**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

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**FORM 10-K/A**

 

**(Mark One)**

 

| **ý** |   | **Annual Report pursuant to Section  13 or 15(d) of the Securities Exchange Act of 1934.**                                                                                                                         |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   | **For the fiscal year ended June 27, 2003.**                                                                                                                                                                       |
|       |   |                                                                                                                                                                                                               |
| **o**      |   | **Transition report pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934.**                                                                                                                     |
|       |   | **For the transition period from                  to                ** |

 

**CommissionFile Number  1-10441**

 

**SILICONGRAPHICS, INC.**

(Exact Name of Registrant as Specified in Its Charter)

 

| **DELAWARE**                                                               |   | **94-2789662**                    |
|----------------------------------------------------------------------------|--------|-----------------------------------|
| (State or Other Jurisdiction of Incorporation)                             |   | (IRS Employer Identification No.) |
|                                                                       |
| **1600 Amphitheatre Parkway, Mountain  View, California  94043-1351** |
| (Address of principal executive offices and zip code)                      |
|                                                                       |
| **(650) 960-1980**                                                         |
| (Registrant’s Telephone Number, Including Area Code)                  |
|                                                                       |
| Securities registered pursuant to Section 12(b) of the Act:                |

 

| **Title of  each class**        |   | **Name of  each exchange on which registered:** |
|---------------------------------|--------|-------------------------------------------------|
| Common Stock, $0.001 par value  |   | New York Stock Exchange                         |
| 5 1/4% Senior Convertible Notes |   | New York Stock Exchange                         |

 

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Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes   ý   No   o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.  ý

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act). Yes    ý   No   o

 

The aggregate market value of the registrant’s voting stock held bynon-affiliates of the registrant, based upon the closing sale price of theCommon Stock on December 27, 2002 on the New York Stock Exchange, wasapproximately $216 million. Shares of voting stock held by each executiveofficer and director and by each person who owns 5% or more of any class ofregistrant’s voting stock have been excluded in that such persons may be deemedto be affiliates. This determination of affiliate status is not necessarily aconclusive determination for other purposes.

 

As of August 29, 2003, the registrant had outstanding  210,589,850 shares of Common Stock.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

The section in Part I of our Annual Report on Form 10-K for the fiscalyear ended June 27, 2003 entitled “Executive Officers of the Registrant” isincorporated by reference into Part III of this amended report on Form 10-K/A.

 

 

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**EXPLANATORY NOTE**

 

Silicon Graphics, Inc. hereby amends thefollowing items of its Annual Report on Form 10-K for the fiscal year endedJune 27, 2003. Each of the below referenced Items in Part III are amended bydeleting the Items in their entirety and replacing them with the Items setforth in this amendment. Any Items in the original filing not expressly changedby this amendment shall be as set forth in the original filing.

**PART III**

** **

**ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

** **

**Directors**

 

We have seven directors serving on our Board,divided into three classes serving staggered three-year terms.  The current Class II directors' terms expireat the 2003 Annual Meeting, the current Class III directors' terms expire atthe 2004 Annual Meeting, and the current Class I directors' terms expire at the2005 Annual Meeting.

 
| **Name**                 |   | **Class** |   | **Age** |   | **Principal  Occupation**                                                                                                                               |   | **Director  Since** |
|--------------------------|--------|-----------|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|
|                     |   |      |   |    |   |                                                                                                                                                    |   |                |
| Robert R. Bishop         |   | III       |   | 60      |   | Chairman and Chief Executive Officer, Silicon Graphics, Inc.                                                                                            |   | 1993                |
| Lewis S. Edelheit, Ph.D. |   | I         |   | 61      |   | Former Senior Vice President, Corporate Research & Development,  General Electric Company                                                           |   | 2002                |
| James A. McDivitt        |   | II        |   | 74      |   | Former Senior Vice President, Government Operations and  International, Rockwell International Corporation                                              |   | 1987                |
| Arthur L. Money          |   | II        |   | 63      |   | Former Assistant Secretary of Defense for Command, Control,  Communications and Intelligence and Chief Information Officer, U.S.  Department of Defense |   | 2001                |
| Anthony R. Muller        |   | II        |   | 60      |   | Former Executive Vice President and Chief Financial Officer of JDS  Uniphase Corporation                                                                |   | 2003                |
| Charles A. Steinberg     |   | I         |   | 69      |   | Former President, Broadcast and Professional Company of Sony  Electronics Inc.                                                                          |   | 2002                |
| Robert M. White, Ph.D.   |   | III       |   | 65      |   | Director of Data Storage Systems Center and Professor at Carnegie  Mellon University                                                                    |   | 2002                |

 

Except as indicated below, each nominee orincumbent director has been engaged in the principal occupation set forth aboveduring the past five years. There are no family relationships among directorsor executive officers of the Company.

 

Mr. McDivitt was Senior Vice President,Government Operations and International, of Rockwell International Corporationuntil his retirement in March 1995. He currently serves as the Lead Directorfor the Company’s Board.

 

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Mr. Money served as the Assistant Secretaryof Defense for Command, Control, Communication and Intelligence (C3I) fromOctober 1999 to April 2001. Prior to his Senate confirmation in that role, hewas the Senior Civilian Official, Office of the ASD (C31) from February 1998.Mr. Money also served as the Chief Information Officer for the Department ofDefense from 1998 to 2001. From 1996 to 1998, he served as Assistant Secretaryof the Air Force for Research, Development and Acquisition, and as CIO for theAir Force. Prior to his government service, Mr. Money held senior managementpositions with ESL Inc., a subsidiary of TRW, and the TRW Avionics andSurveillance Group, including the position of President of ESL between January1990 and January 1996. He is also a director of CACI International, RainbowTechnologies, Inc., Terremark Worldwide, Inc., Essex Corporation andIntelli-Check.

