Document:

EX-4.1

Form of Warrants

THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY 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 STOCK ISSUABLE THEREBY MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER,
THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.

WARRANT

to Purchase Common Stock of

TERAFORCE TECHNOLOGY CORPORATION

Expiring on January 31, 2011

This Common Stock Purchase Warrant (the “Warrant”) certifies that for value received,
[INVESTOR] (the “Holder”) is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, [     ] shares of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (as hereinafter defined) at the Exercise Price
(as hereinafter defined), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant and all rights hereunder shall expire at 5:00 p.m., Dallas,
Texas time, on January 31, 2011.

As used herein, the following terms shall have the meanings set forth below:

"Company” shall mean TeraForce Technology Corporation, a Delaware corporation, and
shall also include any successor thereto with respect to the obligations hereunder, by merger,
consolidation or otherwise.

"Common Stock” shall mean and include the Company’s Common Stock, par value $0.01 per
share, authorized on the date of the original issue of this Warrant.

"Exercise Price” shall mean $0.17 per share of Common Stock payable upon exercise of
the Warrant, as adjusted pursuant to the provisions hereof.

“Guarantees” shall have the meaning as defined in that Reimbursement Agreement between
the Holder and the Company of even date 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 last reported sale price for the Common
Stock on such day on the principal securities exchange on which the Common Stock is listed or
admitted to trading or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted to trading on any
securities exchange, the last sale price for the Common Stock on 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 Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm selected from time
to time by the Company for such purpose, in each such case, unless otherwise provided herein,
averaged over a period of ten (10) consecutive Trading Days prior to the date as of which the
determination is to be made; or (y) if the Common Stock shall not be listed or admitted to trading
as provided in clause (x) above, the fair market value of the Common Stock 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 or government or any agency or political
subdivision thereof.

"Securities Act” means the Securities Act of 1933, as amended from time to time.

"Trading Days” shall mean any days during the course of which the principal securities
exchange on which the Common Stock is listed or admitted to trading is open for the exchange of
securities.

"Warrant Shares” shall mean the shares of Common Stock purchased or purchasable by the
Holder hereof upon the exercise of the Warrant.

1

ARTICLE I

EXERCISE OF WARRANT

1.1 Method of Exercise. The Warrant represented hereby may be exercised by the Holder
hereof, in whole or in part, at any time and from time to time on or after the date hereof until
5:00 p.m., Dallas, Texas time, on January 31, 2010. 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 an exhibit hereto, stating therein the election of such Holder to exercise the Warrant in the
manner provided in the Subscription Notice; and (ii) payment in full of the Exercise Price (A) in
cash or by bank check for all Warrant Shares purchased hereunder or (B) if permitted pursuant to
Section 1.6 below, by notifying the Company that this warrant is being exercised pursuant to a
Cashless 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 exercised on the date of receipt by the Company of
the Subscription Notice, accompanied by payment for the Warrant Shares and surrender of this
Warrant, as aforesaid, and such date is referred to herein as the “Exercise Date”. Upon such
exercise, the Company shall, as promptly as practicable and in any event within ten (10) business
days, issue and deliver to such Holder a certificate or certificates for the full number of the
Warrant Shares purchased by such Holder hereunder, 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 this Warrant. As permitted by
applicable law, the Person in whose name the certificates for Common Stock are to be issued shall
be deemed to have become a holder of record of such Common Stock on the Exercise Date and shall be
entitled to all of the benefits of such holder on the Exercise Date, including without limitation
the right to receive dividends and other distributions for which the record date falls on or after
the Exercise Date and to exercise voting rights.

1.2 Reservation of Shares. The Company shall reserve at all times so long as the
Warrant remains outstanding, free from preemptive rights, out of its treasury Common Stock or its
authorized but unissued shares of Common Stock, or both, solely for the purpose of effecting the
exercise of the Warrant, a sufficient number of shares of Common Stock to provide for the exercise
of the Warrant.

1.3 Valid Issuance. All shares of Common Stock that may be issued upon exercise of
the Warrants will, upon issuance by the Company, be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the issuance thereof.

1.4 No Fractional Shares. The Company shall not be required to issue fractional
shares of Common Stock on the exercise of this Warrant. If any fraction of a share of Common Stock
would be issuable on the exercise of this Warrant, the Company shall pay an amount in cash
calculated by it to be equal to the Market Price of one share of Common Stock at the time of such
exercise multiplied by such fraction computed to the nearest whole cent.

