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): June 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.
June 1999 Private Placement
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On June 21, 1999, the Company raised $30,292,120, prior to fees and
expenses estimated at approximately $1,190,000, in a private placement of
6,417,820 shares of its Common Stock to a group of 18 institutional investors
and 18 individual accredited investors (the "June 1999 Private Placement"). The
Company sold the shares at a price of $4.72 per share, above the closing bid
price of $4.71875 on Friday, June 18, 1999, the last trading day preceding the
closing of the financing.
The Company also issued warrants to purchase 6,417,820 shares in the June
1999 Private Placement to the investors. The warrants are exercisable at an
exercise price of $4.72 per share. The warrants expire on June 21, 2002. The
warrants may be exercised only for cash. The warrants contain common
antidilution protection for stock splits, stock dividends and recapitalizations
and if the Company sells Common Stock in private transactions below the exercise
price or market price for the Common Stock.
The Company has agreed to file by July 21, 1999 a registration statement
under the Securities Act of 1933, as amended (the "Securities Act") covering
the resale of the shares of Common Stock issued or issuable (upon exercise of
the warrants) to the investors.
These transactions were exempt from the registration provisions of the
Securities Act, under Sections 4(2) and 4(6) of the Securities Act, and the
rules and regulations thereunder, because of the nature of the offerees and
investors and the manner in which the offering was conducted.
Related Transactions
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In connection with the June 1999 Private Placement, the following transactions
also occurred:
1. Conversion of Series B Convertible Preferred Stock. On or prior to June
18, 1999, the holders of the Company's Series B Convertible Preferred Stock
converted all of the outstanding shares thereof into shares of Common Stock
pursuant to the terms of the Series B Convertible Preferred Stock. These
transactions were exempt from the registration provisions of the Securities Act
under Section 3(a)(9) thereof.
2. Elimination of "Reset" and Redemption Rights Held by Prior Investors. In
September and December 1999, three institutional investors, Advantage Fund II
Limited, Genesee Fund Ltd. - Portfolio B and Koch Industries, Inc., had
purchased 800,000 shares of Common Stock for an aggregate of $8,000,000 and
received warrants to purchase an aggregate of 161,344 shares of Common Stock.
The investors had the right to receive additional shares of Common Stock or
warrants to purchase additional shares of Common Stock if the market price for
the Common Stock was below certain specified levels on certain dates. Pursuant
to these "reset" rights, the Company subsequently issued additional warrants to
purchase an aggregate of 1,370,311 shares of Common Stock.
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These investors agreed to eliminate their right to receive additional
shares of Common Stock, including warrants to purchase additional shares of
Common Stock, pursuant to these "reset" provisions, and the right to require the
Company to redeem, upon the occurrence of specified events, those securities, in
return for the issuance of warrants for the purchase of 731,628 shares of Common
Stock. These warrants have the same terms as the warrants issued in the June
1999 Private Placement. In addition, the exercise price of the warrants to
purchase an aggregate of 161,344 shares issued in September and December 1998
was reduced from $6.00 per share to $4.72 per share.
These transactions were exempt from the registration provisions of the
Securities Act under Sections 4(2) and 4(6) thereof, and the rules and
regulations thereunder, because of the nature of the offerees and investors and
the manner in which the offering was conducted.
3. Elimination of "Reset" Rights and Purchase Option Held by Prior
Investor. In March 1999, the Banca del Gottardo of Lugano, Switzerland,
purchased 1,111,111 shares of Common Stock for $5,000,000, and received warrants
to purchase 1,111,111 shares of Common Stock. The Company also issued an
aggregate of 103,889 shares and warrants to purchase 225,000 shares of Common
Stock in connection with services rendered in the financing, including 85,889
shares and warrants to purchase 200,000 shares of Common Stock to the Banca del
Gottardo. The Banca del Gottardo also had certain "reset" rights with respect to
these shares of Common Stock and warrants and the option to purchase another
$5,000,000 of shares of Common Stock and warrants.
The Banca del Gottardo agreed to eliminate the right to receive additional
shares of Common Stock and warrants and the option to purchase additional shares
of Common Stock and warrants in return for the issuance of warrants to purchase
1,040,387 shares of Common Stock. These warrants have the same terms as the
warrants issued in the June 1999 Private Placement. In addition, the exercise
price of the warrants issued in March 1999 was reduced from $5.16 per share to
$4.72 per share.
These transactions were exempt from the registration provisions of the
Securities Act under Sections 4(2) and 4(6) thereof, and the rules and
regulations thereunder, because of the nature of the investor and the manner in
which the offering was conducted.
4. Exchange of Notes and Warrants. From February 23, 1999 through March 31,
1999, the Company issued its 8% Subordinated Convertible Promissory Notes (the
"Notes") in the aggregate principal amount of $2,491,291, and warrants to
purchase 74,829 shares of Common Stock, to eleven accredited investors,
consisting of two vendors and nine inviduals. The Notes were convertible at
$5.00 per share. All but one investor (a vendor), with a Note in the principal
amount of $494,291, exchanged their
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Notes and warrants for shares of Common Stock and new warrants on the terms of
the June 1999 Private Placement. In this transaction, the Company issued an
aggregate of 433, 585 shares of Common Stock and warrants to purchase 433,585
shares of Common Stock, and the Noteholders surrendered their Notes and prior
warrants to purchase 60,000 shares of Common Stock.
These transactions were exempt from the registration provisions of the
Securities Act under Section 3(a)(9) thereof.
5. Payment of Certain Placement Fees. The Company issued, as part payment
of certain placement fees in the June 1999 Private Placement, 42,373 shares of
Common Stock and warrants to purchase 212,000 shares of Common Stock. These
warrants have the same terms as the warrants issued in the June 1999 Private
Placement.
The Company issued a warrant to purchase 1,591,723 shares of Common Stock
to Terren S. Peizer, who paid $200,000 to the Company for the warrant. This
warrant becomes exercisable on June 21, 2000, for half of the shares then
covered by the warrant, and then becomes exercisable ratably thereafter over the
next twelve months, becoming fully exercisable on June 21, 2001. The warrant
expires on June 21, 2009. The number of shares covered by this warrant increases
on June 21, 2000, to 10% of the Company's outstanding shares of Common Stock
then outstanding, calculated on a fully diluted basis, with certain exceptions
including stock options granted after June 1, 1999, and shares of Common Stock
sold after March 31, 1999 for a per share price of $12.00 or higher. In certain
events, such as a merger or consolidation in which the Company is not the
surviving entity, a sale of all or substantially all of the assets of the
Company or if the Company terminates its relationship with Mr. Peizer, the
vesting provisions accelerate. The number of shares covered by the Warrant
increases if the Board removes Mr. Peizer as Chairman of the Board prior to the
Annual Meeting of Shareholders in 2002 or if a registration statement covering
the resale of the underlying shares is not filed within three months after
issuance. On June 21, 2000, the exercise price of the warrant becomes the lesser
of $4.95 per share, the initial exercise price, or 105% of the market value of
the Company's Common Stock on June 21, 2000. The warrant may be exercised or
cash or pursuant to a "cashless" exercise feature pursuant to which the holder
surrenders shares with a market value, at the time of exercise, equal to the
exercise price of the shares then being acquired.
The foregoing transactions were exempt from the registration provisions of
the Securities Act under Sections 4(2) and 4(6) of the Securities, and the rules
and regulations thereunder, because of the nature of the offerees and investors
and the manner in which the offering was conducted.
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Outstanding Capital Stock as of June 21, 1999
Following the completion of the foregoing transactions, as of June 21,
1999, the Company had issued and outstanding :
- 23,778,546 shares of Common Stock,
- no shares of Preferred Stock, and
- 8% Convertible Promissory Notes in the principal
amount of $494,291.
In addition, the Company had warrants outstanding to purchase an aggregate of
14,421,330 shares and stock options pursuant to its stock option plans to
purchase an aggregate of 3,301,730 shares.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Form of Purchase Agreement, dated as of June 18, 1999, between the
Company and the investors in the June 1999 Private Placement (the
"Investors").
10.2 Form of Warrant, dated June 21, 1999, issued to the Investors.
10.3 Form of Registration Rights Agreement, dated as of June 21, 1999,
between the Company and the Investors.
10.4 Amendment Agreement, dated as of June 17, 1999, between the Company
and the Banca del Gottardo.
10.5 Amendment Agreement, dated as of June 18, 1999, among the Company and
Advantage Fund II Ltd, Genesee Fund Limited - Portfolio B, and Koch
Industries, Inc.
10.6 Registration Rights Agreement, dated as of June 21, 1999, among the
Company and Advantage Fund II Ltd., Genesee Fund Limited - Portfolio
B, and Koch Industries, Inc.
10.7 Warrant, dated June 21, 1999, issued to Terren S. Peizer.
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
June 29, 1999
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of June 18, 1999, is by and among TERA
COMPUTER COMPANY, a Washington corporation, with headquarters located at 411
First Avenue South, Suite 600, Seattle, WA 98104-2860 (the "Company"), and the
party listed on the signature page of this Agreement (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, upon the terms and subject to the conditions of this Agreement, or
an agreement substantially similar to this Agreement, the Investor and certain
other parties (collectively, the "Investors") wish to purchase shares of the
common stock, $.01 par value, of the Company (the "Common Stock"), and to
acquire warrants exercisable for shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; CLOSING
(a) Subscription for Shares. The Company hereby agrees to issue and
sell to the Investor, and the Investor agrees to purchase from the Company the
number of shares of Common Stock (the "Shares") set forth under such Investor's
name on the signature page of this Agreement. The purchase price per Share shall
be equal to $4.72 (the "Purchase Price").
(b) Warrants. In connection with the purchase of the Shares by the
Investor, the Company agrees to issue to the Investor warrants in the form set
forth in Appendix I (the "Warrants") at the rate of one Warrant per one share of
Common Stock purchased by such Investor. The Warrants shall have an initial
Exercise Price equal to $4.72.
(c) Form and Method of Payment. The Investor shall pay the purchase
price for the number of Shares purchased thereby directly to the Company in
United States Dollars by certified or bank check or wire transfer to an account
designated by the Company against issuance to such Investor of the Shares and
the Warrants. The Company shall deliver the certificates for the Shares and the
Warrants directly to the Investor, against payment of the purchase price for the
Shares to the Company on the Closing Date.
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(d) Closing. The date and time of the issuance and sale of the Shares
and issuance of the Warrants (the "Closing Date") shall be at 10:00 a.m.,
Seattle Time, on June 21, 1999 at the offices of Company's counsel in Seattle,
Washington, or at such other mutually agreed date, time and place.
(e) The Company's Conditions Precedent to Sale and Issuance of the
Shares and Warrants. The Investor understands that the Company's obligation to
sell and issue the Shares and to issue the Warrants to the Investors on the
Closing Date is conditioned upon:
(i) Delivery by any or all of the Investors to the Company of
good funds as payment in full for such number of shares of Common Stock as have
an aggregate purchase price of not less than $20 million;
(ii) The execution and delivery by the Investor of a Registration
Rights Agreement substantially in the form of Appendix II hereto (the
"Registration Rights Agreement"); and
(iii) The accuracy on the Closing Date of the representations and
warranties of the Investor contained in this Agreement as if made on the Closing
Date and the performance by the Investor on or before the Closing Date of all
covenants and agreements of the Investor required to be performed on or before
the Closing Date.
(f) The Investor's Conditions Precedent to the Sale and Issuance of
the Shares and Warrants. The Company understands that the Investor's obligation
to purchase the Shares and to acquire the Warrants on the Closing Date is
conditioned upon:
(i) Delivery by the Company to the Investor of the certificates
for the Shares and the Warrants in accordance with this Agreement;
(ii) Delivery by any or all of the Investors to the Company of
good funds as payment in full for such number of shares of Common Stock as have
an aggregate purchase price of not less than $20 million, including the Shares
to be purchased by the Investor hereunder;
(iii) The execution and delivery by the Company of the
Registration Rights Agreement;
(iv) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Investors of a certificate, dated the
Closing Date, of the Chief Executive Officer or the Chief Financial Officer of
the Company confirming such matters and such other matters as the Investors may
reasonably request; and
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(v) Receipt by the Investor on the Closing Date of an opinion of
counsel, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Investor, to the effect set forth in Appendix III;
(vi) All outstanding shares of Series B Convertible Preferred
Stock shall be converted into shares of Common Stock pursuant to the terms
thereof; and
(vii) All existing rights to receive additional shares of Common
Stock (or warrants or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) if the market value of the Common Stock
is less than specified values at specified dates in the future shall be
eliminated.
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES
The Investor represents and warrants to (and makes no other representations
or warranties other than as set forth in this Agreement) and covenants and
agrees with, the Company as follows:
(a) Purchase for Investment. The Investor is purchasing the Shares and
acquiring the Warrants and, upon exercise of the Warrants, will acquire the
shares of Common Stock issuable upon such exercise (the "Warrant Shares"), for
its own account for investment only and not with a view towards the public sale
or distribution thereof except for sales that are exempt from the registration
requirements of the 1933 Act and/or resales registered under the 1933 Act. The
Shares, the Warrants and the Warrant Shares are collectively referred to as the
"Securities." The Investor understands that its investment in the Securities
involves a high degree of risk.
(b) Accredited Investor. The Investor is an "accredited investor" as
that term is defined in Rule 501 of Regulation D under the 1933 Act.
(c) Reoffers and Resales. All subsequent offers and sales of the
Securities by the Investor shall be made pursuant to registration of the
Securities being offered and sold under the 1933 Act or pursuant to an exemption
from registration.
(d) Company Reliance. The Investor understands that the Securities are
being offered to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Investor's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.
(e) Information Provided. The Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances, and
operations of the Company and materials relating to the offer and sale of the
Securities that have been reasonably requested by the Investor. The Investor and
its advisors, if any, have been afforded the opportunity to ask
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questions of the management of the Company and have received complete and
satisfactory answers to any such inquiries.
(f) Absence of Approvals. Each Investor understands that no federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
(g) Purchase Agreement. This Agreement has been duly and validly
authorized, executed, and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable in accordance with its terms.
3. COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to, and covenants and agrees with, the
Investor that:
(a) Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Washington, and
has all requisite corporate power and authority (i) to own, lease, and operate
its properties and to carry on its business as now being conducted, and (ii) to
execute, deliver, and perform its obligations under this Agreement, the
Securities and the Registration Rights Agreement, and to consummate the
transactions contemplated hereby and thereby. The Company is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company. The Company has no subsidiaries.
(b) Capitalization. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, $.01 par value, and (ii)
5,000,000 shares of Preferred Stock, $.01 par value. The Company's outstanding
securities are as set forth in Schedule 3(b). The Company does not have
outstanding any securities (or obligations to issue any such securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to
acquire shares of Common Stock, except as disclosed in Schedule 3(b), Schedule
4(i) or otherwise in this Agreement. The outstanding shares of Common Stock and
outstanding options, warrants, and other securities to purchase Common Stock
have been duly authorized and validly issued. None of such outstanding shares of
Common Stock, options, warrants, and other securities has been issued in
violation of the preemptive rights of any security holder of the Company. Except
as set forth on Schedule 3(b), no holder of any of the Company's securities has
any rights, "demand," "piggy-back" or otherwise, to have such securities
registered.
(c) Concerning the Securities. The Securities have been duly
authorized and the Shares, when issued and paid for in accordance with this
Agreement, and the Warrant Shares, when issued upon due exercise of the Warrants
will be duly and validly issued, fully paid, non-assessable and free from liens,
and will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive or similar rights of any security holder of
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the Company or any other person to acquire any securities issued by the Company.
The Common Stock currently is listed for trading on the Nasdaq National Market
System ("Nasdaq") and, except as set forth in Schedule 3(c), (i) the Company and
the Shares, the Warrant Shares and the Common Stock meet the currently
applicable criteria for continued listing and trading on Nasdaq; (ii) the
Company has not been notified in the last two years by Nasdaq of any failure or
potential failure to meet the criteria for continued listing and trading on
Nasdaq; (iii) no suspension of trading in the Common Stock is in effect; (iv)
the Company knows of no reason that the Shares and the Warrant Shares will not
be eligible for listing on Nasdaq; and (v) the Company has delivered to Nasdaq
all required notices.