 

Mr. Muller served as Executive Vice Presidentand Chief Financial Officer of JDS Uniphase Corporation, a manufacturer ofoptical products for communications and industrial, commercial and consumerapplications from May 2000 until his retirement in February 2003. Before that,he served as Senior Vice President and Chief Financial Officer of JDS Uniphase Corporationfrom January 1998 to May 2000. From September 1996 to January 1998, he servedas Senior Vice President and Chief Financial Officer of Micro Focus Group Plc.,a supplier of software tools. Mr. Muller also serves as a member of the boardof directors of WebEx Communications and Time Warner Telecom Inc. Mr. Mullerholds a B.A. degree from the University of Pennsylvania and an M.B.A. degreefrom Stanford University.

 

Mr. Bishop was appointed the Chairman of theBoard and Chief Executive Officer of Silicon Graphics, Inc. in the fall of1999. From 1996 to 1999, he was the non-executive Chairman of the Board ofSilicon Graphics World Trade Corporation, and from 1986 to 1995 he was thePresident of Silicon Graphics World Trade Corporation.

 

Dr. Edelheit served as Senior Vice Presidentof General Electric’s corporate research and development from 1992 until hisretirement in December 2001. He began his career at General Electric in 1969,where he helped pioneer major advances in computed tomography. Between 1986 and1991, he left General Electric to become President and CEO of Quantum MedicalSystems and remained its President after it was acquired by SiemensCorporation. He is a member of the National Academy of Engineering and theIndustrial Research Institute, and a Fellow of the American Physical Society.He is also a director of Sonic Innovations, Inc. and Pacific Northwest NationalLaboratory, a non-public research laboratory.

 

Mr. Steinberg served as President of theBroadcast and Professional Company of Sony Electronics Inc. from March 1988 toJune 1999. During that time period, he also served as Chairman and CEO of twoSony subsidiaries, Sony Trans Com Inc. and Sony Cinema Products Corporation. Hecurrently is an executive advisor to Sony’s Strategic Venture Investments Groupand a consultant and advisory board member to other electronics companies and aventure capital company.

 

Dr. White currently serves as a director ofthe Data Storage Systems Center and Professor of Electrical and ComputerEngineering at Carnegie Mellon University. He joined Carnegie Mellon Universityin 1993. Prior to that, he served as the first Undersecretary of Commerce forTechnology under President George H. Bush and held senior management positionsat Control Data Corporation and Xerox’s Palo Alto Research Center. He is also adirector of STMicroelectronics N.V. and ENSCO, Inc., a private company.

 

**Executive Officers**

** **

The information concerning executive officersand family relationships required by this Item is incorporated by reference tothe section in Part I of our Annual Report on Form 10-K for the fiscal yearended June 27, 2003 entitled “Executive Officers of the Registrant”.

 

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**Compliance with Section 16(a) of the ExchangeAct**

** **

Section 16(a) of the Exchange Act requiresthe Company’s officers and directors, and persons who own more than ten percentof a registered class of the Company’s equity securities, to file reports ofownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC andthe New York Stock Exchange, and to give the Company copies of these filings.Based on the written representations of its directors and officers and a reviewof the copies of such forms furnished to the Company during the fiscal yearended June 27, 2003, the Company believes that its officers, directors and tenpercent stockholders complied with all Section 16(a) filing requirements.

 

**ITEM 11. EXECUTIVE COMPENSATION**

** **

**Summary Compensation Table**

** **

The following table sets forth the cash andequity compensation for the three fiscal years ended June 27, 2003 forRobert R. Bishop, Chief Executive Officer, and each of the four other mosthighly compensated executive officers of SGI (determined at the end of fiscal2003).

