EXHIBIT 10.1

[COMPANY LETTERHEAD]

May 24, 2007

Mark J. Barrenechea

Re: Employment Terms

Dear Mark:

Rackable Systems, Inc. (the “Company”), is pleased to offer you the position of
President and Chief Executive Officer (“CEO”), on the following terms. Your
employment shall commence on April 29, 2007.

1.    POSITION. You will serve in an executive capacity and shall perform the
duties of CEO as commonly associated with this position, as specified in the
Bylaws of the Company, and as required by the Board of Directors of the Company
(the “Board”). You will report to the Board. Subject to the terms of this offer
letter agreement, the Board reserves the right to change your position, duties,
reporting relationship, work location, and job duties, from time to time in its
discretion. Your new employment relationship with the Company will not affect
your current status as a Director on the Board.

2.    COMPENSATION.
 
(a)  Base Salary. Your initial annual base salary will be $350,000.00, less
standard payroll deductions and withholdings. You will be paid bi-weekly in
accordance with Company practice and policy.
 
(b)  Performance Bonus. In addition, you will be eligible to earn an annual
performance bonus of up to $250,000.00, based upon both your performance and the
Company’s performance with respect to applicable performance targets which are
expected to include revenue and profitability targets and other organizational
milestones (“Targets”), set solely by the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”). The bonus payment
shall be earned upon the fulfillments of Targets and is payable within a
reasonable period of time, not to exceed thirty (30) days from the date that the
Compensation Committee concludes that Targets have been fulfilled. The
Compensation Committee will determine in its sole discretion whether the Targets
have been achieved, whether you have earned a bonus, and the amount of any
earned bonus. You must be employed on the bonus payment date to earn and be
eligible to receive any bonus.
 
(c) Review of Compensation. Your base salary and bonus eligibility will be
reviewed on an annual or more frequent basis by the Compensation Committee and
are subject to change in the discretion of the Compensation Committee, subject
to the terms of this offer letter agreement.

 
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3.    OPTION GRANT.

(a) Equity Grants. Subject to Compensation Committee approval, the Company will
issue you an option (the “Option”) to purchase 700,000 shares of the Company’s
common stock pursuant to the Company’s 2005 Equity Incentive Plan (the “Plan”)
at an exercise price equal to the fair market value of the stock as of the date
of grant as determined by the Compensation Committee. In addition, subject to
Compensation Committee approval, the Company will grant you 150,000 restricted
shares of the Company’s common stock (the “Restricted Stock Award”).

(b) Vesting Schedule. Both the Option and the Restricted Stock Award will be
subject to a four-year vesting period subject to your continuous service to the
Company as an employee or consultant (as defined in the Plan and Restricted
Stock Purchase Agreement), with one forty-eighth (1/48th) of the respective
shares subject to the Option and the Restricted Stock Award vesting for each
full month of your continuous service as an employee or consultant following
your start date as an employee of the Company.

(c) Governing Documents. The Option will be governed in full by the terms and
conditions of the Plan and your individual Option agreement; the Restricted
Stock Award will be governed in full by the terms and conditions of the
Restricted Stock Purchase Agreement. You understand that the Option and the
Restricted Stock Award are expected to be granted on or about June 11, 2007.

4.    EMPLOYEE BENEFITS. You will be eligible to participate in the Company’s
standard employee benefit plans in accordance with the terms and conditions of
the plans and applicable policies which may be in effect from time to time, and
provided by the Company to its executive employees generally, including but not
limited to group health insurance coverage, disability insurance, life
insurance, ESPP, 401(k) Plan, and paid time off and paid holidays. You will be
eligible for reimbursement of your legitimate and documented business expenses
incurred in connection with your employment, pursuant to the Company’s standard
reimbursement expense policy and practices. The Company may modify its benefits
programs and policies from time to time in its discretion.

5.    INVENTION AND NON-DISCLOSURE AGREEMENT. As a condition of your employment,
you are required to sign and abide by the Company’s Proprietary Information and
Inventions Agreement (the “Non-Disclosure Agreement”), attached hereto as
Exhibit A.

6.    SERVICE AS EMPLOYEE; OUTSIDE ACTIVITIES.

(a) Location and Duties. You will work at the Company’s corporate headquarters
currently located in Fremont, California, subject to necessary business travel.
During your employment with the Company, you will devote your best efforts and
substantially all of your business time and attention (except for vacation
periods and reasonable periods of illness or other incapacity permitted by the
Company’s general employment policies) to the business of the Company.
 
