Exhibit 10.4

 

SILICON GRAPHICS, INC.

 

AMENDED AND RESTATED 1996 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.
(“SGI”) 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 (the “Committee”) appointed by the
Board of Directors of SGI (the “Board”), 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 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 22,500,000 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 Committee 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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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)                                  other shares that (a) in the case of shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (b) have a Fair Market Value on
the date of surrender not greater than the aggregate exercise price of the
shares as to which said Option shall be exercised;

 

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

 

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

 

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

 

(iv)                              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 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

 

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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, 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

 

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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 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

 

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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 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

 

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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
SGI.

 

(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.

 

(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

 

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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 nonstatutory 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.

AMENDED AND RESTATED

1996 SUPPLEMENTAL NON-EXECUTIVE EQUITY INCENTIVE 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 included in this Option package, and in
all respects subject to the terms, definitions and provisions of the Amended and
Restated 1996 Supplemental Non-Executive Equity Incentive 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 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 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.

 

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.

 

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(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 and delivered to SGI’s
Employee Stock Services group or by using the electronic methods approved from
time to time by Employee Stock Services (currently www.optionslink.com).  If an
electronic exercise method is not chosen, such notice shall be in the form of
Exhibit A (Stock Exercise Request) found at the 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 SGI
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
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 a
cashless exercise of the Option and delivery to SGI of the sale proceeds
required to pay the exercise price.

 

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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 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, SGI may require Optionee to make any representation
and warranty to SGI 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

 

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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 SGI, 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 SGI means:

 

(i)                                     the acquisition by any Person (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the “Exchange Act”)) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the Exchange

 

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Act), directly or indirectly, of fifty percent (50%) or more of the combined
voting power of the outstanding shares of capital stock of SGI’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 the NOTICE whose election, or nomination for election
by SGI’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 Exchange 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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(NEW HIRE)

 

SILICON GRAPHICS, INC.

AMENDED AND RESTATED

1996 SUPPLEMENTAL NON-EXECUTIVE EQUITY INCENTIVE 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 included in this Option package, and in
all respects subject to the terms, definitions and provisions of the Amended and
Restated 1996 Supplemental Non-Executive Equity Incentive 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 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 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.

 

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 hire 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 hire.

 

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

 

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(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 and delivered to SGI’s
Employee Stock Services group or by using the electronic methods approved from
time to time by Employee Stock Services (currently www.optionslink.com).  If an
electronic exercise method is not chosen, such notice shall be in the form of
Exhibit A (Stock Exercise Request) found at the 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 SGI
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 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
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 a
cashless exercise of the Option and delivery to SGI of the sale proceeds
required to pay the exercise price.

 

2

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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 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, SGI may require Optionee to make any representation
and warranty to SGI 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

 

3

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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 SGI, 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 SGI means:

 

(i)                                     the acquisition by any Person (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the Exchange

 

4

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

 

Act), directly or indirectly, of fifty percent (50%) or more of the combined
voting power of the outstanding shares of capital stock of SGI’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 the NOTICE whose election, or nomination for election
by SGI’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 Exchange 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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