SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER

Transcription

1 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER MARY JO SMITH, Derivatively on Behalf of Case No. 07CC01359 Netlist, Inc., V. Plaintiff, CHUNG K. HONG, CHRISTOPHER LOPES, NAM KI HONG, THOMAS F. LAGATTA, ALAN H. PORTNOY, DAVID M. RICKEY and PRESTON ROM M, and Defendants, NETLIST, INC., a Delaware Corporation, Nominal Defendant. NOTICE OF PENDENCY AND SETTLEMENT OF DERIVATIVE ACTION TO: ALL HOLDERS OF NETLIST, INC. ("NETLIST") COMMON STOCK AS OF JUNE 1, PLEASE READ THIS NOTICE CAREFULLY. IT MAY AFFECT YOUR RIGHTS. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF A SHAREHOLDER DERIVATIVE ACTION AND RELATED CLAIMS. HOLDERS OF NETLIST COMMON STOCK AS OF JUNE 1, 2009 ARE ENTITLED TO OBJECT, IF THEY DESIRE, TO THE SETTLEMENT AS DESCRIBED HEREIN. IF THE COURT APPROVES THE SETTLEMENT, YOU WILL BE BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSED SETTLEMENT, AND FROM PURSUING THE SETTLED CLAIMS. This Notice is given pursuant to an Order of the Superior Court of the State of California for the County of Orange (the "Court"). The purpose of the Notice is to advise you that the above-entitled action is now pending in the Court and that the parties thereto have reached a settlement (the "Settlement") which, if approved by the Court, would fully, finally and forever resolve this action on the terms and conditions summarized in this Notice. The Court will consider final approval of the Settlement at a hearing to be held on November 5, 2009 at 1:30 p.m. before the Court in Department CX104 of the Superior Court of the State of California for the County of Orange, 700 Civic Center Drive West, Santa Ana, CA This Notice is not intended to be and should not be construed as an expression of any opinion by the Court with respect to the truth of the allegations of the claims in the Derivative Action or the merits of the claims or defenses asserted. This Notice is merely to advise you of the pendency and proposed Settlement and of your rights thereunder. I. THE DERIVATIVE ACTION A. In August 2007, Plaintiff commenced this shareholder derivative action (the "Derivative Acton) against Individual Defendants and nominal defendant Netlist. B. In her Shareholder Derivative Complaint, Plaintiff asserts claims against Individual Defendants premised on alleged breaches of various state laws and duties, including fiduciary duty, abuse of control, constructive fraud, corporate waste, unjust enrichment, gross mismanagement, and California Corporations Code Sections 25402, 25403, and C. Plaintiffs claims arise from, among other things, allegations that Netlist issued a false and misleading Registration Statement and Prospectus in connection with its Initial Public Offering (IPO") of securities on November 30, D. Also in August 2007, the law firm of Federman & Sherwood, on behalf of a purported Netlist shareholder named Brandon Chang, sent a letter to Netlist's Board of Directors containing factual allegations substantially similar to those set 1 On November 8, 2007, by a stipulated Order, the Court temporarily stayed the Derivative Action pending final resolution of the defendants' motions to dismiss in Belodoff V. Netlist, Inc., et a/., Lead Case No. SACV DOC (MLGx) (the "Federal Class Action"), which is before the U.S. District Court for the Central District of California. Accordingly, Netlist and Individual Defendants, to date, have not responded to Plaintiff's Shareholder Derivative Complaint in this Derivative Action.

