Exhibit 10.2


 


Subordination
Agreement


 


	
  Creditor(s):

  	
  Borrower(s):

  
	
   

  	
   

  
	
  NETLIST, INC., a Delaware
  corporation

  	
  NETLIST, INC., a Delaware
  corporation

  
	
   

  	
   

  
	
  and

  	
  Guarantor(s):

  
	
   

  	
   

  
	
  Netlist Technology Texas LP, a
  Texas limited partnership

  	
  Netlist Technology Texas LP, a
  Texas limited partnership

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  c/o NETLIST, INC.

  	
   

  
	
  51 Discovery, Suite 150

  	
   

  
	
  Irvine, CA 92618

  	
   

  
	
  Attn: Gail Itow, CFO

  	
   

  
	
  Fax: 949.679.0113

  	
   

  
	
  Email: gitow@netlist.com

  	
   

  



 


Dated as of October 31, 2009


 


This
Subordination Agreement is entered into between
SILICON VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara,
California 95054, and the creditor(s) named above (individually and
collectively, and jointly and severally, the “Creditor”).


 


1.     Subordination.  To induce Bank in its discretion to extend
credit to the above-named borrower (“Borrower”) pursuant to that Loan and
Security Agreement, dated as of an Effective Date on or about the date hereof
(as amended, restated supplemented, or otherwise modified from time to time,
the “Loan Agreement”), which credit is guarantied by the above-named guarantor
(“Guarantor”; the Borrower and the Guarantor are referred to herein,
individually and collectively, as the “Obligor”), the Creditor hereby agrees to
subordinate and does hereby subordinate payment by the Obligor of any and all
indebtedness of the Obligor, now or hereafter incurred, created or evidenced,
to the Creditor, however such indebtedness may be hereafter extended, renewed
or evidenced (together with all collateral, security and guarantees, if any,
for the payment of any such indebtedness) (collectively, the “Junior Debt”), to
the payment in full in cash to Bank of any and all present and future
indebtedness, liabilities, guarantees and other obligations, of every kind and
description (including without limitation any interest, charges and other sums
accruing after the filing of a petition by or against Obligor under the
Bankruptcy Code (or equivalent statute)), of the Obligor to Bank under or in
connection with the Loan Agreement or any other Loan Document (as such term is
defined in the Loan Agreement) (collectively, the “Senior Debt”), and the
Creditor agrees not to ask for, demand, sue for, take or receive any payments
with respect to all or any part of the Junior Debt or any security therefor,
unless and until all of the Senior Debt have been paid and performed in full,
except that if no default or event of default and no event which, with notice
or passage of time or both, would constitute a default or event of default, has
occurred under any documents or instruments evidencing or relating to the
Senior Debt, both before and after giving effect to the following payments,
then intercompany trading obligations and other regularly scheduled payments
with respect to the Junior Debt may be made in the ordinary course of business;
provided, further, that non-cash accruals in respect of the Junior Debt may be
reflected in the respective books and records of 


 


1

















 


	
  Silicon Valley Bank

  	
   

  	
  Subordination Agreement

  



 


Obligor
and Creditor irrespective of the existence of any such default or event of
default.


 


The
word “indebtedness” is used herein in its most comprehensive sense and includes
without limitation any and all present and future loans, advances, credit,
debts, obligations, liabilities, representations, warranties, and guarantees,
of any kind and nature, absolute or contingent, liquidated or unliquidated, and
individual or joint.  Creditor represents
and warrants to Bank that the Obligor is now indebted to the Creditor in the
amounts set forth on Schedule 1 attached hereto and under the notes and/or
documents (if any) described on Schedule 1 attached hereto and that the same is
all outstanding indebtedness owing from the Obligor to the Creditor (but the
subordination set forth herein shall not be affected by any lack of any such
attached Schedule 1).


 


2.     Distribution of Assets.  The Creditor further agrees that upon any
distribution of the assets or readjustment of the indebtedness of the Obligor
whether by reason of liquidation, composition, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding involving the readjustment of all or any of the Junior Debt, or the
application of the assets of the Obligor to the payment or liquidation thereof,
Bank shall be entitled to receive payment in full in cash of all of the Senior
Debt prior to the payment of all or any part of the Junior Debt, and in order
to enable Bank to enforce its rights hereunder in any such action or
proceeding, Bank is hereby irrevocably authorized and empowered in its
discretion (but without any obligation on Bank’s part) to make and present for
and on behalf of the Creditor such proofs of claim against the Obligor on account
of the Junior Debt as Bank may deem expedient or proper and to vote such proofs
of claim in any such proceeding and to receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form the
same may be paid or issued and to apply same on account of the Senior
Debt.  The Creditor further agrees to
execute and deliver to Bank such assignments or other instruments as may be
required by Bank in order to enable Bank to enforce any and all such claims and
to collect any and all dividends or other payments or disbursements which may
be made at any time on account of all and any of the Junior Debt.


