UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 21, 1999
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TERA COMPUTER COMPANY
(Exact name of registrant as specified in its charter)
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Washington 0-26820 93-0962605
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
411 First Avenue South, Suite 600
Seattle, WA 98104-2860
(Address of principal executive offices)
Registrant's telephone number, including area code: (206) 701-2000
Registrant's facsimile number, including area code: (206) 701-2500
None
(Former name or former address, if changed since last report)
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Item 5. Other Events.
As described in a Report on Form 8-K filed on June 30, 1999, we completed a
$30.3 million private placement financing on June 21, 1999. As part of that
financing, and as described in the Form 8-K filed on June 30, 1999, we issued
shares of common stock and warrants to purchase shares of common stock; we
amended certain agreements with prior investors pursuant to which we were
required, in specified instances, to issue additional shares of common stock and
warrants to purchase shares of common stock; and all of our outstanding shares
of Series B Convertible Preferred Stock were converted into shares of common
stock.
These transactions changed some of the facts described in Item 2 under the
caption "Risk Factors" in our Form 10-Q for the quarter ended March 31, 1999,
and filed with the Securities and Exchange Commission on May 17, 1999. A revised
set of "Risk Factors" is set forth below.
On May 21, 1999, our Restated Articles of Incorporation were amended to increase
the number of authorized shares of Common Stock to 50,000,000. On June 25, 1999,
our Restated By-laws were amended to provide for a nonexecutive chairman and
permit a seventh director.
Risk Factors
The following factors should be considered in evaluating our business,
operations and prospects and may affect our future results and financial
condition.
Failure to Complete Development of a Commercially Acceptable MTA System Would
Jeopardize Our Viability. Our inability to overcome the technical challenges
involved in integrating and completing MTA systems that satisfy internal
performance specifications and that are commercially acceptable would jeopardize
our viability as an ongoing business. 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 processors into commercially configured computer systems in 1998.
We have not yet achieved the level of stability required to meet stringent
commercial reliability standards and cannot be certain when, if ever, we will do
so.
Failure to Overcome the Technical Challenges of Completing the Development of
the MTA System Could Adversely Affect Our Business. Continued delays in
completing the hardware components or software of our MTA system, or in
integrating the full system, could materially and adversely affect our business
and results of operations. 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, various
processor and network chip technologies that we thought were functional across
multiple configurations have subsequently been discovered to require additional
design features to function as intended and to achieve a fully operational
system scalable to multiple processors. We also continue to find certain flaws
or "bugs" in our proprietary UNIX-based system software, which require
correction. This redesign work, particularly on integrated circuits and printed
circuit boards, has been costly and caused delays in the development of our
prototype systems, 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.
Our Inability to Obtain Acceptable Hardware Components Will Delay Our
Development Efforts and Strain Our Financial Resources. The manufacture of
components for the MTA system is a difficult and complex process, and few
companies can meet our design requirements. Manufacturing difficulties or
limitations of suppliers could result in:
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o a limitation on the number of MTA systems that can be assembled 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.
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 integrated circuits, limited
and delayed deliveries of such integrated circuits, poor yields on packaged
integrated circuits and deliveries of a very limited number of reliable 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 to upgrade that system to larger configurations.
Although we work continually with our suppliers to solve these problems, we
cannot be certain that they will be able to manufacture the components to our
design and quality specifications.
Our Uncertain Prospects for Revenues and Earnings Could Adversely Affect an
Investment in Us. We cannot be certain that we will be successful in delivering
and receiving payments for any additional MTA systems, or whether we will be
able to generate additional sales or achieve a profitable level of operations in
the future. We have experienced net losses in each year of our operations. We
incurred net losses of approximately $15.8 million in 1997, $19.8 million in
1998 and $ 13.4 million in the first six months of 1999. 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 assemble 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.
Our Reliance on Third Party Suppliers Poses Significant Risks to Our Business
and Prospects. 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 primarily from
Vitesse Semiconductor Corporation; printed circuit boards from Multilayer
Technology, Inc. and Johnson Matthey Electronics; flex circuits from
Compunetics, Inc.; power supplies from Ascom Energy Systems, Inc.;
uninterruptible power
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supplies from Piller, Inc.; cooling distribution units from C.H. Bull Company;
and our complentary metal-oxide silicon, or CMOS, integrated circuits from
Taiwan Semiconductor Manufacturing Company. We rely on Cadence Design Systems,
Inc., for significant design assistance on the implementation of our CMOS
integrated circuits. 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 to
recommence manufacture of the redesigned components;
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.
Replacement of Our Current Integrated Circuits Will Require Significant
Resources and May Not Be Successful. Over the next several years we plan to
replace in stages most of our gallium arsenide integrated circuits with
integrated circuits made of complementary metal-oxide silicon, or CMOS. We
believe that CMOS integrated circuits will enable us to offer larger, more cost
effective systems. For example, the 24 gallium arsenide integrated circuits
currently on each processor board will be replaced by one CMOS microprocessor.
This process requires the redesign of most of our integrated circuits,
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 for design assistance. If we encounter significant problems with this
redesign, we may be delayed substantially in delivering larger MTA 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 most of the then remaining
inventory of gallium arsenide components, and we may incur a substantial expense
in writing off such inventory.
A Substantial Number of Our Shares Are Eligible for Future Sale , Could Depress
Market Prices of our Stock and Could Hinder Our Ability to Obtain Additional
Financing. Sales 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 June 30, 1999, we had
outstanding:
o 23,778,546 shares of common stock,
o warrants to purchase another 14,421,330 shares of common stock,
o 8% Convertible Promissory Notes in the principal amount of $494,291,
convertible at $5.00 per share into 98,858 shares of common stock, and
o stock options to purchase an aggregate of 3,301,730 shares of common stock.
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As part of the financing completed on June 21, 1999, we issued a warrant to
Terren S. Peizer exercisable for a minimum of 1,591,723 shares of common stock,
and such number is included in the 14,421,330 shares described above as issuable
upon exercise of outstanding warrants. On June 21, 2000, and in certain
circumstances prior to that date, such as if we were involved in a merger or
similar transaction or if we terminated our relationship with Mr. Peizer, the
number of shares subject to this warrant increases to 10% of our issued and
outstanding shares, on a fully diluted basis, with certain limited exceptions.
If this warrant had been so exercisable as of June 30, 1999, it would have
exercisable for a total of 4,445,415 shares.
Almost all of our outstanding shares of common stock may be sold without
substantial restrictions. 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 our common stock,
including sales of common stock issuable upon the exercise of the warrants could
depress prevailing market prices for the common stock. Even the perception that
such sales could occur may impact market prices.
