Exhibit 4.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of March 24, 1997, by and between
TERA COMPUTER COMPANY, a Washington corporation, with headquarters located at
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ADVANTAGE FUND LIMITED, a British Virgin Islands corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of non-voting, convertible preferred stock
of the Company which will be convertible into shares of Common Stock, $.01 par
value (the "Common Stock"), of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) Subscription. The Buyer hereby agrees to purchase from the Company
the number of shares (the "Preferred Shares") of Series B Convertible Preferred
Stock, $.01 par value (the "Preferred Stock"), of the Company set forth on the
signature page of this Agreement, having the terms and conditions as set forth
in the form of Statement of Rights and Preferences of the Series B Convertible
Preferred Stock included in the form of Articles of Amendment attached hereto as
Annex I (the "Statement of Rights") at the price per share and for the aggregate
purchase price set forth on the signature page of this Agreement. The purchase
price for the Preferred Shares shall be payable in United States Dollars. The
shares of Common Stock issuable upon conversion of the Preferred Shares are
referred to herein as the "Common Shares." The Common Shares and the Preferred
Shares are referred to herein collectively as the "Shares."
(b) Form of Payment. Unless otherwise agreed by the Buyer and the
Company, the Buyer shall pay the purchase price for the Preferred Shares by
delivering good funds in United States Dollars to the escrow agent (the "Escrow
Agent") identified in the
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Joint Escrow Instructions attached hereto as Annex II (the "Joint Escrow
Instructions"). Such delivery of funds shall be made against delivery by the
Company of the certificates for the Preferred Shares registered in the name of
the Buyer. Unless otherwise agreed by the Buyer and the Company, promptly
following payment by the Buyer to the Escrow Agent of the purchase price of the
Preferred Shares, but in no event later than the two Business Days after such
payment, the Company shall deliver certificates for the Preferred Shares,
registered in the name of the Buyer, to the Escrow Agent. The certificates for
the Preferred Shares shall be delivered by the Company to the Escrow Agent on a
delivery against payment basis at the closing. By signing this Agreement, the
Buyer and the Company each agree to all of the terms and conditions of, and
become a party to, the Joint Escrow Instructions, all of the provisions of which
are incorporated herein by this reference as if set forth in full. As used in
this Agreement, the term "Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(c) Method of Payment. Payment to the Escrow Agent of the purchase
price for the Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
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ABA#▇▇▇▇▇▇▇▇▇
For credit to A/C#37179446
For credit to the account of ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attorney Escrow Account
Reference: Advantage/Tera
Not later than 4:00 p.m., New York City time, on the date which is two Business
Days after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for the Preferred
Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) Purchase for Investment. The Buyer is purchasing the Preferred
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(b) Accredited Investor; No Broker-Dealer. The Buyer is an "accredited
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investor" as that term is defined in Rule 501 of the General Rules and
Regulations under the 1933 Act by reason of Rule 501(a)(3). The Buyer is not a
person required to be registered as a broker or dealer under Section 15(a) of
the Securities Exchange Act of 1934, as amended (the "1934 Act") or a member of
the National Association of Securities Dealers.
(c) Reoffers and Resales. All subsequent offers and sales of the
Shares by the Buyer shall be made pursuant to registration of the Shares being
offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(d) Company Reliance. The Buyer understands that the Preferred Shares
are being offered and sold, and the Common Shares are being offered, to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Preferred Shares and to receive an offer
of the Common Shares;
(e) Information Provided. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Shares and the offer of the Common Shares which have been requested by
the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1995; (2) Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996 (and Amendment No. 1
thereto on Form 10-Q/A); (3) Current Reports on Form 8-K, filed on July 1, 1996,
July 15, 1996 and September 11, 1996, with the SEC; and (4) the Confidential
Private Placement Memorandum dated February 21, 1997 (collectively, the
"Disclosure Documents"); and the Buyer understands that its investment in the
Shares involves a high degree of risk;
(f) Absence of Approvals. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares; and
(g) Subscription Agreement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
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(h) No Current Holdings. The Buyer owns no shares of Common Stock or
other securities of the Company.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with, the
Buyer that:
(a) Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Washington, and
has all requisite corporate power and authority (i) to own, lease and operate
its properties and to carry on its business as now being conducted, and (ii) to
execute, deliver and perform its obligations under this Agreement, the
Registration Rights Agreement, the form of which is attached hereto as Annex III
(the "Registration Rights Agreement"), the Statement of Rights and the other
agreements to be executed and delivered by the Company in connection herewith,
and to consummate the transactions contemplated hereby and thereby. The Company
is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions wherein such qualification is necessary and where
failure so to qualify could have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company. The Company has no subsidiaries.
