Exhibit 10.5


 


Variable Compensation Plan


 


2005


 


Plan Prepared for and accepted by


 


	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  



 


Date:             


 


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Variable
Compensation Plan Objectives


 


The purpose of the 2005 Variable Compensation Plan (the “Plan”) is:


 


A.           To provide economic motivation to those
individuals directly involved in obtaining design win and sales commitments for
products and services of MathStar, Inc. (the “Company”) for the purpose of
meeting or exceeding the Company’s design wins, sales goals and sales
objectives.


B.             To create incentive
for meeting defined design win goals.


C.             To create incentive
for meeting defined sales objectives.


D.            To provide a
compensation model for each eligible individual.


E.              To attract and
retain world-class sales personnel, sales managers, field application engineers
and field application managers.


 


Eligibility


 


Eligibility for variable compensation is determined by MathStar Inc.
Sales Management and Human Resources and is fundamentally based on individuals
who meet all or part of the following criteria:


 


A.           Responsibility for
account management


B.             Responsibility for
territory management


C.             Support of pre and
post sales design win activity


D.            Achievement of sales
revenue goals


E.              Negotiation and/ or
conclusion of sales commitments


F.              Support for
strategic initiatives and associated goals and milestones


G.             Eligibility in the
Plan is limited to the period of time the individual is a full-time employee of
the Company


H.            Eligible individuals
will earn variable compensation as of their first day of full-time employment


I.                 If an eligible employee’s employment
with the Company is terminated for any reason, variable compensation will be
paid on revenue recognized through the last day of employment.  Revenue is determined by the invoice date and
subject to any credits issued against this revenue through the date the final
variable compensation amount is disbursed. 
If the individual transfers to another position where the individual is
not eligible for this plan, this agreement ceases to be in effect for that
employee at midnight on the day of transfer.


 


Variable
Compensation For Field Sales Personnel


 


Variable
Compensation may be earned in addition to the eligible employee’s base
salary.  The total of Base Salary and
Variable compensation will be the Employees target compensation. From time to
time, Management may award other types of compensation that will have no effect
on employees target compensation.


 


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The Company reserves the right to change or modify territories and or
assigned responsibilities for the field team at any time.  Any changes must be approved by the Vice
President of Sales with written notification to the affected individual or individuals.  The variable compensation plans for those
affected by these changes will be reviewed and any changes needed to the
variable compensation plan will be made. 
The variable compensation plan will than be reissued to the employee or
employees reflecting their new assigned responsibilities.


 


Variable compensation is paid based on the combination of net eligible
sales (“Sales”) earned and design wins. 
Sales is defined as product and services that are recognized by the
Company as revenue. Sales can be recognized to a territory, region, account
base or an individual’s responsibility including resale through an authorized
distributor or authorized sales representative and based on customer design
location ship-to and bill-to information. 
Sales will be reduced by any credit issued by the Company during the
quarter such as product returns, price protections, and rebates.  A design win is defined as:


 


1.               The sale of
a tool set and/or a development board for a particular development effort


 


2.               The sale of
at least 10 parts into a particular program


 


3.               A purchase
of a development NRE of at least $100,000


 


4.               Any action or
transaction designated by the CEO as a design win


 


Variable
Compensation Calculation For Applications and Applications Management


 


For
each design win a  $2000 cash bonus will
be paid.


 


The
aggregate award for any one design cannot be more than 2x a single design
win.  It will be the VP of Sales
responsibility to determine any pro rata awards for participation by multiple
applications people.


 


The
award form will be filled out monthly, as required.


 


Variable
Compensation Calculation For Sales and Sales Management


 


FSE Compensation


 


For
the first 4 wins, a  $2000 cash bonus
will be paid.


 


For
the next 6 wins, a  $3000 cash bonus will
be paid.


 


For
the next 5 wins, a $4000 cash bonus will be paid.


 


For
more than 15 wins, a $5000 cash bonus will be paid.


 


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Sales Manager Compensation


 


For the first
4 wins, a  $3000 cash bonus will be paid.


 


For the next 6
wins, a  $4000 cash bonus will be paid.


 


For design
wins greater than 10, a $5000 cash bonus will be paid.


 


The Sales
Manager will be paid on design wins achieved by the team under the manger and
for any individual wins.


 


VP Sales
Compensation


 


For
the first 10 wins, a  $5000 cash bonus
will be paid.


 


For
the next 10 wins, a  $6000 cash bonus
will be paid.


 


For
more than 20 wins, a $7000 cash bonus will be paid.


 


The
Sales Manager will be paid on design wins achieved by the team under the manger
and for any individual wins.


 


A.           Those individuals that
generate revenue will also be compensated at 5% of revenue. This applies only
to the sales person (FSE, Manager, or VP) of record for a particular order.


 


B.             The Sales variable
compensation will be calculated monthly using the form contained in the
appendix to this document.


 


Payment


 


Variable compensation is paid monthly within 15 days after the filing
of the sales incentive form.


 


Inclusions
and Exclusions


 


The following items are eligible for variable sales compensation.


 


•    Chip
sales


•    Board
level product sales


•    System
level product sales


•    NRE
sales


•    Development
charges


•    Early
technology access charges


•    IP
sales


•    Royalty
payments received by the Company


•    Sales
through an authorized sales representative


 


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•      Sales
through an authorized distributor


 


The following items are NOT eligible for variable compensation.


 


•      Inter-company
sales to subsidiaries


•      Product
for internal use only


•      Surcharges,
taxes, freight and customs duties


 


In unique business transactions, the eligibility of that transaction
for inclusion in calculating Sales variable compensation shall be determined by
the Vice President of Sales.


 


Sales
Splits


 


In the event that different sales persons from different territories or
regions share the same customer, all sales persons responsible for such
customers will carry the full quota and get credit for all sales into this
account.  These figures will be used to
calculate the annual sales variable compensation for each individual.


 


Effective
Dates


 


The effective date of this Plan is March 1, 2005 through February 28th,
2006.  The company reserves the right to
amend this Plan.  Any modifications to
the Plan will require approval by the Worldwide SalesVice President and Human
Resources.


 


Variable compensation plans for each individual and any changes to
these plans must be documented.  Proper
approval from the individual, sales management, Vice President of Sales and
Human Resources must be obtained for any changes.


 


Any questions pertaining to this plan should be directed to sales
Management and/or Human resources.


 


This Plan was received and accepted by:


 


 


	
   

  	
   

  	
   

  	
   

  
	
  (Signature- CFO)

  	
   

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature- HR)

  	
   

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature- V.P. of Sales)

  	
   

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature- President & CEO)

  	
   

  	
  (Date)

  	
   

  



 


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Apendix A


 


Design
Win and Sales Incentive


 


FSE or FAE:


 


Month:


 


Design Wins


 


	
  Customer

  	
   

  	
  Design Win #

  	
   

  	
  Monetary Award

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total for Month

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


Incentive


 


	
  Customer

  	
   

  	
  Revenue

  	
   

  	
  P.O.

  	
   

  	
  Incentive Rate

  	
   

  	
  Incentive

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total for Month

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


CFO:


 


VP Sales:


 


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