Exhibit 10.7


 


HONEYWELL/MATHSTAR
Strategic Agreement


 


This agreement is entered
into as of December 13, 2004, is written by and between Honeywell
International Inc., acting through its Defense & Space Electronics
Systems Space business units, (“Honeywell”) with locations in Cleanwater, FL,
Glendale, AZ and Plymouth, MN and MathStar Inc. (“MathStar”) located in
Hopkins, MN.


 


Honeywell and MathStar
are herinafter referred signly as “Party” and collectively as the “Parties.”


 


Recitals:


 


Whereas MathStar is a leader
in the development of reprogrammable Silicon Object technology suitable for use
as reprogrammable Digital Signal Processor (DSP); and


 


Whereas MathStar desires
to license to Honeywell certain application and production rights; and


 


Whereas Honeywell is a
leader in the development of DSP solutions for Space applications; and


 


Whereas Honeywell is a
leader in the design and rnanufacturing of radiation tolerant and hardened
components; and


 


Whereas the Parties
desire to cooperate in the development of radiation hardened Field Programmable
Object Array (FPOA) technology for use in Space applications; and


 


Whereas the Parties
desire to pursue contracts or other opportunities, which may lead to the
development of DSP solutions, based in part on MathStar technology.


 


NOW, THEREFORE, in
consideration of their mutual promises, the Parties agree as follows:


 


1.             Definitions:


 


The following definitions
should apply to the terms in this agreement unless other meanings shall be
indicated by the context:


 


1.1.1                        Space: Application of FPOA technology above
50,000 feet altitude and have a procurement document specified radiation, space
level screening and qualification requirement.


 


1.1.2                        Defense: Application of FPOA technology to
any military purpose including but not limited to aircraft, missile, vehicle,
ship (surface or subsurface).


 


1.1.3                        Silicon Objects: The proprietary technology
developed by MathStar that is the basis for the creation of Field Programmable
Object Arrays (FPOA).


 


1.1.4        Field Programmable Object Arrays: The chip
level implementation of a re-configurable processor based on Silicon Objects
technology. A FPOA can be created with a variety of features and applications,
depending on the needs of the application and service.


 


1.1.5        Design Tools: The software and associated
documentation, needed to design, simulate, configure,


 


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and validate an
FPOA design.


 


1.1.6        Program: An identified sales opportunity
that results in a unique contract, subcontract or purchase order involving
specific application of FPOA technology for use by Honeywell. FPOA
modifications, change orders, and similar actions, occurring in the course of
Program execution are not considered a new or unique Program.


 


1.1.7        Honeywell: This agreement does not
encompass all of Honeywell International Inc. The agreement is specifically
limited to the Honeywell DSES Space business with locations in Clearwater, FL,
Glendale, AZ and Plymouth, MN.


 


1.1.8        Commercial Item: Any item, other than real
property, that is of a type customarily used by the general public or by
non-governmental entities for purposes other than governmental purposes, and
has been sold, leased, or licensed to the genenal public, or has been offered
for sale, lease, or license to the general public.


 


1.2           Titles
utilized herein are inserted for convenience and shall not be construed to
limit or modify the scope of any provision of this agreement or affect the
interpretation thereof.


 


2.             Term
of Agreement


 


The Term of this
Agreement shall be for thirty-six (36) months from the effective date, unless
terminated or extended by written agreement of the Parties.


 


3.             Protection
of Proprietary Information


 


The obligation to protect
confidential information is set forth in a separate Proprietary Information
Agreement (PIA) in effect as of 16 February 2004. The PIA shall survive
any termination or expiration of this Agreement and remain in full force and
effect.


 


4.             Honeywell
Obligations


 


Honeywell will cooperate
with MathStar to assess the FPOA technology, tools, and services in terms of
their technical capabilities, prices, and forward development roadmaps.  Honeywell will consult with MathStar on Space
requirements to be considered by MathStar in the development of its technology,
products, tools, and services for Space applications.


 


4.2           Honeywell
will assess foundry options for MathStar technology and products for Space and
recommend the foundry approach(s) most suitable.


 


4.3           Honeywell
will be the sales channel for Honeywell/MathStar developed FPOA-based Digital
Signal Processing (DSP) solutions for Space applications wherein the FPOA
technology, products, tools, and services are part of the solution. Honeywell
will involve MathStar in process of determining if the FPOA is applicable to
identified opportunities.


 


4.4           Honeywell
intends to submit proposals in response to qualified opportunities for DSP
solution(s) that may contain FPO technology, products, tools, and services.
Honeywell may include MathStar as a proposed subcontractor in proposals that
utilize the MathStar FPOA technology, products, tools, or services.  Honeywell shall have the sole right to
determine the final form and contents of any proposal submittal.


 


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4.5           Honeywell
will fabricate and sell FPOA parts to MathStar provided the Parties agree to
acceptable terms and conditions.


 


5.             MathStar
Obligations


 


5.1                                 MathStar
will continue its development of the FPOA technology, objects, tools, products,
and services in accordance with its plans and make these products, technology,
tools, and services available to Honeywell for use in Space.  MathStar will consult with Honeywell on a
quarterly basis regarding the requirements for Space and consider these requirements
in its forward development plans.


 


5.2           MathStar
shall have the sole right to determine the direction of its non-Space FPOA
technology, products, tools, and services.


 


5.3           MathStar
recognizes the nature of the sales process for opportunities in Space (i.e.,
long sales cycles, significant customer interaction, efforts to assess and
mitigate risks including demonstrations, significant proposal efforts, pursuit
of variations due to annual government appropriations of programs, and
long-term commitments and program cycles) and agrees to support Honeywell in
its sales process of DSP solutions in Space, to the extent warranted by the
Program as solely determined by MathStar.


 


5.4                                 MathStar
will provide technical information to Honeywell regarding the FPOA technology,
tools, products, and services including forward roadmopuond plans for use by
Honeywell in planning for DSP solutions. This will include, but not be limited
to, technical briefings, detailed technical assessments, and demonstrations of
the FPOA. MathStar will provide engineering support to Honeywell in the sales,
proposal, negotiation, and contract phases of DSP solutions. Moreover, MathStar
agrees to provide Honeywell and its customers, when requested, periodic
technical support in order to use the FPOA in proposed DSP solutions.


 


5.5                                 MathStar
shall support Honeywell proposal activity by furnishing reasonable proposal,
information, material and personnel required for the work to be performed by
MathStar for each Program being proposed in accordance with FAR Part 12 as
applicable.  MathStar will not be
required to maintain or provide Government cost accounting systems.


 


5.6                                 In
the event a prime contract is awarded to Honeywell based upon the joint efforts
described herein, MathStar will accept a subcontract from Honeywell provided
that price, schedule, and reasonable terms and conditions can be mutually
agreed upon, and that the Honeywell customer approves (if required) such a
subcontract.  MathStar will accept, as a
minimum subcontract terms and conditions with which Honeywell must comply
because of applicable statutes and regulations.


 


5.7           MathStar
will provide Honeywell annual reports, to the extent available, on financial
status, forward strategies and business outlook in sufficient detail as to
provide Honeywell insight into the viability of MathStar.


 


6.             Termination


 


6.1           Unless
sooner terminated or extended by written agreement of the Parties hereto, this
agreement shall terminate upon the happening of any of the following events:


 


6.1.1                        Thirty-six
(36) months after the effective date of this agreement.


 


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6.1.2                        At either
Party’s election, if eighteen (18) months after the effective date of this
agreement MathStar has not received from Honeywell contract(s) whose value
equals or exceeds $3,000,000. The Parties recognize and agree there is no
guarantee of a contract or that any revenue will result from this Agreement.


 


6.1.3                        At
Honeywell’s election, upon acquisition of MathStar, by purchase, merger, or
otherwise, by a business, or part of a business, one or more of whose product
lines substantially duplicate one or more of the product lines of Honeywell, as
limited by 1.1.7, so as to endanger, in the judgment of Honeywell, the
protection of Honeywell’s proprietary information anticipated to be delivered
in connection with this agreement. The acquisition of MathStar, by purchase,
merger, or otherwise, by a business, or pad of a business primarily engaged in
the design, manufacture or sale of semiconductors for non-Space applications
shall not be considered a competitor to Honeywell.


 


6.1.4                        At either
Party’s election, if the other Party becomes insolvent or suspends any of its
operations or if any petition is filed or proceeding commenced by or similar
arrangement against a Party (whether voluntary or involuntary) under any
federal or state law, or under any agreement, instrument, security interest or,
relating to bankruptcy, arrangement among debtor and creditors, reorganization,
receivership or assignment for the benefit of creditors, provided however that
in the case of an involuntary petition, the right to terminate this Agreement
shall only arise if the terminating party agrees, based on a commercially
reasonable conclusion, that such petition is not frivolous and the other Party
has not provided the terminating party reasonable evidence of continued
viability. In the event either Party becomes engaged in any of the actions
above, it shall provide notice to the other Party within three (3) days.


 


6.2           A
termination under this article shall not affect the rights and obligations
of the Parties hereto as described in provision 3, 8, 9, 11, 12, 13, 16 and 17.


 


7.             License
Rights


 


7.1           In
consideration of obligations described in this agreement, the Parties agree to
the following:


 


7.1.1        MathStar
grants to Honeywell an exclusive, perpetual, worldwide right to make, have
made, sell, offer for sale, or import radiation hardened or radiation tolerant
FPOAs developed under this agreement by MathStar during the term of this
agreement for Space applications, wherein the right “to have made” means only
that the Honeywell may contract with a third party or parties to manufacture
radiation hardened or radiation tolerant FPOAs developed under this agreement
for sale by Honeywell in Space applications.


 


During the term of this
Agreement, Honeywell shall have the right to sublicense the FPOA designs
developed under this agreement to third parties, subject to and expressly
contingent with the payment of royalties for each sublicense consistent with
the terms of section 10.3, solely for Space applications. Honeywell shall
provide a copy of any such subficense agreement to MathStar.


 


7.1.2        In
the event of termination by Honeywell under section 6.1.4 above MathStar
grants to Honeywell a non-exclusive, royalty bearing, irrevocable and
perpetual, worldwide license under any MathStar intellectual property used in
the development of FPOAs under this Agreement or any subcontract granted
hereunder to make, have made, offer for sale, sell, or import products for
Space applications. The previous sentence notwithstanding, if within 180 days
from such


 


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termination of this
Agreement MathStar emerges from any petition or proceeding under 6.1.4,
including any proceeding under any federal or state law relating to bankruptcy,
arrangement among debtor and creditors, reorganization, receivership or
assignment for the benefit of creditors as the identical legal entity that
entered such proceeding and in a form that permits it to continue to perform
its obligations under this Agreement and any subcontract granted hereunder,
MathStar may, at its option, revoke Honeywell’s license under this section 7.1.2
and re-institute this Agreement.


 


7.1.3                        Honeywell
shall retain all right, title and interest in and to intellectual property
developed solely by Honeywell’s employees, agents or consultants under this
Agreement and any related subcontract that is awarded to MathStar. Except as
otherwise provided herein, MathStar shall retain all right, title and interest
in and to any intellectual property developed solely by MathStar’s employees,
agents or consultants under this Agreement and any related subcontract that is
awarded to MathStar. Honeywell and MathStar shall jointly own any intellectual
property that is jointly developed by the employees, agents or consultants of
the Parties under this Agreement or any subcontract awarded to MathStar. Except
for modifications necessary to make the FPOAs radiation tolerant or radiation
hard, which shall be performed jointly by the Parties, all improvements to
MathStar’s Silicon Object technology under this agreement shall be performed
exclusively by MathStar. Further, Honeywell sahall have no right to improve
MathStar’s Silicon Object technology outside of this agreement.


 


7.1.4        In
the event MathStar sells FPOA product based in whole or in part on Honeywell
intellectual property and the parts are not fabricated by a Honeywell foundry,
MathStar will compensate Honeywell in accordance with a mutually agreed royalty
structure.


 


8.             Publicity


 


Except to the extent
required by law, neither Party shall release any information, advertisements,
announcements or other publicity concerning the other Party including the
performance or nature of the work related to this agreement without the prior
express written approval of the other Party. Notwithstanding the above, this
agreement may be made known to the U.S. Government as part of a sales pursuit
by either without the other Parties written permission.


 


9.             Limitation
of Liability


 


Either Party’s liability
for damages arising out of or related to this agreement is limited to the price
for the specific product or service that gives rise to claim. In no event shall
either Party be liable for any imcidenbal damages, oonsequeniial damoges,
opeual damagea, loss of profits, loss of revenue or loss of use, even if
informed of the possibility of such damages. To the extent permitted by
applicable law, these limitations and exclusions will apply regardless of
whether liability arises from breach of contract, tort (including but not
limited to negligence), by operation of law or otherwise.


 


10.           MathStar
Development Costs and Renumeration


 


10.1         When
Honeywell requires an FPOA solution, MathStar shall be the exclusive bidder and
shall propose to Honeywell the solution for technology, products, tools and
services.


 


10.2         All
Design Tools will be included in the proposal to Honeywell based upon a
commercial pricing structure.


 


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10.3         Honeywell
shall pay MathStar a royalty of either a prepaid fee of * per program or * per
FPOA part delivered or as otherwise agreed to by the parties.


 


10.4         The
Parties agree that Honeywell shall be responsible for all license/royalty
compensation to MathStar under this agreement and any program, notwithstanding
any non-payment by the customer to Honeywell.


 


11.           Added
Intellectual Property Rights


 


In addition to the
license rights described above, in the event Honeywell receives ocontract for a
Program and a subcontract is placed with MathStar, there will likely be
additional intellectual property rights to be determined by the terms and
conditions of each specific Program. These additimnal intellectual property
rights will not reduce the rights set forth in this agreement.


 


12.           Escrow
of IP/Tools


 


MathStar will deposit a
copy of all existing design work developed under this agreement, including but
not limited to: Verilog HDL for the FPOA’s with documentation; design tools and
source code for each tool with documentation; and executable files with
documentation with a nationally recognized third-Party escrow agent and
maintain such escrow arrangements throughout the term of this Agreement. Such
source code escrow arrangements will provide for the release of the tools and or
source code to Honeywell, at no cost to Honeywell, in the event the Agreement
is terminated in accordance with section 6.1.4 of the Termination
provisions.  The Parties hereby agree to
enter into an escrow agreement, upon mutually agreed-to terms, with a nationally
recognized third-Party escrow agent within 45 days of the execution of this
Agreement. MathStar will pay the costs associated with retaining such escrow
agent. In the event that the most up-to-date release or update of the tools and
or source code has not been deposited with such escrow agent and Honeywell is
entitled to the tools and or source code, Honeywell may obtain the tools and or
source code for such release or update directly from MathStar. Honeywell’s use
of this information shall be consistent with the rights described in section 7.1.2.


 


13.           Law


 


This Agreement shall be
construed and interpreted and the Parties’ rights and obligations determined In
accordance with the laws of the State of New York, U.S.A., without reference to
that jurisdiction’s conflict of laws provision.


 


14.           Assignment


 


Neither Party shall
assign this agreement or any interest therein, in whole or in part, without the
prior written consent of the other Party which consent shall not be
unreasonably withheld.


 


15.           Expenses


 


Except as otherwise set
forth herein, each Party will bear all costs, risks and liabilities incurred by
it arising out of its performance of this agreement.


 


16.           Disputes


 


Any dispute arising out
of or relating to this agreement, including the breach, termination, or


 










* Confidential Treatment
has been requested, the portion indicated has been redacted and the redacted
portion has been separately filed with the Securities and Exchange Commission.


 


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validity hereof, will be
finally resolved by a sole arbitrator in accordance with the CPR Institute for
Dispute Resolution Rules for Non-Adminishered Arbitration then currently
in effect. The arbitration will be governed by the Federal Arbitration Act, 9
U.S.C. ss 1-16, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The place of arbitration will
be New York, New York.  If the dispute
between the parties is related to a dispute between Honeywell and its customer,
MathStar agrees (i) to a stay in arbitration proceedings until Honeywell’s
dispute with its customer is finally resolved, and (ii) to continue to
perform its obligations under this order during the stay. Either party may
apply to the arbitrator seeking injunctive relief until the arbitration award
is rendered or the controversy is otherwise resolved. Either party also may,
without waiving any remedy under this agreement, seek from any court having
jurisdiction any interim or provisional relief that is necessary to protect the
rights or property of that party, pending the arbitrator’s determination of the
merits of the controversy.


 


17.           Compliance
with Laws


 


Each Party agrees to
comply with applicable provisions of all Federal, state, and local laws and
ordinances and all orders, rules and regulations promulgated thereunder.


 


18.           No
Warranties


 


18.1         The
Parties agree to make their own independent evaluation of any information
provided by the other Party. Neither Party makes any representation or warranty
regarding the use, accuracy or sufficiency of any information provided in
connection with this agreement including, without limitation, warranties
against infringement of intellectual property rights of third Parties.


 


18.2         This
constitutes the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all previous agreements, communications,
or representations, either verbal or written, between the Parties hereto. Any
oral understandings are expressly excluded. This agreement may not be changed,
altered, supplemented or added to except by the mutual written consent of the
Parties authorized representatives.


 


19.           Counterparts


 


This agreement may be
executed in one or more counterparts, including by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.


 


IN WITNESS WHEREOF, the
Parties have caused this agreement to be duly executed by their authorized
representatives.


 


	
  HONEYWELL
  INTERNATIONAL INC.

  	
   

  	
  MATHSTAR
  INC.

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Lee Williams

  	
   

  	
  By:

  	
  /s/ Douglas M. Pihl

  
	
  Name:

  	
  Lee Williams

  	
   

  	
  Name:

  	
  Douglas M. Pihl

  
	
  Title:

  	
  Vice President/GM DSES
  Space

  	
   

  	
  Title: 

  	
  CEO

  
	
  Date:

  	
  12-13-2004

  	
   

  	
  Date: 

  	
  12-15-2004

  
										



 


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