Document:

Exhibit
10.4

 

SILICON
GRAPHICS, INC.

 

AMENDED
AND RESTATED1996 SUPPLEMENTAL NON-

EXECUTIVE EQUITY INCENTIVE PLAN

 

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

 

2.                                       Eligibility.  Stock Awards (“Rights”) and nonstatutory
stock options (“Options”) may be granted to Eligible Employees.  If otherwise eligible, an Employee who has
been granted an Option or Right may be granted additional Options or Rights.

 

3.                                       Stock Subject to the Plan.

 

(a)                                  Subject to Section 11 of the Plan,
the maximum aggregate number of shares of Common Stock of the Company (“shares”)
that may be issued pursuant to Options and Rights granted to participants under
the Plan shall be 17,500,000 shares*.  If
shares issued pursuant to a Stock Award are forfeited or otherwise reacquired
by the Company, or if an Option or Right expires or becomes unexercisable
without having been exercised in full, the reacquired or unpurchased shares,
respectively, that were subject thereto shall become available for future grant
or sale under the Plan (unless the Plan has terminated).

 

(b)                                 Any
shares issued under the Plan may consist in whole or in part of authorized and
unissued shares or of treasury shares, and no fractional shares shall be issued
under the Plan.  Cash may be paid in lieu
of any fractional shares in settlement of awards under the Plan.

 

4.                                       Plan Administration.

 

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

 

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

 

 

regulations and
guidelines for carrying out the Plan as it may deem necessary or proper.  This power includes, but is not limited to,
selecting award recipients, establishing all award terms and conditions and
adopting modifications, amendments and procedures, including subplans and the
like as may be necessary to comply with provisions of the laws and applicable
regulatory rulings of countries in which the Company operates in order to
assure the viability of awards granted under the Plan and to enable
participants employed in such countries to receive advantages and benefits
under the Plan and such laws and rulings.

 

(b)                                 Effect
of Committee’s Decision.  The
Committee’s decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options or Rights.

 

5.                                       Duration of the Plan.  The Plan shall remain in effect until
terminated by the Board.

 

6.                                       Awards.  The Committee shall determine the type or
types of award(s) to be made to each participant.  Awards may be granted singly, in combination
or in tandem.  Awards also may be made in
combination or in tandem with, in replacement of, as alternatives to, or as the
payment form for grants or rights under any other employee or compensation plan
of the Company, including the plan of any acquired entity.  The types of awards that may be granted under
the Plan are Options and Stock Awards.

 

7.                                       Options.

 

(a)                                  Options;
Number of Shares.  The Committee, in
its discretion, may grant Options to eligible participants.  Each Option shall be evidenced by a Notice of
Grant that shall specify the number of shares to which it pertains and be in
such form and contain such provisions as the Committee shall from time to time
deem appropriate.  Without limiting the
foregoing, the Committee may at any time authorize the Company, with the
consent of the respective recipients, to issue new Options or Rights in
exchange for the surrender and cancellation of outstanding Options or
Rights.  Option agreements shall contain
the following terms and conditions:

 

(i)                                     Exercise
Price.  The per share exercise price
for the shares issuable pursuant to an Option shall be such price as is
determined by the Committee.

 

(ii)                                  Waiting
Period and Exercise Dates.  At the
time an Option is granted, the Committee shall determine the terms and
conditions to be satisfied before shares may be purchased, including the dates
on which shares subject to the Option may first be purchased.  The Committee may specify than an Option may
not be exercised until the completion of a service period specified at the time
of

 

 

grant.  (Any such period is referred to herein as the
“waiting period.”)  At the time an Option
is granted, the Committee shall fix the period within which the Option may be
exercised, which shall not be earlier than the end of the waiting period, if
any.

 

(iii)                               Form
of Payment.  The consideration to be
paid for the shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Committee and may consist
entirely of:

 

(1)                                  cash;

 

(2)                                  check;

 

(3)                                  promissory
note;

 

(4)                                  other
shares that (1) in the case of shares acquired upon exercise of an option,
have been owned by the Optionee for more than six months on the date of
surrender, and (2) have a Fair Market Value on the date of surrender not
greater than the aggregate exercise price of the shares as to which said Option
shall be exercised;

 

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

 

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

 

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

 

(iv)                              Other
Provisions.  Unless otherwise
determined by the Committee at the time of grant, each Option shall provide
that in the event of a change in control of the Company (as specified by the
Committee), any Optionee’s Options will become exercisable in full if, within
twenty-four (24) months after a change in control of the Company, the Optionee’s
employment is terminated without cause or the Optionee resigns due to certain
involuntary relocations or reductions in compensation, as specified by the
Committee.  Each Option granted under the
Plan may contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Committee.

