Document:

ex10-2.htm

 

 

 

 

 

 

 

 

 

DATED 14 June 2010

(1)  RACKSPACE LIMITED

(2)  DAVID KELLY

 

 

DIRECTOR'S SERVICE AGREEMENT

 

 

	  	  

  

  

  

CONTENTS

	
1

	
DEFINITIONS AND INTERPRETATION

	
1

	
2

	
EMPLOYMENT CAPACITY

	
3

	
3

	
COMMENCEMENT AND CONTINUITY OF EMPLOYMENT

	
3

	
4

	
PERIOD OF EMPLOYMENT

	
4

	
5

	
DUTIES

	
4

	
6

	
DEVOTION TO DUTIES

	
4

	
7

	
PLACE OF WORK

	
5

	
8

	
HOURS OF WORK

	
5

	
9

	
REMUNERATION

	
5

	
10

	
BONUS

	
5

	
11

	
TELEPHONE

	
6

	
12

	
EXPENSES

	

6

	
13

	
PENSION

	
6

	
14

	
INSURANCE BENEFITS

	
6

	
15

	
STOCK OPTIONS & RSU

	
7

	
16

	
HOLIDAYS

	
7

	
17

	
SICKNESS OR INJURY

	
7

	
18

	
INTELLECTUAL PROPERTY

	
8

	
19

	
CONFIDENTIAL INFORMATION

	
8

	
20

	
DATA PROTECTION AND ELECTRONIC COMMUNICATIONS

	
9

	
21

	
PERIOD AWAY FROM WORK

	
9

	
22

	
DISCIPLINARY AND GRIEVANCE PROCEDURE

	
10

	
23

	
TERMINATION

	
10

	
24

	
RETURN OF PROPERTY AND DOCUMENTS

	
10

	
25

	
RESIGNATION OF OFFICES

	
10

	
26

	
PREVENTION OF UNFAIR COMPETITION

	
11

	
27

	
RECONSTRUCTION OR AMALGAMATION

	
11

	
28

	
PRIOR RIGHTS AND DELAY

	
12

	
29

	
NOTICES

	
12

	
30

	
GENERAL

	
12

	
31

	
PRIOR AGREEMENTS AND ENTIRE AGREEMENT

	
12

	
32

	
MISCELLANEOUS STATUTORY PROVISIONS

	
12

	
33

	
THIRD PARTY RIGHTS

	
12

	
34

	
GOVERNING LAW AND JURISDICTION

	
12

	
SCHEDULE: STATEMENT OF INITIAL EMPLOYMENT PARTICULARS

	
13

  

  

  

THIS AGREEMENT is made on 14 day of June 2010.

BETWEEN

 

	
(1)  

	
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

	
(2)  

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

( the "Executive").

IT IS AGREED AS FOLLOWS

 

	
1  

	
DEFINITIONS AND INTERPRETATION

 

	
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;

  

- 1 -

  

	
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;

  

- 2 -

  

	
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.

 

	
2  

	
EMPLOYMENT CAPACITY

 

The Company shall employ the Executive and the Executive agrees to serve the Company upon and subject to the provisions of this Agreement in the capacity of Senior Vice President International or in such other capacity or office as the Company may from time to time reasonably direct, reporting directly to the CEO.

 

	
3  

	
COMMENCEMENT AND CONTINUITY OF EMPLOYMENT

 

	
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.

 

  

- 3 -

  

	
4  

	
PERIOD OF EMPLOYMENT

 

	
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  

	
DUTIES

 

	
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  

	
DEVOTION TO DUTIES

 

	
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.

  

- 4 -

  

 

	
7  

	
PLACE OF WORK

 

	
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  

	
HOURS OF WORK

 

	
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  

	
REMUNERATION

 

	
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  

	
BONUS

 

	
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.

 

  

- 5 -

  

	
11  

	
TELEPHONE

 

The Company shall provide the Executive with a mobile telephone and shall discharge all maintenance, rental costs and reasonable related charges incurred by the Executive.

 

	
12  

	
EXPENSES

 

	
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  

	
PENSION

 

	
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  

	
INSURANCE BENEFITS

 

	
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;

Details of the above policies are available from the HR Director EMEA.

From time to time the Company may, in its absolute discretion, amend, alter or substitute the terms of the above benefits, or replace them wholly.

