appoint with the Executive's consent not to be unreasonably withheld, delayed or conditioned):

5.1.1  

hold office as director of the Company;

5.1.2  

perform those duties assigned to him or vested in him by the Board, the Company or any Group Company;

5.1.3  

comply with all reasonable and lawful requests and instructions of the Board (whether given by or with the authority of the Board), and with all the Company's rules, regulations, policies and procedures and those of any Group Company from time to time in force; and

5.1.4  

faithfully and loyally serve the Company or any Group Company to the best of his ability and use his best endeavours to promote the Company's and the Group Company's interests.

5.2  

The Company reserves the right to assign to the Executive duties of a different nature, either additional to, or instead of, those referred to in clause 5.1, it being understood that he will not be assigned duties which he cannot reasonably perform or which is not consistent with his position with the Company.

5.3  

The Executive may be required to perform services not only for the Company but also for any Group Company, and without further remuneration (except as otherwise agreed), to accept any such office or position in or with any Group Company which is consistent with his position with the Company, as the Board or the Company may from time to time reasonably require. The Company may, at its sole discretion, assign the Executive's employment to any Group Company on the same terms and conditions as set out in this Agreement.

5.4  

The Executive shall keep the CEO promptly and fully informed (in writing if so required) of his conduct of the business and give to the CEO such information relating to the affairs of the Company or of any of the Group Companies to which his duties relate as he may from time to time request.

5.5  

Subject to clause 5.6, the Company shall not be under any obligation to assign any, or any particular, duties to the Executive, and the Company may, in its discretion, exercise its rights pursuant to clause 21 below during any period when no duties are assigned to the Executive.

5.6  

The Company shall continue to pay the Executive his full basic salary and to make available to him and pay all other benefits to which he is entitled under this Agreement during any period where no duties are assigned to the Executive.

6.1  

Save where the Company has assigned no duties to the Executive, the Executive shall devote the whole of his time, attention and abilities at such times as the Board, the Company, any Group Company or his duties may reasonably require to the business and affairs of the Company or Group Companies, unless prevented by ill-health.

6.2  

The Executive shall not during this Agreement, and whether or not he has had any duties assigned to him by the Company either on his own account or for any other person, firm, company or association, in any capacity whatsoever, be engaged or concerned in, or provide services to, any business or engagement other than that of the Company or any Group Company, except with the prior consent in writing of the Board, but the Executive may hold up to 5% of any securities which are quoted on a recognised investment exchange.

6.3  

The Executive confirms that he has disclosed fully to the Company all circumstances in respect of which there is, or might be, a conflict of interest between the Company or any Group Company, and the Executive or his Immediate Relatives, and he agrees to disclose fully to the Company any such circumstances which may arise during employment.

6.4  

The Executive shall not without the consent of the CEO during his employment communicate to the press or other media any comment, opinion or information whatsoever regarding the Company or any Group Company.

6.5  

Notwithstanding clauses 6.1, and 6.2, and provided that there is no conflict of interest, the Board acknowledges and consents to the Executive’s continued non-executive directorship and shareholding in By Design (UK) Limited, a private limited company trading as “MyDeco”, as well as his non-executive directorship in Holiday Extras Limited, a private limited company, subject to the Executive spending no more than 12 days per annum discharging such non-executive duties. Any further directorships will require formal consent of the Board, pursuant to clause 6.2.

7.1  

The Executive will work at the offices of the Company currently at 4 The Square, Stockley Park, Uxbridge, UB11 1ET, the Company’s new offices at 11 Millington Road, Hayes, Middlesex, UB3 4AZ or shall work at such other place or places as the Company may reasonably require within commuting distance of the Executive’s home address (as at the date of this Agreement) for the proper performance of his duties. The Executive will also be required to travel both within and outside the United Kingdom in order to fulfil his duties, including travel to the Group Company’s headquarters in Texas on at least a quarterly basis.

