Exhibit
      10.1

     

    Rackable
      Systems, Inc.

    


    RETENTION
      AGREEMENT

     

    This
      Retention
      Agreement
      (this
“Agreement”),
      effective as of the date of the last signature on the signature page hereof
      (the
“Effective
      Date”),
      is
      executed by and between Rackable Systems, Inc., a Delaware corporation (the
      “Company”),
      and
      Giovanni Coglitore (the “Executive”).
      The
      Company and the Executive are each individually referred to in this Agreement
      as
      a “Party”
and
      are
      collectively referred to in this Agreement as the “Parties.”
      

     

    Recitals

     

    A. The
      Executive and the Company are parties to an Employment Agreement, dated December
      23, 2002, as amended effective November 16, 2005 (as so amended, the
“Employment
      Agreement”),
      and a
      Retention Bonus Agreement, dated September 12, 2006, as amended effective
      January 9, 2007 as so amended, the “Bonus
      Agreement”).
      The
      Employment Agreement outlines the general terms of employment for the Executive,
      and the Bonus Agreement provides for a bonus to be paid to the Executive in
      the
      event of a change in control of the Company. 

     

    B. The
      Parties desire to enter into this Agreement, which shall be in addition to,
      and
      shall not amend or modify in any way the provisions of, the Employment Agreement
      or the Bonus Agreement. 

     

    C. The
      Company wishes to incentivize the Executive to remain with the Company and
      use
      his best efforts to assist the Company in connection with the conduct of the
      Company’s business.

     

    Agreement

     

    In
      consideration of the mutual promises and covenants set forth in this Agreement,
      the receipt and sufficiency of which are acknowledged by the Parties, the
      Parties agree as follows:

     

    1.  Certain
      Definitions. 

     

    1.1  Affiliate.
      Any
      Person that directly or indirectly, through one or more intermediaries,
      controls, is controlled by or is under common control with another Person.
      For
      purposes hereof, “control” means the power to vote or direct the voting of
      sufficient securities or other interests to elect a majority of the directors
      or
      to control the management of another Person.

     

    1.2  Board.
      The
      Board of Directors of the Company. 

     

    1.3  Code.
      The
      Internal Revenue Code of 1986, as amended.

     

    1.4  Entity.
      A
      corporation, partnership, limited liability company or other entity.


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.5  Involuntary
      Termination With Cause.
      A
      termination by the Company or any of its Subsidiaries of the Executive’s
      employment relationship with the Company or any of its Subsidiaries for any
      of
      the following reasons:

     

    (a)  the
      Executive’s willfull refusal to perform in any material respect the Executive’s
      duties or responsibilities for the Company or any of its Subsidiaries or his
      willful disregard in any material respect of any lawful written financial or
      budgetary limitations established in good faith by the Board, provided the
      Board
      provides him with written notice of such refusal or disregard and provides
      the
      Executive with thirty (30) days to cure such refusal or disregard, and the
      Executive fails to cure such refusal or disregard within such thirty (30)
      days;

     

    (b)  the
      Executive’s willful misconduct that causes material and demonstrable injury,
      monetarily or otherwise, to the Company or any of its Subsidiaries, including,
      but not limited to, misappropriation or conversion of assets of the Company
      or
      any of its Subsidiaries (other than non-material assets), provided the Board
      provides him with written notice of such misconduct and provides the Executive
      with thirty (30) days to cure such misconduct, and the Executive fails to cure
      such misconduct within such thirty (30) days; or

     

    (c)  the
      Executive’s conviction or plea of nolo
      contendre
      to a
      crime of moral turpitude causing material and demonstrable injury to the Company
      or otherwise demonstrating unfitness to serve as an officer of the Company
      or
      conviction of or entry of a plea of nolo
      contendere
      to a
      felony.

     

    No
      act or
      failure by the Executive shall be deemed “willful” if done, or omitted to be
      done, in good faith and with the reasonable belief that the action or omission
      was in the best interest of the Company or any of its Affiliates. For the
      avoidance of doubt, a termination of employment of the Executive due to death
      or
      disability shall not qualify as an Involuntary Termination With
      Cause.

