Exhibit 10.4

 

SILICON GRAPHICS, INC.

 

AMENDED AND RESTATED1996 SUPPLEMENTAL NON-
EXECUTIVE EQUITY INCENTIVE PLAN

 

1.                                       Purpose of the Plan.  The purpose of
the Silicon Graphics, Inc. 1996 Supplemental Non-Executive Equity Incentive Plan
(the “Plan”) is to promote the long-term success of Silicon Graphics, Inc. (the
“Company”) by providing supplemental equity incentives to non-executives of the
Company to address special circumstances identified from time to time by the
Compensation and Human Resources Committee, which could without limitation
include special retention programs addressing exceptional competitive pressures
in the market for technical personnel, special recognition programs for
outstanding performance, and other circumstances outside of the normal course.

 

2.                                       Eligibility.  Stock Awards (“Rights”)
and nonstatutory stock options (“Options”) may be granted to Eligible
Employees.  If otherwise eligible, an Employee 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 11 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 17,500,000 shares*.  If shares issued pursuant to a Stock
Award are forfeited or otherwise reacquired by the Company, or if an Option or
Right expires or becomes unexercisable without having been exercised in full,
the reacquired or unpurchased shares, respectively, that were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated).

 

(b)                                 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.

 

4.                                       Plan Administration.

 

(a)                                  Committee.  The Compensation and Human
Resources Committee (the “Committee”) appointed by the Board of Directors of the
Company (the “Board”) shall be responsible for administering the Plan.  The
Committee shall have full and exclusive power to interpret the Plan and to adopt
such rules,

 

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*  The number of shares authorized for issuance was increased by 5,000,000
shares through an amendment approved by the Board of Directors in July 2001.

 

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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.

 

(b)                                 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.

 

5.                                       Duration of the Plan.  The Plan shall
remain in effect until terminated 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 and Stock Awards.

 

7.                                       Options.

 

(a)                                  Options; Number of Shares.  The Committee,
in its discretion, may grant Options to eligible participants.  Each Option
shall be evidenced by a Notice of Grant that shall specify the number of shares
to which it pertains 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.

 

(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 than an Option may not be exercised until the completion of a service
period specified at the time of

 

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grant.  (Any such period is referred to herein as the “waiting period.”)  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.

 

(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 may consist entirely
of:

 

(1)                                  cash;

 

(2)                                  check;

 

(3)                                  promissory note;

 

(4)                                  other shares that (1) 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 (2) 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;

 

(5)                                  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;

 

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

 

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

 

(iv)                              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 (24)
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.

 

(v)                                 Buyout Provisions.  The Committee may at any
time offer to buy out 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.

 

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(b)                                 Method of Exercise.

 

(i)                                     Procedure for Exercise; Rights as a
Stockholder.  Any Option 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.

 

An Option 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 by the
person entitled to exercise the Option 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 11 of the Plan.

 

Exercise of an Option in any manner shall result in a decrease in the number of
shares that 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.

 

(ii)                                  Termination of Employment Relationship. 
In the event an Optionee ceases to be an Employee (other than as a result of the
Optionee’s death or Disability), the Optionee may exercise his or her Option,
but only within such period of time from the date of such termination as is
determined by the Committee 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 as set forth in the Option Agreement).  To the extent that Optionee was
not entitled to exercise an Option at the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.

 

(iii)                               Disability of Optionee.  In the event an
Optionee ceases to be an Employee as a result of the Optionee’s Disability, the
Optionee may exercise his or her Option, but only within twelve (12) months from
the date of such termination, and, unless determined otherwise by the Committee,
only to the extent

 

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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 as set
forth in the Option Agreement).  To the extent that Optionee was not entitled to
exercise an Option at the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

 

(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 by bequest or inheritance may exercise
the Option, 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 as set forth in the Option
Agreement).  To the extent that Optionee was not entitled to exercise an Option
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 (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.

 

8.                                       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.                                       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.  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.

 

10.                                 Tranferability 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 10, the Optionee’s “immediate family” shall include any child,
stepchild,

 

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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.

 

11.                                 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 that have 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, however, 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

 

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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 11(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
(either 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, however, that if such consideration received in the merger or
sale of assets was not solely common 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.

 

12.                                 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.

 

13.                                 Amendment and Termination of the Plan.

 

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

 

(b)                                 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.

 

14.                                 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

 

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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.

 

15.                                 Liability of Company.  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.

 

16.                                 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.

 

17.                                 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)                                 “Common Stock” means the Common Stock of the
Company.

 

(c)                                  “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.

 

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

 

(e)                                  “Eligible Employee” means an Employee who
is not a vice-president or more senior Employee.

 

(f)                                    “Employee” means any person employed by
the Company.

 

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(g)                                 “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.

 

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

 

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

 

(j)                                     “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.

 

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

 

(l)                                     “Optionee” means an Employee who holds
an outstanding Option or Right.

 

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

 

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RENEWAL

 

SILICON GRAPHICS, INC.

1996 SUPPLEMENTAL NON-EXECUTIVE EQUITY INCENTIVE PLAN

 

NON-STATUTORY STOCK OPTION GRANT AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (the “Company”), 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 included in this option paskage, and in
all respects subject to the terms, definitions and provisions of the 1996
Supplemental Non-Executive Equity Incentive Plan (the “Plan”) adopted by the
Company 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 included in
this option grant package and also available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com). Optionee further 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 agress 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.

 

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 twelve and one-half percent (12.5%) of the
Shares subject to the Option every six months on each anniversary of the date of
hire 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.

 

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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 methods approved from tme 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 the Stock Administration’s 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 the Company his or her Investment Representation Statement in
the form of Exhibit B, (available in Stock Administration) 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 the Company 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.

 

6.             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

 

 

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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.  If Optionee ceases to
serve as an Employee, he or she may, but only within three (3) months after the
date he or she ceases to be an Employee 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
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 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

 

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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)            an 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.

 

(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

 

4

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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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RENEWAL

 

SILICON GRAPHICS, INC.

1996 SUPPLEMENTAL NON-EXECUTIVE EQUITY INCENTIVE PLAN

 

NON-STATUTORY STOCK OPTION GRANT AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (the “Company”), 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 included in this option paskage, and in
all respects subject to the terms, definitions and provisions of the 1996
Supplemental Non-Executive Equity Incentive Plan (the “Plan”) adopted by the
Company 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 included in
this option grant package and also available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com). Optionee further 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 agress 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.

 

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 twelve and one-half percent (12.5%) of the
Shares subject to the Option every six months on each 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.

 

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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 methods approved from tme 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 the Stock Administration’s 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 the Company his or her Investment Representation Statement in
the form of Exhibit B, (available in Stock Administration) 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 the Company 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.

 

6.             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

 

2

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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.  If Optionee ceases to
serve as an Employee, he or she may, but only within three (3) months after the
date he or she ceases to be an Employee 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
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 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

 

3

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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)            an 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.

 

(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

 

4

--------------------------------------------------------------------------------

 

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.

 

5

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