As filed with the Securities and Exchange Commission on April 9, 1999
Registration No. 333-67885
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 2
to
Form S-3 Registration Statement
Under the Securities Act of 1933
---------------
TERA COMPUTER COMPANY
(Exact name of registrant as specified in its charter)
---------------
WASHINGTON 93-0962605
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
411 First Avenue South
Suite 600
Seattle, WA 98104
(206) 701-2000 (telephone)
(206) 701-2500 (facsimile)
(Address, including zip code, and telephone and
facsimile numbers, including area code, of
principal executive offices)
---------------
Kenneth W. Johnson, Chief Financial Officer
Tera Computer Company
411 First Avenue South
Suite 600
Seattle, WA 98104
(206) 701-2000 (telephone)
(206) 701-2500 (facsimile)
(Name, address, including zip code, and
telephone and facsimile numbers, including area code, of
agent for service)
Copy to:
Christopher J. Voss
Stoel Rives LLP
One Union Square, 36th Floor
Seattle, WA 98101-3197
(206) 624-0900 (telephone)
(206) 386-7500 (facsimile)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Per Aggregate Offering Registration
Registered Registered (1) Share(2) Price (2) Fee(3)
- -------------------- -------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, 1,497,929 shares $6.50 $6,173,430 $1,759
$.01 par value
=================================================================================================
(1) Pursuant to Rule 416 under the Securities Act of 1933, there are also being
registered such indeterminate number of additional shares of Common Stock as may
be issuable upon exercise of the Common Stock purchase warrants described herein
pursuant to the provisions thereof regarding adjustment for stock dividends,
stock splits or similar events.
(2) Of the shares being registered hereby, 161,344 are issuable upon exercise of
outstanding common stock purchase warrants at an exercise price of $6.00 per
share, and 536,585 are issuable upon exercise of outstanding common stock
purchase warrants at an exercise price of $0.01 per share. The proposed maximum
offering price per share and maximum aggregate offering price for the balance of
the shares being registered hereby is calculated in accordance with Rule 457(c)
under the Securities Act.
(3) A registration fee of $3,160 was paid upon filing of the initial
registration statement on November 24, 1998.
</TABLE>
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said section 8(a), may determine.
<PAGE>
PROSPECTUS, Subject to Completion, dated March 26, 1999
TERA COMPUTER COMPANY
1,497,929 shares of Common Stock
These shares of common stock are being offered and sold from time to time
by certain of our current shareholders. We issued the shares, or reserved the
shares for issuance, to the selling shareholders in connection with investments
that the selling shareholders made in the Company in September and December
1998.
The selling shareholders may sell the shares from time to time at fixed
prices, market prices, prices computed with formulas based on market prices, or
at negotiated prices, and may engage a broker or dealer to sell the shares. For
additional information on the selling shareholders' possible methods of sale,
you should refer to the section of this prospectus entitled "Plan of
Distribution" on page 17. We will not receive any proceeds from the sale of the
shares, but will bear the costs relating to the registration of the shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"TERA." On March 25, 1999, the closing price for our common stock was $6.375 per
share.
--------------------
This shares offered in this prospectus involve a high degree of risk. You
should carefully consider the "Risk Factors" beginning on page 4 in determining
whether to purchase shares of our common stock.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------
The date of this Prospectus is _____, 1999.
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
Our Business .................................................... 3
Risk Factors .................................................... 4
Capitalization .................................................. 14
Selling Shareholders ............................................ 15
Plan of Distribution ............................................ 17
Experts ......................................................... 18
Limitation of Liability and Indemnification ..................... 18
Information Incorporated by Reference ........................... 18
Available Information ........................................... 19
You should rely only on information contained or incorporated by reference
in this prospectus. See "Information Incorporated by Reference" on Page 18.
Neither Tera nor the selling shareholders have authorized any other person to
provide you with information different from that contained in this prospectus.
The shares of common stock are not being offered in any jurisdiction where
the offering is not permitted.
The information contained in this prospectus is correct only as of the date
on the cover, regardless of the date this prospectus was delivered to you or the
date on which you acquired any of the shares.
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<PAGE>
OUR BUSINESS
We design and market high performance computer systems based on our unique
multi-threaded architecture, the "MTA system."
Our MTA system addresses a wide range of scientific and engineering
applications, such as simulating and visualizing complex mechanical and
biochemical systems. Examples of these applications include car crash
simulations and molecular modeling for pharmaceutical drug design. In addition,
the MTA system is suited for emerging commercial applications, such as
computer-aided design and visualization, and highly data-intensive applications,
such as information-on-demand across the Internet, portfolio analysis for
investment analysts, and the analysis of very large collections of data to
answer queries. Because it may be used to solve a wide variety of scientific,
industrial and commercial problems, the MTA system is considered a general
purpose supercomputer.
We were organized in December 1987, and since then have been working to
design, develop and manufacture the MTA system, including hardware and software.
In April 1998, we installed a two-resource module MTA system at the San Diego
Supercomputer Center, our first customer, and recognized our first revenue from
system sales. In December 1998, this system was upgraded to a four-resource
module system. We plan to upgrade this system to larger configurations in stages
as we receive production printed circuit boards, packaged integrated circuits
and other components from our vendors. We also plan additional shipments to
other customers in 1999, although we presently have no contracts for other
deliveries.
Our principal executive offices are located at Merrill Place, Suite 600, 411
First Avenue South, Seattle, WA 98104-2860, and our telephone number is (206)
701-2000.
--------------------
"Tera" and "MTA" are trademarks of the Company. This prospectus also
contains and incorporates trademarks of other companies.
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<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in shares of Tera's common stock.
