EMPLOYMENT AGREEMENT

Exhibit 10.19

EXECUTION

JACK RANDALL

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 23, 2002, between Rackable Systems, Inc., a Delaware corporation (formerly known as Rackable Corporation) (the “Company”) and Jack Randall (“Executive”).

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties intending to be legally bound agree as follows:

1. Employment. The Company shall employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending on the earlier of (i) the five (5) year anniversary of the date hereof (unless extended by mutual agreement of the parties) or (ii) as provided in Section 4 hereof (the “Employment Period”).

2. Position and Duties.

(a) During the Employment Period, Executive shall serve as Vice President of Manufacturing of the Company, or in such other senior executive position as the Company’s Board of Directors (the “Board”), in its sole discretion, may designate from time to time, subject in each such case, to the overall direction and authority of the Board. In addition, and without further compensation, Executive shall serve as a director and/or senior executive officer of one or more of the Company’s Affiliates if requested by the Board and so elected or appointed.

(b) Executive shall report to the Board or its designee, and Executive shall devote his best efforts and his full business time, business judgment, skill, knowledge and attention to advancing the business and affairs of the Company and its Affiliates as the Board or its designee may from time to time direct and to the discharge of his duties and responsibilities hereunder, with the understanding that Executive will also devote a certain amount of time and attention to personal investment activities, non-profit and/or charitable organizations (but excluding employment with any business other than the Company) so long as such activities do not interfere with Executive’s performance of his duties hereunder.

3. Base Salary and Benefits.

(a) During the Employment Period, Executive’s base salary shall be $150,000 per year (the “Base Salary”), which salary shall be payable in regular installments in accordance with the Company’s general payroll practices and shall be subject to required withholding. The Base Salary shall be reviewed by the Board for increase at least once every twelve (12) months.

(b) Executive shall be eligible to be included in all employee benefit plans, programs, arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, automobile (or automobile allowance), vacation and paid holidays) to the extent established by the Company for, or made available to all its senior executives.

1.

(c) The Company shall reimburse Executive for all reasonable out-of-pocket expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

4. Term.

(a) The Employment Period shall begin on the date hereof and shall terminate upon the earlier of (i) the five (5) year anniversary of the date hereof (unless extended by the mutual agreement of the parties), (ii) Executive’s resignation, death or Disability, (iii) the termination by the Company at any time without Cause or by Executive with Good Reason, and (iv) the termination by the Company at any time with Cause or by Executive with Good Reason.

(b) If the Employment Period is terminated by the Company without Cause or by Executive for Good Reason, the Company shall provide, and the Executive shall be entitled to receive the following enumerated benefits: (i) a lump sum equal to three (3) months of his Base Salary; and (ii) payment of COBRA premiums for the Executive and his covered dependents for a period of six (6) months after the end of the Employment Period (collectively, the “Severance Benefits”). Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to pay any amounts payable under this Section 4(b) during such times as Executive has, directly or indirectly, taken any action described in Sections 5, 6 or 7 hereof. As a condition to the Company’s obligations (if any) to make severance payments pursuant to this Section 4(b), Executive will execute and deliver a general release for the benefit of the Company in form and substance mutually satisfactory to the Company and Executive. Subject to the foregoing, Severance Benefits will be due and payable within five (5) days of the execution of the aforementioned general release.

(c) If the Employment Period ends for any other reason than termination by the Company without Cause or by Executive for Good Reason, Executive shall be only entitled to receive his Base Salary through the date of termination.

(d) Except as otherwise provided above, all of Executive’s rights to benefits and compensation (including, without limitation, bonuses) hereunder (if any) which accrue or become payable after the termination of the Employment Period shall cease upon such termination.

5. Confidential Information, Inventions and Intellectual Property Rights; Non-Disparagement; Confidentiality of Terms.

(a) Executive hereby acknowledges and reaffirms all of his liabilities and obligations under that certain Invention and Non-Disclosure Agreement, dated as of the date hereof, by and between the Company and Executive and attached hereto as Exhibit A.

(b) Executive agrees that Executive shall not, at any time, whether during or after Executive ceases to provide services to the Company or any of its Affiliates, make or publish any untruthful statement (orally or in writing) that intentionally libels, slanders, disparages or otherwise defaces the goodwill or reputation (whether or not such disparagement legally constitutes libel or slander) of the Company, any Subsidiary, RSI or any of their Affiliates, or its other officers, managers, directors, partners or investment professionals. Executive acknowledges that he, as part of his employment hereunder, is responsible for preserving the goodwill or reputation of the aforementioned parties.

