THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF
THIS SECURITY OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
SECURITY ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR
REGISTRATION UNDER STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND
SUCH SHARES OF COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM, SCOPE AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. TP-1 Right to Purchase 1,591,723
Shares of Common Stock of
Tera Computer Company
TERA COMPUTER COMPANY
Common Stock Purchase Warrant
TERA COMPUTER COMPANY, a Washington corporation (the "Company"), hereby
certifies that, for value received, Xxxxxx X. Xxxxxx, or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
5:00 p.m., Seattle time, on June 21, 2009, One Million Five Hundred Ninety One
Thousand Seven Hundred Twenty-three (1,591,723) fully paid and nonassessable
shares of Common Stock, $.01 par value, of the Company at an Exercise Price per
share initially equal to $4.95. The number of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided in this Warrant.
1. Certain Adjustments. In addition to Sections 3 and 4, the number of shares of
Common Stock which may be purchased pursuant to this Warrant and the Exercise
Price are subject to adjustment as set out in this Section 1.
(a) As of the first anniversary of the date of this Warrant, assuming this
Warrant has not been previously exercised in full prior thereto, the number of
shares of Common Stock which may be purchased pursuant to this Warrant shall
equal (i) 10% of the number of shares of Common Stock then issued and
outstanding, (ii) less the number of shares of Common Stock which may have been
issued pursuant to one or more partial exercises prior thereto.
If prior to the second anniversary of the date of this Warrant and if Tera
is a party to a merger or consolidation pursuant to which the holders of a
majority of the shares of
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Common Stock prior to the transaction do not hold a majority of the shares of
the voting securities of the surviving entity after such transaction or is a
party to a sale of all or substantially all of the assets of Tera, then for not
less than twenty days prior to the closing of any such merger, consolidation or
sale, this Warrant shall be exercisable for 100% of the total number of shares
covered hereby. If such merger, consolidation or sale occurs prior to the first
anniversary of the date of this Warrant, and if this Warrant has not been
previously exercised in full prior thereto, the number of shares of Common Stock
which may be purchased pursuant to this Warrant shall equal 10% of the number of
shares of Common Stock issued and outstanding as of immediately prior to such
sale, consolidation or sale, less the number of shares of Common Stock which may
have been issued pursuant to one or more partial exercises prior thereto.
If Tera does not file a registration statement with the Securities and
Exchange Commission covering the resale of the shares of Common Stock underlying
this Warrant within three months of the issuance of this Warrant, or does not so
file subsequent registration statements covering additional shares of Common
Stock that subsequently become subject to this Warrant, then the number of
shares subject to this Warrant shall increase by 1% of the number of shares of
Common Stock then issued and outstanding for each three months that the
registration statement is not filed.
If prior to the Annual Meeting of Shareholders in 2002, the Board of
Directors removes Xxxxxx X. Xxxxxx from the position of Chairman of the Board,
then the number of shares issuable pursuant to this Warrant shall increase by 2%
of the number of shares of Common Stock then issued and outstanding, effective
upon such removal. No such adjustment shall be made if Xxxxxx X. Xxxxxx resigns
from such position.
If Xxxxxx X. Xxxxxx terminates his relationship with the Company, then the
Holder may exercise this Warrant only with respect to the number of shares as to
which may be purchased hereunder as of the date Holder has given notice of such
termination. If the Company terminates its relationship with Xxxxxx X. Xxxxxx,
then effective upon such termination this Warrant shall be exercisable for 100%
of the shares of Common Stock which may be purchased hereunder, and if such
termination occurs prior to the first anniversary of the date of this Warrant,
the number of shares of which may be purchased pursuant to this Warrant shall
equal 10% of the number of shares of Common Stock then issued and outstanding,
less the number of shares of Common Stock which may have been issued pursuant to
one or more partial exercises prior thereto.
For purposes of this Warrant, the phrase "the number of shares of Common
Stock issued and outstanding"
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as of a particular time shall mean all shares of Common Stock then issued and
outstanding plus all shares of Common Stock then issuable pursuant to
convertible securities, warrants, options and other rights then issued and
outstanding, including this Warrant and all shares of Common Stock issued upon
exercise of this Warrant but excluding all shares of Common Stock issued after
March 31, 1999, for a consideration of $12.00 per share or greater or which are
issuable on the first anniversary for a consideration of $12.00 per share or
greater and all shares issued or issuable pursuant to options granted after June
1, 1999, under the Companys 1999 Stock Option Plan. If the number of shares of
Common Stock issuable pursuant to the convertible securities, warrants, options
and other rights varies depending upon the market price for the Companys Common
Stock, then the number of shares then issuable shall depend upon the Market
Price for the Common Stock as of such date.
