UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

Filed by the Registrantþ

Filed by a Party other than the Registrant¨

Check the appropriate box:

Cray Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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NOTICE OF 20142016 ANNUAL MEETING OF SHAREHOLDERS

Dear Cray Inc. Shareholder:

You are cordially invited to attend our Annual Meeting of Shareholders, which will be held in the Fifth Avenue Conference Room at our principal executive offices located at 901 Fifth Avenue, Seattle, Washington 98164 on Thursday,Wednesday, June 12, 2014,8, 2016, at 3:00 p.m. Pacific Time for the following purposes:

1.    To vote on the election of seveneight directors, each to serve a one-year term;

2.    To ratify the appointment of Peterson Sullivan LLP as our independent registered public accounting firm for the year ending December 31, 2014;2016;

3.    To vote on the amendment and restatement of our 2013 Equity Incentive Plan to increase the number of shares of common stock authorized for issuance thereunder and to re-approve the performance factors under our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended; and

3.4.    To vote, on an advisory or non-binding basis, to approve the compensation of our Named Executive Officers.

The shareholders will also act on any other business that may properly come before the Annual Meeting, including any adjournments or postponements of the Annual Meeting.

Any action on the items of business described above may be considered at the Annual Meeting at the scheduled time and date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed. Your Board of Directors recommends a voteFOR the election of the nominees for director;FOR the ratification of the appointment of our independent registered public accounting firm for the year ending December 31, 2014; andFOR the approval of the compensation of our Named Executive Officers.

Only shareholders of record on April 10, 2014,8, 2016, the record date for the Annual Meeting, are entitled to the notice of, and to vote on, these matters.

At the Annual Meeting, we will review our performance during the past year. You will have an opportunity to ask questions about Cray Inc. and our operations.

As we did last year, we are furnishing proxy materials via the Internet. The approximate date of availability for the Proxy Statement and accompanying proxy materials is April 23, 2014. Please read the Proxy Statement for more information on this alternative for distributing our proxy materials, which we believe will allow us to provide shareholders with the information they need, while lowering the costs of delivering the Proxy Statement and related materials and reducing the environmental impact of the Annual Meeting.

Your vote is important regardless of the number of shares you own or whether you plan to attend the Annual Meeting in person. You may vote through several different ways, and instructions on the various voting methods are contained in the accompanying Proxy Statement. Even if you plan to attend the Annual Meeting, we urge you to vote at your earliest convenience. Any shareholder attending the Annual Meeting may vote in person even if he or she has voted previously.

Details of the business to be conducted at the Annual Meeting are more fully described in the accompanying Proxy Statement.

We look forward to seeing you. Thank you for your ongoing support of and interest in Cray.

Sincerely,

Peter J. Ungaro

President and Chief Executive Officer

Seattle, Washington

April 23, 201425, 2016

PROXY STATEMENT

TABLE OF CONTENTS

CRAY INC.

901 Fifth Avenue, Suite 1000

Seattle, WA 98164

PROXY STATEMENT FOR ANNUAL

ANNUAL MEETING OF SHAREHOLDERS

To Beto be Held At:at:

901 Fifth Avenue, Fifth Avenue Conference Room

Seattle, WA 98164

June 12, 20148, 2016

3:00 p.m. Pacific Time

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

It is possible that other business may come before the Annual Meeting, although we currently are not aware of any such matters.

Q:	Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Beneficial Owner of Shares Held in Street Name.If you have shares held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice was forwarded to you by that organization. The organization holding the shares in your account is considered the shareholder of record with respect to those shares for the purpose of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares it holds in your account.

If your shares are registered directly in your name, you may vote via the Internet or by telephone through services offered by Broadridge Financial Solutions, Inc. (“Broadridge”). If you received the Notice, then go

to the website referred to on the Notice. If you received a full set of proxy materials in the mail, then go to the website or call the telephone number referred to on the proxy card. Please have the Notice or proxy card in hand when going online or calling, and follow the instructions on the form you are using.

You may vote via the Internet or by telephone 24 hours a day, 7 days a week until 11:59 p.m. Eastern Time/8:59 p.m. Pacific Time, on Wednesday,Tuesday, June 11, 2014,7, 2016, the day before the Annual Meeting.

If you requested printed copies of the proxy materials, you may also vote by completing and signing the enclosed proxy card and mailing it to us in the enclosed self-addressed envelope (postage-free in the United States). We need to receive the signed proxy card by the time of the Annual Meeting.

If You Are a Beneficial Owner of Shares Registered in the Name of a Brokerage Firm, Bank or Other Organization:

A number of brokerage firms, banks, andbroker-dealers or other similar organizations participate in a program for shares held in “street name” that offers Internet and telephone voting options. This program is different from the program for shares registered directly in the name of the shareholder. If your shares are held in an account at an organization participating in this program, then you may vote those shares by using the website or calling the telephone number referenced on the instructions provided by that organization. Similarly, if you received printed copies of the proxy materials through your broker, bank or other nominee organization, then you may vote by completing and signing the voting form and mailing it to that organization in the self-addressedself- addressed envelope it provided.

We will tabulate the latest valid vote or instruction that we receive from you.

The shares allocated under the Cray 401(k) Plan can be voted by submitting voting instructions via the Internet, by telephone or by mailing your proxy card. Voting of shares held in the Cray 401(k) Plan must be completed by 11:59 p.m. Eastern Time/8:59 p.m. Pacific Time on Monday,Friday, June 9, 2014.3, 2016. These shares cannot be voted at the Annual Meeting and prior voting instructions cannot be revoked at the Annual Meeting. Otherwise, participants can vote these shares in the same manner as described above for shares held directly in the name of the shareholder.

The Trustee will cast votes for shares in the Cray 401(k) Plan according to each participant’s instructions. If the Trustee does not receive instructions from a participant in time for the Annual Meeting, the Trustee will vote the participant’s allocated shares in the same manner and proportion as the shares with respect to which voting instructions were received.

then the proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to all other matters properly presented for a vote at the Annual Meeting, including without limitation whether to postpone or adjourn the Annual Meeting.

Beneficial Owners of Shares Held in Street Name.    If you are a beneficial owner of shares held in “street name” and do not provide the organization that holds your shares with specific voting instructions, then under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters.

If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-discretionary matter, then the organization will inform our Inspector of Elections that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”

Please provide voting instructions to the organizations that hold your shares by carefully following their instructions.

For the purpose of determining whether the shareholders have approved Proposal 2 (ratification of independent registered public accounting firm), Proposal 3 (amendment and restatement of our 2013 Equity Incentive Plan to increase the number of shares of common stock authorized for issuance thereunder and to re-approve the performance factors under our 2013 Equity Incentive Plan for purposes of Section 162(m) of the IRC) or Proposal 34 (advisory vote on the compensation of our Named Executive Officers), each proposal will be adopted if the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal as abstentions are not treated as votes cast affirmatively or negatively, and therefore will have no effect on the outcome of Proposal 2, Proposal 3 or Proposal 3.4.

The seveneight nominees for director who receive the most votes “for” election will be elected, assuming the presence of a quorum. Accordingly, if you do not vote for a nominee, do not instruct your broker how to vote for a nominee or if you indicate “withhold authority to vote” for a nominee, your vote will not count either “for” or “against” the nominee.

Proposal 2: To Ratify the Appointment of Peterson Sullivan LLP as Our Independent Registered Public Accounting Firm for the Year Ending December 31, 2014.2016.

To be approved, the number of votes cast in favor must exceed the number of votes cast against. If you do not vote or if you abstain from voting, it will have no effect on this proposal, assuming the presence of a quorum.

Proposal 3: To Amend and Restate Our 2013 Equity Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance Thereunder and to Re-approve the Performance Factors Under Our 2013 Equity Incentive Plan for Purposes of Section 162(m) of the IRC.

To be approved, the number of votes cast in favor must exceed the number of votes cast against. If you do not vote or if you abstain from voting, it will have no effect on this proposal as in either case it will not count either “for” or “against” the proposal, assuming the presence of a quorum.

Proposal 4: Advisory Vote on the Compensation of Our Named Executive Officers.

To be approved, the number of votes cast in favor must exceed the number of votes cast against. If you do not vote or if you abstain from voting, it will have no effect on this proposal as in either case it will not count either “for” or “against” the proposal, assuming the presence of a quorum.

Shareholder of Record:Please visit the Broadridge Investor E-Connect proxy delivery preferencesweb-page,www.proxyvote.com, enter your voter control number found on your Notice, and follow the instructions for obtaining your documents electronically, or telephone: 1-800-579-1639, or send an email to:sendmaterial@proxyvote.com.

Beneficial Owner of Shares Held in Street Name:Please visit the Broadridge Investor E-Connectweb-page,www.proxyvote.com, and follow the instructions at that site, or telephone Broadridge at1-800-579-1639, or send an email to:sendmaterial@proxyvote.com. sendmaterial@proxyvote.com.

Please have the Notice in hand when accessing these sites or telephoning. Your election to view these documents via the Internet will remain in effect until you revoke it. If you so elect, then next year you would receive an email with instructions containing links to those materials and to the proxy voting site. Please be aware that if you choose to access these materials via the Internet, then you may incur costs such as telephone and Internet access charges for which you will be responsible.

Q:	I receivereceived multiple copies of the Notice and/or proxy materials. What does that mean, and can I reduce the number of copies that I receive?

If your shares are registered directly in your name, you may be receiving more than one copy of the proxy materials because our transfer agent has more than one account for you with slightly different versions of your name, such as different first names (“James” and “Jim,” for example) or with and without middle initials. If this is the case, you can contact our transfer agent and consolidate your accounts under one name. The contact information for our transfer agent is set out below in the next Q and A.

If you own shares through a brokerage firm, bank or other organization holding your shares in “street name,” we have implemented “householding,” a process that reduces the number of copies of the Annual Meeting materials and other correspondence you receive from us. Householding is available for shareholders who share the same last name and address and hold shares in “street name,” where the shares are held through the same brokerage firm, bank or other nominee. As a result of householding, only one Notice of Internet Availability of Proxy Materials or Proxy Statement and Annual Report will be delivered to multiple shareholders sharing an address unless you notify your broker or bank to the contrary. If you hold your shares in street name and would like to start householding, or if you participate in householding and would like to receive a separate Notice of Internet Availability of Proxy Materials or Proxy Statement and Annual Report, please call 1-800-542-10611-866-540-7095 from a touch-tone phone and provide the name of your broker, bank or other nominee and your account number(s), or contact Ruby H. Alexander, Assistant Corporate Secretary, at Cray Inc., 901 Fifth Avenue, Suite 1000, Seattle, WA 98164.

Unfortunately, householding is only possible for shares held through the same brokerage firm, bank or other nominee. Thus you cannot apply householding to reduce the number of sets of proxy materials you receive in the mail if you have accounts at different brokers, for example. In those circumstances, one way to reduce the number of sets of proxy materials you receive in the mail is to sign up to review the materials via the Internet. See “Can I view future proxy statements, annual reports and other documents via the Internet, and not receive any paper copies through the mail?” above.

We will deliver promptly upon written or oral request a separate copy of the Annual Meeting materials to a shareholder at a shared address to which a single copy of such materials had been delivered.

OUR COMMON STOCK OWNERSHIP

The following table shows, as of April 10, 2014,8, 2016, the number of shares of our common stock beneficially owned by the following persons:

As of April 10, 2014,8, 2016, there were 40,689,40040,765,644 shares of our common stock outstanding.

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

The information under the column “Common Shares Owned” with respect to Invesco Ltd. is based on a Schedule 13G filed with the SEC on February 10, 2014, regarding beneficial ownership as of December 31, 2013. In that Schedule 13G, Invesco Ltd. reported beneficial ownership of 3,726,891 shares, with sole voting power of 3,505,018 shares, without shared voting power, sole dispositive power of 3,726,891 shares and without shared dispositive power.

The information under the column “Common Shares Owned” with respect to Wells Fargo & Company is based on a Schedule 13G/A filed with the SEC, on January 28, 2014, regarding ownership as of December 31, 2013. In that Schedule 13G/A, Wells Fargo & Company, as parent company, reported beneficial ownership of 3,608,388 shares, with sole voting power of 27,216 shares, sole dispositive power of 27,216 shares and shared voting power of 3,580,953 shares and shared dispositive power of 3,581,172 shares, with its subsidiary, Wells Capital Management Incorporated, an investment adviser, reporting beneficial ownership of 3,557,268 shares, without sole voting power or sole dispositive power and shared voting power of 790,968 shares and shared dispositive power of 3,557,268 shares, and another subsidiary, Wells Fargo Funds Management, LLC, an investment adviser, reporting beneficial ownership of 2,787,641 shares, without sole voting power or sole dispositive power and shared voting power of 2,787,641 shares and shared dispositive power of 2,787,641 shares.

