As filed with the Securities and Exchange Commission on February 17, 2000
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-3 Registration Statement
Under the Securities Act of 1933
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TERA COMPUTER COMPANY
(Exact name of registrant as specified in its charter)
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WASHINGTON 93-0962605
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
411 First Avenue South
Suite 600
Seattle, WA 98104
(206) 701-2000 (telephone)
(206) 701-2500 (facsimile)
(Address, including zip code, and telephone and
facsimile numbers, including area code, of
principal executive offices)
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Kenneth W. Johnson, Chief Financial Officer
Tera Computer Company
411 First Avenue South
Suite 600
Seattle, WA 98104
(206) 701-2000 (telephone)
(206) 701-2500 (facsimile)
(Name, address, including zip code,
and telephone and facsimile numbers, including area
code, of agent for service)
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Copy to:
Christopher J. Voss
Stoel Rives LLP
One Union Square, 36th Floor
Seattle, WA 98101-3197
(206) 624-0900 (telephone)
(206) 386-7500 (facsimile)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, check the following box. [X]
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Per Aggregate Offering Registration
Registered Registered (1) Share(2) Price (2) Fee
- ------------------- ---------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, 5,556,875 shares $ 6.50 $ 35,788,287 $ 9,449
$.01 par value
- ------------------------------------------------------------------------------------------------
(1) Pursuant to Rule 416 under the Securities Act of 1933, there are also being registered such
indeterminate number of additional shares of common stock as may be issuable upon exercise of
the common stock purchase warrants described herein pursuant to the provisions thereof regarding
adjustment for stock dividends, stock splits or similar events.
(2) Of the shares being registered hereby, 200,000 are issuable upon exercise of outstanding
common stock purchase warrants at an exercise price of $6.00 per share and 130,000 are issuable
upon the exercise of outstanding common stock purchase warrants at an exercise price of $4.72
per share. The proposed maximum offering price per share and maximum aggregate offering price
for the balance of the shares being registered hereby is calculated in accordance with Rule
457(c) under the Securities Act.
</TABLE>
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said section 8(a), may determine.
<PAGE>
PROSPECTUS, Subject to Completion, dated February 17, 2000
TERA COMPUTER COMPANY
5,556,875 shares of Common Stock
These shares of Common Stock are being offered and sold from time to time
by certain of our current shareholders.
The selling shareholders may sell the shares from time to time at fixed
prices, market prices, prices computed with formulas based on market prices, or
at negotiated prices, and may engage a broker or dealer to sell the shares. For
additional information on the selling shareholders' possible methods of sale,
you should refer to the section of this prospectus entitled "Plan of
Distribution" on page 6. We will not receive any proceeds from the sale of the
shares, but will bear the costs relating to the registration of the shares. Our
Common Stock is traded on the Nasdaq National Market under the symbol "TERA." On
February 15, 2000, the closing price for our Common Stock was $6.63 per share.
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The shares offered in this prospectus involve a high degree of risk. You
should carefully consider the "Risk Factors" contained in our Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1999 filed with the
Securities and Exchange Commission on November 15, 1999 and in our future
filings made with the Securities and Exchange Commission, which are incorporated
by reference in this prospectus, in determining whether to purchase shares of
our Common Stock.
-------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is _____, 2000.
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
Our Business ...................................................... 3
Selling Shareholders .............................................. 3
Plan of Distribution .............................................. 6
Experts ........................................................... 8
Limitation of Liability and Indemnification ....................... 8
Information Incorporated by Reference ............................. 9
Available Information ............................................. 10
You should rely only on information contained or incorporated by reference
in this prospectus. See "Information Incorporated by Reference" on page 9.
Neither Tera nor the selling shareholders have authorized any other person to
provide you with information different from that contained in this prospectus.
The shares of Common Stock are not being offered in any jurisdiction where
the offering is not permitted.
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<PAGE>
OUR BUSINESS
Tera Computer Company designs, builds and sells high-performance computer
systems, sometimes referred to as "supercomputers." Our executive offices are
located at Merrill Place, Suite 600, 411 First Avenue South, Seattle, WA
98104-2860, and our telephone number is (206) 701-2000.
SELLING SHAREHOLDERS
The following table sets forth certain information as of February 3, 2000
regarding the selling shareholders' ownership of our common stock and as
adjusted to reflect the selling shareholders ownership of our common stock if
all shares covered by this prospectus are sold. The shares covered by this
prospectus include:
o shares of common stock issued to certain of the selling shareholders in
a private placement in February 2000;
o shares of common stock issuable upon exercise of warrants issued to
certain of the selling shareholders as payment for consulting services
in January 1999;
o shares of common stock issuable upon exercise of warrants issued to
certain of the selling shareholders as payment for consulting services
in March 1999; and
o shares of common stock issuable upon exercise of a warrant issued to
certain of the selling shareholders for services in connection with a
private placement of the Company's securities.
