ATAR Avatar Ventures Corp (CE)

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE TO

TENDER OFFER STATEMENT UNDER SECTION 14(d)(l) OR 13(e)(l) OF
THE SECURITIES EXCHANGE ACT OF 1934

ATARI, INC.

(Name of Subject Company (Issuer))

ATARI, INC.

(Name of Filing Person (Offeror))

Options to Acquire Common Stock, Par Value $0.10 Per Share
(Title of Class of Securities)

Common Stock: 04651M204
(CUSIP Number of Class of Securities)

Jim Wilson
Chief Executive Officer and President
Atari, Inc.
417 Fifth Avenue
New York, NY 10016
(212) 726-6500
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on
Behalf of Filing Persons)

Copies to:
Thomas C. Janson, Esq.
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
(212) 530-5000

CALCULATION OF FILING FEE

Transaction Valuation*		Amount of Filing Fee

o		Check the box if any part of the fee is offset as provided by Rule 0-1 l(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: N/A		Filing Party: N/A
Form or Registration No.: N/A		Date Filed: N/A

þ		Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

o		third—party tender offer subject to Rule 14d-1.

þ		issuer tender offer subject to Rule 13e-4.

o		going-private transaction subject to Rule 13e-3.

o		amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: o

417 Fifth Avenue
New York, New York 10016

To the stockholders of Atari, Inc.:

     You are cordially invited to attend a special meeting of the stockholders of Atari, Inc. (“Atari”) to be held at Atari’s offices, 417 Fifth Avenue, New York, New York 10016, on [                      ], 2008 at [                      ], local time.

     At the special meeting Atari is asking its stockholders to consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of April 30, 2008, by and among Atari, Infogrames Entertainment S.A. (“Infogrames”), and Irata Acquisition Corp., a wholly owned indirect subsidiary of Infogrames (“Merger Sub”), pursuant to which Merger Sub will be merged with and into Atari, with Atari continuing as the surviving corporation in the merger as a wholly owned indirect subsidiary of Infogrames. If the merger is completed, each share of Atari common stock outstanding at the effective time of the merger (other than shares held by holders who have perfected and not withdrawn a demand for appraisal rights, and shares beneficially owned by Infogrames) will be cancelled and converted into the right to receive US$1.68 in cash, without interest. Shares beneficially owned by Infogrames will be cancelled with no consideration paid therefor.

     The Special Committee of the board of directors of Atari, which was established to evaluate transactions between Atari and Infogrames and its affiliates, reviewed and negotiated the proposed transaction. Atari’s board of directors, acting on the recommendation of the Special Committee, has approved the merger agreement. Both the Special Committee and Atari’s board of directors have determined that the merger and the merger agreement are fair and advisable to and in the best interests of Atari’s stockholders (other than Infogrames and its affiliates). Therefore, acting on the recommendation of the Special Committee, the board of directors of Atari recommends that you vote “FOR” the adoption and approval of the merger agreement.

     Approval of the merger requires the affirmative vote of at least a majority of Atari’s outstanding common stock entitled to vote on the merger. As of [                      ], the record date for the special meeting, Infogrames directly or indirectly controlled approximately 51.6% of the voting securities of Atari, which is sufficient to adopt and approve the merger agreement. As a result, approval of the merger agreement will occur upon the vote in favor of the merger agreement by Infogrames, regardless of the vote of any other stockholder of Atari.

     Regardless of the number of shares you own, and whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy card or submit a proxy over the Internet or by phone as described on the proxy card (or, if your shares are held in “street name”, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares). You retain the right to revoke the proxy at any time before it is actually voted by giving notice in writing to the Secretary of Atari, by giving notice at the special meeting, or by submitting a duly executed proxy bearing a later date. If you have instructed a broker, nominee, fiduciary or other custodian to vote your shares, you must follow its directions to change or revoke your voting instructions. The failure to vote will have the same effect as a vote against the merger agreement . Finally, if you do not vote in favor of approval of the merger agreement and you fulfill other procedural requirements, which are summarized in the accompanying proxy statement, Delaware law entitles you to a judicial appraisal of the fair value of your shares.

     The enclosed proxy statement provides you with information about the proposed merger, the merger agreement and the special meeting. Atari urges you to read it and its annexes carefully.

Very truly yours,

Eugene I. Davis
Chairman of the Board of Directors

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of this transaction or passed upon the merits or fairness of this transaction or the adequacy or accuracy of the disclosure in the enclosed proxy statement. Any representation to the contrary is a criminal offense.

     The enclosed proxy statement is dated [                      ], 2008 and is first being mailed to stockholders on or about [                      ], 2008.

417 Fifth Avenue
New York, New York 10016

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF ATARI, INC.
TO BE HELD [                      ], 2008

To the stockholders of Atari, Inc.:

     Atari will hold a special meeting of stockholders of Atari, Inc. (“Atari”) on [                      ] , 2008 at [            ], local time, at Atari’s offices, 417 Fifth Avenue, New York, New York 10016. The purpose of the meeting is:

	1.		to consider and vote upon a proposal to adopt and approve the Agreement and Plan of Merger, dated as of April 30, 2008, by and among Atari, Infogrames Entertainment S.A. (“Infogrames”) and Irata Acquisition Corp. (“Merger Sub”); and
	2.		to transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

     Atari has described the merger agreement and the related merger in the accompanying proxy statement and annexes, which you should read in their entirety before voting. A copy of the merger agreement is attached as Annex A to the proxy statement. The record date to determine stockholders entitled to vote at the special meeting is [                      ], 2008. Only holders of Atari common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting.

     To make sure your shares are represented at the special meeting, you should, as soon as possible, complete, sign, date and return the enclosed proxy card or submit a proxy over the Internet or by phone as described on the proxy card (or, if your shares are held in “street name”, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares). You retain the right to revoke the proxy at any time before it is actually voted by giving notice in writing to the Secretary of Atari, by giving notice in open meeting at the special meeting or by submitting a duly executed proxy bearing a later date. If you have instructed a broker, nominee, fiduciary or other custodian to vote your shares, you must follow its directions to change or revoke your voting instructions. The failure to vote will have the same effect as a vote against the merger agreement . If you do not vote in favor of approval of the merger agreement and you fulfill other procedural requirements, which are summarized in the accompanying proxy statement, Delaware law entitles you to a judicial appraisal of the fair value of your shares.