The information under the column “Common Shares Owned” with respect to FMR LLC is based on a Schedule 13G/A filed with the SEC on March 10, 2014, regarding beneficial ownership as of December 31, 2013. In that Schedule 13G/A, FMR LLC reported beneficial ownership of 2,721,729 shares, with sole voting power over 393,057 shares and sole dispositive power over 2,721,729 shares.

The information under the column “Common Shares Owned” with respect to T. Rowe Price Associates, Inc. is based on a Schedule 13G13G/A filed with the SEC on February 10, 2014,9, 2016, regarding beneficial ownership as of December 31, 2013.2015. In that Schedule 13G,13G/A, T. Rowe Price Associates, Inc. reported beneficial ownership of 2,503,7973,103,507 shares, with sole voting power of 244,000443,910 shares, without shared voting power, sole dispositive power of 2,503,7973,103,507 shares and without shared dispositive power.

The information under the column “Common Shares Owned” with respect to Capital Research Global InvestorsInvesco Ltd. is based on a Schedule 13G13G/A filed with the SEC on February 12, 2014,4, 2016, regarding beneficial ownership as of December 31, 2013.2015. In that Schedule 13G, Capital Research Global Investors13G/A, Invesco Ltd. reported beneficial ownership of 2,453,1052,724,845 shares, with sole voting power of 2,453,1052,724,845 shares, without shared voting power, sole dispositive power of 2,453,1052,724,845 shares and without shared dispositive power.

The information under the column “Common Shares Owned” with respect to Mairs and Power, Inc. is based on a Schedule 13G/A filed with the SEC on February 12, 2016, regarding beneficial ownership as of December 31, 2015. In that Schedule 13G/A, Mairs and Power, Inc. reported beneficial ownership of 2,454,956 shares, with sole voting power of 1,951,138 shares, without shared voting power, sole dispositive power of 2,454,956 shares and without shared dispositive power.

The information under the column “Common Shares Owned” with respect to BlackRock, Inc. is based on a Schedule 13G13G/A filed with the SEC on January 28, 2014,26, 2016, regarding beneficial ownership as of December 31, 2013.2015. In that Schedule 13G,13G/A, BlackRock, Inc. reported beneficial ownership of 2,339,2962,312,250 shares, with sole voting power of 2,225,4202,225,284 shares, without shared voting power, sole dispositive power of 2,339,2962,312,250 shares and without shared dispositive power.

The information under the column “Common Shares Owned” with respect to Vanguard Group, Inc. is based on a Schedule 13G filed with the SEC on February 10, 2016, regarding beneficial ownership as of December 31, 2015. In that Schedule 13G, Vanguard Group, Inc. reported beneficial ownership of 2,149,324 shares, with sole voting power of 89,754 shares, with shared voting power of 3,600 shares, sole dispositive power of 2,058,470 shares and with shared dispositive power of 90,854 shares.

(4)	The number of shares of common stock shown for the indicated directors includes restricted shares that vest on the dates indicated, and that are forfeitable in certain circumstances, as follows:

Executive Officers		Performance Vesting Restricted Stock Awards
Peter J. Ungaro			20,000
Brian C. Henry			10,000
William C. Blake			7,000
Arvind Parthasarathi(a)			184,000
Michael C. Piraino			7,000
Other executive officers			21,000

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended or the (the “Exchange Act”) requires that our directors, executive and other specified officers and greater-than-10% shareholders file reports with the SEC on their initial beneficial ownership of our common stock and any subsequent changes. They must also provide us with copies of the reports.

We are required to tell you in this Proxy Statement if we know about any failure to report as required. We reviewed copies of all reports furnished to us and obtained written representations that no other reports were required. Based solely on this review, we believe that all of the reporting persons complied with their filing requirements for 2013,2015, except as follows: Each of (a) BarryDaniel C. Bolding, Brian C. Henry, Charles A. Morreale, Peter J. Ungaro and Margaret A. WilliamsRegis filed a Form 5 to report three late Form 4 transactions reporting the forfeiture of common stock by holders of restricted stock awards in exchange for payments by the Company of statutory tax withholding amounts on behalf of the holders arising as a result of the vesting of restricted stock awards; (b) Charles D. Fairchild, Arvind Parthasarathi and Michael C. Piraino filed a Form 5 to report two late Form 4 transactions reporting the forfeiture of common stock by holders of restricted stock awards in exchange for payments by the Company of statutory tax withholding amounts on behalf of the holders arising as a result of the vesting of restricted stock awards; and (c) William C. Blake filed a Form 5 to report one late Form 4 transaction reportingto correctly distinguish between total shares held directly and indirectly on the forfeiture of common stock by holders of restricted stock awards in exchange for payments byoriginal Form 4 filed with the Company of statutory tax withholding amountsSEC on behalf ofMay 2, 2013; and Barry C. Bolding filed one late Form 4 transaction to correctly report that 261 ESPP-related shares were inadvertently included twice on the holders arising as a result oforiginal Form 4 filed with the vesting of restricted stock awards.SEC on May 19, 2011.

THE BOARD OF DIRECTORS

The Board of Directors oversees our business and affairs and monitors the performance of our management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Chief Executive Officer, other key executives and our principal external advisers (legal counsel, outside auditors and compensation consultants), by reading the reports and other materials that we send them regularly and by participating in Board and committeeCommittee meetings.

Corporate Governance Principles

The goals of our Board are to build long-term value for our shareholders and to ensure our vitality for our customers, employees and others thatwho depend on us. Our Board has adopted and follows corporate governance practices that our Board and our senior management believe promote these purposes, are sound and represent best practices. To this end we have established the following:

Under our Corporate Governance Guidelines and the applicable Committee charters, each director has complete access to our management, and the Board and each Committee have the right to consult and retain independent legal counsel, accountants and other advisers at our expense. All of the foregoing documents are available via the Internet at our website atwww.cray.com under “About Cray“Company — InvestorsCompany Information —Investors — Corporate Governance.” We will post on this website any amendments to the Code of Business Conduct or waivers of the Code of Business Conduct for directors and executive officers.

We periodically review our governance practices against requirements of the SEC, the listing standards of the NasdaqNASDAQ Global Market (“NasdaqNASDAQ”), the laws of the state of Washington and practices suggested by recognized corporate governance authorities. In 2015, we also engaged an independent third-party to help conduct a self-evaluation process for each of our directors and the Board, a practice which we generally undertake approximately every other year.

Independence

As of April 23, 2014,25, 2016, our Board has eight members. John B. Jones, Jr. is not standing for re-election to our Board, his term as a director will end on the date of the Annual Meeting and the size of our Board will decrease from eight to seven directors at such time. The Board appreciates Mr. Jones’ service and contributions to our success. The Board has determined that all of our directors serving on our Board as of April 23, 2014,25, 2016, except for Mr. Ungaro, our President and Chief Executive Officer, meet the NasdaqNASDAQ and SEC standards for independence and that all the members of the Audit Committee meet the heightened independence standards required for Audit Committee members under NasdaqNASDAQ and SEC standards. Only independent directors may serve on our Audit, Compensation and Corporate Governance Committees.

As set forth in our Corporate Governance Guidelines, the Board believes that at least two-thirds of the Board should consist of independent directors and that, absent compelling circumstances, the Board should not contain more than two members from our management. As of April 23, 2014,25, 2016, seven of our eight directors arewere considered independent, and one member of our management, Mr. Ungaro, our President and Chief Executive Officer, iswas on the Board.

In determining the independence of our directors, the Board affirmatively decides whether a non-management director has a relationship that would interfere with that director’s exercise of independent judgment in carrying out the responsibilities of being a director. In making that decision, the Board is informed of the NasdaqNASDAQ and SEC rules that disqualify a person from being considered as independent, considers the responses from each director in an annual questionnaire and reviews the applicable standards with each Board member.

Meetings and Attendance

TheDuring 2015, the Board met nineseven times and the Board’s standing committees held a total of 20 meetings and the Board’s special transaction committee held one meeting during 2013.32 meetings. The rate of attendance in 20132015 for all directors at Board and committeeCommittee meetings was 98%.

The non-management directors meet in executive sessions of the Board on a regular basis, generally at the beginning and at the end of each scheduled quarterly Board meeting and at other times as required. In addition, the Board committees meet periodically without members of our management present.

The Committees of the Board

The Board has established an Audit Committee, a Compensation Committee, a Corporate Governance Committee and a Strategic Technology Assessment Committee as standing committees of the Board. None of the directors who serve as members of these committeesCommittees is, or has ever been, one of our employees.

Audit Committee.    The current members of the Audit Committee are Daniel C.Mr. Regis (Chair), Sally G.Mr. Kiely, Ms. Narodick and Stephen C. Richards.Mr. Turner. Mr. Richards passed away in November 2015, and was replaced on the Audit Committee by Mr. Kiely. Mr. Turner was appointed as a member to the Audit Committee on April 18, 2016. The Audit Committee and the Board have determined that each individual who currently is and who in 20132015 was a member of the Audit Committee is “independent,” as that term is defined in SEC and NasdaqNASDAQ rules and regulations, and that Mr.Messrs. Regis, isKiely and Turner are each an “audit committee financial expert,” as that term is defined in SEC regulations. The Audit Committee met sevennine times during 2013.2015. As noted above, the Audit Committee’s charter is available atwww.cray.com under “About Cray“Company — Company Information — Investors — Corporate—Corporate Governance.” The Audit Committee assists the Board in fulfilling its responsibility for oversight of:

The Audit Committee reviews all reports submitted on our anonymous, confidential reporting system and is directly and solely responsible for appointing, determining the compensation payable to, overseeing, terminating and replacing any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. See “Discussion of Proposals Recommended by the Board — Proposal 2: To Ratify the Appointment of Peterson Sullivan LLP as Our Independent Registered Public Accounting Firm for the Year Ending December 31, 20142016 — Audit Committee Pre-Approval Policy” below.

The report of the Audit Committee regarding its review of the consolidated financial statements and other matters is set forth below beginning on page 55.53.

Compensation Committee.    The current members of the Compensation Committee are Frank L.Mr. Schireson (Chair), Mr. Kiely, Ms. Narodick and Mr. Turner. Dr. Lederman (Chair), John B. Jones, Jr., Stephen C. Kiely and Stephen C. Richards. Mr. Jones isdid not standingstand for re-election to our Board at our

our Board,2015 annual meeting of shareholders and his term on the Compensation Committee will endended on June 12, 2014,10, 2015, the date of our 2015 annual meeting of shareholders. Mr. Richards passed away in November 2015, and was replaced on the Annual Meeting.committee by Ms. Narodick. Mr. Turner was appointed as a member to the Compensation Committee on April 18, 2016. The Compensation Committee and the Board have determined that each individual who currently is and who in 20132015 was a member of the Compensation Committee is “independent,” as that term is defined in NasdaqNASDAQ rules and regulations, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”).IRC. The Compensation Committee met sixfive times during 2013.2015. As noted above, the Compensation Committee’s charter is available atwww.cray.com under “About Cray“Company — Company Information — Investors — Corporate—Corporate Governance.” The Compensation Committee assists the Board in fulfilling its responsibilities for the oversight of:

See “Compensation of the Executive Officers — Compensation Discussion and Analysis” for further information regarding the Compensation Committee and its actions with respect to senior officer compensation. The Compensation Committee’s Report on the Compensation Discussion and Analysis and related matters is set forth below beginning on page 39.24.

Corporate Governance Committee.    The current members of the Corporate Governance Committee are Stephen C.Mr. Kiely (Chair), Frank L. Lederman, SallyMs. Narodick and Daniel C.Mr. Regis. Dr. Lederman did not stand for re-election to our Board at our 2015 annual meeting of shareholders and his term on the Corporate Governance Committee ended on June 10, 2015, the date of our 2015 annual meeting of shareholders. The Corporate Governance Committee and the Board have determined that each individual who currently is and who in 20132015 was a member of the Corporate Governance Committee is “independent,” as that term is defined in NasdaqNASDAQ rules and regulations. The Corporate Governance Committee met foureight times during 2013.2015. As noted above, the Corporate Governance Committee’s charter is available atwww.cray.com under “About Cray“Company — Company Information — Investors — Corporate—Corporate Governance.” The Corporate Governance Committee has the responsibility to:

See “Shareholder Communications, Director Candidate Recommendations and Nominations and Other Shareholder Proposals” regarding the Corporate Governance Committee’s processes for evaluating potential Board members and how shareholders can nominate director candidates, propose matters to come before the shareholders and communicate with the Board.

