**Exhibit 10.10**

 

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

 

MKT-DSA-VTB-001

 

**Diablo Technologies, Inc.Development And Supply Agreement**

 

ThisDevelopment and Supply Agreement (“Agreement”) is made this 10th day of September 2008(“Effective Date”) between Diablo Technologies, Inc,, a Canadiancorporation having a principal place of business at 290 St. Joseph, Suite 200,Gatineau, Quebec J8Y 3Y3 (“Diablo”) and Netlist, Inc., a Delawarecorporation 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 Diablofor sale to Netlist; and Diablo has the capability of designing andmanufacturing such products and desires to do so for sale to Netlist.

 

Now,therefore, in consideration of the promises and the mutual agreementshereinafter set forth, and intending to be legally bound, the parties heretoagree as follows:

 

**AGREEMENT**

 

**1.****                                     ****Definitions**.  Thefollowing terms shall have the meanings set forth below.

 

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

 

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

 

“IntellectualProperty Rights” shall mean all intellectual property rights including, butnot limited to, patents, copyrights, authors’ rights, trademarks, tradenames,know-how and trade secrets, irrespective of whether such rights arise underU.S. or international intellectual property, unfair competition or trade secretlaws.

 

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

 

“MarketShare” shall mean the number of Netlist Chipsets shipped, invoiced or soldby Netlist to any third party.

 

| Confidential  Information |   |   |   | 9/10/2008 |
|---------------------------|--------|--------|--------|-----------|

 

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“NetlistTechnology” shall mean Netlist’s patented and trade secret-protected RankMultiplication/Load Rank Multiplication technology (“DxD/LRD”), includingwithout limitation its “know-how” and database design technology, developedprior to the Effective Date and provided to Diablo.

 

“NetlistChipset” shall mean a DDR3 proprietary chip set solution consisting of aDDR3 standard register (with DxD/LRD physically enabled) and set of isolationdevices utilizing the Netlist Technology for use in Netlist RDIMM productsimplemented in OEM server systems developed under this Agreement in accordancewith the Specification.

 

“DiabloStandard Register” or “Register” shall mean a DDR3 industry standardregister derivative of Netlist Chipset with either or both of DxD/LRDfunctionality 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 modifiedto produce the initial prototypes, and, to the extent necessary, modificationsthereto, 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 (setforth in Exhibit D) to Diablo for the design and development of theNetlist Chipset and the delivery of the initial prototypes, all meeting theSpecifications, 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 commerciallyreasonable efforts to design and develop the Product as defined in the SOWand to meet the Development Schedule (set forth in Exhibit B).  Netlist agrees to promptly respond toinquiries, make personnel available to discuss any changes or concerns ofDiablo and to generally cooperate in assisting Diablo in the design anddevelopment of the Product.

 

(b)           **Changes**.  Netlistmay, at any time during the term of this Agreement, request changes to theSpecification and any other functional or performance specifications agreed tobetween Diablo and Netlist.  Such requestshall be submitted by Netlist to Diablo in writing.  Diablo will then estimate, using industryestablished reasonable and customary rates, the amount of work necessary, theadditional development time and cost that would be incurred, and shall requestNetlist’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 andProduction Price will be updated in writing and signed by both parties toreflect any such changes.

 

(c)           **Engineering Resources**.  Eachparty will designate a project manager in the SOW who shall act as that party’sliaison and administrator of the project provided pursuant to the SOW.  Diablo hereby agrees to submit to the Netlistproject manager the names and other pertinent information requested by Netlistprior to utilization of any personnel of Diablo.  Netlist reserves the right to interviewDiablo’s personnel prior to such utilization. Netlist reserves the right to request the reasonable replacement of anyof Diablo’s personnel assigned to this project, and Diablo shall as soon aspossible consider such request and may remove same and secure replacement(s) reasonablyacceptable to Netlist.

 

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(d)           **Joint Tasks**.

 

(i)            The parties agree to **[***]**forboth the **[***]**and the **[***]** to ensure Diablo is developing acompetitive solution.  Diablo and Netlistwill establish a **[***]**schedule of**[***]**that will provide bothorganizations the greatest confidence of program success.

 

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

 

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

 

(e)           **License**.  In partialconsideration 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 inaccordance with the terms contained herein.

 

(i)            Delivery.  Upon execution of this Agreement, Netlistwill provide to Diablo (A) a copy of the **[***]**to enable Diablo to design and manufacture the Products and (B) allnecessary **[***]**to Diablo insupport 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 thatDiablo shall not sell or manufacture any device constituting the NetlistChipset or Netlist Technology to or for any party except Netlist; provided thatDiablo will be **[***]**and **[***]**to any third party **[***]**.