 

(v)                                 Buyout
Provisions.  The Committee may at any
time offer to buy out for a payment in cash, promissory note or shares, an
Option previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the Optionee at the time that such offer is
made.

 

 

(b)                                 Method of Exercise.

 

(i)                                     Procedure
for Exercise; Rights as a Stockholder. 
Any Option granted hereunder shall be exercisable at such times and
under such conditions as determined by the Committee and as shall be
permissible under the terms of the Plan.

 

An Option may not be
exercised for a fraction of a share.

 

An Option shall be deemed
to be exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the shares with respect to which the
Option is exercised has been received by the Company.  Full payment may, as authorized by the
Committee and permitted by the Option Agreement, consist of any consideration
and method of payment allowable under subsection 7(a)(iii) of the
Plan.  Until the issuance (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such shares,
no right to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option.  No adjustment will be made
for a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 11 of the
Plan.

 

Exercise of an Option in
any manner shall result in a decrease in the number of shares that thereafter
shall be available, both for purposes of the Plan and for sale under the
Option, by the number of shares as to which the Option is exercised.

 

(ii)                                  Termination
of Employment Relationship.  In the
event an Optionee ceases to be an Employee (other than as a result of the
Optionee’s death or Disability), the Optionee may exercise his or her Option,
but only within such period of time from the date of such termination as is
determined by the Committee and, unless determined otherwise by the Committee,
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). 
To the extent that Optionee was not entitled to exercise an Option at
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

 

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

 

 

that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement).  To the extent that Optionee
was not entitled to exercise an Option at the date of such termination, and to
the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.

 

(iv)                              Death
of Optionee.  In the event of an
Optionee’s death, the Optionee’s estate or a person who acquired the right to
exercise the deceased Optionee’s Option by bequest or inheritance may exercise
the Option, but only within twelve (12) months following the date of death,
and, unless determined otherwise by the Committee, only to the extent that the
Optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement).  To the extent that Optionee
was not entitled to exercise an Option at the date of death, and to the extent
that the Optionee’s estate or a person who acquired the right to exercise such
Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

 

8.                                       Stock Awards.  All or part of any Stock Award may be subject
to conditions and restrictions established by the Committee, and set forth in
the award agreement, which will include, but are not limited to, achievement of
specific business objectives and other measurements of individual, business
unit or Company performance measured over a period of not less than twelve (12)
months.

 

9.                                       Deferrals and Settlements.  Payment of awards may be in the form of cash,
Common Stock, other awards or combinations thereof as the Committee shall
determine, and with such restrictions as it may impose.  The Committee also may require or permit
participants to elect to defer the issuance of shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan.  The Committee may also provide
that deferred settlements include the payment or crediting of interest on the
deferral amounts.

 

10.                                 Tranferability
of Options and Rights.  Unless
otherwise determined by the Committee to the contrary, Options and Rights may
not be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.  The Committee may, in the manner established
by the Committee, provide for the transfer, without payment of consideration,
of an Option or Right by the Optionee to the Optionee’s “immediate family”.  In such case, the Option or Right will be
exercisable only by such transferee. 
Following a transfer, any such Options or Rights shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to the transfer.  For purposes of this Section 10,
the Optionee’s “immediate family” shall include any child, stepchild,

 

 

grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Optionee’s household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation
in which these persons (or the Optionee) control the management of assets, and
any other entity in which these persons (or the Optionee) own more than fifty
percent of the voting interests.  A transfer
under a domestic relations order in settlement of marital property rights is
not a prohibited transfer for value.

 

11.                                 Adjustments Upon Changes in Capitalization,
Dissolution, Merger, Asset Sale or Change of Control.

 

(a)                                  Changes
in Capitalization.  Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Right, and the number of
shares of Common Stock that have been authorized for issuance under the Plan
but as to which no Options or Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Right, as
well as the price per share of Common Stock covered by each such outstanding
Option or Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Right.

 

(b)                                 Dissolution
or Liquidation.  In the event of the
proposed dissolution or liquidation of the Company, to the extent that an
Option or Right has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action.  The Committee may, in the exercise of its
sole discretion in such instances, declare that any Option or Right shall
terminate as of a date fixed by the Committee and give each Optionee the right
to exercise his or her Option or Right as to all or any part of the Optioned
Stock, including shares as to which the Option or Right would not otherwise be
exercisable.

 

(c)                                  Merger
or Asset Sale.  In the event of a
merger of the Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding Option and
Right shall be assumed or an equivalent Option or Right substituted by the
successor corporation or a Parent or Subsidiary of

 

 

the successor
corporation.  In the event that the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, the Committee may, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
or Right as to all or a portion of the Optioned Stock, including shares as to
which it would not otherwise be exercisable. 
If the Committee makes an Option or Right exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Committee shall notify the Optionee that the Option or Right shall be
exercisable for such period as the Committee may designate, and the Option or
Right will terminate upon the expiration of such period.  For the purposes of this Section 11(c),
the Option or Right shall be considered assumed if, immediately following the
merger or sale of assets, the Option or Right confers the right to receive, for
each share of Optioned Stock subject to the Option or Right immediately prior
to the merger or sale of assets, the consideration (either stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in
the merger or sale of assets was not solely common stock of the successor
corporation or its parent, the Committee may, with the consent of the successor
corporation and the Optionee, provide for the consideration to be received upon
the exercise of the Option or Right, for each share of Optioned Stock subject
to the Option or Right, to be solely common stock of the successor corporation
or its parent equal in Fair Market Value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.

 

12.                                 Date of Grant.  The date of grant of an Option or Right shall
be, for all purposes, the date on which the Committee makes the determination
granting such Option or Right, or such other later date as is determined by the
Committee.  Notice of the determination
shall be provided to each Optionee within a reasonable time after the date of
such grant.

 

13.                                 Amendment and Termination of the Plan.

 

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

 

(b)                                 Effect
of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Company, which agreement must be in writing and signed by the Optionee
and the Company.

 

14.                                 Conditions Upon Issuance of Shares.

 

(a)                                  Legal
Compliance.  Shares shall not be
issued pursuant to the exercise of an Option or Right unless the exercise of
such Option or Right and the

 

 

issuance and delivery of
such shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, Applicable Laws, and the
requirements of any stock exchange or quotation system upon which the shares
may then be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

 

(b)                                 Investment
Representations.  As a condition to
the exercise of an Option or Right, the Company may require the person
exercising such Option or Right to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required.

 

15.                                 Liability of Company.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained.

 

16.                                 Reservation of Shares.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of shares as shall be
sufficient to satisfy the requirements of the Plan.

 

17.                                 Definitions.  As used herein, the following definitions
shall apply:

 

(a)                                  “Applicable
Laws” means all applicable law, including without limitation, the Code,
Delaware General Corporation Law, and applicable federal and state securities
laws.

 

(b)                                 “Common
Stock” means the Common Stock of the Company.

 

(c)                                  “Company”
means Silicon Graphics, Inc., and any entity that is directly or indirectly
controlled by the Company, or any entity in which the Company has a significant
equity interest, as determined by the Committee.

 

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

 

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

 

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

 

 

(g)                                 “Fair
Market Value” means, as of any date, the closing price for a share of
Common Stock as reported daily in The Wall Street Journal or a similar readily
available public source.  If no sales of
shares were made on such date, the closing price of a share as reported for the
preceding day on which sale of shares were made shall be used.

 

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

 

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

 

(j)                                     “Option
Agreement” means a written agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option grant.  The Option Agreement is subject to the terms
and conditions of the Plan.

 

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

 

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

 

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

 

 

RENEWAL

 

SILICON GRAPHICS, INC.

1996 SUPPLEMENTAL
NON-EXECUTIVE EQUITY INCENTIVE PLAN

 

NON-STATUTORY STOCK OPTION GRANT
AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (the
“Company”), has granted to the Optionee named on the attached NOTICE OF GRANT
OF STOCK OPTION AND GRANT AGREEMENT (the “NOTICE”) which is incorporated herein
by reference, an option to purchase the total number of shares of Common Stock
and at the price determined, both as set forth on the attached NOTICE included
in this option paskage, and in all respects subject to the terms, definitions
and provisions of the 1996 Supplemental Non-Executive Equity Incentive Plan
(the “Plan”) adopted by the Company which is incorporated herein by
reference.  The terms defined in the Plan
shall have the same defined meanings herein.

 

By accepting the NOTICE, Optionee acknowledges
responsibility of reviewing the terms of the Plan and the related prospectus,
copies of which are included in this option grant package and also available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com). Optionee further represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof.  Optionee further agress to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Plan.