(b) Capitalization. The authorized capital stock of the Company
currently consists of (a) 25,000,000 shares of Common Stock of which 6,977,487
shares were outstanding as of March 21, 1997, all of which are fully paid and
nonassessable; and (b) 5,000,000 shares of Preferred Stock, $.01 par value, of
which 2,360,000 shares are designated Series A Convertible Preferred Stock, none
of which are outstanding, and 3,000 shares will be designated as Series B
Convertible Preferred Stock; and on the Closing Date (as defined in Section 6
herein) there will be no material increase from March 21, 1997 in the number of
shares of Common Stock outstanding. As of March 21, 1997, the Company had
outstanding options and warrants entitling the holders to purchase 5,421,832
shares of Common Stock on such date. The Company does not have outstanding any
material amount of securities (or obligations to issue any such securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to
acquire shares of Common Stock, except as disclosed above or in the Disclosure
Documents. The outstanding shares of Common Stock and outstanding options,
warrants and other securities to purchase Common Stock have been duly authorized
and validly issued. None of such outstanding shares of Common Stock, options,
warrants and other securities has been issued in violation of the preemptive
rights of any securityholder of the Company. The offers and sales of the
outstanding shares of Common Stock and options, warrants and other rights to
acquire Common Stock were at all relevant times either registered under the 1933
Act and applicable state securities laws or
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exempt from such requirements. No holder of any of the Company's securities has
any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement), except
as set forth in Section 3(b) of the Disclosure Letter delivered to the Purchaser
at or before the execution of this Agreement (the "Disclosure Letter").
(c) Concerning the Securities. The Shares have been duly authorized
and the Preferred Shares, when issued and paid for in accordance with this
Agreement, and the Common Shares, when issued upon conversion of the Preferred
Shares or in payment of dividends thereon, as the case may be, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive or similar rights of any stockholder of the Company or any other
person to acquire any of the Shares. The Common Stock is listed for trading on
the Nasdaq SmallCap Market ("Nasdaq") and (1) the Company and the Common Stock
meet the currently applicable criteria for continued listing and trading on
Nasdaq; (2) the Company has not been notified since September 25, 1995, by
Nasdaq of any failure or potential failure to meet the criteria for continued
listing and trading on Nasdaq; (3) no suspension of trading in the Common Stock
is in effect; and (4) the Company knows of no reason that the Common Shares will
not be eligible for listing on Nasdaq; except as set forth in Section 3(c) of
the Disclosure Letter.
(d) Subscription Agreement; Registration Rights Agreement. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and this Agreement is, and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and limits upon rights to indemnity.
(e) Non-contravention. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the issuance of the Preferred
Shares as contemplated by this Agreement and the other transactions contemplated
by this Agreement, the Registration Rights Agreement and the terms of the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
Restated Articles of Incorporation or Bylaws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound
which would have a material adverse effect on the Company or any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body
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having jurisdiction over the Company or any of its properties or assets which
would have a material adverse effect on the Company.
(f) Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for (1) the issuance and sale of the Preferred Shares as
contemplated by this Agreement and (2) the issuance of Common Shares on
conversion of the Preferred Shares.
(g) Information Provided. The information provided by or on behalf of
the Company to the Buyer in connection with the transactions contemplated by the
Agreement, including, without limitation, the information referred to in Section
2(e) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are made, not
misleading.
(h) Absence of Certain Changes. Since December 31, 1995, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company, except as disclosed in the Disclosure
Documents.
(i) Absence of Certain Proceedings. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
pending or, to the knowledge of the Company, threatened against the Company and,
to the knowledge of the Company, there is no inquiry or investigation before or
by any court, public board or body or governmental agency pending or threatened
against the Company, in any such case wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the properties, business,
condition (financial or other), results of operations or prospects of the
Company taken as a whole or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
The Company does not have pending before the SEC any request for confidential
treatment of information and to the best of the Company's knowledge no such
request will be made by the Company prior to the time the Registration Statement
relating to the Common Shares which is contemplated by the Registration Rights
Agreement is first ordered effective by the SEC; and to the best of the
Company's knowledge there is not pending or contemplated and has not been any
investigation by the SEC of the Company or any director or officer of the
Company.
(j) Properties. The Company has good title to all property, real and
personal (tangible and intangible), and other assets owned by it, free and clear
of all security interests, charges, mortgages, liens or other encumbrances,
except such as are described in
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the Disclosure Documents or such as do not materially interfere with the use of
such property made, or proposed to be made, by the Company. The leases, licenses
or other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable with only such exceptions as do not materially interfere with the
use of such property made, or proposed to be made, by the Company. The Company
has received no notice of any material violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties.