In addition, the existence of outstanding warrants and options, may prove
to be a hindrance to our future equity financings. Further, the holders of the
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.
We May Engage in Additional Financings Which May Be Dilutive to Existing
Shareholders. Our present cash resources and revenue from anticipated sales of
MTA systems is now sufficient to finance our planned operations for the next
twelve months. Nevertheless, we likely will raise additional equity and/or debt
capital in the next twelve months to enhance our financial position for future
operations. In addition, if we were not able to complete development of a
commercially acceptable MTA system, obtain acceptable hardware components or
complete the replacement of CMOS integrated circuits, as described above, we may
need additional capital earlier than planned. 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.
Our Inability to Sell Our MTA Systems at Expected Prices Would Adversely Affect
our Business and Profitability. 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 these 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.
Lack of Government Funding for High Performance Systems Would Adversely Affect
our Business and Increase Our Capital Requirements. The inability of U.S. and
foreign government agencies to procure additional 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. 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.
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The Absence of Third-Party Application Software Translated to Run On the MTA
Could Adversely Affect Our Ability to Make Commercial Sales. 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
rewrite their software application programs so that they will run on our MTA
system. We also plan to modify and rewrite third-party software applications to
run on 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 rewrite their applications, or that we will successfully
rewrite third-party applications, to run on our 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 we
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 Inability to Attract, Retain and Motivate Key Personnel Would Jeopardize Our
Success. Our success also depends in large part upon our ability to attract,
retain and motivate highly skilled technical and marketing and sales personnel.
Competition for highly skilled management, technical, marketing and sales
personnel is intense, and we may not be successful in attracting and retaining
such personnel.
We are dependent on Burton J. Smith, our 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 contract with Mr. Smith or Mr. Rottsolk, or
with any other employee.
Our Quarterly Performance May Vary Significantly and Could Cause Our Stock Price
to be Volatile. 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;
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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.
Our Stock Price May Be Volatile. The trading price of our common stock is
subject to significant fluctuations in response to, among other factors:
o changes in analysts' estimates;
o announcements of technological innovations by us or our competitors; and
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.
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.
We May Be Unable to Compete Successfully in the High Performance Computer
Market. The performance of our 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.
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.
The high performance computer market is highly competitive and has been
dominated by Cray Research, Inc., a subsidiary of Silicon Graphics, Inc. Other
participants in the market include IBM Corporation and Japanese companies such
as NEC Corporation,
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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 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 15 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 would
require management attention and cause us to incur significant expense.
The laws of certain 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, these efforts may not be successful.
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, we must meet Nasdaq's listing maintenance standards. If the bid price of
our common stock falls below $5.00 for an extended period, or we are unable to
continue to meet Nasdaq's standards for any other reason, our common stock could
be delisted from the Nasdaq National Market.
If our common stock were 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 these
markets or exchanges could reduce the liquidity for our common stock.
If our 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, our common stock. In addition, a 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 declines
and remains 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 these penny stock rules should not affect the quotation of our common
stock on the Nasdaq National
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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:
o a staggered Board of Directors, so that only two or three of our seven
directors are elected each year;
o removal of a director only for cause and 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 calling 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.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
3.1 Restated Articles of Incorporation, as amended through May 21, 1999.
3.2 Restated By-Laws, as amended through June 25, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TERA COMPUTER COMPANY
By: /s/ KENNETH W. JOHNSON
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Kenneth W. Johnson
Vice President - Finance
July 21, 1999
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Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
TERA COMPUTER COMPANY
ARTICLE I
Name
The name of this Corporation is Tera Computer Company.
ARTICLE II
Capital Stock
A. Authorized Capital. The Corporation is authorized to issue a total of
fifty-five million (55,000,000) shares, consisting of fifty million (50,000,000)
shares of $.01 par value to be designated "Common Stock" and five million
(5,000,000) shares of $.01 par value to be designated "Preferred Stock." Subject
to any rights expressly granted to Preferred Stock issued pursuant to Paragraph
B of this Article, the Common Stock shall have all the rights ordinarily
associated with common shares, including but not limited to general voting
rights, general rights to dividends, and liquidation rights. The Preferred Stock
shall have the rights and preferences described in Paragraph B of this article
or in a resolution of the Board of Directors adopted pursuant to Paragraph B.
B. Issuance of Preferred Stock in Series. The Preferred Stock may be issued
from time to time in one or more series in any manner permitted by law and these
Restated Articles of Incorporation, as determined from time to time by the Board
of Directors and stated in the resolution or resolutions providing for its
issuance, prior to the issuance of any shares thereof. The Board of Directors
shall have the authority to fix and determine, subject to the provisions hereof,
the rights and preferences of the shares of any series so established. Unless
otherwise provided in the resolution establishing a series of shares of
Preferred Stock, prior to the issuance of any shares of a series so established
or to be established, the Board of Directors may by resolution amend the
relative rights and preferences of the shares of such series, and, after the
issuance of shares of a series whose number has been designated by the Board of
Directors, the resolution establishing the series may be amended by the Board of
Directors to decrease (but not below the number of shares of such series then
outstanding) the number of shares of that series.
ARTICLE III
No Preemptive Rights
Except as may otherwise be provided by the Board of Directors, no holder of
any shares of this Corporation shall have any preemptive right to purchase,
subscribe for or otherwise acquire any securities of this Corporation of any
class or kind now or hereafter authorized.
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ARTICLE IV
Cumulative Voting
There shall be no cumulative voting of shares in this Corporation.
ARTICLE V
Directors
A. Number. The Corporation shall have at least six directors, the actual
number to be prescribed in the Bylaws. Subject to the minimum requirement of six
directors, the number of directors may be increased or decreased from time to
time by amendment of the Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent director.
B. Staggered Terms. The Board of Directors shall be divided into three
classes of directors, with said classes to be as equal in number as may be
possible. Initially, two directors shall be assigned to Class 1, two directors
shall be assigned to Class 2, and two directors shall be assigned to Class 3.
Any director or directors in excess of the number divisible by three shall be
first assigned to Class 1 and any additional director shall be assigned to Class
2, as the case may be. (For example, if there are eight directors, the seventh
director shall be in Class 1 and the eighth director in Class 2.) At the first
election of directors to such classified Board of Directors, each Class 1
Director shall be elected to serve until the next ensuing annual meeting of
shareholders, each Class 2 Director shall be elected to serve until the second
ensuing annual meeting of shareholders and each Class 3 Director shall be
elected to serve until the third ensuing annual meeting of shareholders. At each
annual meeting of shareholders following the meeting at which the Board of
Directors is initially classified, the number of directors equal to the number
of directors in the class whose term expires at the time of such meeting shall
be elected to serve until the third ensuing annual meeting of shareholders.