		By Order of the Board of Directors   Kristina K. Pappa
Dated: [            ], 2008		Secretary

      Whether or not you plan to attend the special meeting in person, please complete, sign, date and return the enclosed proxy in the accompanying self-addressed postage pre-paid envelope or submit a proxy over the Internet or by phone as described on the proxy card (or, if your shares are held in “street name”, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares) as soon as possible.

TABLE OF CONTENTS

		Page
SUMMARY TERM SHEET			1
Persons Involved in the Proposed Transaction			1
The Special Meeting			1
Structure of the Transaction			2
Purposes for the Merger			3
Certain Effects of the Merger			3
Atari’s Reasons for the Merger; Recommendations of the Special Committee and the Atari Board of Directors			3
Opinion of the Financial Advisor to the Special Committee of the Board of Directors			4
Position of the Infogrames Parties as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders			4
Interests of Certain Persons in the Merger			4
No Solicitation of Takeover Proposals			5
Conditions to the Merger			6
Termination of the Merger Agreement			6
Termination Fee			8
Litigation Related to the Merger			8
Material United States Federal Income Tax Consequences			9
Appraisal Rights			9
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND MERGER			10
SPECIAL FACTORS			16
Structure of the Transaction			16
Purposes for the Merger			25
Atari’s Reasons for the Merger; Recommendations of the Special Committee and the Atari Board of Directors			26
Position of the Infogrames Parties as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders; Intent of Infogrames to Vote in Favor of the Merger Transaction			30
Opinion of the Financial Advisor to the Special Committee of the Board of Directors			32
Financial Projections			34
Opinion and Analyses by Duff & Phelps			35
Financial Analyses			36
Summary Analysis			41
Summary of Presentation by the Financial Advisor to Infogrames			42
Net Asset Value			44
Comparable Minority Buy-Outs			45
Comparable Companies’ Trading Multiples			46
Lazard			46
Alternatives to the Merger			47
Certain Effects of the Merger			47
Interests of Certain Persons in the Merger			49
Appraisal Rights Condition			52
Plans for Atari if the Merger is Not Completed			52
Estimated Fees and Expenses of the Merger			53
Financing of the Merger			53
Regulatory Approvals and Requirements			53
Litigation Related to the Merger			53
Material United States Federal Income Tax Consequences			54
Anticipated Accounting Treatment of the Merger			56
Appraisal Rights			56
PERSONS INVOLVED IN THE PROPOSED TRANSACTION			60

		Page
THE SPECIAL MEETING			62
Date, Time and Place			62
Matters to be Considered			62
Record Date; Voting Rights			62
Quorum			62
Required Vote and Voting Rights			62
How Shares are Voted; Proxies; Revocation of Proxies			62
Solicitation of Proxies			63
Appraisal Rights			63
Adjournment			63
Attending the Special Meeting			63
FORWARD-LOOKING STATEMENTS			64
THE MERGER AGREEMENT			65
Effective Time			65
Appraisal Rights			66
Representations and Warranties			66
Conduct of Atari’s Business Pending the Merger			69
No Solicitation of Takeover Proposals			70
Stockholders Meeting			71
Reasonable Commercial Efforts to Obtain Consents, Filings and Taking Further Action			72
Other Covenants and Agreements			72
Conditions to the Merger			73
Termination of Merger Agreement			74
Termination Fee			75
Infogrames Secured Credit Facility			76
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA			77
MARKET PRICE AND DIVIDEND INFORMATION			79
CERTAIN TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES			80
PRIOR PUBLIC OFFERINGS AND STOCK PURCHASES			86
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			87
DIRECTORS AND EXECUTIVE OFFICERS OF ATARI AND THE INFOGRAMES PARTIES			89
FUTURE STOCKHOLDER PROPOSALS			93
INDEPENDENT ACCOUNTANTS			93
WHERE YOU CAN FIND MORE INFORMATION			93

Annexes

		Page
Annex A — Agreement and Plan of Merger			A-1
Annex B — Opinion of Duff & Phelps LLC			B-1
Annex C — Section 262 of the General Corporation Law of the State of Delaware			C-1
Annex D — Atari, Inc. Annual Report on Form 10-K for the fiscal year ended March 31, 2008			D-1
Annex E — Atari, Inc. Amendment to Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008			E-1

SUMMARY TERM SHEET

      You are being asked to consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of April 30, 2008, by and among Atari, Inc. (“Atari”), Infogrames Entertainment S.A. (“Infogrames”) and Irata Acquisition Corp. (“Merger Sub”), which is referred to in this proxy statement as the merger agreement. The merger agreement provides for the merger of Merger Sub with and into Atari, which would be the surviving corporation in the merger, and, immediately following the merger, Infogrames would have beneficial ownership of all of the outstanding capital stock of Atari. This summary term sheet briefly describes the material terms of the proposed merger and may not contain all of the information that is important to you. Atari urges you to read carefully the entire proxy statement, including the annexes hereto. Each item in this summary term sheet includes a page reference directing you to a more complete description of that item.

Persons Involved in the Proposed Transaction (page 60)

	•		Atari. Atari publishes and distributes interactive entertainment software in North America. The 1,000+ published titles distributed by Atari include hard-core, genre-defining franchises such as Test Drive ® and mass-market and children’s franchises such as Dragon Ball Z ® .
	•		Infogrames and CUSH. Infogrames Entertainment S.A. (“Infogrames”) is a société anonyme (S.A.) corporation organized under the laws of France. Infogrames, the parent company of the Atari Group, is listed on the Paris Euronext stock exchange (Euronext — ISIN: FR-0010478248) and has two principal subsidiaries: Atari and Atari Europe. The Atari Group is a producer, publisher and distributor of interactive entertainment software for all market segments and in all major existing game formats (Microsoft, Nintendo and Sony) and on CD-ROM for PC. Its games are sold in more than 60 countries. For the fiscal year ended March 31, 2008, Infogrames had consolidated net revenues (including Atari results) of €290.7 million. Infogrames beneficially owns approximately 51.6% of Atari’s common stock through its wholly owned subsidiary, California U.S. Holdings, Inc., a California corporation (“CUSH”). If the merger is completed, Atari will become a direct wholly owned subsidiary of CUSH and an indirect wholly owned subsidiary of Infogrames.
	•		Merger Sub. Irata Acquisition Corp (“Merger Sub”) is a newly formed Delaware corporation that is a direct wholly owned subsidiary of CUSH. Merger Sub’s sole purpose is to effect the merger. Merger Sub’s corporate existence will terminate upon consummation of the merger. Infogrames, Merger Sub and CUSH are collectively referred to in this proxy statement as the “Infogrames Parties.”
	•		BlueBay High Yield . BlueBay High Yield Investments (Luxembourg) S.A.R.L. (“BlueBay High Yield”) is a lender to Atari under the BlueBay Credit Facility. See “Certain Transactions with Directors, Executive Officers and Affiliates”. BlueBay High Yield is an affiliate of the BlueBay Value Recovery (Master) Fund Limited (“BVRF”) and the BlueBay Multi-Strategy (Master) Fund Limited (“BMSF”, and together with BVRF, the “BlueBay Funds”). The BlueBay Funds, as disclosed in the Schedule 13D/A dated May 8, 2008 filed with the Securities and Exchange Commission (“SEC”), collectively hold approximately 31.5% of the outstanding shares of common stock of Infogrames. The BlueBay Funds also are eligible to redeem certain warrants and convert convertible bonds into shares of Infogrames, whereby, upon redemption and exercise of such stock warrants, the BlueBay Funds would collectively hold approximately 54.9% of the outstanding stock of Infogrames (on a fully diluted basis). The BlueBay Funds are deemed by Rule 13d-3(d)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”) to be beneficial owners of Atari stock held by Infogrames for beneficial ownership reporting purposes. See “Security Ownership of Certain Beneficial Owners and Management”. The principal business of each of the BlueBay Funds is, as an investment company, the investment of its assets across a number of asset classes, employing different investment strategies, in order to achieve returns for its investors.