 

(iii)          JEDEC Standard.  If for any reason Netlist decides to makeavailable DxD/LRD to the market as an industry standard through JEDEC or otherstandards body; Diablo will be **[***]**undersame terms and conditions as offered to other third parties.  Netlist will provide Diablo with at least **[***]** notice of a possible release to anyindustry 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 topurchase orders or changes to purchase orders issued by Netlist and accepted inwriting by Diablo (“Purchase Orders”), to procure Inventory, componentsand other supplies and to manufacture, test, assemble, and deliver the NetlistChipset pursuant to the Specifications for each device of the Netlist Chipsetand to deliver such Netlist Chipset to a location designated by Netlist.  Except as set forth herein, this Agreementshall not constitute a requirements contract and Netlist shall not be obligatedto order Products from Diablo.

 

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(b)           **Forecasts**.  Netlistshall provide each **[***]**rollingforecast 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 deliverydates for the first **[***]**of aForecast.  The remaining **[***]**of each Forecast will be done on a **[***]**basis.  Purchase Orders will be done by Netlist onthe 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 specifiedin the Forecast.  Such purchasecommitment (including the payment obligations) shall be **[***]**and any **[***]**of such Registers are **[***]**.  For **[***]**containedin the **[***]**of a Forecast,Netlist shall **[***]**such **[***]**but will be entitled to **[***]**for such Netlist Chipset by up to **[***]**from the delivery date that Diablohad previously committed to meet.

 

(ii)           Netlist shall be committed to purchase all Netlist Chipsets containedwithin the **[***]** of a Forecast onthe delivery date that Diablo specified in the Forecast.  Such purchase commitment (including thepayment obligations) shall be **[***]**and any **[***]** of such NetlistChipsets 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 Diablohad previously committed to meet.

 

(c)           **Purchase Orders**.  Allorders 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 thisAgreement, and shall conform to the binding Forecasts in accordance with Section 3(b).  Netlist shall submit such Purchase Orders toDiablo at least ninety (90) days prior to the date of requested delivery (“DeliveryDate”).

 

(d)           **Terms and Conditions**.  Anyadditional or different terms or conditions in any communication by Netlist(whether in a purchase order or otherwise) are hereby rejected and shall benull and void, irrespective of the means of Netlist’s acceptance.  Diablo’s failure to object to any additionalor different provisions proposed by Netlist shall not constitute a waiver ofthese terms and conditions, nor constitute acceptance of any such Netlist’sterms and conditions.  All orders orcontracts must be approved and accepted by Diablo at its principal place ofbusiness.  The terms and conditions ofthis Agreement shall be applicable whether or not they are attached to orenclosed with the Products sold hereunder.

 

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

 

(i)            A minimum of **[***]**ofNetlist Market Share for the Netlist Chipsets will be allocated to Diablo ifDiablo delivers working engineering samples of the Product no later than **[***]**and production worthy devices nolater than **[***]**.  This minimum Market Share commitment willapply to the first year of production and will be maintained at least, but notnecessarily limited to, **[***]**MarketShare thereafter for the life of the Products provided that Diablo maintains acommercially reasonable continuity of supply sufficient to meet Netlist’sForecasts.

 

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

 

(iii)          The **[***]**listed in (ii) aboveshall be reduced by **[***]**forevery 2 months of delay in delivering production worthy devices of the NetlistChipset to Netlist.  Should Diablo beunable to deliver production worthy devices of the Netlist Chipset by **[***]**, Netlist will have no furtherobligations to Diablo, whether to purchase Netlist Chipset or to make anypayments beyond the second payment under Exhibit D.

 

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

 

(v)           Audit.  Netlist will maintain complete and accuraterecords for not less than three (3) years after this Agreement expires oris terminated.  Diablo may audit Netlist’srecords in accordance with this Section; provided that a nationally recognizedaccounting firm retained by Diablo (“Auditor”) will have access to such recordssolely for the purposes of confirming that Netlist has fulfilled itsobligations under Sections (i) - (iv) above.

 

**4.****                                     ****Product Shipment and Inspection.**

 

(a)           **Shipments**.  Shipmentwill be F.O.B. Diablo’s factory, at which time risk of loss and title will passto Netlist.  All freight, insurance andother shipping expenses, as well as any special packing expenses not includedin 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 carrierpursuant to Diablo’s standard shipping practices unless otherwise specified inwriting by Netlist.