Notwithstanding any of the foregoing provisions of this Article V, directors
shall serve until their successors are elected and qualified or until their
earlier death, resignation or removal from office, or until there is a decrease
in the number of directors; provided, however, that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director.
C. Removal. The directors of this Corporation may be removed only for
cause, in the manner provided by the Bylaws, by the affirmative vote of the
holders of not less than two-thirds of the shares entitled to elect the director
or directors whose removal is being sought.
ARTICLE VI
Limitation on Director Liability
To the fullest extent permitted by Washington law and subject to the Bylaws
of this Corporation, a director of this Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for his or her conduct as a
director. Any amendment to or repeal of this Article VI shall not adversely
affect any right of a director of this Corporation hereunder with respect to any
acts or omissions of the director occurring prior to amendment or repeal.
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ARTICLE VII
Indemnification of Directors
To the fullest extent permitted by its Bylaws and Washington law, this
Corporation is authorized to indemnify any of its directors. The Board of
Directors shall be entitled to determine the terms of indemnification, including
advance of expenses, and to give effect thereto through the adoption of Bylaws,
approval of agreements, or by any other manner approved by the Board of
Directors. Any amendment to or repeal of this Article VII shall not adversely
affect any right of an individual with respect to any right to indemnification
arising prior to such amendment or repeal.
ARTICLE VIII
Registered Office and Registered Agent
The name of the registered agent of this Corporation and the street address
of its registered office are as follows:
JGB Service Corporation
3600 One Union Square
600 University Street
Seattle, WA 98101
ARTICLE IX
Bylaws
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws of this Corporation subject to approval by a majority of the Continuing
Directors (as defined in Section A of Article XII hereof); provided, however,
that the Board of Directors may not repeal or amend any bylaw that the
shareholders expressly have provided may not be amended or repealed by the Board
of Directors. The shareholders shall also have the power to adopt, amend or
repeal the Bylaws of this Corporation by the affirmative vote of the holders of
not less than two-thirds of the outstanding shares entitled to vote thereon and,
to the extent, if any, provided by resolution adopted by the Board of Directors
authorizing the issuance of a class or series of Preferred Stock, by the
affirmative vote of the holders of not less than two-thirds of the outstanding
shares of Common Stock and/or of such class or series of Preferred Stock, voting
as separate voting groups.
ARTICLE X
Special Meetings of Shareholders
The Chairman of the Board of Directors, the President or a majority of the
Board of Directors may call special meetings of the shareholders for any
purpose. Further, for so long as the Corporation is a "public company" under
Title 23B RCW, a special meeting of the shareholders shall be held if the
holders of not less than 30% of all the votes entitled to be cast on any issue
proposed to be considered at such special meeting have dated, signed and
delivered to the Secretary of this Corporation one or more written demands for
such meeting, describing the purpose or purposes for which it is to be held;
provided, however, that if the Corporation is not a "public company" under Title
23B RCW, the percentage of such votes required to call a special meeting shall
be 25%.
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ARTICLE XI
Amendments to Restated Articles of Incorporation
This Corporation reserves, and the rights of the shareholders of this
Corporation are granted subject to, the right to amend or repeal any of the
provisions contained in these Restated Articles of Incorporation as follows:
A. Two-Thirds Requirement. Except as provided in Section B of this Article
XI, the Restated Articles of Incorporation may be amended or repealed only upon
the affirmative vote of the holders of at least two-thirds of the outstanding
shares entitled to vote thereon and, to the extent, if any, provided by
resolution adopted by the Board of Directors authorizing the issuance of a class
or series of Preferred Stock, by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Common Stock and/or of such class or
series of Preferred Stock, voting as separate voting groups.
B. Majority Voting. Notwithstanding the provisions of Section A of this
Article XI, if an amendment or repeal of a Section or Article of the Restated
Articles of Incorporation is approved by a majority of the Continuing Directors
(as defined in Section A of Article XII hereof), voting separately and as a
subclass of directors, such amendment or repeal shall require the affirmative
vote of the holders of at least a majority of the outstanding shares entitled to
vote thereon and, to the extent, if any, provided by resolution adopted by the
Board of Directors authorizing the issuance of a class or series of Preferred
Stock, by the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock and/or of such class or series of Preferred
Stock, voting as separate voting groups.
ARTICLE XII
Special Voting Requirements
In addition to any affirmative vote required by law, by these Restated
Articles of Incorporation or otherwise, any "Business Combination" (as
hereinafter defined) involving this Corporation shall be subject to approval in
the manner set forth in this Article XII.
A. Definitions. For the purpose of this Article XII:
a. "Business Combination" means (i) a merger, share exchange or
consolidation of this Corporation or any of its Subsidiaries with any other
corporation; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition or encumbrance, whether in one transaction or a series of
transactions, by this Corporation or any of its Subsidiaries of all or a
substantial part of this Corporation's assets otherwise than in the usual and
regular course of business; or (iii) any agreement, contract or other
arrangement providing for any of the foregoing transactions.
b. "Continuing Director" means any member of the Board of
Directors (i) who was a member of the Board of Directors on August 31, 1995, or
(ii) who is elected to the Board of Directors after August 31, 1995, after being
nominated by a majority of the Continuing Directors voting separately and as a
subclass of directors on such nomination.
c. "Subsidiary" means a domestic or foreign corporation, a
majority of the outstanding voting shares of which are owned, directly or
indirectly, by this Corporation.
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B. Vote Required for Business Combinations.
1. Except as provided in subsection 2 of this Section B, the
affirmative vote of the holders of not less than two-thirds of the outstanding
shares entitled to vote thereon and, to the extent, if any, provided by
resolution adopted by the Board of Directors authorizing the issuance of a class
or series of Preferred Stock, the affirmative vote of the holders of not less
than two-thirds of the outstanding shares of Common Stock and/or of such class
or series of Preferred Stock, voting as separate voting groups, shall be
required for the adoption or authorization of a Business Combination.
2. Notwithstanding subsection (1) of this Section 2, if a Business
Combination shall have been approved by a majority of the Continuing Directors,
voting separately and as a subclass of directors, such Business Combination, if
required to be approved by this Corporation's shareholders by the Washington
Business Corporation Act or these Restated Articles of Incorporation, shall be
approved only with the affirmative vote of the holders of not less than a
majority of the outstanding shares entitled to vote thereon and, to the extent,
if any, provided by resolution adopted by the Board of Directors authorizing the
issuance of a class or series of Preferred Stock, the affirmative vote of the
holders of not less than a majority of the outstanding shares of Common Stock
and/or such class or series of Preferred Stock, voting as separate voting
groups.
