Exhibit 4.1


MATHSTAR, INC.


and


WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Rights Agent


TAX BENEFIT PRESERVATION PLAN AND

RIGHTS AGREEMENT


Dated as of February 25, 2010









	
  

 	
  

 	
  

 	
  

 
	
 TABLE OF CONTENTS

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 1.

 	
 Certain
 Definitions

 	
  

 	
 1

 
	
 Section 2.

 	
 Appointment
 of Rights Agent

 	
  

 	
 7

 
	
 Section 3.

 	
 Issue of
 Right Certificates

 	
  

 	
 7

 
	
 Section 4.

 	
 Form of
 Right Certificates

 	
  

 	
 9

 
	
 Section 5.

 	
 Countersignature
 and Registration

 	
  

 	
 9

 
	
 Section 6.

 	
 Transfer,
 Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates

 	
  

 	
 10

 
	
 Section 7.

 	
 Exercise of
 Rights, Purchase Price; Expiration Date of Rights

 	
  

 	
 10

 
	
 Section 8.

 	
 Cancellation
 and Destruction of Right Certificates

 	
  

 	
 12

 
	
 Section 9.

 	
 Availability
 of Shares of Preferred Stock

 	
  

 	
 12

 
	
 Section 10.

 	
 Preferred
 Stock Record Date

 	
  

 	
 13

 
	
 Section 11.

 	
 Adjustment
 of Purchase Price, Number and Kind of Shares and Number of Rights

 	
  

 	
 14

 
	
 Section 12.

 	
 Certificate
 of Adjusted Purchase Price or Number of Shares

 	
  

 	
 21

 
	
 Section 13.

 	
 Fractional
 Rights and Fractional Shares

 	
  

 	
 21

 
	
 Section 14.

 	
 Rights of
 Action

 	
  

 	
 22

 
	
 Section 15.

 	
 Agreement of
 Right Holders

 	
  

 	
 23

 
	
 Section 16.

 	
 Right
 Certificate Holder Not Deemed a Stockholder

 	
  

 	
 24

 
	
 Section 17.

 	
 Concerning
 the Rights Agent

 	
  

 	
 24

 
	
 Section 18.

 	
 Merger or
 Consolidation or Change of Name of Rights Agent

 	
  

 	
 24

 
	
 Section 19.

 	
 Duties of
 Rights Agent

 	
  

 	
 25

 
	
 Section 20.

 	
 Change of
 Rights Agent

 	
  

 	
 27

 
	
 Section 21.

 	
 Issuance of
 New Right Certificates

 	
  

 	
 28

 
	
 Section 22.

 	
 Redemption

 	
  

 	
 28

 
	
 Section 23.

 	
 Exchange

 	
  

 	
 29

 
	
 Section 24.

 	
 Notice of
 Certain Events

 	
  

 	
 30

 
	
 Section 25.

 	
 Notices

 	
  

 	
 31

 
	
 Section 26.

 	
 Supplements
 and Amendments

 	
  

 	
 31

 
	
 Section 27.

 	
 Successors

 	
  

 	
 32

 
	
 Section 28.

 	
 Benefits of
 this Plan

 	
  

 	
 32

 
	
 Section 29.

 	
 Process to
 Seek Exemption

 	
  

 	
 32

 
	
 Section 30.

 	
 Determinations
 and Actions by the Board of Directors

 	
  

 	
 33

 
	
 Section 31.

 	
 Severability

 	
  

 	
 33

 
	
 Section 32.

 	
 Governing
 Law

 	
  

 	
 33

 
	
 Section 33.

 	
 Counterparts

 	
  

 	
 33

 
	
 Section 34.

 	
 Descriptive
 Headings

 	
  

 	
 34

 
	
 Section 35.

 	
 Force
 Majeure

 	
  

 	
 34

 


i





TAX BENEFIT PRESERVATION PLAN AND

RIGHTS AGREEMENT


                      Tax
Benefit Preservation Plan and Rights Agreement, dated as of February 25, 2010
(“Plan”), between MathStar, Inc., a Delaware corporation (the “Company”), and
Wells Fargo Shareowner Services, a division of Wells Fargo Bank, National
Association, as Rights Agent (the “Rights Agent”). 


                      The
Company has generated net operating loss carryovers and tax credit carryovers
for United States federal income tax purposes (“NOLs”), which will potentially
provide valuable Tax Benefits (as defined below) to the Company. The ability to
use the NOLs may be impaired or destroyed by an “ownership change” within the
meaning of Section 382 (as defined below). The Company desires to avoid such an
“ownership change” and thereby preserve the ability to utilize the NOLs. In
furtherance of such objective, the Company desires to enter into this Plan. 


                      The
Board of Directors of the Company (the “Board of Directors”) has adopted
resolutions creating a series of preferred stock designated as “Series A
Preferred Stock” and has authorized and declared a dividend of one preferred
share purchase right (a “Right”) for each share of Common Stock (as hereinafter
defined) outstanding as of the Close of Business (as defined below) on March
12, 2010 (the “Record Date”), each Right initially representing the right to
purchase one one-millionth (subject to adjustment) of a share of Preferred
Stock (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right (subject to adjustment as provided herein) with respect to each share of
Common Stock that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined); provided, however, that Rights may be issued with respect
to shares of Common Stock that shall become outstanding after the Distribution
Date and prior to the Expiration Date in accordance with Section 21. 


                      Accordingly,
in consideration of the premises and the mutual agreements herein set forth,
the parties hereby agree as follows: 


	
  

 	
  

 
	
           Section
 1.          Certain
 Definitions. For purposes of this Plan, the following terms have the
 meaning indicated:

 
	
  

 	
  

 
	
  

 	
             (a)          “Acquiring
 Person” shall mean any Person (other than any Exempt Person) that has become,
 in itself or, together with all Affiliates and Associates of such Person, the
 Beneficial Owner of 4.99% or more of the shares of Common Stock then
 outstanding; provided, however, that any Existing Holder (as defined below)
 will not be deemed to be an Acquiring Person for any purpose of this Plan on
 and after the date on which the adoption of this Plan is first publicly
 announced unless and until such time as such Existing Holder acquires Beneficial
 Ownership of additional shares of Common Stock representing .5% of the Common
 Stock then outstanding, unless, upon becoming the Beneficial Owner of such
 additional shares of Common Stock, such Person is not then the Beneficial
 Owner of 4.99% or more of the shares of Common Stock then outstanding;
 provided, further, that a Person will not be deemed to have become an 

 


1









	
  

 	
  

 
	
  

 	
 Acquiring
 Person solely as a result of (i) a reduction in the number of shares of
 Common Stock outstanding, (ii) the exercise of any options, warrants, rights
 or similar interests (including restricted stock) granted by the Company to
 its directors, officers and employees, (iii) any unilateral grant of any
 security by the Company or any issuance by the Company of shares of its capital
 stock to such Person, or (iv) an Exempt Transaction, unless and until such
 time as such Person thereafter acquires Beneficial Ownership of one
 additional share of Common Stock (other than pursuant to a dividend or
 distribution paid or made by the Company on the outstanding Common Stock or
 pursuant to a split or subdivision of the outstanding Common Stock), unless,
 upon becoming the Beneficial Owner of such additional share of Common Stock,
 such Person is not then the Beneficial Owner of 4.99% or more of the shares
 of Common Stock then outstanding. Notwithstanding the foregoing, if the Board
 determines in good faith that a Person who would otherwise be an “Acquiring
 Person,” as defined pursuant to the foregoing provisions of this Section
 1(a), has become such inadvertently (including, without limitation, because
 (A) such Person was unaware that it beneficially owned a percentage of Common
 Stock that would otherwise cause such Person to be an “Acquiring Person” or
 (B) such Person was aware of the extent of its Beneficial Ownership of Common
 Stock but had no actual knowledge of the consequences of such Beneficial
 Ownership under this Plan), and such Person divests as promptly as
 practicable a sufficient number of shares of Common Stock so that such Person
 would no longer be an Acquiring Person, as defined pursuant to the foregoing
 provisions of this Section 1(a), then such Person shall not be deemed to be
 or to have become an “Acquiring Person” for purposes of this Plan as a result
 of such inadvertent acquisition. In addition, notwithstanding the foregoing,
 if a Person who would otherwise be an “Acquiring Person,” as defined pursuant
 to the foregoing provisions of this Section 1(a), has become such as a result
 of an acquisition of Beneficial Ownership of shares of Common Stock that the
 Board in its sole discretion determines in good faith, prior to the
 Distribution Date that would otherwise occur as a result of such acquisition,
 will not jeopardize or endanger the availability to the Company of the NOLs,
 then such Person shall not be deemed to be or to have become an “Acquiring
 Person” for purposes of this Plan as a result of such acquisition, unless and
 until such time as such Person thereafter acquires Beneficial Ownership of
 one additional share of Common Stock (other than pursuant to a dividend or
 distribution paid or made by the Company on the outstanding Common Stock or
 pursuant to a split or subdivision of the outstanding Common Stock), unless,
 upon becoming the Beneficial Owner of such additional share of Common Stock,
 such Person is not then the Beneficial Owner of 4.99% or more of the shares
 of Common Stock then outstanding or the Board determines otherwise in
 accordance with this sentence or the preceding sentence. For all purposes of
 this Plan, any calculation of the number of shares of Common Stock
 outstanding at any particular time, including for purposes of determining the
 particular percentage of the outstanding shares of Common Stock of which any
 Person is the Beneficial Owner, shall be made in accordance with the last
 sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
 the Exchange Act (as defined below) as in effect on the date hereof. 

 
	
  

 	
  

 
	
  

 	
           (b)          “Affiliate”
 and “Associate” shall have the respective meanings ascribed to such terms in
 Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
 effect on the date hereof, and to the extent not included within the
 foregoing clause 

 


2









	
  

 	
  

 	
  

 
	
  

 	
 of this
 Section 1(b), shall also include, with respect to any Person, any other
 Person (whether or not an Exempt Person) whose shares of Common Stock would
 be deemed constructively owned by such first Person, owned by a single
 “entity” as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or
 otherwise aggregated with shares owned by such first Person pursuant to the
 provisions of the Code, or any successor provision or replacement provisions
 to Section 382, and the Treasury Regulations thereunder, provided, however,
 that a Person shall not be deemed to be the Affiliate or Associate of another
 Person solely because either or both Persons are or were directors of the
 Company. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)          A
 Person shall be deemed the “Beneficial Owner” of, shall be deemed to have
 “Beneficial Ownership” of and shall be deemed to “beneficially own” any
 securities: 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (i)          which
 such Person or any of such Person’s Affiliates or Associates, directly or
 indirectly, has the right to acquire (whether such right is exercisable
 immediately or only after the passage of time) pursuant to any agreement,
 arrangement or understanding (whether or not in writing) (including any
 purchase orders for shares of Common Stock initiated prior to the first
 public announcement of the adoption of this Plan) or upon the exercise of
 conversion rights, exchange rights, warrants, options, or other rights (in
 each case, other than upon exercise or exchange of the Rights); provided,
 however, that a Person shall not be deemed the “Beneficial Owner” of, or to
 “beneficially own” securities (including rights, options or warrants) which
 are convertible or exchangeable into or exercisable for Common Stock until
 such time as such securities are converted or exchanged into or exercised for
 Common Stock except to the extent the acquisition or transfer of such rights,
 options or warrants would be treated as exercised on the date of its
 acquisition or transfer under Section 1.382-4(d) of the Treasury Regulations;
 provided, further, that a Person shall not be deemed the Beneficial Owner of,
 or to beneficially own, securities tendered pursuant to a tender or exchange
 offer made by such Person or any of such Person’s Affiliates or Associates
 until such tendered securities are accepted for purchase or exchange; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (ii)         which
 such Person or any of such Person’s Affiliates or Associates, directly or
 indirectly, has or shares the right to vote or dispose of, or has “beneficial
 ownership” of (as defined under Rule 13d-3 of the General Rules and
 Regulations under the Exchange Act), including pursuant to any agreement,
 arrangement or understanding (whether or not in writing), but only if the
 effect of such agreement, arrangement or understanding is to treat such
 Persons as an “entity” under Section 1.382-3(a)(1) of the Treasury
 Regulations; or 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iii)        of
 which any other Person is the Beneficial Owner, if such Person or any of such
 Person’s Affiliates or Associates has any agreement, arrangement or
 understanding (whether or not in writing) with such other Person (or any of
 such other Person’s Affiliates or Associates) with respect to acquiring,
 holding, voting or disposing of such securities of the Company, but only if
 the effect of such agreement, arrangement or understanding is to treat such Persons
 as an 

 


3









	
  

 	
  

 	
  

 
	
  

 	
  

 	
 “entity”
 under Section 1.382-3(a)(1) of the Treasury Regulations; provided, however,
 that a Person shall not be deemed the Beneficial Owner of, or to beneficially
 own, any security (A) if such Person has the right to vote such security
 pursuant to an agreement, arrangement or understanding (whether or not in
 writing) which (1) arises solely from a revocable proxy or consent given to
 such Person in response to a public proxy or consent solicitation made
 pursuant to, and in accordance with, the applicable rules and regulations
 promulgated under the Exchange Act and (2) is not also then reportable on
 Schedule 13D or Schedule 13G under the Exchange Act (or any comparable or
 successor report), or (B) if such Beneficial Ownership arises solely as a
 result of such Person’s status as a “clearing agency,” as defined in Section
 3(a)(23) of the Exchange Act; provided, further, that nothing in this Section
 1(c) shall cause a Person engaged in business as an underwriter of securities
 or member of a selling group to be the Beneficial Owner of, or to
 beneficially own, any securities acquired through such Person’s participation
 in good faith in an underwriting syndicate until the expiration of 40
 calendar days after the date of such acquisition, or such later date as the
 Board may determine in any specific case. Notwithstanding anything herein to
 the contrary, to the extent not within the foregoing provisions of this
 Section 1(c), a Person shall be deemed the Beneficial Owner of, and shall be
 deemed to beneficially own or have Beneficial Ownership of, securities which
 such Person would be deemed to constructively own or which otherwise would be
 aggregated with shares owned by such Person pursuant to Section 382 of the
 Code, or any successor provision or replacement provision and the Treasury
 Regulations thereunder. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)          “Board”
 shall have the meaning set forth in the recitals hereto. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (e)          “Book
 Entry” shall mean an uncertificated book entry for the Common Stock. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (f)          “Business
 Day” shall mean any day other than a Saturday, a Sunday or a day on which
 banking institutions in the State of Wisconsin are authorized or obligated by
 law or executive order to close. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (g)          “Capital
 Stock” when used with reference to any Person other than the Company shall
 mean the common stock (or, in the case of any entity other than a
 corporation, the equivalent equity interest) with the greatest voting power
 of such other Person or, if such other Person is a Subsidiary of another
 Person, the Person or Persons which ultimately control such first-mentioned
 Person. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (h)          “Certificate
 of Incorporation” shall mean the Certificate of Incorporation of the Company,
 as filed with the Secretary of State of the State of Delaware on June 7,
 2005, as amended on May 23, 2008, and as the same may be amended and restated
 from time to time. 