     

    1.6  Own,
      Owned, Owner, Ownership.
      A Person
      shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have
      acquired “Ownership” of securities if such Person, directly or indirectly,
      through any contract, arrangement, understanding, relationship or otherwise,
      is
      the beneficial owner of such securities. For example, a holder of stock of
      a
      corporation (the “direct corporation”) is deemed to Own such stock and to Own a
      pro rata portion (based on relative holdings of the stock of the direct
      corporation) of any stock of any other corporation Owned by the direct
      corporation. 

     

    1.7  Person.
      An
      individual, a partnership, a limited liability company, a corporation, an
      association, a joint stock company, a trust, a joint venture, an unincorporated
      organization and a governmental entity or any department, agency or political
      subdivision thereof.

     

    1.8  Resignation
      for Good Reason.
      The
      Executive shall be deemed to have resigned with “Good Reason” if he resigns
      after any of the following actions are taken without his written consent: (x)
      the reduction of the Executive’s cash compensation by more than 10%; (y) a
      material change in the Executive’s job title, reporting structure, duties, or
      authority; or (z) the relocation of the Executive’s principal place of work by
      30 or more miles.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.9  Subsidiary.
      With
      respect to the Company, (A) any corporation of which more than fifty percent
      (50%) of the outstanding capital stock having ordinary voting power to elect
      a
      majority of the board of directors of such corporation (irrespective of whether,
      at the time, stock of any other class or classes of such corporation shall
      have
      or might have voting power by reason of the happening of any contingency) is
      at
      the time, directly or indirectly, Owned by the Company, and (B) any Entity
      other
      than a corporation in which the Company has a direct or indirect interest
      (whether in the form of voting or participation in profits or capital
      contribution) of more than fifty percent (50%).

     

    2.  Retention
      Bonus.
       

     

    2.1  Cash
      Payment.
      The
      Company shall make a cash payment to the Executive in an amount equal to
      $250,000 (less required deductions and withholdings) on each of December 31,
      2007, December 31, 2008, December 31, 2009, and December 31, 2010 (each such
      date, a “Retention
      Bonus Date”),
      for a
      total of $1,000,000 (each such bonus payment on a Retention Bonus Date, a
“Retention
      Bonus Payment”);
      provided,
      however,
      that:

     

    (a)  if
      the
      Executive’s employment with the Company is terminated as a result of either an
      Involuntary Termination With Cause or the Executive’s resignation of employment
      other than a Resignation for Good Reason, then no Retention Bonus Payment will
      be made relating to any Retention Bonus Date following the date of such
      termination of employment;
      and

     

    (b)  if
      the
      Executive’s employment with the Company is terminated other than as a result of
      an event set forth in Section 2.1(a), then the Retention Bonus Payment for
      the
      next succeeding Retention Bonus Date shall be $250,000 multiplied by the
      fraction obtained by dividing the number of calendar days transpired from the
      last Retention Bonus Date to the date of termination of the Executive’s
      employment divided by 365, and no Retention Bonus Payments will be made relating
      to any Retention Bonus Dates thereafter; provided,
      however,
      that
      prior to receipt of any payment pursuant to this Section 2.1(b), the Executive
      must sign, date, return to the Company, and allow to become effective, a general
      release of all known and unknown claims in a form satisfactory to the
      Company.

     

    2.2  Time
      of Payment and Form Of Benefits.
      

     

