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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
 
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Soliciting Material Pursuant to § 240.14a-12
Cray Inc.
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12980891&doc=2
June 25, 2019
Dear Cray Inc. Shareholder:
You are cordially invited to attend a special meeting of shareholders of Cray Inc. (“Cray” or “we,” “us” or “our”) to be held on August 27, 2019 at 9:00 a.m., Pacific Time, at the office of Fenwick & West LLP located at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101.
At the special meeting, you will be asked to consider and vote upon a proposal to approve an agreement and plan of merger (“Merger Agreement”) by and among Hewlett Packard Enterprise Company, a Delaware corporation (“HPE”), Canopy Merger Sub, Inc., a Washington corporation and wholly owned subsidiary of HPE, and Cray.
If the Merger Agreement is approved and the merger is completed, Cray will become a wholly owned subsidiary of HPE and each share of Cray common stock that you own as of the effective time of the merger will be converted into the right to receive $35.00 in cash, without interest and less any withholding taxes required by applicable law (unless you have properly demanded your statutory dissenters’ rights with respect to the merger).
Our board of directors (“Board”) considered a number of factors in evaluating the terms of the Merger Agreement. Based on its review, our Board unanimously determined that the terms and conditions of the merger and the Merger Agreement are advisable, fair to and in the best interests of Cray and our shareholders. Accordingly, our Board has unanimously approved the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, and unanimously recommends that you vote “FOR” the approval of the Merger Agreement.
The enclosed proxy statement provides detailed information about the special meeting, the Merger Agreement, and the merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the proxy statement carefully in its entirety. The proxy statement is dated June 25, 2019, and is first being mailed to Cray shareholders on or about June 28, 2019.
Your vote is very important, regardless of the number of shares you own. The proposal to approve the Merger Agreement must be approved by the holders of not less than a majority of the outstanding shares of Cray common stock on the record date. Only shareholders who owned shares of Cray common stock at the close of business on June 24, 2019, the record date for the special meeting, will be entitled to vote at the special meeting.
To vote your shares, you may return your proxy card, submit a proxy via the Internet or by telephone, as specified in the Internet and telephone voting instructions contained in the proxy statement, or attend the special meeting and vote in person. If your shares are held in the name of a brokerage firm, bank, trust, or other nominee, you must instruct the brokerage firm, bank, trust, or other nominee how to vote your shares or obtain a proxy, executed in your favor, from that record holder in order to vote at the special meeting. Even if you plan to attend the special meeting, we urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating, and returning the enclosed proxy card.
If you fail to return your proxy, attend the special meeting and vote in person, or give voting instructions to your brokerage firm, bank, trust, or other nominee, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the approval of the Merger Agreement.
If you attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person.
We look forward to seeing you. Thank you for your ongoing support of and interest in Cray.
Sincerely,
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12980891&doc=3
Peter J. Ungaro
President and Chief Executive Officer
Seattle, Washington
June 25, 2019



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12980891&doc=2
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
To the Shareholders of Cray Inc.:
Cray Inc. (“Cray” or “we,” “us” or “our”) will hold a special meeting of shareholders at the office of Fenwick & West LLP located at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101, at 9:00 a.m., Pacific Time, on August 27, 2019, to consider and vote upon the following proposals:
1.
To approve the Agreement and Plan of Merger (the “Merger Agreement”), dated as of May 16, 2019, by and among Hewlett Packard Enterprise Company, a Delaware corporation (“HPE”), Canopy Merger Sub, Inc., a Washington corporation and wholly owned subsidiary of HPE (“Merger Sub”), and Cray, as such agreement may be amended from time to time;
2.
To approve, on a non-binding advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger (the “advisory compensation proposal”); and
3.
To approve the adjournment of the special meeting to a later date if our board of directors (“Board”) determines that it is necessary or appropriate, and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or there are not sufficient votes in favor of the approval of the Merger Agreement at the time of the special meeting (the “adjournment proposal”).
Only record holders of Cray common stock at the close of business on June 24, 2019, are entitled to receive notice of, and will be entitled to vote at, the special meeting, including any adjournments or postponements of the special meeting. Your vote is important, regardless of the number of shares of Cray common stock you own.
The affirmative vote of the holders of not less than a majority of the outstanding shares of Cray common stock on the record date is required to approve the Merger Agreement. Approval of the advisory compensation proposal and the adjournment proposal require the votes cast “FOR” such proposal to exceed the number of votes cast “AGAINST” such proposal.
In the event that a quorum is not present in person or represented by proxy at the special meeting, a majority of the shareholders present in person or represented by proxy may adjourn the meeting until a quorum is present. In the event that a quorum is not present in person or represented by proxy at the special meeting and the adjournment proposal fails, our Board may set a new record date and meeting date for a special meeting to consider the Merger Agreement, the advisory compensation proposal and the adjournment proposal in accordance with the Merger Agreement.
If the merger is completed, our shareholders who (i) do not vote in favor of the approval of the Merger Agreement or consent thereto in writing and (ii) exercise dissenters’ rights when and in the manner required under Chapter 23B.13 of the Washington Business Corporation Act (“WBCA”) may be entitled to the payment of the fair value of their shares under the applicable provisions of Chapter 23B.13 of the WBCA.
For a more detailed discussion of your dissenter’s rights, see “The Merger—Dissenters’ Rights” beginning on page 38 of this proxy statement and Annex C to this proxy statement.
You are cordially invited to attend the special meeting in person. Whether or not you expect to attend the special meeting, please complete, date, sign and return the enclosed proxy card, or vote via the Internet or by telephone, as instructed in these materials as promptly as possible in order to ensure your representation at the special meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the special meeting, as you may revoke your earlier vote if you don’t hold your shares through the Cray 401(k) Plan account. Please note, however, that if your shares are held in the name of your brokerage firm, bank, trust or other nominee and you wish to vote at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy issued in your name from that record holder.
If you sign, date and return your proxy card or submit a proxy via the Internet or by telephone without indicating how you wish to vote, your proxy will be voted “FOR” the approval of the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal, in accordance with the recommendation of our Board. If you do attend



the special meeting and wish to vote in person, you may revoke your proxy and vote in person. You may revoke your proxy in the manner described in the enclosed proxy statement at any time before it has been voted at the special meeting.
Our Board unanimously recommends that you vote “FOR” approval of the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.
The merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the Merger Agreement is attached as Annex A to this proxy statement. If you have any questions or need assistance in voting your shares of our common stock, please contact our proxy solicitor, MacKenzie Partners, Inc., via telephone toll-free at (800) 322-2885 or via email at cray@mackenziepartners.com.

By Order of the Board of Directors,
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12980891&doc=3
Peter J. Ungaro
President and Chief Executive Officer
Seattle, Washington
June 25, 2019




YOUR VOTE IS IMPORTANT
Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the special meeting, please complete, date, sign and return the enclosed proxy card, or vote via the Internet or by telephone as instructed in these materials, as promptly as possible in order to ensure your representation at the special meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the special meeting.
If you fail to submit your proxy via Internet or telephone, return your proxy card, attend the special meeting and vote in person, or give voting instructions to your brokerage firm, bank, trust or other nominee, then your shares will not be counted for determining whether a quorum is present at the special meeting and your decision not to respond will have the same effect as if you voted “AGAINST” the approval of the Merger Agreement.
Please note, however, that if your shares are held of record by a brokerage firm, bank, trust or other nominee and you wish to vote at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy issued in your name from that record holder.
REFERENCES FOR ADDITIONAL INFORMATION 
If you have any questions about this proxy statement, the special meeting, the merger or need assistance with voting procedures, you should contact:
Cray Inc.
901 Fifth Avenue, Suite 1000
Seattle, Washington 98164
Attn: Corporate Secretary
or
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, New York 10018
(212) 929-5500
or
Call Toll-Free (800) 322-2885
Email: cray@mackenziepartners.com



CRAY INC.
PROXY STATEMENT
TABLE OF CONTENTS
 
 
 
 
 
 
 
 

i


 
 
 
 
 
 
 
 
 
 
 
 
 
 

ii


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

iii


QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following Q&A is intended to address some commonly asked questions about the special meeting of shareholders and the merger. These questions and answers may not address all questions that may be important to you as a Cray shareholder. We urge you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.
Q:
Why am I receiving this proxy statement?
A:
You are receiving this proxy statement because you were a Cray shareholder as of June 24, 2019, the record date for the special meeting. To complete the merger, shareholders holding a majority of the shares of Cray common stock outstanding as of June 24, 2019, the record date for the special meeting, must vote to approve the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this proxy statement.
You are being solicited to vote in favor of the proposal to approve the Merger Agreement and to approve the advisory compensation and adjournment proposals to be voted on at the special meeting.
The Merger
Q:
What will happen to my Cray common stock as a result of the merger?
A:
If the merger is completed, each share of Cray common stock that you hold at the effective time of the merger (Effective Time) will be converted into the right to receive $35.00 in cash, without interest, less any withholding taxes required by applicable law. This does not apply to shares of Cray common stock held by any Cray shareholders who have properly exercised their dissenters’ rights under the WBCA. See “The Merger—Dissenters’ Rights” beginning on page 38 of this proxy statement.
Q:
What will happen to Cray generally as a result of the merger?
A:
If the merger is completed, Cray will cease to be an independent public company and will be a company wholly owned by HPE. As a result, you will no longer have any ownership interest in Cray. Upon completion of the merger, shares of Cray common stock will no longer be listed on any stock exchange or quotation system, including The Nasdaq Global Select Market. In addition, following the completion of the merger, the registration of Cray common stock and our reporting obligations under the Securities Exchange Act of 1934, as amended (Exchange Act), will be terminated.
Q:
What are the U.S. federal income tax consequences of the merger to me?
A:
The receipt of cash in exchange for shares of Cray common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive and the adjusted tax basis of your shares of Cray common stock. If you are a U.S. holder (as such term is defined below under “The Merger—Certain U.S. Federal Income Tax Consequences of the Merger” beginning on page 42 of this proxy statement), you generally will be subject to U.S. federal income tax on any gain recognized in connection with the merger. If you are a non-U.S. holder (as such term is defined below under “The Merger—Certain U.S. Federal Income Tax Consequences of the Merger” beginning on page 42 of this proxy statement), you generally will not be subject to U.S. federal income tax on any gain recognized in connection with the merger unless you have certain connections to the United States. The tax consequences of the merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the merger will affect you. For a more detailed summary of the U.S. federal income tax consequences of the merger, see “The Merger—Certain U.S. Federal Income Tax Consequences of the Merger” beginning on page 42 of this proxy statement.
Q:
Am I entitled to dissenters’ rights in connection with the merger?
A:
You may dissent from the merger and obtain payment of the “fair value” (as defined in Section 23B.13.010 of the WBCA) of your common stock if you follow the procedures prescribed by the WCBA. Failure to strictly comply with these procedures may result in your waiver of, or inability to exercise, your dissenters’ rights. For more information regarding dissenters’ rights, see “The Merger—Dissenters’ Rights” beginning on page 38 of this proxy statement.
A copy of the full text of Chapter 23B.13 of the WBCA is included as Annex C to this proxy statement. The “fair value” of your stock (as defined in Section 23B.13.010 of the WCBA) may be more or less than the merger consideration.
Q:
When do you expect the merger to be completed?
A:
We are working toward completing the merger as quickly as possible; however, the merger is subject to various closing conditions, including, among others, Cray shareholder approval, the expiration or earlier termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and obtaining certain foreign antitrust approvals. We cannot assure you that all conditions to the merger will be satisfied or, if satisfied, the date by which they will be satisfied.

Q-1


Q:
When will I receive the merger consideration for my shares of Cray common stock?
A:
After the merger is completed, you will receive written instructions, including a letter of transmittal, that explain how to exchange your shares for the merger consideration payable in the merger. When you properly return and complete the required documentation described in the written instructions, you will receive from the payment agent a payment of the cash consideration for your shares.
The Special Meeting
Q:
When and where will the special meeting of shareholders be held?
A:
The special meeting of Cray shareholders will be held at the office of Fenwick & West LLP located at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101 at 9:00 a.m., Pacific Time, on August 27, 2019.
Q:
What are the proposals that will be voted on at the special meeting?
A:
You will be asked to consider and vote on (i) a proposal to approve the Merger Agreement; (ii) a proposal to approve, on a non-binding advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger; and (iii) a proposal to adjourn the special meeting to a later date if our Board determines that it is necessary or appropriate, and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or there are not sufficient votes in favor of the approval of the Merger Agreement at the time of the special meeting.
Q:
How does our Board recommend that I vote on the proposals?
A:
Our Board unanimously approved the Merger Agreement and determined that the merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Cray and our shareholders and unanimously recommends that you vote:
FOR” the proposal to approve the Merger Agreement;
FOR” the advisory compensation proposal; and
FOR” the adjournment proposal.
See “The Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 21 of this proxy statement.
Q:
Who is entitled to attend and vote at the special meeting?
A:
The record date for the special meeting is June 24, 2019. If you own shares of Cray common stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the special meeting or any adjournment thereof. As of the record date, there were approximately 41,337,879 shares of Cray common stock issued and outstanding held collectively by approximately 201 shareholders of record.
Q:
How many votes are required to approve the Merger Agreement?
A:
Under Washington law and our Restated Articles of Incorporation, approval of the Merger Agreement requires the affirmative vote of the holders of not less than a majority of the outstanding shares of Cray common stock entitled to vote on the Merger Agreement.
If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement.
Q:
How many votes are required to approve the advisory compensation proposal?
A:
In accordance with Section 14A of the Exchange Act and the applicable rules promulgated thereunder by the Securities and Exchange Commission (the “SEC”), shareholders have the opportunity to cast a non-binding, advisory vote to approve certain compensation that may be paid or become payable to our named executive officers in connection with the merger, as described in the table “Quantification of Potential Payments and Benefits to Our Named Executive Officers” table on page 36 of this proxy statement, including the footnotes to the table and related narrative discussion beginning on page 36 of this proxy statement. The vote to approve such compensation to our named executive officers is advisory and therefore will not be binding on Cray or HPE, nor will it overrule any prior decision or require our Board (or any committee of our Board) to take any action. Accordingly, if our shareholders approve the Merger Agreement and the merger is completed, the compensation will be or may become payable to our named executive officers in accordance with the terms of their compensation agreements and arrangements, regardless of whether our shareholders approve the advisory compensation proposal.  

Q-2


The proposal will be approved if the votes cast “FOR” such proposal by the shareholders exceed the number of votes cast “AGAINST” such proposal at the special meeting.
If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the advisory compensation proposal, provided that a quorum is present in person or represented by proxy at the special meeting.
Q:
How many votes are required to approve the adjournment proposal?
A:
In order for the adjournment proposal to be approved, the votes cast “FOR” such proposal by the shareholders must exceed the votes cast “AGAINST” such proposal.
If you abstain from voting, fail to cast your vote in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the vote for the adjournment proposal (even if less than a quorum).
Q:
How are votes counted? Why is my vote important? What happens if I abstain?
A:
If you do not submit a proxy or voting instructions or vote in person at the special meeting, it will be more difficult for us to obtain the necessary quorum to hold the special meeting.  
Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes and abstentions.
If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote against the proposal to approve the Merger Agreement.
If you fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have no effect on the advisory compensation proposal or the adjournment proposal, provided that a quorum is present in person or represented by proxy at the special meeting.
Q:
Do any of our directors or executive officers have interests in the merger that may differ from those of our shareholders?
A:
In considering the recommendation of our Board with respect to the Merger Agreement, you should be aware that our directors and executive officers have potential interests in the merger that may be different from, or in addition to, those of our shareholders generally. These interests may create potential conflicts of interest. Our Board was aware that these interests existed and considered them, among other matters, when it approved the Merger Agreement and made its recommendation that our shareholders approve the Merger Agreement. See “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 33 of this proxy statement.
Q:
What do I need to do now?
A:
After carefully reading and considering the information contained in this proxy statement, including the annexes and the other documents referred to in this proxy statement, please vote your shares in one of the manners described below. You have one vote for each share of Cray common stock you own as of the record date.
Q:
How do I vote if I am a shareholder of record?
A:
You may vote:
by following the Internet voting instructions printed on your proxy card;
by following the telephone voting instructions printed on your proxy card;
by completing, signing and dating each proxy card you receive and returning it in the enclosed postage-paid envelope; or
by appearing and casting your vote in person at the special meeting.
If you are voting via the Internet or by telephone, your voting instructions must be received by the date and time indicated on the applicable proxy card(s).
Voting via the Internet, by telephone or by mailing in your proxy card will not prevent you from voting in person at the special meeting. You are encouraged to submit a proxy via the Internet, by telephone or by mail even if you plan to attend the special meeting in person, to ensure that your shares of Cray common stock are present in person or represented at the special meeting.

Q-3


If your shares are held by a brokerage firm, bank, trust or other nominee, you may direct your brokerage firm, bank, trust or other nominee to submit a proxy card by following the instructions that the brokerage firm, bank, trust or other nominee provides to you with these materials. If you hold shares through a brokerage firm, bank, trust or other nominee and wish to vote your shares in person at the special meeting, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy from your brokerage firm, bank, trust or other nominee and present it to the inspector of elections with your ballot when you vote at the special meeting.
If you return a properly signed and dated proxy card but do not mark the box showing how you wish to vote, your shares will be voted “FOR” the proposal to approve the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal. Please do not send your share certificate with your proxy card.
Q:
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with our transfer agent, Computershare Inc., you are considered, with respect to those shares, to be the “shareholder of record.” If you are a shareholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of Cray.  
If your shares are held through a brokerage firm, bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” If you are a beneficial owner of shares of common stock held in “street name,” this proxy statement has been forwarded to you by your brokerage firm, bank, broker or other nominee who is considered, with respect to those shares, to be the shareholder of record. As the beneficial owner, you have the right to direct your brokerage firm, bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the shareholder of record, you may not vote your shares in person by ballot at the special meeting unless you obtain a “legal proxy” from your brokerage firm, bank, broker or other nominee giving you the right to vote your shares at the special meeting.
Q:
How do I vote if my shares are held by my brokerage firm, bank, trust or other nominee?
A:
If your shares are held in a brokerage account or by another nominee, such as a bank or trust, then the brokerage firm, bank, trust or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered to be the beneficial owner of those shares, with your shares being held in “street name.” “Street name” holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, trust or other nominee how to vote their shares. Your brokerage firm, bank, trust or other nominee will only be permitted to vote your shares for you at the special meeting if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your brokerage firm, bank, trust or other nominee regarding how to instruct them to vote your shares. If you wish to vote in person at the special meeting, you must bring a proxy from your brokerage firm, bank, trust or other nominee authorizing you to vote at the special meeting.  
In addition, because any shares you may hold in “street name” will be deemed to be held by a different shareholder than any shares you hold of record, shares held in “street name” will not be combined for voting purposes with shares you hold of record. To be sure your shares are voted, you should instruct your brokerage firm, bank, trust or other nominee to vote your shares that you hold in “street name.” Shares held by a corporation or business entity must be voted by an authorized officer of the entity.
Q:
How do I vote if I hold shares in my Cray 401(k) Plan account?
A:
Shares of our common stock held in the Cray 401(k) Plan are registered in the name of Fidelity Management Trust Company, the trustee of the Cray 401(k) Plan (Trustee). Under the Cray 401(k) Plan, participants may instruct the Trustee how to vote the shares of Cray common stock allocated to their accounts.
The shares allocated under the Cray 401(k) Plan can be voted by submitting voting instructions via the Internet, by telephone or by mailing your proxy card. Voting of shares held in the Cray 401(k) Plan must be completed by 11:59 p.m., Eastern Time, on August 22, 2019. These shares cannot be voted at the special meeting and prior voting instructions cannot be revoked at the special meeting. Otherwise, participants can vote these shares in the same manner as described above for shares held directly in the name of the shareholder.
The Trustee will cast votes for shares in the Cray 401(k) Plan according to each participant’s instructions. If the Trustee does not receive instructions from a participant in time for the special meeting, the Trustee will vote the participant’s allocated shares in the same manner and proportion as the shares with respect to which voting instructions were received.

Q-4


Q:
May I change my vote after I have delivered my proxy?
A:
Yes. If you are the shareholder of record of Cray common stock, you have the right to change or revoke your proxy at any time before the vote being taken at the special meeting:
by delivering to our General Counsel a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;
by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy, so you must vote in person at the meeting to revoke your proxy);
by signing and delivering a new proxy, relating to the same shares of Cray common stock and bearing a later date; or
by submitting another proxy by telephone or via the Internet after the date of your prior proxy and by the date and time indicated on the applicable proxy card(s).
Written notices of revocation and other communications with respect to the revocation of any votes or proxies should be addressed to:
Cray Inc.
901 Fifth Avenue, Suite 1000
Seattle, Washington 98164
Attn: Corporate Secretary
If you are a “street name” holder of Cray common stock, you should contact your brokerage firm, bank, trust or other nominee to obtain instructions as to how to change or revoke your proxy.
Q:
What is the deadline for voting my shares?
A:
If you are a shareholder of record, your proxy must be received via the Internet or by telephone by 11:59 p.m. Eastern Time on August 26, 2019, in order for your shares to be voted at the special meeting. However, if you are a shareholder of record, you may instead mark, sign, date and return the enclosed proxy card, which must be received before the polls close at the special meeting, in order for your shares to be voted at the special meeting. If you are a beneficial owner, please read the voting instructions provided by your bank, broker, trust or other nominee for information on the deadline for voting your shares.
Q:
Should I send in my share certificates now?
A:
No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of Cray common stock for the merger consideration. If your shares are held in “street name” by your brokerage firm, bank, trust or other nominee, you will receive instructions from your brokerage firm, bank, trust or other nominee as to how to effect the surrender of your “street name” shares in exchange for the merger consideration. PLEASE DO NOT SEND IN YOUR SHARE CERTIFICATES NOW.
Q:
What happens if I sell my shares of Cray common stock after the record date but before the special meeting?
A:
The record date for shareholders entitled to vote at the special meeting is earlier than the date of the special meeting and the expected closing date of the merger. If you transfer your shares of Cray common stock after the record date but before the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares.
In addition, if you sell your shares prior to the special meeting or prior to the Effective Time, you will not be eligible to exercise your dissenter’s rights in respect of the merger. For a more detailed discussion of your dissenter’s rights and the requirements for properly demanding your dissenter’s rights, see “The Merger—Dissenters’ Rights” beginning on page 38 of this proxy statement and Annex C to this proxy statement.
Q:
What happens if the proposal to approve the Merger Agreement is not approved by our shareholders or if the merger is not completed for any other reason?
A:
If the special meeting (including any adjournments or postponements thereof) has been held and completed, and the proposal to approve the Merger Agreement is not approved by our shareholders or if the merger is not completed for any other reason, our shareholders will not receive any payment for their shares in connection with the merger. Instead, we will remain a stand-alone public company and Cray common stock will continue to be listed and traded on The Nasdaq Global Select Market. Under specified circumstances, we may be required to pay to HPE a termination fee, as described below under “The Merger Agreement—Termination Fee and Expenses” beginning on page 61 of this proxy statement.

Q-5


Q:
How do our directors and executive officers intend to vote their shares of common stock in respect of the proposal to approve the Merger Agreement?
A:
We currently expect that our directors and executive officers will vote their shares of common stock in favor of the proposal to approve the Merger Agreement. At the close of business on the record date for the special meeting, our directors and executive officers and their affiliates were entitled to vote 704,353 shares of common stock at the special meeting, or approximately 1.70% of the shares of common stock outstanding on such date.
Q:
What happens if I return my proxy card but I do not indicate how to vote?
A:
If you properly return your proxy card but do not include instructions on how to vote, your shares of common stock will be voted “FOR” the approval of the Merger Agreement, “FOR” the approval of the advisory compensation proposal and “FOR” the approval of the adjournment proposal. We do not currently intend to present any other proposals for consideration at the special meeting.
Q:
Do I need to attend the special meeting?
A:
No. While our shareholders of record may exercise their right to vote their shares in person at the special meeting, it is not necessary for you to attend the special meeting in order to vote your shares of common stock.
Q:
What should I do if I receive more than one set of voting materials?
A:
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a shareholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please sign, date and return (or grant your proxy electronically over the Internet or by telephone) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.
Q:
Where can I find the voting results of the special meeting?
A:
If available, we may announce preliminary voting results at the conclusion of the special meeting. We intend to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that we file with the SEC are publicly available when filed. For more information, see “Where You Can Find More Information” beginning on page 67 of this proxy statement.
Q:
Who can answer further questions?
A:
For additional questions about the merger, assistance in submitting proxies or voting shares of Cray common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact us at Cray Inc., Attn: General Counsel, 901 Fifth Avenue, Suite 1000, Seattle, Washington 98164, or call 206-701-2000, or contact our proxy solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, New York 10018
(212) 929-5500
or
Call Toll-Free (800) 322-2885
Email: cray@mackenziepartners.com

If your brokerage firm, bank, trust or other nominee holds your shares in “street name,” you should also call your brokerage firm, bank, trust or other nominee for additional information.

Q-6


FORWARD-LOOKING INFORMATION
This proxy statement contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, that are based on our current expectations, assumptions, beliefs, estimates and projections about the proposed merger, Cray and our industry. The forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “should,” “could” and similar expressions. Factors that may affect those forward-looking statements include, among other things:
the parties’ inability to consummate the merger due to failure to satisfy conditions to the completion of the transaction, including the receipt of shareholder approval or the regulatory approvals required for the transaction, which may not be obtained on the terms expected, on the anticipated schedule or at all;
the failure to recruit or retain Cray employees;
the intense competition facing HPE and Cray, which may pose unexpected future challenges;
the risk that the Merger Agreement may be terminated in circumstances that require us to pay HPE a termination fee of $46.0 million;
the costs, fees, expenses and charges we incur related to the merger;
risks arising from the merger’s diversion of management’s attention from our ongoing business operations;
the outcome of lawsuits that have been or may be brought by certain purported shareholders seeking to rescind the Merger Agreement or enjoin the consummation of the merger;
the effect of the announcement or pendency of the merger on our business relationships, operating results and business generally;
adverse effects on the market price of our common stock and on our operating results because of a failure to complete the merger;
the risk that our financial results differ from those set forth in the projections described in this proxy statement; and
other risks detailed in Cray’s filings with the SEC, including Cray’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which discuss these and other important risk factors concerning our operations.
We caution you that reliance on any forward-looking statement involves risks and uncertainties and that, although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to revise any of these forward-looking statements to reflect future events or circumstances.

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SUMMARY
This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To understand the merger fully and for a more complete description of the legal terms of the merger, you should read carefully this entire proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. See “Where You Can Find More Information” beginning on page 67 of this proxy statement. The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document governing the merger. Each item in this summary references another section of this proxy statement with more detailed disclosure about that item.
The Companies (page 13)
Cray Inc.
Cray is a Washington corporation that focuses on the design, development, manufacture, marketing and servicing of computing products that magnify and enhance human capital, foster discovery and innovation, and create scientific break-throughs, as well as competitive advantages. Our products include compute systems commonly known as supercomputers, as well as high-performance storage, data analytics and artificial intelligence (“AI”) solutions. We offer these products individually, integrated into a complete solution, or hosted in the cloud, depending on a customer’s needs. We also provide related software and system maintenance, support and engineering services.
Canopy Merger Sub, Inc.
Merger Sub is a Washington corporation and a wholly owned subsidiary of HPE that was organized solely for the purpose of entering into the Merger Agreement and completing the merger and the other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement. Upon consummation of the merger, Merger Sub will cease to exist as a separate corporation and Cray will continue as the surviving corporation (“Surviving Corporation”).
Hewlett Packard Enterprise Company
HPE is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future. HPE’s legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and HPE strives every day to uphold and enhance that legacy through its dedication to providing innovative technological solutions to its customers.
Commercial Relationship Between the Companies
Prior to entry into the Merger Agreement, Cray entered into various purchase orders and amended a product resell agreement with HPE. For further discussion regarding the commercial relationship between Cray and HPE, see “The Merger—Background of the Merger” beginning on page 14 of this proxy statement.
The Merger (page 14)
Subject to the terms and conditions of the Merger Agreement and in accordance with Washington law, at the Effective Time, Merger Sub, a wholly owned subsidiary of HPE and a party to the Merger Agreement, will merge with and into Cray. Cray will survive the merger as a wholly owned subsidiary of HPE and the separate corporate existence of Merger Sub will cease.
Special Meeting of Cray’s Shareholders (page 56)
Date, Time and Place
A special meeting of our shareholders will be held on August 27, 2019, at the office of Fenwick & West LLP located at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101, at 9:00 a.m., Pacific Time, to consider and vote upon:
a proposal to approve the Merger Agreement;
a proposal to approve, on a non-binding advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger; and
a proposal to adjourn the special meeting to a later date if our Board determines that it is necessary or appropriate, and is permitted by the Merger Agreement, to solicit additional proxies if there is not a quorum present or there are not sufficient votes in favor of the approval of the Merger Agreement at the time of the special meeting.