	
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.

 

  

- 6 -

  

	
15  

	
STOCK OPTIONS & RSU

 

Subject to final approval of the Group Company’s Compensation Committee which is expected to be within 90 days of the Commencement Date, and to any restrictions from time to time imposed by law the Executive will be eligible to receive:

	
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  

	
HOLIDAYS

 

	
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  

	
SICKNESS OR INJURY

 

	
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.

These payments will include any entitlement to Statutory Sick Pay, and when this is exhausted shall be reduced by the amount of any state sickness benefit(s) which may be recoverable by the Executive (whether or not recovered). Qualifying days for the purposes of Statutory Sick Pay are Monday to Friday inclusive. In the event that the Executive becomes eligible to receive benefits under the Company’s permanent health insurance scheme (pursuant to clause 14.1.2) or his own scheme (if applicable pursuant to clause 14.4) the Company shall not have any obligation to make any, or any further payments (as applicable) to the Executive under this clause 17.2.

	
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.

 

  

- 7 -

  

	
18  

	
INTELLECTUAL PROPERTY

 

	
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 agrees 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  

	
CONFIDENTIAL INFORMATION

 

	
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

any Confidential Information of or belonging to the Company or any Group Company or to any third party (which includes customers, suppliers, employees and officers of the Company or any Group Company) which was learnt or disclosed to the Executive in confidence in the course of his employment.

	
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.

 

  

- 8 -

  

	
20  

	
DATA PROTECTION AND ELECTRONIC COMMUNICATIONS

 

	
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.

By signing this Agreement the Executive understands and agrees that the content of his communications and access to the Company's or any Group Company's systems can be accessed and hereby consents to any such interception, monitoring, viewing and/or recording taking place.

 

	
21  

	
PERIOD AWAY FROM WORK

 

	
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

not to communicate with employees or officers of the Company and any Group Company in relation to his employment or the circumstances surrounding its termination save in respect of those individuals whose names are notified to the Executive provided that the Company shall continue to pay the Executive his full basic salary and to make available to him all other benefits to which he is entitled under this Agreement during any such period. Any holiday entitlement which has accrued to the Executive as at the commencement of any period away from work pursuant to this clause 21, and any holiday entitlement which continues to accrue, shall be deemed to be taken by the Executive during such period.

	
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.

 

  

- 9 -

  

	
22  

	
DISCIPLINARY AND GRIEVANCE PROCEDURE

 

	
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  

	
TERMINATION

 

	
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;

(where any reference in this sub-clause to an act shall be interpreted as including a reference to an omission); or where:

	
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.

 

	
24  

	
RETURN OF PROPERTY AND DOCUMENTS

 

Whenever requested to do so by the Company the Executive shall immediately return to the Company in accordance with its instructions all records, papers, correspondence, customer files, equipment (including computer equipment), mobile telephone, software, notes, reports or property of whatsoever nature (including keys, books, materials and credit cards) which may be in his possession or control and which relate in any way to the business or affairs of the Company and any Group Company, and no copies, notes or abridgements of any of the above shall be retained by him.

 

	
25  

	
RESIGNATION OF OFFICES

 

After termination of his employment, however it occurs, the Executive shall immediately upon the request of the Company resign from all offices held by him in the Company and in any Group Company without claim for compensation, and should he fail to do so the Company and any applicable Group Company may act as the Executive's attorney pursuant to clause 30.2 to give effect to such resignation(s).

 

  

- 10 -

  

	
26  

	
PREVENTION OF UNFAIR COMPETITION

 

	
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,

any Competitor, provided that this restriction shall not apply if the Executive's duties and responsibilities for any such Competitor do not involve him in the, sale or provision of any goods or services which are similar to or competitive with the Products or Services; or

	
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

any Key Person (whether or not such person would commit any breach of his or her contract with the Company or any Relevant Group Company) unless such Key Person had ceased to be employed or engaged by the Company or Relevant Group Company (as the case may be) more than three months previously; or

	
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)

any Customer or Prospective Customer in respect of Products or Services, provided that this clause 26.1.3 shall not prohibit general advertising in the press or other media by the Executive (or by any person, firm, company or association on his behalf), which is not specifically targeted at or sent to Customers or Prospective Customers.

	
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.