2 forth in the Derivative Action, and demanding that the Board establish a special litigation committee and institute litigation against unspecified directors and officers (the "Demand"). E. Following receipt of the Demand, Netlist's Board authorized its outside litigation counsel to investigate the allegations set forth in the Demand and to make recommendations in order for independent members of the Board to formulate a response. After conducting an appropriate investigation, including an extensive review of relevant documents and interviews of numerous individuals with knowledge of the issues raised in the Demand and the Derivative Action, Netlist's outside litigation counsel presented its findings to the independent members of Netlist's Board. In September 2008, having fully considered the issue, the independent Board members unanimously agreed to recommend to the full Board that it reject all of the requests set forth in the Demand. The Board subsequently rejected the Demand and declined to take any of the requested actions. F. On December 16, 2008, in an effort to resolve the Federal Class Action, the Derivative Action, and the issues raised in the Demand, the parties mediated the matters before Judge Daniel Weinstein (Ret.) of JAMS. While the parties did not reach a settlement agreement during the mediation, the parties to the Derivative Action and the Demand made significant progress towards a resolution and continued to pursue good-faith settlement negotiations. G. In April 2009, the parties agreed in principle to settle the Derivative Action and any further request for action raised in the Demand on terms set forth in the Stipulation and subject to Court approval, including the total payment in the amount of $300,000 on behalf of Individual Defendants by the D&O Insurers for Netlist to cover the attorneys' fees and expenses of Plaintiff's Counsel and Demand Shareholder's Counsel, and Plaintiff's Incentive Fee Award.2 II. CLAIMS OF PLAINTIFF AND BENEFITS OF SETTLEMENT Plaintiff believes that the claims asserted in the Derivative Action have merit. However, Plaintiff's Counsel recognize and acknowledge the expense and length of continued proceedings necessary to prosecute the Derivative Action on behalf of Netlist and against Individual Defendants through trial and, potentially, through appeals. Plaintiffs Counsel have conducted an investigation of the claims asserted in the Derivative Action, including research of publicly available information and review of certain documents requested by and provided to Plaintiffs Counsel by Netlist. Plaintiff's Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex actions such as the Derivative Action, as well as the difficulties and delays inherent in such litigation. Plaintiff's Counsel are also mindful of the inherent problems of proof of, and possible defenses to, the causes of action asserted in the Derivative Action. The settlement set forth in the Stipulation confers substantial benefits upon Netlist. III. DENIAL OF WRONGDOING AND LIABILITY BY THE SETTLING DEFENDANTS The Settling Defendants have denied and continue to deny each and all of the claims and contentions alleged in the Derivative Action, and that they have committed any violations of law or engaged in any wrongful acts alleged, or that could have been alleged, in the Derivative Action. The Settling Defendants also have denied and continue to deny, among other things, the allegations that Netlist or any of its stockholders have suffered damage or that Netlist or any of its stockholders were harmed in any way by any of the conduct alleged in the Derivative Action. Nonetheless, the Settling Defendants have concluded that further conduct of the Derivative Action would be protracted and expensive, and that it is desirable and beneficial to them that the Derivative Action be fully and finally settled in the manner and upon the terms and conditions set forth in the Stipulation, in order to limit further expense, inconvenience and distraction, and to dispose of the burden of protracted litigation. The Settling Defendants have also taken into account the uncertainty and risks inherent in any litigation, especially in complex cases like this. Netlist has determined that it is in Netlist's interest to enter into the Stipulation because Netlist will receive substantial consideration as a result of the agreed-upon settlement of the Derivative Action. IV. DEFINITIONS As used in the Stipulation, the following terms have the meanings specified below: 1. "Court" means the Superior Court of the State of California, County of Orange. 2. "D&O Insurers" means National Union Fire Insurance Company of Pittsburgh, PA (AIG), Navigators Insurance Company, Liberty Mutual Insurance Company, Hudson Insurance Company, and XL Specialty Insurance Company. 2 Presently, there is no agreement in principle or otherwise to settle the Federal Class Action. The federal court has twice dismissed plaintiffs claims in the Federal Class Action without prejudice. On May 21, 2009, the federal class plaintiffs filed their Second Amended Consolidated Complaint. On June 22, 2009, Defendants moved to dismiss that complaint as well. The hearing on defendants' motion to dismiss is currently set for August 31,