1.5 Reimbursement Agreement; Registration Rights Agreement. This Warrant is issued in
connection with that certain Reimbursement Agreement dated January 25, 2005 between the Company and
the Holder (the “Reimbursement Agreement”). Except as otherwise set forth in that certain
Registration Rights Agreement dated as of January 25, 2005 between the Company and the Holder (the
“Registration Rights Agreement”), the Warrant and the Warrant Shares are not registered
pursuant to the Securities Act and may not be transferred absent an effective registration
statement or an exemption from such registration.

1.6 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 the extent required by the
Registration Rights Agreement, then, notwithstanding anything to the contrary, the Holder may
exercise, at its election, in its sole discretion, this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon exercise of this
Warrant, elect instead to receive the Warrant Shares through a “cashless” or
“net-issue” exercise of the Warrant (“Cashless Exercise”). The Holder
shall exchange the Warrant subject to a Cashless Exercise for that number of Warrant Shares
determined by multiplying the number of Warrant Shares issuable hereunder 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 Notice shall 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 in whose name the
Warrant is registered as the Holder and owner hereof (notwithstanding any notations of ownership or
writing hereon made by anyone other than the Company) for all purposes and shall not be affected by
any notice to the contrary unless agreed to in writing by the Company.

2.2 Restrictions on Transfer of Warrants. The Holder of the Warrant agrees that the
Warrant is not transferrable without the prior written consent of the Company and any such transfer
without such consent shall be void and without effect, unless such transfer occurs by operation of
law. Subject to the restrictions on transfer of the Warrant in this Section 2.2, the Company, from
time to time, shall register the transfer of the Warrant in such books upon surrender of this
Warrant at the Company’s principal office, properly endorsed or accompanied by appropriate
instruments of transfer and written instructions for transfer satisfactory to the Company. Upon
any such transfer and upon payment by the Holder or its transferee of any applicable transfer
taxes, a new Warrant shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrant shall be canceled by the Company. The Holder
shall pay all taxes and all other expenses and charges payable in connection with the transfer of
the Warrant pursuant to this Section 2.2.

2.3 Compliance with Securities Laws. Subject to the terms of the Registration Rights
Agreement and notwithstanding any other provisions contained in this Warrant, the Holder hereof
understands and agrees that the following restrictions and limitations shall be applicable to all
Warrant Shares and to all resales or other transfers thereof pursuant to the Securities Act, and
that as a condition to the exercise of such warrant that the following are and will be true and
correct:

(A) The Holder hereof agrees that the Warrant Shares shall not be sold or otherwise
transferred unless the Warrant Shares are registered under the Securities Act and applicable
state securities or blue sky laws or are exempt therefrom.

(B) A legend in substantially the following form will be placed on the certificate(s)
evidencing the Warrant Shares:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE 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 CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR UPON RECEIPT OF AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY PURSUANT TO A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE
SECURITIES LAWS.”

(C) Stop transfer instructions will be imposed with respect to the Warrant 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 of Rule 501
of Regulation D as promulgated under the Securities Act, and will be so as a condition of
purchasing any of the Warrant Shares. The Holder will acquire the Warrant, and if
exercised, any Warrant Shares for its own account for investment purposes and not with a
view towards distribution. The Holder must bear the economic risk of the investment for an
indefinite period of time because the Warrant and Warrant Shares have not been registered
under the Securities Act and therefore cannot be sold unless they are subsequently
registered under the Securities Act or an exemption from such registration is available. The
Holder has received and carefully reviewed copies of all documents filed by the Company with
the Securities and Exchange Commission as of the date hereof, and will do so before each
exercise of the Warrant. No representations or warranties have been made to the Holder by
the Company, the officers or directors of the Company, or any agent, employee or affiliate
of any of them. The Holder is aware that the Warrant and any purchase of the Warrant Shares
involves a high degree of risk and that it may sustain, and has the financial ability to
sustain, the loss of its entire investment. The Holder 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
authority has made any finding or determination relating to the fairness of an investment in
the Warrant or Warrant Shares and that no Federal or State governmental authority has
recommended or endorsed, or will recommend or endorse, the investment herein. The Holder,
in making the decision to acquire the Warrant, and if it is exercised, the purchase of the
Warrant Shares subscribed for, has relied upon independent investigations made by it and has
not relied on any information or representations made by third parties. The Holder has
significant assets, and upon consummation of the purchase of the Warrant Shares, will
continue to have significant assets exclusive of the Warrant Shares. The Holder understands
that the Warrant, and if exercised, the Warrant Shares are being offered and sold to it in
reliance on specific provisions of Federal and State securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth herein in order to determine the
applicability of such provisions. The Holder, in making the decision to purchase the
Warrant, and if exercised, the Warrant Shares subscribed for, has relied upon independent
investigations made by it and has not relied on any information or representations made by
third parties.