The selling shareholders' percentage of ownership after this offering is
based on 31,430,021 shares of common stock that were outstanding as of February
3, 2000, and assumes no exercise of any outstanding options or warrants after
February 3, 2000.
<TABLE>
<CAPTION>
Ownership After Offering
if All Shares Offered
Shares Hereby Are Sold
Owned Prior to Shares Being -------------------------
Selling Shareholder Offering Offered Shares Percent
- ------------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Banca del Gottardo 4,763,570 2,391,875 2,371,695 7.5%
Castle Creek Technology
Partners LLC 773,422 280,000 493,422 1.6%
William David Corbett 25,000 25,000 0 0
Cranshire Capital, L.P. 280,000 280,000 0 0
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<PAGE>
Ownership After Offering
if All Shares Offered
Shares Hereby Are Sold
Owned Prior to Shares Being -------------------------
Selling Shareholder Offering Offered Shares Percent
- ------------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Angel Cruz 0 57,000 0 0
DM Management, LLC 236,178 130,000 106,178 *
EDJ Limited 50,000 50,000 0 0
Jack E. Erlanger 25,000 25,000 0 0
Nathan Goldstein 0 6,000 0 0
Harpel Family
Partnership 76,450 29,840 46,610 *
Harpel International, L.P. 37,978 16,140 21,838 *
Harpel Partners, L.P. 345,109 107,820 237,239 *
Harpel Select Growth, L.P. 152,132 46,200 105,932 *
Headwater Holdings, LLC 200,000 200,000 0 0
William Hott 40,000 40,000 0 0
JMG Capital Partners, L.P. 100,000 100,000 0 0
JMG Triton Offshore Fund Ltd. 100,000 100,000 0 0
Anthony J. Kirincic 0 6,000 0 0
Kirlin Securities, Inc. 0 20,000 0 0
David O. Lidner 0 6,000 0 0
Ivan Lieberburg 25,000 25,000 0 0
Christopher A. Marlett
Living Trust 30,000 30,000 0 0
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<PAGE>
Ownership After Offering
if All Shares Offered
Shares Hereby Are Sold
Owned Prior to Shares Being -------------------------
Selling Shareholder Offering Offered Shares Percent
- ------------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
MDB Capital Group, LLC 20,000 20,000 0 0
Montrose Investments Ltd. 800,000 400,000 400,000 1.3%
Nob Hill Capital
Associates, L.P. 15,000 15,000 0 0
Nob Hill Capital
Partners, L.P. 85,000 85,000 0 0
Thomas Parigian 0 64,000 0 0
Timothy R. Pask 30,000 30,000 0 0
Thomas Poletti 0 5,000 0 0
Photiney Poliak 0 5,000 0 0
Denise Reilly 0 31,000 0 0
Raymond Scott 50,000 50,000 0 0
Gary J. Shemano aka
The Shemano Group
Investment Account 100,000 100,000 0 0
David Stefansky 50,000 50,000 0 0
Strong River Investments 811,864 600,000 211,864 *
Trans-Union Group, Inc. 20,000 20,000 0 0
Viviana Partners, L.P. 50,000 50,000 0 0
Von Graffenried AG
Privatbank 60,000 60,000 0 0
* Less than 1%
</TABLE>
The shares of common stock listed as owned by Banca del Gottardo after this
offering, together with 1,241,111 shares issuable upon exercise of warrants,
have been registered for
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<PAGE>
offer and sale by Banca del Gottardo in Registration Statements on Form S-3,
Registration Nos. 333-76223 and 333-83521. Banca del Gottardo has represented to
us that it purchased our common stock for its own account and on behalf of its
private banking and other clients, and that no client or group of affiliated
clients owns more than one percent of our outstanding shares of common stock.
The shares of common stock listed as owned by Castle Creek Technology
Partners LLC, DM Management, LLC, Harpel Family Partnership, Harpel
International, L.P., Harpel Partners, L.P.,Harpel Select Growth, L.P., Montrose
Investments Ltd. and Strong River Investments after this offering have been
registered for offer and sale by these selling shareholders in a Registration
Statement on Form S-3, Registration No. 333-83521.
Except as set forth below, none of the selling shareholders has held any
positions or office or had any other material relationship with us or any of our
affiliates within the past three years:
o On February 2, 2000, Castle Creek Technology Partners LLC filed a
Schedule 13 G/A, indicating that it had beneficial ownership of
1,552,744 shares, or 6.2%, of our outstanding common stock.
In recognition of the fact that the selling shareholders may wish to be
legally permitted to sell their shares when they deem appropriate, we have
agreed with the selling shareholders to file with the Securities and Exchange
Commission ("SEC"), under the Securities Act of 1933 (the "Securities Act"), a
registration statement on Form S-3, of which this prospectus forms a part, with
respect to the resale of the shares, and have agreed to prepare and file such
amendments and supplements to the registration statement as may be necessary to
keep the registration statement effective until the shares are no longer
required to be registered for sale by the selling shareholders.
PLAN OF DISTRIBUTION
Tera is registering the shares covered by this prospectus for the selling
shareholders. As used in this prospectus, "selling shareholders" includes the
pledgees, donees, transferees or others who may later hold the selling
shareholders' interest. Tera will pay the costs and fees of registering the
shares, but the selling shareholders will pay any brokerage commissions,
discounts or other expenses relating to the sale of the shares. Tera and the
selling shareholders each have agreed to indemnify the other against certain
liabilities, including liabilities arising under the Securities Act, that relate
to statements or omissions in the registration statement of which this
prospectus forms a part.
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<PAGE>
The selling shareholders may sell the shares in the over-the-counter market
or otherwise, at market prices prevailing at the time of sale, at prices related
to prevailing market prices, or at negotiated prices. In addition, the selling
shareholders may sell some or all of their shares through:
o a block trade in which a broker-dealer may resell a portion of the
block, as principal, in order to facilitate the transaction;
o purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or
o ordinary brokerage transactions and transactions in which a broker
solicits purchases.
When selling the shares, the selling shareholders may enter into hedging
transactions. For example, the selling shareholders may:
o enter into transactions involving short sales of the shares by
broker-dealers;
o sell shares short themselves and redeliver such shares to close out
their short positions;
o enter into option or other types of transactions that require the
selling shareholder to deliver shares to a broker-dealer, who will then
resell or transfer the shares under this prospectus; or
o loan or pledge the shares to a broker-dealer, who may sell the loaned
shares or, in the event of default, sell the pledged shares.
The selling shareholders may negotiate and pay broker-dealers commissions,
discounts or concessions for their services. Broker-dealers engaged by the
selling shareholders may allow other broker-dealers to participate in resales.
However, the selling shareholders and any broker-dealers involved in the sale or
resale of the shares may qualify as "underwriters" within the meaning of the
Section 2(a)(11) of the Securities Act. In addition, the broker-dealers'
commissions, discounts or concessions may qualify as underwriters' compensation
under the Securities Act. If the selling shareholders qualify as "underwriters,"
they will be subject to the prospectus delivery requirements of Section 5(b)(2)
of the Securities Act.
In addition to selling their shares under this prospectus, the selling
shareholders may:
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<PAGE>
o agree to indemnify any broker-dealer or agent against certain
liabilities related to the selling of the shares, including liabilities
arising under the Securities Act;
o transfer their shares in other ways not involving market makers or
established trading markets, including directly by gift, distribution,
or other transfer; or
o sell their shares under Rule 144 of the Securities Act rather than under
this prospectus, if the transaction meets the requirements of Rule 144.
Upon notification by a selling shareholder that any material arrangement
has been entered into with a broker-dealer for the sale of the shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, we will file a supplement to this
prospectus, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing the material terms of the transaction. In addition, we will file a
supplement to this prospectus if a selling shareholder notifies us that a donee
or pledgee intends to sell more than 500 shares.
EXPERTS
The balance sheets of Tera Computer Company as of December 31, 1997 and
1998 and the related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998,
incorporated by reference into this prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports with respect
thereto, which includes an explanatory paragraph concerning our ability to
continue as a going-concern. These financial statements have been incorporated
in reliance on the reports of such firm given upon their authority as experts in
accounting and auditing.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Restated Articles of Incorporation provide that, to the fullest extent
permitted by the Washington Business Corporation Act, our directors will not be
liable for monetary damages to Tera or its shareholders, excluding, however,
liability for acts or omissions involving intentional misconduct or knowing
violations of law, illegal distributions or transactions from which the director
receives benefits to which the director is not legally entitled. Our Restated
Bylaws provide that Tera will indemnify its directors and, by action of the
Board of Directors, may indemnify its officers, employees and other agents to
the fullest extent permitted by applicable law, except for any legal proceeding
that is initiated by such directors, officers, employees or agents without
authorization of the Board of Directors.
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<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Tera pursuant
to the foregoing provisions, or otherwise, we have been advised that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" our publicly-filed reports
into this prospectus, which means that information included in those reports is
considered part of this prospectus. Information that we file with the SEC
subsequent to the date of this prospectus will automatically update and
supersede the information contained in this prospectus. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until the selling shareholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998
and Amendments 1 and 2 thereto as filed with the SEC on August 17,
1999 and August 26, 1999, respectively;
2. Our Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1999 and Amendment No. 1 thereto filed with the SEC on August 16,
1999;
3. Our Quarterly Report on Form 10-Q for the quarterly periods ended June
30, 1999 and September 30, 1999;
4. Our Current Report on Form 8-K for the event of February 2, 2000, as
filed with the SEC on February 15, 2000;
5. Our Current Report on Form 8-K for the event of May 21, 1999, as filed
with the SEC on July 21, 1999;
6. Our Current Report on Form 8-K for the event of June 25, 1999, as
filed with the SEC on June 29, 1999;
7. Our Current Report on Form 8-K for the event of June 21, 1999, as
filed with the SEC on June 30, 1999;
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<PAGE>
8. Our Current Report on Form 8-K for the event of March 22, 1999, as
filed with the SEC on March 25, 1999;
9. Our Current Report on Form 8-K for the event of March 10, 1999, as
filed with the SEC on March 25, 1999; and
10. The description of our common stock set forth in our Registration
Statement on Form SB-2 (Registration No. 33-95460-LA), including any
amendment or report filed for the purpose of updating such
description, as incorporated by reference in our Registration
Statement on Form 8-A (Registration No. 0-26820), including the
amendment thereto on Form 8-A/A.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, other than exhibits to
such documents. You should direct any requests for documents to Investor
Relations, Tera Computer Company, 411 First Avenue South, Suite 600, Seattle,
Washington 98104, Telephone (206) 701-2000.
The information relating to Tera contained in this prospectus is not
comprehensive and should be read together with the information contained in the
incorporated documents.
AVAILABLE INFORMATION
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with SEC rules.
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy the Registration Statement and any other document
that we file at the SEC's public reference rooms located at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade Center,
Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov.
Statements contained in this prospectus as to the contents of any contract
or other document referred to are not necessarily complete. You should refer to
the copy of such contract or other document filed as an exhibit to the
Registration Statement.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
All expenses in connection with the issuance and distribution of the
securities being registered will be paid by the Company. The following is an
itemized statement of these expenses (all amounts are estimated except for the
SEC and Nasdaq listing fees):
SEC Registration fee..................................... $ 9,449
Nasdaq listing fee....................................... $ 17,500
Legal fees............................................... $ 8,000
Accountant's Fees........................................ $ 3,000
Printing Fees............................................ $ 0
Miscellaneous............................................ $ 51
Total.................................................... $ 38,000
Item 15. Indemnification of Officers and Directors.
-----------------------------------------
Article XII of the Company's Restated Articles of Incorporation and
Section 11 of the Company's Restated Bylaws require indemnification of
directors, officers, employees and agents of the Company to the fullest extent
permitted by the Washington Business Corporation Act (the "Act"). Sections
23B.08.500 through 23B.08.600 of the Act authorize a court to award, or a
corporation's board of directors to grant, indemnification to directors and
officers on terms sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act.
Section 23B.08.320 of the Act authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article XI of the
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<PAGE>
Company's Restated Articles of Incorporation contains provisions implementing,
to the fullest extent permitted by Washington law, such limitations on a
director's liability to the Company and its shareholders.
Item 16. Exhibits.
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3.1 Restated Articles of Incorporation of the Company (1)
3.2 Restated Bylaws of the Company (1)
5 Opinion on Legality
10.1 Form of Registration Rights Agreement, dated January 21, 2000 between
the Company and certain selling shareholders (and schedule of similar
Agreements) (2)
10.2 Form of Purchase Agreement, dated January 21, 2000, between the Company
and certain selling shareholders (and schedule of similar Agreements)
(2)
10.3 Form of Warrant, between the Company and DM Management LLC (3)
10.4 Form of Warrant, between the Company and Certain selling shareholders
(and schedule of similar Warrants)
23 Consent of Deloitte & Touche LLP
24 Power of Attorney (included on signature page hereof)
- --------------
(1) Incorporated by reference to the Company's Current Report on Form 8-K for
the event of May 21, 1999, filed with the Commission on July 21, 1999.
(2) Incorporated by reference to the Company's Current Report on Form 8-K for
the event of February 2, 2000, filed with the Commission on February 15,
2000.
(3) Incorporated by reference to Exhibit 10.2 on the Company's Current Report
on Form 8-K for the event of June 21, 1999, filed with the Commission
June 30, 1999.
Item 17. Undertakings.
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post- effective amendment to this Registration Statement
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
that, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
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<PAGE>
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question,
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on February 2, 2000.
TERA COMPUTER COMPANY
By: /s/ JAMES E. ROTTSOLK
-------------------------------------
James E. Rottsolk
Chief Executive Officer
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<PAGE>
KNOW ALL BY THESE PRESENTS that each person whose signature appears below hereby
authorizes and appoints Burton J. Smith and James E. Rottsolk, and each of them,
with full power of substitution and full power to act without the other, as his
true and lawful attorney-in- fact and agent to act in his name, place and stead
and to execute in the name and on behalf of each file, any and all amendments to
this Registration Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 2nd day of February, 2000:
Signature and Title
/s/ TERREN S. PEIZER
- ----------------------------------
Terren S. Peizer, Chairman
of the Board of Directors
/s/ BURTON J. SMITH /s/ DANIEL J. EVANS
- ---------------------------------- ----------------------------------
Burton J. Smith, Director Daniel J. Evans, Director
/s/ JAMES E. ROTTSOLK /s/ KENNETH W. KENNEDY
- ---------------------------------- ----------------------------------
James E. Rottsolk Kenneth W. Kennedy, Director
Chief Executive Officer and
Director
/s/ KENNETH W. JOHNSON /s/ JOHN W. TITCOMB, JR.
- ---------------------------------- ----------------------------------
Kenneth W. Johnson John W. Titcomb, Jr., Director
Chief Financial Officer
/s/ PHILISSA SARGIN /s/ DAVID N. CUTLER
- ---------------------------------- ----------------------------------
Philissa Sargin David N. Cutler, Director
Chief Accounting Officer
/s/ STEPHEN C. KIELY /s/ DEAN D. THORNTON
- ---------------------------------- ----------------------------------
Stephen C. Kiely, Director Dean D. Thornton, Director
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February 17, 2000
Board of Directors of
Tera Computer Company
Dear Sirs:
I have supervised the corporate proceedings relative to the issuance of:
1. 5,226,875 shares of common stock, $.01 par value (the "Common Stock"), of
Tera Computer Company, a Washington corporation (the "Company"), pursuant
to the Purchase Agreement, dated as of January 21, 2000 by and among the
Company and the investors listed on the Purchase Agreement (the "2000
Placement");
2. Warrants to purchase 130,000 shares of Common Stock, and of the
authorization of shares of Common Stock issuable upon exercise of such
warrants, to DM Management, LLC for services in connection with a private
placement of the Company's securities (the "DM Management Warrants");
3. Warrants to purchase 100,000 shares of Common Stock, and of the
authorization of shares of Common Stock issuable upon exercise of such
warrants, to Angel Cruz, Nathan Goldstein, Anthony Kirincic, Kirlin
Securities and David Lidner for financial advisory services (collectively,
the "Kirlin Warrants"); and
4. Warrants to purchase 100,000 shares of Common Stock, and of the
authorization of shares of Common Stock issuable upon exercise of such
warrants, to Thomas Parigian, Photiney Poliack and Denise Reilly for
financial advisory services (collectively, the "Agean Warrants").
The shares of Common Stock issued to the investors in the 2000 Placement
pursuant to the above-referenced Purchase Agreement and in connection with the
2000 Placement are referred to herein as the "Shares." The DM Management
Warrant, Kirlin Warrants and the Agean Warrants are collectively referred to
herein as the "Warrants."
I also am familiar with the corporate proceedings relative to the
incorporation of the Company and to its present corporate status. Based upon the
foregoing and having regard for such legal considerations, as I have deemed
relevant, I am of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Washington, with full corporate power to issue
the Shares, and the Warrants and to issue the Common Stock reserved for issuance
upon exercise of the Warrants.
<PAGE>
2. The Shares have been duly authorized by appropriate corporate action and
are validly issued, fully paid, and nonassessable.
3. The shares of Common Stock issuable upon exercise of the Warrants have
been duly authorized and reserved for such purpose by appropriate corporate
action. The shares of Common Stock issuable upon exercise of the Warrants will
be validly issued, fully paid, and nonassessable upon such exercise.
Very truly yours,
/s/ KENNETH W. JOHNSON
Kenneth W. Johnson, Esq.
Vice President - Finance
and General Counsel
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.
Warrant No. F-_______ Warrant to Purchase _______
Shares of Common Stock
WARRANT
-------
Dated: _________________, 1999
THIS CERTIFIES THAT, for value received, _______________ (the "Holder"), is
entitled to purchase from TERA COMPUTER COMPANY, a Washington corporation (the
"Company"), at the price and during the period as hereinafter specified, up to
___________ (__________) shares of common stock, $.01 par value ("Common
Stock"), at a purchase price of $6.00 per share, subject to adjustment as
described in Section 8 hereof (the "Exercise Price"), at any time during the
period commencing on the date hereof , and extending through March 30, 2004 (the
"Expiration Date"). After the Expiration Date, the Holder shall have no right to
purchase any shares of Common Stock hereunder.
1. This Warrant is issued pursuant to a Financial Consulting Agreement of
even date between the Company and ______________ (the "Consulting Agreement"),
and is one of a series of warrants of like tenor issued thereunder that, in the
aggregate, represent the right to purchase 100,000 shares of Common Stock.
2. (a) The rights represented by this Warrant may be exercised at any time
within the periods above specified, in whole or in part, by (i) the surrender of
this Warrant (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the exercise price then in effect for the number of
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<PAGE>
shares of Common Stock specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any; and (iii) delivery to the Company
of a duly executed agreement signed by the person(s) designated in the purchase
form to the effect that such person(s) agree(s) to be bound by the provisions of
Section 6 and Subsections 7(b), 7(c) and 7(d) hereof. This Warrant shall be
deemed to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Warrant is
surrendered and payment is made in accordance with the foregoing provisions of
this Section 2, and the person or persons in whose name or names the
certificates for shares of Common Stock shall be issuable upon such exercise
shall become the holder or holders of record of such Common Stock at that time
and date. The certificates for the Common Stock so purchased shall be delivered
to the Holder within a reasonable time, not exceeding five (5) business days,
after the rights represented by this Warrant shall have been so 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, or part thereof (the "Shares");
A = the current fair market value of one share of Common Stock on
the second trading day immediately preceding the day this Warrant
is surrendered pursuant to this Section 2(b); and
B = the Exercise Price of this Warrant.
