¨	Preliminary Proxy Statement

¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ	Definitive Proxy Statement

¨	Definitive Additional Materials

¨	Soliciting Material Pursuant to §240.14a-12

þ	No fee required.

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)	Title of each class of securities to which transaction applies:

(2)	Aggregate number of securities to which transaction applies:

(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)	Proposed maximum aggregate value of transaction:

(5)	Total fee paid:

¨	Fee paid previously with preliminary materials.

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)	Amount Previously Paid:

(2)	Form, Schedule or Registration Statement No.:

(3)	Filing Party:

(4)	Date Filed:

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•	Our Notice of 2019 Annual Meeting of Shareholders and our Proxy Statement for Annual Meeting of Shareholders (Proxy Statement), which summarize the information regarding the matters to be voted on at the Annual Meeting;

•	Our 2018 Annual Report to Shareholders, which includes our Annual Report on Form 10-K and audited consolidated financial statements for the year ended December 31, 2018 (Annual Report); and

•	The proxy card if you requested printed versions of these materials by mail or an electronic voting form if you are viewing these materials via the internet.

•	The election of nine directors to the Board of Directors, each to serve a one-year term;

•	The advisory and non-binding vote on the compensation of our Named Executive Officers;

•	The amendment and restatement of our 2013 Equity Incentive Plan, as amended and restated (2013 Equity Incentive Plan or the Plan); and

•	The ratification of the appointment of Peterson Sullivan LLP as our independent registered public accounting firm for the year ending December 31, 2019.

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•	Vote again via the internet or by telephone;

•	Send in another signed proxy card with a later date;

•	Send a letter revoking your vote or proxy to our Corporate Secretary at our offices in Seattle, Washington; or

•	Attend the Annual Meeting and vote in person.

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•	All persons we know to be beneficial owners of at least 5% of our common stock;

•	Our directors;

•	Our Named Executive Officers for 2018; and

•	All current directors and executive officers as a group.

*	Less than 1% of the outstanding common stock.

(1)	Unless otherwise indicated, all addresses are c/o Cray Inc., 901 Fifth Avenue, Suite 1000, Seattle, WA 98164.

(2)

Unless otherwise indicated in these footnotes and subject to community property laws where applicable, each of the listed shareholders has sole voting and investment power with respect to the shares shown as beneficially owned by such shareholder. The number of shares and percentage of beneficial ownership includes shares of common stock issuable pursuant to stock options held by the person or group that may be exercised on April 5, 2019, or within 60 days thereafter.

(3)	The information under the column “Common Shares Owned” with respect to BlackRock, Inc. is based on a Schedule 13G/A filed with the SEC on January 24, 2019, regarding beneficial ownership as of December 31,

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(4)

The information under the column “Common Shares Owned” with respect to The Vanguard Group is based on a Schedule 13G/A filed with the SEC on February 11, 2019, regarding beneficial ownership as of December 31, 2018. In that Schedule 13G/A, The Vanguard Group reported beneficial ownership of 4,178,677 shares, with sole voting power of 47,305 shares, with shared voting power of 11,400 shares, sole dispositive power of 4,124,172 shares, and with shared dispositive power of 54,505 shares.

(5)

The information under the column “Common Shares Owned” with respect to Dimensional Fund Advisors LP is based on a Schedule 13G/A filed with the SEC on February 8, 2019, regarding beneficial ownership as of December 31, 2018. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the Funds). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, Dimensional) may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. Dimensional Fund Advisors LP holds sole voting power as to 1,965,262 shares and sole dispositive power of 2,064,868 shares.

(6)	Represents (i) 14,697 shares held by Mr. Banerjee and (ii) 20,000 options exercisable within 60 days of April 5, 2019.

(7)	Represents (i) 4,067 shares held by Ms. Fallon and (ii) 20,000 options exercisable within 60 days of April 5, 2019.

(8)	Represents 20,000 options exercisable by Mr. Gold within 60 days of April 5, 2019.

(9)	Represents (i) 4,067 shares held by Mr. Kiely and (ii) 16,786 shares held by The Kiely Trust dtd 9/24/18. Mr. Kiely is one of the trustees of The Kiely Trust dtd 9/24/18 and has voting and dispositive power over the shares held by The Kiely Trust dtd 9/24/18.

(10)	Represents (i) 4,067 shares held by Mr. Regis and (ii) 47,141 shares held by Regis Investments, L.P. Mr. Regis is the general partner of Regis Investment L.P. and has voting and dispositive power over the shares held by Regis Investment, L.P.

(11)	Represents (i) 12,579 shares held by Mr. Schireson and (ii) 20,000 options exercisable within 60 days of April 5, 2019.

