EXHIBIT
4.1


CATALYST
SEMICONDUCTOR


and


COMPUTERSHARE
TRUST COMPANY, N.A.


 


 


PREFERRED
SHARES RIGHTS AGREEMENT


Dated as
of December 21, 2006









 



TABLE OF
CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issuance of Rights Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Rights Certificates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

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

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Exercise of Rights; Exercise Price; Expiration Date
  of Rights

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Rights Certificates

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Reservation and Availability of Preferred Shares

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Record Date

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Adjustment of Exercise Price, Number of Shares or
  Number of Rights

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Exercise Price or Number of
  Shares

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Consolidation, Merger or Sale or Transfer of Assets
  or Earning Power

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Agreement of Rights Holders

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Rights Certificate Holder Not Deemed a Stockholder

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name of Rights
  Agent

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  31

  



 



 ii
 






 



 


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Issuance of New Rights Certificates

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Redemption

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Exchange

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
   

  	
  Notice of Certain Events

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Successors

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
   

  	
  Determinations and Actions by the Board of
  Directors, etc

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
   

  	
  Benefits of this Agreement

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Severability

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Governing Law

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Certificate of Designations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Rights Certificate

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Summary of Rights

  	
   

  	
   

  



 



 iii

















PREFERRED
SHARES RIGHTS AGREEMENT


This Preferred
Shares Rights Agreement is dated as of December 21, 2006, between Catalyst
Semiconductor, Inc., a Delaware corporation, (the “Company”),
and Computershare Trust Company, N.A. (the “Rights
Agent”).


On December 21,
2006, (the “Rights Dividend Declaration Date”),
the Board of Directors of the Company authorized and declared a dividend of one
Preferred Share Purchase Right (a “Right”)
for each Common Share (as hereinafter defined) of the Company outstanding as of
the Close of Business (as hereinafter defined) on January 18, 2007 (the “Record Date”), each Right
representing the right to purchase one one-thousandth (0.001) of a share of
Series A Participating Preferred Stock (as such number may be adjusted
pursuant to the provisions of this Agreement), having the rights, preferences
and privileges set forth in the form of Certificate of Designations of Rights,
Preferences and Privileges of Series A Participating Preferred Stock
attached hereto as Exhibit A, upon the terms and subject to the
conditions herein set forth, and further authorized and directed the issuance
of one Right (as such number may be adjusted pursuant to the provisions of this
Agreement) with respect to each Common Share 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), and in certain
circumstances after the Distribution Date.


NOW, THEREFORE, in
consideration of the promises and the mutual agreements herein set forth, the
parties hereby agree as follows:


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


(a)           “Acquiring Person”
shall mean any Person, who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the
Common Shares then outstanding, but shall not include the Company, any
Subsidiary of the Company or any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan.


Notwithstanding
the foregoing, no Person shall be deemed to be an Acquiring Person as the
result of an acquisition of Common Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of the
Company then outstanding; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of the Company
such Person does not 









 



beneficially own 15% or
more of the Common Shares of the Company then outstanding.  Notwithstanding the foregoing, (i) if
the Company’s Board of Directors determines in good faith that a Person who
would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it
beneficially owned a percentage of the Common Shares that would otherwise cause
such Person to be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), or (B) such Person was aware of the
extent of the Common Shares it beneficially owned but had no actual knowledge
of the consequences of such beneficial ownership under this Agreement) and
without any intention of changing or influencing control of the Company, and if
such Person divested or divests with reasonable promptness (as determined in
the discretion of the Board of Directors) a sufficient number of Common Shares
so that such Person would no longer be an “Acquiring Person,” as defined
pursuant to the foregoing provisions of this paragraph (a), then such Person
shall not be deemed to be or to have become an “Acquiring Person” for any
purposes of this Agreement including, without limitation Section 1(hh) hereof;
and (ii) if, as of the date hereof, any Person is the Beneficial Owner of
15% or more of the Common Shares outstanding, such Person shall not be or
become an “Acquiring Person,” as defined pursuant to the foregoing provisions
of this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial Owner of such
additional Common Shares, such Person is not then the Beneficial Owner of 15%
or more of the Common Shares then outstanding. In its determination of whether
a Person has divested or shall divest with reasonable promptness in accordance
with this paragraph (a), the Board of Directors may take into account such
factors as it deems relevant, which may in the discretion of the Board of
Directors, include the potential impact of the divestiture by such Person on
the Company’s stock price, any liability of such Person which may result from
such divestment arising in connection with Section 16 of the Exchange Act, and
any undertakings by such Person, which the Board of Directors deems reasonably
necessary to ensure compliance with this paragraph (a).


(b)           “Adjustment Fraction”
shall have the meaning set forth in Section 11(a)(i) hereof.


(c)           “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
of this Agreement.


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


(i)            which
such Person or any of such Person’s Affiliates or Associates beneficially owns,
directly or indirectly, for purposes of Section 13(d) of the Exchange Act
and Rule 13d-3 thereunder (or any comparable or successor law or
regulation);



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(ii)           which
such Person or any of such Person’s Affiliates or Associates has (A) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed pursuant to this Section 1(d)(ii)(A) to
be the Beneficial Owner of, or to beneficially own, (1) securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person’s Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (2) securities which
a Person or any of such Person’s Affiliates or Associates may be deemed to have
the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of
the Company prior to there being an Acquiring Person; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security under this Section 1(d)(ii)(B) if the agreement,
arrangement or understanding to vote such security (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 of the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable
or successor report); or


(iii)          which
are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding,
whether or not in writing (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Company; provided, however,
that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another
officer or director of the Company solely by reason of actions undertaken by
such persons in their capacity as officers or directors of the Company or
(y) the Beneficial Owner of securities held of record by the trustee of
any employee benefit plan of the Company or any Subsidiary of the Company for
the benefit of any employee of the Company or any Subsidiary of the Company,
other than the officer or director, by reason of any influence that such
officer or director may have over the voting of the securities held in the
plan.


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


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



 3
 






 



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


(h)           “Common Shares” when
used with reference to the Company shall mean the shares of Common Stock of the
Company, par value at $0.001 per share. 
Common Shares when used with reference to any Person other than the
Company shall mean the capital stock (or 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.


(i)            “Company” shall mean
Company, a Delaware corporation, subject to the terms of
Section 13(a)(iii)(C) hereof.


(j)            “Current Per Share Market Price”
of any security (a “Security” for purposes of this definition), for all
computations other than those made pursuant to Section 11(a)(iii) hereof,
shall mean the average of the daily closing prices per share of such Security
for the thirty (30) consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Per Share Market Price of any Security on any date shall be
deemed to be the average of the daily closing prices per share of such Security
for the ten (10) consecutive Trading Days 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 (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares
or (ii) any subdivision, combination or reclassification of such Security,
and prior to the expiration of the applicable thirty (30) Trading Day or ten
(10) Trading Day period, 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 average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, 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 of Directors of the Company.  If on any such date no market maker is making
a market in the Security, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be
used.  If the Preferred Shares are not
publicly traded, the Current Per Share Market Price of the Preferred Shares
shall be conclusively deemed to be (x) the Current Per Share Market Price
of the Common Shares as determined pursuant to this Section 1(j), as
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof, multiplied by (y) 1,000.  If the Security is not publicly held or so
listed or traded, Current Per Share Market Price shall mean the fair value per
share as 



 4
 






 



determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.


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


(l)            “Distribution Date”
shall mean the earlier of (i) the Close of Business on the tenth (10th) Business day (or such later
date as may be determined by action of the Company’s Board of Directors) after
the Shares Acquisition Date (or, if the tenth (10th) business day after the Shares
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date) or (ii) the Close of Business on the tenth (10th) Business Day (or such later date as may
be determined by action of the Company’s Board of Directors) after the date
that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if, assuming the
successful consummation thereof, such Person would be an Acquiring Person.


(m)          “Equivalent Shares”
shall mean Preferred Shares and any other class or series of capital stock
of the Company which is entitled to the same rights, privileges and
preferences as the Preferred Shares.