The Special Meeting (page 62)

•

Date, Time, Place (page 62) . The special meeting will be held on [___], 2008 at [___], local time, at Atari’s offices, 417 Fifth Avenue, New York, New York 10016.

	•		Matters to be Considered (page 62) . At the special meeting, Atari stockholders will consider and vote upon a proposal to adopt and approve the merger agreement.
	•		Record Date and Quorum (page 62) . Atari has fixed [___], 2008 as the record date for the special meeting. Only holders of record of Atari’s common stock as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. The presence at the special meeting, in person or by proxy, of the holders of a majority of shares of common stock outstanding on the record date will constitute a quorum, permitting Atari to conduct its business at the special meeting.
	•		Required Vote and Voting Rights (page 62) . Stockholder adoption and approval of the merger agreement requires the affirmative vote of at least a majority of Atari’s outstanding common stock entitled to vote on the merger. Each share of Atari’s common stock is entitled to one vote. As of the record date, Infogrames directly or indirectly controlled approximately 51.6% of the voting securities of Atari, which is sufficient to adopt and approve the merger agreement. Therefore, approval of the merger agreement will occur as a result of the vote in favor of the merger agreement by Infogrames, regardless of the vote of any other stockholder of Atari.
	•		How Shares are Voted (page 62) . You may vote by attending the special meeting and voting in person, by submitting a ballot or by completing the enclosed proxy card and then signing, dating and returning it in the self-addressed postage pre-paid envelope provided. You may also vote over the internet or by telephone. For more information on voting by mail, over the internet or by telephone, see “Questions and Answers About the Special Meeting and Merger” beginning on page 10. Submitting a proxy now will not limit your right to vote at the special meeting if you decide to attend in person and vote. If your shares are held of record in “street name” by a broker, nominee, fiduciary or other custodian and you wish to vote in person at the special meeting, you must obtain from the record holder a proxy issued in your name. Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares, following the procedures provided by your broker. Failure to instruct your broker to vote your shares will have the same effect as a vote AGAINST the merger agreement.
	•		Revocation of Proxies (page 62) . You may revoke your proxy at any time before it is actually voted by giving notice in writing to the Secretary of Atari, by giving notice of the revocation at the special meeting or by submitting a duly executed proxy bearing a later date. Attendance at the special meeting will not, by itself, revoke a proxy. If you have given voting instructions to a broker, nominee, fiduciary or other custodian that holds your shares in “street name”, you may revoke those instructions by following the directions given by the broker, nominee, fiduciary or other custodian.

Structure of the Transaction (page 16)

     Pursuant to the merger agreement, Merger Sub will be merged with and into Atari. Atari will continue its corporate existence under Delaware law as the surviving corporation in the merger and Atari will become a wholly owned indirect subsidiary of Infogrames.

     At the effective time of the merger, pursuant to the merger agreement and Delaware law:

	•		all shares of Atari common stock that are held by Infogrames, Atari or any of their wholly owned subsidiaries will be cancelled and retired without any consideration payable therefor;
	•		each other share of Atari common stock issued and outstanding immediately before the effective time of the merger (other than any share as to which a dissenting stockholder has perfected and not withdrawn appraisal rights under Delaware law) will be converted into the right to receive US$1.68 in cash without interest;
	•		each option holder will be entitled to receive an amount in cash equal to the product of (x) the number of shares into which each option was exercisable prior to the effective time subject to such stock option, multiplied by (y) the excess, if any, of the per share merger consideration of US$1.68 over the per share exercise price of such stock option, less applicable taxes required to be withheld with respect to such

			payment and, to the extent permitted under the applicable option plans, each outstanding and unexercised option to purchase shares of Atari common stock granted under Atari’s stock incentive plans (whether vested or unvested) at the effective time of the merger will be cancelled;
	•		Atari will use its reasonable best efforts to effect a tender offer to purchase all outstanding options to acquire shares of Atari common stock granted under Atari’s employee stock incentive plans (whether or not vested or exercisable) that Atari does not have the right to cancel and that have exercise prices that exceed US$1.68 per share;
	•		each outstanding share of Merger Sub common stock will be converted into one share of common stock of Atari, the surviving corporation in the merger; and
	•		shares of Atari common stock, the holders of which perfect their appraisal rights in the manner prescribed by Section 262 of the Delaware General Corporate Law (“DGCL”), will be cancelled and each holder of such shares will be entitled to receive a cash payment equal to the fair value of such shares, as determined pursuant to court appraisal proceedings.

     For the purposes of this proxy statement, shares of common stock of Atari beneficially owned by Infogrames and holders who have perfected and not withdrawn a demand for appraisal rights are collectively referred to as “excluded shares”.

Purposes for the Merger (page 25)

     Atari’s purpose in undertaking the merger is to allow its stockholders (other than Infogrames and its affiliates) to realize the value of their investment in Atari in cash at a price that represents a 6.3% premium to the 5-day trading price prior to the date of Infogrames’ announcement of its offer, and a 58.5% premium to the 30-day trading price prior to the date of Infogrames’ announcement of its offer, of Atari’s common stock on the Nasdaq Stock Market.

