Exhibit 10.6

 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR
OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT NO.: MS-

MATHSTAR, INC.

COMMON STOCK PURCHASE WARRANT

          MathStar, Inc., a Delaware corporation (the “Company”), hereby agrees
that, for value received, _________, or its assigns (collectively, the
“holder”), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 P.M., Minneapolis,
Minnesota time, on September 28, 2016, ________________(_______) Shares of the
Company’s common stock (the “Common Stock”) at an exercise price of $0.61 per
Share, subject to adjustment as provided herein (the “Exercise Price”).

          1.          Exercise. The purchase rights granted by this Warrant
shall be exercised by the holder surrendering this Warrant with the form of
exercise attached hereto duly executed by such holder, to the Company at its
principal office, accompanied by payment, in cash or by cashier’s check payable
to the order of the Company, of the purchase price payable in respect of the
number of Shares being purchased (unless exercised pursuant to Section 5
hereof). If fewer than all of the Shares purchasable hereunder are purchased
upon exercise, the Company will execute and deliver to the holder hereof a new
Warrant (dated the date hereof) evidencing the number of Shares not so
purchased. As soon as practicable after the exercise of this Warrant and payment
of the purchase price, the Company will cause to be issued in the name of and
delivered to the holder hereof, or as such holder may direct, one or more
certificates representing the Shares purchased upon such exercise. The Company
may require that any certificates representing the shares contain a legend
substantially as follows:

 

 

 

 

The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or applicable state securities laws. No
transfer of such securities or any interest therein may be made except pursuant
to registration under said laws unless the Company has received an opinion of
counsel acceptable to the Company stating either that the securities have been
registered or such transfer does not require registration under said laws.

 

          2.          Transfer. This Warrant is issued upon the following terms,
to which the holder hereof consents and agrees: (a) until this Warrant is duly
transferred on the Company’s books, the Company may treat the registered holder
of this Warrant as absolute owner hereof for all purposes without being affected
by any notice to the contrary; (b) each successive holder of this Warrant, or of
any portion of the rights represented thereby, shall be bound by the terms and

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conditions set forth herein; (c) subject to compliance with applicable
securities laws, this Warrant is immediately assignable by Feltl and Company,
Inc., notwithstanding anything herein to the contrary, to officers, directors,
employees and registered representatives of Feltl and Company, Inc. and its
affiliates and subagent(s), and the officers, directors, employees and
registered representatives of such sub-agent(s); provided, any determination as
to the assignability of the Warrant shall promptly be made by the Company at its
expense; and (d) no assignment or transfer of any portion of this Warrant or any
warrant shares may be made by those individuals or entities who become holders
pursuant to Section 2(c) above, without the prior written approval of Feltl and
Company, Inc. Section 2(d) shall remain in full force and effect as long as the
holder is an officer, director, employee or registered representative of Feltl
and Company, Inc. and its affiliates and subagent(s), and an officer, director,
employee or registered representative of such subagent(s), as set forth in
Section 2(c) above.

          3.          Antidilution Adjustments to Exercise Price. The provisions
of this Warrant are subject to adjustment as provided in this Section 3.

          (a)          The Exercise Price shall be adjusted from time to time if
the Company shall hereafter: (i) pay any dividends on the Common Stock payable
in Common Stock or securities convertible into Common Stock; (ii) subdivide its
then-outstanding shares of Common Stock into a greater number of shares; or
(iii) combine its then-outstanding shares of Common Stock, by reclassification
or otherwise. In any such event, the Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (A) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then- existing Exercise
Price, by (B) the total number of shares of Common Stock outstanding immediately
after such event (including in each case the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Exercise Price.

          Adjustments made pursuant to this subsection shall become effective
immediately after the record date in the case of a dividend or distribution; or
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
subsection, the holder of the Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors shall reasonably and not arbitrarily determine the allocation of the
adjusted Exercise Price between or among shares of such classes of capital stock
or shares of Common Stock and other capital stock. All calculations under this
subsection shall be made to the nearest cent or to the nearest 1/100 of a share,
as the case may be. In the event that, as a result of an adjustment made
pursuant to this subsection, the holder of the Warrant thereafter surrendered
for exercise shall become entitled to receive any securities of the Company
other than shares of Common Stock, thereafter the exercise price of such other
securities so receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained herein with respect to the shares of
Common Stock and such other securities.