You should not purchase any of the shares unless you can afford a complete loss
of your investment.
- --------------------------------------------------------------------------------
We Have Not Completed Development of a Commercially Acceptable MTA System
The development of a new very high performance computer system is a lengthy
and technically challenging process and requires a significant investment of
capital and other resources. Several companies in this market experienced
extreme financial difficulty in the 1990s, including Thinking Machines
Corporation, Cray Computer Corporation, Kendall Square Research Corporation and
Supercomputer Systems, Inc. We first integrated multiple MTA resource modules
into commercially configured computer systems only in 1998, and have not yet
built the MTA system to meet stringent commercial reliability standards. To
date, we have sold one MTA system to the National Science Foundation which is
installed at the San Diego Supercomputer Center, and have no purchase orders for
additional systems. We may not be able to meet all of the technical challenges
required to integrate and complete MTA systems that satisfy internal performance
specifications and that are commercially acceptable.
Completing the Development of the MTA System Poses Ongoing Technical Challenges
From time to time during the development process of the MTA system, we have
been required to redesign certain components of the MTA system because of
previously unforeseen design flaws. For example, we have discovered certain
design flaws in certain application-specific integrated circuits, printed
circuit boards and flex circuits, all of which had to be redesigned. We also
continue to find certain flaws or "bugs" in our system software, which require
correction. This redesign work has been costly and caused delays in the
development of our prototype, in the delivery of our initial MTA system and in
upgrades to that system. We expect that additional modifications to the hardware
components, system software and the integrated system will be necessary as we
build larger MTA systems for the commercial market. Additional delays in
completing the various hardware components or software, or in integrating the
full system, would materially and adversely affect our business and results of
operations.
Our Suppliers May Not Deliver Acceptable Hardware Components
The manufacture of components for the MTA system is a difficult and complex
process, and few companies can meet our requirements. Our suppliers have
previously experienced problems in manufacturing MTA system components to our
design and quality specifications. In prior years we have been forced to
redesign certain components for manufacture by alternative suppliers because our
original suppliers were unable to consistently manufacture components of
satisfactory quality. In 1997 and 1998, we experienced varying (and sometimes
"zero") yields of gallium arsenide application-specific integrated circuits,
limited and delayed deliveries of such integrated circuits and deliveries of a
very limited number of reliable
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<PAGE>
printed circuit boards. Together, these supply constraints caused substantial
delays in our ability to deliver the initial MTA system to the San Diego
Supercomputer Center and upgrading that system to larger configurations.
Although we are working with our suppliers to solve these problems, there
can be no assurance that they will be able to manufacture the components to our
design and quality specifications. Future manufacturing difficulties or
limitations of the suppliers could result in:
o a limitation on the number of MTA systems that can be produced using such
components;
o unacceptably high prices for those components, with a resulting loss of
profitability and loss of competitiveness for our products; and
o increased demands on our financial resources, requiring additional equity
and/or debt financings to continue business operations.
We Will Need Additional Capital To Continue Business Operations
Present cash resources and revenue from anticipated sales of MTA systems
and existing service contracts will be insufficient to finance our planned
operations throughout 1999. We believe that we will need to raise at least $12
million to meet our contractual commitments and to continue our current levels
of business operations even if we receive revenues from system sales when
anticipated; we have raised approximately $7 million from financings in the
first quarter of 1999. If we do not receive any revenues from system sales when
anticipated, then we will need additional capital. Even after completing such
financings and reciving product revenue from sales, we may raise additional
equity capital in 1999 to enhance our financial position for future operations.
Financings may not be available to us when needed or, if available, may not be
available on satisfactory terms or may be dilutive to our shareholders. If no
financing is available to us or is available only on a limited basis, then we
would have to significantly reduce our current operations, including inventory
purchases, research and design expenditures and numbers of employees.
We Have Had Limited Revenues and No Earnings; This May Continue
We have experienced net losses in each year of operations, and had an
accumulated net loss of approximately $62.6 million as of December 31, 1998. We
incurred net losses $12.1 million in 1996, $15.8 million in 1997, and $19.8
million in 1998. We expect to incur substantial further losses until we make
sales on a regular basis. We do not expect to have a profitable fiscal quarter
prior to 2000, if then.
Whether we will achieve additional revenue, or any earnings, will depend
upon a number of factors, including:
o our ability to manufacture production quality MTA systems in commercial
quantities;
o our ability to achieve broad market acceptance of the MTA system;
o the level of revenue in any given period;
o the terms and conditions of sale or lease for an MTA system;
o the MTA system model or models sold; and
o our expense levels and manufacturing costs.
There can be no assurance that we will be successful in delivering and receiving
payments for any additional MTA systems, or that we will be able to generate
additional sales or achieve a profitable level of operations in the future.
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<PAGE>
Our Reliance on Third Party Suppliers Poses Significant Risks
We subcontract the manufacture of substantially all of our hardware
components, including integrated circuits, printed circuit boards, flex circuits
and power supplies, on a sole or limited source basis to third party suppliers.
We obtain our gallium arsenide integrated circuits from Vitesse Semiconductor
Corporation and TriQuint Corporation; printed circuit boards from Multek
Corporation and Johnson-Matthey Inc.; flex circuits from Compunectics Inc.;
power supplies from ABB Power Supplies, Inc.; uninterruptible power supplies
from Pillar GmbH; and cooling distribution units from C.H. Bull Company. We are
exposed to substantial risks because of our reliance on these and other limited
or sole source suppliers. For example:
o if a reduction or interruption of supply of our components occurred, it
could take us a considerable period of time to identify and qualify
alternative suppliers to redesign our products as necessary and recommence
manufacture;
o if we were ever unable to locate a supplier for a component, we would be
unable to assemble and deliver our products;
o one or more suppliers may make strategic changes in their product lines,
which may result in the delay or suspension of manufacture of our
components or systems; and
o some of our key suppliers are small companies with limited financial and
other resources, and consequently may be more likely to experience
financial difficulties than larger, well established companies.
