Document:

Offer letter from the Registrant to Tom Gallivan

 Exhibit 10.38 
  
 

 
  
 September 8, 2004

  

			
	 Mr. Tom Gallivan
 3383 Shady Spring Lane
 Mountain View, CA 94040
	  	 1933 Milmont Drive
 Milpitas, California 95035
  
 P
408.240.8300
 F 408.321.0293
  
 www.rackable.com

  
 Dear Tom, 
  
 Rackable Systems, Inc. (“Rackable” or the “Company”) is pleased to offer
you the position of Vice President of Worldwide Sales, reporting to the Chief Executive Officer. This letter sets forth the terms of this offer. 
  

	1.	Base Salary. Annual base salary of $160,000. You will be paid 1/26 of this amount every 2 weeks, or a total of $6,153.85 (gross) less payroll deductions and all required
withholdings. You shall devote your best efforts and your full business time, business judgment, business skill, knowledge and attention to advancing the business and affairs of Rackable and its affiliates. 

  

	2.	2004 Q4 Bonus Plan. For the 4th quarter
of 2004, you will be eligible for a $25,000 (gross) bonus based upon specific objectives set by the CEO. The actual bonus amount will be determined by your performance to the defined objectives, and is expected but not guaranteed to be paid at a
rate of 80% or more of the eligible bonus amount. Assuming your continued employment through the fourth quarter of calendar year 2004, Rackable will pay out the bonus in the first regular payroll run of 2005, less payroll deductions and all required
withholdings. 

  

	3.	2005 Incentive Compensation / Bonus. You are eligible to receive incentive compensation for calendar year 2005 that will be computed as an override of 0.1% of the
company’s revenue performance (net of returns) on first $160 million in revenues, 0.2% thereafter to $200 million in revenues and 0.3% on all revenues above $200 million. If the company were to achieve $250 million in revenues, the gross bonus
amount would be $390,000 (160M*0.1% + $40M*.2%+ $50M *0.3%). If annualized gross margins fall below the target of 17%, it may be necessary to modify the bonus structure prospectively. Bonus amounts will be computed quarterly and will be paid during
the first regular payroll run of the following quarter, less payroll deductions and all required withholdings. For 2006 and beyond, your compensation and bonus structure shall be determined annually. These bonus amounts are computed based upon
organic revenue growth due to growth in Rackable Systems’ direct sales force, its cultivation of indirect channels, etc., but are not intended to apply to revenues associated with acquisition of other companies. To the extent that Rackable does
acquire another company or companies with significant revenues, we will agree upon modifications to this incentive structure accordingly. 

  

	4.	 Equity position. It will be recommended to the Board of Directors that you be granted a stock option to purchase 150,000 shares of Common Stock under 

  

 Tom Gallivan’s Offer Letter 
 September 8, 2004 
 Page 2 of 3 
  
 Rackable’s Employee Stock Option
Plan. It will be recommended to the Board of Directors that these options be priced at $4.00 per share. Your options will be subject to a five year vesting schedule, with vesting to commence as of your start date as an employee under this Agreement.
Your options shall only vest if you have been continuously employed by Rackable from the Start Date listed below through the applicable option vesting date (e.g., at the end of the first year of employment or the applicable monthly period thereafter
as set forth in the next sentence). Under the vesting schedule, your option shares would vest at the rate of 20% upon completion of the first year of employment, with an additional 1.6667% of such shares vesting for each full month of continuous
employment completed after the first anniversary. Your options, if approved, shall be granted subject to all of the terms and conditions set forth in an option agreement prepared by Rackable and executed by you and Rackable (the “Stock Option
Agreement”) and the grant of such options shall be conditioned upon the execution of such Stock Option Agreement. 
  

	5.	Acceleration upon change of control. You will be eligible for immediate vesting of all unvested shares upon the occurrence of both (a) a “change of control” and (b) any
one of the following within 12 months after “change of control”, termination without cause; given a position of substantially lesser responsibility; or required to relocate, the specific terms of which shall be set forth in your Stock
Option Agreement. “Change of control” is defined as an exchange of more than 50% of Rackable’s equity securities in an acquisition. 

  

Rackable also offers a benefits package, including medical and dental insurance coverage, three weeks vacation annually, and sick leave and paid holidays as specified
by Rackable policy for all employees. 
  