 


3.     Transfer of Subordinated Debt.  The Creditor shall not sell, pledge, assign or
otherwise transfer, at any time while this Agreement remains in effect, any
rights, claim or interest of any kind in or to any of the Junior Debt, either
principal or interest, without first notifying Bank and making such
transfer expressly subject to this Subordination Agreement in form and substance
satisfactory to Bank.  The Creditor
represents and warrants to Bank that the Creditor has not sold, pledged,
assigned or otherwise transferred any of the Junior Debt, or any interest
therein or collateral or security therefor to any other person.  The Creditor will concurrently endorse all
notes and other written evidence of the Junior Debt with a statement that they
are subordinated to the Senior Debt pursuant to the terms of this Agreement, in
such form as Bank shall require, and the Creditor will exhibit the originals of
such notes and other written evidence of the Junior Debt to Bank so that Bank
can confirm that such endorsement has been made (but no failure to do any of
the foregoing shall affect the subordination of the Junior Debt provided for herein,
which shall be fully effective upon execution of this Agreement).


 


4.     Bank’s Rights.  This is a continuing agreement of
subordination and Bank may continue, without notice to the Creditor, to extend
credit or other accommodation or benefit and loan monies to or for the account
of the Obligor in reliance hereon.  Bank
may at any time, in its discretion, renew or extend the time of payment of all
or any Senior Debt, modify the Senior Debt and any terms or provisions thereof
or of any agreement relating thereto, waive or release any collateral which may
be held therefor at any time, and make and enter into any such agreement or
agreements as Bank may deem proper or desirable relating to the Senior Debt,
without notice to or further consent from the Creditor and without any manner
impairing or affecting this Agreement or any of Bank’s rights hereunder.  The Creditor waives notice of acceptance
hereof, notice of the creation of any Senior Debt, the giving or extension of
any credit by Bank to the Obligor, or the taking, waiving or releasing of any
security therefor, or the making of any modifications, and the Creditor waives
presentment, demand, protest, notice of protest, notice of default, and all
other notices to which the Creditor might otherwise be entitled.  This Section 4 applies to each Creditor
in its capacity as a creditor of the Obligor, and not in such Creditor’s direct
capacity as an Obligor.


 


2

















 


	
  Silicon Valley Bank

  	
   

  	
  Subordination Agreement

  



 


5.     Revivor.  If,
after payment of the Senior Debt, the Obligor thereafter becomes liable to Bank
on account of the Senior Debt, or any payment made on the Senior Debt shall for
any reason be returned by Bank, this Agreement shall thereupon in all respects
become effective with respect to such subsequent or reinstated Senior Debt,
without the necessity of any further act or agreement between Bank and the
Creditor.


 


6.     General.   This Agreement sets forth in full all of the
representations and agreements of the parties with respect to the subject
matter hereof and supersedes all prior discussions, representations, agreements
and understandings between the parties. 
This Agreement may not be modified or amended, nor may any rights
hereunder be waived, except in a writing signed by the parties hereto.  In the event of any litigation between the
parties based upon, arising out of, or in any way relating to this Agreement,
the prevailing party shall be entitled to recover all of his costs and expenses
(including without limitation attorneys’ fees) from the non-prevailing
party.  The parties agree to cooperate
fully with each other and take all further actions and execute all further
documents from time to time as may be reasonably necessary to carry out the
purposes of this Agreement.  At Bank’s
option, all actions and proceedings based upon, arising out of or relating in
any way directly or indirectly to, this Agreement shall be litigated
exclusively in courts located within Santa Clara County, California, and
Creditor consents to the jurisdiction of any such court, and irrevocably
agrees to be bound by any judgment rendered thereby, and consents to the
service of process in any such action or proceeding by personal delivery,
first-class mail, or any other method permitted by law, and waives any and all
rights to transfer or change the venue of any such action or proceeding to any
court located outside Santa Clara County, California.  This Agreement is being entered into, and
shall be governed by the laws of the State of California. Each Creditor
represents and warrants that all actions on the part of such Creditor, its
officers, directors, partners, managers, members and shareholders, as
applicable, necessary for the authorization of this Agreement and the
performance of all obligations of such Creditor hereunder have been taken, and
that the execution, delivery and performance of and compliance with this
Agreement will not result in any material violation or default of any term of
any of its charter, formation or other organizational documents (such as
Articles or Certificate of Incorporation, bylaws, partnership agreement,
operating agreement, etc., as applicable). 
This Agreement shall be binding upon the Creditor and its successors and
assigns and shall inure to the benefit of Bank and Bank’s successors and
assigns.


 


7.     WAIVER OF RIGHT TO JURY TRIAL; JUDICIAL REFERENCE. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, CREDITOR AND BANK EACH WAIVE THEIR RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING
CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL
INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.