 
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(b) Company Policies. Your employment relationship with the Company shall also
be governed by the general employment policies and practices of the Company,
including but not limited to the policies contained in the Company’s Employee
Handbook (except that if the terms of this letter differ from or are in conflict
with the Company’s general employment policies or practices, this letter will
control), and you will be required to abide by the general employment policies
and practices of the Company.

(c) Other Activities. Throughout your employment with the Company, you may
engage in civic and not-for-profit activities so long as such activities do not
interfere with the performance of your duties hereunder or present a conflict of
interest with the Company. Subject to the restrictions set forth herein and with
the prior written consent of the Board, you may serve as a director of other
corporations and may devote a reasonable amount of your time to other types of
business or public activities not expressly mentioned in this paragraph. The
Board is aware that you serve as a director for Overland Storage and Berkeley
Mills and that you own less than 10% of the outstanding shares in these
companies. The Board may rescind its consent to your service as a director of
all other corporations or participation in other business or public activities,
if the Board, in its sole discretion, determines that such activities
compromise, are in conflict with, or threaten to compromise or conflict with the
Company’s business interests or your duties to the Company.

(d) Conflict of Interest. During your employment by the Company, except on
behalf of the Company, you will not directly or indirectly serve as an officer,
director, stockholder, employee, partner, proprietor, investor, joint venturer,
associate, representative or consultant for or on behalf of any other person,
corporation, firm, partnership or other entity whatsoever known by you to
compete with the Company (or is planning or preparing to compete with the
Company), anywhere in the world, in any line of business engaged in (or planned
to be engaged in) by the Company; provided, however, that you may purchase or
otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without participating in the activities of
such enterprise) if such securities are listed on any national or regional
securities exchange.

7.    AT-WILL EMPLOYMENT RELATIONSHIP. Your employment relationship with the
Company is at-will. Accordingly, both you and the Company may terminate the
employment relationship at any time, with or without Cause (as defined below),
and with or without advance notice.

8.    DEFINITIONS.

(a) Definition of “Cause.” For purposes of this offer letter agreement, “Cause”
is defined as one or more of the following events: (i) the indictment or
conviction for a felony or other crime, in each case involving moral turpitude;
(ii) the commission of any other act or omission involving fraud or intentional
deceit with respect to the Company or any of its affiliates or any of their
directors, stockholders, partners or members; (iii) any act or omission
involving dishonesty that causes material injury to the Company or any of its
affiliates or any of their directors, stockholders, partners or members; (iv)
gross negligence (defined as conduct or a failure to act that is so reckless
that it demonstrates a substantial lack of concern for whether an injury will
result) with respect to the Company or any of its subsidiaries; (v) willful
misconduct with respect to the Company or any of its subsidiaries; (vi) any
other material breach of this agreement or any other agreement referred to
herein (including the Non-Disclosure Agreement); provided, however, that, it
shall only be deemed Cause pursuant to clause (vi) if you are given written
notice describing the basis of Cause and, if the event is reasonably susceptible
of cure, you fail to cure within thirty (30) days.
 
 
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(b) Definition of “Good Reason.” For purposes of this offer letter agreement,
“Good Reason” is defined as one or more of the following conditions that occur
without your written consent: (i) the assignment to you, or the removal from
you, of any duties or responsibilities that results in the material diminution
of your authority, duties or responsibilities, including a Change in Control
that results in your no longer serving as the Chief Executive Officer of a
publicly traded corporate entity; (ii) a material reduction by the Company of
your base salary; (iii) the Company’s material breach of its obligations to you
under this offer letter agreement; or (iv) your office relocation to a location
more than fifty miles from your then present location; provided however that, it
shall only be deemed Good Reason pursuant to the foregoing definition if (i) the
Company is given written notice from you within ninety (90) days following the
first occurrence of a condition that you consider to constitute Good Reason
describing the condition and fails to remedy such condition within thirty (30)
days following such written notice, and (ii) you resign from employment within
ninety (90) days following the end of the period within which the Company was
entitled to remedy the condition constituting Good Reason but failed to do so.

(c) Definition of “Change in Control.” For purposes of this offer letter
agreement, “Change in Control” means the occurrence, in a single transaction or
in a series of related transactions, of either of the following events:

(i)  There is consummated (A) a merger, consolidation or similar transaction
involving (directly or indirectly) the Company or (B) a tender offer or exchange
offer addressed to the stockholders of the Company and, in either event,
immediately after the consummation of such merger, consolidation or similar
transaction or such tender or exchange offer, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or (B) more than fifty percent (50%) of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction; or
 
(ii)  There is consummated a sale, lease, exclusive license or other disposition
of all or substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries
to an Entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or
other disposition.
 