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Exhibit 3.2
RESTATED BYLAWS
OF
TERA COMPUTER COMPANY
SECTION 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
1.1 Annual Meeting. The annual meeting of the shareholders of this
corporation (the "Corporation") for the election of directors and for the
transaction of such other business as may properly come before the meeting shall
be held each year at the principal office of the Corporation, or at some other
place either within or without the State of Washington as designated by the
Board of Directors, on the day and at the time specified in Exhibit A, which is
attached hereto and incorporated herein by this reference, or on such other day
and time as may be set by the Board of Directors. If the specified day is a
Sunday or a legal holiday, then the meeting will take place on the next business
day at the same time or on such other day and time as may be set by the Board of
Directors.
1.2 Special Meetings. Special meetings of the shareholders for any
purpose or purposes may be called at any time by the President or a majority of
the Board of Directors. Further, for so long as the Corporation is a "public
company" under Title 23B RCW, a special meeting of the shareholders shall be
held if the holders of not less than 30% of all the votes entitled to be cast on
the issue proposed to be considered at such special meeting have dated, signed
and delivered to the Secretary one or more written demands for such meeting,
describing the purpose or purposes for which it is to be held; provided,
however, that if the Corporation is not a "public company" under Title 23B RCW,
the percentage of votes required to call a special meeting shall be 25%. The
meetings shall be held at such time and place as the Board of Directors may
prescribe, or, if not held upon the request of the Board of Directors, at such
time and place as may be established by the President or by the Secretary in the
President's absence.
1.3 Notice of Meetings. Written notice of the place, date and time of
the annual shareholders' meeting and written notice of the place, date, time and
purpose or purposes of special shareholders' meetings shall be delivered not
less than 10 (or, if required by Washington law, 20) or more than 60 days before
the date of the meeting, either personally, by facsimile, or by mail, or in any
other manner approved by law, by or at the direction of the President or the
Secretary, to each shareholder of record entitled to notice of such meeting.
Mailed notices shall be deemed to be delivered when deposited in the mail,
first-class postage prepaid, correctly addressed to the shareholder's address
shown in the Corporation's current record of shareholders. Notice given in any
other manner shall be deemed effective when dispatched to the shareholder's
address, telephone number or other number appearing on the records of the
Corporation.
1.4 Waiver of Notice. Except where expressly prohibited by law or the
Restated Articles of Incorporation, notice of the place, date, time and purpose
or purposes of any shareholders' meeting may be waived in a signed writing
delivered to the Corporation by any shareholder at any time, either before or
after the meeting. Attendance at the meeting in person or by proxy waives
objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting. A shareholder waives objection to
consideration of a particular matter at a meeting that is not within the purpose
or purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
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1.5 Shareholders' Action Without a Meeting. The shareholders may take
any action without a meeting that they could properly take at a meeting, if one
or more written consents setting forth the action so taken are signed by all of
the shareholders entitled to vote with respect to the subject matter and are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. If required by Washington law, all nonvoting shareholders
must be given written notice of the proposed action at least 10 days before the
action is taken, unless such notice is waived in a manner consistent with these
Bylaws. Actions taken under this section are effective when all consents are in
the possession of the Corporation, unless otherwise specified in the consent. A
shareholder may withdraw consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.
1.6 Telephone Meetings. Shareholders may participate in a meeting of
shareholders by means of a conference telephone or any similar communications
equipment that enables all persons participating in the meeting to hear each
other during the meeting. Participation by such means shall constitute presence
in person at a meeting.
1.7 List of Shareholders. At least 10 days before any shareholders'
meeting, the Secretary of the Corporation or the agent having charge of the
stock transfer books of the Corporation shall have prepared an alphabetical list
of the names of the shareholders on the record date who are entitled to notice
of a shareholders' meeting, arranged by voting group, and within each voting
group, by class or series of shares, and showing the address of and number of
shares held by each shareholder.
1.8 Quorum and Voting. The presence in person or by proxy of the
holders of a majority of the votes entitled to be cast on a matter at a meeting
shall constitute a quorum of shareholders for that matter. If a quorum exists,
action on a matter shall be approved by a voting group if the votes cast within
a voting group favoring the action exceed the votes cast within the voting group
opposing the action, unless a greater number of affirmative votes is required by
the Restated Articles of Incorporation or by Washington law. If the Restated
Articles of Incorporation or Washington law provide for voting by two or more
voting groups on a matter, action on a matter is taken only when voted upon by
each of those voting groups counted separately. Action may be taken by one
voting group on a matter even though no action is taken by another voting group.
1.9 Adjourned Meetings. If a shareholders' meeting is adjourned to a
different place, date or time, whether for failure to achieve a quorum or
otherwise, notice need not be given of the new place, date or time if the new
place, date or time is announced at the meeting before adjournment. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in these Bylaws, that determination shall apply to any
adjournment thereof, unless Washington law requires fixing a new record date. If
Washington law requires that a new record date be set for the adjourned meeting,
notice of the adjourned meeting must be given to shareholders as of the new
record date. Any business may be transacted at an adjourned meeting that could
have been transacted at the meeting as originally called.
1.10 Proxies. A shareholder may appoint a proxy to vote or otherwise
act for the shareholder by signing an appointment form, either personally or by
an agent. No appointment shall be valid after 11 months from the date of its
execution unless the appointment form expressly so provides. An appointment of a
proxy is revocable unless the appointment is coupled with an interest. No
revocation shall be effective until written notice thereof has actually been
received by the Secretary of the Corporation or any other person authorized to
tabulate votes.
1.11 Business for Shareholders' Meetings.
1.11.1 Business at Annual Meetings.
(a) In addition to the election of directors, other proper
business may be transacted at an annual meeting of shareholders, provided that
such business is properly brought before such meeting. To be properly brought
before an annual meeting business must be (i) brought by or at the direction of
the Board or (ii) brought before the meeting by a
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shareholder by inclusion in the Corporation's proxy statement pursuant to the
provisions of Rule 14a-8 under Section 14 of the Securities Exchange Act of
1934, as amended, or any successor provision, when and if such Rule is
applicable thereto, or if such business is not so included in the Corporation's
proxy statement, only pursuant to written notice thereof in accordance with
subsection 1.12 hereof, and received by the Secretary not fewer than 60 nor more
than 90 days prior to the date of such annual meeting (or, if less than 60 days'
notice or prior public disclosure of the date of the annual meeting is given or
made to the shareholders, not later than the close of business on the tenth
business day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made, whichever first occurs).
(b) Any such shareholder notice shall set forth (i) the name
and address of the shareholder proposing such business; (ii) a representation
that the shareholder is entitled to vote at such meeting; (iii) a statement of
the number of shares of the Corporation which are beneficially owned by the
shareholder and the date upon which such shares were acquired; (iv) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to propose such business; and (v) as to each matter the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting, the language of the proposal (if appropriate), and any
material interest of the shareholder in such business.