(d) Purchase Agreement; Warrants; Registration Rights Agreement. This
Agreement, the Warrants and the Registration Rights Agreement have been duly and
validly authorized by the Company. This Agreement, the Warrants and the
Registration Rights Agreement have been duly executed and delivered on behalf of
the Company and are valid and binding obligations of the Company enforceable in
accordance with their respective terms.
(e) Non-contravention. The execution and delivery of this Agreement by
the Company and the issuance by the Company of the Securities, as contemplated
by this Agreement, and completion of the other transactions contemplated in this
Agreement, the Registration Rights Agreement, and the Warrants, do not and will
not conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default or give rise to any right of termination,
cancellation or acceleration under, the Restated and Amended Articles of
Incorporation or Bylaws of the Company, or, except as has been waived, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound
or any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
(f) Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency or Nasdaq is required to be obtained by the
Company for (i) the issuance and sale of the Shares and the issuance of the
Warrants, as contemplated by this Agreement, and (ii) the issuance of Warrant
Shares upon exercise of the Warrants, except for the filing of one or more Forms
D with respect to the Securities as required under Regulation D under the 1933
Act and Listing Applications on Nasdaq.
(g) Information Provided. The Company has made available to the
Investor copies of all periodic reports, statements and other documents that the
Company has filed with the SEC under the Securities Exchange Act of 1934 (the
"1934 Act") since January 1, 1998 (collectively, the "Disclosure Documents"),
each in the form (including exhibits and any amendments thereto) as it was filed
with the SEC. All information provided by or on behalf of the Company to the
Investor in connection with the transactions contemplated by the Agreement,
including, without limitation, the Disclosure Documents, does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein,
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in the light of the circumstances in which they were made, not misleading. The
Company has publicly disclosed all material adverse information concerning the
Company.
(h) Absence of Certain Changes. Except as disclosed in the Disclosure
Documents, since December 31, 1998, (i) there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company, and (ii) the Company has no material (individually or in the
aggregate) liabilities, known or unknown debts or obligations whether accrued,
absolute, contingent or otherwise, and whether due or to become due.
(i) Absence of Certain Proceedings. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
pending or, to the knowledge of the Company, threatened against the Company and,
to the knowledge of the Company, there is no inquiry or investigation before or
by any court, public board or body or governmental agency pending or threatened
against the Company, in any such case wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the properties, business,
condition (financial or other), results of operations or prospects of the
Company or the transactions contemplated by this Agreement or any of the
documents contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
(j) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. Except as set forth in Schedule 3(j),
all such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act.
(k) No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person acting on behalf of the Company, in respect of or in connection with the
offer and sale of the Securities. Neither the Company nor any person authorized
to act on its behalf has sold or offered for sale any shares of Common Stock or
the Warrants, or solicited any offers to buy any shares of Common Stock or the
Warrants so as thereby to cause the issuance or sale of any of the Securities to
be in violation of Section 5 of the 1933 Act. The transactions contemplated
hereby are exempt from the registration requirements of the Securities Act,
assuming the accuracy of the representations and warranties of each of the
Investors to the extent relevant for such determination.
(l) Financial Statements; Contracts. The financial statements of the
Company included in the Disclosure Documents were prepared in accordance with
U.S. generally accepted accounting principles, consistently applied, and the
rules and regulations of the SEC during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or in a
subsequently filed Disclosure Document, (ii) in the case of unaudited interim
statements, to the extent they do not include footnotes or are condensed or
summary statements, or (iii) as set forth in Schedule 3(j)) and present
accurately and completely the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, immaterial year-end
audit
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adjustments). The Disclosure Documents contain as exhibits all material
contracts that were required to be filed as exhibits thereto by applicable SEC
regulations (each a "Contract"). Neither the Company nor, to the best knowledge
of the Company, any of the other parties thereto, is in breach or violation of
any Contract, which breach or violation relates to indebtedness for borrowed
money or would have a material adverse effect on the Company's operations taken
as a whole ("Material Adverse Effect"). No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or the happening
of any further event or condition, would become a breach or default by the
Company under any Contract which breach or default would have a Material Adverse
Effect.
(m) Intellectual Property; Y2K Compliance. The Company owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of its
business as now being conducted and as previously described in the Company's
Annual Report on Form 10-K most recently filed with the SEC and any subsequently
filed reports on Form 10-Q and Form 8-K. The Company, to the best of its
knowledge, does not infringe any right of any other person with respect to any
Intangibles nor is there any claim of infringement made by a third party against
or involving the Company which infringement or claim, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. The information set forth in the Disclosure
Documents with respect to Year 2000-related compliance by the Company does not
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained therein not misleading. The
management of the Company believes in good faith that Year 2000-related matters
will not have a Material Adverse Effect.
(n) Certain Practices. Neither the Company, nor any director, officer
and, to the best knowledge of the Company, any agent, employee or other person
acting on behalf of the Company has, in the course of his or her actions for, or
on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee. Without limiting the generality of the foregoing, the Company has not
directly or indirectly made or agreed to make (whether or not said payment is
lawful) any payment to obtain, or with respect to, sales other than usual and
regular compensation to its or their employees and sales representatives with
respect to such sales.
(o) Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Schedule 3(o). No Key Employee,
to the best of the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-
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competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company to any liability with respect to any of the foregoing matters. No Key
Employee has, to the best of the knowledge of the Company, any intention to
terminate or limit his employment with, or services to, the Company, nor is any
such Key Employee subject to any constraints (e.g., litigation) which would
cause such employee to be unable to devote his full time and attention to such
employment or services. "Key Employee" means each of Burton J. Smith, James E.
Rottsolk, Charles D. Callahan, Susan L. Coatney, Kenneth W. Johnson, Brian D.
Koblenz, Gerald E. Loe, Katherine L. Rowe, and Richard M. Russell.
(p) Certain Securities Issuances. The Company currently has no
arrangement, prospects, understanding or intention (and does not reasonably
anticipate any agreement) to issue, after the Closing, in an offering prior to
January 1, 2000, not registered under the 1933 Act, (i) shares of Common Stock
at a purchase price per share that is less than ninety (90%) of the closing bid
price for the Common Stock immediately prior to the sale of such shares, (ii)
shares of preferred stock or notes or other instruments which are convertible
into, or exercisable or exchangeable for, shares of Common Stock based on the
market value of the Common Stock at the time of conversion, exercise or
exchange, or (iii) shares of Common Stock pursuant to contractual provisions
that require the issuance of additional shares of Common Stock (or warrants or
other securities convertible into, or exercisable or exchangeable for shares of
Common Stock) if the market value of the Common Stock is less than specified
values at certain dates in the future.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
(a) Transfer Restrictions. The Investor acknowledges that the Warrants
have not been and are not being registered under the 1933 Act, and, except as
provided in the Registration Rights Agreement, the other Securities have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (i) subsequently registered thereunder or (ii) such Investor has
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope, and substance to the Company, to the effect that the Securities to be
sold or transferred are being sold in compliance with an exemption from such
registration other than Rule 144 under the 1933 Act; or (iii) in compliance with
Rule 144 under the 1933 Act. In addition, the Investor acknowledges that neither
the Company nor any other person is under any obligation to register the
Securities (other than pursuant to the Registration Rights Agreement) under the
1933 Act or to comply with the terms and conditions of any exemption thereunder
(other than pursuant to Section 4(d) hereof and pursuant to the Registration
Rights Agreement).
(b) Restrictive Legend. The Investor acknowledges and agrees that,
until such time as any of the Securities have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, the certificates for the
such Securities shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR IN A TRANSACTION EXEMPT FROM REGISTRATION.
Once the applicable Registration Statement required to be filed by the Company
pursuant to Section 2 of the Registration Rights Agreement has been declared
effective, thereafter (i) upon request of the Investor the Company will
substitute certificates without the above-referenced legend for certificates for
any Securities issued prior to the date such Registration Statement is declared
effective by the SEC which bear such legend and promptly remove any
stop-transfer restriction relating to such Securities, but in no event later
than three business days after surrender of such certificates by such Investor,
and (ii) the Company shall not place any restrictive legend on certificates for
any Securities issued or impose any stop-transfer restriction thereon. If the
Company fails to remove any legend as required herein (a "Legend Removal
Failure"), then beginning on the tenth business day following such failure, if
the Company continues to fail to remove such legend, the Company shall pay to
the Investor an amount equal to one percent (1%) of the Funded Amount (as
defined herein) per day that such failure continues. "Funded Amount" means the
aggregate purchase price paid by the Investor for the Shares.
(c) Securities Filings. The Company agrees to file a Form D with the
SEC with respect to the Securities as required under Regulation D promulgated
under the 1933 Act and to provide a copy thereof to the Investor promptly after
such filing. The Company agrees to file a report on Form 8-K with respect to the
issuance of the Securities, including as an exhibit thereto this Agreement, the
Registration Rights Agreement and the form of Warrant, no later than five
business days after the Closing Date. The Investor agrees to cooperate with the
Company in connection with such filings and, upon request of the Company, to
provide all information relating to such Investor reasonably required for such
filings.
(d) Registration; Authorization for Trading; Reporting Status. On or
before the date that is 30 days after the Closing Date, the Company shall
prepare and file, at its expense, a Registration Statement on Form S-3 with the
SEC pursuant to the Registration Rights Agreement. From the Closing Date until
the date that is two years from the date after the last exercise by any Investor
of any Warrant, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. In addition, as soon as practicable after the Closing Date, the
Company shall prepare and submit a listing application with Nasdaq with respect
to the Shares and Warrant Shares and take all reasonable steps within the
control of the Company to maintain the listing of the Common Stock, the Shares
and the Warrant Shares on Nasdaq.
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(e) Use of Proceeds. The proceeds of sale of the Shares will be used
for general working capital purposes and in the operation of the Company's
business. Neither the Company nor any agent acting on its behalf has taken or
will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(f) Blue Sky Laws. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
from qualification for, the Shares for sale to the Investor pursuant to this
Agreement and the Warrants and the Warrant Shares for issuance to the Investor,
under such of the securities or "blue sky" laws of jurisdictions as shall be
applicable to the offer and sale of the Shares and the issuance of the Warrants
pursuant to this Agreement. The Company shall furnish copies of all filings,
applications, orders, and grants or confirmations of exemptions relating to such
securities or "blue sky" laws to the Investor within five days of filing or
receipt thereof, as the case may be.
(g) Best Efforts. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Shares and issue the Warrants set forth in Sections 1(e)
and 1(f) of this Agreement, as the case may be, on the Closing Date.
(h) Reservation of Common Stock. The Company shall take all action
necessary so that a number of shares of the authorized but unissued Common Stock
sufficient to provide for the issuance of all Warrant Shares issuable hereunder
are at all times reserved by the Company, free from preemptive rights, for such
issuance.
(i) Brokers' or Finders' Fees. Except as set forth on Schedule 4(i),
the Company and the Investor represent and warrant to each other that they have
not incurred any obligation or liability, contingent or otherwise, for brokerage
or finders' fees, or agents' commission or other like payment in connection with
this Agreement or the transactions contemplated hereby. Each party agrees to
indemnify and hold the other parties harmless from and against any obligation or
liability for brokers' or finders' fees or agents' commissions or other like
payment based in any way on agreements, arrangements or understandings claimed
to have been made by such indemnifying party with any third party.
(j) Expenses. The Company agrees to pay the reasonable and documented
fees and expenses of counsel for the Investor in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be entered into pursuant to this Agreement.
(k) Certain Issuances of Securities. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock, warrants or
other securities convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock that are subject to Rule 4460(i) of
Nasdaq (or any successor, replacement or similar provision thereof
10
<PAGE>
or of any other market on which the Common Stock is listed for trading)
(collectively, "Rule 4460(i)") and that would be integrated with the issuance of
the Common Stock, Warrants or the Warrant Shares for purposes of Rule 4460(i).
If for any reason the Company is required by Rule 4460(i) or by Nasdaq to obtain
shareholder approval with respect to any securities of the Company issued to or
held by any Investor, the Company shall promptly hold a special meeting of its
shareholders for such purpose within 60 days of learning of such requirement and
shall use its best efforts to obtain such approval at such meeting.
(l) Exchange of 8% Convertible Notes. Except as set forth in Schedule
3(b), the Company shall exchange all outstanding 8% Convertible Subordinated
Promissory Notes and associated warrants ("Notes") for Common Stock and warrants
on the same terms and conditions as the Shares and Warrants.
5. MISCELLANEOUS
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
(b) Counterparts. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile copy of this Agreement
bearing a signature on behalf of a party hereto shall be legal and binding on
such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Investor or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
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(g) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission) or by courier and shall be effective upon
receipt (or on the next business day, if the date of such receipt is not a
business day), if delivered personally or by courier, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Financial Officer (facsimile number (206)
701-2218), with a copy to Stoel Rives LLP, Suite 3600, One Union Square, 600
University Street, Seattle, WA 98101, Attn: Christopher J. Voss, Esq. (facsimile
number (206) 386-7500) or, in the case of the Investor, at its address shown on
the signature page of this Agreement, or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision. The Investor hereby designates as
its address for any notice required or permitted to be given to the Investor
pursuant to the Warrants the address shown on the signature page of this
Agreement, until such Investor shall designate another address for such purpose.
(h) Survival; Indemnification. The respective representations,
warranties, covenants, and agreements of the Investor and the Company contained
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement shall survive the delivery of payment for the Shares and the
issuance of the Warrants and the Warrant Shares, and shall remain in full force
and effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them. The Company agrees to indemnify and
hold harmless the Investor and each of the Investor's officers, directors,
shareholders, members, employees, partners, agents and affiliates (each an
"Indemnitee") for loss or damage to the extent arising as a result of or related
to (a) any breach by the Company of any of its representations or covenants set
forth herein or (b) any cause of action, suit or claim brought or made against
any Indemnitee (other than actions, suits or claims by the Company for breach of
this Agreement, the Warrant or the Registration Rights Agreement by any
Indemnitee or by governmental or regulatory authorities) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto or contemplated hereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities or (iii) the status of Investor as an investor in the Company,
provided, however, the Company shall have no obligation to indemnify any such
person to the extent such loss or damage arises out of or results from a breach
by any Indemnitee of this Agreement, the Warrant or the Registration Rights
Agreement or any other agreement binding on any Indemnitee, or from violation of
law by any Indemnitee. The right to indemnification shall include the right to
advancement of expenses as they are incurred.
(i) Entire Agreement. This Agreement and the annexes and schedules
attached hereto set forth the entire agreement between the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, with respect thereto.
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(j) Binding Nature of Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(k) Third-Party Beneficiaries. Nothing in this Agreement shall be
construed so as to confer any benefit on any person other than the parties
hereto and their respective successors and permitted assigns.
(l) Termination. The Company and the Investor shall each have the
right to terminate this Agreement if the Closing Date shall not have occurred on
or before June 25, 1999 other than solely by reason of a breach of this
Agreement by such terminating party. Any such termination shall be effective
upon the giving of notice thereof by the Company or the Investor, as applicable.
Upon such termination, the terminating party shall have no further obligation to
the other party hereunder and the other party shall remain liable for any breach
of this Agreement or the other documents contemplated hereby which occurred on
or prior to the date of such termination.
(m) Further Assurances. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(n) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(o) Failure to Pay. The failure to pay any amounts due under this
Agreement, the Registration Rights Agreement or the Warrant when they come due
shall result in the imposition of interest on such amounts at a rate equal to
the lesser of (x) 18% per annum and (y) the highest amount permitted by law.
(p) Press Releases and Public Announcements. The Company and the
Investor shall have the right to approve before issuance any press releases, SEC
or other filings, or any other public statements, with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Investor, to make any press release
or SEC, Nasdaq, NASD or exchange filings with respect to such transactions as is
required by applicable law and regulations or contemplated herein (although the
Investor shall (to the extent time permits) be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
(q) Remedies; Characterizations. The remedies provided in this
Agreement shall be cumulative and in addition to all other remedies available
under this Agreement, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit the Investor's right to actual damages for any
failure by the Company to comply with the terms of this Agreement. The Company
covenants to the Investor that there shall be no characterization concerning
this instrument other than as expressly provided
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herein. Amounts set forth or provided for herein with respect to payments and
the like (and the computation thereof) shall be the amounts to be received by
the Investor and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Investor
and the Company by their respective officers thereunto duly authorized as of the
date set forth above.
