Document:

Exhibit
10.9

 

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.

 

	
  Toshiba America Electronic
  Components, Inc.

  	
   

  	
  TOSHIBA

  
	
  2950 Orchard Parkway,
  San Jose, CA 95131

  	
   

  	
   

  

 

Design and Production Agreement

Amendment #2

Netlist Inc.

 

This Amendment #2 (‘‘Amendment #2”) to the ID
ASIC Design and Production Agreement, dated July 31, 2008, as amended (TAEC#
51N12402125) (“Agreement”) is between Toshiba America Electronic Components, Inc.,
with a principal place of business at 19900 MacArthur Boulevard, Suite 400,
Irvine, CA 92612 (“TAEC”) and Netlist Inc., with a place of business at 51
Discovery, Suite 150 Irvine, CA 92618 (“Customer”) and sets out the terms
and conditions under which TAEC will design the product identified herein for
Customer. This Amendment is effective as of the date finally executed below (“Effective
Date”).

 

1.             Project
Name

 

ID ASIC

 

2.             New
Schedule

 

The parties agree to delete the contents of Section 4
of the Agreement, Schedule, and replace it with the following:

 

Major Project Milestones.

 

	
  Event

  	
   

  	
  Target Date/Completed

  
	
  Development PO Released

  	
   

  	
  [***]

  
	
  Preliminary Feasibility
  Study

  	
   

  	
  [***]

  
	
  Design Decision

  	
   

  	
  [***]

  
	
  Design Initiation

  	
   

  	
  [***]

  
	
  Package Selection
  Finalized

  	
   

  	
  [***]

  
	
  Early RTL for
  Pipecleaning

  	
   

  	
  [***]

  
	
  Final RTL (functionally
  correct)

  	
   

  	
  [***]

  
	
  Tapeout - Second
  Signoff (GDSII transfer)

  	
   

  	
  [***]

  
	
  Delivery of Prototypes

  	
   

  	
  TBD

  
	
  System compliance phase
  - start

  	
   

  	
  TBD

  
	
  System compliance phase
  - complete

  	
   

  	
  TBD

  
	
  1st Risk
  Production shipment

  	
   

  	
  TBD

  

 

Production turnaround
time:  16 working weeks.

 

Schedule is provisional.

 

3.             New
Internal/External IP

 

The parties agree to delete the contents of Section 7
of the Agreement, Internal/External IP, and replace it with the following:

 

Toshiba Confidential

 

1

 

Internal IP:

 

[***]

 

External
IP:

[***]

 

4.                                      Additional Features Non-Recurring Engineering
Charges and Payment Schedule:

 

4.1                                 Customer
agrees to pay non-recurring engineering charges (“Additional Features NRE”) to
TAEC for support of the following design changes:

 

[***]

 

2

 

4.2                                 The
Additional Features NRE will he calculated according to the resources expended
by TAEC, which will be charged at the rate of US$[***] per
full-time-equivalent person per week. TAEC will provide a weekly update to
Customer regarding resources expended.

 

TAEC
estimates that the Additional Features NRE for this ID design will be US$[***], or thirty-two (32) person-weeks. This estimate is
subject to change.

 

4.3                                 The
Additional Features NRE will be payable as follows:

 

1.                                       US$[***] ([***]% of
estimated Additional Features NRE) upon tapeout or [***],
whichever is earlier.

 

2.                                       The
balance (total person-weeks actually expended, less US$[***])
upon Delivery of Prototypes together with test logs showing successful
completion of the Toshiba Testing as defined in the Product Testing Agreement
between the parties.

 

For
the avoidance of doubt, the Additional Features. NRE payable under this
Amendment #2 is in addition to and does not replace the NRE payable under the
Agreement and/or Amendment #1.

 

5.             Cancellation

 

5.1                                 If
Customer wishes to discontinue the project set forth in this Amendment #2 prior
to tapeout, then Customer shall pay TAEC US$[***]
(“Additional Features Cancellation Fee”), In addition, TAEC reserves the right
to invoice Customer for any resources expended by TAEC prior to cancellation in
excess of 19 person-weeks. The Additional Features Cancellation Fee shall be
offset by any amount of the Additional Features NRE already paid to TAEC by
Customer.

