VA Research Manufacturing Contract [Amendment No. 2] - VA Linux Systems Inc. and SYNNEX Information Technologies Inc.
SECOND AMENDMENT TO VA RESEARCH MANUFACTURING CONTRACT
This Second Amendment to VA Research Manufacturing Contract is entered
into as of February 9, 2001 ("Amendment 2"), by and between VA Linux Systems,
Inc. ("VA Linux") and SYNNEX Information Technologies, Inc. ("SYNNEX") and shall
amend the VA Research Manufacturing Contract, dated May 27, 1999, by and between
VA Linux and SYNNEX ("Original Agreement"), as further amended by Amendment 1
thereto, dated as to the parties September 14, 1999 ("Amendment 1") (the
Original Agreement and Amendment 1 collectively referred to as the "Agreement").
WHEREAS, VA Linux and SYNNEX desire to amend the Agreement to their
mutual benefit to more accurately reflect the work to be performed by SYNNEX for
VA Linux thereunder,
NOW, THEREFORE, in consideration of the mutual premises and for valuable
consideration, the parties agree as follows:
1. All terms unless specifically defined and capitalized herein shall have
the same meaning and effect as in the Agreement.
2. Section 2.2.2 shall be added to the Agreement, as follows (the terms
"Section" and "Paragraph" are used interchangeably in the Agreement and
herein):
2.2.2 "Aged Inventory" is defined as any Necessary or Customized
Materials more than * old from the SYNNEX receiving date.
This Aged Inventory shall be paid in accordance with the *
rolling cash deposits to SYNNEX as set forth in Exhibit B
(rev 2). The * rolling cash deposits for Aged Inventory
shall commence as of *.
"* Aged Inventory" is defined as any Necessary or
Customized Materials more than * old from the SYNNEX
receiving date. VA Linux shall reimburse SYNNEX as a
prepayment for any * Aged Inventory in accordance with
Section 2.2.1(ii) or Section 2.2.1(iii), as applicable,
and by no later than *. SYNNEX shall pay VA Linux the
reselling price of Necessary Materials (prepaid in full by
VA Linux) within * after such resale. This prepayment for
* Aged Inventory shall commence as of *.
"Obsolete Inventory" is defined as any Necessary or
Customized Materials obsoleted due to the end of a
Product's life cycle. VA Linux shall reimburse SYNNEX as a
prepayment for any Obsolete Inventory in accordance with
Section 2.2.1(ii) or Section 2.2.1(iii), as applicable,
and by no later than *. SYNNEX shall pay VA Linux the
reselling price of Necessary Materials (prepaid in full by
VA Linux) within * after such resale. This prepayment for
Obsolete Inventory shall commence as of *.
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In the sole and exclusive discretion of SYNNEX, any such
prepayment for the * Aged Inventory or Obsolete Inventory
shall be by (i) a deduction against the * rolling cash
deposits for Aged Inventory as set forth in Exhibit B (rev
2) or (ii) wire transfer, bank draft or other similar
transaction (collectively, "Other Transactions"). Such
prepayment of the * Aged Inventory and Obsolete Inventory
shall be deemed a sale of such * Aged Inventory and
Obsolete Inventory to VA Linux.
3. Section 2.3 shall be deleted in its entirety and the following
substituted therefor:
2.3 Materials procured to manufacture Products shall be purchased to
forecast based on lead time and grouped in the following three
(3) categories:
(i) "Regular Materials" are defined as commodity materials
distributed by SYNNEX in its regular course of business
and purchased on a lead time basis.
(ii) "Necessary Materials" are defined as commodity materials
purchased by SYNNEX necessary for the manufacturing of the
Products that are (A) not distributed by SYNNEX in its
regular course of business or (B) mutually agreed upon by
VA Linux and SYNNEX under special conditions, including
without limitation, EOL (End of Life) one time buys and
significant volume increases above the normal volume
carried by SYNNEX. Necessary Materials shall be purchased
on a lead time plus * of additional supply.
(iii) "Customized Materials" are defined as unique materials
purchased by SYNNEX specifically for the manufacturing of
the Products. Customized Materials shall be purchased on a
lead time plus * of additional supply; provided, however,
that for those Customized Materials that are less than *,
computed individually, of the total system cost of the
Customized Materials), SYNNEX may purchase such materials
in "Economic Order Quantities". "Economic Order
Quantities" are defined as the minimum purchase quantities
required by the supplier to qualify for lower unit pricing
or delivery or other favorable terms.