(c) No business shall be conducted at any annual meeting of
shareholders except in accordance with this subsection 1.11.1. If the facts
warrant, the Board, or the chairman of an annual meeting of shareholders, may
determine and declare that (i) a proposal does not constitute proper business to
be transacted at the meeting or (ii) the business was not properly brought
before the meeting in accordance with the provisions of this subsection 1.11.1
and if, in either case, it is so determined, any such business shall not be
transacted.
1.11.2 Business at Special Meetings. At any special meeting of
the shareholders, only business within the purpose or purposes described in the
meeting notice required by Section 1.3 may be conducted.
1.12 Notice to Corporation. Any written notice required to be
delivered by a shareholder to the Corporation pursuant to section 1.2 or section
1.11 hereof must be given, either by personal delivery or by registered or
certified mail, postage prepaid, to the Secretary at the Corporation's principal
office.
SECTION 2
BOARD OF DIRECTORS
2.1 Number and Qualification. The business affairs and property of the
Corporation shall be managed under the direction of a Board of Directors, the
number of members of which is hereby set at seven (7). A member of the Board of
Directors does not need to be a shareholder of the Corporation or a Washington
resident.
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2.2 Election--Term of Office.
2.2.1 The directors shall be elected by the shareholders at each
annual shareholders' meeting or at a special shareholders' meeting called for
such purpose.
2.2.2 The Board of Directors shall be divided into three classes
of directors, with said classes to be as equal in number as may be possible.
Initially, two directors shall be assigned to Class 1, two directors shall be
assigned to Class 2, and two directors shall be assigned to Class 3. Any
director or directors in excess of the number divisible by three shall be first
assigned to Class 1 and any additional director shall be assigned to Class 2, as
the case may be. (For example, if there are eight directors, the seventh
director shall be in Class 1 and the eighth director in Class 2.) At the first
election of directors to such classified Board of Directors, each Class 1
Director shall be elected to serve until the next ensuing annual meeting of
shareholders, each Class 2 Director shall be elected to serve until the second
ensuing annual meeting of shareholders and each Class 3 Director shall be
elected to serve until the third ensuing annual meeting of shareholders. At each
annual meeting of shareholders following the meeting at which the Board of
Directors is initially classified, the number of directors equal to the number
of directors in the class whose term expires at the time of such meeting shall
be elected to serve until the third ensuing annual meeting of shareholders.
Notwithstanding any of the foregoing provisions of this Section 2, directors
shall serve until their successors are elected and qualified or until their
earlier death, resignation or removal from office, or until there is a decrease
in the number of directors; provided, however, that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director.
2.2.3 The term of office of a director shall commence effective
immediately upon election, unless otherwise specified in a resolution approved
by the shareholders in connection with the election of such director. Directors
shall serve until their successors are elected and qualified or until their
earlier death, resignation or removal from office, or until there is a decrease
in the authorized number of directors; provided, however, that no decrease in
the number of directors shall have the effect of shortening the term of any
incumbent director.
2.3 Nominations.
2.3.1 Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors by the
shareholders. Nominations for the election of directors may be made (a) by or at
the direction of the Board or (b) by any shareholder of record entitled to vote
for the election of directors at such meeting; provided, however, that a
shareholder may nominate persons for election as directors only if written
notice (in accordance with section 1.12 hereof) of such shareholder's intention
to make such nominations is received by the Secretary not later than (i) with
respect to an election to be held at an annual meeting of the shareholders, not
fewer than 60 nor more than 90 days prior to the date of such annual meeting
(or, if less than 60 days' notice or prior public disclosure of the date of the
annual meeting is given or made to the shareholders, not later than the close of
business on the tenth business day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs) and (ii) with respect to an election to be held at a
special meeting of the shareholders for the election of directors, the close of
business on the tenth business day following the date on which notice of such
meeting is first mailed to shareholders.
2.3.2 Any such shareholder's notice shall set forth (a) the name
and address of the shareholder who intends to make a nomination; (b) a
representation that the shareholder is entitled to vote at such meeting; (c) a
statement of the number of shares of the Corporation which are beneficially
owned by the shareholder and the dates upon which such shares were acquired; (d)
a representation that the shareholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (e) as to
each person the shareholder proposes to nominate for election or reelection as a
director, the name and address of such person and such other information
regarding such nominee as would be required in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had such nominee
been nominated by the Board, and a description of any arrangements or
understandings, between the shareholder and such nominee and any other persons
(including their names),
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pursuant to which the nomination is to be made; and (f) the consent of each such
nominee to serve as a director if elected.
2.3.3 If the facts warrant, the Board, or the chairman of a
shareholders' meeting at which directors are to be elected, shall determine and
declare that a nomination was not made in accordance with the foregoing
procedure and, if it is so determined, the defective nomination shall be
disregarded. The right of shareholders to make nominations pursuant to the
foregoing procedure is subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation. The procedures set forth in this section 2.3 for nomination
for the election of directors by shareholders are in addition to, and not in
limitation of, any procedures now in effect or hereafter adopted by or at the
direction of the Board or any committee thereof.
2.4 Removal.
2.4.1 Any director or the entire Board of Directors may be
removed only for cause and only by the holders of not less than two-thirds of
the shares entitled to elect the director or directors whose removal is sought.
Such action may only be taken at a special meeting of the shareholders called
expressly for that purpose, provided that notice of the proposed removal, which
shall include a statement of the charges alleged against the director, shall
have been duly given to the shareholders together with or as a part of the
notice of the meeting.
2.4.2 The vacancy created by the removal of a director under this
section 2.4 shall be filled only by a vote of the holders of two-thirds of the
shares then entitled to elect the director removed. Such vote may be taken at
the same meeting at which the removal of such director was accomplished, or at
such later meeting, annual or special, as the shareholders may decide.
2.5 Vacancies. Subject to the provisions of section 2.4 hereof and
unless the Restated Articles of Incorporation provide otherwise, vacancies in
the Board of Directors, whether caused by resignation, death, retirement,
disqualification, increase in the number of directors, or otherwise, may be
filled for the remainder of the term by the Board of Directors, by the
shareholders, or, if the directors in office constitute less than a quorum of
the Board of Directors, by an affirmative vote of a majority of the remaining
directors. The term of a director elected to fill a vacancy expires upon the
election and qualification of his or her successor. A vacancy that will occur at
a specific later date may be filled before the vacancy occurs, but the new
director may not take office until the vacancy occurs.