CMOS Implementation Will Require Significant Resources and May Not Be Successful
Over the next couple of years we plan to replace in stages most of our
gallium arsenide integrated circuits with integrated circuits made of CMOS
(complementary metal-oxide silicon). We believe that CMOS application-specific
integrated circuits will enable us to offer larger, more cost effective systems.
For example, the 24 gallium arsenide application-specific integrated circuits
currently on each processor board likely will be replaced by one CMOS
microprocessor. This process requires the redesign of all integrated circuits,
application-specific integrated circuit packages and printed circuit boards,
which in turn involves significant effort by our engineers and requires us to
devote significant capital for non-recurring engineering expenses, including
payments to potential suppliers and for design assistance. If we encounter
significant problems with this redesign, we may be delayed substantially in
delivering larger systems, which would materially and adversely affect our
working capital, business and results of operations. If we are successful in
producing CMOS components as planned, we may not be able, or desire, to use any
of the then remaining inventory of gallium arsenide components, and we may incur
a substantial expense in writing off such inventory.
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<PAGE>
A Substantial Number of Our Shares Are Eligible for Future Sale and Could
Depress Market Prices
Sale of a substantial number of shares of our common stock in the public
market or the prospect of such sales could materially and adversely affect the
market price of the common stock. As of March 8, 1999, we had outstanding:
o 14,328,701 shares of common stock;
o 5,715 shares of Series B Convertible Preferred Stock convertible into an
indeterminate number of shares of common stock; and
o privately placed warrants to purchase another 1,845,521 shares of common
stock.
Almost all of our outstanding shares of common stock may be sold without
substantial restrictions. In addition, as of March 8, 1999, we had granted
options under our option plans to purchase an aggregate of 3,095,895 shares of
common stock. All of the shares purchased under the option plans are available
for sale in the public market, subject in some cases to volume and other
limitations.
Sales in the public market of substantial amounts of common stock,
including sales of common stock issuable upon conversion of the Series B
Convertible Preferred Stock or the exercise of the privately placed warrants,
could depress prevailing market prices for the common stock. Even the perception
that such sales could occur may impact market prices.
Additional Shares Issuable By Us Would Dilute Your Shareholdings and Could
Hinder Our Ability to Obtain Additional Financing
We may be required to issue substantial additional shares of common stock to
holders of our Series B Convertible Preferred Stock and to holders of common
stock with certain "adjustment" rights. The Series B Convertible Preferred Stock
has a variable conversion rate equal to the lowest market "sale" price (subject
to adjustment in certain circumstances) in the five trading days prior to each
conversion. The number of shares of common stock that would be issuable upon
conversion of the 5,715 shares of Series B Convertible Preferred Stock
outstanding as of March 8, 1999 (excluding any issuance of common stock in
payment of 5% per annum accrued dividends on the Series B) is illustrated below:
Number of Shares
of Common
Conversion Price Stock Issuable
$10.00 571,500
$8.00 714,375
$6.00 952,500
$4.00 1,428,750
The Series B convertible preferred stock may be converted at any time, but
holders tend to convert their shares when the market price of our common stock
increases significantly within short periods.
The shares of common stock sold to the selling shareholders in the
September 1998 and December 1998 private placements have certain "adjustment"
rights pursuant to which we are required to issue warrants to purchase
additional shares of common stock at an exercise price of $.01 per share to the
selling shareholders (or to their permitted assigns) if the market price of our
common stock is less than a specified target value on certain "measurement
dates."
We agreed with the selling shareholders that the first measurement date
would be on February 22, 1999, as of which date we became obligated to issue
warrants to acquire 536,585 additional shares of common stock (the "February
Adjustment Warrants") to the selling shareholders in accordance with the terms
of the adjustment provisions of the
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<PAGE>
subscription agreements for the September and December private placements. The
shares underlying the February Adjustment Warrants have been registered in the
Registration Statement of which this prospectus constitutes a part.
The next measurement date will be on May 22, 1999. Assuming that the
selling shareholders continue to hold all of the 800,000 shares issued to them
in the September and December private placements and all of the February
Adjustment Warrants, the number of warrants to purchase additional shares that
would be issued to the investors on that date is illustrated below:
Market Price of Number of
Common Stock Warrants Issuable
--------------- -----------------
$12.00 - 0 -
$10.00 80,000
$8.00 200,000
$6.00 478,048
$4.00 1,385,365
Subsequent measurement dates are every three months thereafter through
September 30, 2001, and each subsequent target value will be $12.00 or the
lowest target value for any prior measurement date.
For subsequent measurement dates, the adjustment provision operates
similarly. If the market price is less than the applicable target value for
measurement dates after May 22, 1999, then the number of shares to be issued
will be increased by 1.25%, which reflects a negotiated issuance premium.