As used herein, current fair market value of Common Stock on any day 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 on
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<PAGE>
which the Common Stock is at the time admitted to trading or listed, or, if the
Common Stock is not admitted for trading on a national securities exchange or if
any such exchange is not the principal trading market for the Common Stock, the
last sale price as reported by the Nasdaq Stock Market or the National
Association of Securities Dealers, Inc. ("NASD"), as the case may be, if the
Common Stock is quoted on the Nasdaq National Market or Nasdaq SmallCap Market
or is quoted on the NASD OTC Bulletin Board, in each case as officially reported
by such exchange, Nasdaq Stock Market or NASD, or, if there have been no sales
on such day, the average of the closing prices (if any exchange) or the last
sale prices (if Nasdaq or NASD OTC Bulletin Boarc), for the immediately
preceding three trading days, in each case of officially reported. If on the
date for which current fair market value is to be determined the Common Stock is
not listed on any securities exchange or on the Nasdaq Stock Market or NASD OTC
Bulletin Board, 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 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) This Warrant may be exercised in whole or in part. If the event of
the exercise in part only, upon surrender of this Warrant for cancellation,
together with the duly executed purchase form and funds (or conversion
equivalent) sufficient to pay any Exercise Price, the Company shall cause to be
delivered to the Holder without charge a new Warrant of like tenor to this
Warrant in the name of the Holder evidencing the right of the Holder to purchase
the aggregate number of shares of Common Stock purchasable hereunder as to which
this Warrant has not been exercised or assigned.
(d) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant and of reasonably
satisfactory indemnification, the Company shall execute and deliver a new
Warrant of like tenor and date. Any such new Warrant executed and delivered as a
result of such loss , theft, mutilation or destruction shall constitute a
substitute contractual obligation on the part of the Company.
3. This Warrant is transferable, and may be sold, assigned or hypothecated,
subject to compliance with applicable federal and state securities
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<PAGE>
laws. Any such assignment shall be effected by the Holder by (i) executing the
form of assignment at the end hereof and (ii) surrendering this Warrant for
cancellation at the office or agency of the Company referred to in Section 2
hereof, whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder), a new Warrant or Warrants of like tenor and
representing in the aggregate rights to purchase the same number of shares of
Common Stock as are purchasable hereunder at such time.
4. The Company covenants and agrees that all shares of Common Stock which
may be purchased hereunder will, upon issuance and delivery against payment
therefor as provided herein, be duly and validly issued, fully paid and
nonassessable. The Company further covenants and agrees that, during the period
within which this Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of its Common Stock for
issuance upon exercise of this Warrant.
5. This Warrant shall not entitle the Holder to any voting rights or other
rights, including without limitation notice of meetings of other actions or
receipt of dividends, as a shareholder of the Company.
6. (a) The Company shall advise the Holder, whether the Holder holds this
Warrant or has exercised this Warrant and holds shares of Common Stock related
thereto, by written notice at least two (2) weeks prior to the filing of any new
registration statement thereto under the Securities Act of 1933 (the "Act") for
a public offering of securities, covering any shares of Common Stock of the
Company, for its own account or for the account of others, except for any
registration statement filed on Form S-4 or S-8 (or other comparable form), and
will, during the period from the date hereof through the Expiration Date, upon
the request of the Holder, by giving written notice to the Company within seven
(7) days of its receipt of the Company's notice of its intent to file, include
in any such new registration statement such information as may be required to
permit a public offering of all or any of the Common Stock issuable upon the
exercise of this Warrants (the "Registrable Securities). The Company shall use
its best efforts to cause any registration statement filed pursuant to this
Section 6(a) that is declared effective to remain effective and shall maintain a
current prospectus relating thereto until all Registrable Securitiies have been
sold or are freely saleable without restriction under Rule 144 (or its
successor). The delivery by the Holder of any such notice shall not constitute a
demand made pursuant to Section 6(b). The Company shall supply prospectuses and
such other documents as the Holder may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities, use its best
efforts to register and qualify any of the Registrable Securities for sale in
such states (i) as such Holder designates and (ii) with respect to which the
Company obtained a qualification in
4
<PAGE>
connection with its initial public offering; and do any and all other acts and
things which may be necessary or desirable to enable such Holder to consummate
the public sale or other disposition of the Registrable Securities, all at no
expense to the Holder (other than sales commissions, underwriting discounts or
commissions, or other expenses of such sale), and furnish indemnification in the
manner provided in Section 7 hereof. The Holder shall furnish to the Company
information and indemnification as set forth in Section 7.