 
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The term Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company.

9.    ACCELERATION OF VESTING UPON CHANGE IN CONTROL. All unvested stock options
and all unvested grants of restricted stock, herein referred to and any
subsequent grants of stock options, restricted stocks or any other stock awards
in future plans, shall become fully vested upon the closing of a Change in
Control of the Company.

10.    SEVERANCE BENEFITS.

(a) Entitlement to Severance Benefits. If, at any time, your employment is
terminated by the Company without Cause, or by you for Good Reason, you will be
eligible to receive, as your sole severance benefits (the “Severance Benefits”):

(1)  Severance pay in the total amount equal to the sum of (i) twelve (12)
months of your base salary in effect as of the employment termination date, and
(ii) the full amount of your annual performance bonus. The severance pay will be
subject to required payroll deductions and withholdings, and will be paid in
twenty-four (24) equal installments over a period of twelve (12) months, with
such payments made on the Company’s normal payroll schedule.

(2)  If you timely elect and continue to remain eligible for continued group
health insurance coverage under federal COBRA law or, if applicable, state
insurance laws (collectively, “COBRA”), the Company will pay your COBRA premiums
sufficient to continue your group health insurance coverage at the same level in
effect as of your employment termination date (including dependent coverage, if
applicable) for twelve (12) months after the employment termination date;
provided that, the Company’s obligation to pay your COBRA premiums will cease
earlier if you become eligible for group health insurance coverage through a new
employer and you must provide prompt written notice to the Board if you become
eligible for group health insurance coverage through a new employer within
twelve (12) months of your employment termination date; and

(3)  Any then-outstanding stock options provided to you by the Option (as
defined herein) and any then-outstanding restricted shares provided to you by
the Restricted Stock Award (as defined herein) will both be subject to
accelerated vesting equal to the number of shares that would vest over an
additional twelve (12) month period, and you will have twelve (12) months from
the employment termination date in which to exercise the Option.

(b) Release Requirement. Notwithstanding the foregoing, in order to be eligible
for the Severance Benefits, you must first sign, date, return to the Company,
and allow to become effective the Mutual Release of Claims attached hereto as
Exhibit B, which the Company also agrees to sign prior to the Effective Date of
the Mutual Release of Claims (as defined in Exhibit B). You will not be eligible
for the Severance Benefits if your employment is terminated for Cause, or if you
resign for any reason that does not qualify as Good Reason. In addition, in the
event that you materially breach the Non-Disclosure Agreement, the Mutual
Release of Claims, or any other obligations you owe to the Company after
termination of your employment (including but not limited to the nonsolicitation
provisions hereunder), the Company’s obligation to provide the Severance
Benefits (or to continue to provide the Severance Benefits) will cease
immediately and in full as of the date of your breach.
 
 
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(d) Deferred Compensation. Anything in this agreement to the contrary
notwithstanding, if the Company reasonably determines that any payments
hereunder fail to satisfy the distribution requirements of Section 409A(a)(2) of
the Internal Revenue Code of 1986, as amended (the “Code”) and you concur with
such determination, then the payment of such benefit shall be delayed to the
minimum extent necessary so that such payments are not subject to the provisions
of Section 409A(a)(1) of the Code; provided, however, that in no event shall
such delay be more than six (6) months and one (1) day from the date of
termination of your employment with the Company.

(e) Excise Tax.

(i) Anything in this agreement to the contrary notwithstanding, if any payment
or benefit that you would receive pursuant to this offer letter agreement or
otherwise (“Payment”) would (i) constitute a “parachute payment” within the
meaning of Section 280G of the Code, and (ii) but for this sentence, be subject
to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then
such Payment shall be equal to the Reduced Amount (defined below). The “Reduced
Amount” shall be either (y) the largest portion of the Payment that would result
in no portion of the Payment (after reduction) being subject to the Excise Tax,
or (z) the entire Payment, whichever amount after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate, net of the
maximum reduction in federal income taxes which could be obtained from a
deduction of such state and local taxes), results in your receipt, on an
after-tax basis, of the greatest amount of the Payment to you.