TERA COMPUTER COMPANY
By:
-------------------------------------
Name: James E. Rottsolk
Title: President and CEO
INVESTOR:
Name:
------------------------------
By:
--------------------------
Title:
-----------------------
Address:
--------------------------
Telephone:
------------------------
Facsimile:
------------------------
Federal Tax Id. No.:
--------------
No. of Shares:
--------------
15
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF
THIS SECURITY AND OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
SECURITY ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR
REGISTRATION UNDER STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND
SUCH SHARES OF COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM, SCOPE AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. Right to Purchase ________ Shares of
Common Stock of Tera Computer Company
TERA COMPUTER COMPANY
Common Stock Purchase Warrant
TERA COMPUTER COMPANY, a Washington corporation (the "Company"),
hereby certifies that, for value received, _______________________, or
registered assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time after the
date hereof, and before 5:00 p.m., Seattle time, on June 21, 2002
___________________________ (_____________) fully paid and nonassessable shares
of Common Stock, $.01 par value, of the Company at an Exercise Price per share
initially equal to $4.72. The number of such shares of Common Stock and the
Exercise Price are subject to adjustment as provided in this Warrant.
1. Exercise By Holder. This Warrant may be exercised by the Holder hereof
in full or in part at any time or from time to time during the exercise period
specified in the first paragraph hereof, by surrender of this Warrant and the
subscription form annexed hereto (duly executed) by such Holder to the Company
and by making payment, in cash or by certified or official bank check payable to
the order of the Company or wire transfer to the Company's account, in the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the Holder in the subscription form by (b) the Exercise Price then
in effect. On any partial exercise the Company will forthwith issue and deliver
to or upon the order of the Holder hereof a new Warrant or Warrants of like
tenor, in the name of the Holder hereof or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may request, providing in the aggregate
on the face or faces thereof for the purchase of the number of shares of Common
Stock for which such Warrant or Warrants may still be exercised.
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2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue or stamp taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock to which such Holder shall be entitled on such exercise, in such
denominations as may be requested by such Holder, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value of one full
share, together with any other stock or other securities any property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
3. Certain Antidilution Provisions.
a. Dividends, Etc. If the Company shall pay to the holders of its
Common Stock a dividend in shares of Common Stock or in securities convertible
into Common Stock, the Exercise Price in effect immediately prior to the record
date fixed for the determination of the holders of Common Stock entitled to such
dividend shall be proportionately decreased, effective at the opening of
business on the next following full business day.
b. Splits, Combinations, Etc. If the Company shall split the
outstanding shares of its Common Stock into a greater number of shares or
combine the outstanding shares into a smaller number, the Exercise Price in
effect immediately prior to such action shall be proportionately decreased in
the case of a split or increased in the case of a combination, effective at the
opening of business on the full business day next following the day such action
becomes effective.
c. Number of Shares. Upon each adjustment of the Exercise Price
pursuant to this Section 3, the Holder of this Warrant shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would be issuable on such exercise as of immediately prior to such
adjustment by a fraction of which (x) the numerator is the Exercise Price in
effect immediately prior to such adjustment and (y) the denominator is the
Exercise Price in effect on the date of such exercise.
4. Protection in Case of Reclassification. In case of any reclassification
or change of the terms of the outstanding shares of the class of Common Stock
issuable upon the exercise of this Warrant (other than a change relating to par
value, or as a result of a subdivision or combination), the Company shall use
its best efforts to execute an agreement providing that the holder of this
Warrant shall have the right thereafter to exercise this Warrant for the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification or change for which this Warrant might have been exercised
immediately prior to such reclassification or change. This Section 4 shall apply
to successive reclassifications and changes of Common Stock described above.
Notice of the execution of any agreement
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pertaining to such reclassification or change shall be given to the holder of
this Warrant as soon as practicable and in any event not less than ten (10)
business days before any such transaction is consummated.
5. Certain Additional Antidilution Provisions. The Exercise Price and the
number of Warrant Shares shall be subject to adjustment from time to time as
provided in this Section 5. In the event that any adjustment of the Exercise
Price as required herein results in a fraction of a cent, such Exercise Price
shall be rounded up or down to the nearest cent.
a. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. Except as otherwise provided in Sections 3, 4 and 5(b)(vi) hereof,
if and whenever after the initial issuance of this Warrant, the Company issues
or sells, or in accordance with Section 5(b) hereof is deemed to have issued or
sold, any shares of Common Stock for no consideration or for a consideration per
share less than the then effective Exercise Price or the Market Price (as herein
defined) on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
E' = (E) (O + P/M) / (CSDO)
where:
E' = the adjusted Exercise Price
E = the then effective Exercise Price;
M = the greater of the then current Market Price or the then
effective Exercise Price;
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 5(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock outstanding
immediately after the Dilutive Issuance, plus any additional
shares of Common Stock deemed outstanding as a result
of the Dilutive Issuance, determined pursuant to Section 5(b)
below.
b. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 5(a) hereof, the following
will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options"),
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and the price per share for which Common Stock is issuable upon the exercise of
such Options is less than the then effective Exercise Price or the Market Price
on the date of issuance ("Below Market Options"), then the maximum total number
of shares of Common Stock issuable upon the exercise of all such Below Market
Options (assuming full exercise, conversion or exchange of Convertible
Securities, if applicable) will, as of the date of the issuance or grant of such
Below Market Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For purposes of the preceding
sentence, the price per share for which Common Stock is issuable upon the
exercise of such Below Market Options is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or granting of such Below Market Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
exercise of all such Below Market Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Below Market Options, the minimum
aggregate amount of additional consideration payable upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below
Market Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options, except as otherwise
provided in subsections (iii) and (iv) hereof.
(ii) Issuance of Convertible Securities.
(1) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 5(b)(ii)(2) if applicable) is less than the then
effective Exercise Price or the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the price per share for which Common Stock
is issuable upon such exercise, conversion or exchange is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual issuances of such
Common Stock upon exercise, conversion or exchange of such Convertible
Securities, except as otherwise provided in subsections (iii) and (iv) hereof.
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(2) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 5(b)(ii)(l)
shall be deemed to be the lowest price per share which would be applicable
assuming that (1) all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied, and (2) the Market
Price on the date of issuance of such Convertible Security was eighty percent
(80%) of the Market Price on such date (the "Assumed Variable Market Price").
(iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange or any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Options or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Exercise Price then in effect will be readjusted
to the Exercise Price which would have been in effect at the time of such
expiration or termination had such Options or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise, conversion or exchange of all such Options or
Convertible Securities at the time such Options or Convertible Securities first
become exercisable, convertible or exchangeable. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration part or
all of which shall be other than cash, the amount of the consideration other
than cash received by the Company will be the fair market value of such
consideration except where such consideration consists of freely-tradable
securities, in which case the amount of consideration received by the Company
will be the Market Price
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thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the net
assets and business of the non-surviving corporation as is attributable to such
Common Stock, Options or Convertible Securities, as the case may be. The fair
market value of any consideration other than cash or securities will be
determined in the good faith reasonable business judgment of the Board of
Directors.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on the date hereof in
accordance with the terms of such securities as of such date; (ii) upon the
grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee or Director benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose; (iii) upon the issuance of
the Shares or Warrants in accordance with terms of the Purchase Agreement or as
contemplated by the Purchase Agreement, including the schedules thereto; (iv)
upon the exercise of the Warrants; or (v) any securities issued in any firmly
underwritten public offering.
(vii) Market Price. The term "Market Price" shall mean, as of any
date, (i) the average of the closing bid prices for the shares of Common Stock
as reported by The Nasdaq National Market for the number of trading days
immediately preceding such date that are used in determining the issuance price
for securities being issued, or (ii) if The Nasdaq National Market is not the
principal trading market for the Common Stock, the average of the last reported
bid prices on the principal trading market for the Common Stock during the same
period, or, if there is no bid price for such period, the last reported sales
price for such period, or (iii) if market value cannot be calculated as of such
date on any of the foregoing bases, the Market Price shall be the average fair
market value as reasonably determined by an investment banking firm selected by
the Company and reasonably acceptable to the holders of a majority in interest
of the Warrants, with the costs of the appraisal to be borne by the Company. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.
6. Major Transactions. If the Company shall consolidate or merge with any
other corporation or entity (other than a merger in which the Company is the
surviving or continuing entity and its capital stock is unchanged in such
transaction) or there shall occur any share exchange pursuant to which all of
the outstanding shares of Common Stock are converted into other securities or
property or the Company shall sell all or substantially all of its assets (each
of the foregoing being a "Major Transaction"), then the initial Holder of this
Warrant (and only the initial Holder of this Warrant) may, at its option, either
(a) in the event that the Common Stock remains outstanding or holders of Common
Stock receive any common stock or substantially similar equity interest, in each
of the foregoing cases which is publicly traded,
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retain this Warrant and this Warrant shall continue to apply to such Common
Stock or shall apply, as nearly as practicable, to such other common stock or
equity interest, as the case may be, or (b) regardless of whether (a) applies,
receive consideration, in exchange for this Warrant (without payment of any
exercise price hereunder), equal to the greater of, as determined in the sole
discretion of such holder: (i) the number of shares of stock or securities or
property of the Company, or of the entity resulting from such Major Transaction
(the "Major Transaction Consideration"), to which a holder of the number of
shares of Common Stock delivered upon the exercise of this Warrant would have
been entitled upon such Major Transaction had such holder so exercised this
Warrant (without regard to any limitations on exercise herein or elsewhere
contained) on the trading date immediately preceding the public announcement of
the transaction resulting in such Major Transaction and had such Common Stock
been issued and outstanding, less the shares necessary to satisfy the Exercise
Price, calculated based on the price per share of Common Stock determined in the
Major Transaction, and had such initial Holder been the holder of record of such
Common Stock at the time of the consummation of such Major Transaction, or (ii)
cash paid by the Company in immediately available funds, in an amount equal to
the number of shares of Common Stock for which this Warrant was exercisable
(without regard to any limitations on exercise herein contained and assuming
payment of the Exercise Price in cash hereunder) times (x) in the event that the
common stock of the surviving company is not publicly traded, seventy five
percent (75%) of the Black-Scholes Amount (as defined herein) or (y) in the
event that the common stock of the surviving company is publicly traded, fifty
seven and one-half percent (57.5%) of the Black-Scholes Amount; and the Company
shall make lawful provision for the foregoing as a part of such Major
Transaction and shall cause the issuer of any security in such transaction which
constitutes Registrable Securities under the Registration Rights Agreement to
assume all of the Company's obligations under the Registration Rights Agreement
(provided any cash election pursuant to clause (ii) above must be made in
writing to the Company within ten (10) business days following consummation of
such applicable transaction), provided, however, that the amount of cash payable
by the Company shall not exceed $1.50 per share (such $1.50 amount to be
adjusted pro rata in the event of any stock splits, stock dividends or
combinations). In the event that the Company shall consolidate or merge with any
other corporation in a transaction in which common stock of the surviving
corporation or the parent thereof (the "Exchange Securities") is issued to the
holders of Common Stock in such transaction in exchange for all such Common
Stock, and (I) the Exchange Securities are publicly traded, (II) the average
daily trading volume of the Exchange Securities during the ninety (90) day
period ending on the date on which such transaction is publicly disclosed is
greater than nine hundred thousand dollars ($900,000) per day, (III) the
historical one hundred (100) day volatility of the Exchange Securities during
the period ending on the date on which such transaction is publicly disclosed is
greater than sixty percent (60%) and (IV) the market capitalization of the
issuer of the Exchange Securities is not less than one hundred million dollars
($100,000,000) based on the last sale price of the Exchange Securities on the
date immediately before the date on which such transaction is publicly disclosed
(in each case, with respect to the foregoing clauses (I) through (IV), as
reported by Bloomberg), then the provisions of clause (b) of the preceding
sentence shall not apply. No sooner than ten (10) business days nor later than
five (5) business days prior to the consummation of the Major Transaction or
Common Stock Major Transaction, as the case may be (each, a "Transaction"),
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but not prior to the public announcement of such Transaction, the Company shall
deliver written notice ("Notice of Transaction") to each holder of a Warrant,
which Notice of Transaction shall be deemed to have been delivered one (1)
business day after the Company's sending such notice by telecopy (provided that
the Company sends a confirming copy of such notice on the same day by overnight
courier) of such Notice of Transaction. Such Notice of Transaction shall
indicate the amount and type of the transaction consideration which such holder
of a Warrant would receive under this Section ("Transaction Consideration"). If
the Transaction Consideration is cash and does not consist entirely of United
States currency, such holder may elect to receive United States currency in an
amount equal to the value of the Transaction Consideration in lieu of the
Transaction Consideration by delivering notice of such election to the Company
within five (5) business days of such holder's receipt of the Notice of
Transaction.
The "Black-Scholes Amount" shall be an amount determined by calculating the
"Black-Scholes" value of an option to purchase one share of Common Stock on the
applicable page on the Bloomberg online page, using the following variable
values: (i) the current market price of the Common Stock equal to the closing
trade price on the last trading day before the date of the Notice of
Transaction; (ii) volatility of the Common Stock equal to the volatility of the
Common Stock during the one hundred (100) trading day period preceding the date
of the Notice of Transaction; (iii) a risk free rate equal to the interest rate
on the United States treasury bill or treasury note with a maturity
corresponding to the remaining term of this Warrant on the date of the Notice of
Transaction; and (iv) an exercise price equal to the Exercise Price on the date
of the Notice of Transaction. In the event such calculation function is no
longer available utilizing the Bloomberg online page, the holder of a Warrant
shall calculate such amount in its sole discretion using the closest available
alternative mechanism and variable values to those available utilizing the
Bloomberg online page for such calculation function.
7. Reservation of Stock; Valid Issuance of Stock. The Company will at all
times reserve and keep available, solely for issuance and delivery on the
exercise of this Warrant, all shares of Common Stock from time to time issuable
on the exercise of this Warrant. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock, upon the exercise of all or
any portion of this Warrant.
8. Register of Warrants. The Company shall maintain, at the principal
office of the Company (or such other office as it may designate by notice to the
Holder hereof), a register in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each successor and prior owner of such Warrant. The Company
shall be entitled to treat the person in whose name this Warrant is so
registered as the sole and absolute owner of this Warrant for all purposes.
9. Exchange of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Holder hereof at the office or agency of the Company referred to
in Section 6, for one or more new Warrants of like tenor representing in the
aggregate the right to subscribe for and
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purchase the number of shares of Common Stock which may be subscribed for
purchase hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
Holder hereof at the time of such surrender.
10. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
11. Warrant Agent. The Company will act as the exercise agent for the
purpose of issuing Common Stock on the exercise of this Warrant pursuant to
Section 1. The Company may, by written notice to the Holder, appoint an agent
having an office in the United States of America, for the purpose of issuing
Common Stock on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company, until properly exercised.
13. Notices, etc. All notices and other communications from the Company to
the registered Holder of this Warrant shall be mailed by first class certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or at the address shown for such Holder on the
register of Warrants referred to in Section 6.
14. No Impairment. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms required to be
observed or performed hereunder by the Company, but the Company will at all
times in good faith take all actions necessary for the performance of its
obligations under this Warrant.
15. Miscellaneous. This Warrant and any terms hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement or such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, Tera Computer Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
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Dated: June 21, 1999 TERA COMPUTER COMPANY
By:
------------------------------------
Name: James E. Rottsolk
Title: President
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FORM OF SUBSCRIPTION
COMMON STOCK PURCHASE WARRANT
OF TERA COMPUTER COMPANY
(To be signed only on exercise of Warrant)
TO: Tera Computer Company
411 First Avenue South, Suite 600
Seattle, Washington 98104-2860
1. The undersigned Holder of the attached original, executed Warrant hereby
elects to exercise its purchase right under such Warrant with respect to shares
of Common Stock, as defined in the Warrant, of Tera Computer Company, a
Washington corporation (the "Company").
