<PAGE>   1

                                                                    Exhibit 10.5

                         TRANSITION SERVICES AGREEMENT

        TRANSITION SERVICES AGREEMENT, dated as of March 31, 2000 (the "Services
Agreement"), by and between SILICON GRAPHICS, INC., a Delaware corporation
("SGI"), and TERA COMPUTER COMPANY, a Washington corporation ("Tera"). SGI and
Tera are sometimes hereinafter collectively referred to as the "Parties."

                                    RECITALS

        A. SGI and Tera are parties to an Asset Purchase Agreement, dated as of
March 1, 2000, as amended March 31, 2000 (the "Asset Purchase Agreement"),
pursuant to which Tera has agreed to acquire certain business and assets of SGI.

        B. The Parties are interested in purchasing from each other certain
transition services listed and described in Schedule A and Schedule B attached
hereto during certain transition periods commencing from the date hereof.

        NOW, THEREFORE, the Parties, in consideration of the premises and the
mutual covenants and agreements contained herein, and intending to become
legally bound, hereby agree as follows:

                                    SECTION 1
                       AGREEMENT TO SELL AND BUY SERVICES

        1.1 Definitions. Except as otherwise defined in this Services Agreement,
all capitalized terms shall have the meaning assigned to them in the Asset
Purchase Agreement.

        1.2 Provision of Services.

               (a) SGI shall provide to Tera the services described on Schedule
A (the "SGI Services") for the period set forth on Schedule A for each such SGI
Service. All of the SGI Services shall be provided in accordance with the terms,
limitations and conditions set forth herein and on Schedule A.

               (b) Tera shall provide to SGI the services described on Schedule
B (the "Tera Services" and together with the SGI Services, the "Services") for
the period set forth on Schedule B for each such Tera Service. All of the Tera
Services shall be provided in accordance with the terms, limitations and
conditions set forth herein and on Schedule B.

               (c) The Party providing Services (the "Service Provider") shall
receive, as payment for providing each Service, the amount, if any, set forth on
Schedule A or B, as the case may be, for each such Service.



<PAGE>   2

               (d) If the Service Provider's obligation to perform any Service
expires or is terminated pursuant to this Agreement, there shall be no
obligation to reinstate such Service, unless the Parties mutually agree in
writing.

               (e) If after the date of this Agreement, either Party identifies
any additional Service it reasonably requires from the other Party in order to
operate its business, the Parties will negotiate in good faith for such
additional Service and amend Schedule A or B, as the case may be, to reflect the
same; provided that this Section 1.2(e) shall not require any Party to provide
any additional Services absent the agreement of such Party.

        1.3 Access.

               (a) Tera shall make available on a timely basis to SGI all
information and materials reasonably required by SGI to enable it to provide the
SGI Services. SGI shall not be liable for any claims, errors or omissions
resulting from untimely or incorrect information provided by Tera. To the extent
reasonably necessary in order to provide the SGI Services, upon reasonable
advance notice to the applicable Tera Representative (as defined below), Tera
shall give appropriate representatives of SGI reasonable access, during regular
business hours and at such other times as are reasonably required, to the
premises of Tera.

               (b) SGI shall make available on a timely basis to Tera all
information and materials reasonably required by Tera to enable it to provide
the Tera Services. Tera shall not be liable for any claims, errors or omissions
resulting from untimely or incorrect information provided by SGI. To the extent
reasonably necessary in order to provide the Tera Services, upon reasonable
advance notice to the applicable SGI Representative (as defined below), SGI
shall give appropriate representatives of Tera reasonable access, during regular
business hours and at such other times as are reasonably required, to the
premises of SGI.

        1.4 Tera Representatives. Tera has designated the individual(s) set
forth on Schedule B for each Tera Service as its representative(s) for such Tera
Service (the "Tera Representatives") who have the authority to act on Tera's
behalf in connection with the performance of such Tera Services for which they
are the named Tera Representative, and who shall serve as the primary contact
for communications between SGI and Tera concerning the performance of such Tera
Services for which they are the named Tera Representative. No Tera
Representative has the authority to (i) amend or supplement the terms,
limitations or conditions of any Tera Service set forth on Schedule B or (ii)
agree to provide any services beyond the Tera Services described on Schedule B.

