Document:

Stock Repurchase Agreement between the Registrant and Jack Randall

  
 Exhibit 10.34

  
 STOCK REPURCHASE AGREEMENT 
  
 This Stock Repurchase Agreement (the “Agreement”) is entered into
as of February 2, 2005 between Jack Randall, an individual (“Seller”), and Rackable Systems, Inc. (f/k/a Rackable Corporation), a Delaware corporation (the “Company”). 
  
 RECITALS 
  
 WHEREAS, Seller is the owner of 2,299,023 shares of Common Stock of the Company; and 
  
 WHEREAS, Seller desires to sell and the Company desires to purchase Four Hundred Eight Thousand Forty One (408,041) shares
of Common Stock of the Company (the “Shares”) for an aggregate purchase price of One Million Nine Hundred Ninety Nine Thousand Nine Hundred Ninety Eight Dollars and Eleven Cents ($1,999,998.11), in accordance with the terms and conditions
of this Agreement. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Agreement and other good and valuable consideration, the parties agree as follows: 
  
 Article 1. Purchase of Shares. Concurrently with the execution of this Agreement, Seller hereby sells the Shares to the Company and the Company hereby purchases the Shares for a total purchase price of
One Million Nine Hundred Ninety Nine Thousand Nine Hundred Ninety Eight Dollars and Eleven Cents ($1,999,998.11) (the “Purchase Price”). Upon execution of this Agreement, the Company shall pay the Purchase Price for the Shares in
immediately available funds by check or by wire transfer to an account designated by Seller, and Seller shall deliver stock certificates representing the Shares together with an executed assignment separate from certificate transferring the Shares
to the Company or otherwise properly endorsed for transfer. The Company’s officers shall thereafter cause the Shares to be cancelled on the books of the Company. 
  
 Article 2. Representations and Warranties of Seller. Seller represents and warrants to the Company that:

  
 (a) Seller is the owner, free and clear of any liens,
encumbrances, security agreements, options, claims, charges, or restrictions, except as set forth in (a) the Founders Repurchase and Rights Agreement entered into by and among the Company, GNJ, Inc. (f/k/a Rackable Systems, Inc.)
(“OldCo”), Rackable Investment LLC (“Investment LLC”), Seller, Nikolai Gallo and Giovanni Coglitore dated as of December 23, 2002, (b) the Stockholders Voting Agreement entered into by and among the Company, OldCo, Investment
LLC, Seller, Nikolai Gallo and Giovanni Coglitore dated as of December 23, 2002, and (c) the Registration 

  

 
Rights Agreement entered into by and among the Company, OldCo, Investment LLC, Seller, Nikolai Gallo and Giovanni Coglitore dated as of December 23, 2002.

  
 (b) Seller has full power and capacity to execute, deliver
and, subject to consent of the Board of Directors of the Company, perform under this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of the Seller in accordance with its terms. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of Seller, enforceable in accordance with its terms. 
  
 (c) Seller has entered into this Agreement based on its own investigation and analysis and that of its advisors, including legal counsel. Seller has had
an opportunity to review the Agreement and has conducted all due diligence and received all materials and information that it deems relevant, including the Company’s future business prospects, in connection with its decision to sell the Shares
under this Agreement. Seller has had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms applicable to the Shares and regarding all information applicable to Seller’s decision to enter
into this Agreement. Seller understands that the Company’s plans for the future may result in the Company’s Common Stock becoming significantly more valuable, including potentially an initial public offering, and that the future value of
the Shares could far exceed the amounts such Seller will receive under this Agreement. Seller has determined to forego the possibility of such future value to obtain the consideration being paid pursuant hereto at the present time. The Company has
not made any representation to such Seller about the advisability of this decision or the potential future value of the Shares. 
  
 (d) Seller has had an opportunity to review the federal, state and local tax consequences of the sale of the Shares to the Company and the transactions
contemplated by this Agreement with its own tax advisors. Seller is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Seller understands that he (and not the Company) shall be
responsible for its own tax liability, if any, that may arise as a result of the transactions contemplated by this Agreement. 
  
