Exhibit 10.10


 


CERTAIN INFORMATION (INDICATED BY “[***]”) IN THIS EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


 


MKT-DSA-VTB-001


 


Diablo Technologies, Inc.

Development And Supply Agreement


 


This
Development and Supply Agreement (“Agreement”) is made this 10th day of September 2008
(“Effective Date”) between Diablo Technologies, Inc,, a Canadian
corporation having a principal place of business at 290 St. Joseph, Suite 200,
Gatineau, Quebec J8Y 3Y3 (“Diablo”) and Netlist, Inc., a Delaware
corporation having a principal place of business at 51 Discovery, Irvine,
CA 92618 (“Netlist”).


 


RECITALS


 


Whereas,
Netlist desires to have certain products designed and manufactured by Diablo
for sale to Netlist; and Diablo has the capability of designing and
manufacturing such products and desires to do so for sale to Netlist.


 


Now,
therefore, in consideration of the promises and the mutual agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
agree as follows:


 


AGREEMENT


 


1.                                      Definitions.  The
following terms shall have the meanings set forth below.


 


“Confidential
Information” of a party shall mean any information disclosed by that party
to the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked “Confidential,” “Proprietary” or
in some other manner to indicate its confidential nature.  Confidential Information may also include
oral information disclosed by one party to the other pursuant to this
Agreement, provided that such information is designated as confidential at the
time of disclosure and is reduced to writing by the disclosing party within a
reasonable time (not to exceed thirty (30) days) after its oral disclosure, and
such writing is marked in a manner to indicate its confidential nature and
delivered to the receiving party.


 


“Cost”
shall mean Diablo’s full standard cost basis including without limitation any
applicable license royalties.


 


“Intellectual
Property Rights” shall mean all intellectual property rights including, but
not limited to, patents, copyrights, authors’ rights, trademarks, tradenames,
know-how and trade secrets, irrespective of whether such rights arise under
U.S. or international intellectual property, unfair competition or trade secret
laws.


 


“Inventory”
shall mean raw materials and supplies necessary for the manufacture of Products
pursuant to this Agreement.


 


“Market
Share” shall mean the number of Netlist Chipsets shipped, invoiced or sold
by Netlist to any third party.


 




	
  Confidential
  Information

  	
   

  	
   

  	
   

  	
  9/10/2008

  






 


1

















 


“Netlist
Technology” shall mean Netlist’s patented and trade secret-protected Rank
Multiplication/Load Rank Multiplication technology (“DxD/LRD”), including
without limitation its “know-how” and database design technology, developed
prior to the Effective Date and provided to Diablo.


 


“Netlist
Chipset” shall mean a DDR3 proprietary chip set solution consisting of a
DDR3 standard register (with DxD/LRD physically enabled) and set of isolation
devices utilizing the Netlist Technology for use in Netlist RDIMM products
implemented in OEM server systems developed under this Agreement in accordance
with the Specification.


 


“Diablo
Standard Register” or “Register” shall mean a DDR3 industry standard
register derivative of Netlist Chipset with either or both of DxD/LRD
functionality physically disabled.


 


“Products”
shall include both Netlist Chipset and Diablo Standard Register.


 


“Specifications”
shall mean the logic diagram, schematics, test requirements and definition,
plots, and electric related requirements and “know-how” and revised or modified
to produce the initial prototypes, and, to the extent necessary, modifications
thereto, to produce the Product set forth in Exhibit A.


 


2.                                      Development and Design.


 


(a)           Development and Design. 
Netlist agrees to pay a NRE (Non-Recurring Engineering) Payment (set
forth in Exhibit D) to Diablo for the design and development of the
Netlist Chipset and the delivery of the initial prototypes, all meeting the
Specifications, as defined in the Statement of Work set forth in Exhibit A
(“SOW”) and on the dates specified in the NRE Payment Schedule.  Diablo shall use its commercially
reasonable efforts to design and develop the Product as defined in the SOW
and to meet the Development Schedule (set forth in Exhibit B).  Netlist agrees to promptly respond to
inquiries, make personnel available to discuss any changes or concerns of
Diablo and to generally cooperate in assisting Diablo in the design and
development of the Product.


