EXHIBIT 10.1 AMENDMENT NUMBER ONE TO SENIOR SECURED CREDIT AGREEMENT This Amendment Number One to Senior Secured Credit Agreement ("Amendment"), dated as of November 9 2005, and effective as of May 31, 2005, is entered into by and among WELLS FARGO FOOTHILL, INC., a California corporation ("Lender") on the one hand, and CRAY INC., a Washington corporation ("Parent"), and each of Parent's Subsidiaries identified on the signature page hereof (such Subsidiaries, together with Parent, are referred to hereinafter each individually as a "Borrower", and individually and collectively, jointly and severally, as the "Borrowers"), on the other hand, in light of the following: A. Lender and Borrowers have previously entered into that certain Senior Secured Credit Agreement, dated as of May 31, 2005 (the "Agreement"). B. Borrowers and Lender desire to amend the Agreement as provided for and on the conditions herein. NOW, THEREFORE, Borrowers, Agent and Lenders hereby amend and supplement the Agreement as follows: 1. DEFINITIONS. All initially capitalized terms used in this Amendment shall have the meanings given to them in the agreement unless specifically defined herein. 2. AMENDMENTS. (a) Exhibit B-1 - Form of Borrowing Base Certificate is replaced with the Exhibit B-1 attached to this Amendment. (b) Exhibit C-1 - Form of Compliance Certificate is replaced with the Exhibit C-1 attached to this Amendment. (c) The definition of "Borrowing Base" set forth in Schedule 1.1 to the Agreement is hereby amended to read as follows: "Borrowing Base" means, as of any date of determination, the result of: (a) the lesser of (i) $10,000,000, and (ii) 85% of the amount of Eligible Accounts, minus the amount, if any, of the Dilution Reserve, plus (b) the lesser of (i) $20,000,000, and (ii) 100% of TSM Recurring Revenues, minus (c) the sum of (i) the Bank Product Reserve, and (ii) the aggregate amount of reserves, if any, established by Lender under Section 2.1(b). 1 (d) The definition of "Maximum Revolver Amount" set forth in Schedule 1.1 of the Agreement is hereby amended to read as follows: "Maximum Revolver Amount" means $30,000,000, minus the Line Block. (d) Section 6.16(b)(i) of the Agreement is amended in its entirety to read as follows: "(b) Make: (i) CAPITAL EXPENDITURES. Capital Expenditures in any fiscal year in excess of the amount set forth in the following table for the applicable period: For the First 6 Months of Fiscal Fiscal Year 2005 Fiscal Year 2006 Year 2007 $ 17,500,000(*) $ 16,000,000 $ 8,000,000 (*) No more than $8,000,000 of such amount shall consist of Capital Expenditures reflected as "purchases of property and equipment" on Parent's and its Subsidiaries' statement of cash flows (contained within Parent's and its Subsidiaries' financial statements) prepared from time to time." 3. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby affirms to Lender that all of such Borrower's representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof. 4. NO DEFAULTS. Borrowers hereby affirm to Lender that no Event of Default has occurred and is continuing as of the date hereof. 5. CONDITION PRECEDENT. The effectiveness of this Amendment is expressly conditioned upon receipt by Lender of a fully executed copy of this Amendment. 6. COSTS AND EXPENSES. Borrowers shall pay to Lender all of Lender's out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel arising in connection with the preparation, execution, and delivery of this Amendment and all related documents. 7. LIMITED EFFECT. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect. 8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of a counterpart of this Amendment by each of the parties hereto. [Signatures on next page] 2 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above. WELLS FARGO FOOTHILL, INC., a California corporation By: /s/ Mara Vaisz ---------------------------- Title: Vice President S-1 Amendent Number One to Credit Agreement CRAY INC., a Washington corporation By: /s/ Kenneth W. Johnson ---------------------------- Name: Kenneth W. Johnson Title: Senior Vice President CRAY FEDERAL INC., a Washington corporation By: /s/ Charles A. Weidenfeller --------------------------------- Name: Charles A. Weidenfeller Title: President S-2 Amendement Number One to Credit Agreement EXHIBIT B-1 FORM OF BORROWING BASE CERTIFICATE Wells Fargo Foothill, Inc. 2450 Colorado Avenue Suite 3000 West Santa Monica, California 90404 The undersigned, Cray Inc., a Washington corporation ("Parent"), pursuant to Schedule 5.2 of that certain Credit Agreement, dated as of May 31, 2005 (as amended, restated, modified, supplemented, refinanced, renewed, or extended from time to time, the "Credit Agreement"), entered into among Parent, its subsidiaries signatory thereto as Borrowers (collectively with Parent, "Borrowers"), and Wells Fargo Foothill, Inc., a California corporation as the lender (in such capacity, together with its successors and assigns, if any, in such capacity, "Lender"), hereby certifies to Lender that the following items, calculated in accordance with the terms and definitions set forth in the Credit Agreement for such items are true and correct, and that Borrowers are in compliance with and, after giving effect to any currently requested Advances, will be in compliance with, the terms, conditions, and provisions of the Credit Agreement. All initially capitalized terms used in this Borrowing Base Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein. [Remainder of page intentionally left blank.] 