REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 30, 1998 (this
"Agreement"), is made by and between TERA COMPUTER COMPANY, a Washington
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated as of June
30, 1998, between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Initial
Investor an aggregate of 3,000 shares of Series B Convertible Preferred Stock
(the "Preferred Shares") and warrants to purchase an aggregate of 50,000 shares
of common stock, $.01 par value (the "Common Stock"), of the Company (the
"Warrants") as provided in the Subscription Agreement, which Preferred Shares
are convertible into, and which Warrants are exercisable for, shares of Common
Stock; and
WHEREAS, the Company has an option under the Subscription Agreement to sell
to the Initial Investor, and the Initial Investor agrees to purchase or cause
its designee to purchase from the Company, up to an additional 6,000 shares of
Preferred Stock (the "Option Shares") and warrants to purchase up to an
additional 100,000 shares of Common Stock (the "Additional Warrants"), which
Option Shares are convertible into, and which Warrants are exercisable for,
shares of Common Stock;
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription 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
Underlying Shares (as defined in Section 1(a)(viii) 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 Initial
Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Conversion Shares" means the shares of Common Stock issuable
upon exercise of the Preferred Shares and the Option Shares, as the case
may be.
(ii) "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 to a "Negotiation Event" (as therein defined),
Section 5(f) or due to a transfer by the Investor contemplated by Section
10(g).
(iii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 10 hereof.
(iv) "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").
(v) "Registrable Securities" means the Underlying Shares and any
shares of Common Stock issued by the Company to any Investor as a dividend
on the Preferred Shares and the Option Shares and as payment of any
interest on accrued dividends in arrears.
(vi) "Registration Statement" means a registration statement of
the Company under the Securities Act, including any amendment thereto.
(vii) "SEC Filing Date" means the date the Registration Statement
is first filed with the SEC pursuant to Section 2.
(viii) "Underlying Shares" means the Conversion Shares and the
Warrant Shares.
(ix) "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants and the Additional Warrants, as the case may
be.
(b) Capitalized terms defined in the introductory paragraph or the
recitals to this Agreement shall have the respective meanings therein provided.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement, or, if applicable,
in the Statement of Rights and Preferences of the Series B Convertible Preferred
Stock and the Warrants.
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2. Mandatory Registration for Resale.
(a) The Company shall prepare and, on or before July 31, 1998, 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 at least the
number of Conversion Shares and Warrant Shares issuable to the Investor upon
conversion of the Preferred Shares and the Option Shares and exercise of the
Warrants and the Additional Warrants, determined as if the Preferred Shares and
the Option Shares were converted in full and the Warrants and the Additional
Warrants were exercised in full on the SEC Filing Date (determined without
regard to the limitation contained in the second sentence of Section 7(a) of the
Statement of Rights and the limitation contained in Section 1.1(b) of the
Warrants), and which Registration Statement shall state that, in accordance with
Rule 416 under the Securities Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares and the Option Shares and exercise of
the Warrants and the Additional Warrants to prevent dilution resulting from
stock splits, stock dividends or similar transactions, including by reason of
changes in the conversion price of the Preferred Shares and the Option Shares
and the exercise price of the Warrants and the Additional Warrants in accordance
with the respective terms thereof. The Registration Statement shall also cover
the resale of shares of Common Stock issuable to the holder of 3,000 shares of
Series B Convertible Preferred Stock and warrants to purchase 50,000 shares of
Common Stock which shares are required to be registered by the Company pursuant
to an agreement dated the date hereof in substantially the form of this
Agreement. 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 on conversion in full of the unconverted Preferred Shares or
Option Shares and upon exercise of unexercised Warrants or Additional 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 conversion and 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).
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(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) If (i) the Company fails to file a Registration Statement with the
SEC on or before July 31, 1998, (ii) the Registration Statement covering the
Registrable Securities which is required to be filed by the Company pursuant to
the first sentence of Section 2(a) hereof is not effective within 90 days after
the Closing Date, (iii) the Company fails to submit a request for acceleration
of the effective date of the Registration Statement in accordance with Section
4(a), (iv) the Registration Statement required to be filed by the Company
pursuant to Section 2(a) shall cease to be available for use by any holder of
Preferred Shares or Option Shares which is named therein as a selling
shareholder for any reason (including, without limitation, by reason of an SEC
stop order, a material misstatement or omission in such Registration Statement
or the information contained in such Registration Statement having become
outdated) other than for an Excluded Period or for action caused by the selling
shareholder, including without limitation the attempt to sell securities other
than pursuant to the method of disposition described in the Registration
Statement, or (v) a holder of Preferred Shares or Option Shares has become
unable to convert any Preferred Shares or Option Shares in accordance with
Section (7)(a) of the Statement of Rights (other than by reason of the 4.9%
limitation set forth therein), then the Conversion Rate (as defined in the
Statement of Rights) shall be adjusted as provided in the Statement of Rights.
(d) The Company, without the prior consent of the holders of a
majority in interest of the outstanding Preferred Shares and Option Shares, will
not file another registration statement with the SEC covering shares of the
Company's Common Stock prior to the effectiveness of the Registration Statement
described in Section 2(a), other than Registration Statements on Forms S-4 or
S-8.
(e) 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.
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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 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.