 


4









	
  

 	
  

 
	
  

 	
            (i)          “Close
 of Business” on any given date shall mean 5:00 P.M., Eastern time, on such
 date; provided, however, that if such date is not a Business Day it shall
 mean 5:00 P.M., Eastern time, on the next succeeding Business Day. 

 
	
  

 	
  

 
	
  

 	
            (j)          “Code”
 shall mean the Internal Revenue Code of 1986, as amended. 

 
	
  

 	
  

 
	
  

 	
           (k)          “Common
 Stock” when used with reference to the Company shall mean the Common Stock,
 par value $0.01 per share, of the Company. 

 
	
  

 	
  

 
	
  

 	
            (l)          “Common
 Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii)
 hereof. 

 
	
  

 	
  

 
	
  

 	
           (m)         “Current
 Value” shall have the meaning set forth in Section 11(a)(iii) hereof. 

 
	
  

 	
  

 
	
  

 	
           (n)          “Distribution
 Date” shall have the meaning set forth in Section 3 hereof. 

 
	
  

 	
  

 
	
  

 	
           (o)          “Equivalent
 Preferred Shares” shall have the meaning set forth in Section 11(b) hereof. 

 
	
  

 	
  

 
	
  

 	
           (p)          “Exchange
 Act” shall mean the Securities Exchange Act of 1934, as amended. 

 
	
  

 	
  

 
	
  

 	
           (q)          “Exchange
 Ratio” shall have the meaning set forth in Section 23 hereof. 

 
	
  

 	
  

 
	
  

 	
           (r)           “Exempt
 Person” shall mean (i) the Company or any Subsidiary (as such term is
 hereinafter defined) of the Company, in each case including, without
 limitation, in its fiduciary capacity, (ii) any employee benefit and/or
 savings plan of the Company or of any Subsidiary of the Company, or (iii) any
 entity or trustee holding (or acting in a fiduciary capacity in respect of)
 Common Stock for or pursuant to the terms of any such plan or for the purpose
 of funding any such plan or funding other benefits for employees of the
 Company or of any Subsidiary of the Company. 

 
	
  

 	
  

 
	
  

 	
           (s)           “Exempt
 Transaction” shall mean any transaction that the Board, in its sole
 discretion, has declared exempt pursuant to Section 29, which determination
 shall be irrevocable with respect to such transaction. 

 
	
  

 	
  

 
	
  

 	
           (t)           “Existing
 Holder” shall mean any Person who, together with all Affiliates and
 Associates, beneficially owned shares of Common Stock in excess of 4.99% of
 the shares of Common Stock then outstanding immediately prior to the first
 public announcement hereof. 

 
	
  

 	
  

 
	
  

 	
           (u)           “Expiration
 Date” shall have the meaning set forth in Section 7 hereof. 

 
	
  

 	
  

 
	
  

 	
           (v)           “NOLs”
 shall have the meaning set forth in the recitals hereto. 

 
	
  

 	
  

 
	
  

 	
           (w)          “Person”
 shall mean any individual, firm, corporation, partnership, limited liability
 company, limited liability partnership, trust or other legal entity, group of
 

 


5









	
  

 	
  

 
	
  

 	
 persons
 making a “coordinated acquisition” of shares or otherwise treated as an
 entity within the meaning of Section 1.382-3(a)(1) of the Treasury
 Regulations or otherwise, and includes any successor (by merger or otherwise)
 of such individual or entity. 

 
	
  

 	
  

 
	
  

 	
           (x)          “Plan”
 shall have the meaning ascribed thereto in the preamble to this Plan, and
 such term shall include all amendments to this Plan. 

 
	
  

 	
  

 
	
  

 	
           (y)          “Preferred
 Stock” shall mean the Series A Preferred Stock, par value $0.001 per share,
 of the Company having the rights and preferences set forth in the Form of
 Certificate of Designations attached to this Plan as Exhibit A. 

 
	
  

 	
  

 
	
  

 	
           (z)          “Purchase
 Price” shall have the meaning set forth in Section 7(b) hereof. 

 
	
  

 	
  

 
	
  

 	
           (aa)         “Record
 Date” shall have the meaning set forth in the preamble hereto.

 
	
  

 	
  

 
	
  

 	
           (bb)         “Redemption
 Date” shall have the meaning set forth in Section 7 hereof.

 
	
  

 	
  

 
	
  

 	
           (cc)         “Redemption
 Price” shall have the meaning set forth in Section 22 hereof.

 
	
  

 	
  

 
	
  

 	
           (dd)         “Right”
 shall have the meaning set forth in the recitals hereto.

 
	
  

 	
  

 
	
  

 	
           (ee)         “Right
 Certificate” shall have the meaning set forth in Section 3 hereof.

 
	
  

 	
  

 
	
  

 	
           (ff)          “Securities
 Act” shall mean the Securities Act of 1933, as amended.

 
	
  

 	
  

 
	
  

 	
           (gg)         “Section
 11(a)(ii) Trigger Date” shall have the meaning set forth in Section
 11(a)(iii) hereof. 

 
	
  

 	
  

 
	
  

 	
           (hh)         “Section
 382” shall mean Section 382 of the Code, or any comparable successor
 provision. 

 
	
  

 	
  

 
	
  

 	
           (ii)           “Spread”
 shall have the meaning set forth in Section 11(a)(iii) hereof. 

 
	
  

 	
  

 
	
  

 	
           (jj)           “Stock
 Acquisition Date” shall mean the first date of public announcement (which,
 for purposes of this definition, shall include, without limitation, a report
 filed pursuant to Section 13(d) of the Exchange Act) by the Company or an
 Acquiring Person of facts that indicate that an Acquiring Person has become
 such, or such earlier date as a majority of the Board shall become aware of
 the existence of an Acquiring Person. 

 
	
  

 	
  

 
	
  

 	
           (kk)         “Subsidiary”
 of any Person shall mean any corporation or other entity of which securities
 or other ownership interests having ordinary voting power sufficient to elect
 a majority of the board of directors or other persons performing similar
 functions are beneficially owned, directly or indirectly, by such Person, and
 any corporation or other entity that is otherwise controlled by such Person. 

 
	
  

 	
  

 
	
  

 	
           (ll)           “Substitution
 Period” shall have the meaning set forth in Section 11(a)(iii) hereof. 

 
	
  

 	
  

 
	
  

 	
           (mm)       “Summary
 of Rights” shall have the meaning set forth in Section 3 hereof. 

 


6









	
  

 	
  

 
	
  

 	
            (nn)         “Tax
 Benefits” shall mean the net operating loss carryovers, capital loss
 carryovers, general business carryovers, alternative minimum tax credit
 carryovers and foreign tax credit carryovers, as well as any loss or
 deduction attributable to a “net unrealized built-in loss” within the meaning
 of Section 382 and the Treasury Regulations promulgated thereunder, of the
 Company or any of its Subsidiaries. 

 
	
  

 	
  

 
	
  

 	
            (oo)         “Trading
 Day” shall have the meaning set forth in Section 11(d)(i) hereof. 

 
	
  

 	
  

 
	
  

 	
            (pp)         “Treasury
 Regulations” shall mean final, temporary and proposed income tax regulations
 promulgated under the Code, including any amendments thereto. 

 



          Any
determination required by the definitions in the Plan shall be made by the
Board in its good faith judgment, which determination shall be binding on the
Rights Agent and the holders of Rights. 


          Section
2.          Appointment of
Rights Agent. The Company hereby appoints the Rights Agent to act as agent
for the Company in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or desirable, upon ten
(10) days’ prior written notice to the Rights Agent. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for, the acts or
omissions of any such co-Rights Agent. 


          Section
3.          Issue of Right
Certificates. 


	
  

 	
  

 
	
  

 	
            (a)          Until
 the earlier of (i) the Close of Business on the tenth Business Day after the
 Stock Acquisition Date or (ii) the Close of Business on the tenth Business
 Day (or, unless the Distribution Date shall have previously occurred, such
 later date as may be specified by the Board) after the commencement by any
 Person (other than an Exempt Person) of, or of the first public announcement
 of the intention of such Person to commence, a tender or exchange offer, the
 consummation of which would result in any Person (other than an Exempt
 Person) becoming an Acquiring Person (the earlier of such dates being
 referred to as the “Distribution Date”; provided, however, that if either of
 such dates occurs after the date of this Plan and on or prior to the Record
 Date, then the Distribution Date shall be the Record Date), (x) the Rights
 will be evidenced (subject to the provisions of Section 3(b) hereof) by the
 certificates representing the Common Stock registered in the names of the
 holders thereof (or by Book Entry shares in respect of such Common Stock) and
 not by separate Right Certificates, and (y) the Rights will be transferable
 only in connection with the transfer of Common Stock. As soon as practicable
 after the Distribution Date, the Company will prepare and execute, the Rights
 Agent will countersign and the Company will send or cause to be sent (and the
 Rights Agent will, if requested, send) by first-class, postage-prepaid mail,
 to each record holder of Common Stock as of the close of business on the
 Distribution Date (other than any Acquiring Person or any Associate or
 Affiliate of an Acquiring Person), at the address of such holder shown on the
 records of the Company, a Right Certificate, in substantially the form of
 Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to
 adjustment as provided herein) for each share of Common Stock so held. As of
 and after the Distribution Date, the Rights will be evidenced solely by such
 Right Certificates. 

 


7









	
  

 	
  

 
	
  

 	
           (b)          As
 promptly as practicable following the Record Date, the Company will send a
 copy of a Summary of Rights to Purchase Shares of Preferred Stock, in
 substantially the form of Exhibit C hereto (the “Summary of Rights”), by first-class,
 postage-prepaid mail, to each record holder of Common Stock as of the Close
 of Business on the Record Date (other than any Acquiring Person or any
 Associate or Affiliate of any Acquiring Person), at the address of such
 holder shown on the records of the Company. With respect to certificates
 representing Common Stock (or Book Entry shares of Common Stock) outstanding
 as of the Record Date, until the Distribution Date, the Rights will be
 evidenced by such certificates registered in the names of the holders thereof
 (or the Book Entry shares). Until the Distribution Date (or, if earlier, the
 Expiration Date), the surrender for transfer of any certificate for Common
 Stock (or any Book Entry shares of Common Stock) outstanding on the Record
 Date shall also constitute the transfer of the Rights associated with the
 Common Stock represented by such certificate or Book Entry shares. 

 
	
  

 	
  

 
	
  

 	
           (c)          Rights
 shall be issued in respect of all shares of Common Stock issued or disposed
 of after the Record Date but prior to the earlier of the Distribution Date
 and the Expiration Date (or in certain circumstances provided in Section 21
 hereof, after the Distribution Date). Certificates issued for Common Stock
 after the Record Date but prior to the earlier of the Distribution Date and
 the Expiration Date (or in certain circumstances provided in Section 22
 hereof, after the Distribution date) shall have impressed on, printed on,
 written on or otherwise affixed to them the following legend: 

 



          This
certificate or statement, as applicable, also evidences and entitles the holder
hereof to certain Rights as set forth in a Tax Benefit Preservation Plan and
Rights Agreement between MathStar, Inc. (the “Company”) and Wells Fargo Bank,
National Association, as Rights Agent, dated as of February 25, 2010 and as
amended from time to time (the “Plan”), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of the Company. Under certain circumstances, as set
forth in the Plan, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this statement. The Company will mail to the
holder of this certificate or statement, as applicable, a copy of the Plan
without charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Plan, Rights owned by or transferred to any
Person who is or becomes an Acquiring Person (as defined in the Plan) and
certain transferees thereof will become null and void and will no longer be
transferable. 


          With
respect to any Book Entry shares of Common Stock, such legend shall be included
in a notice to the registered holder of such shares in accordance with
applicable law. With respect to certificates containing the foregoing legend,
or any notice of the foregoing legend delivered to holders of Book Entry
shares, until the Distribution Date the Rights associated with the Common Stock
represented by such certificates or Book Entry shares shall be evidenced by
such certificates or Book Entry shares alone, and the surrender for transfer of
any such certificate or Book Entry share, except as otherwise provided herein,
shall also constitute the transfer of the Rights associated with the Common
Stock represented thereby. In the event that the Company purchases or otherwise
acquires any Common Stock after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Stock shall be deemed canceled and



8






retired so
that the Company shall not be entitled to exercise any Rights associated with
the shares of Common Stock which are no longer outstanding. 


          Notwithstanding
this paragraph (c), neither the omission of the legend required hereby, nor the
failure to deliver the notice of such legend, shall affect the enforceability
of any part of this Plan or the rights of any holder of the Rights. 


          Section
4.          Form of Right
Certificates. The Right Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Plan, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or automated quotation system on which
the Rights may from time to time be listed or quoted, or to conform to usage.
Subject to the provisions of this Plan, the Right Certificates shall entitle
the holders thereof to purchase such number of one one-millionth of a share of
Preferred Stock as shall be set forth therein at the Purchase Price (as
determined pursuant to Section 7), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein. 


          Section
5.          Countersignature
and Registration. 



           (a)           The
Right Certificates shall be executed on behalf of the Company by the President
of the Company, either manually or by facsimile signature, shall have affixed
thereto the Company’s seal or a facsimile thereof and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless countersigned. In case any officer of the Company who
shall have signed any of the Right Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Plan any such Person was not such an officer. 


           (b)            Following
the Distribution Date, the Rights Agent will keep or cause to be kept, at an
office or agency designated for such purpose, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and
the date of each of the Right Certificates. 




9






          Section
6.            Transfer,
Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates. 