 (e) Seller acknowledges that this Agreement is one of a series of three (3) such agreements, all of like tenor except as to the name of the seller, which
were negotiated and executed simultaneously with Nikolai Gallo and Giovanni Coglitore (the “Stock Repurchase Agreements”). 
  
 (f) Seller has executed the Subordination Agreement dated January 25, 2005 between Silicon Valley Bank and Seller, Giovanni Coglitore and Nikolai Gallo
(the “Subordination Agreement”). 
  
 Article 3.
Representations and Warranties of the Company. The Company represents and warrants to Seller that: 
  
 (a) the authorized capital of the Company consists of (i) 23,320,000 shares of Series A Senior Convertible Participating Senior Preferred Stock, $0.001
par value (the “Series A Preferred Stock”), of which 19,320,000 shares are issued and outstanding, (ii) 23,320,000 shares 

  

 
of Series B Redeemable Preferred Stock, $0.001 par value (the “Series B Preferred Stock”), none of which are issued and outstanding, and (iii)
28,500,000 shares of Common Stock, $0.001 par value (the “Common Stock”), of which 8,366,704 shares are issued and outstanding. The Company is authorized to issue an additional 3,750,000 shares of Common Stock of the Company pursuant to
the Company’s 2002 Stock Option Plan. 
  
 (b) Subject to
approval of this Agreement and the transactions contemplated thereunder by the Board of Directors of the Company, the Company has full power and authority to execute and deliver this Agreement. 
  
 (c) Investment LLC is the holder of record of more than one half of the
Company’s outstanding voting securities. The Company has made its stock ledger available for review by Seller and its counsel. 
  
 Article 4. Consent to Transactions. Seller hereby irrevocably consents to the purchase by the Company of shares from Nikolai Gallo and
Giovanni Coglitore pursuant to the terms of the Stock Repurchase Agreements, and agrees that the transactions are fair and in the interest of the Company’s stockholders. Seller and the Company acknowledge that Nikolai Gallo, Giovanni Coglitore
(in his capacity as direct owner or indirectly as trustee, custodian or otherwise), Investment LLC, Thomas K. Barton, Todd Ford, Joseph Coglitore, and Silicon Valley Bank (each a “Consenting Person”) have consented to the purchase by the
Company of the Shares from Seller. 
  
 Article 5.
Waiver. Seller irrevocably waives any claim against Company (other than any claims for the return of proceeds arising from the repayment of proceeds received under this Agreement as a result of claims other than by or through a Consenting
Person) and against any of the Company’s officers, directors, or affiliates (as well as attorneys of each of the foregoing), relating to any alleged noncompliance with any provision of Sections 500 et seq. of the California Corporations Code,
if applicable, or under Section 160 of the Delaware General Corporation Law relating to the transactions contemplated hereby or under the other Stock Repurchase Agreements. 
  
 Article 6. Arms Length Transaction. Each party has conducted its own investigation and analysis and freely and
independently bargained for this Agreement at arms length without reliance on any other party and each party is receiving reasonably equivalent value and fair consideration. Each party agrees that the value of the Shares is uncertain, and could be
substantially more than or substantially less than the Purchase Price. 
  
 Article 7. Miscellaneous 
  
 Section 7.1. Governing Law. This Agreement is to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of
the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. All disputes and controversies arising out of or in connection with this Agreement shall be resolved exclusively by 

  

 
the state and federal courts located in Santa Clara County in the State of California, and each party hereto agrees to submit to the jurisdiction of said
courts and agrees that venue shall lie exclusively with such courts. 
  
 Section 7.2. Entire Agreement; Amendment; Waiver. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes any prior
understandings and agreements between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No failure on the part of
a party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege. 
  
 Section 7.3. Severability. If any provision of this Agreement, or the application of such provision to any person or
circumstance, is held invalid or unenforceable, the remainder of this Agreement, or the application of such provisions to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby.

