Exhibit 10.11


 


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


 


Settlement
Agreement and Amendment to

Development And Supply Agreement


 


This Settlement Parchment
and Amendment to the Development and Supply Agreement (“Amendment”) is
made this 12th day of January 2010 (“Amendment
Effective Date”) between Diablo Technologies, Inc., a Canadian
corporation having a principal place of business at 290 St. Joseph, Suite 200,
Gatineau, Quebec J8Y 3Y3 (“Diablo”) and Netlist, Inc., a Delaware
corporation having a principal place of business at 51 Discovery, Irvine, CA
92618 (“Netlist”).


 


R E C I T
A L S


 


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


 


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


 


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


 


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


 


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


 


A G R E E
M 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 for
all 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 in
each Netlist density configuration added to the plan of record.  Diablo shall use these funds solely to 1)
purchase DIMMs from Netlist and 2) to purchase Netlist customer target systems
for in-system validation of the Netlist Chipset.


 


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


 


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


 


[***]


 


2.                                       Release and Covenant Not to Sue.


 


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


 


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


 


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that Netlist or any
customer or business partner of Netlist is using any Confidential Information
of Diablo, provided that Netlist and Netlist’s customers and business partners
undertake reasonable precautions to maintain the confidentiality of Diablo’s
Confidential Information; 2) any claim for patent infringement based on an
invention arising as a consequence of work performed under this Agreement; or
3) that Netlist or its customers or business partners are otherwise using
technology developed by Diablo as a consequence of worked performed under this
Agreement.  Diablo hereby expressly
waives and releases any rights it may have at law or in equity to take any
legal action or other action as described in this paragraph against Netlist,
its customers or its business partners. 
The term “business partner” as used in this paragraph refers to third
parties working with Netlist in connection with Netlist products, and such
third parties are only entitled to the protections of this paragraph to the
extent of their work with Netlist.


 


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


 


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


 


(iv)                              Release and Covenant Not to Sue by
Netlist


 


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


 


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


 


A M E N D
M E N T S


 


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


 


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


 


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


 


The Market Share
Commitment shall not be capped at the minimum percentages indicated below.  Netlist shall cooperate and disclose the
status of and any feedback (whether positive or negative) to Diablo in
connection with Netlists’s qualification with any customers of the Netlist
Chipset.


 


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


 


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


 


(iii)                               Audit.  Netlist will
maintain complete and accurate records for not less than three (3) years
after this Agreement expires or is terminated. 
Diablo may audit Netlist’s records in accordance with this Section,
twice per year, at its expense; provided that a nationally recognized
accounting firm retained by Diablo (“Auditor”) will pursuant to a
confidentiality agreement have access to such records solely for the purposes
of confirming that Netlist has fulfilled its obligations under Section (i) above.


 


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


 


9.1                                 Guaranteed Minimum Allocation


 


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


 


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10.                                 Production Incentive.


 


[***]


 


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


 


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


 


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


 


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


 


G E N E R
A L


 


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


 


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


 


	
  Netlist, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Chun K. Hong

  	
   

  
	
  Name:

  	
  Chun K. Hong

  	
   

  
	
  Title:

  	
  President, CEO

  	
   

  



 


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  Diablo Technologies, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Richard Badalone

  	
   

  
	
  Name:

  	
  Richard Badalone

  	
   

  
	
  Title:

  	
  President, CEO

  	
   

  



 


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