Atari Software

7/29/2019 Atari Software

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EX-99.C.2 2 e60672a1exv99wcw2.htm EX-99(C)(2): DUFF & PHELPS, LLCPRESENTATION

Exhibit (c)(2)

FairnessAnalysisConfidentialP resentation to the SpecialCommittee of the Board of DirectorsApril 25, 2008 ST RI C T L Y C O N F I D E N T I A L


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Disclaimer The following pagescontain materialthatis beingprovided by Duff & Phelps, LLC(Duff & Phelps) to the SpecialCommittee of the Boardof Directors(the Committee) of Atari, Inc. (Atari or the Company) inthe contextof a meeting held to consider a proposed transaction by which InfogramesEntertainmentS.A.(I ESA or Buyer) willacquire allthe outstandingcommon stockof Atarinotowned by IESA (the Pr oposed Transaction). The accompanying materialwascompiled or prepared on aconfidentialbasis for the sole use of the Committee and notwith a view toward public disclosure. Because thismaterialw asprepared for use in the contextof an oralpre sentation to the Committee, which isfamiliar with the businessand affairsof Atar i,neither Atarinor Duff & Phelps, nor any of their respective legalor financialadvisorsor accountants, take any responsibility for the accuracy or c ompletenessof any of the materialif used by personsother than the Committee. These materialsare not intended to representan opinion butrather to serve asdiscussion materialsfor the Board to review and as a basisupon which Duff & Phelpsmay render an opinionastothe f airness, from a financialpointof view, to the stockholdersof the Company other thanIESA (the Public Shareholders) of the consideration to be received by such holdersin the Proposed Transaction. An opinionwould not i) addressthe meritsof the underlying businessdecision of Atarito enter into the Proposed Transaction;ii) constitute a r ecommendation to Atari, the Board of Directorsof Atari, the Committee, the stockholdersof Atari, or any other person asto how such person should vote or asto any other specific action thatshould be taken inconnectionwith the Proposed Transaction;or iii) create any fiduciary duty on Duff & Phelpsspartto any party. The information utilized inprepar ing thispresentation wasobtainedfrom Atari, public sources, andnon-public sources. Any estimatesand projec tionscontained herein have been prepared by the senior managementof Atariand

involve numerousand significantsubjective determinations, which may or may notprove to be correct. Duff & Phelpsdid notattemptto independently verify such information. Norepresentationor warranty, expressed or implied, ismade astothe accuracy or completeness of such information and nothing contained herein is, or shallbe relied upon as, a representation, whether asto the past or the future. No selected company or selected transaction used in our analysisisdirectly comparable to Atari, IESA, or the Proposed Transaction. STRICTLY CONFIDENTAL


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Assumptions, Qualificationsand Limiting ConditionsDuff & Phelpshasmade numerousassumptionswithre spectto industry performance, generalbusiness, marketand economic conditionsandother matters, many of whichare beyondthe control of any party involved in the Proposed Transaction. Our analysisisnecessarily based upon market, economic, financialand other conditionsasthey existand can be evaluated as of the date hereof. Duff & Phelpsassumed thatany estimates, evaluationsand projections( financialor otherwise) furnished to Duff & Phelpswer e reasonably prepared and based upon thebest currently available information and good faith judgmentof the person or personsfurnishing the same. Duff & Phelpsassumed thatallgovernmental, regulatory or other consentsand approvalsnecessary f or the consummation of the Proposed Transaction willbe obtained withoutany adverse effecton the Company or the contemplated benefitsexpected to be derived in the Proposed Transaction. Duff & Phelpsassumed withoutverification the accuracy and adequacy of the legaladvice given by counselto Atarion all legalmatterswith respect to the Proposed Transaction and assumedallproceduresrequired by law tobe taken inconnectionwiththe Pr oposed Transactionhave been,or willbe, duly, validly and timely taken and thatthe Proposed Transaction willbe consummated in a manner thatcompliesin all respectswith the applicable provisionsof the SecuritiesAc tof 1933, asamended, the SecuritiesExchange Act of 1934, asamended,and allother applicable statutes, rulesand regulations. Duff &Phelpsdid notmake any independentevaluation,appraisal or physicalinspection of either the Companysor IESA ssolvency or of any specific assetsor liabilities(contingentor otherw ise). Thispresentation should notbe construed asa valuation opinion, creditrating, solvency opinion, an analysisof either the Companysor IESAscreditworthiness or astaxa dvice or asaccountingadvice. Duff & Phelpshasnotbeen re quested to, and did not, (a) negotiate the

termsof the Proposed Transaction or (b) advise the Board of Directorsor any other party with respect to alternativesto the Proposed Transaction. Inaddition, Duff & Phelpsisnotexpressingany opinion asto the marketprice or value of the Companyscommon stockafter announcement of the Proposed Transaction. Duff & Phelpsrelied upon the factthatthe Board of Directors of the Company, the Committee and the Company have been advised by counselasto alllegal matterswith respectto the Proposed Transaction, including whether allprocedures required by law to be taken in connection with the Proposed Transaction have been duly, validly and timely taken;and Duff & Phelpshasnot made, and assumesno responsibility to make, any representation, or render any opinion, asto any legalmatter. ST R I CT L Y CO N F I D E N T I A L
http://www.sec.gov/Archives/edgar/data/1002607/000095012308008807/e60672a1exv99wcw2.htmhttp://www.sec.gov/Archives/edgar/data/1002607/000095012308008807/e60672a1exv99wcw2.htmhttp://www.sec.gov/Archives/edgar/data/1002607/000095012308008807/e60672a1exv99wcw2.htmhttp://www.sec.gov/Archives/edgar/data/1002607/000095012308008807/e60672a1exv99wcw2.htm


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Table of Contents

I.Overview of Proposed Transaction

II.ObservationsRegarding Atari

III.Public MarketValue

IV.Selected Public Company Analysis

V.Selected M&A Transaction Analysis(Valuation Multiples)

VI.Selected M&A Transaction Analysis(PremiumsPaid)

VII.Net AssetValue Analysis

VIII. Liquidation Analysis

4 ST RI CT L Y CO N F I D E N T I A L


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I.Overview of Proposed Transaction ST RI C T L Y C O N FI D E N T I A L


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Overview of Proposed Transaction Transaction Overview On March6, 2008, Atari, Inc. (Atari or the Company) received a non-binding expressionof intentfrom InfogramesEntertainmentS.A. and itsaffiliates( IESA or the Buyer), whichowns51.6%of the outstanding sharesof Atari, to acquire allthe outstanding common stock of Atarinot owned by IESA for a per shar e cash amountof $1.68 (the Proposed Transaction).On March 5, 2008, the closing price per share of the Ataricommon stockwas$1.68. On March11, 2008, Duff & Phelps, LLC(Duff & Phelps) wasengaged asfinancial advisor to provide an opinion to the SpecialCommittee of the Board of Directorsof Atari(the Special Committee) asto the fairness, from a financialpointof view , to the stockholdersof the Company other than IESA (thePublic Shareholders) of the c onsideration to be received by such holdersin the Proposed Transaction. On behalf of the SpecialCommittee, Duff & Phelpsheld meetingsand discussionswith AtarimanagementandAlixPartners,the Companysrestructuring advisors, undertook initialevaluation of the Company and reached preliminary valuation findings. Atthe directionof the SpecialCommittee, Duff & Phelpssubsequently engagedinlimiteddiscussionswithLazard, Ltd. (Lazard),f inancialadvisor to IESA, with regard to the per share cash consideration of $1.68 (Per Share Cash Consideration). On March18, 2008, Lazard informed Duff & PhelpsthatIESA wasnotwilling to increase the Pe r Share Cash Consideration. Lazard communicated on behalf of IESA thatthe per share price of the common stockhad increased in the few daysbefore the announcementof the Proposed Transaction and the Per Share CashConsideration represented a pre mium to the share price five daysand 30 daysprior to the announcement. After reviewing the Per Share Cash Consideration with the SpecialCommittee and MilbankTweed Hadley McCloy LLP (Milbank), legaladvisor to the SpecialCommittee, andatthe direc tion of the SpecialCommittee, Milbank