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


(o)           “Exchange Ratio”
shall have the meaning set forth in Section 24(a) hereof.


(p)           “Exercise Price”
shall have the meaning set forth in Section 4(a) hereof.


(q)           “Expiration Date”
shall mean the earliest to occur of: (i) the Close of Business on the
Final Expiration Date, (ii) the Redemption Date, or (iii) the time at
which the Board of Directors orders the exchange of the Rights as provided in
Section 24 hereof.


(r)            “Final Expiration Date”
shall mean December 31, 2016.


(s)           “Nasdaq”  shall mean
The Nasdaq Stock Market, Inc.


(t)            “Person” shall mean
any individual, firm, corporation or other entity, and shall include any
successor (by merger or otherwise) of such entity.


(u)           “Post-Event Transferee”
shall have the meaning set forth in Section 7(e) hereof.



 5
 






 



(v)           “Preferred Shares”
shall mean shares of Series A Participating Preferred Stock, par value $0.001
per share, of the Company.


(w)          “Pre-Event Transferee”
shall have the meaning set forth in Section 7(e) hereof.


(x)            “Principal Party”  shall
have the meaning set forth in Section 13(b) hereof.


(y)           “Record Date” shall
have the meaning set forth in the recitals at the beginning of this Agreement.


(z)            “Redemption Date”
shall have the meaning set forth in Section 23(a) hereof.


(aa)         “Redemption Price”
shall have the meaning set forth in Section 23(a) hereof.


(bb)         “Rights Agent” shall
mean (i) Computershare Trust Company, N.A., (ii) its successor or
replacement as provided in Sections 19 and 21 hereof or (iii) any
additional Person appointed pursuant to Section 2 hereof.


(cc)         “Rights Certificate”  shall
mean a certificate substantially in the form attached hereto as Exhibit B.


(dd)         “Rights Dividend Declaration Date”
shall have the meaning set forth in the recitals at the beginning of this
Agreement.


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


(ff)           “Section 13 Event”
shall mean any event described in clause (i), (ii) or (iii) of
Section 13(a) hereof.


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


(hh)         “Shares 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
that an Acquiring Person has become such; provided that, if such Person
is determined not to have become an Acquiring Person pursuant to
Section 1(a) hereof, then no Shares Acquisition Date shall be deemed to
have occurred by virtue of such event.


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



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(jj)           “Subsidiary” of any
Person shall mean any corporation or other entity of which an amount of voting
securities sufficient to elect a majority of the directors or Persons having
similar authority of such corporation or other entity is beneficially owned,
directly or indirectly, by such Person, or any corporation or other entity
otherwise controlled by such Person.


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


(ll)           “Summary of Rights”  shall
mean a summary of this Agreement substantially in the form attached hereto as
Exhibit C.


(mm)       “Total Exercise Price”
shall have the meaning set forth in Section 4(a) hereof.


(nn)         “Trading Day” shall
mean a day on which the principal national securities exchange on which a
referenced security is listed or admitted to trading is open for the
transaction of business or, if a referenced security is not listed or admitted
to trading on any national securities exchange, a Business Day.


(oo)         A
“Triggering Event”
shall be deemed to have occurred upon any Person becoming an Acquiring Person.


Section 2.               Appointment of
Rights Agent.  The Company hereby appoints the Rights Agent to act as
agent for the Company and the holders of the Rights (who, in accordance with
Section 3 hereof, shall prior to the Distribution Date also be the holders
of the Common Shares) 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 co-Rights Agent.


Section 3.               Issuance of
Rights Certificates.


(a)           Until
the Distribution Date, (i) the Rights will be evidenced (subject to the
provisions of Sections 3(b) and 3(c) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights
Certificates will be transferable only in connection with the transfer of
Common Shares.  Until the earlier of the Distribution Date or the Expiration
Date, the surrender for transfer of certificates for Common Shares shall also
constitute the surrender for transfer of the Rights associated with the Common
Shares represented thereby.  As 



 7
 






 



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 Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate evidencing one Right for each
Common Share so held, subject to adjustment as provided herein.  In the event that an adjustment in the number
of Rights per Common Share has been made pursuant to Section 11 hereof,
then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights (in accordance with Section 14(a) hereof).  As of the Distribution Date, the Rights will
be evidenced solely by such Rights Certificates and may be transferred by the
transfer of the Rights Certificates as permitted hereby, separately and apart
from any transfer of Common Shares, and the holders of such Rights Certificates
as listed in the records of the Company or any transfer agent or registrar for
the Rights shall be the record holders thereof.


(b)           On
the Record Date or as soon as practicable thereafter, the Company will send a
copy of the Summary of Rights by first-class, postage-prepaid mail, to each
record holder of Common Shares as of the Close of Business on the Record Date,
at the address of such holder shown on the records of the Company’s transfer
agent and registrar.  With respect to certificates for Common Shares
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 together with the Summary of Rights.


(c)           Unless
the Board of Directors by resolution adopted at or before the time of the
issuance of any Common Shares after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date (or, in certain circumstances
provided in Section 22 hereof, after the Distribution Date) specifies to
the contrary, Rights shall be issued in respect of all Common Shares that are
so issued, and Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:


THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE
HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
CATALYST SEMICONDUCTOR, INC. AND COMPUTERSHARE TRUST COMPANY, N.A., AS THE
RIGHTS AGENT, DATED AS OF DECEMBER 21, 2006 (THE “RIGHTS AGREEMENT”), THE TERMS
OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF CATALYST SEMICONDUCTOR, INC. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL
BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF
THE RIGHTS AGREEMENT 



 8
 






 



WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR.  UNDER CERTAIN CIRCUMSTANCES
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO
IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY
OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND
VOID.


With respect to such
certificates containing the foregoing legend, until the earlier of the
Distribution Date or the Expiration Date, the Rights associated with the Common
Shares represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.


(d)           In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.


Section 4.               Form of Rights
Certificates.


(a)           The
Rights Certificates (and the forms of election to purchase Common Shares and of
assignment to be printed on the reverse thereof) shall be substantially in the
form of 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 are not inconsistent with the provisions
of this Agreement, 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 a national market system, on which the
Rights may from time to time be listed or included, or to conform to
usage.  Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date (or in the case of Rights issued with respect to Common Shares
issued by the Company after the Record Date, as of the date of issuance of such
Common Shares) and on their face shall entitle the holders thereof to purchase
such number of one-thousandths (0.001) of a Preferred Share as shall be set
forth therein at the price set forth therein (such exercise price per one
one-thousandth (0.001) of a Preferred Share being hereinafter referred to as
the “Exercise Price”
and the aggregate Exercise Price of all Preferred Shares issuable upon exercise
of one Right being hereinafter referred to as the “Total Exercise Price”),
but the number and type of securities purchasable upon the exercise of
each Right and the Exercise Price shall be subject to adjustment as
provided herein.


(b)           Any
Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by:  (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a Post-Event Transferee,
(iii) a Pre-Event Transferee or (iv) any 



 9
 






 



subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a
Pre-Event Transferee, either directly or through one or more intermediate
transferees, and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of
any other Rights Certificate referred to in this sentence, shall contain (to
the extent feasible) the following legend:


THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). 
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
THE RIGHTS AGREEMENT.


Section 5.               Countersignature
and Registration.


(a)           The
Rights Certificates shall be executed on behalf of the Company by its Chairman
of the Board, its Chief Executive Officer, its Chief Financial Officer, its
President or any Vice President, either manually or by facsimile signature, and
by the Secretary or an Assistant Secretary of the Company, either manually or
by facsimile signature, and shall have affixed thereto the Company’s seal (if
any) or a facsimile thereof.  The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned.  In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights 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
Rights Certificates on behalf of the Company had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.


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



 10
















 


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


(a)           Subject
to the provisions of Sections 7(e), 14 and 24 hereof, at any time after
the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Rights Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase.  Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the office of the Rights Agent designated for such
purpose.  Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Rights Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.  Thereupon the
Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof,
countersign and deliver to the person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested.  The Company may require payment from the
registered holder 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 Rights Certificates.


