Exhibit
      10.1

    


    


    May
      15,
      2007

    


    


    Tom
      Barton

    


    


    Dear
      Tom:

    


    This
      letter sets forth the substance of the separation agreement (the “Agreement”)
      that
      Rackable Systems, Inc. (the “Company”)
      is
      offering to you in connection with your employment transition. 

    


    1. Separation.
      Your
      employment with the Company as its Chief Executive Officer (“CEO”),
      and
      in all other employment positions, was terminated by the Company effective
      April
      29, 2007 (the “Separation
      Date”).
      

    


    2. Accrued
      Salary and Vacation.
      On April
      30, 2007, the Company paid you all accrued salary, and all accrued and unused
      vacation earned and payable for your services through April 30, 2007, less
      standard payroll deductions and withholdings. The Company also will pay you
      for
      all accrued but unpaid business expenses incurred by you in accordance with
      the
      Company’s expense reimbursement policy. 

    


    3. Severance
      Payments.
      Your
      employment termination shall be deemed a termination without Cause pursuant
      to
      the terms of your Employment Agreement with the Company dated December 23,
      2002
      (the “Employment
      Agreement”),
      as
      amended by the First Amendment to the Employment Agreement dated September
      1,
      2005 (collectively with the Employment Agreement, the “Amended
      Agreement”).
      Accordingly, pursuant to Section 4(b) of the Employment Agreement, in exchange
      for you entering into and abiding by the terms of this Agreement and Sections
      6,
      7, and 8 of the Employment Agreement, the Company will pay you severance in
      the
      form of continuing payment of your last base salary, less applicable payroll
      deductions and withholdings, for a period of twelve (12) months (the “Severance
      Payments”, the twelve (12) month period referred to as the “Severance Period”).
      The Severance Payments will be paid on the Company’s regular payroll cycle
      beginning on the first regularly-scheduled payroll date after the Effective
      Date
      of this Agreement, as defined in paragraph 11 below. 

    


    4. Health
      Insurance.
      To the
      extent provided by the federal COBRA law or, if applicable, state insurance
      laws, and by the Company’s current group health insurance policies, you will be
      eligible to continue your group health insurance benefits at your own expense.
      Later, you may be able to convert to an individual policy through the provider
      of the Company’s health insurance, if you wish.  If
      you
      timely elect continued coverage under COBRA, the Company, as part of this
      Agreement and as a further severance benefit, will pay the COBRA premiums
      necessary to maintain your current level of health insurance coverage (for
      yourself and any covered dependents) in effect through the twelve (12) month
      anniversary of the Separation Date (“COBRA
      Premiums”).

    


    5. Equity.
      On
      December 23, 2002, you were granted certain stock options (collectively, the
      “Options”)
      pursuant to the terms of the Rackable Systems, Inc. 2002 Stock Option Plan
      (the
“2002
      Plan”). The
      Options shall cease vesting as of the Separation Date; provided, however, that
      in exchange for entering into this Agreement and allowing it to become effective
      by its terms, the Company will accelerate the vesting of the Options so that
      you
      become fully vested in the number of Options that would have become vested
      if
      your employment continued for twelve (12) months after the Separation Date.
      Additionally, you will have twelve (12) months after the Separation Date to
      exercise any vested shares subject to the Options. Except as expressly provided
      herein, your rights, duties and obligations with respect to the Options
      (including your right to exercise any vested shares) shall continued to be
      governed by the terms and conditions of the 2002 Plan and the stock option
      grant
      notices and stock option agreements applicable to the Options. Any stock options
      granted to you on September 1, 2006, or on January 2, 2007, which were unvested
      as of your Separation Date, terminated as of your Separation Date pursuant
      to
      the Company’s 2005 Equity Incentive Plan. A summary of your options and
      restricted stock as of April 29, 2007 is set forth on the table attached as
      Exhibit A hereto.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    6. Other
      Compensation or Benefits.
      The
      Company will reimburse you for the reasonable attorneys’ fees incurred by you in
      connection with this Agreement up to a maximum of $5,000.00. You acknowledge
      that, except as expressly provided in this Agreement, you will not receive
      any
      additional compensation, bonuses, equity interests or vesting, severance or
      other benefits from the Company or any of its affiliated entities after the
      Separation Date. 

    


    7. Other
      Obligations.
      You
      hereby acknowledge and agree to abide by your continuing obligations under
      Sections 6 (Confidential Information, Inventions and Intellectual Property
      Rights; Non-Disparagement; Confidentiality of Terms), 7 (Non-Solicitation)
      and 8
      (Enforcement) of the Employment Agreement, including (but not limited to) your
      obligations pursuant to your Invention and Non-Disclosure Agreement with the
      Company dated December 23, 2002 (the “Confidentiality
      Agreement”).
      

