Exhibit
10.11


 


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.


 


Settlement Agreement and Amendment to

Development And Supply Agreement


 


This
Settlement Agreement and Amendment to the Development and Supply Agreement (“Amendment”)
is made this 12th day of January 2010 (“Amendment
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 entered into a Development and Supply Agreement with Diablo to have
certain products designed and manufactured by Diablo on September 10, 2008
(“Agreement”); and


 


Whereas,
in the course of performing this Agreement, the parties have had disputes
regarding the obligations and performance under this Agreement, including the
breaches thereof;


 


WHEREAS,
the parties have agreed to compromise, settle and resolve all past disputes,
liabilities and obligations between them concerning or regarding the alleged
breaches of the Agreement;


 


WHEREAS,
the parties agree that the settlement and amendments embodied in this Agreement
are made in good faith and shall not constitute an admission of liability or
other admission against interest by any party hereto.


 


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:


 


AGREEMENTS


 


1.             Purchase and Payment Obligations.  Within five (5) business days of the
Amendment Effective Date, Netlist shall:


 


(a)           Receive a certificate of conformance from
Diablo stating [***] as per the [***] depicted in [***] between Diablo and Netlist.  Make a payment of US$[***] to Diablo as the NRE Payment
milestone “[***]” agreed in Exhibit D;


 


(b)           Issue a purchase order to Diablo for [***] aligned with previously provided
forecasts, which shall be accompanied by an [***];


 


(c)           Provide to Diablo a delivery schedule for all
devices between now and September 2010;


 


(d)           Agree to provide Diablo a budget of $[***] US dollars for each Netlist Chipset
qualification in each Netlist density configuration added to the plan of
record.  Diablo shall use these funds
solely to 1) purchase DIMMs from Netlist and 2) to purchase Netlist customer
target systems for in-system validation of the Netlist Chipset.


 


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(e)           Agree to jointly initiate a cost benefit
analysis for development of a [***].  Should this analysis conclude a development
is necessary, Netlist shall initiate said development.


 


(f)            Receive from Diablo the items requested below
or a plan including a schedule to address the items requested below


 


1.             Return of all [***] as
previously requested (Diablo may request to change the quantity to allow for [***])


2.             [***] for both RD and ID devices
([***]).  In addition, Netlist requests specific test
results and engineering assessment for the following parameters:  [***]


3.             [***] for [***]


4.             Progress report on [***] and
Reliability [***]


5.             Errata List of [***] for
both RD and ID


6.             Review and finalize the Phase Definition and phase exit criteria ([***]) including [***] phase plan and schedule as well as Production readiness
status


7.             Latest encrypted [***] for
both RD and ID I/O


8.             On an ongoing basis Diablo will provide any and all available information
and data which is essential for Netlist’s qualification efforts for Diablo
Chipsets.


 


2.             Release and Covenant Not to Sue.


 


(i)            Diablo hereby fully releases and forever discharges Netlist, and its
respective past, present and future officers, directors, representatives,
employees, agents, principals, shareholders, attorneys, assigns, predecessors,
successors, affiliates, and subsidiaries, from any and all claims, causes of
action, debts, liabilities, rights to damages, collection, reimbursement,
costs, expenses, attorneys’ fees, and rights to injunctive relief, known or
unknown, relating to any alleged breach of this Agreement, by such party prior
to the Amendment Effective Date, including but not limited to any allegation by
Diablo that Netlist made improper use of any Diablo Confidential Information or
any other technology encompassed within Diablo’s Intellectual Property Rights.


 


(ii)           Diablo further covenants and agrees that it will not assert any claim or
take any action against Netlist or any customer or business partner of Netlist,
or claim that Netlist is not entitled to ship products using chips procured
from other suppliers, now or in the future, based on Netlist’s marketing or
sale of products that utilize chips procured from companies other than Diablo,
only with respect to the followings claims: 1) any claim that Netlist or any
customer or business partner of Netlist is using any Confidential Information
of Diablo, provided that Netlist and Netlist’s customers and business partners
undertake reasonable precautions to maintain the confidentiality of Diablo’s
Confidential Information; 2) any claim for patent infringement based on an
invention arising as a consequence of work performed under this Agreement; or
3) that Netlist or its customers or business partners are otherwise using
technology developed by Diablo as a consequence of worked performed under this
Agreement.  Diablo hereby expressly
waives and releases any rights it may have at law or in equity to take any
legal action or other action as described in this paragraph against Netlist,
its customers or its business partners. 
The term “business partner” as used in this paragraph refers to third
parties working with Netlist in connection with Netlist products, and such
third parties are only entitled to the protections of this paragraph to the
extent of their work with Netlist.