 

(b)           **Product Inspection and Acceptance**.  TheProducts delivered by Diablo will be inspected and tested as required byNetlist within thirty (30) days of receipt (the “Acceptance Period”).  If Products are found to be defective inmaterial or workmanship and/or fail to meet the Specifications, Netlist mayreject such Products during the Acceptance Period.  Products not rejected during the AcceptancePeriod will be deemed accepted.  Netlistmay 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 Netlisthereunder are due forty-five (45) days from the date of invoice for Productsdelivered to Netlist and shall be made in lawful U.S. currency.  Any amounts not paid when due will accrueinterest at the rate of 1 1/2% per month, or the maximum amount allowed by law,if lower.  In the event that any paymentis more than forty-five (45) days late, Diablo shall have the right to suspendperformance until all payments are made current.

 

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(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 Netlistshall be responsible for all such items.

 

(ii)           **Expediting Charges**.  Netlist shall be responsible for anyexpediting charges reasonably necessary because of a change in Netlist’srequirements.  Diablo shall obtainapproval from Netlist for expediting charges prior to incurring any suchcharge.

 

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

 

**6.****                                     ****Marketing and Other Obligations**

 

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

 

(b)           **Joint Promotion and Marketing**.

 

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

 

(ii)           Joint Press Release.  Netlist and Diablo will issue a joint pressrelease announcing this relationship and both parties will agree to the contentof 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 Netlistshall provide a written endorsement for the incorporation into a Diablo pressrelease announcing the availability of the Diablo Standard Register for massproduction.  Diablo may identify to itsinvestors that Netlist is a customer, but will refrain from issuing any press releasesidentifying Netlist as a customer until Netlist has fully validated the fullcompliance and functionality of Diablo’s products in Netlist’s applications.

 

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**7.****                                     ****Intellectual Property Rights.**

 

(a)           **[***]**.  Allrights, 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 soleand exclusive property of **[***]**.  For purposes of this Agreement, “**[***]**” shall mean the development of asilicon chip set using the **[***]**(including without limitation the packaging) which will meet **[***]**.

 

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

 

**8.****                                     ****Confidential Information.**

 

(a)           **Nondisclosure and Nonuse**.  Eachparty shall treat as confidential all Confidential Information of the otherparty, shall not use such Confidential Information except as set forth in thisAgreement, and shall use reasonable efforts not to disclose such ConfidentialInformation to any third party.  Withoutlimiting the foregoing, each of the parties shall use at least the same degreeof care which it uses to prevent the disclosure of its own confidentialinformation of like importance to prevent the disclosure of ConfidentialInformation disclosed to it by the other party under this Agreement.  Each party shall disclose ConfidentialInformation of the other party only to its directors, officers, employees, andconsultants who are required to have such information in order for such partyto carry out the transactions contemplated by this Agreement and who havesigned nondisclosure agreements protecting the Confidential Information on substantiallythe same terms as this Agreement.  Eachparty shall promptly notify the other party of any actual or suspected misuseor unauthorized disclosure of the other party’s Confidential Information.  For purposes of clarification, the NetlistTechnology is the Confidential Information of Netlist and may not be used forany purpose other than as set forth in this Agreement, including withoutlimitation use of such Netlist Technology to develop a chip competitive to theNetlist Chipset.

 

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

 

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

 

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

 

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

 

**9.****                                     ****Indemnification.**

 

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

 

(i)            **Injunctions**.  In the event that any Product is, or in theDiablo’s sole opinion is likely to be, enjoined due to the type of infringementdescribed in Section (a) above, Diablo, at its option and expense,may either (i) modify the Netlist Chipset so that they becomenon-infringing, (ii) replace the Netlist Chipset with functionallyequivalent non-infringing Products reasonably acceptable to Netlist or, if theforegoing alternatives are not reasonably available to Diablo, (iii) acceptreturn of the Products and refund to Netlist the purchase price of the Productsand portion of the NRE payment which shall be reduced over a four (4) yearperiod under a straight line depreciation.

 

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

 

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(b)           **Indemnification by Netlist**. Netlist agrees, at its own expense, to defend or at its option to settleany claim or action brought against Diablo on the issue of infringement of anypatent, copyright, trademark, trade secret, mask work right or otherintellectual property right of any third party by the Netlist Technology asused or distributed within the scope of this Agreement, and to indemnify Diabloagainst any and all damages and costs, including legal fees, that a courtawards against Netlist under any such claim or action; provided thatDiablo provides Netlist with (i) prompt written notice of such claim oraction, (ii) sole control and authority over the defense or settlement ofsuch claim or action and (iii) proper and full information and reasonableassistance to defend and/or settle any such claim or action.