2. The undersigned Holder pays the aggregate purchase price for such shares
of Common Stock (i) by lawful money of the United States or the enclosed
certified or official bank check payable in United States dollars to the order
of the Company in the amount of $_________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of $____________, which
transfer has been made before or simultaneously with the delivery of this Form
of Subscription pursuant to the instructions of the Company.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
----------------------------------
Address:
----------------------------------
----------------------------------
Dated:
-------------------
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
--------------------------------------
--------------------------------------
(Address)
11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 21, 1999 (this
"Agreement"), is made by and between TERA COMPUTER COMPANY, a Washington
corporation (the "Company"), and the party listed on the signature page of this
Agreement (the "Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Purchase Agreement dated as June 18, 1999,
between the Investor and the Company (the "Purchase Agreement"), the Company has
agreed, upon the terms and subject to the conditions of the Purchase Agreement,
to issue and sell to the __________ shares (the "Shares") of Common Stock, $.01
par value (the "Common Stock"), and warrants (the "Warrants") to purchase the
same number of shares of Common Stock of the Company; and
WHEREAS, to induce the Investor to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Securities Act"), and applicable state securities laws with
respect to the Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Purchase Agreement,
or, if applicable, in the Warrants.
2. Mandatory Registration for Resale.
(a) The Company shall prepare and, on or before thirty (30) days after
the Closing Date, file with the Securities and Exchange Commission ("SEC") a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect the
registration for resale of the Shares and the Warrant Shares), which covers the
resale by the Investor of the Shares and the Warrant Shares and the resale by
all other Investors of their respective Shares and Warrant Shares, and any other
securities that are exchanged for such Shares and Warrant Shares (collectively
the "Registrable Securities").
(b) The Company meets the requirements for the use of Form S-3 for
registration of the Registrable Securities for resale by the Investor. The
Company believes that it may register all of the Registrable Securities under
the Securities Act on Form S-3. The
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Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to Section 2 hereof, as applicable, the Company
shall:
(a) use its best efforts to cause the Registration Statement required
to be filed pursuant to Section 2(a) hereof to become effective as soon as
practicable, but in no event later than the ninetieth (90th) day following the
Closing Date (or the one hundred twentieth (120th) day following the Closing
Date if the SEC reviews such Registration Statement) (the "Registration
Deadline"). If (i) the Registration Statement covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC on or before the applicable Registration
Deadline (a "Registration Failure"), or (ii) after such Registration Statement
has been declared effective by the SEC, sales of the Registrable Securities
covered thereby cannot be made pursuant to such Registration Statement (by
reason of a stop order or the Company's failure to update the registration
statement or any other reason outside the control of the Investors) except
pursuant to a suspension of sales permitted under Section 3(e) hereof pursuant
to a Negotiation Event (a "Registration Suspension"), then the Company will make
payments to the Investor in such amounts and at such times as shall be
determined pursuant to this Section 3(a) as partial relief for the damages to
the Investor by reason of any such delay in or reduction of the ability to sell
the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). In the event of a Registration Failure,
the Company shall pay to the Investor an amount equal to (A) three percent (3%)
times (B) the Funded Amount (as defined below) times (C) the number of months
(prorated per day for partial months) following the applicable Registration
Deadline prior to the date the applicable Registration Statement filed pursuant
to Section 2(a) is declared effective by the SEC. In the event of a Registration
Suspension, the Company shall pay to the Investor an amount equal to (D) three
percent (3%) times (E) the Funded Amount times (F) the number of months
(prorated per day for partial months) from (x) the date on which sales of all
the Registrable Securities first cannot be made to (y) the date on which sales
of all such Registrable Securities can again be made. "Funded Amount" means the
aggregate purchase price of the Shares registered (or to be registered) on the
Registration Statement. Amounts to be paid pursuant to this Section 3(a) shall
be paid in cash. Such payments shall be made within five (5) business days after
the end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, payments shall be made for
each such thirty (30) day period within five (5) business days after the end of
such thirty (30) day period. The Company shall use its best efforts to keep the
Registration Statement effective pursuant to Rule 415 and available for use at
all times during the period from the Closing Date to the earliest of (i) the
date which is two years after the last exercise by any of the Investors of any
Warrant, (ii) the date on which each Investor may sell all of its Registrable
Securities without registration under the Securities Act pursuant to Rule 144,
without restriction on the manner of sale or the volume of securities which may
be sold in any period and without the requirement for the giving of any notice
to, or the making of any filing with, the SEC and (iii) the date on which the
Investors no longer beneficially own any Registrable Securities or Warrants (the
"Registration Period"). The Company represents and warrants to, and covenants
and agrees with, the Investor that the Registration Statement
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<PAGE>
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep such Registration Statement effective and available for use at
all times during the Registration Period;
(c) furnish to the Investor (i) promptly after the same is prepared
and publicly distributed, filed with the SEC or received by the Company, one
copy of the Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, each letter
written by or on behalf of the Company to the SEC or the staff of the SEC and
each item of written correspondence from the SEC or the staff of the SEC
relating to such Registration Statement (other than any portion of any thereof
that contains information for which the Company has sought confidential
treatment) and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such securities or blue
sky laws of such jurisdictions as any Investor reasonably requests, (ii) prepare
and file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto (I) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its articles of
incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
shareholders;
(e) as promptly as practicable after becoming aware of such event or
circumstance, notify the Investor (by telephone and by facsimile) of any event
or circumstance of which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits
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<PAGE>
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly (but not later than five (5)
days thereafter) to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, file such supplement or
amendment with the SEC at such time as shall permit the Investor to sell
Registrable Securities as promptly as practicable, and deliver a number of
copies of such supplement or amendment to the Investor as such Investor may
reasonably request. If such event is the conduct of negotiations with respect to
a material transaction, the disclosure of which the Board of Directors
reasonably concludes would be materially detrimental to the Company (each, a
"Negotiation Event"), the Company shall be entitled, upon giving notice of a
Negotiation Event to the Investor (the "Negotiation Notice") and upon the
reasonable determination of the Company, after consulting with counsel, that
failure to disclose the Negotiation Event would constitute an omission to state
a material fact required to be stated in the Registration Statement, to require
the Investor to suspend sales of the Common Stock pursuant to the Registration
Statement for a period of up to fifteen (15) days after the giving of the
Negotiation Notice; provided, however, that the Company shall not give more than
two (2) Negotiation Notices in any twelve (12) month period; and provided,
further, that, after the expiration of such fifteen (15) day period, the Company
shall take all steps necessary to end such required suspension of sales,
including by filing an amendment or supplement to the Registration Statement;
(f) as promptly as practicable after becoming aware of such event,
notify the Investor of the issuance by the SEC of any stop order or other
suspension of effectiveness of the Registration Statement at the earliest
possible time, and the Company shall use its best efforts to prevent the
issuance of any such stop order or other suspension;
(g) provide the Investor a copy of the Registration Statement and all
amendments and supplements thereto at least five (5) business days prior to the
filing thereof with the SEC, provided, that any failure or delay by the Investor
in submitting comments to the Company during such period shall not require the
Company to delay its filing of the Registration Statement or any such amendments
or supplements; and the Company shall provide all correspondence of the Company
to and from the SEC staff regarding the Registration Statement to the Investor
upon written request of the Investor;
(h) make available for inspection by the Investor and its counsel or
other agents retained by the Investor (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable the Investor to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information that any Inspector reasonably may request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to the Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in
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<PAGE>
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(h). The Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at the Company's own expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential;
(i) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement to be listed on Nasdaq or such other
principal securities market on which securities of the same class or series
issued by the Company are then listed or traded;
(j) if the Investor is deemed to be an underwriter under the
Securities Act, the Company shall, upon written request of the Investor, furnish
the Investor on the date of effectiveness of the Registration Statement (a) an
opinion, dated as of such applicable date, from counsel representing the Company
addressed to the Investor and in form, scope and substances as is customarily
given in an underwritten public offering and (b) a letter, dated as of such
applicable date, from the Company's independent certified public accountants
addressed to the Investor and in form, scope and substance as customarily given
to underwriters in an underwritten public offering;
(k) hold in confidence and not make any disclosure of any information
provided by the Investor to the Company and designated by the Investor as its
confidential information, unless (i) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such information is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information has been made generally available to the
public other than by disclosure in violation of this agreement;
(l) take all other actions necessary to comply with federal and any
applicable state securities laws in connection with the obligations of the
Company under this Agreement; and
(m) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investor. In connection with the registration of the
Registrable Securities, the Investor shall have the following obligations:
(a) It is a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of the Investor that the Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable
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Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as shall be necessary for the foregoing and as the
Company may reasonably request. At least six (6) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor
(the "Requested Information") if any of the Investor's Registrable Securities
are eligible for inclusion in the Registration Statement. If at least one (1)
business day prior to the filing date the Company has not received the Requested
Information from the Investor (a "Non-Responsive Investor"), then the Company
may file the Registration Statement without including Registrable Securities of
such Non-Responsive Investor but shall not be relieved of its obligation to file
a Registration Statement with the SEC relating to the Registrable Securities of
such Non-Responsive Investor promptly after such Non-Responsive Investor
provides the Requested Information;
(b) The Investor by acceptance of the Registrable Securities agrees to
cooperate with the Company as reasonably requested thereby in connection with
the preparation and filing of the Registration Statement hereunder, unless the
Investor has notified the Company in writing of the Investor's election to
exclude all of the Investor's Registrable Securities from the Registration
Statement;
(c) The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice, except
that each Investor may retain one (1) copy of such prospectus solely for its
files; and
(d) The Investor agrees that it will not effect any disposition of the
Registrable Securities except as contemplated in the Registration Statement or
as is otherwise in compliance with applicable securities laws and that it will
promptly notify the Company of any material change in the information set forth
in the Registration Statement regarding the Investor's plan of distribution. The
Investor agrees (a) to notify the Company in writing in the event that such
Investor enters into any material agreement with a broker or a dealer for the
sale of the Registrable Securities through a block trade, special offering or
exchange distribution and (b) in connection with such agreement, to provide to
the Company in writing the information necessary to enable the Company to
prepare, at the Company's sole cost and expense, any supplemental prospectus
pursuant to Rule 424(c) under the Securities Act which is required with respect
to such transaction. In connection with any sale of Registrable Securities which
is made pursuant to the Registration Statement, the Investor shall comply with
the prospectus delivery requirements of the Securities Act.
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5. Expenses of Registration. All reasonable expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, listing, qualification, and filing fees, printing and accounting
expenses, fees and disbursements of counsel for the Company, shall be borne by
the Company; provided, however, that the Investor shall pay all brokerage and
selling commissions and associated costs pertaining to the sale of its
Registrable Securities.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will defend, indemnify
and hold harmless the Investor and its directors, officers, members, employees,
partners, agents, and each person who controls the Investor within the meaning
of the Securities Act or the Exchange Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
other law, or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Persons, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement, the prospectus or any such amendment
thereof or supplement thereto, if such prospectus was timely made available by
the Company pursuant to Section 3(c) hereof; (II) with respect to any
preliminary prospectus shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
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supplemented, if such person was notified of such untrue statement or omission
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; and (III) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person.
(b) In connection with any Registration Statement in which the
Investor is participating, the Investor agrees to defend, indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any other shareholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such shareholder within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented. The obligation of the Investor
under this Section 6(b) shall not exceed the purchase price paid by the Investor
for the Registrable Securities.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
and continue control of the defense thereof with counsel selected by the
indemnifying party but reasonably acceptable to the Indemnified Person or the
Indemnified Party, as the case may be, and such indemnifying party shall
diligently pursue such defense; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or
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Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the amount by which the net amount of proceeds received by such seller from
the sale of such Registrable Securities exceeds the purchase price paid by such
seller for such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investor the benefits of Rule 144, the Company agrees, during the Registration
Period, to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee who (1) holds, or upon
such assignment will hold, at least twenty percent (20%) of the Registrable
Securities or (2) is an affiliate of such Investor; provided in the case of (1)
and (2), (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a
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copy of such agreement is furnished to the Company within a reasonable time
after such assignment; (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned; (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws; (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (e) such transfer shall have been made in
accordance with the applicable provisions of the Purchase Agreement; (f) such
transferee shall be an "accredited investor" as that term defined in Rule 501 of
Regulation D promulgated under the Securities Act but shall not be a
broker-dealer or a member of the National Association of Securities Dealers,
Inc.; and (g) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), such assignee or transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment. In connection with any such transfer the Company shall promptly
after such assignment take such actions as shall be reasonably required for the
Registration Statement and related prospectus to be available for use by such
transferee for sales of the Registrable Securities in respect of which the
rights to registration have been assigned.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Investor
and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities or Warrants whenever such person or entity owns of record such
Registrable Securities or Warrants. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Registrable Securities or Warrants, the Company shall act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities or Warrants.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand or courier) or delivered by facsimile: (i) if to the Company, at Tera
Computer Company, 411 First Avenue South, Suite 600, Seattle, Washington
98104-2860, Attention: Chief Executive Officer, facsimile No. (206) 701-2218,
with a copy to Stoel Rives LLP, One Union Square, 36th Floor, Seattle,
Washington 98101, Attention: Christopher J. Voss, facsimile no. (206) 386-7500;
and (ii) if to the Investors at their respective addresses set forth on the
Purchase Agreement; or at such other address as each such party furnishes by
notice given in accordance with this Section 10(b), and shall be effective, when
personally delivered, upon receipt, and when sent by facsimile, upon receipt of
confirmation of successful transmission.
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(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the law of the State of New York applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of day and year first
above written.
TERA COMPUTER COMPANY
By:
------------------------------------
Name: James E. Rottsolk
Title: President and CEO
INVESTOR:
Name:
--------------------------------
By:
-------------------------
Title:
----------------------
Address:
---------------------------
---------------------------
Telephone:
---------------------------
Facsimile:
---------------------------
12
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT, dated as of June 17, 1999 (this "Agreement"),
is be and among TERA COMPUTER COMPANY, a Washington corporation (the "Company")
and the BANCA DEL GOTTARDO (the "Investor").
WHEREAS, pursuant to a Purchase Agreement, dated as of March 9, 1999 (the
"March 1999 Agreement"), the Investor purchased 1,111,111 shares of the
Company's common stock, $0.01 par value (the "Common Stock), acquired common
stock purchase warrants covering 1,111,111 shares of Common Stock and aquired
the right to purachase and receive additional shares of Common Stock and
warrants; and
WHEREAS, the Company is raising additional capital from other sources in a
private placement of Common Stock and Common Stock Purchase Warrants (the
"Warrants") to be consummated in June 1999 (the "Private Placement"); and
WHEREAS, the Investor has agreed to participate in the Private Placement;
and
WHEREAS, it is a condition precedent to the closing of the Private
Placement that certain additional agreements be reached among the Investor and
the Company regarding the Investor's right to acquire additional shares of
Common Stock and warrants;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. All terms not defined in this Agreement are used as defined
in the March 1999 Agreement.
2. Private Placement. The Investor agrees to invest not less than
$5,000,000 in the Private Placement pursuant to the purchase agreement and
related documents governing the Private Placement.
3. Option/Additional Shares. The March 1999 Agreement is amended to
eliminate the Investor's right to purchase the Option Shares and receive
Additional Warrants in Section 2 of the March 1999 Agreement and Company's
obligation to issue Additional Shares contained in Section 3 of the March 1999
Agreement, and the March 1999 Agreement is hereby amended to delete Sections 2
and 3 in their entirety.
4. Issuance and Amendment of Warrants.
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(a) Issuance of Warrants. As part of the Closing of the Private
Placement and in addition to the Warrants to be issued to the Investor for its
investment in the Private Placement on the same terms as all other investors in
the Private Placement, the Company shall deliver to the Investor, or as the
Investor shall otherwise designate, Warrants in the same form and with the same
terms as the Warrants issued in the Private Placement for an aggregate of
775,556 shares of Common Stock plus 25% of the number of shares of Common Stock
issued to the Investor as part of its investment in the Private Placement.
(b) Amendment of Warrants. At the Closing of the Private Placement,
the Warrants issued to the Investor pursuant to the March Agreement for an
aggregate of 1,111,111 shares, and the other Warrants then issued, shall be
amended to reduce the initial Exercise Price from $5.16 to the initial Exercise
Price for the Warrants issued in the Private Placement.