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Record Date and Voting Power
You are entitled to vote at the special meeting if you owned shares of our common stock at the close of business on June 24, 2019, the record date for the special meeting. You will have one vote at the special meeting for each share of our common stock you owned at the close of business on the record date. There are 41,337,879 shares of our common stock outstanding and entitled to be voted at the special meeting.
Quorum
A quorum of shareholders is necessary to hold a valid special meeting. Under our bylaws, a quorum is present at the special meeting if the holders of a majority of the votes entitled to be cast at the special meeting are present in person or represented by proxy.
Vote Required
The approval of the Merger Agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding as of the record date.
Approval of the non-binding, advisory compensation proposal requires that the votes cast “FOR” such proposal exceed the number of votes cast “AGAINST” such proposal.
Approval of the adjournment proposal requires the votes cast “FOR” such proposal to exceed the number of votes cast “AGAINST” such proposal.
In the event that a quorum is not present in person or represented by proxy at the special meeting, a majority of the shareholders present in person or represented by proxy may adjourn the meeting until a quorum is present. In the event that a quorum is not present in person or represented by proxy at the special meeting and the adjournment proposal fails, our Board may set a new record date and meeting date for a special meeting to consider the Merger Agreement, the advisory compensation proposal and the adjournment proposal in accordance with the Merger Agreement.
Treatment of Outstanding Common Stock (page 46)
The Merger Agreement provides that each share of our common stock outstanding immediately prior to the Effective Time will be converted at the Effective Time into the right to receive $35.00 in cash, without interest and less any withholding taxes required by applicable law.
After the merger is completed, as a result of the merger, you will have the right to receive the merger consideration but you will no longer have any rights as a Cray shareholder. Each of our shareholders will receive the merger consideration in exchange for the shares of our common stock in accordance with the instructions contained in the letter of transmittal to be sent to our shareholders as soon as reasonably practicable after the closing of the merger, unless the Cray shareholder has properly demanded dissenter’s rights with respect to its shares and not withdrawn the demand.
Treatment of Outstanding Equity Awards (page 47)
Vested Stock Options
Each vested Cray stock option with an exercise price less than $35.00 that is outstanding at the effective time of the merger will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the aggregate number of shares of the Cray common stock subject to such stock option, multiplied by (ii) the excess of the per share merger consideration of $35.00 over the applicable per share exercise price of such stock option, without interest and less applicable tax withholding. 
Unvested Stock Options
Each unvested Cray stock option with an exercise price less than $35.00 that is outstanding at the effective time of the merger will be assumed by HPE and converted into an option to acquire a number of shares of HPE’s common stock (rounded down to the nearest whole number of shares) equal to the product of (i) the aggregate number of shares of Cray common stock subject to such stock option multiplied by (ii) the Equity Award Exchange Ratio (as defined below). The per share exercise price of the assumed stock option will equal the quotient (rounded up to the nearest whole cent) obtained by dividing the exercise price per share of the original option by the Equity Award Exchange Ratio. The assumed stock option will continue to be subject to the same terms and conditions as applied to the corresponding Cray stock option immediately prior to the effective time (including all applicable vesting acceleration provisions). The Equity Award Exchange Ratio will equal the quotient of (a) $35.00 divided by (b) the volume weighted average price of a share of HPE’s common stock over the ten-trading-day period ending on the second-to-last trading day prior to the effective time.

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Underwater Options
Each Cray stock option, whether vested or unvested, with an exercise price equal to or greater than the per share merger consideration of $35.00 will automatically be canceled for no consideration.
Vested RSUs
Each Cray restricted stock unit (“RSU award”) that is outstanding and vested at the effective time of the merger will automatically be canceled and converted into the right to receive the per share merger consideration of $35.00 for each share of Cray common stock underlying such RSU award, without interest and less applicable tax withholding.
Unvested RSUs
Each Cray RSU award subject to service-based vesting that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) the number of shares of Cray common stock subject to such RSU award, multiplied by (ii) the Equity Award Exchange Ratio, and will remain subject to the terms and conditions as applied to such RSU award immediately prior to the effective time (including all applicable vesting acceleration provisions).
Unvested PSUs
Each Cray RSU award subject to performance-based vesting (“PSU award”) that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) 50% of the number of shares of Cray common stock subject to such PSU award (the remainder of such shares will be forfeited), multiplied by (ii) the Equity Award Exchange Ratio. Each converted PSU award will no longer be subject to performance vesting and will instead vest subject to the holder’s continued service through the one-year anniversary of the closing date of the merger. The converted PSU awards will otherwise remain subject to the terms and conditions as applied to such PSU awards immediately prior to the effective time (including all applicable vesting acceleration provisions).
RSAs
Each restricted stock award (“RSA”) held by our non-employee directors that is outstanding and unvested as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive the per share merger consideration of $35.00 for each share of Cray common stock underlying such RSA, without interest and less applicable tax withholding.
Recommendation of Our Board and Reasons for the Merger (page 21)
At a meeting of our Board on May 16, 2019, our Board unanimously determined that the Merger Agreement and the merger are advisable, fair to and in the best interests of Cray and our shareholders and unanimously approved the Merger Agreement. Our Board unanimously recommends that you vote “FOR” the approval of the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.
In the course of reaching its decision, our Board reviewed a significant amount of information and considered a number of factors. For a discussion of the factors considered by our Board in reaching its decision to approve the Merger Agreement and recommend that our shareholders approve the Merger Agreement, see “The Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 21 of this proxy statement.
Opinion of Morgan Stanley & Co. LLC (page 24 and Annex B)
We retained Morgan Stanley & Co. LLC (Morgan Stanley) to provide us with financial advisory services in connection with the merger. We selected Morgan Stanley to act as our financial adviser based on Morgan Stanley’s qualifications, expertise and reputation, and its knowledge of our business and affairs. On May 16, 2019, Morgan Stanley rendered its oral opinion, subsequently confirmed by delivery of a written opinion, dated May 16, 2019, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the merger consideration to be received by the holders of shares of our common stock (other than those shares specified in the written opinion) pursuant to the Merger Agreement is fair from a financial point of view to such holders of shares of our common stock.
The full text of the written opinion of Morgan Stanley, dated May 16, 2019, is attached as Annex B to this proxy statement, and is incorporated by reference in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. The summary of the opinion of Morgan Stanley set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion and the summary of Morgan Stanley’s opinion below carefully and in their entirety. Morgan Stanley’s opinion was directed

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to our Board, in its capacity as such, and addressed only the fairness from a financial point of view of the merger consideration to be received by our shareholders (other than the holders of those shares specified in the written opinion) pursuant to the Merger Agreement as of the date of the opinion and did not address any other aspects or implications of the merger. Morgan Stanley’s opinion was not intended to, and does not, constitute advice or a recommendation to any Cray shareholder as to how to vote at the special meeting to be held in connection with the merger or whether to take any other action with respect to the merger.
For a more complete description, see “The Merger—Opinion of Morgan Stanley & Co. LLC” beginning on page 24 of this proxy statement.
Interests of Our Directors and Executive Officers in the Merger (page 33)
When considering the recommendation of our Board, you should be aware that members of our Board and our executive officers have potential interests in the merger that may be different from or in addition to their interests as Cray shareholders generally, as described below. These interests may create potential conflicts of interest and, include the following:
Our executive officers are party to equity award agreements and management retention agreements with Cray, each of which provides for accelerated vesting of equity awards and other severance benefits in the event of certain terminations of employment following the merger;
In connection with the merger, Mr. Ungaro entered into an employment agreement with HPE which provides, among other matters, for the cancellation and conversion of his unvested Cray equity awards into cash payments, certain cash and HPE equity incentive compensation payable subject to Mr. Ungaro’s continued service with HPE following the merger, and certain accelerated vesting of HPE equity awards and other severance payments and benefits in the event of qualifying terminations of employment with HPE following the merger; and
In connection with the merger, all outstanding and unvested equity awards held by the non-employee members of our Board will accelerate and vest in full.
The members of our Board were aware of the material facts as to these additional interests, and considered them, among other matters, when they approved the Merger Agreement. For a discussion of the interests of our directors and executive officers in the merger, see “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 33 of this proxy statement.
Conditions to the Closing of the Merger (page 58)
Cray’s, HPE’s and Merger Sub’s obligations to effect the merger are subject to the satisfaction or waiver on or prior to the date of the closing of the merger (“Closing Date”) of the following conditions:
the approval of the Merger Agreement by the affirmative vote of the holders of not less than a majority of the outstanding shares of Cray common stock;
the absence of any temporary restraining order, preliminary or permanent injunction, or any law or other judgment that has been enacted, issued, promulgated, enforced or entered by a governmental authority of competent jurisdiction, which is still in effect and has the effect of making the merger illegal or otherwise preventing or prohibiting the consummation of the merger (a “Restraint”); and
the waiting period (and extensions) under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (“HSR Act”) has expired or been terminated and other specified antitrust approvals, consents or clearances have been obtained.
HPE’s and Merger Sub’s obligations to effect the merger are subject to the satisfaction or waiver by HPE or Merger Sub on or prior to the Closing Date of the following conditions:
the continued accuracy in all respects of certain of Cray’s representations and warranties relating to Cray’s organization, standing and corporate power; authority and recommendation; the absence of certain changes; state takeover statutes and rights plan; brokers and other advisors; and the opinion of Cray’s financial advisor;
the continued accuracy in all material respects of certain of Cray’s representations and warranties relating to Cray’s subsidiaries;
the continued accuracy of Cray’s representations and warranties relating to Cray’s capital stock except for inaccuracies that would not increase the aggregate amount payable by Merger Sub or HPE in the merger by more than a de minimis amount;
the continued accuracy of certain representations and warranties (other than those described above) except as would not have a material adverse effect on us;

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Cray has performed and complied in all material respects with the obligations, covenants and agreements required to be performed or complied with under the Merger Agreement; and
that a material adverse effect has not occurred and is not continuing.
Cray’s obligations to effect the merger are subject to the satisfaction or waiver by Cray on or prior to the Closing Date of the following conditions:
the continued accuracy of the representations and warranties of HPE and Merger Sub except for such inaccuracies that would not prevent or materially delay the ability of HPE or Merger Sub to consummate the merger prior to the Outside Date (as defined below) or perform any of their respective obligations under the Merger Agreement; and
HPE and Merger Sub have performed and complied in all material respects with the obligations, covenants and agreements required to be performed or complied with by them under the Merger Agreement.
Financing of the Merger (page 60)
Consummation of the merger is not conditioned upon HPE’s ability to obtain financing. HPE expects to use cash on hand, existing financing facilities and/or other debt financing to fund the merger consideration and the other transactions contemplated by the Merger Agreement.
No Solicitation of Takeover Proposals (page 53)
The Merger Agreement restricts our ability to solicit, initiate, endorse, knowingly facilitate or knowingly encourage a takeover proposal with respect to Cray, or engage in discussions or negotiations with a third party regarding specified transactions involving Cray. Notwithstanding these restrictions, prior to the time that our shareholders approve the Merger Agreement, our Board may respond to an unsolicited, bona fide written takeover proposal that our Board determines in good faith (after consultation with its outside legal counsel and financial advisor) constitutes, or could reasonably be expected to result in, a superior proposal compared to the merger with HPE (see “The Merger Agreement—Covenants—No Solicitation of Takeover Proposals” beginning on page 53 of this proxy statement) and with respect to which our Board determines in good faith (after consultation with its outside legal counsel and financial advisor) that failure to take such action would reasonably be expected to be inconsistent with our Board’s fiduciary duties, by furnishing information with respect to Cray and by entering into discussions with the party or parties making the takeover proposal, so long as we comply with the terms of the Merger Agreement.
In addition, prior to the time our shareholders approve the Merger Agreement, our Board may withdraw its recommendation of the Merger Agreement in connection with a superior proposal if it concludes in good faith (after consultation with its outside legal counsel and financial advisor) that in light of such superior proposal, the failure to change its recommendation would reasonably be expected to be inconsistent with its fiduciary duties to our shareholders, so long as we comply with the terms of the Merger Agreement. Our Board may also withdraw its recommendation of the Merger Agreement prior to the time our shareholders approve the Merger Agreement in certain circumstances unrelated to a takeover proposal if it concludes in good faith (after consultation with its outside legal counsel and financial advisor) that in light of an intervening event, the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties to our shareholders, so long as we comply with the terms of the Merger Agreement.
Termination of the Merger Agreement (page 60)
The Merger Agreement may be terminated and abandoned under any of the following circumstances:
by mutual written consent of Cray and HPE;
by either HPE or Cray, if the Effective Time has not occurred on or before November 16, 2019 (“Outside Date”), except if, on the Outside Date, all of the conditions to the consummation of the Merger have been satisfied or waived, other than the condition relating to the absence of Restraints (to the extent such Restraint is in respect of the HSR Act or any other antitrust law), the condition relating to the expiration or termination of the waiting period under the HSR Act and the obtaining of other specified antitrust approvals, consents or clearances or conditions that by their nature are to be satisfied or validly waived on the Closing Date, then the Outside Date may be extended by either HPE or Cray for up to two periods (the first period of four months and the second period of three months), and such extended date shall constitute the Outside Date (any such termination, an “Outside Date Termination”), provided that such right to terminate will not be available to any party whose breach of the Merger Agreement was a principal cause of or resulted in the failure of the Effective Time to occur by such date;
by either HPE or Cray, if any Restraint is in effect preventing or prohibiting the consummation of the Merger, and such Restraint will have become final and nonappealable, provided that such right to terminate will not be available to any party unless such party has complied with specified obligations to prevent, oppose or remove such Restraint

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or any party whose breach of the Merger Agreement was a principal cause of or resulted in the Restraint;
by either HPE or Cray, if we fail to obtain shareholder approval of the Merger Agreement (any such termination, a “Vote-Down Termination”);
by HPE, if we breach any representations or warranties or fail to perform any of the covenants or agreements in the Merger Agreement so that the related closing conditions would not be satisfied and such breach or failure has not been or cannot be remedied within the specified cure period in the Merger Agreement (any such termination, a “Breach Termination”), unless HPE or Merger Sub is then in material breach of the Merger Agreement such that Cray has the right to terminate the Merger Agreement as a result of such material breach;
by HPE, if we experience a material adverse effect that cannot be cured by November 16, 2019, or at least 20 business days have elapsed since HPE has delivered written notice of the occurrence of such material adverse effect;
by HPE, if at any time prior to obtaining shareholder approval of the Merger Agreement (i) our Board changes its recommendation with respect to approval of the Merger Agreement or approves or recommends any takeover proposal, (ii) a tender or exchange offer relating to our securities has commenced (other than by HPE or an affiliate of HPE) and our Board has recommended that our shareholders tender their shares in such tender or exchange offer or, within 10 business days after the commencement of such tender or exchange offer, our Board has failed to recommend against acceptance of such offer (a termination pursuant to clause (i) or (ii), a “Change in Recommendation Termination”) or (iii) there is a material breach by Cray of the provisions of the Merger Agreement relating to solicitations of takeover proposals (a “Non-Solicitation Termination”);
by Cray, if HPE breaches any representations or warranties or fails to perform any of the covenants or agreements in the Merger Agreement so that the related closing conditions would not be satisfied and such breach or failure has not been or cannot be remedied within the specified cure period in the Merger Agreement, unless Cray is then in material breach of the Merger Agreement such that HPE has the right to terminate the Merger Agreement as a result of such material breach; or
by Cray, at any time prior to obtaining shareholder approval of the Merger Agreement, in order to enter into an alternative acquisition agreement providing for a superior proposal (so long as Cray pays the termination fee concurrently with such termination as described under “—Termination Fee and Expenses“ below) (a “Superior Proposal Termination”).
Termination Fee and Expenses (page 61)
We have agreed to pay HPE a termination fee of $46,000,000 in cash (“Termination Fee”) if:
the Merger Agreement is terminated by HPE pursuant to a Change in Recommendation Termination;
the Merger Agreement is terminated by Cray pursuant to a Superior Proposal Termination; or
(i) after the date of the Merger Agreement, a takeover proposal has become publicly known and not irrevocably withdrawn at least two business days prior to the termination of the Merger Agreement, (ii) thereafter, the Merger Agreement is terminated (a) by HPE or Cray pursuant to an Outside Date Termination (but only (1) if shareholder approval of the Merger Agreement had not been obtained prior to such termination or (2) if HPE was then be entitled to terminate the Merger Agreement pursuant to a Non-Solicitation Termination or a Breach Termination), (b) by HPE pursuant to a Non-Solicitation Termination or a Breach Termination or (c) by HPE or Cray pursuant to a Vote-Down Termination, and (iii) within 12 months of such termination, Cray or any of its subsidiaries enters into a definitive agreement that provides for any takeover proposal, or any takeover proposal (regardless of when made) is consummated.
Regulatory Matters (page 43)
Under the Merger Agreement, the merger cannot be completed until (1) the applicable waiting period under the HSR Act has expired or been terminated; (2) the applicable waiting period under The Act against Restraints of Competition of Germany has expired or the Federal Cartel Office in Germany has granted clearance; (3) the applicable waiting period under the Austrian Cartel Act has expired or the Austrian Federal Competition Authority has granted clearance; (4) the applicable waiting period under The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade of Japan has expired or the Japan Fair Trade Commission has granted clearance; and (5) the applicable waiting period under The Monopoly Regulation and Fair Trade Act of Korea has expired and the Korea Fair Trade Commission has granted clearance.
Market Prices and Dividend Data (page 9)
Our common stock is listed on The Nasdaq Global Select Market under the symbol “CRAY.” On May 16, 2019, the last full trading day before the public announcement of the merger, the closing price for our common stock was $29.81 per

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share, and on June 24, 2019, the latest practicable trading day before the filing of this proxy statement, the closing price for our common stock was $34.69 per share.
We have not paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Certain U.S. Federal Income Tax Consequences of the Merger (page 42)
The receipt of cash in exchange for shares of Cray common stock pursuant to the merger will be a taxable transaction to our U.S. shareholders for U.S. federal income tax purposes. See “The Merger—Certain U.S. Federal Income Tax Consequences of the Merger” beginning on page 42 of this proxy statement.
The tax consequences of the merger to you will depend on your particular circumstances. We strongly recommend that you consult your own tax advisor to determine how the merger will affect you.
Dissenters’ Rights (page 38)
Cray shareholders have the right under Chapter 23B.13 of the WBCA to dissent from, and obtain a cash payment of the fair value (as defined in Chapter 23B13.010 of the WBCA) of their shares of Cray common stock (plus accrued interest from the effective date of the merger) in the event of, the merger instead of receiving the merger consideration. A shareholder electing to dissent from the merger must strictly comply with all procedures required under the WBCA. The procedures are summarized in “The Merger—Dissenters’ Rights” beginning on page 38 of this proxy statement and a copy of the relevant statutory provisions is attached as Annex C to this proxy statement.
ANY CRAY SHAREHOLDER WHO WISHES TO EXERCISE DISSENTER’S RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO SHOULD REVIEW ANNEX C CAREFULLY AND IN ITS ENTIRETY AND SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR, SINCE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.
Litigation Relating to the Merger (page 44)
On June 19, 2019, a putative shareholder class action complaint was filed in the Superior Court of the State of Washington for King County against Cray and the individual members of our Board, captioned Keith v. Cray Inc., et al., Case No. 19-2-16273-2 SEA (the “Keith Complaint”), asserting that the Board breached its fiduciary duties in connection with the proposed HPE transaction by, among other things, allegedly conducting a flawed and conflicted sales process and by causing to be disseminated a materially incomplete and misleading proxy statement. On June 24, 2019, a similar putative shareholder class action complaint was filed in the Superior Court of the State of Washington for Snohomish County against Cray and the individual members of our Board, captioned Delman v. Ungaro, et al. (the “Delman Complaint” and together with the Keith Complaint, the “Washington Complaints”).
On June 20, 2019, a putative shareholder class action complaint was filed in the United States District Court, District of Delaware, against Cray, the individual members of our Board, HPE and Merger Sub, captioned Davie v. Cray Inc. et al., Case No. 1:19-cv-01148-UNA (the “Davie Complaint”). On June 21, 2019, another putative shareholder class action complaint was filed in the same court against Cray, the individual members of our Board, HPE and Merger Sub, captioned Kent v. Cray Inc. et al., Case No. 1:19-cv-01157-UNA (the “Kent Complaint”), and on June 24, 2019, an individual action was filed in the same court against the same defendants, captioned Stein v. Cray Inc. et al., Case No. 1:19-cv-01188-UNA (the “Stein Complaint” and together with the Davie Complaint and Kent Complaint, the “Delaware Complaints”). The Delaware Complaints each assert that defendants violated Sections 14(a) and 20(a) of the Exchange Act by making untrue statements of material fact and omitting certain material facts related to the contemplated merger in the proxy statement.
The Washington Complaints and Delaware Complaints seek, among other things, an order enjoining defendants from consummating the merger, money damages and an award of attorneys’ and experts’ fees. Cray believes that the lawsuits are without merit and intends to vigorously defend those actions. Cray may become subject to similar litigation relating to the merger in these or other jurisdictions.
See “The Merger—Litigation Relating to the Merger” beginning on page 44 of this proxy statement.
Additional Information (page 67)
You can find more information about Cray in the periodic reports and other information we file with the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at www.sec.gov. For a more detailed description of the additional information available, see “Where You Can Find More Information” beginning on page 67 of this proxy statement.

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MARKET PRICES AND DIVIDEND DATA
Market Prices
Our common stock is listed on The Nasdaq Global Select Market under the symbol “CRAY.” As of June 24, 2019, we had 41,337,879 shares of common stock outstanding that were held by 201 holders of record.
The following table sets forth the closing price per share of our common stock, as reported on The Nasdaq Global Select Market on May 16, 2019, the last full trading day before the public announcement of the merger, and on June 24, 2019, the latest practicable trading day before the filing of this proxy statement:
 
Common Stock
Closing
Price
May 16, 2019
$
29.81

June 24, 2019
$
34.69

You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock. If the merger is consummated, there will be no further market for our common stock and our common stock will be de-listed from The Nasdaq Global Select Market and de-registered under the Exchange Act.
Dividends
We have not paid cash dividends on our common stock. In the event that the merger is not consummated, we would expect to retain earnings, if any, to fund the development and growth of our business and would not anticipate paying cash dividends on our common stock in the foreseeable future. In the event that the merger is not consummated, our payment of any future dividends would be at the discretion of our Board after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.

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THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of our Board for use at the special meeting of shareholders or at any adjournment or postponement thereof.
Date, Time and Place
We will hold the special meeting at the office of Fenwick & West LLP located at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101, at 9:00 a.m., Pacific Time, on August 27, 2019.
Purpose of the Special Meeting
At the special meeting, we will ask the holders of our common stock to (i) approve the Agreement and Plan of Merger, dated as of May 16, 2019, by and among HPE, Merger Sub and Cray, as such agreement may be amended from time to time (the “Merger Agreement”); (ii) approve, on a non-binding advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger (the “advisory compensation proposal”); and (iii) approve the adjournment of the special meeting to a later date if our Board determines that it is necessary or appropriate, and is permitted by the Merger Agreement, to solicit additional proxies if there are not sufficient votes in favor of the approval of the Merger Agreement at the time of the special meeting (the “adjournment proposal”).
Record Date; Shares Entitled to Vote; Quorum
Only holders of record of our common stock at the close of business on June 24, 2019, the record date, are entitled to notice of, and to vote at, the special meeting. On the record date, 41,337,879 shares of our common stock were issued and outstanding and held by approximately 201 holders of record. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on each of the proposals.
A quorum is present at the special meeting if the holders of a majority of the votes entitled to be cast at the special meeting are present in person or represented by proxy. Votes cast at the special meeting, by proxy or in person, will be tabulated by the inspector of elections appointed for the special meeting. If shares are present at the special meeting in person or represented by proxy, but are not voted, those shares will count toward determining whether or not a quorum is present for the conduct of business at the special meeting, as will all shares voted “FOR,” “AGAINST” or “ABSTAIN” on a proposal.
In the event that a quorum is not present in person or represented by proxy at the special meeting, a majority of the shareholders present in person or represented by proxy may adjourn the meeting until a quorum is present. In the event that a quorum is not present in person or represented by proxy at the special meeting and such adjournment fails, our Board may set a new record date and meeting date for a special meeting to consider the Merger Agreement, the advisory compensation proposal and the adjournment proposal in accordance with the Merger Agreement.
Vote Required
The approval of the Merger Agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding as of the record date. Approval of the Merger Agreement is a condition to the closing of the merger.
Approval of the non-binding, advisory compensation proposal requires that the votes cast “FOR” such proposal exceed the number of votes cast “AGAINST” such proposal, provided that a quorum is present or represented by proxy at the special meeting. Our Board will consider the result of this vote, but because the proposal is advisory only it will not be binding on either Cray or HPE.
Approval of the adjournment proposal requires that the votes cast “FOR” such proposal exceed the number of votes cast “AGAINST” such proposal (even if less than a quorum).
Voting by Cray Directors and Executive Officers
At the close of business on the record date, our directors and executive officers and their affiliates owned and were entitled to vote 704,353 shares of our common stock, which represented approximately 1.70% of the shares of our outstanding common stock on that date. We expect that these directors and executive officers will vote all of their shares of our common stock “FOR” approval of the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.
Certain members of our management and our Board have potential interests in the merger that are in addition to those of shareholders generally and may be different from, or in conflict with, your interests as a Cray shareholder. See “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 33 of this proxy statement.

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Voting of Proxies
If your shares are registered in your name, you may cause your shares to be voted at the special meeting by returning a signed proxy card or voting in person at the meeting. Additionally, you may submit a proxy authorizing the voting of your shares via the Internet at www.proxyvote.com or by telephone by calling 1-800-690-6903. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy via the Internet or by telephone.
If your shares are registered in your name and you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to submit a proxy card even if you plan to attend the special meeting in person.
Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the shareholder. Properly executed proxies that do not contain voting instructions will be voted “FOR” the approval of the Merger Agreement, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal; provided, however, that no proxy that is specifically marked “AGAINST” the proposal to approval the Merger Agreement will be voted “FOR” the advisory compensation proposal or “FOR” the adjournment proposal unless it is specifically marked “FOR” the advisory compensation proposal or “FOR” the adjournment proposal, respectively.
If your shares are held in “street name” through a brokerage firm, bank, trust or other nominee, you may provide voting instructions by completing and returning the voting form provided by your nominee or via the Internet or by telephone through your nominee, if such a service is provided. To provide voting instructions via the Internet or telephone, you should follow the instructions on the voting form provided by your nominee. If you plan to attend the special meeting, you will need a proxy from your nominee in order to be given a ballot to vote the shares. If you do not return your nominee’s voting form, provide voting instructions via the Internet or by telephone through your nominee or attend the special meeting and vote in person with a proxy from your nominee, it will have the same effect as if you voted “AGAINST” the approval of the Merger Agreement, and will have no effect on the advisory compensation proposal (provided that a quorum is present in person or represented by proxy at the special meeting) or the adjournment proposal.
Revocability of Proxies
Any proxy you give pursuant to this solicitation may be revoked by you at any time before it is voted. Proxies may be revoked as follows:
If you have sent a proxy directly to Cray, you may revoke it by:
delivering a written revocation of the proxy or a later dated, signed proxy card, to our General Counsel at 901 Fifth Avenue, Suite 1000, Seattle, Washington 98164, on or before the business day prior to the special meeting;
delivering a new, later dated proxy via the Internet or by telephone until the date set forth in the instructions for voting via the Internet or by telephone;
delivering a written revocation or a later dated, signed proxy card to us at the special meeting prior to the taking of the vote on the matters to be considered at the special meeting; or
attending the special meeting and voting in person.
If you have instructed a broker or nominee to vote your shares, you may revoke your proxy only by following the directions received from your broker or nominee to change those instructions.
Your attendance at the special meeting does not alone automatically revoke your proxy. If you have instructed your brokerage firm, bank, trust or other nominee how to vote your shares, the above-described options for revoking your proxy do not apply. Instead, you must follow the directions provided by your brokerage firm, bank, trust or other nominee to change your vote.
Board’s Recommendations
Our Board has unanimously approved the Merger Agreement and determined that the Merger Agreement and the merger are advisable, fair to and in the best interests of Cray and our shareholders. Our Board unanimously recommends that Cray shareholders (i) vote “FOR” the proposal to approve the Merger Agreement, (ii) vote “FOR” the advisory compensation proposal and (iii) vote “FOR” the adjournment proposal. See “The Merger—Recommendation of Our Board and Reasons for the Merger” beginning on page 21 of this proxy statement. Cray shareholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger. In addition, Cray shareholders are directed to the Merger Agreement, which is attached as Annex A to this proxy statement.