          (b)          Upon each adjustment of the Exercise Price pursuant to
Section 3(a), the holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the

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adjusted Exercise Price the number of shares of Common Stock, calculated to the
nearest full share, obtained by multiplying the number of shares of Common Stock
specified in the Warrant (as then in effect, after all adjustments in the
Exercise Price prior thereto) by the Exercise Price in effect prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.

          (c)          In case of (i) any reorganization of the Company’s
capital stock (other than splits or combinations of Common Stock contemplated by
and provided for in Section 3(a)), (ii) any consolidation or merger of the
Company with another company, limited liability company, partnership or other
business entity, or any sale, conveyance, lease or other transfer by the Company
of all or substantially all of its property to any other company, limited
liability company, partnership or other business entity, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
cash, stock, securities or assets with respect to or in exchange for Common
Stock, or (iii) any dividend or any other distribution upon any class of the
Company’s capital stock payable in capital stock of a different class, other
securities of the Company, or other Company property (other than cash), then, as
a part of such transaction, lawful provision shall be made so that the holder of
the Warrant then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other securities and
property which the holder would have owned or have been entitled to receive
immediately after such consolidation, reorganization, merger, statutory
exchange, sale or conveyance had such Warrant been exercised immediately before
the effective date of such consolidation, merger, statutory exchange, sale or
conveyance and, in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section with respect
to the rights and interests thereafter of the holder of the Warrant, to the end
that the provisions set forth in this Section shall thereafter correspondingly
be made applicable, as nearly as may reasonably be, in relation to any other
shares of stock and other securities and property thereafter deliverable upon
the exercise of the Warrant. The provisions of this paragraph shall similarly
apply to successive consolidations, reorganizations, mergers, statutory
exchanges, sales or conveyances.

          (d)          Upon any adjustment of the Exercise Price, then and in
each such case the Company shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the holder as shown on the Company’s books,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares of Common Stock
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

          (e)          (e) If at any time: (i) the Company shall pay any
dividend upon its Common Stock payable in stock or make any distribution (other
than cash dividends) to the holders of its Common Stock; (ii) the Company shall
offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other rights; (iii) there shall
be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale, conveyance,
lease or other transfer of all or substantially all of its assets to, another
company; or (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more such cases,
the Company shall give prior written notice, by first-class mail, postage
prepaid, addressed to the holder of the Warrant as shown on the books of the
Company, of the date on

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which (1) the books of the Company shall close or a record shall be taken for
such stock dividend, distribution or subscription rights or (2) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in such dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least 15 business days prior to the action in
question and at least 15 business days prior to the record date or the date on
which the Company’s transfer books are closed in respect thereto.

          (f)          If the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of this Warrant issue
any rights, warrants or options to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, then the holder of the Warrant on the record date set by the
Company or such affiliate in connection with such issuance of rights, warrants
or options shall be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrant, to receive such rights,
warrants or options that such holder would have been entitled to receive had the
holder been, on such record date, a holder of record of the number of whole
shares of Common Stock then issuable upon exercise of the holder’s outstanding
Warrant (assuming for purposes of this Section 3(f) that the exercise of the
Warrant is permissible immediately upon issuance).

          (g)          [Intentionally Omitted.]