 

	
27  

	
RECONSTRUCTION OR AMALGAMATION

 

If the Executive's employment is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation, and the Executive is offered employment with any concern or undertaking resulting from such reconstruction or amalgamation on terms and conditions which, taken as a whole, are not substantially less favourable than the terms of this Agreement, the Executive shall have no claim against the Company in respect of the termination of his employment.

 

  

- 11 -

  

	
28  

	
PRIOR RIGHTS AND DELAY

 

	
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  

	
NOTICES

 

	
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  

	
GENERAL

 

	
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  

	
PRIOR AGREEMENTS AND ENTIRE 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  

	
MISCELLANEOUS STATUTORY PROVISIONS

 

	
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.

 

	
33  

	
THIRD PARTY RIGHTS

 

No provision of this Agreement shall be enforceable by any person who is not a party to it pursuant to the Contracts (Rights of Third Parties) Act 1999 but this does not affect any right or remedy of a third party which exists or is available independently of that Act.

 

	
34  

	
GOVERNING LAW AND JURISDICTION

 

This Agreement shall be governed by and construed in accordance with the laws of England and the parties hereto irrevocably submit to the non - exclusive jurisdiction of the Courts of England for the determination of all disputes or claims which may arise out of or in connection with this Agreement.

IN WITNESS WHEREOF the Company has signed this Agreement under the hand of its duly authorised representative and the Executive has executed this Agreement as a deed the date first above written

 

  

- 12 -

  

SCHEDULE

 

STATEMENT OF INITIAL EMPLOYMENT PARTICULARS

 

	
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

	
)

	/s/ Brian Thomson  

 

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

	
 

	
 

 

	
Signed by David Kelly

	
)

	 /s/ David Kelly 

 

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

	
 

	
 

 

- 13 -exhibit10_23.htm

EXHIBIT 10.23

 

 

 

TRANSITION AGREEMENT

 

THIS TRANSITION AGREEMENT (the “Agreement”) is entered into as of September 2, 2010 (the “Effective Date”), by and among MB Financial, Inc., a Maryland corporation (“MBFI”), and MB Financial Bank, National Association (together with each of its successors and assigns permitted under this Agreement sometimes referred to herein as the “Company”), and Thomas D. Panos (“Executive”).

 

RECITALS

 

WHEREAS, the Executive has been employed by the Company or its predecessor since 1996 and is currently President, Chief Commercial Banking Officer, a member of the management committee and a director of the Bank, with primary responsibility for commercial banking sales and customer relationships and service;

 

WHEREAS, the Company and Executive desire to provide for an orderly transition of Executive’s duties, responsibilities and relationships in connection with Executive’s mutually agreed upon departure from the Company in March 2011 and Executive desires to assist the Company in obtaining an orderly transition; and

 

WHEREAS, the Company and Executive now desire to enter into an agreement setting forth the terms of Executive’s continued employment with the Company, his separation from employment and the rights and duties of the parties after entering into this Agreement;

 

NOW THEREFORE, the parties agree as follows:

 

1. Duties.  During the period beginning on the Effective Date and ending March 31, 2011 (such period referred to as the “Transition Period”), the Executive will continue in the employ of the Company with such title, duties and responsibilities as shall be assigned to him by the President and Chief Executive Officer of MBFI, it being understood the Executive’s primary responsibilities will be to assist the Company with respect to the transition of his duties and his business and community relationships to the other senior officers of the Company and to provide advice and assistance to such officers upon their request.  The Executive acknowledges that his tenure as President and Chief Commercial Banking Officer of the Bank and his service as a director of the Bank shall cease as of the Effective Date and this Agreement shall constitute his resignation from such positions.  The Executive’s employment shall terminate as of the last day of the Transition Period.

 

2. Compensation.  In recognition of Executive’s expected contributions to the Company during the Transition Period, in consideration for the release and the other promises of Executive contained in this Agreement, including, but not limited to, Executive’s agreement to faithfully discharge the duties and remain in the employ of the Company as described above through the last day of the Transition Period, the provisions of Section 4 below and Executive’s reaffirmation of his agreements and obligations described in Section 9 below, the Company will provide Executive with the following compensation and benefits; provided, further, that Executive timely signs and returns this Agreement and the release attached as Exhibit A hereto, and timely signs and returns the identical general release at the end of the Transition Period, pursuant to Section 8 below:

 

  

  

  

 

(a) Base Salary and Benefit Plan Participation.  During the Transition Period, the Executive will continue to receive his base salary as in effect on the Effective Date and participate in the Company’s employee benefit plans and programs, including eligibility to receive year-end matching and profit sharing contributions under the Company’s 401(k) plan and related deferred compensation plan.

 

(b) Retention Payment.  On or within five (5) days after the last day of the Transition Period and expiration of any revocation period applicable to the release described in Section 8, the Company will pay to Executive a payment equal to $350,000.

 

  

2

  

 

3. Effect of Termination of Employment Prior to Last Day of Transition Period or Breach by Executive.  In the event Executive’s employment terminates prior to the last day of the Transition Period due to Executive’s voluntary resignation, or in the event the Company terminates Executive’s employment prior to the last day of the Transition Period because Executive breaches his promises hereunder, including those set forth in Section 2, the retention payment described in Section 2(b) shall not be paid to Executive.

 

4. No Additional Entitlements; Effect on Equity Awards.  Executive understands and acknowledges that he will have no further entitlements, other than those included in this Agreement and except with respect to rights, if any, that have vested as of the last day of his employment under the Company’s employee benefit plans and stock-based incentive plan and such rights as he has to maintain COBRA coverage.  For avoidance of doubt, Executive understands and agrees that the retention payment set forth above includes consideration for Executive’s agreement that (a) he will not be entitled to receive bonus or other incentive compensation with respect to 2010 or 2011 or any incremental amounts upon termination of employment, and (b) the stock options and restricted stock awards held by Executive which have not vested as of the date of termination of employment shall be forfeited and cancelled without further vesting as of such date, and his rights under any vested awards shall be determined in accordance with the terms of the respective award agreements applicable to voluntary termination of employment.

 

5. Indemnification and D&O Insurance after Termination of Employment.  During the Transition Period and following Executive’s termination of employment, Executive shall continue to be entitled to indemnification under the indemnification provisions of the Company’s governing documents and to coverage under directors and officers liability insurance with respect to his acts or omissions during his service as an officer or director of the Company, or under this Agreement, to the same extent Executive is entitled to such indemnification and to such insurance coverage as of the date of this Agreement.

 

6. Withholding.  All payments required to be made by the Company hereunder to the Executive shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.

 

7. Section 409A Compliance.  It is intended that any amounts payable under this Agreement and the Company’s and Executive’s exercise of authority or discretion hereunder shall comply with the provisions of Internal Revenue Code Section 409A and the treasury regulations and guidance thereunder (“Section 409A”) so as not to subject the Executive to the payment of interest and tax penalty which may be imposed under Section 409A.  Notwithstanding anything contained herein to the contrary, if, at the Executive’s separation from service, (a) Executive is a specified employee as defined in Section 409A and (b) any of the payments or benefits provided hereunder constitute deferred compensation under Section 409A, then, and only to the extent required by such provisions, the date of payment of such payments or benefits otherwise provided shall be delayed for a period of six (6) months following the separation from service.

 

  

3

  

 

8. Execution of Agreement; Releases.  The payments and benefits to the Executive pursuant to this Agreement are contingent upon (i) the Executive executing and delivering to the Company this Agreement and a release of claims in the form attached to this Agreement as Exhibit A (the “Release”) by 3:00 p.m. (CDT) on Thursday, September 2, 2010, (ii) the Executive executing and delivering to the Company on the last day of the Transition Period a release of claims in substantially the same form as the Release, effective as of that date, and (iii) in each case, Executive does not thereafter revoke such Release in accordance with the terms thereof.  At such time as Executive delivers the release required under clause (ii), the Company shall execute a release, in the form set forth at Exhibit B, and shall deliver such release to Executive.