(ii) If a reduction in the Payment is to be made, the reduction in payments
and/or benefits shall occur in the following order unless you elect in writing a
different order (provided, however, that such election shall be subject to
Company approval, such approval not to be unreasonably withheld or delayed, if
made on or after the date on which the event that triggers the Payment occurs
(the “Payment Event”)): (1) reduction of cash payments; (2) cancellation of
accelerated vesting of equity awards other than stock options; (3) cancellation
of accelerated vesting of stock options; and (4) reduction of other benefits
paid to you. In the event that acceleration of compensation from your equity
awards is to be reduced, such acceleration of vesting shall be canceled in the
reverse order of the date of grant unless you elect in writing a different order
for cancellation.
 
 
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(iii) The accounting firm engaged by the Company for general audit purposes as
of the day prior to the effective date of the Payment Event shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Payment Event, a nationally recognized accounting firm appointed by the
Board and reasonably approved by you shall make the determinations required
hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder.

(iv) The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and you within fifteen (15) calendar days after the date on which
your right to a Payment is triggered (if requested at that time by the Company
or you) or such other time or times as requested by the Company or you. If the
accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall
furnish the Company and you with an opinion reasonably acceptable to you that no
Excise Tax will be imposed with respect to such Payment. The Company shall be
entitled to rely upon the accounting firm’s determinations, which shall be final
and binding.

11.    DISPUTE RESOLUTION. To ensure the rapid and economical resolution of
disputes that may arise in connection with your employment, you and the Company
agree that any and all disputes, claims, or causes of action, in law or equity,
arising from or relating to the enforcement, breach, performance, execution, or
interpretation of this agreement, your employment, or the termination of your
employment, shall be resolved, to the fullest extent permitted by law, by final,
binding and confidential arbitration in San Francisco, California conducted
before a single arbitrator by Judicial Arbitration and Mediation Services, Inc.
(“JAMS”) or its successor, under the then applicable JAMS rules. By agreeing to
this arbitration procedure, both you and the Company waive the right to resolve
any such dispute through a trial by jury or judge or by administrative
proceeding. The arbitrator shall: (a) have the authority to compel adequate
discovery for the resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (b) issue a written arbitration decision
including the arbitrator’s essential findings and conclusions and a statement of
the award. The Company shall pay all of JAMS’ arbitration fees. Nothing in this
letter agreement shall prevent either you or the Company from obtaining
injunctive relief in court if necessary to prevent irreparable harm pending the
conclusion of any arbitration. The parties agree that the arbitrator shall award
reasonable attorneys fees and costs to the prevailing party in any action
brought hereunder, and the arbitrator shall have discretion to determine the
prevailing party in an arbitration where multiple claims may be at issue.

12.    MISCELLANEOUS.

(a) General Provisions. This letter, including the attached Non-Disclosure
Agreement and Mutual Release of Claims, constitutes the complete, final and
exclusive embodiment of the entire agreement between you and the Company with
regard to the subject matter hereof. It is entered into without reliance on any
promise or representation, written or oral, other than those expressly contained
herein, and it supersedes any other agreements, promises, warranties or
representations concerning its subject matter. Changes in your employment terms,
other than those expressly reserved herein to the Company’s or the Board’s
discretion, only can be made in a writing signed by a duly-authorized member of
the Board and you. This letter agreement will bind the heirs, personal
representatives, successors and assigns of both you and the Company, and inure
to the benefit of both you and the Company, their heirs, successors and assigns.
If any provision of this letter agreement is determined to be invalid or
unenforceable, in whole or in part, this determination shall not affect any
other provision of this letter agreement and the provision in question shall be
modified so as to be rendered enforceable in a manner consistent with the intent
of the parties insofar as possible under applicable law. This letter agreement
shall be construed and enforced in accordance with the laws of the State of
California without regard to conflicts of law principles. Any ambiguity in this
letter agreement shall not be construed against either party as the drafter. Any
waiver of a breach of this letter agreement, or rights hereunder, shall be in
writing and shall not be deemed to be a waiver of any successive breach or
rights hereunder. This letter agreement may be executed in counterparts which
shall be deemed to be part of one original, and facsimile signatures shall be
equivalent to original signatures.
 
 
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(b) Legal Right to Work. As required by law, this offer is subject to
satisfactory proof of your right to work in the United States.

 
 
 
 
 
 
 
 
 
 
[Remainder of Page Intentionally Blank.]
 
 
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(c) Acceptance. Please sign this letter and the attached Non-Disclosure
Agreement and return them to me as soon as possible to accept employment with
the Company on the terms set forth herein. We are very excited about having you
join us as an employee and look forward to working with you.