	 	 	 
	 
	 	 
	
 
	 	ARTICLE III

ANTI-DILUTION

3.1 Anti-Dilution Provisions. If the outstanding shares of the Company’s Common
Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be
paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision
or at the record date of such dividend shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend be proportionately reduced. If
outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall, simultaneously with the effectiveness
of such combination, be proportionately increased. When any adjustment is required to be made in
the Exercise Price, the number of Warrant Shares purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the
Exercise Price in effect immediately in effect prior to such adjustment, by (ii) the Exercise Price
in effect immediately after such adjustment.

3.2 Reduction of Exercise Price. Should the Company, at any time while the
Guarantees are outstanding, issue Common Stock at a price per share less than $0.16, or issue
warrants or convertible securities that provide for an exercise or conversion price of less than
$0.16 per share, then the Exercise Price shall be reduced to such lesser amount. Furthermore,
should the “conversion price” be reduced from $0.16 per share pursuant to Section 4.2 of the
Reimbursement Agreement, the Exercise Price shall be reduced to the amount as indicated by Section
4.2 of the Reimbursement Agreement.

3.3 Reorganizations and Asset Sales. If any capital reorganization or
reclassification 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 to another Person shall be effected in such a way that a holder of
Common Stock of the Company shall be entitled to receive capital stock, securities or assets with
respect to or in exchange for their shares, then as part of any such reorganization,
reclassification, consolidation, merger or sale, as the case may be, lawful provision shall be made
so that the Holder of this Warrant shall have the right thereafter to receive upon exercise hereof
the kind and amount of shares of stock or other securities or property which such Holder would have
been entitled to receive if, immediately prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Holder had held the number of shares of
Common Stock which were the purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of Directors of the
Company) shall be made in the application of the provisions set forth herein with respect to the
rights and interests thereafter of the Holder of this Warrant, such that the provisions set forth
herein (including provisions with respect to adjustment of the Exercise Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Warrant.

3.4 Notice of Adjustment. Whenever the Exercise Price or the number of Warrant Shares
issuable upon the exercise of the Warrant shall be adjusted as herein provided, or the rights of
the Holder hereof shall change by reason of other events specified herein, the Company shall
compute the adjusted Exercise Price and the adjusted number of Warrant Shares in accordance with
the provisions hereof and shall prepare a notice setting forth the adjusted Exercise Price and the
adjusted number of Warrant Shares issuable upon the exercise of the Warrant or specifying the other
shares of stock, securities or assets receivable as a result of such change in rights, and showing
in reasonable detail the facts and calculations upon which such adjustments or other changes are
based. The Company shall cause to be mailed to the Holder hereof, no later than 10 days after any
such adjustment herein provided, copies of such notice stating that the Exercise Price and the
number of Warrant Shares purchasable upon exercise of the Warrant have been adjusted and setting
forth the adjusted Exercise Price and the adjusted number of Warrant Shares purchasable upon the
exercise of the Warrant.

	 	 	 
	 
	 	 
	
 
	 	ARTICLE IV

MISCELLANEOUS

4.1 Entire Agreement. This Warrant, together with the Securities Purchase Agreement
and the Registration Rights Agreement, contain the entire agreement between the Holder hereof and
the Company with respect to the Warrant Shares purchasable upon exercise hereof and the related
transactions and supersedes all prior arrangements or understandings with respect thereto.

4.2 Governing Law; Venue. This warrant shall be governed by and construed in
accordance with the laws of the State of Texas. Venue for any dispute arising under this Warrant
shall lie in the state or federal courts of Dallas County, Texas.

4.3 Waiver and Amendment. Any term or provision of this Warrant may be waived at any
time by the party which is entitled to the benefits thereof and any term or provision of this
Warrant may be amended or supplemented at any time by agreement of the Holder hereof and the
Company, except that any waiver of any term or condition, or any amendment or supplementation, of
this Warrant shall be in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party’s rights hereunder
at any time to enforce strict compliance thereafter with every term or condition of this Warrant.

4.4 Illegality. In the event that any one or more of the provisions contained in this
Warrant shall be determined to be invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in any other respect and the
remaining provisions of this Warrant shall not, at the election of the party for whom the benefit
of the provision exists, be in any way impaired.

4.5 Copy of Warrant. A copy of this Warrant shall be filed among the records of the
Company.

4.6 Notice. Any notice or other document required or permitted to be given or
delivered to the Holder or the Company hereof shall be in writing and will deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically generated and kept on file by the sending
party); or (iii) one (1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be: any notice or other document required or permitted to be
given or delivered to the Company shall be sent to the offices of the Company at 1240 East Campbell
Road, Richardson, Texas 75081, Attn: Chief Financial Officer, Telecopy No. (469) 330-4972 or such
other address as shall have been furnished in writing by the Company to the Holder of this Warrant.
Any notice sent or required to be sent hereunder to the Holder shall be sent to the address of the
Holder as contained in the corporate records of the Company or such other address as shall have
been furnished in writing by the Holder to the Company.

4.7 Limitation of Liability; Not Stockholders. No provision of this Warrant shall be
construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or
receive notices (other than as herein expressly provided) in respect of meetings of stockholders
for the election of directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder hereof to
purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder hereof, shall give rise to any liability of such Holder for the purchase price of any shares
of Common Stock or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

4.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of this Warrant, and in
the case of any such loss, theft or destruction upon delivery of a bond of indemnity or such other
security in such form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of such lost, stolen, destroyed or mutilated Warrant.
Any Warrant issued under the provisions 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 an original
contractual obligation on the part of the Company. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any exchange or replacement. The Company
shall pay all taxes (other than securities transfer taxes or income taxes) and all other expenses
and charges payable in connection with the preparation, execution and delivery of Warrants pursuant
to this Section 4.8.

4.9 Registration Rights. The Warrant Shares shall be entitled to such registration
rights under the Securities Act and under applicable state securities laws as are specified in the
Registration Rights Agreement.

4.10 Headings. The Article and Section and other headings herein are for convenience
only and are not a part of this Warrant and shall not affect the interpretation thereof.

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name.

Dated: January 28, 2005

TERAFORCE TECHNOLOGY CORPORATION

By: 

	 	 	 	Name:
Robert P. Capps

	 	 	 	Title: Executive Vice President and Chief
Financial Officer

2EX-4.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is dated as of January 28, 2005
and is by and between TeraForce Technology Corporation, a Delaware corporation (the
“Company”) and [INVESTOR, a resident of Texas, (the “Investor”).

RECITALS

WHEREAS, as of an even date herewith, the Company and the Investor executed a Reimbursement
Agreement ( the “Reimbursement Agreement”); and

WHEREAS, pursuant to the Reimbursement Agreement, the Investor will acquire warrants for the
purchase of up to [ ] shares of the Company’s Common Stock, par value $.01 per share (“Common
Stock”) and shall have the right to acquire up to an additional [ ] shares of Common Stock upon
the exercise of Conversion Rights, as defined in the Reimbursement Agreement ( collectively the
“Shares”); and

WHEREAS, the parties desire to set forth the Investor’s rights and the Company’s obligations
to cause the registration of the Registrable Securities (as defined herein) pursuant to the
Securities Act (as defined herein);

NOW, THEREFORE, in consideration of the transactions contemplated by the Securities Purchase
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

Section 1. Definitions and Usage.

As used in this Agreement:

1.1 Definitions.

(a) “Blackout Period” shall have the meaning set forth in Section 3.

(b) “Business Day” shall mean any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the state of New York generally are
authorized or required by law or other government actions to close.

(c) “Commission” shall mean the Securities and Exchange Commission.

