EX 10.1


    EXHIBIT
      10.1

    


    


     

    May
      23,
      2007

     

    Todd
      Ford

    


     

    Dear
      Todd:

     

    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 Executive Vice President, and in all other
      employment positions, was terminated by the Company effective May 23, 2007
      (the
“Separation
      Date”).
      

     

    2.    Accrued
      Salary and Vacation.
      You
      hereby certify that the Company timely paid you all accrued salary, and all
      accrued and unused vacation earned and payable for your services through the
      Separation Date, 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 9 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 May 23, 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/ Mark Barrenechea

      
        

      

    

    Mark
      Barrenechea

    Chief
      Executive Officer

    


    


    Attachment:
      Exhibit A

    


    


    Understood
      and Agreed:

     

    /s/
      Todd
      Ford

      
        

      

    

    Todd
      Ford

     

    Date:
      May
      24, 2007

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    EQUITY
      SUMMARY

     

    Option
      Awards As of May 23, 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

            	
              423,610

            	
              76,390

            	
              18,056

            	
              58,334

            	
              58,334

            
	
              12/23/2002

            	
              204,225

            	
              $2.14

            	
              144,342

            	
              59,883

            	
              36,056

            	
              23,827

            	
              23,827

            
	
              12/23/2002

            	
              129,
                108

            	
              $2.14

            	
              105,437

            	
              23,671

            	
              8,608

            	
              15,063

            	
              15,063

            
	
              9/1/2006

            	
              162,500

            	
              $27.36

            	
              0

            	
              162,500

            	
              27,083

            	
              135,417

            	
              0

            
	
              1/2/07

            	
              162,500

            	
              $30.97

            	
              0

            	
              162,500

            	
              13,541

            	
              148,959

            	
              0

            
	
              Total

            	
              1,158,333

            	    
	
              673,389

            	
              484,944

            	
              103,344

            	
              381,600

            	
              97,224

            


    

    


    


    Restricted
      Stock Awards as of May 23, 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

            	
              22,500

            	
              2812

            	
              19,688

            	
              2,812

            	
              19,688

            	
              0

            
	
              1/2/07

            	
              22,500

            	
              1406

            	
              21,094

            	
              1,406

            	
              21,094

            	
              0

            
	
              Total

            	
              45,000

            	
              4,218

            	
              40,782

            	
              4,218

            	
              40,782