     The Infogrames Parties’ purpose for engaging in the merger is to acquire all of the shares of common stock (approximately 49.4%) not already beneficially owned by Infogrames. In reaching its decision to effect the merger, the Infogrames board, in consultation with its management, focused primarily on the benefits and synergies of having its products distributed in the United States by a wholly owned company that would no longer be incurring the costs involved with being a public company, and the ability of Infogrames to rebuild and develop Atari for the long term without immediate concerns about its potential liquidation or bankruptcy. See “Special Factors—Purposes for the Merger—Infogrames’ Purpose for the Merger”.

Certain Effects of the Merger (page 47)

     Among other results of the merger, the stockholders of Atari (other than Infogrames and its affiliates) will no longer have any interest in, and will no longer be stockholders of, Atari and will not participate in any future earnings or growth of Atari, and Infogrames will beneficially own all of the outstanding shares of Atari. Following the merger, Atari will no longer file periodic reports and other information with the SEC. Furthermore, Atari’s common stock will no longer be publicly traded and price quotations with respect to sales of shares of Atari’s common stock on the public market will no longer be available. Currently, Atari’s common stock is quoted on the “Pink Sheets” as a consequence of being delisted from the Nasdaq Global Market on May 9, 2008 after a Nasdaq Listing Qualifications Panel determined to delist Atari’s securities because Atari had failed to regain compliance with the requirements of Nasdaq Marketplace Rule 4450(b)(3) regarding the aggregate market value of Atari’s publicly held shares. The merger is considered a “going private” transaction under applicable SEC regulations.

Atari’s Reasons for the Merger; Recommendations of the Special Committee and the Atari Board of Directors (page 26)

     Prior to and at the time of Infogrames’ proposal, three of Atari’s directors had certain conflicts of interest in evaluating the merger. Atari’s special committee of independent directors, consisting of Eugene Davis, Wendell Adair, Bradley Scher and James Shein (the “Special Committee”), was therefore charged with negotiating and evaluating a potential transaction with Infogrames and, if appropriate, recommending the transaction to Atari’s board.

     Both the Special Committee and the board of directors of Atari (other than Mr. Coppee, who did not participate in the decision), after careful consideration of numerous factors, have determined that the merger agreement and the merger are fair and advisable to and in the best interests of Atari’s unaffiliated stockholders. For further information regarding Atari’s reasons for entering into the merger, see “Special Factors—Atari’s Reasons For the Merger; Recommendations of the Special Committee and the Atari Board of Directors”.

     Acting with the recommendation of the Special Committee, the board of directors approved the merger agreement. The board of directors, based in part on the recommendation of the Special Committee, recommends that Atari’s stockholders vote for the adoption and approval of the merger agreement.

Opinion of the Financial Advisor to the Special Committee of the Board of Directors (page 32)

     In connection with the merger, Duff & Phelps LLC (“Duff & Phelps”) rendered its opinion on April 28, 2008 to the Special Committee that, subject to the qualifications and limitations set forth therein, as of that date, the per share merger consideration of US$1.68 in cash to be paid to Atari’s public stockholders (other than Infogrames and its affiliates) in the merger was fair to such holders from a financial point of view.

     The full text of the Duff & Phelps opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Duff & Phelps in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated into this proxy statement by reference. You are urged to read Duff & Phelps’ opinion carefully in its entirety. Duff & Phelps’ opinion was provided to the Special Committee in connection with its evaluation of the per share merger consideration to be paid in the merger, did not address any other aspect of the merger and did not constitute a recommendation to any holder of Atari common stock as to how such holder should vote or act with respect to any matters relating to the merger.

Position of the Infogrames Parties as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders (page 30)

     Each of Infogrames, Merger Sub and CUSH believes that the merger is financially and procedurally fair to Atari’s unaffiliated stockholders for the reasons described under “Position of the Infogrames Parties as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders; Intent of Infogrames to Vote in Favor of the Merger Transaction”.

Interests of Certain Persons in the Merger (page 49)

     In considering the recommendation of the board of directors, you should be aware that certain of Atari’s executive officers and directors, and the Infogrames Parties have interests in the transaction that are different from, or are in addition to, the interests of Atari’s unaffiliated stockholders generally. The Special Committee and the board of directors were aware of these conflicts of interest and considered them along with other matters when they determined to recommend the merger. These interests, which are discussed in detail in the section entitled “Special Factors—Interests of Certain Persons in the Merger”, include the following:

	•		The Infogrames Parties directly or indirectly control 51.6% of the outstanding voting securities of Atari, which is sufficient to adopt and approve the merger and the merger agreement.
	•		The BlueBay Funds, as disclosed in the Schedule 13D/A dated May 8, 2008 filed with the SEC, collectively hold approximately 31.5% of the outstanding shares of common stock of Infogrames. The BlueBay Funds are also eligible to redeem certain warrants and convert convertible bonds into shares of Infogrames, and, upon such redemption and exercise of such stock warrants, the BlueBay Funds would collectively hold approximately 54.9% of the outstanding stock of Infogrames (on a fully diluted basis). The BlueBay Funds are deemed by Rule 13d-3(d)(1) of the Exchange Act to be beneficial owners of Atari stock held by Infogrames for beneficial ownership reporting purposes. See “Security Ownership of Certain Beneficial Owners and Management”.
	•		Infogrames has provided Atari a credit facility for the aggregate principal amount of US$20 million. Such loan is secured by substantially all the assets of Atari (subject to certain obligations under an intercreditor

