CRAY INC
EXHIBIT 10.9
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<TYPE>EX-10.9
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<FILENAME>v88015exv10w9.txt
<DESCRIPTION>EXHIBIT 10.9
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                                                                    EXHIBIT 10.9

                           EXECUTIVE SEVERANCE POLICY

APPLICATION

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

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

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

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

POLICY

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

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

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

          Chief Executive Officer - for a period of twelve months, plus one
          month for each year of service as on officer of the Company, up to a
          maximum of fifteen months.

          Chief Operating Officer - twelve months

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

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

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

          These salary continuation payments will cease if, while receiving
          these salary continuation payments, the officer becomes re-employed by
          the Company or any of its subsidiaries but will continue if the
          officer is employed by another employer.

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

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

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

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

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

          provided, however, to the extent the Company adjusts or changes any or
          all of the medical, vision, orthodontia and life insurance benefits
          generally for employees in the United States, then the Company shall
          make a comparable adjustment in the benefits provided to the officer

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

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     termination, he or she will agree to notify the Company promptly if he or
     she becomes an employee of another employer.

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

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

2.   DEFINITIONS:

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

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

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

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

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

     b.   DISABILITY. For purposes of this policy, "Disability" means that, at
          the time the officer's employment is terminated, he or she has been
          unable to perform the duties

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          of his or her position for a period of six consecutive months as a
          result of the officer's incapability due to physical or mental
          illness.

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

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

          o    a material diminution in job responsibilities; or

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

     d.   SALARY. For purposes of this policy, "Salary" means the officer's base
          salary in effect at the time, exclusive of any bonus.

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

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

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

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

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


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     information, shall present the request in writing to the chair of the
     Administrator, who will decide the claim.

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

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

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

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

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

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


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

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



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