2.6 Quorum and Voting. At any meeting of the Board of Directors, the
presence in person (including presence by electronic means such as a telephone
conference call) of a majority of the number of directors presently in office
shall constitute a quorum for the transaction of business. Notwithstanding the
foregoing, in no case shall a quorum be less than one-third of the authorized
number of directors. If a quorum is present at the time of a vote, the
affirmative vote of a majority of the directors present at the time of the vote
shall be the act of the Board of Directors and of the Corporation except as may
be otherwise specifically provided by the Restated Articles of Incorporation, by
these Bylaws, or by law. A director who is present at a meeting of the Board of
Directors when action is taken is deemed to have assented to the action taken
unless: (a) the director objects at the beginning of the meeting, or promptly
upon his or her arrival, to holding it or to transacting business at the
meeting; (b) the director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or (c) the director delivers written
notice of his or her dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation within a reasonable time
after adjournment of the meeting. The right of dissent or abstention is not
available to a director who votes in favor of the action taken.
2.7 Regular Meetings. Regular meetings of the Board of Directors shall
be held at such place, date and time as shall from time to time be fixed by
resolution of the Board.
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2.8 Special Meetings. Special meetings of the Board of Directors may
be held at any place and at any time and may be called by the Chairman of the
Board, the President, Vice President, Secretary or Treasurer, or any two or more
directors.
2.9 Notice of Meetings.
2.9.1 Unless the Restated Articles of Incorporation provide
otherwise, any regular meeting of the Board of Directors may be held without
notice of the date, time, place, or purpose of the meeting. Any special meeting
of the Board of Directors must be preceded by at least two days' notice of the
date, time, and place of the meeting, but not of its purpose, unless the
Restated Articles of Incorporation or these Bylaws require otherwise. Each
director shall have a mailing address, telephone number and facsimile number on
record with the Corporation for purposes of receiving notice.
2.9.2 Notice may be given personally, by facsimile, by mail, or
in any other manner allowed by law. Oral notice shall be sufficient only if a
written record of such notice is included in the Corporation's minute book.
Notice shall be deemed effective at the earliest of: (a) receipt; (b) delivery
to the proper address or telephone number of the director as shown in the
Corporation's records; or (c) three days after its deposit in the United States
mail, as evidenced by the postmark, if correctly addressed and mailed with
first-class postage prepaid.
2.9.3 Notice of any meeting of the Board of Directors may be
waived by any director at any time, by a signed writing, delivered to the
Corporation for inclusion in the minutes, either before or after the meeting.
Attendance or participation by a director at a meeting shall constitute a waiver
of any required notice of the meeting unless the director promptly objects to
holding the meeting or to the transaction of any business on the grounds that
the meeting was not lawfully convened and the director does not thereafter vote
for or assent to action taken at the meeting.
2.10 Directors' Action Without A Meeting. The Board of Directors or a
committee thereof may take any action without a meeting that it could properly
take at a meeting if one or more written consents setting forth the action are
signed by all of the directors, or all of the members of the committee, as the
case may be, either before or after the action is taken, and if the consents are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such action shall be effective upon the signing of a consent
by the last director to sign, unless the consent specifies a later effective
date.
2.11 Committees of the Board of Directors. The Board of Directors, by
resolutions adopted by a majority of the members of the Board of Directors in
office, may create from among its members one or more committees and shall
appoint the members thereof. Each such committee must have two or more members,
who shall be directors and who shall serve at the pleasure of the Board of
Directors. Each committee of the Board of Directors may exercise the authority
of the Board of Directors to the extent provided in its enabling resolution and
any pertinent subsequent resolutions adopted in like manner, provided that the
authority of each such committee shall be subject to applicable law. Each
committee of the Board of Directors shall keep regular minutes of its
proceedings and shall report to the Board of Directors when requested to do so.
2.12 Telephone Meetings. Members of the Board of Directors or of any
committee appointed by the Board of Directors may participate in a meeting of
the Board of Directors or committee by means of a conference telephone or
similar communications equipment that enables all persons participating in the
meeting to hear each other during the meeting. Participation by such means shall
constitute presence in person at a meeting.
2.13 Chairman. The Board may elect from among its members a Chairman
of the Board who shall have such duties as the Board of Directors may from time
to time prescribe.
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2.14 Compensation of Directors. The Board of Directors may fix the
compensation of directors as such and may authorize the reimbursement of their
expenses.
SECTION 3
OFFICERS
3.1 Officers Enumerated--Election. The officers of the Corporation
shall consist of such officers and assistant officers as may be designated by
resolution of the Board of Directors. The officers may include a President, a
Chief Scientist, one or more Vice Presidents, a Secretary, a Treasurer, and any
assistant officers. The officers shall hold office at the pleasure of the Board
of Directors. Unless otherwise restricted by the Board of Directors, the
President may appoint any assistant officer, the Secretary may appoint one or
more Assistant Secretaries, and the Treasurer may appoint one or more Assistant
Treasurers; provided that any such appointments shall be recorded in writing in
the corporate records.
3.2 Qualifications. None of the officers of the Corporation need be a
director. Any two or more corporate offices may be held by the same person.
3.3 Duties of the Officers. Unless otherwise prescribed by the Board
of Directors, the duties of the officers shall be as follows:
3.3.1 President. The President shall be the chief executive
officer of the Corporation, unless some other officer is so designated by the
Board , and shall exercise the usual executive powers pertaining to the office
of President. The President shall perform such other duties as the Board of
Directors may from time to time designate. In addition, if there is no Secretary
in office, the President shall perform the duties of the Secretary.
3.3.2 Chief Scientist. The Chief Scientist, if one is appointed
by the Board, shall be responsible for the scientific and technical activities
of the Corporation, and shall have such other duties as the Board of Directors
may from time to time designate.
3.3.3 Vice President. Each Vice President shall perform such
duties as the Board of Directors may from time to time designate. In addition,
in the absence or disability of the President, the Vice President (or if there
is more than one Vice President, then in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all restrictions upon the President.
3.3.4 Secretary. The Secretary shall be responsible for and shall
keep, personally or with the assistance of others, records of the proceedings of
the directors and shareholders; authenticate records of the Corporation; attest
all certificates of stock in the name of the Corporation; keep the corporate
seal, if any, and affix the same to certificates of stock and other proper
documents; keep a record of the issuance of certificates of stock and the
transfers of the same; and perform such other duties as the Board of Directors
may from time to time designate.
3.3.5 Treasurer. The Treasurer shall have the care and custody
of, and be responsible for, all funds and securities of the Corporation and
shall cause to be kept regular books of account. The Treasurer shall cause to be
deposited all funds and other valuable effects in the name of the Corporation in
such depositories as may be designated by the Board of Directors. In general,
the Treasurer shall perform all of the duties incident to the office of
Treasurer, and such other duties as from time to time may be assigned by the
Board of Directors.