 


(b)           Changes.  Netlist
may, at any time during the term of this Agreement, request changes to the
Specification and any other functional or performance specifications agreed to
between Diablo and Netlist.  Such request
shall be submitted by Netlist to Diablo in writing.  Diablo will then estimate, using industry
established reasonable and customary rates, the amount of work necessary, the
additional development time and cost that would be incurred, and shall request
Netlist’s approval of such additional cost and development time.  Upon written receipt of such approval,
implementation of such changes will proceed. 
The Specification, Development Schedule, NRE Payment Schedule and
Production Price will be updated in writing and signed by both parties to
reflect any such changes.


 


(c)           Engineering Resources.  Each
party will designate a project manager in the SOW who shall act as that party’s
liaison and administrator of the project provided pursuant to the SOW.  Diablo hereby agrees to submit to the Netlist
project manager the names and other pertinent information requested by Netlist
prior to utilization of any personnel of Diablo.  Netlist reserves the right to interview
Diablo’s personnel prior to such utilization. 
Netlist reserves the right to request the reasonable replacement of any
of Diablo’s personnel assigned to this project, and Diablo shall as soon as
possible consider such request and may remove same and secure replacement(s) reasonably
acceptable to Netlist.


 


2

















 


(d)           Joint Tasks.


 


(i)            The parties agree to [***] for
both the [***] and the [***] to ensure Diablo is developing a
competitive solution.  Diablo and Netlist
will establish a [***] schedule of
[***] that will provide both
organizations the greatest confidence of program success.


 


(ii)           Bring-up; Integration Testing.  Netlist will provide Diablo with its [***] validation platform and Diablo will
provide Netlist with a requirements document ensuring [***] in [***]
the devices and [***].


 


(iii)          [***] agree to make [***] to support [***] and [***] requirements
of the Products with Netlist’s [***].


 


(e)           License.  In partial
consideration of the design and development of the Netlist Chipset, subject to Section 2(e)(ii),
Netlist hereby grants Diablo a [***]
under its Intellectual [***] to [***] to [***]
and [***] the Products in
accordance with the terms contained herein.


 


(i)            Delivery.  Upon execution of this Agreement, Netlist
will provide to Diablo (A) a copy of the [***]
to enable Diablo to design and manufacture the Products and (B) all
necessary [***] to Diablo in
support of the development of the Products.


 


(ii)           Exclusivity.  Subject to Section 2(e)(iii) below,
the Netlist Chipset and Netlist Technology will be exclusive to Netlist in that
Diablo shall not sell or manufacture any device constituting the Netlist
Chipset or Netlist Technology to or for any party except Netlist; provided that
Diablo will be [***] and [***] to any third party [***].


 


(iii)          JEDEC Standard.  If for any reason Netlist decides to make
available DxD/LRD to the market as an industry standard through JEDEC or other
standards body; Diablo will be [***] under
same terms and conditions as offered to other third parties.  Netlist will provide Diablo with at least [***] notice of a possible release to any
industry standard body.


 


(iv)          Priority.  Diablo hereby agrees that the [***] of the [***] shall not occur before the [***] of the [***]
unless Netlist [***] or [***].


 


3.                                      Manufacture and Supply of Products.


 


(a)           Agreement to Manufacture. 
Diablo agrees to make commercially reasonable efforts, pursuant to
purchase orders or changes to purchase orders issued by Netlist and accepted in
writing by Diablo (“Purchase Orders”), to procure Inventory, components
and other supplies and to manufacture, test, assemble, and deliver the Netlist
Chipset pursuant to the Specifications for each device of the Netlist Chipset
and to deliver such Netlist Chipset to a location designated by Netlist.  Except as set forth herein, this Agreement
shall not constitute a requirements contract and Netlist shall not be obligated
to order Products from Diablo.


 


3

















 


(b)           Forecasts.  Netlist
shall provide each [***] rolling
forecast report (“Forecast”) of its Products requirements.  The first [***]
of each Forecast will be done on a [***] basis.  Diablo will respond on a [***] basis with a plan for the delivery
dates for the first [***] of a
Forecast.  The remaining [***] of each Forecast will be done on a [***] basis.  Purchase Orders will be done by Netlist on
the basis of the [***] Forecast.


