Exhibit 10.2

 

SILICON GRAPHICS, INC.

AMENDED AND RESTATED

1993 LONG-TERM INCENTIVE STOCK PLAN

 

1. Purpose of the Plan. The purpose of the Silicon Graphics, Inc. 1993 Long-Term
Incentive Stock Plan (the “Plan”) is to promote the long-term success of Silicon
Graphics, Inc. (“SGI”) and to increase stockholder value by providing its
eligible employees, consultants, officers and directors with incentives to
create excellent performance and to continue service with the Company, its
subsidiaries and affiliates. Both by encouraging such employees, consultants,
officers and directors to become owners of Common Stock and by providing actual
ownership through Plan awards, it is intended that Plan participants will view
the Company from an ownership perspective. Additionally, the Company believes
the Plan will assist in attracting and retaining people of the highest caliber.

 

2. Eligibility. SARs and Stock Awards (collectively “Rights”) and Nonstatutory
Stock Options may be granted to Employees, Consultants and Directors. Options
that are intended to qualify as incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or any
successor section (“Incentive Stock Options”) may be granted only to Employees.
If otherwise eligible, an Employee, Consultant or Director who has been granted
an Option or Right may be granted additional Options or Rights.

 

3. Stock Subject to the Plan.

 

(a) Subject to Section 12 of the Plan, the maximum aggregate number of shares of
Common Stock of the Company (“shares”) that may be issued pursuant to Options
and Rights granted to participants under the Plan shall be the sum of 3.5% of
the issued shares at June 30 of each of the Company’s fiscal years from 1993
through 1997, plus any unused carried forward shares and any forfeited shares;
provided that the number of shares that may be transferred to participants under
the Plan in any one fiscal year of the Company shall not exceed 3.5% of the
issued shares determined as of the June 30 of the immediately preceding fiscal
year plus any unused carried forward shares and any forfeited shares. The term
“shares” shall include shares that have been subject to SARs that are exercised
for cash, whether granted in connection with or independently of Options. For
purposes of this Section 3, the following apply: (i) the number of “issued
shares” at June 30 of a fiscal year means the number of shares outstanding at
that date, plus all shares reacquired by the Company during the preceding fiscal
year, whether or not such shares are designated as retired or treasury shares;
(ii) ”unused shares” means any shares available from a prior Plan year, based on
the percentage of issued shares calculation, which were not transferred, plus
any shares reserved for grants which have not been covered by grants under prior
shareholder-approved plans other than the 1985 Stock Incentive Program (“Prior
Plans”) which will be terminated as of the effective date of the Plan; and
(iii) ”forfeited shares” means any shares issued pursuant to awards made under
the Plan which are forfeited to the Company pursuant to award terms and

 

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conditions, plus any shares covered by grants made under Prior Plans which are
not issued to participants or are returned to the Company because of the
cancellation, expiration or forfeiture of a grant made under the Prior Plans;
provided that the term “forfeited shares” shall not include shares as to which
the original recipient received any benefits of ownership (other than voting
rights).

 

(b) In no event, however, except as subject to Section 12 of the Plan, shall
more than 23,025,560 of the shares eligible for issuance under the Plan be
issued upon the exercise of Incentive Stock Options under the Plan.
Additionally, the maximum number of shares which may be issued pursuant to Stock
Awards contemplated by Section 8 of the Plan shall be limited to 3,800,000
shares (approximately 3% of the number of shares outstanding at June 30, 1993).
At no time shall the total number of securities issuable upon exercise of all
outstanding options and the total number of shares provided for under any stock
bonus or similar plan or agreement of the Company exceed 30% of the then
outstanding securities of the Company (including convertible securities on an as
if converted basis), unless a higher percentage is approved by at least
two-thirds of the outstanding securities entitled to vote.

 

(c) The following limitations will apply to grants of Options or SARs under the
Plan:

 

(i) no Employee will be granted Options or SARs under the Plan to purchase more
than 2,000,000 shares over the term of the Plan; provided that, if the number of
shares available for issuance under Section 3(a) of the Plan is increased, the
maximum number of Options or SARs that any Employee may be granted also
automatically will increase by an amount equal to 500,000 shares for each
additional fiscal year in which shares are allocated for issuance under the
Plan.

