May 15, 2007 Tom Barton Dear Tom:
Exhibit
10.1
May
15,
2007
Xxx
Xxxxxx
Dear
Xxx:
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,
By: /s/
Xxxxxxx X.
Xxxxxxxxxx
Xxxxxxx
X. Xxxxxxxxxx
Chairman
of the Compensation Committee of the Board of Directors
Attachment:
Exhibit A
Understood
and Agreed:
/s/
Xxxxxx
Xxxxxx
Xxxxxx
Xxxxxx
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
|