 

5.2                                 In
the event that Customer unilaterally fails to provide information, data, or
approvals necessary for TAEC to proceed with the project for a period of [***] from TAEC’s initial request for such information,
data, or approvals, TAEC reserves the right to deem the project set forth in
this Amendment #2 cancelled and assess the Additional Features Cancellation
Fee.

 

Except as modified herein, all Other terms and
conditions of the. Agreement shall remain in lull force and effect pet their
terms

 

	
  Toshiba American
  Electronic Components, Inc.

  	
   

  	
  Netlist Inc,

  
	
   

  	
   

  	
   

  
	
  /s/ Takeshi Iwamoto

  	
   

  	
  /s/ Gail Itow

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Takeshi Iwamoto VP,
  Customer SoC Foundry Business Unit

  	
   

  	
  Gail Itow, CFO

  
	
  Printed name and title

  	
   

  	
  Printed name and title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3/10/10

  	
   

  	
  3/5/10

  
	
  Date

  	
   

  	
  Date

  

 

3Exhibit 10.10

 

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.

 

MKT-DSA-VTB-001

 

Diablo Technologies, Inc.

Development
And Supply Agreement

 

This Development and
Supply Agreement (“Agreement”) is made this 10th day of September 2008
(“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”).

 

RECITALS

 

Whereas, Netlist desires
to have certain products designed and manufactured by Diablo for sale to
Netlist; and Diablo has the capability of designing and manufacturing such
products and desires to do so for sale to Netlist.

 

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:

 

AGREEMENT

 

1.                                      Definitions. 
The following terms shall have the meanings set forth below.

 

“Confidential
Information” of a party shall mean any information disclosed by that party
to the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked “Confidential,” “Proprietary” or
in some other manner to indicate its confidential nature.  Confidential Information may also include
oral information disclosed by one party to the other pursuant to this
Agreement, provided that such information is designated as confidential at the
time of disclosure and is reduced to writing by the disclosing party within a
reasonable time (not to exceed thirty (30) days) after its oral disclosure, and
such writing is marked in a manner to indicate its confidential nature and
delivered to the receiving party.

 

“Cost” shall mean
Diablo’s full standard cost basis including without limitation any applicable
license royalties.

 

“Intellectual Property
Rights” shall mean all intellectual property rights including, but not
limited to, patents, copyrights, authors’ rights, trademarks, tradenames,
know-how and trade secrets, irrespective of whether such rights arise under
U.S. or international intellectual property, unfair competition or trade secret
laws.

 

“Inventory” shall
mean raw materials and supplies necessary for the manufacture of Products
pursuant to this Agreement.

 

“Market Share” shall
mean the number of Netlist Chipsets shipped, invoiced or sold by Netlist to any
third party.

 

1

 

“Netlist Technology”
shall mean Netlist’s patented and trade secret-protected Rank
Multiplication/Load Rank Multiplication technology (“DxD/LRD”), including
without limitation its “know-how” and database design technology, developed
prior to the Effective Date and provided to Diablo.

 

“Netlist Chipset”
shall mean a DDR3 proprietary chip set solution consisting of a DDR3 standard
register (with DxD/LRD physically enabled) and set of isolation devices
utilizing the Netlist Technology for use in Netlist RDIMM products implemented
in OEM server systems developed under this Agreement in accordance with the
Specification.

 

“Diablo Standard
Register” or “Register” shall mean a DDR3 industry standard register
derivative of Netlist Chipset with either or both of DxD/LRD functionality
physically disabled.

 

“Products” shall
include both Netlist Chipset and Diablo Standard Register.

 

“Specifications”
shall mean the logic diagram, schematics, test requirements and definition,
plots, and electric related requirements and “know-how” and revised or modified
to produce the initial prototypes, and, to the extent necessary, modifications
thereto, to produce the Product set forth in Exhibit A.