           (a)            Subject
to the provisions of this Plan, at any time after the Close of Business on the
Distribution Date and prior to the Close of Business on the Expiration Date,
any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-millionths
of a share of Preferred Stock (or, following such time, other securities, cash
or assets as the case may be) as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right Certificate or
Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office or agency of the
Rights Agent designated for such purpose. Thereupon the Rights Agent, subject
to the provisions of this Plan, shall countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may be,
as so requested. The Company may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates. 



           (b)            Subject
to the provisions of this Plan, at any time after the Distribution Date and
prior to the Expiration Date, upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company’s
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make and
deliver a new Right Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated. 




          Section
7.           Exercise
of Rights, Purchase Price; Expiration Date of Rights. 



           (a)            Except as
otherwise provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any Right
Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise
provided herein, exercise the Rights evidenced thereby in whole or in part upon
surrender of the Right Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office or
agency of the Rights Agent designated for such purpose, together with payment
of the Purchase Price for each one millionth of a share of Preferred Stock (or
other securities, cash or other assets, as the case may be) as to which the
Rights are exercised, at any time which is both after the Distribution Date and
prior to the time (the “Expiration Date”) that is the earliest of (i) the Close
of Business on February 25, 2015, (ii) the time at which the Rights are
redeemed as provided in Section 22 hereof (the “Redemption Date”), (iii) the
time at which such Rights are exchanged as provided in Section 23 hereof, (iv)
the repeal of Section 382 or any successor statute if the Board determines that
this Plan is no longer necessary for the preservation of Tax 




10









Benefits, or
(v) the beginning of a taxable year of the Company to which the Board
determines that no Tax Benefits may be carried forward. 


           (b)            The
Purchase Price shall be initially $8.50 for each one one-millionth of a share
of Preferred Stock purchasable upon the exercise of a Right. The Purchase Price
and the number of one one-millionths of a share of Preferred Stock or other
securities or property to be acquired upon exercise of a Right shall be subject
to adjustment from time to time as provided in Section 11 hereof and shall be
payable in lawful money of the United States of America in accordance with
paragraph (c) of this Section 7. 


           (c)            Except as
otherwise provided herein, upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the aggregate Purchase Price for the number of shares
of Preferred Stock to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 6 hereof, in cash or by certified check, cashier’s
check or money order payable to the order of the Company, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Stock, or make available if the Rights Agent is the transfer agent
for the Preferred Stock, certificates for the number of shares of Preferred
Stock to be purchased, and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) requisition from a
depositary agent appointed by the Company depositary receipts representing
interests in such number of shares of Preferred Stock as are to be purchased
(in which case certificates for the Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent),
and the Company hereby directs any such depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
13 hereof, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt of the cash
requisitioned from the Company, promptly deliver such cash to or upon the order
of the registered holder of such Right Certificate. 


           (d)            Except as
otherwise provided herein, in case the registered holder of any Right
Certificate shall exercise less than all of the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the exercisable Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 13 hereof. 


           (e)           Notwithstanding
anything in this Plan to the contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to a registered holder
of Rights upon the occurrence of any purported transfer or exercise of Rights
pursuant to Section 6 hereof or this Section 7 unless such registered holder
shall have (i) completed and signed the certificate contained in the form of assignment
or form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such transfer or exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (for the purposes
of this Section 7(e), as such term is defined in 




11







Rule 13d-3 or
13d-5 of the General Rules and Regulations under the Exchange Act), former
Beneficial Owner and/or Affiliates or Associates thereof as the Company shall
reasonably request. 




          Section
8.           Cancellation
and Destruction of Right Certificates. All Right Certificates surrendered
for the purpose of exercise, transfer, split up, combination or exchange shall,
if surrendered to the Company or to any of its agents, be delivered to the
Rights Agent for cancellation or in canceled form, or, if surrendered to the
Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Plan. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any other
Right Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. Subject to applicable law and regulation, the Rights Agent
shall maintain, in a retrievable database, electronic records of all cancelled
or destroyed stock certificates which have been canceled or destroyed by the
Rights Agent. The Rights Agent shall maintain such electronic records or
physical records for the time period required by applicable law and regulation.
Upon written request of the Company (and at the expense of the Company), the
Rights Agent shall provide to the Company or its designee copies of such
electronic records or physical records relating to Right Certificates cancelled
or destroyed by the Rights Agent. 


          Section
9.           Availability
of Shares of Preferred Stock. 



           (a)           The
Company covenants and agrees that it will cause to be reserved and kept available
out of its authorized and unissued shares of Preferred Stock or any shares of
Preferred Stock held in its treasury, the number of shares of Preferred Stock
that will be sufficient to permit the exercise in full of all outstanding
Rights. 


           (b)           So
long as the shares of Preferred Stock (and, following the time that a person
becomes an Acquiring Person, shares of Common Stock and other securities)
issuable upon the exercise of Rights may be listed on any national securities
exchange or quotation system, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on any national securities exchange or quotation
system upon official notice of issuance upon such exercise. 


           (c)           From and
after such time as the Rights become exercisable, the Company shall use its
best efforts, if then necessary, to permit the issuance of shares of Preferred
Stock (and following the time that a Person first becomes an Acquiring Person,
shares of Common Stock and other securities) upon the exercise of Rights, to
register and qualify such shares of Preferred Stock (and following the time
that a Person first becomes an Acquiring Person, shares of Common Stock and
other securities) under the Securities Act and any applicable state securities
or “Blue Sky” laws (to the extent exemptions therefrom are not available),
cause such registration statement and qualifications to become effective as
soon as possible after such filing and keep such registration and
qualifications effective until the earlier of (x) the date as of which the
Rights are no longer exercisable for such securities and (y) the Expiration
Date. The Company may temporarily suspend, for a period of time not to exceed
ninety (90) days, the 




12







exercisability
of the Rights in order to prepare and file a registration statement under the
Securities Act and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. Notwithstanding any
provision of this Plan to the contrary, the Rights shall not be exercisable in
any jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been obtained and until a registration statement under
the Securities Act (if required) shall have been declared effective. 


           (d)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all shares of Preferred Stock (and following the time
that a Person first becomes an Acquiring Person, shares of Common Stock and
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and nonassessable
shares. 


           (e)           The
Company further covenants and agrees that it will pay when due and payable any
and all federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Right Certificates or of any shares
of Preferred Stock (or shares of Common Stock and other securities) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax or charge which may be payable in respect of any transfer or
delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Stock (or
shares of Common Stock and other securities) in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates or depositary receipts for
Preferred Stock (or shares of Common Stock and other securities) upon the
exercise of any Rights until any such tax or charge shall have been paid (any
such tax being payable by that holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s reasonable
satisfaction that no such tax or charge is due. 




          Section
10.           Preferred
Stock Record Date. Each Person in whose name any certificate for Preferred
Stock is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the shares of Preferred Stock represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes or charges) was made;
provided, however, that if the date of such surrender and payment is a date
upon which the Preferred Stock transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which such
transfer books are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled to any rights of a
holder of Preferred Stock for which the Rights shall be exercisable, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein. 


13






          Section
11.     Adjustment of Purchase Price, Number and
Kind of Shares and Number of Rights. The Purchase Price, the number of
shares of Preferred Stock or other securities or property purchasable upon
exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.


	
  

 	
  

 	
  

 
	
  

 	
            
(a)      (i)  
 In the event the Company shall at any time after the date of this Plan (A)
 declare a dividend on the Preferred Stock payable in shares of Preferred
 Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine
 the outstanding shares of Preferred Stock into a smaller number of shares of
 Preferred Stock or (D) issue any shares of its capital stock in a
 reclassification of the Preferred Stock (including any such reclassification
 in connection with a consolidation or merger in which the Company is the
 continuing or surviving corporation), except as otherwise provided in this
 Section 11(a), the Purchase Price in effect at the time of the record date
 for such dividend or of the effective date of such subdivision, combination
 or reclassification, as the case may be, and the number and kind of shares of
 capital stock issuable on such date, shall be proportionately adjusted so that
 the holder of any Right exercised after such time shall be entitled to
 receive the aggregate number and kind of shares of capital stock which, if
 such Right had been exercised immediately prior to such date and at a time
 when the Preferred Stock transfer books of the Company were open, the holder
 would have owned upon such exercise and been entitled to receive by virtue of
 such dividend, subdivision, combination or reclassification.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           
(ii)          Subject
 to Section 23 of this Plan, and except as otherwise provided in this Section
 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes an
 Acquiring Person, each holder of a Right shall thereafter have the right to
 receive, upon exercise thereof at a price equal to the then-current Purchase
 Price, in accordance with the terms of this Plan and in lieu of shares of
 Preferred Stock, such number of shares of Common Stock (or at the option of
 the Company, such number of one-millionths of a share of Preferred Stock) as
 shall equal the result obtained by multiplying (x) the then-current Purchase
 Price, by (y) the number of one-millionths of a share of Preferred Stock for
 which a Right is then exercisable and dividing the product of (x) and (y) by
 (z) 50% of the then-current per share market price of the Common Stock
 (determined pursuant to Section 11(d) hereof) on the date of the occurrence
 of such event; provided, however, that the Purchase Price (as so adjusted)
 and the number of shares of Common Stock so receivable upon exercise of a
 Right shall thereafter be subject to further adjustment as appropriate in
 accordance with this Section 11 hereof. Notwithstanding anything in this Plan
 to the contrary, however, from and after the time (the “Invalidation Time”)
 when any Person first becomes an Acquiring Person, any Rights that are
 beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate
 of any Acquiring Person), (y) a transferee of any Acquiring Person (or any
 such Affiliate or Associate) who becomes a transferee after the Invalidation
 Time or (z) a transferee of any Acquiring Person (or any such Affiliate or
 Associate) who became a transferee prior to or concurrently with the
 Invalidation Time pursuant to either (I) a transfer from the Acquiring Person
 to holders of its equity securities or to any Person with whom it has any
 continuing agreement, arrangement or understanding regarding the transferred

 


14









	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Rights or
 (II) a transfer that the Board has determined is part of a plan, arrangement
 or understanding which has the purpose or effect of avoiding the provisions
 of this paragraph, and subsequent transferees of such Persons, shall be void
 without any further action and any holder of such Rights shall thereafter
 have no rights whatsoever with respect to such Rights under any provision of
 this Plan. The Company shall use all reasonable efforts to ensure that the
 provisions of this Section 11(a)(ii) are complied with, but shall have no
 liability to any holder of Right Certificates or other Person as a result of
 its failure to make any determinations with respect to an Acquiring Person or
 its Affiliates, Associates or transferees hereunder. From and after the
 Invalidation Time, no Right Certificate shall be issued pursuant to Section 3
 or Section 6 hereof that represents Rights that are or have become void
 pursuant to the provisions of this paragraph, and any Right Certificate
 delivered to the Rights Agent that represents Rights that are or have become
 void pursuant to the provisions of this paragraph shall be canceled.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           
(iii)          The
 Company may at its option (or, if required to comply with its Certificate of
 Incorporation, shall) substitute for a share of Common Stock issuable upon
 the exercise of Rights in accordance with the foregoing subparagraph (ii)
 such number or fraction of shares of Preferred Stock (or, if required to
 comply with its Certificate of Incorporation, equivalent shares of its
 capital stock) having an aggregate current market value equal to the current
 per share market price of a share of Common Stock. In the event that there
 shall be an insufficient number of shares of Common Stock authorized but
 unissued (and unreserved) to permit the exercise in full of the Rights in
 accordance with the foregoing subparagraph (ii), the Board shall, with
 respect to such deficiency, to the extent permitted by applicable law and any
 material agreements then in effect to which the Company is a party, (A)
 determine the excess of (x) the value of the shares of Common Stock issuable
 upon the exercise of a Right in accordance with the foregoing subparagraph
 (ii) (the “Current Value”) over (y) the then-current Purchase Price
 multiplied by the number of one-millionths of a share of Preferred Stock for
 which a Right was exercisable immediately prior to the time that the
 Acquiring Person became such (such excess, the “Spread”), and (B) with
 respect to each Right (other than Rights which have become void pursuant to
 Section 11(a)(ii)), make adequate provision to substitute for the shares of
 Common Stock issuable in accordance with subparagraph (ii) upon exercise of
 the Right and payment of the applicable Purchase Price, (1) cash, (2) a
 reduction in such Purchase Price, (3) shares of Preferred Stock or other
 equity securities of the Company (including, without limitation, shares or
 fractions of shares of preferred stock which, by virtue of having dividend,
 voting and liquidation rights substantially comparable to those of the shares
 of Common Stock, are deemed in good faith by the Board to have substantially the
 same value as the shares of Common Stock (such shares of preferred stock and
 shares or fractions of shares of preferred stock are hereinafter referred to
 as “Common Stock Equivalents”)), (4) debt securities of the Company, (5)
 other assets, or (6) any combination of the foregoing, having a value which,
 when added to the value of the shares of Common Stock actually issued upon
 exercise of such Right, shall have an aggregate value equal to the Current
 Value (less the amount of any reduction in

 


15









	
  

 	
  

 	
  

 
	
  

 	
  

 	
 such
 Purchase Price), where such aggregate value has been determined by the Board
 upon the advice of a nationally recognized investment banking firm selected
 in good faith by the Board; provided, however, that if the Company shall not
 make adequate provision to deliver value pursuant to clause (B) above within
 thirty (30) days following the date that the Acquiring Person became such
 (the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated
 to deliver, to the extent permitted by applicable law and any material
 agreements then in effect to which the Company is a party, upon the surrender
 for exercise of a Right and without requiring payment of such Purchase Price,
 shares of Common Stock (to the extent available), and then, if necessary,
 such number or fractions of shares of Preferred Stock (to the extent
 available) and then, if necessary, cash, which shares and/or cash have an
 aggregate value equal to the Spread. If, within the thirty (30) day period
 referred to above the Board shall determine in good faith that it is likely
 that sufficient additional shares of Common Stock could be authorized for
 issuance upon exercise in full of the Rights, then, if the Board elects, such
 thirty (30) day period may be extended to the extent necessary, but not more
 than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
 the Company may seek stockholder approval for the authorization of such
 additional shares (such thirty (30) day period, as it may be extended, is
 hereinafter called the “Substitution Period”). To the extent that the Company
 determines that some action need be taken pursuant to the second and/or third
 sentence of this Section 11(a)(iii), the Company (x) shall provide, subject
 to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii)
 hereof, that such action shall apply uniformly to all outstanding Rights and
 (y) may suspend the exercisability of the Rights until the expiration of the
 Substitution Period in order to seek any authorization of additional shares and/or
 to decide the appropriate form of distribution to be made pursuant to such
 second sentence and to determine the value thereof. In the event of any such
 suspension, the Company shall issue a public announcement stating that the
 exercisability of the Rights has been temporarily suspended, as well as a
 public announcement at such time as the suspension is no longer in effect.
 For purposes of this Section 11(a)(iii), the value of the shares of Common
 Stock shall be the current per share market price (as determined pursuant to
 Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or
 fractional value of any “Common Stock Equivalent” shall be deemed to equal
 the current per share market price of the Common Stock on such date. The
 Board may, but shall not be required to, establish procedures to allocate the
 right to receive shares of Common Stock upon the exercise of the Rights among
 holders of Rights pursuant to this Section 11(a)(iii).

