Document:

exv10w13

 

Exhibit 10.13

	 		
	Compaq Computer Corporation / Smart Modular Technologies, Inc.
	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

 

Compaq Computer Corporation &

Smart Modular Technologies, Inc.

Corporate Purchase Agreement

     This Corporate Purchase Agreement (this “Agreement”) is made and entered into as of the
1st day of May 2001 by Compaq Computer Corporation, a Delaware corporation (“Compaq”), and by
Smart Modular Technologies, Inc., a California Corporation (“Smart Modular”) with its principal
place of business as 4305 Cushing Parkway, Fremont, CA 94538 and Subsidiaries as identified in
Exhibit A.

WHEREAS, Compaq desires to purchase memory, memory modules, and memory kits from Smart Modular as
defined herein;

WHEREAS, Compaq desires for Smart Modular to assemble, kit and deliver high quality, low cost
memory modules and options to Compaq and to Compaq customers for same business day and next
business day delivery;

WHEREAS, Smart Modular is willing to sell memory modules and memory kits to Compaq and provide for
assembly, kitting and delivery of memory kits, as defined herein;

NOW THEREFORE, For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Compaq and Smart Modular hereby agree as follows:

1. DEFINITIONS

1.1. In addition to terms defined elsewhere in this Agreement, capitalized terms used in this
Agreement shall have the meanings given thereto in Annex 1 hereto.

2. PRODUCT PURCHASES

2.1. The terms and conditions contained in this Agreement shall govern the purchase and sale of
product (the “Product”) listed in a product schedule (the “Product Schedule”) entered into from
time to time by Compaq and Smart Modular, which schedule shall be substantially in the form of Exhibit B.

2.2. This Agreement is not a requirements contract and does not obligate Compaq to purchase any
minimum quantity of Product but only establishes the terms and conditions for such purchases if, as
and when Compaq submits orders in accordance with this Agreement.

2.3. In the event that Compaq begins using an additional supplier to support the Memory Options
program, Compaq will provide written notice to Smart Modular 60 calendar days prior to the addition
of a supplier.

3. ORDERS

3.1. Upon execution of this Agreement, Smart Modular agrees that it shall be fully capable
of processing all Orders through Compaq’s system for Electronic Data Interchange (“EDI”).

3.2. Compaq may purchase Products by issuing to Smart Modular written purchase orders (“Written
Orders”) or purchase orders by electronic data interchange (“EDI Orders”); collectively, Written
Orders and EDI Orders are referred to herein as “Order” or
“Orders”. Orders shall set forth the following items:
quantity, price, ship-to location, shipping date, delivery date, part number and revision level. Smart
Modular shall accept any Order that materially conforms with the terms of this Agreement.

 

					
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	Compaq Computer Corporation / Smart Modular Technologies, Inc.
	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

 

3.3. If Compaq issues a Written Order, Smart Modular shall use commercially reasonable efforts
to send written confirmation of such acceptance within two (2) business days after Smart Modular’s
receipt of a Written Order from Compaq.

3.4. If Compaq issues an EDI Order, Smart Modular shall electronically acknowledge receipt of the
EDI Order which shall be confirmed by a Functional 997 (same information as covered in EDI 855)
issued from Smart Modular’s mailbox upon receipt of the EDI Older, or by an EDI Order Verify signal sent
no later than 3 hours after receipt of the EDI Order.

3.5. “Verify”, or “Verification”, as used herein shall mean Smart Modular’s determination of
successful receipt, from electronic mailbox, of all necessary Order information and requirements (e.g.,
quantity, price, ship-to location, shipping date, delivery dates, part number, and revision level), and
“notification to Compaq, of both the receipt of the EDI Order from Compaq and any discrepancies relating to the
readability of such EDI Order. Smart Modular shall electronically verify receipt of an Order as per
Table 1: Verify. EDI Order issued on a non-Business Day shall be “verified” on the next Business Day by
11:00AM.

Table 1: Verify

	 	 	 
	Functional 997 sent by Smart Modular mailbox	 	Verify report sent to Compaq by
	12:00AM to 8:00AM

	 	11:00 AM
	8:01 AM to 2:00 PM

	 	7:00 PM
	2:01 PM to 11:59 PM

	 	11:00 AM Next Business Day

3.6 Smart Modular shall be conclusively presumed to have
accepted all EDI Orders issued by Compaq
that Smart Modular has confirmed by a Functional 997, unless
Compaq is notified specifically, that Smart
Modular has not accepted a particular EDI Order. Such
notification by Smart Modular must take place
within fourteen (14) hours from Smart Modular’s Verification of
Compaq’s EDI Order transmission.

3.7 All EDI Orders, Verifications, and EDI Acknowledgments (collectively, “EDI Transmissions”)
and other related data electronically transmitted shall (i) reference and be subject to the terms and
conditions of this Agreement, and (ii) contain information in a specified format in accordance with
Compaq’s policies, specifications and procedures regarding electronic data interchange information.

3.8 No additional or different provisions proposed by either party hereto in any oral, written or
electronic data interchange acceptance, Written Order, EDI Order, confirmation, verification or
acknowledgment shall apply unless expressly agreed to in writing by the other party. Smart Modular
and Compaq hereby give notice of their objection to any additional or
different terms.

3.9 Smart
Modular agrees that all of Compaq’s Affiliates, wherever located, shall be entitled to
make purchases under this Agreement.

4. TERM OF AGREEMENT

4.1. The term of this Agreement shall be three (3) years, commencing on the dale of this Agreement
(the “Effective Date”). This Agreement will be automatically renewed at the conclusion of the
initial 3 year period for a 12 month period unless one of the parties notifies the other party not
less than 180 calendar days prior to the end of such 1 year period that it does not intend to
renew this Agreement. Such automatic renewal provision shall apply at the end of each successive
12 month period unless either party indicates, in

 

					
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	Compaq Computer Corporation / Smart Modular Technologies, Inc.
	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

 

accordance with the 180 calendar day notice provision described in the preceding sentence,
that renewal is not intended. This Agreement may terminate prior to the aforementioned stated
term under the circumstances set forth in Section 15. Notwithstanding the foregoing, this
Agreement shall remain in full force and effect and shall be applicable to any Order issued by
Compaq and received by Smart Modular during the term of this Agreement until all obligations
under such Order have been fulfilled.

5. PRICING

5.1. The prices for the Products, including memory components, memory module
assembly, kitting material and kitting services, shall be established from
time to time by the parties executing and delivering a pricing schedule in the
form set forth as Exhibit B (the “Pricing Schedule”). The Product prices (the
“Prices”) set forth in any Pricing Schedule shall be fixed for the period set
forth therein.

5.2 Smart Modular will use commercially reasonable efforts to purchase memory
components based on supplier share as designated by Compaq. Compaq will update
the price/allocation matrix as contract- pricing changes occur.

5.3 The Prices shall include all inbound costs to Smart Modular direct,
indirect and incidental charges relating to the sale of the Product to Compaq
including, without limitation, packaging and kitting, in-bound freight shipping
charges, forwarding agent and brokerage fees, insurance costs, document fees,
and duties, and any and all sales, use, excise and similar taxes, provided that
all such charges for semiconductor memory devices shall be included in the
Compaq Contract Price, other than value added taxes. All Product sold hereunder
shall be shipped to Compaq Ex-Works upon delivery to a common carrier. Each
month and based upon each Product’s sale during the previous month from Smart
Modular to Compaq, Smart Modular shall charge through a separate invoice, and
Compaq shall pay, the applicable sale, use and/or value added taxes arising out
of said Product sales.

5.4 Smart Modular must receive written authorization from Compaq prior to all
spot market transactions that exceed the percentage of Spot Market purchases
targeted at 30% Compaq Approved Spot Market Supplier and 70% Compaq Contract
Suppliers. Spot market transactions by Smart Modular will follow the terms and
conditions outlined within Exhibit B.

5.5 Smart Modular is responsible for monitoring and determining the inventory
levels which will allow Smart Modular to reach the On-Time-Delivery
requirements of this Agreement.

5.6 Compaq shall determine the weighted average price based on Compaq
negotiated pricing, Compaq supplier market share commitments and supplier
commitments to the Compaq forecast. It shall be Smart Modular’s responsibility
to inform Compaq when the supplier is unable to deliver to the commitments.
Compaq will use commercially reasonable efforts to ensure that the supplier can
meet the commitments. In the event that product can not be obtained to the
allocation, Smart Modular shall use commercially reasonable efforts to obtain
supply from the other Compaq Contract Suppliers.