engaged in discussionswith legalcounselof IESA to request clarification on the following:IESAsintention with respectto funding the Companysoperating lossesand workingcapitalneedsthroughthe completionof the Proposed Transaction;IESAsintention with respectto obtaining an extension on the forbearance agreement with BlueBay AssetManagementplc (BlueBay); and The minimum shareholder approvalIESA isrequiring to complete the Proposed Transaction. On April 11, 2008, Atarireceived the firstdraft of the merger agreementeffec ting the Proposed Transaction. On April21, 2008, Atarireceived the firstdraftof the cre ditagreementproviding financialsupportthrough closing. Between April 11 and April24, Atar i, IESA, BlueBay, the Committee and their respective counselengaged in numerousdiscussions and draftrevisionsof the transaction documents. ST RI C T L Y CO N FI D E N T I A L


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Overview of Proposed Transaction Summary of Due Diligence In connection withour analysis, we have made such reviews, analysesand inquiries, aswe have deemednec essary andappropriate under the circumstances. Duff & Phelpsalsotookinto account itsassessmentof general economic, marketand financialconditions, aswell asits experience in securitiesand businessvaluation, in general, and with respect to similar transactions, in particular. Our due diligence and analysiswith regardsto the Proposed Transaction included, butwasnot limited to, the itemssummarized below.Discussed the operations,financialconditions, future prospectsand proje cted operationsand performance of the Company and the Proposed Transactionwiththe managementof the Company;Reviewed a draftof the Merger Agreement dated April23, 2008;Reviewed a draftof the CreditAgreementdated April22, 2008;Reviewed certain publicly available financialstatementsa nd other businessandfinancialinformation of the Company andIESA,respectively,and the industriesin which they operate;Reviewed certain internalfinancialstatementsand other financialand operating data concerningthe Company, whichthe Company hasrespectively identifiedasbeingthe mostcurrent financialstatementsa vailable;Reviewed certain financialforecasts, aswell asinformation relating to certain strategic, financialand operationalbenefitsanticipated from the Proposed Transaction, allasprepared by the managementof the Company;Reviewed the historicaltrading price and trading volume of the Company Common Stock, and the publicly traded securitiesof certa in other companiesthatwe deemed relevant;Compared the financialperformance of the Company and the pricesand trading activity of the Company Common Stockwith those of certain other publicly tradedcompaniesthat we deemed relevant;Compared certain financialtermsof the ProposedTransaction to financialterms,to the extentpublicly available, of certain other businesscombination transactionsthatwe

deemed relevant;andConducted such other analysesandconsidered such other factorsas we deemed appropriate. ST RI CT L Y CO N FI D E N T I A L


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Overview of Proposed Transaction FairnessConsiderationsIn determining whether the Per Share Cash Consideration to be received by the Public Shareholdersinthe ProposedTransactionbe fair , from a financialpointof view, tothe Public Shareholders, Duff & Phelps considered, among other factors:The current, historicaland projected financialperf ormance of the Company based on a review of the Companyswellasour discussionswith the Companysmanagement andtheir advisors;The Per Share Cash Consideration relative to recentand historic trading pricesof Atar icommon stock;The adequacy of the premium implied by the Per Share Cash Consideration relative to the premiumspaid in selected public-to-private transactions;andSeveralvaluation methodologies, including: Selected public company analysis Selected M&A transaction analysis(valuation multiples) Netassetvalue analysis Liquidation analysisThe Companyscurrentcashand liquidity positionand its prospectsfor obtaining additionalcashinfusionsfrom personsother affiliates.In connection with the negotiation of a merger, IESA and the Company are negotiating a creditagreementwhichwill Atarisliquidity constraints. A discounted cash flow (DCF) analysiswasnotutilized asmanagementdoes notprepare projectionspastone year. ST R I CT L Y CO N FI DE N T I A L


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Overview of Proposed Transaction Valuation BenchmarksDuff & Phelpsconsidered several valuation approachesto establish valuation benchmarksagainstwhichtocompar e the Per Share CashConsideration: Public MarketValuationDuff & Phelpsanalyzed the closing price and trading volume of Ataricommon stockover the past12 months. Thisanalysis wasused to determine the range of fair marketvalue the mar kethasascribed to the common stockprior to and on the date of the announcementof the Proposed Transaction. Selected Public Company AnalysisDuff & Phelpsreviewed valuation multiplesof selected publicly traded companiesand applied valuation multiplesto Atarisselected rec entoperating results. The Companysnegative EBITDA limited the relevance of the methodology to the application of enterprise valueto revenue multiplesfor the selected companies.SelectedM&A TransactionAnalysis(MultiplesValuation)Duff & Phelpsreviewed valuation multiplesof selected M&A transactionsa nd appliedvaluation multiplesto Atarisselected rece ntoperating results. The Companysnegative EBITDA limited the relevance of the methodology tothe applicationof enterprise value torevenue multiplesfor the selectedM&A transactions. SelectedM&A Transaction Analysis(PremiumsPaid)Duff & Phelpsreviewed the premiumspaid in public to private transactionsin which the majority shareholder purchased the remaining minority equity stake. Duff & Phelpscompared the premiumsover the 1-day, 5-day and 30-day trading price prior to the announcementof such transactionsto the implied premium in the Proposed Transaction. Premiumspaid analysisisrelevant butlimited by the Companysdependence on IESA, the majority shareholder in the Company. NetAssetValue AnalysisDuff & Phelpsreviewed the Companysaudited balance sheetasofDecember 31, 2007 and the Companyspreliminary internalbalance sheetasof March 31, 2008 todetermine the netassetvalue of Atariand added the fair market value of the

Companysintellectualproperty.I n determining the fair marketvalue of the intellectualproperty, Duff & Phelpsrelied, withindependentverification thereof, oninformationprovidedby management, including thirdparty appraisals. LiquidationAnalysisSince the Company isin violation of itsweekly cash flow covenantson itsSenior Secured Creditfacility provided by BlueBay, Duff & Phelpsalso analyzed the potential recoveriesby holders of Atariscommon stockin a Chapter 11 bankruptcy. ST R I CT L Y CO N FI D E N T I A L


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II.ObservationsRegarding Atari S T RI CT L Y CO N F I D E N T I A L