(b) The Exercise Price shall be the lesser of the Exercise Price set forth
in this first paragraph above (as may be adjusted pursuant to the provisions of
Section 3 or 4 of this Warrant) or 105% of the Market Price on the first
anniversary of this Warrant.
The term "Market Price" shall mean the average closing price for the
Companys Common Stock on Nasdaq National Market System (or if applicable such
other market or exchange then constituting the principal market or exchange for
the Companys Common Stock) for the five trading days ending the day prior to
any measurement date.
2. Exercise By Holder.
(a) This Warrant shall be exercisable as set forth in Section 1 and in all
other cases as follows:
(i) on the first anniversary date of this Warrant, for 50% of the
number of total shares of Common Stock which may be purchased
hereunder; and
(ii) thereafter, monthly as of the first date of each month at the
rate of 1/24th of the total number of shares of Common Stock
which may be purchased hereunder, so that as of the second
anniversary date of this Warrant 100% of the total number of
shares of Common Stock covered hereby may be purchased.
This Warrant shall be exercised by surrender of this Warrant and the
subscription form annexed hereto (duly executed) by such Holder to the Company
and by making payment, in cash or by certified or official bank check payable to
the order of the Company or wire transfer to the Companys account, in the
amount
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obtained by multiplying (a) the number of shares of Common Stock designated by
the Holder in the subscription form by (b) the Exercise Price then in effect. On
any partial exercise the Company will forthwith issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, providing in the aggregate on the face
or faces thereof for the purchase of the number of shares of Common Stock for
which such Warrant or Warrants may still be exercised.
(b) Notwithstanding anything to the contrary contained in Section 2(a), the
Holder may elect to exercise this Warrant in whole or in part by receiving
shares of Common Stock equal to the value (as determined below) of this Warrant,
or any part hereof, upon surrender of this Warrant at the principal executive
office of the Company together with notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y(A-B)
_____
A
Where X = the number of Shares of Common Stock to be issued to the Holder;
Y = the number of shares of Common Stock issuable upon the
exercise of this Warrant (the "Shares");
A = the current fair market value of one share of Common Stock;
and
B = the Exercise Price of this Warrant.
As used herein, the current fair market value of Common Stock shall mean,
with respect to each share of Common Stock, the closing price of the Company's
Common Stock sold on the principal national securities exchange, including the
Nasdaq National Market System, on which the Common Stock is at the time admitted
to trading or listed, or, if there have been no sales of any such exchange on
such day, the average of the highest bid and lowest ask price on such day as
reported by NASDAQ, or any similar organization if NASDAQ is no longer reporting
such information, on the date which the form of election is deemed to have been
sent to the Company (the "Notice Date"). If on the date for which current fair
market value is to be determined the Common Stock is not listed on any
securities exchange, including the Nasdaq National Market System, or quoted in
the NASDAQ System or the over-the-counter market, the current fair market value
of Common Stock shall be the highest price per share which the Company could
then obtain from a willing buyer (not a current
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employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a binding agreement for a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
current fair market value of the Common Stock shall be deemed to be the value to
be received by the holders of the Company's Common Stock for each share thereof
pursuant to such merger, acquisition or consolidation.
(c) As soon as practicable after the exercise of this Warrant, and in any
event within five business days thereafter, the Company at its expense
(including the payment by it of any applicable issue or stamp taxes) will cause
to be issued in the name of and delivered to the Holder hereof, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such Holder shall be entitled on
such exercise, in such denominations as may be requested by such Holder, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current fair market
value of one full share.
3. Dilution.
(a) If the Company shall pay to the holders of its Common Stock a dividend
in shares of Common Stock or in securities convertible into Common Stock, the
Exercise Price in effect immediately prior to the record date fixed for the
determination of the holders of Common Stock entitled to such dividend shall be
proportionately decreased, effective at the opening of business on the next
following full business day.
(b) If the Company shall split the outstanding shares of its Common Stock
into a greater number of shares or combine the outstanding shares into a smaller
number, the Exercise Price in effect immediately prior to such action shall be
proportionately decreased in the case of a split or increased in the case of a
combination, effective at the opening of business on the full business day next
following the day such action becomes effective.