 


(i)            Netlist shall be committed to purchase all [***] contained within the first [***] of a Forecast on the delivery date that Diablo specified
in the Forecast.  Such purchase
commitment (including the payment obligations) shall be [***] and any [***] of such Registers are [***].  For [***] contained
in the [***] of a Forecast,
Netlist shall [***] such [***] but will be entitled to [***] for such Netlist Chipset by up to [***] from the delivery date that Diablo
had previously committed to meet.


 


(ii)           Netlist shall be committed to purchase all Netlist Chipsets contained
within the [***] of a Forecast on
the delivery date that Diablo specified in the Forecast.  Such purchase commitment (including the
payment obligations) shall be [***]
and any [***] of such Netlist
Chipsets are [***].  For Netlist Chipsets contained in the [***] of a Forecast, Netlist shall [***] such Netlist Chipsets but will be [***] for such Netlist Chipsets by up to [***] from the delivery date that Diablo
had previously committed to meet.


 


(c)           Purchase Orders.  All
orders for Netlist Chipset shall be submitted to Diablo in writing by mail,
email or facsimile to the address set forth on the signature page to this
Agreement, and shall conform to the binding Forecasts in accordance with Section 3(b).  Netlist shall submit such Purchase Orders to
Diablo at least ninety (90) days prior to the date of requested delivery (“Delivery
Date”).


 


(d)           Terms and Conditions.  Any
additional or different terms or conditions in any communication by Netlist
(whether in a purchase order or otherwise) are hereby rejected and shall be
null and void, irrespective of the means of Netlist’s acceptance.  Diablo’s failure to object to any additional
or different provisions proposed by Netlist shall not constitute a waiver of
these terms and conditions, nor constitute acceptance of any such Netlist’s
terms and conditions.  All orders or
contracts must be approved and accepted by Diablo at its principal place of
business.  The terms and conditions of
this Agreement shall be applicable whether or not they are attached to or
enclosed with the Products sold hereunder.


 


(e)           Market Share Commitment.  [***]


 


(i)            A minimum of [***] of
Netlist Market Share for the Netlist Chipsets will be allocated to Diablo if
Diablo delivers working engineering samples of the Product no later than [***] and production worthy devices no
later than [***].  This minimum Market Share commitment will
apply to the first year of production and will be maintained at least, but not
necessarily limited to, [***] Market
Share thereafter for the life of the Products provided that Diablo maintains a
commercially reasonable continuity of supply sufficient to meet Netlist’s
Forecasts.


 


4

















 


(ii)           A minimum of [***] of
Netlist Market Share for the Netlist Chipsets will be allocated to Diablo if
Diablo delivers working engineering samples of the Product no later than [***] and production worthy devices no
later than [***].  This minimum Market Share commitment will
apply to the first year of production and will he maintained thereafter for the
life of the Products provided that Diablo maintains a commercially reasonable
continuity of supply sufficient to meet Netlist’s Forecasts.


 


(iii)          The [***] listed in (ii) above
shall be reduced by [***] for
every 2 months of delay in delivering production worthy devices of the Netlist
Chipset to Netlist.  Should Diablo be
unable to deliver production worthy devices of the Netlist Chipset by [***], Netlist will have no further
obligations to Diablo, whether to purchase Netlist Chipset or to make any
payments beyond the second payment under Exhibit D.


 


(iv)          The parties hereby agree that the above Market Share commitments are
contingent upon Netlist receiving qualification status on a major leading
platform at one (1) OEM [***] for
RDIMM(s) using the Netlist Chipset and Diablo’s ability to maintain or
reduce sell prices as outlined below in Exhibit C.  If Netlist is not able to secure a major
leading platform at one OEM and if Diablo delivers production devices of the
Netlist Chipset by [***], Netlist
will commit to purchase [***] of
the Products from Diablo over a period of one year.


