Exhibit 10.4

MATHSTAR, INC.
Amended and Restated 2004 Long-Term Incentive Plan

INCENTIVE STOCK OPTION AGREEMENT

 

 

 

OPTION NUMBER:

MSO- __

 

 

OPTIONEE:

PETER SHUTTE

 

 

GRANT DATE:

 

 

 

NUMBER OF OPTION SHARES:

 

 

 

EXERCISE PRICE PER SHARE:

$____ per Share

 

 

EXPIRATION DATE:

 

 

          THIS AGREEMENT is made as of the Grant Date set forth above by and
between MathStar, Inc., a Delaware corporation (the “Company”), and the Optionee
named above, who is an employee of the Company or an Affiliate of the Company
(the “Optionee”).

          The Company desires, by affording the Optionee an opportunity to
purchase shares of its Common Stock, par value $0.01 per share (the “Common
Stock”), as hereinafter provided, to carry out the purpose of the MathStar, Inc.
Amended and Restated 2004 Long-Term Incentive Plan (the “Option Plan”).

          NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the parties hereby
agree as follows:

          1.          Grant of Option. The Company hereby grants to the Optionee
the right and option (the “Option”) to purchase all or any part of the aggregate
number of shares of Common Stock set forth above (the “Option Shares”) (such
number being subject to adjustment as provided in Section 9 hereof) on the terms
and subject to the conditions set forth in this Agreement. This Option is
intended to be an “incentive stock option” within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”). This Option was
originally an option to purchase shares of common stock of Sajan, Inc. granted
under the Sajan, Inc. 2001 Stock Option Plan and is being assumed and converted
by the Company under the Option Plan in connection with the merger of Sajan,
Inc. with and into Garuda Acquisition, LLC (which is a wholly-owned subsidiary
of the Company), effective on [___________], 2010.

          2.          Purchase Price. The per share purchase price of the Option
Shares shall be the Exercise Price Per Share set forth above (such Exercise
Price Per Share being subject to adjustment as provided in Section 9 hereof).

          3.          Term and Exercise of Option.

 

 

 

             (a)          The term of this Option shall commence on the Grant
Date set forth above and shall continue until the Expiration Date set forth
above, unless earlier terminated as provided herein.

 

 

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             (b)          Subject to the earlier termination of this Option
pursuant to its terms and to the terms of the Plan, this Option shall vest and
become exercisable as follows but only if the Optionee then is an employee of
the Company or an Affiliate:

 

 

 

 

 

•

92,124.9 shares are fully vested as of the date hereof;

 

 

 

 

•

5,897.15 shares shall vest on the first day of each month for 27 months,
beginning March 1, 2010; and

 

 

 

 

•

the remaining 5902.05 shares shall vest on June 1, 2012.

 

 

 

 

             (c)          To exercise this Option, the Optionee shall give
written notice to the Company, to the attention of its President or other
designated agent, in substantially the form attached hereto as Exhibit A, and
the Optionee shall deliver payment in full for the Option Shares with respect to
which this Option is then being exercised, as provided in Section 4(a) below.

 

 

 

             (d)          Neither the Optionee nor the Optionee’s legal
representatives, legatees or distributees, as the case may be, will be, or will
be deemed to be, a holder of any Option Shares for any purpose unless and until
certificates for such Option Shares are issued to the Optionee or the Optionee’s
legal representatives, legatees or distributees, under the terms of the Option
Plan.

          4.          Limitations on Exercise of Option.

 

 

 

             (a)          The exercise of this Option will be contingent upon
receipt from the Optionee (or the purchaser acting under Section 7 below) of the
full Exercise Price of such Option Shares. Payment of the Exercise Price shall
be made in cash or by a certified or cashier’s check. However, in its sole
discretion, the Company may accept previously acquired shares of Common Stock of
the Company that have been owned by the Optionee for at least six (6) months,
which shares have an aggregate Fair Market Value on the date of exercise which
is not less than the total Exercise Price, or shares of Common Stock issuable
upon the exercise of this Option, or a combination of cash and such shares of
Common Stock, in payment of the Exercise Price. No Option Shares will be issued
until full payment therefor has been made and the Optionee has executed any and
all agreements that the Company may require the Optionee to execute.

 

 

 

             (b)          The issuance of Option Shares upon the exercise of
this Option shall be subject to all applicable laws, rules, and regulations. If,
in the opinion of the Board of Directors of the Company or a Committee of the
Board of Directors, (i) the listing, registration, or qualification of the
Option Shares upon any securities exchange or under any state or federal law,
(ii) the consent or approval of any regulatory body, or (iii) an agreement of
the Optionee with respect to the disposition of the Option Shares, is necessary
or desirable as a condition to the issuance or sale of the Option Shares, this
Option shall not be exercised and/or the Option Shares shall not be sold unless
and until such listing, registration, qualification, consent, approval or
agreement is effected or obtained in form satisfactory to the Board of Directors
or the Committee.