2.

(c) The Company agrees that it shall direct its senior officers to not, at any time, whether during or after Executive ceases to provide services to the Company or any of its Affiliates, make or publish any untruthful statement (orally or in writing) that intentionally libels, slanders, disparages or otherwise defaces the goodwill or reputation (whether or not such disparagement legally constitutes libel or slander) of the Executive.

(d) Executive agrees, subject to applicable law, to treat with confidentiality the terms of this Agreement and to not disclose or discuss or release any such terms to any person or entity (except Executive’s attorneys, accountants and other consultants and Executive’s spouse who agree to keep such information confidential) without the consent of the Board.

6. Non-Solicitation.

(a) In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the course of his employment with the Company or any of its Affiliates he shall become familiar and during his employment with the Company and RSI prior to the date hereof he has become familiar with RSI’s and the Company’s trade secrets and with other Confidential Information and Work Product concerning the Company, its Affiliates and RSI, including, without limitation, Confidential Information and Work Product and that his services have been and shall be of special, unique and extraordinary value to the Company, its Affiliates and RSI. Therefore, Executive agrees that during the period beginning on the date hereof and ending on the two (2) year anniversary of the termination of the Employment Period (the “Non-solicitation Period”), he shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company (or any of its Subsidiaries or any of its other Affiliates to which Executive provides executive services (each Subsidiary and Affiliate, together with RSI, a “Designated Affiliate”) to leave the employ of the Company or such Designated Affiliate; (ii) hire or employ any person who was an employee of the Company or any Designated Affiliate at any time during the Employment Period, provided that such restriction shall not apply to any person who was not an employee of the Company or a Designated Affiliate for a twelve-month period prior to the making of such offer to hire; (iii) call on, solicit, or service any customer, supplier, licensee, licensor or other business relation or prospective client of the Company or any Designated Affiliate with respect to products and/or services that are or have been provided by the Company or such Designated Affiliate during the twelve-month period prior to the termination of the Employment Period, or which the Company or its Designated Affiliate is currently in the process of developing; or (iv) induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of the Company or any of its Designated Affiliates to cease doing business with the Company or such Designated Affiliate. For the purposes of this Agreement, “RSI” shall mean Rackable Systems, Inc. and its predecessors, the predecessor in interest to the Company’s business.

(b) Executive acknowledges that, in the course of his employment with the Company and RSI, he has and will become familiar with the Confidential Information and Work Product of the Company and its Designated Affiliates. Executive further acknowledges that the scope of the business of the Company and its Designated Affiliates is independent of location (such that it is not practical to limit the restrictions contained in this Section 6 to a specified county, city, or part thereof) and that, therefore, as a senior executive of the Company or one of its Designated Affiliates, Executive has and will have direct or indirect responsibility, oversight or duties with respect to all of the businesses of the Company and its Designated Affiliates and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the restrictions contained in this Section 6 are reasonable in all respects and necessary to protect the goodwill and Confidential Information and Work Product of the Company and its Designated Affiliates and that, without such protection, the Company’s and its Designated Affiliates’ customer and client relations and competitive advantage would be materially adversely effected. It is specifically recognized by Executive that his services to the Company

3.

and its Designated Affiliates are special, unique, and of extraordinary value, that the Company and its Subsidiaries have a protectable interest in prohibiting Executive as provided in this Section 6, that Executive is significantly responsible for the growth and development of the Company and its Designated Affiliates and the creation and preservation of their goodwill, and that money damages are insufficient to protect such interests, that such prohibitions would be necessary and appropriate without regard to payments being made to Executive hereunder, and that the Company would not enter this Agreement with Executive without the restrictions contained in this Section 6. Executive further acknowledges that the restrictions contained in this Section 6 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which each of the Company and its Designated Affiliates conduct their business and do not deprive Executive of his livelihood. Executive agrees that each provision of this Section 6 shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Section 6 is held to be invalid, illegal or unenforceable in any respect under any applicable law by which this Agreement is governed, such invalidity, illegality or unenforceability shall not affect any other provision; provided that such provision shall be construed to give effect to the parties intent of such provision to the maximum extent permitted by applicable law.

7. Enforcement. If, at the time of enforcement of Section 5 or 6 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive’s services are unique and because Executive has access to Confidential Information and Work Product, and for the other reasons set forth herein, the parties hereto agre