 


(v)           Audit.  Netlist will maintain complete and accurate
records for not less than three (3) years after this Agreement expires or
is terminated.  Diablo may audit Netlist’s
records in accordance with this Section; provided that a nationally recognized
accounting firm retained by Diablo (“Auditor”) will have access to such records
solely for the purposes of confirming that Netlist has fulfilled its
obligations under Sections (i) - (iv) above.


 


4.                                      Product Shipment and Inspection.


 


(a)           Shipments.  Shipment
will be F.O.B. Diablo’s factory, at which time risk of loss and title will pass
to Netlist.  All freight, insurance and
other shipping expenses, as well as any special packing expenses not included
in the original price quotation for the Products will be paid by Netlist.  The carrier shall be deemed Netlist’s agent,
and any claims for damages in shipment must be filed with the carrier.  Diablo is authorized to designate a carrier
pursuant to Diablo’s standard shipping practices unless otherwise specified in
writing by Netlist.


 


(b)           Product Inspection and Acceptance.  The
Products delivered by Diablo will be inspected and tested as required by
Netlist within thirty (30) days of receipt (the “Acceptance Period”).  If Products are found to be defective in
material or workmanship and/or fail to meet the Specifications, Netlist may
reject such Products during the Acceptance Period.  Products not rejected during the Acceptance
Period will be deemed accepted.  Netlist
may return rejected Products pursuant to Section 10(c).


 


5.                                      Payment Terms, Additional Costs and Price Changes.


 


(a)           Payment Terms. 
Payment for any products, services or other costs to be paid by Netlist
hereunder are due forty-five (45) days from the date of invoice for Products
delivered to Netlist and shall be made in lawful U.S. currency.  Any amounts not paid when due will accrue
interest at the rate of 1 1/2% per month, or the maximum amount allowed by law,
if lower.  In the event that any payment
is more than forty-five (45) days late, Diablo shall have the right to suspend
performance until all payments are made current.


 


5

















 


(b)           Additional Costs.


 


(i)            Duties and Taxes.  All prices quoted are exclusive of federal,
state and local excise, sales, use and similar duties and taxes, and Netlist
shall be responsible for all such items.


 


(ii)           Expediting Charges.  Netlist shall be responsible for any
expediting charges reasonably necessary because of a change in Netlist’s
requirements.  Diablo shall obtain
approval from Netlist for expediting charges prior to incurring any such
charge.


 


(c)           Price.  The
initial maximum average selling price for Products is set forth on Exhibit C
hereto; which shall be subject to final order acknowledgment from Diablo at the
time a Purchase Order is placed. Netlist and Diablo will agree to quarterly
pricing sixty (60) days prior to the beginning of each quarter.  The price guidelines set forth in Exhibit C
will be the basis for establishing quarterly pricing such that the original
metrics used to define this price structure remains reasonably intact.  The average selling price is contingent upon
Diablo receiving the minimum Market Share defined in Section 3e above, and
maintaining market competitive selling prices to Netlist.


 


6.                                      Marketing and Other Obligations


 


(a)           Should Diablo meet the full specifications
outlined by DxD/LRD within the designated and agreed to time schedules, Netlist
will add Diablo to Netlist’s approved vendor list for both the Netlist Chipset
and Diablo Standard Register.


 


(b)           Joint Promotion and Marketing.


 


(i)            Netlist and Diablo will engage in a joint marketing effort providing
introductions of each other to their respective customers.  Netlist shall use best commercial efforts, in
order to meet Netlist market share obligations to Diablo, by promoting, where
possible, the use of Netlist products utilizing Diablo based products.  Both parties shall provide appropriate
recognition of the other party’s contributions.


 


(ii)           Joint Press Release.  Netlist and Diablo will issue a joint press
release announcing this relationship and both parties will agree to the content
of the press release and specific timing. 
Any joint press releases will occur only after Netlist has fully [***] and [***]
of Diablo’s products in Netlist’s applications.


 


(iii)          Diablo shall be permitted to identify Netlist as its customer and Netlist
shall provide a written endorsement for the incorporation into a Diablo press
release announcing the availability of the Diablo Standard Register for mass
production.  Diablo may identify to its
investors that Netlist is a customer, but will refrain from issuing any press releases
identifying Netlist as a customer until Netlist has fully validated the full
compliance and functionality of Diablo’s products in Netlist’s applications.


