**Exhibit 4.21**
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLETHEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED(THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAW AND,ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCKISSUABLE THEREBY MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPTPURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTIONEXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANYOTHER APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
TERAFORCE TECHNOLOGY CORPORATION
Expiring on April 30, 2006
     This Common Stock Purchase Warrant (the “Warrant”) certifies that forvalue received, O. S. Wyatt, Jr. (the “Holder”) is entitled to subscribe forand purchase from the Company (as hereinafter defined), in whole or in part,3,250,000 shares of duly authorized, validly issued, fully paid andnonassessable shares of Common Stock (as hereinafter defined) at the ExercisePrice (as hereinafter defined), subject, however, to the provisions and uponthe terms and conditions hereinafter set forth. This Warrant and all rightshereunder shall expire at 5:00 p.m., Houston, Texas time, on April 30, 2006.This Warrant is issued in connection with the extension of a letter of creditprovided by the Holder that secures certain indebtedness of the Company.
     As used herein, the following terms shall have the meanings set forthbelow:
     “Company” shall mean TeraForce Technology Corporation, a Delawarecorporation, and shall also include any successor thereto with respect to theobligations hereunder, by merger, consolidation or otherwise.
     “Common Stock” shall mean and include the Company’s Common Stock, parvalue $0.01 per share, authorized on the date of the original issue of thisWarrant.
     “Exercise Price” shall mean $0.29 per share of Common Stock payable uponexercise of the Warrant, as adjusted pursuant to the provisions hereof.
     “Market Price” for any day, when used with reference to Common Stock,shall mean the price of said Common Stock determined as follows: (x) the lastreported sale price for the Common Stock on such day on the principalsecurities exchange on which the Common Stock is listed or admitted to tradingor if no such sale takes place on such date, the average of the closing bid andasked prices thereof as officially reported, or, if not so listed or admittedto trading on any securities exchange, the last sale price for the Common Stockon the National Association of Securities Dealers National Market on such date,or, if there shall have been no trading on such date or if the Common Stockshall not be listed on such system, the average of the closing bid and askedprices in the over-the-counter market as furnished by any NASDmember firm selected from time to time by the Company for such purpose, ineach such case, unless otherwise provided herein, averaged over a period
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of ten(10) consecutive Trading Days prior to the date as of which the determinationis to be made; or (y) if the Common Stock shall not be listed or admitted totrading as provided in clause (x) above, the fair market value of the CommonStock as determined in good faith by the Board of Directors of the Company.
     “Person” means any individual, corporation, partnership, joint venture,association, joint stock company, trust, unincorporated organization orgovernment or any agency or political subdivision thereof.
     “Securities Act” means the Securities Act of 1933, as amended from time totime.
     “Trading Days” shall mean any days during the course of which theprincipal securities exchange on which the Common Stock is listed or admittedto trading is open for the exchange of securities.
     “Warrant Shares” shall mean the shares of Common Stock purchased orpurchasable by the Holder hereof upon the exercise of the Warrant.