Strategic Technology Assessment Committee.    The current members of the Strategic Technology Assessment Committee are PrithvirajDr. Banerjee (Chair), John B. Jones, Jr., Frank L.Mr. Homlish and Mr. Schireson. Dr. Lederman and Stephen C. Kiely. Mr. Jones served as the Chair of our Strategic Technology Assessment Committee until May 1, 2013 when Dr. Banerjee was appointed as the Chair. Mr. Jones isdid not standingstand for re-election to our Board at our 2015 annual meeting of shareholders and his term on the Strategic Technology Assessment Committee will endended on June 12, 2014,10, 2015, the date of the Annual Meeting.our 2015 annual meeting of shareholders. The Strategic Technology Assessment Committee and the Board have determined that each individual who currently is a member of the Strategic Technology Assessment Committee is “independent,” as that term is defined in NasdaqNASDAQ rules and regulations, although such independence is not a requirement for membership on this Committee. The Strategic Technology Assessment Committee met threefive times during 2013.2015. As noted above, the

Strategic Technology Assessment Committee’s charter is available atwww.cray.com under “About Cray“Company —Company Information — Investors — Corporate Governance.” The Strategic Technology Assessment Committee has the responsibility to:

From time to time, the Board establishes other committees on an ad-hoc basis to assist in its oversight responsibilities.

Board Leadership Structure

We separate the roles of Chairman of the Board and Chief Executive Officer in recognition of the differences between the two roles. Mr. Kiely has served as Chairman of the Board, a non-executive position, since August 2005. As Chairman, Mr. Kiely consults with Mr. Ungaro, our Chief Executive Officer, regarding agenda items for Board meetings; chairs executive sessions of the Board’s independent directors; on behalf of the independent directors, provides feedback and mentoring to the Chief Executive Officer; and performs such other duties as the Board deems appropriate. We believe that this structure is currently appropriate given the experience of Mr. Kiely, both outside of his service with us and as a member of our Board, our size and stage of development and the operational efficiencies that currently result from separating the roles. Mr. Kiely has both operational and corporate governance experience that is highly applicable to a company such as ours. Our Board, in consultation with members of our senior executive team, including Mr. Ungaro, believes that capitalizing on such technology and governance expertise by designating Mr. Kiely as Chairman of the Board is the most effective way to realize the leadership potential offered by both Mr. Kiely and Mr. Ungaro at this time. However, we believe that it is in the best interests of our shareholders for the Board to make a determination regarding the separation or combination of these roles each time it elects a new Chairman of the Board or Chief Executive Officer or at other times, based in each case on the relevant facts and circumstances applicable at that time.

Board’s Role in Risk Oversight

The Board’s role in our risk oversight process includes receiving regular reports from members of our senior management on areas of material risk to us, including competitive, economic, operational, financial, legal and regulatory, and strategic and reputational risks. We also utilize a formal Enterprise Risk Management system (the “ERM System”“ERM System”) to assist us in tracking and mitigating risks. In addition to periodic review, evaluation and modification of risks maintained in the ERM System by management, we provide periodic reports of risks tracked in the ERM System to the Board (or the appropriate committee of the Board in the case of risks that are under the purview of a particular committee).Audit Committee. The full Board or the appropriate committeeAudit Committee receives these reports from the management personnel principally responsible for identifying, managing and mitigating a particular area of risk within the organization to enable it to understand our risk identification, risk management and risk mitigation strategies. When a committeethe Audit Committee receives the report, the chairman of the relevant committeeAudit Committee reports on the discussion to the full Board during the committee reports portion of the next Board meeting, which enables the Board and its committeesthe Audit Committee to coordinate the risk oversight role, particularly with respect to risk interrelationships. As part of its charter, the Audit Committee discusses our policies with respect to risk assessment, risk management and the ERM System process set forth above.

Risk Considerations in Our Compensation Program

Our Compensation Committee has discussed the concept of risk as it relates to our compensation program. The Compensation Committee engages an independent compensation advisorconsultant, Mercer (US) Inc., a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“Mercer”) to assess the risks of its compensation program. The Compensation Committee does not believe our compensation program encourages excessive or inappropriate risk-taking for the following reasons:

indicator; likewise, our cash incentive plan includes a 200% cap on the target awards and utilizes a “balanced scorecard” approach to appropriately weight goals and performance. We believe this cap limits the incentive for excessive risk-taking by our employees;

Director Attendance at Annual Meetings

We encourage but do not require our directors to attend the annual meeting of shareholders either in person or telephonically. In 2013, seven2015, five of our directors who were directors at the time of our annual meeting of shareholders attended the 20132015 annual meeting.

Shareholder Communications, Director Candidate Recommendations and Nominations and Other Shareholder Proposals

Communications.    The Corporate Governance Committee has established a procedure for our shareholders to communicate with the Board. Communications should be in writing, addressed to Corporate Secretary, Cray Inc., 901 Fifth Avenue, Suite 1000, Seattle, WA 98164, and addressed to the attention of the Board or any of its individual committees or to the Chairman of the Board. Copies of all communications so addressed will be promptly forwarded to the chairman of the committee involved, in the case of communications addressed to the Board as a whole or to individual directors, to the Corporate Governance Committee or, if addressed to the Chairman, to the Chairman of the Board.

Director Candidates.    The criteria for Board membership as adopted by the Board include a person’s integrity, knowledge, judgment, skills, expertise, collegiality, diversity of experience and other time commitments (including positions on other company boards) in the context of the then-current composition of the Board. While our Corporate Governance Guidelines do not prescribe diversity standards, as a matter of practice, the Corporate Governance Committee considers diversity in the context of the Board as a whole and

takes into account the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of current and prospective directors to facilitate Board deliberations that reflect a broad range of perspectives. The Corporate Governance Committee is responsible for assessing the appropriate balance of skills brought to the Board by its members, and ensuring that an appropriate mix of specialized knowledge (e.g., financial, industry or technology) is represented on the Board. Since 2012, the Corporate Governance Committee has engaged a third partythird-party consulting firm, Heidrick & Struggles, International, Inc., to assist the Corporate Governance Committee in identifying candidates for Board membership.

Once the Corporate Governance Committee has identified a potential director nominee, the Corporate Governance Committee, in consultation with the Chief Executive Officer, evaluates the prospective nominee against the specific criteria that the Board has established and as set forth in our Corporate Governance Guidelines. If the Corporate Governance Committee determines to proceed with further consideration, then members of the Corporate Governance Committee, the Chief Executive Officer and other members of the Board, as appropriate, interview the prospective nominee. After completing this evaluation and interview, the Corporate Governance Committee makes a recommendation to the full Board, which makes the final determination whether to electappoint the new director.

The Corporate Governance Committee will consider candidates for director recommended by shareholders and will evaluate those candidates using the criteria set forth above. Shareholders should accompany their recommendations with a sufficiently detailed description of the candidate’s background and qualifications to allow the Corporate Governance Committee to evaluate the candidate in light of the criteria described above, a document signed by the candidate indicating his or her willingness to serve if elected and evidence of the nominating shareholder’s ownership of our common stock. Such recommendation and documents should be

submitted in writing to Corporate Secretary, Cray Inc., 901 Fifth Avenue, Suite 1000, Seattle, WA 98164, and addressed to the attention of the Corporate Governance Committee.

Director Nominations by Shareholders.    Our Bylaws permit shareholders to nominate directors at a shareholders’ meeting. In order to nominate a director at a shareholders’ meeting, a shareholder making a nomination must notify us not fewer than 60 nor more than 90 days in advance of the meeting or, if less than 60 days’ notice or prior public disclosure of the date of the meeting is given or made to the shareholders, by the 10th business day following the first public announcement of the meeting. In addition, the proposal must contain the information required in our Bylaws for director nominations, including:

The Chairman of the Board, in his discretion, may determine that a proposed nomination was not made in accordance with the required procedures and, if so, disregard the nomination.

Shareholder Proposals.

20142016 Annual Meeting. In order for a shareholder proposal to be raised from the floor during the Annual Meeting, written notice of the proposal must be received by us not less than 60 days nor more than 90 days prior to the Annual Meeting or, if less than 60 days’ notice or prior public disclosure of the date of the Annual Meeting

is given or made to the shareholders, by the 10^th10th business day following the first public announcement of the Annual Meeting. The proposal must also contain the information required in our Bylaws for shareholder proposals, including:

The Chairman of the Board, if the facts so warrant, may determine that any business was not properly brought before the Annual Meeting in accordance with our Bylaws.

20152017 Proxy Statement. In order for a shareholder proposal to be considered for inclusion in our proxy statement and form of proxy for the 20152017 annual meeting, we must receive the written proposal no later than December 24, 2014.2016. Shareholder proposals also must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials.

If you wish to obtain a free copy of our Articles of Incorporation, Bylaws or any of our corporate governance documents, please contact Ruby H. Alexander, Assistant Corporate Secretary, Cray Inc., 901 Fifth Avenue, Suite 1000, Seattle, WA 98164. These documents also are available on our website,www.cray.com under “About Cray“Company — Company Information — Investors — Corporate Governance.”

Compensation of Directors

In setting director compensation to attract and retain highly qualified individuals to serve on our Board, the Corporate Governance Committee considers the significant amount of time that directors expend in fulfilling their duties, the skill level required of members of the Board and a general understanding of director compensation at companies of similar size and complexity. Directors who are also our employees receive no additional compensation for their service on the Board. As described more fully below, director compensation is in the form of cash and, to align further the longer-term interests of the individual directors with those of our shareholders, equity, with the grant of a fully vested stock option with a ten-year term upon first joining the Board and annual grants of restricted stock vesting generally over two years.in one year.

The Corporate Governance Committee reviews director compensation annually. No changes to director compensation were made in 2013.2015. In reaching decisions about director compensation, the Corporate Governance Committee has used publicly available professional compensation surveys, proxy data and the individual experience of the Committee members. To date, theThe Corporate Governance Committee has decided not to engage a compensation consultantrecently engaged Mercer with respect to director compensation.

Cash Compensation

The following table sets forth the cash compensation policy in 20132015 for our non-employee directors.

When the Board creates committees other than the standing committees identified above, the Board determines whether to extend the same committee fee structure to the members of such committees. WeMembers of the Board do not receive any per meeting fees, but we do reimburse all expenses related to participation in meetings of the shareholders, Board and committees.

Mr. Jones isDr. Lederman did not standingstand for re-election to our Board at our 2015 annual meeting of shareholders and his term on the Board will endended on June 12, 2014,10, 2015, the date of the Annual Meeting. In March 2014, the Board grantedour 2015 annual meeting of shareholders. Dr. Lederman received a $75,000$100,000 cash bonus to John B. Jones, Jr. to be paid to Mr. Jones on the date of the Annual Meeting in recognition of his nineeleven years of valued service and contributions to Cray.contributions.

Equity Compensation

Amendment to Board Compensation Policy.    In March 2014, the Board amended the Board compensation policy to reflect that future restricted stock awards to continuing non-employee directors will vest 100% on the earlier of (i) 12 months from the date of grant and (ii) the date that is immediately prior to the date of the next annual shareholders’ meeting.

Stock Options.    Each non-employee director, upon his or her first appointment or election to the Board, is granted an option for 20,000 shares, vesting immediately, with an exercise price equal to the fair market value of our common stock as reported by NASDAQ on the trading date of suchimmediately prior to the first appointment or election.

Restricted Stock Awards.    We currently grant to eachEach continuing non-employee director first elected or reelected by theour shareholders is granted restricted shares of common stock with a value equal to that director’s cash fees earned in the previous fiscal year. The per share value of shares granted is determined by using the fair market value of our common stockbased on the date of such election, which is the closing sales price on NASDAQ for our common stock on the trading day immediately prior to grant. Restricted stock awards granted in June 20132015 to our continuing non-employee directors will vest 50%100% on the earlier of June 14, 2014 and the date that is immediately prior to the date of our Annual Meeting and 50% on the earlier of June 14, 2015 and the date that is immediately prior to the date of our 2015 annual meeting of shareholders, except as noted below. In March 2014, the Board amended the restricted stock award granted to Mr. Jones on June 14, 2013 to accelerate the vesting on such award so that it will be 100% vested on the earlier of June 14, 2014 and10, 2016 or the date that is immediately prior to the date of our Annual Meeting. In line with the amended Board compensation policy described above, restricted stock awards to continuing non-employee directors will vest 100% on the earlier of (i) 12 months from the date of grant and (ii) the date that is immediately prior to the date of the next annual shareholders’ meeting. Until the shares are vested, the shares are restricted against sale or transfer. The non-employee directors may vote and receive dividends on the restricted shares while the restrictions remain in place. The restricted shares vest in full if a non-employeenon- employee director can no longer serve due to death or Disability (as defined in our 2013 Equity Incentive Plan) or followingupon a Corporate Transaction.Transaction (as defined in our 2013 Equity Incentive Plan). The restricted shares are forfeited if, while unvested, a non-employee director resigns or retires from the Board (other than with the express approval of the Corporate Governance Committee), or is asked to leave the Board by the Corporate Governance Committee.