1 Effective Date of Calculation: ___________ A. BORROWING BASE CALCULATION 1. Eligible Accounts a. (i) 85% of Eligible Accounts(1) $___________ (ii) the amount, if any, of the Dilution Reserve $___________ (iii) Item 1.a.(i) minus Item 1.a.(ii) $___________ b. $10,000,000 $___________ c. The lesser of Items 1.a. and 1.b. $___________ 2. a. 100% of TSM Recurring Revenues $___________ b. $20,000,000 $___________ c. The lesser of Items 2.a. and 2.b. $___________ 3. Reserves a. Bank Products Reserve $___________ b. the sum of the aggregate amount of reserves, if any, established by Lender under Section 2.1(b) of the Credit Agreement $___________ c. Sum of Items 3.a. and 3.b $___________ (1) See Annex A 2 4. Borrowing Base (Item 1.c.plus Item 2.c, minus Item 3.c.): $_______ 5. Availability Calculation a. (i) Maximum Revolver Amount minus Line Block (if applicable) $_______ (ii) Letter of Credit Usage $_______ (iv) outstanding Advances $_______ (vi) Item 5.a(i) munus Item 5.a(ii) minus Item 5.a(iii) $_______ b. (i) Borrowing Base $_______ (ii) Letter of Credit Usage $_______ (iii) outstanding Advances $_______ (iv) Item5.b(i) munus Item 5.b(ii) munus Item 5.b(iii) $_______ c. The lesser of Item 5.a. and 5.b. $_______ B. LETTER OF CREDIT CALCULATION 1. maximum L/C amount $_______ 2. L/Cs permitted under Borrowing Base a. Borrowing Base (from Section A, Item 4) $_______ 3 b. Amount of current outstanding Advances $_______ c. Item 2.a. munus Item 2.b. $_______ 3. L/Cs permitted under Maximum Revolver Amount a. Maximum Revolver Amount minus Line Block (if applicable) $_______ b. Amount of current outstanding Advances $_______ c. Item 3.a. munus Item 3.b. $_______ 4. Letter of Credit Usage plus the amount of any proposed Letters of Credit $_______ 5. No L/C Avalilability if Item 4 is greater than Item 1, Item 2.c. or Item 3.c. $_______ 4 Additionally, the undersigned hereby certifies and represents and warrants to Lender on behalf of the Borrowers that (i) as if the date hereof, each reprtesentation or warranty contained in or pursuant to any Loan Document, any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any Loan Document, and as of the effective date of any advance, continuation or conversion requested above is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (ii) each of the covenants and agreements contained in any Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above, and (iv) all of the foregoing is true and correct as of the effective date of the calculations set forth above and that such calculation have been made in accordance with the requirements of the Credit Agreement. CRAY, INC., a Washington corporation as Parent By:_____________________ Name:___________________ Title:__________________ 5 Annex A Accounts created by a Borrower in the ordinary course of its business arising out of sale of goods (and not out of the rendition of services), that are not related to Recurring Revenues, that comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents $______ less (without duplication) The amount of customer deposits and unapplied cash relating to Accounts $______ Accounts that the Account Debtor has failed to pay within 90 days of original invoice date or Accounts with selling terms of more than 30 days $______ Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under the immediately preceding clause $______ Accounts with respect to which the Account Debtor is an Affiliate of any Borrower or an employee or agent of any Borrower or any Affiliate of any Borrower $______ Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional $______ Accounts that are not payable in Dollars and in the United States $______ Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or Canada, or (ii) is not organized under the laws of the United States or any state thereof or Canada, or (iii) is the government of any foreign country or sovereign state other than Canada, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Lender (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Lender and is directly drawable by Lender, or (z) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, satisfactory to Lender $______ 6 Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which the applicable Borrower has complied, to the reasonable satisfaction of Lender, with the Assignment of Claims Act, 31 USC Section 3727), or (ii) any state of the United States $_______ Accounts with respect to which the Account Debtor is a creditor of any Borrower, has or has asserted a right of setoff, or has disputed its obligation to pay all or any portion of the Account, to the extent of such claim, right of setoff, or dispute $_______ Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which a Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor, $_______ Accounts with respect to which the Account Debtor is located in a state or jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that requires, as a condition to access to the courts of such jurisdiction, that a creditor qualify to transact business, file a business activities report or other report or form, or take one or more other actions, unless the applicable Borrower has so qualified, filed such reports or forms, or taken such actions (and, in each case, paid any required fees or other charges), except to the extent that the applicable Borrower may qualify subsequently as a foreign entity authorized to transact business in such state or jurisdiction and gain access