(b)           Upon
receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
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 Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.


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


(a)           Subject
to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the Close of Business on the Expiration Date by
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office of
the Rights Agent designated for such purpose, together with payment of the
Exercise Price for each one-thousandth (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) as to which the Rights are exercised.



 11
 






 



(b)           The
Exercise Price for each one-thousandth (0.001) of a Preferred Share issuable
pursuant to the exercise of a Right shall initially be $18.00, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.


(c)           Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of the Exercise
Price for the number of one-thousandths (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) to be purchased and an amount equal to any applicable transfer tax
required to be paid by the holder of such Rights Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i) (A) requisition from any transfer agent
of the Preferred Shares (or make available, if the Rights Agent is the transfer
agent for the Preferred Shares) a certificate or certificates for the number of
one-thousandths (0.001) of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests or (B) if the Company shall have elected to deposit the
total number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be)
issuable upon exercise of the Rights hereunder with a depository agent,
requisition from the depository agent depository receipts representing such
number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) as
are to be purchased (in which case certificates for the Preferred Shares (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) represented by such receipts shall be deposited by the transfer
agent with the depository agent) and the Company hereby directs the depository
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 14 hereof, (iii) after receipt of
such certificates or depository receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Rights Certificate.  The payment of the
Exercise Price (as such amount may be reduced (including to zero) pursuant to
Section 11(a)(iii) hereof) and an amount equal to any applicable transfer
tax required to be paid by the holder of such Rights Certificate in accordance
with Section 9(e) hereof, may be made in cash or by certified bank check,
cashier’s check or bank draft payable to the order of the Company.  In the event that the Company is obligated to
issue securities of the Company other than Preferred Shares, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate.


(d)           In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Rights Certificate or to his or her duly
authorized assigns, subject to the provisions of Section 14 hereof.



 12
 






 



(e)           Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Triggering Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such (a “Post-Event Transferee”),
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Company’s
Board of Directors has determined is part of a plan, arrangement or under­standing
which has as a primary purpose or effect the avoidance of this
Section 7(e) (a “Pre-Event
Transferee”) or (iv) any subsequent transferee receiving
transferred Rights from a Post-Event Transferee or a Pre-Event Transferee,
either directly or through one or more intermediate transferees, shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person’s Affiliates, Associates or transferees hereunder.


(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in
Section 7 unless such registered holder shall, in addition to having
complied with the requirements of subsection 7(a), have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise and
(ii) provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request.


Section 8.               Cancellation and
Destruction of Rights Certificates.  All Rights 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 Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. 
The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof.  The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate evidencing the destruction thereof to
the Company.



 13
 






 



Section 9.               Reservation and
Availability of Preferred Shares.


(a)           The
Company covenants and agrees that it will use its best efforts to cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
not reserved for another purpose (and, following the occurrence of a Triggering
Event, out of its authorized and unissued Common Shares and/or other
securities), the number of Preferred Shares (and, following the occurrence of
the Triggering Event, Common Shares and/or other securities) that will be
sufficient to permit the exercise in full of all outstanding Rights.


(b)           If
the Company shall hereafter list any of its Preferred Shares on a national
securities exchange, then so long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities) issuable
and deliverable upon exercise of the Rights may be listed on such exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable (but only to the extent that it is reasonably likely
that the Rights will be exercised), all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.


(c)           The
Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Triggering Event in
which the consideration to be delivered by the Company upon exercise of the
Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Securities Act with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon
as practicable after such filing and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and
(B) the date of expiration of the Rights.  The Company may
temporarily suspend, for a period not to exceed ninety (90) days after the date
set forth in clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective.  Upon any such suspension, the Company shall
issue a public announcement stating, and notify the Rights Agent, that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement and notification to the Rights Agent at such time as the
suspension is no longer in effect.  The
Company will also take such action as may be appropriate under, or to ensure compliance
with, the securities or “blue sky” laws of the various states in connection
with the exercisability of the Rights. 
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction, unless the requisite
qualification in such jurisdiction shall have been obtained, or an exemption
therefrom shall be available, and until a registration statement has been
declared and remains effective.


(d)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (or other securities of the
Company) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such securities (subject to 



 14
 






 



payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.


(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 original issuance or delivery of the Rights Certificates or of
any Preferred Shares (or other securities of the Company) upon the exercise of
Rights.  The Company shall not, however, be required to pay any transfer
tax which may be payable in respect of any transfer or delivery of Rights Certificates
to a person other than, or the issuance or delivery of certificates or
depository receipts for the Preferred Shares (or other securities of the
Company) in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depository receipts for Preferred Shares (or other
securities of the Company) upon the exercise of any Rights until any such tax
shall have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company’s satisfaction that no such tax is due.


Section 10.             Record Date. 
Each Person in whose name any certificate for a number of one-thousandths
(0.001) of a Preferred Share (or other securities of the Company) is issued
upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of Preferred Shares (or other securities of the
Company) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Total Exercise Price with respect to which the Rights have
been exercised (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
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 the transfer books of the
Company are open.  Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not
be entitled to any rights of a holder of Preferred Shares (or other securities
of the Company) for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.


Section 11.             Adjustment of
Exercise Price, Number of Shares or Number of Rights.  The Exercise
Price, the number and kind of shares or other property covered by each Right
and the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.


(a)           (i)            Anything in this
Agreement to the contrary notwithstanding, in the event that the Company shall
at any time after the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
(by reverse stock split or otherwise) into a smaller number of Preferred
Shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as 



 15
 






 



otherwise
provided in this Section 11 and Section 7(e) hereof: (1) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall
be adjusted so that the Exercise Price thereafter shall equal the result
obtained by dividing the Exercise Price in effect immediately prior to such
time by a fraction (the “Adjustment
Fraction”), the numerator of which shall be the total number of
Preferred Shares (or shares of capital stock issued in such reclassification of
the Preferred Shares) outstanding immediately following such time and the
denominator of which shall be the total number of Preferred Shares outstanding
immediately prior to such time; 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 such Right; and (2) the number of
one-thousandths (0.001) of a Preferred Share (or share of such other capital
stock) issuable upon the exercise of each Right shall equal the number of
one-thousandths (0.001) of a Preferred Share (or share of such other capital
stock) as was issuable upon exercise of a Right immediately prior to the
occurrence of the event described in clauses (A)-(D) of this
Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however,
that, no such adjustment shall be made pursuant to this Section 11(a)(i)
to the extent that there shall have simultaneously occurred an event described
in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder.  Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this
Section 11(a)(i) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as one Common
Share has associated with it immediately following the adjustment made pursuant
to this Section 11(a)(i).


(ii)   Subject
to Section 24 of this Agreement, in the event that a Triggering Event
shall have occurred, then promptly following such Triggering Event each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive for each Right, upon exercise thereof in accordance
with the terms of this Agreement and payment of the Exercise Price in effect
immediately prior to the occurrence of the Triggering Event, in lieu of a number
of one-thousandths (0.001) of a Preferred Share, such number of Common Shares
of the Company as shall equal the quotient obtained by dividing
(A) the product obtained by multiplying (1) the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event by
(2) the number of one-thousandths (0.001) of a Preferred Share for which a
Right was exercisable (or would have been exercisable if the Distribution Date
had occurred) immediately prior to the first occurrence of a Triggering Event, by
(B) fifty percent (50%) of the Current Per Share Market Price for
Common Shares on the date of occurrence of the Triggering Event; provided,
however, that the Exercise Price and the number of Common Shares of the
Company so receivable upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(e) hereof to
reflect any events occurring in respect of the Common Shares of the Company
after the occurrence of the Triggering Event.