5.7 Smart Modular acknowledges that Compaq’s agreement to purchase Product for
incorporation into Compaq’s computer systems represents a valuable and
substantial endorsement of Smart Modular’s Products. In addition, Smart
Modular acknowledges that Compaq’s (i) engineering expertise, (ii) early
requirements input, (iii) architectural contributions, evaluation and testing
of prototypes and samples and subsequent feedback to Smart Modular of the
results regarding test results, (iv) integration and product compatibility
testing; (v) warehouse that increase Smart Modular’s efficiency, and (vi)
marketing and promotional activities provide substantial value to Smart
Modular. In consideration of the value and benefit that Smart Modular
receives from Compaq, including, but not limited to, those set forth above, and
the potential substantial quantities to be purchased by Compaq, Smart Modular
represents that the maximum Effective Price, as defined below, charged to
Compaq for Products will be the lowest price offered by Smart Modular with
terms no less favorable than accorded by Smart Modular to any of its other
customers in each case for equivalent products manufactured by Smart
Modular under similar

 

					
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	Compaq Computer Corporation
/ Smart Modular Technologies, Inc.

Corporate Purchase Agreement
	 	Rev 1.0

Contract No. 2171-080101

 

circumstances, regardless of the quantities that Compaq actually
purchases. This Section 5.9 shall apply to all Products purchased and services
provided by Compaq hereunder, including but not limited to all memory modules,
memory option kitting and DRAM’s, as identified in Exhibit B.

5.8 N/A.

5.9 Smart Modular shall use its best efforts to maintain a vigorous cost
reduction program and to ensure that the Prices and terms set forth in this
Agreement and Exhibit B hereunder are aggressive and competitive at all times.
If Compaq does not consider the quoted pricing and terms to be aggressive and
competitive, Compaq shall have the right, at any time and from time to time, to
request an immediate meeting with Smart Modular, and Smart Modular shall use its
best efforts to amend the quoted pricing and terms to comply with Section 5.11
by entering into a new Pricing Schedule (if required).

5.10 Compaq may, upon reasonable written notice to Smart Modular, appoint an
independent auditor to review Smart Modular’s records to determine if Compaq is
receiving pricing as agreed to hereunder and that Smart Modular is complying
with the terms of this Agreement. Smart Modular shall allow such independent
auditor access to all applicable records of Smart Modular for the purpose of
conducting such audit. The independent auditor shall only report to Compaq
whether Smart Modular is complying with the terms of this Agreement.

5.11 In the event that Smart Modular provides Effective Prices and/or terms for
Product to any one or more of its customers, which results in Compaq’s
Effective Price exceeding the maximum Effective Price to Compaq as defined
above, Compaq shall be entitled to a price reduction and/or amendment
retroactive to the date such Effective Prices are/or terms were made available
to such other customers. Thereafter, Compaq shall be entitled to such lower
Effective Price from that date forward. For purposes of this Agreement,
Effective Price shall mean Smart Modular’s purchase order price to its customer
minus any and all rebates of any kind, performance based incentives,
allowances, and/or other special considerations applicable to such
customer.

5.12 Smart Modular agrees that Compaq will be in a preferred position relative
to any of its other customers with respect to allocation of Products, resources
and support.

6. EXCLUSIVITY AND MANUFACTURING RIGHTS

6.1 Compaq may, from time to time, engage Smart Modular in the design and
manufacture of Compaq unique memory modules. Compaq unique memory modules will
be separately identified in Exhibit B (Pricing), Exhibit C (Specifications) of
the Corporate Purchase Agreement and may include unique terms and conditions
regarding their purchase. All unique terms and conditions will be negotiated
during Compaq’s and Smart Modular’s regular negotiations sessions and
incorporated into the Exhibits. Compaq and Smart Modular further agree that
Compaq is hereby granted exclusive use of Compaq unique memory module designs,
whether created by Compaq or Smart Modular, for all Products purchased by
Compaq, as defined in Exhibits B, C and D hereunder; provided that Compaq
notifies Smart Modular in writing which modules it considers to be Compaq unique
memory modules prior to the design of such modules.

6.2 SMART Modular shall maintain adequate manufacturing, test and fulfillment
capacity to meet the needs of this program.

6.3. Factory loading of greater than 70% of the theoretical limits for more
than thirty (30) days in any consecutive ninety (90) calendar day period, shall
be defined as insufficient capacity. The theoretical manufacturing capacity
limit shall be established as three (3) eight hour shifts per day operating six
(6) days per week in Smart’s Compaq qualified manufacturing operations.

6.4 If Compaq determines pursuant to Sections 6.2 and 6.3 that Smart
Modular lacks sufficient production capacity to meet Compaq’s forecast
production requirements, Smart Modular Shall provide

 

					
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	Compaq Computer Corporation / Smart Modular Technologies, Inc.

Corporate Purchase Agreement
	 	Rev 1.0

Contract No. 2171-080101

 

Compaq the information required to manufacture and/or to have
manufactured the Product, including but not limited to Smart Modular’s then
current drawings, bills of material, Gerber files, and vendor lists, and Smart
Modular agrees to provide to Compaq the support and information required by
Compaq to manufacture or to have manufactured such product, including
authorization to purchase any necessary proprietary components from Smart
Modular’s suppliers.

6.5 Upon
Compaq’s determination pursuant to Sections 6.2, 6.3 and 6.4, Smart
Modular will also provide to Compaq, at Compaq’s request and on a commercially
reasonable basis, telephone and on-site personnel support as Compaq may request
from Smart Modular to assist and enable Compaq to manufacture or to have
manufactured such Product in commercial quantities.

6.6 Compaq is hereby granted a license under trade secrets and patents to access
and to use all of Smart Modular’s drawings, bills of material, and suppliers to
make or to have made Products and to create improvements. Compaq shall be
prohibited from exercising such grant except in the event that (i) Smart Modular
merges into or is acquired by any third party and materially becomes unable to
meet Compaq’s demand for Product as required by this Agreement, and/or (ii)
Smart Modular is acquired by a Compaq competitor, and/or (iii) Smart Modular
enters into business proceedings including, going out of business, filing for
bankruptcy or reorganization, or going into receivership. Smart Modular agrees
that the presentation of this Agreement by Compaq to Smart Modular’s successors
and assigns shall be sufficient for such successors and assigns to make Smart
Modular drawings, bills of material, and vendor lists accessible to Compaq.

6.7 N/A.

7. SHIPMENT AND DELIVERY

7.1. Smart Modular shall ship Product to Compaq, its Affiliates, and/or to
Compaq’s authorized resellers on the date (the “On-dock Date”) and to the
location (the “Specified Location”) specified in the related Order. Smart
Modular shall ship all Orders complete, unless authorized by Compaq to ship a
partial order. Smart Modular and Compaq agree to the terms in Table 3A: EMEA
Options On-Time Shipment Metrics and Table 3B: North America Options On-Time
Shipment Metrics to establish Smart Modular’s performance against this term.

Table 3A: North America, EMEA & APD Options On-Time Shipment Metrics

	 	 	 	 	 	 	 
	 	 	On-Time Shipment Metric	 	 	 	 
	Shipment	 	Desktop (1 & 2), Video,	 	On-Time Shipment Metric	 	 
	Period	 	Portables	 	Servers	 	Comment:
	Effective May

1, 2001

	 	95% On-Time to
1 Working Day
Metric
	 	95% On Time to
2 Working Days
Metric
	 	Specialty SKUs such as modules
requiring
stacking will be assigned
lead-times as agreed upon by both parties

7.2. Smart Modular should use commercially reasonable efforts to ship
Orders on a First In First Out (FIFO) basis by ship date. In the event that
Smart Modular fails to ship an Order based on the On-Time Shipment Metrics,
then that Order should be shipped prior to shipping new Orders of the same part
number.

7.3. The failure of Smart Modular to meet the On-Time Shipment Metrics over a
calendar quarter, provided that the Orders received are in compliance with the
terms, conditions and lead times of this Agreement, shall constitute a material
breach of this Agreement. Smart Modular shall notify Compaq in writing
immediately if Smart Modular has knowledge of any event which is reasonably
likely to delay any agreed ship date or shipment plan.

 

					
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	 	Contract No. 2171-080101

 

7.4. Title shall pass to Compaq on Smart Modular’s outgoing shipping dock.
All Product sold hereunder shall be shipped from Smart Ex-Works upon delivery
by Smart to a Compaq-approved carrier. Compaq will identify primary and
alternate approved common carriers and Smart agrees to use only Compaq approved
carriers.

7.5. If Smart Modular delivers Product more than two business days in advance
of the On-dock Date then, Compaq may, at its option, either (i) return such
Product to Smart Modular at Smart Modular’s risk and expense, including but not
limited to any transportation, import, or export related expenses or duties,
(in which case Smart Modular, at its expense, shall redeliver such Product to
Compaq on the correct On- dock Date therefor) or (ii) retain such Product and
make payment on the date payment would have been due based on the correct
On-dock Date therefor.