			agreement among Infogrames, Blue Bay High Yield and Atari). For additional information regarding the Infogrames credit facility, see “Certain Transactions with Directors, Executive Officers and Affiliates”.
	•		BlueBay High Yield has provided Atari a credit facility for the aggregate principal loan amount of US$14 million, plus accrued and unpaid and accruing interest and fees. Such loan is secured by substantially all the assets of Atari (subject to certain obligations under an intercreditor agreement among Infogrames, BlueBay High Yield and Atari). BlueBay High Yield and Atari entered into a Waiver, Consent and Fourth Amendment, dated as of April 30, 2008 (the “Fourth Credit Facility Amendment”), pursuant to which BlueBay High Yield agreed to, among other things, waive Atari’s non- compliance with certain representations and covenants under the credit facility and consent to the merger. If any party elects to terminate the merger agreement, it would constitute an event of default under the credit facility. For additional information regarding the Blue Bay High Yield credit facility, see “Certain Transactions with Directors, Executive Officers and Affiliates”.
	•		Each executive officer and director of Atari holding Atari stock options (whether vested or unvested) will be entitled to receive an amount in cash equal to the excess, if any, of the per share merger consideration of US$1.68 over the applicable exercise price per share of Atari common stock subject to such Atari stock option, and such stock options will be cancelled. All outstanding options (other than those granted to Jim Wilson and Timothy Flynn) have exercise prices above US$1.68 per share.
	•		It is expected that certain of the persons serving as executive officers of Atari immediately prior to the effective time of the merger will remain executive officers of the surviving corporation and will be eligible to participate in the global stock option plan of Infogrames.
	•		The merger agreement provides that, following the merger, indemnification and insurance arrangements will be maintained for the persons serving as Atari’s directors and officers.
	•		In consideration of the expected time and effort that would be required of Special Committee members in evaluating and approving transactions with Infogrames, including a merger proposal, on November 4, 2007 the board of directors determined that each member of the Special Committee shall receive a retainer of US$10,000 (with the exception of the Chairman of the Special Committee, who receives US$25,000). In addition, each member of the Special Committee receives US$2,000 for each Special Committee meeting attended in person and US$1,000 for each Special Committee meeting attended by telephone. The members of the Special Committee will also be reimbursed for their reasonable out-of-pocket travel and other expenses in connection with their service on the Special Committee.

No Solicitation of Takeover Proposals (page 70)

     The merger agreement contains restrictions on Atari’s and the board’s ability to (i) initiate, solicit, knowingly encourage or facilitate any inquiries, offers or proposals relating to a takeover proposal, or (ii) engage in or continue discussions or negotiations with, or provide any non-public information relating to Atari or any of its subsidiaries, to any person who has made or indicated an intention to make a takeover proposal.

     Atari and its board of directors may, however, if specified conditions are satisfied and the board of directors determines in good faith after consultation with outside legal counsel that the failure to take such action could constitute a breach of its fiduciary duties to Atari’s stockholders under applicable law, engage in negotiations or discussions with, and provide information about Atari to, any third party that makes an unsolicited bona fide written takeover proposal that the board of directors determines, in good faith, constitutes a superior proposal (as defined in the merger agreement) or is reasonably likely to result in a superior proposal. However, nothing in the merger agreement obligates Infogrames in any way to vote in favor of a superior proposal.

     The merger agreement also provides that Atari’s board of directors shall not directly or indirectly withdraw, modify or amend (or propose or resolve to withdraw, modify or amend), in a manner adverse to Infogrames, its recommendation with respect to the merger or approve, endorse or recommend (or propose to approve, endorse or recommend) any takeover proposal other than the merger, except that before the stockholders approve the merger, Atari’s board of directors may withhold or withdraw its recommendation if Atari’s board of directors determines in good faith, after consultation with its legal and financial advisors, that the failure to do so would reasonably be

expected to result in a violation of the directors’ fiduciary duties to Atari’s stockholders under applicable law, provided that Atari’s board of directors has provided Infogrames with at least three business days’ prior notice of its intention to change its recommendation. In the event of a change of recommendation due to the existence of a superior proposal, Atari’s board of directors shall give Infogrames written notice of its intention to change its recommendation at least five business days prior to making a change of recommendation. At any time Infogrames will be permitted to propose to Atari’s board of directors, revisions to the terms of the transactions contemplated by the merger agreement, and the board of directors is required to negotiate in good faith regarding any such revisions, and Atari’s board of directors may withhold or withdraw its recommendation on the basis of the superior proposal only in the event that it continues to be a superior proposal in light of any revisions to the terms of the transaction contemplated by the merger agreement to which Infogrames and Atari’s board of directors have agreed.

Conditions to the Merger (page 73)

     The respective obligation of each party to complete the merger is subject to the merger agreement being adopted by the requisite Atari stockholder vote.

     The obligation of Infogrames to complete the merger is subject to the satisfaction or waiver of various conditions specified in the merger agreement, including conditions relating to, among other things:

	•		the absence of any event or circumstance that has or is reasonably likely to have a material adverse effect (as defined in the merger agreement) on Atari;
	•		performance by Atari of its obligations under the merger agreement;
	•		the accuracy of the Atari’s representations and warranties under the merger agreement;
	•		the absence of any court or governmental entity enacting, issuing, promulgating, enforcing or entering any order or law that is in effect which restrains, enjoins or otherwise prohibits consummation of the merger;
	•		obtaining necessary governmental and certain other consents and approvals for the transactions contemplated under the merger agreement;
	•		the absence of any breach of certain company material contracts;
	•		less than 15% of the outstanding Atari common stock validly exercising appraisal rights prior to the effective time; and
	•		No default has been declared by the lender under the credit facility provided by BlueBay High Yield.

     The obligation of Atari to complete the merger is subject to the satisfaction or waiver of conditions relating to, among other things:

	•		the absence of any event or circumstance that has or is reasonably likely to have a material adverse effect (as defined in the merger agreement) on Infogrames;
	•		performance by Infogrames of its obligations under the merger agreement; and
	•		the accuracy of Infogrames’ representations and warranties under the merger agreement.

Termination of the Merger Agreement (page 74)

     The merger agreement may be terminated at any time prior to the effective time of the merger by mutual written consent of Infogrames and Atari (through action by, or with approval of, the Special Committee).

     The merger agreement may be terminated by either Atari (through action by, or with approval of, the Special Committee) or Infogrames at any time prior to the effective time if:

	•		the closing does not occur by August 31, 2008, with certain extensions if (i) the Securities and Exchange Commission (“SEC”) has reviewed the Atari proxy statement and the special meeting has not been held by August 31, 2008 and (ii) after August 31, 2008 but prior to October 31, 2008, any governmental entity has entered an order that enjoins the merger and a party to the merger agreement commenced an appeal thereof, the merger agreement may be extended by written notice to the other party to the date that is 30 days following the issuance of a decision by the applicable appeals court with respect to the appeal (but in no event beyond October 31, 2008);
	•		the affirmative vote of the holders of a majority of the outstanding shares of Atari’s common stock is not obtained;
	•		Atari’s board changes its recommendation to Atari’s stockholders of the merger and merger agreement in any manner adverse to Infogrames due to the existence of a superior proposal;
	•		any law is enacted that prohibits the consummation of the merger; or
	•		any order is entered that prohibits consummation of the merger, and such order is final and nonappealable.