 
| **Name and  Principal Position**   |   |                      |   | **Annual Compensation** |    | **Long Term**                       |                    |
|------------------------------------|--------|---------------------------|--------|-------------------------|---------|-------------------------------------|-------------------------|
| **Fiscal  Year**                   |   | **Salary ($)**            |   | **Bonus  ($)(1)**       |    | **Other Annual  Compensation  ($)** | **Compensation Awards** |
| **Options (#)**                    |   | **Restricted  Stock ($)** |
| Robert R. Bishop(2)                |   | 2003                      |   | $                       | 800,000 |                                | —                  |   | $ | 9,116 | (3) | — |   | — |   |
| Chairman  and Chief Executive      |   | 2002                      |   | 800,000                 |    | $                                   | 370,000                 |   | 7,528 | (3) | 750,000 |   | — |   |
| Officer                            |   | 2001                      |   | 800,000                 |    | —                              |                    | 7,566 | (3) | 2,000,000 |   | — |   |
|                               |   |                      |   |                    |    |                                |                    |   |   |   |   |   |   |
| Warren  C. Pratt                   |   | 2003                      |   | $                       | 495,000 |                                | —                  |   | $ | 317,970 | (4) | — |   | — |   |
| Chief  Operating Officer and       |   | 2002                      |   | 480,031                 |    | $                                   | 116,800                 |   | 276,233 | (4) | 400,000 |   | — |   |
| Executive  Vice President          |   | 2001                      |   | 458,615                 |    | —                              |                    | 211,879 | (4) | 100,000 |   | — |   |
|                               |   |                      |   |                    |    |                                |                    |   |   |   |   |   |   |
| Anthony  K. Robbins                |   | 2003                      |   | $                       | 357,200 |                                | $                       | 98,231 |   | $ | 3,617 | (5) | 250,000 |   | — |   |
| Senior  Vice President, Silicon    |   | 2002                      |   | 356,528                 |    | 283,504                             |                    | 3,862 | (5) | 300,000 |   | — |   |
| Graphics,  Inc., and President,    |   | 2001                      |   | 317,204                 |    | 119,102                             |                    | 6,200 | (5) | 300,000 |   | — |   |
| Silicon  Graphics Federal, Inc.    |   |                      |   |                    |    |                                |                    |   |   |   |   |   |   |
|                               |   |                      |   |                    |    |                                |                    |   |   |   |   |   |   |
| Jeffrey  V. Zellmer                |   | 2003                      |   | $                       | 325,000 |                                | —                  |   | $ | 257,335 | (6) | 225,000 |   | — |   |
| Senior  Vice President and Chief   |   | 2002                      |   | 322,007                 |    | $                                   | 190,625                 |   | 193,947 | (6) | 200,000 |   | — |   |
| Financial  Officer                 |   | 2001                      |   | 242,380                 |    | 32,500                              |                    | 15,720 | (6) | 70,000 |   | $ | 35,492 | (7) |
|                               |   |                      |   |                    |    |                                |                    |   |   |   |   |   |   |
| Sandra  M. Escher                  |   | 2003                      |   | $                       | 305,000 |                                | —                  |   | $ | 145,265 | (8) | 160,000 |   | — |   |
| Senior  Vice President and General |   | 2002                      |   | 303,577                 |    | $                                   | 185,275                 |   | 109,311 | (8) | 150,000 |   | — |   |
| Counsel                            |   | 2001                      |   | 217,147                 |    | 16,667                              |                    | 4,453 | (8) | 100,000 |   | — |   |
|                                    |        |                           |        |                         |         |                                     |                         |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  The bonus column for Mr. Robbins includescommissions paid.

 

(2)                                  Mr. Bishop elected to defer his salary andbonus for each of the fiscal years shown above.

 

(3)                                  Consists of life insurance premiums paid bythe Company, except that fiscal 2001 also includes $4,596 of reimbursement fortaxes.

 

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(4)                                  Includes loan forgiveness, income on imputedinterest and amounts reimbursed by the Company for payment of taxes inconnection with the loans described in “Certain Transactions” in the amounts of$270,927, $238,490 and $147,706 for fiscal 2003, 2002 and 2001, respectively.Also includes tax equalization benefits as described under “CertainTransactions”, relocation assistance, executive perquisites, matching 401(k)contributions and life insurance premiums paid by the Company.

 

(5)                                  Consists of life insurance premiums paid bythe Company, matching 401(k) contributions, executive perquisites, andreimbursement for taxes.

 

(6)                                  Includes loan forgiveness, income on imputedinterest and amounts reimbursed by the Company for payment of taxes inconnection with the loans described in “Certain Transactions” in the amounts of$255,609 and $192,227 for fiscal 2003 and 2002, respectively.  Remaining amounts consist of matching 401(k)contributions and life insurance premiums paid by the Company.

 

(7)                                  Mr. Zellmer’s restricted stock award of 8,000shares granted in August 2000 fully vested on August 8, 2001.

 

(8)                                  Includes loan forgiveness, income on imputedinterest and amounts reimbursed by the Company for payment of taxes inconnection with the loans described in “Certain Transactions” in the amounts of$143,575 and $107,647 for fiscal 2003 and 2002, respectively. Remaining amountsconsist of matching 401(k) contributions and life insurance premiums paid bythe Company.

 

**Option Grants in Fiscal 2003**

** **

The following table provides detailsregarding all stock options granted to the executive officers named in theSummary Compensation Table in fiscal 2003.

 
|               |   | **Individual Grants(1)**                                |   |                                                           |   |
|--------------------|--------|---------------------------------------------------------|--------|----------------------------------------------------------------|--------|
| **Name**           |   | **Number of  Securities  Underlying  Options  Granted** |   | **% of Total  Options  Granted to  Employees in  Fiscal Year** |   | **Exercise  Price  ($/Share)** |   | **Expiration  Date** |   | **Potential Realizable Value at  Assumed Annual Rates of  Stock Price Appreciation for  Option Term(2)** |   |
| **5%**             |   | **10%**                                                 |
| Robert R. Bishop   |   | —                                                  |   | —                                                         |   | N/A |   | N/A |   | — |   | — |   |
| Warren C. Pratt    |   | —                                                  |   | —                                                         |   | N/A |   | N/A |   | — |   | — |   |
| Jeffrey V. Zellmer |   | 225,000                                                 |   | 2.28                                                           | %      | $ | 1.45 |   | 7/31/12 |   | $ | 205,177 |   | $ | 519,958 |   |
| Anthony K. Robbins |   | 250,000                                                 |   | 2.53                                                           | %      | $ | 1.45 |   | 7/31/12 |   | 227,974 |   | 577,732 |   |
| Sandra M. Escher   |   | 160,000                                                 |   | 1.62                                                           | %      | $ | 1.45 |   | 7/31/12 |   | 145,904 |   | 369,748 |   |
|                    |        |                                                         |        |                                                                |        |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  The options in this table were granted underthe 1993 Long-Term Incentive Stock Plan. The options become exercisable at arate of 2% per month over a period of fifty months and expire ten years fromthe date of grant.