7.2  

The Executive may be required to work outside the United Kingdom for continuous periods of up to 30 calendar days from time to time, travelling throughout Africa, Asia, Australasia, Europe, the Middle East and the US.  The Executive’s terms and conditions of employment will remain the same during such periods.

7.3  

The Executive shall not be required to reside in other parts of the world.

8.1  

There are no normal working hours associated with the Executive's position, the parties acknowledging that the senior status of the Executive and his autonomous decision-making powers mean that he is free to determine the hours which he works, provided that he fulfils his duties under this Agreement, and that the Executive is therefore covered by Regulation 20(1) of the Regulations.

8.2  

Without prejudice to clause 8.1, if, in fact, the Executive is not covered by Regulation 20(1) of the Regulations, the Executive agrees that the maximum weekly working time limit provided for in Regulation 4(1) of the Regulations shall not apply to him, and he specifically waives that limit by signing this Agreement. The Executive has the right to terminate the agreement in this sub-clause by providing three months' written notice. The exercise of that right shall not in any way affect the operation of any other provision in this Agreement.

9.1  

The Executive shall receive a basic salary accruing from day to day at the rate of £200,000 per annum, to be paid by equal monthly instalments on or about the 25th day of each calendar month by credit transfer. This basic salary shall (unless otherwise agreed in writing by the Company) be inclusive of all fees and other remuneration which the Executive may receive for his services (whether as employee or office-holder) from the Company or any Group Company.

9.2  

The Company may deduct from the Executive's basic salary, sum in lieu of pension contributions and/or bonus any sums owing to the Company or any Group Company by the Executive from time to time.

9.3  

The Executive’s salary shall be reviewed by the Board during the first quarter of each calendar year.  The Board shall be under no obligation to award the Executive any increase, whether or not the Executive may reasonably expect to be awarded one.

10.1  

In addition to his basic salary the Executive is eligible to participate in the discretionary corporate incentive bonus plan from time to time in force in respect of each financial year of the Company.  Subject to the Group Company and the Executive achieving performance objectives as established by the Board, the on target bonus opportunity will be 70% of basic salary.  For the avoidance of doubt, the on target bonus earnings for the first financial year are £140,000 and the 70% bonus calculation will be based on the basic salary only.  Any bonus will be paid in accordance with bonus payment policy in effect for all other executives and no less often than annually.

10.2  

Any bonus awarded by the Company implies no expectation nor creates any precedent for the awarding of any subsequent bonus.

10.3  

In the event that the Executive is employed for part only of any Financial Year, the bonus payable shall be calculated pro rata in respect of that Financial Year and paid at the normal time. For the purpose of this clause 10, earnings shall be deemed to accrue without fluctuation from day to day and shall be apportioned on a daily basis (calculated by reference to 261 working days in each Financial Year).

10.4  

If the Company exercises its right pursuant to clause 4.2, the calculation of the payment shall include any bonus payment relating to any period of notice which the Executive has not worked or not been allowed to work.

12.1  

The Executive shall be reimbursed all reasonable travel, hotel and entertainment expenses properly and necessarily incurred by him in the performance of his duties, subject to the Company’s rules and policies relating to expenses. The Executive shall produce valid receipts in respect of such expenses before any reimbursement is made.

       12.2

Should the Executive be provided with Company credit cards, he shall comply with any conditions for the time being laid down by the Company as to their use.

13.1  

Although, the Executive is eligible to join the Company's Pension Scheme, the Executive has exercised his right not to join, and the Company has agreed to pay the Executive  a sum equivalent to 10% of his basic salary per annum in lieu of such benefit, to be paid by equal monthly instalments on or about the 25th day of each calendar month by credit transfer. This sum shall be in addition to the basic salary set out in clause 9.1, but shall not form part of the bonus calculation set out at clause 10.1. For the avoidance of doubt, the sum payable for the first financial year will be £20,000.

13.2  

As the Executive has decided not join the Company’s Pension Scheme then:

13.2.1  

the Company will not be under any obligation to make any pension provision for the Executive or his dependants; and

13.2.2  

the Executive will be permitted to join such scheme only at the discretion of the Company and the trustees of the scheme.