Assuming that the market price of the common stock on May 22, 1999 was $8.00 per
share and the selling shareholders continue to hold the original 800,000 shares,
the February Adjustment Warrants, and the warrants to purchase an additional
200,000 shares assumed to be issued on May 22, 1999, our obligation to issue
warrants to acquire additional shares on August 22, 1999 (the third measurement
date) may be illustrated as follows:
Market Price of Number of
Common Stock Warrants Issuable
--------------- -----------------
$12.00 - 0 -
$10.00 - 0 -
$8.00 - 0 -
$6.00 300,731
$4.00 1,219,390
The existence of the Series B Convertible Preferred Stock and the
possibility of the issuance of warrants to acquire additional shares, as
described above, as well as the existence of other outstanding warrants and
options, may prove to be a hindrance to our future equity financings. Further,
the holders of such warrants and options may exercise them at a time when we
would otherwise be able to obtain additional equity capital on terms more
favorable to us. Such factors could materially and adversely affect our ability
to meet our capital needs.
Expected Sales Prices May Not Be Realizable
Most of our potential customers already own or lease very high performance
computer systems. Some of our competitors may offer trade-in allowances or
substantial discounts to potential customers, and we may not be able to match
such
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<PAGE>
sales incentives. We may be required to provide discounts to make sales or to
finance the leasing of our products, which would result in a deferral of our
receipt of cash for such systems. These developments could materially and
adversely affect our business and results of operations.
Continued Government Funding is Uncertain
We have targeted U.S. and foreign government agencies and research
laboratories for our early sales. Our first sale was to the U.S. National
Science Foundation for installation at the San Diego Supercomputer Center. The
U.S. government historically has facilitated the development of, and has
constituted a market for, new and enhanced very high performance computer
systems. If the U.S. government or foreign governments were to reduce or delay
funding of certain high technology programs employing high performance
computing, then one of our target markets would be seriously adversely affected.
The inability of U.S. and foreign government agencies to procure additional very
high performance computer systems, due to lack of funding or for any other
reason, would materially and adversely affect our business, results of
operations and need for capital.
Significant Sales Depends Upon the Porting of Third Party Application Software
In order to make sales in markets beyond the very high performance
scientific market, such as government agencies and research laboratories, to
engineering and other commercial markets, we must be able to attract independent
software vendors to port their software application programs so that they will
run on the MTA system. We also plan to modify and port third-party software
applications to the MTA system ourselves to facilitate the expansion of our
potential markets. There can be no assurance that we will be able to induce
independent software vendors to port their applications, or that we will
successfully port third-party applications to the MTA system, and the failure to
do so could materially and adversely affect our business and results of
operations.
Rapid Growth Could Strain Our Management and Financial Resources
If we are successful in manufacturing and marketing the MTA system, we
believe that Tera would undergo a period of rapid growth that could place a
significant strain on our management, financial and other resources. Our ability
to manage our growth will require us:
o to continue to improve our operational and financial systems;
o to motivate and effectively manage our employees;
o to complete the implementation of a new financial, budgeting and management
information system; and
o to enhance internal control systems.
Our success will depend on our management's ability to make these changes and to
manage our operations effectively over the long term.
Our Success Depends on Key Personnel
Our success also will depend in large part upon our ability:
o to attract and retain highly skilled technical and marketing and sales
personnel;
o to provide technological depth and support;
o to complete and enhance the MTA system hardware and software; and
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<PAGE>
o to develop implementations of the MTA system.
Competition for highly skilled management, technical, marketing and sales
personnel is intense. We may not succeed in attracting and retaining such
personnel.
We are dependent on Burton J. Smith, our Chairman of the Board and Chief
Scientist, and James E. Rottsolk, our Chief Executive Officer. The loss of
either officer's services could have a material impact on our ability to achieve
our business objectives. We are the beneficiary of key man life insurance
policies on the lives of Messrs. Smith and Rottsolk in the amount of $2 million
and $1 million, respectively. We have no employment contracts with either Mr.
Smith or Mr. Rottsolk, or with any other employee.
Our Quarterly Performance May Vary Significantly
If we are able to attain market acceptance of the MTA system, one or a few
system sales may account for a substantial percentage of our quarterly and
annual revenue. This is due to the anticipated high average sales price of the
MTA system models and the timing of purchase orders and product acceptances.
Because a number of our prospective customers receive funding from the U.S. or
foreign governments, the timing of orders from such customers may be subject to
the appropriation and funding schedules of the relevant government agencies. The
timing of orders and shipments also could be affected by other events outside
our control, such as:
o changes in levels of customer capital spending;
o the introduction or announcement of competitive products;
o the availability of components; or
o currency fluctuations and international conflicts or economic crises.
Because of these factors, revenue, net income or loss and cash flow are likely
to fluctuate significantly from quarter to quarter.
U.S. Export Controls Could Hinder Our Sales to Foreign Customers
The U.S. government regulates the export of high performance computer
systems such as the MTA system. Delay or denial in the granting of any required
licenses could materially and adversely affect our business and results of
operations.
We May Not Be Able to Keep Up With Rapid Technological Change
Our market is characterized by rapidly changing technology, accelerated
product obsolescence, and continuously evolving industry standards. Our success
will depend upon our ability to complete development of the MTA system and to
introduce new products and features in a timely manner to meet evolving customer
requirements. We may not succeed in these efforts. Our business and results of
operations will be materially and adversely affected if we incur delays in
developing our products or if such products do not gain broad market acceptance.
In addition, products or technologies developed by others may render our
products or technologies noncompetitive or obsolete.
Competition in the High Performance Computer Market is Intense
Our competitors include established companies that are well-known in the
high performance computer market and new entrants capitalizing on developments
in parallel processing and increased computer performance through networking.
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<PAGE>
The high performance computer market is highly competitive and has been
dominated by Cray Research, Inc., now a subsidiary of Silicon Graphics, Inc.
Other participants in the market include IBM Corporation and Japanese companies
such as NEC Corporation, Fujitsu, Ltd., and Hitachi, Ltd. Each of these
competitors has broader product lines and substantially greater research,
engineering, manufacturing, marketing and financial resources than we do.