5. Registration. The Company agrees to register the shares of Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") within 30 days of
issuance pursuant to the same Registration Statement as used for the
registration of the resale of the shares issued in the Private Placement. The
Company will enter into a Registration Rights Agreement with the Investor with
the same terms and provisions as the Registration Rights Agreement it enters
with the investors in the Private Placement.
6. Term of Agreement. If the Closing of the Private Placement does not
occur on or before June 30, 1999, then either party may declare this Agreement
to be null and void, which declaration shall be binding on the other.
7. Company Representations, Warranties and Covenants
The Company represents and warrants to, and covenants and agrees with, the
Investor that:
(a) Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Washington, and
has all requisite corporate power and authority (i) to own, lease, and operate
its properties and to carry on its business as now being conducted, and (ii) to
execute, deliver, and perform its obligations under this Agreement, the Warrants
and the other agreements to be executed and delivered or amended by the Company
in connection with this Agreement, and to consummate the transactions
contemplated hereby and thereby.
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(b) Concerning the Warrants. The Warrants have been duly authorized
and the Warrant Shares when issued upon due exercise of the Warrants, will be
duly and validly issued, fully paid and non-assessable, and will not subject the
holder thereof to personal liability by reason of being such holder.
(c) Authorization. This Agreement and the Warrants have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered on behalf of the Company and this Agreement is, and the Warrants, when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally and limits
upon rights to indemnity.
(d) Non-contravention. The execution and delivery of this Agreement by
the Company and the issuance by the Company of the Warrants and Warrants Shares,
as contemplated by this Agreement, and completion of the other transactions
contemplated in this Agreement and the Warrants do not and will not conflict
with or result in a breach by the Company of any of the terms or provisions of,
or constitute a default under, the Restated and Amended Articles of
Incorporation or Bylaws of the Company, or any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound which would have a
material adverse effect on the Company, or any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets which would have a material adverse effect on the Company.
(e) Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency or Nasdaq is required to be obtained by the
Company for (i) the issuance of the Warrants as contemplated by this Agreement,
and (ii) the issuance of Warrant Shares upon exercise of the Warrants, except
for the filing of one or more Forms D with respect to such securities as
required under Regulation D under the 1933 Act and Listing Applications on
Nasdaq.
(f) Information Provided All information provided by or on behalf of
the Company to the Investor in connection with the transactions contemplated by
the Agreement does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the
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statements therein, in the light of the circumstances in which they were made,
not misleading.
(g) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. Except as set forth on Sechedule 7(g),
all of such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act.
8. Certain Covenants and Restrictions.
(a) Transfer Restrictions. The Investor acknowledges that (i) the
Warrants have not been and are not being registered under the 1933 Act, and,
except as provided in this Agreement and the Registration Rights Agreement, the
Warrant Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (x) subsequently registered thereunder or (y)
such Investor shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope, and substance to the Company, to the
effect that the Warrant Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (ii) any sale of
the Securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any such resale of Securities under circumstances in which
the seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder (other than pursuant to Section 6(d) hereof and
pursuant to the Registration Rights Agreement).
(b) Restrictive Legend. The Investor acknowledges and agrees that,
until such time as the Warrants and Warrant Shares have been registered under
the 1933 Act, the certificates for the such securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
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EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Once an applicable Registration Statement has been declared effective,
thereafter (i) upon request of a Investor the Company will substitute
certificates without the above-referenced legend for certificates for any
Warrant Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such legend and promptly remove any
stop-transfer restriction relating to such Warrant Shares, but in no event later
than five Business Days after surrender of such certificates by such Investor,
and (ii) the Company shall not place any restrictive legend on certificates for
any Warrant Shares issued or impose any stop-transfer restriction thereon.
(c) Form D. The Company agrees to file a Form D with the SEC with
respect to the Warrants and Warrant Shares as required under Regulation D
promulgated under the 1933 Act and to provide a copy thereof to the Investor
promptly after such filing. The Investor agrees to cooperate with the Company in
connection with such filing and, upon request of the Company, to provide all
information relating to the Investor reasonably required for such filing.
(d) Authorization for Trading; Reporting Status. On or before the date
that is 30 days after the Closing, but in any event before the effective date of
the Registration Statement, the Company shall file a listing application for the
Warrant Shares with the Nasdaq and shall provide evidence of such filing to the
Investor, and the Company, on or before the date that is 30 days after the
issuance thereof. From the Closing until such time as the Registration Statement
is no longer required to be in effect, the Company shall file all reports
required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934
Act and the Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination.
(e) Certain Expenses and Fees. Whether or not the closing of the
transactions contemplated hereby occurs, the Company shall pay or reimburse the
Investor for all reasonable expenses (including, without limitation, legal fees
and expenses of counsel to the Investor of up to $10,000) incurred by the
Investors in connection with this Agreement and the transactions contemplated
hereby.
(f) Reservation of Common Stock. The Company shall take all action
necessary so that a number of shares
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of the authorized but unissued Common Stock sufficient to provide for the
issuance of Warrant Shares issuable hereunder are at all times reserved by the
Company, free from preemptive rights. If the Company shall issue any securities
or make any change in its capital structure which would change the number of
shares of Common Stock issuable as Warrant Shares as herein provided, the
Company shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for issuance of the Warrant Shares on the
new basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to permit the issuance of all Warrant Shares
issuable hereunder, the Company promptly shall seek, and use its best efforts to
obtain and complete, such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(g) Trading Reports. The Investor shall promptly report to the Company
all market sales of shares of Common Stock of the Company by such Investor.
(h) Brokers' or Finders' Fees. The Company and the Investor represents
and warrants to each other that they have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees, or agents'
commission or other like payment in connection with this Agreement or the
transactions contemplated hereby. Each party agrees to indemnify and hold the
other parties harmless from and against any obligation or liability for brokers'
or finders' fees or agents' commissions or other like payment based in any way
on agreements, arrangements or understandings claimed to have been made by such
indemnifying party with any third party.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Washington.
(b) Counterparts. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile copy of this Agreement
bearing a signature on behalf of a party hereto shall be legal and binding on
such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference
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and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Investors or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties hereto
shall operate as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission) or by courier and shall be effective upon
receipt (or on the next Business Day, if the date of such receipt is not a
Business Day), if delivered personally or by courier, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Financial Officer (facsimile number (206)
701-2218), with a copy to Stoel Rives LLP, Suite 3600, One Union Square, 600
University Street, Seattle, WA 98101, Attn: Christopher J. Voss, Esq. (facsimile
number (206) 386-7500) or, in the case of each Investor, at its address shown on
the signature page of this Agreement, with a copy to the Law Offices of Gary L.
Blum, 3278 Wilshire Blvd, Suite 603, Los Angeles, CA 90010 (facsimile number
(213) 384-1035), or such other address or telephone line facsimile transmission
number as a party shall have provided by notice to the other party in accordance
with this provision. Each Investor hereby designates as its address for any
notice required or permitted to be given to the Investor pursuant to the
Warrants the address shown on the signature page of this
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Agreement, until such Investor shall designate another address for such purpose.
(h) Survival. The respective representations, warranties, covenants,
and agreements of each Investor and the Company contained in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
survive the delivery of payment for the Initial Shares and the Option Shares,
the issuance of the Warrants, the Additional Warrants the Adjustment Shares and
the Warrant Shares, and shall remain in full force and effect regardless of any
investigation made by or on behalf of them or any person controlling or advising
any of them.
(i) Entire Agreement; Confirmation. This Agreement and the annexes and
schedules attached hereto set forth the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, with respect thereto. Except as amended
hereby, the March 1999 Agreement and the Registration Rights Agreement remain in
effect in accordance with their respective terms.
(k) Further Assurances. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(l) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Investors
and the Company by their respective officers thereunto duly authorized as of the
date set forth above.
TERA COMPUTER COMPANY
By: /s/ JAMES E. ROTTSOLK
-----------------------------------
Name: James E. Rottsolk
Title: President and CEO
INVESTOR
BANCA DEL GOTTARDO
By: /s/ FABIO TESTORI CLAUDIO POLI
-----------------------------------------------------------------
Name: Fabio Testori Claudio Poli
Title: Member of Executive Board Officer
Address: viale S. Franscini 8
6901 Lugano
Switzerland
Telephone: 011-4191-808-1111
Facsimile: 011-4191-808-2454/43
9
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT, dated as of June 18, 1999 (this "Agreement"), is
by and among TERA COMPUTER COMPANY, a Washington corporation (the "Company"),
ADVANTAGE FUND II LTD., a British Virgin Islands corporation ("Advantage"),
GENESEE FUND LIMITED - PORTFOLIO B, a British Virgin Islands corporation
("Genesee"), and KOCH INDUSTRIES, INC., a Kansas corporation ("Koch" and
collectively with Advantage and Genesee, the "Holders").
WHEREAS, pursuant to a Subscription Agreement, dated as of June 30, 1998
(the "June 30 Agreement"), Advantage purchased from the Company 6,000 shares of
the Company's Series B Convertible Preferred Stock, $.01 par value (the "Series
B Stock"), and acquired warrants to purchase an aggregate of 50,000 shares of
Common Stock (the "June 30 Warrants");
WHEREAS, pursuant to a Subscription Agreement, dated as of September 30,
1998 (the "September 30 Agreement"), Advantage and Koch purchased from the
Company an aggregate of 600,000 shares of the Company's Common Stock, $0.01 par
value (the "Common Stock"), acquired warrants to purchase an aggregate of
121,008 shares of Common Stock (the "September 30 Warrants"), and acquired the
right to receive additional shares of Common Stock; and
WHEREAS, pursuant to a Subscription Agreement, dated as of December 16,
1998 (the "December 16 Agreement"), Genesee and Koch purchased from the Company
an aggregate of 200,000 shares of Common Stock, acquired warrants to purchase an
aggregate of 40,336 shares of Common Stock (the "December 16 Warrants," and
together with the June 30 Warrants and the September 30 Warrants, the "Original
Warrants"), and acquired the right to receive additional shares of Common Stock;
and
WHEREAS, pursuant to two Amendment Agreements, each dated as of March 22,
1999 (the "March 22 Agreements"), Advantage, Genesee, Koch and the Company,
among other things, amended the September 30 Agreement and December 16 Agreement
and related agreements to provide for the issuance of Adjustment Warrants (as
such term is defined in the March 22 Agreements) in lieu of additional shares of
Common Stock; and
WHEREAS, the Company is attempting to raise not less than $15,000,000 of
additional capital in a private placement of Common Stock and Common Stock
Purchase Warrants (the "Private Placement Warrants") to be consummated in June
1999 (the "Private Placement"); and
WHEREAS, it is a condition precedent to the closing of the Private
Placement that certain additional agreements be reached among Advantage,
Genesee, Koch and the Company regarding the shares of Common Stock and
Adjustment Warrants held by Advantage, Genesee and Koch and the shares of Series
B Stock held by Advantage;
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NOW THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. All terms not defined herein are used as defined in the
March 22 Agreements, and if not defined therein, in the June 30 Agreement, the
September 30 Agreement and the December 16 Agreement, as applicable.
2. Adjustment Warrants. Advantage, Genesee and Koch each agree that,
commencing on the date of this Agreement, it will not transfer or assign any of
its rights under the September 30 Agreement or the December 16 Agreement or any
Adjustment Warrants it presently holds until after the closing of the Private
Placement (the "Closing"). Effective at the Effective Time (as defined in
Section 10), the September 30 Agreement and the December 16 Agreement, as
amended by the March 22 Agreements, are each further amended to eliminate the
provisions requiring the Company, in certain circumstances, to issue and deliver
Adjustment Warrants to Advantage, Genesee and Koch, as the case may be, and in
particular each of Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 6(k) are hereby
deleted from both the September 30 Agreement and the December 16 Agreement, as
each has been amended by the applicable March 22 Agreement. Nothing herein shall
be construed to affect in any way the issuance of Adjustment Warrants prior to
the date of this Agreement.
3. Repurchase Rights and Obligations. Effective at the Effective Time, the
September 30 Agreement and the December 16 Agreement, as amended by the March 22
Agreements, are each amended to delete Sections 7 and 7.1 thereof.
4. Issuance of Warrants. At the Effective Time, the Company shall deliver
to Advantage, Genesee and Koch, Common Stock Purchase Warrants (the "Warrants")
substantially in the form attached hereto as Annex I, as follows:
(a) to Advantage, Warrants to purchase 302,217 shares of Common Stock.
(b) to Genesee, Warrants to purchase 158,122 shares of Common Stock;
and
(c) to Koch, Warrants to purchase 271,289 shares of Common Stock.
Except as otherwise set forth in Annex I, the Warrants issued pursuant to this
Section 4 shall have the same exercise price per share and other terms and
provisions as the Private Placement Warrants.
5. Certain Covenants and Restrictions.
(a) Registration Rights Agreement. The Holders and the Company agree
to enter into a Registration Rights Agreement substantially in the form attached
hereto as Annex II (the "Registration Rights Agreement") at or prior to the
Effective Time with respect to the resale of the shares of Common Stock issuable
upon exercise of the Warrants (the "Warrant Shares").
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<PAGE>
(b) Transfer Restrictions. Each Holder acknowledges that (i) the
Warrants have not been and are not being registered under the Securities Act of
1933, as amended (the "1933 Act"), and, except as provided in this Agreement and
the Registration Rights Agreement, the Warrant Shares have not been and are not
being registered under the 1933 Act, and may not be transferred unless (x)
subsequently registered thereunder or (y) such Holder shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope, and
substance to the Company, to the effect that the Warrants or the Warrant Shares
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration; (ii) any sale of the Warrants and Warrant Shares made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any such resale of Warrants or Warrant Shares under circumstances in
which the seller, or the person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Warrants or Warrant Shares (other than pursuant to
the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder (other than pursuant to Section
5(d) hereof and pursuant to the Registration Rights Agreement).
(c) Restrictive Legend. Each Holder acknowledges and agrees that the
certificates for the Warrants and the Warrant Shares and, until such time as the
Warrant Shares have been registered under the 1933 Act, the certificates for the
Warrant Shares shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Once the Registration Statement required to be filed by the Company pursuant to
the Registration Rights Agreement has been declared effective, thereafter (i)
upon request of a Holder the Company will substitute certificates without the
above-referenced legend for certificates for any Warrant Shares issued prior to
the date such Registration Statement is declared effective by the SEC which bear
such legend and promptly remove any stop-transfer restriction relating to such
Warrant Shares, but in no event later than three Business Days after surrender
of such certificates by such Holder, and (ii) the Company shall not place any
restrictive legend on certificates for any Warrant Shares issued or impose any
stop-transfer restriction thereon.
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<PAGE>
(d) Form D. The Company agrees to file a Form D with the SEC with
respect to the Warrants and Warrant Shares as required under Regulation D
promulgated under the 1933 Act and to provide a copy thereof to the Holders
promptly after such filing. Each Holder agrees to cooperate with the Company in
connection with such filing and, upon request of the Company, to provide all
information relating to such Holder reasonably required for such filing.
(e) Authorization for Trading; Reporting Status. On or before the date
that is 30 days after the Effective Time, but in any event before the effective
date of the Registration Statement, the Company shall file a listing application
for the Warrant Shares with the Nasdaq and shall provide evidence of such filing
to the Holders. From the Effective Time until such time as the Registration
Statement is no longer required to be in effect, the Company shall file all
reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
(f) Reservation of Common Stock. The Company shall take all action
necessary so that a number of shares of the authorized but unissued Common Stock
sufficient to provide for the issuance of Warrant Shares issuable under the
Warrants are at all times reserved by the Company, free from preemptive rights.
If the Company shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock issuable as
Warrant Shares as herein provided, the Company shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
issuance of the Warrant Shares on the new basis. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
the issuance of all Warrant Shares issuable hereunder, the Company promptly
shall seek, and use its best efforts to obtain and complete, such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(g) Brokers' or Finders' Fees. Except as set forth in Schedule 5(g),
each of the Company and the Holders represents and warrants to each other that
they have not incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees, or agents' commission or other like payment in
connection with this Agreement or the transactions contemplated hereby. Each
party agrees to indemnify and hold the other parties harmless from and against
any obligation or liability for brokers' or finders' fees or agents' commissions
or other like payment based in any way on agreements, arrangements or
understandings claimed to have been made by such indemnifying party with any
third party.