 

2.                                      Development and Design.

 

(a)                                  Development and Design. 
Netlist agrees to pay a NRE (Non-Recurring Engineering) Payment (set
forth in Exhibit D) to Diablo for the design and development of the
Netlist Chipset and the delivery of the initial prototypes, all meeting the
Specifications, as defined in the Statement of Work set forth in Exhibit A
(“SOW”) and on the dates specified in the NRE Payment Schedule.  Diablo shall use its commercially reasonable
efforts to design and develop the Product as defined in the SOW and to meet the
Development Schedule (set forth in Exhibit B).  Netlist agrees to promptly respond to
inquiries, make personnel available to discuss any changes or concerns of
Diablo and to generally cooperate in assisting Diablo in the design and
development of the Product.

 

(b)                                 Changes. 
Netlist may, at any time during the term of this Agreement, request
changes to the Specification and any other functional or performance
specifications agreed to between Diablo and Netlist.  Such request shall be submitted by Netlist to
Diablo in writing.  Diablo will then
estimate, using industry established reasonable and customary rates, the amount
of work necessary, the additional development time and cost that would be
incurred, and shall request Netlist’s approval of such additional cost and
development time.  Upon written receipt
of such approval, implementation of such changes will proceed.  The Specification, Development Schedule, NRE
Payment Schedule and Production Price will be updated in writing and signed by
both parties to reflect any such changes.

 

(c)                                  Engineering Resources. 
Each party will designate a project manager in the SOW who shall act as
that party’s liaison and administrator of the project provided pursuant to the
SOW.  Diablo hereby agrees to submit to
the Netlist project manager the names and other pertinent information requested
by Netlist prior to utilization of any personnel of Diablo.  Netlist reserves the right to interview Diablo’s
personnel prior to such utilization. 
Netlist reserves the right to request the reasonable replacement of any
of Diablo’s personnel assigned to this project, 

 

2

 

and Diablo shall as soon as possible consider such request and may
remove same and secure replacement(s) reasonably acceptable to Netlist.

 

(d)                                 Joint Tasks.

 

[***]

 

(e)                                  License.

 

[***]

 

3.                                      Manufacture and Supply of
Products.

 

(a)                                  Agreement to Manufacture. 
Diablo agrees to make commercially reasonable efforts, pursuant to
purchase orders or changes to purchase orders issued by Netlist and accepted 

 

3

 

in writing by Diablo (“Purchase Orders”), to procure Inventory,
components and other supplies and to manufacture, test, assemble, and deliver
the Netlist Chipset pursuant to the Specifications for each device of the
Netlist Chipset and to deliver such Netlist Chipset to a location designated by
Netlist.  Except as set forth herein,
this Agreement shall not constitute a requirements contract and Netlist shall
not be obligated to order Products from Diablo.

 

[***]

 

(c)                                  Purchase Orders. 
All orders for Netlist Chipset shall be submitted to Diablo in writing
by mail, email or facsimile to the address set forth on the signature page to
this Agreement, and shall conform to the binding Forecasts in accordance with Section 3(b).  Netlist shall submit such Purchase Orders to
Diablo at least ninety (90) days prior to the date of requested delivery (“Delivery
Date”).

 

(d)                                 Terms and Conditions. 
Any additional or different terms or conditions in any communication by
Netlist (whether in a purchase order or otherwise) are hereby rejected and
shall be null and void, irrespective of the means of Netlist’s acceptance.  Diablo’s failure to object to any additional
or different provisions proposed by Netlist shall not constitute a waiver of
these terms and conditions, nor constitute acceptance of any such Netlist’s
terms and conditions.  All orders or
contracts must be approved and accepted by Diablo at its principal place of
business.  The terms and conditions of
this Agreement shall be applicable whether or not they are attached to or
enclosed with the Products sold hereunder.

 

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

 

4

 

(i)                                     A [***] for the
Netlist Chipsets will be allocated to Diablo if Diablo delivers working
engineering samples of the Product no later than [***]
and production worthy devices no later than [***].  This minimum Market Share commitment will
apply to the first year of production and will be maintained at least, but not
necessarily limited to, [***] Market
Share thereafter for the life of the Products provided that Diablo maintains a
commercially reasonable continuity of supply sufficient to meet Netlist’s
Forecasts.