A number of companies have developed or plan to develop parallel systems
for the high performance computer market. To date, these products have been
limited in applicability and scalability and are often difficult to program. A
breakthrough in architecture or software technology could change this situation.
Such a breakthrough would materially and adversely our business and results of
operations.
The performance of the MTA system may not be competitive with the computer
systems offered by our competitors, and we may not compete successfully over
time against new entrants or innovative competitors at the lower end of the
market. Furthermore, periodic announcements by our competitors of new high
performance computer systems and price adjustments may materially and adversely
affect our business and results of operations.
We May Not Be Able To Protect Our Proprietary Information and Rights Adequately
We rely on a combination of copyright and trade secret protection,
non-disclosure agreements and licensing arrangements to establish, protect and
enforce our proprietary information and rights. In addition, we have a number of
patent applications pending and plan to file additional patent applications.
There can be no assurance, however, that patents will be issued from the pending
applications or that any issued patents will protect adequately those aspects of
our technology to which such patents will relate. Despite our efforts to
safeguard and maintain our proprietary rights, there can be no assurance that we
will succeed in doing so or that our competitors will not independently develop
or patent technologies that are substantially equivalent or superior to our
technologies.
Although we are not a party to any present litigation regarding proprietary
rights, third parties may assert intellectual property claims against us in the
future. Such claims, if proved, could materially and adversely affect our
business and results of operations. In addition, even meritless claims require
management attention and cause us to incur significant expense.
The laws of certain foreign countries do not protect intellectual property
rights to the same extent or in the same manner as do the laws of the United
States. Although we continue to implement protective measures and intend to
defend our proprietary rights vigorously, there can be no assurance that these
efforts will succeed.
Our Stock Price May Be Volatile
The trading price of our common stock could be subject to significant
fluctuations in response to, among other factors:
o variations in quarterly operating results;
o changes in analysts' estimates;
o announcements of technological innovations by us or our competitors; and
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<PAGE>
o general conditions in the high performance computer industry.
In addition, the stock market is subject to price and volume fluctuations that
particularly affect the market prices for small capitalization, high technology
companies. These fluctuations are often unrelated to the operating performance
of these companies.
It May Become More Difficult to Sell Our Stock in the Public Market
Our common stock is quoted on the Nasdaq National Market. In order to
remain listed on this market, the Company must meet Nasdaq's listing maintenance
standards. If the price of our common stock falls below minimum price levels for
an extended period, or we are unable to continue to meet Nasdaq's standards for
any other reason, the common stock could be delisted from the Nasdaq National
Market.
If the common stock is delisted, we likely would seek to list the common
stock on the Nasdaq SmallCap Market or for quotation on the American Stock
Exchange or a regional stock exchange. However, listing or quotation on such
market or exchange could reduce the liquidity of the market for the common
stock.
If the common stock were not listed or quoted on another market or
exchange, trading of the common stock would be conducted in the over-the-counter
market on an electronic bulletin board established for unlisted securities or in
what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations for
the price of, the common stock. In addition, such delisting from the Nasdaq
National Market and failure to obtain listing or quotation on such other market
or exchange would subject our securities to so-called "penny stock" rules that
impose additional sales practice and market-making requirements on
broker-dealers who sell and/or make a market in such securities. Consequently,
removal from the Nasdaq National Market and failure to obtain listing or
quotation on another market or exchange could affect the ability or willingness
of broker-dealers to sell and/or make a market in the common stock and the
ability of purchasers of the common stock to sell their securities in the
secondary market. In addition, if the market price of the common stock falls to
below $5.00 per share, we may become subject to certain penny stock rules even
if our common stock is still quoted on the Nasdaq National Market. While such
penny stock rules should not affect the quotation of our common stock on the
Nasdaq National Market, such rules may further limit the market liquidity of the
common stock and the ability of investors to sell the common stock in the
secondary market.
We Do Not Anticipate Declaring Any Dividends
We have not previously paid any dividends on our common stock and for the
foreseeable future we intend to continue our policy of retaining any earnings to
finance the development and expansion of our business.
Certain Provisions of our Articles and Bylaws Could Make a Proposed Acquisition
That is Not Approved by Our Management More Difficult
Certain provisions of our Restated Articles of Incorporation and Restated Bylaws
could make it more difficult for a third party to acquire us. These provisions
could limit the price that certain investors might be willing to pay in the
future for our common stock.
For example, our Articles and Bylaws provide for:
-12-
<PAGE>
o a staggered Board of Directors, so that only two of six new directors are
elected each year;
o removal of a director for cause only upon the affirmative vote of not less
than two-thirds of the shares entitled to vote to elect directors;
o the issuance of preferred stock, without shareholder approval, with rights
senior to those of the common stock;
o no cumulative voting of shares;
o a special meeting of the shareholders only upon demand by the holders of
not less than 30% of the shares entitled to vote at such a meeting;
o amendments to the Articles of Incorporation require the affirmative vote of
not less than two-thirds of the outstanding shares entitled to vote on the
amendment, unless the amendment was approved by a majority of "continuing
directors" (as that term is defined in our Articles);
o special voting requirements for mergers and other business combinations,
unless the proposed transaction was approved by a majority of continuing
directors;
o special procedures to bring matters before our shareholders at our annual
shareholders' meeting; and
o special procedures for nominating members for election to the Board of
Directors.
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<PAGE>
- --------------------------------------------------------------------------------
Special Note Regarding Forward-Looking Statements
Some of the statements contained in this prospectus discuss future expectations,
contain projections or results of operations or financial condition or state
other "forward-looking" information. These statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ from those contemplated by the statements and, therefore,
these statements are not guarantees of our future performance.