 


6

















 


7.                                      Intellectual Property Rights.


 


(a)           [***].  All
rights, title and interest in and to the design and development of the [***] and [***]
of the [***]; and any improvement,
update, modification or additional parts thereof, and all of [***]embodied in the [***], shall at all times remain the sole
and exclusive property of [***].  For purposes of this Agreement, “[***]” shall mean the development of a
silicon chip set using the [***]
(including without limitation the packaging) which will meet [***].


 


(b)           [***].  All
rights, title and interest in and to the design and development of the underlying
[***]of the [***], the [***] and all [***] embodied
in the [***], any improvement,
update, modification or additional parts thereof, shall at all times remain the
sole and exclusive property of [***].  For purposes of this Agreement, “[***]” shall mean [***] with regard to [***] and [***].


 


8.                                      Confidential Information.


 


(a)           Nondisclosure and Nonuse.  Each
party shall treat as confidential all Confidential Information of the other
party, shall not use such Confidential Information except as set forth in this
Agreement, and shall use reasonable efforts not to disclose such Confidential
Information to any third party.  Without
limiting the foregoing, each of the parties shall use at least the same degree
of care which it uses to prevent the disclosure of its own confidential
information of like importance to prevent the disclosure of Confidential
Information disclosed to it by the other party under this Agreement.  Each party shall disclose Confidential
Information of the other party only to its directors, officers, employees, and
consultants who are required to have such information in order for such party
to carry out the transactions contemplated by this Agreement and who have
signed nondisclosure agreements protecting the Confidential Information on substantially
the same terms as this Agreement.  Each
party shall promptly notify the other party of any actual or suspected misuse
or unauthorized disclosure of the other party’s Confidential Information.  For purposes of clarification, the Netlist
Technology is the Confidential Information of Netlist and may not be used for
any purpose other than as set forth in this Agreement, including without
limitation use of such Netlist Technology to develop a chip competitive to the
Netlist Chipset.


 


(b)           Exceptions. 
Notwithstanding the above, neither party shall have liability to the
other with regard to any Confidential Information of the other which the
receiving party can prove (i) was in the public domain at the time it was
disclosed or has entered the public domain through no fault of the receiving
party; (ii) was known to the receiving party, without restriction, at the
time of disclosure, as demonstrated by files in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the
disclosing party; (iv) was independently developed by the receiving party
without any use of the Confidential Information, as demonstrated by files
created at the time of such independent development; (v) is disclosed
pursuant to the order or requirement of a court, administrative agency, or
other governmental body; provided, however, that the receiving party shall
provide prompt notice of such court order or requirement to the disclosing
party to enable the disclosing party to seek a protective order or otherwise
prevent or restrict such disclosure.


 


7

















 


(c)           Return of Confidential Information.  Upon
expiration or termination of this Agreement and at the request of either party,
the other party shall promptly return all Confidential Information of the other
party.


 


(d)           Remedies.  Any breach
of the restrictions contained in this Section is a breach of this
Agreement which may cause irreparable harm to the nonbreaching party.  Any such breach shall entitle the nonbreaching
party to injunctive relief in addition to all legal remedies.


 


Confidentiality of Agreement.  Each party shall be entitled to disclose the
existence of this Agreement, but agrees that the terms and conditions of this
Agreement shall be treated as Confidential Information and shall not be
disclosed to any third party; provided, however, that each party may disclose
the terms and conditions of this Agreement: (i) as required by any court
or other governmental body; (ii) as otherwise required by law; (iii) to
legal counsel of the parties; (iv) in confidence, to accountants, banks,
and financing sources and their advisors; (v) in connection with the
enforcement of this Agreement or rights under this Agreement or (vi) in
confidence, in connection with an actual or proposed merger, acquisition, or
similar transaction.