to such courts, without incurring any cost or penalty viewed by Lender to be significant in amount, and such later qualification cures any access to such courts to enforce payment of such Account, $_______ Accounts, the collection of which, Lender, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor's financial condition, $_______ Accounts that are not subject to a valid and perfected first priority Lender's Lien, $_______ Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor $_______ Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by the applicable Borrower of the subject contract for goods or services. $_______ 7 Total Excluded Accounts $_______ ELIGIBLE ACCOUNTS (TOTAL ACCOUNTS LESS TOTAL EXCLUDED ACCOUNTS): $_______ 8 EXHIBIT C-1 FORM OF COMPLIANCE CERTIFICATE [on Parent's letterhead] To: Wells Fargo Foothill, Inc. 2450 Colorado Avenue Suite 3000 West Santa Monica, California 90404 Attn: Business Finance Division Manager Re: Compliance Certificate dated ____________ Ladies and Gentlemen: Reference is made to that certain CREDIT AGREEMENT (the "Credit Agreement") dated as of May 31, 2005, by and among WELLS FARGO FOOTHILL, INC. (together with its successors and permitted assigns, "Lender"), CRAY INC., a Washington corporation ("Parent"), and each of its Subsidiaries party thereto. Capitalized terms used in this Compliance Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein. Pursuant to Schedule 5.3 of the Credit Agreement, the undersigned officer of Parent hereby certifies that: The financial information of Parent and its Subsidiaries with respect to fiscal quarter end and fiscal year end periods (furnished in Schedule 1 attached hereto), if applicable, has been prepared in accordance with GAAP (except for year-end adjustments and the lack of footnotes), and fairly presents in all material respects the financial condition of Parent and its Subsidiaries. The financial information of Parent and its Subsidiaries with respect to periods other than fiscal quarter end and fiscal year end periods (furnished in Schedule 1 attached hereto), if applicable, do not include all of the adjustments or footnotes necessary to be in compliance with GAAP. I believe that these statements should provide a reasonable basis for the Lender to monitor Parents' and its Subsidiaries' results from operations and their financial position. These statements are not deliberately misleading and, to my knowledge, do not contain fraudulent information or fail to include material information. 1. Such officer has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and condition of Parent and its Subsidiaries during the accounting period covered by the financial statements delivered pursuant to Schedule 5.3 of the Credit Agreement. 2. Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on Schedule 2 attached hereto, specifying the nature and period of existence thereof and what action Parent and its Subsidiaries have taken, are taking, or propose to take with respect thereto. 1 3. The representations and warranties of Parent and its Subsidiaries set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof (except to the extent they relate to a specified date), except as set forth on Schedule 3 attached hereto. 4. Parent and its Subsidiaries are in compliance with the applicable covenants contained in Section 6.16 of the Credit Agreement as demonstrated on Schedule 4 hereof. 5. Attached hereto on Schedule 5 is a copy of Parent and its Subsidiaries [10-Q QUARTERLY REPORT/10-K ANNUAL REPORT], filed since the delivery of Borrower's last Compliance Certificate. 2 IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this _____ day of _______________, ___________. CRAY INC., a Washington corporation By:_____________________ Name:___________________ Title:__________________ 3 SCHEDULE 1 FINANCIAL 4 SCHEDULE 2 DEFAULT OR EVENT OF DEFAULT 5 SCHEDULE 3 REPRESENTATIONS AND WARRANTIES 6 SCHEDULE 4 FINANCIAL COVENANTS 1. MINIMUM EBITDA. Parent's and its Subsidiaries' EBITDA, tested as of the last day of each fiscal quarter of Parent, for the most recently completed [6] [9] [12] [AS APPROPRIATE] month period ending _________, ________ is $______________, which amount [IS/IS NOT] greater than or equal to the amount set forth in Section 6.16(a)(i) of the Credit Agreement for the corresponding period. 2. MINIMUM RECURRING REVENUES. Parent's and its Subsidiaries' Recurring Revenues, tested as of the last day of each fiscal quarter of Parent, for the most recently completed [6] [9] [12] [AS APPROPRIATE] month period ending _________, ________ are $______________, which amount [IS/IS NOT] greater than or equal to the amount set forth in Section 6.16(a)(ii) of the Credit Agreement for the corresponding period. 3. CAPITAL EXPENDITURES. Parent's and its Subsidiaries' Capital Expenditures, for the [FISCAL YEAR ENDING _________, ________ ARE $____________] [FOR THE FIRST SIX MONTH OF THE FISCAL YEAR ENDING _________, ________ ARE $____________] [AS APPROPRIATE], which amount [IS/IS NOT] less than or equal to the amount set forth in Section 6.16(b)(i) of the Credit Agreement for the corresponding period. [WITH RESPECT TO PARENT'S AND ITS SUBSIDIARIES' FISCAL YEAR ENDING 1995, PARENT'S AND ITS SUBSIDIARIES' CAPITAL EXPENDITURES CONSISTING OF "PURCHASE OF PROPERTY AND EQUIPMENT" ARE $______________, WHICH AMOUNT [IS/IS NOT] LESS THAN OR EQUAL TO THE AMOUNT SET FORTH IN SECTION 6.16(B)(I) OF THE CREDIT AGREEMENT.] 7 SCHEDULE 5 [10-Q QUARTERLY REPORT/10-K ANNUAL REPORT] 8