(iii)  In
lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof,
the Company may, if the Company’s Board of Directors determines that such
action is necessary or appropriate and not contrary to the interest of holders
of Rights and, in the event that 



 16
 






 



the number of Common
Shares which are authorized by the Company’s Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights,
or if any necessary regulatory approval for such issuance has not been obtained
by the Company, the Company shall: 
(A) determine the excess of (1) the value of the Common Shares
issuable upon the exercise of a Right (the “Current Value”) over (2) the Exercise Price (such
excess, the “Spread”) and
(B) with respect to each Right, make adequate provision to substitute for
such Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Exercise Price, (3) other equity securities of the
Company (including, without limitation, shares or units of shares of any series
of preferred stock which the Company’s Board of Directors has deemed to have
the same value as Common Shares (such shares or units of shares of preferred
stock are herein called “Common
Stock Equivalents”)), except to the extent that the Company has
not obtained any necessary stockholder or regulatory approval for such
issuance, (4) debt securities of the Company, except to the extent that
the Company has not obtained any necessary stockholder or regulatory approval
for such issuance, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Company’s Board of Directors based
upon the advice of a nationally recognized investment banking firm selected by
the Company’s Board of Directors; provided, however, that if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a Triggering Event and (y) the date on
which the Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Exercise Price, Common Shares
(to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance,
and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread.  If the Company’s
Board of Directors shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above 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 or take
action to obtain such regulatory approval (such period, as it may be extended,
the “Substitution Period”).  To the extent that the Company
determines that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) 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, to take any action to obtain any required
regulatory approval and/or to decide the appropriate form of distribution to be
made pursuant to such first 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 Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of
any Common Stock Equivalent shall be deemed to have the same value as the
Common Shares on such date.



 17
 






 



(b)           In
case the Company shall, at any time after the date of this Agreement, fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling such holders (for a period expiring within
forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record
date, plus the number of Preferred Shares or Equivalent Shares, as the case may
be, which the aggregate offering price of the total number of Preferred Shares
or Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, 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 Company’s
Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights.  Preferred Shares
and Equivalent 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 Exercise Price shall be adjusted to be the
Exercise Price which would then be in effect if such record date had not been
fixed.


(c)           In
case the Company shall, at any time after the date of this Agreement, fix a
record date for the making of a distribution to all holders of the Preferred
Shares or of any class or series of Equivalent Shares (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 quarterly cash dividend, if any, or a dividend
payable in Preferred Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), then, in each such case,
the Exercise Price to be in effect after such record date shall be determined
by multiplying the Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the Current Per Share
Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to 



 18
 






 



a Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Preferred Share or Equivalent
Share on such record date; 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.  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 Exercise Price shall be adjusted to be the Exercise Price
which would have been in effect if such record date had not been fixed.


(d)           Anything
herein to the contrary notwithstanding, no adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) of the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(d) are not
required to be made 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
ten-thousandth (0.0001) of a Common Share or other share or one
hundred-thousandth (0.00001) of a Preferred Share, as the case may be.  Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three (3) years from the date
of the transaction which requires such adjustment or (ii) the Expiration
Date.


(e)           If
as a result of an adjustment made pursuant to Section 11(a) or Section 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Preferred Shares, thereafter the
number of such other shares so receivable upon exercise of any Right and, if
required, the Exercise Price thereof, 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 Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares 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 Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of one-thousandths (0.001) of a Preferred
Share 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(h), upon each adjustment of the Exercise Price as a result of
the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth (0.00001) of a share)
obtained by (i) multiplying (x) the number of Preferred Shares
covered by a Right immediately prior to this adjustment, by (y) the
Exercise Price in effect immediately prior to such adjustment of the Exercise 



 19
 






 



Price, and
(ii) dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price.


(h)           The
Company may elect on or after the date of any adjustment of the Exercise Price
as a result of the calculations made in Section 11(b) or (c) to adjust the
number of Rights, in substitution for any adjustment in the number of Preferred
Shares 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-thousandths (0.001) of a Preferred Share 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 one hundred-thousandth (0.00001)) obtained by dividing
the Exercise Price in effect immediately prior to adjustment of the Exercise
Price by the Exercise Price in effect immediately after adjustment of the
Exercise 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 Exercise Price is adjusted or any day thereafter,
but, if any Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(h),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 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 Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.  Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Exercise Price) and
shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.


(i)            Irrespective
of any adjustment or change in the Exercise Price or the number of Preferred
Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Exercise Price
per one one-thousandth (0.001) of a Preferred Share and the number of one-thousandths
(0.001) of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.


(j)            Before
taking any action that would cause an adjustment reducing the Exercise Price
below the par or stated value, if any, of the number of one-thousandths (0.001)
of a Preferred Share 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 as fully paid
and nonassessable shares such number of one-thousandths (0.001) of a Preferred
Share at such adjusted Exercise Price.



 20
 






 



(k)           In
any case in which this Section 11 shall require that an adjustment in the
Exercise 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 the issuing to
the holder of any Right exercised after such record date of the number of
one-thousandths (0.001) of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths (0.001) of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Exercise 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 (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.


(l)            Anything
in this Section 11 to the contrary notwithstanding, prior to the
Distribution Date, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for
cash of any Preferred or Common Shares at less than the current market price,
(iii) issuance wholly for cash of Preferred or Common Shares or securities
which by their terms are convertible into or exchangeable for Preferred or
Common Shares, (iv) stock dividends or (v) issuance of rights, options
or warrants referred to in this Section 11, hereafter made by the Company
to holders of its Preferred or Common Shares shall not be taxable to such
stockholders.


(m)          The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Sections 23, 24 or 27 hereof, take (or permit to be
taken) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.


(n)           In
the event that the Company shall at any time after the date of this Agreement
(A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such event, except as
otherwise provided in this Section 11(a) and Section 7(e) hereof:
(1) each Common Share (or shares of capital stock issued in such
reclassification of the Common Shares) outstanding immediately following such
time shall have associated with it the number of Rights as were associated with
one Common Share immediately prior to the occurrence of the event described in
clauses (A)-(D) above; (2) the Exercise Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that the Exercise Price
thereafter shall equal the result obtained by multiplying the Exercise Price in
effect immediately prior to such time by a fraction, the numerator of which
shall be the total number of Common Shares outstanding immediately prior to the
event described in clauses (A)-(D) above, and the denominator of which 



 21
 






 



shall be the
total number of Common Shares outstanding immediately after such event; 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 such Right; and
(3) the number of one-thousandths (0.001) of a Preferred Share (or shares
of such other capital stock) issuable upon the exercise of each Right
outstanding after such event shall equal the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as were issuable
with respect to one Right immediately prior to such event.  Each Common
Share that shall become outstanding after an adjustment has been made pursuant
to this Section 11(n) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as one Common
Share has associated with it immediately following the adjustment made pursuant
to this Section 11(n).  If an event
occurs which would require an adjustment under both this Section 11(n) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.


Section 12.             Certificate of
Adjusted Exercise Price or Number of Shares.  Whenever an adjustment
is made as provided in Sections 11 and 13 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 Preferred Shares a copy
of such certificate and (c) mail a brief summary thereof to each holder of
a Rights Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing sentence, the
failure of the Company to make such certification or give such notice shall not
affect the validity of such adjustment or the force or effect of the
requirement for such adjustment.  The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.


Section 13.             Consolidation,
Merger or Sale or Transfer of Assets or Earning Power.


(a)           In
the event that, following a Triggering Event, directly or indirectly:


(i)            the
Company shall consolidate with, or merge with and into, any other Person (other
than a wholly-owned Subsidiary of the Company in a transaction the principal
purpose of which is to change the state of incorporation of the Company and
which complies with Section 11(m) hereof);


(ii)           any
Person shall consolidate with the Company, or merge with and into the Company
and the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such merger, all or part of the
Common Shares shall be changed into or exchanged for stock or other securities
of any other person (or the Company); or


(iii)          the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one or more transactions, assets or
earning power aggregating fifty percent (50%) or more of the assets or earning
power of the Company and its 



 22
 






 



Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company or
one or more of its wholly owned Subsidiaries in one or more transactions, each
of which individually (and together) complies with Section 11(m) hereof),


then, concurrent
with and in each such case,


(A)  each holder of a Right (except as provided in
Section 7(e) hereof) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance
with the terms of this Agreement, such number of validly authorized and issued,
fully paid, nonassessable and freely tradeable Common Shares of the Principal
Party (as hereinafter defined), free of any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result obtained
by dividing such Total Exercise Price by an amount equal to fifty percent (50%)
of the Current Per Share Market Price of the Common Shares of such Principal
Party on the date of consummation of such Section 13 Event, provided,
however, that the Exercise Price and the number of Common Shares of such
Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(e) hereof;


(B)   such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement;


(C)   the term “Company” shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;


(D)  such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and


(E)   upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Total Exercise
Price as provided in this Section 13(a), such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such Right
pursuant to this Section 13(a), and such Principal Party shall take such
steps (including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with
the terms hereof for such cash, shares, rights, warrants and other property.