 Your employment with Rackable is for no
specified term and is “at will,” and may be terminated by you or Rackable at any time, with or without cause or advance notice. 
  
 This letter, the Company’s agreement relating to proprietary rights between you and Rackable to be provided by the Company to you (the “Inventions
Agreement”) and, if approved by the Board of Directors, the form of option agreement between you and Rackable relating to your option grant described above set forth the terms of your employment with the Company and supersede any prior
representations or agreements, whether written or oral. It is a condition to this offer and your employment that you execute the Inventions Agreement on or prior to your acceptance of this offer letter. You also must comply with all Company policies
and rules. As required by law, this offer is subject to satisfactory proof of your right to work in the United States. You agree to treat with confidentiality the terms of this offer and to not disclose or discuss or release any such terms to any
person or entity (except your attorney, accountant and other consultants) without the consent of the Board of Directors of the Company. This letter may not be modified or amended, except by a written agreement, signed by the Company and you.

  

 Tom Gallivan’s Offer Letter 
 September 8, 2004 
 Page 3 of 3 
  
 Tom, we believe this position will provide you with an excellent opportunity for professional growth, as well as offering you the excitement and rewards of a dynamic and
growing company. Rackable feels the single most important factor in our success will be our people. We are confident that the skills and background you bring to us will be instrumental to Rackable’s success. 
  
 Please keep a copy and return the signed original of this offer letter to me by September 10,
2004. As we’ve discussed, we look forward to you joining our team and starting on or before September 13, 2004. 
  

			
	Sincerely,
	
	RACKABLE SYSTEMS, INC.
		
	By:	 	/s/ Thomas K. Barton
	 	 	 Thomas K. Barton
 Chief Executive
Officer

  
 I agree to and accept this offer of
employment with RACKABLE SYSTEMS, Inc. 
  

					
			
	 

]
  
	 	 	 	09/13/04
	Name	 	 	 	Start DateLetter agreement dated February 2, 2005

 Exhibit 10.39 
  
 [Rackable Systems, Inc. letterhead] 
  

February 2, 2005 
  
 Rackable Investment LLC 
 c/o Parthenon Capital 
 Attn: Marc Rubin and Brian Golson 
 75 State Street, 26th Floor 
 Boston, CA 02109

  
 Dear Marc and Brian: 
  
 As you are aware, Rackable Systems, Inc. (the “Company”) is in the process of
undertaking an initial public offering of its common stock. In connection therewith, the Company has determined that it is necessary and advisable that the Company and Rackable Investment LLC (“RI LLC”) enter into this agreement, to which
RI LLC agrees. In addition, each of Giovanni Coglitore, Nikolai Gallo and Jack Randall (collectively, the “Founders”), in order to induce the Company and RI LLC to enter into this agreement, agree to become parties hereto and to consent to
the terms hereof. As a result, in consideration of the mutual promises and covenants set forth below, the receipt and sufficiency of which are hereby acknowledged, RI LLC, the Company and the Founders agree as follows: 
  

	1.	 The Company, RI LLC and the Founders agree that Stockholders Voting Agreement, dated December 23, 2002, by and between the Company, GNJ, Inc. (f/k/a Rackable
Systems, Inc.), RI LLC and the other persons who may become signatory thereto (the “Voting Agreement”), continues to remain in full force and effect pursuant to its terms. In addition, the parties agree that, for so long as the Voting
Agreement is in effect (and notwithstanding anything to the contrary contained therein), (a) the Company will not increase the size of the Board to more than seven directors, or decrease the size of the Board to less than five directors, without the
written consent of RI LLC (and none of parties shall otherwise take or cause to be taken any action in contravention therewith), and (b) each Stockholder shall vote all of its voting securities of the Company over which such Stockholder has voting
control and shall take all other necessary or desirable actions within his control (whether in his capacity as a stockholder, director, member of the board or any committee thereof or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without
limitation, calling special board and stockholder meetings and causing the nomination of the directors), to enable (i) RI LLC to elect, remove and replace a majority of Board, which shall consist of three such directors designated by RI LLC from
time to time (if the size of the Board is five directors) or four such directors designated by RI LLC from time to 