(12)	Represents (i) 10,353 shares held by Mr. Turner and (ii) 20,000 options exercisable within 60 days of April 5, 2019.

(13)	Represents (i) 282,620 shares held by Mr. Ungaro, (ii) 3,443 shares held in the Cray 401(k) Plan, (iii) 471,198 options exercisable within 60 days of April 5, 2019, and (iv) 55,700 shares of restricted stock units that are expected to vest within 60 days of April 5, 2019.

(14)	Represents (i) 69,272 shares held by Mr. Henry, (ii) 132,498 options exercisable within 60 days of April 5, 2019, and (iii) 23,250 shares of restricted stock units that are expected to vest within 60 days of April 5, 2019.

(15)	Represents (i) 45,229 shares held by Mr. Morreale, (ii) 2,059 shares held in the Cray 401(k) Plan, (iii) 40,248 options exercisable within 60 days of April 5, 2019, and (iv) 12,750 shares of restricted stock units that are expected to vest within 60 days of April 5, 2019.

(16)	Represents (i) 16,284 shares held by Dr. Papaefstathiou, (ii) 22,749 options exercisable within 60 days of April 5, 2019, and (iii) 14,000 shares of restricted stock units that are expected to vest within 60 days of April 5, 2019.

(17)	Represents (i) 48,230 shares held by Mr. Piraino, (ii) 575 shares held in the Cray 401(k) Plan, (iii) 97,068 options exercisable within 60 days of April 5, 2019, and (iv) 14,250 shares of restricted stock units that are expected to vest within 60 days of April 5, 2019.

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•	A Code of Business Conduct that sets forth our ethical principles and applies to all of our directors, officers, and employees;

•	Corporate Governance Guidelines that set forth our corporate governance principles;

•	A Related Person Transaction Policy that applies to all of our directors, officers, and employees;

•	Charters for our Audit, Compensation, Corporate Governance, and Strategic Technology Assessment Committees; and

•	A confidential, anonymous system for employees and others to report concerns about fraud, accounting matters, violations of our policies, and other matters.

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•	The quality and integrity of our accounting and financial reporting processes and the audits of our consolidated financial statements;

•	The qualifications and independence of the independent registered public accounting firm engaged to issue an audit report on our consolidated financial statements;

•	The performance of our systems of internal controls and disclosure controls;

•	The review and approval or ratification of “related person transactions” under our Related Person Transaction Policy; and

•	Our procedures for legal and regulatory compliance, risk assessment, and business conduct standards.

•	Our compensation policies, plans, and benefit programs;

•	The compensation of the Chief Executive Officer and other officers;

•	The administration of our cash- and equity-based compensation plans; and

•	Evaluation and mitigation of potential risks related to our compensation policies.

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•	Review the compensation of Board members and recommend to the full Board changes to Board compensation as appropriate to attract and retain qualified directors;

•	Assist the Board in its oversight of our technology strategy and product plans; and

•	Assess whether our research and development investments are sufficient and appropriate to support the competitiveness of our offerings in the marketplace.

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•	Base salaries are aligned with employee responsibilities so employees are not motivated to take excessive risks to achieve a reasonable level of financial security;

•

The determination of cash incentive awards is based on a review of two key Company performance measures, described under “Compensation Discussion and Analysis – 2018 Compensation Determinations,” promoting accountability and line of sight to executives and employees in driving business success. Our cash incentive plans for 2018 include specific caps on the target awards, which limits the incentive for excessive risk-taking by our employees;

•	Long-term equity compensation programs are designed to reward executives and other participants for driving sustainable and profitable growth for shareholders;

•	Equity incentive awards for our executive officers have included different types of equity instruments, which helps to diversify the executive officers’ interests and limit excessive risk taking;

•	The vesting periods for our time-based equity awards are designed to encourage executives and other participants to focus on sustained stock price appreciation;

•	Our outstanding performance-based restricted stock units vest upon the achievement of certain operational and financial milestones, and those milestones and the terms of the grants are designed to encourage sustained, measurable performance;

•	The mix between fixed and variable, annual and long-term, and cash and equity compensation is designed to encourage strategies and actions that are in our shareholders’ long-term interests;

•	Our system of internal controls over financial reporting, standards of business conduct, and compliance programs reduce the likelihood of manipulation of our financial performance to enhance payments under our bonus and sales compensation plans;

•	Our Chief Executive Officer is subject to, and is in compliance with, our stock ownership guidelines described under “Compensation Discussion and Analysis – Compensation Program Elements and Purposes,” which encourage a level of stock ownership that we believe appropriately aligns his long-term interests with those of our shareholders;

•	We have a clawback or recoupment policy for certain performance-based incentive compensation of our executive officers; and

•	Our Insider Trading Policy prohibits all employees from pledging shares, engaging in short sales, or hedging transactions involving our securities.

