Document:

EXHIBIT 10.1

 

NINTH
AMENDMENT TO

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

 

This Amendment, dated as of May 2, 2008, is made
by and between NETLIST, INC., a Delaware corporation, and NETLIST TECHNOLOGY
TEXAS, L.P., a Texas limited partnership (each a “Borrower” and collectively,
the “Borrowers”), on the one hand, and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its
WELLS FARGO BUSINESS CREDIT operating division, on the other hand.

 

RECITALS

 

The Borrowers and Wells Fargo Business Credit, Inc.,
a Minnesota corporation (“WFBCI”), are parties 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 Security Agreement,
dated as of June 30, 2004, a Second Amendment to Credit and Security
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 of Defaults,
dated as of April 18, 2006, a Fifth Amendment to Credit and Security
Agreement, dated as of July 28, 2006, a Sixth Amendment to Credit and
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, and an Eighth Amendment to Amended and Restated Credit and Security
Agreement, dated as of June 30, 2007 (as so amended, the
“Credit Agreement”). Capitalized terms used in these recitals have the meanings
given to them in the Credit Agreement unless otherwise specified.

 

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

 

The Borrowers have requested that the Lender make certain
additional amendments to the Credit Agreement, which the Lender is willing to
make pursuant to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements herein contained, it is agreed as
follows:

 

1.             Defined Terms.

 

(a)           Capitalized terms used
in this Amendment which are defined in the Credit Agreement shall have the same
meanings as defined therein, unless otherwise defined herein.

 

(b)           The following
definitions set forth in Section 1.1 of the Credit Agreement are hereby
amended in their entirety as follows:

 

“Equipment Advance(s)” has the meaning given to such
term in Section 2.11(a).

 

 

“Foreign Accounts Eligibility Period” means until January 31,
2009.

 

“Inventory Sublimit” means $1,000,000.

 

(c)           Clause (x) of the definition
of “Eligible Accounts” set forth in Section 1.1 of the Credit Agreement is
hereby amended in its entirety as follows:

 

(x)            Accounts
owed by an Account Debtor (or an Affiliate of such Account Debtor), regardless
of whether otherwise eligible, to the extent that the balance of such Accounts
exceeds the percentage of the aggregate amount of all Accounts indicated in the
table below opposite the applicable Account Debtor; and Accounts owned by any
two Account Debtors (or Affiliates of such Account Debtors), regardless of
whether otherwise eligible, to the extent that the combined balance of such
Accounts exceeds 80% of the aggregate amount of all Accounts:

 

	
  Account Debtor or Affiliate of Such

  Account Debtor

  	
   

  	
  Concentration Limit

  	
   

  
	
  Dell Computer Corporation

  	
   

  	
  50

  	
  %

  
	
  IBM

  	
   

  	
  40

  	
  %

  
	
  Hon Hai Precision
  Industry Co.

  	
   

  	
  40

  	
  %

  
	
  Hewlett Packard

  	
   

  	
  40

  	
  %

  
	
  All others

  	
   

  	
  15

  	
  %

  

 

(d)           The following new definitions
are hereby added to Section 1.1 of the Credit Agreement as follows:

 

“Equipment Advance(s) Tranche II” has the meaning
given to such term in Section 2.11(c). 
For purposes of this Agreement and the Equipment Note, all Equipment
Advances Tranche II are Equipment Advances.

 

“Equipment Advances Tranche II Commitment” has the
meaning given to such term in Section 2.11(c), and is a sublimit within
the Equipment Advance Commitment.

 

“Equipment Advance Tranche II Conversion Date” means December 31,
2008.

 

“Ninth Amendment” means that certain Ninth Amendment
to Amended and Restated Credit and Security Agreement, dated as of May 2, 2008,
among the Borrowers and the Lender, amending this Agreement.

 

2

 

2.             Amendment to Section 2.11.  Section 2.11 of the Credit Agreement is
hereby amended in its entirety as follows:

 

Section 2.11           Equipment Advances.