 
	
  

 	
  

 	
  

 
	
  

 	
            (b)          In
 case the Company shall fix a record date for the issuance of rights, options
 or warrants to all holders of Preferred Stock entitling them (for a period
 expiring within 45 calendar days after such record date) to subscribe for or
 purchase Preferred Stock (or shares having similar rights, privileges and
 preferences as the Preferred Stock (“Equivalent Preferred Shares”)) or
 securities convertible into Preferred Stock or Equivalent Preferred Shares at
 a price per share of Preferred Stock or Equivalent Preferred Shares (or
 having a conversion price per share, if a security convertible into shares of
 Preferred Stock or Equivalent Preferred Shares) less than the then current
 per

 


16









	
  

 	
  

 	
  

 
	
  

 	
 share market
 price of the Preferred Stock (determined pursuant to Section 11(d) hereof) on
 such record date, the Purchase Price to be in effect after such record date
 shall be determined by multiplying the Purchase Price in effect immediately
 prior to such record date by a fraction, the numerator of which shall be the
 number of shares of Preferred Stock and Equivalent Preferred Shares
 outstanding on such record date plus the number of shares of Preferred Stock
 and Equivalent Preferred Shares which the aggregate offering price of the
 total number of such shares so to be offered (and/or the aggregate initial
 conversion price of the convertible securities so to be offered) would
 purchase at such current market price, and the denominator of which shall be
 the number of shares of Preferred Stock and Equivalent Preferred Shares
 outstanding on such record date plus the number of additional shares of
 Preferred Stock and/or Equivalent Preferred Shares to be offered for
 subscription or purchase (or into which the convertible securities so to be
 offered are initially convertible); provided, however, that in no event shall
 the consideration to be paid upon the exercise of one Right be less than the
 aggregate par value of the shares of capital stock of the Company issuable
 upon exercise of one Right. In case such subscription price may be paid in a
 consideration part or all of which shall be in a form other than cash, the
 value of such consideration shall be as determined in good faith by the
 Board, whose determination shall be described in a statement filed with the
 Rights Agent and which shall be binding on the Rights Agent. Shares of
 Preferred Stock and Equivalent Preferred Shares owned by or held for the
 account of the Company shall not be deemed outstanding for the purpose of any
 such computation. Such adjustment shall be made successively whenever such a
 record date is fixed; and in the event that such rights, options or warrants
 are not so issued, the Purchase Price shall be adjusted to be the Purchase
 Price which would then be in effect if such record date had not been fixed.

 
	
  

 	
  

 	
  

 
	
  

 	
            
(c)          In
 case the Company shall fix a record date for the making of a distribution to
 all holders of the Preferred Stock (including any such distribution made in
 connection with a consolidation or merger in which the Company is the
 continuing or surviving corporation) of evidences of indebtedness or assets
 (other than a regular cash dividend or a dividend payable in Preferred Stock)
 or subscription rights or warrants (excluding those referred to in Section
 11(b) hereof), the Purchase Price to be in effect after such record date
 shall be determined by multiplying the Purchase Price in effect immediately
 prior to such record date by a fraction, the numerator of which shall be the
 then-current per share market price of the Preferred Stock (determined
 pursuant to Section 11(d) hereof) on such record date, less the fair market
 value (as determined in good faith by the Board whose determination shall be
 described in a statement filed with the Rights Agent and shall be binding on
 the Rights Agent) of the portion of such assets or evidences of indebtedness
 so to be distributed or of such subscription rights or warrants applicable to
 one share of Preferred Stock, and the denominator of which shall be such
 current per share market price of the Preferred Stock; provided, however,
 that in no event shall the consideration to be paid upon the exercise of one
 Right be less than the aggregate par value of the shares of capital stock of
 the Company to be issued upon exercise of one Right. Such adjustments shall
 be made successively whenever such a record date is fixed; and in the event
 that such distribution is not so made, the Purchase Price shall again be
 adjusted to be the Purchase Price that would then be in effect if such record
 date had not been fixed.

 


17









	
  

 	
  

 	
  

 
	
  

 	
            
(d)          (i)          Except
 as otherwise provided herein, for the purpose of any computation hereunder,
 the “current per share market price” of any security (a “Security” for the
 purpose of this Section 11(d)(i)) on any date shall be deemed to be the
 average of the daily closing prices per share of such Security for the 30
 consecutive Trading Days (as such term is hereinafter defined) immediately
 prior to such date; provided, however, that in the event that the current per
 share market price of the Security is determined during a period following
 the announcement by the issuer of such Security of (A) a dividend or
 distribution on such Security payable in shares of such Security or
 securities convertible into such shares, or (B) any subdivision, combination
 or reclassification of such Security, and prior to the expiration of 30
 Trading Days after the ex-dividend date for such dividend or distribution, or
 the record date for such subdivision, combination or reclassification, then,
 and in each such case, the current per share market price shall be
 appropriately adjusted to reflect the current market price per share
 equivalent of such Security. The closing price for each day shall be the last
 sale price, regular way, or, in case no such sale takes place on such day,
 the last quoted price or, if on such date the Security is not so quoted or
 reported, the average of the high and low asked prices in the
 over-the-counter market as reported by any system then in use, or, if not so
 quoted, the average of the closing bid and asked prices as furnished by a
 professional market maker making a market in the Security selected by the
 Board. The term “Trading Day” shall mean a day on which the principal
 national securities exchange on which the Security is listed or admitted to
 trading is open for the transaction of business or, if the Security is not
 listed or admitted to trading on any national securities exchange, a Business
 Day.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (ii)         For
 the purpose of any computation hereunder, if the Preferred Stock is publicly
 traded, the “current per share market price” of the Preferred Stock shall be
 determined in accordance with the method set forth in Section 11(d)(i). If
 the Preferred Stock is not publicly traded but the Common Stock is publicly
 traded, the “current per share market price” of the Preferred Stock shall be
 conclusively deemed to be the current per share market price of the Common
 Stock as determined pursuant to Section 11(d)(i) multiplied by the then
 applicable Adjustment Number (as defined in and determined in accordance with
 the Certificate of Designation for the Preferred Stock). If neither the
 Common Stock nor the Preferred Stock is publicly traded, “current per share
 market price” shall mean the fair value per share as determined in good faith
 by the Board, whose determination shall be described in a statement filed
 with the Rights Agent and shall be binding on the Rights Agent.

 
	
  

 	
  

 	
  

 
	
  

 	
            (e)         No
 adjustment in the Purchase Price shall be required unless such adjustment
 would require an increase or decrease of at least 1% in the Purchase Price;
 provided, however, that any adjustments not required to be made by reason of
 this Section 11(e) shall be carried forward and taken into account in any
 subsequent adjustment. All calculations under this Section 11 shall be made
 to the nearest cent or to the nearest one ten-millionth of a share of
 Preferred Stock or share of Common Stock or other share or security as the
 case may be. Notwithstanding the first sentence of this Section 11(e), any
 adjustment required by this Section 11 shall be made no later than the
 earlier of (i) three years from the date of the transaction which requires
 such adjustment or (ii) the Expiration Date. If as a result of an adjustment
 made pursuant to Section 11(a)

 


18







	
  

 	
  

 
	
  

 	
 hereof, the
 holder of any Right thereafter exercised shall become entitled to receive any
 shares of capital stock of the Company other than the Preferred Stock,
 thereafter the Purchase Price and the number of such other shares so
 receivable upon exercise of a Right shall be subject to adjustment from time
 to time in a manner and on terms as nearly equivalent as practicable to the
 provisions with respect to the Preferred Stock contained in Sections 11(a),
 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) and the provisions of Sections 7,
 9, 10 and 13 hereof with respect to the Preferred Stock shall apply on like
 terms to any such other shares. 

 
	
  

 	
  

 
	
  

 	
           (f)          All
 Rights originally issued by the Company subsequent to any adjustment made to
 the Purchase Price hereunder shall evidence the right to purchase, at the
 adjusted Purchase Price, the number of one one-millionths of a share of
 Preferred Stock purchasable from time to time hereunder upon exercise of the
 Rights, all subject to further adjustment as provided herein. 

 
	
  

 	
  

 
	
  

 	
           (g)          Unless
 the Company shall have exercised its election as provided in Section 11(i),
 upon each adjustment of the Purchase Price as a result of the calculations
 made in Sections 11(b) and 11(c), each Right outstanding immediately prior to
 the making of such adjustment shall thereafter evidence the right to
 purchase, at the adjusted Purchase Price, that number of one one-millionths
 of a share of Preferred Stock (calculated to the nearest ten-millionth of a
 share of Preferred Stock) obtained by (i) multiplying (x) the number of
 one-millionths of a share of Preferred Stock purchasable upon the exercise of
 a Right immediately prior to such adjustment by (y) the Purchase Price in
 effect immediately prior to such adjustment of the Purchase Price and (ii)
 dividing the product so obtained by the Purchase Price in effect immediately
 after such adjustment of the Purchase Price. 

 
	
  

 	
  

 
	
  

 	
           (h)          The
 Company may elect on or after the date of any adjustment of the Purchase
 Price or any adjustment made to the number of shares of Preferred Stock for
 which a Right may be exercised pursuant to Section 11(a)(i), 11(b) or 11(c)
 hereof to adjust the number of Rights, in substitution for any adjustment in
 the number of one one-millionths of a share of Preferred Stock purchasable
 upon the exercise of a Right. Each of the Rights outstanding after such
 adjustment of the number of Rights shall be exercisable for the number of one
 one-millionths of a share of Preferred Stock for which a Right was
 exercisable immediately prior to such adjustment. Each Right held of record
 prior to such adjustment of the number of Rights shall become that number of
 Rights (calculated to the nearest ten-millionth) obtained by dividing the
 Purchase Price in effect immediately prior to adjustment of the Purchase
 Price by the Purchase Price in effect immediately after adjustment of the
 Purchase Price. The Company shall make a public announcement of its election
 to adjust the number of Rights, indicating the record date for the
 adjustment, and, if known at the time, the amount of the adjustment to be
 made. This record date may be the date on which the Purchase Price is
 adjusted or any day thereafter, but, if the Right Certificates have been
 issued, shall be at least 10 days later than the date of the public
 announcement. If Right Certificates have been issued, upon each adjustment of
 the number of Rights pursuant to this Section 11(i), the Company may, as
 promptly as practicable, cause to be distributed to holders of record of
 Right Certificates on such record date Right Certificates evidencing, subject
 to Section 13 

 


19









	
  

 	
  

 
	
  

 	
 hereof, the
 additional Rights to which such holders shall be entitled as a result of such
 adjustment, or, at the option of the Company, shall cause to be distributed
 to such holders of record in substitution and replacement for the Right
 Certificates held by such holders prior to the date of adjustment, and upon
 surrender thereof, if required by the Company, new Right Certificates evidencing
 all the Rights to which such holders shall be entitled as a result of such
 adjustment. Right Certificates so to be distributed shall be issued, executed
 and countersigned in the manner provided for herein and shall be registered
 in the names of the holders of record of Right Certificates on the record
 date specified in the public announcement. 

 
	
  

 	
  

 
	
  

 	
           (i)          Irrespective
 of any adjustment or change in the Purchase Price or the number of one
 one-millionths of a share of Preferred Stock issuable upon the exercise of
 the Rights, the Right Certificates theretofore and thereafter issued may
 continue to express the Purchase Price and the number of one-millionths of a
 share of Preferred Stock which were expressed in the initial Right Certificates
 issued hereunder without effect on the Purchase Price payable to exercise a
 Right or the number of one one-millionths of a share of Preferred Stock
 issuable upon the exercise of a Right as provided herein. 

 
	
  

 	
  

 
	
  

 	
           (j)          Before
 taking any action that would cause an adjustment reducing the Purchase Price
 below the then par value, if any, of the shares of Preferred Stock or other
 shares of capital stock issuable upon exercise of the Rights, the Company
 shall take any corporate action which may, in the opinion of its counsel, be
 necessary in order that the Company may validly and legally issue fully paid
 and nonassessable shares of Preferred Stock or other such shares at such
 adjusted Purchase Price. 

 
	
  

 	
  

 
	
  

 	
          (k)          In
 any case in which this Section 11 shall require that an adjustment in the
 Purchase Price be made effective as of a record date for a specified event,
 the Company may elect to defer until the occurrence of such event issuing to
 the holder of any Right exercised after such record date the Preferred Stock,
 Common Stock or other capital stock or securities of the Company, if any,
 issuable upon such exercise over and above the Preferred Stock, Common Stock
 or and other capital stock or securities of the Company, if any, issuable
 upon such exercise on the basis of the Purchase Price in effect prior to such
 adjustment; provided, however, that the Company shall deliver to such holder
 a due bill or other appropriate instrument evidencing such holder’s right to
 receive such additional shares upon the occurrence of the event requiring
 such adjustment. 

 
	
  

 	
  

 
	
  

 	
           (l)          Notwithstanding
 anything in this Section 11 to the contrary, the Company shall be entitled to
 make such adjustments in the Purchase Price, in addition to those adjustments
 expressly required by this Section 11, as and to the extent that the Board in
 its sole discretion shall determine to be advisable in order that any
 consolidation or subdivision of the Preferred Stock, issuance wholly for cash
 of any shares of Preferred Stock at less than the current market price,
 issuance wholly for cash of Preferred Stock or securities which by their
 terms are convertible into or exchangeable for Preferred Stock, dividends on
 Preferred Stock payable in shares of Preferred Stock or issuance of rights,
 options or warrants referred to hereinabove in Section 11(b), hereafter made
 by the Company to holders of its Preferred Stock shall not be taxable to such
 stockholders. 