13.3  

If pursuant to clause 13.2.2, the Executive subsequently joins the Pension Scheme (or any comparable substituted scheme), then the sum payable in lieu of such benefit will no longer be paid directly to the Executive, but will be paid directly into the Company’s Pension Scheme. If the Executive subsequently elects to leave such scheme at any time thereafter then:

13.3.1  

the Company will not be under any obligation to make any further pension provision for the Executive or his dependants;

13.3.2  

the Company will revert to paying the sum in lieu of such benefit directly  to the Executive; and

13.3.3  

the Executive will be permitted to rejoin such scheme (or to join any other pension scheme established by the Company) only at the discretion of the Company and the trustees of the scheme.

14.1  

During his employment and subject to clause 14.2 the Executive shall be entitled at the Company's expense, and in accordance with the terms and conditions of the policies from time to time in force, including any applicable restrictions:

14.1.1  

to become a member of the Company's private medical insurance scheme in respect of himself, his spouse/civil partner and children under the age of 18;

14.1.2  

to participate in the Company's permanent health insurance scheme and income protection scheme;

14.1.3  

to participate in the Company's life assurance scheme at four times the Executive’s basic salary;

14.1.4  

to participate in the Company's business travel insurance scheme;

14.2  

Neither any outstanding or prospective entitlement to the benefits referred to in clauses 14.1 (other than the permanent health insurance scheme) nor any actual or prospective loss of entitlement to those benefits, shall preclude the Company from exercising any right to terminate the Executive's employment under this Agreement.

14.3  

If any benefits provider (including but not limited to any insurance company) refuses for any reason to provide any benefits to the Executive, the Company shall not be liable to provide any such benefits itself, or to pay any compensation in lieu.

14.4

Upon request, the Company may agree to pay the Executive a sum up to £2000 per annum in lieu of the medical benefit set out in clause 14.1.1 in order that the Executive may continue participating in his existing medical insurance scheme, provided that the Executive provides evidence of his payments into such scheme of his choice.

15.1  

Options to purchase 70,000 shares of Common Stock in the Company’s  parent corporation, Rackspace Hosting, Inc., with an exercise price equal to the closing price as of the date on which the Compensation Committee grants the options in accordance with its equity award policy. The Options will be issued pursuant to the Rackspace Hosting, Inc. 2007 Long Term Incentive Plan and its standard form of Stock Option Agreement and will vest over four years in annual installments.

 

15.2

50,000 Restricted Stock Units (RSU’s) in the Company’s parent corporation, Rackspace Hosting, Inc, in accordance with its equity award policy. The RSU’s will be issued pursuant to the Rackspace Hosting, Inc. 2007 Long Term Incentive Plan and will vest over four years in annual installments.

16.1  

In addition to normal public holidays the Executive is entitled to 25 working days paid holiday during each holiday year. Holiday entitlement shall accrue pro-rata throughout the holiday year.  A "holiday year" means the period from 1 January in one year to the next following 31 December.

16.2  

The Executive may not take more than 10 working days' holiday at any one time without the prior approval of the CEO.

16.3  

Any holiday entitlement remaining at the end of each holiday year shall lapse unless otherwise approved by the CEO.

16.4  

Subject to clause 16.5 below the Executive will be entitled to payment in lieu of any accrued but untaken holiday entitlement at the date of termination.  For these purposes one day's holiday entitlement shall accrue at the rate of 1/261 basic annual salary.

16.5  

On the termination of his employment pursuant to clause 23.1 the Executive will only be entitled to payment in lieu of unused holiday entitlement calculated in accordance with the Regulations and for these purposes all holiday entitlement in the relevant holiday year shall be holiday entitlement calculated in accordance with the Regulations.

16.6  

In all cases, if the Executive has taken more than his accrued entitlement at the date of termination, the Company shall make an appropriate deduction from the Executive's final payment. For these purposes one day's holiday entitlement shall accrue at the rate of 1 /261 basic annual salary.