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•	The nominating shareholder’s name and address;

•	A representation that the nominating shareholder is entitled to vote at such meeting;

•	The number of shares of our common stock that the nominating shareholder owns and when the nominating shareholder acquired such shares;

•	A representation that the nominating shareholder intends to appear at the meeting, in person or by proxy;

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•	The nominee’s name, age, address, and principal occupation or employment;

•	All information concerning the nominee that must be disclosed about nominees in proxy solicitations under the SEC proxy rules; and

•	The nominee’s executed consent to serve as a director if so elected.

•	A brief description of the business the shareholder wishes to bring before the Annual Meeting, the reasons for conducting such business, and the language of the proposal;

•	The shareholder’s name and address;

•	The number of shares of our common stock that the shareholder owns and when the shareholder acquired them;

•	A representation that the shareholder is entitled to vote at such meeting;

•	A representation that the shareholder intends to appear at the Annual Meeting, in person or by proxy; and

•	A brief description of any material interest the shareholder has in the business to be brought before the Annual Meeting.

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(1)	Based on the recommendations of Mercer and the Corporate Governance Committee, the Board approved an increase to the annual retainer for members of the Compensation Committee from $5,000 to $10,000 effective as of July 1, 2018, so as to remain competitive with Cray’s Peer Group.

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•	Directors are expected to own shares of our common stock, the value of which equals at least $250,000 based on the average closing price per share for our common stock as reported by Nasdaq over the 90 trading days prior to the end of each fiscal year.

•	Each director has five years following the later of commencement of his or her service on our Board or the adoption or amendment of our stock ownership guidelines to satisfy the minimum share holdings of our stock ownership guidelines.

•	Directors may sell enough shares to cover the income tax liability when restricted shares vest.

(1)	The annual retainer for members of the Compensation Committee was increased from $5,000 to $10,000 effective July 1, 2018. Payments of prorated increases were issued to Messrs. Kiely, Schireson, and Turner, as discussed above.

(2)

Amounts in this column represent the fair value of the restricted stock awards granted on June 12, 2018, calculated in accordance with ASC 718 by multiplying the closing price of our common stock as reported by Nasdaq on the date of the grant ($27.10) by the number of shares awarded disregarding any adjustments for estimated forfeitures. The amount any director realizes from these restricted stock awards, if any, will depend on the future market value of our common stock when these shares are sold, and there is no assurance that any director will realize amounts at or near the values shown. A more detailed discussion of the assumptions used in the valuation of stock awards made in the year 2018 may be found in Note 2 of the Notes to the Financial Statements in our Annual Report on Form 10‑K for the year ended December 31, 2018.

(3)	The following table provides additional information about non-employee director equity awards, including the stock awards made to non-employee directors during 2018 and the number of stock options and shares of restricted stock held by each non-employee director on December 31, 2018:

(a)	Pursuant to the policy described under “Equity Compensation – Restricted Stock Awards” above, on June 12, 2018, we granted to each non-employee director shares of restricted stock, all of which vest

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(4)	Consists of applicable Washington State and City of Seattle business and occupation taxes and Seattle business license fees paid by us.

(5)	Ms. Fallon was appointed to the Strategic Technology Assessment Committee effective February 21, 2018 and received a prorated payment for her service on that committee.

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•	An overview of our compensation program’s guiding principles, compensation philosophy, and objectives

•	A review of the pay elements we consider when structuring executive compensation

•	A detailed discussion of our 2018 executive compensation program determinations

•	A summary of our key policies and pay practices used to ensure effective governance and risk mitigation

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•	Provide effective compensation and benefit programs that are competitive both within our industry and with other relevant organizations with which we compete for executive talent;

•	Encourage and reward behaviors that ultimately contribute to the achievement of organizational goals that increase long-term shareholder value without encouraging unbalanced short-term focus or inappropriate risk taking, thus fostering an innovative, high-performance culture;

•	Align the interests of our organization and our executives with the long-term interests of our shareholders;

•	Provide a retention incentive; and

•	Provide a work environment that promotes integrity, innovation, excellence, teamwork, and respect for the individual.

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•	In our industry or similar industries such as application software, systems software, communications equipment, electronic components, electronic equipment and instruments, technology hardware, storage, and peripherals;

•	Similar to us with respect to elements such as operating results, research and development investments and product solutions, size of revenue (currently 0.8x to 2.5x our target revenue for year-end 2018), and market capitalization; and

•	Those with whom we compete in the recruitment of executive officers.