 

The foregoing limitations set forth in this Section 3(c) are intended to satisfy
the requirements applicable to Options and SARs intended to qualify as
“performance-based compensation” within the meaning of Section 162(k) of the
Code. In the event that the Committee determines that such limitations are not
required to qualify Options or SARs as performance-based compensation, the
Committee may modify or eliminate such limitations.

 

(d) For purposes of Section 3(a), except as to forfeited shares, the payment of
cash dividends and dividend equivalents in conjunction with outstanding awards
shall not be counted against the shares available for issuance.

 

(e) Any shares issued under the Plan may consist in whole or in part of
authorized and unissued shares or of treasury shares, and no fractional shares
shall be issued under the Plan. Cash may be paid in lieu of any fractional
shares in settlement of awards under the Plan.

 

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4. Plan Administration.

 

(a) Committees.

 

(i) Multiple Administrative Bodies. The Plan may be administered by different
committees with respect to different groups of Employees, Consultants and
Directors. Committee shall mean a committee of Directors appointed by the Board
of Directors of the Company (the “Board”).

 

(ii) Section 162m. To the extent that the Company determines it to be desirable
to qualify Options granted hereunder as “performance-based compensation” within
the meaning of Section 162(m) of the Code, the Plan shall be administered by a
committee of two or more “outside directors” within the meaning of
Section 162(m) of the Code.

 

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy applicable laws.

 

(b) Powers of the Committee. The Committee shall have full and exclusive power
to interpret the Plan and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper. This power includes,
but is not limited to, selecting award recipients, establishing all award terms
and conditions and adopting modifications, amendments and procedures, including
subplans and the like as may be necessary to comply with provisions of the laws
and applicable regulatory rulings of countries in which the Company operates in
order to assure the viability of awards granted under the Plan and to enable
participants employed in such countries to receive advantages and benefits under
the Plan and such laws and rulings.

 

(c) Effect of Committee’s Decision. The Committee’s decisions, determinations
and interpretations shall be final and binding on all Optionees and any other
holders of Options or Rights.

 

(d) Tax Withholding. The Committee may, in its discretion, allow Optionees to
satisfy withholding tax obligations by electing to have the Company withhold
from the shares to be issued upon exercise of an Option that number of shares
having a Fair Market Value of the shares to be withheld shall be determined on
the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have shares withheld for this purpose shall be made
in such form and under such conditions as the Committee may deem necessary or
advisable.

 

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5. Duration of the Plan. The Plan shall continue in effect for a term of ten
(10) years from January 13, 2006, unless sooner terminated by the Board under
the terms of the Plan; provided that in no event may Incentive Stock Options be
granted under the Plan later than 10 years from the date the Plan was adopted by
the Board.

 

6. Awards. The Committee shall determine the type or types of award(s) to be
made to each participant. Awards may be granted singly, in combination or in
tandem. Awards also may be made in combination or in tandem with, in replacement
of, as alternatives to, or as the payment form for grants or rights under any
other employee or compensation plan of the Company, including the plan of any
acquired entity. The types of awards that may be granted under the Plan are
Options, SARs and Stock Awards.

 

7. Options and SARs.

 

(a) Options; Number of Shares. The Committee, in its discretion, may grant
Options to eligible participants and shall determine whether such Options shall
be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a Notice of Grant which shall specify the number of shares to which
it pertains, expressly identify the Options as Incentive Stock Options or as
Nonstatutory Stock Options and be in such form and contain such provisions as
the Committee shall from time to time deem appropriate. Without limiting the
foregoing, the Committee may at any time authorize the Company, with the consent
of the respective recipients, to issue new Options or Rights in exchange for the
surrender and cancellation of outstanding Options or Rights. Option agreements
shall contain the following terms and conditions:

 

(i) Exercise Price. The per share exercise price for the shares issuable
pursuant to an Option shall be such price as is determined by the Committee;
provided that in no event shall the price of an Option or SAR be less than 100%
of the Fair Market Value of the Common Stock on the date the Option or SAR is
granted, subject to any additional conditions set out in Subsection 7(a)(v)
below; provided further that in the case of an Option that is granted to an
eligible Employee, Consultant, Officer or Director who, at the time of the grant
of such Option, owns stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per share exercise price shall be no less than 110% of the Fair Market Value
of the Common Stock on the date the Option is granted.