3 3. "Demand" means the August 17, 2007 letter sent to Netlist's Board of Directors by the law firm of Federman & Sherwood on behalf of purported Netlist shareholder Brandon Chang. 4. "Demand Shareholder Counsel" means William B. Federman of the law firm of Federman & Sherwood. 5. "Derivative Action" means Smith v. Hong, Case No. 07CC01359, pending in the Superior Court of the State of California, County of Orange. 6. "Effective Date" means the first date by which all of the events and conditions specified in ig 6.1 of the Stipulation have been met and have occurred. 7. "Federal Class Action" means Belodoff v. Netlist, Inc., et al., Lead Case No. SACV DOC (MLGx), pending in the United States District Court for the Central District of California. 8. "Fee and Expenses Payment" means the payment of Plaintiff's Counsels' and Demand Shareholder's Counsel's attorneys' fees and expenses as contemplated by TR of the Stipulation. 9. "Final" means the latest of: (a) the date of final affirmance of any appeal of the Judgment, the expiration of time for filing, or denial of, a petition for review of the Judgment and, if a petition for review by the California Supreme Court is granted, the date of final affirmance of the Judgment following review pursuant to that grant; a petition for or a denial of a writ of certiorari to review the Judgment and, if certiorari is granted, the date of final affirmance of the Judgment following review pursuant to that grant; or (b) the date of final dismissal or withdrawal of any appeal from the Judgment or the final dismissal, denial or withdrawal of any proceeding before the California Supreme Court to review the Judgment; or (c) if no appeal is filed, the expiration date of the time for filing or noticing of any appeal from the Judgment. Any proceeding or order, or any appeal or petition for review, pertaining solely to any application for attorneys' fees and expenses shall not in any way delay or preclude the Judgment from becoming Final. 10. "Incentive Fee Award" means such funds as may be awarded to the Plaintiff to compensate her for her time and expenses in connection with the Derivative Action. 11. "Individual Defendants" means Chung K. Hong, Christopher Lopes, Nam Ki Hong, Thomas F. Lagatta, Alan H. Portnoy, David M. Rickey, and Preston Romm. 12. "Individual Defendants' Counsel" means the law firm of Morrison & Foerster LLP. 13. "Judgment" means the judgment to be rendered by the Court, substantially in the form attached hereto as Exhibit A, or as modified pursuant to the agreement of the Settling Parties. 14. "Netlist" means nominal defendant Netlist, Inc., a Delaware corporation with its principal place of business in Irvine, California, including any of its predecessors, successors, parents, subsidiaries, divisions, affiliates or related affiliates, and assigns. 15. "Netlist's Counsel" means the law firm of Morrison & Foerster LLP. 16. "Netlist Stockholders" mean all record owners of Netlist common stock as of June 1, "Person" means a natural person, individual, corporation, partnership, limited partnership, limited liability company, association, joint venture, joint venturer, joint stock company, estate, legal representative, trust, unincorporated association, government or any political subdivision or agency thereof, and any business or legal entity and, as applicable, their/its respective spouses, heirs, executors, administrators, predecessors, successors, representatives, or assignees. 18. "Plaintiff" means Mary Jo Smith, individually and on behalf of her successors, spouses, heirs, executors, administrators and assigns, and on behalf of Netlist. 19. "Plaintiffs Counsel" means Frank J. Johnson and Frank A. Bottini, Jr., Johnson Bottini LLP, 655 W. Broadway, Suite 1400, San Diego, CA and Marc S. Henzel, Law Offices of Marc Henzel, 273 Montgomery Avenue, Suite 202, Bala Cynwyd, PA "Related Parties" means each of Settling Defendants' past, present, or future directors, officers, employees, partners, insurers, co-insurers, reinsurers, principles, agents, controlling shareholders, attorneys, accountants or auditors, advisors, investment advisors, personal or legal representatives, predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated entities, members of Individual Defendants' immediate family, and any trust of which any Individual Defendant is the settler or which is for the benefit of any Individual Defendant and/or members of his/her immediate family, and any entity in which an Individual Defendant and or any member of Individual Defendants' immediate family has or have a controlling interest (directly or indirectly). 3

4 21. "Released Claims" means any and all claims or causes of action, demands, rights, liabilities, suits, debts, obligations and causes of action of every nature and description whatsoever, known or unknown (including Unknown Claims as defined in ig 28 hereof), contingent or absolute, mature or unmature, discoverable or undiscoverable, whether concealed or hidden, asserted or that could or might have been asserted based upon, arising out of, or related to: (a) any mismanagement, act, failure to act, omission, misrepresentation, fact, event, transaction, occurrence or any other matter set forth, alleged or otherwise referred, or which could have been alleged in the Shareholder Derivative Complaint (or in amendments thereto) to and through the execution of the Stipulation; (b) any internal investigations conducted by Netlist's Board of Directors and/or committees thereof of events that occurred to and through the execution of the Stipulation; (c) any reports, disclosures or statements, or any failure to make a report, disclosure or statement, by Netlist or any Released Party relating to the subject matter of the Derivative Action; and/or (d) any claims in connection with, based upon, or arising out of, or relating to the Settlement. Released Claims does not include any of the legal causes of action asserted in Belodoff v. Netlist, Inc., et a/., Lead Case No. SACV DOC (MLGx), pending in the United States District Court for the Central District of California. 