 

(ii)                                  A [***] for the
Netlist Chipsets will be allocated to Diablo if Diablo delivers working
engineering samples of the Product no later than [***]
and production worthy devices no later than [***].  This minimum Market Share commitment will
apply to the first year of production and will he maintained thereafter for the
life of the Products provided that Diablo maintains a commercially reasonable
continuity of supply sufficient to meet Netlist’s Forecasts.

 

(iii)                               The [***] listed in
(ii) above shall be reduced by [***] for every
2 months of delay in delivering production worthy devices of the Netlist
Chipset to Netlist.  Should Diablo be
unable to deliver production worthy devices of the Netlist Chipset by [***] Netlist will have no further obligations to Diablo,
whether to purchase Netlist Chipset or to make any payments beyond the second
payment under Exhibit D.

 

(iv)                              The parties hereby agree that the above
Market Share commitments are contingent upon Netlist receiving qualification
status on a major leading platform at one (1) OEM (IBM, RP, or Dell) for
RDIMM(s) using the Netlist Chipset and Diablo’s ability to maintain or
reduce sell prices as outlined below in Exhibit C.  If Netlist is not able to secure a major
leading platform at one OEM and if Diablo delivers production devices of the
Netlist Chipset by [***] Netlist
will commit to purchase [***] of the
Products from Diablo over a period of one year.

 

(v)                                 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;
provided that a nationally recognized accounting firm retained by Diablo (“Auditor”)
will have access to such records solely for the purposes of confirming that
Netlist has fulfilled its obligations under Sections (i) - (iv) above.

 

4.                                      Product Shipment and
Inspection.

 

(a)                                  Shipments. 
Shipment will be F.O.B. Diablo’s factory, at which time risk of loss and
title will pass to Netlist.  All freight,
insurance and other shipping expenses, as well as any special packing expenses
not included in the original price quotation for the Products will be paid by
Netlist.  The carrier shall be deemed
Netlist’s agent, and any claims for damages in shipment must be filed with the
carrier.  Diablo is authorized to
designate a carrier pursuant to Diablo’s standard shipping practices unless
otherwise specified in writing by Netlist.

 

5

 

(b)                                 Product Inspection and
Acceptance.  The Products delivered by Diablo will be
inspected and tested as required by Netlist within thirty (30) days of receipt
(the “Acceptance Period”).  If
Products are found to be defective in material or workmanship and/or fail to
meet the Specifications, Netlist may reject such Products during the Acceptance
Period.  Products not rejected during the
Acceptance Period will be deemed accepted. 
Netlist may return rejected Products pursuant to Section 10(c).

 

5.                                      Payment Terms, Additional
Costs and Price Changes.

 

(a)                                  Payment Terms. 
Payment for any products, services or other costs to be paid by Netlist
hereunder are due forty-five (45) days from the date of invoice for Products
delivered to Netlist and shall be made in lawful U.S. currency.  Any amounts not paid when due will accrue
interest at the rate of 1 1/2% per month, or the maximum amount allowed by law,
if lower.  In the event that any payment
is more than forty-five (45) days late, Diablo shall have the right to suspend
performance until all payments are made current.

 

(b)                                 Additional Costs.

 

(i)                                     Duties and Taxes.  
All prices quoted are exclusive of federal, state and local excise,
sales, use and similar duties and taxes, and Netlist shall be responsible for
all such items.

 

(ii)                                  Expediting Charges. 
Netlist shall be responsible for any expediting charges reasonably
necessary because of a change in Netlist’s requirements.  Diablo shall obtain approval from Netlist for
expediting charges prior to incurring any such charge.

 

(c)                                  Price. 
The initial maximum average selling price for Products is set forth on Exhibit C
hereto; which shall be subject to final order acknowledgment from Diablo at the
time a Purchase Order is placed. Netlist and Diablo will agree to quarterly
pricing sixty (60) days prior to the beginning of each quarter.  The price guidelines set forth in Exhibit C
will be the basis for establishing quarterly pricing such that the original
metrics used to define this price structure remains reasonably intact.  The average selling price is contingent upon
Diablo receiving the minimum Market Share defined in Section 3e above, and
maintaining market competitive selling prices to Netlist.

 

6.                                      Marketing and Other
Obligations

 

[***]

 

(b)                                 Joint Promotion and
Marketing.