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•	Align NEOs’ interests with those of our shareholders

•	Provide a significant portion of total target compensation that is at risk, subject to future stock price performance

•	Motivate and retain the necessary talent to lead the Company toward attainment of our goals and objectives

(1)	The multiples are based on the closing price per share of our common stock on the date of grant for restricted stock units and the closing price per share of our common stock one business day prior to the date of grant for stock options based on the Black-Scholes Model.

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•	Cancel any outstanding compensation award granted after the adoption of the policy in April 2011 (whether or not granted under a plan and regardless of whether it is vested or deferred); and/or

•	Require recoupment of all or a portion of any after-tax portion of any bonus, incentive payment, commission, equity-based award, or other incentive-based compensation granted or received after the adoption of the policy in April 2011.

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(1)

These amounts reflect the aggregate grant date fair value of restricted stock units, without reflecting forfeitures, computed in accordance with ASC 718 for 2018, 2017, or 2016, respectively. These amounts do not represent the actual amounts paid to or realized by the NEO for these awards during years 2018, 2017, or 2016. See the section entitled “Share-Based Compensation” in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018, for a description of the valuation of these restricted stock units. The amount any NEO realizes, if any, from these restricted stock units will depend on the future market value of our common stock when these shares are sold, and there is no assurance that the NEO will realize amounts at or near the values shown.

(2)	The valuation methodology for restricted stock units as described in footnote (1) assumes full vesting and maximum performance achievement and does not take into account the performance vesting criteria (and the reduced likelihood of vesting) associated with the performance vesting restricted stock units (PVRSUs) granted in 2017 to Dr. Papaefstathiou described further in footnote (13), below.

(3)

These amounts represent the aggregate grant date fair value of stock option awards, without reflecting forfeitures, computed in accordance with ASC 718 for 2018, 2017, or 2016, respectively. These amounts do not represent the actual amounts paid to or realized by the NEO for these awards during years 2018, 2017, or 2016. The value as of the grant date for stock option awards is recognized over the number of days of service required for the grant to become vested. See the sections entitled “Share-Based Compensation” and “Shareholders’ Equity” in Notes 2 and 15 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018, for a description of the valuation of these stock options, including key assumptions under the Black-Scholes pricing model. The values determined by the Black-Scholes pricing model are highly dependent on these assumptions, particularly regarding volatility of the market price for our common stock and expected life of these options. The amount any NEO realizes, if any, from these options depends on the future excess, if any, of the market value of our common stock as reported by Nasdaq over the exercise price of the

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(4)

The information in this column reflects payments to the NEOs under our annual cash incentive plan for the indicated year. Payments for amounts earned under our plan were paid in March of the year following the performance year. See the “Grants of Plan-Based Awards in 2018” table below and “2018 Compensation Determinations – Annual Cash Incentive Compensation Plan” in the Compensation Discussion and Analysis above for a description of the 2018 Executive Bonus Plan, including the conditions to payments of awards.

(5)	The amounts shown in this column includes matching contributions under the Cray 401(k) Plan:

(6)

The amounts shown in this column are the sum of the amounts shown in the columns for salary, bonus, restricted stock units, PVRSUs, stock option awards, non-equity incentive plan compensation, and all other compensation, as required by SEC rules. Because these sums combine cash payments earned by and made to the NEOs with amounts not earned by or paid to the NEOs but rather amounts reflecting the grant date fair value of restricted stock units, options, or PVRSUs held by the NEOs, the actual total amount earned in any year by a NEO depends on future events and, for the reasons described in footnotes (1), (2), and (3) above, there is no assurance that the NEOs will realize a total sum at or near the values shown.

(7)	The amounts shown in this column reflect discretionary payments to the NEOs approved by the Compensation Committee as described in “2018 Compensation Determinations – Annual Cash Incentive Compensation Plan” in the Compensation Discussion and Analysis above.

(8)	Mr. Ungaro’s annual salary was increased to $540,000 effective July 2, 2016.

(9)	Mr. Henry’s annual salary was increased to $400,000 effective July 2, 2016.

(10)	Mr. Morreale’s annual salary was increased to $325,000 effective July 2, 2016.

(11)	Dr. Papaefstathiou was appointed as our Senior Vice President, Research and Development on January 9, 2017. His salary reflects his partial service during 2017. Dr. Papaefstathiou was compensated based on an annual salary of $350,000.

(12)	This amount represents a one-time signing bonus received by Dr. Papaefstathiou.