     The merger agreement may be terminated by Infogrames at any time prior to the effective time if:

	•		Atari’s board of directors withdraws, modifies or amends its recommendation to Atari’s stockholders of the merger and merger agreement in any manner adverse to Infogrames;
	•		a tender offer or exchange offer for any outstanding shares of Atari common stock is commenced and Atari’s board of directors fails to recommend against acceptance of the tender offer or exchange offer by Atari’s stockholders within ten business days after the offer’s commencement, or the board of directors or Atari publicly announces its intention not to do so;
	•		Atari’s board of directors exempts any person other than Infogrames or any of its affiliates from §203 of the DGCL (relating to business combinations with interested stockholders);
	•		Atari breaches any of its representations or warranties contained in the merger agreement, if such breach would have a material adverse effect on Atari, or if Atari fails to materially perform its obligations under the merger agreement, and in either case such breach is not cured within 20 business days; provided that Infogrames cannot terminate the merger agreement by reason of Atari’s breach of the credit facility provided by Infogrames unless BlueBay High Yield has declared a default under the credit facility it provides Atari and has accelerated Atari’s obligations thereunder. For further information regarding Atari’s credit facility with BlueBay High Yield, see “Certain Transactions with Directors, Executive Officers and Affiliates”;
	•		a material adverse effect on Atari occurs;
	•		one or more key intellectual property assets (as defined in the merger agreement) of Atari become materially impaired as a result of the acts or omissions of Atari;
	•		BlueBay High Yield has declared a default under the credit facility it provides Atari and has accelerated the obligations thereunder; or
	•		Atari or any of its subsidiaries has commenced certain bankruptcy-related actions.

     The merger agreement may be terminated by Atari (through action by, or with approval of, the Special Committee) at any time prior to the effective time of the merger if Infogrames breaches any of its representations, warranties, covenants, or agreements contained in the merger agreement, if such breach would have a material adverse effect on Infogrames, or if Infogrames fails to materially perform its obligations under the merger agreement, and in either case such breach is not cured within 20 business days.

Termination Fee (page 75)

     Atari will pay Infogrames a termination fee of US$450,000 if the agreement is terminated:

	•		by Infogrames because (i) Atari’s board withdraws, modifies or amends its recommendation to Atari’s stockholders of the merger and merger agreement in any manner adverse to Infogrames; (ii) Atari’s board of directors fails to recommend against acceptance of a tender offer or exchange offer for outstanding shares of Atari common stock within ten business days of the offer’s commencement, or publicly announces its intention not to do so; (iii) Atari’s board of directors exempts any person other than Infogrames or any of its affiliates from the provisions of §203 of the DGCL (regarding business combinations with interested stockholders); (iv) Atari willfully breaches any of its representations, warranties, covenants, or agreements contained in the merger agreement, if such breach would have a material adverse effect on Atari, and such breach is not cured within 20 business days;
	•		By Atari because Atari’s board changes its recommendation of the merger and merger agreement in favor of a superior proposal, or if Atari enters into an agreement relating to a superior proposal; or
	•		By either Infogrames or Atari because (i) the closing did not occur by the latest date permitted under the merger agreement, (ii) the requisite vote of the Atari stockholders is not yet obtained or (iii) Atari’s board changes its recommendation to Atari stockholders of the merger and merger agreement in favor of a superior proposal, but a takeover proposal had been proposed during the term of the Agreement and, within 18 months of the termination of the merger agreement, Atari or its subsidiaries enters into an agreement for the implementation of a takeover proposal (whether or not it is the same takeover proposal that had been previously proposed).

Litigation Related to the Merger (page 53)

Stanley v. IESA, Atari, Inc. and Atari, Inc. Board of Directors

     On April 18, 2008, attorneys representing Christian M. Stanley, a purported stockholder of Atari (“Plaintiff”), filed a Verified Class Action Complaint against Atari, certain of its directors and former directors, and Infogrames, in the Delaware Court of Chancery. In summary, the complaint alleges that the director defendants breached their fiduciary duties to Atari’s unaffiliated stockholders by entering into an agreement that allows Infogrames to acquire the outstanding shares of Atari’s common stock at an allegedly unfairly low price. An Amended Complaint was filed on May 20, 2008, updating the allegations of the initial complaint to challenge certain provisions of the definitive merger agreement. On the same day, Plaintiff filed motions to expedite the suit and to preliminarily enjoin the merger. Plaintiff filed a Second Amended Complaint on June 30, 2008, further amending the complaint to challenge the adequacy of the disclosures contained in the Preliminary Proxy Statement on Form PREM 14A (the “Preliminary Proxy”) submitted in support of the proposed merger and asserting a claim against Atari and Infogrames for aiding and abetting the directors’ and former directors’ breach of their fiduciary duties.

     Plaintiff alleges that the US$1.68 per share offering price represents no premium over the closing price of Atari stock on March 5, 2008, the last day of trading before Atari announced the proposed merger transaction. Plaintiff alleges that in light of Infogrames’ approximately 51.6% ownership of Atari, Atari’s unaffiliated stockholders have no voice in deciding whether to accept the proposed merger transaction, and Plaintiff challenges certain of the “no shop” and termination fee provisions of the merger agreement. Plaintiff claims that the named directors are engaging in self-dealing and acting in furtherance of their own interests at the expense of those of Atari’s unaffiliated stockholders. Plaintiff also alleges that the disclosures in the Preliminary Proxy are deficient in that they fail to disclose material financial information and the information presented to and considered by the Board and its advisors. Plaintiff asks the court to enjoin the proposed merger transaction, or alternatively, to rescind it in the event that it is consummated. In addition, Plaintiff seeks damages suffered as a result of the directors’ violation of their fiduciary duties.

     The parties have been in discussions regarding a resolution of the action and are negotiating the terms of such resolution.

Letter from Coghill Capital Management, LLC

     On June 18, 2008, attorneys representing an individual shareholder, Coghill Capital Management, LLC (“CCM”), delivered a letter to Infogrames and Atari’s Board alleging that Atari had sustained damages as a result of entering into certain contractual arrangements between Atari and Infogrames and that, as a result, the proposed merger consideration was inadequate. CCM further alleged that Infogrames prevented Atari from properly discharging the duties it owed to shareholders and that certain former and current executive officers and directors of Infogrames derived improper personal benefits from Atari. CCM demanded that the Atari Board commence an action against Infogrames to recover the alleged damages if Infogrames does not agree to increase the merger consideration to at least $7.00 per share.

