Exhibit 10.1

 

Grant No.            

 

SILICON GRAPHICS, INC.

DIRECTOR’S OPTION AGREEMENT

(First Option)

 

Silicon Graphics, Inc., a Delaware corporation (“SGI”), has granted
                     an option to purchase a total of 50,000 shares of SGI’s
Common Stock (the “Optioned Stock”), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the 1993
Long-Term Incentive Stock Plan (the “Plan”) adopted by SGI which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.

 

1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.

 

2. Exercise Price. The exercise price is $          for each share of Common
Stock, which is 100% of the fair market value of the Common Stock as determined
on the date of grant of this Option.

 

3. Exercise of Option. This option shall be exercisable during its term in
accordance with the provisions of Section 7 of the Plan as follows:

 

(i) Right to Exercise.

 

(a) This Option shall become exercisable in two installments: the first fifty
percent (50%) of the Optioned Stock on the first anniversary of the Grant Date
and the second fifty percent (50%) of the Optioned Stock on the date of the next
anniversary of the Grant Date, so long as the Optionee remains a Director.

 

(b) This Option may not be exercised for a fraction of a share.

 

(c) In the event of Optionee’s death, disability or other termination of service
as a Director, the exercisability of this Option is governed by Sections 6, 7
and 8 of this Agreement.

 

(ii) Method of Exercise.

 

(a) This Option shall be exercisable by written notice which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder’s investment intent with respect to such Shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall

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be signed by the Optionee and shall be delivered in person, by facsimile or by
certified mail to the SGI’s Employee Stock Services Department. The written
notice shall be accompanied by payment of the exercise price

 

(b) No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, the Shares shall be considered transferred to the
Optionee on the date on which the Option is exercised with respect to such
shares.

 

4. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

 

(i) cash;

 

(ii) check;

 

(iii) surrender of other Shares of Common Stock of SGI of a value equal to the
exercise price of the shares as to which the Option is being exercised which, in
the case of shares acquired previously upon exercise of an option have been
owned by the Optionee for more than six (6) months on the date of surrender; or

 

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

 

5. Restrictions on Exercise. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulations, or if such issuance would not comply
with the requirements of any stock exchange upon which the Shares may then be
listed. As a condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.

 

6. Termination of Status as a Director. If the Optionee ceases to serve as a
Director, he or she may, but only within three (3) months after the date he or
she ceases to be a Director of the Company, exercise this Option to the extent
that he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
five (5) year term has expired. To the extent that the Optionee was not entitled
to exercise this Option at the date of such termination, or if the Optionee does
not exercise this Option within the time specified herein, the Option shall
terminate.

 

7. Disability of Optionee. Notwithstanding the provisions of Section 6 above, if
the Optionee is unable to continue his or her service as a Director as a result
of

 

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the Optionee’s Disability, he or she may, but only within twelve (12) months
from the date of termination, exercise this Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its five (5) year term
has expired. To the extent that the Optionee was not entitled to exercise this
Option at the date of termination, or if the Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.

 

8. Death of Optionee. In the event of the death of the Optionee during the term
of this Option, the Option may be exercised, at any time within twelve
(12) months following the date of death, by the Optionee’s estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
death. Notwithstanding the foregoing, in no event may the Option be exercised
after its five (5) year term has expired.

 

9. Transferability of Option. Unless otherwise determined by the Committee to
the contrary, this Option 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 Optionee
only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

 

10. Term of Option. This Option may not be exercised more than five (5) years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.

 

11. Taxation Upon Exercise of Option. Optionee understands that, upon exercise
of this Option, he or she will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares purchased over
the exercise price paid for such Shares. (Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, the
measurement and timing of such income may be deferred, and the Optionee is
advised to contact a tax advisor concerning the desirability of filing an 83(b)
election in connection with the exercise of the Option.) Upon a resale of such
Shares by the Optionee, any difference between the sale price and the fair
market value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.

 

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SILICON GRAPHICS, INC., a Delaware corporation

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Sandra M. Escher

Senior Vice President, General Counsel and

Secretary

 

Optionee acknowledges receipt of a copy of the Plan, a copy of which is annexed
hereto, and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Plan.

 

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Optionee

 

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Grant No.            