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Effect of Abstentions and Broker Non-Votes
Abstentions and shares not in attendance at the special meeting and not voted by proxy will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement. Abstentions will have no effect on each of the advisory compensation proposal and the adjournment proposal. Shares not in attendance at the special meeting and not voted by proxy will have no effect on the each of the advisory compensation proposal (provided that a quorum is present in person or represented by proxy at the special meeting) and the adjournment proposal. Because brokerage firms, banks, trusts or other nominees holding shares of Cray common stock in “street name” may not vote your shares of Cray common stock on the approval of the Merger Agreement, the advisory compensation proposal or the adjournment proposal unless you provide instructions on how to vote, your failure to provide instructions will result in your shares not being present at the meeting and not being voted on those proposals. It is very important that all of our shareholders vote their shares, so please promptly complete and return the enclosed proxy card.
Solicitation of Proxies
This proxy solicitation is being made by Cray on behalf of our Board and will be paid for by Cray. Our directors, officers and employees may also solicit proxies by personal interview, mail, email, telephone, or other means of communication. These persons will not be paid additional remuneration for their efforts. We have also retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a fee of $15,000 plus the reimbursement of out-of-pocket expenses incurred on behalf of Cray. You should not send your share certificates with your proxy card. A letter of transmittal with instructions for the surrender of your share certificates, if any, will be mailed to our shareholders as soon as practicable after completion of the merger.
Shareholder List
A list of our shareholders entitled to vote at the special meeting will be available for examination by any Cray shareholder at the special meeting. For 10 days prior to the special meeting, this shareholder list will be available for inspection by any shareholder for any purpose germane to the special meeting during ordinary business hours at our corporate offices located at 901 Fifth Avenue, Suite 1000, Seattle, Washington 98164.

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THE COMPANIES
Cray Inc.
901 Fifth Avenue, Suite 1000
Seattle, Washington 98164
(206) 701-2000
Cray Inc. focuses on the design, development, manufacture, marketing and servicing of computing products that magnify and enhance human capital, foster discovery and innovation, and create scientific break-throughs, as well as competitive advantages. Our products include compute systems commonly known as supercomputers, as well as high-performance storage, data analytics and AI solutions. We offer these products individually, integrated into a complete solution, or hosted in the cloud, depending on a customer’s needs. We also provide related software and system maintenance, support and engineering services. Cray was incorporated in the State of Washington in December 1987.
Hewlett Packard Enterprise Company
6280 America Center Drive
San Jose, California 95002
(650) 687-5817
Hewlett Packard Enterprise Company is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. HPE enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future. HPE’s legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and HPE strives every day to uphold and enhance that legacy through its dedication to providing innovative technological solutions to its customers.
Canopy Merger Sub, Inc.
6280 America Center Drive
San Jose, California 95002
(650) 687-5817
Canopy Merger Sub, Inc. is a Washington corporation and wholly owned subsidiary of HPE that was organized solely for the purpose of entering into the Merger Agreement and completing the merger and the other transactions contemplated by the Merger Agreement. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement. Upon consummation of the merger, Merger Sub will cease to exist as a separate corporation and Cray will continue as the Surviving Corporation.

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THE MERGER
The following discussion describes material aspects of the merger. While we believe that the following description covers the material terms of the merger, the description may not contain all of the information that may be important to you. The discussion of the merger in this proxy statement is qualified in its entirety by reference to the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement. We encourage you to read carefully this entire proxy statement, including the Merger Agreement, for a more complete understanding of the merger.
Background of the Merger
Our Board, together with our senior management, periodically reviews and assesses our long-term strategies and our risks and opportunities as an independent company in light of evolving industry dynamics and technologies and the business environment and other developments in our market. In connection with these reviews, our Board and our senior management have from time to time reviewed and evaluated possible opportunities for strategic partnerships, business combinations, acquisitions, licensing transactions and other financial and strategic alternatives for Cray, including continuing as a standalone company, with a view to maximizing shareholder value.
Since 2017, we received and entered into various purchase orders from HPE. As part of this commercial relationship, our management team communicated and met with HPE. In addition, we regularly discussed potential opportunities for additional commercial relationships with HPE.
On August 8, 2017, at the request of HPE, Mr. Ungaro met with Antonio Neri (then the President of HPE and General Manager of HPE’s Enterprise Group, and, since February 1, 2018, the Chief Executive Officer of HPE), to discuss a possible strategic transaction between HPE and Cray, and on September 7, 2017, Mr. Ungaro met again with Mr. Neri and another representative of HPE. During these meetings, Mr. Neri indicated that, while at that time HPE was unable to pursue a business combination transaction with Cray, it might in the future be interested in exploring such a transaction. On November 17, 2017, Mr. Ungaro informed our Board of these discussions with HPE.
On December 11, 2017, at Mr. Neri’s request, Mr. Ungaro and Brian Henry, our Chief Financial Officer, met with Mr. Neri and Vishal Bhagwati, Senior Vice President of Corporate Development for HPE. At this meeting, Messrs. Neri and Bhagwati indicated that HPE would like to explore a possible business combination transaction with Cray, but that HPE needed to conduct additional financial analysis with respect to such a transaction before making a formal offer.
On December 14, 2017, HPE and Cray entered into a confidentiality agreement, which did not include a “standstill” provision, and on December 18 and 19, 2017, Mr. Bhagwati provided Cray with a proposed meeting agenda and request for information for discussion at a meeting to be held on January 11, 2018 at the offices of HPE.
On January 11, 2018, Mr. Ungaro and Mr. Henry met with Mr. Bhagwati and other representatives of HPE and gave a presentation regarding our business, including certain non-public business and financial information regarding Cray.
On January 15, 2018, representatives of HPE were provided access to a virtual data room containing non-public financial and business information regarding Cray.
On January 19, 2018, Mr. Bhagwati contacted Mr. Henry to provide an update on HPE’s consideration of a potential business combination with Cray. Mr. Bhagwati indicated that HPE was still interested in pursuing such a transaction and that it was continuing to conduct its financial analysis, including with respect to potential synergies and integration opportunities that could be achieved. Mr. Bhagwati provided an indicative timeline for such a transaction and requested additional non-public business and financial information from us to further HPE’s due diligence.
On January 26, 2018, Mr. Bhagwati contacted Mr. Ungaro and Mr. Henry to provide an updated timeline for a potential business combination transaction with Cray and to request additional financial and business information regarding Cray.
On January 29, 2018, our Board held a telephonic meeting, together with members of our senior management and a representative of Cray’s outside legal advisor, Fenwick & West LLP (“Fenwick & West”), present. During the meeting, Mr. Ungaro reviewed the discussions that had occurred between Cray and HPE, and led a discussion regarding a possible business combination transaction with HPE. Our Board then discussed whether to contact other potential bidders to assess their interest in a potential business combination with Cray, and the companies that would have a strategic interest in, and the financial ability to complete, a business combination with Cray. After discussion, our Board determined that contacting other potential parties at that time could negatively affect shareholders by potentially placing Cray’s relationships with certain strategic partners and other commercial relationships at risk, and that this risk outweighed the benefits to shareholders of conducting such an outreach at that time. During the meeting, our Board also discussed whether Cray should engage a financial advisor to assist with a potential sale transaction and our Board’s evaluation of strategic alternatives. Our Board discussed and approved contacting Morgan Stanley, which had previously advised Cray on certain other matters, to evaluate its capabilities and interest in serving as Cray’s financial advisor, based on Morgan Stanley’s

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qualifications, reputation and knowledge of the industry in which Cray operates, and the technology industry in generally, Morgan Stanley’s experience in similar situations, and its familiarity with Cray. Thereafter, members of our senior management contacted representatives of Morgan Stanley to discuss Morgan Stanley’s representation of Cray as our financial advisor and the proposed terms of such representation.
On February 2, 2018, Mr. Bhagwati contacted Mr. Ungaro to provide an update on HPE’s internal discussions regarding a possible business combination transaction with Cray.
On February 13, 2018, Mr. Bhagwati contacted Mr. Ungaro and indicated that after further discussion among HPE’s senior management team, HPE would not be pursuing a transaction with Cray at that time, but that HPE might re-engage in such a process in the future.
Between February 13, 2018 and September 13, 2018, there were no further discussions between representatives of HPE and representatives of Cray regarding a potential business combination transaction with Cray.
On September 13, 2018, Mr. Neri met with Mr. Ungaro and indicated that HPE was again interested in pursuing a business combination transaction with Cray, and was interested in resuming the parties’ prior discussions regarding a transaction. Mr. Ungaro agreed to provide limited due diligence information to HPE, including updates to the diligence information that was previously provided during the parties’ prior round of discussions.
On September 24, 2018, Mr. Bhagwati contacted Mr. Ungaro and reiterated that HPE was still interested in pursuing a potential transaction with Cray, and that the HPE board of directors had discussed the possibility of a transaction and was supportive of it. Mr. Bhagwati also requested updated business and financial information regarding Cray in support of HPE’s due diligence.
Between September 25, 2018 and October 12, 2018, we provided HPE with non-public technical information, and representatives of Cray and representatives of HPE discussed this information and technology strategies.
On October 12, 2018, we entered into an amended product resell agreement with HPE, which was originally entered into by Hewlett-Packard Company and Seagate System (US) Inc. (“Seagate”) in 2015 and later assigned to Cray as a part of our acquisition of Seagate’s enterprise storage array business.
On October 18, 2018 we provided HPE with financial projections through 2023 that were based on projections that our senior management had previously reviewed with our Board.
On October 22, 2018, Mr. Bhagwati and Mr. Ungaro discussed the status of HPE’s consideration of a potential transaction with Cray.
On October 23, 2018, our senior management spoke with all of the members of our Board and provided an update on the discussions with HPE. In addition, the members of our senior management and the members of our Board discussed the terms on which Cray would engage Morgan Stanley as our financial advisor.
On October 24, 2018, our Board approved the engagement letter with Morgan Stanley by unanimous written consent, and on October 29, 2018, we entered into an engagement letter in which we retained Morgan Stanley as our financial advisor.
On November 2, 2018, Mr. Neri and Mr. Bhagwati had a meeting with Mr. Ungaro, at which Mr. Neri and Mr. Bhagwati presented a non-binding written proposal for HPE to acquire Cray for $25.00 per share in cash (November 2 Proposal), which proposal also requested that we enter into an exclusivity agreement prohibiting us from soliciting, or negotiating, other acquisition proposals for a period of 30 days (with automatic extensions for successive seven-day periods, unless terminated by a party) during which HPE would conduct due diligence and definitive agreements would be negotiated.
On November 7 and 8, 2018, our Board held a regular quarterly meeting, together with members of our senior management and representatives of Fenwick & West and, on November 8, representatives of Morgan Stanley, at which our Board and representatives of Morgan Stanley discussed the November 2 Proposal and possible responses to HPE, and the representatives of Fenwick & West discussed the fiduciary duties of our Board. In addition, representatives of Morgan Stanley discussed Morgan Stanley’s preliminary views on Cray’s valuation. After discussion, our Board instructed Morgan Stanley to inform HPE that its proposal of $25.00 per share was insufficient, and to indicate that the Board believed that a price of $40.00 per share would be acceptable to our Board, and that if HPE were to make a proposal in the mid- to high-$30s, our Board would be sufficiently interested to review the revised proposal and engage in further discussions. Our Board and members of senior management then discussed certain long-term financial projections for Cray’s future long-term financial results under various scenarios that had been prepared by our senior management.
Following the board meeting on November 8, 2018, representatives of Morgan Stanley contacted Mr. Bhagwati and informed him that our Board had reviewed the November 2 Proposal and was open to further discussion, but that HPE

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would need to submit an improved proposal. In response, Mr. Bhagwati requested that Cray make a specific counterproposal.
On November 11, 2018, a representative of Morgan Stanley communicated to Mr. Bhagwati and indicated that HPE’s proposal of $25.00 per share was insufficient, that our Board believed that a price of $40.00 per share would be acceptable, subject to understanding other terms relating to deal certainty and other matters, and that if HPE were to make a proposal in the mid- to high-$30s, our Board would be sufficiently interested to review the revised proposal.
On November 12, 2018, representatives of Deutsche Bank, HPE’s financial advisor, communicated to representatives of Morgan Stanley that it believed that the response Morgan Stanley provided on November 11 did not provide a constructive basis to move forward, as it did not contain a specific counterproposal and lacked justification of Cray’s intrinsic value, and that to the extent Cray was inclined to provide a specific counterproposal with additional information to substantiate its position on value, HPE may be open to discussing it.
On November 16, 2018, Mr. Neri and Mr. Ungaro discussed Cray’s response to the November 2 Proposal and Mr. Ungaro reiterated the response that Morgan Stanley conveyed to Mr. Bhagwati on November 11. Later that day, a representative of HPE’s financial advisor spoke with a representative of Morgan Stanley requesting additional financial information, and an analysis in support of Cray’s view of its valuation.
On November 18, 2018, representatives of Morgan Stanley spoke to Mr. Bhagwati and Tarek Robbiati, Chief Financial Officer of HPE, and reviewed discussions to date, including both parties’ respective views on valuation. Mr. Bhagwati and Mr. Robbiati stated that in order for HPE to provide a revised proposal they would need to receive a specific response to the November 2 Proposal.
On November 25, 2018, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, representatives of Morgan Stanley provided an update on the recent discussions with HPE and Morgan Stanley’s preliminary views on Cray’s valuation. Our Board then discussed next steps to continue to evaluate the November 2 Proposal, including strategies for counteroffers or indications of purchase price ranges that might be of interest to Cray, and discussed long-term financial projections prepared by our senior management, and which were consistent with the projections previously discussed with our Board. Subsequently, our Board instructed Morgan Stanley to indicate to HPE that our Board would be willing to support a transaction at a price of $38.00 per share, and to provide HPE with a preliminary valuation analysis of Cray in support of that proposal.
On November 27, 2018, representatives of Morgan Stanley, on behalf of Cray, informed Mr. Bhagwati that our Board indicated a willingness to support a transaction at a price of $38.00 per share, and provided HPE with materials in support of our Board’s view on the appropriate valuation of Cray. The representatives of Morgan Stanley also invited Mr. Bhagwati to submit a revised proposal for our Board to consider.
On December 5, 2018, representatives of Morgan Stanley again spoke with Mr. Bhagwati and reiterated the views on valuation set forth in the materials provided by Morgan Stanley to HPE on November 27, 2018.
On December 10, 2018, representatives of Morgan Stanley provided HPE with additional detail relating to our projections, including additional sales pipeline detail regarding potential Exascale contracts and a “low case” scenario for 2019, which were otherwise consistent with the projections provided in October and November 2018, and Mr. Ungaro and Mr. Henry met with Mr. Bhagwati and Mr. Robbiati, along with representatives of Morgan Stanley and Deutsche Bank, to discuss our projections.
On December 13, 2018, our Board held a telephonic meeting together with members of our senior management and a representative of Fenwick & West. During the meeting, Mr. Ungaro gave an update on the discussions with HPE.
On December 19, 2018, representatives of HPE delivered a revised non-binding written proposal for an acquisition of Cray for $28.00 per share in cash (December 19 Proposal), which proposal also requested that we enter into an exclusivity agreement prohibiting Cray from soliciting, or negotiating, other acquisition proposals for a period of 30 days (with automatic extensions for successive seven-day periods, unless terminated by a party).
On December 24, 2018, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, our senior management provided an update on discussions with HPE, including a description of the December 19 Proposal and HPE’s views regarding Cray’s valuation. Our Board also discussed our long-term prospects and updated long-term financial projections that reflected an update to the 2018 and 2019 forecast but were otherwise consistent with the projections reviewed on November 25, 2018. Following a discussion with representatives of Morgan Stanley regarding the December 19 Proposal, our Board determined that HPE’s revised offer was insufficient and that a counteroffer to HPE would not be productive, and instructed Morgan Stanley to inform HPE of this determination.

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On January 5, 2019, representatives of Morgan Stanley and Deutsche Bank discussed the December 19 Proposal, and valuations that might be acceptable to each party, but did not reach any agreement on a valuation that could be acceptable to both parties. There were no further discussions between HPE and Cray regarding a potential business combination between January 5, 2019 and March 5, 2019.
On March 5, 2019, Mr. Neri and Mr. Ungaro discussed the potential for a business combination between HPE and Cray.
On April 5, 2019, Mr. Bhagwati contacted a representative of Morgan Stanley to re-affirm HPE’s interest in a strategic transaction with Cray, and proposed an increase in the proposed price to $34.00 per share. Mr. Bhagwati subsequently delivered to representatives of Morgan Stanley a written, non-binding proposal for HPE to acquire Cray for $34.00 per share in cash (April 5 Proposal”), which proposal also requested that we enter into an exclusivity agreement prohibiting Cray from soliciting, or negotiating, other acquisition proposals for a period of 30 days, automatically extended for successive seven-day periods unless terminated by a party. The proposed price of $34.00 per share was approximately 26.3% higher than the closing price of Cray common stock on April 4, 2019.
Between April 6, 2019 and April 7, 2019, Mr. Neri contacted Mr. Ungaro to re-affirm the April 5 Proposal and discuss HPE’s interest in the strategic transaction with Cray.
On April 8, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, our Board, senior management and representatives of Morgan Stanley and Fenwick & West discussed the April 5 Proposal, the discussions that had occurred between Cray and HPE, and HPE’s request for an exclusivity agreement. Our Board and senior management then discussed the challenges faced by Cray as an independent company,as described in “—Recommendation of Our Board and Reasons for the Merger” beginning on page 21 of this proxy statement. Our Board and senior management also discussed timing considerations relating to announcements of possible contract awards for exascale computer systems (that is, computing systems capable of at least a billion billion, i.e., a quintillion, calculations per second) that were to be awarded as part of the Department of Energy’s “CORAL-2” procurement. Our Board, senior management and representatives of Morgan Stanley and Fenwick & West then discussed possible responses, including strategies for obtaining an increased proposal from HPE and for determining interest in Cray from other potential bidders that might be interested in, and able to consummate, an acquisition of Cray. Our Board and representatives of Morgan Stanley discussed the fact that no other parties had expressed interest in an acquisition of Cray and the fact that few other companies might be able to achieve meaningful synergies in a combination with Cray. In addition, our Board discussed the risks that might result from rumors that Cray was involved in an acquisition process, including risks to potential business opportunities, and risks to a transaction with HPE. Following this discussion, our Board identified two public companies (“Company A” and “Company B”), that it believed were most likely to have strategic interest in, and financial ability to complete, a business combination with Cray, and our Board authorized our senior management to contact Company A and Company B to ascertain whether they would be interested in discussing a business combination transaction with Cray. Our Board and representatives of Morgan Stanley discussed whether Cray should also reach out to other potential parties and determined that such other parties would likely not be interested in exploring a business combination with Cray at the valuation proposed by HPE, or unable to do so in a timeframe that would not jeopardize the proposed transaction with HPE, or that such outreach could negatively affect other commercial relationships. Our Board also noted that the terms of any merger agreement that it would enter into would permit interested parties to make an unsolicited proposal following announcement of a transaction.
On April 9, 2019, Mr. Ungaro contacted the chief executive officer of Company A to discuss Company A’s interest in a potential business combination transaction with Cray. That same day, Mr. Ungaro also contacted a corporate vice president and general manager of Company B to discuss Company B’s interest in a potential business combination transaction with Cray.
On April 10, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, representatives of Morgan Stanley discussed the April 5 Proposal and possible responses, our Board and representatives of Morgan Stanley discussed Cray’s valuation and our Board reviewed updated long-term financial projections prepared by our senior management. These projections reflected an updated forecast for 2019 that included updated projected 2024 results, but otherwise did not differ materially from the projections reviewed with our Board on December 24, 2018. Representatives of Fenwick & West discussed the fiduciary duties of our Board. Mr. Ungaro then provided an update on the most recent discussions with representatives of Company A and Company B, and timing considerations relating to Cray’s negotiations and possible timing of potential contracts for exascale systems. Our Board then directed senior management and Morgan Stanley to respond to HPE and seek an increase in price to $37 per share.
On April 11, 2019, we entered into a confidentiality agreement with Company A. The confidentiality agreement included a “standstill” provision that generally prohibited Company A from making public proposals to acquire Cray, acquiring Cray securities or taking similar actions, and which provided that the standstill provision would no longer apply following any

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the execution by Cray of a definitive acquisition agreement with another party or the commencement of a tender offer for 50% or more of Cray’s outstanding voting power.
On April 12, 2019, Mr. Ungaro and Mr. Henry met with representatives of Company A to discuss a possible business combination transaction with Cray.
On April 14, 2019, our senior management provided representatives of Company A with non-public business and financial information regarding Cray, and on April 14 and 15, 2019, Mr. Ungaro spoke further with representatives of Company A regarding the possibility of a business combination transaction with Cray. Mr. Henry provided representatives of Company A with information on April 14 and April 17, 2019, and discussed that information with them on April 18, 2019.
On April 15, 2019, representatives of Morgan Stanley responded to HPE by seeking an increase in HPE’s price to $37 per share, as instructed by our Board.
On April 15 and April 16, 2019, members of our senior management, including Mr. Ungaro and Mr. Scott, had discussions with representatives of Company A to discuss certain business, technical and financial information regarding Cray. Thereafter, the representatives of Company A requested additional non-public business and financial information regarding Cray.
Also on April 16, 2019, a representative of Company B indicated to Mr. Ungaro that Company B was continuing to evaluate a potential transaction with Cray, but such representative had no further updates at such time. Company B did not subsequently indicate any interest in pursuing a possible business transaction with Cray.
On April 17, 2019, Mr. Neri communicated verbally to representatives of Cray that HPE would be willing to increase its offer to $35.00 per share, and indicated that it was not prepared to increase it any further. Mr. Neri renewed HPE’s prior request that Cray agree to negotiate with HPE on an exclusive basis. Also on April 17, 2019, Mr. Ungaro spoke further with the chief executive officer of Company A regarding a possible business combination transaction with Cray.
On April 19, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, our Board and representatives of Morgan Stanley and Fenwick & West discussed HPE’s proposed increase in the purchase price to $35.00 per share and our Board reviewed our long-term financial projections that were consistent with the projections reviewed at the meeting of our Board on April 10, 2019. Representatives of Morgan Stanley discussed Morgan Stanley’s preliminary views on Cray’s valuation. Mr. Ungaro then led a discussion regarding the most recent discussions with Company A and the fact that Company B had not expressed interest in pursuing a transaction with Cray. Our Board discussed possible responses to HPE. It was the consensus of our Board that the appropriate response to HPE would depend on the level of acquisition interest expressed by Company A and whether HPE delivered a written offer to confirm its April 17 verbal offer. Our Board and senior management also discussed timing considerations relating to announcements of possible contract awards for exascale computer systems that were to be awarded as part of the Department of Energy’s “CORAL-2” procurement. Following discussion, the Board directed our senior management to enter into an exclusivity agreement with HPE if Company A did not express interest in pursuing a business combination transaction and HPE delivered a written offer confirming its proposed $35.00 per share purchase price.
On April 20, 2019, the Chief Executive Officer of Company A indicated to Mr. Ungaro that Company A was no longer interested in pursuing a business combination transaction with Cray.
On April 21, 2019, representatives of HPE delivered a revised written non-binding offer for HPE to acquire Cray for $35.00 per share in cash, which proposal also requested that we enter into an exclusivity agreement prohibiting Cray from soliciting, or negotiating, other acquisition proposals for a period of 30 days, automatically extended for successive seven-day periods unless terminated by a party. This proposal was accompanied by a detailed list of materials requested by HPE for review as part of its due diligence process. The proposed price of $35.00 per share was approximately 28.4% higher than the most recent closing price of Cray common stock and approximately 32.9% higher than the average closing price of Cray common stock over the 30-day period prior to April 21, 2019.
On April 22, 2019, the parties negotiated and entered into the exclusivity agreement prohibiting Cray from soliciting, or negotiating, other acquisition proposals for a period of 30 days (and without any provision for automatic extension thereafter).
On April 24, 2019 to April 26, 2019, representatives of Cray and HPE held business, financial and technical due diligence meetings at HPE’s headquarters in San Jose, California. Mr. Ungaro and Mr. Henry attended the meetings in person and members of Cray senior management called in for various portions of the meetings.
Commencing on April 26, 2019, Cray provided representatives of HPE and its advisors, including representatives from HPE’s outside legal advisor, Wachtell, Lipton, Rosen & Katz (Wachtell Lipton), with access to an electronic data room containing due diligence information regarding Cray.

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During the period from April 26, 2019 to May 16, 2019, representatives of HPE and its advisors conducted a further due diligence review of Cray, including a number of in-person and telephonic meetings with members of our senior management and other personnel.
On the evening of April 30, 2019, HPE and Wachtell Lipton delivered a draft merger agreement (draft merger agreement), to representatives of Cray and Fenwick & West. Among other things, the draft merger agreement proposed (i) a termination fee of 5.0% of Cray’s equity value at the transaction price, (ii) that several of Cray’s representations and warranties would be tested as a condition to the closing of the Merger without reference to whether a breach had a “Material Adverse Effect”, (iii) restrictions on Cray’s ability to enter into new contracts with customers and suppliers without HPE’s consent prior to closing and (iv) an outside date of six months that automatically extended in three-month increments if necessary to obtain regulatory approval.
Also on April 30, 2019, we provided HPE with the financial projections through 2023 that were consistent with the projections that had been discussed with our Board at its April 19, 2019 meeting.
On May 2 and 3, 2019, our Board held a regular quarterly meeting, together with members of our senior management and representatives of Fenwick & West and, on May 3, representatives of Morgan Stanley. During this meeting, representatives of Fenwick & West discussed the fiduciary duties of our Board and reviewed terms of the draft merger agreement, and the directors provided direction to the representatives of Fenwick & West regarding the positions to be taken regarding those issues.
On May 6, 2019, representatives of Fenwick & West provided representatives of Wachtell Lipton with Cray’s proposed revisions to the draft merger agreement. The proposed revisions provided for, among other things, (i) a termination fee equal to 2% of Cray’s equity value at the transaction price (and limited the circumstances under which a fee would be payable during the “tail period” of 12 months after the merger agreement was terminated), (ii) that certain of the representations and warranties of the Company would be brought down subject to materiality and Material Adverse Effect qualifications, (iii) removed the restrictions on Cray’s ability to enter into contracts with customers and suppliers in the ordinary course of its business and (iv) that provided for an outside date of six months with one automatic extension of three months if necessary to obtain regulatory approval. Between May 6, 2019 and May 16, 2019, Fenwick and West and Wachtell Lipton continued to negotiate the draft merger agreement.
On May 7, 2019, the U.S. Department of Energy announced a contract with Cray to build an exascale computer system at Oak Ridge National Laboratory, with the total contract award valued at more than $600 million. In addition, after the market closed on May 7, Cray announced its results of operations for the first quarter of 2019. On May 8, 2019, following these announcements, the closing price of Cray common stock was $27.87, an increase of approximately 6.3% from the closing price of Cray common stock on May 6, 2019.
On May 9, 2019, following agreement by HPE and Cray on the purchase price, HPE communicated to Mr. Ungaro the terms of an employment agreement with HPE (“HPE Employment Agreement”) pursuant to which Mr. Ungaro will become a member of the management of HPE’s Hybrid IT Group and from May 9, 2019 through May 16, 2019, HPE and Mr. Ungaro, who was advised by separate counsel, negotiated such terms, and the form of the HPE Employment Agreement, which was executed by Mr. Ungaro and HPE concurrently with the execution of the merger agreement.
On May 12, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During the meeting, representatives of Morgan Stanley discussed Morgan Stanley’s preliminary views on Cray’s valuation. Our Board and members of senior management also discussed the projections to be used by Morgan Stanley in connection with rendering its fairness opinion to our Board.  Our Board and members of senior management discussed the fact that the projections reflected likely future large sales of Cray’s exascale-class computer systems, and our Board and senior management noted that there was risk that the current demand for these systems might not continue over the long term as a result of anticipated competition from larger competitors, cloud-based competitors, and the challenges of competing against local vendors in other countries. Accordingly, our Board directed senior management to include in such projections an alternative view of 2024 (referred to as “Scenario B”) that reflected a more conservative view of the long-term uncertainties in the market for exascale-class computer systems, to be used by Morgan Stanley together with the projections that had been reviewed by our Board on April 19, 2019 (referred to as “Scenario A”).
On May 14, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. During this meeting, representatives of Fenwick & West discussed the issues under negotiation in the draft merger agreement, and the directors provided direction to the representatives of Fenwick & West regarding the positions to be taken regarding those issues. Mr. Ungaro then described the HPE Employment Agreement, and his negotiations with HPE regarding this agreement, to the Board. Our Board and the representatives of Morgan Stanley then reviewed the discussions that had taken place with HPE, and also discussed the financial projections that had been prepared by our senior management, including the 2024 Scenario B projections that had been prepared following the May 12 meeting of our Board and the Scenario A projections that had been reviewed by our Board at its April

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19 and May 12 meetings. Representatives of Morgan Stanley then reviewed with our Board Morgan Stanley’s preliminary views on Cray’s valuation.
Between May 11 and May 16, 2019, the parties and their counsel continued to negotiate the terms of the draft merger agreement, with the parties ultimately agreeing that the merger agreement would provide, among other things, (i) for a termination fee equal to 3% of Cray’s equity value at the transaction price, with limited circumstances under which such fee would be payable during the 12-month tail period after the merger agreement was terminated, (ii) that certain of the representations and warranties of Cray would be brought down subject to materiality and Material Adverse Effect qualifications, (iii) that Cray would have the ability to enter into new customer contracts in the ordinary course of its business, subject to HPE having limited consent rights with respect to certain adverse contract terms and (iv) that provided for an outside date of six months, with two automatic extensions (the first for four months, and the second for three months) if necessary to obtain regulatory approval.
On May 16, 2019, the parties completed the negotiation of the draft merger agreement.
Later on May 16, 2019, our Board held a telephonic meeting, together with members of our senior management and representatives of Morgan Stanley and Fenwick & West. Representatives of Morgan Stanley discussed with our Board Morgan Stanley’s financial analysis of the proposed per share consideration of $35.00 in cash. Following such discussion, Morgan Stanley rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion dated as of May 16, 2019, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the merger consideration to be received by the holders of shares of our common stock (other than those shares specified in the written opinion) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of our common stock.
Our Board also considered that our projections include assumptions relating to (i) the probability of winning certain significant government and other customer contracts for which we had submitted or planned to submit bids as of the date of the projections, (ii) the revenue (including the conditions to the receipt thereof) we would receive pursuant to such contracts (if awarded) and other related financial consequences to us and (iii) the impact such contracts (including the identity of the customers) could have on our financial results, reputation and prospects, in each case taking into account the information available to us at such time.
Following the presentation by representatives of Morgan Stanley, and such other deliberations, a representative of Fenwick & West discussed the fiduciary duties of our Board in connection with the proposed merger agreement, and reviewed with our Board the principal terms of the proposed merger agreement with HPE, including, among other things, (i) the consideration of $35.00 per share in cash and lack of any financing contingency or financing condition on HPE’s obligation to pay the purchase price upon the satisfaction of closing conditions, (ii) the treatment of Cray’s equity incentives, (iii) closing conditions and estimated closing timing, (iv) the definition of “material adverse effect”, (v) key covenants, including the efforts required to obtain regulatory clearances, (vi) covenants regarding Cray’s conduct of its business between signing and closing, including its ability to enter into new customer and supplier contracts, (vii) certain terms regarding Cray’s employees, (viii) the deal protection provisions, including with respect to non-solicitation of offers and termination fee and the events under which the termination fee would be payable and (ix) the termination provisions, including the “outside date” by which either party could terminate the merger agreement if the merger had not been consummated by such time. The representative of Fenwick & West then reviewed with our Board key aspects of the process followed by our Board in the exercise of their fiduciary duties to our shareholders.
The representative of Fenwick & West also reviewed with our Board a proposed amendment to our bylaws to provide that certain types of shareholder litigation be brought exclusively in the Superior Court of the State of Washington in King County (or if such court does not have jurisdiction, any other state of federal court in the State of Washington), in light of the court’s experience in considering matters relating to the duties of corporate officers and directors and the rights of shareholders and the benefit of reducing the potentially inconsistent and conflicting results, and attendant costs, of having litigation proceed in multiple jurisdictions.
After careful deliberation, including consideration of the factors described in “—Recommendation of Our Board and Reasons for the Merger” beginning on page 21 of this proxy statement, our Board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Cray and its shareholders, (ii) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, (iii) directed that the approval of the merger agreement, the merger and the principal terms thereof be submitted to a vote of the shareholders of Cray and (iv) recommended the approval of the merger agreement, the merger and the principal terms thereof by the shareholders of Cray. Our Board also unanimously approved the amendment of Cray’s bylaws to provide that certain types of shareholder litigation be brought exclusively in the Superior Court of the State of Washington in King County (or if such court does not have jurisdiction, any other state of federal court in the State of Washington).