 

(2)                                  Potential realizable value assumes that thestock price increases from the date of grant until the end of the option term(10 years) at the annual rate specified (5% and 10%). The 5% and 10% assumedannual rates of appreciation are mandated by SEC rules and do not represent SGI’sestimate or projection of the future price of its common stock. SGI believesthat this method does not accurately illustrate the potential value of stockoptions.

 

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**Option Exercises in Fiscal 2003 and FiscalYear-End Option Values**

 
|               |   | **Shares  Acquired on  Exercise** |   | **Value  Realized** |   | **Number of Unexercised  Options at June 27, 2003** |   | **Value of Unexercised In-the-  Money Options at Fiscal Year  End(1)** |   |
|--------------------|--------|-----------------------------------|--------|---------------------|--------|-----------------------------------------------------|--------|------------------------------------------------------------------------|--------|
| **Name**           |   |                              |   | **Exercisable**     |   | **Unexercisable**                                   |   | **Exercisable**                                                        |   | **Unexercisable** |   |
| Robert R. Bishop   |   | —                            |   | —              |   | 1,894,500                                           |   | 855,600                                                                |   | — |   | — |   |
| Warren C. Pratt    |   | —                            |   | —              |   | 769,586                                             |   | 308,399                                                                |   | $ | 1,927 |   | $ | 677 |   |
| Jeffrey V. Zellmer |   | —                            |   | —              |   | 318,448                                             |   | 195,999                                                                |   | 97,520 |   | 8,480 |   |
| Anthony K. Robbins |   | —                            |   | —              |   | 904,153                                             |   | 243,064                                                                |   | 146,280 |   | 12,720 |   |
| Sandra M. Escher   |   | —                            |   | —              |   | 429,011                                             |   | 141,489                                                                |   | 73,140 |   | 6,360 |   |
|                    |        |                                   |        |                     |        |                                                     |        |                                                                        |        |  |  |  |  |  |  |

 

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(1)                                  The amounts in this column reflect thedifference between the closing market price of the common stock onJune 27, 2003, which was $1.10, and the option exercise price. The actualvalue of unexercised options fluctuates with the market price of the commonstock.

 

**Director Compensation**

** **

Employee directors are not compensated fortheir service on the Board.

 

Each non-employee director receives a fee of$6,000 per quarter and $2,000 for each Board and committee meeting attended.The chair of each committee receives an additional $1,000 for each committeemeeting attended. The Lead Director receives an additional fee of $3,000 perquarter.

 

Each non-employee director is granted anoption to purchase 50,000 shares of common stock on the date on which he or shefirst becomes a director. These options become exercisable in equalinstallments on the first two anniversary dates following the date of grant,subject to accelerated vesting on a change in control. At the regularlyscheduled fall meeting of the Board, each non-employee director who has servedon the Board for at least six months also receives an option to purchase 20,000shares of common stock which is fully exercisable on the date of grant. Theexercise price of the initial option grants and the annual option grants todirectors is the fair market value of our common stock at the time of grant.Options granted to non-employee directors expire after ten years, and can onlybe exercised while the optionee is a director, or within three months afterservice as a director terminates or within one year after a director’s serviceterminates due to death, disability or retirement from the Board with more than5 years of service at age 65 or above.

 

Under the Silicon Graphics Non-QualifiedDeferred Compensation Plan, non-employee directors may elect in advance todefer all or a portion of their cash compensation. Directors who participate inthe deferral plan may direct the investment of the assets in their deferralaccounts among a variety of mutual funds or may make an irrevocable election tocredit the deferred fees to a stock credit account based on the value of theCompany’s common stock. Directors may elect to receive payment of their deferredcompensation in a lump sum or in annual installments not to exceed ten years,except in the case of amounts in the stock credit account, which aredistributed in a lump sum based on the value of the Company’s common stock atthe time the director’s service terminates.

 

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**Compensation Committee Interlocks and InsiderParticipation**

** **

The members of the Compensation and HumanResources Committee during portions of fiscal 2003 were C. Richard Kramlich,Dr. Edelheit, Mr. McDivitt, Mr. Money, Mr. Muller, Mr. Steinberg and Dr. White,all of whom are non-employee directors. Mr. Money received $73,200 in fiscal2003 in compensation under a consulting contract with the Company and itsfederal government sales subsidiary. Mr. Money, Mr. McDivitt and Dr. White alsoserve on the board of the Company’s federal government sales subsidiary andreceive fees of $2,000 per meeting attended, except that Mr. Money receives afee of $3,000 per meeting attended as chairman of the subsidiary’s board.

 

**REPORT OF THE COMPENSATIONAND HUMAN RESOURCES COMMITTEEOF THE BOARD OF DIRECTORS**

** **

*The following Report of the Compensation and Human Resources Committeeof the Board shall not be deemed to be “soliciting material” or to be “filed”with the SEC nor shall this information be incorporated by reference into anyfuture filing under the Securities Act of 1933 (the “Securities Act”) or theSecurities Exchange Act of 1934 (the “Exchange Act”), each as amended, exceptto the extent that SGI specifically incorporates it by reference into suchfiling.*

 

The Compensation and Human ResourcesCommittee of the Board of Directors reviews and approves executive compensationpolicies, including compensation of the Chief Executive Officer. The Committeeadministers SGI’s stock incentive plans, approves stock option grants foremployees, and reviews management performance and the Company’s successionplanning. The Committee is currently composed of three independent directors,as defined by the listing standards of the New York Stock Exchange.