ARTICLE I
EXERCISE OF WARRANT
     1.1     Method of Exercise. The Warrant represented hereby may be exercisedby the Holder hereof, in whole or in part, at any time and from time to time onor after the date hereof until 5:00 p.m., Houston, Texas time, on April 30,2006. To exercise the Warrant, the Holder hereof shall deliver to the Company(i) a written notice in the form of the Subscription Notice attached as anexhibit hereto, stating therein the election of such Holder to exercise theWarrant in the manner provided in the Subscription Notice; and (ii) payment infull of the Exercise Price (A) in cash or by bank check for all Warrant Sharespurchased hereunder, or (B) if permitted pursuant to Section 1.6 below, bynotifying the Company that this Warrant is being exercised pursuant to aCashless Exercise (as defined in Section 1.6), or (C) a combination of (A) and(B) above; and (iii) this Warrant. The Warrant shall be deemed to be exercisedon the date of receipt by the Company of the Subscription Notice, accompaniedby payment for the Warrant Shares and surrender of this Warrant, as aforesaid,and such date is referred to herein as the “Exercise Date”. Upon suchexercise, the Company shall, as promptly as practicable and in any event withinten (10) business days, issue and deliver to such Holder a certificate orcertificates for the full number of the Warrant Shares purchased by such Holderhereunder, and shall, unless the Warrant has expired or has been redeemed,deliver to the Holder hereof a new Warrant representing the portion, if any,that shall not have been exercised, in all other respects identical to thisWarrant. As permitted by applicable law, the Person in whose name thecertificates for Common Stock are to be issued shall be deemed to have become aholder of record of such Common Stock on the Exercise Date and shall beentitled to all of the benefits of such holder on the Exercise Date, includingwithout limitation the right to receive dividends and other distributions forwhich the record date falls on or after the Exercise Date and to exercisevoting rights.
     1.2     Reservation of Shares. The Company shall reserve at all times so longas the Warrant remains outstanding, free from preemptive rights, out of itstreasury Common Stock or its authorized but unissued shares of Common Stock, orboth, solely for the purpose of effecting the exercise of the Warrant, asufficient number of shares of Common Stock to provide for the exercise of theWarrant.
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     1.3     Valid Issuance. All shares of Common Stock that may be issued uponexercise of the Warrants will, upon issuance by the Company, be duly andvalidly issued, fully paid and nonassessable and free from all taxes, liens andcharges with respect to the issuance thereof.
     1.4     No Fractional Shares. The Company shall not be required to issuefractional shares of Common Stock on the exercise of this Warrant. If anyfraction of a share of Common Stock would be issuable on the exercise of thisWarrant, the Company shall pay an amount in cash calculated by it to be equalto the Market Price of one share of Common Stock at the time of such exercisemultiplied by such fraction computed to the nearest whole cent.
     1.5     Cashless Exercise. If (i) the Company and the Holder mutually elect;or (ii) the Warrant Shares to be issued are not registered for resale to theextent required by the Registration Rights Agreement, then, notwithstandinganything to the contrary, the Holder may exercise, at its election, in its solediscretion, this Warrant in whole or in part and, in lieu of making the cashpayment otherwise contemplated to be made to the Company upon exercise of thisWarrant, elect instead to receive the Warrant Shares through a “cashless” or“net-issue” exercise of the Warrant (“Cashless Exercise”). The Holder shallexchange the Warrant subject to a Cashless Exercise for that number of WarrantShares determined by multiplying the number of Warrant Shares issuablehereunder by a fraction, the numerator of which shall be the difference between(x) the Market Price and (y) the Exercise Price for each such Warrant Share,and the denominator of which shall be the Market Price; the Subscription Noticeshall set forth the calculation upon which the Cashless Exercise is based.
ARTICLE II
TRANSFER
     2.1     Ownership of Warrant. The Company may deem and treat the Person inwhose name the Warrant is registered as the Holder and owner hereof(notwithstanding any notations of ownership or writing hereon made by anyoneother than the Company) for all purposes and shall not be affected by anynotice to the contrary unless agreed to in writing by the Company.
     2.2     Restrictions on Transfer of Warrants. The Holder of the Warrantagrees that the Warrant is not transferrable without the prior written consentof the Company and any such transfer without such consent shall be void andwithout effect, unless such transfer shall occur by operation of law. Subjectto the restrictions on transfer of the Warrant in this Section 2.2, theCompany, from time to time, shall register the transfer of the Warrant in suchbooks upon surrender of this Warrant at the Company’s principal office,properly endorsed or accompanied by appropriate instruments of transfer andwritten instructions for transfer satisfactory to the Company. Upon any suchtransfer and upon payment by the Holder or its transferee of any applicabletransfer taxes, a new Warrant shall be issued to the transferee and thetransferor (as their respective interests may appear) and the surrenderedWarrant shall be canceled by the Company. The Holder shall pay all taxes andall other expenses and charges payable in connection with the transfer of theWarrant pursuant to this Section 2.2.
