Document:

Exhibit 10.32

 

FORBEARANCE

TO

LOAN AND SECURITY AGREEMENT

 

This FORBEARANCE to Loan and Security Agreement (this  “Agreement”) is entered into this 27 day of March 2013, by and between Silicon Valley Bank (“Bank”) and Netlist, Inc., a Delaware corporation (“Borrower”).

 

RECITALS

 

A.                                    Bank and Borrower have entered into that certain Loan and Security Agreement with an Effective Date of October 31, 2009 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).  Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

B.                                    Borrower acknowledges that Borrower is currently in default of the Loan Agreement for failing to comply with the Tangible Net Worth Financial Covenant set forth in Section 6.9(b) of the Loan Agreement for each of the compliance periods ending October 31, 2012, November 30, 2012, December 31, 2012 and January 31, 2013 and such failure to comply constitutes an Event of Default (the “Existing Defaults”).

 

C.                                    Borrower has requested that Bank forbear from exercising its rights and remedies against Borrower during the Forbearance Period (as defined in Section 2.1 below).  Although Bank is under no obligation to do so, Bank is willing to forbear from exercising its rights and remedies against Borrower through the Forbearance Period on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.                                      Definitions.  Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Loan Agreement.

 

2.                                      Forbearance.

 

2.1                               Forbearance Period.  Subject to all the terms and conditions set forth herein, Bank shall forbear from filing any legal action or instituting or enforcing any rights and remedies it may have against Borrower from the Forbearance Effective Date (as defined in Section 11) until the date (the “Forbearance Termination Date”) which is the earliest to occur of (a) April 30, 2013, (b) the failure after the date hereof of Borrower to comply with any of the terms or undertakings of this Agreement, (c) the occurrence after the date hereof of any Event of Default (other than the Existing Defaults), (d) the date that Borrower joins in, assists, cooperates, or participates as an adverse party or adverse witness in any suit or other proceeding against Bank relating to 

 

 

the Obligations in connection with or related to any of the transactions contemplated by any of the other Loan Documents.  Except as expressly provided herein, this Agreement does not constitute a waiver or release by Bank of any Obligations or of the Existing Defaults or any other present or future Event of Default whether or not known to Bank.  If Borrower does not comply with the terms of this Agreement, Bank shall have no further obligations under this Agreement and shall be permitted to exercise at such time any rights and remedies against Borrower as it deems appropriate in its sole and absolute discretion.  Borrower understands that Bank has made no commitment and is under no obligation whatsoever to grant any additional extensions of time at the end of the Forbearance Period.  The time period between the Forbearance Effective Date and the Forbearance Termination Date is referred to herein as the “Forbearance Period.”

 

2.2                               Forbearance Terms. Repayment and performance of all Obligations of Borrower to Bank under the Loan Agreement and this Agreement shall be secured by the Collateral.

 

3.                                      Amendments to Loan Agreement.

 

3.1                               Modified Interest Rate.  Section 2.3(a) of the Loan Agreement is hereby amended in its entirety to read as follows:

 

(a)                                 Interest Rate.

 

(i)                                     Advances.  Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a per annum rate equal to the following: (i) at all times that a Streamline Period is in effect, one and three-quarters of one percentage points (1.75%) above the Prime Rate; and (ii) at all times that a Streamline Period is not in effect, two and three-quarters of one percentage points (2.75%) above the Prime Rate; which interest shall be payable monthly in accordance with Section 2.3(f) below.

 

(ii)                                        Term Loan.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a per annum rate equal to three and one-quarter percentage points (3.25%) above the Prime Rate, which interest shall be payable monthly in accordance with Section 2.3(f) below.

 

3.2                               Modified Definition of Borrowing Base.  The definition of “Borrowing Base” set forth in Section 13.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

“Borrowing Base” is (a) 80% (the “A/R Advance Rate” and also an “Advance Rate”) of Eligible Accounts minus (b) the amount of Two Million Dollars ($2,000,000) (the 

 

 

“BB Blocked Amount”), as determined by Bank from Borrower’s most recent Transaction Report; provided, however, that Bank may decrease any one or more of the Advance Rates in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral or Borrower.

 

4.                                      Limitation of Forbearance.

 

4.1                               This Agreement is effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

4.2                               This Agreement shall be construed in connection with and as part of the Loan Documents, and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents are hereby ratified and confirmed and shall remain in full force and effect.

 

5.                                      [Omitted].

 

6.                                      Representations and Warranties.  Borrower represents and warrants to Bank as follows:

 

6.1                               (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default other than the Existing Defaults has occurred and is continuing;

 

6.2                               Borrower has the power and authority to execute and deliver this Agreement and to perform its obligations under the Loan Agreement;

 

6.3                               The organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

6.4                               The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement have been duly authorized by all necessary action on the part of Borrower;

 

6.5                               The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or  decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

 

6.6                               The execution and delivery by Borrower of this Agreement and the performance by Borrower of its obligations under the Loan Agreement do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

 

6.7                               This Agreement has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

7.                                      Prior Agreement.  The Loan Documents are hereby ratified and reaffirmed and shall remain in full force and effect.  This Agreement is not a novation and the terms and conditions of this Agreement shall be in addition to and supplemental to all terms and conditions set forth in the Loan Documents.  In the event of any conflict or inconsistency between this Agreement and the terms of such documents, the terms of this Agreement shall be controlling, but such document shall not otherwise be affected or the rights therein impaired.  As of the date hereof, the aggregate outstanding principal amount owing to Bank is $3,111,111.