7.6. Changes to shipping and/or delivery dates may only be made by Compaq’s
authorized purchasing representatives as designated in writing from time to
time. Compaq may, without cost or liability, issue change orders for Product
quantities and schedule dates in accordance with the flexibility agreement
attached as Exhibit D (the “Memory Flexibility
Agreement”) [Does not Exist - N/A]. If any change Order
is made orally, Compaq shall provide an Order confirming such change within one
(1) Business Day, and Smart Modular shall provide written confirmation of such
change within one (1) Business Day of receiving Compaq’s confirming Order.

7.7. Compaq may measure Smart Modular’s On Time Delivery performance against
commitments for the purpose of establishing Smart Modular’s rate of On Time
Delivery, lead time and cycle time improvement against Compaq’s requirements.
On Time Delivery shall mean delivery of scheduled Product no more than two (2)
business days early and zero (0) business days late as measured on Compaq’s
and/or Compaq’s reseller’s receiving dock.

7.8. In addition, Compaq may measure Smart Modular’s On-Time Order Receipt to
Shipment Cycle Time as a function of the elapsed time between Smart Modular’s
receipt of Compaq’s EDI 850 Order Release and Compaq’s receipt of Smart
Modular’s EDI 856 Ship Notification. On-Time Shipping Performance Metrics
are defined in Table 4: Desktop1, Desktop2, Portables, Server Products.

Table 4A: Desktop and Portable Products:

	 	 	 	 	 	 	 
	Compaq EDI 850 Order	 	Compaq EDI 850 Order	 	Smart EDI 856	 	Smart EDI 856 Ship
	Transmit	 	Transmit Date	 	Ship Notice	 	Date
	12:00 AM to 8:00 AM
	 	Business Day 0
	 	11:59 PM
	 	Business Day I
	8:0l AM to 2:00 PM
	 	Business Day 0
	 	11:59 PM
	 	Business Day 1
	2:01 PM to 11:59 PM
	 	Business Day 0
	 	11:59 PM
	 	Business Day 2

Table 4B: Server Products:

	 	 	 	 	 	 	 
	Compaq EDI 850 Order	 	Compaq EDI 850 Order	 	Smart EDI 856	 	Smart EDI 856 Ship
	Transmit	 	Transmit Date	 	Ship Notice	 	Date
	12:00 AM to 8:00 AM
	 	Business Day 0
	 	11:59 PM
	 	Business Day 2
	8:0l AM to 2:00 PM
	 	Business Day 0
	 	11:59 PM
	 	Business Day 2
	2:01 PM to 11:59 PM
	 	Business Day 0
	 	11:59 PM
	 	Business Day 3

7.9. Lead times for all Product ordered hereunder shall not exceed that
listed in the Exhibit D — Memory Module Flexibility Agreement. Smart Modular
shall provide status reports identified in Exhibit J on Smart Modular’s
manufacturing cycle times.

7.10. Within twelve (12) months of the date in which Compaq receives Product,
Compaq may request the return, at Compaq’s expense, of unused standard Product
to Smart Modular for credit. Product may be returned and credited at a then
negotiated price.

7.11. Smart Modular shall use commercially reasonable efforts to ship on the
same business day for Orders of Desktop/Portable Product received prior to 8:00
AM at SMART’s supporting facility.

 

					
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Corporate Purchase Agreement
	 	Rev 1.0

Contract No. 2171-080101

 

8. PACKING, MARKING, AND SHIPPING INSTRUCTIONS

8.1. All product shall be prepared and packaged in accordance with Compaq’s
Memory Option Kit packaging specifications and bills of materials. A sample
Memory Option Kit packaging specification and bill of material is included in
Exhibit C. Compaq, at its sole discretion, from time to time may alter
packaging specifications. If Compaq’s alterations result in a material change
in Smart Modular’s costs or on-time for performance, Smart Modular and Compaq
shall negotiate in good faith such adjustments as the parties deem appropriate
to address such changes.

8.2. Smart Modular shall mark, or cause to be marked, each shipping container
to adequately show Compaq’s Order number, part number, revision level, lot
number, and quantity contained therein, and appropriate country of origin
marking. In addition, Smart Modular will conform to Compaq’s bar code
specification which will be provided to Smart Modular. A packing list showing
the Order number shall be included in each shipment. These data fields are
identified in Compaq’s Bar Code Label Specification, Rev. K, in Exhibit C.

9. QUALITY

9.1. Smart Modular commits to use commercially reasonable efforts to provide
defect free Product to Compaq. Smart Modular shall ensure that all Products
conform to the specifications, drawings, samples, revision levels and other
descriptions designated in the Product Schedule for such Product (the
“Specifications”). The Specifications shall include any labeling requirements
imposed by applicable law.

9.2. Compaq’s Approved Vendor List (AVL) shall only come from Compaq. Smart
Modular may request an updated AVL at any time from Compaq. Smart Modular
shall use Compaq’s AVL for all Memory Components to be used for Compaq unless a
written waiver is provided from Compaq. Smart Modular shall use Compaq’s AVL
for all Memory Modules to be used for Compaq unless a written waiver is provided
from Compaq.

Example of Compaq AVL:

     
**COMPAQ CONFIDENTIAL**

Date of
report: January 1, 1997

	 	 	 
	 

	Compatible Supplier Parts List for..
	 

	 	Compaq Part Number : XXXXXX       Page: X
	 

	 	Part Description : DIMM, BUFF,XMxX,ECC,EDO.XOnS
	 

	 	Part Revision Level: X
	 

	 	Part Class Code : XXXX
	 

	 	Part Project Number: XXXXX

Supplier Part #

	 	 	 	 	 
	ABCABC-6

DEFDEF-6
	 	ABC SUPPLIER

DEF SUPLLIER
	 	APPROVED

DISAPPROV

9.3. Smart
Modular and Compaq agree that a statistically significant 250 DPPM
threshold, measured at the module level, will be used to trigger Supplier
Corrective Action Requests (SCARS). Smart Modular shall report the outgoing
module level DPPM as identified in Exhibit J to Compaq.

9.4 Smart Modular shall establish and/or maintain a Quality Manual acceptable to
Compaq. Smart Modular’s Quality Manual is attached to this Agreement as
Exhibit E (the “Quality Manual”) and shall not be amended without written notice
to Compaq.

9.5 Upon reasonable notice, Compaq shall be entitled to visit and inspect Smart
Modular’s facility sites during normal business hours and Smart Modular shall
cooperate to facilitate such visits. Compaq’s

 

					
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	Corporate Purchase Agreement
	 	Contract No. 2171-080101

 

inspections shall in no way relieve Smart Modular of its obligation to deliver
conforming Product or waive Compaq’s right of inspection and acceptance at the
time the Products are delivered.

9.6 At Compaq’s request, Smart Modular shall provide Compaq with relevant
inspection, quality, and reliability data.

9.7 Smart Modular agrees to provide reports identified
in Exhibit J.

10. CHANGE ORDERS

10.1. Compaq may from time to time change the Specifications for the Products, and
Smart Modular shall use its best efforts to ensure that all Product complies
therewith. If Compaq’s changes result in a material change in Smart Modular’s
costs or on-time for performance, Smart Modular and Compaq shall negotiate in good
faith such adjustments as the parties deem appropriate to address such changes. Any
request by Smart Modular for any such adjustment must be made in writing to Compaq
within ten (10) business days’ of Smart Modular’s receipt of Compaq’s notice of
change in specifications.

10.2. Smart Modular agrees to advise Compaq of any changes to process, materials,
or sources of supply and ensure that such changes do not compromise specifications,
quality, reliability or availability of Products ordered by Compaq.

11. INSPECTION AND ACCEPTANCE

11.1. Products purchased or to be purchased pursuant to this Agreement shall be
subject to inspection and test by Compaq, its Affiliates, and its authorized
resellers including during the period of manufacture or development. Inspection may
occur at Compaq, its Affiliate, or reseller locations as well as at Smart Modular’s
facilities and/or those of Smart Modular’s subcontractors. Unless otherwise
specified in the Order, final inspection and acceptance of Product by Compaq shall
be at (i) Compaq’s facilities and/or (ii) those of Compaq’s authorized resellers.
Compaq reserves the right to reject Product which does not conform to the
Specifications or that contains any defect in material, workmanship or Smart
Modular design (the “Defective Product”). Compaq may in accordance with Section
11.2 return Defective Product to Smart Modular, at Smart Modular’s expense, for
corrective action, which corrective action shall include and be prioritized as
follows: (i) Smart Modular shall first attempt to repair or replace said
Defective Product, (ii) if repair or replacement is not possible, then Smart
Modular shall credit Compaq for an amount equal to (a) the current Compaq contract
price for said Defective Product, unless the defect arose from or was related to
any DRAM component failure, which occurred inside the applicable DRAM supplier’s
warranty period, or (b) the current Compaq contract price minus the current Compaq
contract cost of the DRAM components contained in such Product for said Defective
Product, if the defect arose from or was related to any DRAM component failure,

which occurred outside the applicable DRAM supplier’s warranty period, (iii)
exercise any other rights as Compaq may have at law or in equity that are
consistent with the other provisions of this Agreement. Product required to be
corrected or replaced shall be subject to the same inspection and acceptance
provisions of this Agreement as Product originally delivered under any Order. Smart
Modular shall reimburse Compaq for the costs of any reasonable inspection measures
deemed necessary by Compaq.