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ObservationsRegarding AtariCompany Overview Founded in 1992 asGT Interactive Software Corporation and headquartered in New York, NY, the Company completed aninitialpublic offering in1996. In1999, IESA, a Frenchcor porationlistedonthe Euronext, acquired beneficial ownership of a majority share of the outstanding common stockof the Company and subsequently renamed the Company Infogrames, Inc. In May2003, the Company changed itsname to Atari, Inc. and began trading on the Nasdaq under the tic ker ATAR. IESA currently owns 51.6% of Atariscommon stock. Atari engagesin the publishing, development, and distribution of video game software primarily in North America. Ataridistributes video gamesfor variousplatforms, including Sony PlayStation 2, PlayStation 3 and PSP, Nintendo Wiiand DS, and MicrosoftXboxandXbox 360, aswella sfor personalcomputers. The Company hasobtained the right touse the Atari brand name under a license granted from Atari Interactive, Inc., an IESAsubsidiary, thatexpiresin 2013. Two other license agreementsexpire in the nextfive yea rs:The Dragon BallZ license agreement, whichisAtarislargesttitle andr epresented approximately 28% of totalnetrevenue inFY2007, expiresinJanuary 2010;IESA distribution agreementsrepresented 56% of totalnetr evenue in FY2007. The agreementsinclude the Old Distribution Agreement, enacted in1999, which governsthe distribution of Atarisclassic game library aswell asa Short-Form Distribution Agreement, enacted in 2007, governing new releases. The Old Distribution Agreementwould terminate if IESA reduced itsholdingsin Atarito below 25%. The Short-Form Distribution Agreement expiresin December 2010;Until2005, Atari wasactively involved in developing video games and infinancing developmentof video gamesby independentdevelopers, which Atariwould publish and distribute under licensesfrom the developers. Beginningin 2005, because of cash constraints, Atarisubstantially reduced itsinvolvementin

developmentof video gamesand announced plansto divestitsinternal developmentstudios. Source:SECfilings, equity research, BloombergandAtariboar dpresentationsST RI CT L Y CO N FI D E N T I A L


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ObservationsRegarding AtariCompany Overview (Continued) During fiscaly ears2006 and 2007, Atarisold a number of intellectualpropertiesanddeve lopmentfacilitiesin order toobtaincashto fund operations. During2007, Atariraisedapproximately $35.0 million through the sale of the rightsto itsTest Driver gamesand certain other intellectualproperty , and the sale of its Reflections and Shiny studios. By the end of 2007 Atarino longer owned any developmentstudios. Atarialso exited the software distribution businesswhich further contributed to the Companysdecreasing revenue. The reduction of developmentactivitiessignificantly reduced the number of gamesthat Ataripublished. Atarihasprojected FY2008 net revenue of $78.6 million after r egisteringLTMnet revenue as of December 31, 2007 of $91.8 million. During FY2007, netre venue from publishing activitieswere $104.0 million, compared with$153.6 million during FY2006 and $289.6million during FY2005. Ataris budgetfor fiscalyear 2009 projectsnetrevenue of $126.5 million and EBITDA of $2.0 million.The budgetishighly dependenton IESAsrelease schedule and the successof e achnew title release. The budgetwillrequire fundingof asmuchas$18millionandthe Companysability to obtain additionalfinancing isuncer tain. The Company isengaged in a multifaceted relationship with the Parent, which resultsin the majority of Atarisproductcoming from IESA. Historically, Atarihasa lso relied on IESA for funding which hascome in the form of the sale of production studiosand intellectualproperty to IESA aswellasloan facilitiesfrom IESAslargest shareholder, BlueBay. Source:SECfilings, equity research, Bloomberg and Atariboard presentationsST RI C T L Y CO N FI D E N T I A L


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ObservationsRegarding AtariChronology of RecentEvents(April2007YTD 2008) April5, 2007Atariannouncesthat itsChairman/ActingCFO BrunoBonnellisdepar ting. Bonnellsdeparture from Ataricomesat the same time ashisdeparture as CEO and director of IESA. May 1,2007Atariannouncesa 20% workforce re duction. May 22, 2007Atarielects Arturo Rodriguez to serve asacting Chief FinancialOff icer untilsomebody iselected to serve permanently in thatcapac ity. July 24, 2007The Board of Directorselects MichaelG. Corrigan, a member of the Board since November 2005, to serve asitsnon-executive Chairman.September 7, 2007Atariannouncesthe resignation of MarcelNicolaia sSenior Vice President, ProductDevelopmentOperationsand Chief Technology Officer. September 18, 2007The Company filesitsSECForm 10-K for the period endingMarch 31, 2007 in which Deloitte & Touche LLP givesa qualified opinion expressing doubtthatthe Company can continue asa going concern.October 1,2007Guggenheim Corporate Funding LLC(Guggenheim) providesa waiver of covenantdefaultsa sof June30, 2007 and reducesthe aggregate borrowingcommitmentof the revolvingline of credit to$3 million(downfrom $10 million). October 5,2007JamesAckerly, Ronald C. Bernard,MichaelG. Corrigan,DennisGuye nnotand Ann E. Kronen are removed from the Board of Directorsof Atariby action taken by IESA. October 10, 2007CurtisSolsvig III isappointed AtarisChief Restructuring Officer and AlixPartners, a firm atwhich Mr.Solsvig isa Managing Director, isretained to advise the Company on itsoperationalrestructuring initiatives. October 15, 2007Atariannouncesthe appointmentof Wendell Adair, Eugene I. Davis, JamesB. Shein, and Bradley E. Scher asindependentboard members. In conjunction with their respective appointmentsto Ataris Board of Directors, MessrsAdair, Davis, Shein and Scher are appointed to serve on the boardsSpecial Committee. October18, 2007Atariconsents

to the transfer of the loans outstanding of $3 million from Guggenheim to an affiliate of BlueBay. October 23, 2007BlueBay amendsthe credit agreement, increasing Atarisborrowingcapac ity to$10million. ST RI CT L Y CO N F I D E N T I A L


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ObservationsRegarding AtariChronology of RecentEvents(April2007YTD 2008) November 13, 2007Atariannouncesa business restructuringpla ntofocusthe Company solely onpublishinganddistribution. The Company alsoannouncedlicense agree mentswith IESA regarding the TestDrive franchise granting IESA exclusive rightsto the fra nchise. Atarialso announcesthe removalof David Pierce asCEO.CurtisSolsvig, currently the Chief Restructuring Office r, assumesthe role of Interim CEO. December 10, 2007Atariamends itsBlueBay creditfa cility, increasing Atarisborrowing capacity from $10million to $14 million. February 12, 2008Atarireports earningsfor the third quarter FY2008 and nine monthsended December 31, 2007. Despite decreasing revenue, Atariscost-cutting effortsresulted in slightly improved operatingloss(quarter- over-quarter results). Asa resultof c ovenantviolations, the Company entersinto a forbearance agreementwith BlueBay. March 6, 2008Atarirece ivesa letter from IESAregarding a non-binding expression of intenttoacquire the outstandingcommon stockof Atarinotowned by IESA for a per share cash price of $1.68. March 24, 2008Atarireceives a Staff DeterminationLetter from the NasdaqListingQualificationsDepartme ntstating thatAtarihas notgained compliance with the requirementsof Nasdaq Marketplace Rule 4450(b)(3), and thatitssecuritiesare there fore subjectto delisting from The Nasdaq GlobalMarket. Atarihasr equested a hearing and untila determinationisreached, the Companysshares will continue to trade on the Nasdaq. March26, 2008Atariannouncesthat ThomasSchmider, Co-Founder and COO of IESA, resigned asa member of AtarisBoard of Direc torseffective March21, 2008. March 31, 2008 Atariannouncesthe appointmentof Jim Wilson asitsCEO andPresident, effective immediately. Mr.Wilson isassuming the responsibilitiesof CEO which have been overseen by CurtisG. Solsvig III, AtariInc.sChief Restr ucturingOfficer since October 2007. April4,

2008Atariannouncesthat Curtis G. Solsvig III resigned ascompanysChief Restructuring Officer effec tive April2, 2008. Mr. Solsvigwillcontinue toprovide servicestothe company pursuantto an engagementletter previously enteredintobetwe enAtariand AlixPar tnersLLP, which wasretained to assistthe company through itsrestructuring process. April 22, 2008Atariannouncesthat Jean-MichelPerbet, Deputy COO of IESA and Chairman of IESA Europe,resigned asa member of AtarisBoard of Directorseffective April16, 2008. April24, 2008Atari, IESA, BlueBay, the Committee and their respective counselengaged in numerousdiscussionsand draftr evisionsof the transaction documents. ST RI CT L Y CO N FI D E N T I A L