Sincerely,

/s/ Charles M. Boesenberg

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Charles M. Boesenberg
Chairman of the Compensation Committee of the Board of Directors

Understood and Agreed:

/s/ Mark J. Barrenechea

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Mark J. Barrenechea

May 24, 2007

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Date

Exhibit A - Invention and Non-Disclosure Agreement
Exhibit B - Mutual Release of Claims
 
 
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EXHIBIT A

INVENTION AND NON-DISCLOSURE AGREEMENT
 
RACKABLE SYSTEMS, INC.
 
EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
 
In consideration of my employment by Rackable Systems, Inc., a Delaware
corporation (the "Company"), I hereby agree to the following with respect to my
use and development of information and technology of the Company, as more fully
set out below.
 
 
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Proprietary Information.
 
Confidential Restrictions. I agree to hold in strict confidence and in trust for
the sole benefit of the Company all Proprietary Information (as defined below)
that I may have access to during the course of my employment with the Company
and will not disclose any Proprietary Information, directly or indirectly, to
anyone outside of the Company, or use, copy, publish, summarize, or remove from
Company premises such information (or remove from the premises any other
property of the Company) except (i) during my employment to the extent necessary
to carry out my responsibilities as an employee of the Company or (ii) after
termination of my employment, as specifically authorized by the President of the
Company. I further understand that the publication of any Proprietary
Information through literature or speeches must be approved in advance in
writing by the President of the Company. "Proprietary Information" shall mean
all information and any idea in whatever form, tangible or intangible, whether
disclosed to or learned or developed by me, pertaining in any manner to the
business of the Company (or any affiliate of it that might be formed) or to the
Company's customers, suppliers, licensors and other commercial partners unless:
(i) the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
 
Third Party Information. I recognize that the Company has received and in the
future will receive from third parties their confidential or proprietary
information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree that I owe the Company and such third parties, during the term
of my employment and thereafter, a duty to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm, or corporation (except as necessary in carrying out my work
for the Company consistent with the Company's agreement with such third party)
or to use it for the benefit of anyone other than for the Company or such third
party (consistent with the Company's agreement with such third party) without
the express written authorization of the President of the Company.
 
Interference with Business. I hereby acknowledge that pursuit of the activities
forbidden by this Section 1(c) would necessarily involve the use or disclosure
of Proprietary Information in breach of Section 1, but that proof of such breach
would be extremely difficult. To forestall such disclosure, use, and breach, I
agree that for the term of this Agreement and for a period of one (1) year after
termination of my employment with the Company, I shall not, for myself or any
third party, directly or indirectly (i) divert or attempt to divert from the
Company (or any affiliate of it that might be formed) any business of any kind
in which it is engaged, including, without limitation, the solicitation of or
interference with any of its suppliers or customers; (ii) employ, solicit for
employment, or recommend for employment any person employed by the Company (or
by any affiliate of it that might be formed) during the period of such person's
employment and for a period of one (1) year thereafter; or (iii) engage in any
business activity that is or may be competitive with the Company (or any
affiliate of it that might be formed). I understand that none of my activities
will be prohibited under this Section 1(c) if I can prove that the action was
taken without the use in any way of Proprietary Information.
 
 
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Inventions.
 
Defined; Statutory Notice. I understand that during the term of my employment,
there are certain restrictions on my development of technology, ideas, and
inventions, referred to in this Agreement as "Invention Ideas." The term
Invention Ideas means any and all ideas, processes, trademarks, service marks,
inventions, technology, computer programs, original works of authorship,
designs, formulas, discoveries, patents, copyrights, and all improvements,
rights, and claims related to the foregoing that are conceived, developed, or
reduced to practice by me alone or with others except to the extent that
California Labor Code Section 2870 lawfully prohibits the assignment of rights
in such ideas, processes, inventions, etc. I understand that Section 2870(a)
provides:
 

   
Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:

 
 
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Relate at the time of conception or reduction to practice of the invention to
the employer's business, or actual or demonstrably anticipated research or
development of the employer.
 
Result from any work performed by the employee for the employer.
 
Records of Invention Ideas. I agree to maintain adequate and current written
records on the development of all Invention Ideas and to disclose promptly to
the Company all Invention Ideas and relevant records, which records will remain
the sole property of the Company. I further agree that all information and
records pertaining to any idea, process, trademark, service mark, invention,
technology, computer program, original work of authorship, design, formula,
discovery, patent, or copyright that I do not believe to be an Invention Idea,
but is conceived, developed, or reduced to practice by me (alone or with others)
during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (such
disclosure to be received in confidence). The Company shall examine such
information to determine if in fact the idea, process, or invention, etc., is an
Invention Idea subject to this Agreement.
 
