**EXHIBIT 10.1**

** **

**TENTH AMENDMENT TOAMENDED AND RESTATED CREDIT AND SECURITY AGREEMENTAND WAIVER OF DEFAULTS**

** **

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

 

RECITALS

 

The Borrowers and WellsFargo Business Credit, Inc., a Minnesota corporation (“WFBCI”), areparties 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 SecurityAgreement, dated as of June 30, 2004, a Second Amendment to Credit andSecurity 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 ofDefaults, dated as of April 18, 2006, a Fifth Amendment to Credit andSecurity Agreement, dated as of July 28, 2006, a Sixth Amendment to Creditand 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 SecurityAgreement, dated as of June 30, 2007, and a Ninth Amendment to Amended andRestated Credit and Security Agreement, dated as of May 2, 2008 (as soamended**,**the “Credit Agreement”). Capitalizedterms used in these recitals have the meanings given to them in the CreditAgreement unless otherwise specified.

 

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

 

The Borrowers are in defaultof 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 requestedthat the Lender waive the Existing Default and make certain amendments to theCredit Agreement, which the Lender is willing to do pursuant to the terms andconditions set forth herein

 

NOW, THEREFORE, inconsideration of the premises and of the mutual covenants and agreements hereincontained, it is agreed as follows:

 

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1.             **Defined Terms**.

 

(a)           Capitalizedterms used in this Amendment which are defined in the Credit Agreement shallhave 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 CreditAgreement is hereby deleted.

 

(c)           The followingdefinitions set forth in Section 1.1 of the Credit Agreement are herebyamended in their entirety as follows:

 

“Default Rate” means an annualinterest 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 anannual interest rate equal to the greater of (i) the sum of the Prime Rateplus the applicable Margin, which interest rate shall, in each case, changewhen and as the Prime Rate changes, or (ii) five percent (5.0%).

 

“Security Documents” meansthis Agreement, the Lockbox and Collection Account Agreement, the SecurityAgreements, the Securities Account Control Agreement, and any other documentdelivered to the Lender from time to time to secure the Obligations.

 

(d)           The followingnew definitions are hereby added to Section 1.1 of the Credit Agreement inappropriate alphabetical order:

 

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

 

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

 

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

 

“Tenth Amendment” means thatcertain 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 ControlAgreement” means that certain Securities Account Control Agreement, dated as ofJune 25, 2008, by and among Netlist, Inc., Wells Fargo Bank, NationalAssociation, acting through its Investment Group, and Wells Fargo.

 

“Securities Collateral” hasthe meaning of “Collateral” as defined in the Securities Account ControlAgreement.

 

2.             **Amendmentto Section 2.4(b)**.  Section 2.4(b) of the CreditAgreement is hereby amended in its entirety as follows:

 

(b)           The initial notice sent bythe Lender shall be sent as promptly as practicable after such Lender learnsthat its Return has been reduced, shall include

 

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

 

3.             **Amendmentto Section 2.5(a)(i)**.  Clause (i) of Section 2.5(a) ofthe Credit Agreement is hereby amended in its entirety as follows:

 

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

 

4.             **NewSection 2.5A**.  Anew Section 2.5A is hereby added to the Credit Agreement immediatelyfollowing Section 2.5 thereof as follows:

 

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

 

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

 

(ii)           Availability.

 

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

 

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

 

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

 

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

 

(d)           The issuance of any BA issubject to the Lender’s express approval and must be in form and contentsatisfactory to the Lender.

 

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

 

(f)            To allow the Lender toautomatically charge its checking account for applicable fees, discounts, andother charges.

 

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

 

(b)           ***Margins*****.**  The Margins for all Floating RateAdvances and all LIBOR Advances shall be the Margins set forth in the tablebelow opposite the applicable balance of the Borrowers’ combined accountbalance 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 betested as of the end of each month based on the statements delivered pursuantto Section 6.1(r).  Any reductionsor increases in the Margins will be effective as of the first day of the monthfollowing the applicable test date.  Inthe event that the Borrowers fail to timely deliver the statements requiredpursuant to Section 6.1(r), in addition to and not in substitution for anyof 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. Notwithstandingthe foregoing, no reduction in any Margin will be made if a Default Periodexists at the time that such reduction would otherwise be made.

 

6.             **Amendmentto Section 2.13(f)**.  Section 2.13(f) of the CreditAgreement is hereby amended in its entirety as follows:

 

(f)            ***BA Fees***.  The Borrowers shall pay to the Lender a feewith respect to each BA, in an amount equal to one percent (1.0%) per annum ofthe face amount of such BA (but in not event less than $125), pro rated for thetenor 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 withoutwaiving any of its other rights and remedies, agrees to issue any BA during aDefault Period, such fee shall increase to four percent (4.0%) per annum of theface 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, payableupon 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 connectionwith such BA.

 

7.             **Amendmentto Section 3.1**.  Section 3.1of the Credit Agreement is hereby amended by adding the following at the endthereof:

 

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

 

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

 

Section 6.2             Financial Covenants.