    


    8. Release
      of Claims.
      

    


    (a) General
      Release by You.
      Except
      for the Excluded Claims (as defined below), in consideration for the benefits
      to
      be provided to you under this Agreement to which you would not otherwise be
      entitled, you hereby generally and completely release the Company, its parent,
      subsidiary, and affiliated entities and each of their respective officers,
      directors, agents, servants, employees, attorneys, shareholders, successors,
      and
      assigns (collectively with 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 you sign this Agreement (collectively, the “Released
      Claims”). 

    


    (b) Claims
      Released by You.
      The
      Released Claims include, but are not limited to: (1) all claims arising out
      of
      or in any way related to your employment with the Company or the termination
      of
      that employment; (2) all claims related to your compensation or benefits from
      the Company, including salary, bonuses, commissions, vacation pay, 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). 

    


    (c) Excluded
      Claims.
      Notwithstanding the foregoing, the following are not included in the Released
      Claims (the “Excluded Claims”): (1) rights you have under this Agreement;
      (2) any claims that may arise out of any events, acts, conduct or omissions
      occurring after this Agreement is executed, including without limitation any
      claims for breach of this Agreement; (3) any rights or claims for
      indemnification you may have pursuant to any written indemnification agreement
      to which you are a party, as well as the charter, bylaws, or operating
      agreements of any of the Released Parties, or under applicable law; (4) vested
      benefits under the terms of the Company’s 401K, life insurance, health
      insurance, or disability insurance plans, or (5) any rights which are not
      waivable as a matter of law. In addition, you understand that nothing in this
      release prevents you 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
      you acknowledge and agree that you shall not recover any monetary benefits
      in
      connection with any such claim, charge or proceeding with regard to any claim
      released herein. You hereby represent and warrant that, other than the Excluded
      Claims, you are not aware of any claims you have or might have against any
      of
      the Released Parties that are not included in the Released Claims.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (d) Release
      by the Company. The
      Company hereby generally and completely releases you 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 Agreement; provided,
      however,
      that
      that this release shall not
      extend
      to: (1) any claims that may arise out of any events, acts, conduct or omissions
      occurring after this Agreement is executed, including without limitation any
      claims for breach of this Agreement; (2) any claims arising at any time out
      of
      your obligations to protect the Company’s proprietary information, including
      without limitation any claims arising from your obligations under your
      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 you during your employment with the Company
      which were outside of your authority or outside of the course and scope of
      your
      employment.  

    


    9. ADEA
      Waiver and Release. You
      acknowledge that you are knowingly and voluntarily waiving and releasing any
      rights you may have under the ADEA (“ADEA
      Waiver”).
      You
      also acknowledge that the consideration given for the ADEA Waiver is in addition
      to anything of value to which you were already entitled. You further acknowledge
      that you have been advised by this writing, as required by the ADEA, that:
      (a) your ADEA Waiver does not apply to any rights or claims that arise
      after the date you sign this Agreement; (b) you should consult with an
      attorney prior to signing this Agreement; (c) you have twenty-one (21) days
      to consider this Agreement (although you may choose to voluntarily sign it
      sooner); (d) you have seven (7) days following the date you sign this
      Agreement to revoke your acceptance of it; and (e) this Agreement will not
      be effective until the date upon which the revocation period has expired
      unexercised, which will be the eighth day after you sign this Agreement
      (“Effective
      Date”).

    


    10. Section
      1542 Waiver.
      The
      parties each UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN
      AND
      UNKNOWN CLAIMS, except as otherwise stated herein. In giving the release herein,
      which includes claims which may be unknown to the Company or you at present,
      the
      parties acknowledge that they have read and understand 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 each expressly waive and relinquish all rights and benefits under that
      section and any law of any other jurisdiction of similar effect with respect
      to
      the parties’ respective releases of any unknown or unsuspected claims
      herein.

    


    11. Confidential
      Arbitration.
      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,
      interpretation, or execution of this Agreement, shall be resolved solely and
      exclusively, in accordance with the arbitration procedures set forth in Section
      25 of the Employment Agreement. Nothing herein shall prevent you or the Company
      from seeking injunctive relief in court to prevent irreparable harm pending
      completion of any arbitration proceeding.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    12. Mutual
      Nondisparagement. You
      agree
      that you will not make any disparaging remarks, or any remarks that could
      reasonably be construed as disparaging, whether orally or in writing, regarding
      the Company that is intended to be harmful to the Company or its reputation.
      The
      Company agrees that its officers and directors will not make any disparaging
      remarks, or any remarks that could reasonably be construed as disparaging,
      whether orally or in writing, regarding you that is intended to be harmful
      to
      your business or personal reputation. Nothing
      in this Section 12 is intended to prohibit you or the Company or any of its
      officers or directors from testifying or responding truthfully in response
      to
      any court order, arbitral order, subpoena or government investigation, or in
      connection with any legal proceeding brought by one party against the
      other.