 

9. Entire Agreement.  Executive acknowledges and agrees that this Agreement includes the entire agreement and understanding between the parties and supercedes any prior agreements, written or oral, including Executive’s Change in Control Severance Agreement and Gross-Up Agreement with the Company, with respect to the subject matter hereof, including the termination of Executive’s employment and all amounts to which Executive shall be entitled whether during the Transition Period or thereafter; provided, however, that Executive acknowledges and agrees that (a) provisions of the Protective Covenants Agreement between Executive and the Company; (b) the provisions of any prior agreements between the Company and Executive (including award agreements) relating to the effect of certain laws and regulations on Executive’s compensation and Executive’s agreement to forgo compensation or to repay amounts of compensation received which are determined to not be or to not have been permitted under such laws and regulations; and (c) the provisions of any prior agreements between the Company and Executive relating to confidentiality, protection of the Company’s confidential or proprietary information; shall in each case continue to apply to Executive during and after his employment as if fully set forth and applicable to this Agreement including the compensation which may be payable to Executive hereunder. As a material inducement to the Company entering into this Agreement, Executive reaffirms that the foregoing provisions remain fully binding on Executive.

 

[Signature Page Follows]

 

  

4

  

 

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Transition Agreement as of the date and year first set forth above.

 

 

	
MB FINANCIAL, INC.

	
By: /s/ Rosemarie Bouman

	
Its: Vice President

	  
	
MB FINANCIAL BANK NATIONAL ASSOCIATION

	
By: /s/ Rosemarie Bouman

	
Its: Executive Vice President

	  
	
EXECUTIVE

	
/s/ Thomas D. Panos

 

 

  

5

  

Exhibit A

GENERAL RELEASE OF ALL CLAIMS

 

1. For valuable consideration, the adequacy of which is hereby acknowledged, the undersigned (“Executive”), for himself, his spouse, heirs, administrators, children, representatives, executors, successors, assigns, and all other persons claiming through Executive, if any (collectively, “Releasers”), does hereby release, waive, and forever discharge MB Financial, Inc. and MB Financial Bank National Association (collectively, “Company”), Company’s Subsidiaries, parents, affiliates, related organizations, employees, officers, directors, attorneys, successors, and assigns (collectively, the “Releasees”) from, and does fully waive any obligations of Releasees to Releasers for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses (including attorneys’ fees and costs) of any kind whatsoever, whether known or unknown or contingent or absolute, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Releasers in consequence of, arising out of, or in any way relating to Executive’s employment with Company or any of its affiliates and the termination of Executive’s employment.  The foregoing release and discharge, waiver and covenant not to sue includes, but is not limited to, all claims and any obligations or causes of action arising from such claims, under common law including wrongful or retaliatory discharge, breach of contract (including, but not limited to, the Transition Agreement between the Company and the Executive (the “Transition Agreement”)), with respect to which this is the Release referred to in Section 8 thereof, and any claims under any stock option and restricted stock unit agreements between Executive and the Company) and any action arising in tort including libel, slander, defamation or intentional infliction of emotional distress, and claims under any federal, state or local statute including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866 and 1871 (42 U.S.C. § 1981), the National Labor Relations Act, the Fair Labor Standards Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, the Illinois Human Rights Act, the Age Discrimination in Employment Act or the discrimination or employment laws of any state or municipality, and/or any claims under any express or implied contract which Releasers may claim existed with Releasees.  This also includes a release by Executive of any claims for breach of contract, wrongful discharge and all claims for alleged physical or personal injury, emotional distress relating to or arising out of Executive’s employment with Company or the termination of that employment; and any claims under the WARN Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions.  This release and waiver does not apply to any claims or rights that may arise after the date Executive signs this General Release.  The foregoing release does not apply to (a) any claims or rights for compensation, benefits, indemnification and any other surviving rights now existing under the Transition Agreement, the organization documents of the Company or any other agreement providing for indemnification regardless of when any claim is filed, or (b) any claims or rights under directors and officers liability insurance.

 

  

A -1

  

 

2. Excluded from this release and waiver are any claims which cannot be waived by law, including but not limited to the right to participate in an investigation conducted by certain government agencies.  Executive does, however, waive Executive’s right to any monetary recovery should any agency (such as the Equal Employment Opportunity Commission) pursue any claims on Executive’s behalf.  Executive represents and warrants that Executive has not filed any complaint, charge, or lawsuit against the Releasees with any government agency or any court.

 

3. Executive agrees never to sue Releasees in any forum for any claim covered by the above waiver and release language.  If Executive violates this General Release by suing Releasees, other than as set forth in Section 1 hereof, Executive shall be liable to the Company for its reasonable attorneys’ fees and other litigation costs incurred in defending against such a suit.