Assignment. I agree to assign to the Company, without further consideration, my
entire right, title, and interest (throughout the United States and in all
foreign countries), free and clear of all liens and encumbrances, in and to each
Invention Idea, which shall be the sole property of the Company, whether or not
patentable. In the event any Invention Idea shall be deemed by the Company to be
patentable or otherwise registrable, I will assist the Company (at its expense)
in obtaining letters patent or other applicable registrations thereon and I will
execute all documents and do all other things (including testifying at the
Company's expense) necessary or proper to obtain letters patent or other
applicable registrations thereon and to vest the Company with full title
thereto. Should the Company be unable to secure my signature on any document
necessary to apply for, prosecute, obtain, or enforce any patent, copyright, or
other right or protection relating to any Invention Idea, whether due to my
mental or physical incapacity or any other cause, I hereby irrevocably designate
and appoint the Company and each of its duly authorized officers and agents as
my agent and attorney-in-fact, to act for and in my behalf and stead, to execute
and file any such document, and to do all other lawfully permitted acts to
further the prosecution, issuance, and enforcement of patents, copyrights, or
other rights or protections with the same force and effect as if executed and
delivered by me.
 
Exclusions. Except as disclosed in Exhibit A, there are no ideas, processes,
trademarks, service marks, inventions, technology, computer programs, original
works of authorship, designs, formulas, discoveries, patents, copyrights, or
improvements to the foregoing that I wish to exclude from the operation of this
Agreement.
 
Post-Termination Period. I acknowledge that because of the difficulty of
establishing when any idea, process, invention, etc., is first conceived or
developed by me, or whether it results from access to Proprietary Information or
the Company’s equipment, facilities and data, I agree that any idea, process,
trademark, service mark, invention, technology, computer program, original work
of authorship, design, formula, discovery, patent, copyright, or any
improvement, rights, or claims related to the foregoing shall be presumed to be
an Invention Idea if it is conceived, developed, used, sold, exploited, or
reduced to practice by me or with my aid within one (1) year after my
termination of employment with the Company. I can rebut the above presumption if
I prove that the invention, idea, process, etc., is not an Invention Idea as
defined in paragraph 2(a).
 
 
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I understand that nothing in this Agreement is intended to expand the scope of
protection provided me by Sections 2870 through 2872 of the California Labor
Code.
 
Former or Conflicting Obligations. During my employment with the Company, I will
not disclose to the Company, or use, or induce the Company to use, any
proprietary information or trade secrets of others. I represent that my
performance of this Agreement will not breach any agreement to keep in
confidence proprietary information acquired by me in confidence or in trust
prior to my employment by the Company. I certify that I have no outstanding
agreement or obligation that is in conflict with any of the provisions of this
Agreement, or that would preclude me from complying with the provisions hereof.
I further certify that during the term of my employment with the Company, I will
not engage in any other employment, occupation, consulting or other business
activity directly related to the business in which the Company is now involved
or becomes involved during the term of such employment.
 
Government Contracts. I understand that the Company has or may enter into
contracts with the government under which certain intellectual property rights
will be required to be protected, assigned, licensed, or otherwise transferred
and I hereby agree to execute such other documents and agreements as are
necessary to enable the Company to meet its obligations under any such
government contracts.
 
Termination. I hereby acknowledge and agree that all personal property,
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, blueprints, and other documents or materials
or copies thereof, Proprietary Information, and equipment furnished to or
prepared by me in the course of or incident to my employment, belong to the
Company and will be promptly returned to the Company upon termination of my
employment with the Company. Following my termination, I will not retain any
written or other tangible material containing any Proprietary Information or
information pertaining to any Invention Idea. I understand that my obligations
contained herein will survive the termination of my employment. In the event of
termination of my employment, I agree to sign and deliver to the Company a
Termination Certificate in the form attached hereto as Exhibit B.
 
 
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Miscellaneous Provisions.
 
Assignment. I agree that the Company may assign to another person or entity any
of its rights under this Agreement, including, without limitation, any successor
in interest to the Company or its business operations. This Agreement shall be
binding upon me and my heirs, executors, administrators, and successors, and
shall inure to the benefit of the Company's successors and assigns.
 