(h) Filing Registration Statement for Holders' Outstanding Securities.
Without limiting or waiving the terms of the several Registration Rights
Agreements entered into between the Company and each of the Holders in
connection with the September 30 Agreement and the December 16 Agreement, as
amended by the March 22 Agreements (the "Original Registration Rights
Agreements"), the Company agrees to file a Registration Statement under the 1933
Act for the resale of the Registrable Securities (as defined in each Original
Registration Rights
4
<PAGE>
Agreement) of each Investor within five business days after the later of (i) the
date of the Effective Time in accordance with the terms of the Original
Registration Rights Agreements and (ii) the date the Form S-3 registration
statement, Registration No. 333-76223, currently on file with the SEC, is
declared effective; provided that the Company shall file such Registration
Statement not later than July 15, 1999.
6. Holder's Representations, Warranties and Covenants.
Each Holder, severally and not jointly, represents and warrants to, and
covenants and agrees with, the Company as follows:
(a) Purchase for Investment. The Holder is acquiring the Warrants and,
upon exercise of the Warrants, will acquire the Warrant Shares, for its own
account for investment only and not with a view towards the public sale or
distribution thereof. The Holder understands that its investment in the Warrants
and Warrant Shares involves a high degree of risk.
(b) Accredited Investor; No Broker-Dealer. The Holder is an
"accredited investor" as that term is defined in Rule 501 of Regulation D under
the 1933 Act by reason of Rule 501(a)(3). The Holder is not a person required to
be registered as a broker or dealer under Section 15(a) of the 1934 Act or a
member of the National Association of Securities Dealers, Inc.
(c) Reoffers and Resales. All subsequent offers and sales of the
Warrants and Warrant Shares by the Holder shall be made pursuant to registration
of such securities being offered and sold under the 1933 Act or pursuant to an
exemption from registration.
(d) Company Reliance. The Holder understands that the Warrants are
being issued, and the Warrant Shares are being offered to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Holder's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Holder set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Holder to acquire the Warrants and Warrant Shares.
(e) Information Provided. The Holder and its advisors, if any, have
been furnished with all materials relating to the business, finances, and
operations of the Company and materials relating to the offer and sale of the
Warrants and Warrant Shares that have been requested by the Holder. Each Holder
and its advisors, if any, have been afforded the opportunity to ask questions of
the management of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Holder has had the opportunity to obtain and review the following reports
filed by the Company with the SEC pursuant to the 1934 Act: the Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, the Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1999, two reports on Form 8-K
filed on March 25, 1999, and the Proxy Statement for the Annual Meeting of
Shareholders held on May 5, 1999 (collectively, the "Disclosure Documents").
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<PAGE>
(f) Absence of Approvals. The Holder understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Warrants or Warrant
Shares.
(g) Agreement. This Agreement has been duly and validly authorized,
executed, and delivered on behalf of the Holder and is a valid and binding
agreement of the Holder enforceable in accordance with its terms, subject to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
7. Advantage Representations, Warranties and Covenants.
Advantage hereby represents and warrants to the Company that, except for
conversions of shares of the Series B Stock into shares of Common Stock, it has
not assigned, sold or otherwise transferred any shares of Series B Stock and
that it will not assign, sell or otherwise transfer any of the shares of Series
B Stock that it presently holds. Advantage hereby covenants and agrees with the
Company that, at or prior to the Effective Time, it will convert all shares of
the Series B Stock that it holds into shares of Common Stock pursuant to the
terms of the Statement of Rights and Preferences of the Series B Stock.
8. Company Representations, Warranties and Covenants.
The Company represents and warrants to, and covenants and agrees with, each
Holder that:
(a) Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Washington, and
has all requisite corporate power and authority (i) to own, lease, and operate
its properties and to carry on its business as now being conducted, and (ii) to
execute, deliver, and perform its obligations under this Agreement, the
Warrants, the Registration Rights Agreement and the other agreements to be
executed and delivered or amended by the Company in connection with this
Agreement, and to consummate the transactions contemplated hereby and thereby.
(b) Concerning the Warrants and Warrant Shares. The Warrants have been
duly authorized and the Warrant Shares when issued upon due exercise of the
Warrants, will be duly and validly issued, fully paid and non-assessable, and
will not subject the holder thereof to personal liability by reason of being
such holder. The Common Stock is listed for trading on the Nasdaq and, except as
set forth on Schedule 8(b), (i) the Company and the Common Stock meet the
currently applicable criteria for continued listing and trading on Nasdaq; (ii)
the Company has not been notified since September 25, 1995 by Nasdaq of any
failure or potential failure to meet the criteria for continued listing and
trading on Nasdaq; (iii) no suspension of trading in the Common Stock is in
effect; and (iv) the Company knows of no reason that the Warrant Shares will not
be eligible for listing on Nasdaq.
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(c) Authorization. This Agreement, the Registration Rights Agreement
and the Warrants have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered on behalf of the Company and this
Agreement is, and the Registration Rights Agreement and the Warrants, when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally and limits
upon rights to indemnity.
(d) Non-contravention. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the issuance by the
Company of the Warrants and Warrants Shares, as contemplated by this Agreement,
and completion of the other transactions contemplated in this Agreement, the
Registration Rights Agreement, and the Warrants do not and will not conflict
with or result in a breach by the Company of any of the terms or provisions of,
or constitute a default under, the Restated and Amended Articles of
Incorporation or Bylaws of the Company, or any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound which would have a
material adverse effect on the Company, or any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets which would have a material adverse effect on the Company.
(e) Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency or Nasdaq or the shareholders of the
Company is required to be obtained by the Company for (i) the issuance of the
Warrants as contemplated by this Agreement, and (ii) the issuance of Warrant
Shares upon exercise of the Warrants, except for the filing of one or more Forms
D with respect to such securities as required under Regulation D under the 1933
Act and listing applications with Nasdaq.
(f) Information Provided. All information provided by or on behalf of
the Company to the Holders in connection with the transactions contemplated by
this Agreement, including, without limitation, the Disclosure Documents and the
other information referred to in Section 6(e) of this Agreement, taken as a
whole, does not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading.
(g) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. Except as set forth on Schedule 8(g),
all such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act. The Company has not filed any reports with the SEC under the 1934 Act since
May 17, 1999, other than the Disclosure Documents.
(h) Absence of Certain Changes. Except as disclosed in the Disclosure
Documents, since December 31, 1998, there has been no material adverse change
and no material
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adverse development in the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company, and,
except as and to the extent disclosed, reflected or reserved against in the
financial statements of the Company and the notes thereto included in the
Disclosure Documents, the Company has no material (individually or in the
aggregate) liabilities, debts or obligations whether accrued, absolute,
contingent or otherwise, and whether due or to become due. Subsequent to
December 31, 1998, the Company has not incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company, other than those incurred in the ordinary course of its
business or disclosed in the Disclosure Documents.
(i) Absence of Certain Proceedings. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
(an "Action") pending or, to the knowledge of the Company, threatened against
the Company and, to the knowledge of the Company, there is no inquiry or
investigation before or by any court, public board or body or governmental
agency pending or threatened against the Company, in any such case wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company or the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
Neither the Company nor any director or officer thereof is or has been the
subject of any Action involving (i) a claim of violation of or liability under
federal or state securities laws or (ii) a claim of breach of fiduciary duty.
The Company does not have pending before the SEC any request for confidential
treatment of information and to the knowledge of the Company, no such request
will be made by the Company prior to the time the Registration Statement
relating to the Warrant Shares which is contemplated by the Registration Rights
Agreements is first ordered effective by the SEC; and, to the knowledge of the
Company, there is not pending or contemplated and has not been any investigation
by the SEC of the Company or any director or officer of the Company.
(j) No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person acting on behalf of the Company, in respect of or in connection with the
offer of the Warrants and Warrant Shares. Except as set forth in Schedule 8(j),
neither the Company nor, to its knowledge, any person acting on behalf of the
Company has, either directly or indirectly, sold or offered for sale to any
person any shares of the Common Stock or the Warrants or, within the six months
prior to the date hereof, any other similar security of the Company except as
contemplated by this Agreement; and neither the Company nor any person
authorized to act on its behalf will sell or offer for sale any shares of Common
Stock or Warrants, or solicit any offers to buy any shares of Common Stock or
Warrants, so as thereby to cause the issuance of the Warrants or the Warrant
Shares to be in violation of Section 5 of the 1933 Act.
(k) Certain Issuances of Securities. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock, warrants or
other securities convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock that are subject to Rule 4460(i) of
Nasdaq (or any successor, replacement or similar provision thereof
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<PAGE>
or of any other market on which the Common Stock is listed for trading)
(collectively, "Rule 4460(i)") and that would be integrated with the issuance of
the Warrants or the Warrant Shares for purposes of Rule 4460(i). If for any
reason the Company is required by Rule 4460(i) or by Nasdaq to obtain
shareholder approval with respect to any securities of the Company issued to or
held by any Holder, the Company shall promptly hold a special meeting of its
shareholders for such purpose within 60 days of learning of such requirement and
shall use its best efforts to obtain such approval at such meeting.
9. Conditions.
(a) Conditions to the Company's Obligations. Each Holder understands
the Company's obligations to issue the Warrants to the Holders at the Effective
Time pursuant to this Agreement is conditioned upon:
(i) The Closing of the Private Placement occurring;
(ii) The receipt and acceptance by the Company of this Agreement
as evidenced by the execution of this Agreement by the Company and delivery of
an executed counterpart of this Agreement to the Holders or their legal counsel;
and
(iii) The accuracy as of the Effective Time of the
representations and warranties of the Holders as if made at and as of the
Effective Time and the performance by the Holders on or before the Effective
Time of all covenants and agreements of the Holders required to be performed on
or before the Effective Time, including without limitation the conversion of all
of the issued and outstanding shares of Series B Stock pursuant to Section 7.
(b) Conditions to the Holders' Obligations. The Company understands
that each Holder's obligations to acquire the Warrants and become subject to the
other provisions of this Agreement at the Effective Time pursuant to this
Agreement is conditioned upon:
(i) The Closing of the Private Placement occurring;
(ii) The delivery by the Company to each Holder of the Warrants
in accordance with this Agreement;
(iii) The accuracy at the Effective Time of the representations
and warranties of the Company contained in this Agreement as if made at and as
of the Effective Time and the performance by the Company on or before the
Effective Time of all covenants and agreements of the Company required to be
performed on or before the Effective Time, and the receipt by the Holders of a
certificate, dated the date of the Effective Time, of the Chief Executive
Officer or the Chief Financial Officer of the Company confirming such matters
and such other matters as the Holders may reasonably request;
(iv) Receipt by the Holders of a certificate, dated the date of
the Effective Time, of the Secretary of the Company certifying the Articles of
Incorporation and
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Bylaws of the Company as then in effect, all resolutions of the Board of
Directors (and committees thereof) of the Company relating to this Agreement and
the transactions contemplated hereby, and such other matters as reasonably
requested by the Holders; and
(v) Receipt by the Holders on the date of the Effective Time of
an opinion of Stoel Rives, LLP, counsel for the Company, in form, scope and
substance reasonably satisfactory to the Holders, to the effect set forth in
Annex III.
10. Effectiveness. This Agreement shall become effective upon the
occurrence of the Closing, provided that the conditions to the respective
obligations of the parties in Section 9 shall have been satisfied or waived (the
date and time of the effectiveness of this Agreement is referred to herein as
the "Effective Time"). Except as expressly amended by this Agreement at the
Effective Time, the June 30 Agreement, the September 30 Agreement, the December
16 Agreement, the March 22 Agreements and the several Registration Rights
Agreements and the other agreements and instruments entered into connection with
the foregoing (collectively, the "Existing Agreements") shall remain in full
force and effect in accordance with their respective terms. If the Effective
Time does not occur on or prior to June 30, 1999, then any party hereto, by
notice to the other parties, may declare this Agreement (except for Section
11(h)) to be null and void and of no effect, and such declaration shall be
binding on all parties hereto. In the event of such declaration, the Existing
Agreements shall remain in full force and effect in accordance with their
respective terms without giving effect to this Agreement.
11. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Washington.
(b) Counterparts. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A telephone line facsimile copy of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Holders or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific
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instance and for the purpose for which given. No course of dealing between the
parties hereto shall operate as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered in accordance with the notice
provisions of the June 30 Agreement, the September 30 Agreement and the December
16 Agreement, as amended by the March 22 Agreements, as applicable.
(h) Certain Expenses and Fees. Irrespective of whether the Effective
Time occurs, the Company shall pay or reimburse the Holders for all reasonable
expenses (including, without limitation, legal fees and expenses of counsel to
the Holders) incurred by the Holders in connection with this Agreement and the
transactions contemplated hereby.
(i) Survival. The respective representations, warranties, covenants,
and agreements of each Holder and the Company contained in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
survive the Effective Time and shall remain in full force and effect regardless
of any investigation made by or on behalf of them or any person controlling or
advising any of them.
(j) Further Assurances. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(k) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
Holders and the Company by their respective officers thereunto duly authorized
as of the date first set forth above.
TERA COMPUTER COMPANY
By: /s/ JAMES ROTTSOLK
-----------------------------------
Title: Chief Executive Officer
--------------------------------
Address: 411 First Avenue South
Seattle, WA 98104-2860
Facsimile: 206-701-2218
ADVANTAGE FUND II LTD.
By: /s/
------------------------------------
Title: Director
---------------------------------
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
GENESEE FUND LIMITED -
PORTFOLIO B
By: /s/
------------------------------------
Title: Director
---------------------------------
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
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KOCH INDUSTRIES, INC.
By: /s/ JOSH TAYLOR
------------------------------------
Title: Vice-President
---------------------------------
Address: 4111 East 37th Street North
Wichita, KS 67270
Facsimile: (316) 828-7947
13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as June 21 , 1999 (this
"Agreement"), is made by and between TERA COMPUTER COMPANY, a Washington
corporation (the "Company"), and the persons named on the signature page hereto
(the "Investors").
W I T N E S S E T H:
WHEREAS, in connection with the Amendment Agreement, dated as of June 18,
1999, among the Investors and the Company (the "Amendment Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Amendment Agreement, to issue to the Investors warrants (the "Warrants") to
purchase an aggregate of 731,628 shares of Common Stock of the Company as
provided in the Amendment Agreement;
WHEREAS, to induce the Investors to execute and deliver the Amendment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws with respect to the Warrant Shares
(as defined in Section 1(a) below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person; for
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as
used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Period" means any period during which the Company is
entitled to suspend trading of the Common Stock by any Investor pursuant to
Section 4(f) pertaining
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to a "Negotiation Event" (as therein defined) or due to a transfer by the
Investor contemplated by Section 10(g).
"Filing Date" means the date which is forty-five (45) days after the
date of the Effective Time.
"Investors" means the Investors and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance
with Section 10 hereof.
"Nasdaq" means the Nasdaq National Market.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
"Registrable Securities" means the Warrant Shares.
"Registration Period" means the period from the Closing Date to the
earliest of (i) the date which is three years after the date on which the
last Warrant Shares are issued pursuant to exercise of the Warrants, (ii)
the date on which each Investor may sell all of its Registrable Securities
without registration under the Securities Act pursuant to Rule 144, without
restriction on the manner of sale or the volume of securities which may be
sold in any period and without the requirement for the giving of any notice
to, or the making of any filing with, the SEC and (iii) the date on which
the Investors no longer beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of the Company
under the Securities Act, including any amendment thereto.
"Rule 144" means Rule 144 as promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit
a holder of any securities to sell securities of the Company to the public
without registration under the Securities Act.
"SEC Filing Date" means the date the Registration Statement is first
filed with the SEC pursuant to Section 2.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(b) Capitalized terms defined in the introductory paragraph or the
recitals to this Agreement shall have the respective meanings therein provided.
Capitalized terms used
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herein and not otherwise defined herein shall have the respective meanings set
forth in the Amendment Agreement, or, if applicable, in the Warrants.