 

(a)           Subject
to the terms and conditions hereof, from the first Business Day following the
effective date of the Fifth Amendment up to but not including the Equipment
Advance Conversion Date, the Lender agrees to make one or more advances (each,
an “Equipment Advance” and collectively the “Equipment Advances”) to or for the
benefit of the Borrowers, in minimum amounts of $100,000 up to an aggregate
amount not to exceed the Equipment Advance Commitment. The Borrowers’
obligation to pay the Equipment Advances shall be evidenced by the Equipment
Note and shall be secured by the Collateral as provided in Article III.  Equipment Advances may not be re-borrowed
after repayment is made by the Borrowers. 
Each Equipment Advance shall be advanced directly to the applicable
vendor or the Borrowers, as the Borrowers may request.  The foregoing to the contrary
notwithstanding, (i) each Equipment Advance shall be in an amount, as
determined by the Lender, not to exceed 80% of the Borrowers’ invoice cost (net
of shipping, taxes, freight, installation, and other so-called “soft costs”) of
new or used Equipment that is to be purchased by the Borrowers with the
proceeds of such Advance, or new or used Equipment that has been purchased by
the Borrowers within 30 days prior to the date of such Advance, (ii) the
Equipment that is to be acquired or that has been purchased by the Borrowers
must be acceptable to the Lender in all respects, not be a fixture, and not be
intended to be affixed to real property or to become installed in or affixed to
other goods, and must be located at one of the Borrowers’ facilities located in
the United States, (iii) the Lender shall have no obligation to make any
Equipment Advance hereunder to the extent that the making thereof would cause
the then outstanding amount of all Equipment Advances to exceed the Equipment
Advance Commitment, (iv) prior to each such Equipment Advance, the Lender
shall have received an invoice for the Equipment to be purchased in form and
substance satisfactory to the Lender, together with evidence satisfactory to
the Lender that the delivery of such
Equipment has been made and unconditionally accepted by the Borrowers, (v) the
Lender may review the value of any Equipment purchased with any Equipment
Advance, with the results of such review to be satisfactory to the Lender in
its sole discretion, (vi) the aggregate amount of all Equipment Advances
outstanding at any time (including giving effect to any requested Equipment
Advance) shall not exceed the lesser of cost or fair market value, of all of
the Equipment acquired or financed with the proceeds of such Equipment
Advances, and (vii) except as otherwise provided in Section 2.11(c), on
the Equipment Advance Conversion Date the Equipment Advance Commitment and the Lender’s
obligation to make Equipment Advances shall terminate.

 

(b)           Until
the Equipment Advance Conversion Date, no principal payments shall be due on
the outstanding Equipment Advances; provided that the Borrowers shall
make interest payments thereon during such 

 

3

 

period in accordance with
Section 2.12.  Except as otherwise
provide in Section 2.11(c), the Borrowers shall repay the Equipment
Advances in equal monthly installments of principal, each in the amount equal
to 1/42 of the aggregate amount of all Equipment Advances outstanding on the
Equipment Advance Conversion Date and such installments to be due and payable
on the first day of each month commencing February 1, 2007 and continuing
on the first day of each succeeding month.

 