- --------------------------------------------------------------------------------
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1998, excluding (i) 2,583,036 shares issuable upon exercise of
outstanding stock options as of December 31, 1998 and (ii) 1,072,936 shares of
common stock currently issuable upon exercise of certain privately placed
warrants.
December 31, 1998
-----------------
Long-term portion of capital leases .............................$ 573,054
Shareholders' equity:
Preferred Stock, $.01 par value:
5,000,000 shares authorized; issued
and outstanding, 6,000 shares of
Series B Convertible ........................................ 5,674,406
Common Stock, $.01 par value:
25,000,000 shares authorized; issued
and outstanding, 14,235,085 shares ...................... 68,744,437
Preferred Stock dividend distributable ...................... 75,000
Accumulated deficit ............................................. (62,604,556)
Total shareholders' equity .................................. 11,889,287
Total capitalization ....................................$ 12,462,341
============
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<PAGE>
SELLING SHAREHOLDERS
On September 30, 1998, Advantage Fund II Ltd. ("Advantage") and Koch
Industries, Inc. (Koch") each acquired 300,000 shares of common stock and
warrants to purchase 60,504 shares of common stock (the "September Private
Placement"). On December 16, 1998, Genesee Fund Limited - Portfolio B
("Genesee") and Koch each acquired 100,000 shares of common stock and warrants
to purchase 20,168 shares of common stock (the "December Private Placement").
Advantage, Koch, and Genesee are sometimes referred to in this prospectus
individually as a "selling shareholder" and collectively as the "selling
shareholders." Except with respect to the parties to the transactions and the
number of shares and warrants issued by Tera, the terms and conditions of the
September Private Placement and the December Private Placement were identical in
all material respects. The material terms of the subscription agreements
pursuant to which the selling shareholders acquired the shares of common stock,
warrants, and February Adjustment Warrants are described fully in the Current
Report on Form 8-K, as filed with the SEC on March 25, 1999, which report is
incorporated by reference in this prospectus.
The common stock purchase warrants issued by Tera to the selling
shareholders in the September Private Placement and December Private Placement
are exercisable at $6.00 per share. This exercise price is subject to adjustment
in the event of stock splits, stock dividends, recapitalizations,
reclassifications, and other common anti-dilution events. The exercise price
does not adjust for changes in market price or other performance criteria. The
warrants contain provisions which permit "cashless exercises" pursuant to which,
at the time of exercise, the exercising holders may surrender to Tera a number
of underlying shares of common stock having a market value equal to the
aggregate exercise price of the warrants being exercised, reducing the total
number of shares to be issued by the Company upon exercise.
The shares issued to the selling shareholders in the September Private
Placement and the December Private Placement, the shares issuable upon exercise
of the warrants issued in those transactions, and the shares issuable upon
exercise of the February Adjustment Warrants have been registered in the
registration statement of which this prospectus forms a part.
The following table sets forth certain information as of March 22, 1999,
regarding the ownership of the common stock by the selling shareholders and as
adjusted to give effect to the sale of the shares offered hereby. The
information relating to the shares owned by the selling shareholders prior to
the offering excludes:
o the number of shares issuable upon exercise of the warrants issued in
the September Private Placement and the December Private Placement;
o the number of shares issuable upon exercise of the February Adjustment
Warrants;
o shares of common stock issuable upon conversion of the 5,197 shares of
Series B Convertible Preferred Stock issued by the Company to
Advantage and Genesee in June 1998 that were outstanding as of March
22, 1999, and accrued dividends thereon payable in shares of common
stock; and
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<PAGE>
o shares issuable upon the exercise of common stock purchase warrants
issued by the Company to Advantage and Genesee in December 1997 and
June 1998 that were outstanding as of March 22, 1999.
The information relating to the shares being offered hereby represents:
o the number of shares of common stock sold to the selling shareholders
in the September Private Placement and December Private Placement;
o the number of shares of common stock issuable upon exercise of the
warrants issued to the selling shareholders in the September Private
Placement and December Private Placement; and
o the number of shares issuable upon exercise of the February Adjustment
Warrants.
<TABLE>
<CAPTION>
Ownership After Offering
Shares if All Shares Offered
Owned Prior to Shares Being Hereby Are Sold
Selling Shareholder Offering Offered Shares Percent
------------------- -------- ------- ------ -------
<S> <C> <C> <C> <C>
Advantage Fund II Ltd. 300,000 561,723 - 0 - -
Genesee Fund Limited -Portfolio B 100,217 187,241 - 0 - -
Koch Industries, Inc. 400,000 748,965 - 0 - -
</TABLE>
The selling shareholders and their respective officers and directors have
not held any positions or office or had any other material relationship with
Tera or any of its affiliates within the past three years.
In recognition of the fact that the selling shareholders may wish to be
legally permitted to sell their shares when they deem appropriate, the Company
agreed with the selling shareholders to file with the SEC, under the Securities
Act, a registration statement on Form S-3, of which this prospectus forms a
part, with respect to the resale of the shares, and has agreed to prepare and
file such amendments and supplements to the registration statement as may be
necessary to keep the registration statement effective until the shares are no
longer required to be registered for the sale thereof by the selling
shareholders. The Company also has agreed to file additional registration
statements in the future to register for resale any additional shares of common
stock issuable to the selling shareholders pursuant to their adjustment rights
described in the "Risk Factor" entitled "Additional Shares Issuable By Us Would
Dilute Your Shareholdings and Could Hinder Our Ability to Obtain Additional
Financing" on page 7 hereof and in the Current Report on Form 8-K, as filed with
the SEC on March 25, 1999, which report is incorporated by reference in this
prospectus.