(k) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. All of such forms, reports and other
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act.
(m) Absence of Brokers, Finders, Etc. Except as set forth in Section
3(m) of the Disclosure Letter, no broker, finder or similar person is entitled
to any commission, fee or other compensation by reason of the transactions
contemplated by this Agreement and the Company shall pay, and indemnify and hold
harmless the Buyer from, any claim made against the Buyer by any person for any
such conversion, fee or other compensation.
4. Certain Covenants and Acknowledgments.
(a) Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Shares have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Common Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any such resale
of Shares under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Shares
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply
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with the terms and conditions of any exemption thereunder (other than pursuant
to Section 4(d) hereof and pursuant to the Registration Rights Agreement).
(b) Restrictive Legend. The Buyer acknowledges and agrees that the
certificates for the Preferred Shares and, until such time as the Common Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the certificates for the Common Shares issued upon conversion
of the Preferred Shares, may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for the Shares):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under the
Securities Act of 1933, as amended, or an opinion of counsel
that registration is not required under said Act.
Once the Registration Statement required to be filed by the Company pursuant to
Section 2 of the Registration Rights Agreement has been declared effective,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without this restrictive legend for certificates for any Common
Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three days after surrender of such certificates by the Buyer and (2) the Company
shall not place any restrictive legend on certificates for Common Shares issued
on conversion of the Preferred Shares or impose any stop-transfer restriction
thereon except as permitted under the Registration Rights Agreement.
(c) Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
(d) Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate
with the Company in connection with such filing and, upon request of the
Company, to provide all information relating to the Buyer reasonably required
for such filing.
(e) Authorization for Trading; Reporting Status. On or before the date
that is 30 days after the Closing Date, but in any event before the effective
date of the Registration Statement (as defined in the Registration Rights
Agreement), the Company shall file a listing application for the Common Shares
with the Nasdaq and shall provide evidence
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of such filing to the Buyer. From the Closing Date until such time as the
Registration Statement is no longer required to be in effect, the Company shall
file all reports required to be filed with the SEC pursuant to Section 13 or
15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(f) Use of Proceeds. The Company does not own or have any present
intention of acquiring any "margin stock" as defined in Regulation G (12 C.F.R.
Part 207) of the Board of Governors of the Federal Reserve System ("margin
stock"). The proceeds of sale of the Preferred Shares will be used for general
working capital purposes and in the operation of the Company's business. None of
such proceeds will be used, directly or indirectly (1) to make any loan to or
investment in any other person or (2) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(g) Blue Sky Laws. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
for, the Preferred Shares for sale to the Buyer pursuant to this Agreement and
the Common Shares for issuance to the Buyer on conversion of the Preferred
Shares under such of the securities or "blue sky" laws of jurisdictions as shall
be applicable to the sale of the Preferred Shares pursuant to this Agreement and
the issuance to the Buyer of Common Shares on conversion of the Preferred
Shares. The Company shall furnish copies of all filings, applications, orders
and grants or confirmations of exemptions relating to such securities or "blue
sky" laws on or prior to the Closing Date.
(h) Certain Expenses. Whether or not the closing occurs, the Company
shall pay or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer of up to $15,000)
incurred by the Buyer in connection with this Agreement and the transactions
contemplated hereby.
(i) Certain Issuances of Securities.
(1) If the transactions contemplated by this Agreement are
subject to the rules proposed to be adopted by Nasdaq which would require
stockholder approval of certain transactions (the "Nasdaq Stockholder
Approval Rules") then unless the
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Company obtains Stockholder Approval (as defined in the Statement of
Rights) or a waiver thereof from Nasdaq, the Company will not issue any
shares of Common Stock or shares of any other series of preferred stock or
other securities convertible into, exchangeable for or otherwise entitling
the holder to acquire shares of Common Stock which issuance would be
subject to the Nasdaq Stockholder Approval Rules (or any successor or
replacement provision thereof) and which would be integrated with the sale
of the Preferred Shares to the Buyer or the issuance of Common Shares upon
conversion thereof for purposes of the Nasdaq Stockholder Approval Rules
(or any successor or replacement provision thereof).