 

1.             Nature
of the Option.  This Option is a
non-statutory option and is not intended to qualify for any special tax
benefits to the Optionee.

 

2.             Exercise
Price.  The exercise price for each
share of Common Stock is as set forth in the attached NOTICE.

 

3.             Exercise
of Option.  This Option shall be
exercisable during its term in accordance with the provisions of Section 7 of
the Plan as follows:

 

(a)           Right
to Exercise.

 

(i)            Subject to subsection 3(a) (ii) and (iii), below,
this Option shall be exercisable to the extent of twelve and one-half percent
(12.5%) of the Shares subject to the Option every six months on each
anniversary of the date of hire as set forth in the attached NOTICE.

 

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

 

(iii)          In
the event of Optionee’s death, disability or other termination of employment,
the exercisability of the Option is governed by Sections 7, 8, and 9 below.

 

 

(b)           Method
of Exercise.  This Option shall be
exercisable by written notice signed by the Optionee and delivered to the
Company’s Employee Stock Services group or by using the electronic methods
approved from tme to time by Employee Stock Services (currently
www.optionslink.com).  If electronic
exercise method is not chosen, such notice shall be in the form of Exhibit A
(Stock Exercise Request) found at the Stock Administration’s website or upon
request.  The exercise notice shall be
accompanied by payment of the exercise price. 
The Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the exercise price.

 

No Shares will be issued pursuant to the exercise of
an Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.  Assuming such
compliance, the Shares shall be considered transferred to the Optionee on the
date on which the Option is exercised with respect to such shares.

 

4.             Optionee’s
Representations.  In the event the
shares purchasable pursuant to the exercise of this Option have not been
registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, Optionee shall, concurrently with the exercise of all or
any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form of Exhibit B, (available in Stock
Administration) and shall read the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.

 

5.             Method
of Payment.  Payment of the exercise
price shall be by any of the following, or a combination thereof, at the
election of the Optionee:

 

(i)            cash;
or

 

(ii)           check;
or

 

(iii)          surrender
of other Shares of Common Stock of the Company of a value equal to the exercise
price of the shares as to which the Option is being exercised which, in the
case of shares acquired previously upon exercise of an option have been owned
by the Optionee for more than six (6) months on the date of surrender; or

 

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

 

6.             Restrictions
on Exercise.  This Option may not be
exercised if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other

 

 

2

 

law or regulation, including any rule under Part 207 of Title 12 of the
Code of Federal Regulations (“Regulation G”) as promulgated by the Federal
Reserve Board.  As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.

 

7.             Termination
of Status as an Employee.  If
Optionee ceases to serve as an Employee, he or she may, but only within three
(3) months after the date he or she ceases to be an Employee of the Company,
exercise this Option to the extent that he or she was entitled to exercise it
at the date of such termination.  To the
extent that he or she was not entitled to exercise this Option at the date of
such termination, or if he or she does not exercise this Option within the time
specified herein, the Option shall terminate.

 

8.             Disability
of Optionee.  Notwithstanding the
provisions of Section 7 above, if Optionee is unable to continue his or her
employment relationship with the Company as a result of his or her Disability,
the Optionee may, but only within twelve (12) months from the date of such
termination, exercise his or her Option to the extent he or she was entitled to
exercise the Option at the date of such termination.  To the extent that he or she was not entitled
to exercise the Option at the date of termination, or if he or she does not
exercise such Option within the time specified herein, the Option shall
terminate.

 

9.             Death
of Optionee.  In the event of the
death of Optionee during the term of this Option, the Option may be exercised,
at any time within twelve (12) months following the date of death, by
Optionee’s estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued as of the date of death.

 

10.           Transferability
of Option.  Unless otherwise
determined by the Committee to the contrary, this Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by the Optionee.  The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

 

11.           Term
of Option.  This Option may not be
exercised more than seven (7) years from the date of grant of this Option, and
may be exercised during such term only in accordance with the Plan and the
terms of this Option.

 

12.           Taxation
Upon Exercise of Option.  Optionee
understands that, upon exercise of this Option, he will recognize income for
tax purposes in an amount equal to the excess of the then fair market value of
the shares over the exercise price.  The
Company will be required to withhold tax from Optionee’s current compensation
with respect to such income; to the extent that Optionee’s current compensation
is insufficient to satisfy the withholding tax liability, the Company may
require the Optionee to make a

 

3

 

cash payment to cover such liability as a condition of exercise of this
Option.  Upon a resale of such shares by
the Optionee, any difference between the sale price and the fair market value
of the shares on the date of exercise of the Option will be treated as capital
gain or loss.

