HONEYWELL/MATHSTAR Strategic Agreement

Strategic Alliance Agreement

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MATHSTAR INC | Honeywell International Inc.,

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Title: HONEYWELL/MATHSTAR Strategic Agreement
Governing Law: New York Date: 8/3/2005

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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,

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.

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.

6.1.2 At either Party’s election, if eighteen (18) months after the effective date of this agreement MathStar