(F)   For purposes hereof, the “earning power” of the
Company and its Subsidiaries shall be determined in good faith by the Company’s
Board of Directors on the basis of 



 23
 






 



the operating income of each business operated by the Company and its
Subsidiaries during the three fiscal years preceding the date of such
determination (or, in the case of any business not operated by the Company or
any Subsidiary during three full fiscal years preceding such date, during the
period such business was operated by the Company or any Subsidiary).


(b)           For
purposes of this Agreement, the term “Principal Party” shall mean:


(i)            in
the case of any transaction described in clause (i) or (ii) of
Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the
other party to the merger, if such Person survives said merger, or, if there is
more than one such Person, the Person the Common Shares of which have the
greatest aggregate market value of shares outstanding or (y) if the Person
that is the other party to the merger does not survive the merger, the Person
that does survive the merger (including the Company if it survives) or
(z) the Person resulting from the consolidation; and


(ii)           in
the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets
or earning power cannot be determined, whichever of such Persons is the issuer
of Common Shares having the greatest aggregate market value of shares
outstanding; provided that in any such case described in the foregoing
clause (b)(i) or (b)(ii), if the Common Shares of such Person are not at such
time or have not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, then (1) if such
Person is a direct or indirect Subsidiary of another Person the Common Shares
of which are and have been so registered, the term “Principal Party” shall
refer to such other Person, or (2) if such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Shares of which are
and have been so registered, the term “Principal Party” shall refer to
whichever of such Persons is the issuer of Common Shares having the greatest
aggregate market value of shares outstanding, or (3) if such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly by the same Person, the rules set
forth in clauses (1) and (2) above shall apply to each of the owners having an
interest in the venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in
the same ratio as its interest in such Person bears to the total of such
interests.


(c)           The
Company shall not consummate any Section 13 Event unless the Principal
Party shall have a sufficient number of authorized Common Shares that have not
been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered



 24
















 


to the Rights
Agent a supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance
with Sections 13(a) and 13(b) hereof, that all rights of first refusal or
preemptive rights in respect of the issuance of Common Shares of such Principal
Party upon exercise of outstanding Rights have been waived, that there are no
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such
Principal Party under this Agreement, and further providing that, as soon as
practicable after the date of such Section 13 Event, such Principal Party
will:


(i)            prepare
and file a registration statement under the Securities Act with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and use its best
efforts to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date, and similarly comply with applicable state securities
laws;


(ii)           use
its best efforts to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for quotation on Nasdaq and
list (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on Nasdaq; and


(iii)          deliver
to holders of the Rights historical financial statements for such Principal
Party which comply in all respects with the requirements for registration on
Form 10 (or any successor form) under the Exchange Act.


In the event that
at any time after the occurrence of a Triggering Event some or all of the
Rights shall not have been exercised at the time of a transaction described in
this Section 13, the Rights which have not theretofore been exercised
shall thereafter be exercisable in the manner described in Section 13(a)
(without taking into account any prior adjustment required by
Section 11(a)(ii)).


(d)           In
case the “Principal Party” for purposes of Section 13(b) hereof has
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party
to issue (other than to holders of Rights pursuant to Section 13 hereof),
in connection with, or as a consequence of, the consummation of a
Section 13 Event, Common Shares or Equivalent Shares of such Principal
Party at less than the then Current Per Share Market Price thereof or
securities exercisable for, or convertible into, Common Shares or Equivalent
Shares of such Principal Party at less than such then Current Per Share Market
Price, or (ii) providing for any special payment, tax or similar provision
in connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13 hereof, then, in such event, the
Company hereby agrees with each holder of Rights that it shall not consummate
any such transaction unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal



 25
 






 



Party shall
have been canceled, waived or amended, or that the authorized securities shall
be redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.


(e)           The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, effect or permit to occur any Section 13 Event, if
(i) at the time or immediately after such Section 13 Event there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the
stockholders of the Person who constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates or (iii) the form or nature of organization of the Principal
Party would preclude or limit the exercisability of the Rights.


(f)            The
provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers.


Section 14.             Fractional Rights
and Fractional Shares.


(a)           The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights.  In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
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 14(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, as
determined pursuant to the second sentence of Section 1(j) hereof.


(b)           The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions that are integral multiples of one one-thousandth (0.001) of a
Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth (0.001) of a Preferred Share). 
Interests in fractions of Preferred Shares in integral multiples of one
one-thousandth (0.001) of a Preferred Share may, at the election of the
Company, be evidenced by depository receipts, pursuant to an appropriate
agreement between the Company and a depository selected by it; provided,
that such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depository receipts.  In lieu of
fractional Preferred Shares that are not integral multiples of one
one-thousandth (0.001) of a Preferred Share, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a Preferred Share.  For
purposes of this Section 14(b), the current market value of a Preferred
Share shall be (x) one



 26
 






 



thousand
multiplied by (y) the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(j) hereof) for the Trading
Day immediately prior to the date of such exercise.


(c)           The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares upon the
exercise or exchange of Rights.  In lieu of such fractional Common Shares,
the Company shall pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Common Share.  For purposes of this Section 14(c), the
current market value of a Common Share shall be the closing price of a Common
Share (as determined pursuant to the second sentence of Section 1(j)
hereof) for the Trading Day immediately prior to the date of such exercise.


(d)           The
holder of a Right by the acceptance of the Right expressly waives his or her
right to receive any fractional Rights or any fractional shares (other than
fractions that are integral multiples of one one-thousandth (0.001) of a
Preferred Share) upon exercise of a Right.


Section 15.             Rights of Action. 
All rights of action in respect of this Agreement, excepting the rights of
action given to the Rights Agent pursuant to Section 18 hereof, are
vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Shares);
and any registered holder of any Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in
respect of, his or her right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement.  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 Agreement 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
Agreement.


Section 16.             Agreement of
Rights 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 be transferable only in connection
with the transfer of the Common Shares;


(b)           after
the Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed; and



 27
 






 



(c)           subject
to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may
deem and treat the person in whose name the Rights Certificate (or, prior
to the Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.


Section 17.             Rights Certificate
Holder Not Deemed a Stockholder.  No holder, as such, of any Rights
Certificate shall be entitled to vote, receive dividends or be deemed for any
purpose to be the holder of the Preferred Shares or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights Certificate
be construed to confer upon the holder of any Rights 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 specifically provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.


Section 18.             Concerning the
Rights Agent.


(a)           The
Company agrees to pay to the Rights Agent such compensation as shall be agreed
to in writing between the Company and the Rights Agent for all services
rendered by it hereunder and, and from time to time, on demand of the Rights
Agent, its reasonable expenses and counsel fees and expenses and other
disbursements incurred in the administration and execution of this Agreement
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 Agreement,
including the costs and expenses of defending against any claim of liability in
the premises.  The provisions of this
Section 18 (a) shall survive the termination of this Agreement.


(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 Agreement in reliance upon any Rights Certificate or
certificate for the Preferred Shares or Common Shares or for 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 20 hereof.



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Section 19.             Merger or
Consolidation or Change of Name of Rights Agent.


(a)           Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof.  In case at the time such successor Rights Agent shall succeed to
the agency created by this Agreement, any of the Rights Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights 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 Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.


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


Section 20.             Duties of Rights
Agent.  The Rights Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Rights 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 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 Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
Current Per Share Market Price) 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 any one of
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such



 29
 






 



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 Agreement 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 Agreement or in the Rights 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 Agreement 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 Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any change in the exercisability of the Rights or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 or 24, 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 Rights Certificates
after receipt by the Rights Agent 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 Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
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 Agreement.