 

13.           Acceleration
Upon Change of Control. 
Notwithstanding provisions of Section 3(a) with respect to option
exercisability, in the event of a Change of Control of the Company, this Option
shall automatically become exercisable in full if, within twenty-four (24)
months after a Change of Control Date, (i) the Optionee is involuntarily
terminated by the Company or any successor company (hereinafter, the
“Employer”) without Cause or (ii) the Optionee voluntarily resigns from the
Employer for Good Reason.

 

14.           Definitions.  For purposes of Section 13, the terms
“Cause,” “Change of Control,” “Change of Control Date,” and “Good Reason” shall
have the meanings set out below:

 

(a)           “Cause”
means the termination of employment of an Optionee shall have taken place as a
result of:

 

(i)            an
act or acts of dishonesty undertaken by such Optionee and intended to result in
gain or personal enrichment of the Optionee, or

 

(ii)           persistent
failure to perform the duties and obligations of such Optionee which is not
remedied in a reasonable period of time after receipt of written notice from
the Employer, or

 

(iii)          violation
of confidentiality or proprietary information obligations to or agreements
entered into with the Employer, or

 

(iv)          use,
sale or distribution of illegal drugs on the Employer’s premises, or

 

(v)           threatening,
intimidating, or coercing or harassing fellow employees, or

 

(vi)          the
conviction of such Optionee of a felony.

 

(b)           “Change
of Control” of the Company means:

 

(i)            the
acquisition by any Person (as such term is used in Sections 13(d) and 14(d) of
the 1934 Act) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of fifty percent (50%)
or more of the combined voting power of the outstanding shares of capital stock
of the

 

4

 

Company’s then outstanding securities with respect to the election of
the directors of the Board.

 

(ii)           During
any period of three (3) consecutive years individuals who, at the beginning of
such period, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board, provided that any person
becoming a Director of the Board subsequent to the date of this agreement whose
election, or nomination for election by the Company’s shareholders, was
approved by the vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of any individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the 1934 Act) shall be, for these purposes, considered as though such
person were a member of the Incumbent Board.

 

(c)           “Change
of Control Date” means the effective date of the Change of Control or such date
which the Board shall, by resolution, deem to be the Change of Control Date.

 

(d)           “Good
Reason” for voluntary resignation means (i) the Employer reduces by ten percent
(10%) or more the Optionee’s compensation at the rate in effect immediately
prior to the Change of Control or (ii) without the Optionee’s express written
consent, the Employer requires the Optionee to change the location of his or
her job or office, so that he or she will be based at a location more then
fifty (50) miles from the location of his or her job or office immediately
prior to the Change of Control.  For
these purposes, “Compensation” includes base salary, exclusive of bonus,
incentive compensation and shift differential, paid by the Employer as
consideration for the Optionee’s service.

 

5

 

RENEWAL

 

SILICON GRAPHICS, INC.

1996 SUPPLEMENTAL
NON-EXECUTIVE EQUITY INCENTIVE PLAN

 

NON-STATUTORY STOCK OPTION GRANT
AGREEMENT

 

Silicon Graphics, Inc., a Delaware corporation (the “Company”),
has granted to the Optionee named on the attached NOTICE OF GRANT OF STOCK
OPTION AND GRANT AGREEMENT (the “NOTICE”) which is incorporated herein by
reference, an option to purchase the total number of shares of Common Stock and
at the price determined, both as set forth on the attached NOTICE included in
this option paskage, and in all respects subject to the terms, definitions and
provisions of the 1996 Supplemental Non-Executive Equity Incentive Plan (the “Plan”)
adopted by the Company which is incorporated herein by reference.  The terms defined in the Plan shall have the
same defined meanings herein.

 

By accepting the NOTICE, Optionee acknowledges
responsibility of reviewing the terms of the Plan and the related prospectus,
copies of which are included in this option grant package and also available at
http://www-finance.corp.sgi.com/stock or upon request from Employee Stock
Services (MS-645 or stock_support@sgi.com). Optionee further represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof.  Optionee further agress to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Plan.

 

1.             Nature
of the Option.  This Option is a
non-statutory option and is not intended to qualify for any special tax
benefits to the Optionee.

 

2.             Exercise
Price.  The exercise price for each
share of Common Stock is as set forth in the attached NOTICE.

 

3.             Exercise
of Option.  This Option shall be
exercisable during its term in accordance with the provisions of Section 7 of
the Plan as follows:

 

(a)           Right
to Exercise.