        1.5 SGI Representatives. SGI has designated the individual(s) set forth
on Schedule A for each SGI Service as its representative(s) for such SGI Service
(the "SGI Representatives") who have the authority to act on SGI's behalf in
connection with the performance of such SGI Services for which they are the
named SGI Representative, and who shall serve as the primary contact for
communications between Tera and SGI concerning



                                       2
<PAGE>   3

the performance of such SGI Services for which they are the named SGI
Representative. No SGI Representative has the authority to (i) amend or
supplement the terms, limitations or conditions of any SGI Service set forth on
Schedule A or (ii) agree to provide any services beyond the SGI Services
described on Schedule A.

                                    SECTION 2
                    SERVICES, PAYMENT; INDEPENDENT CONTRACTOR

        2.1 Services to be Provided.

               (a) Unless otherwise agreed in writing by the Parties, the
Service Provider shall use commercially reasonable efforts to perform all
Services to be performed under this Services Agreement. Notwithstanding anything
to the contrary contained herein, the Service Provider shall not be in default
of its obligations to provide any Service hereunder to the extent the inability
to provide such Service arises out of the other Party's failure to perform such
tasks as are required to be performed by the other Party to enable the Service
Provider to provide such Service.

               (b) SGI and Tera agree to cooperate, to provide such information,
and to take such actions as may be reasonably required to assist each other in
accomplishing the Services, including, without limitation, in the manner
specifically set forth in Schedules A and B hereto. The Parties agree to
maintain the confidentiality of all non-public information relating to the other
Party and its affiliates regarding the Services and each Party's business
activities, except as may be required to be disclosed by law.

               (c) Any amendment, supplement, variation, alteration or
modification to any Service as described on Schedule A or B must be made in
writing and signed by an executive officer or agent of each of the Parties.

               (d) The Service Provider shall have the right to cease
temporarily for maintenance purposes the operation of the equipment or
facilities providing any Service whenever in its reasonable and good faith
judgment such action is necessary. In the event such maintenance is required,
the other Party shall be reasonably notified of such maintenance (which notice
may be given during or after any emergency maintenance). Notwithstanding the
above, the Service Provider shall give the other Party as much advance notice of
any shutdown as is practicable, but in no event less that five business days
(except in the case of an emergency as set forth above). Where written notice is
not feasible, oral notice may be given. The Service Provider shall be relieved
of its obligations to provide such Service during the period that its equipment
or facilities are shut down; provided that the Service Provider shall use all
reasonable efforts to restart such equipment or reopen such facilities as
promptly as practicable.

        2.2 Payment. Invoices for SGI Services rendered will be delivered to
Tera as provided in Schedule A for each SGI Service for which SGI will be paid,
and amounts



                                       3
<PAGE>   4

charged shall be payable as provided in Schedule A. Invoices for Tera Services
rendered will be delivered to SGI as provided in Schedule B for each Tera
Service for which Tera will be paid, and amounts charged shall be payable as
provided in Schedule B. Invoiced amounts not paid when due shall be subject to
late charges for each month and portion thereof that the invoice is overdue,
with such late charges calculated at the lesser of (i) 18% and (ii) the maximum
rate allowed by applicable law.

        2.3 Independent Contractor. All Services performed by a Service Provider
under this Services Agreement shall be performed by the Service Provider as an
independent contractor, and employees of the Service Provider or any other
entities providing Services shall at all times be under the Service Provider's
sole discretion and control. Neither the Service Provider nor any other person
or entity performing any Services hereunder shall be deemed for any purpose to
be the agent, servant, employee, or representative of the other Party in the
performance of this Services Agreement. Nothing in this Services Agreement shall
be construed to mean that a Service Provider is a partner of the other Party or
a joint venturer with the other Party. The relationship of the Service Provider
to the other Party under this Services Agreement, and with respect to the
Services, shall be that of an independent contractor. The Service Provider shall
be responsible for and shall withhold or pay, or both, as may be required by
law, all taxes pertaining to the employment of its personnel and/or performance
by it of the Services. The Service Provider also assumes full responsibility for
the payment of all payroll burdens, fringe benefits and payroll taxes, whether
federal, state, municipal or otherwise, as to its employees, servants or agents
engaged in the performance of any Services.