 

(i)                                     Netlist and Diablo will engage in a joint
marketing effort providing introductions of each other to their respective
customers.  Netlist shall use best
commercial efforts, in order to meet Netlist market share obligations to Diablo,
by promoting, where possible, the use of Netlist products utilizing Diablo
based products.  Both parties shall
provide appropriate recognition of the other party’s contributions.

 

6

 

(ii)                                  Joint Press Release.  [***]

 

(iii)                               [***]

 

7.                                      Intellectual Property
Rights.

 

(a)                                  [***]

 

(b)                                 [***]

 

8.                                      Confidential Information.

 

(a)                                  Nondisclosure and Nonuse. 
Each party shall treat as confidential all Confidential Information of
the other party, shall not use such Confidential Information except as set
forth in this Agreement, and shall use reasonable efforts not to disclose such
Confidential Information to any third party. 
Without limiting the foregoing, each of the parties shall use at least
the same degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement.  Each party shall disclose
Confidential Information of the other party only to its directors, officers,
employees, and consultants who are required to have such information in order
for such party to carry out the transactions contemplated by this Agreement and
who have signed nondisclosure agreements protecting the Confidential
Information on substantially the same terms as this Agreement.  Each party shall promptly notify the other
party of any actual or suspected misuse or unauthorized disclosure of the other
party’s Confidential Information.  For
purposes of clarification, the Netlist Technology is the Confidential
Information of Netlist and may not be used for any purpose other than as set
forth in this Agreement, including without limitation use of such Netlist
Technology to develop a chip competitive to the Netlist Chipset.

 

(b)                                 Exceptions. 
Notwithstanding the above, neither party shall have liability to the
other with regard to any Confidential Information of the other which the
receiving party can prove (i) was in the public domain at the time it was
disclosed or has entered the public domain 

 

7

 

through no fault of the receiving party; (ii) was known to the
receiving party, without restriction, at the time of disclosure, as
demonstrated by files in existence at the time of disclosure; (iii) is
disclosed with the prior written approval of the disclosing party; (iv) was
independently developed by the receiving party without any use of the
Confidential Information, as demonstrated by files created at the time of such
independent development; (v) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other governmental body;
provided, however, that the receiving party shall provide prompt notice of such
court order or requirement to the disclosing party to enable the disclosing
party to seek a protective order or otherwise prevent or restrict such
disclosure.

 

(c)                                  Return of Confidential
Information.  Upon expiration or termination of this
Agreement and at the request of either party, the other party shall promptly
return all Confidential Information of the other party.

 

(d)                                 Remedies. 
Any breach of the restrictions contained in this Section is a
breach of this Agreement which may cause irreparable harm to the nonbreaching
party.  Any such breach shall entitle the
nonbreaching party to injunctive relief in addition to all legal remedies.

 

Confidentiality
of Agreement.  Each party shall be entitled to disclose the
existence of this Agreement, but agrees that the terms and conditions of this
Agreement shall be treated as Confidential Information and shall not be
disclosed to any third party; provided, however, that each party may disclose
the terms and conditions of this Agreement: (i) as required by any court
or other governmental body; (ii) as otherwise required by law; (iii) to
legal counsel of the parties; (iv) in confidence, to accountants, banks,
and financing sources and their advisors; (v) in connection with the
enforcement of this Agreement or rights under this Agreement or (vi) in
confidence, in connection with an actual or proposed merger, acquisition, or
similar transaction.

 

9.                                      Indemnification.

 

(a)                                  Indemnification by Diablo. 
Diablo agrees, at its own expense, to defend or at its option to settle
any claim or action brought against Netlist on the issue of infringement of any
patent, copyright, trademark, trade secret, mask work right or other
intellectual property right of any third party by the Products as used or
distributed within the scope of this Agreement, and to indemnify Netlist
against any and all damages and costs, including legal fees, that a court
awards against Netlist under any such claim or action; provided that
Netlist provides Diablo with (i) prompt written notice of such claim or
action, (ii) sole control and authority over the defense or settlement of
such claim or action and (iii) proper and full information and reasonable
assistance to defend and/or settle any such claim or action.