(2) The Company shall not offer, sell, contract to sell or issue
(or engage any person to assist the Company in taking any such action) any
equity securities or securities convertible into, exchangeable for or
otherwise entitling the holder to acquire, any Common Stock (collectively,
"Equity Securities") at a price below the market price of the Common Stock
during the period from the Closing Date to the date on which the
Registration Statement shall have been effective with the SEC for 60
consecutive days; provided, however, that nothing in this Section 4(i)(2)
shall prohibit the Company from issuing securities (x) pursuant to
compensation plans for employees, directors, officers, advisers or
consultants of the Company and in accordance with the terms of such plans
as in effect as of the date of this Agreement or (y) upon exercise of
conversion, exchange, purchase or similar rights issued, granted or given
by the Company and outstanding as of the date of this Agreement, including
without limitation amending any outstanding warrants of the Company to
lower the exercise price thereof and calling for the redemption of such
warrants.
(j) Best Efforts. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares set forth in Section 7 or 8, as the case
may be, of this Agreement on or before the Closing Date.
(k) Certain Trading Restrictions. The Buyer agrees that, during the
period from the date the Registration Statement is first declared effective by
the SEC to the date of the conversion in full or redemption of all Preferred
Shares owned by the Buyer, the Buyer shall not engage in short sales or other
hedging transactions relating to the Common Stock, except that the Buyer 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 (as defined herein)
has been submitted to the Company and the Transfer Agent (as defined herein).
The Buyer further agrees that, from the Closing Date until the date the
Registration Statement is first declared effective by the SEC, it will not sell
or contract to sell any equity security of the Company.
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5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(a) Transfer Agent Instructions. Promptly after the Buyer's delivery
of the aggregate purchase price for the Preferred Shares in accordance with
Section 1(c) hereof, and prior to the Closing Date, the Company will irrevocably
instruct ChaseMellon Shareholder Services, L.L.C., as Transfer Agent and
Registrar (the "Transfer Agent"), by letter in the form attached hereto as Annex
IV, to issue certificates for the Common Shares from time to time on conversion
of the Preferred Shares in such amounts as specified from time to time to the
Company in the Conversion Notices surrendered in connection with such
conversions and referred to in Section 5(b) of this Agreement. The Common Shares
shall be registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer in connection with each conversion of
Preferred Shares. Such certificates may bear the restrictive legend specified in
Section 4(b) of this Agreement prior to registration of the resale of the Common
Shares under the 1933 Act. The Company warrants that no instructions other than
(x) such instructions referred to in this Section 5(a), (y) stop-transfer
instructions to give effect to Section 4(a) hereof prior to the registration of
the resale of the Common Shares under the 1933 Act, and, if applicable, pursuant
to Section 4(f) of the Registration Rights Agreement, and (z) the instructions
required by Section 3(n) of the Registration Rights Agreement will be given by
the Company to the Transfer Agent and that the Common Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Section 5(a) shall limit in any way
the Buyer's obligation and agreement to comply with all applicable securities
laws upon resale of the Shares. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory in form, scope, and substance to the
Company that registration of a resale by the Buyer of any of the Shares in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall permit the transfer of such Shares and, in
the case of the Common Shares, promptly, but in no event later than three days
after receipt of such opinion, instruct the Transfer Agent to issue upon
transfer one more share certificates in such name and such denominations as
specified by the Buyer. The provisions of Section 3(n) of the Registration
Rights Agreement shall be in addition to this Section 5(a) once said Section
3(n) becomes applicable.
(b) Conversion Procedure. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer or any subsequent
holder of the Preferred Shares shall complete, sign and furnish to the Company,
with a copy to the Transfer Agent, a Notice of Conversion in the form attached
hereto as Annex V, which shall be deemed to satisfy all requirements of the
Statement of Rights (a "Conversion Notice"). As set forth in Section 9(c)(3) of
the Statement of Rights, the number of Common Shares to be issued in connection
with a particular conversion of Preferred Shares is, absent manifest error,
conclusively the number of Common Shares stated in the applicable Conversion
Notice. If in connection with a particular conversion of Preferred Shares the
Company determines that manifest error has been made by virtue of the conversion
price or other information set forth
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in the applicable Conversion Notice, the Company shall have the right
immediately to notify the Transfer Agent of such error (with a copy of such
notice given to the Buyer by telephone line facsimile transmission), which
notice shall state the number of Common Shares in dispute, and, notwithstanding
such notice from the Company, shall direct the Transfer Agent to issue and
deliver the number of Common Shares not in dispute as and when required by the
Statement of Rights. If the Company shall have notified the Transfer Agent of
any such error, the Company shall, on the date such notice is given, submit the
dispute to Deloitte & Touche LLP or another firm of independent public
accountants of recognized national standing (the "Auditors") for determination
and shall instruct the Auditors to resolve such dispute and to notify the
Company, the Transfer Agent, and the converting holder of Preferred Shares
within one Business Day after such dispute is submitted to the Auditors.