(g)           The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Secretary or any Assistant Secretary of the
Company, and to apply to such 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 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 Rights Agreement 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



 30
 






 



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 (5) Business Days after the
date on which any officer of the Company actually receives such application,
unless any such 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
Agreement.  Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.


(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 reasonable care was exercised in the selection
and continued employment thereof.


(j)            No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.


(k)           If,
with respect to any Rights Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the
Rights Agent shall not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.


Section 21.             Change of Rights
Agent.  The Rights Agent or any successor Rights Agent may resign and
be discharged from its duties under this Agreement upon thirty (30) days’ notice
(or, following the termination of the transfer agency relationship, if any, in
effect between the Company and such Rights Agent or successor Rights Agent,
upon ten (10) business days’ notice) in writing mailed to the Company and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail and to the holders of the Rights Certificates by first-class
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 resign automatically on the effective date of
such



 31
 






 



termination; and any required notice will be sent by
the Company.  The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days’ notice (or,
following the termination of the transfer agency relationship, if any, in
effect between the Company and such Rights Agent or successor Rights Agent,
upon ten (10) business 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 Shares or Preferred Shares by registered or certified mail, and to the
holders of the Rights 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
thirty (30) days (or, following the termination of the transfer agency
relationship, if any, in effect between the Company and such Rights Agent or
successor Rights Agent, upon ten (10) business days’ notice) 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 Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then the registered
holder of any Rights 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 corporation or trust company
organized and doing business under the laws of the United States, in good
standing, 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 individually or combined with an affiliate at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $50 million dollars 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 Rights Agent and each transfer agent of the Preferred Shares and
the Common Shares, and mail a notice thereof in writing to the registered holders
of the Rights Certificates.  Failure to
give any notice provided for in this Section 21, 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 22.             Issuance of New
Rights Certificates.  Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option,
issue new Rights Certificates evidencing Rights in such form as may be approved
by its Board of Directors to reflect any adjustment or change in the Exercise
Price and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement.  In addition, in
connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to Common Shares so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement or upon the exercise, conversion or exchange of other securities of
the Company outstanding at the date hereof or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company and (b) may, in
any other case, if deemed necessary or appropriate by the Board of Directors of
the Company, issue Rights



 32
 






 



Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued and this sentence
shall be null and void ab initio if, and to the extent that, such
issuance or this sentence would create a significant risk of or result in
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued or would create a significant risk of or
result in such options’ or employee plans’ or arrangements’ failing to qualify
for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.


Section 23.             Redemption.


(a)           The
Company may, at its option and with the approval of the Board of Directors, at
any time prior to the Close of Business on the earlier of (i) the fifth
day following the Shares Acquisition Date (or such later date as may be
determined by action of the Company’s Board of Directors and publicly announced
by the Company) and (ii) the Final Expiration Date, 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 after the date hereof (such redemption price
being herein referred to as the “Redemption Price”) and the Company may, at its option,
pay the Redemption Price either in Common Shares (based on the Current Per
Share Market Price thereof at the time of redemption) or cash.  Such redemption of the Rights by the Company
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.  The date on which the Board of Directors
elects to make the redemption effective shall be referred to as the “Redemption Date.”


(b)           Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent, 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
ten (10) days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders 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 Shares.  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
will state the method by which the payment of the Redemption Price will be
made.  Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this
Section 23 or in Section 24 hereof, and other than in connection with
the purchase of Common Shares prior to the Distribution Date.



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Section 24.             Exchange.


(a)           Subject
to applicable laws, rules and regulations, and subject to subsection 24(c)
below, the Company may, at its option, by action of the Board of Directors, at
any time after the occurrence of a Triggering Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.


(b)           Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(a) of this Section 24 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 Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio.  The Company shall give
public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange.  The Company shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent.  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 exchange will
state the method by which the exchange of the Common Shares 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 7(e) hereof)
held by each holder of Rights.


(c)           In
the event that there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with Section 24(a), the Company shall either
take such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights or alternatively, at the option of a
majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or
other securities having a value equal to the Current Value in exchange for each
Right.  For purposes of this Section 24(c) only, the Current Value
shall mean the



 34
 






 



product of the
Current Per Share Market Price of Common Shares on the date of the occurrence
of the event described above in subsection (a), multiplied by the number of
Common Shares for which the Right otherwise would be exchangeable if there were
sufficient shares available.  To the
extent that the Company determines that some action need be taken pursuant to
clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily suspend the exercisability of the Rights for a period
of up to sixty (60) days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision 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.


(d)           The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares.  In lieu
of such fractional Common Shares, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Common Shares
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Common Share (as determined pursuant to the
second sentence of Section 1(j) hereof).


(e)           The
Company may, at its option, by majority vote of the Board of Directors, at any
time before any Person has become an Acquiring Person, exchange all or part of
the then outstanding Rights for rights of substantially equivalent value, as
determined reasonably and with good faith by the Board of Directors based upon
the advice of one or more nationally recognized investment banking firms.


(f)            Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(e) of this Section 24 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 rights in exchange therefor as has been determined by
the Board of Directors in accordance with subsection 24(e) above. 
The Company shall give public notice of any such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  The Company
shall mail a notice of any such exchange to all of the holders of such Rights
at their last addresses as they appear upon the registry books of the transfer
agent for the Common Shares of the Company. 
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 exchange will state the
method by which the exchange of the Rights will be effected.


Section 25.             Notice of Certain
Events.


(a)           In
case the Company shall propose to effect or permit to occur any Triggering
Event or Section 13 Event, the Company shall give notice thereof to each
holder of Rights in accordance with Section 26 hereof at least twenty (20)
days prior to occurrence of such Triggering Event or such Section 13
Event.



 35
 






 



(b)           In
case any Triggering Event or Section 13 Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii)
and 13 hereof.


Section 26.             Notices. 
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:


Catalyst Semiconductor,
Inc.


2975 Stender Way

Santa Clara, CA 95054-3214


Attention: 
President


with a copy to:


Wilson Sonsini
Goodrich & Rosati


Professional
Corporation


650 Page Mill Road


Palo Alto,
California 94304-1050


Attention:  Robert Latta, Esq.


Julia Reigel, Esq.


Subject to the
provisions of Section 21 hereof, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:


Computershare Trust
Company, N.A.


250 Royall Street


Canton, MA 02021


Attention: 
Relationship Management


Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Rights 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 27.             Supplements and
Amendments.  Prior to the occurrence of a Distribution Date, the
Company may supplement or amend this Agreement in any respect without the
approval of any holders of Rights and the Rights Agent shall, if the Company so
directs, execute such supplement or amendment. 
From and after the occurrence of a Distribution Date, the Company and
the Rights Agent may from time to time supplement or amend this Agreement
without the approval



 36
 






 



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) to change
or supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at
such time as the Rights are not then redeemable or (B) any other time
period unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or the benefits to, the holders of Rights (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person).  Upon the delivery of a
certificate from an appropriate officer of the Company that states that the proposed
supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or
amendment.  Prior to the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with
the interests of the holders of Common Shares. 
Notwithstanding any other provision hereof, the Rights Agent’s consent
must be obtained regarding any amendment or supplement pursuant to this Section
27 which alters the Rights Agent’s rights or duties, which consent shall not be
unreasonably withheld.


Section 28.             Successors. 
All the covenants and provisions of this Agreement 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 29.             Determinations and
Actions by the Board of Directors, etc.  For all purposes of this
Agreement, any calculation of the number of Common Shares outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares 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.  The Board of Directors of
the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power (i) to interpret the provisions of this Agreement and (ii) to
make all determinations deemed necessary or advisable for the administration of
this Agreement (including a determination to redeem or not redeem the Rights or
to amend the Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties and (y) with respect to claims
specifically arising from the Agreement, not subject the Board to any liability
to the holders of the Rights.