 

(i)            Subject to subsection 3(a) (ii) and (iii), below,
this Option shall be exercisable to the extent of twelve and one-half percent
(12.5%) of the Shares subject to the Option every six months on each
anniversary of the date of grant as set forth in the attached NOTICE.

 

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

 

(iii)          In
the event of Optionee’s death, disability or other termination of employment,
the exercisability of the Option is governed by Sections 7, 8, and 9 below.

 

 

(b)           Method
of Exercise.  This Option shall be
exercisable by written notice signed by the Optionee and delivered to the
Company’s Employee Stock Services group or by using the electronic methods
approved from tme to time by Employee Stock Services (currently
www.optionslink.com).  If electronic
exercise method is not chosen, such notice shall be in the form of Exhibit A
(Stock Exercise Request) found at the Stock Administration’s website or upon
request.  The exercise notice shall be
accompanied by payment of the exercise price. 
The Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the exercise price.

 

No Shares will be issued pursuant to the exercise of
an Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.  Assuming such
compliance, the Shares shall be considered transferred to the Optionee on the
date on which the Option is exercised with respect to such shares.

 

4.             Optionee’s
Representations.  In the event the
shares purchasable pursuant to the exercise of this Option have not been
registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, Optionee shall, concurrently with the exercise of all or
any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form of Exhibit B, (available in Stock
Administration) and shall read the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.

 

5.             Method
of Payment.  Payment of the exercise
price shall be by any of the following, or a combination thereof, at the
election of the Optionee:

 

(i)            cash;
or

 

(ii)           check;
or

 

(iii)          surrender
of other Shares of Common Stock of the Company of a value equal to the exercise
price of the shares as to which the Option is being exercised which, in the
case of shares acquired previously upon exercise of an option have been owned
by the Optionee for more than six (6) months on the date of surrender; or

 

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

 

6.             Restrictions
on Exercise.  This Option may not be
exercised if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other

 

2

 

law or regulation, including any rule under Part 207 of Title 12 of the
Code of Federal Regulations (“Regulation G”) as promulgated by the Federal
Reserve Board.  As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.

 

7.             Termination
of Status as an Employee.  If
Optionee ceases to serve as an Employee, he or she may, but only within three
(3) months after the date he or she ceases to be an Employee of the Company,
exercise this Option to the extent that he or she was entitled to exercise it
at the date of such termination.  To the
extent that he or she was not entitled to exercise this Option at the date of
such termination, or if he or she does not exercise this Option within the time
specified herein, the Option shall terminate.

 

8.             Disability
of Optionee.  Notwithstanding the
provisions of Section 7 above, if Optionee is unable to continue his or her
employment relationship with the Company as a result of his or her Disability,
the Optionee may, but only within twelve (12) months from the date of such
termination, exercise his or her Option to the extent he or she was entitled to
exercise the Option at the date of such termination.  To the extent that he or she was not entitled
to exercise the Option at the date of termination, or if he or she does not
exercise such Option within the time specified herein, the Option shall
terminate.

 

9.             Death
of Optionee.  In the event of the
death of Optionee during the term of this Option, the Option may be exercised,
at any time within twelve (12) months following the date of death, by Optionee’s
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that had
accrued as of the date of death.

 

10.           Transferability
of Option.  Unless otherwise
determined by the Committee to the contrary, this Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by the Optionee.  The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

 

11.           Term
of Option.  This Option may not be
exercised more than seven (7) years from the date of grant of this Option, and
may be exercised during such term only in accordance with the Plan and the
terms of this Option.

 

12.           Taxation
Upon Exercise of Option.  Optionee
understands that, upon exercise of this Option, he will recognize income for
tax purposes in an amount equal to the excess of the then fair market value of
the shares over the exercise price.  The
Company will be required to withhold tax from Optionee’s current compensation
with respect to such income; to the extent that Optionee’s current compensation
is insufficient to satisfy the withholding tax liability, the Company may
require the Optionee to make a

 

3

 

cash payment to cover such liability as a condition of exercise of this
Option.  Upon a resale of such shares by
the Optionee, any difference between the sale price and the fair market value
of the shares on the date of exercise of the Option will be treated as capital
gain or loss.

 

13.           Acceleration
Upon Change of Control. 
Notwithstanding provisions of Section 3(a) with respect to option
exercisability, in the event of a Change of Control of the Company, this Option
shall automatically become exercisable in full if, within twenty-four (24)
months after a Change of Control Date, (i) the Optionee is involuntarily
terminated by the Company or any successor company (hereinafter, the “Employer”)
without Cause or (ii) the Optionee voluntarily resigns from the Employer for
Good Reason.