 

SILICON GRAPHICS, INC.

DIRECTOR’S OPTION AGREEMENT

(Annual Option)

 

Silicon Graphics, Inc., a Delaware corporation (“SGI”), has granted to
                     (the “Optionee”), as of                    , an option to
purchase a total of 20,000 shares of SGI’s Common Stock (the “Optioned Stock”),
at the price determined as provided herein, and in all respects subject to the
terms, definitions and provisions of the 1993 Long-Term Incentive Stock Plan
(the “Plan”) adopted by SGI which is incorporated herein by reference. The terms
defined in the Plan shall have the same defined meanings herein.

 

1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.

 

2. Exercise Price. The exercise price is $          for each share of Common
Stock, which is 100% of the fair market value of the Common Stock as determined
on the date of grant of this Option.

 

3. Exercise of Option. This option shall be exercisable during its term in
accordance with the provisions of Section 7 of the Plan as follows:

 

(i) Right to Exercise.

 

(a) This Option shall become exercisable in two installments: the first fifty
percent (50%) of the Optioned Stock on the date of the next Annual Meeting and
the second fifty percent (50%) of the Optioned Stock on the date of the next
Annual Meeting, so long as the Optionee remains a Director.

 

(b) This Option may not be exercised for a fraction of a share.

 

(c) In the event of Optionee’s death, disability or other termination of service
as a Director, the exercisability of this Option is governed by Sections 6, 7
and 8 of this Agreement.

 

(iii) Method of Exercise.

 

(a) This Option shall be exercisable by written notice which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder’s investment intent with respect to such Shares of Common Stock as
may be

 

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required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person, by
facsimile or by certified mail to SGI’s Employee Stock Services. The written
notice shall be accompanied by payment of the exercise price

 

(b) No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, the Shares shall be considered transferred to the
Optionee on the date on which the Option is exercised with respect to such
shares.

 

4. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

 

(i) cash;

 

(ii) check;

 

(iii) surrender of other Shares of Common Stock of SGI of a value equal to the
exercise price of the shares as to which the Option is being exercised which, in
the case of shares acquired previously upon exercise of an option have been
owned by the Optionee for more than six (6) months on the date of surrender; or

 

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

 

5. Restrictions on Exercise. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulations, or if such issuance would not comply
with the requirements of any stock exchange upon which the Shares may then be
listed. As a condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.

 

6. Termination of Status as a Director. If the Optionee ceases to serve as a
Director, he or she may, but only within three (3) months after the date he or
she ceases to be a Director of the Company, exercise this Option to the extent
that he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
ten (10) year term has expired. To the extent that the Optionee was not entitled
to exercise this Option at the date of such termination, or if the Optionee does
not exercise this Option within the time specified herein, the Option shall
terminate.

 

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7. Disability of Optionee. Notwithstanding the provisions of Section 6 above, if
the Optionee is unable to continue his or her service as a Director as a result
of the Optionee’s Disability, he or she may, but only within twelve (12) months
from the date of termination, exercise this Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its ten (10) year term
has expired. To the extent that the Optionee was not entitled to exercise this
Option at the date of termination, or if the Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.

 

8. Death of Optionee. In the event of the death of the Optionee during the term
of this Option, the Option may be exercised, at any time within twelve
(12) months following the date of death, by the Optionee’s estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
death. Notwithstanding the foregoing, in no event may the Option be exercised
after its ten (10) year term has expired.

 

9. Transferability of Option. Unless otherwise determined by the Committee to
the contrary, this Option 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 Optionee
only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

 

10. Term of Option. This Option may not be exercised more than ten (10) years
(five years if Optionee owns, immediately before this Option is granted, stock
representing more than 10 percent of the total combined voting power of all
classes of stock of SGI) from the date of grant of this Option, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option.

 

11. Taxation Upon Exercise of Option. Optionee understands that, upon exercise
of this Option, he or she will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares purchased over
the exercise price paid for such Shares. (Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, the
measurement and timing of such income may be deferred, and the Optionee is
advised to contact a tax advisor concerning the desirability of filing an 83(b)
election in connection with the exercise of the Option.) Upon a resale of such
Shares by the Optionee, any difference between the sale price and the fair
market value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.