Material United States Federal Income Tax Consequences (page 54)

     The receipt of the cash merger consideration pursuant to the merger by Atari’s unaffiliated U.S. stockholders will be a taxable transaction for U.S. federal income tax purposes. A U.S. stockholder whose shares of Atari common stock are converted to cash in the merger will recognize capital gain or loss for United States federal income tax purposes equal to the excess, if any, of the cash received in the merger over the U.S. holder’s adjusted tax basis in the shares converted into the merger consideration. Such gain or loss will be long-term capital gain or loss provided that the U.S. holder’s holding period for such shares is more than one year at the time the merger is completed. The deductibility of capital losses is subject to limitations.

     The receipt of the cash merger consideration pursuant to the merger by Atari’s unaffiliated non-U.S. stockholders generally will not be subject to United Stated federal income tax except under certain circumstances.

     Tax matters are very complex, and the tax consequences of the merger to you will depend on the facts of your own situation. We recommend that you consult your tax advisor for a full understanding of the tax consequences of the merger to you, including the federal, state, local and foreign tax consequences of the merger. See “Special Factors—Material United States Federal Income Tax Consequences”.

Appraisal Rights (page 56)

     Stockholders who do not vote in favor of approval of the merger agreement and who comply with the procedures for perfecting appraisal rights under the applicable statutory provisions of Delaware law summarized elsewhere in this proxy statement may be entitled to payment of the “fair value” of their shares in cash determined in accordance with Delaware law. See “Special Factors—Appraisal Rights”.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND MERGER

     The following questions and answers, presented for your convenience only, briefly address some commonly asked questions about the special meeting and the merger. You should still carefully read the entire proxy statement, including the annexes hereto.

Q:		Why am I receiving these materials?
A:		The board of directors is providing these proxy materials to give you information for use in determining how to vote on the merger agreement in connection with the special meeting.
Q:		When and where is the special meeting?
A:		The special meeting will be held on [                      ], 2008, at [                      ], local time, at Atari’s offices, 417 Fifth Avenue, New York, New York 10016.
Q:		Will Atari still conduct its 2008 Annual Meeting?
A:		If stockholders adopt and approve the merger agreement and approve the merger at the special meeting, and the merger is completed on a timely basis, Atari will not hold its 2008 Annual Meeting.
Q:		What am I being asked to vote upon?
A:		You are being asked to consider and vote upon a proposal to adopt and approve the merger agreement. Pursuant to the merger agreement, Merger Sub will merge into Atari, and Atari will continue its corporate existence under Delaware law as the surviving corporation in the merger and Atari will become a wholly owned indirect subsidiary of Infogrames.
Q:		Who can vote on the proposal to adopt and approve the merger agreement?
A:		All holders of Atari common stock at the close of business on [                      ], 2008, the record date for the special meeting, may vote in person or by proxy on the proposal to adopt and approve the merger agreement at the special meeting.
Q:		How many shares of Atari common stock need to be represented at the special meeting?
A:		The holders of shares of voting stock representing a majority of the voting power of the shares of voting stock issued, outstanding and entitled to vote at a meeting of stockholders, must be represented in person or by proxy at such meeting to constitute a quorum for the transaction of business. If you vote by proxy card, over the internet or by telephone, or in person at the special meeting, your shares will be considered present for the purpose of determining whether the quorum requirement has been satisfied.
Q:		What vote is required to adopt and approve the merger agreement?
A:		Stockholder adoption and approval of the merger agreement requires the affirmative vote of a majority of Atari’s outstanding common stock entitled to vote on the merger of Atari. As of the record date, Infogrames directly or indirectly controlled approximately 51.6% of the voting securities of Atari, which is sufficient to adopt and approve the merger agreement. As a result, approval of the merger agreement will occur upon the vote in favor of the merger agreement by Infogrames, regardless of the vote of any other stockholder of Atari.
Q:		What will happen in the merger?
A:		The proposed transaction is a merger of Merger Sub with and into Atari. Atari will continue its corporate existence under Delaware law as the surviving corporation in the merger and Atari will become a wholly owned indirect subsidiary of Infogrames.

Q:		What will each holder of Atari common stock receive in the merger?
A:		At the effective time of the merger, each share of Atari common stock outstanding at the effective time of the merger (other than excluded shares) that you hold will be cancelled and converted into the right to receive US$1.68 in cash, without interest. Shares beneficially owned by Infogrames will be cancelled with no consideration paid therefor. Shares held by stockholders who vote against adoption of the merger agreement and perfect a demand for appraisal rights under Delaware law will be cancelled and the dissenting shares will receive only the payment provided for pursuant to Section 267 of the DGCL. See Annex C.
Q:		What will an option holder receive in the merger?
A:		At the effective time of the merger, all outstanding options to acquire shares of Atari’s common stock granted under Atari stock incentive plans, whether or not vested or exercisable, that you hold will be converted into the right to receive an amount in cash, without interest, equal to the product of the number of shares of Atari common stock subject to such option multiplied by the excess, if any, of US$1.68 over the exercise price per share of each such option. Furthermore, prior to the effective time of the merger, Atari has agreed to use its reasonable best efforts to effect a tender offer to purchase all outstanding options to acquire shares of Atari common stock granted under Atari’s employee stock incentive plans (whether or not vested or exercisable) that Atari does not have the right to cancel and that have exercise prices that exceed US$1.68 per share. Documents regarding the tender offer will be mailed to option holders at or about the time this proxy statement is sent to Atari stockholders. Any payments to the option holder will be reduced by applicable withholding taxes.
Q:		What consideration will management participants receive in the merger?
A:		To the extent they hold shares of Atari’s common stock or options to acquire Atari’s common stock, management participants will receive the same consideration as all other stock and option holders. Other than such merger consideration, no officers or directors of Atari will receive any consideration or other remuneration in connection with the merger. See “Special Factors—Interests of Certain Persons in the Merger—Other Consideration in Connection with the Merger” and “Security Ownership of Certain Beneficial Owners and Management”.
Q:		What are the reasons for the merger?
A:		Atari’s purpose in undertaking the merger is to allow its stockholders (other than Infogrames and its affiliates) to realize the value of their investment in Atari in cash at a price that represents a 6.3% premium to the 5-day trading price prior to the date of Infogrames’ announcement of its offer, and a 58.5% premium to the 30-day trading price prior to the date of Infogrames’ announcement of its offer, of Atari’s common stock on the Nasdaq Stock Market.
		Infogrames’ purpose for engaging in the merger is to acquire all of the shares of common stock (approximately 49.4%) not already beneficially owned by Infogrames. In reaching its decision to effect the merger, the Infogrames board, in consultation with its management, focused primarily on the benefits and synergies of having its products distributed in the United States by a wholly owned company that would no longer be incurring the costs involved with being a public company, and the ability of Infogrames to rebuild and develop Atari for the long term without immediate concerns about its potential liquidation or bankruptcy. See “Special Factors—Purposes for the Merger—Infogrames’ Purpose for the Merger”.
Q:		What was the role of the Special Committee?
A:		The Special Committee of Atari’s board of directors was established in May 2006 to evaluate transactions between Atari and Infogrames and its affiliates. Prior to and at the time of Infogrames’ proposal, three of Atari’s directors also served as directors of Infogrames or its direct or indirect subsidiaries. Because these directors had financial and other interests that could be different from, and in addition to, the interests of Atari stockholders (other than Infogrames and its affiliates) in transactions with Infogrames and its affiliates, including the proposed merger transaction, Atari’s board of directors decided that, in order to protect the interests of Atari’s unaffiliated stockholders, the Special Committee of independent directors who are not affiliated with Infogrames, should evaluate and negotiate the merger agreement and, if appropriate, recommend the merger and