22. "Released Parties" means each and all of Individual Defendants, Netlist, and each and all of their Related Parties. 23. "Settlement" means the terms and conditions set forth in the Stipulation. 24. "Settling Defendants" means Netlist and each of Individual Defendants. 25. "Settling Parties" means Netlist, Plaintiff (on behalf of herself and Netlist), and each of Individual Defendants. 26. "Shareholder Derivative Complaint" means Plaintiff's Shareholder Derivative Complaint dated August 31, "Stipulation" means the Stipulation and Agreement of Settlement of Derivative Claims, including any recitals and/or exhibits attached hereto. 28. "Unknown Claims" means any Released Claims that a Person, including Plaintiff, may not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties which, if known by him, her or it, might have affected his, her or its settlement and release, or might have affected his, her or its decision not to object to the Settlement. With respect to any and all Released Claims, the Settling Parties stipulate and agree that, upon the Effective Date, Plaintiff shall waive and by operation of the Judgment shall have waived, the provisions, rights and benefits of California Civil Code Section 1542, which provides: 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 SETTLEMENT WITH THE DEBTOR. Plaintiff shall expressly and by operation of the Judgment shall have, expressly waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to California Civil Code Section Plaintiff may hereafter discover facts in addition to or different from those which she now knows or believes to be true with respect to the Released Claims, but Plaintiff shall expressly fully, finally, and forever settle and release, upon the Effective Date, shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released, any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or have existed, upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. Plaintiff acknowledges that the foregoing waiver was separately bargained for and a key element of the Settlement of which this release is a part. V. THE PROPOSED SETTLEMENT In full and final settlement of the Derivative Action, the Board of Directors of Netlist has agreed to adopt the corporate governance measures outlined below within ninety (90) days from the date the Judgment becomes Final and will keep such measures in force and effect for a period of no less than two (2) years from the date the Judgment becomes Final. The various measures are: 1. The Board of Directors (a) The Board shall adopt a resolution that limits the number of Board members concurrently serving as officers and/or full-time employees of the Company to two (2) members. (b) The Board shall adopt the appropriate resolutions to implement the following reforms to its existing Corporate Governance Guidelines: 4

5 (i) No director shall stand for re-election who has not participated in at least 65% of the combined total of Board and committee meetings (for any committee on which that member serves), unless excused from such meetings for medical purposes, during the entire term for which he or she was elected. (ii) The independent directors of the Board will meet regularly in executive session (with no management directors or management present) as often as they shall determine, but at least semi-annually. Executive sessions of the independent directors will be called and chaired by the Chair of the Board's Nominating and Corporate Governance Committee. These executive session discussions may include such topics as the independent directors determine. During such executive sessions, the Board shall have direct access to the Company's CFO, General Counsel, CTO, or such other officer of the Company as the Board directs. (iii) Any director who is also the Chair of any Board committee shall resign as committee chair at the end of the Company's fiscal year, if such director does not participate in at least 65% of the meetings for that committee during the fiscal year, unless excused from such meetings for medical purposes. No director of the Company shall concurrently serve on the board of directors of any more than three (3) public companies, and the Chief Executive Officer of Netlist shall not serve on the board of directors of more than two (2) public companies, including Netlist. 2. Compensation Committee (a) The Board shall adopt the appropriate resolutions to revise the Compensation Committee Charter to provide that at least once every four (4) years, the Compensation Committee shall retain an independent consultant to review executive officer compensation and provide a written report with recommendations to the Compensation Committee, which will review the report. The report may include suggestions about the design of compensation programs in light of market trends in executive compensation. (b) Any consultant selected by the Compensation Committee shall receive no more than 10% of its gross revenues from consulting services for Netlist. 