 

**Compensation Philosophy**

** **

SGI operates in the highly competitive andrapidly changing high technology industry. The Committee seeks to establishcompensation policies that allow SGI flexibility to respond to changes in itsbusiness environment. The goals of SGI’s compensation program are to aligncompensation with SGI’s overall business objectives and performance, to fosterteamwork and to enable SGI to attract, retain and reward employees whocontribute to its long-term success.

 

**Executive Compensation Components**

** **

Compensation for SGI’s executive officersgenerally consists of base salary and annual incentive plans, combined withstock option awards. The Committee assesses the past performance andanticipated future contribution of each executive officer in establishing thetotal amount and mix of each element of compensation.

 

*Salary*. The salaries of the executive officers, including the Chief ExecutiveOfficer, are determined by the Committee with reference to several surveys ofsalaries paid to executives with similar responsibilities at comparablecompanies, primarily in the high technology industry. The peer group for eachexecutive officer is composed of executives whose responsibilities are similarin scope and content. SGI seeks to set executive compensation levels that arecompetitive with the average levels of peer group compensation. During fiscal2003, there were no salary increases for executive officers.

 

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*Annual Incentive*.  The Committee annually reviews and approves an executiveincentive plan. During fiscal 2003, all executive officers were eligible fortarget bonuses based on a percentage of their base salary, depending on their positions.The bonus, if awarded, is computed as a percentage of that target based onSGI’s performance in achieving specified objectives. For fiscal 2003, theseobjectives included the achievement by SGI of certain quarterly revenue andEBITDA goals. No payments were made in fiscal 2003 under this plan.

 

*Deferred Compensation Plan*.  The Non-Qualified Deferred Compensation Planis a voluntary, non-tax qualified plan available to certain members ofmanagement and non-employee directors. Participants in the plan may elect inadvance to defer all or a portion of their cash compensation.

 

*Stock Options and Restricted Stock Awards*.  Stock options and restricted stock awardsare designed to align the interests of executives with the long-term interestsof the stockholders. The Committee approves option grants subject to vestingperiods to retain executives and encourage sustained contributions. Theexercise price of most options is the market price on the date of grant.Restricted stock awards are also subject to vesting, based generally on thepassage of time. No restricted stock awards were granted to executive officersin fiscal 2003.

 

*Compensation of the Chief Executive Officer*.  Robert R. Bishop joined the company in thefall of 1999 as Chairman and Chief Executive Officer at an initial annual basesalary of $800,000.  Over the four yearshe has been in this role, his salary has remained unchanged.  The Committee set Mr. Bishop’s target forparticipation in the fiscal 2003 executive incentive program at 185% of hisbase salary, such that his bonus, had it been awarded would have comprised themajority of his total potential annual compensation.  Mr. Bishop, who owns about 2% of the Company’s outstanding commonstock, did not receive a stock option grant in fiscal 2003.  No bonus was paid in fiscal 2003, and Mr.Bishop has deferred all of his cash compensation for fiscal 2001, 2002 and2003.

 

**Section 162(m)**

** **

SGI is subject to Section 162(m) of theU.S. Internal Revenue Code, which limits the deductibility of certaincompensation payments to its executive officers. SGI does not have a policyrequiring the Committee to qualify all compensation for deductibility underthis provision. The Committee’s current view is that any non-deductible amountswill be immaterial to SGI’s financial or tax position, and that SGI derivessubstantial benefits from the flexibility provided by the current system, inwhich the selection and quantification of performance targets are modified fromyear to year to reflect changing conditions. However, the Committee considersthe net cost to SGI in making all compensation decisions and will continue toevaluate the impact of this provision on its compensation programs.

 
|   | COMPENSATION AND HUMAN RESOURCES  COMMITTEE |
|--------|---------------------------------------------|
|   | Charles A. Steinberg, *Chairman*            |
|   | Lewis S. Edelheit                           |
|   | Anthony R. Muller                           |

 

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**COMPANY STOCK PRICE PERFORMANCE GRAPHComparison of Five Year Cumulative Total Return**

 

*The information contained in the performance graph shall not be deemedto be “soliciting material” or to be “filed” with the SEC nor shall thisinformation be incorporated by reference into any future filing under theSecurities Act or the Exchange Act, except to the extent that SGI specificallyincorporates it by reference into such filing.*

 

In accordance with SEC rules, the Company isrequired to present a table showing a line-graph presentation comparingcumulative five-year returns on an indexed basis with a broad equity marketindex and either a nationally recognized industry standard or an index of peercompanies selected by the Company. The Company has selected the S&P 500Index for the broad equity index and the S&P Computer Hardware Index as anindustry standard for the five fiscal year period commencing June 30, 1998 andending June 27, 2003. The stock price performance shown on the graph belowis not necessarily of future performance.

