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Employment Agreement - VA Linux Systems Inc. and Robert Russo

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October 26, 1999

Mr. Robert Russo
1926 Clover Court
Pleasanton, CA 94588

Dear Bob:

At VA Linux Systems, we depend on the commitment, enthusiasm and skills of our
team members to lead the Company's growth. Each person has both the luxury and
the duty to contribute to the future success of the Company in the most
meaningful way he or she can.

With this in mind, we are pleased to offer you a position as Senior Vice
President and General Manager of Worldwide Field Operations, reporting to Larry
Augustin, President & CEO.

In this position, you will play a significant role in building the Company's
sales, support, and services businesses. Your areas of responsibility will

      o     Worldwide responsibility for all sales and sales support activities.

      o     Worldwide responsibility for all customer support (post sales
            support) activities.

      o     Worldwide responsibility for all professional services activities.

      o     Representing the Company in your interactions with customers, the
            Linux community, suppliers, investors, media representatives and
            the general community.

Your compensation will consist of:

      o     BASE COMPENSATION -- You will receive a base salary of $175,000.
            Such salary shall be paid periodically in accordance with normal
            Company payroll practices.

      o     INCENTIVE COMPENSATION -- You will also be eligible to receive an
            incentive based bonus that will be targeted at $125,000 upon
            attainment of the Board approved Plan. Incentive compensation will
            be based upon achievement of both quarterly and annual goals which
            will be mutually determined for the new plan year. The plan will
            provide accelerators for "over plan" performance. Again, the target
            inventive bonus will be paid in accordance with normal Company
            practices and policies.

      o     STOCK OPTIONS -- VA Linux is offering you an option to purchase
            950,000 shares of common stock which reflects the Company's
            forthcoming stock split, at an exercise price at the then-fair
            market value, as determined by the Board at the date of grant.
            Vesting of all options will commence immediately upon start of
            employment and will continue at a rate of 1/48 per month.

      o     EMPLOYEE BENEFITS -- You will also receive the Company's normal
            employee benefit package, including health insurance through
            Lifeguard, dental insurance through Guardian, and a 401(k)
            retirement plan. You will also receive two weeks paid vacation each

<PAGE>   2
o   EMPLOYMENT RELATIONSHIPS -- As with all VA Linux Systems staff, your
    employment is "at will," meaning either you or the Company may terminate
    your employment at any time, for any reason.

    In the event of termination, the following severance benefits shall apply:

    A)  INVOLUNTARY RESIGNATION. If you are Involuntary Terminated from the
        Company within the first year of employment, you will receive 6 months
        base compensation inclusive of all benefits and 6 months vesting of
        stock. If you are Involuntarily Terminated after the first year of
        employment, you will receive three months base compensation and three
        months continued vesting. In the event a new CEO is named during the
        first 12 months of employment, the Employee will accelerate 25% of the
        initial stock grant if employee is terminated for any reason within the
        longer of (a) six months of the new CEO being named or; (b) 12 months
        from employee start date.

    B)  CHANGE OF CONTROL TERMINATION. Accelerated vesting of initial option
        grant on Change of Control and Involuntary Termination -- You will
        receive 12 additional months of accelerated vesting of your initial
        option grant upon (a) a Change of Control and (b) Involuntary
        Termination within six months of Change of Control.

        voluntarily resigns from the Company (other than a resignation that is
        an Involuntary Termination), or if the Company terminates the Employee's
        employment for Cause, then the Employee shall not be entitled to receive
        severance or other benefits except for those, if any, as may then be
        established under the Company's then-existing severance and benefits
        plans and policies at the time of such resignation or termination.

        meaning as defined in Section 2(b) of the Founders' Stock Repurchase
        Agreement, dated October 30, 1998, except in so far as when the term
        Founder is used, the term Employee is understood for this Agreement.

Bob, we are pleased to welcome you to VA Linux Systems. If you ever feel it
necessary to discuss issues of your employment, please feel free to raise them
frankly with us. Please signify your acceptance of this offer by signing below
and returning this letter to me no later than Wednesday morning, October 27,


/s/ LARRY M. AUGUSTIN                   /s/ TODD SCHULL
Larry M. Augustin, PhD                  Todd Schull
President & CEO                         Vice President & CFO

Accepted by:

/s/ ROBERT RUSSO                        10/27/99
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Robert Russo                            Date