 


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(iii)          Diablo acknowledges that there is a risk that subsequent to the execution
of this Amendment, it may discover, incur or suffer facts and/or claims which
were unknown or unanticipated at the time this Amendment is executed.  Diablo acknowledges and agrees that by reason
of the releases and covenants contained herein, it is assuming the risk of such
unknown facts and/or claims and agrees that this Amendment applies
thereto.  In connection therewith, Diablo
expressly waives the benefits of Section 1542 of the California Civil
Code, which section provides as follows, and any laws of similar affect
applicable in any jurisdiction:


 


“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.”


 


(iv)          Release and Covenant Not to Sue by Netlist


 


Netlist
hereby fully releases, forever discharges and covenants not to sue Diablo and
its respective past, present and future officers, directors, representatives,
employees, agents, principals, shareholders, attorneys, assigns, predecessors,
successors, affiliates, and subsidiaries, from any and all claims, causes of
action, debts, liabilities, rights to damages, collection, reimbursement, costs,
expenses, attorneys’ fees, and rights to injunctive relief, known or unknown,
relating to any alleged breach of this Agreement by such party prior to the
Amendment Effective Date.


 


(v)           The foregoing Releases and Covenants Not to Sue are not intended to and
do not alter or affect the obligations of either Netlist or Diablo with respect
to the Agreement or this Amendment, including but not limited to Diablo’s
obligations to provide an escrow deposit or to indemnify Netlist pursuant to
the terms of the Agreement.


 


AMENDMENTS


 


9.             Market Share Commitment.  The following Section 3(e) is
hereby amended in its entirety to read as follows:


 


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


 


“Netlist
Market Share”: shall mean the number of Netlist Chipsets shipped, invoiced or
sold, as part of a qualified memory module using Diablo supplied Netlist
Chipsets or separately as individual components, by Netlist to any third party.


 


3

















 


The
Market Share Commitment shall [***] indicated
below.  Netlist shall cooperate and
disclose the status of and any feedback (whether positive or negative) to
Diablo in connection with Netlists’s qualification with any customers of the
Netlist Chipset.


 


Netlist
agrees not to renegotiate the purchase price of the Products to achieve or
maintain this percentage:


 


(i)            [***] of Netlist
Production: [***];

Between [***] months of Netlist Production: [***];

After [***] month of Netlist Production: [***].


 


(ii)           In addition, all quantities of Netlist Chipsets set
forth in any Purchase Order issued by Netlist to Diablo and confirmed by Diablo
in accordance with this Agreement, but which Diablo is completely unable to
fulfill, shall be deemed to have been allocated to Diablo.


 


(iii)          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, twice per year, at its expense;
provided that a nationally recognized accounting firm retained by Diablo (“Auditor”)
will pursuant to a confidentiality agreement have access to such records solely
for the purposes of confirming that Netlist has fulfilled its obligations under
Section (i) above.


 


(iv)          If qualification requirements change in the 12
months following signing this Amendment, Netlist will give Diablo notice as
soon as possible to allow Diablo to propose a remedy.  During this period, if the product does not
meet the customer requirements, Netlist shall make commercially reasonable
efforts to maintain Diablo’s market share by increasing shipments to other
customers.


 


9.1           Guaranteed Minimum
Allocation


 


Notwithstanding
section 3(e), Netlist shall allocate to Diablo a minimum of [***]% of the Netlist total annual consumption of [***] provided however such allocation shall be limited to a
maximum of 100% of the Netlist Market Share.


 


10.           Production Incentive.


 


·      [***]


 


[***]


 


11.           Term.  Section 11(a) is hereby amended in
its entirety to read as follows:


 


“(a)         Term.  This Agreement shall become effective on the
Effective Date of this Agreement and shall continue for a period of three (3) 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 term, unless terminated in accordance
with this Agreement or unless either party notifies the other party in writing
of its intent not to renew at least ninety (90) days prior to the expiration of
the Initial Term or subsequent term.”


 


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16.           Section II (e) shall
be amended to include:


 


The
obligations of Diablo under Section 2 of this Amendment will survive, in
accordance with the terms hereof, the term and termination of this Agreement,
and will remain in full force and effect regardless of the cause of any
termination and be binding on any successors or assigns.


 


GENERAL


 


17.           Except as set forth herein,
all terms and conditions of the Agreement shall remain in full force and
effect.  Unless otherwise defined in this
Amendment, capitalized terms used in this Amendment shall have the same meaning
as set forth in the Agreement.  This
Amendment, together with the Agreement, constitute the entire agreement of the
parties with respect to the subject matter hereof, and supersedes any other
agreements, promises, representations or discussions, written or oral,
concerning such subject matter.


 


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


 


	
  Netlist, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Chun K. Hong

  	
   

  
	
  Name:

  	
  Chun
  K. Hong

  	
   

  
	
  Title:

  	
  President,
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  Diablo
  Technologies, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Richard Badalone

  	
   

  
	
  Name:

  	
  Richard
  Badalone

  	
   

  
	
  Title:

  	
  President,
  CEO

  	
   

  



 


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