(d) “Common Stock” shall mean (i) the common stock of the Company, par value $.01 per
share, and (ii) shares of capital stock of the Company issued by the Company in respect of or in
exchange for shares of such common stock in connection with any stock dividend or distribution,
stock split-up, recapitalization, recombination or exchange by the Company generally of shares of
such common stock.

(e) “Continuously Effective,” with respect to a specified registration statement,
shall mean that it shall not cease to be effective and available for Transfers of Registrable
Securities thereunder for longer than either (i) any ten (10) consecutive business days, or (ii) an
aggregate of fifteen (15) business days during the period specified in the relevant provision of
this Agreement.

(f) “Effectiveness Period” shall have the meaning set forth in Section 2.

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

(h) “Filing Date” shall have the meaning set forth in Section 2.

(i) “Holders” shall mean the Investor and the transferees of the Registrable
Securities of the Investor, at such times as such Persons shall own Registrable Securities. For
purposes of this Agreement, a Person will be deemed to be a holder and an owner of Registrable
Securities whenever such Person has the right to acquire such Registrable Securities (by
conversion, purchase or otherwise), whether or not such acquisition has actually been effected and
whether or not such right is currently exercisable.

(j) “Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal, state, county,
city, municipal or otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).

(k) “Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplement by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed to be incorporated
by reference in such Prospectus.

(l) “Register,” “registered,” and “registration” shall refer to a
registration effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.

(m) “Registrable Securities” shall mean the Shares; provided, however, that
Registrable Securities shall not include any Registrable Securities which have theretofore been
registered and sold pursuant to the Securities Act or which have been sold to the public pursuant
to Rule 144 or any similar rule promulgated by the Commission pursuant to the Securities Act, and,
provided further, the Company shall have no obligation under Section 2 or Section 3 to register any
Registrable Securities if the Company delivers to the Holders requesting such registration an
opinion of counsel to the effect that the proposed sale or disposition of all of the Registrable
Securities for which registration was requested does not require registration under the Securities
Act for a sale or disposition in a single public sale, and offers to remove any and all legends
restricting transfer from the certificates evidencing such Registrable Securities.

(n) “Registration Statement” means the registration statement and any additional
registration statements contemplated by Section 2 including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

(o) not used

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

(q) “Securities Purchase Agreement” shall have the meaning set forth in the Recitals
to this Agreement.

(r) “Transfer” shall mean and include the act of selling, giving, transferring,
creating a trust (voting or otherwise) and transferring title thereto, assigning or otherwise
disposing of (other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings); provided however, that any transfer or other
disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of
default under or with respect to a pledge, hypothecation or other transfer as security shall
constitute a “Transfer.”

(s) “Violation” shall have the meaning set forth in Section 6.

1.2 Usage.

(a) References to a Person are also references to its assigns and successors in interest (by
means of merger, consolidation or sale of all or substantially all the assets of such Person or
otherwise, as the case may be).

(b) References to Registrable Securities “owned” by a Holder shall include Registrable
Securities beneficially owned by such Person but which are held of record in the name of a nominee,
trustee, custodian, or other agent.

(c) References to a document are to a document as amended, waived and otherwise modified from
time to time and references to a statute or other governmental rule are to a statute or other
governmental rule as amended and otherwise modified from time to time (and references to any
provision thereof shall include references to any successor provision).

(d) References to Sections or to Schedules or Exhibits are to sections hereof or schedules or
exhibits hereto, unless the context otherwise requires.

(e) The definitions set forth herein are equally applicable both to the singular and plural
forms and the feminine, masculine and neuter forms of the terms defined.

(f) The term “including” and correlative terms shall be deemed to be followed by “without
limitation” whether or not followed by such words or words of like import.

(g) The term “hereof” and similar terms refer to this Agreement as a whole.

(h) The “date of” any notice or request given pursuant to this Agreement shall be determined
in accordance with Section 10.2.

Section 2. Shelf Registration. On or prior to March 31, 2005 (the “Filing Date”),
the Company shall prepare and file with the Commission a “Shelf” Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form S-3 (if the Company is not then eligible to register
for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate
form in accordance herewith). The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as possible after the
filing thereof, and shall use its best efforts to keep such Registration Statement Continuously
Effective under the Securities Act until the date when all Registrable Securities covered by such
Registration Statement have been sold or may be sold without restrictions pursuant to Rule 144(k)
as determined by the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent (the “Effectiveness Period”),
provided, however, that the Company shall not be deemed to have used its best efforts to
keep the Registration Statement effective during the Effectiveness Period if it voluntarily takes
any action that would result in the Holder not being able to sell the Registrable Securities
covered by such Registration Statement during the Effectiveness Period, unless such action is
pursuant to a Blackout Period (as defined in Section 3) permitted hereunder, required under
applicable law or the Company has filed a post-effective amendment to the Registration Statement
and the Commission has not declared it effective. Other provisions of this Agreement not
withstanding, the Registration Statement may include shares of Common Stock held by other holders
or to be issued to other holders upon the exercise of warrants.

Section 3. Registration Procedures.

In connection with the Company’s registration obligations hereunder, the Company shall:

(a) Prepare and file with the Commission on or prior to the Filing Date, a Registration
Statement on Form S-3 (or if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3 such registration shall be on another appropriate form in
accordance herewith) which shall contain the “Plan of Distribution” and cause the Registration
Statement to become effective and remain effective as provided herein; provided, however,
that not less than ten (10) Business Days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to
the Holder copies of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the review and comment
of the Holder, and (ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to the Holder, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Investor shall reasonably object on a timely
basis.

(b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement as may be necessary to keep the Registration Statement
Continuously Effective as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in order to register
for resale under the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holder true and complete copies of all
correspondence from and to the Commission relating to the Registration Statement; and (iv) comply
in all material respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the Registration Statement
during the Effectiveness Period in accordance with the intended methods of disposition by the
Holder set forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.

(c) Notify the Holder as promptly as reasonably possible (and, in the case of (i)(A) below,
not less than five (5) days prior to such filing) and (if requested by such Holder) confirm such
notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to
be filed; (B) when the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement (the Company shall provide true and complete copies thereof and all written responses
thereto to the Holder); and (C) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any proceedings for that purpose; (iv) if at any time
any of the representations and warranties of the Company contained in any agreement contemplated
hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of
any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose; and (vi) the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other documents so that in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus or any Prospectus supplement, it will not
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

(d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i)
any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

(e) Furnish to the Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Holder (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

(f) Promptly deliver to Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Holder may reasonably request; and the Company hereby consents to the use of such Prospectus and
each amendment or supplement thereto by the selling Holder in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

(g) If the Registration Statement refers to the Holder by name or otherwise as the holder of
any securities of the Company, then such Holder shall have the right to require (if such reference
to such Holder by name or otherwise is not required by the Securities Act or any similar Federal
statute then in force) the deletion of the reference to such Holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to the time that such reference ceases
to be required.

(h) Holder covenants and agrees that (i) it will not sell any Registrable Securities under the
Registration Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(f) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as contemplated by
Section 3(c)(i); and (ii) it and its officers, directors or affiliates, if any, will comply with
the prospectus delivery requirements of the Securities Act as applicable to it in connection with
sales of Registrable Securities pursuant to the Registration Statement.

(i) If there is a significant business opportunity (including but not limited to the
acquisition or disposition of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or similar transaction) available to the Company which its Board of
Directors reasonably determines not to be in the Company’s best interest to disclose, then the
Company may suspend the right of the Holder to sell Registrable Securities under a Registration
Statement for one period not to exceed 20 Business Days during the Effectiveness Period (the
“Blackout Period”).

(j) Use all reasonable efforts to cause the Common Stock, if the Common Stock is then listed
on a securities exchange or included for quotation in a recognized trading market, to continue to
be so listed or included for a reasonable period of time after the offering.

(k) Use all reasonable efforts to cause the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the business and operations of the Company
to enable the selling Holders of Registrable Securities to consummate the disposition of such
Registrable Securities.

Section 4. Holders’ Obligations. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to the Registrable
Securities of any selling Holder of Registrable Securities that such selling Holder shall:

4.1 Furnish to the Company such information regarding such Selling Holder, the number of the
Registrable Securities owned by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such selling Holder’s Registrable Securities, and
to cooperate with the Company in preparing such registration.

Section 5. Expenses of Registration.

5.1 The Company shall bear and pay all expenses and fees incurred in connection with the
Registration Statement pursuant to Section 2 for any Holder (which right may be Transferred to any
Person to whom Registrable Securities are Transferred as permitted by Section 7), including
registration, qualification and filing fees, exchange listing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses and the expenses of
any special audits incident to or required by any such registration, but excluding underwriting
discounts and commissions relating to Registrable Securities (which shall be paid by the Holders)
and fees and expenses of counsel to the Holder.

Section 6. Indemnification; Contribution. If any Registrable Securities are included in a
registration statement under this Agreement:

6.1 To the extent permitted by applicable law, the Company shall indemnify and hold harmless
each Holder, each Person, if any, who controls such Holder within the meaning of the Securities
Act, and each affiliate, officer, director, partner, agent and employee of such Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or
several), including attorneys’ fees and disbursements and expenses of investigation, incurred by
such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to
which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or
other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses
arise out of or are based upon any of the following statements, omissions or violations
(collectively a “Violation”):

(a) Any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, including any preliminary Prospectus or final Prospectus
contained therein, or any amendments or supplements thereto;

(b) The omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading; or

(c) Any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any applicable state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any applicable state securities law;

provided, however, that the indemnification required by this Section 6.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement
is effected without the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim, damage, liability or
expense to the extent that it arises out of or is based upon a Violation that occurs in reliance
upon and in conformity with written information furnished to the Company by the indemnified party
expressly for use in connection with such registration; provided, further, that the indemnity
agreement contained in this Section 6 shall not apply to any Holder to the extent that any such
loss is based on or arises out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact, contained in or omitted from any
preliminary prospectus if the final prospectus shall correct such untrue statement or alleged
untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not
been sent or given to such person at or prior to the confirmation of sale to such person if such
Holder was under an obligation to deliver such final prospectus and failed to do so.

6.2 To the extent permitted by applicable law, each Holder, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its officers who shall have
signed the Registration Statement, and each Person, if any, who controls the Company within the
meaning of the Securities Act, against any and all losses, claims, damages, liabilities and
expenses, including attorneys’ fees and disbursements and expenses of investigation, incurred by
such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to
which any of the foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities
and expenses arise out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration; provided, however,
that the indemnification required by this Section 6.2 shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or expense if settlement is effected without the consent
of the relevant Holder of Registrable Securities, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the liability of the Holder under this Section 6.2 shall be limited
in an amount equal to the net proceeds from the sale of the shares sold by such Holder, unless such
liability arises out of or is based on willful conduct or gross negligence by such Holder.

6.3 Promptly after receipt by an indemnified party under this Section 6 of notice of the
commencement of any action, suit, proceeding, investigation or threat thereof made in writing for
which such indemnified party may make a claim under this Section 6, such indemnified party shall
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and disbursements and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party within a reasonable time following
the commencement of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under this Section 6 but
shall not relieve the indemnifying party of any liability that it may have to any indemnified party
otherwise than pursuant to this Section 6. Any fees and expenses incurred by the indemnified party
(including any fees and expenses incurred in connection with investigating or preparing to defend
such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30)
days of written notice thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification hereunder). Any such
indemnified party shall have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay
such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the
defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in addition to those
available to the indemnifying party and that the assertion of such defenses would create a conflict
of interest such that counsel employed by the indemnifying party could not faithfully represent the
indemnified party (in which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate local counsel) at
any time for all such indemnified parties, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such indemnified party and any other of such
indemnified parties with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or
counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any
action, proceeding or claim without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld.

6.4 If the indemnification required by this Section 6 from the indemnifying party is
unavailable or insufficient to hold harmless an indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses referred to in this Section 6:

(a) The indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect (i) the relative benefits received by the indemnifying party or parties, on the one
hand and the indemnified party on the other from the sale of the Registrable Securities, or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party on the one hand and indemnified parties on the other in
connection with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include, subject to
the limitations set forth in Section 6.1 and Section 6.2, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation or
proceeding.

(b) The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4 were determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations referred to in
Section 6.4(a). No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.

(c) Notwithstanding the provisions of this Section 6.4, a Holder shall not be
required to contribute any amount or make any other payments under this Agreement that in
the aggregate exceed the net proceeds received by the Holder from the sales of the
Registrable Securities of the Company.

6.5 The obligations of the Company and the selling Holders of Registrable Securities under
this Section 6 shall survive the completion of any offering of Registrable Securities pursuant to a
registration statement under this Agreement, and otherwise.