2. Mandatory Registration for Resale.
(a) The Company shall prepare and, on or before the Filing Date, file
with the SEC a Registration Statement on Form S-3, which on the SEC Filing Date
covers the resale of a number of shares of Common Stock equal to the number of
Warrant Shares issuable to the Investors upon exercise of the Warrants. If at
any time the number of shares of Common Stock included in the Registration
Statement required to be filed as provided in the first sentence of this Section
2(a) shall be insufficient to cover the number of shares of Common Stock
issuable upon exercise of unexercised Warrants, then promptly, but in no event
later than 20 days after such insufficiency shall occur, the Company shall file
with the SEC an additional Registration Statement on Form S-3 (which shall not
constitute a post-effective amendment to the Registration Statement filed
pursuant to the first sentence of this Section 2(a)) covering such number of
shares of Common Stock as shall be sufficient to permit such exercises. For all
purposes of this Agreement such additional Registration Statement shall be
deemed to be the Registration Statement required to be filed by the Company
pursuant to Section 2(a) of this Agreement, and the Company and the Investors
shall have the same rights and obligations with respect to such additional
Registration Statement as they shall have with respect to the initial
Registration Statement required to be filed by the Company pursuant to this
Section 2(a).
(b) If any offering pursuant to a Registration Statement under Section
2(a) hereof involves an underwritten offering, the Investors who hold a majority
in interest of the Registrable Securities subject to such underwritten offering
shall have the right to select legal counsel and an investment banker or bankers
and manager or managers to administer the offering, which investment banker(s)
or manager(s) shall be reasonably satisfactory to the Company. The Investors who
hold the Registrable Securities to be included in such underwritten offering
shall pay all underwriting discounts and selling commissions and other fees and
expenses of such investment banker(s) and manager(s) (other than registration
expenses payable by the Company pursuant to Section 6 hereof) with respect to
their Registrable Securities and the fees and disbursements of such legal
counsel selected by the Investors.
(c) The Company meets the requirements for the use of Form S-3 for
registration of the Registrable Securities for resale by the Investors. The
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
3. Company Registration and Underwritten Offering.
(a) If at any time or from time to time the Company shall determine to
register any of its shares of Common Stock for its own account for offer and
sale in a firmly underwritten public offering, it shall (i) promptly give
written notice thereof to each Investor that owns of record any Registrable
Securities as of the date of such notice, and (ii) include in such registration
and underwritten offering all Registrable Securities requested to be so included
by any such
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<PAGE>
Investor in a writing delivered to the Company within 20 days after receipt of
such written notice from the Company by the Investor, except as set forth below.
(b) Investors proposing to distribute all or a portion of their
Registrable Securities through such underwritten offering shall (together with
the Company and any other shareholders distributing their securities through
such underwritten offering) enter into an underwriting agreement in usual and
customary form with the managing underwriter(s) selected for such underwritten
offering by the Company. Notwithstanding any other provision of this Section 3,
if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
in its sole discretion may limit the number of Registrable Securities to be
included in the registration, or may exclude Registrable Securities entirely
from such registration. In such case, the Company shall so advise all Investors
whose Registrable Securities otherwise would be included in such registration,
and the number of shares of Registrable Securities that may be included in such
registration and underwritten offering shall be allocated among the Investors
requesting registration in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by each of such Investors at
the date of filing of the Registration Statement. If any Investor disapproves of
the terms and conditions of the underwritten offering, such Investor may
withdraw therefrom by written notice to the Company and the managing
underwriter(s). Any Registrable Securities excluded or withdrawn from such
underwritten offering shall be withdrawn from such registration.
(c) Each Investor hereby agrees that, if requested by the Company and
the managing underwriter(s), it will enter into a customary form of "lock-up"
agreement with the Company and the managing underwriter(s) with respect to any
Registrable Securities then held by such Investor (other than those included in
the registration and underwritten offering described in this Section 3), which
agreement shall contain such terms and conditions no more restrictive on the
Investor's ability to sell or otherwise transfer such Registrable Securities
than those contained in any other such agreements then entered into by the
Company and the managing underwriter(s) with other comparable holders of the
Company's Common Stock.
(d) Promptly following the expiration or termination of any such
lock-up agreement, the Company will take all reasonable steps, including filing
a Registration Statement in accordance with Section 2(a) hereof (or, in
accordance with Section 4(a) hereof, a post-effective amendment or supplement to
any Registration Statement and prospectus contained therein that previously was
filed in accordance with Section 2(a)), to enable Investors to sell their
remaining Registrable Securities free from restrictions under applicable
securities laws.
(e) The Company shall have the right to terminate or withdraw any
registration initiated by the Company under this Section 3 prior to the
effectiveness of such registration whether or not any Investor has elected to
include Registrable Securities in such registration.
4. Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to Sections 2 and 3 hereof, as applicable, the
Company shall:
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<PAGE>
(a) prepare promptly, and file with the SEC not later than the Filing
Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts to
cause each Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing, and keep the Registration
Statement effective pursuant to Rule 415 at all times during the Registration
Period; submit to the SEC, within five business days after the Company learns
that no review of the Registration Statement will be made by the staff of the
SEC or that the staff of the SEC has no further comments on the Registration
Statement, as the case may be, a request for acceleration of effectiveness of
the Registration Statement to a time and date not later than two Business Days
after the submission of such request; notify the Investors of the effectiveness
of the Registration Statement on the date that the Company is advised by the SEC
that the Registration Statement has been declared effective; and the Company
represents and warrants to, and covenants and agrees with, the Investors that
the Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein), at the time it is first filed with the SEC, at
the time it is ordered effective by the SEC and at all times during which it is
required to be effective hereunder (and each such amendment and supplement at
the time it is filed with the SEC and at all times during which it is available
for use in connection with the offer and sale of the Registrable Securities)
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement until such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel, (i) promptly after the same
is prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
each letter written by or on behalf of the Company to the SEC or the staff of
the SEC and each item of written correspondence from the SEC or the staff of the
SEC relating to such Registration Statement (other than any portion of any
thereof that contains information for which the Company has sought confidential
treatment) and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such securities or blue
sky laws of such jurisdictions as the Investors who hold a majority in interest
of the Registrable Securities being offered
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<PAGE>
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto (I) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 4(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its articles of
incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
shareholders;
(e) in the event that the Registrable Securities are being offered in
an underwritten offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities as
promptly as practicable, and deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request. If such
event is the conduct of negotiations with respect to a transaction, the
disclosure of which the Company reasonably concludes would be detrimental to the
Company (each, a "Negotiation Event"), the Company shall be entitled, upon
giving notice of a Negotiation Event to each holder (the "Negotiation Notice")
and upon the reasonable determination of the Company, after consulting with
counsel, that failure to disclose the Negotiation Event would constitute an
omission to state a material fact required to be stated in the Registration
Statement, to require the Investors to suspend sales of the Common Stock
pursuant to the Registration Statement for a period of up to fifteen (15) days
after the giving of the Negotiation Notice; provided, however, that the Company
shall not give more than one (1) Negotiation Notice in any twelve-month period;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
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(h) permit a single firm of counsel designated as selling
shareholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC, provided, that to the extent that the
failure of such counsel to respond promptly hereunder results in a delay in the
filing of the Registration Statement beyond the Filing Date, the filing deadline
shall be extended by the amount of such resulting delay;
(i) make generally available to its security holders as soon as
practical, but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest of
the Registrable Securities being sold, furnish on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in
underwritten public offerings, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement and a
single firm of counsel and a single firm of accountants or other agents retained
by any such Investor and one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable each Investor to exercise
its due diligence responsibility, and cause the Company's officers, directors
and employees to supply all information that any Inspector reasonably may
request for purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
an Investor) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
4(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or
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governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's own expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Investor provided
to the Company pursuant to Sections 5(a) and 5(e) hereof unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor, at such Investor's own expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information;
(l) use its best efforts (i) to cause all the Registrable Securities
covered by the Registration Statement to be listed on Nasdaq or such other
principal securities market on which securities of the same class or series
issued by the Company are then listed or traded or (ii) if securities of the
same class or series as the Registrable Securities are not then listed on Nasdaq
or any such other securities market, to cause all of the Registrable Securities
covered by the Registration Statement to be listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq SmallCap Market;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities being
offered and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations
or amounts as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request; and,
within three business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver to the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as Exhibit 1
and shall deliver to the Investors (with a copy to the Company's transfer agent)
an opinion of its general counsel, in the form attached hereto as Exhibit 2;
(o) during the Registration Period the Company shall not bid for or
purchase any Common Stock or any right to purchase Common Stock or attempt to
induce any person to purchase any such security or right if such bid, purchase
or attempt would in any way limit the
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right of the Investors to sell Registrable Securities by reason of the
limitations in Regulation M under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
5. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor but shall not
be relieved of its obligation to file a Registration Statement with the SEC
relating to the Registrable Securities of such Non-Responsive Investor promptly
after such Non-Responsive Investor provides the Requested Information;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested thereby
in connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, or if an Investor seeks to participate in a registration and
underwritten offering pursuant to Section 3 hereof, each Investor or each such
participating Investor, as the case may be, agrees to enter into and perform
such Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter(s) of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor's election to exclude all
or a portion of such Investor's Registrable Securities from the Registration
Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 4(f) or
4(g), such Investor will
9
<PAGE>
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4(f) or 4(g) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession of the prospectus covering such Registrable Securities
current at the time of receipt of such notice;
(e) No Investor may participate in any registration relating to an
underwritten offering hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, with respect to an underwritten offering under Section 2 hereof,
or approved by the Company, with respect to an underwritten offering under
Section 3 hereof; (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; and (iii) agrees to
pay its pro rata share of all underwriting discounts and selling commissions
(and, with respect to an underwritten offering pursuant to Section 2(b) hereof,
any other fees and expenses) of any investment banker(s) and manager(s) with
respect to its Registrable Securities sold in such offering and of the fees and
expenses of counsel selected by the Investors; and
(f) Each Investor agrees that it will not effect any disposition of
the Registrable Securities except as contemplated in the Registration Statement
or as is otherwise in compliance with applicable securities laws and that it
will promptly notify the Company of any material change in the information set
forth in the Registration Statement regarding such Investor's plan of
distribution. Each Investor agrees (a) to notify the Company in writing in the
event that such Investor enters into any material agreement with a broker or a
dealer for the sale of the Registrable Securities through a block trade, special
offering or exchange distribution and (b) in connection with such agreement, to
provide to the Company in writing the information necessary to enable the
Company to prepare, at the Company's sole cost and expense, any supplemental
prospectus pursuant to Rule 424(c) under the Securities Act which is required
with respect to such transaction. In connection with any sale of Registrable
Securities which is made pursuant to the Registration Statement, each Investor
shall instruct its broker or brokers to deliver the prospectus to the purchaser
or purchasers in connection with such sale, shall supply copies of such
prospectus to such broker or brokers and shall otherwise use its reasonable best
efforts to comply with the prospectus delivery requirements of the Securities
Act.
6. Expenses of Registration. All reasonable expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, listing, qualification, and filing fees, printing and accounting
expenses, fees and disbursements of counsel for the Company, shall be borne by
the Company; provided, however, that the Investors shall pay all (i)
underwriting discounts and selling commissions (and, with respect to an
underwritten offering pursuant to Section 2(b) hereof, any other fees and
expenses) of any investment banker(s) and manager(s) applicable to the sale of
Registrable Securities in an underwritten offering and (ii)
10
<PAGE>
fees and disbursements of counsel to the Investors, in accordance with Sections
2(b) and 5(e) hereof.
7. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 7(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 7(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
4(c) hereof; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus,
11
<PAGE>
as then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 4(c) hereof; and (III) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 10.
(b) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify and hold harmless, to
the same extent and in the same manner set forth in Section 7(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 7(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
7(b) for only that amount of a Claim as does not exceed the amount by which the
net proceeds to such Investor from the sale of Registrable Securities pursuant
to such Registration Statement exceeds the cost of such Registrable Securities
to such Investor. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 10. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 7(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 7 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 7, deliver to the indemnifying party a
written
12
<PAGE>
notice of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control
of the defense thereof with counsel selected by the indemnifying party but
reasonably acceptable to the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
7, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 7 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
8. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 7 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 7, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the amount by which the net amount of proceeds received by such seller from
the sale of such Registrable Securities exceeds the purchase price paid by such
seller for such Registrable Securities.
9. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied
13
<PAGE>
with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
10. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by each Investor to any transferee who (1) holds, or upon
such assignment will hold, at least 20% of the Registrable Securities held by
such Investor (or Warrants exercisable into 20% of such Registrable Securities)
(or any equivalent combination of Warrants and Registrable Securities) or (2) is
an Affiliate of such Investor only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned; (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws; (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein;
(e) such transfer shall have been made in accordance with the applicable
requirements of the Amendment Agreement; (f) such transferee shall be an
"accredited investor" as that term defined in Rule 501 of Regulation D
promulgated under the Securities Act but shall not be a broker-dealer or a
member of the National Association of Securities Dealers, Inc.; and (g) in the
event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a) and the
assignment is not made pursuant to Section 5(b) of the Amendment Agreement, such
assignee or transferee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment. In
connection with any such transfer the Company shall promptly after such
assignment take such actions as shall be reasonably acceptable to the Investors
and such transferee to assure that the Registration Statement and related
prospectus are available for use by such transferee for sales of the Registrable
Securities in respect of which the rights to registration have been so assigned.
In connection with any such assignment, each Investor shall have the right to
assign to such transferee such Investor's rights under the Amendment Agreement
by notice of such assignment to the Company. Following such notice of assignment
of rights under the Amendment Agreement, the Company shall be obligated to such
transferee to perform all of its covenants under the Amendment Agreement as if
such transferee were the Holder under the Amendment Agreement.
11. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold or have the right to
acquire a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 11 shall be binding upon each
Investor and the Company.
14
<PAGE>
12. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand or courier) or delivered by facsimile: (i) if to the Company, at Tera
Computer Company, 411 First Avenue South, Suite 600, Seattle, Washington
98104-2860, Attention: Chief Executive Officer, facsimile No. (206) 701-2218,
with a copy to Stoel Rives LLP, One Union Square, 36th Floor, Seattle,
Washington 98101, Attention: Christopher J. Voss, facsimile no. (206) 386-7500;
(ii) if to Advantage Fund II Ltd. or Genesee Fund Limited - Portfolio B , c/o
Genesee International, Inc., 10500 N.E. 8th Street, Suite 1920, Bellevue,
Washington 98004-4332, facsimile no. (425) 462-4645; (iii) if to Koch
Industries, Inc, at Koch Industries, Inc., 4111 East 37th Street North, Wichita,
Kansas 67270, Attention: Josh Taylor, facsimile no. (316) 828-7947, and (iv) if
to any other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 12(b), and shall be effective, when
personally delivered, upon receipt, and when sent by facsimile, upon receipt of
confirmation of successful transmission.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Washington applicable to agreements
made and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 10 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
15
<PAGE>
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to
perform its obligations under this Agreement, including, without limitation, the
Company's obligations under Section 4(n), or any delay in such performance could
result in damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct and consequential damages caused by
any such failure or delay.
(j) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
TERA COMPUTER COMPANY
By: /s/ JAMES ROTTSOLK
------------------------------------
Title: Chief Executive Officer
---------------------------------
Address: 411 First Avenue South
Seattle, WA 98104-2860
Facsimile: 206-702-2218
ADVANTAGE FUND II LTD.
By: /s/
------------------------------------
Title: Director
---------------------------------
Address: C/O CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
GENESEE FUND LIMITED - PORTFOLIO B
By: /s/
------------------------------------
Title: Director
---------------------------------
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands, Antilles
Facsimile: 011-599-9732-2008
KOCH INDUSTRIES, INC.