(13)

This amount includes Dr. Papaefstathiou’s initial new hire equity awards, the size of which was determined as part of the negotiation of his total compensation package. The valuation methodology for the restricted stock units as described in footnote (1) assumes full vesting and maximum performance achievement and does not take into account the performance vesting criteria (and the reduced likelihood of vesting) associated with the PVRSUs included in the value of the restricted stock units. The PVRSUs vest, if at all, only upon the achievement of certain revenue and operating income milestones, both of which must be met, in either fiscal year 2018 or 2019, or upon a change of control of Cray. The PVRSUs will expire completely on July 2, 2020 if the milestones are not satisfied, or a change of control has not occurred by the deadlines set forth in the PVRSU. No milestones were achieved and no shares vested in 2017 or 2018.

(14)	As an inducement for Dr. Papaefstathiou to join Cray, this amount reflects a one-time target award amount equal to 65% of his annual base salary and was guaranteed at a minimum of 50% for 2017, prorated for the portion of 2017 that he was employed by the Company.

(15)	Mr. Piraino’s annual salary was increased to $325,000 effective July 2, 2016.

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(1)	The target and maximum payout levels represent, respectively, the target attainment (100%) and maximum attainment (200%). Additional information regarding the 2018 Executive Bonus Plan is included under “2018 Compensation Determinations – Annual Cash Incentive Compensation Plan” in the Compensation Discussion and Analysis above.

(2)	In determining the exercise price, we use the closing price per share for our common stock as reported by Nasdaq on the trading date prior to the grant date of the stock option.

(3)

The grant date fair value of the restricted stock units and stock option grants is computed in accordance with ASC 718 and represents our total projected expense for financial reporting purposes of those units and grants. See the sections entitled “Share-Based Compensation” and “Shareholders’ Equity” in Notes 2 and 15 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018, for a description of the valuation of these restricted stock units and stock option grants, including key assumptions under the Black-Scholes pricing model for determining values of stock options. The values determined by the Black-Scholes pricing model are highly dependent on these assumptions, particularly regarding volatility of the market price for our common stock and expected life of the stock options. The amount any NEO realizes, if any, from these restricted stock units and stock option grants depends on the market value of our common stock in the future when the NEO sells the restricted stock units or the shares underlying the stock option grants, and there is no assurance that the NEO will realize amounts at or near the values shown. The valuation methodology for restricted stock units as described in this footnote assumes full vesting.

(4)

Reflects the number of restricted stock units granted on May 17, 2018, pursuant to our 2013 Equity Incentive Plan. Twenty-five percent of the restricted stock units vest on each of the first, second, third, and fourth anniversaries of May 17, 2018. Restricted stock units are forfeitable upon certain events and also vest in full upon the death or Disability (as defined in our 2013 Equity Incentive Plan) of the recipient and upon certain other events, as discussed below in “Termination of Employment and Change of Control Arrangements – Narrative to the Termination of Employment and Change of Control Payments Table.” Additional information regarding the design and terms of these long-term equity awards is included under “2018 Compensation Determinations – Long-Term Equity Awards” and “2018 Compensation Determinations – Other Compensation Elements – Severance Policy and Change of Control Arrangements” in the Compensation Discussion and Analysis above.

(5)

Reflects the number of stock options granted on May 17, 2018, pursuant to our 2013 Equity Incentive Plan. Twenty-five percent of the stock options vest on May 17, 2019, with the remaining balance vesting monthly over the next 36 months so that all options will be vested on May 17, 2022. Vesting of stock options is accelerated upon the death or Disability of the optionee and may be accelerated upon certain other events, as discussed below in “Termination of Employment and Change of Control Arrangements – Narrative to the Termination of Employment and Change of Control Payments Table.” Additional information regarding the design and terms of these long-term equity awards is included under “2018 Compensation Determinations – Long-Term Equity Awards” and “2018 Compensation Determinations – Other Compensation Elements – Severance Policy and Change of Control Arrangements” in the Compensation Discussion and Analysis above.

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(1)	All stock options in this column are fully vested and exercisable.

(2)

Vesting of stock options is accelerated upon the death or Disability of the optionee and may be accelerated upon certain other events, as discussed below in “Termination of Employment and Change of Control Arrangements – Narrative to the Termination of Employment and Change of Control Payments Table.” Additional information regarding the design and terms of these long-term equity awards is included under “2018 Compensation Determinations – Long-Term Equity Awards” in the Compensation Discussion and Analysis above and in the “Termination of Employment and Change of Control Arrangements – Equity Plans and Equity Award Agreements” below.