    (a)  Except
      as
      otherwise provided herein, the payment of a Retention Bonus Payment shall be
      paid in a lump-sum payment, subject to applicable withholding, on the applicable
      Retention Bonus Date or within five (5) business days thereafter (or, if payment
      is made pursuant to Section 2.1(b), within five (5) business days after the
      date
      after termination of employment upon which all of the requirements with respect
      to the general release described in Section 2.1(b) are met), and shall otherwise
      be made in accordance with and subject to the Company’s normal payroll
      practices. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)  If
      the
      Company determines that any cash benefit provided under Section 2.1 fails to
      satisfy the distribution requirement of Section 409A(a)(2)(A) of the Code as
      a
      result of the application of Section 409A(a)(2)(B)(i) of the Code, the payment
      of such benefit shall be accelerated to the minimum extent necessary so that
      the
      benefit is not subject to the provisions of Section 409A(a)(1) of the Code.
      (It
      is the intention of the preceding sentence to apply the short-term deferral
      provisions of Section 409A of the Code, and the regulations and other guidance
      thereunder, to such payments and benefits. The payment schedule as revised
      after
      the application of such preceding sentence shall be referred to as the
“Revised
      Payment Schedule.”)
      However, if there is no Revised Payment Schedule that would avoid the
      application of Section 409A(a)(1) of the Code, the payment of such benefits
      shall not be paid pursuant to the original payment schedule or a Revised Payment
      Schedule and instead the payment of such benefits shall be delayed to the
      minimum extent necessary so that such benefits are not subject to the provisions
      of Section 409A(a)(1) of the Code. The Company may attach conditions to or
      adjust the amounts paid pursuant to this Section 2.2 to preserve, as closely
      as
      possible, the economic consequences that would have applied in the absence
      of
      Section 409A of the Code; provided,
      however,
      that no
      such condition shall result in the payments being subject to Section 409A(a)(1)
      of the Code.

     

    2.3  Withholding.
      All
      payments under this Agreement will be subject to all applicable withholding
      obligations of the Company, including, without limitation, obligations to
      withhold for federal, state and local income and employment taxes.

     

    3.  Notices.
      Any
      notice provided for in this Agreement shall be in writing and shall be either
      personally delivered, mailed by first class mail (return receipt requested),
      or
      sent by overnight courier service, to the recipient at the address indicated
      below:

    


    Notices
      to the Executive:

    


    To
      the
      Executive’s home address then on the records of the Company

    


    Notices
      to the Company:

    


    Rackable
      Systems, Inc. 

    1933
      Milmont Drive

    Milpitas,
      CA 95035

    Facsimile:
      (408) 321-0293 

    Attention:
      Chief
      Executive Officer

    


    or
      such
      other address or to the attention of such other person as the recipient party
      shall have specified by prior written notice to the sending party. Any notice
      under this Agreement shall be deemed to have been given when so delivered or
      mailed.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.  Severability.
      Whenever
      possible, each provision of this Agreement shall be interpreted in such manner
      as to be effective and valid under applicable law, but if any provision of
      this
      Agreement is held to be invalid, illegal or unenforceable in any respect under
      any applicable law or rule in any jurisdiction, such invalidity, illegality
      or
      unenforceability shall not affect any other provision; provided
      that
      such provision shall be construed to give effect to the parties intent of such
      provision to the maximum extent permitted by applicable law.

     

    5.  Complete
      Agreement.
      This
      Agreement embodies the complete agreement and understanding among the parties
      and supersedes and preempts any prior understandings, agreements or
      representations by or among the parties, written or oral, which may have related
      to the subject matter hereof in any way. For the avoidance of doubt, this
      Agreement does not supersede or preempt any provisions of the Employment
      Agreement or the Bonus Agreement. 

     

    6.  No
      Strict Construction.
      The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      parties hereto to express their mutual intent, and no rule of strict
      construction shall be applied against any party.

     

    7.  Descriptive
      Headings.
      The
      descriptive headings of this Agreement are inserted for convenience only and
      do
      not constitute a substantive part of this Agreement. 

     

    8.  Counterparts.
      This
      Agreement may be executed in separate counterparts, each of which is deemed
      to
      be an original and all of which taken together constitute one and the same
      agreement.

     

    9.  Successors
      and Assigns.
      This
      Agreement is intended to bind and inure to the benefit of and be enforceable
      by
      the Executive, the Company and their respective heirs, successors and assigns,
      except that the Executive may not assign his rights or delegate his obligations
      hereunder without the prior written consent of the Company. It is hereby
      expressly agreed that the Affiliates of the Company are intended to be
      third-party beneficiaries to this Agreement, and are entitled to enforce the
      rights and remedies of the Company hereunder.

     

    10.  Choice
      of Law.
      All
      issues and questions concerning the construction, validity, enforcement and
      interpretation of this Agreement and the exhibits and schedules hereto shall
      be
      governed by, and construed in accordance with, the laws of the State of
      California, without giving effect to any choice of law or conflict of law rules
      or provisions (whether of the State of California or any other jurisdiction)
      that would cause the application of the laws of any jurisdiction other than
      the
      State of California.

