EXHIBIT 10.1


 


TENTH AMENDMENT TO

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

AND WAIVER OF DEFAULTS


 


This Amendment, dated as of October 30,
2008, is made by and between NETLIST, INC., a Delaware corporation, and NETLIST
TECHNOLOGY TEXAS, L.P., a Texas limited partnership (each a “Borrower” and
collectively, the “Borrowers”), on the one hand, and WELLS FARGO BANK, NATIONAL
ASSOCIATION (the “Lender”), acting through its WELLS FARGO BUSINESS CREDIT
operating division, on the other hand.


 


RECITALS


 


The Borrowers and Wells
Fargo Business Credit, Inc., a Minnesota corporation (“WFBCI”), are
parties to an Amended and Restated Credit and Security Agreement, dated as of December 27,
2003, as amended by a First Amendment to Amended and Restated Credit and Security
Agreement, dated as of June 30, 2004, a Second Amendment to Credit and
Security Agreement and Waiver of Defaults, dated as of December 20, 2005,
a Third Amendment to Credit and Security Agreement, dated as of February 14,
2006, a Fourth Amendment to Credit and Security Agreement and Waiver of
Defaults, dated as of April 18, 2006, a Fifth Amendment to Credit and
Security Agreement, dated as of July 28, 2006, a Sixth Amendment to Credit
and Security Agreement and Waiver of Defaults, dated as of December 29,
2006, a Seventh Amendment to Credit and Security Agreement, dated as of March 21,
2007, an Eighth Amendment to Amended and Restated Credit and Security
Agreement, dated as of June 30, 2007, and a Ninth Amendment to Amended and
Restated Credit and Security Agreement, dated as of May 2, 2008 (as so
amended, the “Credit Agreement”). Capitalized
terms used in these recitals have the meanings given to them in the Credit
Agreement unless otherwise specified.


 


WFBCI has merged with and
into Lender and Lender is the surviving corporation.


 


The Borrowers are in default
of the following provision of the Credit Agreement (the “Existing Default”)
(numbers appearing between “< >“ are negative):


 


	
   

  	
   

  	
  Required Performance

  	
   

  	
  Actual Performance

  	
   

  
	
  Section/Covenant

  	
   

  	
  3 Months

  Ended

  	
   

  	
  Maximum Net

  Loss

  	
   

  	
  3 Months

  Ended

  	
   

  	
  Net Loss

  	
   

  
	
  Section 6.2(b) – Minimum Net Income (Maximum Net Loss)

  	
   

  	
  9/30/08

  	
   

  	
  <$3,200,000>

  	
   

  	
  9/30/08

  	
   

  	
  <$7,421,435>

  	
   

  



 


The Borrowers have requested
that the Lender waive the Existing Default and make certain amendments to the
Credit Agreement, which the Lender is willing to do pursuant to the terms and
conditions set forth herein


 


NOW, THEREFORE, in
consideration of the premises and of the mutual covenants and agreements herein
contained, it is agreed as follows:


 


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1.             Defined Terms.


 


(a)           Capitalized
terms used in this Amendment which are defined in the Credit Agreement shall
have the same meanings as defined therein, unless otherwise defined herein.


 


(b)           The definition of
“Letter of Credit Sublimit” set forth in Section 1.1 of the Credit
Agreement is hereby deleted.


 


(c)           The following
definitions set forth in Section 1.1 of the Credit Agreement are hereby
amended in their entirety as follows:


 


“Default Rate” means an annual
interest rate equal to one and one-half percent (1.5%) over the Floating Rate,
which interest rate shall change when and as the Prime Rate changes.


 


“Floating Rate” means an
annual interest rate equal to the greater of (i) the sum of the Prime Rate
plus the applicable Margin, which interest rate shall, in each case, change
when and as the Prime Rate changes, or (ii) five percent (5.0%).


 


“Security Documents” means
this Agreement, the Lockbox and Collection Account Agreement, the Security
Agreements, the Securities Account Control Agreement, and any other document
delivered to the Lender from time to time to secure the Obligations.


 


(d)           The following
new definitions are hereby added to Section 1.1 of the Credit Agreement in
appropriate alphabetical order:


 


“BA” means a banker’s
acceptance issued by the Lender pursuant to Section 2.5A.


 


“BA Amount” means the
aggregate face amount of any issued and outstanding BAs.


 


“L/C and BA Sublimit” means Nine
Million Dollars ($9,000,000).