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(3)	The option exercise prices were set at 100% of fair market value of our common stock using the closing price per share for our common stock as reported by Nasdaq on the trading date prior to the grant date of the stock option award.

(4)

Restricted stock units are forfeitable upon certain events. Time-based vesting restricted stock units also vest in full upon the death or Disability (as defined in our 2013 Equity Incentive Plan) of the recipient and upon certain other events, as discussed below in “Termination of Employment and Change of Control Arrangements – Narrative to the Termination of Employment and Change of Control Payments Table.” Additional information regarding the design and terms of these long-term equity awards is included under “2018 Compensation Determinations – Long-Term Equity Awards” in the Compensation Discussion and Analysis above and in the “Termination of Employment and Change of Control Arrangements – Equity Plans and Equity Award Agreements” below.

(5)

Determined by multiplying the closing price of $21.59 per share for our common stock as reported by Nasdaq on December 31, 2018, the last trading day of the year, by the number of unvested restricted stock units then held by the NEO. Additional information regarding the design and terms of these long-term equity awards are included under “2018 Compensation Determinations – Long-Term Equity Awards” in the Compensation Discussion and Analysis above and in the “Termination of Employment and Change of Control Arrangements – Equity Plans and Equity Award Agreements” below.

(6)

These PVRSUs vest, if at all, upon the achievement of certain revenue and operating income milestones, both of which must be met, in either fiscal year 2018 or 2019 (with achievement to be determined, generally, no later than July 1 of each subsequent calendar year) or upon a change of control of Cray. Upon a change of control of Cray, the number of shares subject to the PVRSU that may be earned depends on the size of such change of control and such earned shares will be subject to an additional one-year vesting cliff. Vesting is subject to the executive officers’ provision of services to us on the applicable determination or vesting dates. The PVRSUs vest, if at all, only upon the achievement of certain revenue and operating income milestones, both of which must be met, in either fiscal year 2018 or 2019, or upon a change of control of Cray. The PVRSUs will expire completely on July 2, 2020 if the milestones are not satisfied, or a change of control has not occurred, by the deadlines set forth in the PVRSU.

(7)	Twenty-five percent of the restricted stock units from this grant vested on May 6, 2016, May 6, 2017, and May 6, 2018 and twenty-five percent of the restricted stock units from this grant will vest on May 6, 2019.

(8)	Twenty-five percent of the restricted stock units from this grant vested on May 19, 2017 and May 19, 2018 and twenty-five percent of the restricted stock units from this grant will vest on each of May 19, 2019 and May 19, 2020.

(9)	Twenty-five percent of the restricted stock units from this grant vested on May 18, 2018 and twenty-five percent of the restricted stock units from this grant will vest on each of May 18, 2019, May 18, 2020, and May 18, 2021.

(10)	Twenty-five percent of the restricted stock units from this grant will vest on each of May 17, 2019, May 17, 2020, May 17, 2021, and May 17, 2022.

(11)	Twenty-five percent of the options from this grant vested on May 6, 2016, and the remaining balance will vest monthly over the following 36 months so that all of these options will be vested on May 6, 2019.

(12)	Twenty-five percent of the options from this grant vested on May 19, 2017, and the remaining balance will vest monthly over the following 36 months so that all of these options will be vested on May 19, 2020.

(13)	Twenty-five percent of the options from this grant will vest on May 18, 2018, and the remaining balance will vest monthly over the following 36 months so that all of these options will be vested on May 18, 2021.

(14)	Twenty-five percent of the options from this grant will vest on May 17, 2019, and the remaining balance will vest monthly over the following 36 months so that all of these options will be vested on May 17, 2022.

(15)	Twenty-five percent of the restricted stock units from this grant to Dr. Papaefstathiou vested on January 9, 2018 and January 9, 2019 and twenty-five percent of the restricted stock units from this grant will vest on each of January 9, 2020 and January 9, 2021.

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(1)	Represents the number of shares acquired upon exercise of vested options.

(2)	Represents the value of options exercised calculated by determining the difference between the market price of our common stock as reported by Nasdaq at exercise and the exercise price of the options.

(3)	Represents the number of shares acquired upon vesting of restricted stock awards and restricted stock units.

(4)

Represents the value of vested restricted stock awards and vested restricted stock units calculated by multiplying the number of vested restricted stock awards and vested restricted stock units by the market value of our common stock as reported by Nasdaq on the vesting date or, if the vesting occurred on a day on which Nasdaq was closed for trading, the trading day immediately prior to the vesting date.