                                    SECTION 3
                           TERM OF PARTICULAR SERVICES

        The provision of SGI Services shall commence on the date hereof and,
with respect to each SGI Service listed in Schedule A, shall terminate as set
forth in Section 6.1 below; provided, however, that (i) Tera may cancel any SGI
Service with written notice to SGI; and (ii) SGI may cancel any SGI Service in
accordance with the terms and conditions in Schedule A. The provision of Tera
Services shall commence on the date hereof and, with respect to each Tera
Service listed in Schedule B, shall terminate as set forth in Section 6.1 below;
provided, however, that (i) SGI may cancel any Tera Service with written notice
to Tera; and (ii) Tera may cancel any Tera Service in accordance with the terms
and conditions in Schedule B.

                                    SECTION 4
                                  FORCE MAJEURE

        The Service Provider shall not be liable for any interruption of
service, delay or failure to perform under this Services Agreement when such
interruption, delay or failure results from causes beyond its reasonable
control, including, but not limited to, any strikes, lockouts or other labor
difficulties, acts of any government, riot, insurrection or other



                                       4
<PAGE>   5

hostilities, embargo, fuel or energy shortage, fire, flood, acts of God, wrecks
or transportation delays, or inability to obtain necessary labor, materials or
utilities. In any such event, the Service Provider's obligations hereunder and
the other Party's obligations to pay for any Service so suspended or delayed
hereunder shall be postponed for such time as the Service Provider's performance
is suspended or delayed on account thereof. The Service Provider will notify the
other Party promptly, either orally or in writing, upon learning of the
occurrence of such event of force majeure. Upon the cessation of the force
majeure event, the Service Provider will use all reasonable efforts to resume
its performance as soon as reasonably practicable. The Parties agree that the
terms of this Services Agreement shall be extended for a period of time equal to
the period of time during which the Service Provider's obligations under this
Services Agreement are suspended pursuant to this Section 4.

                                    SECTION 5
                                   LIABILITIES

        5.1 Consequential and Other Damages. The Service Provider shall not be
liable for, and the other Party expressly waives any right to recover, whether
in contract, in tort (including without limitation negligence and strict
liability), or otherwise, any punitive, exemplary, special, indirect, incidental
or consequential damages whatsoever, which in any way arise out of, relate to,
or are a consequence of, the Service Provider's performance or nonperformance
hereunder, or the provision of or failure to provide any Service hereunder,
including, but not limited to, loss of profits, business interruptions and
claims of customers.

        5.2 Limitation of Liability. In any event, the liability of the Service
Provider with respect to this Services Agreement or anything done in connection
herewith, including, but not limited to, the performance or breach hereof, or
from the sale, delivery, provisions or use of any Service or product provided
under or covered by this Services Agreement, whether in contract, tort
(including without limitation negligence or strict liability) or otherwise,
shall not exceed the aggregate of all fees then paid by the other Party to the
Service Provider hereunder.

        5.3 Obligation to Reperform. In the event of any material breach of this
Services Agreement by the Service Provider with respect to any error or defect
in the provision of any Service, the other Party shall promptly notify the
Service Provider of said breach, and the Service Provider shall, at the other
Party's reasonable request, promptly make all reasonable efforts to correct such
error or defect.