2.3.1 Subject to SYNNEX's acceptance of VA Linux's rolling *
forecasts as specified in Exhibit B (rev 2), SYNNEX shall
procure all Necessary and Customized Materials to the
quantity specified in such forecasts, on a * basis. SYNNEX
shall purchase all Necessary and Customized Materials to
cause such materials to be delivered to SYNNEX during *.
Accordingly, the forecast for * forecast shall not deviate
from the forecast for the *.
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4. Section 7.1 shall be deleted in its entirety and the following
substituted therefor:
7.1 The price for Products to be manufactured shall be set from time
to time to reflect the most current material cost. Subject to
SYNNEX's acceptance, the actual sale price of all Products shall
be established through Daily Release Orders provided by VA Linux.
All prices quoted are exclusive of federal, state and local
excise, sales, use and similar taxes and duties; VA Linux shall
be solely and exclusively responsible all such taxes and duties.
Payment for any Products, services or other prior agreed costs to
be paid by VA Linux hereunder is due in * net from invoice date.
SYNNEX reserves the right to alter or change any and all credit
terms upon * prior written notice.
SYNNEX agrees that the labor, overhead, and mark up for each
Product manufactured except for Custom Work shall be as follows:
(i) SYNNEX shall use commercially reasonable efforts to
maintain personnel staffed at commercially reasonable
levels with sufficient credentials and training (as
specified in Exhibit A (rev 3)) to perform SYNNEX's
obligations hereunder. The parties shall meet from time to
time, but no less than semi-annually, to discuss costs of
staffing.
(ii) SYNNEX labor and overhead per Product shall be charged as
an * as specified in Exhibit A (rev 3).
(iii) SYNNEX mark up shall be charged * as specified in Exhibit
A (rev 3).
(iv) SYNNEX shall use commercially reasonable efforts to
purchase all materials for the manufacture of the Products
at best commercial prices offered to SYNNEX.
(v) VA Linux shall pay to SYNNEX a mutually agreed upon fee
for any consigned materials.
(vi) VA Linux shall pay to SYNNEX *.
VA Linux shall pay to SYNNEX * and shall procure all
materials required for the NPI.
5. Section 7.3 shall be added, as follows:
7.3 In addition to the costs listed in Exhibit A (rev 3), in the
event that SYNNEX performs any rework or tear down operation on
finished goods inventory or work in process as a result of (1) a
change of order notification, (2) an order cancellation
notification, or (3) any other
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circumstance unrelated to the actions or inactions of SYNNEX, VA
Linux shall pay to SYNNEX on net * payment terms all of the
following:
(i) * for rework and/or tear down operation,
(ii) the cost of any unrecycleable materials, and
(iii) the mark up for the cancelled orders.
6. Section 7.4 shall be added, as follows:
7.4 VA Linux shall pay to SYNNEX a late payment interest charge of *
on all invoice amounts not paid within * from invoice date. This
late payment interest charge shall be waived in the event a
dispute was raised with respect to the unpaid invoice, as
provided in Section 7.5, and substantially resolved in favor of
VA Linux.
7. Section 7.5 shall be added, as follows:
7.5 VA Linux shall raise any dispute with regard to SYNNEX's
invoices, in writing, to the SYNNEX manager of credit and copied
to the SYNNEX manager of program management, within * of the
invoice dates. In the event VA Linux does not raise a dispute
within such * period, the invoice shall be deemed accurate in all
respects and VA Linux shall pay to SYNNEX any and all amounts due
thereunder, including without limitation, any late payment
interest charge as specified in Section 7.4. In the event VA
Linux timely raises a dispute in writing, SYNNEX shall have * to
respond thereto in writing to the VA Linux director of supply
chain management and copied to the VA Linux vice president of
operation. VA Linux then shall have * to respond thereto in
writing to the above referenced SYNNEX representatives. In the
event either party fails to respond within the applicable *
period, the other party's position shall thereafter be deemed
accurate in all respects and accepted by both parties. Both
parties agree to negotiate in good faith the settlement of any
disputes that may arise hereunder. In the event the above
resolution procedures do not resolve the dispute, the parties
shall submit such dispute to a "Big 5" certified public
accounting firm selected by SYNNEX for final resolution. Any such
final resolution shall include, in addition to the award,
recovery of accountants' fees and costs, attorneys' fees and
costs, and any late payment interest charges to the prevailing
party. SYNNEX agrees to send EDI810(Invoice) to be formatted on a
line item basis to match the format of the VA Linux
EDI850(Purchase Order) no later than *.
8. Section I.A. of Addendum A of the Original Agreement shall be deleted in
its entirety and the following sentence substituted therefor:
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A. VA Linux shall supply a rolling * forecast on or before *. The
parties acknowledge and agree that they have performed this
Agreement in accordance with the aforementioned.
9. Section I.B. of Addendum A of the Original Agreement shall be deleted in
its entirety and the following sentence substituted therefor:
B. VA Linux shall be responsible for all Necessary and Customized
Materials procured to fulfill the rolling * forecasts. SYNNEX
shall procure materials to the quantity specified in such rolling
* forecasts based upon the lead time procurement guidelines set
forth in Section 2.3. In addition, VA Linux shall assume all
vendor returns and/or cancellation agreements passed through
SYNNEX. The parties acknowledge and agree that they have
performed this Agreement in accordance with the aforementioned.
10. The first clause of the first paragraph of Section I.C. of Addendum A of
the Original Agreement shall be deleted, which states as follows: "Daily
Release Orders for the specific configurations to be shipped against the
Blanket Purchase Order with all shipping information, and detail of how
it will be shipped". Such clause shall be replaced by the following:
"Daily purchase orders shall have all shipping information and detail of
how it will be shipped."
11. Section I.E. of Addendum A of the Original Agreement shall be deleted in
it its entirety.
12. Section II.A. of Addendum A of the Original Agreement shall be deleted
in it its entirety.
13. Section II.E. of Addendum A of the Original Agreement shall be deleted
in it its entirety.
14. The second full sentence of the first paragraph of Section II.D. of
Addendum A of the Original Agreement shall be deleted, which states as
follows: "Return freight will be paid by Synnex." Such sentence shall be
replaced by the following: "Repaired or replaced Products shall be
shipped back to VA Linux via ground freight and shall be paid by
SYNNEX."
15. A fifth paragraph shall be added to the end of Section II.F. of Addendum
A of the Original Agreement, as follows:
SYNNEX shall exercise its commercially reasonable efforts to reduce the
cycle time to * plus an additional time required for burn-in in VA
Linux's *. VA Linux shall cooperate with SYNNEX in good faith to
establish and effect parameters and guidelines to accomplish such cycle
time objectives. Such parameters and guidelines include, without
limitation, daily order cut off time, minimizing order flow disruptions
(such as expedited orders, change order notifications, and
re-prioritizing of SYNNEX build plans), and unusually high production
fallouts due to factors beyond the control of SYNNEX.
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Late Shipments. All Products within the * forecast and any additional
Products in excess of the * forecast, as agreed by SYNNEX, shipped more
than * after the receipt of a valid VA Linux purchase order or more than
* after the agreed upon delivery date, whichever is later, to the extent
not related to force majeure, or a VA Linux or VA Linux designated
Supplier issue, are subject to a *.
Quality. All Products that are produced by SYNNEX that do not conform
with deviation, QA and/or ECO procedures, as agreed by the parties in
writing, shall be subject to a *.
16. All other terms and conditions of the Agreement shall remain in full
force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment 2 as of the
date first set forth above.
VA Linux Systems, Inc.
By /s/ DANIEL SHORE
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Daniel Shore
------------------------------------
Print Name
VP of Operations
------------------------------------
Title
SYNNEX Information Technologies, Inc.
By /s/ STEPHEN ICHINAGA
------------------------------------
Stephen Ichinaga
------------------------------------
Print Name
VP of BTO Business Development
------------------------------------
Title
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EXHIBIT A (REV 3)
PAGE 3 OF 3
2/9/01 *
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EXHIBIT B (REV 2)
VA LINUX'S * ROLLING CASH DEPOSITS
FOR AGED INVENTORY
I. Assumptions
1. VA Linux shall provide to SYNNEX a rolling * forecast on *.
2. SYNNEX shall procure materials to the quantity specified in such
rolling * forecasts, on a * basis. SYNNEX shall procure materials
to the quantity specified in such rolling * forecasts based upon
the lead time procurement guidelines set forth in Section 2.3.
II. * Rolling Cash Deposits for Aged Inventory
1. SYNNEX shall provide a monthly inventory report to identify the
Aged Inventory, * Aged Inventory, and Obsolete Inventory ("SYNNEX
Audit") on or before *. VA Linux may, at its option, audit the
SYNNEX Audit within * of receipt of the SYNNEX Audit.
2. VA Linux shall make a * cash deposit to SYNNEX for the total cost
of the Aged Inventory.
3. This * cash deposit shall remain with SYNNEX until the following
* SYNNEX Audit. At such time, the total cash deposit for Aged
Inventory shall be increased for any additional Aged Inventory or
decreased for any reduction in the same.
4. This * SYNNEX Audit and cash deposits for Aged Inventory shall
continue during the term of the Agreement, Amendment 2, and any
subsequent amendments thereto.