**Exhibit10.11**

 

**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.**

 

**Settlement Agreement and Amendment toDevelopment And Supply Agreement**

 

ThisSettlement Agreement and Amendment to the Development and Supply Agreement (“Amendment”)is made 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,CA 92618 (“Netlist”).

 

**RECITALS**

 

Whereas,Netlist entered into a Development and Supply Agreement with Diablo to havecertain products designed and manufactured by Diablo on September 10, 2008(“Agreement”); and

 

Whereas,in the course of performing this Agreement, the parties have had disputesregarding the obligations and performance under this Agreement, including thebreaches thereof;

 

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

 

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

 

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

 

**AGREEMENTS**

 

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

 

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

 

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

 

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

 

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

 

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(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 requested belowor a plan including a schedule to address the items requested below

 

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

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

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

4.             Progress report on **[***]**andReliability **[***]**

5.             Errata List of **[***]**forboth RD and ID

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

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

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

 

2.             Release and Covenant Not to Sue.

 

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

 

(ii)           Diablo further covenants and agrees that it will not assert any claim ortake any action against Netlist or any customer or business partner of Netlist,or claim that Netlist is not entitled to ship products using chips procuredfrom other suppliers, now or in the future, based on Netlist’s marketing orsale of products that utilize chips procured from companies other than Diablo,only with respect to the followings claims: 1) any claim 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.

 

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(iii)          Diablo acknowledges that there is a risk that subsequent to the executionof this Amendment, it may discover, incur or suffer facts and/or claims whichwere unknown or unanticipated at the time this Amendment is executed.  Diablo acknowledges and agrees that by reasonof the releases and covenants contained herein, it is assuming the risk of suchunknown facts and/or claims and agrees that this Amendment appliesthereto.  In connection therewith, Diabloexpressly waives the benefits of Section 1542 of the California CivilCode, which section provides as follows, and any laws of similar affectapplicable in any jurisdiction:

 

“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 HERSETTLEMENT WITH THE DEBTOR.”

 

(iv)          Release and Covenant Not to Sue by Netlist

 

Netlisthereby fully releases, forever discharges and covenants not to sue Diablo andits 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 ofaction, 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 theAmendment Effective Date.

 

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

 

**AMENDMENTS**

 

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

 

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

 

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

 

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TheMarket Share Commitment shall **[***]**indicatedbelow.  Netlist shall cooperate anddisclose the status of and any feedback (whether positive or negative) toDiablo in connection with Netlists’s qualification with any customers of theNetlist Chipset.

 

Netlistagrees not to renegotiate the purchase price of the Products to achieve ormaintain this percentage:

 

(i)            **[***]**of NetlistProduction: **[***]**;Between **[***]** months of Netlist Production: **[***]**;After **[***]** month of Netlist Production: **[***]**.

 

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

 

(iii)          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, 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 solelyfor the purposes of confirming that Netlist has fulfilled its obligations underSection (i) above.

 

(iv)          If qualification requirements change in the 12months following signing this Amendment, Netlist will give Diablo notice assoon 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 MinimumAllocation

 

Notwithstandingsection 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 amaximum of 100% of the Netlist Market Share.

 

10.           Production Incentive.

 

·**     ****[***]**

 

**[***]**

 

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

 

“(a)         **Term**.  This Agreement shall become effective on theEffective Date of this Agreement and shall continue for a period of three (3) years(“Initial Term”).  This Agreementshall be extended automatically at the end of the initial term or subsequentterms for an additional one (1) year term, unless terminated in accordancewith this Agreement or unless either party notifies the other party in writingof its intent not to renew at least ninety (90) days prior to the expiration ofthe Initial Term or subsequent term.”

 

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16.           Section II (e) shallbe amended to include:

 

Theobligations of Diablo under Section 2 of this Amendment will survive, inaccordance with the terms hereof, the term and termination of this Agreement,and will remain in full force and effect regardless of the cause of anytermination 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 andeffect.  Unless otherwise defined in thisAmendment, capitalized terms used in this Amendment shall have the same meaningas set forth in the Agreement.  ThisAmendment, together with the Agreement, constitute the entire agreement of theparties with respect to the subject matter hereof, and supersedes any otheragreements, promises, representations or discussions, written or oral,concerning such subject matter.

 

INWITNESS WHEREOF, the parties hereto have executed this Amendment effective asof 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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