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3.3.6 Assistant Officers. Assistant officers may consist of one
or more Assistant Vice Presidents, one or more Assistant Secretaries, and one or
more Assistant Treasurers. Each assistant officer shall perform those duties
assigned to him or her from time to time by the Board of Directors, the
President, or the officer who appointed him or her.
3.4 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting.
3.5 Removal. Any officer or agent may be removed by action of the
Board of Directors with or without cause, but any removal shall be without
prejudice to the contract rights, if any, of the person removed. Election or
appointment of an officer or agent shall not of itself create any contract
rights.
3.6 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.
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SECTION 4
SHARES AND CERTIFICATES OF SHARES
4.1 Share Certificates. Share certificates shall be issued in
numerical order, and each shareholder shall be entitled to a certificate signed
by any two officers of the Corporation, including the President, the Chief
Scientist, any Vice President, the Secretary and the Treasurer. Share
certificates may be sealed with the corporate seal, if any. Facsimiles of the
signatures and seal may be used as permitted by law. Every share certificate
shall state:
(a) the name of the Corporation;
(b) that the Corporation is organized under the laws of the
State of Washington;
(c) the name of the person to whom the share certificate is
issued;
(d) the number, class and series (if any) of shares that the
certificate represents; and
(e) if the Corporation is authorized to issue shares of more
than one class or series, that upon written request and
without charge, the Corporation will furnish any shareholder
with a full statement of the designations, preferences,
limitations and relative rights of the shares of each class
or series, and the authority of the Board of Directors to
determine variations for future series.
4.2 Consideration for Shares. Shares of the Corporation may be issued
for such consideration as shall be determined by the Board of Directors to be
adequate. The consideration for the issuance of shares may be paid in whole or
in part in cash, or in any tangible or intangible property or benefit to the
Corporation, including but not limited to promissory notes, services performed,
contracts for services to be performed, or other securities of the Corporation.
Establishment by the Board of Directors of the amount of consideration received
or to be received for shares of the Corporation shall be deemed to be a
determination that the consideration so established is adequate.
4.3 Transfers. Shares may be transferred by delivery of the
certificate, accompanied either by an assignment in writing on the back of the
certificate, or by a written power of attorney to sell, assign and transfer the
same, signed by the record holder of the certificate. Except as otherwise
specifically provided in these Bylaws, no shares of stock shall be transferred
on the books of the Corporation until the outstanding certificate therefor has
been surrendered to the Corporation.
4.4 Loss or Destruction of Certificates. In the event of the loss or
destruction of any certificate, a new certificate may be issued in lieu thereof
upon satisfactory proof of such loss or destruction, and upon the giving of
security against loss to the Corporation by bond, indemnity or otherwise, to the
extent deemed necessary by the Board of Directors, the Secretary, or the
Treasurer.
4.5 Fixing Record Date. The Board of Directors may fix in advance a
date as the record date for determining shareholders entitled: (a) to notice of
or to vote at any shareholders' meeting or any adjournment thereof; (b) to
receive payment of any share dividend; or (c) to receive payment of any
distribution. The Board of Directors may in addition fix record dates with
respect to any allotment of rights or conversion or exchange of any securities
by their terms, or for any other proper purpose, as determined by the Board of
Directors and by law. The record date shall be not more than 70 days and, in
case of a meeting of shareholders, not less than 10 days (or such longer period
as may be required by Washington law) prior to the date on which the particular
action requiring determination of shareholders is to be taken. If no record date
is fixed for determining the shareholders entitled to notice of or to vote at a
meeting of shareholders, the record date shall be the date before the day on
which notice of the meeting is mailed. If no record date is fixed for the
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determination of shareholders entitled to a distribution (other than one
involving a purchase, redemption, or other acquisition of the Corporation's own
shares), the record date shall be the date on which the Board adopted the
resolution declaring the distribution. If no record date is fixed for
determining shareholders entitled to a share dividend, the record date shall be
the date on which the Board of Directors authorized the dividend.
SECTION 5
BOOKS, RECORDS AND REPORTS
5.1 Records of Corporate Meetings, Accounting Records and Share
Registers.
5.1.1 The Corporation shall keep, as permanent records, minutes
of all meetings of the Board of Directors and shareholders, and all actions
taken without a meeting, and all actions taken by a committee exercising the
authority of the Board of Directors. The Corporation or its agent shall
maintain, in a form that permits preparation of a list, a list of the names and
addresses of its shareholders, in alphabetical order by class of shares, showing
the number, class, and series, if any, of shares held by each.
5.1.2 The Corporation shall also maintain appropriate accounting
records, and at its principal place of business shall keep copies of: (a) its
Articles of Incorporation or restated Articles of Incorporation and all
amendments in effect; (b) its Bylaws or restated Bylaws and all amendments in
effect; (c) minutes of all shareholders' meetings and records of all actions
taken without meetings for the past three years; (d) the year-end balance sheets
and income statements for the past three fiscal years, prepared as required by
Washington law; (e) all written communications to shareholders generally in the
past three years; (f) a list of the names and business addresses of its current
officers and directors; and (g) its most recent annual report to the Secretary
of State.
5.2 Copies of Corporate Records. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary.
5.3 Examination of Records.
5.3.1 A shareholder shall have the right to inspect and copy,
during regular business hours at the principal office of the Corporation, in
person or by his or her attorney or agent, the corporate records referred to in
subsection 5.1.2 hereof if the shareholder gives the Corporation written notice
of the demand at least five business days before the date on which the
shareholder wishes to make such inspection.
5.3.2 In addition, if a shareholder's demand is made in good
faith and for a proper purpose, a shareholder may inspect and copy, during
regular business hours at a reasonable location specified by the Corporation,
excerpts from minutes of any meeting of the Board of Directors, records of any
action of a committee of the Board of Directors, minutes of any meeting of the
shareholders, and records of actions taken by the shareholders or the Board of
Directors without a meeting, to the extent not subject to inspection under
subsection 5.3.1, accounting records of the Corporation, or the record of
shareholders; provided that the shareholder shall have made a demand describing
with reasonable particularity the shareholder's purpose and the records the
shareholder desires to inspect, and provided further that the records are
directly connected to the shareholder's purpose.
5.3.3 This section shall not affect any right of shareholders to
inspect records of the Corporation that may be otherwise granted to the
shareholders by law.
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5.4 Financial Statements. Not later than four months after the end of
each fiscal year, or in any event prior to its annual meeting of shareholders,
the Corporation shall prepare a balance sheet and income statement in accordance
with Washington law. The Corporation shall furnish a copy of each to any
shareholder upon written request.
SECTION 6
FISCAL YEAR
The fiscal year of the Corporation shall be as set forth in Exhibit A.
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SECTION 7
CORPORATE SEAL
The corporate seal of the Corporation, if any, shall be in the form shown
on Exhibit A.
SECTION 8
MISCELLANEOUS PROCEDURAL PROVISIONS
The Board of Directors may adopt rules of procedure to govern any meetings
of shareholders or directors to the extent not inconsistent with law, the
Corporation's Restated Articles of Incorporation, or these Bylaws, as they are
in effect from time to time. In the absence of any rules of procedure adopted by
the Board of Directors, the chairman of the meeting shall make all decisions
regarding the procedures for any meeting.
SECTION 9
AMENDMENT OF BYLAWS
The Board of Directors is expressly authorized to adopt, amend and repeal
the Bylaws of the Corporation subject to approval by a majority of the
Continuing Directors (as defined below); provided, however, the Board of
Directors may not repeal or amend any bylaw that the shareholders have expressly
provided may not be amended or repealed by the Board of Directors. The
shareholders of the Corporation also have the power to adopt, amend or repeal
the Bylaws of the Corporation by the affirmative vote of the holders of not less
than two-thirds of the outstanding shares and, to the extent, if any, provided
by resolution adopted by the Board of Directors authorizing the issuance of a
class or series of Preferred Stock, by the affirmative vote of the holders of
not less than two-thirds of the outstanding shares of Common Stock and/or of
such class or series of Preferred Stock, voting as separate voting groups.
"Continuing Directors" means any member of the Board of Directors (i) who was a
member of the Board of Directors on August 31, 1995, or (ii) who is elected to
the Board of Directors after August 31, 1995 after being nominated by a majority
of the Continuing Directors voting separately and as a subclass of directors on
such nomination.
SECTION 10
INDEMNIFICATION OF DIRECTORS AND OTHERS
10.1 Grant of Indemnification. Subject to section 10.2, each person
who was or is made a party or is threatened to be made a party to or is involved
(including, without limitation, as a witness) in any threatened, pending, or
completed action, suit or proceeding, whether formal or informal, civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director of the Corporation or
who, while a director of the Corporation, is or was serving at the request of
the Corporation as a director, officer, employee or agent of this or another
corporation or of a partnership, joint venture, trust, other enterprise, or
employee benefit plan, whether the basis of such proceeding is alleged action in
an official capacity as a director or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by applicable law, as then in
effect, against all expense, liability and loss (including attorneys' fees,
costs, judgments, fines, ERISA excise taxes or penalties and amounts to be paid
in settlement) reasonably incurred or suffered by such person in
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connection therewith, and such indemnification shall continue as to a person who
has ceased to be a director and shall inure to the benefit of his or her heirs,
executors and administrators.
10.2 Limitations on Indemnification. Notwithstanding section 10.1, no
indemnification shall be provided hereunder to any such person to the extent
that such indemnification would be prohibited by the Washington Business
Corporation Act or other applicable law as then in effect, nor, except as
provided in section 10.4 with respect to proceedings seeking to enforce rights
to indemnification, shall the Corporation indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person except where such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
10.3 Advancement of Expenses. The right to indemnification conferred
in this section shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition, except where the Board of Directors shall have adopted a resolution
expressly disapproving such advancement of expenses.
10.4 Right to Enforce Indemnification. If a claim under section 10.1
is not paid in full by the Corporation within 60 days after a written claim has
been received by the Corporation, or if a claim for expenses incurred in
defending a proceeding in advance of its final disposition authorized under
section 10.3 is not paid within 60 days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. The claimant shall be presumed to be
entitled to indemnification hereunder upon submission of a written claim (and,
in an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition, where the required undertaking
has been tendered to the Corporation), and thereafter the Corporation shall have
the burden of proof to overcome the presumption that the claimant is so
entitled. It shall be a defense to any such action (other than an action with
respect to expenses authorized under section 10.3) that the claimant has not met
the standards of conduct which make it permissible hereunder or under the
Washington Business Corporation Act for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation.
10.5 Alternate Procedures. Pursuant to RCW 23B.08.560(2) or any
successor provision of the Washington Business Corporation Act, the procedures
for indemnification and advancement of expenses set forth in this section are in
lieu of the procedures required by RCW 23B.08.550 or any successor provision of
the Washington Business Corporation Act.
10.6 Nonexclusivity. The right to indemnification and the advancement
of expenses conferred in this section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Restated Articles of Incorporation or the Bylaws of the Corporation, general
or specific action of the Board, contract or otherwise.
10.7 Indemnification of Officers, Employees and Agents. The
Corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of a
proceeding to officers, employees and agents of the Corporation on the same
terms and with the same scope and effect as the provisions of this section with
respect to the indemnification and advancement of expenses of directors of the
Corporation or pursuant to rights granted pursuant to, or provided by, the
Washington Business Corporation Act or on such other terms as the Board may deem
proper.
10.8 Insurance and Other Security. The Corporation may maintain
insurance, at its expense, to protect itself and any individual who is or was a
director, officer, employee or agent of the Corporation or another Corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against or incurred by the individual in that capacity or arising from
his or her status as an officer, director, agent, or employee, whether or not
the Corporation would have the power to indemnify such person against the same
liability under the Washington Business Corporation Act. The Corporation may
enter into contracts with any director or officer of the Corporation in
furtherance of the provisions of this section and may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this section.
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10.9 Amendment or Modification. This section may be altered or amended
at any time as provided in these Bylaws, but no such amendment shall have the
effect of diminishing the rights of any person who is or was an officer or
director as to any acts or omissions taken or omitted to be taken prior to the
effective date of such amendment.
10.10 Effect of Section. The rights conferred by this section shall be
deemed to be contract rights between the Corporation and each person who is or
was a director or officer. The Corporation expressly intends each such person to
rely on the rights conferred hereby in performing his or her respective duties
on behalf of the Corporation.
SECTION 11
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
Unless otherwise restricted by the Board of Directors, the President, the
Chief Scientist and any Vice President of the Corporation are each authorized to
vote, represent and exercise on behalf of the Corporation all rights incident to
any and all shares of other corporations standing in the name of the
Corporation. This authority may be exercised by such officers either in person
or by a duly executed proxy or power of attorney.
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EXHIBIT A
Section 1.1. Date and time of annual shareholders' meeting:
First Wednesday in May at such time as the Board of
Directors shall direct.
Section 6. Fiscal year: December 31
Section 7. Corporate Seal: None
Date Restated Bylaws Adopted: July 31, 1995, as amended on June 25, 1999
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