          5.          Nontransferability of Option. This Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and during the lifetime of the Optionee, this Option shall be
exercisable only by the Optionee.

          6.          Termination of Employment for “Cause”. Upon termination of
the Optionee’s employment with the Company or an Affiliate for “cause” (as
“cause” is determined in the sole discretion of the Board or the Committee),
this Option shall automatically terminate and be immediately forfeited, whether
or not vested, and neither the Optionee nor the Optionee’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
this Option.

 

 

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          7.          Termination of Employment Not for “Cause”; Death or
Disability of Optionee. Upon termination of the Optionee’s employment with the
Company or an Affiliate not for “cause” (as “cause” is determined in the sole
discretion of the Board or the Committee), death or disability, the Optionee
shall have the shorter of three (3) months after such termination, or until the
Expiration Date to exercise any portion of the Option that was vested on such
termination date, but the unvested portion of the Option shall automatically
terminate and be immediately forfeited, and neither the Optionee nor any of the
Optionee’s heirs, personal representatives, successors or assigns shall have any
rights with respect to such unvested portion of the Option.

          8.          Termination Due to Death or Disability. If the Optionee
dies or is terminated due to a disability (with disability determined in the
sole discretion of the Company) while employed by the Company or an Affiliate,
this Option may be exercised to the same extent that the Optionee would have
been entitled to exercise it at the date of death or termination due to
disability and may be exercised within a period of two (2) years after the date
of death or termination due to a disability, but in no case later than the
Expiration Date set forth above. In the event of death, this Option shall be
exercisable only by the executors or administrators of the Optionee or by the
person or persons to whom the Optionee’s rights under the Option shall pass by
the Optionee’s will or the laws of descent and distribution. Any portion of an
Option that is not exercisable at the time of an Optionee’s death or termination
due to a disability shall automatically terminate.

          9.          No Right to Continued Employment. This Option will not
confer upon the Optionee any right with respect to continuance of employment by
the Company or an Affiliate of the Company, nor will it interfere in any way
with the Company’s right or the Affiliate’s right to terminate the Optionee’s
employment at any time.

          10.        Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend, stock split, reverse
stock split, reclassification, combination, exchange of shares, or other similar
recapitalization of the Company, there shall be an appropriate and proportionate
adjustment to the number of Option Shares and the per share Exercise Price Per
Share hereunder so that the Optionee then shall receive for the aggregate
Exercise Price paid by the Optionee upon exercise of this Option the number of
shares the Optionee would have received if this Option had been exercised before
such recapitalization event occurred. No adjustment shall be made under this
Section 9 upon the issuance by the Company of any warrants, rights, or options
to acquire additional Common Stock or of securities convertible into Common
Stock unless such warrants, rights, options or convertible securities are issued
to all of the Company’s shareholders on a proportionate basis.

          11.        Effect of Certain Transactions. Notwithstanding any
provision in this Option to the contrary, immediately before the effective time
of any of the events described in Sections 11(a) through (d) below, the portion
of this Option that is not vested shall immediately and automatically vest and,
to the extent not exercised, the Option shall be automatically converted into an
Option to acquire the kind and amount of shares of stock or other securities or
property that the Optionee would have owned or have been entitled to receive
immediately after the occurrence of the event, had the Option been exercised in
full immediately before the effective time of such event; provided, however,
that the Expiration Date of the Option shall remain unchanged, and, in any such
case, appropriate adjustment shall be made in the application of the provisions
of this Option with respect to the rights and interests thereafter of the
Optionee, to the end that the provisions set forth in this Option shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Option:

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(a)          The sale, lease, exchange or other transfer, directly or
indirectly, of all or substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a person or entity that
is not controlled by the Company,

 

 

 

(b)          The approval by the Company’s shareholders of any plan or proposal
for the liquidation or dissolution of the Company;

 

 

 

(c)          Any person or entity becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (“Exchange
Act”)), directly or indirectly, of more than fifty percent (50%) of the combined
voting power of the outstanding securities of the Company ordinarily having the
right to vote at elections of directors who were not beneficial owners of at
least fifty percent (50%) of such combined voting power as of the date the
Company’s Board of Directors adopted the Option Plan, and

 

 

 

(d)          A merger or consolidation to which the Company is a party if the
shareholders of the Company immediately prior to the effective date of such
merger or consolidation have, solely on account of ownership of securities of
the Company at such time, “beneficial ownership” (as defined in Rule 13d-3 under
the Exchange Act) immediately following the effective date of such merger or
consolidation of securities of the surviving company representing less than
fifty percent (50%) of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at elections of
directors.

Notwithstanding any provision in the Option Plan or this Option Agreement to the
contrary, the Board of Directors or the Committee shall not have the power or
right, either before or after the occurrence of an event described in
subparagraph (a) through (d) above, to rescind, modify or amend the provisions
of this Section 11 without the consent of the Optionee.

          12.          Limitation on Payments and Benefits. Notwithstanding
anything in this Agreement to the contrary, if any of the payments or benefits
to be made or provided in connection with this Agreement, together with any
other payments, benefits or awards which you have the right to receive from the
Company, or any corporation which is a member of an “affiliated group” (as
defined in Section 1504(a) of the Code without regard to Section 1504(b) of the
Code) of which the Company is a member (“Affiliate”), constitute an “excess
parachute payment” (as defined in Section 280G(b) of the Code), such payments,
benefits or awards to be made or provided in connection with this Agreement, or
any other agreement between you and the Company or its Affiliates, may be
reduced, eliminated, modified or waived to the extent necessary to prevent all,
or any portion, of such payments, benefits or awards from becoming “excess
parachute payments” and therefore subject to the excise tax imposed under
Section 4999 of the Code. The Optionee will have the sole right and discretion
to determine whether the payments, benefits or awards to be made or provided in
connection with this Agreement, or any other agreement between the Optionee and
the Company, should be reduced, whether or not such other agreement with the
Company or an Affiliate expressly addresses the potential application of Section
280G or Section 4999 of the Code (including, without limitation, that “payments”
under such agreement be reduced). The Optionee will also have the right to
designate the particular payments, benefits or awards that are to be reduced,
eliminated, modified or waived; provided that no such adjustment will be made if
it results in additional expense to the Company in excess of expenses the
Company would have experienced if no adjustment had been made. The determination
as to whether any such decrease in the payments or benefits is necessary must be
made in good faith by legal counsel or a certified public accountant selected by
you and reasonably acceptable to the Company, and such determination will be
conclusive and binding upon you and the Company. The Company will pay or
reimburse you on demand for the reasonable fees, costs and expenses of the
counsel or accountant selected to make the determinations under this Section 12.

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          13          Interpretation. The interpretation and construction of any
provision of the Option Plan and this Option shall be made by the Board of
Directors or the Committee and shall be final, conclusive and binding on the
Optionee and all other persons.

          14.         Definitions; Option Plan Governs. Any capitalized term
used herein that is not expressly defined herein shall have the meaning ascribed
to it in the Option Plan. This Option is in all respects subject to and governed
by all of the provisions of the Option Plan.

(Signature page follows.)

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Signature Page to MathStar, Inc.
Incentive Stock Option Agreement

          IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by its duly authorized officer, and the Optionee
has executed this Agreement as of the Grant Date set forth above.

 

 

 

 

 

 

COMPANY:

 

MathStar, Inc.

 

 

 

 

 

By

 

 

 

 

[Name of Officer of the Company]

 

 

 

Its: [Title]

 

 

 

 

 

OPTIONEE:

 

 

 

 

 

 

 

 

 

PETER SHUTTE

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Social Security Number of Optionee:

 

 

 

 

 

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EXHIBIT A
NOTICE OF EXERCISE OF
STOCK OPTION

TO:

FROM:

DATE:

 

 

RE:

Exercise of Stock Option

            I hereby exercise my option to purchase ______ shares of Common
Stock at $______ per share (total exercise price of $______). This notice is
given in accordance with the terms of my Incentive Stock Option Agreement
(“Agreement”) dated _________. The option price and vested amount is in
accordance with Sections 2 and 3 of the Agreement.

Check one:

 

 

 

____

 

Enclosed is cash, or a cashier’s or certified check payable to MathStar, Inc.
for the total exercise price of the shares being purchased.

 

 

 

____

 

Attached is a certificate(s) for ____________________ shares of common stock
duly endorsed in blank and surrendered for the exercise price of the shares
being purchased.*

 

 

 

 

 

*The use of this alternative is subject to the approval of MathStar, Inc.

 

 

 

 

 

Please prepare the stock certificate in the following name(s):

 

 

Sincerely,

 

(Signature)

 

(Print or Type Name)

 

Letter and consideration

received on __________________

(effective date of exercise)

 

 

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