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ObservationsRegarding AtariFinancialSummary The deterioration of Atarisbusinesshasre sulted from increased competition, a weakproductpipeline, anindustry-wide decline inaverage sellingprice for game software, lackof anon-line presence andlossof internal talentand leadership. Atariscurrent budgetfor FY2009 isdependenton the timely release and successof new gamesand the Companysability to secure additionalfinancing.Atari, Inc. Historicaland Projected FinancialPerf ormance FiscalYear EndedMarch 31, ($ in millions) FY 2003A FY 2004A FY 2005A FY 2006A FY 2007A LTM(U) FY 2008E FY 2009B Net Revenue $506.5 $468.9 $343.8 $206.8 $122.3 $91.8 $79.2 $124.2 Growth na (7.4%) (26.7%) (39.8%) (40.9%) ( 24.9%) (35.2%) 35.3% Costof GoodsSold 257.6 260.1 203.6136.7 74.8 52.7 41.4 80.4 Gross Profit248.9 208.8 140.2 70.1 47.5 39.1 37.9 43.8 GrossMargin49.1% 44.5% 40.8% 33.9% 38.8% 42.6% 47.8% 35.2% S, G & A 129.5 117.7 94.0 73.4 47.1 39.7 39.243.2 R& D 75.4 78.258.3 51.9 27.7 20.1 9.4 0.5 D & A 7.5 9.2 7.05.2 3.0 1.9 3.8 2.7 ______TotalOperating Expenses212.4 205.1 159.3 130.5 77.861.7 52.4 46.5EBIT 36.53.7(19.1) (60.4) (30.3) (22.6) (14.5) (2.7) EBIT Mar gin7.2% 0.8% (5.6%) (29.2%) (24.8%) (24.6%) (18.4%) ( 2.2%) EBITDA $44.0 $13.0 ($12.1) ($55.1) ($27.3) ($20.8) ($12.3) $0.2 EBITDA Margin 8.7% 2.8% (3.5%) (26.6%) ( 22.3%) (22.7%) (15.6%) 0.2% LTM= Asof D ecember 31, 2007 (3rd Quarter FY2008) EBITDA = Earningsbefore intere st, taxes, depreciation and amortization, adjusted for one- time gainsor losseson the sa le of assetsand investments, discontinued operations, restructuring expenses and goodwillwrite-downs. In FY2007, the Company incurr ed a $54.1 milliongoodwillwrite-down. Source: Company SECFilings and Company ManagementprojectionsS T RI CT L Y CO N F I D E N T I A L


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ObservationsRegarding AtariBalance SheetSummary Asof December31, 2007, Atarisworking capitalwasnegative $10.3million and itsstockholdersequity wasnegative $16.8 million. Asa resultof substantialopera tinglossesandsignificantc ashrequirementsto fund working capital, Atariis liquidity constrained and itsability to secure additional financing isuncertain. Atari, Inc. Balance SheetSummary ( $ in millions) December 31,March 31, December 31, March 31, 2006 2007 2007 2008 (Estimated) Cash $ 3.6 $ 7.6 $ 5.4 $ 10.0 Receivables, net23.2 9.5 16.2 (0.3) Inventories13.4 8.8 7.4 6.5 Prepaid Expensesand Other CurrentAssets16.3 9.7 6.0 7.7 Total CurrentAssets56.5 35.6 34.9 24.0NetProperty, Plant& Equipment3.84.2 6.3 6.4 Goodwill and Intangibles55 - - -Other Long-Term Assets3.93.0 2.2 2.1TotalAssets $ 119.5 $42.8 $ 43.5 $ 32.6 AccountsPayable $ 13.3 $ 11.0$ 10.6 $ 9.7 AccruedLiabilities15.413.4 11.56.8 RoyaltiesPayable 3.3 4.3 3.8 2.7 CreditFacility 7.014.0 14.0Due to Related Parties9.95.7 5.3 2.7 Other CurrentLiabilities0.40.9 TotalCurrentLiabilities49.3 34.4 45.2 36.8 Due to Related Parties, Long-Term 1.4 1.9 3.03.6 Long-Term DeferredRent6.77.1RelatedPar ty License Advance5.15.4Other Long-Term Liabilities2.0 3.4 0.3 -TotalLiabilities52.7 39.7 60.3 52.9 StockholdersEquity 66.8 3.1 (16.8) (20.3) TotalLiabilities & StockholdersEquity $119.5 $ 42.8 $ 43.5 $ 32.6 Source:Company SECFilings, ManagementEstimatesST RI CT L Y CO N FI D E N T I A L


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ObservationsRegarding AtariFY2009 Monthly BudgetAtarisFY2009 budgetishighly dependenton Ataris(i)developmentpartners(principally IESA) r eleasing their respective game titlesontime andthe perf ormance of these titles, (ii) ability tostreamline itsoperations,( iii) ability to instillstability in many senior managementrolesand (iv) ability to secure additionalfinancing. Atari, Inc. Pr ojected FinancialPerformanceFY2009 Budgetby Month FiscalYear Ending March 31 ($ in thousands) April May June July August September October November December January February March TotalNetRevenue $3,417 $4,258 $29,707 $7,387 $4,055 $6,206 $10,216 $21,490 $8,839 $4,863$11,234 $12,505 $124,176GrowthOver Prior Year Period (11.6%) (0.8%) 1,223.0% 15.4% (15.4%) 194.8% 6.7% 24.1% (31.2%) (10.1%) 111.9% 350.9% 60.9% Costof GoodsSold 2,097 2,620 18,344 4,638 2,565 3,193 6,766 14,965 5,889 3,341 7,656 8,337 80,412 GrossProfit1,320 1,638 11,3632,749 1,490 3,0133,449 6,525 2,951 1,522 3,578 4,168 43,765 Gross Margin38.6% 38.5% 38.2% 37.2% 36.7% 48.5% 33.8% 30.4% 33.4% 31.3% 31.8% 33.3% 35.2% TotalOperatingExpenses2,690 4,1416,6943,8582,7554,2664,508 4,0733,1033,4473,854 3,11746,505 EBIT (1,371) (2,503) 4,669 (1,109) (1,265) (1,253) (1,059) 2,453 (152) (1,925) (276) 1,050 (2,741) EBIT Margin (40.1%) (58.8%) 15.7% (15.0%) (31.2%) (20.2%) (10.4%) 11.4% (1.7%) ( 39.6%) (2.5%) 8.4% (2.2%) EBITDA ($1,052) ($2,186) $4,982 ($800) ($1,040) ($1,031) ($840) $2,670 $64 ($1,717) ($69) $1,255 $237 EBITDA Margin (30.8%) (51.3%) 16.8% (10.8%) ( 25.6%) (16.6%) (8.2%) 12.4% 0.7% (35.3%) (0.6%) 10.0% 0.2% Source: Company ManagementST RI CT L Y CO N FI D E N T I A L