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Following the conclusion of the board meeting on May 16, 2019, Cray and HPE executed the Merger Agreement.
On May 17, 2019, prior to the opening of the financial markets that day, HPE and Cray issued a press release publicly announcing entry into the Merger Agreement.
Recommendation of Our Board and Reasons for the Merger
At a meeting of our Board on May 16, 2019, our Board unanimously (1) approved and declared advisable the Merger Agreement, (2) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby and (3) determined that the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Cray and our shareholders. Our Board unanimously recommends that you vote (i) “FOR” the adoption of the Merger Agreement, (ii) “FOR” the advisory compensation proposal and (iii) “FOR” the adjournment proposal. In evaluating the merger and the Merger Agreement, our Board consulted with our senior management as well as our legal and financial advisors. In determining to approve the Merger Agreement and the merger and recommend that Cray shareholders vote their shares of our common stock in favor of the proposal to approve the Merger Agreement and the merger, our Board considered a number of factors in favor of the merger, including the following (not necessarily in order of relative importance):
that our shareholders will be entitled to receive merger consideration of $35.00 per share in cash upon the closing of the merger, providing liquidity and certainty of value as compared to the uncertain future long-term value that our shareholders might or might not realize if we remained an independent public company, enabling them to realize value that had been created by Cray while eliminating the long-term risks of their investment in Cray common stock;
the fact that the merger consideration represents:
an 18.2% premium over our closing share price of $29.61 on May 15, 2019; and
an 27.7% premium over our average closing share price over the 30 days prior to May 15, 2019;
the financial analyses presented to our Board by Morgan Stanley, as more fully described in “—Opinion of Morgan Stanley & Co. LLC” beginning on page 24 of this proxy statement, and our Board’ assessment, taking into account such financial analyses, of Cray’s value on a standalone basis relative to the $35.00 per share of our common stock in cash to be paid in the merger;
the oral opinion of Morgan Stanley to our Board on May 16, 2019, which was subsequently confirmed by delivery of a written opinion dated as of such date, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the merger consideration to be received by the holders of shares of our common stock (other than those shares specified in the written opinion) pursuant to the Merger Agreement was fair from a financial point of view to such holders of shares of our common stock;
its belief, based on discussions and negotiations by our senior management and advisors with HPE and other potentially interested parties, that the merger consideration (which HPE increased from an initial $25.00 per share of our common stock to the final $35.00 per share of our common stock during the course of negotiations, as described in “—Background of the Merger” beginning on page 14 of this proxy statement) was the highest price HPE or any other interested party would be willing to pay;
its familiarity with our business, operations, assets, properties, business strategy and competitive position, and the nature of the industries in which we operate, industry trends, and economic and market conditions, both on a historical and on a prospective basis;
its belief that, based on its knowledge and discussions with our senior management regarding our business, financial condition, results of operations, competitive position, business strategy and prospects, as well as the risks (including the risks described in our filings with the SEC) involved in, and the timing and likelihood of actually achieving additional value for Cray shareholders from, successfully executing on our business strategy, that on a risk-adjusted basis, remaining independent and executing on Cray’s business strategy was not reasonably likely to create sustainable value for our shareholders, the present value of which would be greater than the merger consideration;
its belief that the risks of Cray continuing to compete in the high-end of the supercomputing segment of the high performance computing market, which is highly dependent on the demand for products by the U.S. Government and other governmental entities, is characterized by unpredictable and extended sales lead times, and is increasingly dominated by larger companies and is subject to potential significant future competition from companies offering cloud-based supercomputing services, outweighed Cray’s potential of expanding its business beyond its traditional customer base;

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our prospects and risks if we were to remain an independent company, including:
our ability to continue to compete in the high end of the supercomputing segment of the high-performance computing market, which is increasingly dominated by larger companies and is subject to potential significant future competition from companies offering cloud-based supercomputing services;
our need to make significant investments to build our capabilities to expand beyond our traditional markets, primarily in data analytics, artificial intelligence and storage and data management opportunities, and the risk that any such investments may not be successful;
challenges resulting from our scale, which limits our ability to make the investments that are needed to take advantage of emerging market opportunities, and can prevent us from receiving pricing on components achievable by larger competitors;
the need to raise additional financing to enable us to invest in new products targeting new market opportunities, fund near-term losses (including research and development expenses ahead of anticipated revenue), and expand manufacturing capacity, and the risk that adequate financing might not be available when needed or on acceptable terms;
our growing challenges faced in serving the high end of the supercomputing segment of the high-performance computing market, including the potential for decreasing overall demand for supercomputers, the trend of reduced product differentiation between generations of processors, and the fact that the industry is highly competitive and cyclical, and is subject to constant and rapid technological change that requires lengthy and technically challenging development processes, and the difficulties in responding to these challenges compared to larger competitors;
our significant fluctuations in our operating results due to a limited number of system sales in a given period, and long sales cycles and customer acceptance processes, making predicting revenue and operating expenses difficult,
the continuing commoditization of high-performance computing hardware and growing commoditization of software, which has resulted in increased pricing pressure and adverse effects on our gross margins;
our dependence on continued demand for supercomputers, which fluctuates based on numerous factors, including macroeconomic trends, capital spending levels, political conditions and continued customer growth, and are subject to the risk of technological trends, such as the slowing of microprocessor improvements, and changes in customer’s spending priorities;
the unpredictability of our future operating results as a result of its dependence on large procurements by a small number of customers, including the U.S. and foreign governments and large enterprises, and the long and unpredictable sales cycle involved in these procurements; and
other risks and uncertainties discussed in our public filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which are incorporated herein by reference;
the fact that the merger consideration consists solely of cash, which provides certainty of value and liquidity to our shareholders and does not expose them to any future risks related to the business or the financial markets generally, as compared to a transaction in which shareholders receive shares or other securities, or as compared to Cray remaining independent; the fact that HPE’s obligation to consummate the transaction is not subject to any financing condition, and our ability to specifically enforce HPE’s obligations under the Merger Agreement (including HPE’s obligations to consummate the merger) as well as, HPE’s obligations to consummate the merger;
its belief, following consultation with legal counsel, that the transaction with HPE presented a limited risk of not achieving regulatory clearance including the obligations of HPE and Cray to use reasonable best efforts to take actions that may be reasonably necessary to obtain approvals or clearances from applicable antitrust authorities;
its belief that the conditions to closing in the Merger Agreement (as described in “The Merger Agreement—Conditions to the Closing of the Merger” beginning on page 58 of this proxy statement), including the definition of “Material Adverse Effect” in the Merger Agreement (as described in “The Merger Agreement—Representations and Warranties—Definition of Material Adverse Effect” beginning on page 49 of this proxy statement) provide a high degree of likelihood that the merger will be consummated;
its belief, based on our Board’s general knowledge of HPE’s business, operations, management, reputation and financial condition, that there was a high probability that the merger would be successfully consummated on the agreed-upon terms after a Merger Agreement was entered into with HPE;

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that our Board, with the assistance of our senior management and Morgan Stanley, considered other parties that would be most likely to have a strategic interest in, and financial ability to complete, a business combination with Cray and solicited the interest of such parties, that neither of the parties contacted indicated an interest in pursuing a transaction, that Cray had not received any unsolicited proposals for an acquisition transaction, and that our Board believed that other parties would likely not be interested in exploring a business combination with Cray at the valuation proposed by HPE, or would be unable to do so in a timeframe that would not jeopardize the proposed HPE transaction, or, that any benefit from such an outreach would be outweighed by the risk that such an outreach could jeopardize other commercial relationships;
our right under the Merger Agreement to respond to third parties submitting acquisition proposals by providing information subject to a confidentiality agreement, and to engage in negotiations or discussions with such persons, if our Board, prior to taking any such actions, determines in good faith that such acquisition proposal either constitutes a “superior proposal” or could reasonably be expected to lead to or result in a “superior proposal” (as described in “The Merger Agreement—Termination of the Merger Agreement” beginning on page 60 of this proxy statement);
the right of our Board, under certain circumstances specified in the Merger Agreement, to withdraw or rescind its recommendation that our shareholders approve the merger in the event that a “superior proposal” is made to Cray or an “intervening event” with respect to Cray occurs, subject to certain conditions set forth in the Merger Agreement (including HPE’s right to have an opportunity to revise the terms of the Merger Agreement) and Cray’s obligation to pay the termination fee of $46 million in the event that HPE were to terminate the Merger Agreement following such withdrawal;
our ability to terminate the Merger Agreement in order to enter into a definitive agreement that our Board determines to be a “superior proposal,” subject to certain conditions set forth in the Merger Agreement (including HPE’s right to have an opportunity to revise the terms of the Merger Agreement) and our obligation to pay the termination fee of $46 million;
its belief, after discussion with our advisors, that the termination fee of $46 million, which constitutes approximately 3.0% of our equity value in the merger, would not preclude or substantially impede a possible superior proposal from being made;
the requirement that the merger will only be effective if approved by the holders of at least a majority of all outstanding shares of our common stock and the absence of any voting commitments by management or other shareholders, providing our shareholders with the right to approve or disapprove of the merger;
the fact that our shareholders will be entitled to dissenters’ rights under Washington law;
its belief that the Merger Agreement’s restrictions on our ability to take certain actions during the pendency of the merger will not unduly interfere with our ability to operate its business in the ordinary course;
the fact that the merger does not require the approval of HPE’s stockholders, with the attendant risks associated with such a vote;
its belief that the terms of the Merger Agreement, taken as a whole, provide a high degree of protection against the risk that the consummation of the merger will be unduly delayed or that the merger will not be consummated;
that the Merger Agreement was the product of arms-length negotiations and contains terms and conditions that are, in our Board’s view, favorable to Cray and its shareholders; and
the continued costs, risks and uncertainties associated with continuing to operate independently as a public company.
In addition, our Board considered a number of uncertainties, risks and other factors weighing against the merger in its deliberations, including the following (not necessarily in order of relative importance):
the non-solicitation provisions of the Merger Agreement that restrict our ability to solicit or, subject to certain exceptions, engage in discussions or negotiations with third parties regarding a proposal to acquire Cray, and the fact that, upon termination of the Merger Agreement under certain specified circumstances, Cray will be required to pay a termination fee of $46 million, which could have the effect of discouraging alternative proposals for a business combination with Cray or reduce the price of such proposal;
the fact that the all-cash price, while providing relative certainty of value, would not allow our shareholders to participate in any future appreciation of HPE’s stock or in the value of any future earnings or growth of Cray including additional value Cray could generate as an independent company from the future sale of additional exascale systems;

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the fact that the Merger Agreement restricts Cray’s ability to engage in certain activities between the date of the Merger Agreement and the effective time of the merger, and that these restrictions could prevent Cray from taking advantage of business opportunities, such as potential acquisitions, which would be advisable if Cray were to remain an independent company;
the fact that the merger may not be consummated unless and until specified conditions are satisfied or waived as more fully described in “Terms of the Merger Agreement—Conditions to Closing of the Merger” beginning on page 58 of this proxy statement, and the right of HPE to terminate the Merger Agreement under certain circumstances;
the potential risk and costs to Cray related to the announcement of the merger and the possibility that the merger does not close, including the potential distraction of employee and management attention during the pendency of the merger, possible employee attrition, the possible impact on existing and prospective customers and business partners, the potential effect on existing relationships with other parties, and the impact that the failure of the merger to close could have on the trading price of shares of our common stock, Cray’s operating results (including the costs incurred in connection with the transactions) and Cray’s ability to maintain sales;
the risk of a delay in receiving, or a failure to receive, the required regulatory clearances for the merger; and
the fact that receipt of the merger consideration in exchange for shares of our common stock pursuant to the merger would generally be a taxable transaction for United States federal income tax purposes as more fully described in the section entitled “—Certain U.S. Federal Income Tax Consequences of the Merger” beginning on page 42 of this proxy statement.
During its consideration of the merger, our Board also was aware of the fact that some of Cray’s directors and executive officers have interests in the merger that differ from or are in addition to their interests as those of Cray shareholders generally, which interests are described in “—Interests of Our Directors and Executive Officers in the Mergerbeginning on page 33 of this proxy statement. 
The foregoing description of the information and factors considered by our Board is not meant to be an exhaustive but is believed to address the material information and factors considered. In view of the wide variety of factors considered by our Board, it did not consider it practicable to, nor did it attempt to, quantify or to give relative weights to the various factors in reaching its determinations and recommendation. Moreover, in considering the factors discussed above, each individual director applied his or her own personal business judgment to the process and may have given different weights to different factors. Our Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Our Board based its recommendation on the totality of the information presented.
Opinion of Morgan Stanley & Co. LLC
The oral opinion of Morgan Stanley to our Board on May 16, 2019, which was subsequently confirmed by delivery of a written opinion dated as of such date, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the merger consideration to be received by the holders of shares of Cray common stock (other than those shares specified in the written opinion) pursuant to the Merger Agreement was fair from a financial point of view to such holders of shares of Cray common stock.
Morgan Stanley was retained by Cray to act as its financial advisor in connection with the merger and to provide financial advisory services in connection with the merger. Cray selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, and its knowledge and understanding of Cray’s business and affairs. On May 16, 2019, Morgan Stanley rendered its oral opinion, subsequently confirmed by delivery of a written opinion dated May 16, 2019, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the merger consideration to be received by the holders of shares of Cray common stock (other than those shares specified in the written opinion) pursuant to the Merger Agreement was fair from a financial point of view to such holders of shares of Cray common stock.
The full text of the written opinion of Morgan Stanley dated May 16, 2019, is attached as Annex B to this proxy statement, and is incorporated by reference in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. The summary of the opinion of Morgan Stanley set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to, and should, read Morgan Stanley’s opinion and the summary of Morgan Stanley’s opinion below carefully and in their entirety. Morgan Stanley’s opinion was directed to our Board, in its capacity as such, and addressed only the fairness from a financial point of view of the merger consideration to be received by Cray

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shareholders (other than the holders of those shares specified in the written opinion) pursuant to the Merger Agreement as of the date of the opinion and did not address any other aspects or implications of the merger. Morgan Stanley’s opinion was not intended to, and does not, constitute advice or a recommendation to any Cray shareholder as to how to vote at the special meeting to be held in connection with the merger or whether to take any other action with respect to the merger.
For purposes of rendering its opinion, Morgan Stanley, among other things:
reviewed certain publicly available financial statements and other business and financial information of Cray;
reviewed certain internal financial statements and other financial and operating data concerning Cray;
reviewed certain financial projections prepared by the management of Cray (for more information, see “—Financial Projections” beginning on page 31 of this proxy statement);
discussed the past and current operations and financial condition and the prospects of Cray with senior executives of Cray;
reviewed the reported prices and trading activity for Cray common stock;
compared the financial performance of Cray and the prices and trading activity of Cray common stock with that of certain other publicly-traded companies comparable with Cray, and their securities;
reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
participated in discussions with representatives of Cray and its legal advisors with respect to Cray’s negotiations with HPE and its financial and legal advisors;
reviewed a draft of the Merger Agreement dated May 16, 2019, and certain related documents; and
performed such other analyses and reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.
In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by Cray, and formed a substantial basis for its opinion. With respect to the financial projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of the management of Cray of the future financial performance of Cray. In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the definitive Merger Agreement would not differ in any material respect from the draft thereof furnished to it. Morgan Stanley assumed that in connection with the receipt of any necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley did not express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the transactions contemplated thereby or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection therewith. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Cray and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Cray’s officers, directors or employees, or any class of such persons, relative to the merger consideration to be received by Cray shareholders in the merger. Morgan Stanley was not requested to make, and did not make, any independent valuation or appraisal of the assets or liabilities of Cray, nor was it furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market, tax and other conditions as in effect on, and the information made available to Morgan Stanley as of, May 16, 2019. Events occurring after such date may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.
Summary of Financial Analyses
The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion dated May 16, 2019, to our Board. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before May 16, 2019, which was the last trading day prior to the meeting of our Board on May 16, 2019, to approve the Merger Agreement and the transactions contemplated thereby, including

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the merger. The various analyses summarized below were based, as applicable, on the closing price of $29.81 per share of Cray common stock as of May 16, 2019, and are not necessarily indicative of current market conditions.
Some of the financial analyses summarized below are included in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole. Considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion.
In performing the financial analyses summarized below and arriving at its opinion, Morgan Stanley used and relied upon the management case provided by Cray management. For more information, see “—Financial Projections” beginning on page 31 of this proxy statement. In accordance with discussions with Cray, Morgan Stanley also used and relied upon certain financial projections based on Wall Street research reports (“street case”).
Public Trading Comparables Analysis
Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded.
Morgan Stanley reviewed and compared certain publicly available and internal financial information (including the management case and certain financial projects from Wall Street research reports) for Cray with comparable publicly available consensus equity analyst research estimates for companies, selected based on Morgan Stanley’s professional judgment and experience, that share similar business characteristics and have certain comparable operating characteristics with Cray, including similar lines of business, market capitalizations or other similar operating characteristics.
For purposes of this analysis, Morgan Stanley analyzed the ratio of aggregate value (“AV”) defined as the fully diluted market capitalization plus total debt and non-controlling interests, less cash and equivalents, to an estimate of revenue for calendar year 2020, for each of the comparable companies, based on publicly available financial data and consensus equity analysis research estimates.
The following table presents the results of this analysis:
Comparable Company
 
CY2020E
AV/Revenue
HPE
 
0.9x
Electronics for Imaging, Inc.(1)
 
1.4x
NetApp, Inc.
 
2.4x
International Business Machines Corporation
 
2.0x
Extreme Networks, Inc.
 
0.8x
Juniper Networks, Inc.
 
1.7x
Seagate Technology plc
 
1.6x
Fujitsu Limited
 
0.3x
Lenovo Group Ltd.
 
0.2x
NEC Corporation
 
0.4x
Hitachi, Ltd.
 
0.3x
_______________
(1)
Data as of April 12, 2019, the trading day prior to the announcement of its pending acquisition.

Based on the results of this analysis and its professional judgment and experience, Morgan Stanley applied:
an AV/revenue range of 1.0x to 2.0x to the management case for calendar year 2020 revenue, which resulted in an implied per share equity value range of $23.56 to $41.55; and
an AV/revenue range of 1.0x to 2.0x to the street case for calendar year 2020 revenue, which resulted in an implied per share equity value range of $17.76 to $30.15.
No company utilized in the public trading comparables analysis is identical to Cray. In evaluating and selecting comparable companies, Morgan Stanley made judgments and assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, all of which are beyond Cray’s control. These include, among other things, the impact of competition on Cray’s businesses and the industry generally, industry growth and the absence of any material change in Cray’s financial condition and prospects and the industry, and in the

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financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.
Discounted Equity Value Analysis
Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into a theoretical estimate of the future implied value of a company’s common equity as a function of that company’s estimated future earnings and a theoretical range of trading multiples. The resulting estimated future implied value is subsequently discounted back to the present day at the company’s cost of equity in order to arrive at an illustrative estimate of the present value for the company’s theoretical future implied stock price.
Using the management case, Morgan Stanley calculated ranges of implied equity values per share of Cray common stock as of May 16, 2019. To calculate the discounted equity value per share of Cray common stock, Morgan Stanley used calendar year 2023 estimated earnings before interest and taxes (“EBIT”) and net income. For each scenario, Morgan Stanley calculated the future equity value per share of Cray common stock at the end of calendar year 2022 by applying the above listed public trading comparables analysis reference range of 6.0x to 10.0x to Cray’s calendar year 2023 EBIT and 7.0x to 11.0x to Cray’s calendar year 2023 net income. Morgan Stanley then discounted the resulting implied equity value to May 16, 2019, at a discount rate equal to Cray’s assumed cost of equity of 9.7 percent. The cost of equity was selected based on the application of Morgan Stanley’s professional judgment and experience and the Capital Asset Pricing Model. Based on these calculations, this analysis implied the following per share value ranges for the Cray common stock:
 
Implied Value Per Share Range
6.0x - 10.0x CY23 EBIT
$24.54 - $37.66
7.0x - 11.0x CY23 P/E
$23.50 - $36.64
Discounted Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. Morgan Stanley calculated a range of equity values per share for Cray common stock based on this discounted cash flow analysis to value Cray on a standalone basis.
Morgan Stanley performed a discounted cash flow analysis for the management case as modified by each of Scenario A and Scenario B. For more information on the management case and Scenario A and Scenario B, see “—Financial Projections” beginning on page 31 of this proxy statement.
Morgan Stanley first calculated the estimated unlevered free cash flows of Cray based on the management case (as modified by each of Scenario A and Scenario B) for the period from calendar year 2019 through calendar year 2024. The estimated unlevered cash flows were calculated as EBIT, (i) plus depreciation and amortization, (ii) less taxes, (iii) less capital expenditures and (iv) plus or less changes in net working capital. Morgan Stanley also calculated a range of terminal values by applying perpetuity growth rates ranging from 1.0 percent to 3.0 percent, which range was selected by Morgan Stanley based upon the application of its professional judgment and experience, to the estimated unlevered free cash flows of Cray after December 31, 2024. Additionally, Morgan Stanley calculated the terminal value in calendar year 2024 using a perpetuity growth formula by capitalizing the normalized calendar year 2024 free cash flow of $109 million and $65 million in Scenario A and Scenario B, respectively, and reflecting Cray management’s assumptions of a 25 percent tax rate and 23 percent tax rate in Scenario A and Scenario B, respectively, and a one percent increase in net working capital. For more information, see “—Financial Projections” beginning on page 31 of this proxy statement.
Morgan Stanley then discounted the unlevered free cash flows and terminal values to their present values as of May 16, 2019, using the mid-year discount convention and discount rates ranging from 8.7 percent to 10.7 percent. These discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect Cray’s estimated weighted average cost of capital.
Based on the number of shares of Cray common stock outstanding and the dilutive securities schedule provided to Morgan Stanley by Cray management as of May 10, 2019, Morgan Stanley calculated the estimated implied value per share of Cray common stock as follows:
Projections Scenario
 
Implied Value
Per Share
Management case (Scenario A)
 
$24.76 - $38.04
Management case (Scenario B)
 
$18.60 - $26.86

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Precedent Transactions Analysis
Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial terms of selected transactions. Morgan Stanley compared publicly available statistics for select hardware company transactions, selected based upon Morgan Stanley’s professional judgment and experience, which were announced since 2010.
The following is a list of the precedent hardware transactions reviewed:
Announcement Date
 
Target
 
Acquiror
 
AV / LTM Revenue
 
AV / NTM Revenue
November 8, 2018
 
ARRIS International plc
 
CommScope Inc.
 
1.1x
 
1.1x
April 9, 2018
 
Verifone Systems, Inc.
 
Francisco Partners
 
1.8x
 
1.8x
March 28, 2018
 
Polycom, Inc.
 
Plantronics, Inc.
 
1.8x
 
N/A
March 7, 2017
 
Nimble Storage, Inc.
 
Hewlett Packard Enterprise Company
 
2.9x
 
2.4x
January 17, 2017
 
SimpliVity Corp
 
Hewlett Packard Enterprise Company
 
3.3x
 
N/A
August 11, 2016
 
Silicon Graphics International Corp.
 
Hewlett Packard Enterprise Company
 
0.5x
 
0.5x
July 8, 2016
 
Polycom, Inc.
 
Siris Capital Group, LLC
 
1.1x
 
1.1x
March 2, 2015
 
Aruba Networks, Inc.
 
Hewlett-Packard Company
 
3.3x
 
2.9x
February 25, 2015
 
Emulex Corporation
 
Avago Technologies Limited
 
1.4x
 
1.6x
June 16, 2014
 
Fusion-io, Inc.
 
SanDisk Corporation
 
2.7x
 
2.4x
January 23, 2014
 
International Business Machines Corporation’s x86 Server Business
 
Lenovo Group Limited
 
0.5x
 
0.6x
November 11, 2013
 
Aastra Technologies
 
Mitel Networks Corporation
 
0.5x
 
0.5x
December 10, 2012
 
Intermec, Inc.
 
Honeywell International Inc.
 
0.8x
 
0.8x
August 13, 2012
 
Comverse Technology, Inc.
 
Verint Systems Inc.
 
0.7x
 
0.6x
October 27, 2010
 
CommScope, Inc.
 
The Carlyle Group L.P.
 
1.2x
 
1.1x
November 17, 2010
 
Hypercom Corporation
 
Verifone Systems, Inc.
 