 

(c)           **Limitation**.  THEFOREGOING PROVISIONS OF THIS SECTION STATE THE ENTIRE LIABILITY ANDOBLIGATION OF EACH PARTY AND THE EXCLUSIVE REMEDY OF NETLIST, WITH RESPECT TOANY ALLEGED OR ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS,TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR NETLISTTECHNOLOGY.

 

(d)           **Mutual Indemnity**.  Theparties will indemnify each other against actions, liabilities, loss, damagesand expenses resulting from injury or death of any person or loss of or damageto any tangible real or tangible personal property to the extent that suchinjury, death, loss or damage is proximately caused by the indemnifying party’snegligent act or omission or intentional misconduct or that of its agents,employees or subcontractors in connection with the performance of itsobligations under this Agreement, provided that the indemnifying party has beennotified in writing as soon as practicable of any such claim.  The indemnifying party will have the soleright to control the defense of all such claims and in no event will theindemnified party settle any claim without the indemnifying party’s priorwritten approval.

 

(e)           **No Other Liability**.  IN NOEVENT SHALL DIABLO, ITS SUPPLIERS OR NETLIST BE LIABLE TO THE OTHER OR ANYTHIRD PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOSTPROFITS, DATA OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL,EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTIONWITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER INCONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE).  EXCEPT FOR LIABILITY INDER SECTIONS 8 and9(a), NEITHER PARTIES TOTAL AND CUMULATIVE LIABILITY ARISING OUT OF OR INCONNECTION WITH ANY PRODUCTS PURCHASED BY NETLIST HEREUNDER SHALL IN NO EVENTEXCEED THE PURCHASE PRICE PAID BY NETLIST FOR SUCH PRODUCTS.  THE LIMITATIONS SET FORTH IN THIS SECTION SHALLAPPLY EVEN IF DIABLO OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OFSUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANYLIMITED REMEDY.

 

**10.****                              ****Warranty and Disclaimer.**

 

(a)           **Warranty**.  Diablowarrants that, for a period of twelve (12) months from the date of shipment ofthe Products from Diablo (the “Warranty Period”), the Products willconform to the Specification in effect as of the date of manufacture.  Diablo SPECIFICALLY DISCLAIMS ANY INCIDENTALOR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) WHICH MAY RESULT FROMTHE USE OF PRODUCTS PURCHASED HEREUNDER. This limited warranty extends only to Netlist as original purchaserunless otherwise agreed upon in writing by Diablo.

 

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

 

(c)           **Remedies**.  If duringthe Warranty Period or Acceptance Period: (i) Diablo is notified promptlyin writing upon discovery of any defect in the Products, including a detaileddescription of such alleged defect, (ii) such Products are returned,transportation charges prepaid, to Diablo’s designated manufacturing facilityin accordance with Diablo’s then-current return procedures, as set forth byDiablo from time to time, and (iii) Diablo’s inspections and testsdetermine that the Products are indeed defective and the Products have not beensubjected to any of the conditions set forth in this Section, then, as Netlist’ssole remedy and Diablo’s sole obligation under the foregoing warranty, Diablowill replace without charge the defective Products at the earliest commerciallyreasonable time.  Any Products that havebeen replaced under this warranty shall have the same warranty coverage asoutlined in 10 (a) above.

 

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

 

**11.****                              ****Term and Termination.**

 

(a)           **Term**.  ThisAgreement shall become effective on the Effective Date of this Agreement andshall continue for a period of three years (“Initial Term”).  This Agreement shall be extendedautomatically at the end of the initial term or subsequent terms for anadditional one (1) year terms, unless terminated in accordance with thisAgreement.

 

(b)           **Termination for Cause**. Either party may terminate this Agreement at any time (i) if theother 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 beor becomes insolvent, or if either party makes an assignment for the benefit ofcreditors, or if there are instituted by or against either party proceedings inbankruptcy or under any insolvency or similar law or for reorganization,receivership or dissolution which proceeding is not dismissed within ninety(90) days.

 

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

 

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

 

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

 

**12.****                              ****Standby Manufacturing Rights**.  At Netlist’s expense, Diablo agrees todeposit into a third party escrow account, pursuant to the terms of an EscrowAgreement (which shall be mutually agreed by the parties), all engineeringdrawings, manufacture documents and instructions and other written materials(including lists of suppliers and their addresses), including database tapesnecessary to enable Netlist to manufacture, assemble, test and/or maintain theProducts (“Escrow Materials”); which Escrow Materials shall be theConfidential Information of Diablo.  SuchEscrow Agreement shall be executed within thirty (30) days after the EffectiveDate and shall authorize the release of the Escrow Materials to Netlist solelyfor use in accordance with the terms and conditions of this Agreement in theevent of a Release Condition as described and to be negotiated in the EscrowAgreement.

 

**13.****                              ****Miscellaneous.**

 

(a)           **Amendments and Waivers**.  Any term of this Agreement may be amended orwaived only with the prior written consent of the parties or their respectivesuccessors and assigns, in a document signed in ink by authorizedrepresentatives of the parties.  Anyamendment or waiver made in accordance with this Section shall be bindingupon the parties and their respective successors and assigns.

 

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

 

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

 

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

 

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(e)           **Notices**.  Any notice required or permitted by thisAgreement shall be in writing and shall be deemed sufficient upon receipt, whendelivered personally or by courier, overnight delivery service or confirmedfacsimile, or forty-eight (48) hours after being deposited in the regular mailas certified or registered mail (airmail if sent internationally) with postageprepaid, if such notice is addressed to the party to be notified at such party’saddress or facsimile number as set forth below, or as subsequently modified bywritten notice.

 

(f)            **Severability**.  If one or more provisions of this Agreementare held to be unenforceable under applicable law, the parties agree torenegotiate such provision in good faith, in order to maintain the economicposition enjoyed by each party as close as possible to that under the provisionrendered unenforceable.  In the eventthat the parties cannot reach a mutually agreeable and enforceable replacementfor such provision, then (i) such provision shall be excluded from thisAgreement, (ii) the balance of the Agreement shall be interpreted as ifsuch provision were so excluded and (iii) the balance of the Agreementshall be enforceable in accordance with its terms.

 

(g)           **Entire Agreement**.  This Agreement, including the Exhibits attachedhereto, constitutes the entire agreement between such parties pertaining to thesubject matter hereof, and merges all prior negotiations and drafts of theparties with regard to the transactions contemplated herein.  Any and all other written or oral agreementsexisting between the parties hereto regarding such transactions are expresslycanceled.

 

(h)           **Independent Contractors**.  The relationship of Diablo and Netlistestablished by this Agreement is that of independent contractors, and nothingcontained in this Agreement will be construed (i) to give either party thepower to direct and control the day-to-day activities of the other, (ii) toconstitute the parties as partners, joint venturers, co-owners or otherwise asparticipants in a joint or common undertaking, or (iii) to allow eitherparty to create or assume any obligation on behalf of the other for any purposewhatsoever.

 

(i)            **Force Majeure**.  If the performance of this Agreement or anyobligations hereunder is prevented, restricted or interfered with by reason offire or other casualty or accident, strikes or labor disputes, war or otherviolence, any law, order, proclamation, regulation, ordinance, demand orrequirement of any government agency, or any other act or condition beyond thereasonable control of the parties hereto, the party so affected upon givingprompt notice to the other parties shall be excused from such performanceduring such prevention, restriction or interference.

 

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

 

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

 

[Remainder of Page Intentionally Blank ]

 

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INWITNESS WHEREOF, the parties hereto have executed this Agreement effective asof 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 TODEVELOPMENT AND SUPPLY AGREEMENT]**

 

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Exhibit A

 

**Statement of Work See**

 

SOWDocument Number MKT-SOW-VTB-001

 

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Exhibit B

 

**Development Schedule**

 

SeeSOW Document Number MKT-SOW-VTB-001

 

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Exhibit C

 

**Production Price Schedule**

 
| **Netlist Chipset** | ** ** | **2009**     | ** ** | **2010**     | ** ** | **2011**     | ** ** | **2012**     | ** ** |
|--------------------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|
| ** **               |       |         |       |         |       |         |       |         |       |
| **[***]**                |       | US$**[***]** |       | US$**[***]** |       | US$**[***]** |       | US$**[***]** |       |
| **[***]**                |       | US$**[***]** |       | US$**[***]** |       | US$**[***]** |       | US$**[***]** |       |

 

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Exhibit D

 

**NRE Payment Schedule**

 
| **Milestone**      | ** ** | **Payment ($)** | ** ** |
|--------------------|------------|----------------------|------------|
| ** **         | ** ** | ** **           | ** ** |
| **[***]**          |       | $                    | **[***]**  |   |
| ** **         |       |                 |       |
| **[***]**          |       | $                    | **[***]**  |   |
| ** **         |       |                 |       |
| **[***]**          |       | $                    | **[***]**  |   |
| ** **         |       |                 |       |
| **[***]**          |       | $                    | **[***]**  |   |
| ** **         |       |                 |       |
| Total NRE Payment: |       | $                    | **[***]**  |   |

 

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