SGI files for bankruptcy

MOUNTAIN VIEW: Silicon Graphics announced that it has reached an agreement
with all of its senior secured bank lenders and holders of a significant amount
of its senior secured debt on terms of a reorganization plan that will reduce
its debt by approximately $250 million, simplifying its capital structure.

As part of this agreement with many of its major stakeholders, and as the
next step in its previously announced plan to reorganize its businesses, the
company and its US subsidiaries have filed voluntary petitions under chapter 11
of the U.S. Bankruptcy Code.

SGI's non-US subsidiaries, including European, Canadian, Mexican, South
American and Asia Pacific subsidiaries were not included in the filing; will
continue their business operations without supervision from the US courts; and
will not be subject to the requirements of chapter 11.

The company expects to file its Plan of Reorganization reflecting the
agreement shortly, and to emerge from Chapter 11 within six months.

"We want to assure our customers, our employees and our communities that
SGI is operating-business as usual," Dennis P. McKenna, the recently
appointed chairman and CEO of SGI, stated. "Our customers can continue to
rely on SGI for its mission-critical products, services, and support."

"We expect to proceed quickly and will emerge from these proceedings
with a significantly improved balance sheet and, as a result, greater operating
flexibility. I am confident in SGI's future. The new direction I have set is
comprehensive, the product portfolio we will unveil is expansive and our
dedication to customer satisfaction is unwavering," McKenna added.

Certain holders of the company's existing senior secured notes are providing
SGI with a $70 million financing facility. The senior secured notes represent a
majority of the company's total outstanding debt.

Subject to court approval, the proceeds from the financing together with cash
generated from daily operations and cash on hand, will be used to pay-down a
portion of SGI's pre-petition debt and to fund operating expenses including
post-petition supplier payments, employee wages and benefits, and other
operating expenses.

The agreement contemplates that the company's existing senior secured
bondholders will be converting their existing debt into the new equity of SGI
and, through a rights offering, will have the opportunity to purchase $50
million of additional new equity. The $50 million rights offering is being
backstopped by certain of these bondholders to ensure that the company raises
the full $50 million of new equity capital.

It is contemplated that the $50 million of new capital will be used to reduce
debt and further enhance the company's liquidity.

Upon confirmation of the plan, the new common stock of the company will be
issued to the holders of SGI's senior secured bonds in the manner described
above. All of SGI's existing common stock and the unsecured subordinated
debentures will be cancelled upon confirmation of the plan by the court and
receive no recovery.

Accordingly, the company believes that SGI's currently outstanding common
stock and unsecured subordinated debentures have no value.

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