     2.3     Compliance with Securities Laws. Notwithstanding any other provisionscontained in this Warrant, the Holder hereof understands and agrees that thefollowing restrictions and limitations shall be applicable to all WarrantShares and to all resales or other transfers thereof pursuant to the SecuritiesAct, and that as a condition to the exercise of such warrant that thefollowing are and will be true and correct:
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          (A)     The Holder hereof agrees that the Warrant Shares shall not besold or otherwise transferred unless the Warrant Shares are registeredunder the Securities Act and applicable state securities or blue sky lawsor are exempt therefrom.
          (B)     A legend in substantially the following form will be placed onthe certificate(s) evidencing the Warrant Shares:
               “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVENOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLESECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTEDBY THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISETRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATIONSTATEMENT UNDER, OR UPON RECEIPT OF AN OPINION OF COUNSELREASONABLY ACCEPTABLE TO THE COMPANY PURSUANT TO ATRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIESACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIESLAWS.”
          (C)     Stop transfer instructions will be imposed with respect to theWarrant Shares so as to restrict resale or other transfer thereof,subject to this Section 2.3.
          (D)     The Holder is an “accredited investor” within the meaning ofRule 501 of Regulation D as promulgated under the Securities Act, andwill be so as a condition of purchasing any of the Warrant Shares. TheHolder will acquire the Warrant, and if exercised, any Warrant Shares forits own account for investment purposes and not with a view towardsdistribution. The Holder must bear the economic risk of the investmentfor an indefinite period of time because the Warrant and Warrant Shareshave not been registered under the Securities Act and therefore cannot besold unless they are subsequently registered under the Securities Act oran exemption from such registration is available. The Holder has receivedand carefully reviewed copies of all documents filed by the Company withthe Securities and Exchange Commission as of the date hereof, and will doso before each exercise of the Warrant. No representations or warrantieshave been made to the Holder by the Company, the officers or directors ofthe Company, or any agent, employee or affiliate of any of them. TheHolder is aware that the Warrant and any purchase of the Warrant Sharesinvolves a high degree of risk and that it may sustain, and has thefinancial ability to sustain, the loss of its entire investment. TheHolder has had the opportunity to ask questions of, and receive answers,satisfactory to it from the Company’s management regarding the Company.The Holder understands that no Federal or State governmental authorityhas made any finding or determination relating to the fairness of aninvestment in the Warrant or Warrant Shares and that no Federal or Stategovernmental authority has recommended or endorsed, or will recommend orendorse, the investment herein. The Holder, in making the decision toacquire the Warrant, and if it is exercised, the purchase of the WarrantShares subscribed for, has relied upon independent investigations made byit and has not relied on any information or representations made by thirdparties. The Holder has significant assets, and upon consummation of thepurchase of the Warrant Shares, will continue to have significant assetsexclusive of the Warrant Shares. The Holder understands that the Warrant,and if exercised, the Warrant Shares are being offeredand sold to it in reliance on specific provisions of Federal andState securities laws and that the Company is relying upon the truth andaccuracy of the representations, warranties, agreements, acknowledgmentsand understandings of the Holder set forth herein in order to determinethe
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applicability of such provisions. The Holder, in making the decisionto purchase the Warrant, and if exercised, the Warrant Shares subscribedfor, has relied upon independent investigations made by it and has notrelied on any information or representations made by third parties.