 


“Tenth Amendment” means that
certain Tenth Amendment to Amended and Restated Credit and Security Agreement,
dated as of October 30, 2008, between the Borrowers and the Lender,
amending this Agreement.


 


“Securities Account Control
Agreement” means that certain Securities Account Control Agreement, dated as of
June 25, 2008, by and among Netlist, Inc., Wells Fargo Bank, National
Association, acting through its Investment Group, and Wells Fargo.


 


“Securities Collateral” has
the meaning of “Collateral” as defined in the Securities Account Control
Agreement.


 


2.             Amendment
to Section 2.4(b).  Section 2.4(b) of the Credit
Agreement is hereby amended in its entirety as follows:


 


(b)           The initial notice sent by
the Lender shall be sent as promptly as practicable after such Lender learns
that its Return has been reduced, shall include


 


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a
demand for payment of the amount necessary to restore such Lender’s Return for
the quarter in which the notice is sent, and shall state in reasonable detail
the cause for the reduction in its Return and its calculation of the amount of
such reduction. Thereafter, such Lender may send a new notice during each
calendar quarter setting forth the calculation of the reduced Return for that
quarter and including a demand for payment of the amount necessary to restore
its Return for that quarter. The Lender’s calculation in any such notice shall
be conclusive and binding absent demonstrable error.


 


3.             Amendment
to Section 2.5(a)(i).  Clause (i) of Section 2.5(a) of
the Credit Agreement is hereby amended in its entirety as follows:


 


(i)            The L/C and BA Sublimit less
the sum of (x) the L/C Amount, and (y) the BA Amount, or


 


4.             New
Section 2.5A.  A
new Section 2.5A is hereby added to the Credit Agreement immediately
following Section 2.5 thereof as follows:


 


Section 2.5A         Banker’s Acceptances.  The Lender agrees, subject to the terms and
conditions of this Agreement, to issue, at any time after the effectiveness of
the Tenth Amendment and prior to the Termination Date, one or more BAs for the
Borrowers’ account.  The Lender shall
have no obligation to issue any BA during any Default Period or if the face
amount of the BA to be issued would exceed the lesser of:


 


(i)            The L/C and BA Sublimit less
the sum of (x) the L/C Amount, and (y) the BA Amount, or


 


(ii)           Availability.


 


Each
BA may be used for financing acceptance transactions for a maximum tenor of
ninety (90) days but not to extend beyond the Termination Date.  In calculating the principal amount
outstanding hereunder, the calculation shall include the face amount of any BA
outstanding. The Borrowers agree:


 


(a)           Each BA shall be in an
amount not less than Twenty-Five Thousand Dollars ($25,000).


 


(b)           Any sum owed to the Lender
under a BA may, at the option of the Lender, be added to the principal amount
outstanding under the Revolving Note and Section 2.1.  The amount will bear interest and be due as
described elsewhere in this Agreement.


 


(c)           Upon the occurrence of an
Event of Default, to immediately prepay and make the Lender whole for any and
all outstanding BAs.


 


(d)           The issuance of any BA is
subject to the Lender’s express approval and must be in form and content
satisfactory to the Lender.


 


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(e)           To sign the Lender’s standard
form agreement for BAs, and to pay any issuance and/or other fees that the
Lender notifies the Borrowers will be charged for issuing and processing BAs
for the Borrowers.


 


(f)            To allow the Lender to
automatically charge its checking account for applicable fees, discounts, and
other charges.


 


5.             Amendment to Section 2.12(b).  Section 2.12(b) of the Credit
Agreement is hereby amended in its entirety as follows:


 


(b)           Margins.  The Margins for all Floating Rate
Advances and all LIBOR Advances shall be the Margins set forth in the table
below opposite the applicable balance of the Borrowers’ combined account
balance maintained at WF Institutional Brokerage Services:


 


	
  Borrowers’ Combined 

  Account Balance 

  Maintained at WF 

  Institutional Brokerage

  Services

  	
   

  	
  Margin for Floating 

  Rate Advances

  	
   

  	
  Margin for LIBOR 

  Advances

  	
   

  
	
  $ 12,000,000 or greater

  	
   

  	
  2.50
  percentage points

  (250 basis points)

  	
   

  	
  5.00
  percentage points

  (500 basis points)

  	
   

  
	
  Less than $12,000,000

  	
   

  	
  3.00
  percentage points

  (300 basis points)

  	
   

  	
  6.00
  percentage points 

  (600 basis points)

  	
   

  



 


Account balances will be
tested as of the end of each month based on the statements delivered pursuant
to Section 6.1(r).  Any reductions
or increases in the Margins will be effective as of the first day of the month
following the applicable test date.  In
the event that the Borrowers fail to timely deliver the statements required
pursuant to Section 6.1(r), in addition to and not in substitution for any
of the Lender’s other rights and remedies available upon an Event of Default,
all Margins shall be presumed to be based on an account balance of less than
$12,000,000 until such statements are delivered to the Lender. Notwithstanding
the foregoing, no reduction in any Margin will be made if a Default Period
exists at the time that such reduction would otherwise be made.