Governing Law; Severability. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of California. If any provision of this Agreement, or
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other persons,
places, and circumstances shall remain in full force and effect.
 
Entire Agreement. The terms of this Agreement are the final expression of my
agreement with respect to the subject matter hereof and may not be contradicted
by evidence of any prior or contemporaneous agreement. This Agreement shall
constitute the complete and exclusive statement of its terms and no extrinsic
evidence whatsoever may be introduced in any judicial, administrative, or other
legal proceeding involving this Agreement.
 
Application of this Agreement. I hereby agree that my obligations set forth in
Sections 1 and 2 hereof and the definitions of Proprietary Information and
Invention Ideas contained therein shall be equally applicable to Proprietary
Information and Invention Ideas relating to any work performed by me for the
Company prior to the execution of this Agreement.
 
 
Date: May 24, 2007
/s/ Mark J. Barrenechea

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Signature
 
 
Mark J. Barrenechea

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Printed Name
 
 
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EXHIBIT A
 
Employee's Prior Inventions
 
Except as set forth below, there are no ideas, processes, trademarks, service
marks, inventions, technology, computer programs, original works of authorship,
designs, formulas, discoveries, patents, copyrights, or any claims, rights, or
improvements to the foregoing that I wish to exclude from the operation of this
Agreement:
 
 
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EXHIBIT B

TERMINATION CERTIFICATE CONCERNING
 
PROPRIETARY INFORMATION AND INVENTIONS
 
 
This is to certify that I have returned all personal property of the Company,
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, blueprints, and other documents and materials,
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment with the Company, and that I did not make
or distribute any copies of the foregoing.
 
I further certify that I have reviewed the Employee Proprietary Information and
Inventions Agreement signed by me and that I have complied with and will
continue to comply with all of its terms, including, without limitation, (i) the
reporting of any invention, process, or idea, etc. conceived or developed by me
and covered by the Agreement and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company’s rights under the Agreement.
 
On termination of my employment with the Company, I will be employed by
___________ [name of new employer]
________________________________________________ [in the  _________________
division] and I will be working in connection with the following projects:
 
[generally describe the projects]
 

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Dated: ________________________________
 
 

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Signature
 
 
 

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Printed Name

 
 
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EXHIBIT B

MUTUAL RELEASE OF CLAIMS
(To be signed on or within 21 days after the employment termination date.)
 
Pursuant to the terms of the offer letter agreement between Rackable Systems,
Inc. (the “Company”) and Mark J. Barrenechea (“Executive”) dated May 24, 2007
(the “Agreement”), the parties hereby enter into the following Mutual Release of
Claims (the “Release”):

1.    Executive’s Release of Claims: 

Executive understands that, on the last date of his employment with the Company,
the Company will pay him any accrued salary and accrued and unused vacation to
which he is entitled by law, regardless of whether he signs this Release, but he
is not entitled to the Severance Benefits, unless he signs and returns this
Release to the Company and allows it to become effective.
 
Executive hereby generally and completely releases the Company, its parent, and
its and their directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers,
affiliates, and assigns (collectively the “Released Parties”) of and from any
and all claims, liabilities and obligations, both known and unknown, arising out
of or in any way related to events, acts, conduct, or omissions occurring at any
time prior to or at the time that Executive signs this Release. This general
release includes, but is not limited to: (1) all claims arising out of or in any
way related to Executive’s employment with the Company or the termination of
that employment; (2) all claims related to Executive’s compensation or benefits
from the Company, including salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership or equity interests in the Company; (3) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith
and fair dealing (including claims based on or arising under the Agreement);
(4) all tort claims, including claims for fraud, defamation, emotional distress,
and discharge in violation of public policy; and (5) all federal, state, and
local statutory claims, including claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil
Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of
1990, the federal Age Discrimination in Employment Act (as amended) (“ADEA”),
the federal Family and Medical Leave Act, the California Labor Code (as
amended), the California Family Rights Act, and the California Fair Employment
and Housing Act (as amended).
 
Executive understands that notwithstanding the foregoing, the following are not
included in the Released Claims (the “Excluded Claims”): (i) any rights or
claims for indemnification Executive may have pursuant to any written
indemnification agreement to which he is a party, the charter, bylaws, or
operating agreements of any of the Released Parties, or under applicable law; or
(ii) any rights which are not waivable as a matter of law. In addition,
Executive understands that nothing in this release prevents him from filing,
cooperating with, or participating in any proceeding before the Equal Employment
Opportunity Commission, the Department of Labor, or the California Department of
Fair Employment and Housing, except that Executive acknowledges and agrees that
he shall not recover any monetary benefits in connection with any such claim,
charge or proceeding with regard to any claim released herein. Executive hereby
represents and warrants that, other than the Excluded Claims, Executive is not
aware of any claims he has or might have against any of the Released Parties
that are not included in the Released Claims.
 