 

(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the
Committee shall determine the terms and conditions to be satisfied before shares
may be purchased, including the dates on which shares subject to the Option may
first be purchased. The Committee may specify that an Option may not be
exercised until the completion of a service period specified at the time of
grant. (Any such period is referred to herein as the “waiting period.”) Except
for Options issued to any Officer, Director or Consultant, such Options shall
become exercisable at the rate of at least 20% per year over five years from the
date of grant. At the time an Option is granted, the Committee shall fix the
period within which the Option may be exercised, which shall not be earlier than
the end of the waiting period, if any, nor later than one hundred twenty
(120) months, from the date of grant.

 

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(iii) Form of Payment. The consideration to be paid for the shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Committee (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of:

 

(1) cash;

 

(2) check;

 

(3) other shares which (a) in the case of shares acquired upon exercise of an
option, have been owned by the Optionee for more than six months on the date of
surrender, and (b) have a Fair Market Value on the date of surrender not greater
than the aggregate exercise price of the shares as to which said Option shall be
exercised;

 

(4) delivery of a properly executed exercise notice together with such other
documentation as the Committee and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price;

 

(5) any combination of the foregoing methods of payment; or

 

(6) such other consideration and method of payment for the issuance of shares to
the extent permitted by Applicable Laws.

 

(iv) Reload Options. The Committee may grant Options that provide for the award
of a new Option when the exercise price has been paid by tendering shares to the
Company, subject to such terms and conditions as the Committee shall determine.

 

(v) Special Incentive Stock Option Provisions. In addition to the foregoing,
Options granted under the Plan which are intended to be Incentive Stock Options
shall be subject to the following terms and conditions:

 

(1) Dollar Limitation. To the extent that the aggregate Fair Market Value of
(a) the shares with respect to which Options designated as Incentive Stock
Options plus (b) the shares of stock of the Company with respect to which other
Incentive Stock Options are exercisable for the first time by an Optionee during
any calendar year under all plans of the Company exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options. For purposes of the preceding
sentence, (a) Options shall be taken into account in the order in which they
were granted, and (b) the Fair Market Value of the shares shall be determined as
of the time the Option or other Incentive Stock Option is granted.

 

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(2) 10% Stockholder. If any Optionee to whom an Incentive Stock Option is to be
granted pursuant to the provisions of the Plan is, on the date of grant, an
individual described in Section 422(b)(6) of the Code, then the following
special provisions shall be applicable to the Option granted to such individual:

 

(a) The per share Option price of shares subject to such Incentive Stock Option
shall not be less than 110% of the Fair Market Value of Common Stock on the date
of grant; and

 

(b) The Option shall not have a term in excess of five (5) years from the date
of grant.

 

Except as modified by the preceding provisions of this subsection 7(a)(v) and
except as otherwise limited by Section 422 of the Code, all of the provisions of
the Plan shall be applicable to the Incentive Stock Options granted hereunder.

 

(vi) Other Provisions. Unless otherwise determined by the Committee at the time
of grant, each Option shall provide that in the event of a change in control of
the Company (as specified by the Committee), any Optionee’s Options will become
exercisable in full if, within twenty-four months after a change in control of
the Company, the Optionee’s employment is terminated without cause or the
Optionee resigns due to certain involuntary relocations or reductions in
compensation, as specified by the Committee. Each Option granted under the Plan
may contain such other terms, provisions, and conditions not inconsistent with
the Plan as may be determined by the Committee.

 

(vii) Buyout Provisions. The Committee may at any time offer to buyout for a
payment in cash, promissory note or shares, an Option previously granted, based
on such terms and conditions as the Committee shall establish and communicate to
the Optionee at the time that such offer is made.

 

(b) SARs.

 

(i) In Connection with Options. At the sole discretion of the Committee, SARs
may be granted in connection with all or any part of an Option, either
concurrently with the grant of the Option or at any time thereafter during the
term of the Option. The following provisions apply to SARs that are granted in
connection with Options:

 

(1) The SAR shall entitle the Optionee to exercise the SAR by surrendering to
the Company unexercised the corresponding portion of the related Option. The
Optionee shall receive in exchange from the Company an amount equal to the
excess of (1) the Fair Market Value on the date of exercise of the SAR of the

 

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Common Stock covered by the surrendered portion of the related Option over
(2) the exercise price of the Common Stock covered by the surrendered portion of
the related Option. Notwithstanding the foregoing, the Committee may place
limits on the amount that may be paid upon exercise of an SAR; provided that
such limit shall not restrict the exercisability of the related Option.