Section 30.             Benefits of this
Agreement.  Nothing in this Agreement shall be construed to give to
any Person other than the Company, the Rights Agent and the registered holders
of the Rights Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim pursuant to this
Agreement; but this Agreement shall be for the sole and



 37
 






 



exclusive benefit of the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares).


Section 31.             Severability. 
If any term, provision, covenant or restriction of this Agreement 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 Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however,
that notwithstanding anything in this Agreement 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 of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated
and shall not expire until the Close of Business on the tenth day following the
date of such determination by the Board of Directors.


Section 32.             Governing Law. 
This Agreement and each Right and each Rights 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 Agreement 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.


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



 38
















 


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


	
  “COMPANY”

  	
  CATALYST SEMICONDUCTOR, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ T. E. Gay III

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
     Thomas Gay

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
     VP Finance & CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “RIGHTS AGENT”

  	
  COMPUTERSHARE TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Darlene M. Diopato

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Darlene M. Diopato

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Senior Managing Director

  
										



 


[SIGNATURE
PAGE TO PREFERRED SHARES RIGHTS AGREEMENT]


















EXHIBIT
A


CERTIFICATE
OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF

SERIES A PARTICIPATING PREFERRED STOCK OF

CATALYST SEMICONDCUTOR, INC.


The undersigned, [          ],
does hereby certify:


1.             That he is duly
elected and acting                 
of Catalyst Semiconductor, Inc., a Delaware corporation (the “Corporation”).


2.             That pursuant to the
authority conferred upon the Board of Directors by the Amended and Restated
Certificate of Incorporation of the said Corporation, the said Board of Directors
of the Corporation on December 21, 2006 adopted the following resolutions
creating a series of 400,000 shares of Preferred Stock designated as
Series A Participating Preferred Stock:


“RESOLVED, that pursuant to the authority vested in the Board
of Directors of the corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation and does hereby fix and herein
state and express the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:


Section 1.               Designation and
Amount.  The shares of such series
shall be designated as “Series A Participating
Preferred Stock.” The Series A Participating Preferred Stock
shall have a par value of $0.001 per share, and the number of shares
constituting such series shall be 400,000.


Section 2.               Proportional
Adjustment.  In the event that the
Corporation shall at any time after the issuance of any share or shares of
Series A Participating Preferred Stock (i) declare any dividend on
Common Stock of the Corporation (“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 Corporation shall simultaneously effect a
proportional adjustment to the number of outstanding shares of Series A
Participating Preferred Stock.


Section
3.               Dividends
and Distributions.


(a)           Subject to the prior
and superior right of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A Participating
Preferred Stock with respect to dividends, the holders of shares of
Series A Participating Preferred Stock shall be entitled to receive when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the last day of January,
April, July, and October in each year (each such date being referred to herein
as a “Quarterly Dividend Payment Date”),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share










 



or fraction of a share of
Series A Participating Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to 1,000 times the aggregate per share amount of all
cash dividends, and 1,000 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 or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Participating Preferred
Stock.


(b)           The Corporation shall
declare a dividend or distribution on the Series A Participating 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 on outstanding shares of Series A Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of issue of
such shares of Series A Participating Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first Quarterly 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 Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue from such
Quarterly Dividend Payment Date.  Accrued
but unpaid dividends shall not bear interest. 
Dividends paid on the shares of Series A Participating 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 Participating
Preferred Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date
fixed for the payment thereof.


Section 4.               Voting Rights.  The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:


(a)           Each share of
Series A Participating Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation.


(b)           Except as otherwise
provided herein or by law, the holders of shares of Series A Participating
Preferred Stock and the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation.


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



 2
 






 



Section
5.               Certain
Restrictions.


(a)           The Corporation shall
not declare any dividend on, make any distribution on, or redeem or purchase or
otherwise acquire for consideration any shares of Common Stock after the first
issuance of a share or fraction of a share of Series A Participating Preferred
Stock unless concurrently therewith it shall declare a dividend on the
Series A Participating Preferred Stock as required by Section 3
hereof.


(b)           Whenever quarterly
dividends or other dividends or distributions payable on the Series A
Participating Preferred Stock as provided in Section 3 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Participating 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
Participating 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 Participating Preferred Stock, except dividends paid
ratably on the Series A Participating 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;


(iii)          redeem or purchase or
otherwise acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Participating Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Series A Participating Preferred Stock;


(iv)          purchase or otherwise
acquire for consideration any shares of Series A Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Participating 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 such shares 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.


(c)           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 5, purchase or otherwise
acquire such shares at such time and in such manner.



 3
 






 



Section 6.               Reacquired
Shares.  Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof.  All such
shares shall upon their cancellation 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 the conditions and restrictions on issuance set forth herein and in the
Amended and Restated Certificate of Incorporation, as then amended.


Section 7.               Liquidation,
Dissolution or Winding Up.  Upon any
liquidation, dissolution or winding up of the Corporation, the holders of
shares of Series A Participating Preferred Stock shall be entitled to receive
an aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal
to any accrued and unpaid dividends on such shares of Series A Participating
Preferred Stock.


Section 8.               Consolidation,
Merger, etc.  In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the 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 the shares
of Series A Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to 1,000 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.


Section 9.               No Redemption.  The shares of Series A Participating
Preferred Stock shall not be redeemable.


Section 10.             Ranking.  The Series A Participating Preferred
Stock shall rank junior to all other series of the Corporation’s Preferred
Stock as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.


Section 11.             Amendment.  The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preference or special rights
of the Series A Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Participating Preferred Stock, voting
separately as a series.


Section 12.             Fractional Shares.  Series A Participating Preferred Stock
may be issued in fractions of a share which 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 Participating Preferred Stock.



 4
 






 



RESOLVED FURTHER,
that the President, Chief Executive Officer, Chief Financial Officer or any
Vice President and the Secretary or any Assistant Secretary of this corporation
be, and they hereby are, authorized and directed to prepare and file a
Certificate of Designations of Rights, Preferences and Privileges in accordance
with the foregoing resolution and the provisions of Delaware law and to take
such actions as they may deem necessary or appropriate to carry out the intent of
the foregoing resolution.”


I further declare
under penalty of perjury that the matters set forth in the foregoing
Certificate of Designation of Rights, Preferences and Privileges are true and
correct of my own knowledge.


Executed at               
California on       , 2006.


	
  

  	
   

  
	
  

  	
  NAME

  
	
   

  	
  TITLE

  



 



 5

















EXHIBIT
B


FORM
OF RIGHTS CERTIFICATE


	
  Certificate No. R-

  	
                      
  Rights

  



 


NOT EXERCISABLE AFTER THE EARLIER OF (i) DECEMBER
31, 2016, (ii) THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE
THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE
ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). 
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
SUCH RIGHTS AGREEMENT.]*


RIGHTS CERTIFICATE


CATALYST
SEMICONDUCTOR, 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 Rights Agreement dated as of December 21,
2006, (the “Rights Agreement”), between
Catalyst Semiconductor, Inc., a Delaware corporation (the “Company”),
and Computershare Trust Company, N.A. (the “Rights Agent”),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M., New York
time, on December 31, 2016 at the office of the Rights Agent designated for
such purpose, or at the office of its successor as Rights Agent, one
one-thousandth






* The portion of the
legend in bracket shall be inserted only if applicable and shall replace the
preceding sentence.










 



(0.001) of a fully paid
and non-assessable share of Series A Participating Preferred Stock, par
value $0.001 per share (the “Preferred Shares”),
of the Company, at an Exercise Price of $18.00 per one-thousandth (0.001) of a
Preferred Share (the “Exercise Price”),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed.  The number of Rights evidenced by this Rights
Certificate (and the number of one-thousandths (0.001) of a Preferred Share
which may be purchased upon exercise hereof) set forth above are the number and
Exercise Price as of               
    ,         
based on the Preferred Shares as constituted at such date.  As provided in the Rights Agreement, the
Exercise Price and the number and kind of Preferred Shares or other securities
which may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.


This Rights
Certificate is subject to all of the terms, provisions and conditions of the
Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement 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 Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights
Agreement.  Copies of the Rights
Agreement are on file at the principal executive offices of the Company and the
above-mentioned office of the Rights Agent.