3. Audit Committee The Board shall adopt the appropriate resolutions to revise the Audit Committee Charter as follows: (a) The Audit Committee shall periodically review legal matters that could reasonably be expected to have a material impact on the Company's financial statement, and shall meet as needed with Netlist's outside counsel or other employees responsible for oversight of litigation. (b) The Audit Committee shall periodically review Netlist's guidelines and policies with respect to risk assessment and risk management, and meet as needed with appropriate risk personnel. To the extent that such guidelines and policies have not been developed by Netlist or have not been reviewed within the past two (2) years, the Audit Committee shall do so. (c) Each regularly scheduled meeting of the Audit Committee shall include at least one session with no management present. (d) The Audit Committee shall adopt a policy requiring management to make available written descriptions of the Company's critical accounting policies and practices to be used by Netlist, and the Audit Committee shall review with management the procedures adopted by management for making such policies available to those employees who record, or review the recording of, revenue. (e) At least once per year, the Audit Committee shall review all material Company investments in securities, and will work with management and/or other professionals to ensure that such investments are properly valued. 4. Corporate Governance Committee The Board shall adopt the appropriate resolutions to revise the Corporate Governance Committee Charter as follows: (a) Each director, following his or her appointment to the Corporate Governance Committee, shall complete an orientation program that shall include information about principles of corporate governance. In addition, on an annual basis, the Board will receive an in-person presentation by a locally recognized expert regarding corporate governance issues. (b) The Corporate Governance Committee shall meet as often as it shall determine necessary, but not less frequently than semi-annually. 5

6 (c) Consistent with relevant SEC rules, Netlist will include in its Proxy Statement information regarding shareholders' rights to submit proposals, including director nominations for consideration at shareholder meetings and to be considered for inclusion in proxy statements. 5. Insider Trading Policy & Stock Transactions (a) The Board shall adopt the appropriate resolutions to revise the Company's Insider Trading Policy to include the following provisions: (i) All Section 16 officers and/or directors of Netlist who have not adopted a valid Rule 10b5-1 trading plan shall not sell Company securities within ten (10) days of any announcement by the Company of a stock buyback program. (ii) At least once per year, the independent directors of the Board shall receive a report of any violations of the Insider Trading Policy. (b) At least once per year, the independent directors of the Board shall receive a report regarding all sales of Netlist stock or hypothecation of Netlist common stock by any personnel with the job title of Vice-President or above. 6. Related-Party Transactions and Company Loans (a) Absent unanimous approval by the Board, no officer or director of the Company shall enter into a related-party transaction with the Company. Such prohibition shall extend to and prohibit, unless unanimously approved by the Board, the Company from making any equity investment in any company in which an officer or director has an ownership interest. (b) No personal loan (which does not include advancements within normal business practices (e.g., advancement of business travel expenses)) in excess of $10,000 shall be made to or from the Company by any employee, officer, or director without unanimous written approval by the Board, and provided that any such loan(s) fully comply with the relevant federal and state securities laws. 7. Litigation and Investigation Issues (a) The Board shall receive, on an annual basis, a report from all outside counsel outlining all material litigation, as that term is defined by the Company's auditor, including the status thereof, for any pending or threatened litigation against the Company. (b) Netlist represents that it has not been notified of, and has no knowledge of, any investigations by the U.S. Securities and Exchange Commission or Department of Justice into the backdating of Netlist stock options or the allegations asserted in either Belodoff v. Netlist, Inc., Lead Case No. SACV DOC (MLGx) (C.D. Cal.) or Smith v. Hong, Case No. 07CC01359 (Cal. Super. Ct., Orange County). VI. DISMISSAL AND RELEASES If the proposed settlement is approved by the Court, the Court will enter a Final Judgment and Order of Dismissal with Prejudice (Judgment") which will dismiss the Derivative Action as against all Defendants with prejudice, and all shareholders of Netlist shall be barred and enjoined from asserting any Released Claims (defined above), including Unknown Claims, against any of the Released Parties. In addition, each of the Released Parties shall be barred and enjoined from prosecuting claims against Netlist, Plaintiff, and Plaintiff's Counsel, excepting any claims relating to any obligations on the part of Netlist to indemnify its present and former officers