Document:

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                                                                     Exhibit 4.2
                                    CRAY INC.

                  2000 NON-EXECUTIVE EMPLOYEE STOCK OPTION PLAN

1.      Purpose. The purpose of the 2000 Non-Executive Employee Stock Option
Plan (the "Plan") is to enable Cray Inc. (the "Company") to attract, reward and
retain the services or advice of the Company's current or future non-executive
employees, agents and consultants and to provide added incentives to them by
encouraging stock ownership in the Company.

2.      Stock Subject to This Plan. Subject to adjustment as provided below and
in Section 6 hereof, the stock subject to this Plan shall consist of shares of
the Company's common stock (the "Common Stock"), and the total number of shares
of Common Stock to be delivered upon the exercise of all stock options granted
under this Plan shall not exceed 6,000,000 shares, as such Common Stock was
constituted on the effective date of this Plan. If any stock option granted
under this Plan shall expire, be surrendered, exchanged for another stock
option, cancelled or terminated for any reason without having been exercised in
full, the unpurchased shares subject to such option shall again be available for
purposes of this Plan, including for replacement stock options which may be
granted in exchange for such surrendered, cancelled or terminated stock options.
Shares issued upon exercise of stock options granted under this Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as may be determined by the Board of Directors of the Company (the
"Board").

3.      Administration. This Plan shall be administered by the Board. The Board
may suspend, amend or terminate this Plan as provided in Section 8.

        3.1     Powers. Subject to the specific provisions of this Plan, the
Board shall have the authority, in its discretion from time to time: (a) to
grant stock options as described in Section 5; (b) to determine the exercise
price per share of stock options; (c) to determine the Optionees (as defined
herein) to whom, and the time or times at which, stock options shall be granted
and the number of shares of Common Stock to be represented by each stock option;
(d) to interpret this Plan; (e) to prescribe, amend and rescind rules and
regulations relating to this Plan; (f) to determine the terms and provisions of
each stock option granted (which need not be identical) and, with the consent of
the holder thereof, modify or amend each stock option; (g) to reduce the
exercise price per share of outstanding and unexercised stock options; (h) to
defer, with the consent of the Optionee, or to accelerate the exercise date of
any stock option; (i) to waive or modify any term or provision contained in any
stock option applicable to the

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underlying shares of Common Stock; (j) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of a stock
option previously granted by the Board; (k) to correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any stock option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect; and (l) to make all other determinations deemed necessary or
advisable for the administration of this Plan. The interpretation and
construction by the Board of any terms or provisions of this Plan, any stock
option issued hereunder or of any rule or regulation promulgated in connection
herewith and all actions taken by the Board shall be conclusive and binding on
all interested parties. The Board may delegate administrative functions to
individuals who are officers or employees of the Company.

        3.2     Limited Liability. No member of the Board or officer of the
Company shall be liable for any action or inaction of the entity or body, or
another person or, except in circumstances involving bad faith, of himself or
herself. Subject only to compliance with the explicit provisions hereof, the
Board may act in its absolute discretion in all matters related to this Plan.

        3.3     Committee. The Board by resolution may delegate to a committee
of the Board consisting of one or more members (the "Committee") any or all
authority for administration of the Plan. If a Committee is appointed, all
references to the Board in the Plan shall mean and relate to such Committee,
except that only the Board may amend, modify, suspend or terminate the Plan as
provided in Section 8.

4.      Eligibility. The Board may award stock options to any current or future
non-executive employee, agent and consultant of the Company or any of its
subsidiaries. Any party to whom a stock option is granted under this Plan is
referred to as an "Optionee."

5.      Awards. The Board, may take the following actions from time to time,
separately or in combination, under this Plan: (a) grant non-qualified stock
options, as provided in Section 5.1 of this Plan; (b) grant stock options to
employees and others in foreign jurisdictions, as provided in Section 5.6 of
this Plan; and (c) grant stock options in certain acquisition transactions, as
provided in Section 5.7 of this Plan. No person may be granted options to
acquire more than 300,000 shares of Common Stock in any fiscal year of the
Company.

        5.1     Non-Qualified Stock Options. Non-Qualified Stock Options shall
be subject to the following terms and conditions:

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                (a)     The exercise price may be more or less than or equal to
the fair market value of the shares of Common Stock covered by the Non-Qualified
Stock Option on the date the option is granted, and the exercise price may
fluctuate based on criteria determined by the Board. The fair market value of
shares shall be the closing price per share of the Common Stock on the trading
date immediately prior to the date of grant as reported on a securities
quotation system or stock exchange. If such shares are not so reported of or
listed, the Board shall from time to time determine the fair market value of the
shares of Common Stock in its discretion.