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ObservationsRegarding AtariSummary of Actual and Projected Cash Receiptsand DisbursementsAn analysisof projecte d cash receiptsanddisbursementsfor FY 2009through September 2008pre paredby the Company indicatestthe Company willneed to obtain additionalfunding asear ly asMay 2008.Cash funding requirementsare highestin June 2008 (negative $19 million). Atari, Inc. Cash Receipt/DisbursementSchedule ($ in thousands) December January February March April May June July AugustSeptember 2007 2008 2008 2008 2008 2008 2008 2008 2008 2008 Actual ActualActual ActualProjecte d Projected Projected Projected Projected Projected ReceiptsPublishing 7,398 11,545 11,948 978 2,194 1,0872,014 9,222 15,895 6,006 Licensing /Other 596 231 740 36 515 744 447 74 156 741 Related Party (Royalty /other) 323 755 265 93 443 1,007 975 334 335 441TotalReceipts8,317 12,531 12,953 1,107 3,1522,837 3,436 9,630 16,387 7,188DisbursementsManufacturing (COGS) 1,430 1,039 1,136352 1,040 3,899 1,976 1,479 2,975 2,823 Related Party (Royalty/Other) 1,900 4,00394400000 0 0Research & Development1,2281,022 17236 2,5522,126 898 50 5658Adver tising 538653744 859 380 523 1,214 1,912 2,469 1,407 Distribution/Freight277 470 336 25 303 254 282 264 408 286 Royalties3,146 0 1,071 38 242 829 81 40 2,213 0 Overhead 5,659 2,215 3,241 588 4,558 2,525 2,246 2,289 1,978 1,955 TotalDisbursements14,178 9,403 7,644 1,899 9,074 10,155 6,697 6,035 10,099 6,530 CashFlow (5,861) 3,128 5,309 (792) (5,922) (7,318) (3,261) 3,595 6,288 658 Cash Balance Beginning Cash Balance (4,393) (10,254)(7,126) (2,761) (2,561) (8,483) (15,801) (19,062) (15,466) (9,178) Cashflow from Operations(5,861) 3,128 5,309 (792) (5,922) (7,318) (3,261) 3,595 6,288658 Ending Cash (10,254) (7,126) (1,817) (3,553) (8,483) ( 15,801) (19,062) (15,466)(9,178) (8,520) Cash Fundingby month Cash Funding in aggregate 14,000 14,000 14,000 14,000

14,000 14,000 14,000 14,000 14,000 14,000 NetCash 3,746 6,874 12,183 10,447 5,517 (1,801) (5,062) (1,466) 4,822 5,480Source:Company ManagementNote:Thisanalysiswasder ivedfrom a weekly analysisperforme dby the Company anditsrestructuring advisors. ST RI CT L Y C O N FI D E N T I A L


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III.Public MarketValue S T R I CT L Y CO N FI D E N T I A L


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Public Market Value AtariCommon StockData Atari is a NASDAQ listed company with 13,477,920 sharesoutstanding. On April22nd, 2008, Ataricommonstockclosedat$1.50which is below IESAsPer Share CashConsiderationand downapproximately 61%from its52-weekhigh of $3.84. ATARI COMMON STOCK DATA APRIL 23, 2007 THROUGH AP RIL 22, 2008 Offer Price (March 6th, 2008) $1.68 Price Prior to Announcement$1.68 1-Day Premium 0.0% 5-Day Premium 6.3% 30-Day P remium 58.5% Closing Price on 4/22/2008 $1.50 52-WeekHigh Ended 4/22/2008 $3.84 52-WeekLow Ended 4/22/2008 $0.86 SharesOutstanding 13,477,920 Average Daily Trading Volume (3 mos.) 27,425InstitutionalO wnership 27.09% Insider Ownership 51.58% AnalystCoverage Wedbush Morgan Source:Bloomberg and CapitalIQ S T RI C T L Y CO N FI D E N T I A L


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Public Market Value AtariCommon StockData (Continued) Atarissharesar e thinly traded, with average daily trading volume in the lastthree monthsof 27,424In the lasttwelve months, Atarisshares have tradedabove andbelow Per Share CashConsideration and its volume weighted price was $1.45 Since the release of AtarismostrecentForm 10-Q on February 13, 2008 through April22nd, 2008, the Companysvolume share price is $1.55. $5 1,000 900 $4 800 February13,2008Atarirele asesits10-Q for the March 6, 2008IESAs700 (Thousands) periodending December offer for Atariof $1.68 $3 31, 2007 (firstnine per share announced 600 monthsof FY 2008) 500 Price $2 400 Volume $1.68 per share offer price 300 $1200 100 $- -4/23/2007 7/3/2007 9/13/2007 11/23/2007 2/6/2008 4/18/2008 Source:Bloomberg ST RI C T L Y CO N F I D E N T I A L


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IV.Selected Public Company AnalysisST RI CT L Y C O N FI D E N T I A L


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Selected Public Company AnalysisPublicly Traded Company Analysis Methodology Duff & Phelpsreviewedthe currenttra ding multiplesof six publicly tradedcompaniesthatDuff & Phelpsdeter mined tobe relevanttoits analysis. Duff & Phelpsanalyzed the LTMand projected revenuesand EBITDA for each of the publicly-traded companies. Duff & Phelpsthen analyzedthe peer groupstrading multiplesof enterprise value (EV) to their respective LTMand projected re venuesand EBITDA. EV iscalculated asthe sum of the equity market value (diluted sharesoutstanding multiplied by the currentstockprice) and net indebtedness. Duff & Phelpsused the following methodology to selectcompanies:Primary and Secondary SICCodes:7372 (prepackaged software), 5045(computers and computer Peripheralequipmentand software) a nd 7822 (motion picture and video tape distribution).Duff & Phelpsreviewed variousSECdocumentsand equity research reportsfor detailsre garding the nature of each selected companysbusinessand financialperformance. Duff & Phelpsexcluded those companieswith a marketcapitalization equalto or in excessof $1 billion. Sixcompanieswere selectedfa llingunder twocategories:Small-CapVideoGame Developers, Publishersand Distributors(Maje sco EntertainmentCo. and Midway GamesInc.)Packaged Media Distributors(Handleman Co., Image EntertainmentInc., Navarre Corp. and Source Interlink Companies, Inc.) None of the companiesutilized for comparative purposesin the following analysisis, of course, identical to Atari. Accordingly, a complete valuation analysiscannotbe limited to a quantitative review of the selected companiesand involvescomplex considerationsa nd judgmentsconcerning differencesin financialand operatingc haracteristicsof such companies, aswe llasother factors thatcould affecttheir value relative to thatof Atari. ST RI CT L Y CO N FI D E N T I A L


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Selected Public Company AnalysisPublicly Traded Company Analysis ConclusionDuff & Phelpscalculated an implied enterprise value of Atariby utilizing the enterprise value multiplesof selec tedPackagedMedia Distributors. These stepsyielded a per share equity value range of $0.38 to $1.75.Given the Companysdecision to reduce its involvementin the developmentof games, analysisof selected video game developers, publishersand distributorswasdeemed to be lessrele vant.EBITDA multiplesare notapplicable in thissituation asAtarihas negative EBITDA for the LTMperiod. Atari, Inc.Selected Public Company Analysis($ in 000sexceptEquity Value Per Share Outstanding) MultiplesSelected Enterprise Value Performance Measure Atari Low Median High Multiple Range Range Packaged Media DistributorsLTMRevenue 1 $91.8 0.06x 0.35x 0.64x 0.15x0.35x $13.8 $32.1 Enterprise Value Range $13.8$32.1 Less:NetDebt2 $8.6 $8.6 TotalEquity Value $5.2 -$23.5 Equity Value Per Share Oustanding 3 $0.38$1.75 1 Latesttwelve monthsasof December 31, 2007 2 Netdebtcalculated by deductingcash and equivalents ($5.4 million) from the $14million creditfacility on Atarisbalance sheetasof December31, 2007 3 Asof December 31,2007,Atarihad 13,477,920 sharesoutstanding ST RI CT L Y CO N FI D E N T I A L