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<PAGE>
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold from time to time by the
selling shareholders or by their pledgees, donees, transferees or other
successors in interest. Sales may be made on one or more exchanges or in the
over-the-counter market (including the National Market), in privately negotiated
transactions, through the writing of options on the shares, or otherwise at
market prices then prevailing or at prices related to the then-current market
price, at fixed prices that may be changed, or at negotiated prices. Any shares
covered by this Prospectus that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under such Rule rather pursuant to this Prospectus.
The shares may be sold to or through brokers or dealers, who may act as
agent or principal, or in direct transactions between the selling shareholders
and purchasers. In addition, the selling shareholders may, from time to time,
sell short the common stock, and in such instances this prospectus may be
delivered in connection with such short sale and the shares offered hereby may
be used to cover the short sale.
Transactions involving brokers or dealers may include (a) ordinary
brokerage transactions, (b) transactions in which the broker or dealer solicits
purchasers, (c) block trades in which the broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, and (d) purchases by a broker or dealer
as a principal and resale by such broker or dealer for its account. In effecting
sales, brokers and dealers engaged by the selling shareholders or from the
purchasers of the shares may arrange for other brokers or dealers to
participate. Participating brokers or dealers may receive discounts, concessions
or commissions from the selling shareholders, the purchasers of the shares for
whom such broker or dealer may act as agent or to whom they may sell as
principal. Any such compensation payable to a broker or dealer may exceed
customary commissions. The Selling Shareholders and such brokers and dealers who
act in connection with the sale of shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by them
and any profit on any resale of the shares as principal may be deemed to be
underwriting discounts and commissions under the Securities Act.
In connection with distributions of the common stock, the selling
shareholders may enter into hedging transactions with brokers or dealers and the
brokers or dealers may engage in short sales of the common stock in the course
of hedging the positions they assume with the selling shareholders. The selling
shareholders also may enter into option or other transactions with brokers or
dealers that involve the delivery of the common stock to the brokers or dealers,
who may then resell or otherwise transfer such common stock. The selling
shareholders also may loan or pledge the common stock to a broker or dealer and
the broker or dealer may sell the common stock so loaned or upon default may
sell or otherwise transfer the pledged common stock.
Advantage and Genesee have agreed to limit their sales of the Company's
common stock on the public market to no more than 5,000 shares, in the
aggregate, per day through May 31, 1999. This limitation will not apply if and
as long as the bid price for the common stock exceeds $13.00 per share.
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<PAGE>
Tera is bearing all costs relating to the registration of the shares. Any
commissions, discounts or other fees payable to brokers or dealers in connection
with any sale of the shares will be borne by the selling shareholders, the
purchasers of the shares, or both. Tera will receive none of the proceeds from
the sale of the shares by the selling shareholders. The Company and the selling
shareholders each have agreed to indemnify the other against certain
liabilities, including liabilities arising under the Securities Act, that relate
to statements or omissions in the registration statement of which this
prospectus forms a part.
EXPERTS
The balance sheets of Tera Computer Company as of December 31, 1996 and
1997 and the related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997, and
period from December 7, 1987 (inception) through December 31, 1997, incorporated
by reference into this prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports with respect thereto. Such
financial statements have been so incorporated in reliance on the reports of
such firm given upon their authority as experts in accounting and auditing.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Articles of Incorporation provide that, to the
fullest extent permitted by the Washington Business Corporation Act, the
Company's directors will not be liable for monetary damages to the Company or
its shareholders, excluding, however, liability for acts or omissions involving
intentional misconduct or knowing violations of law, illegal distributions or
transactions from which the director receives benefits to which the director is
not legally entitled. The Company's Restated Bylaws provide that the Company
will indemnify its directors and, by action of the Board of Directors, may
indemnify its officers, employees and other agents of the Company to the fullest
extent permitted by applicable law, except for any legal proceeding that is
initiated by such directors, officers, employees or agents without authorization
of the Board of Directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC subsequent to the date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the selling shareholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
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<PAGE>
1. Our Annual Report on Form 10-K for the year ended December 31, 1997, and
Amendments No. 1 and No. 2 on Form 10-K/A for the year ended December 31, 1997;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,1998,
and Amendment No. 1 on Form 10-Q/A for the quarter ended March 31, 1998;
3. Our Quarterly Report on Form 10-Q for the quarter ended June 30,1998,
and Amendment No. 1 on Form 10-Q/A for the quarter ended June 30, 1998;
4. Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1998;
5. Our Current Reports on Form 8-K as filed with the SEC on January 7,
1998, January 22, 1998, October 8, 1998, November 8, 1998, and December 23,
1998, and March 25, 1999; and
6. The description of our common stock set forth in our Registration
Statement on Form SB-2 (Registration No. 33-95460-LA), including any amendment
or report filed for the purpose of updating such description, as incorporated by
reference in our Registration Statement on Form 8-A (Registration No. 0-26820),
including the amendment thereto on Form 8-A/A.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, other than exhibits to
such documents. You should direct any requests for documents to Investor
Relations, Tera Computer Company, 411 First Avenue South, Suite 600, Seattle,
Washington 98104, Telephone (206) 701-2000.
The information relating to the Company contained in this prospectus is not
comprehensive and should be read together with the information contained in the
incorporated documents.
AVAILABLE INFORMATION
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with SEC rules.
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy the Registration Statement and any other document
that we file at the SEC's public reference rooms located at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade Center,
Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov or through our web site at http://www.tera.com.