(b) At any time after the date hereof and prior to the Expiration
Date, a 50% Holder (as defined below) may request, on one occasion, that the
Company register under the Act any and all of the Registrable Securities held by
such 50% Holder. Upon the receipt of any such notice, the Company will promptly,
but no later than four weeks after receipt of such notice, file a new
registration statement pursuant to the Act, so that such designated Registrable
Securities may be publicly sold under the Act as promptly as practicable
thereafter and the Company will use reasonable efforts to cause such
registration to become and remain effective (including the taking of such
reasonable steps as are necessary to obtain the removal of any stop order)
within 120 days after the receipt of such notice, provided, that such Holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% Holder may, at its
option, request the registration of any of the shares of Common Stock underlying
this Warrant in a registration statement made by the Company as contemplated by
Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the shares of Common Stock issuable upon exercise of
this Warrant. Within ten (10) days after receiving any such notice pursuant to
this Section 6(b), the Company shall give notice to any other Holders of this
Warrant or similar Warrants issued pursuant to the Consulting Agreement,
advising that the Company is proceeding with such registration statement and
offering to include therein such securities underlying that part of the Warrants
held by the other Holders, provided that they shall furnish the Company with
such appropriate information (relating to the intentions of such Holders) in
connection therewith as the Company shall reasonably request in writing. All
costs and expenses of the first new registration statement filed in accordance
with this Section 6(b) shall be borne by the Company, except that the Holder(s)
shall bear the fees of their own counsel and any other advisors retained by them
and any underwriting discounts or commissions applicable to any of the
securities sold by them. All costs and expenses of the second such new
registration statement shall be borne by the Holder(s). The Company shall use
its best efforts to cause any registration statement filed pursuant to this
Section 6(b) that is declared effective to remain effective and shall maintain a
current prospectus relating thereto until all Registrable Securitiies have been
sold or are freely saleable without restriction under Rule 144 (or its
successor). The
5
<PAGE>
Company shall supply prospectuses, and such other documents as the Holder(s) may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states (i) as such Holder(s)
designate and (ii) with respect to which the Company obtained a qualification in
connection with its initial public offering and furnish indemnification in the
manner provided in Section 7 hereof. Notwithstanding the foregoing, the Company
shall not be required to include in any registration statement any Registrable
Securities which in the opinion of counsel to the Company (which opinion is
reasonably acceptable to counsel to the Representative) would be salable
immediately without restriction under Rule 144 (or its successor) if the Warrant
was exercised pursuant to Section 2(b) herein.
(c) The term "50% Holder" as used in this Section 6 shall mean the
Holder(s) of at least 50% of the shares Common Stock issued or issuable upon
exercise of the Warrant issued in connection with the Consulting Agreement.
(d) The Company shall have the right to terminate or withdraw any
registration initiated by the Company under Section 6(a) hereof prior to the
effectiveness thereof whether or not any Holder (including permitted
transferees) has elected to include Registrable Securities in such registration.
Any such termination or withdrawal shall not otherewise affect Holder(s) rights
under this Section 6.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
any of the shares of Common Stock issuable upon the exercise of this Warrant is
filed under the Act, amended or supplemented, the Company will indemnify and
hold harmless each Holder of the shares of Common Stock covered by such
registration statement, amendment or supplement (such Holder being hereinafter
called the "Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act or the Securities Exchange Act of 1934 (the "Exchange
Act")) the Distributing Holder against any losses, claims, damages or
liabilities, joint or several, to which the Distributing Holder or any such
controlling person may become subject, under the Act, the Exchange Act or
otherwise insofar as such losses, claims, damages or liabilities, or actions in
respect thereof, arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement as declared effective or any final prospectus constituting a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading,and
6
<PAGE>
will reimburse the Distributing Holder or such controlling person for any legal
or other expense reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary prospectus, final prospectus or
amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the preparation
thereof and provided further, that the indemnity agreement provided in this
Section 7(a) with respect to any preliminary prospectus shall not inure to the
benefit of any Distributing Holder or controlling person of such Distributing
Holder from whom the person asserting any losses, claims, charges, liabilities
or litigation based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state therein a material fact,
received such preliminary prospectus, if a copy of the prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission was
corrected has not been sent or given to such person within the time required by
the Act and the Rules and Regulations thereunder.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, preliminary prospectus, final prospectus, or amendment
or supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such loss, claim, damage or liability
arises out of or is based upon an untrue-statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
7
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement hereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
8. The Exercise Price in effect at the time and the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, or (iv) enter into any
transaction whereby this Warrant or the outstanding shares of Common Stock of
the Company are at any time changed into or exchanged for a different number or
kind of shares or other security of the Company or of another corporation
through reorganization, merger, consolidation, liquidation or recapitalization,
then appropriate adjustments in the number of shares of Common Stock (or other
securities for which such shares have previously been exchanged or converted)
