Exhibit 10.42

April 3, 2008

Mr. John Lionato

305 Eagle Trace Dr,

Half Moon Bay, CA 94019

Dear John:

We are pleased to extend you an offer to join Rackspace US, Inc. (the “Company”)
as Senior Vice President, Operations for the Company. The terms and conditions
of our employment offer to you are set forth below:

1. Employment Commencement. You will commence services as a full-time employee
of the Company as soon as practicable but no later than May 1, 2008 (and for the
purposes of this letter, your start date will be the “Employment Commencement
Date”). By signing this offer letter, you represent and warrant to the Company
you are under no contractual commitments inconsistent with your obligations to
the Company.

2. Position. In your capacity as SVP, Operations, you will report to the
President and Chief Executive Officer.

3. Relocation. We agree to reimburse your reasonable relocation expenses in
accordance with our policy. We will assign a relocation specialist to you to
assist you with your relocation needs.

4. Salary. You will be paid a salary at the annual rate of $330,000 per year,
commencing on the Employment Commencement Date specified above and on each
anniversary thereof. Your salary will be reviewed every year.

5. Bonus. You will be entitled to participate in our cash incentive program
which provides for an annual bonus based on the Company’s financial performance
and the evaluation of your performance and contribution to such results. Your
personal, annualized target bonus percentage will be 50% of your base salary.

6. Equity Awards. You will be awarded options to purchase 225,000 shares of
Common Stock in our parent corporation, Rackspace, Inc., pending final board
approval with an exercise price equal to the current appraised fair market value
as of the date on which board or compensation committee grants the options in
accordance with our equity award policy. It is expected to be within 60 days of
your Employment Commencement Date. The stock options will vest over four years
(25% will become exercisable the first anniversary of your Employment
Commencement Date and an additional 25% will vest on each anniversary thereof
through the fourth anniversary) and will be issued pursuant to the Rackspace,
Inc. 2007 Long Term Incentive Plan and our standard form of Stock Option
Agreement.

7. Severance Benefit. If you are terminated without Cause or resign for Good
Reason at any time prior to one year from your start date, in addition to any
accrued but unpaid Base Salary, accrued vacation and unpaid business expense
reimbursements (the “Accrued Obligations”) the Company agrees to provide
severance payment in the amount of $330,000 payable in twelve equal monthly
installments. Upon termination of employment for any other reason, including in
the event of your death or disability, the Company’s obligation shall be limited
to the Accrued Obligations.

 

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For purposes of this Agreement, the term “Cause” shall mean (a) the commission
of, or plea of guilty or no contest to, a felony or a crime involving moral
turpitude or the commission of any other act involving willful malfeasance or
material fiduciary breach with respect to the Company or an affiliate, (b) gross
negligence or willful misconduct with respect to the Company or an affiliate.
The Board of Directors of Parent or its delegate, in its absolute discretion,
shall determine the effect of all matters and questions relating to whether you
have been discharged for Cause. “Good Reason” shall mean and will be deemed to
exist if, without your consent, (a) you suffer a material diminution in your
duties, responsibilities or effective authority or any adverse changes in your
title or position, (b) you suffer a reduction of Base Salary, (c) the Company
fails to pay any earned compensation or to provide for your vested benefits when
due and payable, or (d) any material breach of this offer letter; provided,
however, that (i) you must provide written notification of your intention to
resign within 60 days after you know; (ii) such event or condition is not
corrected, in all material respects; by the Company within 30 days of its
receipt of such notice; (iii) you actually resign your employment with the
Company not more than 30 days following the expiration of such 30-day period;
and (iv) your termination of employment occurs within two years following the
initial occurrence of one or more of such events.

8. Benefits. The Company also offers an excellent benefits package including
medical, dental, disability, life insurance and 401(k). You are eligible to
begin your participation in our benefits on your Employment Commencement Date in
accordance with the specific terms of the respective benefit plans. You will
also be eligible for three weeks of annual vacation in accordance with the
Company’s vacation policies.

9. Confidentiality and Intellectual Property Assignment Agreement. Like all
Company employees, you will be required, as a condition to your employment with
the Company, to sign the Company’s standard Confidentiality and Intellectual
Property Assignment Agreement, a copy of which is attached hereto as Exhibit A.

10. Period of Employment. The contents of this letter do not form an employment
contract or alter your at-will employment status. All Company personnel are
at-will employees. This means that either the Company or the employee may
terminate the employment relationship at any time, for any reason or no reason.
Only the Chief Executive Officer or President may enter into any agreement to
the contrary, whether verbal or written, with any employee. If such Chief
Executive Officer or President should choose to enter into an agreement to the
contrary, it must be a written agreement signed by one of such officers to be
valid. Any contrary representations which may have been made to you are
superseded by this offer. This is the full and complete agreement between you
and the Company on this term. Although your job duties, title, compensation and
benefits, as well as the Company’s personnel policies and procedures, may change
from time to time, the “at will” nature of your employment may only be changed
in an express written agreement signed by you and a duly authorized officer of
the Company.

11. Outside Activities. On and after the Employment Commencement Date, while you
render services to the Company, you will not engage in any other gainful
employment, business or activity without the written consent of the Company.
While you render services to the Company, you also will not assist any person or
organization in competing with the Company, in preparing to compete with the
Company or in hiring any employees of the Company.

12. Withholding Taxes. All forms of compensation referred to in this letter are
subject to reduction to reflect applicable withholding and payroll taxes.

 

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13. Entire Agreement. This letter and the Exhibit attached hereto contain all of
the terms of your employment with the Company and supersede any prior
understandings or agreements, whether oral or written, between you and the
Company.

14. Amendment and Governing Law. This letter agreement may not be amended or
modified except by an express written agreement signed by you and a duly
authorized officer of the Company. The terms of this letter agreement and the
resolution of any disputes will be governed by Texas law.

We hope that you find the foregoing terms acceptable. You may indicate your
agreement with these terms and accept this offer by signing and dating both the
enclosed duplicate original of this letter and the enclosed Confidentiality and
Intellectual Property Assignment Agreement and returning them to me. Please note
that this offer is made contingent on your passing the Company’s pre-employment
screening process, which includes a criminal background check, education
verification, and employment reference check. As required by law, your
employment with the Company is also contingent upon your providing legal proof
of your identity and authorization to work in the United States. This offer, if
not accepted, will expire at the close of business on April 10, 2008.

Again, we are pleased offer you the opportunity to join Rackspace. We look
forward to having you join us on the Employment Commencement Date and to
receiving your services as a Consultant prior to such date.

 

Sincerely, /s/ David Belle-Isle David Belle-Isle Senior Vice President, Human
Resources

I accept the offer to join Rackspace as Senior Vice President, Operations of the
Company and agree to the terms outlined above.

 

April 3, 2008     /s/ John Lionato Date     John Lionato, individually

 

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