AMENDMENT NO. 2 TO STRATEGIC PARTNERSHIP AGREEMENT

Exhibit 10.1

AMENDMENT NO. 2 TO

STRATEGIC PARTNERSHIP AGREEMENT

THIS AMENDMENT NO. 2 TO STRATEGIC PARTNERSHIP AGREEMENT is entered into and effective as of the 5^th of December, 2005 by and among MathStar, Inc., a Delaware corporation (“MathStar”); Valley Technologies, Inc., a Pennsylvania corporation (“VTI”); and, for purposes of only the amendment to Section 3.1.2 below, Gerald Petrole, the President and Chief Executive Officer of VTI (“Petrole”).

RECITALS

WHEREAS, MathStar, VTI and Petrole entered into a Strategic Partnership Agreement dated as of October 8, 2004 (the “Original Agreement”) for the purpose of having VTI develop and support products, algorithms and applications for MathStar’s FPOAs;

WHEREAS, effective on June 10, 2005, MathStar’s board of directors and shareholders approved a three-for-one reverse stock split of the MathStar Common Stock (the “Stock Split”);

WHEREAS, MathStar and VTI amended Section 3.1.1 of the Original Agreement pursuant to Amendment No. 1 to Strategic Partnership Agreement dated August 11, 2005 (“Amendment No. 1”) (the Original Agreement, as amended by Amendment No. 1, is hereinafter referred to as the “Agreement”);

WHEREAS, as provided in Section 3.1.2 of the Agreement, upon execution of the Original Agreement, MathStar granted to Petrole warrants to purchase a total of eighty-three thousand three hundred thirty-four (83,334) shares of MathStar Common Stock at an exercise price of $6.00 per share, as such number of shares and exercise price have been adjusted for the Stock Split; and

WHEREAS, the Parties and Petrole want to amend the Agreement to change the circumstances under which the Petrole Warrants will vest and the method by which Royalty payable by VTI to MathStar is determined.

NOW, THEREFORE, in consideration of the foregoing, the mutual promises contained in the Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MathStar and VTI hereby agree as follows:

1.             Section 1.9 of the Agreement is hereby amended to read in its entirety as follows:

1.9.                  “Design Wins” means the acceptance by a customer of the FPOAs for use in or with respect to such customer’s or prospective customer’s products, as determined by the mutual agreement of the Parties, provided that the projected annual unit volume for any Design Win to be considered a Design Win under this Agreement must be greater than 500 units per year or annual revenue of greater than $250,000 per year as mutually determined by both Parties.