ARTICLE III
ANTI-DILUTION
     3.1     Anti-DilutionProvisions. If the outstanding shares of the Company’sCommon Stock shall be subdivided into a greater number of shares or a dividendin Common Stock shall be paid in respect of Common Stock, the Exercise Price ineffect immediately prior to such subdivision or at the record date of suchdividend shall simultaneously with the effectiveness of such subdivision orimmediately after the record date of such dividend be proportionately reduced.If outstanding shares of Common Stock shall be combined into a smaller numberof shares, the Exercise Price in effect immediately prior to such combinationshall, simultaneously with the effectiveness of such combination, beproportionately increased. When any adjustment is required to be made in theExercise Price, the number of Warrant Shares purchasable upon the exercise ofthis Warrant shall be changed to the number determined by dividing (i) anamount equal to the number of shares issuable upon the exercise of this Warrantimmediately prior to such adjustment, multiplied by the Exercise Price ineffect immediately in effect prior to such adjustment, by (ii) the ExercisePrice in effect immediately after such adjustment.
     3.2     Reorganizations and Asset Sales. If any capital reorganization orreclassification of the capital stock of the Company, or any consolidation,merger or share exchange of the Company with another Person, or the sale,transfer or other disposition of all or substantially all of its assets toanother Person shall be effected in such a way that a holder of Common Stock ofthe Company shall be entitled to receive capital stock, securities or assetswith respect to or in exchange for their shares, then as part of any suchreorganization, reclassification, consolidation, merger or sale, as the casemay be, lawful provision shall be made so that the Holder of this Warrant shallhave the right thereafter to receive upon exercise hereof the kind and amountof shares of stock or other securities or property which such Holder would havebeen entitled to receive if, immediately prior to any such reorganization,reclassification, consolidation, merger or sale, as the case may be, suchHolder had held the number of shares of Common Stock which were the purchasableupon the exercise of this Warrant. In any such case, appropriate adjustment(as reasonably determined in good faith by the Board of Directors of theCompany) shall be made in the application of the provisions set forth hereinwith respect to the rights and interests thereafter of the Holder of thisWarrant, such that the provisions set forth herein (including provisions withrespect to adjustment of the Exercise Price) shall thereafter be applicable, asnearly as is reasonably practicable, in relation to any shares of stock orother securities or property thereafter deliverable upon the exercise of thisWarrant.
     3.3     Notice of Adjustment. Whenever the Exercise Price or the number ofWarrant Shares issuable upon the exercise of the Warrant shall be adjusted asherein provided, or the rights of the Holder hereof shall change by reason ofother events specified herein, the Company shall compute the adjusted ExercisePrice and the adjusted number of Warrant Shares in accordance with theprovisions hereof and shall prepare a notice setting forth the adjustedExercise Price and the adjusted number of Warrant Shares issuable upon theexercise of the Warrant or specifying the other shares of stock, securities orassetsreceivable as a result of such change in rights, and showing in reasonabledetail the facts and calculations upon which such adjustments or other changesare based. The Company shall cause to be mailed to the Holder hereof, no laterthan 10 days after any such adjustment herein provided, copies of such noticestating that the Exercise Price and the number of Warrant Shares purchasableupon exercise of the Warrant have been adjusted and setting forth the adjustedExercise Price and the adjusted number of Warrant Shares purchasable upon theexercise of the Warrant.
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ARTICLE IV
MISCELLANEOUS
     4.1     Entire Agreement. This Warrant, together with the ReimbursementAgreement and the Registration Rights Agreement, contain the entire agreementbetween the Holder hereof and the Company with respect to the Warrant Sharespurchasable upon exercise hereof and the related transactions and supersedesall prior arrangements or understandings with respect thereto.
     4.2     Governing Law; Venue. This warrant shall be governed by and construedin accordance with the laws of the State of Texas. Venue for any disputearising under this Warrant shall lie in the state or federal courts of DallasCounty, Texas.
