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                                                                    Exhibit 10.1

                           EXECUTIVE SEVERANCE POLICY

APPLICATION

This policy applies to the officers of Cray Inc. ("Cray" or the "Company"). In
particular it applies to all individuals who are appointed by the Board of
Directors to officer positions and to those individuals who are appointed by the
Chief Executive Officer as officers. The current individuals covered by this
policy are listed on Exhibit A; the Chief Executive Officer may change Exhibit A
from time to time.

The Company has entered into management retention agreements with certain of its
officers that become applicable if there is a "Change of Control," as defined in
those agreements, of Cray. If those agreements are applicable, then the
individuals covered by those agreements are covered by those agreements and not
by this policy.

This policy does not apply if the officer's employment is terminated for Cause,
death, Disability, retirement or resignation other than for Good Reason (as such
terms are defined in Section 2 below).

The Company has adopted a severance policy for all employees in connection with
reductions-in-force. If applicable, this policy is in lieu of and replaces the
reduction-in-force policy for the covered officers.

POLICY

If the employment of an officer of the Company terminates and this policy is
applicable to such termination, then:

1.    Severance Payment. The officer will be entitled to Severance Payments as
      follows:

      a. Salary Continuation. The officer will continue to receive his or her
      Salary, to be paid in accordance with the Company's standard salary
      payment policy for all employees, for the following periods, as
      applicable:

            President and Chief Executive Officer - for a period of twelve
            months, provided that from March 1, 2005, through March 31, 2008,
            the amount shall be 200% of Salary.

            Senior Vice President - for a period of nine months, plus one month
            for each year of service as an officer of the Company, up to a
            maximum of twelve months

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            Vice President - for a period of six months, plus one month for each
            year of service as an officer of the Company, up to a maximum of
            nine months.

            New Officers - the Compensation Committee of the Board of Directors
            is authorized to approve salary continuation for different periods,
            and to add targeted bonus and other compensation to the definition
            of "Salary" in connection with the hiring or appointment of new
            officers and senior managers, such determinations to be set forth in
            minutes of the Compensation Committee.

            *For purposes of calculating "a year of service" for salary
            continuation purposes, an individual shall be deemed to have
            completed a "year of service" as on officer if the individual has
            completed ten or more full months as an officer.

            The Board of Directors shall determine the period of time over which
            the salary continuation payments are made. These salary continuation
            payments will cease if, while receiving these salary continuation
            payments, the officer becomes re-employed by the Company or any of
            its subsidiaries but will continue if the officer is employed by
            another employer.

      b. Vacation. Any accrued vacation balance to be paid in accordance with
      the Company's standard practice for paying accrued vacation to terminating
      employees.

      c. Benefits. The Company will continue to provide the following benefits
      in accordance with the Company's policies and benefits applicable to all
      employees:

            The Company will pay under COBRA the Company portion of the medical
            benefits that the officer was receiving prior to termination;

            The Company will provide to the officer the Dental, Vision and
            Orthodontia benefits on the same terms as were provided to the
            officer prior to termination; and

            The Company will reimburse the cost of a term life insurance policy
            for the appropriate period in the amount provided to the officer
            immediately prior to termination'

            provided, however, to the extent the Company adjusts or changes any
            or all of the medical, vision, orthodontia and life insurance
            benefits

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                  generally for employees in the United States, then the Company
                  shall make a comparable adjustment in the benefits provided to
                  the officer

            The benefits identified in this clause 1(c) will be provided for a
            period ending the earlier of (i) when the officer no longer receives
            continued salary under clause 1(a) above or (ii) when the officer is
            employed by an employer that provides medical, dental, vision,
            orthodontia and life insurance benefits, as the case may be, and the
            officer was eligible to receive any such benefits. As part of the
            officer's termination, he or she will agree to notify the Company
            promptly if he or she becomes an employee of another employer.

      d.    Stock Options. All outstanding stock options shall cease to vest
            upon termination and all outstanding stock options shall be
            exercisable at any time before the earlier of (i) the expiration
            date of the option or (ii), if permitted under the applicable stock
            option agreements, the expiration of the salary payments under
            clause 1(a) above and, if not so permitted, then pursuant to the
            provisions of the applicable stock option agreements

      e.    Outplacement. The Company will pay for outplacement services (Drake
            Beam Morin Senior Executive Level Programs or equivalent) for a
            period ending the earlier of (i) when the officer no longer receives
            continued salary under clause 1(a) above or (ii) when the officer is
            employed.

2.    Definitions:

      a.    Cause. For purposes of this policy, "Cause" means a termination of
            employment resulting from a good faith determination by the Board of
            Directors that:

            -     the officer has willfully failed or refused in a material
                  respect to follow reasonable policies or directives
                  established by the Board of Directors or the Chief Executive
                  Officer or willfully failed or refused to attend to material
                  duties or obligations of his or her office (other than any
                  such failure resulting from the officer's incapacity due to
                  physical or mental illness), which the officer has failed to
                  correct within a reasonable period following written notice to
                  such officer; or

            -     there has been an act by the officer involving wrongful
                  misconduct which has a demonstrably adverse impact on or
                  material damage to the Company or its subsidiaries, or which
                  constitutes a misappropriation of the assets of the Company or
                  its subsidiaries; or

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            -     the officer has engaged in an unauthorized disclosure of
                  confidential information; or