(c)           Prior
to the effectiveness of the Ninth Amendment, there existed $903,600 of undrawn
availability under the Equipment Advance Commitment which the Lender has agreed
to make available to the Borrowers pursuant to the terms of this Agreement (the
“Equipment Advance Tranche II Commitment). 
Subject to the terms and conditions hereof, from the first Business Day
following the effective date of the Ninth Amendment up to but not including the
Equipment Advance Tranche II Conversion Date, the Lender agrees to make one or
more additional Equipment Advances to or for the benefit of the Borrowers
(each, an “Equipment Advance Tranche II” and collectively the “Equipment
Advances Tranche II”), in minimum amounts of $100,000 up to an aggregate amount
not to exceed the Equipment Advance Tranche II Commitment. The Borrowers’
obligation to pay all Equipment Advances Tranche II shall be evidenced by the
Equipment Note and shall be secured by the Collateral as provided in Article III.  Equipment Advances Tranche II may not be
re-borrowed after repayment is made by the Borrowers.  Each such Equipment Advance Tranche II shall
be advanced directly to the applicable vendor or the Borrowers, as the
Borrowers may request.  The foregoing to
the contrary notwithstanding, (i) each Equipment Advance Tranche II shall
be in an amount, as determined by the Lender, not to exceed 80% of the
Borrowers’ invoice cost (net of shipping, taxes, freight, installation, and
other so-called “soft costs”) of new or used Equipment that is to be purchased
by the Borrowers with the proceeds of such Advance, or new or used Equipment
that has been purchased by the Borrowers within 60 days prior to the date of
such Advance, (ii) the Equipment that is to be acquired or that has been
purchased by the Borrowers must be acceptable to the Lender in all respects,
not be a fixture, and not be intended to be affixed to real property or to
become installed in or affixed to other goods, and must be located at one of
the Borrowers’ facilities located in the United States, (iii) the Lender
shall have no obligation to make any Equipment Advance Tranche II hereunder to
the extent that the making thereof would cause the then outstanding amount of
all Equipment Advances Tranche II to exceed the Equipment Advance Tranche II
Commitment, (iv) prior to each Equipment Advance Tranche II, the Lender
shall have received an invoice for the Equipment to be purchased in form and
substance satisfactory to the Lender, together with evidence satisfactory to the
Lender that the delivery of such Equipment has been made and unconditionally
accepted by the Borrowers, (v) the Lender may review the value of any
Equipment purchased with Equipment Advance Tranche II, with the results of such
review to be satisfactory to the Lender in its sole discretion, (vi) the
aggregate amount of all Equipment Advances (including all Equipment Advances
Tranche II) outstanding at any time (including giving effect to any requested 

 

4

 

Equipment Advance Tranche
II) shall not exceed the lesser of cost or fair market value, of all of the
Equipment acquired or financed with the proceeds of Equipment Advances
(including Equipment Advances Tranche II), and (vii) on the Equipment
Advance Tranche II Conversion Date the Equipment Advance Tranche II Commitment and
the Lender’s obligation to make Equipment Advances Tranche II shall terminate.

 

(d)           Until
the Equipment Advance Tranche II Conversion Date, no principal payments shall
be due on the outstanding Equipment Advances Tranche II; provided that
the Borrowers shall make interest payments thereon during such period in
accordance with Section 2.12.  The
Borrowers shall repay the Equipment Advances Tranche II in equal monthly
installments of principal, each in the amount equal to 1/42 of the aggregate
amount of all Equipment Advances Tranche II outstanding on the Equipment
Advance Tranche II Conversion Date and such installments to be due and payable
on the first day of each month commencing January 1, 2009 and continuing
on the first day of each succeeding month.

 

(e)           If
the Lender at any time obtains an appraisal of the Equipment as permitted under
Section 6.10(e) herein, and the appraisal shows the aggregate
outstanding principal balance of the Equipment Note to exceed eighty percent
(80%) of the Net Orderly Liquidation
Value of the Equipment financed with the Equipment Advances (including
Equipment Advances Tranche II), then the Borrowers, upon demand by the
Lender, shall immediately prepay the Equipment Note in the amount of such
excess.  All prepayments of principal
with respect to the Equipment Note shall be applied to the most remote
principal installment or installments then unpaid.

 

(f)            Notwithstanding the foregoing, on the
Termination Date, the entire unpaid principal balance of the Equipment Note, and all unpaid interest accrued
thereon, shall in any event be due and payable.

 

3.             Amendment
to Section 2.12(b).  Section 2.12(b) of
the Credit Agreement shall be deleted in its entirety and restated as follows:

 

(b)           Margins.  The Margins for all Floating Rate
Advances and all LIBOR Advances shall be the Margins set forth in the table
below opposite the applicable balance of the Borrowers’ combined account
balance maintained at WF Institutional Brokerage Services:

 

5

 

	
  Borrowers’
  Combined

  Account Balance

  Maintained at WF

  Institutional Brokerage

  Services

  	
   

  	
  Margin for Floating

  Rate Advances

  	
   

  	
  Margin for LIBOR

  Advances

  
	
  $12,000,000 or greater

  	
   

  	
  Zero percentage points (0 basis points)

  	
   

  	
  2.50 percentage points (250 basis points)