  
 Section 7.4. Successors and
Assigns. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. 
  
 Section 7.5. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument. 
  
 *     *    * 
  

 IN WITNESS WHEREOF, the undersigned have executed this Stock Repurchase Agreement as of the date first
referenced above. 
  

									
	 “SELLER”
	 	 	 	 “THE COMPANY”

				
	 	 	 	 	 	 	 Rackable Systems, Inc.
 (f/k/a Rackable Corporation)

	     /s/ Jack Randall
	 	 	 	 By:
	 	 /s/ Tom Barton

	 Jack Randall
	 	 	 	 Name:
	 	 Tom Barton

	 	 	 	 	 	 	 Title:
	 	 CEOOffer letter from the Registrant to Hagi Schwartz

 [Rackable Letterhead] 
  
 August 18, 2004 
  
 Mr. Hagi Schwartz 
 754 Moreno Avenue 
 Palo Alto, CA 94303 
  

	Re:	Position on the Board of Directors of Rackable Systems, Inc. (“Rackable”) 

  
 Dear Hagi: 
  
 I am very happy to report that, as we have discussed, you were appointed to the Board of Directors of Rackable (the “Board”) at a meeting held
on August 18, 2004. Furthermore, the Board reached consensus that, once Rackable has established an Audit Committee, the Board expects that you will be appointed to serve as Chairman of the Audit Committee. 
  
 At the recent board meeting, the Board granted to you a non-statutory stock
option to purchase 17,000 shares of Rackable’s common stock, at an exercise price of $4.00 per share. Your option will vest over a four year period commencing on the date of your appointment, with 1/48th vesting per month of service, for so
long as you continue to serve as a director, until the entire amount of the grant is vested. 
  
 In addition, for your services as Chairman of the Audit Committee, the Board granted to you a non-statutory stock option to purchase 15,000 shares of Rackable’s common stock, at an exercise price of $4.00 per
share. This option will also vest over a four year period commencing on the closing date of Rackable’s initial public offering, with 1/48th vesting per month of service, for so long as you continue to serve as the Chairman of the Audit Committee, until the entire amount of the grant is vested. 
  
 All vesting of shares covered by the options will cease upon termination of
your service with Rackable. You may exercise your options until the date 90 days after your termination of service with Rackable. The option grants will permit you to exercise your options immediately after they are granted, even as to unvested
shares, provided that the unvested shares shall be subject to repurchase by Rackable upon termination of service. All other terms of the option will be in accordance with the terms and conditions of the stock option agreement, grant notice and
exercise notice attached hereto. 
  
 As a non-employee director of
Rackable, you will receive an annual retainer of $20,000 for your services, and an additional annual retainer of $10,000 for your services as Chairman of the Audit Committee, to be paid on a quarterly basis. Rackable will also reimburse you for your
travel expenses in attending board and committee meetings. 
  

 1. 

 If the terms of this letter are acceptable to you, and to confirm your willingness to serve on
Rackable’s Board of Directors, please sign and date this letter below. We look forward to your favorable reply and to a productive and enjoyable future relationship. 
  

			
	 Very truly yours,

	
	RACKABLE SYSTEMS, INC.
		
	By:	 	/s/ Thomas K. Barton
	 	 	 Thomas K. Barton

	 	 	 President and Chief Executive Officer

  

					
	 Accepted:
	 	 	 	 
			
	 /s/ Hagi Schwartz
	 	 	 	 8/18/04

	 Hagi Schwartz
	 	 	 	 Date

  
 Attachments: 
  
 Stock Option Agreement 
 Grant Notice 
 Exercise Notice 
  

 2. 

  
 RACKABLE
SYSTEMS, INC. 
 STOCK OPTION GRANT NOTICE

 2002 STOCK OPTION PLAN 
  
 Rackable Systems, Inc. (the “Company”), pursuant to its 2002 Stock Option Plan, hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Notice of Exercise, all of which are
attached hereto and incorporated herein in their entirety. 
  