 

 
|                                 |   | **Jun-98** |   | **Dec-98** |   | **Jun-99** |   | **Dec-99** |   | **Jun-00** |   | **Dec-00** |   | **Jun-01** |   | **Dec-01** |   | **Jun-02** |   | **Dec-02** |   | **Jun-03** |   |
|--------------------------------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|
| **Silicon Graphics Inc.**            |   | $          | 100    |       | $      | 106        |   | $          | 135    |       | $      | 80         |   | $          | 70     |       | $      | 75         |   | $          | 26     |       | $      | 39 |   | $ | 55 |   | $ | 21 |   | $ | 21 |   |
| **S&P 500®**                |   | $          | 100    |       | $      | 109        |   | $          | 123    |       | $      | 132        |   | $          | 132    |       | $      | 120        |   | $          | 112    |       | $      | 106 |   | $ | 92 |   | $ | 83 |   | $ | 92 |   |
| **S&P © Computer Hardware** |   | $          | 100    |       | $      | 149        |   | $          | 180    |       | $      | 215        |   | $          | 233    |       | $      | 136        |   | $          | 142    |       | $      | 134 |   | $ | 91 |   | $ | 94 |   | $ | 109 |   |

 

**Copyright © 2002, Standard & Poor’s, a division of TheMcGraw-Hill Companies, Inc. All rights reserved.**

 

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*                                         Assumes$100 invested on June 30, 1998 in SGI Common Stock, the S&P 500 StockIndex, and the S&P Computer Hardware, with reinvestment of dividends.

 

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**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS**

 

**Security Ownership of Certain BeneficialOwners**

 

As of September 30, 2003, the followingpersons were known by the Company to be the beneficial owners of more than 5%of any class of the Company’s voting securities. This information is based onperiodic SEC filings by stockholders and may not reflect current ownership. 

 
|                                                                                                           |   | **Class of  Securities**                    |   | **Number of  Shares  Beneficially Owned** |   | **Percent of  Class** |   | **Percent of  Total  Voting Power(2)** |    |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|-------------------------------------------|--------|-----------------------|--------|----------------------------------------|---------|
| Highfields  Capital Management(1)  200 Clarendon Street,  51st Floor  Boston, MA 02117                         |   | Common Stock                                |   | 20,195,503                                |   | 9.58                  | %      | 9.58                                   | %       |
|                                                                                                           |   |                                        |   |                                      |   |                  |   |                                   |    |
| Computershare  Trust Company of Canada, as Trustee  100 University Avenue, 8th Floor  Toronto, Ontario M5J 2N1 |   | Series E Preferred Stock,  $0.001 par value |   | 1                                         |   | 100.0                 | %      |                                   | *  |

 

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*              Less than 1%.

 

(1)                                  As reported on a Schedule 13G/A datedFebruary 14, 2003, these shares are beneficially owned by various entitiesand individuals affiliated with Highfields Capital Management. As aninstitutional investment manager, Highfields Capital Management also filesperiodic reports with the SEC on Form 13F disclosing certain investmentholdings. In its filing for the quarter ended June 30, 2003, HighfieldsCapital Management reported holdings of 16,435,720 shares of the Company’scommon stock and $67,558,000 principal amount of the Company’s 5.25% SeniorConvertible Notes. Highfields Capital and individuals affiliated with it shareinvestment discretion with respect to the reported securities.

 

(2)                               Each share of common stock is entitled to onevote, and the outstanding share of Series E Preferred Stock is entitled to36,183 votes.

 

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**Security Ownership of Management**

 

The following table sets forth the beneficialownership of SGI’s common stock as of September 30, 2003 by each directoror nominee director, by each of the current executive officers named in thetable under “Executive Officer Compensation” below, and by all such persons andall current executive officers as a group:

 
| **Name**                                                      |   | **Number of Shares  Beneficially Owned(1)** |   | **Percent of  Common Stock** |    | **Percent of Total  Voting Power** |    |
|---------------------------------------------------------------|--------|---------------------------------------------|--------|------------------------------|---------|------------------------------------|---------|
| Robert R. Bishop                                              |   | 6,298,544                                   |   | 2.96                         | %       | 2.96                               | %       |
| Lewis S. Edelheit                                             |   | 25,000                                      |   |                         | *  |                               | *  |
| James A. McDivitt                                             |   | 245,004                                     |   |                         | *  |                               | *  |
| Arthur L. Money                                               |   | 71,000                                      |   |                         | *  |                               | *  |
| Anthony R. Muller                                             |   | 5,000                                       |   |                         | *  |                               | *  |
| Charles A. Steinberg                                          |   | 55,000                                      |   |                         | *  |                               | *  |
| Robert M. White                                               |   | 25,000                                      |   |                         | *  |                               | *  |
| Warren Pratt                                                  |   | 882,011                                     |   |                         | *  |                               | *  |
| Anthony K. Robbins                                            |   | 1,000,245                                   |   |                         | *  |                               | *  |
| Jeffrey V. Zellmer                                            |   | 376,703                                     |   |                         | *  |                               | *  |
| Sandra M. Escher                                              |   | 461,353                                     |   |                         | *  |                               | *  |
| All executive officers and  directors as a group (16 persons) |   | 10,772,905                                  |   | 4.96                         | %       | 4.96                               | %       |

 

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*              Less than 1%.

 

(1)                                  Unless otherwise indicated, the persons namedhave sole voting and investment power over the shares shown as beingbeneficially owned by them, subject to community property laws, whereapplicable. The table includes the following shares issuable on exercise ofoptions that were exercisable on September 30, 2003, or within 60 daysthereafter: Mr. Bishop, 2,127,500 shares; Dr. Edelheit, 25,000 shares; Mr.McDivitt, 80,000 shares; Mr. Money, 70,000 shares; Mr. Steinberg, 45,000shares; Dr. White, 25,000 shares; Dr. Pratt, 852,585 shares; Mr. Robbins,963,217 shares; Mr. Zellmer, 356,947 shares; Ms. Escher, 455,500 shares; andall directors and executive officers as a group, 6,275,929 shares.