 

14.           Definitions.  For purposes of Section 13, the terms “Cause,”
“Change of Control,” “Change of Control Date,” and “Good Reason” shall have the
meanings set out below:

 

(a)           “Cause”
means the termination of employment of an Optionee shall have taken place as a
result of:

 

(i)            an
act or acts of dishonesty undertaken by such Optionee and intended to result in
gain or personal enrichment of the Optionee, or

 

(ii)           persistent
failure to perform the duties and obligations of such Optionee which is not
remedied in a reasonable period of time after receipt of written notice from
the Employer, or

 

(iii)          violation
of confidentiality or proprietary information obligations to or agreements
entered into with the Employer, or

 

(iv)          use,
sale or distribution of illegal drugs on the Employer’s premises, or

 

(v)           threatening,
intimidating, or coercing or harassing fellow employees, or

 

(vi)          the
conviction of such Optionee of a felony.

 

(b)           “Change
of Control” of the Company means:

 

(i)            the
acquisition by any Person (as such term is used in Sections 13(d) and 14(d) of
the 1934 Act) as Beneficial Owner (as such term is used in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of fifty percent (50%)
or more of the combined voting power of the outstanding shares of capital stock
of the

 

4

 

Company’s then outstanding securities with respect to the election of
the directors of the Board.

 

(ii)           During
any period of three (3) consecutive years individuals who, at the beginning of
such period, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board, provided that any person
becoming a Director of the Board subsequent to the date of this agreement whose
election, or nomination for election by the Company’s shareholders, was
approved by the vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of any individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the Board,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
1934 Act) shall be, for these purposes, considered as though such person were a
member of the Incumbent Board.

 

(c)           “Change
of Control Date” means the effective date of the Change of Control or such date
which the Board shall, by resolution, deem to be the Change of Control Date.

 

(d)           “Good
Reason” for voluntary resignation means (i) the Employer reduces by ten percent
(10%) or more the Optionee’s compensation at the rate in effect immediately
prior to the Change of Control or (ii) without the Optionee’s express written
consent, the Employer requires the Optionee to change the location of his or
her job or office, so that he or she will be based at a location more then
fifty (50) miles from the location of his or her job or office immediately
prior to the Change of Control.  For
these purposes, “Compensation” includes base salary, exclusive of bonus,
incentive compensation and shift differential, paid by the Employer as consideration
for the Optionee’s service.

 

5EXHIBIT 10.5

 

AMENDMENT NUMBER TEN TO
AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

THIS
AMENDMENT NUMBER TEN TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Amendment”), dated as of October 28, 2004, is entered into
between and among, the lenders identified on the signature pages hereof (such
lenders, together with their respective successors and assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”),
WELLS FARGO FOOTHILL, INC., a
California corporation, as the arranger and administrative agent for the
Lenders (“Agent” and together with the Lenders, collectively, the “Lender
Group”), SILICON GRAPHICS, INC.,
a Delaware corporation (“Parent”), and each of Parent’s Subsidiaries
identified on the signature pages hereof (such Subsidiaries, together with
Parent, are referred to hereinafter each individually as a “Borrower,”
and individually and collectively, jointly and severally, as “Borrowers”),
in light of the following:

 

W  I  T  N  E  S  S  E  T
H

 

WHEREAS, Borrowers and
the Lender Group are parties to that certain Amended and Restated Loan and
Security Agreement, dated as of September 20, 2002 (as amended, restated,
supplemented, or modified from time to time, the “Loan Agreement”);

 

WHEREAS, Borrowers have requested that the Lender
Group (i) revise the concentration limit for Accounts due from a certain
account debtor, and (ii) waive Borrowers’ default resulting from Borrowers’
breach of the covenant set forth in section 7.20(a) (Minimum EBITDA) of the Loan
Agreement as of September 30, 2004;

 

WHEREAS, subject to the
satisfaction of the conditions set forth herein, the Lender Group is willing to
so consent to the amendment of the Loan Agreement.

 

NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Loan Agreement as follows:

 

1.                                      DEFINITIONS.

 

Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement, as amended hereby.