 

(a)           ***Intentionally Deleted.***

 

(b)           ***Minimum Net Income(Maximum Net Loss)***.  TheBorrowers will achieve, for each rolling three month period described below,Net Income (or Net Loss) of not less than (or more than, as applicable) theamount 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 toincur Capital Expenditures of more than $1,300,000 in the aggregate during thefiscal year ending December 31, 2008.

 

(d)           ***Intentionally Deleted***.

 

(e)           ***IntentionallyDeleted***.

 

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

 

9.             **Amendmentto Section 6.10(a)**.  Section 6.10(a) of the CreditAgreement is hereby amended in its entirety as follows:

 

(a)           The Borrowers will keepaccurate books of record and account for themselves pertaining to theCollateral and pertaining to each Borrower’s

 

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

 

10.           **Waiverof Existing Default**.  Uponthe terms and subject to the conditions set forth in this Amendment, the Lenderhereby waives the Existing Default.  Thiswaiver of the Existing Default shall be effective only in this specificinstance and for the specific purpose for which it is given, and shall notentitle the Borrowers to any other or further waiver in any similar or othercircumstances.

 

11.           **NoOther Changes**. Except as explicitly amended by this Amendment,all of the terms and conditions of the Credit Agreement shall remain in fullforce and effect and shall apply to any advance or letter of credit thereunder.

 

12.           **AmendmentFee**. 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’sexecution and delivery of this Amendment (the “Amendment Fee”).

 

13.           **ConditionsPrecedent**. This Amendment, and the waiver of the Existing Defaultset forth in Paragraph 10, shall be effective when the Lender shall havereceived an executed original hereof, together with each of the following, eachin substance and form acceptable to the Lender in its sole discretion:

 

(a)           Payment in fullof the Amendment Fee.

 

(b)           Such othermatters as the Lender may require.

 

14.           **Representationsand Warranties**. Each Borrower hereby represents and warrants tothe Lender as follows:

 

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

 

(b)           The execution,delivery and performance by each Borrower of this Amendment has been dulyauthorized by all necessary corporate action and do not (i) require anyauthorization, consent or approval by any governmental department, commission,board, bureau, agency or instrumentality, domestic or foreign, (ii) violateany 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) resultin a breach of or constitute a default under any indenture or loan or creditagreement or any other agreement, lease or instrument to which such Borrower isa party or by which it or its properties may be bound or affected.

 

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(c)           All of therepresentations and warranties contained in Article V of the CreditAgreement are correct on and as of the date hereof as though made on and as ofsuch date, except to the extent that such representations and warranties relatesolely to an earlier date.

 

15.           **References**. Allreferences in the Credit Agreement to “this Agreement” shall be deemed to referto the Credit Agreement as amended hereby; and any and all references in theSecurity Documents to the Credit Agreement shall be deemed to refer to theCredit Agreement as amended hereby.

 

16.           **NoOther Waiver**.  Except asotherwise provided in Paragraph 10 hereof, the execution of this Amendment andacceptance of any documents related hereto shall not be deemed to be a waiverof any Default or Event of Default under the Credit Agreement or breach,default or event of default under any Security Document or other document heldby the Lender, whether or not known to the Lender and whether or not existingon the date of this Amendment.

 

17.           **Release**.

 

(a)           Each Borrower****hereby absolutely and unconditionally releases and foreverdischarges 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 formerdirectors, officers, agents and employees of any of the foregoing, from any andall 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 orfederal law or otherwise, which such Borrower has had, now has or has madeclaim 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 andincluding the date of this Amendment, whether such claims, demands and causesof action are matured or unmatured or known or unknown.  Each Borrower certifies that it has read thefollowing provisions of California Civil Code Section 1542:

 

Ageneral release does not extend to claims which the creditor does not know orsuspect 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 settlementwith the debtor.

 

(b)           Each Borrowerunderstands and acknowledges that the significance and consequence of thiswaiver of California Civil Code Section 1542 is that even if it shouldeventually suffer additional damages arising out of the facts referred toabove, they will not be able to make any claim for those damages. Furthermore, eachBorrower acknowledges that it intends these consequences even as to claims fordamages that may exist as of the date of this release but which it does notknow exist, and which, if known, would materially affect its decision toexecute this Agreement, regardless of whether its lack of knowledge is theresult of ignorance, oversight, error, negligence, or any other cause.

 

18.           **Costsand Expenses**. The Borrowers hereby reaffirm their agreementunder the Credit Agreement to pay or reimburse the Lender on demand for allcosts and expenses incurred by the Lender in connection with the LoanDocuments, including without limitation all reasonable fees and disbursementsof legal counsel. Without limiting the generality of the foregoing, theBorrowers specifically agree to pay all fees and disbursements of counsel tothe Lender for the services performed by such counsel in connection with thepreparation of this Amendment and the documents and instruments incidentalhereto. The Borrowers hereby agree that the Lender may, at any time or fromtime to time in its sole discretion and without further authorization by theBorrowers, make a

 

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loanto 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, andthe Amendment Fee.

 

19.           **Miscellaneous**. ThisAmendment may be executed in any number of counterparts, each of which when soexecuted and delivered shall be deemed an original and all of whichcounterparts, 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 havecaused 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 |
|                                                                                                                   |                                                                                          |  |  |  |  |

 

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