            -     the officer, while employed by the Company or any of its
                  subsidiaries, has performed services for another company or
                  person which competes with the Company, without the prior
                  written approval of the Chief Executive Officer of the
                  Company.

      b.    Disability. For purposes of this policy, "Disability" means that, at
            the time the officer's employment is terminated, he or she has been
            unable to perform the duties of his or her position for a period of
            six consecutive months as a result of the officer's incapability due
            to physical or mental illness.

      c.    Good Reason. For purposes of this policy, "Good Reason" means:

            -     a reduction in salary or benefits (other than applicable to
                  employees generally); or

            -     a material diminution in job responsibilities; or

            -     a request to relocate, except for office relocations that
                  would not increase the officer's one-way commute by more than
                  25 miles.

      d.    Salary. For purposes of this policy, "Salary" means the officer's
            base salary in effect at the time, exclusive of any bonus and of any
            variable pay component, except as follows:

            For the President and Chief Executive Officer, "Salary" means the
            total of the President and Chief Executive's base salary in effect
            at the time, the Preisdent and Chief Executive's bonus under the
            executive bonus plan in effect at the time, assuming 100% of the
            target is reached, and the override bonus based at meeting the plan
            for the year, as approved by the Board (if the Board has not yet
            approved a plan for the applicable year, the previous year's plan
            will be used to determine such bonus).

3.    Conditions. It is a condition for any officer to receive the benefits
      under this policy that the officer execute the Company's standard
      termination agreement and general release and any required revocation or
      waiting period shall have expired, and it is a condition to the
      continuation of salary and other benefits under this policy that the
      officer, following termination, complies with the terms of his or her
      Employee Confidentiality Agreement and any agreement executed during the
      officer's employment or in connection with the officer's termination of
      employment.

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4.    Unfunded Obligations. The obligations of the Company under this policy are
      funded from the Company's general assets.

5.    Administration. This policy shall be administered by the Chief Executive
      Officer of the Company, or such other person or persons as the Chief
      Executive Officer may appoint (such person or persons are referred to as
      the "Administrator"), provided that the Board of Directors may appoint
      another person as Administrator.

6.    ERISA Plan. This policy is intended to be and shall be administered and
      maintained as a welfare benefit plan under Section 3(1) of the Employee
      Retirement Income Security Act of 1974 ("ERISA"), providing certain
      benefits to participants on certain severances from employment. This
      policy is not intended to be a pension plan under Section 3(2)(A) of ERISA
      and shall be maintained and administered so as not to be such a plan.

7.    Claims. Claims for benefits under this policy shall be governed by these
      procedures. The Administrator shall establish administrative processes and
      safeguards to ensure and verify that claims decisions are made in
      accordance with the plan and that, where appropriate, plan provisions have
      been applied consistently with respect to similarly situated claimants.
      Any person claiming a benefit, or requesting an interpretation, ruling or
      information, shall present the request in writing to the chair of the
      Administrator, who will decide the claim.

      7.1 If the claim is wholly or partially denied, the Administrator will
      notify the claimant of the adverse determination within a reasonable time
      not longer than 90 days after the plan received the claim unless special
      circumstances require an extension of time. The Administrator will notify
      a claimant in writing of the need for any extension before the end of the
      initial 90 days. Any notice of extension will indicate the special
      circumstances requiring the extension and the date by which a decision is
      expected. Any extension will be no longer than another 90 days after the
      initial period.

      7.2 The Administrator will provide the claimant with written or electronic
      notification of any adverse determination on a claim, including the
      specific reason or reasons for the determination; reference to the
      specific plan provisions on which the determination is based; a
      description of any additional material or information necessary for the
      claimant to perfect the claim and an explanation of why it is necessary; a
      description of the review procedures under 7.3 and 7.4 and the applicable
      time limits; and a statement of the claimant's right to bring a legal
      action under ERISA following any adverse determination on review.

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      7.3 A claimant may request review within 60 days after receiving a
      notification of an adverse determination on a claim and may submit written
      comments, documents, records and other information relating to the claim

                  (a) Upon request and at no charge, the claimant may have
            copies of any document, record or other information that was relied
            on in making the determination; was submitted, considered or
            generated in the course of making the determination, whether or not
            relied on; or demonstrates compliance with the processes and
            safeguards under 7.1(a).

                  (b) The Administrator's review shall take into account all
            comments, documents, records and other information submitted by the
            claimant relating to the claim, whether or not considered in the
            initial determination.

      7.4 The Administrator will respond to an appeal by notifying the claimant
      of its determination on review within a reasonable time not longer than 60
      days after the plan received the request for review unless an extension of
      time is required for a hearing or other special circumstances. The
      Administrator will also notify a claimant in writing of the need for any
      extension before the end of the initial 60 days. Any notice of extension
      will indicate the special circumstances requiring the extension and the
      date by which a decision is expected. No extension will be longer than
      another 60 days after the initial period.

      7.5 The Administrator will provide the claimant with written or electronic
      notification of its determination on appeal. If the determination is
      adverse, the notice will include the specific reason or reasons for the
      determination; reference to the specific plan provisions on which the
      determination is based; a statement that, upon request and at no charge,
      the claimant may have copies of any document, record or other information
      under 7.3; and a summary of the claimant's right to bring a civil action
      under ERISA.

8.    Status as Policy. The Company may modify and/or terminate this policy at
      any time and, prior to termination of his or her employment, no officer
      has any vested rights under this policy.

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