    


    13. Entire
      Agreement.
      This
      Agreement, together with the Amended Agreement, your applicable Stock Option
      Agreements, the Indemnification Agreement between you and the Company, and
      the
      Confidentiality Agreement, constitutes the complete, final and exclusive
      embodiment of the entire agreement between you, the Company and other parties
      hereto with regard to the subject matter hereof. It supersedes any and all
      agreements entered into by and between you and the Company; provided, however,
      that any of your obligations set forth in the Amended Agreement that survive
      the
      termination of your employment (including without limitation Sections 6, 7,
      and
      8 of the Employment Agreement) shall remain in full force and effect and
      considered a material part hereof. This Agreement is entered into without
      reliance on any promise or representation, written or oral, other than those
      expressly contained herein. It may not be modified except in a writing signed
      by
      you and a duly authorized officer of the Company. Each party has carefully
      read
      this Agreement, has been afforded the opportunity to be advised of its meaning
      and consequences by his or its respective attorneys, and signed the same of
      his
      or its own free will.

    


    14. Applicable
      Law.
      This
      Agreement will be deemed to have been entered into and will be construed and
      enforced in accordance with the laws of the State of California as applied
      to
      contracts made and to be performed entirely within California.

    


    15. Severability.
      If a
      court of competent jurisdiction determines that any term or provision of this
      Agreement is invalid or unenforceable, in whole or in part, then the remaining
      terms and provisions hereof will be unimpaired. The court or arbitrator will
      then have the authority to modify or replace the invalid or unenforceable term
      or provision with a valid and enforceable term or provision that most accurately
      represents the parties’ intention with respect to the invalid or unenforceable
      term or provision.

    


    16. Execution.
      This
      Agreement may be executed in any number of counterparts and by different parties
      hereto in separate counterparts, each of which when so delivered shall be deemed
      an original, but all of which counterparts shall constitute but one and the
      same
      instrument. Signed counterparts transmitted by facsimile or PDF transmission
      shall be as effective as originals.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    If
      this
      Agreement is acceptable to you, please sign and date below and return the
      original to me. 

    


    We
      wish
      you the best of luck in your future endeavors.

    


    Sincerely,

    


    Rackable
      Systems, Inc.

    


    


    By: /s/  
      Charles M.
      Boesenberg                                      


    Charles
      M. Boesenberg

    Chairman
      of the Compensation Committee of the Board of Directors

    


    


    Attachment:
      Exhibit A

    


    


    Understood
      and Agreed:

    


    


    /s/
      Thomas
      Barton                                                            


    Thomas
      Barton

    


    


    Date:                           
       5-16-07                                         
       

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Exhibit
      A

    


    Equity
      Summary

    


    Option
      Awards As of April 29, 2007

     

    
      	
              Grant
                Date

            	
              Number
                of Option Shares Granted

            	
              Exercise
                Price

            	
              Number
                of Option Shares Exercised

            	
              Outstanding
                Number of Option Shares

            	
              Number
                of Vested Option Shares Exercisable

            	
              Number
                of Unvested Option Shares

            	
              Number
                of Unvested Option Shares Accelerated Under
                Agreement

            
	
              12/23/2002

            	
              500,000

            	
              $0.71

            	
              316,666

            	
              183,334

            	
              116,667

            	
              66,667

            	
              66,667

            
	
              12/23/2002

            	
              204,225

            	
              $2.14

            	
              25,159

            	
              179,066

            	
              151,836

            	
              27,230

            	
              27,230

            
	
              12/23/2002

            	
              129,
                108

            	
              $2.14

            	
              0

            	
              129,108

            	
              111,893

            	
              17,215

            	
              17,215

            
	
              9/1/2006

            	
              175,000

            	
              $27.36

            	
              0

            	
              175,000

            	
              25,520

            	
              149,480

            	
              0

            
	
              1/2/07

            	
              175,000

            	
              $30.97

            	
              0

            	
              175,000

            	
              10,937

            	
              164,063

            	
              0

            
	
              Total

            	
              1,183,333

            	 	
              341,825

            	
              841,508

            	
              416,853

            	
              424,655

            	 


    

    


    Restricted
      Stock Awards as of April 29, 2007

     

    
      	
              Grant
                Date

            	
              Number
                of Shares Granted

            	
              Number
                of Shares Released/Sold

            	
              Number
                of Outstanding Restricted Shares

            	
              Number
                of Vested Restricted Shares

            	
              Number
                of Unvested Restricted Shares

            	
              Number
                of Unvested Restricted Stock Awards Accelerated Under
                Agreement

            
	
              9/1/2006

            	
              32,500

            	
              4062

            	
              28,438

            	
              4062

            	
              28,438

            	
              0

            
	
              1/2/07

            	
              32,500

            	
              2031

            	
              30,469

            	
              2031

            	
              30,469

            	
              0

            
	
              Total

            	
              65,000

            	
              6,093

            	
              58,907

            	
              6,093

            	
              58,907