          4.           Transferability Registration Rights.

          (a)          Prior to making any disposition of the Warrant or of any
Common Stock purchased upon exercise of the Warrant, the holder will give
written notice to the Company describing briefly the manner of any such proposed
disposition. The holder will not make any such disposition until (i) the Company
has notified the holder that, in the opinion of its counsel, registration under
the Act is not required with respect to such disposition, or (ii) a registration
statement covering the proposed distribution has been filed by the Company and
has become effective. The holder then will make any disposition only pursuant to
the conditions of such opinion or registration. The Company agrees that, upon
receipt of written notice from the holder hereof with respect to such proposed
distribution, it will use its reasonable best efforts, in consultation with the
holder’s counsel, to ascertain as promptly as possible whether or not
registration is required, and will advise the holder promptly with respect
thereto, and the holder will cooperate in providing the Company with information
necessary to make such determination. If an exemption from state and federal
registration of the exercising of the Warrant is not available during the term
of this Warrant when the holder of the Warrant seeks to exercise the Warrant,
the exercise period of the Warrant will automatically be extended until such
time as a state and federal exemption for the exercise of the Warrant by the
holder becomes applicable to the holder of the Warrant. In the absence of such
an exemption from such registration, and if, as a result, the term of the
Warrant is so extended beyond the original term hereof, the Warrant shall then
remain exercisable for a period of at least thirty (30) business days from the
date the Company delivers to the holder of the Warrant written notice of the
availability

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of such state and federal registration or exemption from such registration. In
no event will the exercise period of the Warrant expire before September 28,
2016.

          (b)          If, at any time prior to the expiration of twelve years
from September 28, 2007, the Company shall propose to file any registration
statement under the Securities Act covering a public offering of the Common
Stock (other than a registration on Form S-4 or Form S-8 (or their successor
forms) or any registration form that does not permit secondary sales), it will
notify the holder hereof at least 30 business days prior to each such filing and
will include in the registration statement (to the extent permitted by
applicable regulation) the Common Stock purchased by the holder or purchasable
by the holder hereunder to the extent requested by the holder hereof; provided
that, notwithstanding the foregoing, the rights provided in this paragraph (b)
shall not apply to a registration related to the Company’s initial public
offering of common stock. Notwithstanding the foregoing, the number of shares of
Common Stock proposed to be registered thereby shall be reduced pro rata with
any other selling shareholder (other than the Company) upon the reasonable
request of the managing underwriter of such offering, if any. If the
registration statement or offering statement filed pursuant to such notice has
not become effective within six months following the date such notice is given
to the holder hereof the Company must again notify such holder in the manner
provided above.

          (c)          At any time prior to the expiration of this Warrant, and
provided that a registration statement on Form S-3 (or its equivalent) is then
available to the Company, and on a one-time basis only, if the then holders of a
majority of the shares of Common Stock underlying the Warrant and those
purchased by a holder upon exercise of the Warrant request the registration of
such shares on Form S-3 (or its equivalent), the Company shall promptly
thereafter effect the registration under the Securities Act of all such shares
of Common Stock which such holders request in writing to be so registered, and
in a manner as nearly as commercially possible corresponding to the methods of
distribution described in such holders’ request. This Section 4(c) shall not
apply to any shares of Common Stock held by the holder pursuant to an exercise
of the Warrant and which shares of Common Stock are then freely transferable by
the holder pursuant to Rule 144(k).

          (d)          Notwithstanding the foregoing, if the Company shall
furnish to holders of the Warrant or Common Stock requesting a registration
statement pursuant to Section 4(c) a certificate signed by the Company’s Chief
Executive Officer stating that in the good faith judgment of the Company’s Board
of Directors, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the one time right to defer such filing for a period of not more than 180
days after receipt of the request of such holders of Common Stock.

          (e)          The Company shall bear all costs, fees and expenses of
any such registrations referred to in this Section 4, including, without
limitation, the Company’s legal and accounting fees, printing expenses and blue
sky fees and expenses, except the fees and expenses of counsel or other special
advisors to such holders and any of their underwriting commissions or discounts.
The Company will take all necessary action which may be required in qualifying
or registering the Common Stock included in the registration statement for
offering and sale under the securities or blue sky laws of such states as are
requested by the holders of such securities and in

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obtaining approval by the Financial Industry Regulatory Authority for the resale
of the Common Stock.

          (f)          The Company will mail to each record holder of the
Warrant and Common Stock, at the last known post office address, written notice
of any exercise of the rights granted under this Section 4, by certified or
registered mail, return-receipt requested, and each holder shall have 30
business days from the date of deposit of such notice in the U.S. mail to notify
the Company in writing whether such holder wishes to join in such exercise of
rights.

          (g)          The Company will furnish the holder hereof with a
reasonable number of copies of any prospectus included in such filings and will
amend or supplement the same as required during the period of required use
thereof. The Company will maintain the effectiveness of any registration
statement or the offering statement filed by the Company under this Section 4,
whether or not at the request of the holder hereof for at least one year
following the effective date thereof.

          (h)          The holder of the Warrant agrees to cooperate in a
commercially reasonable manner with the Company in the preparation and filing of
any such registration statement or offering statement, and in the furnishing of
information concerning the holder for inclusion therein, or in any efforts by
the Company to establish that the proposed sale is exempt under the Securities
Act as to any proposed disposition by the holder.

          (i)          Indemnification.

 

 

 

              (i)          Company Indemnification. The Company will indemnify
each holder, and each holder’s officers, directors, members, governors,
employees, partners, legal counsel, and accountants, and each person controlling
such holder within the meaning of Section 15 of the Securities Act with respect
to any registration, qualification, or compliance effected pursuant to this
Section 4, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act, any underwriter, against all
expenses, claims, losses, damages, and liabilities (or actions, proceedings, or
settlements in respect of such expenses, claims, losses, damages, and
liabilities) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular, or
other document (including any related registration statement, notification, or
similar document) incident to any such registration, qualification, or
compliance, or based on any omission (or alleged omission) to state in such
document a material fact required to be stated in such document or necessary to
make the statements in such document not misleading, or any violation by the
Company of the Securities Act and any applicable state securities laws or any
rule or regulation under the Securities Act or state securities laws applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such holder, and each of such holder’s officers, directors,
partners, legal counsel, and accountants, and each person controlling such
holder, and each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that

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any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such holder or underwriter and stated to be specifically for use in
such document, or any violation by the holder of the Securities Act and any
applicable state securities laws or any rule or regulation under the Securities
Act or state securities laws applicable to the holder and relating to action or
inaction required of the holder in connection with any such registration,
qualification, or compliance; provided that the Company’s obligations under this
Section 4(i)(i) will not apply to amounts paid in settlement of any such claims,
losses, damages, or liabilities (or actions in respect of such claims, losses,
damages, or liabilities) if such settlement is effected without the Company’s
consent (which consent will not be unreasonably withheld, delayed or
conditioned).

 

 

 

              (ii)          Holder Indemnification. Each holder will, if Common
Stock held by such holder or purchasable by the holder upon exercise of the
Warrant is included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, and each
of the Company’s directors, officers, legal counsel, and accountants, and each
underwriter, if any, of the Company’s securities covered by such a registration
statement, and each person who controls the Company or such underwriter within
the meaning of Section 15 of the Securities Act, and each other such holder, and
each of their respective officers, directors, and partners, and each person
controlling such holder or other Company stockholder, against all claims,
expenses, losses, damages, and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular, or other document, or any
omission (or alleged omission) to state in such document a material fact
required to be stated in such document or necessary to make the statements in
such document not misleading, or any violation by the holder of the Securities
Act and any applicable state securities laws or any rule or regulation under the
Securities Act or state securities laws applicable to the holder and relating to
action or inaction required of the holder in connection with any such
registration, qualification, or compliance, and will reimburse the Company, and
each of the Company’s directors, officers, employees, partners, legal counsel,
and accountants, and each person who controls the Company within the meaning of
Section 15 of the Securities Act, for any legal or any other expenses reasonably
incurred in connection with investigating or defending or settling any such
claim, loss, damage, liability, or action, in each case related to any
misstatement or omission to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such holder and stated to be specifically for use in such
document; provided that such holder’s obligations under this Section 4(i)(ii)
will not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect of such claims, losses, damages,
or liabilities) if such settlement is effected without such holder’s consent
(which consent will not be unreasonably withheld, delayed or conditioned); and
provided further that in no event will any indemnity under this Section 4(i)(ii)
exceed the net proceeds. For purposes of this Section 4(i)(ii), the term “net
proceeds,” with respect to any particular holder, means the proceeds from the
offering received by such holder after deducting

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underwriters’ commissions, discounts, and expenses attributable the securities
sold by such holder.

 

 

 

              (iii)          Indemnification Procedures. Each person entitled to
indemnification under this Section 4(i) (the “Indemnified Party”) will give
notice to the person required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and will permit the Indemnifying Party to
assume the defense of such claim or any litigation resulting from such claim;
provided that counsel for the Indemnifying Party who will conduct the defense of
such claim or any litigation resulting from such claim, will be approved by the
Indemnified Party (whose approval will not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such Indemnified Party’s
expense. Notwithstanding the foregoing, any Indemnified Party’s failure to give
notice as provided in this Section 4(i) will not relieve the Indemnifying Party
of the Indemnifying Party’s obligations under this Section 4(i) to the extent
such failure is not materially prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, will, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term of such judgment or such
settlement the claimant’s or plaintiffs release of such Indemnified Party from
all liability in respect to such claim or litigation. Each Indemnified Party
will furnish such information regarding such Indemnified Party or the claim in
question as an Indemnifying Party may reasonably request in writing and as will
be reasonably required in connection with defense of such claim and litigation
resulting from such claim.

 

 

 

            (iv)          Indemnification Unavailability. If the indemnification
provided for in this Section 4(i) is held by a court of competent jurisdiction
to be unavailable to an Indemnified Party with respect to any loss, liability,
claim, damage, or expense referred to in this Section 4(i), then the
Indemnifying Party, instead of indemnifying such Indemnified Party under Section
4(i) or Section 4(i), will contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and of the Indemnified Party, on the other
hand, in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided, however, that in no event will any contribution by a
holder under this Section 4(i) exceed the net proceeds (as defined in Section
4(i). The relative fault of the Indemnifying Party and of the Indemnified Party
will be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the Parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.

          (j)          Nothing contained herein shall be construed as requiring
the holder to exercise this Warrant prior to the initial filing of any
registration statement or the effectiveness thereof.

          (k)          [Reserved.]

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          (l)          The Company shall not permit the inclusion of any
securities other than the shares of Common Stock to be included in any
registration statement filed pursuant to Section 4(c) hereof, without the prior
written consent of the holders of a majority of the Common Stock purchased by or
purchasable by the holder of this Warrant and any of the Warrants issued
pursuant to Section 2(c), which consent shall not be unreasonably withheld.

          5.          Cashless Exercise Option.

          (a)          The holder of this Warrant shall have the right to
require the Company to convert this Warrant (the “Conversion Right”), at any
time after it is exercisable, but prior to its expiration, into shares of Common
Stock as provided for in this Section 5. Upon exercise of the Conversion Right,
the Company shall deliver to the holder (without payment by the holder of any
Exercise Price) that number of shares of Common Stock purchasable hereunder
equal to (i) the number of shares of Common Stock which would, but for such
conversion, be then issuable pursuant to the provisions of Section 1 above upon
the exercise of this Warrant, as specified by the holder in its Conversion
Notice (defined below) (the “Total Common Stock Number”) less (ii) the number of
shares of Common Stock equal to the quotient obtained by dividing (x) the
product of the Total Common Stock Number and the then-applicable Exercise Price
per share, by (y) the Fair Market Value (as defined below) of one share of
Common Stock immediately prior to the exercise of the Conversion Right. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
if the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, such fractional share shall be cancelled.

          (b)          The Conversion Right may be exercised by the holder, at
any time or from time to time after this Warrant is exercisable, prior to its
expiration, on any business day, by delivering a written notice in the form
attached hereto (the “Conversion Notice”) to the Company and specifying (i) the
total number of shares of Common Stock the holder of this Warrant is purchasing
pursuant to such conversion, and (ii) a place and a date not less than one nor
more than 20 business days from the date of the Conversion Notice for the
closing of such conversion.

          (c)          At any closing under Section 5(b), (i) the holder will
surrender the Warrant, (ii) the Company will deliver to the holder one or more
certificates for the number of shares of Common Stock issuable upon such
conversion, and (iii) the Company will deliver to the holder a new Warrant
representing the number of shares, if any, with respect to which the Warrant
shall not have been converted.

          (d)          “Fair Market Value” of a share of Common Stock as of the
date the holder mails the Conversion notice (the “Determination Date”) shall
mean, as applicable:

 

 

 

               (i)          If the Company’s Common Stock is traded on an
exchange or is quoted on the NASDAQ Global Market or the NASDAQ Capital Market,
then the average closing or last sale prices, respectively, reported for the ten
consecutive trading days immediately preceding the Determination Date.

 

 

 

               (ii)          If the Company’s Common Stock is not traded on an
exchange or quoted on the NASDAQ Global Market or the NASDAQ Capital Market but
is traded in the

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over-the-counter market, then the average of the closing bid and asked prices
reported for the ten consecutive trading days immediately preceding the
Determination Date.

 

 

 

               (iii)          If the Company’s Common Stock is not publicly
traded and there has been a bona fide sale for cash on an arm’s-length basis
within 45 days prior to the Determination Date of such Common Stock by the
Company privately to one or more investors unaffiliated with the Company (a
“Qualifying Sale”), then such most recent sales price.

 

 

 

               (iv)          If the Company’s Common Stock is not publicly
traded and there has been no Qualifying Sale, then Fair Market Value of such
stock will be determined by the Board of Directors of the Company, acting in
good faith and in a commercially reasonable manner utilizing customary business
valuation criteria and methodologies (without discount for lack of marketability
or minority interest).

          6.          [Reserved]

          7.          Reservation of Common Stock. A number of shares of Common
Stock sufficient to provide for the exercise of this Warrant, upon the basis
herein set forth, shall at all times be reserved for the exercise thereof.

          8.          Miscellaneous. Whenever reference is made herein to the
issue or sale of shares of Common Stock, the term “Common Stock” shall include
any stock of any class of the Company other than preferred stock with a fixed
limit on dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company.

          The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will at all times in good faith
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof.

          The representations, warranties and agreements contained herein shall
survive the exercise of this Warrant. References to the “holder of’ include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word “holder” shall include the plural thereof. This Warrant shall be
interpreted under the laws of the State of Minnesota without regard to its
conflicts-of-law principles.

          All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and the Company will pay
all stock-transfer taxes in respect of the issuance thereof if any.

          Notwithstanding anything contained herein to the contrary, the holder
of this Warrant shall not be deemed a shareholder of the Company for any purpose
whatsoever (including voting rights) until and unless this Warrant is duly
exercised.

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          Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.

          IN WITNESS WHEREOF, this Common Stock Purchase Warrant has been duly
executed by MathStar, Inc., as of February 23, 2010.

 

 

 

 

MATHSTAR, INC.

 

 

 

 

By

 

 

 

 

 

Its

 

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WARRANT EXERCISE FORM

(To be signed only upon exercise of Warrant)

          The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________ of the shares of Common Stock of
MathStar, Inc. to which such Warrant relates, and herewith makes payment of
$____________ therefor in cash or by certified check, and requests that such
shares be issued and be delivered to, __________________________________ the
address for which is set forth below the signature of the undersigned.

 

 

 

 

Dated: __________________________

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

 

 

(Taxpayer’s I.D. Number)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Address)

 

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ASSIGNMENT FORM

(To be signed only upon authorized transfer of Warrant

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _________________________ the right to purchase shares of Common
Stock of MathStar, Inc. to which the within Warrant relates and appoints
MathStar, Inc., attorney, to transfer said right on the books of MathStar, Inc.
with full power of substitution in the premises.

 

 

 

 

Dated: __________________________

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Address)

 

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CASHLESS EXERCISE FORM

(To be executed upon exercise of Warrant pursuant to Section 5

TO: MATHSTAR, INC.

          The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Warrant for, and to purchase
thereunder, ________________________ shares of Common Stock as provided for in
Section 5 therein.

          If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.

Please issue a certificate or certificates for the number of whole shares Common
Stock in the name of:

 

 

 

NAME

 

 

 

 

(Please print name)

 

 

 

 

 

 

ADDRESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOCIAL SECURITY NO.

 

 

 

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

NOTE: The above signature should correspond exactly with the name on the first
page of this Common Stock Purchase Warrant or with the name of the assignee
appearing in the assignment form on the preceding page.

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