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V.Selected M&A Transaction Analysis(Valuation Multiples) ST RI CT L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(ValuationMultiples) Selected M&A Transaction AnalysisMethodology Duff & Phelpsselected M&A transactionsinvolvingtargetcompanies thatDuff & Phelpsdetermined tobe relevanttoits analysis. Duff & Phelpscomputed the LTMrevenuesand EBITDA for each of the target companies. Duff & Phelpsthen calculated the implied enterprise value for each transaction to the targetsrespective LTMrevenue and EBITDA and compared the multiplesof the selected transactionsto the multiplesimplied in the Proposed Transaction. Duff & Phelpsrestricted the search to include only transactionswith enterprise values lessthan $500 million. Duff & Phelpsused the following methodology in selecting relevantcomparable transactions:Primary and Secondary SICCodes:7372 (prepackaged software), 5045 (computersand computer Per ipheralequipmentand software) and 7822 (motion picture and video tape distribution).Duff & Phelpsreviewed the transaction historiesof relevantcomparablecompanies.Because of a limited sample size, Duff & Phelpsinclude transactionsinvolving foreigntargetsaswella sU.S. based targets. Duff & Phelpsultimately selected8 precedenttransactionsfallingunder twoca tegories:VideoGame Developers, Publishersand DistributorsPackaged Media DistributorsNone of the transactions utilized for comparative purposesin the following analysisis, of course, identicalt o the Proposed Transaction. Accordingly, a complete valuation analysiscannotbe limited to a quantitative review of the selected transactionsand involvescomplex considerationsand judgments. ST RI CT L Y C O N FI D E N T I A L


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Selected M&A Transaction Analysis(ValuationMultiples) Selected M&A TransactionsAnalysis Selected PrecedentTransactionsSELECTED COMPARABLE TRANSACTIONSVIDEO GAME DEVELOPERS, PUBLISHERSAND DISTRIBUTORSEnterprise Value asLTMDate Acquiror Name Enterprise a Multiple of LTM:EBITDA Announced TargetName TargetBusinessDescription Value Revenue EBITDA Margin 6/14/2007 EntertainmentOne Ltd. (AIM:ETO) Engagesin the acquisition and exploitation of DVD distribution rightsfrom third party $98.8 2.00x 8.0x 25.1% Contender EntertainmentGroupproducersin the United Kingdom. 7/25/2006 Mattel Inc.(NYSE:MAT) Engagesin the development, manufacture, and distribution of electronic entertainment$185.8 1.25x 15.6x 8.0% Radica GamesLtd. productsincluding electronic games, video game controllersand accessories. 3/17/2006Electronic ArtsInc. (NasdaqNM:ERTS) Developsgamesfor personalcomputers and game consolesfor the television and computer $45.0 1.52x 5.3x 28.7% DigitalIllusionsCE AB gamesmarketsworldwide. 9/3/2003 Take-TwoInterac tive Software, Inc. Engagesin developing, publishing, distributing, andmarketinginteractive entertainment$42.6 1.02x 7.7x 13.3% TDK Mediactive, Inc. software based on intellectualcontent. 4/24/2002 Atari, Inc. (NasdaqNM:ATAR) Developsinteractive video gamesand creates titlesfor personalcomputersand video game $47.0 8.11x 28.5x 28.4% Shiny Entertainment, Inc. consoles. Median 1.52x 8.0x 25.1% Mean 2.78x 13.0x 20.7% SELECTED COMPARABLE TRANSACTIONSPACKAGED MEDIA DISTRIBUTORSEnterprise Value as LTMDateAcquiror Name Enterprise a Multiple of LTM:EBITDA AnnouncedTargetName TargetBusinessDescription Value Revenue EBITDA Margin 5/9/2007 Peace Arch Entertainment(AMEX:PAE) Operatesasa digitalversatile disc distributor in the United States. Itslibrary includesgenre $10.0

0.53x NA NA Trinity Home Entertainment, LLCclassics, and budgetandfirst-run feature films. 2/14/2007 Marwyn InvestmentManagement LLP Ownsanddistributes film andenterta inmentcontentinternationally andengages in$150.5 0.33x 6.9x 4.8% EntertainmentOne Ltd. wholesaling and specialty retailing home entertainmentproducts. 10/20/2005 Handleman Co. (NYSE:HDL) Engagesin publishing and distributing interactive entertainmentsoftware for video game $112.0 0.43x 4.8x 9.1% Crave EntertainmentGroup, Inc. platformswith titles including action/adventure, first-person shooter and sportsgames. Median 0.43x 5.9x 6.9% Mean 0.43x 5.9x 6.9% Source:SECfilings, CapitalIQ Factset Mergerstat, Bloomberg and other publicly available information. ST RI C T L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(ValuationMultiples) Selected M&A Transaction AnalysisConclusion Duff & Phelpscalculated an impliedenterprise value of Atariby utilizing the enterprise value multiplesof selectedtransactions inwhichthe targetw asa packaged media distributor. These stepsyielded a per share equity value range of $0.72 to $1.41.Given the Companysdecision to reduce itsinvolvementin the developmentof games, analysisof selec ted transactionsinvolving video game developers, publishersand distributorswasdeemed to be lessrelevant.EBITDA multiplesare notapplicable in thissituation asAtarihas negative EBITDA for the LTMperiod. Atari, Inc.Selected M&A Transaction Analysis($ in000sexceptEquity Value Per Share Outstanding) Atari, Inc. Multiples Selected Enterprise Value Performance Measure Low Median High Multiple Range Range Packaged Media DistributorsLTMRevenue 1 $91.8 0.33x 0.43x 0.53x 0.20x0.30x $18.4$27.5 EnterpriseValue Range $18.4 $27.5 Less:NetDebt 2 $8.6 $8.6 TotalEquity Value $9.8 $18.9 Equity Value Per Share Oustanding 3 $0.72 $1.411Latesttwelve monthsas of December 31, 2007 2Netdebtcalculatedby deductingcashandequivale nts($5.4 million) from the $14million creditfacility on Atarisbalance sheetasof December31, 2007 3 Asof December 31, 2007, Atarihad 13,477,920 sharesoutstanding ST RI CT L Y CO N FI D E N T I A L


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VI.Selected M&A Transaction Analysis(Pre miumsPaid) ST RI CT L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) Summary Premiums Paid AnalysisDuff & Phelpsreviewed the premiums paid over marketprice for 26public-to-private transactionsannounced from January 1, 2003throughApril 22, 2008inwhich the majority shareholder acquired the remaining outstanding minority sharesin a U.S. publicly-traded company. In each case, the transaction involvesatleast10% of the outstanding shares. Duff & Phelpsalso reviewe d the transaction premiumspaid over marketprice for 36 public-to-private transactionsof a U.S. publicly-tra ded companyannounced fromOctober 1, 2007 through April22, 2008. These transactionsinvolved an acquisition of 100% of the outstanding sharesor situationsinwhich the acquiror held a minority and acquired the majority of the outstanding shares. In addition, Duff & Phelpsanalyzed premiumspaid insituationsin which the target businesswasdeeme d to be distressed (defined to be situationsin which the targetcompany had a negative EBITDA margin). Duff& Phelpscompared the premiumsover the 1-day, 5-day, and 30-day trading price prior to the announcementof such public-to-private transactiontothe impliedpremium associated withthe ProposedTransaction. SUMMARY PREMIUMSPAID ANA LYSISUSTARGETS Majority Shareholder Purchases Public-to-Private Transactionsin the Majority Shareholder Purchases Public-to-Private Transactionsin the Remaining Outstanding Shares LastSix MonthsRemaining Outstanding Shares LastSix Months(Distressed Situations) (Distressed Situations) 1 Day Prem. 5 Day Prem. 30 Day Prem. 1 Day Prem. 5 Day Prem. 30 Day Prem. 1 Day Prem. 5 Day Prem. 30 Day Prem. 1 Day Prem. 5 Day Prem. 30 Day Prem. Number of Transactions26 2626 11 11 11 36 3636 13 13 13 OverallMedian25.8% 23.7% 34.1% 29.1% 25.9% 41.3% 30.8% 27.3% 32.4% 31.6% 26.8% 27.9% OverallMean 28.4% 29.1% 34.6% 25.0% 26.7% 38.1% 40.7% 42.4% 38.8% 41.2% 37.6% 30.1% Source:MergerstatNote: Majority buying