Immediately after receipt of timely notice of the Auditors' determination, the
Company shall instruct the Transfer Agent to issue to the converting holder any
additional Common Shares to which such holder is entitled based on the
determination of the Auditors. If the Auditors shall fail to notify the Transfer
Agent within three Business Days after the applicable Conversion Notice is given
to the Company and the Transfer Agent, then the Company shall instruct the
Transfer Agent to issue, within three Business Days after receipt of the
applicable Conversion Notice, to the converting holder any additional Common
Shares to which such holder is entitled based on the applicable Conversion
Notice. Such immediate action shall be taken by the Company to assure that there
shall be full compliance with the Company's unqualified obligation that all
Common Shares issuable on such conversion be issued by the due date therefor as
provided in the Statement of Rights.
6. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Shares (the
"Closing Date") shall be 12:00 noon, New York City time, on the date which is
one Business Day after the date on which the Buyer has deposited the purchase
price for the Preferred Shares with the Escrow Agent in accordance with Section
1(c) hereof, or such other mutually agreed to time. The closing shall occur on
the Closing Date at the offices of the Escrow Agent.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the Preferred
Shares to the Buyer pursuant to this Agreement is conditioned upon:
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent or to the Company of
good
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funds as payment in full of an amount equal to the purchase price for the
Preferred Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares on the Closing Date is conditioned upon:
(a) Delivery by the Company to the Escrow Agent or the Buyer of the
certificates for the Preferred Shares in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters;
(c) The receipt by the Buyer of confirmation of the filing with the
Secretary of State of the State of Washington of the Statement of Rights in the
form attached hereto as Annex I;
(d) The receipt by the Buyer of a certificate, dated the Closing Date,
of the Secretary of the Company certifying (1) the Articles of Incorporation and
By-Laws of the Company as in effect on the Closing Date, (2) all resolutions of
the Board of Directors (and committees thereof) of the Company relating to this
Agreement and the transactions contemplated hereby and (3) such other matters as
reasonably requested by the Buyer; and
(e) Receipt by the Buyer on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in Annex VI attached hereto.
9. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington.
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(b) This Agreement may be executed in counterparts and by the parties
hereto on separate counterparts, all of which together shall constitute one and
the same instrument. A facsimile transmission of this Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement.
(f) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt
(or on the next Business Day, if the date of such receipt is not a Business
Day), if delivered personally or by courier, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
transmission number (▇▇▇) ▇▇▇-▇▇▇▇), copy to Stoel ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(telephone line facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or, in the case of
the Buyer, at its address shown on the signature page of this Agreement, with a
copy to Genesee International, Inc., ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (telephone line facsimile transmission number
206-462-4645) or such other address as a party shall have provided by notice to
the other party in accordance with this provision. The Buyer hereby designates
as its address for any notice required or permitted to be given to the Buyer
pursuant to the Statement of Rights the address shown on the signature page of
this agreement, with a copy to: GFL Advantage Fund Limited, ▇/▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇., ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (facsimile number 206-462-4645), until the Buyer shall designate
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another address for such purpose.
(h) Prior to the Closing Date, the Buyer shall have the right to
assign all of its rights and obligations under this Agreement with respect to
the purchase of all or any portion of the Preferred Shares, provided any such
assignee, by written instrument duly executed by such assignee, assumes all
obligations of the Buyer hereunder with respect to the purchase of the portion
of the Preferred Shares so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement, whereupon
the Buyer shall be relieved of any further obligations, responsibilities and
liabilities with respect to the purchase of all or the portion of the Preferred
Shares the obligation for the purchase of which has been so assigned. In the
case of any such assignment, the Company shall agree in writing with such
assignee to make available to such assignee the benefits of the Registration
Rights Agreement with respect to the Common Shares issuable on conversion of the
Preferred Shares with respect to which the purchase under this Agreement has
been so assigned.
(i) The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) This Agreement and its Annexes set forth the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral, with
respect thereto.
(k) The Buyer shall have the right to terminate this Agreement by
giving notice to the Company at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any of
its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is
not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before April 7, 1997, other than solely by reason of a breach of this
Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder
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and the Company shall remain liable for any breach of this Agreement or the
other documents contemplated hereby which occurred on or prior to the date of
such termination.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or
one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES: 3,000
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $3,000,000.00
GFL ADVANTAGE FUND LIMITED
By /s/ A. P. DE ROOT
Title: President
Address: ▇/▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Antilles
TERA COMPUTER COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
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