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<PAGE>
Statements contained in this prospectus as to the contents of any contract
or other document referred to are not necessarily complete and in each instance
you should refer to the copy of such contract or other document filed as an
exhibit to the Registration Statement.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
All expenses in connection with the issuance and distribution of the
securities being registered will be paid by the Company. The following is an
itemized statement of these expenses (all amounts are estimated except for the
SEC and Nasdaq listing fees):
SEC Registration fee.............................. $ 3,160
Nasdaq listing fee................................ $ 17,500
Legal fees........................................ $ 40,000
Accountant's Fees................................. $ 15,000
Printing Fees..................................... $ 500
Miscellaneous..................................... $ 840
-----------
Total............................................. $ 77,000
Item 15. Indemnification of Officers and Directors.
Article XII of the Company's Restated Articles of Incorporation and Section
11 of the Company's Restated Bylaws require indemnification of directors,
officers, employees and agents of the Company to the fullest extent permitted by
the Washington Business Corporation Act (the "Act"). Sections 23B.08.500 through
23B.08.000 of the Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act.
Section 23B.08.320 of the Act authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article XI of the Company's Restated Articles of Incorporation
contains provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the Company and its
shareholders.
II-1
<PAGE>
Item 16. Exhibits.
3.1 Restated Articles of Incorporation of the Company (1)
3.1.1 Articles of Amendment Containing the Statement of Rights and
Preferences of the Series B Convertible Preferred Stock of the Company
(2)
3.1.2 Articles of Amendment Containing the Statement of Rights and
Preferences of the Series A Convertible Preferred Stock of the Company
(3)
3.1.3 Articles of Amendment Containing the Statement of Rights and
Preferences of the Series C Convertible Preferred Stock of the Company
(4)
3.2 Restated Bylaws of the Company (1)
4.1 Subscription Agreement, dated as of September 30, 1998, by and between
the Registrant and each of Advantage Fund II Ltd. and Koch Industries,
Inc. (5)
4.2 Registration Rights Agreement, dated as of September 30, 1998, by and
between the Registrant and Advantage Fund II Ltd. (6)
4.3 Registration Rights Agreement, dated as of September 30, 1998, by and
between the Registrant and Koch Industries, Inc. (6)
4.4 Form of Warrant Issued by the Company to Advantage Fund II Ltd., Koch
Industries, Inc., and Genesee Fund Limited - Portfolio B (6)
4.5 Amendment to Subscription Agreement, dated as of September 30, 1998,
by and between the Registrant and each of Advantage Fund II Ltd. and
Koch Industries, Inc. (5)
4.6 Subscription Agreement, dated as of December 16, 1998, by and between
the Registrant and each of Genesee Fund Limited - Portfolio B and Koch
Industries, Inc. (7)
4.7 Registration Rights Agreement, dated as of December 16, 1998, by and
between the Registrant and Genesee Fund Limited - Portfolio B (7)
4.8 Registration Rights Agreement, dated as of December 16, 1998, by and
between the Registrant and Koch Industries, Inc. (7)
4.9 Amendment Agreement, dated as of March 22, 1999, by and among
Registrant, Advantage Fund II Ltd. and Koch Industries, Inc. (7)
II-2
<PAGE>
4.10 Amendment Agreement, dated as of March 22, 1999, by and among
Registrant, Genesee Fund Limited - Portfolio B and Koch Industries,
Inc. (7)
4.11 Form of Warrant issuable to Advantage Fund II Ltd., Genesee Fund
Limited - Portfolio B, and Koch Industries, Inc. (7)
4.12 Market Sales Agreement, dated as of March 22, 1999, by and between
Registrant and each of Advantage Fund II Ltd. and Genesee Fund Limited
- Portfolio B (7)
5 Opinion on Legality (7)
23 Consent of Deloitte & Touche LLP (7)
24 Power of Attorney (6)
- --------------
(1) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form SB-2, Registration No. 33-95460-LA, filed with the
Commission on September 22, 1995
(2) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-60167, filed with the Commission on July 30,
1998.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-44137, filed with the Commission on February 3,
1998.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-37465, filed with the Commission on October 8,
1997.
(5) Incorporated by reference to the Company's Form 10-Q for the Quarterly
Period Ended September 30, 1998.
(6) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-67885, filed with the Commission on November 24,
1998.
(7) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-3, Registration No. 333-67885, filed with the
Commission on March 29, 1999.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) that,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question,
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on March 25, 1999.
TERA COMPUTER COMPANY
By: /s/ JAMES E. ROTTSOLK
-------------------------------------
James E. Rottsolk
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 25th day of March, 1999:
Signature and Title
- -------------------
/s/ BURTON J. SMITH * /s/ DAVID N. CUTLER
- ---------------------------------- ----------------------------------
Burton J. Smith David N. Cutler, Director
Chairman of the Board of Directors
/s/ JAMES E. ROTTSOLK * /s/ DANIEL J. EVANS
- ---------------------------------- ----------------------------------
James E. Rottsolk Daniel J. Evans, Director
Chief Executive Officer and
Director
/s/ KENNETH W. JOHNSON * /s/ KENNETH W. KENNEDY
- ---------------------------------- ----------------------------------
Kenneth W. Johnson Kenneth W. Kennedy, Director
Principal Financial Officer
/s/ PHILISSA SARGIN * /s/ JOHN W. TITCOMB
- ---------------------------------- ----------------------------------
Philissa Sargin John W. Titcomb, Jr., Director
Principal Accounting Officer
/s/ JAMES E. ROTTSOLK
- ---------------------------------
* By James E. Rottsolk,
Attorney-in-fact
II-5