 

2.                                      AMENDMENT
TO LOAN AGREEMENT.

 

Clause
(i) of the definition of “Eligible Domestic Accounts” in Section 1.1 of
the Loan Agreement is hereby amended by restating it in its entirety, as
follows:

 

“(i)          Accounts with
respect to an Account Debtor whose total obligations owing to Borrower exceed
10% of all Eligible Accounts, to the extent of the obligations owing by such
Account Debtor in excess of such percentage; provided, however, if Accounts
with respect to which the Account Debtor is (w) General Electric Corporation 

 

 

exceed 35% (or such other percentage as Agent may determine in its sole
discretion) of all Eligible Accounts in the aggregate, to the extent of the
obligations owing by such Account Debtor in excess of such percentage, (x)
National Aeronautics and Space Administration (NASA) exceed 25% (or such other
percentage as Agent may determine in its sole discretion) of all Eligible
Accounts in the aggregate, to the extent of the obligations owing by such
Account Debtor in excess of such percentage, (y) Northrop Grumman, NEC
Corporation, General Services Administration, Raytheon Company, or Lockheed
Martin exceed 20% (or such other percentage as Agent may determine in its sole
discretion) of all Eligible Accounts in the aggregate, to the extent of the
obligations owing by such Account Debtor in excess of such percentage, or (z)
BAE Systems or Maryland Procurement exceed 15% (or such other percentage as
Agent may determine in its sole discretion) of all Eligible Accounts in the aggregate,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage,”

 

3.                                      WAIVER.

 

The Lender Group
grants to Borrowers a waiver of Borrowers’ default resulting from Borrowers’
breach of the covenant set forth in section 7.20(a) (Minimum EBITDA) of the
Loan Agreement as of September 30, 2004. 
This waiver is not a waiver of any subsequent Default or Event of
Default arising from a breach of Section 7.20(a) of the Loan Agreement, nor is
it a waiver of any other current or future Default or Event of Default. Lender
is not obligated to provide this or any other waiver of its default rights.

 

4.                                      CONDITIONS
PRECEDENT TO THIS AMENDMENT.

 

The satisfaction
of each of the following shall constitute conditions precedent to the
effectiveness of this Amendment and each and every provision hereof:

 

(a)           The representations and warranties in
the Loan Agreement and the other Loan Documents shall be true and correct in
all respects on and as of the date hereof, as though made on such date (except
to the extent that such representations and warranties relate solely to an
earlier date);

 

(b)           No Default or Event of Default shall
have occurred and be continuing on the date hereof or as of the date of the
effectiveness of this Amendment; and

 

(c)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued and
remain in force by any Governmental Authority against Borrowers or the Lender
Group.

 

5.                                      CONSTRUCTION.

 

THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF
CALIFORNIA.

 

 

6.                                      ENTIRE
AMENDMENT; EFFECT OF AMENDMENT.

 

This Amendment,
and terms and provisions hereof, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersedes any and all
prior or contemporaneous amendments relating to the subject matter hereof.  Except for the amendment to the Loan
Agreement expressly set forth in Section 2 hereof, the Loan
Agreement and other Loan Documents shall remain unchanged and in full force and
effect.  To the extent any terms or
provisions of this Amendment conflict with those of the Loan Agreement or other
Loan Documents, the terms and provisions of this Amendment shall control.  This Amendment is a Loan Document.

 

7.                                      COUNTERPARTS;
TELEFACSIMILE EXECUTION.

 

This Amendment may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties hereto may
execute this Amendment by signing any such counterpart.  Delivery of an executed counterpart of this
Amendment by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by telefacsimile also shall deliver an original executed
counterpart of this Amendment, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.

 

8.                                      MISCELLANEOUS.

 

(a)           Upon
the effectiveness of this Amendment, each reference in the Loan Agreement to “this
Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring
to the Loan Agreement shall mean and refer to the Loan Agreement as amended by
this Amendment.

 

(b)           Upon
the effectiveness of this Amendment, each reference in the Loan Documents to
the “Loan Agreement”, “thereunder”, “therein”, “thereof” or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.

 

 

IN WITNESS WHEREOF, the
parties have caused this Amendment to be executed and delivered as of the date
first written above.

 

	
   

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation, as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Thomas P. Shughrue

  	
   

  
	
   

  	
  Name: 

  	
  Thomas P. Shughrue

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS, INC.,

  
	
   

  	
  a Delaware Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jean Furter

  	
   

  
	
   

  	
  Name:

  	
  Jean Furter

  	
   

  
	
   

  	
  Title:

  	
  VP Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS FEDERAL, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jeff Zellmer

  	
   

  
	
   

  	
  Name:

  	
   Jeff Zellmer

  	
   

  
	
   

  	
  Title:

  	
  Vice President

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