     

    11.  Amendments,
      Waivers, and Termination.
      This
      Agreement will terminate, and be of no further force and effect, on the date
      following the date of the payment of the last Retention Bonus Payment payable
      pursuant to the terms of Section 2.1 hereof. As of any particular time, any
      term
      of this Agreement may be amended, the observance of any term of this Agreement
      may be waived (either generally or in a particular instance and either
      retroactively or prospectively), or this Agreement may be earlier terminated,
      in
      each case only with the written consent of the Company and the Executive. Any
      amendment, waiver, or termination executed in accordance with this Section
      11
      will be binding upon the Executive, the Company, the Company’s
      successors-in-interest, and any person claiming for or on behalf of the
      Executive or the Company. The foregoing not withstanding, the provisions of
      Sections 10 and 13 shall survive any termination of the Agreement

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    12.  Delivery
      by Facsimile.
      This
      Agreement, the agreements referred to herein, and each other agreement or
      instrument entered into in connection herewith or therewith or contemplated
      hereby or thereby, and any amendments hereto or thereto, to the extent signed
      and delivered by means of a facsimile machine, shall be treated in all manner
      and respects as an original agreement or instrument and shall be considered
      to
      have the same binding legal effect as if it were the original signed version
      thereof delivered in person. At the request of any party hereto or to any such
      agreement or instrument, each other party hereto or thereto shall reexecute
      original forms thereof and deliver them to all other parties. No party hereto
      or
      to any such agreement or instrument shall raise the use of a facsimile machine
      to deliver a signature or the fact that any signature or agreement or instrument
      was transmitted or communicated through the use of a facsimile machine as a
      defense to the formation or enforceability of a contract and each such party
      forever waives any such defense.

     

    13.  Dispute
      Resolution.
      Other
      than with respect to suits for injunctive or other equitable relief, any dispute
      under this Agreement shall be resolved by instituting, after thirty (30) days
      written notice to the other party, an arbitration to be conducted in San
      Francisco, California in accordance with the Commercial Arbitration Rules
      (except as modified below) of the American Arbitration Association and with
      the
      Expedited Procedures thereof (collectively, the “Rules”).
      Each
      of the parties hereto agrees that such arbitration shall be conducted by a
      panel
      of three arbitrators, one of whom is selected by the Company, one of whom is
      selected by the Executive and one of whom is mutually agreeable to the
      arbitrators selected by the Company and the Executive; provided that such
      arbitrators shall each be a retired judge or other qualified person with
      relevant experience in deciding cases concerning the matter which is the subject
      of the dispute. The arbitrators shall prepare a written decision containing
      the
      essential findings and conclusions on which the award is based so as to ensure
      meaningful judicial review of the decision. In rendering such decision, the
      arbitrators shall not add to, subtract from or otherwise modify the provisions
      of this Agreement and shall make their determinations in accordance therewith.
      Any award rendered by the arbitrators shall be final, binding and sole and
      exclusive with respect to the subject matter thereof and judgment may be entered
      on it in any court of competent jurisdiction. The losing party shall pay the
      fees and expenses of both parties and the arbitrators, and the arbitrators
      shall
      resolve any fee disputes. 

     

    14.  No
      Implied Employment Contract. This
      Agreement shall not be deemed (i) to give the Executive any right to be retained
      in the employ of the Company, or (ii) to interfere with the right of the Company
      to discharge the Executive at any time, with or without cause, which right
      is
      hereby reserved.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    15.  Effectiveness.
      This
      Agreement is effective upon the execution and delivery of this Agreement by
      the
      Company and the Executive. 

     

    THE
      COMPANY:

     

    RACKABLE
      SYSTEMS, INC.

     

    By:       
      /s/
      Thomas K. Barton 

    Name: 
      Thomas K. Barton

    Its:      
      Chief Executive Officer 

    Date:   
      January 9, 2007

    


    THE
      EXECUTIVE:

    


     

    /s/
      Giovanni Coglitore

    Giovanni
      Coglitore

    Date:
      January 9, 2007