1.0x
 
0.9x
Morgan Stanley reviewed the transactions above for, among other things, the ratio of the AV of each transaction to each target company’s street case revenue for the 12-month period prior to the transaction announcement date (“LTM revenue”), and each target company’s projected street case revenue for the 12-month period following the transaction announcement date (“NTM revenue”). Morgan Stanley determined that, with respect to all such transactions, the low, median, mean and high for each of the street case AV/LTM revenue and the street case AV/NTM revenue were as follows:
 
AV /
LTM Revenue
 
AV/
NTM Revenue
Low
0.5x
 
0.5x
Median
1.2x
 
1.1x
Mean
1.5x
 
1.3x
High
3.3x
 
2.9x
Based on the results of this analysis and its professional judgment and experience, Morgan Stanley applied an AV/LTM revenue range of 1.0x to 2.5x to the street case for Cray’s LTM revenue, which resulted in an implied per share equity value reference range for a share of Cray common stock of $15.51 to $30.80. Based on the results of this analysis and its professional judgment and experience, Morgan Stanley applied an AV/NTM revenue range of 1.0x to 2.5x to the street case for Cray’s NTM revenue, which resulted in an implied per share equity value reference range for a share of Cray common stock of $16.39 to $32.94.
No company or transaction utilized in the precedent transactions analysis is identical to Cray or the merger. In evaluating the precedent transactions, Morgan Stanley made judgments and assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond

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Cray’s control. These include, among other things, the impact of competition on Cray’s business and the industry generally, industry growth and the absence of any material change in the financial condition and prospects of Cray and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared. The fact that points in the range of Cray’s implied value per share of Cray common stock derived from the valuation of precedent transactions were less than or greater than the merger consideration is not necessarily dispositive in connection with Morgan Stanley’s analysis of the merger consideration, but is one of many factors Morgan Stanley considered.
Premiums Paid Analysis
For reference only, and not as a component of its fairness analysis, Morgan Stanley considered, based on publicly available transaction information, the premiums paid in certain precedent transactions. Morgan Stanley compared publicly available statistics for acquisitions of publicly traded U.S. technology companies, that were announced since 2015 with greater than $1 billion in AV.
Morgan Stanley measured the premiums paid in the transactions described above over: (i) the closing price of the target company’s stock on the day prior to a public announcement related to the transaction or prior to the share price being affected by acquisition rumors or similar merger-related news (“Spot Premium”); and (ii) the highest intraday trading price of the target company’s stock during the 12-month period prior to the transaction announcement date (“LTM High Premium”). Based on the results of this analysis and its professional judgment and experience, Morgan Stanley applied a Spot Premium range of 20 percent to 40 percent to Cray’s closing share price as of May 16, 2019, resulting in an implied price per share range of $35.77 to $41.73. Based on the results of this analysis and its professional judgment and experience, Morgan Stanley applied LTM High Premium range of 0 percent to 20 percent to Cray’s closing share price as of May 16, 2019, resulting in an implied price per share range of $30.56 to $36.67.
No company or transaction utilized in the premiums paid analysis is identical to Cray or the merger. In evaluating the precedent transactions used for the premiums paid analysis, Morgan Stanley made assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond Cray’s control. These include, among other things, the impact of competition on Cray’s business and the industry generally, industry growth and the absence of any material change in the financial condition and prospects of Cray and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared. The fact that points in the range of implied value per share of Cray common stock derived from the premiums paid analysis were less than or greater than the merger consideration is not necessarily dispositive in connection with Morgan Stanley’s analysis of the merger consideration, but is one of many factors Morgan Stanley considered.
Historical Trading Range Analysis
For reference only, and not as a component of its fairness analysis, Morgan Stanley reviewed the historical trading range of shares of Cray common stock for the period commencing on May 16, 2018, and ending on May 16, 2019, and observed that the merger consideration under the Merger Agreement of $35 per share of Cray common stock was higher than the intraday trading high of $30.56 per share and the intraday trading low of $18.76 during this period.
Equity Research Analysts’ Price Target Analysis
For reference only, and not as a component of its fairness analysis, Morgan Stanley reviewed the future public trading price targets for shares of Cray common stock issued following Cray’s first quarter earnings announcement on May 7, 2019. These future share price targets reflected each analyst’s estimate as of the date of publication of the future public market trading price of shares of Cray common stock and were not discounted to reflect present values. In order to better compare the equity research analysts’ future share price targets with the merger consideration payable under the Merger Agreement, Morgan Stanley discounted the range of analysts’ future share price targets for Cray using a 9.7 percent discount rate (which rate was selected based on Morgan Stanley’s professional judgment and experience to reflect Cray’s cost of equity). This analysis indicated an implied range of equity values per share of Cray common stock of $31.89 to $32.80.
The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for shares of Cray common stock and these estimates are subject to uncertainties, including the future financial performance of Cray and future financial market conditions.
General
Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion

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of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Cray.
In performing its analyses, Morgan Stanley made numerous assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters, which are beyond the control of Cray. These include, among other things, the impact of competition on the business of Cray and the industry generally, industry growth and the absence of any material change in the financial condition and prospects of Cray and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.
Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the merger consideration pursuant to the Merger Agreement to Cray shareholders, and in connection with the delivery of its opinion to our Board. These analyses do not purport to be appraisals or to reflect the prices at which shares of Cray common stock might actually trade.
The merger consideration was determined through arm’s-length negotiations between Cray and HPE and was approved by our Board. Morgan Stanley acted as financial advisor to Cray during these negotiations but did not, however, recommend any specific form or amount of merger consideration to Cray or our Board, nor opine that any specific consideration constituted the only appropriate consideration for the merger. In addition, Morgan Stanley’s opinion did not address the relative merits of the merger as compared to any other alternative business transactions, and Morgan Stanley’s opinion expressed no opinion or recommendation as to how Cray shareholders should act or vote at the special meeting to be held in connection with the merger or whether to take any other action with respect to the merger. In addition, Morgan Stanley’s opinion did not in any manner address the prices at which shares of Cray common stock will trade at any time.
Morgan Stanley’s opinion and its presentation to our Board was one of many factors taken into consideration by our Board in deciding to approve the execution, delivery and performance by Cray of the Merger Agreement and the transaction contemplated thereby. Consequently, the analyses as described above should not be viewed as determinative of the opinion of our Board with respect to the merger consideration pursuant to the Merger Agreement or whether our Board would have been willing to agree to different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.
Cray retained Morgan Stanley based on Morgan Stanley’s qualifications, experience and expertise and its familiarity with Cray. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading and prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of HPE, Cray or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument.
Under the terms of its engagement letter, Morgan Stanley provided Cray financial advisory services and a financial opinion, described in this section and attached as Annex B to this proxy statement, in connection with the merger. Cray has agreed to pay Morgan Stanley a fee of approximately $21.6 million for its services, approximately $4.3 million of which was paid in connection with the delivery of the fairness opinion and approximately $17.3 million of which is contingent upon consummation of the merger. Cray has also agreed to reimburse Morgan Stanley for its reasonable and documented expenses, including fees of outside counsel and other professional advisors, incurred from time to time in connection with this engagement. In addition, Cray has agreed to indemnify Morgan Stanley and its affiliates, its and their respective directors, officers, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates, against certain losses, claims, damages or liabilities, including certain liabilities under the federal securities laws, relating to, arising out of or in connection with Morgan Stanley’s engagement.
In the two years prior to the date of its opinion, Morgan Stanley or its affiliates have not provided financial advisory or financing services for Cray and has not received any fees for such services.
In the two years prior to the date of its opinion, Morgan Stanley or its affiliates have provided financing services for HPE and has received fees in connection with such services of less than approximately $3 million in the aggregate. Morgan Stanley or one of its affiliates is currently a lender to HPE. In the two years prior to the date of its opinion, Morgan Stanley or its affiliates have not provided financial advisory services for HPE and has not received any fees for such services. Morgan Stanley may seek to provide financial advisory and financing services to HPE and Cray and their respective affiliates in the future and would expect to receive fees for the rendering of these services.

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Financial Projections
Our management made available prospective financial information about Cray (the “Projections”) for use in connection with the financial analyses performed by Morgan Stanley with respect to delivering its fairness opinion to our Board. Our management provided the same projections to Morgan Stanley and our Board. A subset of this information was delivered to HPE to assist with its due diligence review.
These Projections did not take into account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the Merger Agreement or the announcement thereof. Further, these Projections did not take into account the effect of any failure of the merger to occur, and should not be viewed as applicable or continuing in that context.
We do not as a matter of course make public projections as to future revenues, operating income or other results beyond the current fiscal year. The Projections are included in this proxy statement only because (1) a subset of the Projections was made available to HPE in connection with the due diligence review of Cray as described above; (2) the Projections were made available to Morgan Stanley for use in connection with its financial analysis as described in “—Opinion of Morgan Stanley & Co. LLC” beginning on page 24 of this proxy statement and (3) the Projections were made available to our Board in connection with their consideration of a potential acquisition of Cray and other strategic alternatives available to us. The information was not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. In the view of our management, the information was prepared on a reasonable basis, reflected the best estimates and judgments available to our management at the time and presented, to the best of our management’s knowledge and belief, the expected course of action and our expected future financial performance as of the date such information was prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of future results.
Although the Projections are presented with numerical specificity, they reflect numerous estimates and assumptions made by us with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to our business, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Projections reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Projections, including, but not limited to, our performance, industry performance, general business and economic conditions, customer requirements, the award of (or failure to be awarded) material customer contracts, including specific contracts for which the Company had submitted or planned to submit bids as of the date of the Projections, staffing levels, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in our reports filed with the SEC. The Projections reflect assumptions as to certain potential business decisions that are subject to change. Without limiting the generality of the foregoing, the Projections include assumptions relating to (i) the probability of winning certain significant government and other customer contracts for which the Company had submitted or planned to submit bids as of the date of the Projections, (ii) the revenue (including the conditions to the receipt thereof) the Company would receive pursuant to such contracts (if awarded) and other related financial consequences to the Company and (iii) the impact such contracts (including the identity of the customers) could have on the Company’s financial results, reputation and prospects, in each case taking into account the information available to the Company at such time. There can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than forecast. The Projections cover several years and such information by its nature becomes less reliable with each successive year. In addition, the Projections will be affected by our ability to achieve strategic goals, objectives and targets over the applicable periods. The Projections cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Projections should not be regarded as an indication that we and our financial advisors or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Projections herein should not be deemed an admission or representation by us that we view such Projections as material information; in fact we view the Projections as non-material because of the inherent risks and uncertainties associated with such long-range forecasts. The inclusion of the Projections in this proxy statement should not be regarded as an indication that the Projections will be necessarily predictive of actual future events. No representation is made by us or any other person regarding the Projections or our ultimate performance compared to such information. The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about us contained in our public filings with the SEC. See “Where You Can Find More Information” of this proxy statement for more information. In light of the foregoing factors, and the uncertainties inherent in the Projections, shareholders are cautioned not to place undue, if any, reliance on the Projections.

31


Neither our independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.
Some of the Projections are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. The summary of such information below is included solely to give shareholders access to the information that was made available to Morgan Stanley, HPE and our Board, and is not included in this proxy statement in order to influence any shareholder to make any investment decision with respect to the merger, including whether or not to seek dissenters’ rights with respect to the shares of our common stock.
The following table presents selected unaudited prospective financial information for the calendar years ending 2019 through 2024:
 
2019E
2020E
2021E
2022E
2023E
Scenario A
2024E
(1)
Scenario B
2024E
(1)
 
(in millions)
Revenue
$
465

$
800

$
925

$
1,350

$
1,500

$
1,250

$
1,050

Gross profit
148

266

321

447

493

432

360

Operating expenses(2)
213

208

220

244

259

263

254

Operating income (loss)
(80
)
43

85

187

216

150

88

EBITDA(3)
(65
)
60

103

205

234

168

106

Net income (loss)
(80
)
41

82

185

216

139

92

_______________
(1)
Scenario B assumes lower product revenue and service revenue in 2024 than Scenario A as a result of an assumed greater reduction in demand for Exascale systems after 2023 in Scenario B.
(2)
Operating expenses include projected stock-based compensation expense of $39 million in 2019, $39 million in 2020, $42 million in 2021, $45 million in 2022 and $49 million in 2023.
(3)
EBITDA consists of earnings before interest income/expense, taxes, and depreciation and amortization. EBITDA is a non-GAAP financial measure and is not intended to represent, or to be used, as a substitute for operating income and net income as a measure of operating performance or for cash flows from operations as a measure of liquidity.


32


Projected Unlevered Free Cash Flow
As part of the Projections, Cray prepared forecasts for projected EBIT, projected depreciation and amortization, projected taxes, projected capital expenditures and projected decrease (increase) in net working capital and provided such forecasts to Morgan Stanley. Using the information set forth in the Projections, Morgan Stanley calculated Projected Unlevered Free Cash Flow, a non-GAAP measure, which calculations were approved by Cray for Morgan Stanley’s use. Such calculations are summarized in the chart below.
 
2019E (Q2-Q4)
2020E
2021E
2022E
2023E
Scenario A
2024E
(1)
Scenario A
Normalized 2024E
(2)
Scenario B
2024E
(1)
Scenario B Normalized 2024E(2)
 
(in millions)
Revenue
$
393

$
800

$
925

$
1,350

$
1,500

$
1,250

$
1,250

$
1,050

$
1,050

EBIT(3)
(51
)
43

85

187

216

150

150

88

88

Depreciation and amortization
11

17

18

18

18

18

17

18

17

Taxes
(2
)
(2
)
(3
)
(4
)
(4
)
(17
)
(37
)
(3
)
(20
)
Capital expenditure
(16
)
(16
)
(46
)
(15
)
(15
)
(15
)
(17
)
(15
)
(17
)
Decrease (increase) in net working capital
(43
)
(106
)
(12
)
(60
)
8

(37
)
(3
)
(4
)
(3
)
Unlevered free cash flow(4)
(100
)
(64
)
42

127

222

98

109

84

65

_______________
(1)
Scenario B assumes lower product revenue and service revenue in 2024 than Scenario A as a result of an assumed greater reduction in demand for Exascale systems after 2023 in Scenario B.
(2)
Normalized 2024 projected results were adjusted to better reflect projected reduced revenue, which in turn impacts the anticipated long-term trends for depreciation, amortization, taxes and changes in net working capital. Depreciation and amortization and capital expenditures are assumed to be equal. Our tax rate is increased to 25.0% and 23.0% in Scenario A and Scenario B, respectively, to reflect an assumption that tax assets had been fully utilized, and net working capital is assumed to change at a lower rate.
(3)
EBIT consists of earnings before interest income/expense and taxes, and is burdened by stock-based compensation expense.
(4)
Unlevered free cash flow consists of EBIT plus depreciation and amortization, minus taxes and capital expenditures, adjusted for changes in net working capital. Unlevered free cash flow is a non-GAAP financial measure and is not intended to represent, or to be used, as a substitute for operating income and net income as a measure of operating performance or for cash flows from operations as a measure of liquidity.

In addition, the Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws.
CRAY DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS OR THE SPECIFIC PORTIONS PRESENTED TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE UNDERLYING ASSUMPTIONS ARE SHOWN TO BE IN ERROR.
Interests of Our Directors and Executive Officers in the Merger
In considering the recommendation of our Board with respect to the Merger Agreement, you should be aware that our directors and executive officers have potential interests in the merger that may be different from, or in addition to, those of our shareholders generally. These interests may create potential conflicts of interest. Our Board was aware that these interests existed and considered them, among other matters, when it approved the Merger Agreement and made its recommendation that our shareholders approve the Merger Agreement.
Overview
A description of the interests of our directors and executive officers, including interests in unvested equity-based awards and other compensation and benefit arrangements, is set forth below. These interests are quantified assuming that the merger (and subsequent qualifying termination of employment, if applicable) occurred on June 21, 2019, the latest practicable date prior to the filing of this proxy statement. This date has been selected for illustrative purposes only, and does not reflect the date on which certain events will or may occur, if at all. The general treatment of stock options, restricted stock units and restricted shares in the merger, is described in “The Merger Agreement—The Merger—Treatment of Outstanding Equity Awards” beginning on page 47 of this proxy statement. For more information on the equity holdings of Cray directors and executive officers, see the table entitled “Security Ownership of Executive Officers and Certain Beneficial Owners” beginning on page 62 of this proxy statement.

33


Treatment of Stock Options
Unvested Stock Options
Each unvested Cray stock option with an exercise price less than $35.00 that is outstanding at the effective time of the merger will be assumed by HPE and converted into an option to acquire a number of shares of HPE’s common stock (rounded down to the nearest whole number of shares) equal to the product of (i) the aggregate number of shares of Cray common stock subject to such stock option multiplied by (ii) the Equity Award Exchange Ratio. The per share exercise price of the assumed stock option will equal the quotient (rounded up to the nearest whole cent) obtained by dividing the exercise price per share of the original option by the Equity Award Exchange Ratio. The assumed stock option will continue to be subject to the same terms and conditions as applied to the corresponding Cray stock option immediately prior to the effective time (including all applicable vesting acceleration provisions).
Underwater Options
Each Cray stock option, whether vested or unvested, with an exercise price equal to or greater than the per share merger consideration of $35.00 will automatically be canceled for no consideration.
Treatment of Unvested Restricted Stock Units
Each Cray RSU award subject to service-based vesting that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) the number of shares of Cray common stock subject to such RSU award, multiplied by (ii) the Equity Award Exchange Ratio, and will remain subject to the terms and conditions as applied to such RSU award immediately prior to the effective time (including all applicable vesting acceleration provisions).
Unvested PSUs
Each Cray PSU award that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) 50% of the number of shares of Cray common stock subject to such PSU award (the remainder of such shares will be forfeited), multiplied by (ii) the Equity Award Exchange Ratio. Each such converted PSU award will be no longer be subject to performance vesting and will instead be eligible to vest subject to continued service through the one-year anniversary of the closing date of the merger. The converted PSU awards will otherwise remain subject to the terms and conditions as applied to such PSU awards immediately prior to the effective time (including all applicable vesting acceleration provisions).
Treatment of Restricted Stock Awards
Each outstanding and unvested RSA held by Cray’s non-employee directors that is outstanding and unvested as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive the per share merger consideration of $35.00 for each share of Cray common stock underlying such RSA, without interest and less applicable tax withholding.
Equity Awards Held by Non-Employee Directors
As of June 21, 2019, the assumed effective date of the merger solely for purposes of this disclosure, the estimated aggregate value of the unvested RSAs held by the non-employee directors, calculated based on the merger consideration value of $35 per share, is $1,127,280.
None of our non-employee directors hold any other unvested Company equity awards.
Existing Severance Arrangements with Cray
Management Retention Agreements
Each of our executive officers is party to a letter agreement with us (each, a “Management Retention Agreement”) that provides for certain severance payments and other benefits upon a termination of the executive officer’s employment without “cause” (as defined in each executive officer’s respective Management Retention Agreement) or his resignation for “good reason” (as defined in each executive officer’s respective Management Retention Agreement) during the period commencing on our execution of an agreement which would result in the occurrence of a change in control of Cray and ending on the date that is two years following the change in control (a “covered termination”). The merger will constitute a change in control for purposes of the Management Retention Agreements. As discussed below under “New Arrangements between Our Executive Officers and HPE,” Mr. Ungaro’s Management Retention Agreement will terminate upon the closing of the merger and he will instead be subject to the terms of his HPE Employment Agreement (as defined below).
Upon a covered termination and subject to his prior execution of a release of claims, each executive officer will become entitled to receive (i) a cash lump-sum in an amount equal to two-times his annual base salary and target annual cash incentive bonus, less applicable tax withholdings, each at the highest rate in effect over the preceding 12 months; (ii)

34


reimbursement for up to 18 months of premiums paid by the executive officer for continued medical, vision and dental benefits on behalf of himself and his covered dependents; (iii) reimbursement for up to 24 months of premiums paid by the executive officer for continued individual term life insurance; and (iv) payment or reimbursement for a designated outplacement services program. In addition, upon a covered termination, any then-outstanding stock options held by the executive officer will accelerate and become fully vested and exercisable. Each vested option held by the executive officer (after giving effect to such acceleration) will remain exercisable until the earlier of 12 months from the date of termination and the expiration of the option.
To the extent any of the foregoing payments or any other amounts payable in connection with the merger would result in excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the Code) (or any similar state or local law), then pursuant to their respective Management Retention Agreements, each of Messrs. Ungaro, Henry, Fairchild, Morreale and Piraino is entitled to an additional cash reimbursement (including a tax gross-up payment) intended to place the executive officer in the same after-tax position as he would have been had such excise tax not applied.
Restricted Stock Unit Agreements
Pursuant to the respective RSU award agreements of our executive officers (and our employees generally), upon a termination of each executive officer’s employment without “cause” (as defined in the applicable RSU award agreement) or his resignation for “good reason” (as defined in the applicable RSU award agreement) following the occurrence of a change in control of Cray, or upon such individual’s death or disability, all then-unvested RSU awards shall accelerate and vest in full. The merger will constitute a change in control for purposes of the RSU award agreements.
Pursuant to the executive officers’ respective PSU award agreements, upon the closing of the merger, 50% of the total shares subject to each PSU award shall be earned and eligible to vest on the one-year anniversary of the closing of the merger, and the remaining shares subject the PSU award will be forfeited. Upon a termination of an executive officer’s employment without “cause” (as defined in each executive officer’s respective PSU award agreement) or his resignation for “good reason” (as defined in each executive officer’s respective PSU award agreement) following the occurrence of a change in control of Cray, all then-unvested PSU awards shall accelerate and vest in full. The merger will constitute a change in control for purposes of the PSU award agreements.
See “—Interests of Our Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to Our Named Executive Officers” beginning on page 36 of this proxy statement for an estimate of the value of the unvested equity awards as well as the severance payments and benefits that may become payable upon a covered termination of our named executive officers. As of June 21, 2019, the assumed effective date of the merger solely for purposes of this disclosure, the estimated aggregate value of the unvested equity awards held by Cray’s executive officer who is not a named executive officers is as follows: (i) unvested Cray stock options equal to $2,851; and (ii) unvested RSU and PSU awards equal to $739,375. Upon a covered termination pursuant to the terms of his Management Retention Agreement, he would be entitled to receive cash severance payments of $742,000 and healthcare and other benefits with an estimated value of $45,497.
New Arrangements between Our Executive Officers and HPE
Peter Ungaro
Mr. Ungaro has entered into an employment agreement with HPE pursuant to which Mr. Ungaro will become a member of the management of HPE’s Hybrid IT Group following the merger (“HPE Employment Agreement”). Pursuant to his HPE Employment Agreement, Mr. Ungaro will receive an annual base salary of $600,000 and an annual target bonus opportunity of 125% of eligible earnings (up to a maximum of 312.5% of eligible earnings for over-achievement) pursuant to HPE’s applicable bonus plan, which will be pro-rated for Mr. Ungaro’s initial year of service.
Treatment of Cray Unvested Equity Awards
Notwithstanding anything to the contrary in the Merger Agreement or any agreement between Mr. Ungaro and Cray, Mr. Ungaro will forfeit all of his unvested stock options and unvested RSUs (after giving effect to the conversion of PSUs, as described above) as of the closing of the merger in exchange for (i) a lump-sum cash payment equal to 50% of the aggregate value of Mr. Ungaro’s unvested Cray equity awards, payable within five business days following the closing of the merger; and (ii) a cash-based award in an amount equal to the remaining 50% of the aggregate value of Mr. Ungaro’s unvested Cray equity awards, which will vest and become payable upon the earlier of (A) the first anniversary of the closing of the merger, subject to Mr. Ungaro’s continued employment on such date and (B) Mr. Ungaro’s termination of employment by HPE without “cause,” Mr. Ungaro’s resignation for “good reason” or due to his death or “disability” (as such terms are defined in the HPE Employment Agreement, an “HPE covered termination”).

35


HPE Retention Awards
Pursuant to his HPE Employment Agreement, Mr. Ungaro will receive a cash-based retention award in the aggregate amount of $2.0 million, less applicable tax withholding, which will vest and become payable with respect to 50% of the total award, on each of the first and second anniversaries of the closing of the merger, in each case, subject to Mr. Ungaro’s continued employment through such date, or upon Mr. Ungaro’s earlier HPE covered termination.
In addition, subject to approval by the board of directors of HPE, Mr. Ungaro will receive three successive annual grants of restricted stock units to acquire shares of HPE common stock, each valued at $3.0 million as of the date of grant (each, an “HPE Annual Equity Grant”). Each HPE Annual Equity Grant will vest with respect to one-third of the total underlying shares of HPE common stock on each anniversary of the grant date, subject to Mr. Ungaro’s continued service to HPE through the applicable vesting date. The HPE Annual Equity Grants may be eligible for accelerated vesting upon a qualifying termination of employment pursuant to the terms of the HPE Company Severance and Long-Term Incentive Change in Control Plan for Executive Officers (“HPE Severance Plan”).
HPE PSUs
Subject to his continued employment through the closing of the merger, HPE will grant Mr. Ungaro a number of restricted stock units to acquire shares of HPE common stock equal to the quotient of $1.0 million, divided by the closing price of the HPE common stock on the day immediately prior to the Closing Date (“HPE PSUs”). The HPE PSUs will vest on the third anniversary of the Closing Date, subject to HPE’s achievement of certain performance milestones and Mr. Ungaro’s continued employment through such date. In the event of over-achievement of the performance milestones, and subject to certain approvals by HPE, Mr. Ungaro will be eligible to earn up to 300% of the shares underlying the HPE PSUs. The HPE PSUs may be eligible for accelerated vesting upon a qualifying termination of employment pursuant to the terms of the HPE Severance Plan.
The HPE Employment Agreement supersedes Mr. Ungaro’s Management Retention Agreement in its entirety except with respect to Mr. Ungaro’s rights to cash reimbursement (including a tax gross-up payment) for any excise taxes incurred by Section 4999 of the Code with respect to amounts payable to Mr. Ungaro in connection with the merger (including pursuant to the HPE Employment Agreement) and any related legal fees and other costs.
Other Arrangements between Our Executive Officers and HPE
As of the date of this proxy statement, except as disclosed above, none of our executive officers have entered into, or committed to enter into, any arrangements or other understandings regarding continued employment or service to HPE following the merger. While it is possible that HPE may enter to into such arrangements in the future, at this time there can be no assurance that HPE will enter into any employment or other arrangements with our management, or if so, of the terms and conditions of any such arrangements.
Quantification of Potential Payments and Benefits to Our Named Executive Officers
In accordance with Item 402(t) of Regulation S-K, the table below sets forth the amount of payments and benefits that each of our named executive officers would or may receive in connection with the merger. The compensation described below is based on the employment and equity arrangements of each named executive officer with us and does not include compensation that is contingent upon services provided to HPE following the closing of the merger. Accordingly, see “—Interests of Our Directors and Executive Officers in the Merger” above, for a description of the employment agreement entered into by Mr. Ungaro with HPE that will become effective upon the closing of the merger.
Please note that the amounts reported below are based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described in footnotes to the table. For example, we have assumed, among other matters, that (i) the effective time of the merger is June 21, 2019, the latest practicable date prior to the filing of this proxy statement, and (ii) each named executive officer experiences a “double-trigger” covered termination (a termination without “cause,” or resignation for “good reason”), in either case immediately following such time. The actual amounts payable to our named executive officers will depend on whether the named executive officer experiences a covered termination, the date of termination (if any) and the terms of the plans or agreements in effect at such time, and accordingly may differ materially from the amounts set forth below.

36


Golden Parachute Compensation
Named Executive Officer
 
Cash ($)(1)
 
Equity
Awards ($)(2)
 
Perquisites/
Benefits ($)(3)
 
Tax
Reimbursement ($)(4)
 
Total ($)
Peter J. Ungaro(5)
 
2,700,000
 
10,737,773
 
73,759
 
3,442,366
 
16,953,898
Brian C. Henry
 
1,320,000
 
4,843,481
 
94,003
 
 
6,257,484
Charles A. Morreale
 
1,072,500
 
2,871,081
 
84,979
 
1,384,211
 
5,412,771
Michael C. Piraino
 
1,072,500
 
3,206,322
 
73,759
 
 
4,352,581
Efstathios Papaefstathiou
 
1,320,000
 
4,404,830
 
73,759
 
 
5,798,589
_______________
(1)
Cash. Pursuant to their respective Management Retention Agreements, upon a “double-trigger” covered termination (a termination without “cause,” or resignation for “good reason”) of employment during the period commencing on the date of the Merger Agreement and ending 24 months following the consummation of the merger, each named executive officer will become entitled to a lump-sum cash severance payment consisting of two times the sum of the named executive officer’s annual base salary and annual target cash bonus, each at the highest rate in effect over the preceding 12 months and less applicable withholdings.
Named Executive Officer
 
Base Salary Component of Severance ($)
 
Bonus Component of Severance ($)
 
Total ($)
Peter J. Ungaro
 
1,080,000
 
1,620,000
 
2,700,000
Brian C. Henry
 
800,000
 
520,000
 
1,320,000
Charles A. Morreale
 
650,000
 
422,500
 
1,072,500
Michael C. Piraino
 
650,000
 
422,500
 
1,072,500
Efstathios Papaefstathiou
 
800,000
 
520,000
 
1,320,000
(2)
Equity. Consistent with the terms of each applicable award agreement, each PSU award, including those held by our named executive officers, will become earned and eligible to vest as to 50% of the total number of shares subject to the award upon the closing of the merger and the remaining shares will be forfeited. The PSUs will vest subject to the holder’s continued service through the first anniversary of the merger; provided that they will vest in full upon the holder’s earlier “double-trigger” covered termination. In addition, pursuant to their respective award agreements, upon a “double trigger” covered termination of employment following the merger, each named executive officer will become entitled to full accelerated vesting of any then-unvested RSU awards.