Executive acknowledges that he is knowingly and voluntarily waiving and
releasing any rights he may have under the ADEA, and that the consideration
given for the waiver and release in the preceding paragraph is in addition to
anything of value to which he is already entitled. Executive further
acknowledges that he has been advised by this writing that: (1) his waiver and
release do not apply to any rights or claims that may arise after the date he
signs this Release; (2) he should consult with an attorney prior to signing this
Release (although he may choose voluntarily not to do so); (3) he has twenty-one
(21) days to consider this Release (although he may choose voluntarily to sign
it earlier); (4) he has seven (7) days following the date he signs this Release
to revoke it by providing written notice of revocation to the Chairman of the
Company’s Board of Directors; and (5) this Release will not be effective until
the date upon which the revocation period has expired, which will be the eighth
calendar day after the date Executive signs it provided that he does not revoke
it and that the Company has signed this Release by such date (the “Effective
Date”).
 
 
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Executive hereby represents that he has been paid all compensation owed and for
all hours worked, he has received all the leave and leave benefits and
protections for which he is eligible, pursuant to the Family and Medical Leave
Act, the California Family Rights Act, or otherwise, and he has not suffered any
on-the-job injury for which he has not already filed a workers’ compensation
claim.

2.    Company’s Release of Claims:

The Company hereby generally and completely releases Executive of and from any
and all claims, liabilities, and obligations, both known and unknown, arising
out of or in any way related to events, acts, conduct or omissions occurring at
any time prior to or at the time the Company signs this Release (the “Released
Claims”); provided however, that this Release shall not extend to: (1) any
claims that may arise out of any events, acts, conduct or omissions occurring
after this Release is executed, including without limitation, any claims for
breach of the Agreement; (2) any claims arising at any time out of Executive’s
obligations to protect the Company’s proprietary information, including without
limitation, any claims arising from Executive’s obligations under his
Confidentiality Agreement, claims arising under the California Uniform Trade
Secrets Act, or common law claims arising from these obligations; or (3) any
claims arising from any actions by Executive during his employment with the
Company which were outside of his authority as President and Chief Executive
Officer and Member of the Board of Directors of the Company or outside of the
course and scope of his employment (the “Excluded Claims”).
 
The Company hereby represents and warrants that, other than the Excluded Claims,
it is not aware of any claims it has or might have against Executive that are
not included in the Released Claims.
 
 
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3.    Section 1542 Waiver:
 
THE PARTIES UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS. The parties acknowledge that each has read and understands
Section 1542 of the California Civil Code which reads as follows: “A general
release does not extend to claims which the creditor does not know or suspect to
exist in his or her favor at the time of executing the release, which if known
by him or her must have materially affected his or her settlement with the
debtor.” The parties hereby expressly waive and relinquish all rights and
benefits under that section and any law or legal principle of similar effect in
any jurisdiction with respect to their respective release of claims herein,
including but not limited to their releases of unknown and unsuspected claims.

4.    Additional Agreements:
 
The parties hereby further agree as follows: (1) Executive agrees not to
disparage the Company, its parent, or its or their officers, directors,
employees, shareholders, affiliates and agents, in any manner likely to be
harmful to its or their business, business reputation, or personal reputation,
and the Company agrees not to disparage Executive in any manner likely to be
harmful to his business reputation or personal reputation (although the parties
may respond accurately and fully to any question, inquiry or request for
information as required by legal process); (2) not to voluntarily (except in
response to legal compulsion) assist any third party in bringing or pursuing any
proposed or pending litigation, arbitration, administrative claim or other
formal proceeding against the other party, or against the Company’s parent or
subsidiary entities, affiliates, officers, directors, employees or agents; and
(3) to reasonably cooperate with the other party, by voluntarily (without legal
compulsion) providing accurate and complete information, in connection with such
other party’s actual or contemplated defense, prosecution, or investigation of
any claims or demands by or against third parties, or other matters, arising
from events, acts, or failures to act that occurred during the period of
Executive’s employment by the Company.

Executive:
 
By:

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Mark J. Barrenechea
 
Date:

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Company:
 
By:

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Title:

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Date:

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