 

(i)                                     Injunctions. 
In the event that any Product is, or in the Diablo’s sole opinion is
likely to be, enjoined due to the type of infringement described in Section (a) above,
Diablo, at its option and expense, may either (i) modify the Netlist
Chipset so that they become non-infringing, (ii) replace the Netlist
Chipset with functionally equivalent non-infringing Products reasonably
acceptable to Netlist or, if the foregoing alternatives are not reasonably
available to Diablo, (iii) accept return of the Products and refund to
Netlist the purchase price of the Products and portion of the NRE payment which
shall be reduced over a four (4) year period under a straight line
depreciation.

 

8

 

(ii)                                  Exceptions. 
Diablo will have no liability to the extent that any such claim is based
on the Netlist Technology or would have been avoided but for (i) use or
combination of the Netlist Chipset with any other products not provided by
Diablo or (ii) modification of the Netlist Chipset after delivery by
Diablo, unless such use, combination and/or modification is authorized in
advance in writing by Diablo.

 

(b)                                 Indemnification by Netlist. 
Netlist agrees, at its own expense, to defend or at its option to settle
any claim or action brought against Diablo on the issue of infringement of any
patent, copyright, trademark, trade secret, mask work right or other
intellectual property right of any third party by the Netlist Technology as
used or distributed within the scope of this Agreement, and to indemnify Diablo
against any and all damages and costs, including legal fees, that a court
awards against Netlist under any such claim or action; provided that
Diablo provides Netlist with (i) prompt written notice of such claim or
action, (ii) sole control and authority over the defense or settlement of
such claim or action and (iii) proper and full information and reasonable
assistance to defend and/or settle any such claim or action.

 

(c)                                  Limitation. 
THE FOREGOING PROVISIONS OF THIS SECTION STATE THE ENTIRE LIABILITY
AND OBLIGATION OF EACH PARTY AND THE EXCLUSIVE REMEDY OF NETLIST, WITH RESPECT
TO ANY ALLEGED OR ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS,
TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR NETLIST
TECHNOLOGY.

 

(d)                                 Mutual Indemnity. 
The parties will indemnify each other against actions, liabilities,
loss, damages and expenses resulting from injury or death of any person or loss
of or damage to any tangible real or tangible personal property to the extent
that such injury, death, loss or damage is proximately caused by the
indemnifying party’s negligent act or omission or intentional misconduct or
that of its agents, employees or subcontractors in connection with the
performance of its obligations under this Agreement, provided that the
indemnifying party has been notified in writing as soon as practicable of any
such claim.  The indemnifying party will
have the sole right to control the defense of all such claims and in no event
will the indemnified party settle any claim without the indemnifying party’s
prior written approval.

 

(e)                                  No Other Liability. 
IN NO EVENT SHALL DIABLO, ITS SUPPLIERS OR NETLIST BE LIABLE TO THE
OTHER OR ANY THIRD PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR
SERVICES, LOST PROFITS, DATA OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE).  EXCEPT FOR LIABILITY INDER SECTIONS 8 and
9(a), NEITHER PARTIES TOTAL AND CUMULATIVE LIABILITY ARISING OUT OF OR IN
CONNECTION WITH ANY PRODUCTS PURCHASED BY NETLIST HEREUNDER SHALL IN NO EVENT
EXCEED THE PURCHASE PRICE PAID BY NETLIST FOR SUCH PRODUCTS.  THE LIMITATIONS SET FORTH IN THIS SECTION SHALL
APPLY EVEN IF DIABLO OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH 

 

9

 

DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.

 

10.                               Warranty and Disclaimer.

 

(a)                                  Warranty. 
Diablo warrants that, for a period of twelve (12) months from the date
of shipment of the Products from Diablo (the “Warranty Period”), the
Products will conform to the Specification in effect as of the date of manufacture.  Diablo SPECIFICALLY DISCLAIMS ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) WHICH MAY RESULT FROM
THE USE OF PRODUCTS PURCHASED HEREUNDER. 
This limited warranty extends only to Netlist as original purchaser
unless otherwise agreed upon in writing by Diablo.