subject to this Warrant shall be made and the Exercise Price in effect at the
time of the record date for such dividend or distribution or of the effective
date of such subdivision, combination, reclassification, reorganization, merger,
consolidation, liquidation or recapitalization shall be proportionately adjusted
so that the Holder of this Warrant exercised after such date shall be entitled
to receive the aggregate number and kind of shares of Common Stock which, if
this Warrant had been exercised by such Holder immediately prior to such date,
it would have been entitled to receive upon such dividend, distribution,
subdivision, combination, reclassification, reorganization, merger,
consolidation,
8
<PAGE>
liquidation or recapitalization. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or other securities
convertible into Common Stock) at a price (the "Subscription Price") less than
the Exercise Price on a per share basis (the "Per Share Exercise Price") on such
record date, the Exercise Price shall be adjusted so that the same shall equal
the price determined by multiplying the Per Share Exercise Price in effect
immediately prior to the date of issuance by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding on the
record date mentioned below and the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at the Per Share Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which shall be sum of
the number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the other convertible securities so
offered are convertible). Such adjustment shall be made successively whenever
such rights or warrants are issued and shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock are not
delivered (or other securities convertible into Common Stock are not delivered)
after the expiration of such rights or warrants the Exercise Price shall be
readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of deliver of only the number of shares of Common Stock (or other
securities convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to all holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection 8(a) above) or subscription rights or warrants (excluding those
referred to in Subsection 8(b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Per Share Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock then outstanding multiplied
by the current market price per share of Common Stock (as defined in Subsection
8(e) below), less the fair market value (as determined by the Company's Board of
Directors) of said assets, or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total number
9
<PAGE>
of shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) Whenever the Exercise Price payable upon exercise of this Warrant
is adjusted pursuant to Subsections 8(a), 8(b) or 8(c) above, the number of
shares of Common Stock purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of shares of Common Stock
issuable upon exercise of this Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(e) For the purpose of any computation under Subsection 8(c) above,
the current market price per share of Common Stock at any date shall be
determined as set forth in Section 2(b) herein.
(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments which may by reason of
this Subsection 8(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal income tax
liability to the holders of the Common Stock or other securities convertible
into Common Stock.
(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of shares of Common Stock issuable upon exercise of this
Warrant to be mailed to the Holder, at its address set forth herein, and shall
cause a certified copy thereof to be mailed to the Company's transfer agent, if
any. The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
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<PAGE>
(h) In the event that at any time, as a result of an adjustment made
pursuant to the provisions of this Section 8, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections 8(a) to 8(f), inclusive,
above.
9. This Agreement shall be governed by and in accordance with the laws of
the State of Washington without regard to conflict of laws provision.
IN WITNESS WHEREOF, TERA COMPUTER COMPANY has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated as first set forth above.
TERA COMPUTER COMPANY
By /s/ JAMES E. ROTTSOLK
--------------------------------------
James E. Rottsolk, President
Attest:
/s/ KENNETH W. JOHNSON
- ---------------------------------
Kenneth W. Johnson
Vice President - Finance and Secretary
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
Tera Computer Company
411 First Avenue South, Suite 600
Seattle, WA 98104-2860
Attention: Chief Financial Officer
1. The undersigned Holder of Warrant No. dated ______ 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;
_____ (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: ________________________________
________________________________
Date: ________________________________
____________________________________________________
(Signature must conform to name of Holder
as specified on the face of the Warrant)
____________________________________________________
Print Name
____________________________________________________
(Address)
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<PAGE>
TRANSFER FORM
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the right to purchase shares of Common Stock represented by the foregoing
Warrant to the extent of ______ shares of Common Stock and appoints
_________________________ attorney to transfer such rights on the books of
_________________________, with full power of substitution in the premises.
Dated: ____________________, _______________
By: ________________________________________
____________________________________________
____________________________________________
Address
In the presence of:
____________________________________________
<PAGE>
Schedule to Exhibit 10.4
Schedule of Warrants
Name Shares
---- ------
Angel Cruz 57,000
Nathan Goldstein 6,000
Anthony Kirincic 6,000
Kirlin Securities, Inc. 20,000
David Lidner 6,000
Thomas Parigian 64,000
Thomas Poletti 5,000
Photiney Poliak 5,000
Denise Reily 31,000
INDEPENDENT AUDITORS' CONSENT
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We consent to the incorporation by reference in this Registration Statement of
Tera Computer Company on Form S-3 of our report dated March 22, 1999, which
report includes an explanatory paragraph concerning the Company's ability to
continue as a going concern, appearing in the Annual Report on Form 10-K of Tera
Computer Company for the year ended December 31, 1998, and to the reference to
Deloitte & Touche LLP under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Seattle, Washington
February 11, 2000