        5.4 Release and Indemnity. Except as specifically set forth in this
Services Agreement, the Party receiving Services shall indemnify and hold
harmless the Service Provider, its subsidiaries, affiliates, successors and
assigns, and its and their respective directors, officers, members,
shareholders, agents and employees (collectively, the "Service Provider
Indemnitees"), against and from any and all claims, demands, complaints,
liabilities, losses, damages and all costs and expenses arising from or relating
to (i) the use of any Service by such Party, or (ii) the presence of such Party
or its employees, agents or



                                       5
<PAGE>   6

subcontractors on the Service Provider's premises; provided, however, that no
Service Provider Indemnitee shall be entitled to indemnification hereunder to
the extent its claim for indemnification shall be finally adjudged to be
attributable to its gross negligence, bad faith or willful misconduct, as may be
finally determined by a court of competent jurisdiction.

                                    SECTION 6
                                   TERMINATION

        6.1 Termination. This Services Agreement shall terminate on the earliest
to occur of (i) with respect to any individual Service, the date of termination
as provided in Schedule A or B hereto, (ii) the date on which the provision of
all Services has been terminated pursuant to Section 6.1 (i), or has been
canceled pursuant to Section 3, and (iii) the date on which this Services
Agreement is terminated pursuant to Section 6.2 below.

        6.2 Breach of Services Agreement. If any Party shall cause or suffer to
exist any material breach of any of its obligations under this Services
Agreement, including, but not limited to, any failure to deliver Services or to
make payments when due, and said Party does not cure such default within twenty
(20) days (or, in the case of any payment default, within fifteen (15) days)
after receiving written notice thereof from the non-breaching Party (unless the
Party receiving the notice of default disputes the existence of such default, in
which case the cure periods referred to above shall begin to run from and after
the date of a final decision by a court of competent jurisdiction finding that a
default exists hereunder), the non-breaching Party may terminate this Services
Agreement including the provision of Services pursuant hereto, immediately by
providing written notice of termination.

        6.3 Sums Due. In the event of a termination of this Services Agreement,
the Service Provider shall be entitled to all outstanding amounts due from the
other Party for Services provided under this Services Agreement up to the date
of termination.

        6.4 Effect of Termination. Sections 2.2, 5.1, 5.2, 5.3, 5.4, 6.3, 7.5,
7.7, 7.8 and this Section 6.4 shall survive any termination of this Services
Agreement.

                                    SECTION 7
                                  MISCELLANEOUS

        7.1 Notices. All notices or other communications made in connection with
this Services Agreement shall be in writing, except as otherwise expressly
permitted herein. Any notice or other communication in connection herewith shall
be duly given: (a) on the day of delivery, if personally delivered to the person
identified below; (b) three (3) days after mailing if mailed by certified or
registered mail, postage prepaid, return receipt requested; (c) one business day
after delivery to any overnight express courier service; and (d) on the business
day of receipt if sent by facsimile or other customary means of
telecommunication, provided receipt thereof is orally confirmed and a copy
thereof is sent in the manner provided by clause (a) or (b) hereof, addressed as
follows:



                                       6
<PAGE>   7


               (a)    If to SGI:

                      Silicon Graphics, Inc.
                      2011 North Shoreline Boulevard
                      Mountain View, California 94043-1398
                      Attention:  Legal Services
                      Telecopier:  (650) 932-0652

               (b)    If to Tera:

                      Tera Computer Company
                      411 First Avenue South, Suite 600
                      Seattle, Washington 98104-2860
                      Attention: Kenneth W. Johnson
                      Telecopier: (206) 701-2218

Such addresses may be changed, from time to time, by means of a written notice
given in the manner provided in this Section. Copies delivered to outside or
in-house counsel shall not constitute notice.

        7.2 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Except as specifically agreed herein, no Party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party; provided, however, that
without the consent of the other Party, (i) a Party may assign any or all of its
rights and obligations hereunder to any of its subsidiaries, in which event the
assigning Party shall remain fully liable for the performance of all its
obligations hereunder; and (ii) subject to the limitations of Section 16.3 of
the Asset Purchase Agreement, a successor in interest by merger, by operation of
law, or by assignment, purchase or other acquisition of all or substantially all
the business of a Party may acquire the respective rights and obligations of
such Party under this Agreement. Any prohibited assignment shall be null and
void.