 

(b)                                 Exclusions. 
The foregoing warranty shall not apply if the defective Products (i) has
been subjected to abuse, misuse, neglect, negligence, accident, improper
testing, improper installation, improper storage, improper handling or use
contrary to any instructions issued by Diablo, (ii) has been repaired or
altered by persons other than Diablo, (iii) has not been installed,
operated, repaired and maintained in accordance with the documentation or (iv) is
attributable to the Netlist Technology. 
In addition, the foregoing warranty shall not apply to Product (i) marked
or identified as “sample,” (ii) loaned or provided to Netlist at no cost,
or (iii) which are sold “as is.”

 

(c)                                  Remedies. 
If during the Warranty Period or Acceptance Period: (i) Diablo is
notified promptly in writing upon discovery of any defect in the Products,
including a detailed description of such alleged defect, (ii) such
Products are returned, transportation charges prepaid, to Diablo’s designated
manufacturing facility in accordance with Diablo’s then-current return
procedures, as set forth by Diablo from time to time, and (iii) Diablo’s
inspections and tests determine that the Products are indeed defective and the
Products have not been subjected to any of the conditions set forth in this
Section, then, as Netlist’s sole remedy and Diablo’s sole obligation under the
foregoing warranty, Diablo will replace without charge the defective Products
at the earliest commercially reasonable time. 
Any Products that have been replaced under this warranty shall have the
same warranty coverage as outlined in 10 (a) above.

 

(d)                                 Disclaimer. 
EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION, DIABLO MAKES NO
OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY PRODUCTS
PROVIDED IN CONNECTION WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, OR ARISING FROM COURSE OF PERFORMANCE, DEALING, USAGE OR
TRADE.

 

11.                               Term and Termination.

 

(a)                                  Term. 
This Agreement shall become effective on the Effective Date of this
Agreement and shall continue for a period of three 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 terms, unless terminated in accordance with this
Agreement.

 

10

 

(b)                                 Termination for Cause. 
Either party may terminate this Agreement at any time (i) if the
other party breaches any term hereof and fails to cure such breach within sixty
(60) days after notice of such breach or (ii) if the other party shall be
or becomes insolvent, or if either party makes an assignment for the benefit of
creditors, or if there are instituted by or against either party proceedings in
bankruptcy or under any insolvency or similar law or for reorganization,
receivership or dissolution which proceeding is not dismissed within ninety
(90) days.

 

(c)                                  Termination for Technical
Reasons.  In the event that after exercising
commercially reasonable efforts, Diablo is unable to deliver production worthy
Netlist Chipsets due to technical changes created or requested by Netlist,
after the establishment of this agreement, either Netlist or Diablo shall have
the right to terminate this agreement.

 

(d)                                 Obligations Upon
Termination.  The termination or expiration of this
Agreement shall in no way relieve either party from its obligations to pay the
other any sums accrued hereunder prior to such termination or expiration.

 

(e)                                  Survival of Certain
Provisions.  Notwithstanding anything to the contrary in
this Agreement, the following sections shall survive termination of this
Agreement: 1, 2e, 5, 7, 8, 9, 10, 11(d), 12 and 13.

 

12.                               Standby Manufacturing
Rights.  At Netlist’s expense, Diablo agrees to
deposit into a third party escrow account, pursuant to the terms of an Escrow
Agreement (which shall be mutually agreed by the parties), all engineering
drawings, manufacture documents and instructions and other written materials
(including lists of suppliers and their addresses), including database tapes
necessary to enable Netlist to manufacture, assemble, test and/or maintain the
Products (“Escrow Materials”); which Escrow Materials shall be the
Confidential Information of Diablo.  Such
Escrow Agreement shall be executed within thirty (30) days after the Effective
Date and shall authorize the release of the Escrow Materials to Netlist solely
for use in accordance with the terms and conditions of this Agreement in the
event of a Release Condition as described and to be negotiated in the Escrow
Agreement.

 

13.                               Miscellaneous.

 

(a)                                  Amendments and Waivers. 
Any term of this Agreement may be amended or waived only with the prior
written consent of the parties or their respective successors and assigns, in a
document signed in ink by authorized representatives of the parties.  Any amendment or waiver made in accordance with
this Section shall be binding upon the parties and their respective
successors and assigns.