                (b)     Unless otherwise established by the Board, any
Non-Qualified Stock Option shall terminate ten years after the date it is
granted.

        5.2     Vesting. To ensure that the Company will achieve the purposes of
and receive the benefits contemplated in this Plan, the Board, at its
discretion, may establish a vesting schedule, change such vesting schedule or
provide for no vesting schedule for stock options granted under the Plan. In
establishing a vesting schedule, the Board may set a "Base Date", meaning a
reference date for the specific option grant and Optionee. If no Base Date is
established by the Board for a specific option grant, then the date of grant of
the stock option by the Board shall constitute the Base Date.

        5.3     Nontransferability. Each stock option granted under this Plan
and the rights and privileges conferred hereby may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will or by the applicable laws of descent and distribution or
pursuant to a qualified domestic relations order. The foregoing notwithstanding,
the Board on conditions it determines may permit the transferability of an
option by an Optionee solely to members of the Optionee's family members or to
one or more trusts or partnerships for the benefit of such family members. Any
purported transfer or assignment in violation of this provision shall be void.

        5.4     Termination of Options.

                5.4.1   Generally. Unless otherwise determined by the Board or
specified in the Optionee's option agreement, if the Optionee's employment or
service with the Company terminates for any reason other than for cause,
resignation, retirement, disability or death, and unless by its terms the stock
option sooner terminates or expires, then the Optionee may exercise, for a
three-month period, that portion of the Optionee's stock option which was
exercisable at the time of such termination of employment or service (provided
the conditions of Section 5.5.4 and any other conditions specified in the option
agreement shall have been met by the date of exercise of such option).

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                5.4.2   For Cause; Resignation.

                (a)     If an Optionee is terminated for cause or resigns in
lieu of dismissal, any stock option granted hereunder shall be deemed to have
terminated as of the time of the first act which led or would have led to the
termination for cause or resignation in lieu of dismissal, and such Optionee
shall thereupon have no right to purchase any shares of Common Stock pursuant to
the exercise of such stock option, and any such exercise shall be null and void.
Termination for "cause" shall include (i) the violation by the Optionee of any
reasonable rule or policy of the Board or the Optionee's superiors or the chief
executive officer or the President of the Company that results in damage to the
Company or which, after notice to do so, the Optionee fails to correct within a
reasonable time; (ii) any willful misconduct or gross negligence by the Optionee
in the responsibilities assigned to him or her; (iii) any willful failure by the
Optionee to perform his or her job as required to meet the objectives of the
Company; (iv) any wrongful conduct of an Optionee which has an adverse impact on
the Company or which constitutes a misappropriation of the assets of the
Company; (v) unauthorized disclosure by the Optionee of confidential
information; or (vi) the Optionee's performing services for any other company or
person which competes with the Company while he or she is employed by or
provides services to the Company, without the prior written approval of the
chief executive officer or President of the Company. "Resignation in lieu of
dismissal" shall mean a resignation by an Optionee of employment with or service
to the Company if (i) the Company has given prior notice to such Optionee of its
intent to dismiss the Optionee for circumstances that constitute cause, or (ii)
within two months of the Optionee's resignation, the chief executive officer or
the President of the Company or the Board determines, which determination shall
be final and binding, that such resignation was related to an act which would
have led to a termination for cause.

                (b)     If an Optionee resigns from the Company, the right of
the Optionee to exercise his or her stock option shall be suspended for a period
of two months from the date of resignation, unless the President or chief
executive officer of the Company or the Board determines otherwise in writing.
Thereafter, unless there is a determination that the Optionee resigned in lieu
of dismissal, the stock option may be exercised at any time prior to the earlier
of (i) the expiration date of the stock option (which shall have been similarly
suspended) or (ii) the expiration of three months after the date of resignation,
for that portion of the Optionee's stock option that was exercisable at the time
of such resignation (provided the conditions of Section 5.5.4 and any other
conditions specified in the option agreement shall have been met at the date of
exercise of such stock option).

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                5.4.3   Retirement. Unless otherwise determined by the Board, if
an Optionee's employment or service with the Company is terminated with the
Company's approval for reasons of age, the stock option may be exercised at any
time prior to the earlier of (a) the expiration date of the stock option or (b)
the expiration of three months after the date of such termination of employment
or service, for that portion of the Optionee's stock option which was
exercisable at the time of such termination of employment or service (provided
the conditions of Section 5.5.4 and any other conditions specified in the option
agreement shall have been met at the date of exercise of such stock option).

                5.4.4   Disability. Unless otherwise determined by the Board, if
an Optionee's employment or relationship with the Company terminates because of
a permanent and total disability (as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code")), the stock option may be
exercised at any time prior to the earlier of (a) expiration date of the stock
option or (b) the expiration of 12 months after the date of such termination for
up to the full number of shares of Common Stock covered thereby, including any
portion not yet vested (provided the conditions of Section 5.5.4 and any other
conditions specified in the option agreement shall have been met by the date of
exercise of such stock option).

                5.4.5   Death. Unless otherwise determined by the Board, in the
event of the death of an Optionee while employed by or providing service to the
Company, the stock option may be exercised at any time prior to the earlier of
(a) the expiration date of the stock option or (b) the expiration of 12 months
after the date of death by the person or persons to whom such Optionee's rights
under the stock option shall pass by the Optionee's will or by the applicable
laws of descent and distribution for up to the full number of shares of Common
Stock covered thereby, including any portion not yet vested (provided the
conditions of Section 5.5.4 and any other conditions specified in the option
agreement shall have been met by the date of exercise of such stock option).

                5.4.6   Extension of Exercise Period Applicable to Termination.
The Board, at the time of grant or at any time thereafter, may extend the
three-month and 12-month exercise periods to any length of time not longer than
the original expiration date of the stock option, and may increase the portion
of a stock option that is exercisable, subject to such terms and conditions as
the Board may determine.

                5.4.7   Failure to Exercise Option. To the extent that the stock
option of any deceased Optionee or of any Optionee whose employment or service
terminates is not exercised within the applicable period, all rights to purchase
shares of Common Stock pursuant to such stock option shall cease and terminate.

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        5.5    Exercise.

               5.5.1 Procedure. Subject to the provisions of Section 5.2 above,
each stock option may be exercised in whole or in part; provided, however, that
no fewer than 100 shares (or the remaining shares then purchasable under the
stock option, if less than 100 shares) may be purchased upon any exercise of any
stock option granted hereunder and that only whole shares will be issued
pursuant to the exercise of any stock option (the number of 100 shares shall not
be changed by any transaction or action described in Section 6 unless the Board
determines that such a change is appropriate). Stock options shall be exercised
by delivery to the Secretary of the Company or his or her designated agent of
written notice of the number of shares with respect to which the stock option is
exercised, together with payment in full of the exercise price.

               5.5.2 Payment. Payment of the stock option exercise price shall
be made in full at the time the written notice of exercise of the stock option
is delivered to the Secretary of the Company or his or her designated agent and
shall be in cash or check or pursuant to irrevocable instructions to a stock
broker to deliver the amount of sales proceeds necessary to pay the appropriate
exercise price and withholding tax obligations, all in accordance with
applicable governmental regulations, for the shares of Common Stock being
purchased. for the shares of Common Stock being purchased. The Board may
determine at any time before exercise, that additional forms of payment will be
permitted, including without limitation full recourse promissory notes.

               5.5.3 Withholding. Prior to the issuance of shares of Common
Stock upon the exercise of a stock option, the Optionee shall pay to the Company
the amount of any applicable federal, state or local tax withholding
obligations. The Company may withhold any distribution in whole or in part until
the Company is so paid. The Company shall have the right to withhold such amount
from any other amounts due or to become due from the Company, as the case may
be, to the Optionee, including salary (subject to applicable law) or to retain
and withhold a number of shares having a market value not less than the amount
of such taxes required to be withheld by the Company to reimburse it for any
such taxes and cancel (in whole or in part) any such shares so withheld.

                5.5.4   Conditions Precedent to Exercise. The Board may
establish conditions precedent to the exercise of any stock option, which shall
be described in the relevant option agreement.

        5.6     Foreign Qualified Grants. Stock options under this Plan may be
granted to non-executive employees of the Company or its subsidiaries or other
persons described in Section 4 who reside in foreign jurisdictions as the Board
may determine

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from time to time. The Board may adopt such supplements to the Plan as are
necessary to comply with the applicable laws of such foreign jurisdictions and
to afford Optionees favorable treatment under such laws; provided, however, that
no award shall be granted under any such supplement on terms which are more
beneficial to such Optionees than the terms permitted by this Plan.

        5.7     Corporate Mergers, Acquisitions, Etc. The Board also may grant
stock options under this Plan having terms, conditions and provisions that vary
from those specified in this Plan provided that such stock options are granted
in substitution for, or in connection with the assumption of, existing stock
options granted, awarded or issued by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition of property
or stock, reorganization or liquidation to which the Company is a party.

        5.8     Option Agreements. Stock options granted under this Plan shall
be evidenced by written stock option agreements which shall contain such terms,
conditions, limitations and restrictions as the Board shall deem advisable and
which are consistent with this Plan. All option agreements shall include or
incorporate by reference the applicable terms and conditions contained in this
Plan.

6.      Adjustments Upon Changes in Capitalization.

        6.1     Stock Splits, Capital Stock Adjustments. The aggregate number
and class of shares for which stock options may be granted under this Plan, the
number and class of shares covered by each outstanding stock option and the
exercise price per share thereof (but not the total price), and each such stock
option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
stock split, stock dividend or consolidation of shares or any like capital stock
adjustment.

        6.2     Effect of Merger, Sale of Assets, Liquidation or Dissolution.

                6.2.1   Termination Unless Assumption or Substitution. Upon the
effective date of a merger, consolidation or plan of exchange (other than a
merger, consolidation or plan of exchange involving the Company in which the
holders of voting securities of the Company immediately prior to such
transaction own at least 50% of the voting power of the outstanding securities
of the surviving corporation or a parent of the surviving corporation after such
transaction), or a sale of all or substantially all the assets of the Company,
or a liquidation or dissolution of the Company, the Plan and any option
theretofore granted hereunder shall terminate,

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unless provisions be made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of options theretofore granted,
or the substitution for such options, with new options covering the shares of a
successor corporation, or a parent, affiliate or subsidiary thereof, with
appropriate adjustments as to number and kind of shares and prices thereof, in
which event the Plan and the options granted under it, or the new options
substituted therefor, shall continue in the manner and under the terms so
provided.

                6.2.2   Exercise and Vesting. If provision is not made pursuant
to the preceding Section 6.2(a) in connection with such a transaction for the
continuance of the Plan and for the assumption of options, or the substitution
for such options of new options covering the shares of a successor employer
corporation or a parent, affiliate or subsidiary thereof, then each Optionee
under the Plan shall be entitled, prior to the effective date of any such
transaction, to exercise the option for the full number of shares covered
thereby, including any portion not yet vested (provided that the conditions of
Section 5.5.4 and any other conditions specified in the Option Agreement shall
have been met at the date of exercise of such option).

        6.3     Fractional Shares. In the event of any adjustment in the number
of shares covered by any stock option, any fractional shares resulting from such
adjustment shall be disregarded and each such stock option shall cover only the
number of full shares resulting from such adjustment.

        6.4     Determination of Board to Be Final. All adjustments under this
Section 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

7.      Securities Regulations.

        7.1     Compliance with Law. Shares of Common Stock shall not be issued
with respect to a stock option granted under this Plan unless the exercise of
such stock option and the issuance and delivery of such shares pursuant thereto
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, applicable
laws of foreign countries and other jurisdictions and the requirements of any
quotation service or stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares hereunder. The inability of
the Company to obtain, from any regulatory body having jurisdiction, the
authority deemed by the Company's counsel to be necessary for the lawful
issuance and

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sale of any shares hereunder or the unavailability of an exemption from
registration for the issuance and sale of any shares hereunder shall relieve the
Company of any liability with respect of the nonissuance or sale of such shares
as to which such requisite authority shall not have been obtained.

        7.2     Investment Purpose. As a condition to the exercise of an option,
the Company may require the Optionee to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any relevant provision of the aforementioned laws. The Company may place a
stop-transfer order against any shares of Common Stock on the official stock
books and records of the Company, and a legend may be stamped on stock
certificates to the effect that the shares of Common Stock may not be pledged,
sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation. The Board also may require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK ISSUABLE
UPON EXERCISE THEREOF.

8.      Amendment and Termination.

        8.1     Plan. The Board may at any time suspend, amend or terminate this
Plan.

        8.2     Options. Subject to the terms and conditions and within the
limitations of this Plan, the Board may modify or amend outstanding stock
options granted under this Plan. The modification or amendment of an outstanding
stock option shall not, without the consent of the Optionee, impair or diminish
any of his or her rights or any of the obligations of the Company under such
stock option. Except as otherwise provided in this Plan, no outstanding stock
option shall be terminated without the consent of the Optionee.

        8.3     Automatic Termination. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the date on which this Plan is adopted
by the Board. No stock option may be granted after such termination or during
any suspension of this Plan. The amendment or termination of this Plan shall
not, without the consent of the Optionee, alter or impair any rights or
obligations under any stock option theretofore granted under this Plan.

9.      Miscellaneous.

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        9.1     Time of Granting Options. The date of grant of a stock option
shall, for all purposes, be the date on which the Company completes the required
corporate action relating to the grant thereof; the execution of an option
agreement and the conditions to the exercise of a stock option shall not defer
the date of grant.

        9.2     No Status as Shareholder. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the stock option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares of Common Stock issuable upon the exercise of
any stock option granted under this Plan unless and until such stock option has
been exercised and the issuance (as evidenced by the appropriate entry on the
books of the Company or duly authorized transfer agent of the Company) of the
stock certificate evidencing such shares.

        9.3     Status as an Employee. Nothing in this Plan or in any stock
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company, or to interfere in any way with the right
of the Company to terminate his or her employment or other relationship with the
Company at any time.

        9.4     Reservation of Shares. The Company, during the term of this
Plan, at all times will reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of this Plan.

10.     Effectiveness of This Plan. This Plan shall become effective upon
adoption by the Board.

             Adopted by the Board of Directors as of March 30, 2000<PAGE>   1
                                                                     Exhibit 4.1

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-1A                                Right to Purchase 5,139,408 Shares of
                                         Common Stock of Cray Inc.

                                    CRAY INC.

                          Common Stock Purchase Warrant

               CRAY INC., a Washington corporation formerly known as Tera
Computer Company (the "Company"), hereby certifies that, for value received,
Terren S. Peizer, 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, Five Million One Hundred Thirty Nine Thousand Four Hundred Eight
(5,139,408) fully paid and non-assessable shares of Common Stock, $.01 par
value, of the Company at an Exercise Price per share initially equal to $2.53.
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 is subject to
adjustment as set out in this Section 1.

        (a)     If prior to June 21, 2001, the Company is a party to a merger or
consolidation pursuant to which the holders of a majority of the shares of
Common Stock prior to the transaction do not hold a majority of the shares of
the voting securities of the surviving entity

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after such transaction or is a party to a sale of all or substantially all of
the assets of the Company, 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 the Company does not file a registration statement with the
Securities and Exchange Commission covering the resale of the shares of Common
Stock underlying this Warrant by March 31, 2001, 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 Terren S. Peizer 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 Terren S.
Peizer, then effective upon such termination this Warrant shall be exercisable
for 100% of the shares of Common Stock which may be purchased hereunder, 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" 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 Company'stock option plans. 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 Company's Common Stock, then the number of shares then issuable shall depend
upon the Market Price for the Common Stock as of such date.

2. Exercise By Holder.

        (a)     This Warrant shall be exercisable as set forth in Section 1 and
in all other cases as follows:

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        3.      on June 21, 2000, for 50% of the number of total shares of
                                               Common Stock which may be
                                               purchased hereunder; and

        4.      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 June 21, 2001,
                                               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 Company's account, in the
amount 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

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              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 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

<PAGE>   5
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 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 Section 4 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

<PAGE>   6
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
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.

This Warrant is a reissuance of a Warrant originally issued on June 21, 1999.

        IN WITNESS WHEREOF, Cray Inc. has caused this Warrant to be executed on
its behalf by one of its officers thereunto duly authorized.

Dated:   February 27, 2001                     CRAY INC.

<PAGE>   7

                                               By: /s/
                                                  ------------------------------
                                               Name:  James E. Rottsolk
                                               Title: President

<PAGE>   8
                              FORM OF SUBSCRIPTION

                          COMMON STOCK PURCHASE WARRANT
                                  OF CRAY INC.
                   (To be signed only on exercise of Warrant)

TO:     Cray Inc.
        411 First Avenue South, Suite 600
        Seattle, Washington 98104-2860

        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 Cray Inc. , 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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