16.7  

Where notice of termination is given by either party the Executive may be required to use any accrued but untaken holiday entitlement prior to the termination of employment.

17.1  

The Executive must comply with the Company's Policy and Rules from time to time in force regarding sickness notification and doctor's certificates, details of which can be obtained from the HR Director, EMEA.

17.2  

Subject to compliance with clause 17.1, the Executive shall receive:

17.2.1  

his basic salary and all benefits, less normal deductions for an aggregate absence of up to 20 working days in any period of 12 months during his first two years of employment;

17.2.2  

his basic salary and all benefits, less normal deductions for an aggregate absence of up to 20 working days in any period of 12 months and half his basic salary, less normal deductions for any further absence of up to in aggregate 45 working days in any period of 12 months after 2 years of employment; and

17.2.3  

his basic salary and all benefits, less normal deductions for an aggregate absence of up to 40 working days in any period of 12 months and half his basic salary, less normal deductions for any further absence of up to in aggregate 90 working days in any period of 12 months after 5 years of employment.

17.3  

During any period where the Executive is unable to work as a result of ill-health, injury or other medical incapacity, the Company may appoint a further executive director or employee to perform the Executive's duties temporarily, until such time as the Executive is able to fully resume the performance of his duties to the Company's satisfaction.

17.4  

If the Executive exhausts his entitlement to sick pay under clause 17.2, the Board may, in its discretion, agree to make further payments to the Executive, provided that if such further payments are made, they may be discontinued or reduced in amount at any time in the CEO's absolute discretion.

17.5  

The Company reserves the right to require the Executive to undergo a medical examination at the Company's expense by a doctor nominated by the Company at any time during or following a period of sickness absence. The Executive authorises the doctor to disclose the results of such examination to the Company.

17.6  

If the absence of the Executive is due to injuries, actionable negligence or nuisance caused by, or on account of a breach of any statutory duty by, any third party, all payments made to him by the Company under this clause 17 shall, to the extent that compensation is recovered from that third party, constitute loans by the Company to the Executive which shall be repaid by the Executive when and to the extent that the Company requests such repayment.

18.1  

The Executive acknowledges that all Intellectual Property Rights in respect of all Intellectual Property made, originated or developed by him at any time in the course of his employment with the Company shall belong to and vest in the Company absolutely to the fullest extent permitted by law.

18.2  

The Executive:

18.2.1  

acknowledges for the purposes of Section 39 Patents Act 1977 that because of the nature of his duties, and the particular responsibilities arising from those duties, he has, and at all times during his employment will have, a special obligation to further the interests of the businesses of the Company;

18.2.2  

undertakes to notify and disclose the Company in writing full details of all Intellectual Property made, originated or developed by him at any time during his employment with the Company immediately upon the creation of the same (and whether or not in material form), and promptly whenever requested by the Company and in any event upon the termination of his employment, to deliver up to the Company all such Intellectual Property and all related correspondence, documents, papers and records and all copies of any such Intellectual Property in his possession or control;

18.2.3  

undertakes to hold upon trust for the benefit of the Company all Intellectual Property Rights in respect of all Intellectual Property made, originated or developed by him during his employment by the Company, until the same are vested absolutely in the Company;

18.2.4  

assigns absolutely with full title guarantee by way of present assignment of present and future rights, all Intellectual Property Rights in any Intellectual Property made, originated or developed now or in the future by him in the course of his employment;

18.2.5  

acknowledges that, other than as provided by law, no further remuneration or compensation other than that set out in this Agreement is or may become due to the Executive in respect of the performance of his obligations under this clause 18;

18.2.6  

undertakes at the expense of the Company to execute all such documents, make such applications, give such assistance and do such acts and things as may in the opinion of the CEO  be necessary or desirable to vest in and register or obtain letters patent or any other registrable rights in the name of the Company or its nominee, and otherwise to protect and maintain any Intellectual Property made, originated or developed by the Executive and all related Intellectual Property Rights; and waives any moral rights (as provided for by Chapter IV Copyright Designs & Patents Act 1988 ("the 1988 Act") or any similar provisions of law in any jurisdiction) in any Intellectual Property made, originated, developed or produced by him in the course of his employment and agr ees not to institute, support, maintain or permit any action or claim to the effect that any treatment, exploitation or use of such Intellectual Property infringes the Executive's moral rights, including (but without limitation) the right to be identified, the right of integrity and the right against false attribution provided for in the 1988 Act.