 


9.                                      Indemnification.


 


(a)           Indemnification by Diablo. 
Diablo agrees, at its own expense, to defend or at its option to settle
any claim or action brought against Netlist on the issue of infringement of any
patent, copyright, trademark, trade secret, mask work right or other
intellectual property right of any third party by the Products as used or
distributed within the scope of this Agreement, and to indemnify Netlist
against any and all damages and costs, including legal fees, that a court
awards against Netlist under any such claim or action; provided that
Netlist provides Diablo with (i) prompt written notice of such claim or
action, (ii) sole control and authority over the defense or settlement of
such claim or action and (iii) proper and full information and reasonable
assistance to defend and/or settle any such claim or action.


 


(i)            Injunctions.  In the event that any Product is, or in the
Diablo’s sole opinion is likely to be, enjoined due to the type of infringement
described in Section (a) above, Diablo, at its option and expense,
may either (i) modify the Netlist Chipset so that they become
non-infringing, (ii) replace the Netlist Chipset with functionally
equivalent non-infringing Products reasonably acceptable to Netlist or, if the
foregoing alternatives are not reasonably available to Diablo, (iii) accept
return of the Products and refund to Netlist the purchase price of the Products
and portion of the NRE payment which shall be reduced over a four (4) year
period under a straight line depreciation.


 


(ii)           Exceptions.  Diablo will have no liability to the extent
that any such claim is based on the Netlist Technology or would have been
avoided but for (i) use or combination of the Netlist Chipset with any
other products not provided by Diablo or (ii) modification of the Netlist
Chipset after delivery by Diablo, unless such use, combination and/or
modification is authorized in advance in writing by Diablo.


 


8

















 


(b)           Indemnification by Netlist. 
Netlist agrees, at its own expense, to defend or at its option to settle
any claim or action brought against Diablo on the issue of infringement of any
patent, copyright, trademark, trade secret, mask work right or other
intellectual property right of any third party by the Netlist Technology as
used or distributed within the scope of this Agreement, and to indemnify Diablo
against any and all damages and costs, including legal fees, that a court
awards against Netlist under any such claim or action; provided that
Diablo provides Netlist with (i) prompt written notice of such claim or
action, (ii) sole control and authority over the defense or settlement of
such claim or action and (iii) proper and full information and reasonable
assistance to defend and/or settle any such claim or action.


 


(c)           Limitation.  THE
FOREGOING PROVISIONS OF THIS SECTION STATE THE ENTIRE LIABILITY AND
OBLIGATION OF EACH PARTY AND THE EXCLUSIVE REMEDY OF NETLIST, WITH RESPECT TO
ANY ALLEGED OR ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS,
TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR NETLIST
TECHNOLOGY.


 


(d)           Mutual Indemnity.  The
parties will indemnify each other against actions, liabilities, loss, damages
and expenses resulting from injury or death of any person or loss of or damage
to any tangible real or tangible personal property to the extent that such
injury, death, loss or damage is proximately caused by the indemnifying party’s
negligent act or omission or intentional misconduct or that of its agents,
employees or subcontractors in connection with the performance of its
obligations under this Agreement, provided that the indemnifying party has been
notified in writing as soon as practicable of any such claim.  The indemnifying party will have the sole
right to control the defense of all such claims and in no event will the
indemnified party settle any claim without the indemnifying party’s prior
written approval.


 


(e)           No Other Liability.  IN NO
EVENT SHALL DIABLO, ITS SUPPLIERS OR NETLIST BE LIABLE TO THE OTHER OR ANY
THIRD PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOST
PROFITS, DATA OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE).  EXCEPT FOR LIABILITY INDER SECTIONS 8 and
9(a), NEITHER PARTIES TOTAL AND CUMULATIVE LIABILITY ARISING OUT OF OR IN
CONNECTION WITH ANY PRODUCTS PURCHASED BY NETLIST HEREUNDER SHALL IN NO EVENT
EXCEED THE PURCHASE PRICE PAID BY NETLIST FOR SUCH PRODUCTS.  THE LIMITATIONS SET FORTH IN THIS SECTION SHALL
APPLY EVEN IF DIABLO OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.


 


10.                               Warranty and Disclaimer.


 


(a)           Warranty.  Diablo
warrants that, for a period of twelve (12) months from the date of shipment of
the Products from Diablo (the “Warranty Period”), the Products will
conform to the Specification in effect as of the date of manufacture.  Diablo SPECIFICALLY DISCLAIMS ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) WHICH MAY RESULT FROM
THE USE OF PRODUCTS PURCHASED HEREUNDER. 
This limited warranty extends only to Netlist as original purchaser
unless otherwise agreed upon in writing by Diablo.


 


9

















 


(b)           Exclusions.  The
foregoing warranty shall not apply if the defective Products (i) has been
subjected to abuse, misuse, neglect, negligence, accident, improper testing,
improper installation, improper storage, improper handling or use contrary to
any instructions issued by Diablo, (ii) has been repaired or altered by
persons other than Diablo, (iii) has not been installed, operated,
repaired and maintained in accordance with the documentation or (iv) is
attributable to the Netlist Technology. 
In addition, the foregoing warranty shall not apply to Product (i) marked
or identified as “sample,” (ii) loaned or provided to Netlist at no cost,
or (iii) which are sold “as is.”


 


(c)           Remedies.  If during
the Warranty Period or Acceptance Period: (i) Diablo is notified promptly
in writing upon discovery of any defect in the Products, including a detailed
description of such alleged defect, (ii) such Products are returned,
transportation charges prepaid, to Diablo’s designated manufacturing facility
in accordance with Diablo’s then-current return procedures, as set forth by
Diablo from time to time, and (iii) Diablo’s inspections and tests
determine that the Products are indeed defective and the Products have not been
subjected to any of the conditions set forth in this Section, then, as Netlist’s
sole remedy and Diablo’s sole obligation under the foregoing warranty, Diablo
will replace without charge the defective Products at the earliest commercially
reasonable time.  Any Products that have
been replaced under this warranty shall have the same warranty coverage as
outlined in 10 (a) above.


 


(d)           Disclaimer.  EXCEPT FOR
THE WARRANTIES SET FORTH IN THIS SECTION, DIABLO MAKES NO OTHER WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY PRODUCTS PROVIDED IN
CONNECTION WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT,
OR ARISING FROM COURSE OF PERFORMANCE, DEALING, USAGE OR TRADE.


 


11.                               Term and Termination.


 


(a)           Term.  This
Agreement shall become effective on the Effective Date of this Agreement and
shall continue for a period of three years (“Initial Term”).  This Agreement shall be extended
automatically at the end of the initial term or subsequent terms for an
additional one (1) year terms, unless terminated in accordance with this
Agreement.


 


(b)           Termination for Cause. 
Either party may terminate this Agreement at any time (i) if the
other party breaches any term hereof and fails to cure such breach within sixty
(60) days after notice of such breach or (ii) if the other party shall be
or becomes insolvent, or if either party makes an assignment for the benefit of
creditors, or if there are instituted by or against either party proceedings in
bankruptcy or under any insolvency or similar law or for reorganization,
receivership or dissolution which proceeding is not dismissed within ninety
(90) days.


 


10
















 


(c)           Termination for Technical Reasons.  In the event that after exercising
commercially reasonable efforts, Diablo is unable to deliver production worthy
Netlist Chipsets due to technical changes created or requested by Netlist,
after the establishment of this agreement, either Netlist or Diablo shall have
the right to terminate this agreement.


 


(d)           Obligations Upon Termination.  The termination or expiration of this
Agreement shall in no way relieve either party from its obligations to pay the
other any sums accrued hereunder prior to such termination or expiration.


 


(e)           Survival of Certain Provisions.  Notwithstanding anything to the contrary in
this Agreement, the following sections shall survive termination of this
Agreement: 1, 2e, 5, 7, 8, 9, 10, 11(d), 12 and 13.


 


12.                               Standby Manufacturing Rights.  At Netlist’s expense, Diablo agrees to
deposit into a third party escrow account, pursuant to the terms of an Escrow
Agreement (which shall be mutually agreed by the parties), all engineering
drawings, manufacture documents and instructions and other written materials
(including lists of suppliers and their addresses), including database tapes
necessary to enable Netlist to manufacture, assemble, test and/or maintain the
Products (“Escrow Materials”); which Escrow Materials shall be the
Confidential Information of Diablo.  Such
Escrow Agreement shall be executed within thirty (30) days after the Effective
Date and shall authorize the release of the Escrow Materials to Netlist solely
for use in accordance with the terms and conditions of this Agreement in the
event of a Release Condition as described and to be negotiated in the Escrow
Agreement.


 


13.                               Miscellaneous.


 


(a)           Amendments and Waivers.  Any term of this Agreement may be amended or
waived only with the prior written consent of the parties or their respective
successors and assigns, in a document signed in ink by authorized
representatives of the parties.  Any
amendment or waiver made in accordance with this Section shall be binding
upon the parties and their respective successors and assigns.


 


(b)           Successors and Assigns.  The rights and obligations of each party
under this Agreement shall not be assignable without the prior written consent
of the other party and any attempt to assign them without that consent will be
void.  Notwithstanding the foregoing,
either party may assign, upon written notice to the other, both the rights and
obligations of this Agreement to the surviving corporation in any merger or
consolidation to which it is a party or to any person who acquires all or
substantially all of its capital stock or assets.  Any purported transfer, assignment or
delegation in, violation of the foregoing will be null and void and of no force
or effect.


 


(c)           Governing Law; Attorney Fees and Costs.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.


 


(d)           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.


 


11

















 


(e)           Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail
as certified or registered mail (airmail if sent internationally) with postage
prepaid, if such notice is addressed to the party to be notified at such party’s
address or facsimile number as set forth below, or as subsequently modified by
written notice.


 


(f)            Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable.  In the event
that the parties cannot reach a mutually agreeable and enforceable replacement
for such provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement
shall be enforceable in accordance with its terms.


 


(g)           Entire Agreement.  This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement between such parties pertaining to the
subject matter hereof, and merges all prior negotiations and drafts of the
parties with regard to the transactions contemplated herein.  Any and all other written or oral agreements
existing between the parties hereto regarding such transactions are expressly
canceled.


 


(h)           Independent Contractors.  The relationship of Diablo and Netlist
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement will be construed (i) to give either party the
power to direct and control the day-to-day activities of the other, (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) to allow either
party to create or assume any obligation on behalf of the other for any purpose
whatsoever.


 


(i)            Force Majeure.  If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strikes or labor disputes, war or other
violence, any law, order, proclamation, regulation, ordinance, demand or
requirement of any government agency, or any other act or condition beyond the
reasonable control of the parties hereto, the party so affected upon giving
prompt notice to the other parties shall be excused from such performance
during such prevention, restriction or interference.


 


(j)            Export Control.  Netlist acknowledges and agrees that the Products
purchased under this Agreement may be subject to restrictions and controls
imposed by the United States Export Administration Act and the regulations
thereunder.  Netlist warrants that it
will not export or re-export any products purchased, or SoftWare licensed,
under this Agreement into any country in violation of such controls or any
other laws, rules or regulations of any country, state or jurisdiction.


 


(k)           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.


 


[Remainder of Page Intentionally Blank ]


 


12

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the Effective Date.


 


	
  Netlist, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  James P. Perrott

  	
   

  
	
  Name:

  	
  James
  P. Perrott

  	
   

  
	
  Title:

  	
  SVP
  Sales & Marketing

  	
   

  
	
   

  	
   

  	
   

  
	
  Diablo Technologies, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Ricardo Badalone

  	
   

  
	
  Name:

  	
  Ricardo
  Badalone

  	
   

  
	
  Title:

  	
  C.E.O.

  	
   

  



 


[SIGNATURE PAGE TO

DEVELOPMENT AND SUPPLY AGREEMENT]


 


13

















 


Exhibit A


 


Statement of Work See


 


SOW
Document Number MKT-SOW-VTB-001


 


14

















 


Exhibit B


 


Development Schedule


 


See
SOW Document Number MKT-SOW-VTB-001


 


15

















 


Exhibit C


 


Production Price Schedule


 


	
  Netlist Chipset

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  2011

  	
   

  	
  2012

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  
	
  [***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  	
  US$[***]

  	
   

  



 


16

















 


Exhibit D


 


NRE Payment Schedule


 


	
  Milestone

  	
   

  	
  Payment ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total NRE Payment:

  	
   

  	
  $

  	
  [***]

  	
   

  



 


17