Section 7. Transfer of Registration Rights. The rights of a Holder hereunder may be
Transferred in whole or in part to (i) any affiliate (as defined in Rule 12b-2 under the Exchange
Act) of a Holder or (ii) any other Person upon the prior written consent of the Company; provided,
however, that any such transferee that is not a party to this Agreement shall have executed and
delivered to the Secretary of the Company a properly completed agreement substantially in the form
of Exhibit A, and provided, further, that the transferor shall have delivered to the
Secretary of the Company, no later than 15 days following the date of the Transfer, written
notification of such Transfer setting forth the name of the transferor, name and address of the
transferee and the number of Registrable Securities which shall have been so Transferred.

Section 8. Amendment, Modification and Waivers; Further Assurances.

(a) This Agreement may be amended with the consent of the parties hereto and the
Company may take any action herein prohibited, or omit to perform any act herein required
to be performed by it, only if the Company shall have obtained the written consent of the
Holder.

(b) No waiver of any terms or conditions of this Agreement shall operate as a waiver
of any other breach of such terms and conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof. No written waiver hereunder, unless it by its own terms explicitly
provides to the contrary, shall be construed to effect a continuing waiver of the
provisions being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against whom such
waiver is claimed in all other instances or for all other purposes to require full
compliance with such provision.

(c) Each of the parties hereto shall execute all such further instruments and
documents and take all such further action as any other party hereto may reasonably require
in order to effectuate the terms and purposes of this Agreement.

Section 9. Assignment; Benefit. This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their respective heirs,
assigns, executors, administrators or successors; provided, however, that except as specifically
provided herein with respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company without the prior
written consent of the Holder. A Holder may Transfer its rights hereunder to a successor in
interest to the Registrable Securities owned by such assignor as permitted by Section 7.

Section 10. Miscellaneous.

10.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING REGARD TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF. EACH OF THE PARTIES HEREBY SUBMITS TO PERSONAL JURISDICTION AND WAIVES ANY OBJECTION AS TO
VENUE IN THE COUNTY OF DALLAS, STATE OF TEXAS. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.

10.2 Notices. All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been sufficiently given (a) if sent by facsimile
transmission, upon telephonic confirmation of receipt, (b) if sent by registered or certified mail,
upon the sooner of the expiration of five (5) days after deposit in the post office facilities
properly addressed with postage prepaid or acknowledgment of receipt, (c) if personally delivered,
when delivered to the party to whom notice is sent, or (d) if delivered by a recognized overnight
courier, upon receipt evidencing proof of delivery, addressed to the appropriate party or parties,
at the address of such party set forth below, (or at such other address as such party may designate
by written notice furnished to all other parties in accordance herewith):

(a) if to the Investor:

(b) if to the Company:

TeraForce Technology Corporation

1240 E. Campbell Road

Richardson, TX 75081

(469) 330-4951

(469) 330-4972 fax

Attn: Robert P. Capps

10.3 Entire Agreement; Integration. This Agreement supersedes all prior agreements
between or among any of the parties hereto with respect to the subject matter contained herein, and
this Agreement embodies the entire understanding among the parties relating to such subject matter.

10.4 Section Headings. Section headings are for convenience of reference only and
shall not affect the meaning of any provision of this Agreement.

10.5 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original, and all of which shall together constitute one and the same
instrument. All signatures need not be on the same counterpart.

10.6 Severability. If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity and enforceability
of the remaining provisions of this Agreement, unless the result thereof would be unreasonable, in
which case the parties hereto shall negotiate in good faith as to appropriate amendments hereto.

10.7 Filing. A copy of this Agreement and of all amendments thereto shall be filed at
the principal executive office of the Company with the corporate recorder of the Company.

10.8 Termination. This Agreement may be terminated at any time by a written
instrument signed by the parties hereto. Unless sooner terminated in accordance with the preceding
sentence, this Agreement (other than Section 6 hereof) shall terminate in its entirety on such date
as there shall be no Registrable Securities outstanding or issuable by the Company.

10.9 No Third Party Beneficiaries. Nothing herein expressed or implied is intended to
confer upon any Person, other than the parties hereto or their respective permitted assigns,
successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.

1

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date
first written above.

TERAFORCE TECHNOLOGY CORPORATION

By:

Name: Robert P. Capps

Title: Executive Vice President

Investor

2

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