 


WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY, IF THE ABOVE WAIVER OF THE RIGHT TO A TRIAL BY JURY
IS NOT ENFORCEABLE, THE PARTIES HERETO AGREE THAT ANY AND ALL DISPUTES OR
CONTROVERSIES OF ANY NATURE BETWEEN THEM ARISING AT ANY TIME SHALL BE DECIDED
BY A REFERENCE TO A PRIVATE JUDGE, MUTUALLY SELECTED BY THE PARTIES (OR, IF
THEY CANNOT AGREE, BY THE PRESIDING JUDGE OF THE SANTA CLARA COUNTY, CALIFORNIA
SUPERIOR COURT) APPOINTED IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE
SECTION 638 (OR PURSUANT TO COMPARABLE PROVISIONS OF FEDERAL LAW IF THE
DISPUTE FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS), SITTING
WITHOUT A JURY, IN SANTA CLARA COUNTY, CALIFORNIA; AND THE PARTIES HEREBY
SUBMIT TO THE JURISDICTION OF SUCH COURT. 
THE REFERENCE PROCEEDINGS SHALL BE CONDUCTED PURSUANT TO AND IN
ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF


 


3

















 


	
  Silicon Valley Bank

  	
   

  	
  Subordination Agreement

  



 


CIVIL
PROCEDURE §§ 638 THROUGH 645.1, INCLUSIVE. 
THE PRIVATE JUDGE SHALL HAVE THE POWER, AMONG OTHERS, TO GRANT
PROVISIONAL RELIEF, INCLUDING WITHOUT LIMITATION, ENTERING TEMPORARY
RESTRAINING ORDERS, ISSUING PRELIMINARY AND PERMANENT INJUNCTIONS AND
APPOINTING RECEIVERS.  ALL SUCH
PROCEEDINGS SHALL BE CLOSED TO THE PUBLIC AND CONFIDENTIAL AND ALL RECORDS
RELATING THERETO SHALL BE PERMANENTLY SEALED. 
IF DURING THE COURSE OF ANY DISPUTE, A PARTY DESIRES TO SEEK PROVISIONAL
RELIEF, BUT A JUDGE HAS NOT BEEN APPOINTED AT THAT POINT PURSUANT TO THE
JUDICIAL REFERENCE PROCEDURES, THEN SUCH PARTY MAY APPLY TO THE SANTA
CLARA COUNTY, CALIFORNIA SUPERIOR COURT FOR SUCH RELIEF.  THE PROCEEDING BEFORE THE PRIVATE JUDGE SHALL
BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES
OF EVIDENCE APPLICABLE TO JUDICIAL PROCEEDINGS. 
THE PARTIES SHALL BE ENTITLED TO DISCOVERY WHICH SHALL BE CONDUCTED IN
THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF DISCOVERY
APPLICABLE TO JUDICIAL PROCEEDINGS.  THE
PRIVATE JUDGE SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY RULES
AND ORDER APPLICABLE TO JUDICIAL PROCEEDINGS IN THE SAME MANNER AS A TRIAL
COURT JUDGE.  THE PARTIES AGREE THAT THE
SELECTED OR APPOINTED PRIVATE JUDGE SHALL HAVE THE POWER TO DECIDE ALL ISSUES
IN THE ACTION OR PROCEEDING, WHETHER OF FACT OR OF LAW, AND SHALL REPORT A
STATEMENT OF DECISION THEREON PURSUANT TO THE CALIFORNIA CODE OF CIVIL
PROCEDURE § 644(A).  NOTHING IN THIS
PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP
REMEDIES, FORECLOSE AGAINST COLLATERAL, OR OBTAIN PROVISIONAL REMEDIES.  THE PRIVATE JUDGE SHALL ALSO DETERMINE ALL
ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION, AND ENFORCEABILITY OF
THIS PARAGRAPH.


 


[remainder
of column and page intentionally left blank; signature page immediately
follows]


 


4

















 


IN
WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered as of the date first above
written.


 


Creditor:


 


	
  NETLIST, INC.

  	
   

  	
  Netlist Technology Texas LP, a
  Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By: NETLIST, INC., its general
  partner

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  



 


Bank:


 


	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  	
   

  



 


OBLIGOR’S AGREEMENT


 


The undersigned Obligor
hereby acknowledges receipt of a copy of the foregoing Subordination Agreement
and agrees not to pay any Junior Debt, except as provided therein.  In the event Obligor breaches this Agreement
or any of the provisions of the foregoing Subordination Agreement, Obligor
agrees that, in addition to all other rights and remedies Bank has, all of the
Senior Debt shall, at Bank’s option and without notice or demand, become immediately
due and payable, unless Bank expressly agrees in writing to waive such
breach.  No waiver by Bank of any breach
shall be effective unless in writing signed by one of Bank’s authorized
officers, and no such waiver shall be deemed to extend to or waive any other or
subsequent breach. Obligor further agrees that, at any time and from time to
time, the foregoing Subordination Agreement may be altered, modified or amended
by Bank and the Creditor without notice to Obligor and without further consent
by Obligor.


 


Obligor:


 


	
  NETLIST,
  INC.

  	
   

  	
  Netlist
  Technology Texas LP, a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:
  NETLIST, INC., its general partner

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  



 


Signature Page


 

















 


SCHEDULE 1


 


[see attached]