minority transaction datesfrom January 2003 to presentand minority buying public-to-private transactions range from October 2007 to presentST RI CT L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) PremiumsPaidSummary of Majority Shareholder PurchasesRemaining OutstandingSharesPREMIUMSPA ID ANALYSISPUBLIC-TO-PRIVATE TRANSACTIONSWI TH USTARGETS(MAJORITY SHAREHOLDER PURCHASESREMAINING OUTSTANDING SHARES) By Enterprise Value since January 2003 ($ in millions) Number of Median Enterprise Median Premium One Day Before Median Premium Five DaysBefore Median Premium 30 DaysBefore Enterprise Value Median LTMRevenue Median LTMEBITDA Transactions Value AnnouncementDate (%) AnnouncementDate (%) AnnouncementDate (%) $1Bil5 $3,167.4 $1,856.4 $433.5 25.6% 22.9% 15.4% $100 Mil$1 Bil7 $189.6 $146.2 ($9.2) 29.1% 25.9% 41.3% $50 Mil- $100 Mil 5 $56.4 $68.6 $2.2 22.5% 21.9% 30.3% $10 Mil$50 Mil9 $19.7 $40.7 $2.0 35.3% 33.3% 52.8% OVERALL MEDIAN 26 $73.4 $116.9 $2.3 25.8% 23.7% 34.1% OVERALLMEAN 28.4% 29.1% 34.6% Atari,Inc. 0.0% 6.3% 58.5% Source:MergerstatST RI C T L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) PremiumsPaidMajority Shareholder PurchasesRemaining Outstanding Shares(January 1, 2003Current) Announced % of Shares1 Day 5Day 30 Da y Enterprise Date TargetBuyer Acquired Premium Premium Premium Value 2-A ug-04 Cox Communications, Inc. Cox Enterprises, Inc. 38.4% 26.0% 24.6% 15.4% $27,378.0 10-Mar-08 Nationwide FinancialServices, Inc. Nationwide MutualInsurance Co. 33.5% 24.4% 16.2% 19.2% 8,311.5 24-Aug-07 Hearst-Argyle Television,Inc. The HearstCorp. 25.7% 14.9% 14.9% ( 0.7%) 3,167.4 5-Nov-07 Alfa Corp. Alfa MutualInsurance Co.46.1% 25.6% 22.9% 19.5% 1,844.3 17-Mar-06 William Lyon Homes William Lyon Homes, Inc. 25.5% 44.0% 50.5% 7.7% 1,563.2 16-Jun-06 Case Pomeroy & Co. CP Ne wco, Inc. 14.0% 5.2% 6.0% 6.8% 291.2 2-Dec-05 Foodarama Supermar kets, Inc. The Saker Family Corp. 49.0% 40.5% 35.1% 38.7% 251.5 18-Jan-08Dominion Homes, Inc. Dominion Homes, I nc. 35.8% 41.3%35.4% 41.3% 210.0 8-Jul-05 Cruzan International, Inc. V&SVin & SpritAB36.4% 12.4% 9.1% 103.5% 189.6 6-Nov-06 Moscow Cable Corp. Renova Gr oupof Cos. 19.0% 29.1% 25.9% 42.5% 159.730-Jun-06TIMCO AviationSer vices, Inc. LJH Ltd. 10.9% 56.9% 97.0% 61.3% 125.5 13-Jun-03 Atalanta Sosnoff Capital LLC Atalanta Sosnoff CapitalCorp. 17.3% 0.4% 6.7% 12.5% 116.5 5-May-03 Semele Group, Inc. Semele G roup, Inc. 46.9% 25.0% 25.0% 21.2% 78.5 29-Jul-03 JanusHotels& Resorts,Inc. JanusAcquisition, Inc. 29.6% (5.8%) (4.4%) (13.3%) 68.3 7-Jul-05 Obsidian Enterprises, Inc. Obsidian EnterprisesInc 22.7% 37.0% 27.6% 44.5% 56.4 5-Apr-04 MinutemanInternational, Inc. Hako-Werke Gm bH 32.0% 22.5% 21.9% 30.3% 55.21-Aug-03 OAO Technology Solutions, Inc. Terrapin Partner sLLC49.0% 15.0% 10.9% 50.0% 55.2 31-Dec-03 Boyd Bros.Transportation, Inc. BBT AcquistionCorp. 28.0% 53.0% 63.9% 97.4% 47.4 20-Nov-06 Hanover Dir ect, Inc.Chelsey Direct LLC31.5% (79.2%) (80.0%)

(79.3%) 37.9 13-Sep-04 Rag Shops,Inc. Sun Capital Partners, Inc.44.3% 23.2% 17.2% 37.8% 22.2 27-Jan-04 Dover InvestmentsCorp. Lawre nce WeissbergRevocable LivingTrust48.7% 35.3% 11.8% 14.7% 22.02-D ec-03 ReedsJewelers, Inc. Sparkle LLC12.5% 88.1% 94.3% 95.2% 19.7 20-Dec-04 ElmersRestaurants, Inc. ERI Acquisition Corp. 41.1% (0.7%) ( 0.5%) 0.0% 16.8 19-Feb-03 Riverside Group, Inc. Riverside G roup, Inc. 43.0% 33.3% 33.3% 60.0% 14.0 2-Dec-03 Kontron Mobile Computing, Inc. Kontron Embedded ComputersAG 48.5% 52.8% 71.9% 52.8% 13.5 21-Nov-03 Chefs International, Inc. LombardiRestaurantGr oup Inc 38.7% 118.9% 118.9% 121.3% 12.3 High118.9% 118.9% 121.3% Median 25.8% 23.7% 34.1% Mean 28.4% 29.1% 34.6% Low (79.2%) (80.0%) (79.3%) Source:Merger statST RI CT L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) PremiumsPaidSummary of Majority Shareholder PurchasesRemaining OutstandingShares(Distressed) PREMIUMSPAID ANALYSISDISTRESSED PUBLIC-TO-PRIVATE TRANSACTIONS(MAJORITY SHAREHOLDERPURCHASESREMAINING OUTSTANDING SHARES) By Enterprise Value since January 2003 ($ in millions) Number of Median Enterprise Median Premium One Day Before Median Premium Five DaysBefore Median Premium 30 DaysBefore Enterprise Value Median LTMRevenue Median LTMEBITDA Transactions Value AnnouncementDate (%) AnnouncementDate (%) AnnouncementDate (%) $1 Bil0 NA NA NA NA NA NA $100 Mil$1Bil6 $174.7 $146.2 ($9.2) 34.8% 30.5% 41.9% $50 Mil$100Mil 2$67.5 $43.9 ($2.7) 31.0% 26.3% 32.9% $10 Mil$50 Mil3 $22.2 $116.9 $1.7 23.2% 17.2% 37.8% OVERALL MEDIAN 11 $116.5 $116.9 ($0.5) 29.1% 25.9%41.3% OVERALL MEAN 25.0% 26.7% 38.1% Atari, Inc.0.0% 6.3% 58.5% Source:MergerstatNote:A distr essed targetwasdeeme d to be a businesswith EBITDA marginsator below zero. ST RI CT L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) PremiumsPaidMajority Shareholder PurchasesRemaining Outstanding Shares(Distressed) (January 1, 2003Current) Announced % of Shares1 Day 5Day 30 Day Enterprise Date Target Buyer Acquired Premium Premium Premium Va lue 2-Dec-05 Foodarama Supermarkets, Inc. The Sa ker Family Corp. 49.0% 40.5% 35.1% 38.7% $251.5 18-Jan-08 Dominion Homes, Inc. Dominion Homes, Inc. 35.8% 41.3% 35.4% 41.3% 210.0 8-Jul-05 Cruzan International,Inc. V&SVin & Sprit AB 36.4% 12.4% 9.1% 103.5% 189.6 6-Nov-06 Moscow Cable Corp. Renova Group of Cos. 19.0% 29.1% 25.9% 42.5% 159.7 30-Jun-06 TIMCO Aviation Services, Inc. LJH Ltd. 10.9% 56.9% 97.0% 61.3% 125.5 13-Jun-03 Atalanta Sosnoff Capital LLC Atalanta Sosnoff CapitalCorp . 17.3% 0.4% 6.7% 12.5% 116.5 5-May-03Semele Group, Inc. Seme le Group, Inc. 46.9% 25.0% 25.0% 21.2% 78.5 7-Jul-05 Obsidian Enterprises, Inc. Obsidian EnterprisesI nc 22.7% 37.0% 27.6% 44.5%56.4 20-Nov-06 Hanover Direct,Inc.Chelsey DirectLLC31.5% (79.2%) (80.0%) (79.3%) 37.9 13-Sep-04 Rag Shops, Inc. Sun CapitalPartners, Inc.44.3% 23.2% 17.2% 37.8% 22.22-Dec-03 ReedsJewelers, Inc. Sparkle LLC12.5% 88.1% 94.3% 95.2% 19.7 High 88.1% 97.0% 103.5% Median 29.1% 25.9% 41.3% Mean 25.0% 26.7% 38.1% Low (79.2%) (80.0%) (79.3%) Source:MergerstatNote:A distressed target wasdeemed to be a businesswith EBITDA marginsat or below zero. ST RI C T L Y CO N FI D E N T I A L