 

 

(b)                                 Successors and Assigns. 
The rights and obligations of each party under this Agreement shall not
be assignable without the prior written consent of the other party and any
attempt to assign them without that consent will be void.  Notwithstanding the foregoing, either party
may assign, upon written notice to the other, both the rights and obligations
of this Agreement to the surviving corporation in any merger or consolidation
to which it is a party or to any person who acquires all or substantially all
of its capital stock or assets.  Any
purported 

 

11

 

transfer, assignment or delegation in, violation of the foregoing will
be null and void and of no force or effect.

 

(c)                                  Governing Law; Attorney
Fees and Costs.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

 

(d)                                 Titles and Subtitles. 
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.

 

(e)                                  Notices. 
Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient upon receipt, when delivered personally or by
courier, overnight delivery service or confirmed facsimile, or forty-eight (48)
hours after being deposited in the regular mail as certified or registered mail
(airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as set forth below, or as subsequently modified by written notice.

 

(f)                                    Severability. 
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, the parties agree to renegotiate such provision in good
faith, in order to maintain the economic position enjoyed by each party as
close as possible to that under the provision rendered unenforceable.  In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii) the
balance of the Agreement shall be enforceable in accordance with its terms.

 

(g)                                 Entire Agreement. 
This Agreement, including the Exhibits attached hereto, constitutes the
entire agreement between such parties pertaining to the subject matter hereof,
and merges all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein.  Any
and all other written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.

 

(h)                                 Independent Contractors. 
The relationship of Diablo and Netlist established by this Agreement is
that of independent contractors, and nothing contained in this Agreement will
be construed (i) to give either party the power to direct and control the
day-to-day activities of the other, (ii) to constitute the parties as
partners, joint venturers, co-owners or otherwise as participants in a joint or
common undertaking, or (iii) to allow either party to create or assume any
obligation on behalf of the other for any purpose whatsoever.

 

(i)                                     Force Majeure. 
If the performance of this Agreement or any obligations hereunder is
prevented, restricted or interfered with by reason of fire or other casualty or
accident, strikes or labor disputes, war or other violence, any law, order,
proclamation, regulation, ordinance, demand or requirement of any government agency,
or any other act or condition beyond the reasonable control of the parties
hereto, the party so affected upon giving prompt notice to the other parties
shall be excused from such performance during such prevention, restriction or
interference.

 

12

 

(j)                                     Export Control. 
Netlist acknowledges and agrees that the Products purchased under this
Agreement may be subject to restrictions and controls imposed by the United
States Export Administration Act and the regulations thereunder.  Netlist warrants that it will not export or
re-export any products purchased, or SoftWare licensed, under this Agreement
into any country in violation of such controls or any other laws, rules or
regulations of any country, state or jurisdiction.

 

(k)                                  Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute
one instrument.

 

[Remainder of Page Intentionally
Blank ]

 

13

 

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

 

	
  Netlist, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Perrott

  	
   

  
	
  Name:

  	
  James P. Perrott

  	
   

  
	
  Title:

  	
  SVP Sales &
  Marketing

  	
   

  
	
   

  	
   

  
	
  Diablo Technologies, Inc.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ricardo Badalone

  	
   

  
	
  Name:

  	
  Ricardo Badalone

  	
   

  
	
  Title:

  	
  C.E.O.

  	
   

  

 

[SIGNATURE
PAGE TO

DEVELOPMENT AND SUPPLY AGREEMENT]

 

14

 

Exhibit A

 

Statement
of Work See

 

SOW Document Number MKT-SOW-VTB-001

 

15

 

Exhibit B

 

Development
Schedule

 

See SOW Document Number
MKT-SOW-VTB-001

 

16

 

Exhibit C

 

Production
Price Schedule

 

	
  Netlist
  Chipset

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  2011

  	
   

  	
  2012

  	
   

  
	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  	
  US$

  	
  [***]

  	
   

  

 

17

 

Exhibit D

 

NRE
Payment Schedule

 

	
  Milestone

  	
   

  	
  Payment ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Specification
  sign-off of the Product

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tape-out
  of Product

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Engineering
  sample shipment of Product

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Production
  status of Product

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  NRE Payment:

  	
   

  	
  $

  	
  [***]

  	
   

  

 

18

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