 

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**Equity Compensation Plan Information**

 
|                                                    |   | **As of June  27, 2003**                                                                      |   |
|---------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                    |   | **Number of  shares to be  issued on exercise of  outstanding options,  warrants and rights** |   | **Weighted  average exercise  price of outstanding  options, warrants and  rights** |   | **Number of  shares  remaining available for  future issuance under  equity compensation plans** |   |
| Equity compensation plans  approved by stockholders(1)  |   | 28,412,319                                                                                    |   | $ | 4.1921 |   | 5,807,071 | (2) |
| Equity compensation plans  not approved by stockholders |   | 20,803,106                                                                                    |   | $ | 3.1513 |   | 5,236,063 |   |
| Total                                                   |   | 49,215,425                                                                                    |   | $ | 3.7314 |   | 11,043,134 |   |

 

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(1)                                  Additionally, the company has outstandingoptions to purchase an aggregate of 710,374 shares at a weighted averageexercise price $6.2526 per share. The options were assumed in connection withcertain acquisitions in 1995 and 1996. No additional awards can be grantedunder these plans.

 

(2)                                  Includes 592 shares available at June 27,2003 for future issuance under the Employee Stock Purchase Plan, which istemporarily suspended pending stockholder approval of an increase in shares.

 

**Amended and Restated 1996 SupplementalNon-Executive Equity Incentive Plan**

 

The Board approved the 1996 SupplementalNon-Executive Equity Incentive Plan in April 1996 and amended the plan toincrease the number of authorized shares in July 2001. The plan was notsubmitted to a stockholder vote. Under the plan, stock awards and nonstatutorystock options may be granted to Company employees with a status belowvice-president. Subject to certain adjustments upon a change in capitalization,the maximum aggregate number of shares of common stock of the Company issuableunder the plan is 22,500,000 shares. As of June 27, 2003, the number ofshares of common stock of the Company issuable under the plan was 5,236,063shares. The plan will remain in effect until terminated by the Board. TheCompensation and Human Resources Committee is responsible for administering theplan.

 

The per share exercise price for the sharesissuable is determined by the committee, which has generally been the fairmarket value of the shares on the date of grant. The options may be exercisedfor a period of ten years following the date of grant. However, in the event aholder ceases to be an employee of the Company, such holder may be required toexercise the option or right prior to the ten year period. Options generallyare granted with monthly vesting over 25 or 50 months, and options granted tonewly hired employees generally are not exercisable for 10 months following thedate of hire. Unless otherwise determined by the committee at the time ofgrant, each option provides that in the event of a change in control of theCompany, any options will become exercisable in full if, within 24 months aftera change in control of the Company, the option holder’s employment isterminated without cause or the option holder resigns due to certaininvoluntary relocations or reductions in compensation.

 

The Board may amend, alter, suspend orterminate the plan at any time. However, no amendment, alteration, suspensionor termination of the plan shall impair the rights of any holder of an optionor right, unless mutually agreed otherwise between the holder and the Company.

 

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**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

** **

**Arrangements with Executive Officers**

** **

*Employment Continuation Agreements*.  SGI has entered into employment continuationagreements with each of its executive officers with the goal of encouraging thecontinued employment of key executives in the event of a potential change incontrol of SGI. Under the agreements, each executive officer is entitled to atermination payment equal to two years of his or her compensation if employmentwith SGI is terminated within 24 months after a change in control, and isgranted full vesting of options and restricted stock effective after a changein control.

 

*Executive Loans*.  During fiscal 2001 and 2002, the Company extended loans toseveral executive officers. The loans were intended to provide a retentionincentive and were approved by the Compensation and Human Resources Committeeof the Board. Since the loans were extended, federal legislation has beenenacted prohibiting such extensions of credit to executive officers andaccordingly, no future extensions of credit will be made by the Company,although the Company continues to honor its contractual obligations underpre-existing extensions of credit.

 

Dr. Pratt was made Chief Operating Officer inApril 2001. Under his amended employment agreement entered into at thattime, the Company committed to extend credit of $5 million to Dr. Pratt,to be paid in annual installments through May 2004 subject to hiscontinued employment with the Company. Pursuant to this agreement, the Companyadvanced funds of $2 million in May 2001, $1 million inMay 2002, and $1 million in May 2003, and is required to advancefunds of an additional $1 million in May 2004 if Dr. Pratt continuesto be employed with the Company. The loan is interest free and will be settledat May 2005, or earlier in the event of a change in control or the terminationof Dr. Pratt’s employment by the Company without cause or by him for goodreason. At the settlement date, Dr. Pratt will repay the outstanding principalamount of the loan up to an amount equal to (i) the value of his vestedstock options and restricted stock held or sold from May 2000 through thesettlement date and (ii) any change in control payments he receives. Anyremaining amount of the loan will be forgiven. On a termination for cause orresignation without good reason before a change in control, the principalamount of the loan will be repayable in full. To the extent that Dr. Pratt issubject to income tax as a result of income being imputed to him due to theinterest free nature of the loan, the Company agreed to pay Dr. Pratt an amountequal to (x) an amount, which after the imposition of taxes on suchamount, will equal the amount of such income tax arising due to the interestfree nature of the loan less (y) the amount of the actual after-tax incomereceived by Dr. Pratt as a result of investing the proceeds of the loan.