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Selected M&A Transaction Analysis(PremiumsPaid) ConclusionMajority Shareholder PurchasesRema ining OutstandingSharesIn reviewingthe 26 transactionsinwhichthe majority shareholder purchasedthe remaining outstandingsharesof a publicly-tra ded subsidiary, Duff & Phelpsobserved the mea n and median of the premiumspaid over the 1-day, 5-day and 30-day trading price prior to a nnouncement. 1-Day Premium 5-Day Premium 30-Day Premium Median 25.8% 23.7% 34.1% Mean 28.4% 29.1% 34.6% Standard Deviation 0.340 0.378 0.408 In reviewing the 11 distressed transactions in which the majority share holder purchased the remaining outstanding sharesof a publicly-tra ded subsidiary, Duff & Phelpsobserved the me an and median of the premiumspaid over the 1-day, 5-day and 30-day trading price prior to announcement. 1-Day Premium 5-Day Premium 30-Day Premium Median 29.1% 25.9% 41.3% Mean 25.0% 26.7% 38.1% Standard Deviation 0.396 0.446 0.456 The Per Share Cash Consideration in theProposed Transaction representsa 1-day , 5-day and30-day premium of 0.0%, 6.3% and 58.5%, respectively. The r elevanceof the premiumspaidanalysisislimited by the Companysdependence onI ESA, the majority shareholder inthe Company, for new release product. ST RI CT L Y CO N FI D E N T I A L


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VII.Net AssetValue AnalysisST RI CT L Y CO N FI D E N T I A L


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NetAssetValue Analysis Calculation of NetAssetValue Duff & Phelps reviewed AtarisDece mber31, 2007 balance sheetaswella sthe CompanysestimatedinternalMarch 31, 2008to calculate the netassetvalue (NAV ) of the Company. Asof December31,2007,Ataristotalasset sand totalliabilities were $43.5million and $60.3 million, respectively, for a NAV of negative $16.8 million Estimated asof March 31, 2008, Ataristotalassets and totalliabilitieswere $32.6million and $52.9 million, respectively, for a NAV of negative $20.3 million Atari, Inc. Balance Sheet Summary ($ in millions) December 31, March 31, 2007 2008 (Estimated) Cash $ 5.4 $ 10.0 Receivables, net16.2 (0.3) Inventories7.4 6.5 Prepaid Expensesand Other Current A ssets6.0 7.7 Total CurrentAssets 34.924.0 NetProperty, Pla nt& Equipment6.3 6.4 Goodwilland Intangibles-Other Long-Term Assets2.2 2.1 TotalAssets$ 43.5 $32.6 AccountsPaya ble $ 10.6 $ 9.7 AccruedLiabilities11.5 6.8 RoyaltiesPayable 3.8 2.7CreditFacility 14.0 14.0Due to Related Parties5.3 2.7 Other CurrentLiabilities0.9 TotalCurrentLiabilities45.2 36.8 Due to RelatedParties, Long-Term 3.0 3.6 Long-Term DeferredRent 6.77.1RelatedPar ty License Advance 5.1 5.4Other Long-Term Liabilities0.3-TotalLiabilities60.3 52.9 StockholdersEquity (16.8) (20.3) TotalLiabilities& StockholdersEquity $ 43.5 $ 32.6 Source:Company SECFilings, ManagementEstimatesSource:SEC filingsST R I CT L Y CO N FI D E N T I A L


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VIII. Liquidation AnalysisST RI C T L Y CO N FI D E N T I A L


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Liquidation AnalysisSummary of LiquidationAnalysisDuff & Phelpsprepared a liquidation analysisassuming an orderly liquidation in which the Company wouldrealize 70% of bookvalue for accountsreceivable, 50% bookvalue for inventory and 70% book value for property, plantand equipment. To thisamount, we added the bookvalue of cash and marketable securities. Additionally, Atariownscer tain intellectualproperty thatis notre flected on the balance sheet. In a liquidation scenario,we assumed thatthe Company would realize 100% of the estimated fair marketvalue of the IP. A 25% discountfor bankruptcy costswa sapplied and the resulting value wasdiscounted backone and one-half yearsto present value ata 20% discountrate to adjustfor the time period required to complete the liquidation. ST R I CT L Y CO N FI D E N T I A L


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Liquidation AnalysisLiquidation AnalysisIn a liquidation scenario, the value of the common stockwould be zero. Atari, Inc. Liquidation Analysis($ inmillion) EstimatedEstimated LiquidationBookValue Recovery Value Cash$5.4100% $5.4 AccountsReceivable 16.8 70% 11.8 Inventory 7.4 50% 3.7 NetPP&E 6.3 70% 4.4 Intellectual Property (1) 13.3 100% 13.3 Total38.5 Less:Bankruptcy Costs@ 25% (2) 9.6 NetTotal28.9 Less:DiscountFac tor (3) 0.7607 TotalLiquidation Value 22.0 AtariLiabilities60.3 Liquidation Value Available to Common Shareholders($38.3) Notes:(1) Estimatedvalue of Atarisintellectualproper ty, based on Ocean Tomo analysisasof January1, 2007. Applied the midpointof the range of value ($17.0 million to $29.9 million) indicated. The rightsto TestDrive were licensed to IESA for $5.0 million in November 2007,therefore, the estimated value of TestDrive ($10 million to $15 million) wassubtracted.The license agreement isfor a sevenyear term, therefore, itwasassumed thatno residualvalue related to the TestDrive IP exists. (2) Estimated liquidation / bankruptcy costs. (3) Discountfactor of 20% over a 1.5 year period. ST RI C T L Y CO N FI D E N T I A L

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