        7.3 No Third-Party Beneficiaries. Except as provided in Section 5.4 with
respect to release and indemnity, nothing in this Services Agreement shall
confer any rights upon any person or entity other than the Parties, and each
such Party's respective successors and permitted assigns.

        7.4 Amendment, Waivers, Etc. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by an executive officer of the Party against
whom enforcement of the amendment, modification, discharge or waiver is sought.
Any such waiver shall constitute a



                                       7
<PAGE>   8

waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the Party granting such waiver in any other
respect or at any other time.

        7.5    Confidential Information; Title to Date.

               (a) Each of the Parties acknowledges that any information of the
other Party received in the course of performance under this Services Agreement
shall be confidential information and shall be subject to the restrictions on
disclosure set forth in the Mutual Nondisclosure Agreement, dated as of August
4, 1999, as amended by Amendment No. 1 thereto, dated as of December 13, 1999,
and as further amended by Section 16.2 of the Asset Purchase Agreement, between
the Company and Service Provider.

               (b) The Company acknowledges that, except as expressly provided
in the Asset Purchase Agreement, it will acquire no right, title or interest
(including without limitation any license rights or rights of use) in any
software or the licenses therefor which are owned or used by the Service
Provider, solely by reason of the Service Provider's provision of the Services
provided hereunder.

        7.6 Governing Law. THIS SERVICES AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS RULES THEREOF.

        7.7 Dispute Resolution.

               (a) Negotiation. The Parties shall attempt in good faith to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the controversy and
who are at a higher level of management than the persons with direct
responsibility for administration of this contract. Any Party may give the other
Party written notice of any dispute not resolved in the normal course of
business. Within fifteen (15) days after delivery of the disputing Party's
notice, the executives of both Parties shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the dispute. All reasonable requests for information made by one
Party to the other will be honored. If the matter has not been resolved by these
persons within fifteen (15) days of the first meeting, the dispute shall be
referred to more senior executives of both Parties who have authority to settle
the dispute and who shall likewise meet to attempt to resolve the dispute.

               (b) Mediation. If the Parties are unable to resolve the matter
within thirty (30) days of the delivery of the disputing Party's notice, or if
the Parties fail to meet within twenty (20) days, the Parties shall endeavor to
settle the dispute by mediation. The Parties shall select a neutral mediator
that is acceptable to both Parties. The Parties shall have forty-five (45) days
from the date a neutral mediator is selected to gather information and perform



                                       8
<PAGE>   9

discovery relating to the dispute (the "Discovery Period"). The costs of
mediation shall be split evenly by the Parties.

               (c) Litigation. If the Parties are unable to resolve the dispute
after a reasonable period of mediation, either party may seek resolution through
the judicial process, consistent with the terms of this Agreement.

               (d) Confidentiality. All discussions and negotiations pursuant to
this Section are confidential and shall be treated as compromise and settlement
discussions for purposes of the applicable rules of evidence. Notwithstanding
the foregoing, materials gathered during the Discovery Period shall not be
excluded from any subsequent litigation in the event that mediation is not
successful.

        7.8 Schedules. All Schedules to this Services Agreement and all terms
and conditions contained therein shall be construed with and as integral parts
of this Services Agreement to the same extent as if they were set forth verbatim
herein.

        7.9 Entire Agreement. This Services Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the Parties with respect to the subject matter hereof.

        7.10 Counterparts. This Services Agreement maybe executed in
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.

        7.11 Headings. The headings contained in this Services Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Services Agreement.

               [THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]



                                       9
<PAGE>   10

        IN WITNESS WHEREOF, the Parties have executed this Services Agreement as
of the date first written above.


                                            SILICON GRAPHICS, INC.


                                            By:
                                               ---------------------------------
                                               Its:
                                                   -----------------------------


                                            TERA COMPUTER COMPANY


                                            By:
                                               ---------------------------------
                                               Its:
                                                   -----------------------------



[Transition Services Agreement]



                                       10