11.2. If Compaq returns Defective Product to Smart Modular for correction or
replacement, Smart Modular shall repair or replace same within ten (10) business
days of receipt thereof. Smart Modular will issue a “Return Material Authorization”
(“RMA”) within twenty four (24) hours of request to minimize field exposure
associated with any suspect material, Prior to shipping any defective Product back
to Smart Modular, Compaq shall use commercially reasonable efforts, including
performing testing, to verify that said product is defective. Compaq will include a
statement with each lot returned explaining the basis and reason for said Product’s
return and including the appropriate RMA number.

 

					
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Corporate Purchase Agreement
	 	Rev 1.0

Contract No. 2171-080101

 

11.3. Smart Modular agrees to provide failure analysis of Defective Product
within 5 business days after receipt thereof. Smart Modular will also provide
Compaq with a written corrective action report addressing the steps that will
he taken to eliminate the recurrence of the problem, and will use commercially
best efforts to implement the actions addressed in such report.

11.4. If Product changes are necessary to correct Smart Modular design,
material, or workmanship defects, Smart Modular shall bare the costs of
correction. If Compaq incurs any direct costs associated with such
corrections arising out of Compaq stock, reseller, and end user inventory
purges and service costs, Smart Modular will reimburse Compaq for the direct
costs incurred.

12. WARRANTY

12.1. Smart Modular hereby warrants to Compaq that Product purchased hereunder
shall (i) vest in Compaq good and valid title to such Product free and clear of
all liens, encumbrances, security interests, burdens and other claims and (ii)
be free from infringements or violations described in Section 19.1. In
addition, from the date of Compaq’s acceptance of Product delivered hereunder,
Smart Modular hereby warrants to Compaq that such Product shall be free for the
Product’s lifetime from defects in material (except for DRAM components),
workmanship and Smart Modular design and be in conformity with the
Specifications. The warranty for replaced or repaired Product will be the same
as the original Product. With respect to defects arising out of or related to
DRAM components, Smart Modular hereby warrants to Compaq that such Product
shall be free from such defects for the warranty period granted directly to
Smart Modular by each respective DRAM supplier or the warranty period granted
indirectly to Smart Modular through Compaq by each respective DRAM supplier, as
applicable. In the case of Epidemic Failure as defined by a statistically
significant Compaq line fallout equal to 7,500 DPPM or a statistically
significant Customer return rate equal to 5,000 DPPM, Smart Modular shall
repair, replace or credit Compaq in accordance with the provisions of Section
11. Upon discovery of a defect in material, workmanship or Smart Modular
design in any Product or the discovery of a Product that is not in compliance
with the Specifications during the warranty period as provided above, Smart
Modular shall repair, replace or credit Compaq in accordance with the
provisions of Section 11.

12.2. Smart Modular warrants that there are no claims of infringement or
violation of the type described in Section 18.1 with respect to
the Product.

13. OUT OF WARRANTY REPAIRS

13.1. Smart Modular agrees to use commercially reasonable efforts to refurbish
to a “like new” condition any Memory Module no longer covered by the express
warranties set forth elsewhere in this Agreement (an “Out of Warranty
Product”). Refurbishment prices shall be set at the time refurbishment is
required and will not exceed 1.2X the then current material and conversion
costs.

14. PAYMENT

14.1. Compaq shall make payment in full for the purchase price of all Product
purchased hereunder (other than items disputed by Compaq in good faith) and
received by Compaq on or before the 45th calendar day after the date of Smart
Modular’s invoice; provided, Smart Modular’s invoice shall not be dated earlier
man the shipment date of Product covered thereby. Payment of invoices shall not
constitute acceptance of the Product.

14.2. Payment shall be made in U.S. dollars.

15. TERMINATION

15.1. Either parry (the “Non-Defaulting Party”) may terminate this Agreement
and/or any Order issued hereunder at any time by written notice to the other
party (the “Defaulting Party”) upon the occurrence of a

 

					
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Default by
the Defaulting Party. In addition, Compaq may terminate this
Agreement and/or any Order issued hereunder at any time for any reason upon
giving 30 calendar days written notice of termination to Smart Modular. This
Agreement shall terminate at the end of the notice period.

15.2. Upon termination by Smart Modular of this Agreement and/or any Order due to
Compaq’s default or upon termination by Compaq for reasons other than Smart
Modular’s Default, Compaq’s entire liability shall be to purchase the following,
without duplication: (i) at the Order purchase price, all finished goods, and at
Smart Modular’s cost all work in progress, and unique materials that have been
purchased within reasonable lead times as identified in Exhibit B, and (ii) all
Product that Compaq has received and had not previously paid for.

15.3. Upon termination by Compaq of this Agreement and/or any Order due to Smart
Modular’s Default, (i) Compaq shall have the option to purchase any materials or
work in progress which Smart Modular may have purchased or processed for the
fulfillment of any Order at Smart Modular’s cost, (ii) Compaq shall have such
additional remedies as may be available at law or in equity and that are consistent
with the terms of this Agreement and (iii) Compaq shall have no obligation to Smart
Modular other than payment of any balance due for Products delivered by Smart
Modular before termination.

16. FORCE MAJEURE

16.1. Neither party shall be liable for its failure to perform any of its
obligations hereunder during any period in which performance is delayed by fire,
flood, hurricane, tornado, earthquake, war, embargo, riot or an unforeseeable
intervention of any government authority that causes a complete interruption of
manufacturing operations, (“Force Majeure”), provided that the party suffering such
delay immediately notifies the other party of the delay.

16.2. If, however, either party’s performance is delayed for reasons set forth
above for a cumulative period of 30 calendar days or more, the other party,
notwithstanding any other provision of this Agreement to the contrary, may
terminate this Agreement and/or any Order issued hereunder by notice to the delayed
party. In the event Smart Modular claims delay due to Force Majeure and Compaq
elects to terminate this Agreement as provided herein, Compaq’s sole liability
hereunder shall be for the payment to Smart Modular of any balance due and owing
for Product previously delivered by Smart Modular and accepted by Compaq. In the
event the parties do not terminate this Agreement and/or Order due to a Force
Majeure, the time for performance or cure will be extended for a period equal to
the duration of the Force Majeure.

17. PRODUCT NOTICES

17.1. Any notice given under this Agreement shall be in writing and will be
effective (i) when delivered, if delivered in person, (ii) during the business
hour of receipt (or the next business hour if not received during a normal
business hour), if by telecopy or (iii) 3 business days after depositing same
in the U.S. mail, postage prepaid and addressed to Smart Modular at the address
set forth below or to such other address as Smart Modular may specify to Compaq
in accordance with this Section 17.1 or to Compaq at the address set forth
below or at such other address as Compaq may specify to Smart Modular in
accordance with this Section 17.1:

	 	 	 	 
	 	If to Compaq:

	 	If to Smart Modular:
	 	 
	 	 
	 	COMPAQ COMPUTER CORPORATION

	 	SMART MODULAR TECHNOLOGIES, INC.
	 	P.O. BOX 692000

	 	4305 CUSHING PARKWAY
	 	20555 S.H. 249

	 	FREMONT, CA 94538
	 	HOUSTON, TEXAS 77269-2000

	 	ATTN: President
	 	ATTN.: Director, Corporate Memory Procurement
	 	 

 

					
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	with
a copy to:

	 	with a copy to:
	 
	 	 
	COMPAQ COMPUTER CORPORATION

	 	SMART MODULAR TECHNOLOGIES, INC.
	P.O. BOX 692000

	 	4305 CUSHING PARKWAY
	20555 S.H. 249

	 	FREMONT, CA 94538
	HOUSTON, TX 77269-2000

	 	ATTN: Ann T. Nguyen
	ATTN.: Division Counsel — Operations

	 	           Associate General Counsel

17.2. For the purpose of this Agreement Table 5: Contacts shall
be used for determining point of contact.

Table 5: Contacts

	 	 	 
	Compaq Corporate Memory Procurement	 	Compaq Operations
	Memory component pricing

	 	Order Processing / Verification
	Supplier allocation / weighted average price

	 	Product pricing
	Product qualification

	 	Approval for partial shipments
	Approved Vendor List

	 	Adjust Product Schedule
	Approval for spot market purchases

	 	Product Transportation
	Supplier commitments

	 	Customs
	Waiver for non-AVL product usage

	 	Invoice Reconciliation
	New Product Information (Spec, BOM, artwork,
etc.)

	 	Smart Program Reviews
	DRAM Program Reviews
	 	 

18. COMPLIANCE WITH LAWS

18.1. All Product supplied and work performed under this Agreement shall
comply with all applicable laws and regulations including, without limitation,
all laws governing Smart Modular’s relationship with its employees, agents or
subcontractors. Upon request, Smart Modular shall certify compliance with such
applicable laws and regulations, and provide such evidence of compliance as
Compaq may reasonably request.

19. INDEMNIFICATION; REMEDIES

19.1. Except as otherwise provided herein, Smart Modular shall indemnify,
defend and hold harmless Compaq and its Affiliates and their respective
directors, officers, shareholders, employees and agents (collectively, the
“Compaq Indemnified Parties”) from and against any and all claims, demands,
suits, actions, judgments, costs and liabilities (including reasonable
attorneys’ fees) (each, an “Indemnified Loss”) relating to or arising out of
any allegation that Products furnished under this Agreement infringe or
violate any third party’s patent, copyright, trade secret, trade name, trade
dress, mask work, mask rights, trademark or any other proprietary right (each,
an “IP Claim”) and shall pay all coats and damages awarded; provided, Smart
Modular shall have no obligation whatsoever pursuant to this Agreement or
otherwise (i) for or with respect to any IP Claim relating to or arising out
of designs, instructions specifications or intellectual property furnished by
Compaq, (ii) for or with respect to any IP Claim relating to or arising out
of the combination of the Products with any hardware, products, equipment,
materials, text, graphics, software or the like supplied by a party other than
Smart Modular where such combination is beyond the Products intended use, or
(iii) for any settlement entered into without Smart Modular’s prior written
consent. Compaq shall notify Smart Modular of such claim, cooperate and assist
Smart Modular with the defense of such claim, and permit Smart Modular to
defend and compromise such claim; provided, Compaq’s failure to so notify
Smart Modular shall not diminish Smart Modular’s indemnity obligations
hereunder except to the extent any Compaq delay in notifying Smart Modular
materially prejudices Smart Modular’s defense of such matter.

 

					
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19.2. If during the course of any IP Claim covered under Section 19.1 herein the use of the
allegedly infringing Product is finally enjoined, Smart Modular shall, at Smart Modular’s option
and expense, use commercially reasonable efforts to do one of the following (in addition to its
obligations under Section 19.1 herein): (i) procure for Compaq the right to use or sell, as
applicable, the allegedly infringing Product, (ii) replace the allegedly infringing Product or the
affected part thereof with equivalent non-infringing technology, (iii) modify the allegedly
infringing Product or the affected part thereof to make it non-infringing Product, (iv) refund to
Compaq an amount equal to the price paid by Compaq for said allegedly infringing Product less any
discounts or credits granted to Compaq. Compaq agrees to return allegedly infringing product to
Smart Modular in the event of refund under (iv).

19.3. Smart Modular shall indemnify, defend and hold harmless the Compaq Indemnified Parties from
and against any Indemnified Loss relating to or arising out of any personal injury or death
resulting from (i) the use of any Product or (ii) Smart Modular’s acts or omissions; provided, the
foregoing indemnity shall not apply to the extent any such claim is attributable solely to design
specifications furnished by Compaq to Smart Modular.

19.4. Except as otherwise provided herein, COMPAQ shall indemnify, defend and hold harmless SMART
and its subsidiaries from and against (i) any and all IP Claims arising out of or related to
designs, instructions, specifications or intellectual property developed by COMPAQ or furnished by
COMPAQ, (ii) any and all IP Claims arising out of or related to any components of the Products,
including without limitation memory semiconductors, consigned or sold to SMART by COMPAQ or
specified by COMPAQ, (iii) any and all IP Claims arising out of or related to the combination of
the Products with any hardware, products, equipment, materials, text, graphics, software or the
like supplied by a party other than SMART, (iv) any and all IP Claims arising out of or related to
the modification of the Products by a party other than SMART, and (v) any and all liens,
liabilities, awards, judgments, costs and expenses (including reasonable attorney’s fees) arising
out of or related to any IP Claim covered under this Section 19.4; provided, however, that the
foregoing indemnity and defense obligation is conditioned on each of the following: (i) prompt
written notice by SMART to COMPAQ of any IP Claim for which indemnity is claimed hereunder, (ii)
complete control of the defense and settlement thereof by COMPAQ, and (iii) complete cooperation by
SMART in such defense. COMPAQ shall have no obligation whatsoever pursuant to this Section 19.4 for
any settlement entered into without the prior written consent of an authorized representative of
COMPAQ. Notwithstanding the foregoing, SMART may defend and/or settle any IP Claim for which COMPAQ
materially fails to perform its indemnity obligation under this Section 19.4 without adversely
affecting SMART’S indemnity rights under this Section 19.4.

19.5 THIS SECTION 19 SHALL BE ENFORCEABLE TO THE EXTENT SET FORTH ABOVE NOTWITHSTANDING THE SOLE,
CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OF ANY OF THE COMPAQ INDEMNIFIED PARTIES.

19.6 Subject to Section 19.7, upon the occurrence of a Default by a party hereto the other party
shall be entitled to exercise such rights and remedies as are available at law or in equity
including the right to seek specific performance upon Smart Modular’s failure to deliver on a
timely basis unique products in conformity with the Specifications.

19.7 NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT
LIMITATION, LOST PROFITS AND UNLIQUIDATED INVENTORY), INDIRECT, SPECIAL OR PUNITIVE DAMAGES EVEN IF
THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT (I) IN CONNECTION WITH A
BREACH OF THE CONFIDENTIALITY PROVISIONS SET FORTH IN THIS AGREEMENT AND (II) TO THE EXTENT ANY
SUCH DAMAGES OF A THIRD PARTY ARE A PART OF AN INDEMNIFIED LOSS AGAINST WHICH. COMPAQ IS
ENTITLED TO BE INDEMNIFIED PURSUANT TO THE OTHER PROVISIONS OF THIS SECTION 19.

 

					
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20. TRADEMARKS; LOGOS

20.1. Smart Modular is authorized to use the Compaq logo and trademark only to the extent necessary
to meet the required specification for the Product. Smart Modular is authorized to use Compaq
labels only as necessary to identify Product for sale hereunder. No other rights with respect to
Compaq’s logos, labels, trademarks, trade names or brand names are conferred, either expressly or
by implication, upon Smart Modular.

20.2. Smart Modular shall maintain strict accountability for Compaq’s security labels. Compaq
security labels identified in the kit bills of materials must be maintained as a secure stock room
item, kitted and issued for each module assembly build, and managed under Smart Modular’s daily
cycle count process for A-Item materials. Smart Modular will provide Compaq with a monthly
reconciliation of module shipments and security label consumption in addition security labels held
in stock, work-in-process, and finished goods.

21. CAPACITY PLANNING

21.1. Smart Modular agrees to review weekly forecasts of at least 6 months duration, as
provided by Compaq, and to advise Compaq if Smart Modular anticipates
that it will be unable to
achieve the requested volumes. Smart Modular may from time to time request Compaq to review
Compaq’s forecast and advise of any changes.

22. GRATUITIES

22.1. Each party represents that it has not offered nor given and will not (i) offer nor give
any employee, agent, or representative of the other party any gratuity, or (ii) influence such
person’s normal job responsibilities in any way with a view toward securing any business from the
other party or influencing such person with respect to the business between the parties.

23.
INSURANCE.

23.1. Smart Modular shall maintain such minimum insurance coverage as is described in Exhibit H.
All insurance policies maintained by Smart Modular in accordance with this Section 23 shall name
Compaq as an additional insured and loss payee.

24. CONFIDENTIAL INFORMATION

24.1. Each party recognizes that it may have previously entered or will in the future enter
into various agreements with the other party which obligates it to maintain as confidential
certain information disclosed to it by the other party. To the extent that such information or any
further confidential information, which might include but is not limited to business plans,
forecasts, capacity, pricing, inventory levels, etc., (collectively referred to hereinafter as
“Information”) is disclosed in furtherance of this Agreement or any Order issued hereunder, such
Information shall be so disclosed pursuant to the minimum terms and conditions listed below;
provided, however, the minimum terms and conditions listed below shall in no way relieve the
parties from any obligation or modify such obligations previously agreed to in other agreements.
Both parties agree that this Agreement and any other agreements regarding confidential information
shall hereafter be considered as coterminous, and shall expire no earlier than the date of
expiration or termination of this Agreement.

24.2. Both parties agree that the party receiving Information will maintain such Information in
confidence for a period of three years from the date of disclosure of such Information and will
not use such information except for the purposes contemplated hereby or in any other applicable
agreements regarding said information.

 

					
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24.3. Each party shall protect the other party’s Information to the same extent that it protects
its own confidential and proprietary information and shall take all reasonable precautions to
prevent unauthorized disclosure to third parties.

24.4. The parties acknowledge that the unauthorized disclosure of such Information will cause
irreparable harm. Accordingly, the parties agree that the injured party shall have the right to
seek immediate injunctive relief enjoining such unauthorized disclosure.

24.5. The provisions of this Section 24 shall not apply to information (i) known to the receiving
party at the time of receipt from the other party, (ii) generally known or available to the public
through no act or failure to act by the receiving party, (iii) furnished to third parties by the
disclosing party without restriction on disclosure, (iv) furnished to the receiving party by a
third party as a matter of right and without restriction on disclosure or (v) furnished as required
by court order or similar governmental authority or by the imminent likelihood thereof or by
applicable law.

24.6. Immediately upon termination of this Agreement or at the request of the other party, each of
the parties shall promptly return all materials in its possession containing Information of the
other party.

25. COUNTRY OF ORIGIN

25.1. For each Product purchased under this Agreement, Smart Modular shall furnish Compaq with the
manufacturer and date code, by quantity and part number (Compaq’s and Smart Modular’s). Product
shall be marked with the country of origin as required by applicable law.

25.2. Smart Modular agrees to provide necessary documents to facilitate the import and export of
Product. Smart Modular further agrees to assist Compaq’s import and export of Product as
reasonably requested by Compaq.

26. MATERIAL FURNISHED BY COMPAQ

26.1. The parties anticipate that, from time to time, Compaq shall sell or consign to Smart Modular
certain material to be used in manufacturing Product (the “Compaq Furnished Material”). Smart
Modular agrees that each item of Compaq Furnished Material shall be used solely for the purpose of
manufacturing Product ordered by Compaq under this Agreement.

26.2. Each item of material furnished by Compaq to Smart Modular on a consignment basis shall be
identified on the books and records of Smart Modular by the letter “CQ” following such item’s part
number or by such other distinguishing mark as Compaq and Smart Modular may agree upon. Title to
consigned material shall remain with Compaq at all times.

26.3. Compaq shall issue an invoice and a debit memo with respect to the purchase price of Compaq
Furnished Material sold by Compaq to Smart Modular, and Compaq immediately may apply such debit
memo against any amounts then owing by Compaq to Smart Modular. In the event any amount reflected
in an invoice has not been satisfied in full by means of applying the corresponding debit memo
against amounts owed by Compaq to Smart Modular within 30 days following the invoice date, Smart
Modular shall pay Compaq in US dollars (or such other currency as Compaq and Smart Modular may
agree upon) the remaining balance of such invoice on or before such 30 day period. To secure
Smart Modular’s payment obligations hereunder, Smart Modular hereby grants to Compaq a security
interest and purchase money security interest in all Compaq Furnished Material and all accounts
receivable and other proceeds thereof. Compaq may take any action (without notice, presently,
demand, protest, notice of protest or dishonor, notice of acceleration or notice of intent to
accelerate, all of which Smart Modular hereby waives) afforded a secured party under the Uniform
Commercial Code upon the occurrence of a Default by Smart Modular, and upon such occurrence, all
payment obligations of Smart Modular to Compaq shall, upon notice by Compaq, become immediately due
and payable; provided, if the Default giving rise to the

 

					
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foregoing remedies is attributable to Smart Modular’s insolvency or any bankruptcy related
proceeding affecting Smart Modular, all obligations of Smart Modular to Compaq shall automatically
become due and payable.

26.4. Smart Modular shall not allow or permit to exist any lien, security interest or other
encumbrance to be placed on or otherwise affect the Compaq Furnished Material other than security
interests and other encumbrances granted to Compaq.

26.5. Smart Modular agrees to sign financing statements, continuation statements, notices to other
creditors and such other instruments as Compaq may reasonably request to maintain a first priority,
perfected security interest in the Compaq Furnished Material that Compaq sells to Smart Modular
from time to time. Smart Modular agrees that a copy of this Agreement shall be sufficient to serve
as a financing statement and may be filed or recorded by Compaq in any public records or offices
reasonably required by Compaq. In addition, with respect to consigned materials, Smart Modular
agrees to make such filings and given notice to its creditors to ensure that such consigned
materials remain free from claims of Smart Modular’s creditors.

26.6. Smart Modular shall receive Compaq’s consigned material per the Sub-Contract Physical
Inventory Process.

26.7. Compaq shall carry the insurance for all the Compaq’s consigned inventory and equipment while
at Smart Modular’s facility, with the exception of the first $1,000,000 of any loss (per
occurrence). Smart Modular shall reimburse Compaq for any loss up to and including $1,000,000.
Compaq will insure the losses above that point.

26.8. Compaq understands that a certain amount of material furnished to Smart Modular to assemble
under consigned Orders will be subject to scrap. Component material and finished assemblies will be
considered in total scrap count. Over a period of three (3) months the ratio of scrap dollars to
delivered Product dollars for which Compaq will accept liability up to twenty five hundredths of
one percent (0.25%) for SOJ packaged devices and up to forty five hundredths of one percent (0.45)
for TSOP packaged devices. Smart Modular accepts liability for scrap Product over and above these
limits. At the end of three (3) month time frame, Smart Modular will provide Compaq an accounting
of scrap versus delivered Product and, if due, a credit memo will be issued to Compaq. Reporting
period will commence within one month of execution of this Agreement.

26.9. Smart Modular shall report and dispose of all the Compaq’s consigned material to either
Compaq’s facility or other site as requested by Compaq per the material transfer process.

26.10 All Compaq consigned material shall be acceptable and supplied to Smart Modular’s dock (i)
if said material is to be used in desktop product, forty-eight (48) hours prior to start of
production for mutually agreed production start schedule, and (ii) if said material is to be used
in server or portable products, seventy-two (72) hours prior to start of production for a mutually
agreed production start schedule. Each shipment of Compaq consigned material shall contain a
packing list itemizing material contained within each container. Smart Modular shall have a
reasonable amount of time not less than one (1) Business Day to verify any discrepancies between
said packing lists and the Compaq consigned material actually delivered.

26.10. Any tools, drawings, specifications, or other materials furnished by Compaq for use by Smart
Modular in its performance under this Agreement or any Order issued hereunder shall be identified
and shall remain the property of Compaq and shall be used by Smart Modular only in its performance
hereunder, Such property shall be delivered, upon request, to a destination specified by Compaq in
good condition, except for normal wear and tear.

 

					
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27. GENERAL

27.1. Any obligations and duties which by their nature extend beyond the expiration or earlier
termination of this Agreement shall survive any such expiration or termination and remain in
effect.

27.2. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, such provision shall be enforced to the fullest extent permitted by applicable law
and the validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

27.3. Any waiver of any kind by a party of a breach of this Agreement must be in writing, shall be
effective only to the extent set forth in such writing and shall not operate or be construed as
a waiver of any subsequent breach. Any delay or omission in exercising any right, power or remedy
pursuant to a breach or default by a party shall not impair any right, power or remedy which either
party may have with respect to a future breach or default.

27.4. Smart Modular shall not export, re-export or otherwise disclose, directly or indirectly,
technical data received from Compaq or the direct product of such technical data to any person or
destination when such export, re-export or disclosure is prohibited by the laws of the United
States or regulations of a Department of the United States. Similarly, Compaq shall not export,
re-export or otherwise disclose, directly or indirectly, technical data received from Smart Modular
or the direct product of such technical data to any person or destination when such export,
re-export or disclosure is prohibited by the laws of the United States or regulations of a
Department of the United States.

27.5. With respect to any payment, reimbursement or other amount owed by one party (the “First
Party”) to the other (the “Second Party”) under this Agreement, the First Party may offset, with
notice, any such amount owed against any amount then owing (including amounts to be owed under
future invoices) by the Second Party to the First Party under this Agreement or any other
agreement.

27.6. This Agreement is hereby identified as “Compaq and Smart Modular Confidential,” and any
additional confidentiality requirements between the parties (now or in the future) applicable to
material identified as such shall apply to this Agreement.

27.7. Except to the extent the confidentiality provisions set forth in Section 24 conflict with
confidentiality provisions set forth in any other confidentiality or non-disclosure agreement
between the parties hereto, this Agreement represents the entire agreement with respect to the
subject matter hereof and supersedes all prior discussions and agreements between the parties
relating to the subject matter hereof. Including without limitation that certain Corporate Purchase
Agreement dated March
1st 1997 between Compaq and Smart Modular. This Agreement can be modified only
by a written amendment duly signed by persons authorized to sign agreements on behalf of both
parties, and shall not be supplemented or modified by any course of dealing or trade usage.
Variance from or addition to the terms and conditions of this Agreement in any Order, or other
written notification from either party will be of no effect.

27.8. THE CONSTRUCTION, VALIDITY, AND PERFORMANCE OF THIS AGREEMENT AND ANY ORDER ISSUED UNDER IT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, U.S.A. THE PARTIES HEREBY WAIVE APPLICATION OF
THE U.N. CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

 

					
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27.9. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT WARRANTIES (EXPRESS OR IMPLIED, STATUTORY
OR OTHERWISE) OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED IN
THEIR ENTIRETY.

IN WITNESS, THE AUTHORIZED REPRESENTATIVES OF THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE
DATE FIRST WRITTEN ABOVE.

	 	 	 	 	 	 	 	 	 
	For Compaq	 	 	 	For Smart Modular
	 
	 	 	 	 	 	 	 	 
	/s/ Jackie Gross

	 	10/11/01
	 	 	 	/s/ Ajay Shah
	 	10/11/01
	 	 	 	 	 
	Signature

	 	Date
	 	 	 	Signature
	 	Date
	Jackie Gross

	 	 	 	 	 	Ajay Shah	 	 
	Director, Memory Procurement

	 	 	 	 	 	President & CEO	 	 

 

					
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	Compaq Computer Corporation / Smart Modular Technologies, Inc.
	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

EXHIBIT H

			
	H.1	 	INSURANCE REQUIREMENTS

     Without limiting any of the obligations or liabilities of Seller, Seller shall maintain, as
long as this Agreement is in effect, at Seller’s expense, insurance policies of the kind and
limits listed below and shall provide Buyer (Corporate Risk Management Department), at the address
indicated in Section 23 of this Agreement, subsequent to execution of this Agreement, a
Certificate of Insurance evidencing such coverage for the term of this Agreement. At renewal of
said insurance policies, binders of insurance shall be deposited with the Buyer (Corporate Risk
Management Department) not less than ten (10) days prior to the expiration date of the expiring
policies. These binders will be replaced by valid certificates of insurance as soon as practicable
following the issuance of each renewal policy.

     Seller shall also require any sub-contractors retained by Seller to insure against the
following risks to the extent stated.

     If such levels of coverage proves not to be available for any reason, the Seller shall
obtain written approval from the Buyer (Corporate Risk Management Department) for a different
insurance limit and coverage as the Buyer may deem appropriate.

     All policies shall be in a form acceptable to the Buyer (Corporate Risk Management
Department) and shall name the Buyer as an additional insured in accordance with Section 23.1.

			
	H.2.	 	DESCRIPTION OF COVERAGE, LIMITS AND SPECIFIC ENDORSEMENT REQUIREMENTS:

	 	 	 	 	 
	H.2.A.(1)

	 	Commercial General Liability	 	 
	 

	 	Bodily Injury/Property Damage
	 	$1,000,000/Occurrence
	 

	 	 	 	$1,000,000 /Aggregate
	 
	 	 	 	 
	 	 	Comprehensive Form Including (if applicable):

	 	 	 
	(1)

	 	Premises/Operations
	(2)

	 	Products/Completed Operations
	(3)

	 	Contractual Liability
	(4)

	 	Independent Contractors
	(5)

	 	Broad Form Property Damage
	(6)

	 	Personal/Advertising Injury
	(7)

	 	Owners’ and Contractors’ Protective
	(8)

	 	Endorsed to add Compaq Computer Corporation as an Additional Insured as required by
	contract

			
	H.2.A(2)	 	Inventory Liability Insurance or Insurance for Property in
the Care, Custody and Control of Seller (if applicable)

	(1)	 	Seller shall maintain a minimum of $1,000,000 on inventory, raw materials or tools and
equipment belonging to Buyer.

					
	 	 	 	 	 
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	Corporate Purchase Agreement
	 	Contract No. 2171-080101

	(2)	 	Buyer is to be named as the Loss Payee as respects the inventory, raw materials or tools
and equipment belonging to Buyer.
	 
	(3)	 	Any claims that occur shall be deemed to be valued at full replacement cost (Dealer Sales
Cost).

			
	H.3	 	All insurance coverages shall provide, where applicable, that:

     H.3.A Each Certificate of Insurance shall contain a provision that coverage afforded
under the policies will not be canceled without at least thirty (30) days prior written notice to
Buyer in the event of cancellation or material change. Furthermore, Seller will obtain an
endorsement to its policies providing that the Seller’s insurance shall be primary as respects
Buyer, its officers and employees. Any other valid and collectible insurance or self-insurance
maintained by or in the name of the Buyer shall be excess of the Seller’s insurance and shall not
contribute to it.

     H.3.B Notice of circumstances that may give rise to a claim given by the insured to the
insurer shall be sufficient to invoke protection of the Policy.

     H.3.C The presence on the site of representatives of the Buyer or the participation of the
Buyer’s representatives shall not invalidate the policy.

     H.3.D Violation of the terms of any other policy issued by the insurer shall not by itself
invalidate the policy.

			
	H.4	 	Seller shall cause each insurance policy issued hereunder to provide:

     H.4.A that Buyer and Buyer’s assigns shall be an additional insured as their interests
may appear, and that the coverage shall contain no special limitations on the scope of protection
afforded to the Buyer, its officers or employees.

     H.4.B that each insurance policy required by this section of the Agreement, and in
accordance with Section H.B.1, shall be endorsed to state that coverage shall not be suspended,
voided, canceled by either party except after thirty (30) days prior written notice by certified
mail, with the exception for Workers’ Compensation as shown in
Section H.B.1, return receipt
requested, has been given to Buyer, Corporate Risk Management Department, at the address
indicated in this Agreement.

			
	H.5	 	H.5.A It is Seller’s responsibility to ensure that the insurance requirements listed above
are in effect for the full term of this Agreement. Cancellation or material change of
coverage without Buyer’s approval shall be considered a breach of contract. In addition, all
of Seller’s outside sub-contractors must retain adequate insurance as detailed above if
performing work for Buyer on Seller’s behalf. Seller is responsible to verify and maintain
Certificates of Insurance from outside sub-contractors.

			
		 	H.5.B Insurance is to be placed with insurers with a Best’s Rating of no less than A:VII,
and must be licensed to do business in the State of Texas and which have been approved by
the Texas State Commissioner of Insurance. For use of any insurance carrier which does not
meet this requirement approval must be received in writing from the Buyer (Corporate Risk
Management Department).

					
	 	 	 	 	 
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	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

EXHIBIT J

Reports

J1.1. Smart Modular agrees to use best efforts to provide the reports listed in Table
J1: Reports at the intervals listed. Daily reports shall be received no later than 4:00pm CST.
Weekly reports shall run Monday to Sunday and be received on the following Monday no later than
4:00pm CST. Monthly reports shall be received no later than the 5th of the following
month no later than 4:00pm CST.

Table J1 : Reports

	 	 	 	 	 	 	 
	Report Title	 	Owner	 	Frequency of Reporting	 	Reported To
	On-Time-Delivery by Day

	 	Smart Modular
	 	Daily
	 	Compaq Operations
	Past Due Order Aging

	 	Smart Modular
	 	Daily / As Needed
	 	Compaq Operations
	DRAM Actual Receipts

	 	Smart Modular
	 	Weekly
	 	Compaq Procurement
	Module Outgoing DPPM

	 	Smart Modular
	 	Monthly
	 	Compaq Procurement
	Reconcile Report

	 	Smart Modular
	 	Monthly
	 	Compaq Operations
	Country of Origin Report

	 	Smart Modular
	 	Monthly
	 	Compaq Procurement
	Product Integrity Audit

	 	Smart Modular
	 	Monthly
	 	Compaq Procurement
	Consumption Report by Memory

Component Supplier

	 	Smart Modular
	 	Weekly
	 	Compaq Procurement
	EOL/Legacy SKUU

Inventory

	 	Smart Modular
	 	Monthly
	 	Compaq Procurement

					
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	Corporate Purchase Agreement
	 	Contract No. 2171-080101

EXHIBIT L

Compaq Supplier Compliance Policy

Compaq Computer Corporation is proud of its reputation for integrity and honesty in its
business dealings. Our corporate culture of fairness and quality is one of our most valuable
assets. Maintaining this reputation is an ongoing process, and Compaq considers it be one of its
most important jobs.

It is essential that the highest standards of conduct be observed by Compaq, as well as its
suppliers. In fact, Compaq believes that it suppliers must operate at the same high level of
integrity as Compaq. In this regard, Compaq has adopted a Supplier Compliance Policy. As part of
this policy, Compaq expects each of its suppliers to comply fully with the requirements set forth
below. This policy requires that Compaq suppliers and their employees exercise the highest degree
of honesty and integrity in conducting their business with Compaq, as well as other third parties.