			
	Optionholder:	  	Hagi Schwartz
	Date of Grant:	  	August 18, 2004
	Vesting Commencement Date:	  	August 18, 2004
	Number of Shares Subject to Option:	  	17,000
	Exercise Price (Per Share):	  	$4.00
	Total Exercise Price:	  	$68,000
	Expiration Date:	  	August 17, 2014

  

					
	Type of Grant:	  	 ̈ Incentive Stock Option1	  	x Nonstatutory Stock Option
			
	Exercise Schedule:	  	 ̈ Same as Vesting Schedule	  	x Early Exercise Permitted
		
	Vesting Schedule:	  	1/48th of the shares vest for each month of
service as a director following the Vesting Commencement Date.
		
	Payment:	  	By one or a combination of the following items (described in the Stock Option Agreement):
		
	 	  	x    By cash or check
	 	  	x    Pursuant to a Regulation T Program if the Shares are publicly traded
	 	  	x    By delivery of already-owned shares if the Shares are publicly traded

  
 Additional
Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice and the Stock Option Agreement. Optionholder further acknowledges that as of the Date of Grant, this
Stock Option Grant Notice and the Stock Option Agreement set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject.

  

									
	RACKABLE SYSTEMS, INC.	 	 	 	OPTIONHOLDER:
					
	 By:
	 	 	 	 	 	 	 	 
	 	 	Signature	 	 	 	 	 	Signature
	 Title:
	 	 	 	 	 	 Date:
	 	 
					
	 Date:
	 	 	 	 	 	 	 	 

  
 ATTACHMENTS: Stock Option Agreement and Notice of Exercise 

	1	If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value
(measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option. 

  

  
 ATTACHMENT
I 
  
 STOCK OPTION
AGREEMENT 
  

  
 ATTACHMENT II

  
 NOTICE OF
EXERCISE 
  

  
 RACKABLE
SYSTEMS, INC. 
 STOCK OPTION GRANT NOTICE

 2002 STOCK OPTION PLAN 
  
 Rackable Systems, Inc. (the “Company”), pursuant to its 2002 Stock Option Plan, hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Notice of Exercise, all of which are
attached hereto and incorporated herein in their entirety. 
  

			
	Optionholder:	  	Hagi Schwartz
	Date of Grant:	  	August 18, 2004
	Vesting Commencement Date:	  	The closing date of the Company’s initial public offering
	Number of Shares Subject to Option:	  	15,000
	Exercise Price (Per Share):	  	$4.00
	Total Exercise Price:	  	$60,000
	Expiration Date:	  	August 17, 2004

  

					
	Type of Grant:	  	 ̈ Incentive Stock Option1	  	x Nonstatutory Stock Option
			
	Exercise Schedule:	  	 ̈ Same as Vesting Schedule	  	x Early Exercise Permitted
		
	Vesting Schedule:	  	 1/48th of the shares vest for each month of service as Chairman of the Audit Committee following the Vesting Commencement Date.
 All of the shares
shall vest on the fifth anniversary of the Date of Grant.

		
	Payment:	  	By one or a combination of the following items (described in the Stock Option Agreement):
		
	 	  	x    By cash or check
	 	  	x    Pursuant to a Regulation T Program if the Shares are publicly traded
	 	  	x    By delivery of already-owned shares if the Shares are publicly traded

  
 Additional
Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice and the Stock Option Agreement. Optionholder further acknowledges that as of the Date of Grant, this
Stock Option Grant Notice and the Stock Option Agreement set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject
with the exception of options previously granted and delivered to Optionholder. 
  

									
	RACKABLE SYSTEMS, INC.	 	 	 	OPTIONHOLDER:
					
	 By:
	 	 	 	 	 	 	 	 
	 	 	Signature	 	 	 	 	 	Signature
	 Title:
	 	 	 	 	 	 Date:
	 	 
					
	 Date:
	 	 	 	 	 	 	 	 

  
 ATTACHMENTS: Stock Option Agreement and Notice of Exercise 

	1	If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value
(measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option. 