For purposes of the director restricted stock agreements, the following definitions apply (terms not defined in the text below are defined in the In addition, under our 2013 Equity Incentive Plan):

“Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of Cray representing fifty percent (50%) orPlan, a non-employee director may receive awards for no more of the total voting power represented by Cray’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by Cray of all or substantially all of Cray’s assets; (iii) the consummation of a merger or consolidation of Cray with any other corporation, other than a merger or consolidation which would result in the voting securities of Cray outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of Cray or such surviving entity or its parent outstanding immediately after such merger or consolidation; (iv) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of Cray give up all of their equity interest in Cray (except for the acquisition, sale or transfer of all or substantially all of the outstanding150,000 shares of Cray); or (v) any liquidation or dissolution of Cray. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation as defined in Section 409A of the Code) would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of Cray or a change in the ownership of a substantial portion of the assets of Cray (both as defined in Section 409A of the Code).

In such restricted stock agreements, “Disability” is determined by Company policies.per calendar year.

Stock Ownership Guidelines.

Our Board instituted the following stock ownership guidelines for non-employee directors:

this guideline and based upon the closing price per share of our common stock on December 31, 2010 (this amount is greater than five times the current annual retainer payable to our directors based on the closing price per share for our common stock as reported by NASDAQ on December 31, 2015).

Director Compensation for 20132015

The following table sets forth information regarding compensation earned by our non-employee directors for the year ended December 31, 2013, even if paid in 2012.2015. Mr. Ungaro is not included in this table as he is an employee and he receives no compensation for his service as a director. His compensation as an employee is shown in the Summary Compensation Table on page 40.37. Mr. Turner is not included in this table as he was appointed to our Board on April 18, 2016 and did not earn any compensation during 2015.

(2)	The following table provides additional information about non-employee director equity awards, including the stock awards made to non-employee directors during 20132015 and the number of stock options and shares of restricted stock held by each non-employee director on December 31, 2013:2015:

EXECUTIVE OFFICERS

The following table lists our executive officers, who will serve in the capacities noted until their successors are duly appointed, and their respective ages as of April 10, 2014:8, 2016:

Peter J. Ungarohas served our as Chief Executive Officer and as a member of our Board of Directors since August 2005 and as our President since March 2005. From September 2004 until AugustMarch 2005, Mr. Ungaro served as our Senior Vice President responsible for sales, marketing and services and from August 2003 until September 2004, he served as our Vice President responsible for sales and marketing. He served as Vice President, Worldwide Deep Computing Sales for IBM Corporation from April 2003 to August 2003 and as Vice President, Worldwide HPC Sales, from February 1999 to April 2003. Mr. Ungaro also held a variety of other sales leadership positions at IBM beginning in 1991. Mr. Ungaro received a B.A. from Washington State University.

Brian C. Henryhas served as our Executive Vice President and Chief Financial Officer since May 2005. Mr. Henry is responsible for finance and accounting, manufacturing and supply chain. Mr. Henry previously served as Executive Vice President and Chief Financial Officer of Onyx Software Corporation, a full suite customer relationship management company, from 2001 to 2005. From 1999 to 2001, he was Executive Vice President and Chief Financial Officer of Lante Corporation, a public internetInternet consulting company focused one-markets and collaborative business models. From 1998 to 1999, Mr. Henry was Chief Operating Officer, Information Management Group, of Convergys Corporation, which was spun off from Cincinnati Bell Inc., a diversified service company, where Mr. Henry served as Executive Vice President and Chief Financial Officer from 1993 to 1998. From 1983 to 1993, he was with Mentor Graphics Corporation in key financial management roles, serving as Chief Financial Officer from 1986 to 1993. Prior to that, Mr. Henry worked at Deloitte & Touche LLP, an accounting and audit firm, as a Certified Public Accountant. Mr. Henry received a B.S. from Portland State University and an M.B.A. from Harvard University where he was a Baker Scholar.

WilliamBarry C. BlakeBoldinghas served as our Senior Vice President and Chief TechnologyStrategy Officer, since April 2012 and served on our Board of Directors from June 2006 to June 2012. Mr. Blake is responsible for defining the integrated infrastructure that will drive Cray’s next generation of supercomputersour strategic planning and solutions. Mr. Blake has been involved in the high performance computing industry for three decades. Until January 2011,corporate development since August 2015. From July 2014 to August 2015, he served as General Manager of Parallel Computing Platforms in Microsoft Corporation’s technical computing group. Prior to its acquisition by Microsoft, Mr. Blake was President and Chief Executive Officer of Interactive Supercomputing, Inc. which developed and sold an interactive parallel computing platform that extended existing desktop simulation tools for parallel computing on a spectrum of computing architectures. Before assuming this position in January 2007, he served as Seniorour Vice President, ProductMarketing and Business Development of Netezza Corporation, which develops, marketsresponsible for our corporate and sells data warehouse appliances. Priorproduct marketing as well as business and corporate development. From September 2011 to that,July 2014, he held key management positions with Compaq Computer Corporation and Digital Equipment Corporation. Mr. Blake is a former member of the board of directors of TotalView Technologies, Inc., Terascala, Inc., Cluster File Systems, Inc., and Unlimited

Scale, Inc. and is a member of the Institute of Electrical and Electronics Engineers and the Association for Computing Machinery. He received a B.S.E.E. from the Lowell Technological Institute.

Barry C. Bolding becamewas our Vice President, Storage &and Data Management and Corporate Marketing in September 2011. Dr. Bolding oversees our storage solutions business and corporate marketing.Marketing. From May 2010 until November 2011, Dr. Bolding served as Vice President, Cray Products Group and Corporate Marketing, overseeing product management, applications, benchmarking and corporate and product marketing for Cray’sour entire range of high performance computing solutions. From January 2009 to May 2010, he served as our Vice President of the Scalable Systems Business Unit. Prior to January 2009, Dr. Bolding was Cray’sour Director of Product Marketing where he analyzed future products and developed long-term strategies. Over the course of his career, Dr. Bolding has worked with key customers in government, academia and commercial markets and held positions as a scientist, applications specialist, systems architect and presales product and marketing manager. He first joined Cray Research, Inc. in 1992 and held subsequent positionslater worked with Network Computing Services and IBM.IBM, returning to Cray in 1999. Dr. Bolding received a B.S. in chemistry from the University of California at Davis and a Ph.D. in chemical physics from Stanford University.

Charles D. Fairchildhas served as our Vice President, Corporate Controller and Chief Accounting Officer since May 2010. Mr. Fairchild previously served as Chief Financial Officer of Radiant Research, Inc., a clinical research and development company, and spent 14 years at Deloitte & Touche LLP. Mr. Fairchild received a B.A. in business administration and an M.B.A. from the University of Washington.

Geun-Bum (Daniel) KimCharles A. Morrealehas served as our Senior Vice President and General Manager, Cluster Solutions since November 2012, bringing more than 20 years of business and engineering experience. He formerly held the dual role of President and Chief Executive Officer of Appro International, Inc., a company he founded in May 1991 as a contract manufacturer. By 1998, Mr. Kim expanded Appro to become one of the largest vendors of original equipment manufacturer high performance computing systems in the United States, and in 2000 he repositioned Appro to design and sell Appro’s own line of branded high performance servers and clusters. In 2007, Mr. Kim established Appro’s direction to deliver only supercomputing solutions. Mr. Kim holds an M.B.A. from the University of Missouri, Kansas City and a Business Administration degree from Sogang University in Korea.

Charles A. Morreale became our Vice President, Field Operations insince September 2011. Mr. Morreale is responsible for customer facing organizations around the world including sales and presales, service, benchmarking and special purpose systems. Prior to such appointment, Mr. Morreale served as our Vice President Custom Engineering responsible for custom engineering. Prior to that, he served as our Vice President responsible for central and field service and benchmarking organizations from April 2005 through January 2009, and, from March 2004 until April 2005, as Director of Worldwide Sales Support. From 2001 to 2004, he was an HPC Sales Executive at IBM and was responsible for worldwide HPC sales activities in the life sciences segment. From 1984 to 2001, he held a variety of positions at Cray Research, Inc. and Silicon Graphics, Inc., starting as a programmer analyst and ending as the Northeast Territory Sales Account Manager. He received a B.S. from The College of New Jersey.

Arvind ParthasarathiMichael C. Pirainohas served as our Senior Vice President and General Manager, YarcData, a division of Cray Inc., since February 2012. From February 2005 to February 2012, he served in several roles with Informatica Corporation, a provider of enterprise data integration and data quality software and services, where he most recently served as Senior Vice President and General Manager of the Master Data Management business unit, in which he led a global team delivering business-focused data management solutions for life sciences, financial services, retail, manufacturing, and healthcare companies as well as government agencies. From August 2007 to January 2010, he served as Informatica’s Vice President of Product Management for data quality products, and from March 2006 to April 2007, he was Senior Director responsible for data migration and data integration solutions. Mr. Parthasarathi was previously Director of Product Management at i2 Technologies, Inc., a provider of supply chain management solutions. Mr. Parthasarathi received a bachelor’s degree in computer science from the Indian Institute of Technology and a master’s degree in computer science from the Massachusetts Institute of Technology.

Michael C. Piraino has served as Vice President Administration, General Counsel and Corporate Secretary since September 2011.August 2015. Mr. Piraino is responsible for the legal, human resources, information technology and facilities teams. From September 2011 to August 2015, Mr. Piraino was our Vice President Administration, General Counsel and Corporate Secretary, responsible for the legal, human resources, information technology, facilities and government programs and quality and process excellence teams. From October 2009 to September 2011, he served as Vice President, General Counsel and Corporate Secretary and was responsible for legal and fromsince August 2010, he was responsible for human resources as well. From October 2007 to September 2009, he was an attorney at Fenwick & West LLP (and a predecessor firm), where his practice focused on corporate finance and securities. From October 2006 to June 2007, Mr. Piraino served with the Exbiblio family of technology companies in various positions, including Chief Executive Officer. From May 1999 to October 2006, he was at WatchGuard Technologies, Inc., a provider of network security solutions, in various roles, including Vice President, General Counsel and Secretary. From October 1995 to May 1999, he was an attorney at Perkins Coie LLP, a law firm. Mr. Piraino began his career as a propulsion engineer at The Boeing Company. He received a B.S. in aeronautical and astronautical engineering from Purdue University and a J.D.,magna cum laude, from the Seattle University School of Law.

Steven L. Scott has served as our Senior Vice President and Chief Technology Officer, since September 2014 when he rejoined us. Dr. Scott is responsible for designing the integrated infrastructure that will drive our next generation of supercomputers. Dr. Scott previously had served as Principal Engineer in the Platforms Group at Google and before that as the Senior Vice President and Chief Technology Officer for NVIDIA’s Tesla business unit. Dr. Scott first joined us in 1992, after earning his Ph.D. in computer architecture and BSEE in computer engineering from the University of Wisconsin-Madison. He was the chief architect of the Cray X1 scalable vector supercomputer. Dr. Scott is a noted expert in high performance computer architecture and interconnection networks. He received the 2005 ACM Maurice Wilkes Award and the 2005 IEEE Seymour Cray Computer Engineering Award, and is a Fellow of IEEE and ACM. Dr. Scott was named to HPCwire’s “People to Watch in High Performance Computing” in 2012 and 2005.

Ryan W. J. Waite has served as our Senior Vice President, Products, responsible for product management for our compute, storage and analytics products since December 2014. Before joining us, Mr. Waite was the general manager of the Data Services group at Amazon Web Services, where he oversaw five big-data services, including product management, engineering and operations. While at Amazon Web Services, he directed the Amazon Kinesis, AWS Fraud Detection, AWS Data Warehouse, AWS Metering and Tag Metadata teams. Before that, Mr. Waite spent 20 years at Microsoft where he was most recently the general manager for its high performance computing team. In that role, he led Microsoft’s HPC business and an engineering team that was responsible for the architecture, development, and test and program management of Windows HPC Server and its integration with Azure.