 

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SILICON GRAPHICS, INC.,

a Delaware corporation

 

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Sandra M. Escher

Vice President, General Counsel and

Secretary

 

Optionee acknowledges receipt of a copy of the Plan, a copy of which is annexed
hereto, and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Plan.

 

 

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Optionee

 

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(New Employee Grant)

 

SILICON GRAPHICS, INC

AMENDED AND RESTATED

1993 LONG-TERM INCENTIVE STOCK PLAN

NON STATUTORY STOCK OPTION GRANT AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (“SGI”), has granted to the
Optionee named on the attached NOTICE OF GRANT OF STOCK OPTION AND GRANT
AGREEMENT (the “NOTICE”) which is incorporated herein by reference, an Option to
purchase the total number of shares of Common Stock and at the price determined,
both as set forth on the attached NOTICE, and in all respects subject to the
terms, definitions and provisions of the 1993 Long-Term Incentive Stock Plan
(the “Plan”) adopted by SGI which is incorporated herein by reference. The terms
defined in the Plan shall have the same defined meanings herein.

 

By accepting the NOTICE, Optionee acknowledges responsibility of reviewing the
terms of the Plan and the related prospectus, copies of which are available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com) and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions thereof. Optionee further agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under the Plan.

 

1. Nature of the Option. This Option is a non-statutory option and is not
intended to qualify for any special tax benefits to the Optionee.

 

2. Exercise Price. The exercise price for each share of Common Stock is as set
forth in the attached NOTICE, which price is not less than the fair market value
per share of the Common Stock on the date of grant.

 

3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 7 of the Plan as follows:

 

(a) Right to Exercise.

 

(i) Subject to subsection 3(a) (ii) and (iii), below, this Option shall be
exercisable, cumulatively, to the extent of twenty-five percent (25%) of the
Shares subject to the Option on the one year anniversary of the date of grant as
set forth in the attached NOTICE; thereafter the Shares subject to the Option
shall be exercisable to the extent of six and one-quarter percent (6.25%) of the
Shares subject to the Option every three months on each quarterly anniversary of
the date of grant.

 

(ii) This Option may not be exercised for a fraction of a share.

 

(iii) In the event of Optionee’s death, disability or other termination of
employment, the exercisability of the Option is governed by Sections 7, 8, and 9
below.

 

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(b) Method of Exercise. This Option shall be exercisable by written notice
signed by the Optionee and delivered to the Company’s Employee Stock Services
group or by using the electronic exercise methods approved from time to time by
Employee Stock Services (currently www.optionslink.com). If electronic exercise
method is not chosen, such notice shall be in the form of Exhibit A (Stock
Exercise Request) found at Employee Stock Services’website or upon request. The
exercise notice shall be accompanied by payment of the exercise price. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the exercise price.

 

No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, the Shares shall be considered transferred to the
Optionee on the date on which the Option is exercised with respect to such
shares.

 

4. Optionee’s Representations. In the event the shares purchasable pursuant to
the exercise of this Option have not been registered under the Securities Act of
1933, as amended, at the time this Option is exercised, Optionee shall,
concurrently with the exercise of all or any portion of this Option, deliver to
SGI his or her Investment Representation Statement in the form of Exhibit B,
(available in Employee Stock Services) and shall read the applicable rules of
the Commissioner of Corporations attached to such Investment Representation
Statement.

 

5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

 

(i) cash; or

 

(ii) check; or

 

(iii) surrender of other Shares of Common Stock of the Company of a value equal
to the exercise price of the shares as to which the Option is being exercised
which, in the case of shares acquired previously upon exercise of an option have
been owned by the Optionee for more than six (6) months on the date of
surrender; or

 

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

 

6. Restrictions on Exercise. This Option may not be exercised until such time as
the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal

 

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Regulations (“Regulation G”) as promulgated by the Federal Reserve Board. As a
condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any
applicable law or regulation.

 

7. Termination of Status as an Employee or Consultant. If Optionee ceases to
serve as an Employee or Consultant, he or she may, but only within three
(3) months after the date he or she ceases to be an Employee or Consultant of
the Company, exercise this Option to the extent that he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise this Option at the date of such termination, or if he
or she does not exercise this Option within the time specified herein, the
Option shall terminate.

 

8. Disability of Optionee. Notwithstanding the provisions of Section 7 above, if
Optionee is unable to continue his or her employment or consulting relationship
with the Company as a result of his or her Disability, the Optionee may, but
only within twelve (12) months from the date of such termination, exercise his
or her Option to the extent he or she was entitled to exercise the Option at the
date of such termination. To the extent that he or she was not entitled to
exercise the Option at the date of termination, or if he or she does not
exercise such Option within the time specified herein, the Option shall
terminate.

 

9. Death of Optionee. In the event of the death of Optionee during the term of
this Option, the Option may be exercised, at any time within twelve (12) months
following the date of death, by Optionee’s estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued as of the date of death.

 

10. Transferability of Option. Unless otherwise determined by the Committee to
the contrary, this Option 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 Optionee
only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

 

11. Term of Option. This Option may not be exercised more than seven (7) years
(five years if Optionee owns, immediately before this Option is granted, stock
representing more than 10 percent of the total combined voting power of all
classes of stock of SGI) from the date of grant of this Option, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option.

 

12. Taxation Upon Exercise of Option. Optionee understands that, upon exercise
of this Option, he will recognize income for tax purposes in an amount equal to
the excess of the then fair market value of the shares over the exercise price.
The Company will be required to withhold tax from Optionee’s current
compensation with respect to such income; to the extent that Optionee’s current
compensation is insufficient

 

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to satisfy the withholding tax liability, the Company may require the Optionee
to make a cash payment to cover such liability as a condition of exercise of
this Option. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the Option will be treated as capital gain or loss.

 

13. Acceleration Upon Change of Control. Notwithstanding provisions of
Section 3(a) with respect to option exercisability, in the event of a Change of
Control of the Company, this Option shall automatically become exercisable in
full if, within twenty-four (24) months after a Change of Control Date, (i) the
Optionee is involuntarily terminated by the Company or any successor company
(hereinafter, the “Employer”) without Cause or (ii) the Optionee voluntarily
resigns from the Employer for Good Reason.

 

14. Definitions. For purposes of Section 13, the terms “Cause,” “Change of
Control,” “Change of Control Date,” and “Good Reason” shall have the meanings
set out below:

 

(a) “Cause” means the termination of employment of an Optionee shall have taken
place as a result of:

 

  (i) any act or acts of dishonesty undertaken by such Optionee and intended to
result in gain or personal enrichment of the Optionee, or

 

  (ii) persistent failure to perform the duties and obligations of such Optionee
which is not remedied in a reasonable period of time after receipt of written
notice from the Employer, or

 

  (iii) violation of confidentiality or proprietary information obligations to
or agreements entered into with the Employer, or

 

  (iv) use, sale or distribution of illegal drugs on the Employer’s premises, or

 

  (v) threatening, intimidating, or coercing or harassing fellow employees, or

 

  (vi) the conviction of such Optionee of a felony.

 

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(b) “Change of Control” of the Company means:

 

  (i) the acquisition by any Person (as such term is used in Sections 13(d) and
14(d) of the 1934 Act) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of fifty percent
(50%) or more of the combined voting power of the outstanding shares of capital
stock of the Company’s then outstanding securities with respect to the election
of the directors of the Board.

 

(ii) During any period of three (3) consecutive years individuals who, at the
beginning of such period, constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board, provided that any
person becoming a Director of the Board subsequent to the date of this agreement
whose election, or nomination for election by the Company’s shareholders, was
approved by the vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of any individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Board, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act)
shall be, for these purposes, considered as though such person were a member of
the Incumbent Board.

 

(c) “Change of Control Date” means the effective date of the Change of Control
or such date which the Board shall, by resolution, deem to be the Change of
Control Date.

 

(d) “Good Reason” for voluntary resignation means (i) the Employer reduces by
ten percent (10%) or more the Optionee’s compensation at the rate in effect
immediately prior to the Change of Control or (ii) without the Optionee’s
express written consent, the Employer requires the Optionee to change the
location of his or her job or office, so that he or she will be based at a
location more then fifty (50) miles from the location of his or her job or
office immediately prior to the Change of Control. For these purposes,
“Compensation” includes base salary, exclusive of bonus, incentive compensation
and shift differential, paid by the Employer as consideration for the Optionee’s
service.

 

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SILICON GRAPHICS, INC.

1993 LONG-TERM INCENTIVE STOCK PLAN

NON-STATUTORY STOCK OPTION GRANT AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (“SGI”), has granted to the
Optionee named on the attached NOTICE OF GRANT OF STOCK OPTION AND GRANT
AGREEMENT (the “NOTICE”) which is incorporated herein by reference, an Option to
purchase the total number of shares of Common Stock and at the price determined,
both as set forth on the attached NOTICE, and in all respects subject to the
terms, definitions and provisions of the 1993 Long-Term Incentive Stock Plan
(the “Plan”) adopted by SGI which is incorporated herein by reference. The terms
defined in the Plan shall have the same defined meanings herein.

 

By signing the NOTICE, Optionee acknowledges responsibility of reviewing the
terms of the Plan and the related prospectus, copies of which are available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com) and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions thereof. Optionee further agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under the Plan.

 

1. Nature of the Option. This Option is a non-statutory option and is not
intended to qualify for any special tax benefits to the Optionee.

 

2. Exercise Price. The exercise price for each share of Common Stock is as set
forth in the attached NOTICE, which price is not less than the fair market value
per share of the Common Stock on the date of grant.

 

3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 7 of the Plan as follows:

 

(a) Right to Exercise.

 

(i) Subject to subsection 3(a) (ii) and (iii), below, this Option shall be
exercisable to the extent of six and one-quarter percent (6.25%) of the Shares
subject to the Option every three months on each quarterly anniversary of the
date of grant as set forth in the attached NOTICE.

 

(ii) This Option may not be exercised for a fraction of a share.

 

(iii) In the event of Optionee’s death, disability or other termination of
employment, the exercisability of the Option is governed by Sections 7, 8, and 9
below.

 

  (b) Method of Exercise. This Option shall be exercisable by written notice
signed by the Optionee

 

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       and delivered to the Company’s Employee Stock Services group or by using
the electronic exercise methods approved from time to time by Employee Stock
Services (currently www.optionslink.com). If electronic exercise method is not
chosen, such notice shall be in the form of Exhibit A (Stock Exercise Request)
found at Employee Stock Services’ web site or upon request. The exercise notice
shall be accompanied by payment of the exercise price. The Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the exercise price.

 

No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, the Shares shall be considered transferred to the
Optionee on the date on which the Option is exercised with respect to such
shares.

 

4. Optionee’s Representations. In the event the shares purchasable pursuant to
the exercise of this Option have not been registered under the Securities Act of
1933, as amended, at the time this Option is exercised, Optionee shall,
concurrently with the exercise of all or any portion of this Option, deliver to
SGI his or her Investment Representation Statement in the form of Exhibit B,
(available in Employee Stock Services) and shall read the applicable rules of
the Commissioner of Corporations attached to such Investment Representation
Statement.

 

5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

 

  (i) cash; or

 

  (ii) check; or

 

  (ii) surrender of other Shares of Common Stock of SGI of a value equal to the
exercise price of the shares as to which the Option is being exercised which, in
the case of shares acquired previously upon exercise of an option have been
owned by the Optionee for more than six (6) months on the date of surrender; or

 

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

 

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6. Restrictions on Exercise. This Option may not be exercised until such time as
the Plan has been approved by the shareholders of SGI, or if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulation, including any rule under Part 207 of
Title 12 of the Code of Federal Regulations (“Regulation G”) as promulgated by
the Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

 

7. Termination of Status as an Employee or Consultant. If Optionee ceases to
serve as an Employee or Consultant, he or she may, but only within three
(3) months after the date he or she ceases to be an Employee or Consultant of
the Company, exercise this Option to the extent that he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise this Option at the date of such termination, or if he
or she does not exercise this Option within the time specified herein, the
Option shall terminate.

 

8. Disability of Optionee. Notwithstanding the provisions of Section 7 above, if
Optionee is unable to continue his or her employment or consulting relationship
with the Company as a result of his or her Disability, the Optionee may, but
only within twelve (12) months from the date of such termination, exercise his
or her Option to the extent he or she was entitled to exercise the Option at the
date of such termination. To the extent that he or she was not entitled to
exercise the Option at the date of termination, or if he or she does not
exercise such Option within the time specified herein, the Option shall
terminate.

 

9. Death of Optionee. In the event of the death of Optionee during the term of
this Option, the Option may be exercised, at any time within twelve (12) months
following the date of death, by Optionee’s estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued as of the date of death.

 

10. Transferability of Option. Unless otherwise determined by the Committee to
the contrary, this Option 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 Optionee
only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

 

11. Term of Option. This Option may not be exercised more than seven (7) years
(five years if Optionee owns, immediately before this Option is

 

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granted, stock representing more than 10 percent of the total combined voting
power of all classes of stock of SGI) from the date of grant of this Option, and
may be exercised during such term only in accordance with the Plan and the terms
of this Option.

 

12. Taxation Upon Exercise of Option. Optionee understands that, upon exercise
of this Option, he will recognize income for tax purposes in an amount equal to
the excess of the then fair market value of the shares over the exercise price.
The Company will be required to withhold tax from Optionee’s current
compensation with respect to such income; to the extent that Optionee’s current
compensation is insufficient to satisfy the withholding tax liability, the
Company may require the Optionee to make a cash payment to cover such liability
as a condition of exercise of this Option. Upon a resale of such shares by the
Optionee, any difference between the sale price and the fair market value of the
shares on the date of exercise of the Option will be treated as capital gain or
loss.

 

13. Acceleration Upon Change of Control. Notwithstanding provisions of
Section 3(a) with respect to option exercisability, in the event of a Change of
Control of the Company, this Option shall automatically become exercisable in
full if, within twenty-four (24) months after a Change of Control Date, (i) the
Optionee is involuntarily terminated by the Company or any successor company
(hereinafter, the “Employer”) without Cause or (ii) the Optionee voluntarily
resigns from the Employer for Good Reason.

 

14. Definitions. For purposes of Section 13, the terms “Cause,” “Change of
Control,” “Change of Control Date,” and “Good Reason” shall have the meanings
set out below:

 

(a) “Cause” means the termination of employment of an Optionee shall have taken
place as a result of:

 

  (i) any act or acts of dishonesty undertaken by such Optionee and intended to
result in gain or personal enrichment of the Optionee, or

 

  (ii) persistent failure to perform the duties and obligations of such Optionee
which is not remedied in a reasonable period of time after receipt of written
notice from the Employer, or

 

  (iii) violation of confidentiality or proprietary information obligations to
or agreements entered into with the Employer, or

 

  (iv) use, sale or distribution of illegal drugs on the Employer’s premises, or

 

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  (v) threatening, intimidating, or coercing or harassing fellow employees, or

 

  (vi) the conviction of such Optionee of a felony.

 

(b) “Change of Control” of the Company means:

 

  (i) the acquisition by any Person (as such term is used in Sections 13(d) and
14(d) of the 1934 Act) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of fifty percent
(50%) or more of the combined voting power of the outstanding shares of capital
stock of the Company’s then outstanding securities with respect to the election
of the directors of the Board.

 

  (ii) During any period of three (3) consecutive years individuals who, at the
beginning of such period, constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board, provided that any
person becoming a Director of the Board subsequent to the date of this agreement
whose election, or nomination for election by the Company’s shareholders, was
approved by the vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of any individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Board, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act)
shall be, for these purposes, considered as though such person were a member of
the Incumbent Board.

 

(c) “Change of Control Date” means the effective date of the Change of Control
or such date, which the Board shall, by resolution, deem to be the Change of
Control Date.

 

(d) “Good Reason” for voluntary resignation means (i) the Employer reduces by
ten percent (10%) or more the Optionee’s compensation at the rate in effect
immediately prior to the Change of Control or (ii) without the Optionee’s
express written consent, the Employer requires the Optionee to change the
location of his or her job or office, so that he or she will be based at a
location more then fifty (50) miles from the location of his or her job or
office immediately prior to the Change of Control. For these purposes,
“Compensation” includes base salary, exclusive of bonus, incentive compensation
and shift differential, paid by the Employer as consideration for the Optionee’s
service.

 

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