By: /s/ JOSH TAYLOR
------------------------------------
Title: Vice-President
---------------------------------
Address: 4111 East 37th Street North
Wichita, KS 67270
Facsimile: (316) 828-7947
17
<PAGE>
EXHIBIT 1
to
Registration Rights Agreement
[Company Letterhead]
[Date]
ChaseMellon Shareholder Services, L.L.C.
as Transfer Agent and Registrar
520 Pike Street, Suite 1220
Seattle, WA 98101
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction to
you (1) to transfer or re-register the certificates for the shares of Common
Stock, $.01 par value (the "Common Stock"), of Tera Computer Company, a
Washington corporation (the "Company"), represented by certificate numbers
_______ and _______ for an aggregate of _______ shares (the "Outstanding
Shares") of Common Stock presently registered in the name of [Name of Investor]
upon surrender of such certificate(s) to you, notwithstanding the legend
appearing on such certificates, and (2) to issue shares (the "Underlying
Shares") of Common Stock to or upon the order of the holder from time to time
upon exercise of Common Stock purchase warrants exercisable for Common Stock,
issued by the Company upon receipt by you of a Form of Subscription from such
holder in the form enclosed herewith. The transfer or re-registration of the
certificates for the Outstanding Shares by you should be made at such time as
you are requested to do so by the record holder of the Outstanding Shares. The
certificate issued upon such transfer or re-registration should be registered in
such name as requested by the holder of record of the certificate surrendered to
you and should not bear any legend which would restrict the transfer of the
shares represented thereby. In addition, you are hereby directed to remove any
stop-transfer instruction relating to the Outstanding Shares. Certificates for
the Underlying Shares should not bear any restrictive legend and should not be
subject to any stop-transfer restriction.
Contemporaneously with the delivery of this letter, the Company is
delivering to you an opinion of Kenneth W. Johnson, general counsel to the
Company, as to registration of the resale of the Outstanding Shares and the
Underlying Shares under the Securities Act of 1933, as amended.
Should you have any questions concerning this matter, please contact me.
Very truly yours,
TERA COMPUTER COMPANY
By:
------------------------------------------
<PAGE>
Name:
Title:
Enclosures
cc: [Names of Investors]
<PAGE>
EXHIBIT 2
to
Registration Rights Agreement
[Date]
TERA COMPUTER COMPANY
Shares of Common Stock
To the Investors listed on Schedule A
ChaseMellon Shareholder Services, L.L.C.
as Transfer Agent and Registrar
520 Pike Street, Suite 1220
Seattle, WA 98101
Ladies and Gentlemen:
I have acted as counsel to Tera Computer Company, a Washington corporation
(the "Company"), in connection with the Amendment Agreement, dated as of June
__, 1999 (the "Amendment Agreement"), between the Company and Advantage Fund II
Ltd., a British Virgin Islands corporation ("Advantage"), Genesee Fund Limited
Portfolio B, a British Virgin Islands corporation ("Genesee"), and Koch
Industries, Inc., a Kansas corporation ("Koch"), pursuant to which Advantage,
Genesee and Koch (the "Holders") acquired warrants to purchase _______ shares of
Common Stock (the "Warrants"). Pursuant to the Registration Rights Agreement,
dated as of June __, 1999, by and between the Company and each Holder (the
"Registration Rights Agreement") entered into in connection with the Amendment
Agreement, the Company agreed to register for resale the shares of Common Stock
issuable upon exercise of the Warrants (collectively, the "Common Shares") under
the Securities Act of 1933, as amended (the "Securities Act"), upon the terms
provided in the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, on __________, the Company filed a Registration Statement on
Form S-3 (File No. 333-__________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Common Shares,
which names the Holders as selling shareholders thereunder.
I advise you that, on ________, 1999, the Registration Statement became
effective under the Securities Act with respect to the resale of the Common
Shares held by or which may be issued to the Holders. Therefore, I am of the
opinion that the Common Shares may be resold by the selling shareholders named
in the Prospectus included in the Registration Statement and the certificates
evidencing the Common Shares need not bear any Securities Act restrictive
legend.
<PAGE>
I have participated in the preparation of the Registration Statement and
the Prospectus, including review and discussions with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although I am not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to my attention that leads us to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that I have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Very truly yours,
<PAGE>
Schedule A
List of Investors
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF
THIS SECURITY OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
SECURITY ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR
REGISTRATION UNDER STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND
SUCH SHARES OF COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM, SCOPE AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. TP-1 Right to Purchase 1,591,723
Shares of Common Stock of
Tera Computer Company
TERA COMPUTER COMPANY
Common Stock Purchase Warrant
TERA COMPUTER COMPANY, a Washington corporation (the "Company"), hereby
certifies that, for value received, Terren S. Peizer, or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
5:00 p.m., Seattle time, on June 21, 2009, One Million Five Hundred Ninety One
Thousand Seven Hundred Twenty-three (1,591,723) fully paid and nonassessable
shares of Common Stock, $.01 par value, of the Company at an Exercise Price per
share initially equal to $4.95. The number of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided in this Warrant.
1. Certain Adjustments. In addition to Sections 3 and 4, the number of shares of
Common Stock which may be purchased pursuant to this Warrant and the Exercise
Price are subject to adjustment as set out in this Section 1.
(a) As of the first anniversary of the date of this Warrant, assuming this
Warrant has not been previously exercised in full prior thereto, the number of
shares of Common Stock which may be purchased pursuant to this Warrant shall
equal (i) 10% of the number of shares of Common Stock then issued and
outstanding, (ii) less the number of shares of Common Stock which may have been
issued pursuant to one or more partial exercises prior thereto.
If prior to the second anniversary of the date of this Warrant and if Tera
is a party to a merger or consolidation pursuant to which the holders of a
majority of the shares of
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Common Stock prior to the transaction do not hold a majority of the shares of
the voting securities of the surviving entity after such transaction or is a
party to a sale of all or substantially all of the assets of Tera, then for not
less than twenty days prior to the closing of any such merger, consolidation or
sale, this Warrant shall be exercisable for 100% of the total number of shares
covered hereby. If such merger, consolidation or sale occurs prior to the first
anniversary of the date of this Warrant, and if this Warrant has not been
previously exercised in full prior thereto, the number of shares of Common Stock
which may be purchased pursuant to this Warrant shall equal 10% of the number of
shares of Common Stock issued and outstanding as of immediately prior to such
sale, consolidation or sale, less the number of shares of Common Stock which may
have been issued pursuant to one or more partial exercises prior thereto.
If Tera does not file a registration statement with the Securities and
Exchange Commission covering the resale of the shares of Common Stock underlying
this Warrant within three months of the issuance of this Warrant, or does not so
file subsequent registration statements covering additional shares of Common
Stock that subsequently become subject to this Warrant, then the number of
shares subject to this Warrant shall increase by 1% of the number of shares of
Common Stock then issued and outstanding for each three months that the
registration statement is not filed.
If prior to the Annual Meeting of Shareholders in 2002, the Board of
Directors removes Terren S. Peizer from the position of Chairman of the Board,
then the number of shares issuable pursuant to this Warrant shall increase by 2%
of the number of shares of Common Stock then issued and outstanding, effective
upon such removal. No such adjustment shall be made if Terren S. Peizer resigns
from such position.
If Terren S. Peizer terminates his relationship with the Company, then the
Holder may exercise this Warrant only with respect to the number of shares as to
which may be purchased hereunder as of the date Holder has given notice of such
termination. If the Company terminates its relationship with Terren S. Peizer,
then effective upon such termination this Warrant shall be exercisable for 100%
of the shares of Common Stock which may be purchased hereunder, and if such
termination occurs prior to the first anniversary of the date of this Warrant,
the number of shares of which may be purchased pursuant to this Warrant shall
equal 10% of the number of shares of Common Stock then issued and outstanding,
less the number of shares of Common Stock which may have been issued pursuant to
one or more partial exercises prior thereto.
For purposes of this Warrant, the phrase "the number of shares of Common
Stock issued and outstanding"
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as of a particular time shall mean all shares of Common Stock then issued and
outstanding plus all shares of Common Stock then issuable pursuant to
convertible securities, warrants, options and other rights then issued and
outstanding, including this Warrant and all shares of Common Stock issued upon
exercise of this Warrant but excluding all shares of Common Stock issued after
March 31, 1999, for a consideration of $12.00 per share or greater or which are
issuable on the first anniversary for a consideration of $12.00 per share or
greater and all shares issued or issuable pursuant to options granted after June
1, 1999, under the Companys 1999 Stock Option Plan. If the number of shares of
Common Stock issuable pursuant to the convertible securities, warrants, options
and other rights varies depending upon the market price for the Companys Common
Stock, then the number of shares then issuable shall depend upon the Market
Price for the Common Stock as of such date.
(b) The Exercise Price shall be the lesser of the Exercise Price set forth
in this first paragraph above (as may be adjusted pursuant to the provisions of
Section 3 or 4 of this Warrant) or 105% of the Market Price on the first
anniversary of this Warrant.
The term "Market Price" shall mean the average closing price for the
Companys Common Stock on Nasdaq National Market System (or if applicable such
other market or exchange then constituting the principal market or exchange for
the Companys Common Stock) for the five trading days ending the day prior to
any measurement date.
2. Exercise By Holder.
(a) This Warrant shall be exercisable as set forth in Section 1 and in all
other cases as follows:
(i) on the first anniversary date of this Warrant, for 50% of the
number of total shares of Common Stock which may be purchased
hereunder; and
(ii) thereafter, monthly as of the first date of each month at the
rate of 1/24th of the total number of shares of Common Stock
which may be purchased hereunder, so that as of the second
anniversary date of this Warrant 100% of the total number of
shares of Common Stock covered hereby may be purchased.
This Warrant shall be exercised by surrender of this Warrant and the
subscription form annexed hereto (duly executed) by such Holder to the Company
and by making payment, in cash or by certified or official bank check payable to
the order of the Company or wire transfer to the Companys account, in the
amount
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obtained by multiplying (a) the number of shares of Common Stock designated by
the Holder in the subscription form by (b) the Exercise Price then in effect. On
any partial exercise the Company will forthwith issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, providing in the aggregate on the face
or faces thereof for the purchase of the number of shares of Common Stock for
which such Warrant or Warrants may still be exercised.
(b) Notwithstanding anything to the contrary contained in Section 2(a), the
Holder may elect to exercise this Warrant in whole or in part by receiving
shares of Common Stock equal to the value (as determined below) of this Warrant,
or any part hereof, upon surrender of this Warrant at the principal executive
office of the Company together with notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y(A-B)
_____
A
Where X = the number of Shares of Common Stock to be issued to the Holder;
Y = the number of shares of Common Stock issuable upon the
exercise of this Warrant (the "Shares");
A = the current fair market value of one share of Common Stock;
and
B = the Exercise Price of this Warrant.
As used herein, the current fair market value of Common Stock shall mean,
with respect to each share of Common Stock, the closing price of the Company's
Common Stock sold on the principal national securities exchange, including the
Nasdaq National Market System, on which the Common Stock is at the time admitted
to trading or listed, or, if there have been no sales of any such exchange on
such day, the average of the highest bid and lowest ask price on such day as
reported by NASDAQ, or any similar organization if NASDAQ is no longer reporting
such information, on the date which the form of election is deemed to have been
sent to the Company (the "Notice Date"). If on the date for which current fair
market value is to be determined the Common Stock is not listed on any
securities exchange, including the Nasdaq National Market System, or quoted in
the NASDAQ System or the over-the-counter market, the current fair market value
of Common Stock shall be the highest price per share which the Company could
then obtain from a willing buyer (not a current
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employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a binding agreement for a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
current fair market value of the Common Stock shall be deemed to be the value to
be received by the holders of the Company's Common Stock for each share thereof
pursuant to such merger, acquisition or consolidation.
(c) As soon as practicable after the exercise of this Warrant, and in any
event within five business days thereafter, the Company at its expense
(including the payment by it of any applicable issue or stamp taxes) will cause
to be issued in the name of and delivered to the Holder hereof, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such Holder shall be entitled on
such exercise, in such denominations as may be requested by such Holder, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current fair market
value of one full share.
3. Dilution.
(a) If the Company shall pay to the holders of its Common Stock a dividend
in shares of Common Stock or in securities convertible into Common Stock, the
Exercise Price in effect immediately prior to the record date fixed for the
determination of the holders of Common Stock entitled to such dividend shall be
proportionately decreased, effective at the opening of business on the next
following full business day.
(b) If the Company shall split the outstanding shares of its Common Stock
into a greater number of shares or combine the outstanding shares into a smaller
number, the Exercise Price in effect immediately prior to such action shall be
proportionately decreased in the case of a split or increased in the case of a
combination, effective at the opening of business on the full business day next
following the day such action becomes effective.
4. Protection in Case or Reclassification, Etc. In case of (i) any
reclassification or change of the terms of the outstanding shares of the class
of Common Stock issuable upon the exercise of this Warrant, then upon exercise
of this Warrant (other than a change relating to par value, or as a result of a
subdivision or combination), or (ii) in case of any (a) consolidation or merger
of the Company with or into another company (other than a merger in which the
Company is the continuing company or which does not result in any
reclassification or change of outstanding shares of Common Stock
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of the class issuable upon exercise of this Warrant, other than a split or
combination of shares), or (b) any sale or conveyance to any other person or
entity of all or substantially all of the assets of the Company, the Company
shall use its best efforts to execute an agreement providing that the holder of
this Warrant shall have the right thereafter to exercise this Warrant for the
kind and amount of shares of stock and other securities and property receivable
upon such reclassification, change, dividend, distribution, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
of the Company for which this Warrant might have been exercised immediately
prior to such reclassification, change, dividend, distribution, consolidation,
merger, sale or conveyance. This Section4 shall apply to successive
reclassifications and changes of and dividends and distributions on shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
Notice of the execution of any agreement pertaining to such reclassification,
change, dividend, distribution, consolidation, merger, sale or conveyance shall
be given to the holder of this Warrant as soon as practicable and in any event
not less than ten (10) business days before any such transaction is consummated.
5. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, all shares of Common Stock from time to time
issuable on the exercise of this Warrant.
6. Register of Warrants. The Company shall maintain, at the principal office of
the Company (or such other office as it may designate by notice to the Holder
hereof), a register in which the Company shall record the name and address of
the person in whose name this Warrant has been issued, as well as the name and
address of each successor and prior owner of such Warrant. The Company shall be
entitled to treat the person in whose name this Warrant is so registered as the
sole and absolute owner of this Warrant for all purposes.
7. Exchange of Warrant. This Warrant is exchangeable, upon the surrender hereof
by the Holder hereof at the office or agency of the Company referred to in
Section 6, for one or more new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock which may be subscribed for purchase hereunder, each of such new Warrants
to represent the right to subscribe for and purchase such number of shares as
shall be designated by said Holder hereof at the time of such surrender.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such
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mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company will act as the exercise agent for the purpose of
issuing Common Stock on the exercise of this Warrant pursuant to Section 1. The
Company may, by written notice to the Holder, appoint an agent having an office
in the United States of America, for the purpose of issuing Common Stock on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant
to Section 7, and replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
10. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle
the Holder hereof to any voting rights or other rights as a stockholder of the
Company, until properly exercised.
11. Notices, etc. All notices and other communications from the Company to the
registered Holder of this Warrant shall be mailed by first class certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such Holder or at the address shown for such Holder on the register
of Warrants referred to in Section 6.
12. Miscellaneous. This Warrant and any terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement or such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of California. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, Tera Computer Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: June 21, 1999 TERA COMPUTER COMPANY
By /s/ JAMES E. ROTTSOLK
----------------------------------------
Name: James E. Rottsolk
Title: President
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FORM OF SUBSCRIPTION
COMMON STOCK PURCHASE WARRANT
OF TERA COMPUTER COMPANY
(To be signed only on exercise of Warrant)
TO: Tera Computer Company
411 First Avenue South, Suite 600
Seattle, Washington 98104-2860
1. The undersigned Holder of the attached original, executed Warrant hereby
elects to exercise its purchase right under such Warrant with respect to shares
of Common Stock, as defined in the Warrant, of Tera Computer Company, a
Washington corporation (the "Company").
2. The undersigned Holder (check one):
____ (a) elects to pay the aggregate purchase price for such shares of
Common Stock (i) by lawful money of the United States or the enclosed certified
or official bank check payable in United States dollars to the order of the
Company in the amount of $___________, or (ii) by wire transfer of United States
funds to the account of the Company in the amount of $____________, which
transfer has been made before or simultaneously with the delivery of this Form
of Subscription pursuant to the instructions of the Company; or
(b) elects to receive shares of Common Stock having a value equal to the
value of the Warrant calculated in accordance with Section 2(b) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
---------------------------------------
Address:
---------------------------------------
Dated:
--------------------------- --------------------------------------
(Signature must conform to name of
Holder as specified on the face
of the Warrant)
--------------------------------------
--------------------------------------
(Address)
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