  

  
 ATTACHMENT
I 
  
 STOCK OPTION
AGREEMENT 
  

  
 ATTACHMENT
II 
  
 NOTICE OF EXERCISE 
  

  
 RACKABLE SYSTEMS, INC.

 2002 STOCK OPTION PLAN 
  
 STOCK OPTION AGREEMENT 
 (NONSTATUTORY STOCK OPTION) 
  
 Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Rackable Systems, Inc. (the “Company”) has granted you a nonstatutory stock option under its 2002 Stock Option Plan (the
“Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. 
  
 The details of the Option are as follows: 
  
 1. VESTING. Subject to the limitations contained herein, the Option will vest as provided in your Grant
Notice, provided that vesting will cease upon the termination of your Continuous Service. 
  
 2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to the Option
and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments. 
  
 3. EXERCISE PRIOR TO VESTING (“EARLY
EXERCISE”). If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of the Option is permitted) and subject to the provisions of the Option, you may elect at
any time that is both (i) during the period of your Continuous Service and (ii) during the term of the Option, to exercise all or part of the Option, including the nonvested portion of the Option; provided, however, that: 
  
 (a) a partial exercise of the Option shall be deemed
to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock; 
  
 (b) any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to
the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement; and 
  
 (c) you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will
result in the same vesting as if no early exercise had occurred. 
  

 4. METHOD OF PAYMENT. Payment
of the exercise price is due in full upon exercise of all or any part of the Option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the
following. 
  
 (a) In the Company’s
sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds. 
  
 (b) Provided that
at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the
Company’s reported earnings (generally six (6) months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair
Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. 
  
 5.
WHOLE SHARES. You may exercise the Option only for whole shares of Common Stock. 
  
 6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained
herein, you may not exercise the Option unless the shares of Common Stock issuable upon such exercise (the “Purchased Shares”) are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may
not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations. 
  
 7. TERM. You may not exercise the Option before the commencement of its term or after its term expires. The
term of the Option commences on the Date of Grant and expires upon the earliest of the following: 
  
 (a) three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided
that if during any part of such three (3)-month period the Option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” the Option shall not expire until the
earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service; 
  
 (b) twelve (12) months after the termination of your Continuous Service due to your Disability;

  

 (c) eighteen (18) months after your death if you die either during your Continuous
Service or within three (3) months after your Continuous Service terminates; 
  
 (d) the Expiration Date indicated in your Grant Notice; or 
  
 (e) the day before the tenth (10th) anniversary of the Date of Grant. 
  
 8. EXERCISE. 
  
 (a) You may exercise the vested portion of the Option (and the unvested portion of the Option if your
Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular
business hours, together with such additional documents as the Company may then require. 
  
 (b) By exercising the Option you agree that, as a condition to any exercise of the Option, the Company may require you to enter
into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of the Option, (2) the lapse of any substantial risk of forfeiture to which the shares of
Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise. 
  
 (c) By exercising the Option you agree that the Company (or a representative of the underwriter(s)) may, in connection with the
first underwritten registration of the offering of any securities of the Company under the Securities Act, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement of the Company filed under the Securities Act. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent
with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The
underwriters of the Company’s stock are intended third party beneficiaries of this Section 8(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. 
  
 9. TRANSFERABILITY. The Option is
not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be entitled to exercise the Option. 
  
 10. CHANGE IN CONTROL. If a Change in Control occurs and your Continuous Service
with the Company has not terminated as of, or immediately prior to, the effective time of the Change 

  

 
in Control, then, as of the effective time of such Change in Control, the vesting and exercisability of your option shall be accelerated in full. 

 
 11. RIGHT OF FIRST
REFUSAL. Shares of Common Stock that you acquire upon exercise of the Option are subject to any right of first refusal that may be described in the Company’s bylaws in effect at such time the Company elects to
exercise its right. The Company’s right of first refusal shall expire on the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or on the Nasdaq
National Market of the Nasdaq Stock Market (or any successor thereto). 
  