 

8.                                      Release by Borrower.

 

8.1                               FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Bank and its present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution of this Agreement (collectively “Released Claims”).  Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

 

8.2                               In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:

 

 

“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.” (Emphasis added.)

 

8.3                               By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever.  Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

 

8.4                               This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release.  Borrower acknowledges that the release contained herein constitutes a material inducement to Bank to enter into this Agreement, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

 

8.5                               Borrower hereby represents and warrants to Bank, and Bank is relying thereon, as follows:

 

(a)                                 Except as expressly stated in this Agreement, neither Bank nor any agent, employee or representative of Bank has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Agreement.

 

(b)                                 Borrower has made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto, as it deems necessary.

 

(c)                                  The terms of this Agreement are contractual and not a mere recital.

 

(d)                                 This Agreement has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Agreement is signed freely, and without duress, by Borrower.

 

(e)                                  Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or 

 

 

purported to assign or transfer, to any person, firm or entity any claims or other matters herein released.  Borrower shall indemnify Bank, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

 

9.                                      Integration.  This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents

 

10.                               Counterparts.  This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

11.                               Conditions to Effectiveness.  The parties agree that the forbearance obligations of Bank herein shall be effective upon the satisfaction of each of the following conditions precedent, each in form and substance satisfactory to Bank, on or prior to March 27, 2013 (the date of the satisfaction of such conditions precedent referred to herein as the “Forbearance Effective Date”) (a) the due execution and delivery to Bank of this Agreement by each party hereto and (b) Borrower’s payment of a forbearance fee in an amount equal to $10,000 (which fee shall be fully earned by Bank upon the execution and delivery of this Agreement by the parties hereto).

 

12.                               Miscellaneous.

 

12.1                        This Agreement shall constitute a Loan Document under the Loan Agreement; the failure to comply with the covenants contained herein shall constitute an Event of Default under the Loan Agreement; and all obligations included in this Agreement (including, without limitation, all obligations for the payment of principal, interest, fees, and other amounts and expenses) shall constitute obligations under the Loan Agreement and secured by the Collateral.

 

12.2                        Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

13.                               Governing Law.  This Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of California.

 

[Signature page follows.]

 

 

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

 

 

	
BANK
    	
 
    	
BORROWER
    
	
 
    	
 
    	
 
    
	
Silicon   Valley Bank
    	
 
    	
Netlist, Inc.
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Brian Lowry
    	
 
    	
By:
    	
/s/   Gail Sasaki
    
	
Name:
    	
Brian   Lowry
    	
 
    	
Name:
    	
Gail   Sasaki
    
	
Title:
    	
Relationship   Manager
    	
 
    	
Title:
    	
Vice   President and Chief Financial OfficerExhibit 10.11

 

Reimbursement of Services Agreement

 

This Reimbursement of Services Agreement (the “Agreement”) is made effective as of October 1, 2012 by and between Richmont Holdings, Inc. a Texas corporation (“Richmont”) and Computer Vision Systems Laboratories Corp. a Florida corporation (“CVSL”).

 

RECITALS

 

Whereas, CVSL is a fully-reporting SEC registrant controlled by John P. Rochon that has announced a strategy of acquiring companies in the direct selling industry; and

 

Whereas, CVSL has yet to establish an infrastructure of personnel and resources necessary to identify, analyze, negotiate and conduct due diligence on such acquisition candidates; and

 

Whereas, CVSL has an immediate and continuing need for such acquisition opportunities and advice and assistance in areas related to identification, analysis, financing, due diligence, negotiations and other strategic planning, accounting, tax and legal matters associated with such potential acquisitions; and

 

Whereas, Richmont has already been pursuing a strategy of acquisitions in the direct selling industry and has incurred significant costs in identifying, analyzing, performing due diligence, structuring and negotiating potential transactions; and

 

Whereas, Richmont has experience in the above areas and CVSL wishes to draw upon such experience to obtain a variety of useful and beneficial services from Richmont, its affiliates and third parties; and

 

Whereas, Richmont is willing to transfer the opportunities it has previously pursued to CVSL and continue to render ongoing services to CVSL; and

 

Whereas, CVSL desires to pursue the existing opportunities and use such services;

 

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                                      CVSL hereby engages Richmont to render acquisition identification, analysis, negotiation, planning, strategy, financing, accounting, tax and legal matters (collectively the “Services”) throughout the term of this Agreement, and Richmont agrees to perform the Services in the interest of CVSL during the term of this Agreement, subject to the terms and conditions stated herein. The Services shall be performed on a continuing basis without any further specific request.