	I.	 	Ethical Standards: Compaq expects its suppliers to avoid conflicts of
interest that create
opportunities for abuses and allegations of commercial bribery.

     A. Conflicts of Interest — Suppliers are expected to avoid any action which may involve, or
appears to involve, a conflict of interest with Compaq. No Compaq supplier shall perform work
or services that are in conflict with work or services performed on behalf of Compaq.

     B. Business Courtesies — Business should be won or lost on the merits of the products and
services being offered by its suppliers. Therefore, supplier funds or personal funds of its
employees should
not be used to provide a business courtesy unless the gift is commemorative, ceremonial or
customary in
nature and has an insubstantial value. Under no circumstances should a kickback or bribe ever
be offered
to Compaq or its employees.

II. Environmental Standards Compaq expects its suppliers to conduct their business in a manner
that provides a safe, healthy and environmentally friendly workplace and meets or exceeds all
applicable
environment and work place legal requirements.

     A. Hazardous Materials, Air Emissions & Waste Water Discharges — Compaq requires that
each of its suppliers comply with all applicable environmental laws and regulations regarding
hazardous
materials, air emissions and waste water discharges, including those regarding the
manufacture,
transportation, storage, disposal, and release to the environment of such materials.

     B. Health & Safety — Compaq expects its suppliers to maintain their facilities in a safe and
healthy manner and in compliance with all applicable laws and regulations.

III. Employment Standards Compaq expects its suppliers to foster human dignity by treating their
employees fairly and with respect. Compaq requires that its suppliers comply with all applicable
national,
state and local employment laws.

     A. Child Labor — Compaq expect its suppliers to refrain from using child labor. Workers can
be no less than 14 years of age and not younger than the compulsory age to be in school.
Compaq supports
the development of legitimate workplace apprenticeship programs for the educational benefit of
young
people.

     B. Prison Labor — Compaq expects its suppliers to refrain from utilizing prison or forced
labor within their workforces.

					
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	 	Contract No. 2171-080101

     C. Disciplinary Practices — Compaq expects its suppliers to refrain from using corporal
punishment or other forms of mental or physical coercion with their employees.

     D. Working Hours — Compaq expects its suppliers to comply with all applicable laws
regarding compensation for overtime work performed by their employees. Additionally,
employees should
be allowed at least one day off in seven.

IV. Competitive Standards Compaq expects its suppliers to compete fairly and vigorously within
the marketplace. Compaq discourages anti-competitive practices by its suppliers that
inhibit the
operation of a free-market economy. Compaq requires that its suppliers comply with all
applicable
competition laws.

     A. Price fixing — Compaq expects its suppliers to refrain from collaborating with competitors
to fix prices for its goods.

     B. Anticompetitive Practices — Compaq will not tolerate anticompetitive practices by its
suppliers, including efforts to allocate markets or customers among their competitors or to
fix bids.

	V.	 	Confidentiality Compaq requires that its suppliers enforce a policy
that ensures the
confidentiality of all proprietary or confidential information provided by
Compaq.

     A. Non-disclosure Agreement — Compaq requires that its suppliers comply with the terms of
the Confidentiality and Non-disclosure Agreements that have been entered into with Compaq

     B. Other Confidentiality Obligations — Compaq requires its suppliers to refrain from making
unauthorized disclosures to Compaq of third party confidential information.

VI. Compliance with Government Laws and Regulations Compaq expects its suppliers to comply
with all applicable laws and regulations governing their business relationships with Compaq.

Compaq is dedicated to maintaining its reputation for fairness and integrity. In many ways the
future success of both Compaq and its suppliers depends on our ability to build on these high
standards.

The foregoing requirements are not intended to be all-inclusive, and Compaq expects its suppliers
to exercise ethical judgment beyond strict compliance with the law, and to be responsive to the
concerns of the communities in which they operate. Failure to comply with the above requirements
may result in reduction of business with Compaq, or in some instances, termination of your
relationship with Compaq. Understanding and complying with the above requirements will help to
ensure that our mutual business activities are conducted in the highest ethical and professional
manner.

					
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	Compaq Computer Corporation / Smart Modular Technologies, Inc.
	 	Rev 1.0
	Corporate Purchase Agreement
	 	Contract No. 2171-080101

ANNEX 1

DEFINITIONS

“Affiliate” means, with respect to any Person, any other Person controlling, controlled by, or
under the common control with that First Person. As used in this definition, the term “control”
means the possession, directly or indirectly or the power to direct, or cause the direction of the
management and policy of the controlled person.

“Business Day” shall mean any day other than a Saturday, a Sunday, or a holiday on which banks in
the State of Texas generally are closed.

“Compaq Indemnified Parties” shall have the meaning given thereto in Section 19.1.

All times indicated within this Agreement shall be Smart Modular local site time unless noted as
otherwise.

“Default” shall mean:

	(i)	 	with respect to Compaq, (a) Compaq’s failure to comply with any material provision of this
Agreement or any Order issued hereunder, and, in the case of a breach which is capable of
remedy, such failure continues unremedied for a period of thirty (30) days of notification
of said breach; provided, delays in delivery shall be deemed incurable and not subject to
the 30-day cure period herein; or (b) Compaq becomes insolvent, becomes subject to any
bankruptcy proceeding, makes an assignment for the benefit of creditors, or a receiver or
similar officer is appointed to take charge of all or a part of such parry’s assets and
such condition is not cured within thirty (30) days; and

	(ii)	 	with respect to Smart Modular, (a) Smart Modular’s failure to comply with any material
provision of this Agreement or any Order issued hereunder, and in the case of a breach which
is capable of remedy, such failure continues unremedied for a period of thirty (30) days of
notification of said breach; provided, the failure of Smart Modular to meet the on-time
shipment performance criteria established in Section 7.1 shall be deemed incurable and
therefore not subject to the 30-day cure period; (b) Smart Modular becomes insolvent, becomes
subject to any bankruptcy proceeding or makes an assignment for the benefit of creditors, or
a receiver or similar officer is appointed to take charge of all or a part of Smart Modular’s
assets and such condition is not cured within thirty (30) days; (c) Smart Modular assigns or
attempts to assign, or subcontracts or attempts to subcontract, any or all of its rights or
obligations under this Agreement or any Orders issued hereunder to a third party without
Compaq’s prior written approval.

“Defective Product” shall have the meaning given thereto in Section 11.1.

“Exworks” shall mean SMART’S only responsibility is to make Product available at its
premises/facility; Compaq shall be responsible for the full cost and arrangements to bring the
Product from SMART’S premises/facility to the desired destination. Moreover, the price excludes any
costs that may be incurred beyond the premises/facility of SMART.

“First Party’ shall have the meaning given thereto in Section 27.5.

“Force Majeure” shall have the meaning given thereto in Section 16.1.

“Indemnified Loss” shall have the meaning given thereto in Section 19.1.

“Information” shall have the meaning given thereto in Section 24.1.

“Non-Defaulting Party” shall have the meaning given thereto in Section 15.1.

					
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	Corporate Purchase Agreement
	 	Contract No. 2171-080101

“On-dock Date” shall have the meaning given thereto in Section 7.1.

“Order” shall have the meaning given thereto in Section 3.2.

“Out of Warranty Product” shall have the meaning given thereto in Section 13.1

“Prices” shall have the meaning given thereto in Section 5.1.

“Pricing Schedule” shall have the meaning given thereto in Section 5.1.

“Product” has the meaning given in Section 2.1.

“Product Schedule” shall have the meaning given in Section 2.1.

“Quality Plan” has the meaning given thereto in Section 9.4.

“Second Party” shall have the meaning given thereto in Section 27.5.

“Specifications” has the meaning given thereto in Section 9.1.

“Specified Location” has the meaning given thereto in Section 7.1.

“Spot Market” means purchases made on the open market instead of under any existing contracts.

“Compaq’s Contract Price” shall have the meaning given thereto in Exhibit B.

					
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Exhibit 10.38

Non-Employee Director Compensation

(Summary of Non-Equity Compensation)

	 	 	 
	Element	 	Amount
	Retainer

	 	$45,000 annually. Directors have the option to
take all or part of this retainer as stock,
which will be valued at the closing price on
the New York Stock Exchange on the last trading
day of the fiscal quarter preceding the quarter
with respect to which payment is due.
	 
	 	 
	Board Meeting Fees

	 	$2,000 per meeting
	 
	 	 
	Committee Meeting Fees

	 	$1,000 per meeting
	 
	 	 
	Committee Chair Retainers

	 	Audit: $12,000 annually

HR & Compensation: $5,000 annually

Nominating and Governance: $5,000 annually

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