 


20









	
  

 	
  

 
	
  

 	
           (m)          Notwithstanding
 anything in this Plan to the contrary, in the event that at any time after
 the date of this Plan and prior to the Distribution Date, the Company shall
 (i) declare and pay any dividend on the Common Stock payable in Common Stock,
 or (ii) effect a subdivision, combination or consolidation of the Common
 Stock (by reclassification or otherwise than by payment of a dividend payable
 in Common Stock) into a greater or lesser number of shares of Common Stock,
 then, in any such case, the number of Rights associated with each share of
 Common Stock then outstanding, or issued or delivered thereafter, shall be
 proportionately adjusted so that the number of Rights thereafter associated
 with each share of Common Stock following any such event shall equal the
 result obtained by multiplying the number of Rights associated with each
 share of Common Stock immediately prior to such event by a fraction the
 numerator of which shall be the total number of shares of Common Stock
 outstanding immediately prior to the occurrence of the event and the
 denominator of which shall be the total number of shares of Common Stock
 outstanding immediately following the occurrence of such event. 

 
	
  

 	
  

 
	
  

 	
           (n)          The
 Company agrees that, after the earlier of the Distribution Date or the Stock Acquisition
 Date, it will not, except as permitted by Section 22, 23 or 26 hereof, take
 (or permit any Subsidiary to take) any action if at the time such action is
 taken it is reasonably foreseeable that such action will diminish
 substantially or eliminate the benefits intended to be afforded by the
 Rights. 

 
	
  

 	
  

 
	
           Section
 12.        Certificate of Adjusted
 Purchase Price or Number of Shares. Whenever an adjustment is made as
 provided in Section 11 hereof, the Company shall promptly (a) prepare a certificate
 setting forth such adjustment, and a brief statement of the facts accounting
 for such adjustment, (b) file with the Rights Agent and with each transfer
 agent for the Common Stock or the Preferred Stock a copy of such certificate
 and (c) mail a brief summary thereof to each holder of a Right Certificate
 (or if prior to the Distribution Date, to each holder of a certificate
 representing shares of Common Stock or Book Entry shares in respect thereof)
 in accordance with Section 25 hereof. The Rights Agent shall be fully
 protected in relying on any such certificate and on any adjustment therein
 contained and shall not be deemed to have knowledge of any such adjustment
 unless and until it shall have received such certificate. Any adjustment to
 be made pursuant to Section 11 hereof shall be effective as of the date of
 the event giving rise to such adjustment.

 
	
  

 	
  

 
	
           Section
 13.        Fractional Rights and
 Fractional Shares.

 
	
  

 	
  

 
	
  

 	
           (a)          The
 Company shall not be required to issue fractions of Rights (except prior to
 the Distribution Date in accordance with Section 11(n) hereof) or to
 distribute Right Certificates which evidence fractional Rights. In lieu of
 such fractional Rights, there shall be paid to the registered holders of the
 Right Certificates with regard to which such fractional Rights would
 otherwise be issuable, an amount in cash equal to the same fraction of the
 current market value of a whole Right. For the purposes of this Section
 13(a), the current market value of a whole Right shall be the closing price
 of the Rights for the Trading Day immediately prior to the date on which such
 fractional Rights would have been otherwise issuable. The closing price for
 any day shall be the last sale price, regular way, or, in case no such sale
 takes place on such day, the average of the closing 

 


21









	
  

 	
  

 
	
  

 	
 bid and
 asked prices, regular way, in either case as reported in the principal
 consolidated transaction reporting system with respect to securities listed
 on the principal national securities exchange on which the Rights are listed
 or admitted to trading or, if the Rights are not listed or admitted to
 trading on any national securities exchange, the last quoted price or, if not
 so quoted, the average of the high bid and low asked prices in the
 over-the-counter market, as reported by such system then in use or, if on any
 such date the Rights are not so quoted, the average of the closing bid and
 asked prices as furnished by a professional market maker making a market in
 the Rights selected by the Board. If on any such date no such market maker is
 making a market in the Rights, the fair value of the Rights on such date as
 determined in good faith by the Board shall be used. 

 
	
  

 	
  

 
	
  

 	
           (b)          The
 Company shall not be required to issue fractions of Preferred Stock (other
 than fractions which are integral multiples of one one-millionth of a share
 of Preferred Stock) or to distribute certificates which evidence fractional
 shares of Preferred Stock (other than fractions which are integral multiples
 of one one-millionth of a share of Preferred Stock) upon the exercise or
 exchange of Rights. Interests in fractions of Preferred Stock in integral
 multiples of one one-millionth of a share of Preferred Stock may, at the
 election of the Company, be evidenced by depositary receipts, pursuant to an
 appropriate agreement between the Company and a depositary selected by it;
 provided that such agreement shall provide that the holders of such
 depositary receipts shall have all the rights, privileges and preferences to
 which they are entitled as beneficial owners (for the purposes of this
 Section 13(b), as such term is defined in Rule 13d-3 or 13d-5 of the General
 Rules and Regulations under the Exchange Act) of the Preferred Stock
 represented by such depositary receipts. In lieu of fractional shares of
 Preferred Stock that are not integral multiples of one one-millionth of a
 share of Preferred Stock, the Company shall pay to the registered holders of
 Right Certificates at the time such Rights are exercised for shares of
 Preferred Stock as herein provided an amount in cash equal to the same
 fraction of the current market value of one share of Preferred Stock. For the
 purposes of this Section 13(b), the current market value of a share of
 Preferred Stock shall be the closing price of a share of Preferred Stock (as
 determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
 immediately prior to the date of such exercise. 

 
	
  

 	
  

 
	
  

 	
           (c)          The
 Company shall not be required to issue fractions of shares of Common Stock or
 to distribute certificates which evidence fractional shares of Common Stock
 upon the exercise or exchange of Rights. In lieu of such fractional shares of
 Common Stock, the Company shall pay to the registered holders of the Right
 Certificates at the time such Rights are exercised or exchanged for shares of
 Common Stock as herein provided an amount in cash equal to the same fraction
 of the current market value of a whole share of Common Stock (as determined
 in accordance with Section 11(d)(i) hereof), for the Trading Day immediately
 prior to the date of such exercise or exchange. 

 
	
  

 	
  

 
	
  

 	
           (d)          The
 holder of a Right by the acceptance of the Right expressly waives his right
 to receive any fractional Rights or any fractional shares upon exercise or
 exchange of a Right (except as provided above). 

 
	
  

 	
  

 
	
          Section
 14.        Rights of Action.
 All rights of action in respect of this Plan, excepting the rights of action
 given to the Rights Agent under Section 17 hereof, are vested in the
 respective

 


22





registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Stock), on such holder’s own
behalf and for such holder’s own benefit, may enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, such holder’s right to exercise the Rights
evidenced by such Right Certificate (or, prior to the Distribution Date, such
Common Stock) in the manner provided in such Rights Certificate and in this
Plan. Without limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Plan and will be entitled
to specific performance of the obligations under, and injunctive relief against
actual or threatened violations of, the obligations of any Person subject to
this Plan. 


          Section
15.       Agreement of Right Holders. Every
holder of a Right, by accepting the same, consents and agrees with the Company
and the Rights Agent and with every other holder of a Right that:  


	
  

 	
  

 
	
  

 	
           (a)          prior
 to the Distribution Date, the Rights will not be evidenced by a Right
 Certificate and will be transferable only in connection with the transfer of
 the Common Stock; 

 
	
  

 	
  

 
	
  

 	
           (b)          after
 the Distribution Date, the Right Certificates are transferable only on the
 registry books of the Rights Agent if surrendered at the office or agency of
 the Rights Agent designated for such purpose, duly endorsed or accompanied by
 a proper instrument of transfer; 

 
	
  

 	
  

 
	
  

 	
           (c)          the
 Company and the Rights Agent may deem and treat the Person in whose name the
 Right Certificate (or, prior to the Distribution Date, the Common Stock
 certificate (or Book Entry shares in respect of Common Stock)) is registered
 as the absolute owner thereof and of the Rights evidenced thereby
 (notwithstanding any notations of ownership or writing on the Right
 Certificates or the Common Stock certificate (or notices provided to holders
 of Book Entry shares of Common Stock) made by anyone other than the Company
 or the Rights Agent) for all purposes whatsoever, and neither the Company nor
 the Rights Agent, subject to Section 7(e) hereof, shall be affected by any
 notice to the contrary; and 

 
	
  

 	
  

 
	
  

 	
           (d)          notwithstanding
 anything in this Plan to the contrary, neither the Company nor the Rights
 Agent shall have any liability to any holder of a Right or other Person as a
 result of its inability to perform any of its obligations under this Plan by
 reason of any preliminary or permanent injunction or other order, judgment,
 decree or ruling (whether interlocutory or final) issued by a court or by a
 governmental, regulatory, self-regulatory or administrative agency or
 commission, or any statute, rule, regulation or executive order promulgated
 or enacted by any governmental authority, prohibiting or otherwise
 restraining performance of such obligation; provided, however, that the
 Company must use its reasonable best efforts to have any such injunction,
 order, judgment, decree or ruling lifted or otherwise overturned as soon as
 possible. 

 


23





           Section
16.       Right Certificate Holder Not
Deemed a Stockholder. No holder, as such, of any Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise or exchange of the Rights represented thereby,
nor shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in this Plan), or
to receive dividends or subscription rights, or otherwise, until the Rights
evidenced by such Right Certificate shall have been exercised or exchanged in
accordance with the provisions hereof. 


           Section
17.       Concerning the Rights Agent.



	
  

 	
  

 
	
  

 	
            (a)          The
 Company agrees to pay to the Rights Agent reasonable compensation for all
 services rendered by it hereunder and, from time to time, on demand of the
 Rights Agent, its reasonable expenses and counsel fees and other
 disbursements incurred in the administration and execution of this Plan and
 the exercise and performance of its duties hereunder. The Company also agrees
 to indemnify the Rights Agent for, and to hold it harmless against, any loss,
 liability or expense, incurred without gross negligence, bad faith or willful
 misconduct on the part of the Rights Agent, for anything done or omitted by
 the Rights Agent in connection with the acceptance and administration of this
 Plan, including the costs and expenses of defending against any claim of
 liability arising therefrom, directly or indirectly. 

 
	
  

 	
  

 
	
  

 	
           (b)          The
 Rights Agent shall be protected and shall incur no liability for, or in
 respect of any action taken, suffered or omitted by it in connection with,
 its administration of this Plan in reliance upon any Right Certificate or
 certificate for the Preferred Stock, the Common Stock or for any other
 securities of the Company, instrument of assignment or transfer, power of
 attorney, endorsement, affidavit, letter, notice, direction, consent,
 certificate, statement or other paper or document reasonably believed by it
 to be genuine and to be signed, executed and, where necessary, verified or
 acknowledged, by the proper Person or Persons, or otherwise upon the advice
 of counsel as set forth in Section 19 hereof. 

 
	
  

 	
  

 
	
          Section
 18.        Merger or Consolidation
 or Change of Name of Rights Agent.

 
	
  

 	
  

 
	
  

 	
           (a)          Any
 corporation or entity into which the Rights Agent or any successor Rights
 Agent may be merged or with which it may be consolidated, or any entity
 corporation or resulting from any merger or consolidation to which the Rights
 Agent or any successor Rights Agent shall be a party, or any corporation or
 entity succeeding to the stock transfer or corporate trust powers of the
 Rights Agent or any successor Rights Agent, shall be the successor to the
 Rights Agent under this Plan without the execution or filing of any paper or
 any further act on the part of any of the parties hereto; provided that such
 corporation or entity would be eligible for appointment as a successor Rights
 Agent under the provisions of Section 20 hereof. In case at the time such
 successor Rights Agent shall succeed to the agency created by this Plan, any
 of the Right Certificates shall 

 


24









	
  

 	
  

 
	
  

 	
 have been
 countersigned but not delivered, any such successor Rights Agent may adopt
 the countersignature of the predecessor Rights Agent and deliver such Right
 Certificates so countersigned; and in case at that time any of the Right
 Certificates shall not have been countersigned, any successor Rights Agent
 may countersign such Right Certificates either in the name of the predecessor
 Rights Agent or in the name of the successor Rights Agent; and in all such
 cases such Right Certificates shall have the full force provided in the Right
 Certificates and in this Plan. 

 
	
  

 	
  

 
	
  

 	
           (b)          In
 case at any time the name of the Rights Agent shall be changed and at such
 time any of the Right Certificates shall have been countersigned but not
 delivered, the Rights Agent may adopt the countersignature under its prior
 name and deliver Right Certificates so countersigned; and in case at that
 time any of the Right Certificates shall not have been countersigned, the
 Rights Agent may countersign such Right Certificates either in its prior name
 or in its changed name and in all such cases such Right Certificates shall
 have the full force provided in the Right Certificates and in this Plan. 

 
	
  

 	
  

 
	
           Section
 19.      Duties of Rights Agent.
 The Rights Agent undertakes the duties and obligations imposed by this Plan
 upon the following terms and conditions, by all of which the Company and the
 holders of Right Certificates, by their acceptance thereof, shall be bound:

 
	
  

 	
  

 
	
  

 	
           (a)          The
 Rights Agent may consult with legal counsel (who may be legal counsel for the
 Company and/or the Board), and the opinion of such counsel shall be full and
 complete authorization and protection to the Rights Agent as to any action
 taken or omitted by it in good faith and in accordance with such opinion. 

 
	
  

 	
  

 
	
  

 	
           (b)          Whenever
 in the performance of its duties under this Plan the Rights Agent shall deem
 it necessary or desirable that any fact or matter be proved or established by
 the Company prior to taking or suffering any action hereunder, such fact or
 matter (unless other evidence in respect thereof be herein specifically
 prescribed) may be deemed to be conclusively proved and established by a
 certificate signed by the President and the Secretary of the Company (each,
 an “Authorized Officer”) and delivered to the Rights Agent; and such
 certificate shall be full authorization to the Rights Agent for any action
 taken or suffered in good faith by it under the provisions of this Plan in
 reliance upon such certificate. 