and directors to the extent required by law or statute, Netlist's articles of incorporation and by-laws, or any resolution (or other action) of the Board of Directors of Netlist. VII. ATTORNEYS' FEES AND EXPENSE AWARD. As a unitary part of the Settlement set forth herein, and in recognition of the benefits conferred upon Netlist as a direct and substantial result of the Derivative Action, Netlist's D&O Insurer(s) shall, subject to approval of the Court, pay a total amount of $298,500 to Plaintiff's Counsel and Demand Shareholder Counsel for their attorneys' fees and expenses. The fee and expense award will compensate counsel for their efforts in achieving the benefits identified in above and for their risk in undertaking this representation on a contingency basis. Plaintiffs Counsel may also request court approval of an Incentive Fee Award not to exceed the aggregate amount of $1, to be paid to Plaintiff by Netlist's D&O Insurer(s). VIII. CONDITIONS FOR SETTLEMENT. The Settlement is conditioned upon the occurrence of certain events. Those events include, among other things: (1) entry of the Judgment by the Court, as provided for in the Stipulation; and (2) expiration of the time to appeal from or alter or amend the Judgment. If, for any reason, any one of the conditions described in the Stipulation is not met, the Stipulation might be terminated and, if terminated, will become null and void, and the parties to the Stipulation will be restored to their respective positions in the litigation as of June 1,

7 IX. NOTICE TO BANKS, BROKERS, AND OTHER NOMINEES. Banks, brokerage firms, institutions, and other persons who are nominees who held the common stock of Netlist for the beneficial interest of other persons on June 1, 2009 are requested within ten (10) days after receipt of this Notice, to: (a) provide Netlist with the names and addresses of such beneficial purchasers, or (b) forward a copy of the Notice to each such beneficial purchaser and provide Netlist with written confirmation that the Notice has been so forwarded. Your reasonable costs and expenses of complying with this provision will be paid upon submission of appropriate documentation to Netlist. Additional copies of the Notice may be obtained from Netlist for forwarding to such beneficial owners. All such correspondence should be addressed as follows: X. THE HEARING Netlist, Inc. Derivative Litigation Notice Administrator do Gilardi & Co. LLC P.O. Box 8040 San Rafael, CA A hearing (the "Settlement Hearing") will be held before the Honorable Thierry Patrick Colaw on November 5, 2009, at 1:30 p.m., in Department CX104 of the Superior Court of the State of California for the County of Orange, 700 Civic Center Drive West, Santa Ana, CA 92701, for the purpose of determining whether the proposed Settlement is fair, reasonable and adequate and whether it should be approved by the Court and whether a judgment should be entered dismissing the Derivative Action with prejudice as against the Defendants. The Settlement Hearing may be continued or adjourned from time to time by the Court at the Settlement Hearing or any continued or adjourned session thereof without further notice. Any Netlist Stockholder may appear at the Settlement Hearing to object to any aspect of the Derivative Settlement. No such person shall be heard unless his, her or its objection or opposition, including the basis therefore, is made in writing, together with proof of current ownership, date of initial purchase and proof of continuous ownership of such shares through the date of the Settlement Hearing, together with copies of all other papers and briefs to be submitted by him, her or it to the Court in connection with the Settlement Hearing, with the Court, and showing due proof of service on the following counsel such that they are received by the Court and counsel no later than September 25, 2009: Attorneys for Nominal Defendant Netlist, Inc. Attorneys for Plaintiff MARY JO SMITH and Individual Defendants SEAN T. PROSSER LAW OFFICES OF MARC S. HENZEL TYSON E. MARSHALL MARC S. HENZEL MORRISON & FOERSTER LLP 273 Montgomery Avenue, Suite High Bluff Drive, Suite 100 Bala Cynwyd, PA San Diego, California Unless otherwise ordered by the court, any shareholder of Netlist who does not make his, her or its objection or opposition in the manner provided shall be deemed to have waived all objections and opposition to the fairness, reasonableness and adequacy of the proposed Settlement. XI. EXAMINATION OF PAPERS AND INQUIRIES This Notice contains only a summary of the terms of the proposed Settlement. For a more detailed statement of the matters involved in this action, reference is made to the pleadings, to the Stipulation and to other papers filed in this action which may be inspected at the Office of the Clerk of the Superior Court for the State of California, County of Orange, 700 Civic Center Drive West, Santa Ana, CA 92701, during business hours of each business day. Inquiries regarding this action should be addressed as follows: DATED: July 27, 2009 SEAN T. PROSSER TYSON E. MARSHALL MORRISON & FOERSTER LLP High Bluff Drive, Suite 100 San Diego, California PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE. 7 BY ORDER OF THE SUPERIOR COURT STATE OF CALIFORNIA, COUNTY OF ORANGE

8 Net//st Inc. Derivative Litigation Notice Administrator do Gilardi & Co. LLC P.O. Box 8040 San Rafael, CA Important Legal Document. NETDER