 


6.             Amendment
to Section 2.13(f).  Section 2.13(f) of the Credit
Agreement is hereby amended in its entirety as follows:


 


(f)            BA Fees.  The Borrowers shall pay to the Lender a fee
with respect to each BA, in an amount equal to one percent (1.0%) per annum of
the face amount of such BA (but in not event less than $125), pro rated for the
tenor of the BA based on a year of 360 days, payable upon issuance; provided,
however, if the Lender, in the Lender’s sole discretion and without
waiving any of its other rights and remedies, agrees to issue any BA during a
Default Period, such fee shall increase to four percent (4.0%) per annum of the
face amount of such BA (but in no event less


 


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than
$500), pro rated for the tenor of the BA based on a year of 360 days, payable
upon issuance. The foregoing fee shall be in addition to any and all fees,
commissions and charges of Wells Fargo Bank with respect to or in connection
with such BA.


 


7.             Amendment
to Section 3.1.  Section 3.1
of the Credit Agreement is hereby amended by adding the following at the end
thereof:


 


Notwithstanding
the foregoing, the Securities Collateral shall secure only the Obligation of
Reimbursement and any Indebtedness owed to the Lender with respect to all BAs.


 


8.             Financial Covenants.  Section 6.2 of the Credit Agreement is
hereby amended in its entirety as follows:


 


Section 6.2             Financial Covenants.


 


(a)           Intentionally Deleted.


 


(b)           Minimum Net Income
(Maximum Net Loss).  The
Borrowers will achieve, for each rolling three month period described below,
Net Income (or Net Loss) of not less than (or more than, as applicable) the
amount set forth for each such period (numbers appearing between “< >“
are negative):


 


	
  Three Months Ending:

  	
   

  	
  Minimum Net Income / Maximum Net Loss

  	
   

  
	
  October 31, 2008

  	
   

  	
  <$10,000,000>

  	
   

  
	
  November 30, 2008

  	
   

  	
  <$11,200,000>

  	
   

  
	
  December 31, 2008

  	
   

  	
  <$5,000,000>

  	
   

  



 


(c)           Capital Expenditures.  The Borrowers will not incur or contract to
incur Capital Expenditures of more than $1,300,000 in the aggregate during the
fiscal year ending December 31, 2008.


 


(d)           Intentionally Deleted.


 


(e)           Intentionally
Deleted.


 


(f)            Minimum Liquidity.  The Borrowers will maintain at all times,
determined as of the end of each month, the sum of their cash and cash
equivalents (including any cash maintained at WF Institutional Brokerage
Services that is pledged to the Lender as Collateral for the Indebtedness) at
an amount not less than $20,000,000.


 


9.             Amendment
to Section 6.10(a).  Section 6.10(a) of the Credit
Agreement is hereby amended in its entirety as follows:


 


(a)           The Borrowers will keep
accurate books of record and account for themselves pertaining to the
Collateral and pertaining to each Borrower’s


 


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business
and financial condition and such other matters as the Lender may from time to
time request in which true and complete entries will be made in accordance with
GAAP and, upon the Lender’s request, will permit any officer, employee,
attorney, accountant or other agent of the Lender to audit, review, make
extracts from or copy any and all company and financial books and records of
the Borrowers at all times during ordinary business hours, to send and discuss
with account debtors and other obligors requests for verification of amounts
owed to either Borrower, and to discuss each Borrower’s affairs with any of its
Directors, Officers, employees or agents. 
Notwithstanding the foregoing, the Lender shall not conduct such audits
more than four times per calendar year unless an Event of Default has occurred
and is continuing.


 


10.           Waiver
of Existing Default.  Upon
the terms and subject to the conditions set forth in this Amendment, the Lender
hereby waives the Existing Default.  This
waiver of the Existing Default shall be effective only in this specific
instance and for the specific purpose for which it is given, and shall not
entitle the Borrowers to any other or further waiver in any similar or other
circumstances.