 

4. In the event Executive is the prevailing party in an action against the Company to enforce the provisions of the Transition Agreement relating to payment of the Retention Payment, then the Company shall be liable to the Executive for his reasonable attorneys’ fees and other litigation costs incurred in such action.

 

5. Executive acknowledges and recites that:

 

 

(a) Executive has read and understands the Transition Agreement and this General Release in its entirety;

 

 

(b) Executive has been advised and directed orally and in writing (and this subparagraph (c) constitutes such written direction) to seek legal counsel and any other advice he wishes with respect to the terms of the Transition Agreement and this General Release before executing it;

 

 

(c) Executive has been given up to twenty-one (21) days to review this Agreement before executing it and has seven (7) days after signing it to revoke it by giving written notice to Mitchell Feiger, MBFI’s President and Chief Executive Officer.

 

 

(d) Executive has executed the Transition Agreement and this General Release knowingly and voluntarily; and

 

 

(e) Executive’s execution of the Transition Agreement and this General Release has not been forced by any employee or agent of the Company, and Executive has had an opportunity to negotiate about the terms of the Transition Agreement and this General Release.

 

  

A -2

  

 

6. This General Release shall be governed by the internal laws (and not the choice of laws) of the State of Illinois, except for the application of pre-emptive Federal law.

 

PLEASE READ THIS AGREEMENT CAREFULLY.  IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

 

 

	
EXECUTIVE

	
/s/ Thomas D. Panos

	
Date: September 2, 2010

	  
	
MB FINANCIAL, INC.

	
By: /s/ Rosemarie Bouman

	
Its: Vice President

	
Date: September 2, 2010

	  
	
MB FINANCIAL BANK NATIONAL ASSOCIATION

	
By: /s/ Rosemarie Bouman

	
Its: Executive Vice President

	
Date: September 2, 2010

 

 

  

A -3

  

 

Exhibit B

GENERAL RELEASE OF CLAIMS

1.           For valuable consideration, the adequacy of which is hereby acknowledged, the undersigned MB Financial, Inc. and MB Financial Bank National Association (collectively, “Company”) for themselves and their respective successors, assigns, and all other persons claiming through the Company, if any (collectively, “Releasers”), do hereby release, waive, and forever discharge Thomas D. Panos, and his successors and assigns (collectively, the “Releasees”) from, and do fully waive any obligations of Releasees to Releasers for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses (including attorneys’ fees and costs) of any kind whatsoever, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Releasers in consequence of, arising out of, or in any way relating to, facts or circumstances which, as of the date the Company executes this Release, are known by members of the board of directors of the Releasers or by senior officers of the Releasers. This release and waiver does not apply to any claims or rights that may arise after the date the Company executes this General Release or which arise out of facts or circumstances not known to the members of the board of directors or senior officers of Releasers as of the date the Company executes this General Release.

 

2.           Excluded from this release and waiver are any claims which cannot be waived by law, including but not limited to claims maintained by or for certain government agencies.

 

3.           The Releasers agree never to sue Releasees in any forum for any claim covered by the above waiver and release language.  If Releasers violate this General Release by suing Releasees, other than as set forth in Section 1 hereof, the Company shall be liable to the Releasees for their reasonable attorneys’ fees and other litigation costs incurred in defending against such a suit.

 

4.           In the event the Company is the prevailing party in an action against the Executive to enforce the provisions of the Transition Agreement, then the Executive shall be liable to the Company for its reasonable attorneys’ fees and other litigation costs incurred in such action.

 

5.           Executive acknowledges and agrees that this Release will be of no force or effect in the event Executive fails to execute or subsequently revokes a General Release required to be executed by Executive pursuant to the Transition Agreement.

 

  

B -1

  

 

6.           This General Release shall be governed by the internal laws (and not the choice of laws) of the State of Illinois, except for the application of pre emptive Federal law.

 

 

	
MB FINANCIAL, INC.

	
By: /s/ Rosemarie Bouman

	
Its: Vice President

	  
	
MB FINANCIAL BANK NATIONAL ASSOCIATION

	
By: /s/ Rosemarie Bouman

	
Its: Executive Vice President

	  
	
EXECUTIVE

	
/s/ Thomas D. Panos

 

 

  

B -2

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