 

2.                                      CVSL may also request Richmont to render additional special services and Richmont undertakes to comply with such requests to the extent that it has the time, resources, manpower and expertise to do so.

 

3.                                      As part of this Agreement, Richmont agrees to transfer  to and provide CVSL all its previously prepared work product created in the identification, analysis, negotiation, planning, strategy, financing, accounting, tax and legal aspects of certain acquisition targets in the direct selling industry (the “Targets”).  CVSL, as consideration for the immediate opportunity to pursue such Targets, agrees to reimburse Richmont for due diligence, financial analysis, legal, travel and other costs Richmont incurred related to the investigation of, transaction structuring of and overall pursuit of the Targets.

 

4.                                      In consideration of the rendering of the Services by Richmont, CVSL agrees to pay to Richmont, without demand, a reimbursement fee (the “Reimbursement Fee”) due on or before the last business day of each month equal to One Hundred Fifty Thousand and no/100 dollars ($150,000.00) for the first six months of the Agreement and One Hundred Sixty Thousand and no/100 dollars ($160,000.00) thereafter, or such other amount as may be agreed to from time to time.  The parties acknowledge and agree that the

 

 

Reimbursement Fee represents reasonable compensation to reimburse Richmont and its affiliates for Richmont’s ongoing costs incurred in the provision of the Services.

 

5.                                      All payments made pursuant to this Agreement shall be paid to Richmont in United States Dollars and deposited to such bank account in the United States as Richmont shall designate.

 

6.                                      Under this Agreement the liability of Richmont for a material breach of the terms of this Agreement shall be limited to cases in which CVSL establishes gross negligence or wrongful intent on the part of Richmont or of any of its agents or employees, provided however, that in no event shall Richmont be held liable for any consequential damages or for any loss of profits suffered by CVSL or by any third party, and provided further that the amount of damages claimed in respect of all breaches that may occur during one calendar year in regard to CVSL shall not exceed the amount of the Reimbursement Fee which CVSL owes to Richmont for the year during which the breach occurred.

 

7.                                      Richmont’s liability for torts committed by Richmont or by its agents or employees shall be limited to cases where CVSL is able to establish that Richmont or one or more of its agents or employees have acted with wrongful intent or gross negligence. Richmont’s liability for torts committed by outside parties which have not entered into a service agreement with Richmont and which Richmont has engaged to help to render the Services shall be limited to that amount of damages that Richmont actually recovers from the outside party.

 

8.                                      This Agreement shall remain in effect for a term of one (1) year unless terminated earlier according to the provisions set out below.  The parties may agree to mutually extend this Agreement in writing.

 

9.                                      Either party may terminate this Agreement for cause for breaches of any material term of this Agreement that remain uncured ninety (90) days after the receipt of written notice from the non-breaching party.

 

10.                               The parties may meet to review and modify this Agreement periodically as to the reasonableness of its terms and the service levels and economic expectations of the parties.  If at any time the parties discover that this Agreement does not provide for a fair balance between the interests of both parties, particularly if the responsibilities between the parties are modified considerably, this Agreement shall be adapted to this change of circumstance. The parties to this Agreement shall then agree upon such amendments as are required to reflect the change of circumstances.

 

11.                               This Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Texas.

 

12.                               All notices, requests, demands and other communications (collectively “Communications”) under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is given; (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below; (iii) on the business day after delivery to an overnight courier service or the express mail service maintained by the United States Postal Service, provided receipt of delivery is confirmed; or (iv) on the fifth (5th) day after mailing, provided receipt of delivery is confirmed, if mailed to the party to whom notice is to be given, by first class mail, registered or certified postage prepaid, properly addressed and return receipt requested, to the other party

 

13.                               In the event that any term or condition of this Agreement shall be declared invalid, this Agreement shall be construed as if the same had not been inserted and the remaining provisions will remain in full force and effect.

 

14.                               This Agreement may be executed in any number of counterparts and each such counterpart shall for all purposes constitute one agreement binding on all parties hereto.

 

 

15.                               The headings and section numbers used herein are for the purpose of convenience only and are not to be used in construing the meaning or intent of this Agreement.

 

16.                               Failure by either party to this Agreement at any time or from time to time to enforce any of the provisions hereof shall not be construed to be a waiver of such provision or of such party’s right to thereafter enforce each and every provision hereof.

 

IN WITNESS WHEREOF the parties hereto have executed this Agreement effective as of the date first written above.

 

 

	
 
    	
 
    	
Richmont   Holdings, Inc.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Kelly   L. Kittrell  
    
	
 
    	
 
    	
 
    	
Name:   Kelly L. Kittrell  
    
	
 
    	
 
    	
 
    	
Title:   Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Computer   Vision Systems Laboratories Corp.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ John   P. Rochon  
    
	
 
    	
 
    	
 
    	
Name:   John P. Rochon  
    
	
 
    	
 
    	
 
    	
Title: Chairman   and Chief Executive Officer

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