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(1)

Except for termination events following a Change of Control, the amounts shown in this column for the NEOs are the salary and bonus cash severance amounts due under the Executive Severance Policy. The amounts due under the Executive Severance Policy are to be paid in a single lump sum payment. The bonus cash severance amount included in this column assumes 100% achievement under our 2018 Executive Bonus Plan.

(2)	Except for PVRSUs, all unvested restricted stock units vest in full upon (x) death or Disability or (y) if following a Change of Control, the NEO is terminated without Cause or resigns for Good Reason (each as defined in the applicable equity agreement).

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(3)	In the event of death or Disability (each as defined in the applicable equity agreement or plan), all unvested options vest in full and become exercisable and all option holders have a 12-month period or, if earlier, until the expiration date of the options to exercise their options.

(4)

Under our PVRSUs granted on January 9, 2017 to Dr. Papaefstathiou and on March 4, 2015 to Messrs. Ungaro, Henry, Morreale, and Piraino, the PVRSUs vest, if at all, only upon the achievement of certain revenue and operating income milestones, both of which must be met, in either fiscal year 2018 or 2019, or upon a change of control of Cray (as defined in the PVRSU agreement). Upon a change of control of Cray, 50% of the shares subject to the PVRSU will be earned if such change of control is of a certain level and 100% of the shares subject to the PVRSU will be earned if such change of control is of a certain higher level, and such earned shares will be subject to an additional one-year vesting cliff. If, following a change of control, an NEO is terminated without Cause or resigns for Good Reason (each as defined in the PVRSU agreement), all of the earned shares will accelerate in full. The amounts shown in this column reflect 100% of the shares subject to the PVRSU being earned upon a change of control and 100% of such shares accelerating to December 31, 2018. We used a price of $21.59 per share to determine market value, which was the closing market price of our common stock as reported by Nasdaq on December 31, 2018, the last trading day of the year.

(5)

The amounts shown in this column, as provided in our Executive Severance Policy, reflect the cost of COBRA coverage for medical, dental, vision, and orthodontia benefits (benefits that the individual and any of his dependents were receiving immediately prior to close of business on December 31, 2018) and the premiums for $500,000 of term life insurance for 18 months (for resignation for good reason or termination without cause) and the premiums for $500,000 of term life insurance for 24 months (for after a change of control event, resignation for good reason, or termination without cause), based on the costs for such benefits in January 2019, plus $12,000 for executive outplacement services for each NEO. The COBRA expense is based on monthly cost for such coverage based on 2019 enrollment for 18 months and assumes a 5% inflationary trend; the life insurance premiums are based on January 2019 expense with no assumed increase. In all cases, these payments would cease if, before the applicable time periods were completed, an NEO becomes employed with another employer that offers such benefits.

(6)	The actual amounts to be paid to and the value of stock options, restricted stock units, and PVRSUs held by an NEO upon any termination of employment can be determined only at the time of such termination and depend on the facts and circumstances then applicable.

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•	A single lump sum payment equal to his per pay period base salary rate multiplied by the Applicable Severance Period (Applicable Severance Period means, for Messrs. Ungaro and Henry, 12 months; and for Messrs. Morreale and Piraino and Dr. Papaefstathiou, nine months plus one month for each year of service as an officer, up to a maximum of 12 months);

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A single lump sum payment equal to his Incentive Compensation (Incentive Compensation means, for Messrs. Ungaro and Henry, 100% of their respective target award under our annual cash incentive plan for executive officers; and for Messrs. Morreale and Piraino and Dr. Papaefstathiou, a pro-rata portion (based on the quarter of the fiscal year in which the termination occurred) of his respective target incentive award under our annual cash incentive plan for executive officers));

•	Continuation of coverage under COBRA for medical, dental, vision, and orthodontia benefits and life insurance benefits, in each case, during the Applicable Severance Period (or up to 18 months in the Company’s discretion) or until such time as he is offered these benefits by a subsequent employer; and

•	Executive outplacement services.

•	A single lump sum cash payment equal to two times his Compensation (Compensation means one year of base salary at the highest base salary rate that he was paid in the 12-month period prior to the date of his termination, plus 100% of his target award under our annual cash incentive plan for executive officers that he was eligible to receive in that 12-month period);

•	Acceleration of the vesting of all of his stock options and he would have 12 months to exercise the stock options after termination or, if earlier, until the options expire;

•	Reimbursement for all COBRA payments for medical benefits for 18 months;

•	Reimbursement of the premiums for a term life insurance policy for 24 months following termination; and

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•	In certain circumstances, if he incurs excise tax due to the application of Section 280G of the IRC, an additional cash payment so that he will be in the same position as if the excise tax were not applicable, and legal fees and other costs incurred with respect to any challenge by the Internal Revenue Service to these calculations and payments.