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(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:
(a) prepare promptly, and file with the SEC not later than July 31,
1998, 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 until the earliest of (i)
such date as is three years after the date the Registration Statement is first
declared effective by the SEC, (ii) the date, on or after two years after the
later of the Closing Date and the Option Closing Date, if any, on which all of
Registrable Securities may be sold without regard to any requirement under the
Securities Act with respect to volume or manner of sale or the filing of any
notice relating thereto, and (iii) the date on which the Investors no longer
beneficially own any Registrable Securities (the period until such date, 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 48
hours after the delivery of such request; 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 time 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;
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(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 therewith 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 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 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;
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(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, 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;
(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 July 31, 1998 or results in the
delay in the effective date thereof beyond the 90-day period specified in
Section 2(c)(ii), the July 31, 1998 filing deadline specified in Section 2(c)(i)
and the 90-day period specified in Section 2(c)(ii) shall be extended by the
amount of such resulting delay;
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(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
underwritten public offerings, 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 Inspector 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 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
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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 the Nasdaq National Market
(the "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 or the American Stock Exchange;
(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(s), 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(s), if any, or the Investors may
reasonably request and registered in such names as the managing underwriter(s),
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 right of the Investors to sell Registrable
Securities by reason of the limitations in Regulation M under the Exchange Act;
and
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(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
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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 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.
(f) Each Investor agrees that during the period from the date the
Registration Statement is first declared effective by the SEC to the date of
conversion in full or redemption of all Preferred Shares and Option Shares owned
by the Investor, the Investor shall not engage in short sales or other hedging
transactions relating to the Common Stock, except that the Investor may enter
into such transactions involving a number of shares of Common Stock not to
exceed the number of shares for which a Conversion Notice has been submitted to
the Transfer Agent and the Company (it being understood that this Section 5(f)
shall not restrict such transactions which are otherwise permitted by the
Subscription Agreement or any other agreement between the Investor and the
Company).
(g) 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
-12-
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 (except as otherwise may be required under applicable state
securities or blue sky laws); 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) 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
-13-
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 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, 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
-14-
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 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
-15-
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 12(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 a 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 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("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 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.
-16-
10. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee who holds at least 20%
of the Registrable Securities (or Preferred Shares, Option Shares, Warrants, and
Additional Warrants convertible or exercisable into 20% of the Registrable
Securities) (or any equivalent combination of Preferred Shares, Option Shares,
Warrants, Additional Warrants, and Registrable Securities) 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 Subscription 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 2(c) of the
Subscription 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
Initial Investor 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.
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.
-17-
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, 0000 Xxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Chief Executive Officer, facsimile No. (000) 000-0000, with a copy to
Stoel Rives LLP, Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxxxxxx X. Xxxx, facsimile no. (000) 000-0000; (ii) if to the
Initial Investor, x/x Xxxxxxx Xxxxxxxxxxxxx, Xxx., 00000 X.X. 0xx Xxxxxx, Xxxxx
0000, Xxxxxxxx, Xxxxxxxxxx 00000-0000, facsimile No. (000) 000-0000; and (iii)
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.
-18-
(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.
(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; provided, however, that in no event shall the total
damages recoverable by the Investors for claims arising from or related to this
Agreement exceed 150% of the aggregate purchase price paid by the Initial
Investor to the Company for the Preferred Shares (and, if the Put Option is
exercised, the Option Shares), less all amounts received by the Investors from
market resales of shares of Common Stock as contemplated by this Agreement.
(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 facsimile of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
-19-
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/
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and
Chief Executive Officer
[NAME OF INVESTOR]
By: /s/
-------------------------------------
Name:
Title:
-20-
EXHIBIT 1
to
Registration
Rights Agreement
[Company Letterhead]
[Date]
ChaseMellon Shareholder Services, L.L.C.
as Transfer Agent and Registrar
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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) ]1 to issue shares (the "Underlying
Shares") of Common Stock to or upon the order of the holder from time to time on
conversion of the shares (the "Preferred Shares") of Series B Convertible
Preferred Stock, $.01 par value, of the Company and/or upon exercise of Common
Stock purchase warrants, issued by the Company upon receipt by you of a Notice
of Conversion and/or Form of Subscription from such holder. [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 Xxxxxxx X. Xxxxxxx, general counsel of the
Company, as to registration of [the Outstanding Shares and]* the Underlying
Shares under the Securities Act of 1933, as amended.
--------------
1 Omit if no conversions of Preferred Stock and exercise of Warrants have
occurred before SEC registration is declared effective.
Should you have any questions concerning this matter, please contact me.
Very truly yours,
TERA COMPUTER COMPANY
By:
-----------------------------------
Name:
Title:
Enclosures
cc: [Names of Investors]
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
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Ladies and Gentlemen:
I am the general counsel of Tera Computer Company, a Washington corporation
(the "Company"), and I understand that [Name of Investor] (the "Holder") has
purchased from the Company an aggregate of ____________ shares (the "Preferred
Shares") of the Company's Series B Convertible Preferred Stock, $.01 par value
(the "Preferred Stock"), and acquired _________ Warrants (the "Warrants"). The
Preferred Shares were purchased and Warrants were acquired by the Holder
pursuant to a Subscription Agreement, dated as of June __, 1998, between the
Holder and the Company (the "Subscription Agreement"). Pursuant to a
Registration Rights Agreement, dated as of June __, 1998, between the Company
and the Holder (the "Registration Rights Agreement") entered into in connection
with the purchase by the Holder of the Preferred Shares, the Company agreed with
the Holder, among other things, to register for resale the shares of Common
Stock issuable upon conversion of the Preferred Shares and exercise of the
Warrants (the "Underlying 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 Underlying Shares, which names the Holder as a selling
shareholder thereunder.
I advise you that, on ________, 1998, a registration statement under the
Securities Act became effective with respect to the resale of the shares of
Common Stock underlying the shares of Preferred Stock and Warrants held by the
Holder. Therefore, I am of the opinion that the Underlying Shares may be resold
by the selling shareholders named in the Prospectus included in such
registration statement and the certificates evidencing the Underlying Shares
need not bear any Securities Act restrictive legend.
Very truly yours,
Schedule A
List of Investors