4. Protection in Case or Reclassification, Etc. In case of (i) any
reclassification or change of the terms of the outstanding shares of the class
of Common Stock issuable upon the exercise of this Warrant, then upon exercise
of this Warrant (other than a change relating to par value, or as a result of a
subdivision or combination), or (ii) in case of any (a) consolidation or merger
of the Company with or into another company (other than a merger in which the
Company is the continuing company or which does not result in any
reclassification or change of outstanding shares of Common Stock
5
of the class issuable upon exercise of this Warrant, other than a split or
combination of shares), or (b) any sale or conveyance to any other person or
entity of all or substantially all of the assets of the Company, the Company
shall use its best efforts to execute an agreement providing that the holder of
this Warrant shall have the right thereafter to exercise this Warrant for the
kind and amount of shares of stock and other securities and property receivable
upon such reclassification, change, dividend, distribution, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
of the Company for which this Warrant might have been exercised immediately
prior to such reclassification, change, dividend, distribution, consolidation,
merger, sale or conveyance. This Section4 shall apply to successive
reclassifications and changes of and dividends and distributions on shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
Notice of the execution of any agreement pertaining to such reclassification,
change, dividend, distribution, consolidation, merger, sale or conveyance shall
be given to the holder of this Warrant as soon as practicable and in any event
not less than ten (10) business days before any such transaction is consummated.
5. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, all shares of Common Stock from time to time
issuable on the exercise of this Warrant.
6. Register of Warrants. The Company shall maintain, at the principal office of
the Company (or such other office as it may designate by notice to the Holder
hereof), a register in which the Company shall record the name and address of
the person in whose name this Warrant has been issued, as well as the name and
address of each successor and prior owner of such Warrant. The Company shall be
entitled to treat the person in whose name this Warrant is so registered as the
sole and absolute owner of this Warrant for all purposes.
7. Exchange of Warrant. This Warrant is exchangeable, upon the surrender hereof
by the Holder hereof at the office or agency of the Company referred to in
Section 6, for one or more new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock which may be subscribed for purchase hereunder, each of such new Warrants
to represent the right to subscribe for and purchase such number of shares as
shall be designated by said Holder hereof at the time of such surrender.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such
6
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company will act as the exercise agent for the purpose of
issuing Common Stock on the exercise of this Warrant pursuant to Section 1. The
Company may, by written notice to the Holder, appoint an agent having an office
in the United States of America, for the purpose of issuing Common Stock on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant
to Section 7, and replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
10. No Rights or Liabilities as a Stockholder. This Warrant shall not entitle
the Holder hereof to any voting rights or other rights as a stockholder of the
Company, until properly exercised.
11. Notices, etc. All notices and other communications from the Company to the
registered Holder of this Warrant shall be mailed by first class certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such Holder or at the address shown for such Holder on the register
of Warrants referred to in Section 6.
12. Miscellaneous. This Warrant and any terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement or such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of California. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, Tera Computer Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: June 21, 1999 TERA COMPUTER COMPANY
By /s/ XXXXX X. XXXXXXXX
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
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FORM OF SUBSCRIPTION
COMMON STOCK PURCHASE WARRANT
OF TERA COMPUTER COMPANY
(To be signed only on exercise of Warrant)
TO: Tera Computer Company
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000-0000
1. The undersigned Holder of the attached original, executed Warrant hereby
elects to exercise its purchase right under such Warrant with respect to shares
of Common Stock, as defined in the Warrant, of Tera Computer Company, a
Washington corporation (the "Company").
2. The undersigned Holder (check one):
____ (a) elects to pay the aggregate purchase price for such shares of
Common Stock (i) by lawful money of the United States or the enclosed certified
or official bank check payable in United States dollars to the order of the
Company in the amount of $___________, or (ii) by wire transfer of United States
funds to the account of the Company in the amount of $____________, which
transfer has been made before or simultaneously with the delivery of this Form
of Subscription pursuant to the instructions of the Company; or
(b) elects to receive shares of Common Stock having a value equal to the
value of the Warrant calculated in accordance with Section 2(b) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
---------------------------------------
Address:
---------------------------------------
Dated:
--------------------------- --------------------------------------
(Signature must conform to name of
Holder as specified on the face
of the Warrant)
--------------------------------------
--------------------------------------
(Address)
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