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(1)	The Plan uses a fungible share pool model in which each full value award (i.e., awards other than Options or SARS count as 1.55 share against the Plan reserve). The shares listed above do not reflect this fungible ratio.

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(1)	Based on the weighted average exercise price of outstanding options. Restricted stock units and PVRSUs do not have an exercise price and are not included in the calculation.

(2)

The shareholders approved our 1995, 1999 and 2003 stock option plans, our 2004, 2006 and 2009 long-term equity compensation plans, our 2013 equity incentive plan, as amended and restated, and our 2001 employee stock purchase plan, as amended. Our 1995, 1999 and 2003 stock option plans and our 2004, 2006 and 2009 long-term equity compensation plans have terminated and no more options, restricted shares, restricted units, or stock bonus awards may be granted under those plans. Our 2001 employee stock purchase plan has terminated and no more shares may be issued under that plan. The 2013 equity incentive plan uses a fungible share pool model in which each full value award (i.e., awards other than Options or SARS count as 1.55 share against the Plan reserve). The shares listed above do not reflect this fungible ratio. Pursuant to the 2013 equity incentive plan, incentive options may be granted to employees (including officers) and nonqualified options may be granted to employees, officers, directors, agents, and consultants with exercise prices at least equal to the fair market value of the underlying common stock at the time of grant, which is the closing price of our common stock as reported by Nasdaq on the trading day immediately prior to the date of grant. While our Board of Directors may grant options with varying vesting periods under these plans, most options granted to employees vest over four years, with 25% of the options vesting after one year and the remaining options vesting monthly over the next three years, and most option grants to non-employee directors vesting immediately. Includes 1,877,602 shares subject to issuance upon exercise or vesting, as applicable, of outstanding options, 1,166,308 shares subject to settlement of restricted stock units, and 482,485 shares subject to settlement of PVRSUs. As of December 31, 2018, under the 2013 Equity Incentive Plan, an aggregate of 2,325,135 shares remained available for grant as stock options or stock appreciation rights and an aggregate of 1,500,087 shares were available for restricted stock awards, stock bonus awards, restricted stock units, performance vesting restricted stock awards, or performance vesting restricted stock units.

(3)

The shareholders did not approve the 2000 non-executive employee stock option plan. Under the 2000 non-executive employee stock option plan approved by our Board of Directors on March 30, 2000, an aggregate of 1,500,000 shares pursuant to non-qualified options could be issued to employees, agents and consultants but not to officers or directors. Otherwise, the 2000 non-executive employee stock option plan is similar to the stock option plans described in footnote (1) above. On March 30, 2010, the 2000 non-executive employee stock option plan was terminated, which ended future grants but did not affect then outstanding options. As of December 31, 2018, under the 2000 non-executive employee stock plan, we had options for 14,583 shares outstanding.

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(1)

Audit services billed in 2017 and 2018 consisted of audits of our annual consolidated financial statements, audits of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, reviews of our quarterly consolidated financial statements, statutory and regulatory audits, consents, comfort letters, and other services related to filings with the SEC and capital-raising offerings.

(2)	No audit-related services were billed in 2017 or 2018.

(3)	No tax services were billed in 2017 or 2018.

(4)	There were no fees billed for other services in 2017 or 2018.

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•	Profit Before Tax;

•	Billings;

•	Revenue;

•	Net revenue;

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•	Earnings (which may include earnings before interest and taxes, earnings before taxes, and net earnings);

•	Operating income;

•	Operating margin;

•	Operating profit;

•	Controllable operating profit, or net operating profit;

•	Net Profit;

•	Gross margin;

•	Operating expenses or operating expenses as a percentage of revenue;

•	Net income;

•	Earnings per share;

•	Total stockholder return;

•	Market share;

•	Return on assets or net assets;

•	The Company’s stock price;

•	Growth in stockholder value relative to a pre-determined index;

•	Return on equity;

•	Return on invested capital;

•	Cash Flow (including free cash flow or operating cash flows)

•	Cash conversion cycle;

•	Economic value added;

•	Individual confidential business objectives;

•	Contract awards or backlog;

•	Overhead or other expense reduction;

•	Credit rating;

•	Strategic plan development and implementation;

•	Succession plan development and implementation;

•	Improvement in workforce diversity;

•	Customer indicators;

•	New product invention or innovation;

•	Attainment of research and development milestones;

•	Improvements in productivity;

•	Bookings;

•	Attainment of objective operating goals and employee metrics;

•	Any other metric that is capable of measurement as determined by the Committee; and

•	Any sale or initial public offering of a Subsidiary or the Company.

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