19.1  

During his employment with the Company and after its termination (however this occurs) the Executive must not (other than in the proper course of his employment with the Company):

19.1.1  

use for his own purposes or those of any other person, firm, company, association or other organisation whatsoever; or

19.1.2  

disclose to any person, firm, company, association or other organisation whatsoever

19.2  

Clause 19.1 does not prevent the Executive from using or disclosing Confidential Information if he is ordered to do so by a court of competent jurisdiction, or if authorised by the Company in writing to do so or if such information has become public otherwise than by default of the Executive.

20.1  

By signing this Agreement the Executive consents:

20.1.1  

to the Company and any Group Company where applicable Processing Personal Data and Sensitive Personal Data during his employment and for a reasonable period afterwards for the purposes of administration and management of his employment and/or the Company's and any Group Company's business. Examples of the purposes for which Personal Data may be processed are (but are not limited to) the following:

(a)  

recruitment activities;

(b)  

administration of absence records, including sick leave and sick pay, monitoring attendance, sickness absences and state of health;

(c)  

administration and maintenance of personnel records, payroll pensions and other benefits;

(d)  

administration of holiday and other absence records such as, adoption leave, parental leave, paternity leave and time off for dependants;

(e)  

equal opportunities matters including the operation of the Company's and any Group Company's equal opportunities policy;

(f)  

monitoring of performance and carrying out performance appraisals and development reviews;

(g)  

disclosure of information to prospective employers in response to a reference enquiry;

(h)  

the pursuit of disciplinary and grievance matters;

(i)  

detection or prevention of the commission or alleged commission of fraud or any offence;

(j)  

the provision of information to any government body or agency or public authority for legitimate purposes including social security and income tax;

(k)  

promotion of the Company's or any Group Company's business activities and/or the Executive's contribution to the Company's or any Group Company's business;

(l)  

monitoring the use of internet email or other IT systems or the use of telephone or fax;

(m)  

for the purpose of or in connection with any legal proceedings (including prospective legal proceedings) for the purposes of obtaining legal advice or otherwise establishing exercising or defending legal rights; and

(n)  

compliance with any legal obligation.

20.1.2  

where reasonably necessary to the transfer of the Executive's Personal Data (including Sensitive Personal Data) to any Group Company based either in the United States of America or inside or outside the European Economic Area for the purposes of managing his employment with the Company and/or any Group Company and or the Company's or any Group Company's business.

20.1.3  

The above provisions are without prejudice to any additional rights to process Personal Data which exist for the Company and/or any Group Company pursuant to and in accordance with the Data Protection Act 1998.

20.2  

The Executive agrees to comply with all policies and procedures implemented by the Company or any relevant Group Company to ensure the Company's compliance with prevailing data protection laws and Handbook.

20.3  

Without prejudice to any other rights it may have, the Company reserves the right to intercept and/or monitor and/or record and/or view, as appropriate, the Executive's use of its or any Group Company's electronic communication systems including telephone, pc, remote access via a laptop or other means for the purpose of ensuring that its or any Group Company's systems:

20.3.1  

are used primarily to further the business of the Company or any Group Company;

20.3.2  

are not used for inappropriate or unlawful purposes, such as accessing or circulating material containing nudity, pornography, racist terminology or other offensive material or for telephoning premium-rate lines;

20.3.3  

are used in compliance with the Handbook and any other relevant policies and procedures of the Company or any Group Company;

20.3.4  

have sufficient capacity for the needs of the business.