  

	 	 
time (if the size of the Board is six or seven directors) and (ii) to enable the Founders to elect, remove and replace one such director designated by the
Founders from time to time (if the size of the Board is five or six directors) and two such directors (if the size of the Board is seven directors). Further, the parties agree that Section 13 of the Voting Agreement is amended to read in its
entirety as follows: 

  
 “Termination. The provisions of this Agreement shall terminate upon the first to occur of (i) the consummation of a Public Offering, (ii) the consummation of a Sale of the Company, or (iii) such time as Rackable, the Founders
and their trusts or comparable entities for the primary benefit of the Founders or their family members cease to beneficially own, collectively, at least 50% of the voting securities of the Company held in the aggregate by such persons as of
December 22, 2002.” 
  

	2.	Prior to December 31, 2005, the Company will not determine the public offering price of the shares of the Company’s common stock to be sold in the first sale in a
firm-commitment underwritten public offering of the Company’s common stock pursuant to a registration statement on Form S-1 or other form under the Securities Act of 1933, as amended (the “IPO”), or otherwise consummate the IPO,
without first consulting RI LLC and obtaining its written consent. 

  

	3.	The Company agrees that prior to the IPO, it will not, without the written consent of RI LLC, (a) make any material changes to the equity compensation plans adopted at the
Company’s Board of Directors meeting held on January 12, 2005, or (b) for so long as RI LLC and its affiliates hold, collectively, a majority of the aggregate number of shares of Series A Stock and Series B Preferred Stock outstanding, (i)
issue equity, other than pursuant to the conversion or redemption provisions of the Certificate of Incorporation or pursuant to the exercise of stock options, or equity equivalents or enter into or modify any transactions, agreements or arrangements
with any of its officers, directors, stockholders or key employees, or make any payments (other than expense reimbursement) to any of the foregoing, other than payment of base salary and bonuses in the ordinary course of business pursuant to
agreements currently in effect or (ii) otherwise take any other action it is prohibited from taking pursuant to its Certificate of Incorporation. Nothing contained in this Agreement affects the rights of the holders of Series A Stock and Series B
Preferred under the Certificate of Incorporation. 

  

	4.	The parties agree that the entering into this Agreement is also additional consideration for the amendments being made pursuant to Amendment No. 1 to the Rackable Systems, Inc.
Registration Agreement being executed on or about the date hereof. 

  

	5.	RI LLC agrees that: 

  

	 	(i)	 it will not elect, consent to or otherwise take any action that would cause, under the terms of the Company’s Certificate of Incorporation, the holders of the
Company’s Series A Senior Convertible Participating Senior Preferred Stock 

  

	 	 
(“Series A Stock”) to receive cash in lieu of shares of the Company’s common stock issuable upon redemption of the Series A Stock; and

  

	 	(ii)	it will not transfer, distribute, or otherwise convey any shares of the Series A Stock held by RI LLC, or any rights to exercise authority thereover, to any member of RI LLC or any
other person, unless such member or other person agrees that it will not elect, consent to or otherwise take any action that would cause, under the terms of the Company’s Certificate of Incorporation, the holders of the Series A Stock to
receive cash in lieu of shares of the Company’s common stock issuable upon redemption of the Series A Stock. 

  
 Nothing in this Section 5 shall otherwise affect RI LLC’s and its transferees’ rights to receive cash in connection with any conversion or
redemption of the Company’s Series A Stock (other than with respect to the Common Stock issuable upon redemption thereof to the extent described in this paragraph 5) or Series B Preferred Stock. 
  
 If you are in agreement with the foregoing, please execute the enclosed copy of this letter
and return it to the Company at the address set forth above. 
  

			
	 Respectively,

	
	 RACKABLE SYSTEMS, INC.

		
	By:	 	/s/ Thomas K. Barton
	 Thomas K. Barton

	 Chief Executive Officer

	
	AGREED AND ACKNOWLEDGED:
	
	 RACKABLE INVESTMENT LLC

		
	By:	 	/s/ Marc Rubin
	 Name:
	 	Marc Rubin
	 Title:
	 	 Vice President

	
	 /s/ Giovanni Coglitore

	 Giovanni Coglitore

	
	 /s/ Nikolai Gallo

	 Nikolai Gallo

	
	 /s/ Jack Randall

	 Jack Randall

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}]]