 12. RIGHT OF REPURCHASE. To the extent, if any, provided in the Company’s bylaws as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise of the Option. 
  
 13. OPTION NOT A SERVICE CONTRACT. The Option is not an employment or service contract, and nothing in the Option
shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in the Option shall obligate
the Company or an Affiliate, their respective shareholders, Board members, officers or employees to continue any relationship that you might have as a director or consultant for the Company or an Affiliate. 
  
 14. WITHHOLDING
OBLIGATIONS. 
  
 (a) At the time you exercise the Option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the Option. 
  
 (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions
or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of the Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of the Option, share withholding
pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such
determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of the Option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully
vested shares of Common Stock determined as of the date of exercise of the Option that are otherwise issuable to you upon 

  

 
such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility. 
  
 (c) You may not exercise the Option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise the Option when desired even though it is vested, and the Company shall have no obligation to issue a certificate for such shares
of Common Stock or release such shares of Common Stock from any escrow provided for herein. 
  
 15. NOTICES. Any notices provided for in the Option shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail
by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. 
  

DEFINITIONS. 
  
 (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 
  
 (b) “Board” means the Board of Directors of the Company. 
  
 (c) “Capitalization
Adjustments” means a change made in the Common Stock subject to the Option without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend
in property other than cash, stock split, liquidating distribution, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). 
  
 (d) “Change in Control” means
the merger, consolidation, sale of all or substantially all of the Company’s assets or similar transaction involving (directly or indirectly) the Company if, immediately after the consummation of such merger, consolidation or similar
transaction, 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. A Change in Control
shall not include the public offering of the Company’s securities pursuant to the Securities Act or any similar law then in force. 
  
 (e) “Code” means the Internal Revenue Code of 1986, as amended. 
  
 (f) “Common Stock” means the
common stock of the Company. 
  
 (g)
“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A 

  

 
change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the
entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service. For
example, a change in status from an employee of the Company to a consultant to an Affiliate or to a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a
leave of absence shall be treated as Continuous Service for purposes of vesting in the Option only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.

  
 (h)
“Disability” means the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate because of the
sickness or injury of the person. 
  
 (i)
“Fair Market Value” means, as of any date, the value of the Common Stock determined as follows: 
  
 (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. 
  
 (ii) In the absence of such markets for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board. 
  
 (j) “Securities Act” means the Securities Act of 1933, as amended. 
  
 * * * * 
  

  
 NOTICE OF EXERCISE

  

					
	 RACKABLE SYSTEMS, INC.
 1933 Milmont Drive
	 	 	 	 
	Milpitas, CA 95035	 	 	 	Date of Exercise:                    

  
 Ladies and Gentlemen: 
  
 This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below. 
  

					
	Type of option (check one):	 	Incentive  ̈	 	Nonstatutory x
			
	Stock option dated:	 	August 18, 2004	 	 
			
	Number of shares as to which option is exercised:	 	_________	 	 
			
	Certificates to be issued in name of:	 	_________	 	 
			
	Total exercise price:	 	$                    	 	 
			
	Cash payment delivered herewith:	 	$                    	 	 

  
 By this exercise, I
agree (i) to provide such additional documents as you may require and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option. 
  
 I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above: 
  
 I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and “control securities” under Rule 144 promulgated under the Securities Act. I warrant and represent
to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws. 
  
 I further acknowledge that I will not be able to resell the Shares for at least ninety days (90) after the stock of the
Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

  

 1. 

 I further acknowledge that all certificates representing any of the Shares subject to the provisions of
the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Certificate of Incorporation, Bylaws and/or applicable securities laws.

  
 I further agree that, if required by the Company (or a
representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell or otherwise transfer or dispose of any shares of Common Stock or
other securities of the Company during such period (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period. 
  

	
	 Very truly yours,

	
	 
	 Hagi Schwartz

  

 2.

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