Margaret A.(Peg)Williams becamehas served as our Senior Vice President, Research and Development since July 2014, responsible for our software and hardware engineering efforts for all of our research and development projects. In March 2016, she informed Cray of her plans to retire as early as the end of 2016. From September 2011 to July 2014, Dr. Williams served as our Senior Vice President, High Performance Computing Systems, in September 2011. Dr. Williams is responsible for our high performance computing systems software and hardware research and development efforts, product management and product marketing. Prior to such appointment, Dr. Williams served as our Senior Vice President of Research &and Development responsible for our software and hardware research and development efforts, including our current and future products and projects. Dr. Williams joined us in May 2005. From 1997 through 2005, she held various positions with IBM, including Vice President of Database Technology and Director and Vice President of HPC Software and AIX Development. She also led the user support team at the Maui High Performance Computing Center, a research and development center, from 1993 through 1996. From 1987 through 1993, Dr. Williams held various positions in high performance computing software development at IBM. Dr. Williams received a B.S. in mathematics and physics from Ursinus College and an M.S. in mathematics and a Ph.D. in applied mathematics from Lehigh University.

COMPENSATION OF THE EXECUTIVE OFFICERS

Compensation Discussion and Analysis

The following discussion describes the material elements of compensation for 20132015 for ourthe following executive officers identified in the “Summary Compensation Table” below (the “Named Executive Officers”).:

This discussion covers 2013 corporate performance, our compensation philosophy and objectives for 2013, the components of our compensation program and the process we followed in determining executive compensation for 2013. It also presents a detailed discussion and analysis of the Compensation Committee’s specific decisions about the compensation of the following Named Executive Officers for 2013:

This discussion covers 2015 corporate performance, our compensation philosophy and objectives for 2015, the components of our compensation program and the process we followed in determining executive compensation for 2015. It also presents a detailed discussion and analysis of the Compensation Committee’s specific decisions about the compensation of these Named Executive Officers for 2015.

20132015 Corporate Performance

We believe it is critical to our short-term and long-term success that our compensation policies, plans and programs be closely correlated with our corporate performance. The following are three areas of corporate performance we evaluated in connection with determining our Named Executive Officers’ total compensation in 2013.2015:

SummaryOverview of 2015 Compensation Discussion and AnalysisDeterminations

As a result of our operational and financial performance in 2015 and earlier, and in light of the Mercer analyses and other factors described in this Proxy Statement, the Compensation Committee:

•

Compensation Components and Purposes.    The major elements of our compensation programs are:

As a result of these decisions, approximately 92% of the total 2015 target compensation for our Chief Executive Officer and approximately 86% to 90% of the total 2015 target compensation for all of our other Named Executive Officer.Officers was performance vesting and dependent upon organizational and individual performance.

addition, our approach has been to set “stretch” goals such that even threshold attainment can reflect a significant accomplishment and therefore 0% attainment on a particular goal can result from what by external standards could be deemed successful execution. In 2013, we achieved approximately 132% of the 2013 Adjusted Operating Income goal and 101% of the Revenue goal. We did not meet the minimum threshold attainment of the Big Data Business Revenue goal and the Cray Cluster Solutions (“CCS”) & Cluster-Attached Revenue goal, each of which is described in greater detail below. Considering these achievements together with each Named Executive Officer’s attainment of their unique Leadership goals, our Named Executive Officers achieved a payout that averaged 82.4% of their respective target awards.

Philosophy and Objectives

We offer technology-differentiated products and services that require a highly educated, specialized and sought-after workforce and often involve long development cycles. In light of these challenges, our compensation philosophy is to provide and effectively implement policies, plans and programs designed to attract, retain and motivate the workforce required for us to achieve our strategic as well as tactical goals and create long-term value for our shareholders. To assist in these efforts, our compensation program has the following objectives:

Compensation Program Components and Purposes

We believe the components of our compensation program described below provide an appropriate mix of fixed and variable pay, balance incentives for short-term operational performance with long-term increases in shareholder value, reinforce an innovative, high-performance culture, and encourage recruitment and retention of our employees and officers.officers and create direct alignment with our shareholders by providing equity ownership in the company. As employees assume greater levels of responsibility, an increasing proportion of their compensation is linked to performance. We review our compensation program periodically and make

adjustments as needed or appropriate to meet our objectives. We have describeddescribe below the principal components of our compensation program and the purpose of each component.

The Compensation Committee believes that the overall structure of the compensation for the Named Executive Officers is in furtherance of our compensation philosophy and objectives in providing, within our means and for our industry, competitive total target compensation with sufficient base salaries coupled with a significant proportion of the total target compensation based on performance and at risk, including a meaningful proportion that is equity-based, to align the officers’ interests with those of our shareholders and provide a strong retention and performance incentive.

The Compensation Committee also: determines the policy for awarding stock options and/or restricted stock grants to other new hires; makes grants of stock options and/or restricted stock to other employees; works with the Board in overseeing our 401(k) Plan; periodically reviews our staffing, including open positions and turnover; receives reports on our health and safety records and any equal employment opportunity claims, investigations and reports; and considers our medical and other health benefits, including potential changes and enhancements, from both a cost and a competitive perspective.

Benchmarking and Other Factors

For its 20132015 compensation decisions, the Compensation Committee considered Mercer’s recommendations to contextualize the overall total compensation approach and general market competitiveness and compared the compensation approach to our peer group companies.

Each year, to assist the Compensation Committee in its deliberations on executive compensation, the Compensation Committee reviews and updates our list of peer companies (our “Peer Group”) as points of comparison, as necessary, to ensure that the comparisons are meaningful. When considering companies for inclusion as one of our peer group companies, the Compensation Committee considers companies that are in our industry, are similar to us with respect to elements such as operating results, research and development investments and product solutions, and those companies with whom we compete in the recruitment of executive officers. For 2013,Based on these factors and management’s input, Mercer recommended, and the Compensation Committee selectedapproved, the following companies to comprise our peer group including F5 Networks,group: Ansys Inc., Super Micro Computer,Avid Technology, Inc., Fei Company, Silicon Graphics International Corp., Silicon LaboratoriesCavium Inc., Semtech Corporation, Emulex Corporation, QLogic Corporation, Fusion-io, Inc., Ocz Technology Group,Commvault Systems, Inc., Extreme Networks, Inc., Lattice SemiconductorF5 Networks, Inc., FEI Company, Harmonic Inc., Mellanox Technologies Inc., OSI Systems, Qlik Technologies, Inc., QLogic Corporation, Silicon Image,Quantum Corp., Riverbed Technology Inc., Radisys Corporation, Micrel, Incorporated, MercurySilicon Graphics International Corp. and Super Micro Computer, Inc. Between 2014 to 2015, our Peer Group changed with (i) the addition of Avid Technology, Inc., Cavium Inc., Commvault Systems, Inc., Harmonic Inc., Mellanox Technologies Inc. and Qlik Technologies, Inc. based on industry, revenue size and business description and (ii) the removal of (a) Electro Scientific Industries, Inc.

Additionally, the, Mercury Systems, Inc., Micrel, Incorporate and Radisys Corporation, due to their respective small revenue size compared to us, (b) Fusion-IO Inc. due to its acquisition in 2014 and (c) Ocz Technology Group, Inc. due to its bankruptcy in 2014. During 2015, we removed Emulex Corporation and Riverbed Technology, Inc. from our Peer Group as they were both acquired and no longer remained public companies. The Compensation Committee also relied on data from the 20122015 Radford Global Technology Survey, which is comprised of organizations within the technology sector and includes data subsets that are comprised of organizations that are similar to us in terms of size. However, the Compensation Committee does not benchmark its compensation to any particular level or against any specific member of the Peer Group. Rather, it utilizes the Peer Group information and the Radford and IPAS surveys as data points in determining, with the assistance of Mercer, the appropriate overall total compensation.

As in previous years, the Compensation Committee, in making specific decisions regarding each Named Executive Officer’s (other than Mr. Ungaro) compensation, also considered Mr. Ungaro’s recommendations described above regarding our other senior officers and factors such as the internal and external relative parity among senior management, the experience and performance of individual officers, their current compensation levels, their potential impact within Cray and the reasonableness of the officer’s compensation in light of our

compensation objectives and our operational and financial performance. Historically, we have had a relatively flat salary structure for our senior officers, with the significant differences in total compensation among the senior officers reflected in short-term cash and long-term equity incentive awards. This approach helps us manage our fixed costs and yet provides the potential for higher compensation levels based on performance-dependent, shortshort- and long-term incentives.

The Compensation Committee recognizedrecognizes that competition for our Named Executive Officers, including Mr. Ungaro, generally comes from much larger companies with significantly greater resources, whether in the high performance computing industry or other technology companies, for which directly comparable compensation information may not be publicly available. The Compensation Committee also believes that for technical and engineering positions, there are less consistently defined positions across technology companies so that the survey and peer group compensation information is less directly applicable to them.

Each of the Named Executive Officers has significant high performance computing experience and/or achievements and roles not reflected in general survey and peer group analyses. The Compensation Committee also supplemented the specific compensation information provided by Mercer with its collective experience, judgment and trending assumptions to establish the 20132015 compensation for the Named Executive Officers and other senior officers.

Results of the 2013 Say on Pay2015 Say-on-Pay Vote

We value the input of our shareholders on our compensation programs. We hold an advisory vote on executive compensation on an annual basis. When designing our 2016 executive compensation program for our Named Executive Officers, the Compensation Committee carefully considered, among other things, the vote results from our 2015 annual meeting. The Compensation Committee considered the results of our 2013 say on pay2015 say-on-pay vote that reflected strong support for our compensation practices, as well as the lack of any significant shareholder feedback requiring compensation changes, and decided to continue our existing compensation policies and practices. At the 2011 annual shareholders meeting, the shareholders voted,In addition, we engage in dialogue with our large stockholders on an advisory basis, to approve the Board’s recommendation that future advisory votes on our executive compensation be held every year and we have determined to follow the shareholder vote and hold an advisory vote on our executive compensation every year.

Results of the 2013 Equity Plan Vote

ongoing basis. The Compensation Committee consideredwill continue to consider the results of our 2013 equity incentive plan vote that reflected strong supportsay-on-pay votes when making future compensation decisions for our equity compensation practices and decided to continue our existing equity compensation policies and practices.named executive officers.

20132015 Compensation Determinations

Overview — Total Target Compensation

The Compensation Committee has adopted a total target compensation approach for our Named Executive Officers and other senior officers that framed its decisions covering:

Given our operational and financial performance in 2012 and earlier and in light of Mercer’s analyses and other factors described in this Proxy Statement, the Compensation Committee:

As a result of these decisions, approximately 73% to 85% of the total 2013 target compensation for our Named Executive Officers was performance-based and reliant on organizational and individual performance.

The Compensation Committee believes that the overall structure of the compensation for the Named Executive Officers is in furtherance of our compensation philosophy and objectives in providing, within our means and for our industry, competitive total target compensation with sufficient base salaries coupled with a significant proportion of the total target compensation based on performance and at risk, including a meaningful proportion that is equity-based, to align the officers’ interests with those of our shareholders and provide a strong retention and performance incentive.

Base Salary

The Compensation Committee uses a salary structure based on market data as a tool to estimate competitive base salaries. The positions are first placed in a band in the salary structure based on competitive market data. With Mr. Ungaro’s assistance (except with respect to Mr. Ungaro’s salary), the salary of each executive officer is evaluated relative to the market median salary according to experience, qualifications, performance and the particular impact the role can have within Cray. ActualThe actual salaries of our Named Executive Officers averaged at or2% below the estimated market median of the position based on competitive market data.

To recognize growth in their organizational management responsibilities, to recognize their individual performances, in consideration ofThe Compensation Committee considered the placement of their existing base salary relative to the market median and in consideration of the fact that Messrs. Ungaro’s and Henry’s, base salaries had not been increased since 2009, the Compensation Committee increasedof Messrs. Ungaro’s, Henry’sUngaro, Henry and Piraino’s base salaries, by $50,000, $25,000,Piraino and 30,000, respectively. Messrs. Blake’sDrs. Scott and Parthasarathi’s base salaries wereWilliams to be appropriate and they remained unchanged in 2013. In 2013, after taking into account the increase to base salaries discussed above, ourfrom 2014. While Named Executive Officers’ baseOfficers salaries were between the 25^th percentile and the median percentile for our peer group companies.are reviewed each year, increases are infrequent.

Annual Cash Incentive Compensation Plan

Our annual cash incentive plan isplans are an important element of the compensation program for all of our employees (the “2015 Employee Bonus Plan”) and senior officers, including the Named Executive Officers. This annual cash incentive plan provides performance-based cash incentives based on our performance and individual performance against specific targets, with the purpose of motivating and rewarding achievement of our critical, tactical, strategic and financial goals. For 2013, the annual cash incentive plan for our senior officers, including all NamedOfficers (the “2015 Executive Officers,Bonus Plan”). Our 2015 Executive Bonus Plan was based on a balanced scorecard“balanced scorecard” award plan, which in turn was based on quantitative financial goals and qualitative operational goals, consistent with 2012.individual goals. These awards were payable only if the specified performance objectivesgoals were achieved.