21.1  

The Company may, at its absolute discretion, require the Executive at any time and for the whole or any part or parts of the contractual notice (whether notice is given by the Company or the Executive, or if the Executive seeks to resign without giving notice other than in circumstances where he is entitled to resign and claim constructive dismissal):

21.1.1  

not to attend any of his places of work or any other premises of the Company or any Group Company;

21.1.2  

not to carry out some or all of his duties under this Agreement or to substitute his then current duties and carry out other duties or special project work instead;

21.1.3  

to resign immediately from all offices he may hold in the Company, and in any Group Company and from all other appointments or offices which he holds as nominee or representative of the Company and its Group Companies;

21.1.4  

to return to the Company all documents and other property (including computer hardware and software) belonging to the Company and any Group Company including but not limited to Confidential Information;

21.1.5  

not to communicate with customers or suppliers of the Company and any Group Company; and

21.2  

Should the Company require the Executive to do all or any of the things set out in clause 21.1 the other terms of this Agreement shall nevertheless remain in full force and effect save as varied by this clause 21 and, for the avoidance of doubt, the Executive's duty of good faith shall continue.

22.1  

The Executive should refer any grievance relating to his employment (other than one relating to a disciplinary decision) to the CEO.

22.2  

The disciplinary procedure is a policy document only and does not form part of the Executive’s contract of employment.  A copy of the disciplinary procedure is available from the HR Director EMEA.  If the Executive is dissatisfied with any disciplinary decision taken in relation to him, he may refer the decision to the Board for review, whose decision shall be final.

22.3  

In order to investigate any disciplinary matter or grievance involving the Executive the Company is entitled to suspend him on full pay and benefits for so long as is reasonably considered necessary by the Company.

23.1  

Notwithstanding any other provision of this Agreement the Company may terminate the Executive's employment with immediate effect (without notice or any payment in lieu of notice), where:

23.1.1  

the Company believes that the Executive has:

(a)  

committed any act of fraud or serious dishonesty, or other gross misconduct, or gross incompetence or gross neglect of duty; or

(b)  

after written warning committed a second or subsequent breach of any express or implied obligation under this Agreement, or of any of the Company's policies and procedures or those of any Group Company from time to time applicable (which for the avoidance of doubt need not be of the same nature or type); or

(c)  

committed any act which in the reasonable opinion of the Board brings him, the Company, or any Group Company into disrepute, or prejudices the interests of the Company or any Group Company;

23.1.2  

the Executive is convicted of any criminal offence other than an offence under the road traffic legislation in the United Kingdom for which the Executive is not sentenced to any term of imprisonment, whether immediate or suspended; or

23.1.3  

the Executive becomes bankrupt or makes any arrangement or composition with his creditors generally; or

23.1.4  

the Executive is or becomes of unsound mind or a patient for the purpose of any statute relating to mental health. The Executive accepts that, in such circumstances, no adjustment could reasonably be made to enable him properly to perform his duties; or

23.1.5  

the Executive becomes prohibited by law from being a director; or

23.1.6  

the Executive resigns his office as director of the Company or any Group Company without the prior agreement of the Board.

23.2  

The Executive's employment with the Company shall automatically terminate on the date of the Executive's 65th birthday subject to the Company’s obligations under The Employment Equality (Age) Regulations 2006 as amended and updated from time to time.

26.1  

After the termination of his employment under this Agreement for any reason the Executive shall not, without the prior written approval of the CEO or the Board, whether directly or indirectly, and whether on his own behalf, or on behalf of any other person, firm, company or association, and whether as an employee, director, principal, agent, consultant or in any other capacity whatsoever:

26.1.1  

at any time during the period of 6 months immediately following the Termination Date, within the Restricted Area:

(a)  

seek employment from, accept employment with, or offer to provide services to; or

(b)  

carry on or assist with, or otherwise be concerned or interested in,

26.1.2  

at any time during the period of 9 months immediately following the Termination Date for the benefit of a business in competition with any business of the Company or any Relevant Group Company:

(a)  

offer employment to or employ or offer or conclude any contract for services with, or solicit or entice the employment or engagement of, or enter into partnership with; or

(b)  

procure or assist any third party so to offer, employ, engage, solicit or entice

26.1.3  

at any time during the period of 9 months immediately following the Termination Date for the benefit of a business in competition with any business of the Company or any Relevant Group Company:

(a)  

canvass or solicit the custom of (or procure or assist with the same); or

(b)  

transact or otherwise deal with (or procure or assist with the same)

26.2  

After the termination of the Executive's employment, however it occurs, he shall not:

26.2.1  

represent to any person, firm, company or association or otherwise lead them to believe that he is still employed by the Company or any Group Company or is in any way connected with or otherwise associated with the business of the Company or any Group Company; or

26.2.2  

make any derogatory or untrue remarks about the Company, any Group Company, any of its or their employees, officers or customers, or any of its or their services or products.

26.3  

The Executive acknowledges:

26.3.1  

that each of the foregoing sub-clauses of this clause 26 constitutes an entirely separate and independent restriction on him; and

26.3.2  

if any of the restrictions shall be adjudged to be void or ineffective for whatever reason but would be adjudged to be valid and effective if it or another restriction were deleted in whole or in part then such restriction shall apply with such deletions as may be necessary to make it valid and effective.

26.4  

The Executive agrees that he will, at the request and cost of the Company, enter into a direct agreement or undertaking with any Relevant Group Company whereby he will accept restrictions corresponding to those set out at clause 26.1 (or such of them as may be appropriate in the circumstances).

26.5  

Nothing in this clause 26 shall prevent the Executive after the termination of his employment with the Company from holding in his own name or jointly or being beneficially interested in any securities of any company or corporation for the time being quoted or listed on any recognised stock exchange, but so that in the case of a Competitor the amount of any one class of securities so held or in which the Executive's beneficial interest exists shall not exceed 5 per cent of the nominal amount of the issued securities of that class during the period specified in clause 26.1.1 above.

26.6  

The Executive agrees that if he receives an offer of employment or engagement (whether oral or written and whether accepted or not) from any person either during this Agreement or during the continuance of restrictions contained in this clause 266 he shall immediately inform the Board of the identity of the offer and its terms if the acceptance of such offer would involve him in the breach of clauses 6, 19, 21, and 26. Without prejudice to the Executive's obligations concerning confidentiality the Executive will provide the offer with details of the substance of the restrictions contained in clause 199 and this clause 266.

28.1  

The termination of the Executive's employment shall be without prejudice to any right that the Company may have in respect of any breach by the Executive of any of the provisions of this Agreement which may have occurred prior to termination.

28.2  

Any failure to exercise or delay by the Company or any Group Company in exercising a right or remedy arising in connection with this Agreement or by law shall not constitute a waiver of such right or remedy or of any other rights or remedies.  No waiver shall be effective unless in writing and signed by the Company or the relevant Group Company or on the Company's or the relevant Group Company's behalf by a duly authorised representative.  A waiver of a right or remedy on one occasion shall not constitute a waiver of the same right or remedy in the future.

29.1  

Any notices under this Agreement shall be in writing and signed by or on behalf of the party giving it.

29.2  

Any such notice may be served by delivering it personally or by sending it by pre-paid recorded delivery post, in the case of the Company, at or to its registered office for the time being, and in the case of the Executive, at or to his last known address or, in the case of either party, at or to any other address in England which that party may from time to time notify in writing to the other.

29.3  

Any such notice delivered personally shall be deemed to be received when delivered (or, if delivered otherwise than between 9.00am and 5.00pm on a business day, at 9.00am on the next business day); any notice sent by pre-paid recorded delivery post shall be deemed to be received 2 days after posting and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted.

30.1  

The Executive warrants that:

30.1.1  

by entering into this Agreement he will not be in breach of any agreements with or obligations owed to any third party;

30.1.2  

the particulars contained in any curriculum vitae/resume supplied and of his qualifications and all other representations (whether verbal or in writing) made to the Company in relation to his employment by the Company or in connection with this Agreement are true and not misleading; and

30.1.3  

he has the appropriate qualifications and experience as are necessary to fulfil his duties pursuant to this Agreement.

30.2  

The Executive hereby irrevocably and by way of security appoints the Company and each Group Company now or in the future existing to be his attorney to act in his name and on his behalf, and as his attorney to sign, execute and do all acts, things and documents which he is obliged to execute and do under the provisions of this Agreement.

31.1  

This Agreement constitutes the entire agreement and understanding of the parties and supersedes any previous agreement or understanding between the parties with respect to the arrangements contemplated by or referred to in it.

31.2  

The Executive acknowledges and agrees that:

31.2.1  

for the avoidance of doubt, no provision of the Company’s Articles of Association, as may be amended from time to time, which confers or purports to confer rights in favour of directors or other officers of the Company is intended to form part of the terms of this Agreement, save to the extent that such rights are set out expressly in this Agreement;

31.2.2  

in entering into this Agreement he does not rely on, and shall have no remedy in respect of, any statement, representation, warranty (in each case whether negligently or innocently made) or understanding of any person (whether party to this Agreement or not) which is not expressly set out in this Agreement; and

31.2.3  

the only remedy available to it for breach of any statement, representation, warranty or other term which is expressly set out in this Agreement shall be for breach of contract under the terms of this Agreement

31.3  

Nothing in this clause 31 shall, however, operate to limit or exclude any liability for fraud or fraudulent misrepresentation.

32.1  

This Agreement is not a temporary or fixed term contract but is of indefinite duration subject to its terms.

32.2  

There are no collective agreements in force relating to the Executive's employment under this Agreement.

The Employer:

Rackspace Limited

The Executive:

David Kelly

Job title:  (Clause 2)

Senior Vice President International

Commencement date:  (Clause 3)

14 June 2010

Term:  (Clause 4)

Indefinite

Notice Period:  (Clause 4)

6 months

Start of continuous employment:  (Clause 3)

14 June 2010. No prior period of employment

Place of work:  (Clause 7)

4 the Square, Stockley Park, Uxbridge, Middlesex, UB11 1ET or 11 Millington Road, Hayes, Middlesex, UB3 4AZ or such other place within commuting distance of Executive’s home address

Overseas employment:  (Clause 7)

Not more than 30 consecutive calendar days

Hours of work:  (Clause 8)

There are no normal working hours associated with the Executive's position, the parties acknowledging that the senior status of the Executive and his autonomous decision-making powers mean that he is free to determine the hours which he works, provided that he fulfils his duties under this Agreement

Basic Salary:  (Clause 9.1)

Bonus:  (Clause 10.1)

£200,000 per annum to be paid monthly

70% of Basic Salary to be paid no less than annually

Pension and other benefits: (Clauses 13 and 14)

Stock Options/RSUs:  (Clause 15)

No Pension. 10% of Basic Salary to be paid in lieu of company contribution into pension scheme. Private medical, permanent health & life assurance offered.

70,000 Options & 50,000 Restricted Stock Units in accordance with terms and subject to compensation committee approval.

Holiday entitlement:  (Clause 16)

25 working days per holiday year

Period of holiday year: (Clause 16)

1 January – 31 December

Sick pay: (Clause 17)

Up to 20 working days full pay in any 12 month period during the first 2 years of employment, increasing to 20 working days full pay and 45 working days at half pay in any 12 month period after 2 years’ employment and, after 5 years’ employment, increasing to 40 working days full pay and 90 working days at half pay in any 12 month period.

Disciplinary rules:  (Clause 22)

See Handbook

Person to whom a grievance should be brought in the first place:

(Clause 22)

CEO

Person to whom a complaint about a disciplinary decision should be made:

(Clause 22)

The Board

Collective agreements:  (Clause 32)

not applicable

Signed by Brian Thomson, for and on behalf of  RACKSPACE LIMITED

)

EXECUTED as a DEED by the said in the presence of:

 

 

Signed by David Kelly

)

EXECUTED as a DEED by the said                                 in the presence of: