Document:

Exhibit 10.17

 

RESTATED

BRIDGE LOAN AND SUBSCRIPTION AGREEMENT

 

IMPORTANT:  PLEASE READ CAREFULLY BEFORE SIGNING

SIGNIFICANT
REPRESENTATIONS ARE

CALLED
FOR HEREIN

 

THIS
BRIDGE LOAN AND SUBSCRIPTION AGREEMENT (the “Agreement”) is dated as of                         ,
2005, by and between MathStar, Inc., a Minnesota corporation (the “Company”),
and                                                    
                                           ,
a resident of the State of                                                    
(the “Investor”).

 

In
consideration of the mutual promises set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             Subscription.  The Investor
hereby tenders the Investor’s subscription and applies for the purchase of                                    
unit(s) of the Company (the “Units”), each Unit consisting of a promissory note
in the original principal amount of $100,000 in the form attached as Appendix
B to the Company’s Confidential Private Placement Memorandum dated March 4,
2005, as amended or supplemented (the “Memorandum”), and common stock purchase
warrants to purchase 20,000 shares of the Company’s $0.01 per share common stock
(“Common Stock”) in the form attached as Appendix C to the
Memorandum.  By signing this Agreement,
the Investor acknowledges that the Company is relying upon the accuracy and
completeness of the representations contained herein in complying with its obligations
under applicable securities laws.

 

2.             Loan; Promissory Note.  The Investor
agrees to lend to the Company the amount of                                    
                                        
and 00/100 Dollars ($                  )
in lawful money of the United States, and the Company agrees to deliver to the
Investor a promissory note in the form attached as Appendix B to the
Memorandum (the “Note”) in that original principal amount to evidence the
Investor’s loan to the Company.  The
delivery of the Note shall be made concurrently with the Investor’s delivery of
funds to the Company in the amount set forth in the foregoing sentence.  Please deliver your completed and
signed Bridge 

 

**  By signing this Bridge
Loan and Subscription Agreement, the Investor acknowledges that the $1.60 per
share conversion price of the Notes and the Warrants and the number of shares
of Common Stock subject to the Notes and the Warrants included in the Units
being purchased by the Investor will be affected by a reverse stock split to
occur after the completion of the offering described in the Memorandum.  For example, if the Company effected a 2.25-for-one
reverse stock split after completion of the offering and the exercise price of
the Warrants was $1.60 per share before the reverse stock split (which would
occur only if the Company’s planned initial public offering is not closed
before the maturity date of the first Notes issued in the offering described in
the Memorandum, including any extension of their term), the number of shares of
Common Stock subject to Warrants included in each Unit (20,000 shares) would be
decreased to 8,889 shares, and the per share exercise price of the Warrants
would be increased to $3.60 per share.

 

 

Loan and Subscription
Agreement, along with a check made payable to Private Bank
Minnesota — MathStar, Inc. Escrow Account (*or wire funds) in
the total original principal amount of the Note, to the following address:

 

Mr. David Lantz

Feltl and Company

225 South 6th Street,
42nd Floor

Minneapolis, MN  55402

 

*If wiring funds, please
wire to:        Private Bank Minnesota

Minneapolis, Minnesota

ABA #091-005-836, for the
account

of MathStar, Inc.,
Account No. 3023793

Reference [Name of
Investor]

 

The
original principal amount of the Note, plus interest accrued thereon to the
date of conversion, may be converted, at the option of the holder, into shares
of the Company’s Common Stock (the “Conversion Shares”) under the terms and
conditions set forth in the Note.

 

3.             Warrants.  In consideration
of the loan evidenced by this Agreement and the Note, the Company shall issue
to the Investor, concurrently with delivery of the Note, a warrant in the form
attached as Appendix C to the Memorandum (the “Warrant”) to purchase
20,000 shares of Common Stock of the Company for each $100,000 of principal
amount of the Note and, for incremental portions of the principal amount in
excess of $100,000, a number of Warrants obtained by multiplying 20,000 by a
fraction, the numerator of which is the incremental principal amount of the
Note in excess of $100,000 and the denominator of which is $100,000, with the
result rounded to the nearest whole number. 
The shares of Common Stock issuable upon exercise of the Warrant are
referred to hereinafter as the “Warrant Shares.”

 

4.             Repayment.  All outstanding
principal and accrued interest on the Note shall be due and payable, and the
indebtedness evidenced by this Note may be prepaid, under the terms set forth
in the Note.

 

5.             Registration Rights.

 

(a)           If the Company
shall determine to proceed with the preparation and filing of a registration
statement (the “IPO Registration Statement”) in connection with its planned
initial public offering of shares of its Common Stock (“IPO”), and if the IPO
Registration Statement is declared effective on or before the maturity date of
the first Notes (as their maturity date may be extended by the Company as
provided in the Note) issued in the offering described in the Memorandum (the “Offering”),
the Company will cause to be included in another registration statement (the “Resale
Registration Statement”) to be filed with the Securities and Exchange
Commission (the “Commission”) within sixty (60) days after the closing date of
the IPO the issuance, if necessary, and resale of all of the Conversion Shares,
all of the Warrant Shares, and all other shares of Common Stock subject to
promissory notes and common stock purchase warrants issued in the Offering
(collectively, the “Resale Shares”) and to register or

 

2

 

qualify
the Resale Shares for resale in the states in which the Resale Shares are to be
sold.  In that regard, the Company will
use its best efforts to:

 

(i)            promptly prepare and file with the Commission such
amendments to the Resale Registration Statement and supplements to the
prospectus contained therein as may be necessary to keep the Resale
Registration Statement effective for twelve (12) months after the effective
date of the Resale Registration Statement, or for such shorter period during
which all of the Resale Shares are sold pursuant to the Resale Registration
Statement or pursuant to exemptions from registration; and

 

(ii)           prepare and promptly file with the Commission and
promptly notify the Investor of the filing of such amendment or supplement to
such Resale Registration Statement or prospectus that is part of the Resale
Registration Statement as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act of 1933, as amended (the “Securities
Act”), any event shall have occurred as the result of which any such prospectus
or any other prospectus as then in effect would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading.

 

(b)           In connection
with the Resale Registration Statement, the Company shall bear all registration
and filing fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, all internal Company expense and all legal fees
and disbursements and other expenses of complying with state securities or Blue
Sky laws of any jurisdictions in which the securities to be offered are to be
registered, qualified or exempt from registration.  Fees and disbursements of counsel and
accountants for the Investor, underwriting discounts and commissions and
transfer taxes for the Investor and any other expenses incurred by the Investor
not expressly described in the foregoing sentence shall be borne by the
Investor.  The Company shall indemnify
the Investor, its officers and directors (if any) and each person, if any, who controls
the Investor within the meaning of Section 15 of the Securities Act
against all losses, claims, damages, and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Resale Registration Statement or prospectus (and as amended or supplemented)
included in the Resale Registration Statement, or caused by any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they are made, unless such statement or omission was
made in reliance upon and in conformity with information furnished in writing
to the Company expressly for use therein by the Investor or by Feltl and
Company (who is to act as exclusive selling agent for the sale of the Units)
(the “Agent”).

 

(c)           The Investor
hereby represents that, notwithstanding a conversion of the Notes held by the
Investor or the exercise of the Warrants by such Investor, pursuant to the
Resale Registration Statement, the Investor will not offer for sale, sell,
distribute, or otherwise dispose of any of the Resale Shares or of any other
shares of Common Stock of the Company for a period of one hundred eighty (180)
days after the effective date of the

 

3

 

IPO
Registration Statement, except (i) with the consent of the managing
underwriter or underwriters of the IPO, (ii) pursuant to will or the laws
of descent and distribution, in which case the shares of Common Stock will be
subject to this restriction, or (iii) by gift pursuant to which each donee
agrees in writing to be bound by the same restriction on transferability.  The Investor hereby agrees that, if the
Investor is so requested, the Investor will sign a separate letter agreement
containing the provisions of this Section 4(c) and such other
provisions as the Company shall reasonably request.

 

6.             Representations and Warranties of the
Company.  The Company represents and warrants to the
Investor that this Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed and delivered
by an authorized officer of the Company, and is a valid and binding agreement
on the part of the Company.  All corporate
action necessary to the authorization, issuance, and delivery of the Note, the
Warrant, the Conversion Shares and the Warrant Shares has been taken on or
before the date hereof.  The Conversion
Shares, when issued in accordance with the terms of the Note, and the Warrant
Shares, when issued in accordance with the terms of the Warrant, will be
duly-authorized, fully-paid and non-assessable.

 

7.             Representations and Warranties of the
Investor.  The Investor represents and warrants to the
Company that the Investor:

 

(a)           Has received,
carefully reviewed and is familiar with the Memorandum, including all exhibits
thereto;

 

(b)           Is in a
financial position to hold the Units, the Notes, the Warrants, the Conversion
Shares and the Warrant Shares for an indefinite period of time and is able to
bear the economic risk and withstand a complete loss of the Investor’s
investment in the Units, the Notes, the Warrants, the Conversion Shares and the
Warrant Shares;

 

(c)           Has
substantial experience in evaluating and investing in private placement
transactions of securities similar to the Offering and in companies similar to
the Company so that the Investor is capable of reading and interpreting the
Memorandum and evaluating the merits and risks of his, her or its investment in
the Company and the Offering, and he, she or it has the capacity to protect
his, her or its own interests;

 

(d)           Believes that
the Investor, either alone or with the assistance of the Investor’s own
professional advisor, has such knowledge and experience in financial and
business matters that the Investor is capable of reading and interpreting the
Memorandum and evaluating the merits and risks of the prospective investment in
the Units, the Notes, the Warrants, the Conversion Shares and the Warrant
Shares;

 

(e)           Has obtained,
to the extent the Investor deems necessary, the Investor’s own personal
professional advice with respect to the risks inherent in the investment in the
Units, the Notes, the Warrants, the Conversion Shares and the Warrant Shares
and the suitability of an investment in the Units, the Notes, the Warrants, the
Conversion Shares, and the Warrant Shares in light of the Investor’s financial
condition and investment needs;

 

4

 

(f)            Believes that
the Investor’s investment in the Units, the Notes, the Warrants, the Conversion
Shares and the Warrant Shares is suitable for the Investor based upon the
Investor’s investment objectives and financial needs, after taking into account
all other investments by the Investor, including the Investor’s existing
investments in the Company (if any); has determined that the Investor’s
investments are not overly concentrated in the Company; and believes that the
Investor has adequate means for providing for the Investor’s current financial
needs and personal contingencies and has no need for liquidity of investment
with respect to the Units, the Notes, the Warrants, the Conversion Shares and
the Warrant Shares;

 

(g)           Has been given
access to full and complete information regarding the Company and has used such
access to the Investor’s satisfaction for the purpose of obtaining information
in addition to, or verifying information included in, the Memorandum, and the
Investor has either met with or been given reasonable opportunity to meet with
officers, directors and other representatives of the Company for the purpose of
asking questions of, and receiving answers from, such officers, directors and
other representatives concerning the Company and the terms and conditions of
the Offering and the current and proposed business and operations of the
Company and to obtain any additional information, to the extent reasonably
available;

 

(h)           Has made his,
her or its own investigation of the Company and its business, personnel and
prospects; has had an opportunity to discuss the Company’s business, management
and financial affairs with directors, officers and management of the Company;
and has had the opportunity to review the Company’s operations and facilities
to the Investor’s satisfaction;

 

(i)            Recognizes
that an investment in the Units, the Notes, the Warrants, the Conversion Shares
and the Warrant Shares is highly speculative and involves a high degree of risk
including, but not limited to, the risk of economic losses from operations of
the Company, the risk of the total loss of the Investor’s investment in the
Company, and the risks described in the Memorandum under the heading “Risk
Factors”;

 

(j)            Realizes that
(i) the purchase of the Units, the Notes, the Warrants, the Conversion
Shares and the Warrant Shares is a long-term investment; (ii) the Investor
must bear the economic risk of investment in the Units, the Notes, the
Warrants, the Conversion Shares and the Warrant Shares for an indefinite period
of time because such securities have not been registered under the Securities
Act or under the securities laws of any state and, therefore, none of such
securities can be sold unless they are subsequently registered under said laws
or exemptions from such registrations are available; (iii) the Investor
may not be able to liquidate the Investor’s investment in the event of an
emergency or pledge any of such securities as collateral for loans; (iv) the
transferability of such securities is restricted and requires the written
consent of the Company; and (v) legends will be placed on the Notes, the
Warrants and the stock certificates evidencing the Conversion Shares and the
Warrant Shares referring to the applicable restrictions on transferability;

 

(k)           Realizes that
the IPO may not be completed at all or under terms that are favorable to the
Company or the Investor;

 

5

 

(l)            Recognizes
that any financial projections, forecasts, assumptions or estimates included in
or referred to in the Memorandum or otherwise delivered or communicated to the
Investor are not statements of fact and that no representation or warranties
are made by the Company or any officer, director, shareholder, employee or
representative thereof with respect to the accuracy of such projections,
forecasts, assumptions or estimates or with respect to the future operations or
the amount of any future income or loss of the Company;

 

(m)          Recognizes that
(i) any predictions, forecasts, estimates and projections included in or
referred to in the Memorandum or otherwise delivered or communicated to the
Investor are for illustrative purposes only and are based upon certain
assumptions and events over which the Company has only partial or no control; (ii) variations
in such assumptions including, but not limited to, sales, costs, selling
expenses, general and administrative expenses, development expenses, customer
acceptance and competitive developments could significantly affect such
predictions, projections, estimates and forecasts; (iii) to the extent
that assumed events do not materialize, the outcome will vary substantially
from that projected or forecasted; and (iv) there are a number of other
factors and risks which could cause actual results to be substantially and
adversely different than projected;

 

(n)           Certifies,
under penalties of perjury, that the Investor is not subject to the backup withholding provisions of Section 3406(a)(i)(C) of
the Internal Revenue Code of 1986, as amended;

 

(o)           If an
individual, represents that he or she is a bona fide resident of, is domiciled
in, and received the offer and made the decision to invest in the Units, in the
State set forth on the first page of this Agreement; if an entity,
represents that its executive offices are located in the State set forth on the
first page of this Agreement; and represents that the Units are being
purchased by the Investor in the Investor’s name solely for the Investor’s own
beneficial interest and not as nominee for, or on behalf of, or for the
beneficial interest of, or with the intention to transfer to, any other person,
trust or organization;

 

(p)           Represents
that if an entity, the Investor was not formed for the purpose of investing in
the Units, the Note, the Warrant, the Conversion Shares or the Warrant Shares;
and

 

(q)           Recognizes
that conflicts of interest may arise because (i) Jo Pihl, who is the
spouse of Douglas M. Pihl (who is the Company’s Chairman and Chief Executive
Officer), is employed as a registered representative of the Agent and will
receive a

 

* (Note: You are subject
to backup withholding if (i) you fail to furnish your Social Security
number or taxpayer identification number herein; (ii) the Internal Revenue
Service notifies the Company that you furnished an incorrect Social Security
number or taxpayer identification number; (iii) you are notified that you
are subject to backup withholding; or (iv) you fail to certify that you
are not subject to backup withholding or you fail to certify your Social
Security number or taxpayer identification number.)

 

6

 

portion
of the commission paid to the Agent in connection with the Offering ; and (ii) affiliates
of the Agent own approximately 684,750 shares of Common Stock plus warrants to
purchase approximately 1,173,472 shares, which includes approximately 8,500
shares of Common Stock and warrants to purchase approximately 521,306 shares
owned by Jo Pihl.

 

8.             Investment Intent; Restrictions on
Transfer.  The Investor has been advised that the offer
and sale of the Units are not being registered under the Securities Act or
applicable state securities laws but are being offered and sold pursuant to
exemptions from such laws and that the Company’s reliance upon such exemptions
is predicated in part on the Investor’s representations as contained
herein.  The Investor represents and
warrants to the Company that the Units are being purchased for the Investor’s
own account and for investment and without the intention of reselling or
redistributing the same (except pursuant to the Resale Registration Statement or
exemptions from registration under the Securities Act and applicable state
securities laws); that the Investor has made no agreement with others regarding
the Units, the Note, the Warrant, the Conversion Shares or the Warrant Shares;
and that the Investor’s financial condition is such that it is not likely that
it will be necessary for the Investor to dispose of the Units, the Note, the
Warrant, the Conversion Shares or the Warrant Shares in the foreseeable
future.  The undersigned is aware that,
in the view of the Commission, a purchase of securities with an intent to
resell any of the same by reason of any foreseeable specific contingency or
anticipated change in market value, or any change in the condition of the
Company, or in connection with a contemplated liquidation or settlement of any
loan obtained through the acquisition of the Units and for which the Units or
any components thereof were pledged as security, would represent an intent
inconsistent with the representations set forth above.  The Investor further represents and agrees
that if, contrary to the Investor’s foregoing intentions, the Investor should
later desire to dispose of or transfer any of the Units, the Note, the Warrant,
the Conversion Shares or the Warrant Shares in any manner, the Investor shall
not do so without first obtaining (a) an opinion of counsel reasonably
acceptable to the Company that such proposed disposition or transfer lawfully
may be made without the registration of such securities under the Securities
Act and applicable state securities laws or (b) such registration.

 

The Investor agrees to furnish any
additional information which the Company deems necessary in order to verify the
answers set forth below.

 

7

 

THE INVESTOR MUST REVIEW AND PROVIDE INFORMATION IN RESPONSE
TO ITEM 9 BELOW.

 

9.             Investor Qualifications.  The Investor
understands that the representations contained below are made for the purpose
of qualifying the Investor as an “accredited investor,” as that term is defined
in Rule 501 of Regulation D under the Securities Act and for the purpose
of inducing a sale of the Units to the Investor.  The Investor hereby represents that the
statement or statements initialed
below are true and correct in all respects. 
The Investor understands that a false representation may constitute a
violation of law, and that any person who suffers damage as a result of a false
representation may have a claim against the Investor for damages.

 

The
Investor represents and warrants to the Company as follows (answer Part a
or b, as applicable).  Please initial all applicable items:

 

(a)           Accredited Investor – Individuals.  The Investor is an INDIVIDUAL and:

 

Investor Initials

 

(i)            The Investor hereby certifies that he or she is an
accredited investor because the Investor has an individual net worth, or joint
net worth with his or her spouse, exceeding $1,000,000.  For purposes of this Agreement, “individual
net worth” means the excess of total assets valued at fair market value,
including home and personal property, over total liabilities.

 

(ii)           The Investor hereby certifies that he or she is an
accredited investor because the Investor has an individual income (exclusive of
any income attributable to his or her spouse) of more than $200,000 in each of
the two most recent years or joint income with his or her spouse of more than
$300,000 in each of those years and that the Investor reasonably expects to
reach the same income level in the current year.

 

(iii)          The Investor certifies that he or she is an accredited
investor because he or she is a director or executive officer of the Company.

 

(b)           Accredited Investor – Entities.  The Investor is an ENTITY (such as
a partnership, corporation, trust, pension plan or limited liability company)
and:

 

Investor Initials

 

(i)            The
Investor hereby certifies that all of the beneficial equity owners of the
Investor qualify as accredited individual investors under items (a)(1) or
(a)(2) above.  (Investors attempting
to qualify under this item must complete the Certificate of Signatory to this
Agreement and each equity owner must complete a separate copy of this
Agreement).  (Note:  the Investor cannot qualify for this category
of accredited investor if the Investor is an irrevocable trust.)

 

(ii)           The
Investor is a bank or savings and loan association as defined in Sections 3(a)(2) and
3(a)(5)(A), respectively, of the Securities Act

 

8

 

acting
either in its individual or fiduciary capacity.

 

(iii)          The
Investor is an insurance company as defined in Section 2(13) of the
Securities Act.

 

(iv)          The
Investor is an investment company registered under the Investment Company Act
of 1940 or a business development company as defined therein, in Section 2(a)(48).

 

(v)           The
Investor is a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958.

 

(vi)          The
Investor is an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 and one or more of the following
is true (check one or more, as applicable):

 

(A)          the
investment decision is made by a plan fiduciary, as defined therein, in Section 3(21),
which is either a bank, savings and loan association, insurance company, or
registered investment adviser; or

 

(B)           the
employee benefit plan has total assets in excess of $5,000,000; or

 

(C)           the
plan is a self-directed plan with investment decisions made solely by persons
who are “accredited investors” as defined therein.

 

(vii)         The
Investor is a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.

 

(viii)        The
Investor has total assets in excess of $5,000,000, was not formed for the
specific purpose of acquiring Units and is one or more of the following
(check one or more, as applicable):

 

(A)          an
organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended; or

 

(B)           a
corporation; or

 

(C)           a
Massachusetts or similar business trust; or

 

(D)          a
partnership.

 

(ix)           The
Investor is a trust with total assets exceeding $5,000,000 which was not formed
for the specific purpose of acquiring Units and whose purchase is directed by a
person who has such knowledge and 

 

9

 

experience in financial
and business matters that he or she is capable of evaluating the merits and
risks of the investment in the Units.

 

10.          Relationship to Brokerage Firms.  Please answer each of the following questions by
checking the appropriate response:

 

(a)           o YES o NO:  Is the Investor a director, officer, partner,
branch manager, registered representative, employee, shareholder of, or
similarly related to or employed by, a brokerage firm?  (IF YES, please contact the Agent to provide
additional information before your subscription can be considered.)

 

(b)           o YES o NO:  Is the Investor’s spouse, father, mother,
father-in-law, mother-in-law, or any of the Investor’s brothers, sisters,
brothers-in-law, sisters-in-law or children, or any relative which the Investor
supports, a director, officer, partner, branch manager, registered
representative, employee, shareholder of, or similarly related to or engaged
by, a brokerage firm?  (IF YES, please
contact the Agent to provide additional information before your subscription
can be considered.)

 

(c)           o YES o NO:  Does the Investor own voting securities of
any brokerage firm?  (IF YES, please
contact the Agent to provide additional information before your subscription can
be considered.)

 

(d)           o YES o NO:  If the Investor is an entity, is any
director, officer, partner or 5% owner of the Investor also a director,
officer, partner, branch manager, registered representative, employee,
shareholder of, or similarly related to or employed by, a brokerage firm?  (IF YES, please contact the Agent to provide
additional information before your subscription can be considered.)

 

11.          Other.

 

(a)           This Agreement
and the rights and obligations of the parties hereunder shall not be assignable,
in whole or in part, by any party without the prior written consent of the
other party.  This Agreement and any
provision hereof may be amended, modified, waived or discharged only by a
writing signed by all of the parties hereto.

 

(b)           This Agreement,
including the exhibits attached thereto, constitutes the entire agreement of
the parties relative to the subject matter hereof and supersedes any and all
other agreements and understandings, whether written or oral, relative to the
matters discussed herein.

 

(c)           This Agreement
shall be construed and enforced in accordance with the laws of the State of
Minnesota, except for such provisions dealing with choice of law.

 

(d)           This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

 

10

 

12.          Authorization.  The Investor, if other than an
individual, hereby represents that this Bridge Loan and Subscription Agreement
has been duly authorized by all necessary action on the part of the Investor,
has been duly executed by an authorized officer or representative of the
Investor, and is a legal, valid, and binding obligation of the Investor
enforceable in accordance with its terms.

 

13.          Type of Ownership.  The Investor hereby represents to the Company
that the Investor will own the Units, Note, Warrant, Conversion Shares and
Warrant Shares in the following manner (initial  one):

 

Investor Initials

 

(a)                    Individual
Ownership

 

(b)                    Joint
Tenant with Right of Survivorship (both parties must sign).  Briefly describe relationship between parties
(e.g. married). 

 

 

(c)                    Tenants
in Common (both parties must sign). 
Briefly describe relationship between parties (e.g. married). 

 

(d)                    Qualified
Retirement Account (i.e. IRA) (See note * below.)

 

(e)                    Community
Property

 

(f)                     Partnership

 

(g)                    Corporation

 

(h)                    Trust
or Estate (Describe and enclose evidence of authorization). 

 

 

(i)                     Other
(Describe). 

 

* * * * * * * *

 

*FOR PURCHASES IN A
RETIREMENT ACCOUNT

(please initial in
the blank space provided)

 

Purchasing in a
Retirement Account.  An
investment in a private placement of securities is HIGHLY SPECULATIVE in
nature.  Accordingly, such an investment
may not be appropriate for Individual Retirement Accounts or other
retirement-type accounts that carry conservative investment objectives.  If this investment is in fact purchased in a
retirement-type account, the Investor hereby represents and affirms that
he/she/it understands the risks of the investment and has decided that such
risks are consistent with the Investor’s investment objectives for this
account.

 

11

 

Dated:                         .

 

Subscription.  The Investor hereby
subscribes to purchase the number of Units set forth below and agrees to pay to
the Company the aggregate purchase price set forth below:

 

	
  Price per Unit

  	
   

  	
  $100,000 per Unit

  
	
   

  	
   

  	
   

  
	
  Number of Units

  	
   

  	
                 
  Units*

  
	
   

  	
   

  	
   

  
	
  Aggregate Purchase
  Price

  	
   

  	
  $               

  

 

* A minimum investment of
$100,000 (one Unit) is required, unless waived in the sole discretion of the
Company.

 

INDIVIDUAL INVESTOR(S):

 

 

	
  X

  	
   

  	
  X

  
	
  Signature

  	
   

  	
  Signature of Second
  Individual

  (if applicable)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (Typed or Printed)

  	
   

  	
  Name (Typed or Printed)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address to Which
  Correspondence

  Should be Directed

  	
   

  	
  Address to Which
  Correspondence

  Should be Directed

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  City, State and Zip
  Code

  	
   

  	
  City, State and Zip
  Code

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security or Tax
  Identification

  Number

  	
   

  	
  Social Security or Tax
  Identification

  Number

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone Number

  	
   

  	
  Telephone Number

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Email Address

  	
   

  	
  Email Address

  

 

12

 

Dated:                         .

 

Subscription.  The Investor hereby
subscribes to purchase the number of Units set forth below and agrees to pay to
the Company an aggregate purchase price set forth below:

 

	
  Price per Unit

  	
   

  	
  $100,000 per Unit

  
	
   

  	
   

  	
   

  
	
  Number of Units

  	
   

  	
                 
  Units*

  
	
   

  	
   

  	
   

  
	
  Aggregate Purchase
  Price

  	
   

  	
  $               

  

 

* A minimum investment of
$100,000 (one Unit) is required, unless waived in the sole discretion of the
Company.

 

ENTITY
INVESTOR(S):

 

	
   

  	
   

  
	
  Name of Entity (Typed
  or Printed)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  *Signature of
  Authorized Person

  	
   

  
	
   

  	
   

  
	
  Its:

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name of Signatory
  (Typed or Printed)

  	
   

  
	
   

  	
   

  
	
  Address to Which
  Correspondence

  Should be Directed

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  City, State and Zip
  Code

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Entity’s Tax
  Identification or

  Social Security Number

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Telephone Number

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Email Address

  	
   

  

 

	
  *

  	
   

  	
  If Units are being
  subscribed for by an entity, the Certificate of Signatory on the

  next page must also be completed.

  

 

13

 

CERTIFICATE
OF SIGNATORY

 

(To be completed
if Units are being subscribed

for by an entity)

 

I,                                                       
the                                                         
of                                       
                                      
(the “Entity”), hereby certify that I am empowered and duly authorized by the
Entity to execute and carry out the terms of the Bridge Loan and Subscription
Agreement and to purchase the Units, and certify further that the Bridge Loan
and Subscription Agreement has been duly and validly executed on behalf of the
Entity and constitutes a legal and binding obligation of the Entity.

 

IN WITNESS WHEREOF, I
have set my hand this        day of                              .

 

 

	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  

 

14

 

ACCEPTANCE

 

The Company hereby
accepts the foregoing Bridge Loan and Subscription Agreement as of the date
above indicated.

 

	
   

  	
  MATHSTAR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name (Typed or Printed)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title (Typed or
  Printed)

  
						

 

15Exhibit 10.18

 

PROMISSORY NOTE

 

	
  $

  	
   

  	
  Minneapolis, Minnesota

  
	
  No. BR - 

  	
   

  	
  , 2005

  

 

FOR VALUE RECEIVED, MathStar, Inc. (the “Company”)
promises to pay to the order of                                             
                                                
(the “Lender”), at the Lender’s address set forth in the Agreement (as defined
below), or at such other place as the Lender may designate in writing from time
to time, the principal sum of                                        
                              
 and 00/100 Dollars ($                                )
in lawful money of the United States, together with interest from the date
hereof on the unpaid principal balance outstanding from time to time at the
rate of eight percent (8%) per year (calculated on the basis of the actual
number of days elapsed and a 360-day year). 
All outstanding principal and accrued interest on this Note shall be due
and payable on                                             
, 2006 (the “Initial Maturity Date”), unless such due date is extended by the
Company in accordance with the provisions of Section 3 below; provided,
however, that notwithstanding the foregoing, this Note shall be payable in full
thirty (30)  calendar days after the
closing date (the “Closing Date”) of the planned initial public offering (the “IPO”)
of shares of the Company’s common stock, $0.01 per share par value (“Common
Stock”).  This Note is one in the series
of promissory notes substantially identical in form and designated as No. BR
-             which may
be issued by the Company in the Offering.

 

1.                                       Bridge
Loan Agreement.  This Note has been
issued pursuant to and is subject to the terms and provisions of the Bridge
Loan and Subscription Agreement (the “Agreement”) dated as of                      ,
2005 between the Company and the Lender, and this Note and the Lender are
entitled to all the benefits provided for in the Agreement or which are
referred to therein.  The provisions of
the Agreement are incorporated herein by reference with the same force and
effect as if fully set forth herein.  All
capitalized terms not defined in this Note shall have the meanings ascribed to
them in the Agreement.

 

2.                                       Prepayment.  At any time before the Closing Date, this
Note may be prepaid in whole or in part at any time and from time to time
without notice, premium or penalty; however, no such prepayments shall be made
or are permitted on or after the Closing Date. 
All prepayments on this Note and all other notes issued in the Offering
shall be applied to this Note and such other notes pro rata on the basis of the
proportion that the then-outstanding principal amount of this Note and each
other note issued in the Offering bears to the aggregate then-outstanding
principal amount of all such notes and, in the case of this Note, such
prepayments shall be applied first to the payment of any costs of collection
that may be due hereunder, then to the payment of accrued interest, and then to
the payment of principal.

 

3.                                       Extension.  The Company may extend the final maturity
date of this Note to                        ,
200      by delivering written notice to the Lender at
any time on or before the Initial Maturity Date.  Principal and interest on this Note shall be
due and payable on the date of the final maturity of this Note.

 

 

4.                                       Notification
of IPO.  The Company shall give
notice to the Lender of the Closing Date of the IPO within five (5) days
after the Closing Date.  Such notice
shall state that this Note will be paid in full thirty (30) days after the
Closing Date and shall describe the conversion rights set forth in Section 5(a) of
this Note.

 

5.                                       Conversion
at the Option of the Lender.

 

(a)                                  After
Completion of IPO.  At the option of
the Lender, the original principal amount of this Note and interest accrued to
the date of conversion may be converted into shares of the Company’s Common
Stock for a period of twenty (20) calendar days after the Closing Date but only
if the Closing Date occurs on or before the maturity date of the first Notes
issued in the offering described in the Memorandum, including any extension of
such maturity date.  The per share
conversion price for such purposes shall be equal to eighty percent (80%) of
the Price to Public in the IPO.  If the
Closing Date does not occur on or before the maturity date of the first Notes
issued in the offering described in the Memorandum, including any extension of
such maturity date, the conversion price of this Note shall be $1.60 per share
of Common Stock (the “Alternative Conversion Price”), subject to adjustment as
provided in Section 5(c) of this Note..

 

(b)                                 Manner
of Conversion.  To convert the
indebtedness evidenced by this Note into shares of the Company’s Common Stock,
Lender shall (i) surrender this Note at the principal office of the
Company, duly endorsed in blank, and (ii) give written notice to the
Company, substantially in the form attached hereto as Schedule A, of the
dollar amount of each of principal and accrued interest that the Lender elects
to convert into shares of Common Stock pursuant to Section 5(a) of
this Note.  As promptly as possible
thereafter, the Company shall issue and deliver to the Lender stock
certificates representing the number of its shares of Common Stock into which
the indebtedness evidenced by this Note has been converted.  In the event of a partial conversion pursuant
to Section 5(a), the Company shall deliver to the Lender with such stock
certificates payment in full for the remaining principal and interest then due
on this Note.  Thereupon, the obligations
of the Company under this Note shall be deemed to have been satisfied and
discharged in full, and any shares of Common Stock into which the indebtedness
evidenced by this Note shall be so converted shall be fully paid and
nonassessable shares.

 

(c)                                  Adjustment
to Alternative Conversion Price.  The
Alternative Conversion Price shall be subject to adjustment at any time after
the date of this Note as hereinafter provided in this Section 5(c).

 

(i)                                     If
the Company at any time divides the outstanding shares of its Common Stock into
a greater number of shares (whether pursuant to a stock split, stock dividend
or otherwise), or if the outstanding shares of its Common Stock are combined
into a smaller number of shares, the Alternative Conversion Price in effect
immediately before such division or combination shall be proportionately
adjusted to reflect the reduction or increase in the value of each share of
Common Stock.

 

2

 

(ii)                                  If
any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another corporation,
shall be effected in such a way that holders of the Company’s Common Stock shall
be entitled to receive stock, other securities or assets with respect to or in
exchange for such Common Stock then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Lender shall have the
right to purchase and receive upon the basis and upon the terms and conditions
specified in this Note and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such shares of stock, other securities or assets
as would have been issued or delivered to the Lender if the Lender had
exercised this Note and had received such shares of Common Stock before such
reorganization, reclassification, consolidation, merger or sale.  The Company shall not effect any such
consolidation, merger or sale unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed to the registered holder of this Note
at the last address of such holder appearing on the books of the Company the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.

 

(iii)                               If
the Company takes any other action, or if any other event occurs which does not
come within the scope of the provisions of Sections 5(c)(i) or (ii) above,
but which should result in an adjustment in the Alternative Conversion Price,
in order to fairly protect the purchase rights of the Lender, an appropriate
adjustment in such purchase rights shall be made by the Company.

 

(iv)                              Upon
any adjustment of the Alternative Conversion Price, the Company shall give
written notice thereof to the Lender, which notice shall state the Alternative
Conversion Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares acquirable at such price upon the exercise of
the conversion rights contained in this Section 5, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

 

6.                                       Investment
Intent.  Other than pursuant to
registration under federal and any applicable state or other securities laws or
an exemption from such registration, the availability of which the Company
shall determine in its sole discretion, this Note and the shares of Common
Stock into which the indebtedness evidenced by this Note may be converted may
not be sold, pledged, assigned or otherwise disposed of (whether voluntarily or
involuntarily) by the Lender.  The
Company may condition such sale, pledge, assignment or other disposition on the
receipt from the party to whom this Note or such shares of Common Stock is to
be so transferred of any representations and agreements requested by the
Company in order to permit such transfer to be made pursuant to exemptions from
registration under federal and applicable state or other securities laws.  The Lender, by acceptance hereof, agrees to
give written notice to the Company

 

3

 

before transferring this Note or the shares of Common Stock subject to
this Note of the Lender’s intention to do so, describing briefly the manner of
any proposed transfer.  Within thirty
(30) days after receiving such written notice, the Company shall notify the
Lender as to whether such transfer may be effected and of the conditions to any
such transfer, and the Lender shall abide by such instructions and conditions
as to which the Lender was notified by the Company.  Any transferee of this Note or the shares of
Common Stock subject to this Note shall be automatically bound by its terms and
provisions and those of the Agreement.

 

7.                                       Notices.  All demands and notices to be given hereunder
shall be delivered or sent by certified mail, return receipt requested; in the
case of the Company, addressed to MathStar, Inc., 5900 Green Oak Drive,
Minnetonka, Minnesota 55343, and in the case of the Lender, addressed to the
address set forth in the Agreement, in either case until a new address shall
have been substituted by like notice.

 

IN WITNESS WHEREOF,
the Company has caused this Note to be executed on its behalf by its duly authorized
officer on the day and year first above written.

 

	
   

  	
  MATHSTAR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  	
   

  
					

 

 

THE ISSUANCE OF THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER APPLICABLE STATE SECURITIES LAWS. 
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND SUCH STATE LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE CORPORATION WHOSE AUTHORIZED OFFICER HAS SIGNED THIS NOTE
ABOVE.

 

4

 

SCHEDULE A

 

TO:                            MATHSTAR,
INC.

 

	
  NOTICE
  OF CONVERSION OF PROMISSORY NOTE   —

  	
  To Be Completed and
  Signed by the Registered Holder to Convert Promissory Note

  

 

The undersigned is the Lender named in the original Promissory Note
(the “Note”) attached hereto in the original principal amount of $                 
and dated                        ,
2005 made payable by MathStar, Inc. (the “Company”) to the Lender.  The Lender hereby irrevocably elects to
exercise its rights to convert $                   
in principal amount of the Note and $               
of interest accrued to date into                    
shares of the Company’s common stock, $0.01 par value per share, at a
conversion price of $               
per share, and requests that stock certificates for such shares shall be issued
in the name of

 

 

	
   

  	
   

  	
   

  
	
   

  	
  (Print Name)

  
	
   

  	
   

  
	
  Please insert social security or other identifying
  number of registered Holder of Note:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature*

  
						

 

*The signature on the Notice of Conversion of Promissory Note must
exactly correspond to the name as written upon the face of the Note in every
particular without alteration or any change whatsoever.  When signing on behalf of a corporation,
partnership, trust or other entity, please indicate your position(s) and
title(s) with such entity.  If the Note
is registered in the name of more than one Lender, all Lenders must sign.

 

5

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