 

In September 2000, the Company also made Dr.Pratt two five-year relocation loans secured by his California residence. Dr.Pratt received a $250,000 loan with an annual interest rate of 6.75% to berepaid in September 2005 or on the earlier sale of the residence or terminationof his employment and a $500,000 loan at no interest to be forgiven in monthlyinstallments over five years subject to continued employment with the Company.To the extent that Dr. Pratt is subject to income tax as a result of theforgiveness of the loan or the interest free nature of the loan, the Companyagreed to pay Dr. Pratt an amount, which after the imposition of taxes on theamount, will equal the amount of the income taxes arising. Dr. Pratt’s maximumaggregate indebtedness to the Company during fiscal 2003 under these loans was$591,875, and at September 30, 2003 was $504,119. During fiscal 2003, Dr.Pratt also received tax equalization benefits in the amount of $44,263 inconnection with his service in fiscal 1999 and 2000 as President of theCompany’s Alias Systems subsidiary in Toronto, Ontario.

 

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The Company loaned Ms. Escher $280,000 inOctober 2001. The loan was interest free and, in accordance with its terms, hasbeen forgiven in quarterly installments beginning in December 2001 over twoyears. The maximum amount of Ms. Escher’s indebtedness to the Company duringfiscal 2003 was $175,000. As of September 30, 2003, the loan has been fullyforgiven. To the extent that Ms. Escher was subject to income tax as a resultof the interest free nature of the loan, the Company agreed to pay Ms. Escheran amount, which after the imposition of taxes on the amount, was equal to theamount of the income taxes arising due to the interest free nature of the loan.

 

Mr. Zellmer was made Chief Financial Officerin July 2001. As part of his compensation arrangement, the Company loaned Mr.Zellmer $500,000. The loan was interest free and, in accordance with its terms,has been forgiven in quarterly installments since October 2001 over two years.The maximum amount of Mr. Zellmer’s indebtedness to the Company during fiscal2003 was $250,000. As of September 30, 2003, the loan has been fullyforgiven. To the extent that Mr. Zellmer was subject to income tax as a resultof the interest free nature of the loan, the Company agreed to pay Mr. Zellmeran amount, which after the imposition of taxes on such amount, was equal to theamount of such income taxes.

 

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**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**Fees Paid to the Independent Auditors**

 

During fiscal 2003 and fiscal 2002, theaggregate fees billed by Ernst & Young LLP for professional services wereas follows: 

 
|                    |   | **Fiscal Year Ended** |      |
|-------------------------|--------|-----------------------|-----------|
|                    |   | **June 27, 2003**     |      | **June 28, 2002** |   |
| Audit  Fees:(1)         |   | $                     | 3,723,619 |   | $ | 3,050,952 |   |
| Audit-Related  Fees:(2) |   | 30,688                |      | 254,000 |   |
| Tax Fees:(3)            |   | 652,602               |      | 769,109 |   |
| All Other  Fees:(4)     |   | 47,637                |      | 162,816 |   |
| Total                   |   | $                     | 4,454,546 |   | $ | 4,236,877 |   |

 

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(1)                                  Representsfees for professional services provided in connection with the audit of ourannual financial statements and review of our quarterly financial statements,advice on accounting matters that arose during the audit and audit services providedin connection with other statutory or regulatory filings. Fiscal 2002 auditfees have been amended from the Company’s 2002 proxy to include $413,406 ofaudit services which had not been billed to the Company at the time of thefiling of the proxy.

(2)                                  Assistanceduring fiscal 2003 in documenting internal control policies and procedures overfinancial reporting.  Fiscal 2002related to the review of the Company’s enterprise resource planning system.

(3)                                  Representsfees for international and U.S. tax planning and compliance services as well asconsultations and assistance surrounding matters with various income and salestax authorities.

(4)                                  Representsfees for services provided in connection with other miscellaneous items nototherwise included in the categories above.

 

The Audit Committee has determined that theprovision by Ernst & Young LLP of non-audit services is compatible withmaintaining the independence of Ernst & Young LLP. In accordance with itscharter, the Audit Committee approves in advance all audit and non-auditservices to be provided by Ernst & Young LLP. In certain cases, the AuditCommittee may delegate authority to pre-approve non-audit services on apreliminary basis to one or more members of the Audit Committee, provided thatsuch pre-approvals are communicated to the full Committee at its next meeting.During fiscal 2003, all services were pre-approved by the Audit Committee inaccordance with this policy.

 

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**PART IV**

 

**ITEM 15. EXHIBITS**

 

Item 15 is hereby supplementedas follows:

 

The following Exhibits are filed as part ofthis Report:

 

31.3         Certificationof Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002

 

31.4         Certificationof Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002

 

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrant has duly causedthis amended report on Form 10-K/A to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|   |                    |   | SILICON GRAPHICS, INC. |
|--------|-------------------------|--------|------------------------|
|   |                    |   |                   |
| Date:  |  October 27,  2003 |   | By:                    |  /s/ Sandra  M. Escher |
|   |                    |   |                   | Name: | Sandra M. Escher |
|   |                    |   |                   | Title: | Senior Vice President,

General Counsel and

Secretary |
|   |                    |   |                   |   |

 

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**INDEX OF EXHIBITS**

** **
| **Exhibit No.** |   | **Document**                                                                                          |
|-----------------|--------|-------------------------------------------------------------------------------------------------------|
| 31.3            |   | Certification of Chief Executive Officer pursuant to Section 302 of   the Sarbanes-Oxley Act of 2002. |
| 31.4            |   | Certification of Chief Financial Officer pursuant to Section 302 of   the Sarbanes-Oxley Act of 2002. |

** **

 

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