  
	
  Less than $12,000,000

  	
   

  	
  One half of one percentage point (50 basis points)

  	
   

  	
  3.50 percentage points (350 basis points)

  

 

Account balances will be tested as of the end of each
month based on the statements delivered pursuant to Section 6.1(r).  Any reductions or increases in the Margins
will be effective as of the first day of the month following the applicable
test date.  In the event that the
Borrowers fail to timely deliver the statements required pursuant to Section 6.1(r),
in addition to and not in substitution for any of 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. Notwithstanding the foregoing, no reduction in any
Margin will be made if a Default Period exists at the time that such reduction
would otherwise be made.

 

4.             Financial
Covenants.  Section 6.2
of the Credit Agreement is hereby amended in its entirety as follows:

 

Section 6.2             Financial
Covenants.

 

(a)           Intentionally Deleted.

 

(b)           Minimum Net Income (Maximum Net Loss).  The Borrowers will achieve, for each rolling
three month period described below, Net Income (or Net Loss) of not less than (or
more than, as applicable) the amount set forth for each such period (numbers
appearing between “< >“ are negative):

 

6

 

	
  Three Months Ending:

  	
   

  	
  Minimum Net Income / Maximum
  Net Loss

  
	
  January 31, 2008

  	
   

  	
  <$2,350,000>

  
	
  February 29, 2008

  	
   

  	
  <$1,850,000>

  
	
  March 31, 2008

  	
   

  	
  <$4,400,000>

  
	
  April 30, 2008

  	
   

  	
  <$3,950,000>

  
	
  May 31, 2008

  	
   

  	
  <$3,850,000>

  
	
  June 30, 2008

  	
   

  	
  <$2,950,000>

  
	
  July 31, 2008

  	
   

  	
  <$3,200,000>

  
	
  August 31, 2008

  	
   

  	
  <$3,200,000>

  
	
  September 30, 2008

  	
   

  	
  <$2,300,000>

  
	
  October 31, 2008

  	
   

  	
  <$1,900,000>

  
	
  November 30, 2008

  	
   

  	
  <$1,700,000>

  
	
  December 31, 2008

  	
   

  	
  <$850,000>

  

 

(c)           Capital Expenditures.  The Borrowers will not incur or contract to
incur Capital Expenditures of more than $1,000,000 in the aggregate during the fiscal
year ending December 31, 2008.

 

(d)           Intentionally Deleted.

 

(e)           Intentionally Deleted.

 

(f)            Minimum Liquidity.  The Borrowers will maintain at all times, determined
as of the end of each month, the sum of their cash and cash equivalents at an
amount not less than $20,000,000.

 

5.             Amendment to Section 6.10(a).  Section 6.10(a) of the Credit
Agreement is hereby amended in its entirety as follows:

 

(a)           The
Borrowers will keep accurate books of record and account for themselves
pertaining to the Collateral and pertaining to each Borrower’s business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender’s request, will permit any officer, employee, attorney,
accountant or other agent of the Lender to audit, review, 

 

7

 

make extracts from or
copy any and all company and financial books and records of the Borrowers at all
times during ordinary business hours, to send and discuss with account debtors
and other obligors requests for verification of amounts owed to either
Borrower, and to discuss each Borrower’s affairs with any of its Directors,
Officers, employees or agents. 
Notwithstanding the foregoing, the Lender shall not conduct such audits
more than three times per calendar year unless an Event of Default has occurred
and is continuing.

 

6.             Amendment to Section 6.10(d).  Section 6.10(d) of the Credit
Agreement is hereby amended in its entirety as follows:

 

(d)           The
Lender may also, from time to time (but no more frequently than one time per
calendar year unless an Event of Default has occurred and is continuing),
obtain at the Borrowers’ expense an appraisal of the Inventory by an appraiser
acceptable to the Lender in its sole discretion.

 

7.             Replacement Exhibit C.  Exhibit C attached to the Credit
Agreement is hereby replaced with Exhibit C attached to this Amendment.