 

(2) When an SAR is exercised, the related Option, to the extent surrendered,
shall cease to be exercisable.

 

(3) An SAR shall be exercisable only when and to the extent that the related
Option is exercisable and shall expire no later than the date on which the
related Option expires.

 

(4) An SAR may only be exercised at a time when the Fair Market Value of the
Common Stock covered by the related Option exceeds the exercise price of the
Common Stock covered by the related Option.

 

(ii) Independent of Options. At the sole discretion of the Committee, SARs may
be granted without related Options. The following provisions apply to SARs that
are not granted in connection with Options:

 

(1) The SAR shall entitle the Optionee, by exercising the SAR, to receive from
the Company an amount equal to the excess of (1) the Fair Market Value of the
Common Stock covered by the exercised portion of the SAR, as of the date of such
exercise, over (2) the Fair Market Value of the Common Stock covered by the
exercised portion of the SAR, as of the last market trading date prior to the
date on which the SAR was granted; provided that the Committee may place limits
on the aggregate amount that may be paid upon exercise of an SAR.

 

(2) SARs shall be exercisable, in whole or in part, at such times as the
Committee shall specify in the Optionee’s SAR agreement.

 

(iii) Form of Payment. The Company’s obligation arising upon the exercise of an
SAR may be paid in Common Stock or in cash, or in any combination of Common
Stock and cash, as the Committee, in its sole discretion, may determine. Shares
issued upon the exercise of an SAR shall be valued at their Fair Market Value as
of the date of exercise.

 

(c) Method of Exercise.

 

(i) Procedure for Exercise; Rights as a Stockholder. Any Option or SAR granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee and as shall be permissible under the terms of the
Plan.

 

An Option may not be exercised for a fraction of a share.

 

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An Option or SAR shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option or SAR by the person entitled to exercise the Option or SAR and full
payment for the shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Committee and
permitted by the Option Agreement, consist of any consideration and method of
payment allowable under subsection 7(a)(iii) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 12 of the Plan.

 

Exercise of an Option in any manner shall result in a decrease in the number of
shares which thereafter shall be available, both for purposes of the Plan and
for sale under the Option, by the number of shares as to which the Option is
exercised. Exercise of an SAR for Common Stock shall, to the extent the SAR is
exercised, result in a decrease in the number of shares which thereafter shall
be available for purposes of the Plan, and the SAR shall cease to be exercisable
to the extent it has been exercised.

 

(ii) Termination of Employment, Consulting or Director Relationship. In the
event an Optionee’s Continuous Status as an Employee, Consultant or Director
terminates (other than upon the Optionee’s death or Disability), the Optionee
may exercise his or her Option or SAR, but only within such period of time from
the date of such termination as is determined by the Committee, which period
shall not be less than 30 days and, in the case of an Option that is intended to
qualify as an Incentive Stock Option, shall not exceed 3 months, and, unless
determined otherwise by the Committee, only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of the term of such Option or SAR as set forth in the Option
or SAR Agreement). To the extent that Optionee was not entitled to exercise an
Option or SAR at the date of such termination, and to the extent that the
Optionee does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.

 

(iii) Disability of Optionee. In the event an Optionee’s Continuous Status as an
Employee, Consultant or Director terminates as a result of the Optionee’s
Disability, the Optionee may exercise his or her Option or SAR, but only within
twelve (12) months from the date of such termination, and, unless determined
otherwise by the Committee, only to the extent that the Optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option or SAR as set forth in the Option or SAR
Agreement). To the extent that Optionee was not entitled to exercise an Option
or SAR at the date of such termination, and to the extent that the Optionee does
not exercise such Option or SAR (to the extent otherwise so entitled) within the
time specified herein, the Option or SAR shall terminate.

 

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(iv) Death of Optionee. In the event of an Optionee’s death, the Optionee’s
estate or a person who acquired the right to exercise the deceased Optionee’s
Option or SAR by bequest or inheritance may exercise the Option or SAR, but only
within twelve (12) months following the date of death, and, unless determined
otherwise by the Committee, only to the extent that the Optionee was entitled to
exercise it at the date of death (but in no event later than the expiration of
the term of such Option or SAR as set forth in the Option or SAR Agreement). To
the extent that Optionee was not entitled to exercise an Option or SAR at the
date of death, and to the extent that the Optionee’s estate or a person who
acquired the right to exercise such Option does not exercise such Option or SAR
(to the extent otherwise so entitled) within the time specified herein, the
Option or SAR shall terminate.

 

8. Stock Awards.

 

(a) Stock Awards. All or part of any Stock Award may be subject to conditions
and restrictions established by the Committee, and set forth in the award
agreement, which will include, but are not limited to, achievement of specific
business objectives and other measurements of individual, business unit or
Company performance measured over a period of not less than twelve (12) months.

 

9. Outside Director Grants.

 

(a) All Options granted pursuant to this Section shall be Nonstatutory Stock
Options and, except as otherwise provided herein, shall be subject to the other
terms and conditions of the Plan.

 

(b) All grants of Options hereunder shall be automatic and non-discretionary and
shall be made strictly in accordance with the following provisions:

 

(i) No person shall have any discretion to select which Outside Directors shall
be granted Options or to determine the number of Shares to be covered by Options
granted to Outside Directors.

 

(ii) Each Outside Director shall be automatically granted an Option to purchase
50,000 Shares (which number shall be subject to adjustment in the manner set
forth in Section 12 hereof upon the occurrence of any event described therein)
upon the date on which such person first becomes a Director (an “Initial
Grant”), whether through election by the stockholders of the Company or by
appointment by the Board to fill a vacancy.

 

(iii) On the date of each regular October meeting of the Board of Directors of
the Company (or, if the Board does not meet in October of any year, on the date
of the next regularly scheduled Board meeting) during the term of this Plan,
each

 

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Outside Director who has served as a Director for at least the previous six
(6) months shall automatically receive an Option to purchase 20,000 Shares
(which number shall be subject to adjustment in the manner set forth in
Section 12 hereof upon the occurrence of any event described therein) (a
“Renewal Grant”).

 

(iv) The terms of each Option granted pursuant to this Section shall be as
follows:

 

(1) the term of the Option shall be one hundred twenty (120) months.

 

(2) the Option shall be exercisable only while the Outside Director remains a
Director of the Company, except as set forth in Section 7 hereof; provided that
if the Optionee retires from the Board of Directors of the Company at 65 or more
years of age with more than 5 years of continuous service on the Board, he or
she may, but only within twelve (12) months from the date of termination,
exercise the Option to the extent he or she was entitled to exercise it at the
date of such termination; provided further that in the event the exercise period
terminates at a time when the Optionee is prohibited from engaging in
transactions in the Company’s stock as a result of the Company’s trading window
being closed, the Option shall remain exercisable until the Optionee is no
longer so prohibited;

 

(3) the exercise price per Share shall be 100% of the Fair Market Value per
Share on the date of grant of the Option; provided that in the case of an Option
that is granted to an eligible Outside Director who, at the time of the grant of
such Option, owns stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per share exercise price shall be no less than 110% of the Fair Market Value of
the Common Stock on the date the Option is granted.

 

(4) with respect to Initial Grants, the Option will become exercisable in two
annual installments on each of the first and second anniversaries of the grant
date, so long as the Optionee remains a Director on such date; provided that the
Option will become fully exercisable in the event of the occurrence of one of
the following events while the Optionee remains a Director (a “Change of
Control”): (x) the consummation of a merger or consolidation of the Company with
or into any other entity pursuant to which the stockholders of the Company
immediately prior to such merger or consolidation hold, directly or indirectly,
less than 50% of the voting power of the surviving entity; (y) the sale or other
disposition of all or substantially all of the Company’s assets; or (z) the
acquisition by any person or persons of the beneficial ownership of 50% or more
of the voting power of the Company’s equity securities in a single transaction
or series of related transactions; and

 

(5) with respect to Renewal Grants, the Option will be fully exercisable on the
grant date.

 

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v) In the event that any Option granted under the Plan would cause the number of
Shares subject to outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then each such automatic
grant shall be for that number of Shares determined by dividing the total number
of Shares remaining available for grant by the number of Outside Directors on
the automatic grant date. No further grants shall be made until such time, if
any, as additional Shares become available for grant under the Plan through
action of the shareholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.

 

10. Deferrals and Settlements. Payment of awards may be in the form of cash,
Common Stock, other awards or combinations thereof as the Committee shall
determine, and with such restrictions as it may impose including, without
limitation, restrictions imposed on Insiders under Rule 16b-3. The Committee
also may require or permit participants to elect to defer the issuance of shares
or the settlement of awards in cash under such rules and procedures as it may
establish under the Plan. The Committee may also provide that deferred
settlements include the payment or crediting of interest on the deferral
amounts.

 

11. Transferability of Options and Rights. Unless otherwise determined by the
Committee to the contrary, Options and Rights may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. The Committee may, in the manner
established by the Committee, provide for the transfer, without payment of
consideration, of an Option or Right by the Optionee to the Optionee’s
“immediate family”. In such case, the Option or Right will be exercisable only
by such transferee. Following a transfer, any such Options or Rights shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to the transfer. For purposes of this Section 11, the
Optionee’s “immediate family” shall include any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Optionee’s household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Optionee) control the management of assets, and any
other entity in which these persons (or the Optionee) own more than fifty
percent of the voting interests. A transfer under a domestic relations order in
settlement of marital property rights is not a prohibited transfer for value.

 

12. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
or Change of Control.

 

(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Right, and the number of shares of Common Stock
which have

 

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been authorized for issuance under the Plan but as to which no Options or Rights
have yet been granted or which have been returned to the Plan upon cancellation
or expiration of an Option or Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without
receipt of consideration.” Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or Right.

 

(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option or Right has not been
previously exercised, it will terminate immediately prior to the consummation of
such proposed action. The Committee may, in the exercise of its sole discretion
in such instances, declare that any Option or Right shall terminate as of a date
fixed by the Committee and give each Optionee the right to exercise his or her
Option or Right as to all or any part of the Optioned Stock, including shares as
to which the Option or Right would not otherwise be exercisable.

 

(c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Right shall be assumed or an equivalent
Option or Right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Committee may, in lieu of such assumption or substitution, provide
for the Optionee to have the right to exercise the Option or Right as to all or
a portion of the Optioned Stock, including shares as to which it would not
otherwise be exercisable. If the Committee makes an Option or Right exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the Committee shall notify the Optionee that the Option or Right shall
be exercisable for such period as the Committee may designate, and the Option or
Right will terminate upon the expiration of such period. For the purposes of
this Section 12(c), the Option or Right shall be considered assumed if,
immediately following the merger or sale of assets, the Option or Right confers
the right to receive, for each share of Optioned Stock subject to the Option or
Right immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
shares); provided, that if such consideration received in the merger or sale of
assets was not solely common

 

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stock of the successor corporation or its parent, the Committee may, with the
consent of the successor corporation and the Optionee, provide for the
consideration to be received upon the exercise of the Option or Right, for each
share of Optioned Stock subject to the Option or Right, to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.

 

13. Date of Grant. The date of grant of an Option or Right shall be, for all
purposes, the date on which the Committee makes the determination granting such
Option or Right, or such other later date as is determined by the Committee.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

 

14. Amendment and Termination of the Plan.

 

(a) Amendment and Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.

 

(b) Stockholder Approval. The Company shall obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Rule 16b-3
or with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
stockholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the Applicable Laws, rules or regulations.

 

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee, unless mutually
agreed otherwise between the Optionee and the Company, which agreement must be
in writing and signed by the Optionee and the Company.

 

15. Conditions Upon Issuance of Shares.

 

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an
Option or Right unless the exercise of such Option or Right and the issuance and
delivery of such shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

 

(b) Investment Representations. As a condition to the exercise of an Option or
Right, the Company may require the person exercising such Option or Right to
represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required.

 

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16. Liability of Company.

 

(a) Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such shares as to which such requisite authority
shall not have been obtained.

 

(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an Option
or Right exceeds, as of the date of grant, the number of shares which may be
issued under the Plan without additional stockholder approval, such Option or
Right shall be void with respect to such excess Optioned Stock, unless
stockholder approval of an amendment sufficiently increasing the number of
shares subject to the Plan is timely obtained in accordance with Section 14 of
the Plan.

 

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

 

18. Stockholder Approval. Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such stockholder approval shall be obtained in the
manner and to the degree required by the Applicable Laws, rules and regulations.

 

19. Financial Statements. The Company shall provide financial statements at
least annually to each eligible Employee, Consultant, Officer or Director during
the period such person has one or more Options outstanding, and in the case of
an individual who acquired Common Stock pursuant to the Plan, during the period
such individual owns such Common Stock. The Company shall not be required to
provide such information if the issuance of awards under the Plan is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information.

 

20. Definitions. As used herein, the following definitions shall apply:

 

(a) “Applicable Laws” means all applicable law, including without limitation,
the Code, Delaware General Corporation Law, and applicable federal and state
securities laws.

 

(b) “Code” means the Internal Revenue Code of 1986, as amended.

 

(c) “Common Stock” means the Common Stock of SGI.

 

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(d) “Company” means Silicon Graphics, Inc., and any entity that is directly or
indirectly controlled by the Company, or any entity in which the Company has a
significant equity interest, as determined by the Committee; provided that with
respect to Options that are intended to qualify as Incentive Stock Options, the
term “Company” shall be limited to Silicon Graphics, Inc. and any “parent” or
“subsidiary” as those terms are defined in Sections 424(e) and (f) of the Code,
respectively, or any successor sections.

 

(e) “Consultant” means any person, including an advisor, engaged by the Company
to render services and who is compensated for such services; provided that the
term “Consultant” shall not include Directors who are paid only a Director’s fee
by the Company or who are not compensated by the Company for their services as
Directors.

 

(f) “Continuous Status as an Employee or Consultant”, means that the
relationship as an Employee or Consultant is not interrupted or terminated by
the Company. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) any leave of absence approved by the
Company, including sick leave, military leave, or any other personal leave;
provided that for purposes of qualifying an Option as an Incentive Stock Option,
in the event any such leave exceeds ninety (90) days, the Optionee’s Continuous
Status as an Employee will be deemed to have terminated on the ninety-first
(91st) day after the commencement of such leave, unless re-employment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; or (ii) transfers between locations of the Company.

 

(g) “Director” means any person who is a member of the Board of Directors of the
Company or its subsidiaries and affiliates.

 

(h) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.

 

(i) “Employee” means any person, including Officers, employed by the Company.
Neither service solely as a Director nor payment solely of a director’s fee by
the Company shall be sufficient to constitute “employment” by the Company.

 

(j) “Fair Market Value” means, as of any date, the closing price for a share of
Common Stock as reported daily in The Wall Street Journal or a similar readily
available public source. If no sales of shares were made on such date, the
closing price of a share as reported for the preceding day on which sale of
shares were made shall be used.

 

(k) “Nonstatutory Stock Option” means any Option that is not an Incentive Stock
Option.

 

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(l) “Notice of Grant” means a written notice evidencing certain terms and
conditions of an individual Option, SAR or Stock Award grant. The Notice of
Grant is part of the Option Agreement, the SAR Agreement and the Stock Award
Agreement.

 

(m) “Officer” means a person who is an officer of the Company.

 

(n) “Option” means a stock option granted pursuant to the Plan.

 

(o) “Option Agreement” means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

 

(p) “Optioned Stock” means the Common Stock subject to an Option or Right.

 

(q) “Optionee” means an Employee, Consultant or Director who holds an
outstanding Option or Right.

 

(r) “Outside Director” means a Director who is not an Employee and who is not
the “beneficial owner” (as defined in Rule 13d-3 of the Securities Exchange Act
of 1934, as amended), directly or indirectly, of securities of the Company
representing 5% or more of the total voting power represented by the Company’s
outstanding voting securities on the date of any grant hereunder.

 

(s) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code, or any successor provision.

 

(t) “SAR” means a stock appreciation right granted pursuant to Section 7(b) of
the Plan.

 

(u) “SAR Agreement” means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual SAR grant. The SAR
Agreement is subject to the terms and conditions of the Plan.

 

(v) “Stock Award” means an award made or denominated in shares or equivalent in
value to shares pursuant to Section 8 of the Plan.

 

(w) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code, or any successor provision.

 

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