Subject to the provisions
of the Rights Agreement, the Rights evidenced by this Rights Certificate
(i) may be redeemed by the Company, at its option, at a redemption price
of $0.001 per Right or (ii) may be exchanged by the Company in whole or in
part for Common Shares, substantially equivalent rights or other consideration
as determined by the Company.


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


No fractional
portion of less than one one-thousandth (0.001) of a Preferred Share will be
issued upon the exercise of any Right or Rights evidenced hereby but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.


No holder of this
Rights Certificate, as such, shall be entitled to vote or receive dividends or
be deemed for any purpose the holder of the Preferred Shares or of any other
securities of the Company which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement 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



 2
 






 



provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.


This Rights
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                               ,
         .


	
  ATTEST:

  	
   

  	
  CATALYST SEMICONDUCTOR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPUTERSHARE TRUST COMPANY, N.A.

  	
   

  	
   

  	
   

  	
   

  
	
  as Rights Agent

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
								



 



 3
















 


Form
of Reverse Side of Rights Certificate


FORM OF ASSIGNMENT


(To be executed by the
registered holder if such

holder desires to transfer the Rights Certificate)


FOR VALUE RECEIVED                              
hereby sells, assigns and transfers unto                        


	
   

  
	
  (Please print name and
  address of transferee)

  
	
   

  



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


Dated:                               ,
         


	
   

  	
   

  
	
  

  	
  Signature

  



 


Signature Guaranteed:


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.









 



CERTIFICATE


The
undersigned hereby certifies by checking the appropriate boxes that:


(1)                                  this
Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);


(2)                                  after
due inquiry and to the best knowledge of the undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.


Dated:                               ,
         


	
  

  	
   

  
	
  

  	
  Signature

  



 


Signature Guaranteed:


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.









 



FORM
OF ELECTION TO PURCHASE


(To be executed if holder
desires to

exercise the Rights Certificate)


To:                                                       


The undersigned
hereby irrevocably elects to exercise                                                      
Rights represented by this Rights Certificate to purchase the number of
one-thousandths (0.001) of a Preferred Share issuable upon the exercise of such
Rights and requests that certificates for such number of one-thousandths
(0.001) of a Preferred Share issued in the name of:


Please insert social
security

or other identifying number


	
   

  
	
  (Please print name and
  address)

  
	
   

  



 


If such number of Rights
shall not be all the Rights evidenced by this Rights Certificate, a new Rights
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)

  
	
   

  



 


Dated:                               ,
         


	
  

  	
   

  
	
  

  	
  Signature

  



 


Signature Guaranteed:


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.









 



CERTIFICATE


The undersigned
hereby certifies by checking the appropriate boxes that:


(1)                                  the
Rights evidenced by this Rights Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);


(2)                                  after
due inquiry and to the best knowledge of the undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.


Dated:                               ,
         


	
  

  	
   

  
	
  

  	
  Signature

  



 


Signature Guaranteed:


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.









 



NOTICE


The signature in
the foregoing Forms of Assignment and Election must conform to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.


















EXHIBIT C


STOCKHOLDER
RIGHTS PLAN


CATALYST SEMICONDUCTOR, INC.


Summary of Rights


	
  Distribution and Transfer of Rights; Rights Certificate:

  	
  The Board of Directors has declared a dividend of
  one Right for each share of Common Stock of Catalyst Semiconductor, Inc. (the
  “Company”)
  outstanding. Prior to the Distribution Date referred to below, the Rights
  will be evidenced by and trade with the certificates for the Common Stock.
  After the Distribution Date, the Company will mail Rights certificates to the
  Company’s stockholders and the Rights will become transferable apart from the
  Common Stock.

  
	
   

  	
   

  
	
  Distribution Date:

  	
  Rights will separate from the Common Stock and
  become exercisable following (a) the tenth business day (or such later
  date as may be determined by the Company’s Board of Directors) after a person
  or group acquires beneficial ownership of 15% or more of the Company’s Common
  Stock or (b) the tenth business day (or such later date as may be
  determined by the Company’s Board of Directors) after a person or group
  announces a tender or exchange offer, the consummation of which would result
  in ownership by a person or group of 15% or more of the Company’s Common
  Stock.

  
	
   

  	
   

  
	
  Preferred Stock Purchasable Upon Exercise of
  Rights:

  	
  After the Distribution Date, each Right will entitle
  the holder to purchase for $18.00 (the “Exercise Price”),
  a fraction of a share of the Company’s Preferred Stock with economic terms
  similar to that of one share of the Company’s Common Stock.

  
	
   

  	
   

  
	
  Flip-In:

  	
  If an acquirer (an “Acquiring
  Person”) obtains 15% or more of the Company’s Common Stock, then
  each Right (other than Rights owned by an Acquiring Person or its affiliates)
  will entitle the holder thereof to purchase, for the Exercise Price, a number
  of shares of the Company’s Common Stock having a then-current market value of
  twice the Exercise Price.

  
	
   

  	
   

  
	
  Flip-Over:

  	
  If, after an Acquiring Person obtains 15% or more of
  the Company’s Common Stock, (a) the Company merges into another entity,
  (b) an acquiring entity merges into the Company or (c) the Company
  sells more than 50% of the Company’s assets or earning power, then
  each Right (other than Rights owned by an Acquiring Person or its affiliates)
  will entitle the

  



 










 



 


	
  

  	
  holder thereof to purchase, for the Exercise Price,
  a number of shares of Common Stock of the person engaging in the transaction
  having a then current market value of twice the Exercise Price.

  
	
   

  	
   

  
	
  Exchange Provision:

  	
  At any time after the date on which an Acquiring
  Person obtains 15% or more of the Company’s Common Stock and prior to the
  acquisition by the Acquiring Person of 50% of the outstanding Common Stock,
  the Board of Directors of the Company may exchange the Rights (other than
  Rights owned by the Acquiring Person or its affiliates), in whole or in part,
  for shares of Common Stock of the Company at an exchange ratio of one share
  of Common Stock per Right (subject to adjustment).

  
	
   

  	
   

  
	
  Redemption of the Rights:

  	
  Rights will be redeemable at the Company’s option
  for $0.001 per Right at any time on or prior to the fifth day (or such later
  date as may be determined by the Company’s Board of Directors) after public
  announcement that a Person has acquired beneficial ownership of 15% or more
  of the Company’s Common Stock (the “Shares Acquisition
  Date”).

  
	
   

  	
   

  
	
  Expiration of the Rights:

  	
  The Rights expire on the earliest of
  (a) December 31, 2006 or (b) exchange or redemption of the Rights
  as described above.

  
	
   

  	
   

  
	
  Amendment of Terms of Rights:

  	
  The terms of the Rights and the Rights Agreement may
  be amended in any respect without the consent of the Rights holders on or
  prior to the Distribution Date; thereafter, the terms of the Rights and the
  Rights Agreement may be amended without the consent of the Rights holders in
  order to cure any ambiguities or to make changes which do not adversely
  affect the interests of Rights holders (other than the Acquiring Person).

  
	
   

  	
   

  
	
  Voting Rights:

  	
  Rights will not have any voting rights.

  
	
   

  	
   

  
	
  Anti-Dilution Provisions:

  	
  Rights will have the benefit of certain customary
  anti-dilution provisions.

  
	
   

  	
   

  
	
  Taxes:

  	
  The Rights distribution should not be taxable for
  federal income tax purposes. However, following an event which renders the
  Rights exercisable or upon redemption of the Rights, stockholders may
  recognize taxable income.

  



 


The
foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the Preferred Stock
Rights Agreement
dated as of December
21, 2006 between the Company and Computershare Trust Company, N.A., as Rights
Agent (the



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“Rights Agreement”).  The Rights Agreement may be
amended from time to time.  A copy of the
Rights Agreement was filed with the Securities and Exchange Commission as an
Exhibit to a Registration Statement on Form 8-A dated December 28, 2006.  A copy of the Rights Agreement is available
free of charge from the Company.



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