Pursuant their respective Management Retention Agreements, upon a “double-trigger” covered termination of employment during the period commencing on the date of the Merger Agreement and ending 24 months following the consummation of the merger, each named executive officer will become entitled to full accelerated vesting of any then-unvested stock options and RSAs. Any vested stock options will remain exercisable until the earlier of 12 months following the date of the covered termination and the tenth anniversary of the date of grant of such option.

The following table sets forth the value of each type of unvested equity-based award held by our named executive officers, calculated based on the merger consideration of $35.00 per share.
Named Executive Officer
 
Value of Unvested Stock Options ($)
 
Value of Unvested RSUs and PSUs ($)
 
Total ($)
Peter J. Ungaro
 
1,210,668
 
9,527,105
 
10,737,773
Brian C. Henry
 
475,481
 
4,368,000
 
4,843,481
Charles A. Morreale
 
244,331
 
2,626,750
 
2,871,081
Michael C. Piraino
 
290,822
 
2,915,500
 
3,206,322
Efstathios Papaefstathiou
 
406,080
 
3,998,750
 
4,404,830

37


(3)
Perquisites/Benefits. Pursuant to their respective Management Retention Agreements, upon a “double-trigger” covered termination of employment during the period commencing on the date of the Merger Agreement and ending 24 months following the consummation of the merger, each named executive officer will become entitled to reimbursement for (i) up to 18 months of premiums paid by executive officer for continued medical, vision and dental benefits on behalf of himself and his covered dependents; (ii) reimbursement for up to 24 months of premiums paid by the named executive officer for continued individual term life insurance; and (iii) payment or reimbursement for a designated outplacement services program. The following table sets forth the estimated value of each component of the foregoing benefits.
Named Executive Officer
 
Health Insurance Premiums ($)
 
Life Insurance Premiums ($)
 
Outplacement Services ($)
 
Total ($)
Peter J. Ungaro
 
44,155
 
17,604
 
12,000
 
73,759
Brian C. Henry
 
44,155
 
37,848
 
12,000
 
94,003
Charles A. Morreale
 
44,155
 
28,824
 
12,000
 
84,979
Michael C. Piraino
 
44,155
 
17,604
 
12,000
 
73,759
Efstathios Papaefstathiou
 
44,155
 
17,604
 
12,000
 
73,759
(4)
Tax Reimbursements. To the extent any compensatory amounts payable to each of Messrs. Ungaro, Henry, Morreale or Piraino in connection with the merger would result in excise taxes imposed by Section 280G and Section 4999 of the Code, then pursuant to their respective Management Retention Agreements, each of such named executive officers is entitled to an additional cash reimbursement (including a tax gross-up payment) intended to place the executive officer in the same after-tax position as he would have been had such excise tax not applied. Amounts reflected are estimates of the potential tax gross-up payments that may become payable with respect to the equity acceleration, severance payments and other benefits described above only (including the assumptions related thereto) and may differ materially from any actual tax gross-up paid by the Company.
(5)
As described under “—Interests of Our Directors and Executive Officers in the Merger,” Mr. Ungaro entered into an HPE Employment Agreement to become effective upon the closing of the merger. Mr. Ungaro’s HPE Employment Agreement will supersede the terms of his Management Retention Agreement with Cray, except to the extent of any tax reimbursements described in Footnote 4. The table above does not include amounts payable under the new employment arrangements with HPE following the merger (including post-closing salary, annual incentive compensation, retention awards and severance payable to Mr. Ungaro upon a certain terminations of employment with HPE).

Indemnification and Insurance
The Merger Agreement provides for indemnification and exculpation rights with respect to liabilities for acts or omissions occurring at or prior to the Effective Time, as well as related advancement of expenses and insurance rights, in favor of the current and former directors and officers of Cray and our subsidiaries (collectively, “indemnitees”). Specifically, HPE and the Surviving Corporation have agreed to indemnify and advance expenses to the indemnitees to the fullest extent permitted by applicable law with respect to any action, claim, suit or other legal proceeding based in whole or in part on, or arising in whole or in part out of, the fact that the indemnitee is or was a director or officer of Cray or any of its subsidiaries. For a period of six years after the Effective Time, the certificate of incorporation and bylaws of the Surviving Corporation must contain provisions no less favorable with respect to indemnification, exculpation, limitation of liabilities and advancement of expenses with respect to our present and former directors and officers and our subsidiaries in respect of acts or omissions occurring or alleged to have occurred at or prior to the Effective Time than those set forth in the articles of incorporation and bylaws of Cray as of the date of the Merger Agreement.
For a period of six years from the Effective Time, HPE must maintain in effect Cray’s current directors’ and officers’ liability insurance policies in respect of acts or omissions occurring at or prior to the Effective Time, covering each indemnitee on terms with respect to such coverage and amounts no less favorable in the aggregate than those of such policies in effect on the date of the Merger Agreement, so long as the aggregate annual premium for such insurance policies does not exceed 300% of the annual premium paid by Cray for coverage for its last full fiscal year (“Maximum Premium”), and if the annual premiums of such insurance exceed the Maximum Premium, then if and to the extent available commercially, HPE or the Surviving Corporation must obtain a policy with the greatest coverage available for a cost not exceeding such amount. However, in lieu of maintaining the foregoing insurance after the Effective Time, Cray (prior to the date on which the Effective Time occurs) may (after reasonable consultation with HPE), or at HPE’s written request prior to the such date, Cray will, or HPE or the Surviving Corporation upon the Effective Time may, obtain a prepaid (“tail”) directors’ and officers’ liability insurance policy in respect of acts or omissions occurring at or prior to the Effective Time for six years from the Effective Time, covering each person who was covered by such policies on the date of the Merger Agreement on terms with respect to such coverage and amounts no less favorable than those of such policies in effect on the date of the Merger Agreement, so long as the maximum premium for such tail insurance policy does not exceed the Maximum Premium.
Dissenters’ Rights
General
Under Chapter 23B.13 of the Washington Business Corporation Act (“WBCA”), holders of shares of our common stock are entitled to dissent from, and obtain payment of the fair value of their shares in cash together with accrued interest from the effective time of the merger in the event of the completion of the merger, instead of receiving the merger consideration

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they would otherwise be entitled to pursuant to the Merger Agreement. The following summarizes the material rights of holders of shares of our common stock under Chapter 23B.13. You should read the applicable sections of Chapter 23B.13, a copy of which is attached as Annex C to this proxy statement, and which governs dissenters’ rights. The summary below is qualified in its entirety by reference to Chapter 23B.13.
Pursuant to Chapter 23B.13.200 of the WBCA, when a proposed merger creating dissenters’ rights is to be submitted to a vote at a meeting of shareholders, as in the case at the Cray special meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under Chapter 23B.13 and must be accompanied by a copy of Chapter 23B.13. The notice of special meeting included with this proxy statement constitutes notice to the holders of shares of our common stock of their dissenters’ rights and a copy of Chapter 23B.13 is attached as Annex C to this proxy statement.
If you are contemplating the possibility of exercising your dissenters’ rights in connection with the merger, you should carefully review the text of Chapter 23B.13. If you do not fully and precisely satisfy the procedural requirements of Chapter 23B.13, you will lose your dissenters’ rights. If any holder of shares of our common stock who asserts dissenters’ rights under the WBCA withdraws or loses (through failure to perfect or otherwise) the right to obtain payment for such holder’s shares under Chapter 23B.13, then such holder’s shares will be converted, or will be treated as if they had been converted, into the right to receive the merger consideration, without interest and subject to any applicable withholding of taxes. We will not provide you with any notice regarding your dissenters’ rights other than as described in this proxy statement and the notice of special meeting included with this proxy statement.
Requirements for Exercising Dissenters’ Rights
If you wish to assert your statutory dissenters’ rights, you must:
deliver to Cray, before the vote is taken at our special meeting regarding the proposal to approve the Merger Agreement, written notice of your intent to demand payment for your shares of our common stock if the merger is effected, which notice must be separate from your proxy. Your vote against the proposal to approve the Merger Agreement alone will not constitute written notice of your intent to assert your dissenters’ rights;
not vote your shares in favor of approval of the Merger Agreement; and
follow the statutory procedures for perfecting dissenters’ rights under Chapter 23B.13, which are summarized under “Dissenters’ Rights Procedures” below.
If you fail to comply with these requirements, and if the Merger Agreement is then approved by our shareholders and the merger is completed, your shares of our common stock will be converted into the right to receive the merger consideration, without interest and subject to any applicable withholding of taxes, and you will have no dissenters’ rights with respect to your shares of our common stock.
Written notice of your intent to assert dissenters’ rights must be delivered to Cray at:
Cray Inc.
Attn: Corporate Secretary
901 Fifth Avenue, Suite 1000
Seattle, WA 98164
Such written notice must be delivered before the vote to approve the Merger Agreement is taken at the Cray special meeting. Your written notice to demand payment should specify your name and mailing address, the number of shares of Cray common stock you own, and that you intend to demand payment of the “fair value” of your shares of Cray common stock if the Merger Agreement is approved.
Vote
You must not vote in favor of, or consent in writing to, the approval of the Merger Agreement. A vote in favor of the approval of the Merger Agreement, by proxy, via the Internet, by telephone or in person, will constitute a waiver of your dissenters’ rights in respect of the shares so voted and will nullify any previously filed written notices of your intent to assert dissenters’ rights. A proxy that does not contain voting instructions will, unless revoked, be voted in favor of the approval of the Merger Agreement. Therefore, a shareholder who votes by proxy and who wishes to exercise dissenters’ rights must vote against the Merger Agreement or abstain from voting on the Merger Agreement.

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Termination of Dissenters’ Rights
Your right to obtain payment of the fair value of your shares of Cray common stock under Chapter 23B.13 will terminate if:
the merger is abandoned or rescinded;
a court having jurisdiction permanently enjoins or sets aside the merger; or
your demand for payment is withdrawn with Cray’s written consent.
Dissenters’ Rights Procedures
If the Merger Agreement is approved by our shareholders, within 10 days after the effective date of the merger, Cray will send written notice regarding the proper procedures for dissenting to all shareholders who have given written notice under Chapter 23B.13 to the address above and have not voted in favor of approval of the Merger Agreement. The notice will:
state where the demand for payment must be sent and where and when the certificates representing certificated shares of Cray common stock must be deposited;
contain information for holders of uncertificated shares as to what extent transfer of the shares will be restricted after the payment demand is received;
include a form for demanding payment that includes the date of the first announcement to the news media or to shareholders of the terms of the merger (which was May 17, 2019) and requires that the person asserting dissenters’ rights certify whether or not the person acquired beneficial ownership of Cray common stock before that date;
indicate the date by which Cray must receive a payment demand, which date will not be fewer than 30 or more than 60 days after the date the written notice is delivered to shareholders; and
include a copy of Chapter 23B.13.
If you wish to assert dissenters’ rights, no later than the date set forth in the notice described above you must demand payment, certify whether you acquired beneficial ownership of your shares before May 17, 2019, and deposit your Cray share certificates in accordance with the terms of the notice. Failure to do so by the date set forth in the notice will cause you to lose the right to obtain payment of the fair value for your shares under Chapter 23B.13.
If the merger is not consummated within 60 days after the date set for demanding payment and depositing share certificates, then Cray will be required to return all deposited certificates and release any transfer restrictions imposed on uncertificated shares. If, after returning the deposited certificates and releasing transfer restrictions, the parties to the Merger Agreement wish to consummate the merger, Cray must send a new dissenters’ rights notice and repeat the payment demand procedure.
Within 30 days after the later of (a) the effective date of the merger and (b) the date the payment demand is received, Cray shall pay each dissenting shareholder who complied with the payment demand and related requirements of Chapter 23B.13.230 of the WBCA (other than dissenting shareholders who acquired their shares of Cray common stock after May 17, 2019, if Cray elects to withhold payment as described below) the amount that Cray estimates to be the fair value of the shareholder’s shares, plus accrued interest. The payment will be accompanied by:
financial data relating to Cray, including a balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any;
an explanation of how Cray estimated the fair value of the shares;
an explanation of how Cray calculated the interest;
a statement of the dissenter’s right to demand supplemental payment if such shareholder believes that the amount paid is less than the fair value of the shares or under certain other circumstances enumerated in Chapter 23B.13.280 and described below; and
a copy of Chapter 23B.13.
For dissenting shareholders who were not the beneficial owners of their shares of Cray common stock before May 17, 2019, Cray may elect to withhold payment under Chapter 23B.13. To the extent that Cray so elects, after consummating the merger, Cray shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of the dissenter’s demand. Cray will send with its offer an explanation of how it estimated the fair value of the shares, an explanation of how the interest was calculated, and a statement of the

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dissenter’s right to demand payment of the dissenter’s own estimate of the dissenter’s shares and the amount of interest due if such dissenter believes that the amount offered is less than the fair value of the shares or under certain other circumstances enumerated in Chapter 23B.13.280 and described below.
If you believe that the amount paid or offered by Cray is less than the fair value of your shares or believe that the interest due is incorrectly calculated, or if Cray fails to make payment for your shares within 60 days after the date set for demanding payment or the merger is not consummated and Cray does not return the deposited share certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment, you must, within 30 days of the payment or offer for payment, deliver notice to Cray in writing informing it of your own estimate of the fair value of your shares and the amount of interest due, and demanding payment of this estimate, less any amount Cray has already paid under Chapter 23B.13. If any dissenting shareholder’s demand for payment of such dissenting shareholder’s own estimate of the fair value of the shares is not settled within 60 days after receipt by Cray of such shareholder’s demand for payment, Chapter 23B.13 requires that Cray commence a proceeding in King County Superior Court and petition the court to determine the fair value of the shares and accrued interest, naming all the dissenting shareholders whose demands remain unsettled as parties to the proceeding. If Cray does not commence the proceeding within the 60-day period, it will pay each dissenter whose demand remains unsettled the amount demanded.
The jurisdiction of the court in which the proceeding is commenced will be plenary and exclusive. The court may appoint one or more appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers will have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. The fair value of the shares as determined by the court may be less than, equal to or greater than the value of the merger consideration to be issued to non-dissenting shareholders for Cray common stock under the terms of the Merger Agreement if the merger is consummated. Shareholders should be aware that investment banking opinions as to the fairness, from a financial point of view, of the consideration payable in a merger are not opinions as to fair value under Chapter 23B.13. Each dissenter made a party to the proceeding is entitled to a judgment (a) for the amount, if any, by which the court finds the fair value of the dissenter’s shares, plus interest, exceeds the amount paid by Cray, or (b) for the fair value, plus accrued interest, of the dissenter’s after-acquired shares for which Cray elected to withhold payment pursuant to Chapter 23B.13.
The court will also determine the costs and expenses of the court proceeding and assess them against Cray, except that the court may assess the costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment under Chapter 23B.13. If the court finds that Cray did not substantially comply with the requirements of Chapters 23B.13.200 through 23B.13.280 of the WBCA, the court may also assess against Cray any fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable. The court may also assess such fees and expenses against any party if the court finds that the party has acted arbitrarily, vexatiously or not in good faith with respect to dissenters’ rights. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against Cray, the court may award to counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.
A record shareholder may assert dissenters’ rights as to fewer than all of the shares registered in the shareholder’s name only if the shareholder dissents with respect to all shares beneficially owned by any one person and delivers to Cray a notice of the name and address of each person on whose behalf the shareholder asserts dissenters’ rights. The rights of a partially dissenting record shareholder are determined as if the shares as to which the dissenter dissents and the dissenter’s other shares were registered in the names of different shareholders. Beneficial owners of Cray common stock who desire to assert dissenters’ rights as to shares held on the beneficial owners’ behalf (a) must submit to Cray the record shareholder’s consent to the dissent not later than the time the beneficial shareholder asserts dissenters’ rights, which consent shall be set forth either in a record or, if Cray has designated an address, location or system to which the consent may be electronically transmitted and the consent is electronically transmitted to the designated address, location or system, in an electronically transmitted record and (b) does so with respect to all shares of which such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote.
For purposes of Chapter 23B.13, “fair value” with respect to dissenters’ shares means the value of the shares of Cray common stock immediately before the effective date of the merger, excluding any appreciation or depreciation in anticipation of the merger, unless exclusion would be inequitable. “Interest” means interest from the effective date of the merger until the date of payment, at the average rate currently paid by Cray on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.
Delisting and De-registration of Cray Common Stock
If the merger is completed, our common stock will be de-listed from and will no longer be traded on The Nasdaq Global Select Market and will be de-registered under the Exchange Act. Following the closing of the merger, we will no longer be an independent public company.

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Certain U.S. Federal Income Tax Consequences of the Merger
The following discussion summarizes certain U.S. federal income tax consequences of the merger to holders of our common stock. This discussion is based upon the provisions of the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein.
This discussion assumes that holders of our common stock hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of our common stock in light of such holder’s particular circumstances, nor does it discuss the special considerations applicable to holders of our common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions or broker-dealers, mutual funds, tax-exempt organizations, insurance companies, dealers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting, persons required to conform their tax reporting of income to their financial statements under Section 451(b) of the Code, controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, holders who acquired their Cray common stock through the exercise of options or otherwise as compensation, holders who hold their Cray common stock as part of a hedge, straddle, constructive sale or conversion transaction, holders who acquired Cray common stock through a 401(k), deferred compensation plan or retirement plan, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, non-U.S. holders who own, actually or constructively, more than 5% of our common stock, and holders who exercise dissenters’ rights. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any aspect of non-U.S., state, local, alternative minimum, estate, gift or other tax law that may be applicable to a holder.
This discussion provides only a general summary of the material U.S. federal income tax consequences of the merger to holders of our common stock. It is not a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws are complex and subject to varying interpretation. Accordingly, the Internal Revenue Service (“IRS”) may not agree with the tax consequences described in this proxy statement. No ruling has been or will be sought from the IRS as to the tax consequences of the merger.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partnership. Partnerships holding our common stock and partners in such partnerships should consult their own tax advisors regarding the consequences of the merger.
All holders should consult their own tax advisor to determine the particular tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws or tax treaties) of the receipt of cash in exchange for shares of our common stock pursuant to the merger.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Cray common stock that is, for U.S. federal income tax purposes:
an individual citizen or individual resident of the United States;
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
a trust if (i) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
an estate the income of which is subject to U.S. federal income tax regardless of its source.
A “non-U.S. holder” is a beneficial owner of our common stock that is not a U.S. holder or an entity classified as a partnership for U.S. tax purposes.
U.S. Holders
The exchange of our common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger and such U.S. holder’s adjusted tax basis in the shares that are converted into cash pursuant to the merger. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the holder’s holding period for such shares exceeds one year as of the date of the merger. Long-term capital gains of certain non-corporate U.S. holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder

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acquired different blocks of our common stock at different times or different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of our common stock.
Non-U.S. Holders
Any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:
the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may also be subject to branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty);
the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% flat rate tax (unless reduced or eliminated by an applicable income tax treaty) on the non-U.S. holder’s net gain realized in the merger, which may be offset by certain U.S. source capital losses of the non-U.S. holder recognized in the same taxable year, if any; or
Cray is or has been a “U.S. real property holding corporation” within the meaning of Section 897(c)(2) of the Code at any time during the shorter of the five-year period preceding the merger or the period that the non-U.S. holder held our common stock and certain other conditions are satisfied. We believe that we have not been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the five-year period preceding the merger.
Information Reporting and Backup Withholding
Payments made in exchange for shares of our common stock generally will be subject to information reporting unless the holder is an “exempt recipient” and may also be subject to backup withholding at a rate of 24%. To avoid backup withholding, U.S. holders that do not otherwise establish an exemption should return a properly completed and executed IRS Form W-9 included with the letter of transmittal, certifying that such holder is a United States person, that the taxpayer identification number provided in the IRS Form W-9 is correct, and that such holder is not subject to backup withholding. Non-U.S. holders should submit a properly completed and executed applicable IRS Form W-8, which may be obtained at www.irs.gov, in order to avoid backup withholding. Such holders should consult their tax advisors to determine which IRS Form W-8 is appropriate. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that the holder furnishes the required information to the IRS in a timely manner.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX CONSEQUENCES RELEVANT TO CRAY SHAREHOLDERS. THE TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER. YOU SHOULD CONSULT YOUR TAX ADVISOR CONCERNING THE U.S. FEDERAL, STATE, LOCAL, NON-U.S. INCOME OR OTHER TAX CONSEQUENCES OF THE MERGER TO YOU.
Regulatory Matters
Antitrust Laws
HSR Act
The closing of the merger is subject to expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (HSR Act) and the rules thereunder. Under the HSR Act and the rules thereunder, the merger may not be completed unless certain information has been furnished to the Antitrust Division of the U.S. Department of Justice and to the Federal Trade Commission and the applicable waiting period expires or is terminated. The HSR Act requires the parties to observe a 30-day waiting period (initial 30-day waiting period), during which time the merger may not be consummated, unless that initial 30-day waiting period is terminated early. If, before the expiration of the initial 30-day waiting period, the Antitrust Division of the U.S. Department of Justice or the Federal Trade Commission issues a request for additional information, the parties may not consummate the transaction until 30 days after Cray and HPE have each substantially complied with such request for additional information (unless this period is shortened pursuant to a grant of earlier termination or extended by agreement between the parties and the relevant antitrust agency). On June 14, 2019, Cray and HPE filed their respective notification and report forms pursuant to the HSR Act with the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission.
At any time before or after the effective time of the merger, the Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, state attorneys general or private parties can file suit under the antitrust laws to enjoin

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consummation of the merger, to impose conditions on the merger, or to require divestitures. There can be no assurance that the merger will not be challenged on antitrust grounds or, if such a challenge is made, that the challenge will not be successful.
German Antitrust Laws
The Act against Restraints of Competition requires HPE and Cray to file a notification with the Federal Cartel Office (the FCO) and provides that the merger shall not occur until a one month waiting period, or in case of an in-depth investigation, a waiting period of four months, from submission of a complete notification to the FCO has expired or the FCO grants an earlier clearance decision. The parties will file a notification with the FCO in connection with the merger as soon as possible.
Austrian Antitrust Laws
Under the Austrian Cartel Act (Cartel Act), the merger may not be completed until the expiration of a four-week waiting period following the filing of a notification with the Austrian Federal Competition Authority (FCA), unless the waiting period has expired or the FCA grants an earlier clearance decision. The parties will file a notification with the FCA in connection with the merger as soon as possible. Under the Cartel Act, the required four-week waiting period will expire if neither the FCA nor the Federal Cartel Prosecutor has lodged an appeal for “Phase II” proceedings within such four-week period. If a Phase II proceeding is undertaken, the waiting period with respect to the merger would be extended for an addition period of up to five months.
Japanese Antitrust Laws
The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (Antimonopoly Act) requires HPE and Cray to file a notification with the Japan Fair Trade Commission (JFTC) and provides that the merger shall not occur until a 30-day waiting period (Phase I) from submission of a complete notification to the JFTC has expired or the JFTC grants an earlier clearance decision. The parties will file a notification with the JFTC in connection with the merger as soon as possible. Under the Antimonopoly Act, the transaction will be deemed to have been cleared if the JFTC does not issue a report request during Phase I. If the JFTC issues a report request during Phase I, the JFTC will have until the later of 120 days from the date of acceptance of the notification or 90 days from the date when the parties completed the response to the report request to decide whether to clear or prohibit the transaction.
Korean Antitrust Laws
The Monopoly Regulation and Fair Trade Act of Korea (MRFTA) requires HPE to file a notification with the Korea Fair Trade Commission (KFTC) and provides that the merger shall not occur until a 30-day waiting period from submission of a complete notification to the KFTC has expired and the KFTC has granted clearance. The parties will file a notification with the KFTC in connection with the merger as soon as possible. Under the MRFTA, the KFTC may extend the review period by an additional 90 days, if necessary.
Litigation Relating to the Merger
On June 19, 2019, a putative shareholder class action complaint was filed in the Superior Court of the State of Washington for King County against Cray and the individual members of our Board, captioned Keith v. Cray Inc., et al., Case No. 19-2-16273-2 SEA (the “Keith Complaint”), asserting that the Board breached its fiduciary duties in connection with the proposed HPE transaction by, among other things, allegedly conducting a flawed and conflicted sales process and by causing to be disseminated a materially incomplete and misleading proxy statement. On June 24, 2019, a similar putative shareholder class action complaint was filed in the Superior Court of the State of Washington for Snohomish County against Cray and the individual members of our Board, captioned Delman v. Ungaro, et al. (the “Delman Complaint” and together with the Keith Complaint, the “Washington Complaints”).
On June 20, 2019, a putative shareholder class action complaint was filed in the United States District Court, District of Delaware, against Cray, the individual members of our Board, HPE and Merger Sub, captioned Davie v. Cray Inc. et al., Case No. 1:19-cv-01148-UNA (the “Davie Complaint”). On June 21, 2019, another putative shareholder class action complaint was filed in the same court against Cray, the individual members of our Board, HPE and Merger Sub, captioned Kent v. Cray Inc. et al., Case No. 1:19-cv-01157-UNA (the “Kent Complaint”), and on June 24, 2019, an individual action was filed in the same court against the same defendants, captioned Stein v. Cray Inc. et al., Case No. 1:19-cv-01188-UNA (the “Stein Complaint” and together with the Davie Complaint and Kent Complaint, the “Delaware Complaints”). The Delaware Complaints each assert that defendants violated Sections 14(a) and 20(a) of the Exchange Act by making untrue statements of material fact and omitting certain material facts related to the contemplated merger in the proxy statement.
The Washington Complaints and Delaware Complaints seek, among other things, an order enjoining defendants from consummating the merger, money damages and an award of attorneys’ and experts’ fees. Cray believes that the lawsuits

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are without merit and intends to vigorously defend those actions. Cray may become subject to similar litigation relating to the merger in these or other jurisdictions.

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THE MERGER AGREEMENT
The following summary describes certain material provisions of the Merger Agreement. This summary is not complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. We urge you to read carefully the Merger Agreement in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you.
The Merger Agreement and the following description have been included to provide you with information regarding the terms of the Merger Agreement and is not intended to modify or supplement any factual disclosures about Cray, HPE or Merger Sub in Cray’s public reports filed with the SEC. Such information can be found elsewhere in this proxy statement and in the other public filings Cray makes with the SEC, which are available, without charge, at www.sec.gov.
In particular, the assertions embodied in the representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specified dates, were solely for the benefit of the parties to the Merger Agreement, and are subject to limitations agreed upon by the parties to the Merger Agreement, including being qualified by confidential disclosure letter provided by Cray to HPE and Merger Sub in connection with the execution of the Merger Agreement. The disclosure letter contains information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement have been made for the purposes of allocating risk between the parties to the Merger Agreement instead of establishing matters of fact. Accordingly, the representations and warranties in the Merger Agreement may not constitute the actual state of facts about Cray, HPE or Merger Sub. The representations, warranties and covenants set forth in the Merger Agreement may also be subject to a contractual standard of materiality different from that generally applicable under federal securities laws or from what may be viewed as material to shareholders. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, or covenants or any descriptions thereof as characterizations of the actual state of facts or the actual condition of Cray, HPE or Merger Sub, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in our public disclosures. The Merger Agreement is described in this proxy statement and attached as Annex A only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Cray, HPE or Merger Sub, or their respective businesses.
The Merger
Subject to the terms and conditions of the Merger Agreement and in accordance with Washington law, at the effective time of the merger, Merger Sub, a wholly owned subsidiary of HPE and a party to the Merger Agreement, will merge with and into Cray. Cray will survive the merger as a wholly owned subsidiary of HPE and the separate corporate existence of Merger Sub will cease.
Effective Time; Closing
The merger will become effective upon the filing of the articles of merger with the Secretary of State of the State of Washington or at such other date and time as may be agreed upon by the parties and specified in the articles of merger. The filing of the articles of merger will occur on the date of closing, which will take place on the third business day after the satisfaction or waiver of the conditions to the closing of the merger set forth in the Merger Agreement and described in this proxy statement, or at such other time as is agreed to in writing between the parties. Although Cray expects to complete the merger as soon as possible following the special meeting of our shareholders (if our shareholders approve the Merger Agreement) and the satisfaction or waiver of the other conditions to the closing of the merger set forth in the Merger Agreement, Cray cannot specify when or assure that Cray and HPE will satisfy or waive all of the conditions to the closing of the merger. See “—Conditions to the Closing of the Merger” beginning on page 58 of this proxy statement.
Treatment of Outstanding Common Stock
The Merger Agreement provides that each share of Cray common stock outstanding immediately prior to the effective time of the merger will be converted at the effective time of the merger into the right to receive $35.00 in cash, without interest and less any withholding taxes required by applicable law, except that shares held by Cray as treasury stock or by HPE or Merger Sub will be canceled and no payment will be made with respect to those shares, shares held by held any wholly owned subsidiary of Cray or HPE (other than Merger Sub) will be converted into such number of shares of common stock of the Surviving Corporation so as to maintain relative ownership percentages, restricted shares of Cray Common Stock underlying any Cray RSA will be treated as described under “The Merger Agreement—The Merger—Treatment of Outstanding Equity Awards” beginning on page 47 of this proxy statement and shares held by shareholders who properly exercise their dissenters’ rights under Washington law with respect to any such shares will be treated as described under “The MergerDissenters’ Rights” beginning on page 38 of this proxy statement.

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Treatment of Outstanding Equity Awards
Vested Stock Options
Each vested Cray stock option with an exercise price less than $35.00 that is outstanding at the effective time of the merger will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the aggregate number of shares of the Cray common stock subject to such stock option, multiplied by (ii) the excess of the per share merger consideration of $35.00 over the applicable per share exercise price of such stock option, without interest and less applicable tax withholding. 
Unvested Stock Options
Each unvested Cray stock option with an exercise price less than $35.00 that is outstanding at the effective time of the merger will be assumed by HPE and converted into an option to acquire a number of shares of HPE’s common stock (rounded down to the nearest whole number of shares) equal to the product of (i) the aggregate number of shares of Cray common stock subject to such stock option multiplied by (ii) the Equity Award Exchange Ratio. The per share exercise price of the assumed stock option will equal the quotient (rounded up to the nearest whole cent) obtained by dividing the exercise price per share of the original option by the Equity Award Exchange Ratio. The assumed stock option will continue to be subject to the same terms and conditions as applied to the corresponding Cray stock option immediately prior to the effective time (including all applicable vesting acceleration provisions).
Underwater Options
Each Cray stock option, whether vested or unvested, with an exercise price equal to or greater than the per share merger consideration of $35.00 will automatically be canceled for no consideration.
Vested RSUs
Each Cray RSU award that is outstanding and vested at the effective time of the merger will automatically be canceled and converted into the right to receive the per share merger consideration of $35.00 for each share of Cray common stock underlying such RSU award, without interest and less applicable tax withholding.
Unvested RSUs
Each Cray RSU award subject to service-based vesting that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) the number of shares of Cray common stock subject to such RSU award, multiplied by (ii) the Equity Award Exchange Ratio, and will remain subject to the terms and conditions as applied to such RSU award immediately prior to the effective time (including all applicable vesting acceleration provisions).
Unvested PSUs
Each Cray PSU award that is outstanding and unvested at the effective time of the merger will be converted into an RSU award for a number of shares of HPE’s common stock equal to the product of (i) 50% of the number of shares of Cray common stock subject to such PSU award (the remainder of such shares will be forfeited), multiplied by (ii) the Equity Award Exchange Ratio. Each such converted PSU award will be no longer be subject to performance vesting and will instead be eligible to vest subject to continued service through the one-year anniversary of the closing date of the merger. The converted PSU awards will otherwise remain subject to the terms and conditions as applied to such PSU awards immediately prior to the effective time (including all applicable vesting acceleration provisions).
RSAs
Each outstanding and unvested RSA held by our non-employee directors will be canceled in exchange for the right to receive the per share merger consideration of $35.00 for each share of Cray common stock underlying such RSA, without interest and less applicable tax withholding.
Surrender of Stock Certificates; Payment of Merger Consideration; Lost Certificates
Prior to the Closing Date, HPE will designate a paying agent reasonably acceptable to Cray and, prior to, at or immediately after the closing of the merger, HPE will deposit, or cause to be deposited, with the paying agent funds in an amount sufficient to pay the aggregate merger consideration as required to be paid pursuant to the Merger Agreement.
As promptly as practicable after the effective time of the merger (and in any event within three business days thereafter), HPE will cause the paying agent to mail to each person who was a holder of record of a certificate or certificates representing shares of Cray common stock a letter of transmittal containing instructions for surrendering certificates formerly representing such shares of Cray common stock in exchange for the merger consideration payable for such shares. After the effective time of the merger, each holder of a certificate previously representing such shares of Cray common stock will, upon (i) surrender to the paying agent of the certificate and (ii) delivery of a properly completed letter of transmittal in accordance

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with the instructions thereto and such other documents as may reasonably be required by the paying agent, be entitled to receive the merger consideration of $35.00 in cash, without interest and less any withholding taxes required by applicable law, for each share of Cray common stock formerly represented by such certificate. Each certificate so surrendered will be canceled. Until surrendered as contemplated by the terms of the Merger Agreement, each certificate formerly representing such shares of Cray common stock will be deemed at any time after the effective time to represent only the right to receive the merger consideration in cash as contemplated by the Merger Agreement, without interest.
With respect to uncertificated shares of Cray common stock held in book-entry form, Cray and HPE will cooperate to establish procedures with the paying agent and each holder of book-entry shares to ensure that the paying agent will transmit the merger consideration with respect to such shares to such holder or its nominees, upon surrender of book-entry shares held by such holder or its nominees in accordance with customary surrender procedures (including receipt by the paying agent of an “agent’s message” in customary form and/or such other evidence, if any, of transfer as the paying agent may reasonably request). Each book-entry share so surrendered will be canceled.
The cash paid upon surrender of any such certificate or book-entry shares will be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Cray’s common stock formerly represented by such certificate or book-entry shares. At the close of business on the day on which the effective time of the merger occurs, Cray’s stock transfer books will be closed and Cray will not register transfers of shares on Cray’s records.
HPE, Merger Sub, the Surviving Corporation and the paying agent will have the right to deduct and withhold from the merger consideration otherwise payable such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code or any other provision of applicable law.
If any such certificate has been lost, stolen or destroyed, the paying agent will pay the merger consideration with respect to each share of Cray common stock formerly represented by such certificate upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by HPE, the posting by such person of a bond in such reasonable amount as HPE may direct as indemnity against any claim that may be made against it with respect to such certificate.
At any time following the twelve-month anniversary of the effective time of the merger, HPE may require the paying agent to deliver to it any funds (including any interest paid thereon) previously made available to the paying agent that have not been distributed to holders of certificates or book-entry shares formerly representing shares of Cray common stock. After that point, shareholders will no longer be able to receive the merger consideration from the paying agent and shall look only to the Surviving Corporation for payment of the merger consideration (subject to applicable state, federal or other abandoned property, escheat or similar laws).
Directors and Officers
The Merger Agreement provides that the initial board of directors of the Surviving Corporation effective as of, and immediately following, the effective time of the merger will consist of the members of the board of directors of Merger Sub immediately prior to the effective time of the merger, and the initial officers of the Surviving Corporation will consist of the officers of Cray immediately prior to the effective time of the merger.
Representations and Warranties
Cray has made a number of representations and warranties to HPE and Merger Sub in the Merger Agreement regarding aspects of Cray’s business and other matters pertinent to the merger. The topics covered by these representations and warranties include, among other things, the following:
Cray’s and Cray’s subsidiaries’ organization, existence, good standing and qualification, organizational and governing documents, and similar corporate matters;
Cray’s ownership of its subsidiaries;
Cray’s capitalization and capital structure;
our Board’s unanimous approval of the Merger Agreement and Cray’s corporate power and authority to execute and deliver the Merger Agreement, to perform Cray’s obligations under the Merger Agreement and to consummate the merger and the other transactions contemplated by the Merger Agreement;
required consents and approvals, and the absent of conflicts with and violations or breaches of, or defaults under, organizational documents, material contracts, laws and government authorizations;
the preparation, accuracy and compliance of Cray’s financial statements and SEC filings;
the absence of certain undisclosed liabilities;
the absence of certain changes or events;

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certain pending and threatened litigation, orders, awards, judgments and investigations;
compliance with laws and governmental authorizations, including export and import laws and laws relating to economic, trade and financial sanctions;
environmental matters;
material contracts, including government contracts and bids;
labor and other employment matters;
employee benefits plans;
tax matters;
real property and leases;
intellectual property matters;
Cray’s insurance policies;
the absence of transactions with Cray’s affiliates that have not been disclosed in Cray’s public filings;
compliance with anti-corruption laws;
privacy and security matters;
top customers and suppliers;
the accuracy of the information supplied by Cray for use in this proxy statement;
the inapplicability of any state takeover or similar statute or regulation to the Merger Agreement and the merger;
the absence of any shareholder rights agreement, rights plan, “poison pill” or other similar agreement adopted by us;
Cray’s engagement of, and payment of fees to, brokers, investment bankers and financial advisors, and fees payable by Cray to other advisors in connection with the Merger Agreement and the merger; and
Cray’s receipt of a fairness opinion from Morgan Stanley.
Definition of Material Adverse Effect
Some of Cray’s representations and warranties in the Merger Agreement are qualified as to “materiality” or “Material Adverse Effect.” For purposes of the Merger Agreement, a “Material Adverse Effect” with respect to Cray means any change, circumstance, effect, event or occurrence that, individually or in the aggregate, (i) has or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of Cray and its subsidiaries, taken as a whole, or (ii) prevents or materially delays the consummation by Cray of the merger or any of the other transactions contemplated by the Merger Agreement on a timely basis.
However, no change, circumstance, effect, event or occurrence to the extent resulting from, arising out of or attributable to any of the following will, either alone or in combination, constitute or be taken into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect for purposes of clause (i) in the preceding paragraph:
changes in general economic or financial markets or political conditions in the United States or any other country;
any outbreak or escalation of hostilities, acts of war (whether or not declared) or terrorism;
any hurricane, tornado, tsunami, flood, mudslide, volcano, earthquake, wild fire, epidemic or other natural disaster or force majeure event;
any change after the May 16, 2019 in applicable law or GAAP (or any authoritative interpretation thereof);
general conditions in the industry (or changes in such conditions) in which Cray operates;
conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets in the United States or any other country or region in the world, including (i) changes in interest rates in the United States or any other country or region in the world and changes in exchange rates for the currencies of any countries, and (ii) any widespread general suspension of trading in securities (whether equity, debt, derivative or hybrid securities) on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world;

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the failure, in and of itself, of Cray to meet any internal or published projections, estimates, plans, budgets or forecasts or analyst projections or estimates, in any such case in respect of revenues, earnings or other financial, business or operating metrics, or changes in the market price or trading volume of Cray common stock, or analyst downgrades with respect to Cray common stock or changes in the credit rating of Cray (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect, if not otherwise excluded by one of the other bullet points of this definition);
the execution and delivery of the Merger Agreement or the pendency or consummation of the transactions contemplated thereby (including the identity of HPE), or the public announcement thereof, including any impact on the relationship of Cray or any of its subsidiaries, contractual or otherwise, with its customers, suppliers, distributors, vendors, lenders, employees or partners (subject to specified exceptions);
any action taken by Cray or any of its subsidiaries that is expressly required to be taken by the Merger Agreement, or the failure of Cray or any of its subsidiaries to take any action expressly prohibited from being taken by the Merger Agreement, or any action taken or not taken by Cray or any of its subsidiaries at HPE’s express written request; and
any legal proceedings commenced or threatened against HPE, Merger Sub or Cray or any of their respective affiliates by any private party relating to, arising out of or involving the Merger Agreement (including any shareholder litigation), the merger or any of the other transactions contemplated thereby or that would otherwise prevent or materially impede, interfere with, hinder or delay the consummation of the merger and the other transactions contemplated by the Merger Agreement;
except that, in the cases of the first, second, third, fourth, fifth and sixth bullet points set forth above, unless and to the extent that Cray and its subsidiaries, taken as a whole, are disproportionately adversely affected thereby as compared with other participants in the industry in which Cray operates.
HPE and Merger Sub have made a number of representations and warranties to Cray regarding aspects of their business and various matters pertinent to the merger. The topics covered by these representations and warranties include the following:
organization, existence, good standing and qualification, and similar corporate matters;
corporate power and authority in connection with the Merger Agreement;
required consents and approvals, and the absence of conflicts with and violations or breaches of, or defaults under, organizational documents, contracts, laws and governmental authorizations;
available funds to finance the consideration payable in the merger;
accuracy of information supplied for use in this proxy statement;
operations and HPE’s ownership of Merger Sub;
absence of litigation, arbitration and similar proceedings with respect to the merger;
brokers and other advisors;
that, at the time the Board approved the Merger Agreement, neither HPE nor Merger Sub was an “acquiring person” with respect to Cray as defined in Chapter 23B.19 of the Washington Business Corporation Act;
independent investigation of Cray; and
non-reliance on Cray estimates, projections, forecasts, forward-looking statements and business plans, and acknowledgment of the absence of other Cray representations and warranties.
Some of HPE’s and Merger Sub’s representations and warranties in the Merger Agreement are qualified as to “materiality” or “Parent Material Adverse Effect.” For purposes of the Merger Agreement, a “Parent Material Adverse Effect” with respect to HPE and Merger Sub means any change, circumstance, effect, event or occurrence that, individually or in the aggregate, would prevent or materially delay the ability of HPE or Merger Sub to consummate the merger prior to the Outside Date or perform any of their respective obligations under the Merger Agreement.
The representations and warranties of each of the parties to the Merger Agreement will expire upon the effective time of the merger.

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Covenants
Conduct of Cray’s Business Prior to the Merger
Cray has agreed that, from the date of the Merger Agreement until the effective time of the merger (or, if earlier, until the valid termination of the Merger Agreement pursuant to its terms), except as required by law, as expressly provided by the Merger Agreement or as disclosed prior to the execution of the Merger Agreement in Cray’s confidential disclosure letter, Cray will and will cause each of its subsidiaries to carry on its business only in the ordinary course of business consistent with past practice in all material respects and use commercially reasonable efforts to preserve intact its current business organization and to preserve its relationships and goodwill with customers, suppliers, employees, licensors, licensees, distributors, lessors and others having significant business dealings with Cray or any of its subsidiaries.
Cray has further agreed that, from the date of the Merger Agreement until the effective time of the merger (or, if earlier, until the valid termination of the Merger Agreement pursuant to its terms), except as consented to in writing by HPE (which consent may not be unreasonably withheld, conditioned or delayed), as required by law or as disclosed prior to the execution of the Merger Agreement in Cray’s confidential disclosure letter, Cray will not, and will not permit any of its subsidiaries to, directly or indirectly, among other things and subject to specified exceptions:
declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of any securities of Cray or any of its subsidiaries or set any record date therefor, subject to specified exceptions;
split, combine, reclassify or otherwise amend the terms of any securities of Cray or any of its subsidiaries, or issue or authorize the issuance of any other securities in lieu of or in substitution for securities of Cray;
repurchase, redeem or otherwise acquire any securities of Cray or any of its subsidiaries or any options, warrants or other rights to acquire any such securities, other than specified exceptions with respect to outstanding Cray equity awards;
issue, deliver or sell any shares of Cray or any of its subsidiaries, or other voting securities or equity interests, any securities convertible or exchangeable into any such shares, voting securities or equity interests, any options, warrants or other rights to acquire any such shares, voting securities, equity interests or convertible or exchangeable securities, any stock-based performance units, any indebtedness of Cray or any of its subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of shares or equity interests of any Cray subsidiary may vote, or any other rights that give any person the right to receive any economic interest of a nature accruing to the holders of securities of Cray, subject in each case to specified exceptions;
mortgage, pledge, hypothecate, grant an easement with respect to, or otherwise encumber or restrict the use of any securities, assets, properties or rights (including intellectual property rights) of Cray or any of its subsidiaries, or otherwise create, assume or suffer to exist any liens thereupon, subject to specified exceptions;
amend the organizational documents of Cray or any of its subsidiaries;
acquire or agree to acquire from any third person (i) any person or business, by merging or consolidating with, purchasing an equity interest in or a substantial portion of the assets of, making an investment in or loan or capital contribution to or in any other manner, any person or business, or (ii) any assets that are otherwise material to Cray and its subsidiaries, subject to specified exceptions, including for acquisitions of inventory, supplies and raw materials in the ordinary course of business consistent with past practice;
(i) sell, lease, license, sub-license or otherwise dispose of, or otherwise encumber any of its properties, rights or assets (including intellectual property rights), subject to specified exceptions, including for sales of inventory, licenses of software or sales of professional services in the ordinary course of business consistent with past practice, or (ii) abandon or permit to lapse any of its registered intellectual property rights;
adopt or enter into any plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Cray or any of its subsidiaries;
(i) incur, create, assume or otherwise become liable for, any indebtedness owed to any third person in excess of $500,000, or amend, modify or refinance any indebtedness owed to any third person, (ii) make any loans, advances or capital contributions to, or investments in, any other person (other than advances of expenses and other routine amounts to employees in the ordinary course of business consistent with past practice) or (iii) redeem, repurchase, prepay, defease, cancel or otherwise acquire any indebtedness;
incur or commit to incur any capital expenditures or authorizations or commitments with respect thereto, subject to specified exemptions;

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pay, discharge, settle or satisfy any material claims, liabilities or obligations, subject to specified exceptions, including for payment, discharge or satisfaction in the ordinary course of business consistent with past practice;
commence any action, claim, suit or other legal proceeding, or compromise, settle or agree to settle any such action, claim, suit or other legal proceeding made or pending by, or against, Cray or any of its subsidiaries, subject to specified exceptions;
(i) other than customer contracts and certain supply contracts in the ordinary course of business consistent with past practice, enter into, terminate, cancel, amend in any material respect or modify in any material respect any material contract, subject to specified exceptions, (ii) expressly waive any material term of or any material default under, or release, settle or compromise any material claim against Cray or any of its subsidiaries or any material liability or material obligation owing to Cray or any of its subsidiaries under, any material contract, subject to specified exceptions, (iii) enter into any contract that contains a change of control or similar provision that would require a payment to the other party or parties thereto in connection with the merger or the other transactions contemplated by the Merger Agreement or (iv) amend or modify the engagement letter between Cray and Morgan Stanley;
change its fiscal year or change any of its financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP or applicable law, or (other than as required by GAAP for any assets that are required to be marked-to-market on a periodic basis) revalue any of its material assets;
(i) change any material method of tax accounting or make (other than on an originally filed tax return consistent with past practices and except as otherwise required by a change in applicable tax law), change or revoke any material tax election, (ii) file any material amended tax return or claim for a material tax refund, (iii) settle or compromise any material tax liability or refund, (iv) extend the statutory period of limitations with respect to the assessment or collection of any material tax other than an extension obtained in the ordinary course of business consistent with past practice, (v) change any tax period, (vi) prepare or file any material tax return other than on a basis consistent with past practice (except as otherwise required by a change in applicable tax law), or (vii) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law) or any tax allocation, indemnification or sharing agreement (excluding any commercial agreements entered into in the ordinary course of business and not primarily relating to taxes) or request any tax ruling or tax holiday;
fail to keep in force insurance policies or replacement or revised provisions regarding insurance coverage with respect to the material assets, operations and activities of Cray and its subsidiaries as in effect as of the date of the Merger Agreement;
enter into any new line of business (other than any line of business that is reasonably related to and a reasonably foreseeable extension of any line of business existing as of the date of the Merger Agreement) or terminate any line of business existing as of the date of the Merger Agreement;
enter into any new lease of real property or amend in any material respect the terms of any existing lease of real property, other than renewals of existing leases in the ordinary course of business consistent with past practice;
except as required by the terms of any employee benefit plan as in effect on the date of the Merger Agreement, (i) increase the compensation or benefits payable or to become payable to any of its directors, officers, employees or individual independent contractors, (ii) grant to any of its directors, officers, employees or individual independent contractors any increase in severance or termination pay, (iii) pay or award, or commit to pay or award, any bonuses or incentive compensation, (iv) enter into any employment, consulting, severance, retention or termination agreement (including offer letters) with any of its directors, officers, employees or individual independent contractors, subject to specified exceptions, (v) establish, adopt, enter into, amend or terminate any labor agreement or any employee benefit plan, (vi) take any action to accelerate any payment or benefit, or the funding of any payment or benefit, payable or to become payable to any of its directors, officers, employees or individual independent contractors, (vii) terminate the employment of any employee or individual independent contractor having total annual base salary in excess of $200,000, other than for cause, or (viii) hire any employee or individual independent contractor having an annual base salary in excess of $200,000; or
authorize any of, or commit or agree to take any of, the foregoing actions.

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No Solicitation of Takeover Proposals
Until the earlier of the effective time of the merger and the valid termination of the Merger Agreement pursuant to its terms, Cray has agreed not to, has agreed to cause its subsidiaries and the officers and directors of Cray and its subsidiaries not to, and has agreed to use reasonable best efforts to cause its and their respective other representatives not to, directly or indirectly:
solicit, initiate, endorse, knowingly facilitate or knowingly encourage the submission or announcement of any inquiries, proposals or offers that constitute or would reasonably be expected to lead to any Takeover Proposal (as defined below);
provide any nonpublic information concerning Cray or any of its subsidiaries to any person or group (as defined in Rule 13d-3 under the Exchange Act) in connection with any Takeover Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any Takeover Proposal, or engage in any discussions or negotiations with respect to any Takeover Proposal (other than solely to inform any relevant third party of the non-solicitation restrictions in the Merger Agreement);
approve, support, adopt, endorse or recommend any Takeover Proposal;
take any action to make the provisions of any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover law inapplicable to any person other than HPE and its affiliates or to any transactions constituting or contemplated by a Takeover Proposal;
otherwise cooperate with or assist or participate in, or knowingly facilitate, any such inquiries, proposals, offers, discussions or negotiations; or
resolve or agree to do any of the foregoing.
Upon the execution of the Merger Agreement, Cray also agreed, and agreed to cause its subsidiaries and its and their respective officers and directors to, and agreed to use reasonable best efforts to cause its and their respective other representatives to, immediately cease and cause to be terminated any solicitation, encouragement, discussion or negotiation with any person or group that may be ongoing with respect to any Takeover Proposal or potential Takeover Proposal.
For purposes of the Merger Agreement, “Takeover Proposal” means any inquiry, proposal or offer from any person or group providing for any of the following:
any direct or indirect acquisition or purchase, in a single transaction or a series of related transactions, of (i) assets representing 20% or more of the aggregate fair market value of the consolidated assets (including intellectual property rights) of Cray and its subsidiaries, taken as a whole (but excluding, for the avoidance of doubt, any license of intellectual property rights entered into in the ordinary course of business consistent with past practice), or (ii) shares or other securities of Cray or any of its subsidiaries that, together with any other shares or any other such securities beneficially owned by such person or group, would represent 20% or more of the outstanding shares or other securities Cray or any of its subsidiaries;
any tender offer or exchange offer that, if consummated, would result in any person or group owning, directly or indirectly, 20% or more of the outstanding shares or other securities of Cray or any of its subsidiaries;
any merger, consolidation, business combination, share exchange or similar transaction involving Cray or any of its subsidiaries pursuant to which any person or group (or the shareholders of any person) would own, directly or indirectly, 20% or more of the aggregate voting power of Cray or of the surviving entity in a merger or the resulting direct or indirect parent of Cray or such surviving entity or 20% or more of the aggregate fair market value of the consolidated assets (including intellectual property rights) of Cray and its subsidiaries, taken as a whole; or
any reorganization, recapitalization, extraordinary dividend, liquidation, dissolution or any other similar transaction involving Cray or any of its material operating subsidiaries whose business represents 20% or more of the consolidated net revenues, net income or assets of Cray and its subsidiaries, taken as a whole, for the 12-month period ending on December 31, 2018.
Notwithstanding the foregoing, the transactions contemplated by the Merger Agreement and any proposal or offer by HPE or any of its subsidiaries are deemed to be excluded from the definition of Takeover Proposal.
For purposes of the Merger Agreement, “Superior Proposal” means any bona fide, written Takeover Proposal received after the date of the Merger Agreement that was not solicited or negotiated in material breach of the restrictions described above and that if consummated would result in a person or group owning, directly or indirectly, (i) more than 80% of the outstanding shares of Cray or (ii) more than 80% of the aggregate fair market value of the consolidated assets of Cray and its subsidiaries, taken as a whole, in each case, which our Board determines in good faith (after consultation with its

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financial advisor and outside legal counsel) to be more favorable to our shareholders from a financial point of view than the merger, in each case, taking into account all the terms and conditions of such proposal and the Merger Agreement (including any changes to the terms of the Merger Agreement proposed by HPE pursuant to the notice and negotiation provisions described below) that our Board determines to be relevant and which our Board determines to be reasonably capable of being completed in accordance with its terms (including, in the case of a cash transaction (in whole or in part), our Board determining that financing is then fully committed or reasonably determined to be available), taking into account all financial, legal, regulatory and other aspects of such Takeover Proposal that our Board determines to be relevant.
Notwithstanding the restrictions described above, if at any time prior to the approval of the Merger Agreement by the affirmative vote of the holders of not less than a majority of the outstanding shares of Cray common stock (“Requisite Vote”), (i) Cray has received a bona fide written Takeover Proposal from a third party that did not result from a material breach of the restrictions described above, and (ii) our Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that such Takeover Proposal constitutes or could reasonably be expected to result in a Superior Proposal and that the failure to take such action described in either bullet below would reasonably be expected to be inconsistent with our Board’s fiduciary duties under applicable law, then Cray may:
furnish information with respect to Cray and its subsidiaries to the person making such Takeover Proposal pursuant to a confidentiality agreement with terms no less favorable to Cray in any respect than those contained in the confidentiality agreement between Cray and HPE, so long as Cray substantially concurrently provides to HPE any nonpublic information that is provided to any person and which was not previously provided to HPE; and/or
engage in discussions or negotiations with the person making such Takeover Proposal regarding such Takeover Proposal.
Prior to or concurrently with taking any action described in either of the preceding two bullet points, Cray must provide written notice to HPE of the determination of our Board to authorize such action.
Cray must promptly (and, in any event, within 24 hours) notify HPE in the event that Cray, any of its subsidiaries or any of their respective representatives receives any Takeover Proposal, or any initial request for nonpublic information concerning Cray or any of its subsidiaries related to, or from any person or group in connection with, any Takeover Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any Takeover Proposal, or any initial request for discussions or negotiations related to any Takeover Proposal (and any material changes related to any of the foregoing). In connection with any such notice, Cray must also provide to HPE the identity of the person or group making such Takeover Proposal or request and the material terms and conditions thereof (including, if available, copies of any written requests, proposals or offers, including proposed agreements, and written summaries of the material terms of any oral requests, proposals or offers) and the nature of such request. Thereafter, Cray must keep HPE reasonably informed on a reasonably timely basis of any material developments with respect to the discussions with respect thereto, including any material changes to the terms thereof. In addition, Cray must promptly (and in any event within 24 hours) notify HPE if it determines to begin providing information or to begin engaging in discussions or negotiations concerning a Takeover Proposal pursuant to provisions described above, and may in no event begin providing such information or begin engaging in such discussions or negotiations prior to providing such notice. Cray must also provide HPE with at least 24 hours’ prior notice (or such shorter notice as may be provided to our Board) of each meeting of our Board at which our Board is reasonably expected to consider any Takeover Proposal.
Change of Board Recommendation or Termination
As described above, and subject to the provisions described below, our Board has resolved to recommend that our shareholders vote for the approval of the Merger Agreement. The foregoing recommendation is referred to herein as “our Board recommendation”.
Except as described below, neither our Board nor any committee of our Board may:
withdraw or rescind (or modify or qualify in a manner adverse to HPE or Merger Sub), or publicly propose to withdraw or rescind (or modify or qualify in a manner adverse to HPE or Merger Sub), our Board recommendation;
adopt, approve, declare the advisability of or recommend, or publicly propose to adopt, approve, declare the advisability of or recommend, any Takeover Proposal;
approve or authorize, or cause or permit Cray or any of its subsidiaries to execute or enter into any confidentiality agreement, exclusivity agreement, license agreement, letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar contract related to any Takeover Proposal, other than a confidentiality agreement with terms no less favorable to Cray in any respect than those contained in the confidentiality agreement between Cray and HPE in accordance with the provisions described above under “—No Solicitation of Takeover Proposals”;

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following the date any Takeover Proposal or any material modification thereto is first made public or sent or given to Cray shareholders, fail to publicly recommend against any such Takeover Proposal within five business days following HPE’s written request to do so (which request may only be made once with respect to any such Takeover Proposal and each material modification thereto) or subsequently withdraw, change, amend, modify or qualify (or publicly propose to do so), in a manner adverse to HPE, such recommendation against such Takeover Proposal or fail to issue a press release that expressly reaffirms our Board recommendation within such five business day period;
fail to include our Board recommendation in this proxy statement or any amendment thereof when disseminated to Cray shareholders; or
publicly propose or publicly announce an intention to take any of the foregoing actions.
Any action described in the foregoing six bullet points is referred to as an “Adverse Recommendation Change”.
However, at any time prior to the approval of the Merger Agreement by the Requisite Vote, our Board may, subject to compliance in all material respects with the provisions described above under “—No Solicitation of Takeover Proposals” and in this “Change of Board Recommendation or Termination” section, (i) terminate the Merger Agreement in order to enter into an agreement providing for a Superior Proposal or (ii) effect an Adverse Recommendation Change in response to an Intervening Event (as defined below), but only so long as:
our Board determines in good faith (after consultation with its outside legal counsel) that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law;
in the case of a termination of the Merger Agreement in order to enter into an agreement providing for a Superior Proposal, our Board determines in good faith (after consultation with its outside legal counsel and financial advisors) that the applicable Takeover Proposal constitutes a Superior Proposal and Cray terminates the Merger Agreement pursuant to its terms on such reason;
Cray has provided prior written notice to HPE and Merger Sub, at least four business days in advance, that it will take the applicable action referred to in clause (i) or (ii) above, and specifying in reasonable detail the reasons therefor (a “Notice of Intended Recommendation Change”);
if Cray is proposing to terminate the Merger Agreement in order to enter into an agreement providing for a Superior Proposal, and if requested by HPE, after providing any such Notice of Intended Recommendation Change, Cray negotiates, and causes its directors and officers to and instructs and uses its reasonable best efforts to cause its other representatives to negotiate, with HPE and Merger Sub in good faith during any such four business day period (with any material amendment to the terms of any such Superior Proposal requiring a new Notice of Intended Recommendation Change and compliance with the other requirements of this bullet point anew, except that references herein to a four business day period will be deemed to refer to a two business day period) regarding any written proposal by HPE to amend the terms and conditions of the Merger Agreement and the other agreements contemplated thereby and at the end of such four business day period (or two business day period, in the case of a material amendment) our Board again makes the determinations described in the first two bullet points above with respect to such Superior Proposal; and
if Cray proposes to effect an Adverse Recommendation Change in response to an Intervening Event (as defined below), (a) such Adverse Recommendation Change is being made as a result of an event, fact, development or occurrence that materially affects the business, assets or operations of Cray that was not known or reasonably foreseeable by our Board as of the date of the Merger Agreement and becomes known to our Board after the date of the Merger Agreement (each, an “Intervening Event”), except that none of the following will constitute or be deemed to be an Intervening Event: (1) any event, fact, development or circumstance resulting from any breach of the Merger Agreement by Cray, (2) the receipt, existence or terms of any Takeover Proposal or any matter relating thereto or any consequences thereof, (3) any action taken by any party pursuant to and in compliance with the covenants and agreements set forth in the Merger Agreement, and any consequences of such action, (4) general changes in the industry in which Cray operates (unless such changes disproportionately affect Cray as compared with other participants in the industry, and then only to the extent of such disproportionate effect), (5) the fact, in and of itself, that Cray exceeds any internal or published projections or (6) changes, in and of themselves, in the price of Cray common stock; and (b) during any such four business day period, if requested by HPE, Cray engages in good faith negotiations with HPE regarding any written proposal by HPE to amend the terms and conditions of the Merger Agreement and the other agreements contemplated thereby and at the end of such four business day period our Board again makes the determinations described in the first bullet point above with respect to such Intervening Event.

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None of the provisions described above under “—No Solicitation of Takeover Proposals” or in this “—Change of Board Recommendation or Termination” section will prohibit Cray from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act, so long as any action taken or statement made to so comply is consistent with these provisions. In addition, nothing in the Merger Agreement will prohibit Cray or our Board from making the following communications, and no such statements will be deemed, in and of themselves, to constitute an Adverse Recommendation Change: (i) a “stop, look and listen” communication of the type contemplated by Rule 14d-9(f) under the Exchange Act, (ii) an express rejection of any applicable Takeover Proposal, (iii) an express reaffirmation of our Board recommendation or (iv) a factually accurate public statement that describes Cray’s receipt and review of a Takeover Proposal, the terms thereof and the identity of the person making such Takeover Proposal, and the operation of the Merger Agreement with respect thereto, provided that the public statement contains an express reaffirmation of our Board recommendation. Nothing in the Merger Agreement will prohibit Cray or our Board from making any other statement to Cray shareholders that our Board, after consultation with its outside legal counsel, has determined in good faith is required by applicable law, but nothing in this sentence will permit our Board to make any Adverse Recommendation Change except to the extent expressly permitted by, and in accordance with, the provisions described above in this “—Change of Board Recommendation or Termination” section.
Special Meeting of Cray’s Shareholders
Cray has agreed, subject to any applicable legal restraints, to convene and hold a special meeting of our shareholders, for the purpose of the approval of the Merger Agreement by our shareholders, as promptly as practicable but no later than the 45th calendar day after the expiration of the 10-day waiting period provided in Ruled 14a-6(a) promulgated under the Exchange Act or the date on which Cray learns that the SEC has no further comments on the proxy statement. Cray has also agreed to use its reasonable best efforts to obtain the approval of the Merger Agreement by the Requisite Vote. Cray may not postpone or adjourn the special meeting without the prior written consent of HPE, except Cray may adjourn the special meeting by not more than seven calendar days and to a date prior to the fifth business day preceding the Outside Date in order to obtain the Requisite Vote, obtain a quorum necessary for the special meeting or to comply with applicable law (as determined by Cray in good faith after consultation with HPE). In addition, if HPE reasonably determines in good faith that the Requisite Vote is unlikely to be obtained at the special meeting, including due to an absence of quorum, HPE may cause Cray to adjourn or postpone the special meeting by not more than seven calendar days and to a date prior to the fifth business day preceding the Outside Date in order to obtain the Requisite Vote.
Unless the Merger Agreement is validly terminated, Cray is required to convene and hold the special meeting regardless of whether our Board effects a change of Board recommendation. Further, Cray’s obligation to hold the shareholders meeting will not be affected by the commencement, public proposal, public disclosure or communication to Cray of any Takeover Proposal (whether or not such Takeover Proposal is a Superior Proposal). Unless the Merger Agreement is terminated in accordance with its terms, Cray has agreed that Cray will not submit to the vote of our shareholders any Takeover Proposal (whether or not a Superior Proposal) prior to the vote of our shareholders with respect to the Merger Agreement at the special meeting.
Efforts to Consummate the Merger; Regulatory Matters
Cray, HPE and Merger Sub have each agreed to use reasonable best efforts to:
take all actions and to assist and cooperate with the other parties in doing all things necessary, proper or advisable to consummate, as promptly as reasonably practicable, the Merger and the other transactions contemplated by the Merger Agreement, including using reasonable best efforts to cause the conditions to the closing of the merger to be satisfied as promptly as reasonably practicable;
obtain all necessary governmental authorizations of or by any governmental authority and make all necessary registrations, declarations and filings with, and notices to, such governmental authorities (including pursuant to the HSR Act) and take all reasonable steps as may be necessary to avoid an action by any governmental authority with respect to the transactions contemplated by the Merger Agreement;
execute and deliver any additional instruments reasonably necessary to consummate the transactions contemplated by the Merger Agreement; and
vigorously defend or contest any action brought by any private party that would otherwise prevent or materially impede, interfere with, hinder or delay the consummation of the Merger and the other transactions contemplated by the Merger Agreement or any litigation by any private party arising out of or involving the Merger Agreement.
In addition to the above, Cray, HPE and Merger Sub agreed to:
make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated by the Merger Agreement;

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make appropriate filings pursuant to any competition, merger control, antitrust or similar law of Austria, Germany, Japan, South Korea and, as appropriate, consult with the U.K. Competition and Markets Authority and submit a Merger Notice if requested (together, the “Specified Foreign Merger Control Laws”);
supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the HSR Act or any Specified Foreign Merger Control Laws; and
use their respective reasonable best efforts to take or cause to be taken all other actions necessary, proper or advisable consistent with the Merger Agreement to cause the expiration or termination of the applicable waiting periods, or receipt of required governmental authorizations, as applicable, under the HSR Act and the Specified Foreign Merger Control Laws as soon as practicable.
However, neither Cray nor HPE, nor any of their respective subsidiaries or other affiliates, will be required to:
sell, lease, license, transfer, dispose of, divest or otherwise encumber, or hold separate pending any such action, or propose, negotiate or offer to effect, or consent or commit to, any such sale, leasing, licensing, transfer, disposal, divestiture or other encumberment, or holding separate, before or after the effective time of the merger, of any assets, licenses, operations, rights, product lines, businesses or interest therein of HPE, Cray or the Surviving Corporation (or any of their respective subsidiaries or other affiliates); or
take or agree to take any other action or agree or consent to any limitations or restrictions on freedom of actions with respect to, or its ability to retain, or make changes in, any such assets, licenses, operations, rights, product lines, businesses or interest therein of HPE, Cray or the Surviving Corporation (or any of their respective subsidiaries or other affiliates), if taking any such action described in either of the above bullets would reasonably be expected to have, either individually or in the aggregate, a material adverse effect on HPE and its subsidiaries or Cray and Cray’s subsidiaries. For these purposes, a “material adverse effect” is measured relative to the size of Cray and its subsidiaries, taken as a whole, regardless of whether such actions are imposed on, or affect HPE, Cray or any of their respective subsidiaries.
In addition, Cray has agreed to use commercially reasonable efforts to obtain prior to the effective time of the merger all required consents, approvals or waivers from any third party in connection with the Merger, including as required under any material contracts, and participate in any related discussions or negotiations with HPE upon HPE’s reasonable request.
Access to Information
Until the earlier of the effective time of the merger and the termination of the Merger Agreement pursuant to its terms, Cray has agreed to afford to HPE, Merger Sub and their respective directors, officers, employees, attorneys, accountants and other advisors or representatives reasonable access during normal business hours, upon reasonable prior notice, to Cray’s properties, books and records, and members of management or other key employees as HPE may reasonably request, subject to customary exceptions and limitations.
Directors’ and Officers’ Indemnification and Insurance
The Merger Agreement provides for indemnification and exculpation rights with respect to liabilities for acts or omissions occurring at or prior to the effective time of the merger, as well as related advancement of expenses and insurance rights, in favor of any person who is or prior to the effective time of the merger becomes, or has been at any time prior to the date of the Merger Agreement, a director or officer of Cray or any of its subsidiaries (collectively, the “indemnitees”). Specifically, HPE and the Surviving Corporation have agreed to indemnify and advance expenses to the indemnitees to the fullest extent permitted by applicable law with respect to any action, claim, suit or other legal proceeding based in whole or in part on, or arising in whole or in part out of, the fact that the indemnitee is or was a director or officer of Cray or any of its subsidiaries prior to the effective time of the merger. For a period of six years after the effective time of the merger, the certificate of incorporation and bylaws of the Surviving Corporation must contain provisions no less favorable with respect to indemnification, exculpation, limitation of liabilities and advancement of expenses with respect to the indemnitees in respect of acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger than are as set forth in the articles of incorporation and bylaws of Cray as of the date of the Merger Agreement.
For a period of six years from the effective time of the merger, HPE must maintain in effect Cray’s current directors’ and officers’ liability insurance policies in respect of acts or omissions occurring at or prior to the effective time of the merger, covering each indemnitee on terms with respect to such coverage and amounts no less favorable in the aggregate than those of such policies in effect on the date of the Merger Agreement, provided that neither HPE nor the Surviving Corporation shall be required to pay an aggregate annual premium for such insurance policies in excess of 300% of the annual premium paid by Cray for coverage for its last full fiscal year (the “Maximum Premium”), and if the annual premiums of such insurance exceed the Maximum Premium, then if and to the extent available commercially, HPE or the Surviving Corporation must obtain a policy with the greatest coverage available for a cost not exceeding such Maximum Premium. However, in lieu of maintaining the foregoing insurance after the effective time of the merger, Cray (prior to the Closing Date) may (after

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reasonable consultation with HPE), or at HPE’s written request prior to the Closing Date, Cray will, or HPE or the Surviving Corporation upon the effective time of the merger may, obtain a prepaid (“tail”) directors’ and officers’ liability insurance policy in respect of acts or omissions occurring at or prior to the effective time of the merger for six years from the effective time of the merger, covering each person who was covered by such policies on the date of the Merger Agreement on terms with respect to such coverage and amounts no less favorable than those of such policies in effect on the date of the Merger Agreement, so long as the maximum premium for such tail insurance policy does not exceed the Maximum Premium.
Employee Matters
For a period of one year following the effective time of the merger, HPE will provide to each employee of Cray or any of its subsidiaries as of immediately prior to the effective time of the merger (each, a “Company Employee”), for so long as such Company Employee remains employed by HPE or any of its subsidiaries during such period, (i) base salary that is at least equal to that provided to such Company Employee immediately prior to the effective time of the merger, (ii) cash incentive compensation opportunities (including with respect to individual target bonus levels) that are no less favorable than those provided to similarly situated employees of HPE and its subsidiaries (other than Cray and its subsidiaries); (iii) other employee benefits that are no less favorable in the aggregate than those provided to similarly situated employees of HPE and its subsidiaries (other than Cray and its subsidiaries) and (iv) upon a termination without cause of a Company Employee, severance benefits that are no less favorable than those provided to similarly situated employees of HPE and its subsidiaries (other than Cray and its subsidiaries).
Each Company Employee will be given credit for all service with Cray and its subsidiaries and their respective predecessors, if applicable, for purposes of eligibility for vacation and service recognition awards under the employee benefit plans of HPE, the Surviving Corporation, or any of their subsidiaries in which such Company Employee becomes a participant, and eligibility under the Family and Medical Leave Act; provided that foregoing service credit will not apply to the extent that its application would result in a duplication of benefits.
With respect to each health and welfare benefit plan maintained by HPE or the Surviving Corporation for the benefit of Company Employees, HPE will use commercially reasonable efforts to cause (i) the waiver of all limitations as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to Company Employees (and their eligible dependents) under such plan to the extent that such conditions, exclusions or waiting periods were waived or satisfied under the comparable health or welfare benefit plans of Cray immediately prior to the effective time of the merger; and (ii) each Company Employee (or his or her eligible dependents) to be given credit under such plan for all amounts paid by Company Employee (or his or her eligible dependents) under any similar Cray benefit plans for the plan year that includes the effective time of the merger for purposes of satisfying any applicable deductible or out-of-pocket requirements under such plan maintained by HPE or the Surviving Corporation, as applicable, for the plan year in which the effective time of the merger occurs.
Security Holder Litigation
In the event that any action, claim, suit or other legal proceeding is commenced or threatened against HPE, Merger Sub, Cray or any of their respective affiliates by any private party relating to, arising out of or involving the Merger Agreement (including any shareholder litigation), the Merger or any of the other transactions contemplated by the Merger Agreement or that would otherwise prevent or materially impede, interfere with, hinder or delay the consummation of the Merger and the other transactions contemplated by the Merger Agreement, HPE and Cray have agreed to keep each other reasonably informed with respect thereto, subject to certain exceptions to preserve legal privilege.
Cray must promptly advise HPE and must cooperate fully with HPE (and must use reasonable best efforts to cause its representatives to cooperate fully with HPE) in connection with, and must consult with and permit HPE and its representatives to participate in, the defense, negotiations or settlement of any such legal proceedings, and Cray must give due consideration to HPE’s advice with respect thereto. Cray may not, and must not permit any of its subsidiaries nor any of its or their representatives to, compromise, settle, come to a settlement arrangement regarding any such legal proceeding or consent thereto unless in each case HPE has consented thereto in advance in writing.
Conditions to the Closing of the Merger
Cray’s, HPE’s and Merger Sub’s obligations to effect the merger are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
the Requisite Vote has been obtained;
the absence of any temporary restraining order, preliminary or permanent injunction, or any law or other judgment that has been enacted, issued, promulgated, enforced or entered by a governmental authority of competent jurisdiction, which is still in effect and has the effect of making the merger illegal or otherwise preventing or prohibiting the consummation of the merger (a “Restraint”); and

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the waiting period (and extensions) applicable to the transactions contemplated by the Merger Agreement under the HSR Act has expired or been terminated and all other required approvals, consents or clearances under the Specified Foreign Merger Control Laws have been obtained.
HPE’s and Merger Sub’s obligations to effect the merger are subject to the satisfaction or waiver by HPE or Merger Sub on or prior to the Closing Date of the following conditions:
certain of Cray’s representations and warranties relating to Cray’s organization, standing and corporate power; authority and recommendation; the absence of certain changes; state takeover statutes and rights plan; brokers and other advisors; and the opinion of Cray’s financial advisor are true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except, in each case, to the extent any such representations and warranties are made as of a specific date, in which case as of such specific date only);
certain of Cray’s representations and warranties relating to Cray’s subsidiaries are true and correct in all material respects (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import therein) as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except, in each case, to the extent any such representations and warranties are made as of a specific date, in which case such representations and warranties are true and correct in all material respects (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import therein) as of such specific date only);
certain of Cray’s representations and warranties relating to Cray’s capital structure are true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except to the extent any such representations and warranties are made as of a specific date, in which case such representations and warranties will be true and correct in all respects as of such specific date only), except for inaccuracies that, individually or the aggregate, would not increase the aggregate amount payable by Merger Sub or HPE in the merger by more than a de minimis amount;
Cray’s representations and warranties (other than those described above) are true and correct in all respects (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import therein) as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except, in each case, to the extent any such representations and warranties are made as of a specific date, in which case such representations and warranties are true and correct in all respects (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import in the Merger Agreement) as of such specific date only) except where the failure of such representations and warranties to be true and correct has not had and would not have, individually or in the aggregate, a Material Adverse Effect;
Cray has performed and complied in all material respects with the obligations, covenants and agreements required to be performed or complied with under the Merger Agreement at or prior to the closing of the merger;
the absence of a Material Adverse Effect that has occurred since May 16, 2019 and that is continuing; and
the receipt of a certificate from the chief executive officer or chief financial officer of Cray, dated as of the Closing Date, certifying to the effect that the conditions in the preceding six bullet points have been satisfied.
Cray’s obligations to effect the merger are subject to the satisfaction or waiver by Cray on or prior to the Closing Date of the following conditions:
the representations and warranties of HPE and Merger Sub in the Merger Agreement are true and correct in all respects (disregarding all qualifications or limitations as to “materiality,” “Parent Material Adverse Effect” and words of similar import therein) as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except, in each case, to the extent any such representations and warranties are made as of a specific date, in which case such representations and warranties are true and correct in all respects (disregarding all qualifications or limitations as to “materiality,” “Parent Material Adverse Effect” and words of similar import therein) as of such specific date only) except where the failure of such representations and warranties to be true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect;
HPE and Merger Sub have performed and complied in all material respects with the obligations, covenants and agreements required to be performed or complied with by them under the Merger Agreement at or prior to the closing of the merger; and
Receipt of a certificate from an officer of HPE, dated as of the Closing Date, certifying to the effect that the conditions in the preceding two bullet points have been satisfied.

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Financing of the Merger
Consummation of the merger is not conditioned upon HPE’s ability to obtain financing. HPE expects to use cash on hand, existing financing facilities and/or other debt financing to fund the merger consideration and the other transactions contemplated by the Merger Agreement.
Termination of the Merger Agreement
The Merger Agreement may be terminated and abandoned under any of the following circumstances:
by mutual written consent of Cray and HPE;
by either HPE or Cray, if the effective time of the merger has not occurred on or before November 16, 2019 (“Outside Date”), except if, on the Outside Date, all of the conditions to the consummation of the Merger have been satisfied or waived, other than the condition relating to the absence of Restraints (to the extent such Restraint is in respect of the HSR Act or any other antitrust law), the condition relating to the expiration or termination of the waiting period under the HSR Act and the obtaining of approvals, consents or clearances under the Specified Foreign Merger Control Laws or conditions that by their nature are to be satisfied or validly waived on the Closing Date (if such conditions would be satisfied or validly waived were the Closing Date to occur at such time), then, at the election of HPE or Cray, the Outside Date will be extended for up to two periods (the first period of four months and the second period of three months) by delivery of written notice to the other party, and such extended date shall constitute the Outside Date, (provided that the right to terminate pursuant to this provision will not be available to any party whose breach of the Merger Agreement was a principal cause of or resulted in the failure of the effective time of the merger to occur by such date) (any such termination, an “Outside Date Termination”);
by either HPE or Cray, if any Restraint is in effect enjoining, restraining or otherwise preventing or prohibiting the consummation of the merger, and such Restraint will have become final and nonappealable (provided that the right to terminate pursuant to this provision will not be available (i) to any party unless such party has complied with specified obligations to prevent, oppose or remove such Restraint or (ii) to any party whose breach of the Merger Agreement was a principal cause of or resulted in such Restraint);
by either HPE or Cray, if the special meeting of our shareholders (including any adjournments or postponements thereof) has been duly held and completed and a vote on approval of the Merger Agreement has been taken and the Requisite Vote has not been obtained (any such termination, a “Vote-Down Termination”);
by HPE, if there is any breach of or inaccuracy in any of Cray’s representations or warranties set forth in the Merger Agreement or Cray fails to perform any of its covenants or agreements set forth in the Merger Agreement, (A) which inaccuracy, breach or failure to perform would give rise to the failure of the related closing condition to be satisfied, (B) HPE delivers to Cray written notice of such inaccuracy, breach or failure to perform and (C) such inaccuracy, breach or failure to perform (1) is not capable of being cured prior to the Outside Date or (2) is not cured within twenty business days following HPE’s delivery of written notice to Cray of such inaccuracy, breach or failure to perform (any such termination, a “Breach Termination”); however, HPE will not have this right to terminate this Agreement if HPE or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements such that Cray has the right to terminate this Agreement as a result of such material breach;
by HPE, if a Material Adverse Effect has occurred and such Material Adverse Effect is either (A) not capable of being cured prior to the Outside Date or (B) is not cured within twenty Business Days following HPE’s delivery of written notice to Cray of such occurrence;
by HPE, if at any time prior to obtaining the Requisite Vote, there is (i) an Adverse Recommendation Change, (ii) a tender or exchange offer relating to securities of Cray has commenced (other than by HPE or an affiliate of HPE) and our Board has recommended that the shareholders of Cray tender their shares in such tender or exchange offer or, within ten business days after the commencement of such tender or exchange offer, our Board has failed to recommend against acceptance of such offer (a termination pursuant to clause (i) or (ii) a, “Change in Recommendation Termination”) or (iii) a material breach by Cray of the provisions of the Merger Agreement relating to solicitations of Takeover Proposals (a “Non-Solicitation Termination”);
by Cray, if there is any breach or inaccuracy in any of HPE’s or Merger Sub’s representations or warranties set forth in the Merger Agreement or HPE or Merger Sub has failed to perform any of its covenants or agreements set forth in the Merger Agreement, (i) which inaccuracy, breach or failure to perform would give rise to the failure of the related closing condition to be satisfied, (ii) Cray delivers to HPE written notice of such inaccuracy, breach or failure to perform and (iii) such inaccuracy, breach or failure to perform (A) is not capable of being cured prior to the Outside Date or (B) is not cured within twenty Business Days following the Cray’s delivery of written notice to HPE of such breach; however, Cray will not have this right to terminate the Merger Agreement if Cray is then

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in material breach of any of its representations, warranties, covenants or agreements such that HPE has the right to terminate the Merger Agreement as a result of such material breach; or
by Cray, at any time prior to obtaining the Requisite Vote, in order to enter into an acquisition agreement providing for a Superior Proposal immediately following or concurrently with such termination (so long Cray pays the Termination Fee (as defined below) concurrently with such termination (a “Superior Proposal Termination”).
Termination Fee and Expenses
Cray has agreed to pay HPE a termination fee of $46,000,000 in cash (“Termination Fee”) if:
the Merger Agreement is terminated by HPE pursuant to a Change in Recommendation Termination;
the Merger Agreement is terminated by Cray pursuant to a Superior Proposal Termination; or
(i) after the date of the Merger Agreement, a Takeover Proposal has become publicly known and not irrevocably withdrawn at least two business days prior to the termination of the Merger Agreement, (ii) thereafter, the Merger Agreement is terminated (a) by HPE or Cray pursuant to an Outside Date Termination (but only (1) if the Requisite Vote had not been obtained prior to such termination or (2) if HPE was then be entitled to terminate the Merger Agreement pursuant to a Non-Solicitation Termination or a Breach Termination), (b) by HPE pursuant to a Non-Solicitation Termination or a Breach Termination arising from a breach of Cray’s covenants or agreements set forth in the Merger Agreement or (c) by HPE or Cray pursuant to a Vote-Down Termination, and (iii) within 12 months of such termination, Cray or any of its subsidiaries enters into a definitive agreement that provides for any Takeover Proposal, or any Takeover Proposal (regardless of when made) is consummated. Solely for purposes of this provision, all references to “20%” in the definition of Takeover Proposal are deemed to be references to “50%.”
In no event will Cray be required to pay the Termination Fee on more than one occasion. Upon the termination of the Merger Agreement under circumstances in which the Termination Fee is payable and Cray pays the Termination Fee in full to HPE (or a person designated by HPE), such Termination Fee will be deemed to be liquidated damages, and not a penalty, payable to HPE and, except in the case of fraud or any willful breach of the Merger Agreement, receipt of the Termination Fee will constitute the sole and exclusive remedy of HPE, Merger Sub and their respective affiliates for any and all losses or damages suffered or incurred by HPE, Merger Sub or any of its affiliates in connection with the Merger Agreement and the transactions contemplated thereby.
Specific Performance
HPE, Merger Sub and Cray have agreed that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that any provision of the Merger Agreement (including failing to take such actions as are required of it thereunder to consummate the merger or the transactions contemplated thereby) is not performed in accordance with its specific terms or is otherwise breached. Accordingly, the parties have agreed that, prior to the termination of the Merger Agreement pursuant to its terms, each party will be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled under the terms of the Merger Agreement at law or in equity.
Expenses
Except in limited circumstances expressly specified in the Merger Agreement, all fees and expenses incurred in connection with the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement will be paid by the party incurring such fees or expenses, whether or not the Merger or any of the other transactions contemplated by the Merger Agreement are consummated.
Governing Law
The Merger Agreement and any action, claim, suit or other legal proceeding that may directly or indirectly be based upon, relate to or arise out of the Merger Agreement or any transaction contemplated thereby, or the negotiation, execution or performance thereof, will be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any laws that might result in the application of the law of another jurisdiction, except with respect to matters relating to Article I of Merger Agreement and the fiduciary duties of our Board and the board of directors of Merger Sub, which will be governed by and construed in accordance with the law of the State of Washington.

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SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial ownership of our common stock as of June 21, 2019, for:
each beneficial owner of more than 5% of our outstanding common stock;
each of our executive officers and each of our directors; and
all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by footnote, to our knowledge, the persons and entities named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them, subject to applicable community property laws. Securities that may be acquired within 60 days of June 21, 2019, including shares subject to stock options that may be exercised, and RSUs or PSUs that may vest and settle, are deemed to be beneficially owned by the person or entity holding such securities for the purpose of computing beneficial ownership, but are not treated as outstanding for the purpose of computing the ownership of any other person or entity. The information as to beneficial ownership presented in the table below does not take into account any accelerated vesting that may occur in connection with the closing of the merger. The applicable percentages of beneficial ownership are based on 41,337,879 shares of common stock outstanding as of June 21, 2019.
Name and Address(1)
 
Common
Shares
Owned
 
Restricted Stock Units Vesting and Options Exercisable Within 60 Days
 
Total
Beneficial
Ownership(2)
 
Percentage
5% Shareholders:
 
 
 
 
 
 
 
 
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
 
6,035,363

 

 
6,035,363

(3) 
14.6%
 
 
 
 
 
 
 
 
 
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
 
4,178,677

 

 
4,178,677

(4) 
10.1%
 
 
 
 
 
 
 
 
 
Dimensional Fund Advisors LP
Building One, 6300 Bee Cave Road
Austin, TX 78746
 
2,064,868

 

 
2,064,868

(5) 
5.0%
 
 
 
 
 
 
 
 
 
Non-Employee Directors:
 
 
 
 
 
 
 
 
Prithviraj Banerjee
 
18,723

 
20,000

 
38,723

(6) 
*
Catriona M. Fallon
 
8,093

 
20,000

 
28,093

(7) 
*
Stephen E. Gold
 
4,026

 
20,000

 
24,026

(8) 
*
Stephen C. Kiely
 
24,879

 

 
24,879

(9) 
*
Sally G. Narodick
 
53,834

 

 
53,834

 
*
Daniel C. Regis
 
55,234

 

 
55,234

(10) 
*
Max L. Schireson
 
16,605

 
20,000

 
36,605

(11) 
*
Brian V. Turner
 
14,379

 
20,000

 
34,379

(12) 
*
 
 
 
 
 
 
 
 
 
Executive Officers: