**Exhibit 10.11**

 

**CERTAININFORMATION (INDICATED BY “[***]”) IN THIS EXHIBIT HAS BEEN OMITTED AND FILEDSEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTEDWITH RESPECT TO THE OMITTED PORTIONS.**

 

**SettlementAgreement and Amendment toDevelopment And Supply Agreement**

 

This Settlement Parchmentand Amendment to the Development and Supply Agreement (“Amendment”) ismade this 12th day of January 2010 (“AmendmentEffective 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, CA92618 (“Netlist”).

 

**R E C I TA L S**

 

Whereas, Netlist enteredinto a Development and Supply Agreement with Diablo to have certain productsdesigned and manufactured by Diablo on September 10, 2008 (“Agreement”);and

 

Whereas, in the course ofperforming this Agreement, the parties have had disputes regarding theobligations and performance under this Agreement, including the breachesthereof;

 

WHEREAS, the parties haveagreed to compromise, settle and resolve all past disputes, liabilities andobligations between them concerning or regarding the alleged breaches of theAgreement;

 

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

 

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

 

**A G R E EM E N T S**

 

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

 

(a)                                  **[***]**

 

(b)                                 **[***]**

 

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

 

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(d)                                 Agree to provide Diablo a budget of $**[***]** US dollars for each Netlist Chipset qualification ineach 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 systemsfor in-system validation of the Netlist Chipset.

 

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

 

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

 

**[***]**

 

2.                                       Release and Covenant Not to Sue.

 

(i)            Diablo hereby fully releases and foreverdischarges 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 todamages, collection, reimbursement, costs, expenses, attorneys’ fees, andrights to injunctive relief, known or unknown, relating to any alleged breachof this Agreement, by such party prior to the Amendment Effective Date,including but not limited to any allegation by Diablo that Netlist madeimproper use of any Diablo Confidential Information or any other technologyencompassed within Diablo’s Intellectual Property Rights.

 

(ii)           Diablo further covenants and agrees thatit will not assert any claim or take any action against Netlist or any customeror business partner of Netlist, or claim that Netlist is not entitled to shipproducts using chips procured from other suppliers, now or in the future, basedon Netlist’s marketing or sale of products that utilize chips procured fromcompanies other than Diablo, only with respect to the followings claims: 1) anyclaim 

 

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that Netlist or anycustomer or business partner of Netlist is using any Confidential Informationof Diablo, provided that Netlist and Netlist’s customers and business partnersundertake reasonable precautions to maintain the confidentiality of Diablo’sConfidential Information; 2) any claim for patent infringement based on aninvention arising as a consequence of work performed under this Agreement; or3) that Netlist or its customers or business partners are otherwise usingtechnology developed by Diablo as a consequence of worked performed under thisAgreement.  Diablo hereby expresslywaives and releases any rights it may have at law or in equity to take anylegal 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 thirdparties working with Netlist in connection with Netlist products, and suchthird parties are only entitled to the protections of this paragraph to theextent of their work with Netlist.

 

(iii)          Diablo acknowledges that there is a riskthat subsequent to the execution of this Amendment, it may discover, incur orsuffer facts and/or claims which were unknown or unanticipated at the time thisAmendment is executed.  Diabloacknowledges 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 thatthis Amendment applies thereto.  Inconnection therewith, Diablo expressly waives the benefits of Section 1542of the California Civil Code, which section provides as follows, and any lawsof similar affect applicable in any jurisdiction:

 

“A GENERAL RELEASE DOESNOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST INHIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM ORHER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

(iv)                              Release and Covenant Not to Sue byNetlist

 

Netlist hereby fullyreleases, forever discharges and covenants not to sue Diablo and its respectivepast, 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 toany alleged breach of this Agreement by such party prior to the AmendmentEffective Date.

 

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

 

**A M E N DM E N T S**

 

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

 

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“3(e)                      Market Share Commitment. Netlist shall allocate to Diablo the following percentages of Netlist MarketShare for the Netlist Chipsets unless Netlist Product using Netlist Chipsetssupplied by Diablo do not successfully complete required third partyqualification.  Netlist shall not biasthird party qualifications against Netlist Product using Diablo suppliedNetlist Chipsets.

 

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

 

The Market ShareCommitment shall not be capped at the minimum percentages indicated below.  Netlist shall cooperate and disclose thestatus of and any feedback (whether positive or negative) to Diablo inconnection with Netlists’s qualification with any customers of the NetlistChipset.

 

Netlist agrees not torenegotiate the purchase price of the Products to achieve or maintain thispercentage:

 

(i)                                     1st 6 Months of Netlist Production: **[***]**; Between 6th and 18th months of Netlist Production: **[***]**; After 18 month of Netlist Production: **[***]**.

 

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

 

(iii)                               Audit.  Netlist willmaintain complete and accurate records for not less than three (3) yearsafter 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 recognizedaccounting firm retained by Diablo (“Auditor”) will pursuant to aconfidentiality agreement have access to such records solely for the purposesof confirming that Netlist has fulfilled its obligations under Section (i) above.

 

(iv)                              If qualification requirements change inthe 12 months following signing this Amendment, Netlist will give Diablo noticeas soon as possible to allow Diablo to propose a remedy.  During this period, if the product does notmeet the customer requirements, Netlist shall make commercially reasonableefforts to maintain Diablo’s market share by increasing shipments to othercustomers.

 

9.1                                 Guaranteed Minimum Allocation

 

Notwithstanding section3(e), Netlist shall allocate to Diablo a minimum of **[***]**%of the Netlist total annual consumption of **[***]** providedhowever such allocation shall be limited to a maximum of 100% of the NetlistMarket Share.

 

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10.                                 Production Incentive.

 

**[***]**

 

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

 

“(a)                            **Term**. This Agreement shall become effective on the Effective Date of thisAgreement and shall continue for a period of three (3) years (“InitialTerm”).  This Agreement shall beextended automatically at the end of the initial term or subsequent terms foran additional one (1) year term, unless terminated in accordance with thisAgreement or unless either party notifies the other party in writing of itsintent not to renew at least ninety (90) days prior to the expiration of theInitial Term or subsequent term.”

 

16.                                 Section II (e) shall be amendedto include:

 

The obligations of Diablounder Section 2 of this Amendment will survive, in accordance with theterms hereof, the term and termination of this Agreement, and will remain infull force and effect regardless of the cause of any termination and be bindingon any successors or assigns.

 

**G E N E RA L**

 

17.                                 Except as set forth herein, all terms andconditions 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 setforth in the Agreement.  This Amendment,together with the Agreement, constitute the entire agreement of the partieswith respect to the subject matter hereof, and supersedes any other agreements,promises, representations or discussions, written or oral, concerning suchsubject matter.

 

IN WITNESS WHEREOF, theparties hereto have executed this Amendment effective as of the AmendmentEffective Date.

 
| **Netlist, Inc.** |
|------------------------|
|                   |   |   |
| By:                    | */s/ Chun K. Hong* |   |
| Name:                  | Chun K. Hong |   |
| Title:                 | President, CEO |   |

 

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| **Diablo Technologies, Inc.** |
|------------------------------------|
|                               |   |   |
| By:                                | */s/ Richard Badalone* |   |
| Name:                              | Richard Badalone |   |
| Title:                             | President, CEO |   |

 

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