Based on benchmarking data,analysis of our Peer Group and the Radford and IPAS Surveys described above, for 2015, the target awards as a percentage of base salary for Messrs. Ungaro Blake and Piraino were above the 75th percentile and Messrs. Henry

the target awards as a percentage of base salary for Drs. Scott and ParthasarathiWilliams were between the 50th and 75th percentiles. When comparing ourpercentiles and the target award as a percentage of base salary for Mr. Henry was between the 25th and the 50th percentile. We maintained the target bonus awards as a percentage of base salary at the same levels as in 2014 for Messrs. Ungaro and Henry and Drs. Scott and Williams and increased the target bonus award for Mr. Piraino in connection with his promotion to Senior Vice President. However, the Compensation Committee does not benchmark its compensation to any particular level or against any specific member of the Peer Group. Rather, it utilizes the Peer Group information as a data point in determining, with the assistance of Mercer, the appropriate compensation. The Compensation Committee believes that the Named Executive Officers to benchmarking data, the Compensation Committee wantsshould have a greater proportion of their variable compensation relative to total compensation to be at riskat-risk and based on performance, thus emphasizing the incentive nature of their compensation, and thecompensation. The Compensation Committee also believes that the incentive plan targets containedshould contain rigorous thresholds that must be met before the target awards couldcan be earned, which thresholds had prevented incentive plan awards being paid in previous years.earned.

Annual Cash Incentive Compensation Targets

The following table showssets forth the 20132015 target award amount for eachthe Named Executive Officer underOfficers listed below pursuant to our 2015 annual cash incentive plan:

Balanced Scorecard Awards

The following is a description of the balanced scorecard components and goals for our Named Executive Officers:

General Conditions.

The minimum percentage achievement for each balanced scorecard goal was 25% (at the “Threshold” target — below the Threshold target achievement was set at 0%) and the maximum was 200% (at the “Maximum” target). In addition, our approach has been to set “stretch” goals such that even threshold attainment can reflect a significant accomplishment and therefore 0% attainment on a particular goal can result from what by external standards could be deemed successful execution. Subject to the caps described below, the achievement for each balanced scorecard goal was added based on the weighting of that particular goal for the individual to determine an overall balanced scorecard percentage payout.

The aggregate bonus payment to all participants (including both Named Executive Officers and employees) under the annual cash incentive plans for executive officers2015 Employee Bonus Plan and employees (thethe 2015 Executive Bonus Plan (together, the “Bonus Plans”) may not exceed 50%33% of PBOI (“pre-bonus” operating income, defined below). To the extent, absent this cap, the aggregate bonus payment under the Bonus Plans would exceed 50%33% of PBOI, all such bonus payments are reduced on a pro-rata basis such that the aggregate bonus payment under the Bonus Plans equals 50%33% of PBOI. “PBOI” means Operating Income with aggregate bonuses paidotherwise payable under the Bonus Plans added back. For 2015, no PBOI adjustment was required.

Balanced Scorecard Goals. In setting 2013 performanceThe 2015 Executive Bonus Plan includes qualified financial goals, for the annual cash incentive plan, the Compensation Committee set performance goals with varied weightingwhich are weighted differently for each participating Named Executive Officer, depending on their areas of responsibility and the factors over which they have the most influence. EachIn addition, each Named Executive Officer hadhas individual leadership goals.

Qualified Financial Goals

The following are the qualified financial goals included in our Bonus Plans and the following quantitative financialrationale for including them. These goals for 2013, for the following reasons:were established by our Compensation Committee.

With respect to the Revenue goal, the threshold goal, or 25% attainment, was $655 million, the target goal, or 100% attainment, was $730 million, and the maximum goal, or 200% attainment, was $880 million or above. With respect to the Commercial Revenue goal, the minimum goal, or 25% attainment, was $450$35 million, the target goal, or 100% attainment, was $525 million, and the maximum goal, or 200% attainment, was $625 million. With respect to the Adjusted Operating Income goal, the minimum goal, or 25% attainment, was $3 million, the target goal, or 100% attainment, was $16 million, and the maximum goal, or 200% attainment, was $33 million. With respect to the Big Data Business Revenue goal, the minimum goal, or 25% attainment, was $70 million, the target goal, or 100% attainment, was $85$73 million, and the maximum goal, or 200% attainment, was $110 million.million or above. With respect to the CCS and Cluster-Attached StorageNew Product Revenue goal, the minimum goal, or 25% attainment, was $70$20 million, the target goal, or 100% attainment, was $95$40 million, and the maximum goal, or 200% attainment, was $130 million.$70 million or above. With respect to the Operating Income goal, the threshold goal, or 25% attainment, was $20 million, the target goal, or 100% attainment, was $40 million, and the maximum goal, or 200% attainment, was $72 million or above. With respect to the Quarterly Scaling goals of 24 possible, the minimum goal, or 25% attainment, was 17 goals, the target goal, or 100% attainment, was 20 goals, and the maximum goal, or 200% attainment, was 24 goals.

The 2015 scorecards for each Named Executive Officer were the same except for their Leadership goals. 20% was weighted for Revenue, 10% for Commercial Revenue, 10% for New Product Revenue, 40% for Operating Income, 10% for Quarterly Scaling and 10% for Leadership goals. For 2015, the percentage achievement for the Revenue goal was 95.7% and the percentage achievement for the Commercial Revenue goal was 200%. Attainment against the New Product Revenue goal did not meet the minimum threshold. The percentage achievement for the Operating Income goal was 103%. The percentage achievement for the Quarterly Scaling goals was 125%.

Individual Leadership Goals

In addition to the quantitative financial goals, each Named Executive Officer had his or her own leadership goals, which are described in more detail below. With respect to the leadership goals, the minimum goal, or 25% attainment, was Meets“Meets Some Expectations,Expectations”, the target goal, or 100% attainment, was Fully Meets/Sometimes Exceeds Expectations,“Fully Meets Expectations”, and the maximum goal, or 200% attainment, was Dramatically“Dramatically Exceeds Expectations.Expectations”.

If actual results fell between the specified levels but above the minimum threshold goal, a resulting percentage could, in the discretion of the Compensation Committee, be interpolated.

Individual Balanced Scorecards. The 2013 scorecards forFor each of the Named Executive Officer are the same exceptOfficers, following is a summary of their individual leadership goals for their Leadership goals and with respect to the weighting of Mr. Parthasarathi’s scorecard which included a greater emphasis on his YarcData-specific goals that were included in his Leadership goals and lesser emphasis on Revenue and CCS and Cluster-Attached Storage Revenue.2015:

Peter J. Ungaro — Mr. Ungaro’s scorecard was weighted 20% for Revenue, 20% Big Data Business Revenue, 10% for CCS and Cluster-Attached Storage Revenue, 40% for Adjusted Operating Income and 10% for leadership goals. Mr. Ungaro’s leadership goals included strategy development and execution goals, which included winning a role in a major research and development contract, positioning the company for growth, building a big dataCompany to grow revenue at 20% year-to-year in 2015 and beyond, developing overall strategy to meet our business goals, living our core values and continued compliance with applicable governmental rules and regulations.

Brian C. Henry — Mr. Henry’s scorecard was weighted 20% for Revenue, 20% Big Data Business Revenue, 10% for CCS and Cluster-Attached Storage Revenue, 40% for Adjusted Operating Income and 10% for leadership goals. Mr. Henry’s leadership goals included goals relating tosupporting the integration of Appro International,

Inc., on-time delivery of manufactured products, implementing a financeProducts organization on business decisions, improving management reporting with leading and budgeting tool,key operating performance indicators, developing revenue recognition policies for new revenue recognition standards, shortening manufacturing order-to-delivery lead times, building an adequate manufacturing capacity and space plan, living our core values and continued compliance with applicable governmental rules and regulations.

WilliamMichael C. BlakePiraino — Mr. Blake’s scorecard was weighted 20% for Revenue, 20% Big Data Business Revenue, 10% for CCS and Cluster-Attached Storage Revenue, 40% for Adjusted Operating Income and 10% for leadership goals. Mr. Blake’sPiraino’s leadership goals included building a strong hiring and on-boarding process to bring the best talent to the Company, defining and documenting succession planning for each team overseen by Mr. Piraino, managing facilities long-term space planning and implementing facilities near-term space plans, developing a strategy for large-scale data-intensive computing, establishing a MapReduce/Hadoop programming model, shifting from a Statement of Work based product planning processthree to a broader market-in customer driven approach,five year information technology infrastructure plan, including cybersecurity, living our core values and continued compliance with applicable governmental rules and regulations.

Arvind ParthasarathiSteven L. Scott — Mr. Parthasarathi’s scorecard was weighted 15% for Revenue, 20% Big Data Business Revenue, 5% for CCS and Cluster-Attached Storage Revenue, 40% for Adjusted Operating Income and 20% for leadership goals. Mr. Parthasarathi’sDr. Scott’s leadership goals included bookings goals, acquisition of new customers, Urika deliverables,working on product development,roadmaps, supporting various organizations within the Company, living our core values and continued compliance with applicable governmental rules and regulations.

Michael C. PirainoMargaret A. Williams — Mr. Piraino’s scorecard was weighted 20% for Revenue, 20% Big Data Business Revenue, 10% for CCS and Cluster-Attached Storage Revenue, 40% for Adjusted Operating Income and 10% for leadership goals. Mr. Piraino’sDr. Williams’ leadership goals included specific goals relatingcompleting research and development deliverables and milestones, delivering on-time products pursuant to the many administrative departments for which he is responsible,Company product roadmaps, living our core values and continued compliance with applicable governmental rules and regulations.

For 2013,Based upon the percentageCompensation Committee’s review of the Named Executive Officers’ achievement foragainst each of their individual leadership goals during 2015 under the Revenue goal2015 Executive Bonus Plan, it was determined to be 100.8%, the percentage achievement for the Adjusted Operating Revenue goal was determined to be 131.9%. Attainment against the Big Data Business Revenue goal and the CCS and Cluster-Attached Storage Revenue goal was determined to not meet the minimum thresholds.

It was determined that each of Messrs.that: Mr. Ungaro Henry and Piraino attained 100% of their respective leadership goals under the 2013 cash incentive plan, Mr. Blake attained 92%110% of his leadership goals, andgoals; Mr. ParthasarathiHenry attained 85%102% of his leadership goalsgoal; Mr. Piraino attained 99% of his leadership goal; Dr. Scott attained 98% of his leadership goal; and Dr. Williams attained 105% of her leadership goals.

For 2015, the overall percentage achievement under our 2015 Executive Bonus Plan for Mr. Ungaro was 103.8%, for Mr. Henry it was 103%, for Mr. Piraino, it was 102.8%, for Dr. Scott it was 102.6% and for Dr. Williams it was 103.3%.

For information regarding actual amounts paid under the 2013 cash incentive plan.2015 Executive Bonus Plan, see the tables and associated footnotes and narratives under “Compensation Tables” below.

Difficulty of Performance and Net Income TargetsGoals

We believe that the Compensation Committee has historically set performance targets for our annual cash incentive plan that are achievable, but requirethat include significant effortchallenges to be met, with annual incentive awards at target being at substantial risk and incentive awards above target being very difficult to realize. In the past eightfive years, we paid no cash incentive awards for 2007, paid at-target awards for 2006, paid above-target awards for 2008 and 2012, and paid below-target awards for 2009, 2010, 2011, 2013 and 2013.2014. The Compensation Committee likewise determined that the 2015 qualified financial goals and the individual leadership goals were achievable, but required significant effort to be met, and these goals were achieved above target for 2015.

Discretionary Bonuses

Our Compensation Committee may award discretionary cash bonuses to, among other things, incentivize new hires, encourage retention of executives and reward individuals or groups of individuals who make exceptional contributions to Cray. No discretionary bonuses were awardedpaid to our Named Executive Officers in 2013.during 2015.

Long-Term Equity Awards

We grantHistorically, and in 2015, we granted stock options, restricted stock awards and restricted stock forunits to certain new hires, principally for senior manager and officer positions and generally on an annual basis as part of the total target compensation plan for the Named Executive Officers and other senior officers. In addition in 2015, we granted performance vesting restricted stock units to our senior officers.

In accordance with our compensation philosophy and objectives described above, these grants are designed to:

As noted earlier, inIn the past several years we have recruited a number of key senior officers and through that process have learned that the available talent pool in our industry is limited and that candidates and our officers have significant other opportunities. Given these circumstances, the Compensation Committee has emphasized the retention nature of equity awards to keep our senior management team in place.

Time-Based Equity Awards

To provide longer-term performance and retention incentives, we generally grant stock options with ten-year terms and four-year vesting schedules, with exercise prices equal to 100% of grant date fair market value (determined by the most recent closing price for our common stock prior to the date of grant). Equity awards are typically granted each year. Whether grants are made and the number of shares granted vary based on many factors, including financial performance and retention concerns. As financial gain from stock options depends on increases in the market price for our common stock after the date of grant, we believe option grants encourage recipients to focus on performance and initiatives that should lead to an increase in the market price of our common stock, which benefits all of our shareholders. In addition, when the market price for the underlying common stock is higher than the exercise prices of stock options that are not fully vested, those options provide a retention incentive. Stock options, however, represent a high-risk and potential high-return component, as the realizable value, and consequently the retention incentive, of each option can fall to zero if the market price for the underlying common stock falls below the exercise price.

We grant restricted stock with vesting dependent on continued employment, generally with four-year vesting schedules, with one quarter of the granted shares vesting each year. Awards of restricted stock are designed to increase each recipient’s ownership of our common stock, thereby aligning their interests with shareholders and, with a longer-term vesting schedule, to provide a significant long-term retention incentive.

Performance-Based Equity Awards

To provide specific performance incentives with respect to the development of our YarcData business, some of our employees, including all Named Executive Officers, were granted Performance Vesting Restricted Stock Awards in 2013, which were one-time grants associated with the development of our YarcData business. These awards of restricted stock vest, if at all, only upon the achievement of certain operational and strategic performance criteria exclusively related to the operation of our YarcData business or upon a change of control of Cray. The amount that would vest as a result of a change of control depends on the gross proceeds received by our shareholders. The gross proceed levels are set at the time of grant with an objective of increasing the reward to the extent that the YarcData business likely contributed materially to the amount of gross proceeds received by our shareholders. We currently believe that achieving such operational and strategic performance criteria will be very difficult, even when considered over a multi-year time horizon.

The Performance Vesting Restricted Stock Awards do not provide for any time-based vesting and the value that such employee will receive, if any, is contingent solely upon the achievement of the performance criteria. The Performance Vesting Restricted Stock Awards will expire completely if the operational and strategic performance vesting criteria are not satisfied by the calendar day immediately following that date on which we file our Form 10-K with the SEC for the fiscal year ended December 31, 2016. In 2013, the number of time-based Restricted Stock grants that would have normally been awarded was reduced for all of our executive officers, including each Named Executive Officer, as an offset to the addition of the grant of Performance Vesting Restricted Stock. Our executive officers and each Named Executive Officers received fewer time-based Restricted Stock awards in 2013 than they would have typically been granted had we not granted Performance

Vested Restricted Stock Awards. Our typical practice is to award the same number of time-based Restricted Stock and stock options to our executives, but in 2013, we reduced the number of time-based Restricted Awards in light of the Performance Vesting Restricted Stock Awards in 2013. The Performance Vesting Restricted Stock Awards granted in 2013 were meant to provide additional focus on the development of our YarcData business.

Target Total Equity Awards

Mercer provided market data estimating the total long-term incentive values expressed as multiples of base salaries for each of ourthe Named Executive Officers. InThe Compensation Committee has not used any one factor in its equity grant determinations. Rather, in determining the size of equity awards, the Compensation Committee considered the Named Executive Officer’s (i) contributions to our overall performance, (ii) future potential performance and contributions to Cray, (iii) current ownership of our common stock, (iv) extent and frequency of prior stock option grants and restricted stock awards and/or restricted stock units and (vi) unvested stock options and restricted stock awards and/or restricted stock units and the remaining duration of the outstanding stock options, and restricted stock. When considering the total target equitystock awards for 2013, given the contingency and difficulty of achievement,and/or restricted stock units. In addition, in 2015, the Compensation Committee significantly discounteddecided to create a special performance incentive, that also has significant retention benefits, reflected in the performance vesting restricted stock unit grants to our senior officers.

The following table sets forth the value of Performance Vesting Restricted Stock Awards. The value of the 20132015 equity grants to the Named Executive Officers expressed as a multiple of their respective base salary were generally above the estimated market medians primarily due to the one-time addition of Performance Vesting Restricted Stock, and consistent with our compensation philosophy and objectives described above.salary:

As explained above, the Compensation Committee has not used any one factor in its equity grant determinations nor set a specific burn or use rate. The Compensation Committee expects that the pool of options and restricted stock currently available for grants is sufficient to meet our current and future requirements.

For additional information regarding equity grants in 20132015 and in prior years, see the tables and associated footnotes and narratives under “Compensation Tables” below.

Time-Based Vesting Equity Awards

To provide longer-term performance and retention incentives, we generally grant stock options and restricted stock units. Our stock options typically have ten-year terms and four-year vesting schedules, with the exercise price equaling 100% of the most recent closing price for our common stock as reported by NASDAQ prior to the date of grant. Our time-based vesting restricted stock units typically have four-year vesting schedules. Equity awards are typically granted each year to certain employees. Whether grants are made and the number of shares granted varies based on many factors, including financial performance and retention concerns. As financial gain from stock options depends on increases in the market price for our common stock after the date of grant, we believe stock option grants encourage recipients to focus on performance and initiatives that should lead to an increase in the market price of our common stock, which benefits all of our shareholders. In addition, for unvested restricted stock units, and when the market price for the underlying common stock is higher than the exercise prices of stock options that are not fully vested, those grants of restricted stock units or options provide a

retention incentive. Stock options, however, represent a high-risk and potential high-return component, as the realizable value, and consequently the retention incentive, of each stock option can fall to zero if the market price for the underlying common stock falls below the exercise price.

In 2015, we granted time-based vesting restricted stock units and stock options to each of our Named Executive Officers. For Messrs. Ungaro, Henry and Piraino and Dr. Scott, 25% of such restricted stock units vest on each of May 6, 2016, May 6, 2017, May 6, 2018 and May 6, 2019. For Dr. Williams, 50% of such restricted stock units vest on each of May 6, 2016 and May 6, 2017. For Messrs. Ungaro, Henry and Piraino and Dr. Scott, 25% of such stock option awards vest on May 6, 2016, with the remaining balance vesting monthly over the next 36 months, so that all options will be vested on May 6, 2019. For Dr. Williams, 50% of such stock option award vests on each of May 6, 2016 and May 6, 2017.

Performance Vesting Equity Awards

The Compensation Committee continues to believe that, in the right circumstances, performance vesting of equity awards can create a significant performance incentive.

In March 2015, to provide performance incentives, each of our Named Executive Officers was granted restricted stock units that vest upon the achievement of certain revenue and operating income milestones, if both milestones are met in fiscal year 2016, 2017, 2018 or 2019 (with achievement to be determined, generally, no later than July 1 of each subsequent calendar year), subject to the executive officers’ provision of services to us on the applicable determination dates (such awards, the “Performance Vesting RSUs”). Such Performance Vesting RSUs will expire completely and will be terminated on July 2, 2020 if the milestones are not satisfied in any of 2016, 2017, 2018 or 2019. None of the Performance Vesting RSUs were eligible to be earned or vested in 2015.

The Compensation Committee selected these metrics because they are relevant indicators of our financial performance over the short- and longer-terms. Operating income is indicative of our operational profitability and efficiency and provides some balance to encourage profitable revenue growth. Revenue reflects growth in our business. The Compensation Committee believes these milestones represent challenging goals that will require significant growth in revenues and profitability to achieve.

No performance vesting equity awards granted in prior years were eligible to vest in 2015.

Severance Policy and Change of Control Agreements

We have adopted an executive severance policy and entered into certain change of control agreements and titled management retention agreements, designed to attract and retain officers in a competitive marketplace for talent, to retain officers during the uncertainty of rumored or actual fundamental corporate changes and to ensure

that the officers evaluate any potential acquisition situations impartially without concern for how they may be personally affected. We believe that these plans are important competitive considerations, as it is generally believed that it takes senior corporate officers significant time to find new employment after their employment ends. We have a policy that prohibits the inclusion of any new provisions related to 280G gross-up payments and requires the removal of any provisions related to 280G gross-up payments in any existing agreement or arrangement with any executive officer in the event the material compensation terms of any such arrangement or agreement are amended in a manner that is materially favorable to the executive.

Executive Severance Policy.    In October 2002, our Board adopted anThe Company’s Executive Severance Policy, that covered our then senior executive officers. We updated the Executive Severance Policy in late 2008 to comply with Section 409A of the IRC, and in December 2010 in order to comply with Section 409A of the IRC, and eliminate unnecessarily complex provisions. If officers are terminated without Cause or resign for Good Reason, as those terms are defined in the Policy, the officers receive a single lump sum payment equal to six to 12 months of base salary, depending on their position and how long they have served as officers, continuation of health and term life insurance benefits for a period generally ranging from six to 12 months (or up to 18 months in certain circumstances), and outplacement services. Mr. Ungaro and Mr. Henry also receive their full target incentive award in accordance with our previous agreements with each of them, which were negotiated in 2005 when Mr. Ungaro was named our President and Mr. Henry first joined us. The other covered officers also receive part or all of their respective target cash incentive awards for the year in which their employment terminates depending on the timing of their termination. To receive these benefits, the officer must provide us with a general release and continue to comply with his or her confidentiality and other agreements with us. For officers who are not parties to the management retention agreements discussed below, the Policy provides benefits following a Change of Control if they are terminated without Cause or terminate for Good Reason, as such terms are defined in the Policy, within 24 months of the Change of Control. Our obligations under the Policy are unfunded, and our Board has the express right to modify or terminate the Policy at any time prior to a potential Change of Control or Change of Control, as that term is defined in the Policy, or prior to delivery of a notice of termination of employment for a covered officer.

Management Retention Agreements,.    In 2008, we began entering into change of control agreements with Named Executive Officers and certain other senior officers. In 2011, we amended the form of Management Retention Agreement, which modified the earlier agreements to comply with Section 409A of the IRC. Payments are made under these agreements only if two events occur (often referred to as a “double-trigger” form of agreement): first, there must be a Change of Control; and, second, within 24 months after the Change of Control, the officer’s employment is terminated without Cause or the officer resigns for Good Reason, as such terms are defined in the agreement. If the agreements apply, the officer is to receive a lump sum payment equal to two times the officer’s annual compensation (base salary plus annual cash incentive plan award at target), payment of the COBRA costs for medical benefits for 18 months, reimbursement of the cost of term life insurance for 24 months, the acceleration of vesting of all stock options and 12 months to exercise all options after termination or, if earlier, until the options expire, and outplacement services. If there is a dispute as to whether “Cause” or “Good Reason” exists, the officer remains an employee until the dispute is settled, with Cray having the election to have the officer continue to work or be placed on paid leave. All or a part of certain payments may be delayed to after six months following termination of employment, as required by Section 409A of the IRC. In the prior agreements, we provided for a tax gross-up payment if payments are subject to an “excess parachute payment” excise tax. We believed at the time these agreements were entered into that tax gross-up payments were an appropriate component of executive compensation so that the recipient could receive the benefit of the intended compensation without regard to the complexity of the calculations of “excess parachute payments” and because the payment would be limited to two times annual compensation and benefits, rather than the higher levels generally permitted by IRC before the excise tax is imposed. We have a policy that mandates any future amendments to these retention agreements meeting specific criteria must remove these gross-up payments and that no gross-up payments be included in any new retention agreements.

In addition, the agreements with Mr. Ungaro and Mr. Henry each provide that, for a one-month period beginning six months following a Change of Control, he can resign and receive the benefits under his Agreement if at such time he no longer holds his same position and reporting relationship at a company registered under the Exchange Act as he held with us prior to the Change of Control. This was added as a competitive provision and balanced the key nature of their current positions with a publicly-held company, the loss of which constitutes a substantial diminution of job responsibilities and duties, and the provision of an appropriate period following a Change of Control to permit negotiations as to their respective positions, if any, with the new controlling entity.

Stock Option Plans and Restricted Stock Agreements.    Our stock option plans and restricted stock agreements (other than the restricted stock agreements reflecting the Performance Vesting Restricted Stock Awards) provide that if Cray is sold and the existing options and restricted stock are not continued or assumed by the successor entity, or paid out an amount equal to the excess of the fair market value over the exercise price or purchase price, then each optionee would have the opportunity to exercise his or her options in full, including any portion not then vested, and the options would terminate upon the sale becoming effective, and the restricted stock would vest in full. We believe that acceleration of vesting of options and restricted stock is appropriate when the options and restricted stock grants are not continued or assumed by the successor company or paid out an amount equal to the excess of the fair market value over the exercise price or purchase price, as the recipient has not received the full contemplated benefit of the equity award due to circumstances beyond the recipient’s control. In addition, our restricted stock agreements (other than the restricted stock agreements reflecting the Performance Vesting Restricted Stock Awards) generally provide that if the holder’sfor certain employment is terminated without Cause termination and/or for Good Reason following a change ofin control or dies or suffers a disability, all restricted shares not then vested shall immediately vest. In addition, if a Named Executive Officer has held restricted stock for 18 months and his or her employmentbenefits. Each is terminated for any reason other than Cause, then the Named Executive Officer receives a pro-rata portion of the unvested shares based on the time period he has held the restricted stock compared to the four-year vesting period.

The Executive Severance Policy, the Management Retention Agreements and the stock option plans and restricted stock agreements (other than the restricted stock agreements reflecting the Performance Vesting Restricted Stock Awards) are described in more detail under “Termination of Employment and Change of Control Arrangements — Narrative to the Termination of Employment and Change of Control Payments Table” below.

Retirement Plans

Our only retirement plan for all U.S. employees, including the Named Executive Officers, is a qualified 401(k) plan under which employees may contribute a portion of their salary on a pre-tax basis. Participants may invest in a limited number of mutual funds, and may sell, but may not direct the purchase of, shares of our common stock. For 2013,2015, we matched 12.5%20% of theeach participant’s total 20132015 contributions in cash.

We do not have anya pension plan for any of our U.S. employees, including our Named Executive Officers. We do not have any plan for any of our Named Executive Officers or other employees that provides for the deferral of compensation on a qualified or non-qualified basis under the IRC other than our 401(k) Plan.

Additional Benefits and Perquisites

We have health and welfare plans available on a non-discriminatory basis to all employees in the United States designed to meet the health and welfare needs of our employees and their families and to provide a total competitive compensation package. We provide these benefits to the Named Executive Officers and other senior officers on the same terms and conditions as provided to all other eligible employees:

We do not provide benefits or perquisites for the Named Executive Officers or other senior officers that are not available on the same terms to our employees generally.

CEOChief Executive Officer Stock Ownership Guidelines.    We have stock ownership guidelines for our Chief Executive Officer in furtherance of our goal of aligning the interests of our Chief Executive Officer with those of our stockholders.shareholders. Under the guidelines, our Chief Executive Officer is expected to hold 200,000 vested shares of our common stock, which amount represented, when we adopted this guideline, at least three (3) times the value of his then-current base salary based on the closing stock price of our stock as of December 31, 2010 (this amount is greater than three (3) times his current base salary based on the closing price per share of our common stock on December 31, 2013)2015), within the later of five years from appointment as Chief Executive Officer and February 2016.

Compensation Recovery.    We have a recoupment or “clawback” policy for cash and equity incentive awards paid to executive officers. The policy provides that if an executive officer’s actual compensation was based upon the achievement of financial results that were subsequently the subject of a substantial restatement of our financial statements and the executive officer’s fraud or intentional illegal conduct materially contributed to that financial restatement, then, in addition to any other remedies available to us under applicable law, to the extent permitted by law and as the Board determines appropriate, we may:

Under the policy, it is a requirement that the individual was an executive officer when the compensation was granted or received and that the financial restatement resulted in greater compensation than would have otherwise been received.

The Executive Compensation Process

The Compensation Committee determines base salary, the level of target awards under our annual cash incentive plan, including the “balanced scorecard” goals and objectives described below, and the number and type of equity grants to be awarded under our long-term equity incentive plans for our senior officers during the

year. In making these determinations, the Compensation Committee considers our corporate goals, business plan and objectives for the year, reviews analyses from our independent compensation consultant, Mercer, and consults with our Chief Executive Officer, when appropriate. For its 2015 compensation decisions, the Compensation Committee considered the Mercer analyses described below to contextualize our overall total compensation approach and general market competitiveness. The Compensation Committee also analyzed compensation payable by companies that we consider to be in our peer group and by other companies with which we generally compete for hiring executives. The Compensation Committee also considered the roles, responsibilities and specialized expertise of the Named Executive Officers, including our Chief Executive Officer and that competition for our Named Executive Officers generally comes from much larger companies with significantly greater resources.

Role and Authority of the Compensation Committee

The current members of the Compensation Committee are Mr. Schireson (Chair), Mr. Kiely, Ms. Narodick and Mr. Turner. Mr. Richards served on the Compensation Committee as a member and also served as its Chairman from June 10, 2015 until his death in November 2015. On November 20, 2015, the Board appointed Ms. Narodick to the Compensation Committee and named Mr. Schireson as its Chairman. Mr. Turner was appointed to the Compensation Committee on April 18, 2016. The Board has determined that each individual who served on the Compensation Committee in 2015 and each current member of the Compensation Committee is “independent,” as that term is defined in NASDAQ rules and regulations, and an “outside director” within the meaning of Section 162(m) of the IRC and a “non-employee director” as defined in Rule 16b-3 under the Exchange Act. During 2015, the Compensation Committee met in person or by telephone five times.

The Compensation Committee assists our Board in fulfilling its responsibilities for the oversight of our compensation policies, plans and benefit programs, the compensation of our Chief Executive Officer and other senior officers, and the administration of our equity compensation plans. After reviewing competitive market data, expectations for the position, our corporate goals, business plan and objectives for the year and our prior performance, the Compensation Committee determines base salary, the level of target awards under our annual cash incentive plan, including the balanced scorecard goals and objectives, and the number and type of equity grants to be awarded under our long-term equity incentive plans for our senior officers during that year. The Compensation Committee has the authority to determine the annual compensation for our senior officers, subject to any approval by the full Board which the Compensation Committee or legal counsel determines to be desirable or that is required by applicable law or the listing standards of The NASDAQ Stock Market.

The Compensation Committee also: determines the policy for awarding stock options and/or restricted stock units to new hires who are not senior officers; makes grants of stock options and/or restricted stock units to other employees; evaluates risks, if any, associated with our compensation programs; works with the Board in overseeing our 401(k) Plan; periodically reviews our staffing, including open positions and turnover; receives reports on our health and safety records and any equal employment opportunity claims, investigations and reports; and considers our medical and other health benefits, including potential changes and enhancements, from both a cost and a competitive perspective.

Role of the Chief Executive Officer and Management

The Compensation Committee confers regularly with Mr. Ungaro, our Chief Executive Officer, and other senior officers and members of our Human Resources department regarding the structure and effectiveness of our compensation plans and proposals for changes to our compensation programs. As members of our Board, Compensation Committee members obtain information regarding our tactical and strategic objectives, goals, operational and financial results, our annual financial plan and the outlook regarding our future performance. The Compensation Committee meets twice each year with Mr. Ungaro to review his performance and at least once a year to review his evaluation of the performance of other senior officers, and annually to review his recommendations for the compensation of the other senior officers, including the other Named Executive Officers. Mr. Ungaro’s recommendations cover base salary, the structure of the annual cash incentive plan, including target awards and performance goals and objectives for each senior officer and the level and form of equity grants.

Role of Compensation Consultants

The Compensation Committee retained Mercer to review our compensation programs for senior officers, advise the Compensation Committee regarding total compensation philosophy, define the applicable market and conduct benchmarking analyses and provide continuing insight into and education on executive compensation trends and practices. The Compensation Committee actively seeks an independent broad view of current compensation levels, practices and programs, particularly in the high-technology industry. Mercer reported directly to the Compensation Committee and has not performed any services for our management either prior to or since its engagement by the Compensation Committee. The total fees paid to Mercer for 2015 were $68,450. During 2015, the Compensation Committee reviewed the services of Mercer and the fees provided to Mercer relative to Mercer’s revenues. Based on the foregoing, and other factors relating to Mercer’s independence, the Compensation Committee confirmed that Mercer was an independent compensation advisor to the Compensation Committee and that its engagement did not present any conflicts of interest.

Securities Trading Policies

Our securities trading policy includes that, except for trades pursuant to approved Rule 10b5-1 plans, directors, officers and employees may not trade in Cray securities while possessing material nonpublic information concerning Cray or trade in Cray securities outside of the applicable trading windows. Our securities trading policy further includes that directors, officers and employees may not purchase or sell puts or calls to sell or buy our common stock, engage in short sales, put options, call options, or any other hedging transactions with respect to our common stock, or buy our common stock on margin or pledge shares of our common stock. Except for trades pursuant to approved Rule 10b5-1 plans, our policy restricts trading in Cray securities by directors, officers and employees to open window periods following the widespread public release of our quarterly and annual financial results.

Tax Deductibility

Section 162(m) of the IRC limits to $1$1.0 million per person the amount that we may deduct for compensation paid in any one year to our Chief Executive Officer and certain of our most highly compensated officers.officers, unless certain requirements are met. This limitation does not apply, however, to “performance-based” compensation, as defined in the IRC. Our stock options generally qualify as “performance-based” compensation, except for incentive stock options. Payments to our Chief Executive OfficerWe anticipate that the compensation income paid by Cray realized upon the exercise of qualifying stock options may be deductible. Compensation income paid by Cray realized upon the settlement of restricted stock units granted under a shareholder-approved equity incentive plan may be deductible if certain pre-existing performance criteria and certain other requirements of our most highly compensated officers under our annualSection 162(m) of the IRC are satisfied. In addition, compensation income paid by Cray as a cash incentive plan and our outstanding restricted stock grants dobonus is generally not qualify as “performance-based” compensation and are not deductibleanticipated to the extent that the $1 million limit is exceeded.be fully deductible. The deductibility of some types of compensation payments depends upon the timing of the awards and the vesting or exercise of previously granted rights. Interpretations of and changes in applicable tax laws and regulations, as well as other factors beyond our control, also can affect deductibility of compensation. Although deductibility of compensation is preferred, tax deductibility is not a primary objective of our compensation programs, particularly given our considerable net loss carry-forward position for U.S. tax purposes. Rather, we maintain the flexibility to structure our compensation programs in ways that promote the best interests of our shareholders.

Risk from Compensation Policies and Practices

The Compensation Committee reviews our compensation policies and practices to determine areas of resulting risk and the actions that we have taken, or should take, to mitigate any such identified risk. Based on the Compensation Committee’s review of our compensation policies and practices, we do not believe that any risks relating from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on our business. Additional information on the committee’s analysis of compensation-related risk is set forth above under “The Board of Directors — Risk Considerations in Our Compensation Program.”

Compensation Committee Report

The Compensation Committee is responsible for overseeing our compensation policies, plans and benefits program, the compensation of the Chief Executive Officer and other senior officers and the administration of our equity compensation plans. As set forth in the Compensation Committee’s charter, which can be found at:www.cray.com under “About Cray“Company — Company Information — Investors — Corporate Governance,” the Compensation Committee acts only in an oversight capacity, and relies on the work and assurances of management and outside advisers that the Compensation Committee retains. The Compensation Committee believes it has satisfied its charter responsibilities for 2013.2015.

The Compensation Committee has worked with management for the past several years to develop a systematic compensation philosophy and structure. The Compensation Committee retained Mercer to advise the Compensation Committee. The analysis and advice provided by Mercer formed the basis in many respects for the 20132015 executive compensation decisions as described in the foregoing Compensation Discussion and Analysis.

A second focus area of the Compensation Committee has been the structure and strength of our senior management team. Most of our current management team was hired in 2005, when Mr. Ungaro became President, or more recently, including key hires and promotions in 2008, 2009, 2011 and 2012. The Compensation Committee meets twice a year with Mr. Ungaro to review his performance as our Chief Executive Officer and to obtain his assessment of the strengths and weaknesses of the management team. The Compensation Committee believes that under Mr. Ungaro’s leadership, we have made great strides in a very competitive market and through difficult times.market. The Compensation Committee has worked with Mr. Ungaro to develop a strong “performance culture” at Cray. One aspect of that process has been emphasis on succession plans, identification of high potential, at-risk and retiring employees and efforts to improve the officers’ management and leadership skills within our management group. Another aspect, as is reflected in our compensation structure, is to add significant retention and incentive elements in long-term compensation awards to competitive base salaries, as discussed in the foregoing Compensation Discussion and Analysis.

The Compensation Committee has reviewed and discussed with management the above Compensation Discussion and Analysis. Based on that review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

The Compensation Committee

FrankMax L. Lederman,Schireson, Chair

John B. Jones, Jr.

Stephen C. Kiely

Stephen C. RichardsSally G. Narodick

Compensation Tables

The tables on the following pages describe, with respect to our Named Executive Officers, the 2013, 20122015, 2014 and 20112013 salaries, bonuses, incentive awards and other compensation reportable under SEC rules, plan-based awards granted in 2013,2015, values of outstanding equity awards as of year-end 2013,2015, exercises of stock options and vesting of restricted stock awards in 2013,2015, and potential payments upon termination of employment and following a Change of Control.

Summary Compensation

The following table summarizes the compensation for the indicated years for our Named Executive Officers for the year ended December 31, 2013.2015.

Summary Compensation Table