A. Bank and Borrower are parties to that certain Loan and Security Agreement with an Effective Date of October 31, 2009 (as amended, modified, supplemented or restated, the “Loan Agreement”) in effect between Bank and Borrower.

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Bank has agreed to so amend the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

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

2. Amendments to Loan Documents.  The Loan Agreement is amended as follows, effective on the date hereof (except where a different effective date is specified below):

2.1 Modified Anniversary Fee.  Section 2.4(g) of the Loan Agreement is hereby amended in its entirety to read as follows

2.2 Modified Tangible Net Worth Financial Covenant.  Section 6.9(b) of the Loan Agreement is hereby amended in its entirety to read as follows:

2.3 Modified Termination Fee. Section 12.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

2.4 Modified Definition of Revolving Line Maturity Date.  The definition of Revolving Line Maturity Date set forth in Section 13.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

2.5 Modified Exhibit B.  Exhibit B to the Loan Agreement is hereby amended in its entirety to read as set forth in Exhibit B attached hereto.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are 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.

3.2 This Amendment 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 (as amended by this Amendment, as applicable) are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment, (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, or except as otherwise previously disclosed in writing by Borrower to Bank), and (b) no Event of Default has occurred and is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Documents, as amended by this Amendment;

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

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Documents, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Documents, as amended by this Amendment, 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;

4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Documents, as amended by this Amendment, 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

4.7 This Amendment 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.

5.

Release by Borrower.  Borrower hereby agree as follows:

5.1 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 Amendment (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.

5.2 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:

5.3 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,

5.4 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 Amendment, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

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

(a) Except as expressly stated in this Amendment, 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 Amendment.

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

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

(d) This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment 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.

6. Bank Expenses.  Borrower shall pay to Bank, when due, all Bank Expenses (including reasonable attorneys’ fees and expenses), when due, incurred in connection with or pursuant to this Amendment.

7. Counterparts.  This Amendment 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.

8. Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto and (b) Borrower’s payment of an amendment fee in an amount equal to $25,000.  The above-mentioned fee shall be fully earned and payable concurrently with the execution and delivery of this Amendment and shall be non-refundable and in addition to all interest and other fees payable to Bank under the Loan Documents.  Bank is authorized to charge such fees to Borrower’s loan account. 

BANK

BORROWER

Silicon Valley Bank

Netlist, Inc.

By:

/s/ Brian Lowry

By:

/s/ Gail M. Sasaki

Name:

Brian Lowry

Name:

Gail Sasaki

Title:

Vice President

Title:

CFO, Vice President

TO:       SILICON VALLEY BANK

Date:                                               

FROM:       NETLIST, INC.

Reporting Covenant

Required

Complies

Monthly financial statements with Compliance Certificate

Monthly within 30 days

Yes   No

Annual financial statement (CPA Audited)

Concurrently with Form 10-K

Yes   No

10‑Q, 10‑K and 8-K

Within 5 days after filing with SEC

Yes   No

Annual Projections

Within 30 days of start of FYE

Yes   No

A/R & A/P Agings; Deferred Revenue Report

Monthly within 20 days

Yes   No

Transaction Reports

(i) if no Credit Extensions outstanding, monthly (within twenty (20) days after the end of each month) and at the time of each request for an Advance; and (ii) if Credit Extensions outstanding, weekly and at the time of each request for an Advance

Yes   No

The following intellectual property was registered after the Effective Date (if no registrations, state “None”)

____________________________________________________________________________

Financial Covenant

Required

Actual

Complies

Maintain on a Monthly Basis:

Minimum Adjusted Quick Ratio

1.00 : 1.00

        : 1.00

Yes   No

Minimum Tangible Net Worth

$3,000,000 plus (i) 50% of new equity and sub debt plus (ii) 50% of quarterly net income.

$            

Yes   No

NETLIST, INC.

BANK USE ONLY

Received by:

By:

authorized signer

Name:

Date:

Title:

Verified:

authorized signer

Date:

Compliance Status:                Yes     No      

Actual:

A.

Borrower’s cash and Cash Equivalents that are unencumbered (except for Bank’s security interest) and unrestricted

$             

B.

Aggregate net amount of Borrower’s Eligible Accounts

$            

C.

Sum of line A plus line B

$            

D.

Current Liabilities

$            

E.

Adjusted Quick Ratio (line C divided by line D)

           : 1.00

Is line F equal to or greater than 1.00 : 1.00 ?

        No, not in compliance

        Yes, in compliance

Actual:

A.

Aggregate value of total assets of Borrower and its Subsidiaries

$            

B.

Aggregate value of goodwill of Borrower and its Subsidiaries

$            

C.

Aggregate value of intangible assets of Borrower and its Subsidiaries

$            

D.

Aggregate value of investments of Borrower and its Subsidiaries consisting of minority investments in companies which investments are not publicly-traded

$            

E.

Aggregate value of any reserves not already deducted from assets

$            

F.

Aggregate value of liabilities of Borrower and its Subsidiaries (including all Indebtedness) and current portion of Subordinated Debt permitted by Bank to be paid by Borrower (but no other Subordinated Debt)

$            

G.

Aggregate value of Indebtedness of Borrower subordinated to Borrower’s Indebtedness to Bank

$            

H.

Tangible Net Worth (line A minus line B minus line C minus line D minus line E minus line F plus line G)

$            

Is line H equal to or greater than Required Amount?

        No, not in compliance

        Yes, in compliance