     4.3     Waiver and Amendment. Any term or provision of this Warrant may bewaived at any time by the party which is entitled to the benefits thereof andany term or provision of this Warrant may be amended or supplemented at anytime by agreement of the Holder hereof and the Company, except that any waiverof any term or condition, or any amendment or supplementation, of this Warrantshall be in writing. A waiver of any breach or failure to enforce any of theterms or conditions of this Warrant shall not in any way effect, limit or waivea party’s rights hereunder at any time to enforce strict compliance thereafterwith every term or condition of this Warrant.
     4.4     Illegality. In the event that any one or more of the provisionscontained in this Warrant shall be determined to be invalid, illegal orunenforceable in any respect for any reason, the validity, legality andenforceability of any such provision in any other respect and the remainingprovisions of this Warrant shall not, at the election of the party for whom thebenefit of the provision exists, be in any way impaired.
     4.5     Copy of Warrant. A copy of this Warrant shall be filed among therecords of the Company.
     4.6     Notice. Any notice or other document required or permitted to begiven or delivered to the Holder or the Company hereof shall be in writing andwill deemed to have been delivered: (i) upon receipt, when deliveredpersonally; (ii) upon receipt, when sent by facsimile (provided a confirmationof transmission is mechanically generated and kept on file by the sendingparty); or (iii) one (1) day after deposit with a nationally recognizedovernight delivery service, in each case properly addressed to the party toreceive the same. The addresses and facsimile numbers for such communicationsshall be: any notice or other document required or permitted to be given ordelivered to the Company shall be sent to the offices of the Company at 1240East Campbell Road, Richardson, Texas 75081, Attn: Chief Executive Officer,Telecopy No. (469) 330-4972 or such other address as shall have been furnishedin writing by the Company to the Holder of this Warrant. Any notice sent orrequired to be sent hereunderto the Holder shall be sent to the address of the Holder as contained inthe corporate records of the Company or such other address as shall have beenfurnished in writing by the Holder to the Company.
     4.7     Limitation of Liability; Not Stockholders. No provision of thisWarrant shall be construed as conferring upon the Holder hereof the right tovote, consent, receive dividends or receive notices (other than as hereinexpressly provided) in respect of meetings of stockholders for the election ofdirectors of the Company or any other matter whatsoever as a stockholder of theCompany. No provision hereof, in the absence of affirmative action by theHolder hereof to purchase shares of Common Stock, and no mere enumerationherein of the rights or privileges of the Holder hereof, shall give rise to anyliability of such Holder for the purchase
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price of any shares of Common Stockor as a stockholder of the Company, whether such liability is asserted by theCompany or by creditors of the Company.
     4.8     Exchange, Loss, Destruction, etc. of Warrant. Upon receipt ofevidence satisfactory to the Company of the loss, theft, mutilation ordestruction of this Warrant, and in the case of any such loss, theft ordestruction upon delivery of a bond of indemnity or such other security in suchform and amount as shall be reasonably satisfactory to the Company, or in theevent of such mutilation upon surrender and cancellation of this Warrant, theCompany will make and deliver a new Warrant of like tenor, in lieu of suchlost, stolen, destroyed or mutilated Warrant. Any Warrant issued under theprovisions of this Section 4.8 in lieu of any Warrant alleged to be lost,destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute anoriginal contractual obligation on the part of the Company. This Warrant shallbe promptly canceled by the Company upon the surrender hereof in connectionwith any exchange or replacement. The Company shall pay all taxes (other thansecurities transfer taxes or income taxes) and all other expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to this Section 4.8.
     4.9     Registration Rights. The Warrant Shares shall be entitled to suchregistration rights under the Securities Act and under applicable statesecurities laws as are specified in the Registration Rights Agreement.
     4.10     Headings. The Article and Section and other headings herein are forconvenience only and are not a part of this Warrant and shall not affect theinterpretation thereof.
     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed inits name.
Dated: February 27, 2004       TERAFORCE TECHNOLOGY CORPORATION      By: /s/ Robert P. Capps        Name: Robert P. Capps Title: Executive Vice President and Chief Financial   Officer
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