 
	
  

 	
  

 
	
  

 	
           (c)          The
 Rights Agent shall be liable hereunder to the Company and any other Person
 only for its own gross negligence, bad faith or willful misconduct. 

 
	
  

 	
  

 
	
  

 	
           (d)          The
 Rights Agent shall not be liable for or by reason of any of the statements of
 fact or recitals contained in this Plan or in the Right Certificates (except
 its countersignature thereof) or be required to verify the same, but all such
 statements and recitals are and shall be deemed to have been made by the
 Company only. 

 
	
  

 	
  

 
	
  

 	
           (e)          The
 Rights Agent shall not be under any responsibility in respect of the validity
 of this Plan or the execution and delivery hereof (except the due execution
 hereof by the Rights Agent) or in respect of the validity or execution of any
 Right Certificate (except its countersignature thereof); nor shall it be
 responsible for any breach by the 

 


25









	
  

 	
  

 
	
  

 	
 Company of
 any covenant or condition contained in this Plan or in any Right Certificate;
 nor shall it be responsible for any change in the exercisability of the
 Rights (including the Rights becoming void pursuant to Section 11(a)(ii)
 hereof) or any adjustment in the terms of the Rights (including the manner,
 method or amount thereof) provided for in Sections 3, 11, 22 and 23, or the
 ascertaining of the existence of facts that would require any such change or
 adjustment (except with respect to the exercise of Rights evidenced by Right
 Certificates after receipt of a certificate furnished pursuant to Section 12,
 describing such change or adjustment); nor shall it by any act hereunder be
 deemed to make any representation or warranty as to the authorization or
 reservation of any shares of Preferred Stock or other securities to be issued
 pursuant to this Plan or any Right Certificate or as to whether any shares of
 Preferred Stock or other securities will, when issued, be validly authorized
 and issued, fully paid and nonassessable. 

 
	
  

 	
  

 
	
  

 	
           (f)          The
 Company agrees that it will perform, execute, acknowledge and deliver or
 cause to be performed, executed, acknowledged and delivered all such further
 and other acts, instruments and assurances as may reasonably be required by
 the Rights Agent for the carrying out or performing by the Rights Agent of
 the provisions of this Plan. 

 
	
  

 	
  

 
	
  

 	
           (g)          The
 Rights Agent is hereby authorized and directed to accept instructions with
 respect to the performance of its duties hereunder from any person reasonably
 believed by the Rights Agent to be one of the Authorized Officers of the
 Company, and to apply to such Authorized Officers for advice or instructions
 in connection with its duties, and it shall not be liable for any action
 taken or suffered by it in good faith in accordance with instructions of any
 such Authorized Officer or for any delay in acting while waiting for those
 instructions. Any application by the Rights Agent for written instructions
 from the Company may, at the option of the Rights Agent, set forth in writing
 any action proposed to be taken or omitted by the Rights Agent under this
 Plan and the date on and/or after which such action shall be taken or such
 omission shall be effective. The Rights Agent shall not be liable for any
 action taken by, or omission of, the Rights Agent in accordance with a
 proposal included in any such application on or after the date specified in
 such application (which date shall not be less than five Business Days after
 the date any Authorized Officer of the Company actually receives such
 application unless any such Authorized Officer shall have consented in
 writing to an earlier date) unless, prior to taking any such action (or the
 effective date in the case of an omission), the Rights Agent shall have
 received written instructions in response to such application specifying the
 action to be taken or omitted. 

 
	
  

 	
  

 
	
  

 	
           (h)          The
 Rights Agent and any stockholder, director, officer or employee of the Rights
 Agent may buy, sell or deal in any of the Rights or other securities of the
 Company or become pecuniarily interested in any transaction in which the
 Company may be interested, or contract with or lend money to the Company or
 otherwise act as fully and freely as though it were not Rights Agent under
 this Plan. Nothing herein shall preclude the Rights Agent from acting in any
 other capacity for the Company or for any other legal entity. 

 


26









	
  

 	
  

 
	
  

 	
           (i)          The
 Rights Agent may execute and exercise any of the rights or powers hereby
 vested in it or perform any duty hereunder either itself or by or through its
 attorneys or agents, and the Rights Agent shall not be answerable or
 accountable for any act, default, neglect or misconduct of any such attorneys
 or agents or for any loss to the Company resulting from any such act,
 default, neglect or misconduct, provided, that reasonable care was exercised
 in the selection and continued employment thereof. 

 
	
  

 	
  

 
	
  

 	
           (j)          If,
 with respect to any Right Certificate surrendered to the Rights Agent for
 exercise or transfer, the certificate contained in the form of assignment or
 the form of election to purchase set forth on the reverse thereof, as the
 case may be, has not been completed to certify the holder is not an Acquiring
 Person (or an Affiliate or Associate thereof) or a transferee thereof, the
 Rights Agent shall not take any further action with respect to such requested
 exercise or transfer without first consulting with the Company. 

 
	
  

 	
  

 
	
  

 	
           (k)          The
 Rights Agent has no responsibility whatsoever to provide any tax advice to
 the Company’s shareholders. 

 



          Section
20.       Change of Rights Agent. The
Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Plan upon 30 days’ notice in writing mailed to the
Company and to each transfer agent of the Common Stock or Preferred Stock by
registered or certified mail. In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to have resigned automatically and be discharged from its duties
under this Plan as of the effective date of such termination, and the Company
shall be responsible for sending any required notice. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (A) a corporation or other entity organized and doing business
under the laws of the United States or any state thereof, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million or (B) an affiliate of a corporation or entity
described in clause (A) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor 


27





Rights Agent
and each transfer agent of the Common Stock or Preferred Stock, and, following
the Distribution Date, mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 20, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be. 


          Section
21.       Issuance of New Right
Certificates. Notwithstanding any of the provisions of this Plan or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such forms as may be approved by its Board to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Plan. In addition,
in connection with the issuance or sale of Common Stock following the
Distribution Date and prior to the Expiration Date, the Company may with
respect to shares of Common Stock so issued or sold pursuant to (i) the
exercise of stock options, (ii) under any employee plan or arrangement, (iii)
the exercise, conversion or exchange of securities, notes or debentures issued
by the Company or (iv) a contractual obligation of the Company, in each case
existing prior to the Distribution Date, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale. 


          Section
22.       Redemption. 


	
  

 	
  

 
	
  

 	
           (a)          The
 Board may, at any time prior to such time as any Person first becomes an
 Acquiring Person, redeem all but not less than all the then outstanding
 Rights at a redemption price of $0.001 per Right, appropriately adjusted to
 reflect any stock split, stock dividend or similar transaction occurring in
 respect of the Common Stock after the date hereof (the “Redemption Price”).
 The redemption of the Rights may be made effective at such time, on such
 basis and with such conditions as the Board in its sole discretion may
 establish. The Company may, at its option, pay the Redemption Price in cash,
 shares of Common Stock (based on the current market price of the Common Stock
 at the time of redemption as determined pursuant to Section 11(d)(i) hereof)
 or any other form of consideration deemed appropriate by the Board. 

 
	
  

 	
  

 
	
  

 	
           (b)          Immediately
 upon the action of the Board ordering the redemption of the Rights pursuant
 to paragraph (a) of this Section 22 (or at such later time as the Board may
 establish for the effectiveness of such redemption), and without any further action
 and without any notice, the right to exercise the Rights will terminate and
 the only right thereafter of the holders of Rights shall be to receive the
 Redemption Price. The Company shall promptly give public notice of any such
 redemption; provided, however, that the failure to give, or any defect in,
 any such notice shall not affect the validity of such redemption. Within 10
 days after such action of the Board ordering the redemption of the Rights (or
 such later time as the Board may establish for the effectiveness of such
 redemption), the Company shall mail a notice of redemption to all the holders
 of the then outstanding Rights at their last addresses as they appear upon
 the registry books of the Rights Agent or, prior to the Distribution Date, on
 the registry books of the transfer agent for the Common Stock. Any notice
 which is mailed in the manner herein provided shall be deemed given, whether
 or not the holder receives the notice. Each such notice of redemption shall
 state the method by which the payment of the Redemption Price will be 

 


28









	
  

 	
  

 
	
  

 	
 made. The
 failure to give notice required by this Section 22(b) or any defect therein
 shall not affect the validity of the action taken by the Company. 

 
	
  

 	
  

 
	
  

 	
           (c)          In
 the case of a redemption under Section 22(a) hereof, the Company may, at its
 option, discharge all of its obligations with respect to the Rights by (i)
 issuing a press release announcing the manner of redemption of the Rights and
 (ii) mailing payment of the Redemption Price to the registered holders of the
 Rights at their last addresses as they appear on the registry books of the
 Rights Agent or, prior to the Distribution Date, on the registry books of the
 transfer agent of the Common Stock, and upon such action, all outstanding
 Right Certificates shall be void without any further action by the Company. 

 
	
  

 	
  

 
	
           Section
 23.       Exchange.

 
	
  

 	
  

 
	
  

 	
           (a)          The
 Board may, at its option, at any time after any Person first becomes an
 Acquiring Person, exchange all or part of the then outstanding Rights (which
 shall not include Rights that have not become effective or that have become
 void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of
 Common Stock at an exchange ratio of one share of Common Stock (or
 one-millionth of a share of Preferred Stock) per Right, appropriately
 adjusted to reflect any stock split, stock dividend or similar transaction
 occurring after the date hereof (such amount per Right being hereinafter
 referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the
 Board shall not be empowered to effect such exchange at any time after an
 Acquiring Person becomes the Beneficial Owner of shares of Common Stock
 aggregating 50% or more of the voting power of the shares of Common Stock
 then outstanding. The exchange of the Rights by the Board may be made
 effective at such time, on such basis and with such conditions as the Board
 in its sole discretion may establish. Prior to effecting an exchange pursuant
 to this Section 23, the Board may direct the Company to enter into a Trust
 Agreement in such form and with such terms as the Board shall then approve
 (the “Trust Agreement”). If the Board so directs, the Company shall enter
 into the Trust Agreement and shall issue to the trust created by such
 agreement (the “Trust”) all of the shares of Common Stock issuable pursuant
 to the exchange, and all Persons entitled to receive shares pursuant to the
 exchange shall be entitled to receive such shares (and any dividends or
 distributions made thereon after the date on which such shares are deposited
 in the Trust) only from the Trust and solely upon compliance with the
 relevant terms and provisions of the Trust Agreement. 

 
	
  

 	
  

 
	
  

 	
           (b)          Immediately
 upon the effectiveness of the action of the Board ordering the exchange of
 any Rights pursuant to paragraph (a) of this Section 23 and without any
 further action and without any notice, the right to exercise such Rights
 shall terminate and the only right thereafter of a holder of such Rights
 shall be to receive that number of shares of Common Stock equal to the number
 of such Rights held by such holder multiplied by the Exchange Ratio. The
 Company shall promptly give public notice of any such exchange and shall
 promptly mail a notice of any such exchange to all of the holders of the
 Rights so exchanged at their last addresses as they appear upon the registry
 books of the Rights Agent; provided, however, that the failure to give, or
 any defect in, such notice shall not affect the validity of such exchange.
 Any notice which is mailed in 

 


29









	
  

 	
  

 
	
  

 	
 the manner
 herein provided shall be deemed given, whether or not the holder receives the
 notice. Each such notice of exchange will state the method by which the
 exchange of the shares of Common Stock for Rights will be effected and, in
 the event of any partial exchange, the number of Rights which will be
 exchanged. Any partial exchange shall be effected pro rata based on the
 number of Rights (other than Rights which have become void pursuant to the provisions
 of Section 11(a)(ii) hereof) held by each holder of Rights. 

 
	
  

 	
  

 
	
  

 	
           (c)          The
 Company may at its option substitute, and, in the event that there shall not
 be sufficient shares of Common Stock issued but not outstanding or authorized
 but unissued (and unreserved) to permit an exchange of Rights as contemplated
 in accordance with this Section 23 (or if the issuance of Common Stock in
 exchange for any Rights would not otherwise be permitted under the
 Certificate of Incorporation), the Company shall substitute, to the extent of
 such insufficiency or to the extent necessary to comply with its Certificate
 of Incorporation, for each share of Common Stock that would otherwise be
 issuable upon exchange of a Right, a number of shares of Preferred Stock or
 fraction thereof (or Equivalent Preferred Shares, as such term is defined in
 Section 11(b), or other equivalent shares of its capital stock) such that the
 current per share market price (determined pursuant to Section 11(d) hereof)
 of one share of Preferred Stock (or Equivalent Preferred Share or other
 equivalent share) multiplied by such number or fraction is equal to the
 current per share market price of one share of Common Stock (determined
 pursuant to Section 11(d) hereof) as of the date of such exchange. 

 
	
  

 	
  

 
	
           Section
 24.      Notice of Certain
 Events. 

 
	
  

 	
  

 
	
  

 	
           (a)          In
 case the Company shall at any time after the earlier of the Distribution Date
 or the Stock Acquisition Date propose (i) to pay any dividend payable in
 stock of any class to the holders of its Preferred Stock or to make any other
 distribution to the holders of its Preferred Stock (other than a regular
 quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock
 rights or warrants to subscribe for or to purchase any additional shares of
 Preferred Stock or shares of stock of any class or any other securities,
 rights or options, (iii) to effect any reclassification of its Preferred
 Stock (other than a reclassification involving only the subdivision or
 combination of outstanding Preferred Stock), (iv) to effect the liquidation,
 dissolution or winding up of the Company, or (v) to declare or pay any
 dividend on the Common Stock payable in Common Stock, to effect a
 subdivision, combination or consolidation of the Common Stock (by
 reclassification or otherwise than by payment of dividends in Common Stock),
 then, in each such case, the Company shall give to each holder of a Right
 Certificate, in accordance with Section 25 hereof, a notice of such proposed
 action, which shall specify the record date for the purposes of such stock
 dividend or distribution or offering of rights or warrants, or the date on
 which such liquidation, dissolution, winding up, reclassification,
 subdivision, combination or consolidation is to take place and the date of
 participation therein by the holders of the Common Stock and/or Preferred
 Stock, if any such date is to be fixed, and such notice shall be so given in
 the case of any action covered by clause (i) or (ii) above at least 10 days
 prior to the record date for determining holders of the Preferred Stock for
 purposes of such action, and in the case of any such other action, at least
 10 days prior to the date of the taking of such proposed action or the date
 of participation therein by the holders of the Common Stock and/or Preferred
 Stock, whichever shall be the earlier. 

 


30









	
  

 	
  

 
	
  

 	
           (b)          In
 case any event described in Section 11(a)(ii) shall occur then the Company
 shall as soon as practicable thereafter give to each holder of a Right
 Certificate (or if occurring prior to the Distribution Date, the holders of
 the Common Stock) in accordance with Section 25 hereof, a notice of the
 occurrence of such event, which notice shall describe such event and the consequences
 of such event to holders of Rights under Section 11(a)(ii). 

 
	
  

 	
  

 
	
  

 	
           (c)          The
 failure to give notice required by this Section 24 or any defect therein
 shall not affect the validity of the action taken by the Company or the vote
 upon any such action. 

 



          Section
25.        Notices. Notices or
demands authorized by this Plan to be given or made by the Rights Agent or by
the holder of any Right Certificate to or on the Company shall be sufficiently
given or made if sent by overnight delivery service or first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows: 


	
  

 	
  

 
	
  

 	
 MathStar,
 Inc. 

 
	
  

 	
 625
 Whitetail Boulevard

 
	
  

 	
 River Falls,
 WI 54022

 
	
  

 	
 Attention:
 Secretary 

 



          Subject
to the provisions of Section 20 hereof, any notice or demand authorized by this
Plan to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by overnight delivery service or first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows: 


	
  

 	
  

 
	
  

 	
 Wells Fargo
 Shareowner Services

 
	
  

 	
 161 North
 Concord Exchange 

 
	
  

 	
 St. Paul, MN
 55075

 
	
  

 	
 Attention:
 Pamela E. Herlich 

 



          Notices
or demands authorized by this Plan to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books of the Company. 


          Section
26.        Supplements and
Amendments. Except as otherwise provided in this Section 26, for so long as
the Rights are then redeemable, the Company may in its sole and absolute
discretion, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Plan in any respect without the approval of any
holders of the Rights. At any time when the Rights are no longer redeemable,
except as otherwise provided in this Section 26, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend this Plan
without the approval of any holders of Rights, in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (iii) shorten or
lengthen any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem 


31






necessary or
desirable; provided, however, that no such supplement or amendment may
adversely affect the interests of the holders of Rights as such (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no
such amendment may cause the Rights again to become redeemable or cause this
Plan again to become amendable other than in accordance with this sentence.
Notwithstanding anything contained in this Plan to the contrary, no supplement
or amendment shall be made which decreases the Redemption Price. Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the supplement or amendment is in compliance with the terms of this
Section 26, the Rights Agent shall promptly execute such supplement or
amendment, provided that any supplement or amendment does not adversely affect
the rights, duties or obligations of the Rights Agent under this Plan. The
Rights Agent hereby acknowledges that in all matters arising under this Plan,
including any amendment hereto pursuant to this Section 26, time is of the
essence. 


          Section
27.          Successors.
All the covenants and provisions of this Plan by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder. 


          Section
28.          Benefits of
this Plan. Nothing in this Plan shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Right Certificates (and, prior to the Distribution Date, the Common Stock) any
legal or equitable right, remedy or claim under this Plan; but this Plan shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock). 


          Section
29.          Process to
Seek Exemption. Any Person who desires to effect any acquisition of Common
Stock that would, if consummated, result in such Person (together with its
Affiliates and Associates) beneficially owning 4.99% or more of the
then-outstanding Common Stock (or, in the case of an Existing Holder,
additional shares of Common Stock representing .5% or more of the
then-outstanding Common Stock) (a “Requesting Person”) may, prior to the Stock
Acquisition Date and in accordance with this Section 29, request that the Board
grant an exemption with respect to such acquisition under this Plan so that
such acquisition would be deemed to be an “Exempt Transaction” for purposes of
this Plan (an “Exemption Request”). An Exemption Request shall be in proper
form and shall be delivered by registered mail, return receipt requested, to
the Secretary of the Company at the principal executive office of the Company.
To be in proper form, an Exemption Request shall set forth (i) the name and
address of the Requesting Person, (ii) the number and percentage of shares of
Common Stock then beneficially owned by the Requesting Person, together with
all Affiliates and Associates of the Requesting Person, and (iii) a reasonably
detailed description of the transaction or transactions by which the Requesting
Person would propose to acquire Beneficial Ownership of Common Stock
aggregating 4.99% or more of the then outstanding Common Stock (or, in the case
of an Existing Holder, additional shares of Common Stock representing .5% or
more of the then-outstanding Common Stock) and the maximum number and
percentage of shares of Common Stock that the Requesting Person proposes to
acquire. The Board shall make a determination whether to grant an exemption in
response to an Exemption Request as promptly as practicable (and, in any event,
within ten (10) Business Days) after receipt thereof; provided, that the
failure of the Board to make a determination within such period shall be deemed
to constitute the denial by the Board of the Exemption Request. The Board shall
only 


32





grant an
exemption in response to an Exemption Request if the Board determines in its
sole discretion that the acquisition of Beneficial Ownership of Common Stock by
the Requesting Person will not jeopardize or endanger the availability to the
Company of the NOLs. Any exemption granted hereunder may be granted in whole or
in part, and may be subject to limitations or conditions (including a
requirement that the Requesting Person agree that it will not acquire
Beneficial Ownership of shares of Common Stock in excess of the maximum number
and percentage of shares approved by the Board), in each case as and to the
extent the Board shall determine necessary or desirable to provide for the
protection of the Company’s NOLs. Any Exemption Request may be submitted on a
confidential basis and, except to the extent required by applicable law, the
Company shall maintain the confidentiality of such Exemption Request and the
Board’s determination with respect thereto. 


          Section
30.          Determinations
and Actions by the Board of Directors. The Board shall have the exclusive
power and authority to administer this Plan and to exercise the rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Plan, including, without
limitation, the right and power to (i) interpret the provisions of this Plan
and (ii) make all determinations deemed necessary or advisable for the
administration of this Plan (including, without limitation, a determination to
redeem or not redeem the Rights or to amend or not amend this Plan). All such
actions, calculations, interpretations and determinations that are done or made
by the Board in good faith shall be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights, as such, and all other
parties. 


          Section
31.          Severability.
If any term, provision, covenant or restriction of this Plan or applicable to
this Plan is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Plan shall remain in full force and effect
and shall in no way be affected, impaired or invalidated; provided, however,
that notwithstanding anything in this Plan to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Plan would adversely
affect the purpose or effect of this Plan, the right of redemption set forth in
Section 22 hereof shall be reinstated (with prompt notice to the Rights Agent)
and shall not expire until the close of business on the tenth Business Day
following the date of such determination by the Board. Without limiting the
foregoing, if any provision requiring a specific group of Directors of the
Company to act is held by any court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then
be made by the Board in accordance with applicable law and the Company’s Certificate
of Incorporation and Bylaws. 


          Section
32.          Governing Law.
This Plan and each Right Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State. 


          Section
33.          Counterparts.
This Plan may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. A
signature to this Plan 


33





transmitted
electronically shall have the same authority, effect and enforceability as an
original signature. 


          Section
34.          Descriptive
Headings. Descriptive headings of the several sections of this Plan are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.  


          Section
35.          Force Majeure.
Notwithstanding anything to the contrary contained herein, the Rights Agent
shall not be liable for any delays or failures in performance resulting from
acts beyond its reasonable control, including, without limitation, acts of God,
terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions
or malfunction of computer facilities, loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war or civil unrest.  


          IN
WITNESS WHEREOF, the parties hereto have caused this Plan to be duly executed,
all as of the day and year first above written. 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 MATHSTAR,
 INC.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  /s/ Shannon Zimmerman



 	
  

 
	
  

 	
 Name:
 Shannon Zimmerman

 
	
  

 	
 Title: Chief
 Executive Officer

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 WELLS FARGO
 BANK, NATIONAL

 
	
  

 	
 ASSOCIATION,

 
	
  

 	
 as Rights
 Agent

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  /s/ Pamela E. Herlich



 	
  

 
	
  

 	
 Name: Pamela
 E. Herlich

 
	
  

 	
 Title: Vice
 President, Account Management

 
	
  

 	
  

 	
   Wells Fargo
 Shareowner Services

 


34





EXHIBIT A


FORM OF


CERTIFICATE OF DESIGNATIONS


OF


SERIES A PREFERRED STOCK


OF


MATHSTAR, INC.


Pursuant to
Section 151 of the General Corporation

Law of the State of Delaware 


MATHSTAR,
INC., a corporation organized and existing under the laws of the State of
Delaware (the “Corporation”), in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY: 


That pursuant
to the authority vested in the Board of Directors of the Corporation (the
“Board of Directors”) in accordance with the provisions of the Certificate of
Incorporation of the said Corporation (the “Certificate of Incorporation”), the
said Board of Directors on February 23, 2010 adopted the following resolution
creating a series of 25 shares of Preferred Stock designated as “Series A
Preferred Stock”: 


          RESOLVED,
that pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of the Certificate of
Incorporation, a series of Preferred Stock, par value $0.001 per share, of the
Corporation be and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series and the
qualifications, limitations and restrictions thereof are as follows: 


Series A
Preferred Stock 


1.        Designation and
Amount. There shall be a series of Preferred Stock that shall be designated as
“Series A Preferred Stock,” and the number of shares constituting such series
shall be twenty-five (25). Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, however, that no decrease
shall reduce the number of shares of Series A Preferred Stock to less than the
number of shares then issued and outstanding plus the number of shares issuable
upon exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation. 


2.        Dividends
and Distribution. 


A-1





(A)          Subject
to the prior and superior rights of the holders of any shares of any class or
series of stock of the Corporation ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of any class
or series of stock of the Corporation ranking junior to the Series A Preferred
Stock in respect thereof, shall be entitled to receive quarterly dividends,
payable in cash (except as otherwise provided herein), when, as and if declared
by the Board of Directors out of funds legally available for the purpose (each
such date being referred to herein as a “Dividend Payment Date”), commencing on
the first Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number
(as defined below) times the aggregate per share amount of all cash dividends,
and the Adjustment Number times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, par value $0.01 per share, of the
Corporation (the “Common Stock”), or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Dividend Payment Date, or, with respect to the
first Dividend Payment Date, since the first issuance of any share or fraction
of a share of Series A Preferred Stock. The “Adjustment Number” shall initially
be 1,000,000. In the event the Corporation shall at any time after February 25,
2010 (i) declare and pay any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event. 


(B)          The
Corporation shall declare a dividend or distribution on the Series A Preferred
Stock as provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock). 


(C)          Dividends
shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Dividend Payment Date next preceding the date of issue
of such shares of Series A Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Dividend Payment Date; in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a dividend and before such Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive 


A-2









	
  

 	
  

 
	
  

 	
 payment of a
 dividend or distribution declared thereon, which record date shall be no more
 than 60 days prior to the date fixed for the payment thereof. 

 



3.        Voting
Rights. The holders of shares of Series A Preferred Stock shall have the
following voting rights: 


	
  

 	
  

 
	
  

 	
 (A)          Each
 share of Series A Preferred Stock shall entitle the holder thereof to a
 number of votes equal to the Adjustment Number on all matters submitted to a
 vote of the stockholders of the Corporation. 

 
	
  

 	
  

 
	
  

 	
 (B)          Except
 as required by law, by Section 3(C) and by Section 10 hereof, holders of
 Series A Preferred Stock shall have no special voting rights and their
 consent shall not be required (except to the extent they are entitled to vote
 with holders of Common Stock as set forth herein) for taking any corporate action.
 

 



4.        Certain
Restrictions. 


	
  

 	
  

 
	
  

 	
 (A)          Whenever
 dividends or distributions payable on the Series A Preferred Stock as
 provided in Section 2 are in arrears, thereafter and until all accrued and
 unpaid dividends and distributions, whether or not declared, on shares of
 Series A Preferred Stock outstanding shall have been paid in full, the
 Corporation shall not: 

 






	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (i)          declare
 or pay dividends on, make any other distributions on, or redeem or purchase
 or otherwise acquire for consideration any shares of stock ranking junior
 (either as to dividends or upon liquidation, dissolution or winding up) to
 the Series A Preferred Stock; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii)          declare
 or pay dividends on or make any other distributions on any shares of stock
 ranking on a parity (either as to dividends or upon liquidation, dissolution
 or winding up) with the Series A Preferred Stock, except dividends paid
 ratably on the Series A Preferred Stock and all such parity stock on which
 dividends are payable or in arrears in proportion to the total amounts to
 which the holders of all such shares are then entitled; or

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (iii)          purchase
 or otherwise acquire for consideration any shares of Series A Preferred
 Stock, or any shares of stock ranking on a parity with the Series A Preferred
 Stock, except in accordance with a purchase offer made in writing or by
 publication (as determined by the Board of Directors) to all holders of
 Series A Preferred Stock, or to such holders and holders of any such shares
 ranking on a parity therewith, upon such terms as the Board of Directors,
 after consideration of the respective annual dividend rates and other
 relative rights and preferences of the respective series and classes, shall
 determine in good faith will result in fair and equitable treatment among the
 respective series or classes.

 






	
  

 	
  

 
	
  

 	
 (B)          The
 Corporation shall not permit any subsidiary of the Corporation to purchase or
 otherwise acquire for consideration any shares of stock of the Corporation
 unless the Corporation could, under paragraph (A) of this Section 4, purchase
 or otherwise acquire such shares at such time and in such manner.

 



A-3





5.        Reacquired
Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired promptly after the
acquisition thereof. All such shares shall upon their retirement become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors, subject to any conditions and restrictions on
issuance set forth herein. 


6.        Liquidation,
Dissolution or Winding Up. 


	
  

 	
  

 
	
  

 	
 (A)          Upon
 any liquidation, dissolution or winding up of the Corporation, voluntary or
 otherwise, no distribution shall be made to the holders of shares of stock
 ranking junior (either as to dividends or upon liquidation, dissolution or
 winding up) to the Series A Preferred Stock unless, prior thereto, the holders
 of shares of Series A Preferred Stock shall have received an amount per share
 (the “Series A Liquidation Preference”) equal to the greater of (i) $1,000
 plus an amount equal to accrued and unpaid dividends and distributions
 thereon, whether or not declared, to the date of such payment, or (ii) the
 Adjustment Number times the per share amount of all cash and other property
 to be distributed in respect of the Common Stock upon such liquidation,
 dissolution or winding up of the Corporation. 

 
	
  

 	
  

 
	
  

 	
 (B)          In
 the event, however, that there are not sufficient assets available to permit
 payment in full of the Series A Liquidation Preference and the liquidation
 preferences of all other classes and series of stock of the Corporation, if
 any, that rank on a parity with the Series A Preferred Stock in respect
 thereof, then the assets available for such distribution shall be distributed
 ratably to the holders of the Series A Preferred Stock and the holders of
 such parity shares in proportion to their respective liquidation preferences.
 

 
	
  

 	
  

 
	
  

 	
 (C)          Neither
 the merger or consolidation of the Corporation into or with another entity
 nor the merger or consolidation of any other entity into or with the
 Corporation shall be deemed to be a liquidation, dissolution or winding up of
 the Corporation within the meaning of this Section 6. 

 



7.        Consolidation,
Merger, Etc. In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the outstanding shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to the Adjustment Number times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. 


8.        No
Redemption. Shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation. 


9.        Ranking.
The Series A Preferred Stock shall rank junior to all other series of the
Preferred Stock as to the payment of dividends and as to the distribution of
assets upon liquidation, dissolution or winding up, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters. 


A-4





10.          Amendment.
At any time that any shares of Series A Preferred Stock are outstanding, the
Certificate of Incorporation of the Corporation shall not be amended, by
merger, consolidation or otherwise, which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
of the outstanding shares of Series A Preferred Stock, voting separately as a
class. 


11.          Fractional
Shares. Series A Preferred Stock may be issued in fractions of a share that shall
entitle the holder, in proportion to such holder’s fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock. 


IN WITNESS
WHEREOF, the undersigned has executed this Certificate this 25th day
of February, 2010. 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 MATHSTAR,
 INC.

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  



 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 


A-5






EXHIBIT B


FORM OF RIGHT CERTIFICATE


Certificate
No. R-______ 


          NOT
EXERCISABLE AFTER FEBRUARY 25, 2015 OR SUCH EARLIER DATE AS PROVIDED BY THE
PLAN OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE. 


RIGHT
CERTIFICATE 


MATHSTAR, INC.



This certifies
that ____________________________ or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Tax Benefit
Preservation Plan and Rights Agreement, dated as of February 25, 2010, as the
same may be amended from time to time (the “Plan”), between MathStar, Inc., a
Delaware corporation (the “Company”), and Wells Fargo Bank, National
Association, as Rights Agent (the “Rights Agent”), to purchase from the Company
at any time after the Distribution Date (as such term is defined in the Plan)
and prior to 5:00 P.M., Eastern time, on February 25, 2015 at the office or
agency of the Rights Agent designated for such purpose, or of its successor as
Rights Agent, one one-millionth of a fully paid non-assessable share of Series
A Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the
Company at a purchase price of $8.50 per one one-millionth of a share of
Preferred Stock (the “Purchase Price”), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of one
one-millionths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of [__________ __, 20__], based on the
Preferred Stock as constituted at such date. As provided in the Plan, the
Purchase Price, the number of one one-millionths of a share of Preferred Stock
(or other securities or property) which may be purchased upon the exercise of
the Rights and the number of Rights evidenced by this Right Certificate are
subject to modification and adjustment upon the happening of certain events. 


This Right
Certificate is subject to all of the terms, provisions and conditions of the
Plan, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Plan reference is hereby made for
a full description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the holders of
the Right Certificates. Copies of the Plan are on file at the principal
executive 


B-1





offices of the
Company. The Company will mail to the holder of this Right Certificate a copy
of the Plan without charge after receipt of a written request therefor. 


This Right
Certificate, with or without other Right Certificates, upon surrender at the
office or agency of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of shares of Preferred Stock as the Rights evidenced by the Right Certificate
or Right Certificates surrendered shall have entitled such holder to purchase.
If this Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised. 


Subject to the
provisions of the Plan, the Rights evidenced by this Certificate (i) may be
redeemed by the Company at a redemption price of $0.001 per Right or (ii) may
be exchanged in whole or in part for shares of the Company’s Common Stock, par
value $0.01 per share, or shares of Preferred Stock. 


No fractional
shares of Common Stock or Preferred Stock will be issued upon the exercise or
exchange of any Right or Rights evidenced hereby (other than fractions of
Preferred Stock which are integral multiples of one one-millionths of a share
of Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment will be made, as
provided in the Plan. 


No holder of
this Right Certificate, as such, shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of the Preferred Stock or of any other
securities of the Company which may at any time be issuable on the exercise or
exchange hereof, nor shall anything contained in the Plan or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Plan) or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been exercised or
exchanged as provided in the Plan. 


This Right
Certificate shall not be valid or obligatory for any purpose until it shall
have been countersigned by the Rights Agent. 


WITNESS the
facsimile signature of the proper officers of the Company and its corporate
seal. Dated as of _________ __, 20__. 


MATHSTAR, INC.



	
  

 	
  

 	
  

 
	
 By: 

 	
  

 	
  

 
	
 Name:

 	
  

 
	
 Title:

 	
  

 


B-2





ATTEST: 


Name: 

Title: 


Countersigned:



WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Rights Agent 


By: 

Name: 

Title: 


Form of Reverse Side of Right Certificate 


FORM OF
ASSIGNMENT 


(To be
executed by the registered holder if such 

holder desires to transfer the Right Certificate) 


FOR VALUE
RECEIVED __________________________ hereby sells, assigns and transfers unto 


	
  

 	
  

 
	
 (Please
 print name and address of transferee)

 	
  

 



_______ Rights
represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
___________________________ Attorney, to transfer said Rights on the books of
the within-named Company, with full power of substitution. 


Dated: 


	
  

 	
  

 
	
 Signature

 	
  

 



Signature
Medallion Guaranteed: 


Signatures
must be Medallion Guaranteed by a bank, trust company, broker, dealer or other
eligible institution participating in a recognized Signature Medallion
Guarantee program. 


B-3





..............................................................................................................



(To be
completed) 


The
undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being sold, assigned or transferred to an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Plan). 


	
  

 	
  

 
	
 Signature

 	
  

 



Form of
Reverse Side of Right Certificate -- continued 


FORM OF
ELECTION TO PURCHASE 


(To be
executed if holder desires to exercise 

Rights represented by Right Certificate) 


TO MATHSTAR,
INC.: 


The
undersigned hereby irrevocably elects to exercise ________ Rights represented
by this Right Certificate to purchase the shares of Preferred Stock (or other
securities or property) issuable upon the exercise of such Rights and requests
that certificates representing such shares of Preferred Stock (or such other securities)
be issued in the name of: 


(Please print
name and address) 


If such number
of Rights shall not be all the Rights evidenced by this Right Certificate, a
new Right Certificate for the balance remaining of such Rights shall be
registered in the name of and delivered to: 


Please insert
social security 

or other identifying number 


(Please print
name and address) 


B-4









	
  

 	
  

 	
  

 
	
 Dated: 

 	
  

 	
  

 







	
  

 	
  

 
	
 Signature

 	
  

 



(Signature
must conform to holder specified on Right Certificate) 


Signature
Medallion Guaranteed: 


Signature must
be Medallion Guaranteed by a bank, trust company, broker, dealer or other
eligible institution participating in a recognized Signature Medallion
Guarantee program. 


Form of
Reverse Side of Right Certificate -- continued 


	
  

 	
  

 
	
 (To be
 completed)

 	
  

 



The
undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being sold, assigned or transferred to, an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Plan). 


	
  

 	
  

 
	
 Signature

 	
  

 






	
  

 	
  

 



NOTICE 


The signature
in the Form of Assignment or Form of Election to Purchase, as the case may be,
must conform to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever. 


In the event
the certification set forth above in the Form of Assignment or the Form of
Election to Purchase, as the case may be, is not completed, such Assignment or
Election to Purchase will not be honored. 


B-5





EXHIBIT C 


          UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE. 


SUMMARY OF
RIGHTS TO PURCHASE 

SHARES OF PREFERRED STOCK OF 

MATHSTAR, INC. 


Effective
February 25, 2010, the Board of Directors of MathStar, Inc. (the “Company”)
declared a dividend of one preferred share purchase right (a “Right”) for each
outstanding share of Common Stock, par value $0.01 per share (the “Common
Stock”). The dividend is payable on March 12, 2010 (the “Record Date”) to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-millionth of a share of Series A Preferred
Stock, par value $0.001per share, of the Company (the “Preferred Stock”) at a
price of $8.50 per one one-millionth of a share of Preferred Stock (the “Purchase
Price”), subject to adjustment. The description and terms of the Rights are set
forth in a Tax Benefit Preservation Plan and Rights Agreement, dated as of
February 25, 2010, as the same may be amended from time to time (the “Plan”),
between the Company and Wells Fargo Bank, National Association, as Rights Agent
(the “Rights Agent”). 


The Plan is
intended to help protect the Company’s tax net operating loss carryforwards and
have certain anti-takeover effects. The Rights may cause substantial dilution
to a person or group that attempts to acquire the Company on terms not approved
by the Board of Directors. Additionally, the Board of Directors may redeem the
Rights, as discussed more fully below. The Plan is intended to act as a
deterrent to any person or group from becoming or obtaining the right to become
a “5-percent shareholder” (as such term is used in Section 382 of the Internal
Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations
promulgated thereunder) or, in certain cases, increasing such person’s or
group’s ownership of Common Stock beyond a specified threshold, without the
approval of the Board of Directors. 


Until the
earlier to occur of (i) 10 business days following a public announcement that a
person or group of affiliated or associated persons (with certain exceptions,
an “Acquiring Person”) has acquired beneficial ownership of 4.99% or more of
the shares of Common Stock then outstanding or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group of affiliated persons becomes an Acquiring
Person) after the date of commencement of a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 4.99% or more of the then-outstanding shares of Common Stock (the
earlier of such dates being called the “Distribution Date”), the Rights will be
evidenced, with respect to any of the Common Stock certificates (or book entry
shares in respect of the Common Stock) outstanding as of the Record Date, by
such Common Stock certificate (or such book entry shares) together with this
Summary of Rights. 


C-1





The Plan
provides that, until the Distribution Date (or earlier expiration of the Rights),
the Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier expiration of the Rights), new Common Stock
certificates (or book entry shares in respect of the Common Stock) issued after
the Record Date upon transfer or new issuances of Common Stock will contain a
notation incorporating the Plan by reference and, with respect to any
uncertificated book entry shares issued after the Record Date, proper notice
will be provided that incorporates the Plan by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock (or book
entry shares of Common Stock) outstanding as of the Record Date, even without a
notation incorporating the Plan by reference (or such notice, in the case of
Book Entry shares), notice or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the shares of Common
Stock represented by such certificate or book entry shares, as the case may be.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights (“Right Certificates”) will be mailed to (or credited to
the account of) holders of record of the Common Stock as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights. 


The Rights are
not exercisable until the Distribution Date. The Rights will expire upon the
earliest of the close of business on February 25, 2015 (unless that date is
advanced or extended), the time at which the Rights are redeemed or exchanged
under the Plan, the repeal of Section 382 of the Code or any successor statute
if the Board determines that the Plan is no longer necessary for the
preservation of the Company’s tax benefits, or the beginning of a taxable year
of the Company to which the Board determines that no tax benefits may be
carried forward. 


The Purchase
Price payable, and the number of shares of Preferred Stock or other securities
or property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Preferred Stock, (ii)
upon the grant to holders of the Preferred Stock of certain rights or warrants
to subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less than the
then-current market price of the Preferred Stock or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends or dividends payable in Preferred
Stock) or of subscription rights or warrants (other than those referred to
above). 


The Rights are
also subject to adjustment in the event of a stock dividend on the Common Stock
payable in shares of Common Stock, or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the Distribution
Date. 


Shares of
Preferred Stock purchasable upon exercise of the Rights will not be redeemable.
Each share of Preferred Stock will be entitled, when, as and if declared, to a
minimum preferential dividend payment of the greater of (a) $1.00 per share,
and (b) an amount equal to 1,000,000 times the dividend declared per share of
Common Stock. In the event of liquidation, dissolution or winding up of the
Company, the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of the greater of (a) $1,000 per share (plus
any accrued but unpaid dividends), and (b) an amount equal to 1,000,000 times
the payment made per share of Common Stock. Each share of Preferred Stock will
have 1,000,000 votes, voting together with the Common Stock. Finally, in the
event of any merger, consolidation or other transaction in 


C-2





which
outstanding shares of Common Stock are converted or exchanged, each share of
Preferred Stock will be entitled to receive 1,000,000 times the amount received
per share of Common Stock. These rights are protected by customary
anti-dilution provisions. 


Because of the
nature of the Preferred Stock’s dividend, liquidation and voting rights, the
value of the one one-millionth interest in a share of Preferred Stock
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock. 


In the event
that any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become void), will thereafter
have the right to receive upon exercise of a Right and payment of the Purchase
Price, that number of shares of Common Stock having a market value of two times
the Purchase Price. 


At any time
after any person or group becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the voting power of the
outstanding shares of Common Stock, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, for shares of Common Stock or Preferred Stock (or a series
of the Company’s preferred stock having similar rights, preferences and
privileges), at an exchange ratio of one share of Common Stock, or a fractional
share of Preferred Stock (or of a share of a similar class or series of the
Company’s preferred stock having similar rights, preferences and privileges) of
equivalent value, per Right (subject to adjustment). 


With certain
exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional shares of Common Stock or Preferred Stock will be issued
(other than fractions which are integral multiples of one one-millionth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise. 


At any time
prior to the time an Acquiring Person becomes such, the Board of Directors may
redeem the Rights in whole, but not in part, at a price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of adoption of the Plan (the “Redemption
Price”). The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price. 


For so long as
the Rights are then redeemable, the Company may, except with respect to the
Redemption Price, amend the Plan in any manner. After the Rights are no longer
redeemable, the Company may, except with respect to the Redemption Price, amend
the Plan in any manner that does not adversely affect the interests of holders
of the Rights. 


C-3





Until a Right
is exercised or exchanged, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends. 


This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Plan, as the same may be amended from time to
time, which is hereby incorporated herein by reference. 


C-4