 


11.           No
Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.


 


12.           Amendment
Fee. The Borrowers shall pay Lender as of the date hereof a fully earned,
non-refundable fee in the amount of $50,000 in consideration of Lender’s
execution and delivery of this Amendment (the “Amendment Fee”).


 


13.           Conditions
Precedent. This Amendment, and the waiver of the Existing Default
set forth in Paragraph 10, shall be effective when the Lender shall have
received an executed original hereof, together with each of the following, each
in substance and form acceptable to the Lender in its sole discretion:


 


(a)           Payment in full
of the Amendment Fee.


 


(b)           Such other
matters as the Lender may require.


 


14.           Representations
and Warranties. Each Borrower hereby represents and warrants to
the Lender as follows:


 


(a)           Such Borrower
has all requisite power and authority to execute this Amendment, to perform all
of its obligations hereunder, and this Amendment has been duly executed and
delivered by such Borrower and constitute the legal, valid and binding
obligation of such Borrower, enforceable in accordance with their terms.


 


(b)           The execution,
delivery and performance by each Borrower of this Amendment has been duly
authorized by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate
any provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to such Borrower,
or the articles of incorporation or by-laws of such Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such Borrower is
a party or by which it or its properties may be bound or affected.


 


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(c)           All of the
representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date.


 


15.           References. All
references in the Credit Agreement to “this Agreement” shall be deemed to refer
to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.


 


16.           No
Other Waiver.  Except as
otherwise provided in Paragraph 10 hereof, the execution of this Amendment and
acceptance of any documents related hereto shall not be deemed to be a waiver
of any Default or Event of Default under the Credit Agreement or breach,
default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing
on the date of this Amendment.


 


17.           Release.


 


(a)           Each Borrower  hereby absolutely and unconditionally releases and forever
discharges the Lender, and any and all participants, parent corporations,
subsidiary corporations, affiliated corporations, insurers, indemnitors,
successors and assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing, from any and
all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or
federal law or otherwise, which such Borrower has had, now has or has made
claim to have against any such person for or by reason of any act, omission,
matter, cause or thing whatsoever arising from the beginning of time to and
including the date of this Amendment, whether such claims, demands and causes
of action are matured or unmatured or known or unknown.  Each Borrower certifies that it has read the
following provisions of California Civil Code Section 1542:


 


A
general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release,
which if known by him or her must have materially affected his or her settlement
with the debtor.


 


(b)           Each Borrower
understands and acknowledges that the significance and consequence of this
waiver of California Civil Code Section 1542 is that even if it should
eventually suffer additional damages arising out of the facts referred to
above, they will not be able to make any claim for those damages. Furthermore, each
Borrower acknowledges that it intends these consequences even as to claims for
damages that may exist as of the date of this release but which it does not
know exist, and which, if known, would materially affect its decision to
execute this Agreement, regardless of whether its lack of knowledge is the
result of ignorance, oversight, error, negligence, or any other cause.


 


18.           Costs
and Expenses. The Borrowers hereby reaffirm their agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Loan
Documents, including without limitation all reasonable fees and disbursements
of legal counsel. Without limiting the generality of the foregoing, the
Borrowers specifically agree to pay all fees and disbursements of counsel to
the Lender for the services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments incidental
hereto. The Borrowers hereby agree that the Lender may, at any time or from
time to time in its sole discretion and without further authorization by the
Borrowers, make a


 


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loan
to the Borrowers under the Credit Agreement, or apply the proceeds of any loan,
for the purpose of paying any such fees, disbursements, costs and expenses, and
the Amendment Fee.


 


19.           Miscellaneous. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.


 


[remainder of this page intentionally left blank]


 


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


 


	
  WELLS
  FARGO BANK, NATIONAL 

  ASSOCIATION, acting through its Wells Fargo 

  Business Credit operating division  



  	
  NETLIST,
  INC.

  
	
   

  	
  By:
  

  	
  /s/
  Chun K. Hong  

  
	
   

  	
  Name:
  Chun K. Hong

  
	
  By:
  

  	
  /s/
  John Curry  

  	
   

  	
  Its:
  President

  
	
  Name:
  John Curry  

  	
   

  	
   

  
	
  Its  Vice
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NETLIST TECHNOLOGY TEXAS L.P. 

  By: Netlist Holdings GP, Inc., its general partner

  
	
   

  	
   

   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  Chun K. Hong

  
	
   

  	
   

  	
  Name:
  Chun K. Hong

  
	
   

  	
   

  	
  Its:
  President

  
						



 


9