 

8.             No Other Changes. Except as
explicitly amended by this Amendment, all of the terms and conditions of the
Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

 

9.             Amendment Fee. The Borrowers shall pay the Lender a fully
earned, non-refundable fee in the amount of $10,000 (“Amendment Fee”) in
consideration of the Lender’s execution and delivery of this Amendment.  The Amendment Fee shall be due and payable
upon execution of this Amendment.

 

10.           Conditions Precedent. This
Amendment shall be effective when the Lender shall have received an executed
original hereof, together with each of the following, each in substance and
form acceptable to the Lender in its sole discretion:

 

(a)           The
Amendment Fee; and

 

(b)           Such
other matters as the Lender may require.

 

11.           Representations and Warranties. Each
Borrower hereby represents and warrants to the Lender as follows:

 

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

 

(b)           The
execution, delivery and performance by each Borrower of this Amendment has been
duly authorized by all necessary corporate action and do not (i) require
any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate
any provision of any law, rule or 

 

8

 

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) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such Borrower is
a party or by which it or its properties may be bound or affected.

 

(c)           All of the representations
and warranties contained in Article V of the Credit Agreement are correct
on and as of the date hereof as though made on and as of such date, except to
the extent that such representations and warranties relate solely to an earlier
date.

 

12.           References.
All references in the Credit Agreement to “this Agreement” shall be deemed to
refer to the Credit Agreement as amended hereby; and any and all references in
the Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.

 

13.           No Waiver.  The
execution of this Amendment and acceptance of any documents related hereto
shall not be deemed to be a waiver of any Default or Event of Default under the
Credit Agreement or breach, default or event of default under any Security
Document or other document held by the Lender, whether or not known to the
Lender and whether or not existing on the date of this Amendment.

 

14.           Release.

 

(a)           Each Borrower  hereby absolutely and unconditionally releases and forever
discharges 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 former
directors, officers, agents and employees of any of the foregoing, from any and
all 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 or
federal law or otherwise, which such Borrower has had, now has or has made
claim 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 and
including the date of this Amendment, whether such claims, demands and causes of
action are matured or unmatured or known or unknown.  Each Borrower certifies that it has read the
following provisions of California Civil Code Section 1542:

 

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.

 

(b)           Each Borrower
understands and acknowledges that the significance and consequence of this waiver
of California Civil Code Section 1542 is that even if it should eventually
suffer additional damages arising out of the facts referred to above, they will
not be able to make any claim for those damages. Furthermore, each Borrower
acknowledges that it intends these consequences even as to claims for damages
that may exist as of the date of this release but which it does not know exist,
and which, if known, would materially affect its 

 

9

 

decision to execute this
Agreement, regardless of whether its lack of knowledge is the result of
ignorance, oversight, error, negligence, or any other cause.

 

15.           Costs and
Expenses. The Borrowers hereby reaffirm their agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrowers
specifically agree to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation
of this Amendment and the documents and instruments incidental hereto. The
Borrowers hereby agree that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrowers, make a
loan to 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, and the Amendment Fee.

 

16.           Miscellaneous.
This Amendment may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.

 

[remainder of this page intentionally left blank]

 

10

 

IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed as of the date first written above.

 

	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION

  	
   

  	
  NETLIST, INC.

  
	
  Through its Wells Fargo Business Credit

  operating division

  	
   

  	
  By:

  	
  /s/ Chun K. Hong

  
	
   

  	
   

  	
  Name: Chun K. Hong

  
	
   

  	
   

  	
   

  	
  Its: President

  
	
  By

  	
  /s/ Jeffrey Cristol

  	
   

  	
   

  
	
  Name: Jeffrey Cristol

  	
   

  	
   

  
	
  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: PresidentEXHIBIT
10.5

 

	
  SUMMARY
  SHEET:

  	
  SUMMARY
  OF ACCELERATION OF VESTING AND EXTENSION OF EXERCISE PERIOD FOR RESIGNING
  DIRECTORS

  

 

On
February 14, 2008, Cano Petroleum, Inc. authorized for any current or
future non-employee members of the Board of Directors who elect to resign and
are in good standing at the time of such resignation that all unvested stock
options will vest upon resignation and the exercise period for all stock
options will be extended to twenty-four (24) months after the date of
resignation.

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