		the terms of the merger agreement to Atari’s board. See “ Special Factors—Interests of Certain Persons in the Merger—Atari Directors”.
Q:		What was the recommendation of the Special Committee to the Atari board of directors?
A:		The Special Committee has determined that the merger agreement and the merger are fair and advisable to and in the best interests of the unaffiliated stockholders of Atari. The Special Committee has unanimously recommended that the board of directors: (a) approve and adopt the merger agreement; ( b) approve the merger; and (c) recommend that the stockholders of Atari vote for the adoption and approval of the merger agreement.
Q:		What is the recommendation of the board of directors to the holders of common stock of Atari?
A:		The board of directors, based on the recommendation of the Special Committee, recommends that Atari’s stockholders vote FOR the adoption and approval of the merger agreement. The recommendation of the board of directors was made after consideration of all the material factors, both positive and negative. See “Special Factors—Atari’s Reasons for the Merger; Recommendations of the Special Committee and the Atari Board of Directors”.
Q:		What are the consequences of the merger to current Atari officers and directors?
A:		At the effective time of the merger, the directors of Merger Sub will become the directors of the surviving corporation in the merger. It is expected that, immediately following the effective time of the merger, the officers of Atari immediately prior to the effective time of the merger will remain officers of the surviving corporation.
Q:		Is the merger subject to the satisfaction of any conditions?
A:		Yes. Before completion of the transactions contemplated by the merger agreement, a number of closing conditions must be satisfied or waived. These conditions are described in this proxy statement in the section entitled “The Merger Agreement—Conditions to the Merger”. If these conditions are not satisfied or waived, the merger will not be completed even if Atari’s stockholders vote to adopt and approve the merger agreement.
Q:		When do you expect the merger to be completed?
A:		If the merger and the merger agreement are approved and adopted at the special meeting by the affirmative vote of a majority of Atari’s outstanding common stock entitled to vote on the merger, and if the other conditions to the merger agreement are satisfied or waived, Atari and Infogrames expect to complete the merger promptly after the special meeting.
Q:		What are the U.S. federal income tax consequences of the merger to Atari’s unaffiliated stockholders?
A:		The receipt of the cash merger consideration pursuant to the merger by Atari’s unaffiliated U.S. stockholders will be a taxable transaction for U.S. federal income tax purposes. A U.S. stockholder whose shares of Atari common stock are converted to cash in the merger will recognize capital gain or loss for United States federal income tax purposes equal to the excess, if any, of the cash received in the merger over the U.S. holder’s adjusted tax basis in the shares converted into the merger consideration. Such gain or loss will be long-term capital gain or loss provided that the U.S. holder’s holding period for such shares is more than one year at the time the merger is completed. The deductibility of capital losses is subject to limitations.
		The receipt of the cash merger consideration pursuant to the merger by Atari’s unaffiliated non-U.S. stockholders generally will not be subject to United Stated federal income tax except under certain circumstances.
		Tax matters are very complex, and the tax consequences of the merger to you will depend on the facts of your own situation. We recommend that you consult your tax advisor for a full understanding of the tax consequences of the merger to you, including the federal, state, local and foreign tax consequences of the merger. See “Special Factors—Material United States Federal Income Tax Consequences”.

Q:		What happens if I do not return a proxy card?
A:		If you neither vote at the meeting nor grant your proxy as described in this proxy statement, your shares will not be voted, which will have the effect of voting AGAINST the adoption and approval of the merger agreement.
Q:		May I change my vote after I have mailed my signed proxy card or otherwise voted?
A:		Yes. You may revoke your proxy at any time before it is actually voted by sending a signed statement to the Secretary of Atari that the proxy is revoked, by submitting a duly executed proxy bearing a later date, or by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke a proxy . If you have given voting instructions to a broker, nominee, fiduciary or other custodian that holds your shares in “ street name”, you may revoke those instructions by following the directions given by the broker, nominee, fiduciary or other custodian.
Q:		If my shares are held in “street name” by my broker, will my broker vote my shares for me?
A:		Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares, following the procedures provided by your broker. Failure to instruct your broker to vote your shares will have the same effect as a vote AGAINST the merger agreement.
Q:		What does it mean if I receive more than one set of materials?
A:		This means you own shares of Atari common stock that are registered under different names. For example, you may own some shares directly as a stockholder of record and other shares through a broker; or you may own shares through more than one broker. In these situations, you will receive multiple sets of proxy materials. You must complete, sign, date and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards that you receive in order to vote all of the shares you own. Each proxy card you receive comes with its own postage pre-paid return envelope; if you vote by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card.
Q:		If the merger is completed, how will I receive the cash for my shares?
A:		Infogrames has selected American Stock Transfer and Trust Company to act as the paying agent. Infogrames will provide funds necessary for the payment of the aggregate merger consideration to the paying agent, no later than close of business on the business day immediately preceding the closing date. Promptly after the effective time, the paying agent will mail a letter of transmittal that will contain instructions concerning the procedure for surrendering stock certificates. Upon surrender of the stock certificates to the paying agent, together with a properly completed letter of transmittal and any other documents the paying agent may require, the holder will receive the appropriate merger consideration, less any applicable withholding taxes. No interest will be paid or will accrue on any amount payable upon surrender of stock certificates.
Q:		Should I send in my stock certificates now ?
A:		No. If the merger is completed, you will receive written instructions for exchanging your Atari stock certificates for the applicable per share cash amount. You must return your Atari stock certificates as described in the instructions.
Q:		What if I have lost a stock certificate?
A:		If any certificate is lost, stolen or destroyed, upon making an affidavit of that fact and posting a bond in the form required by Infogrames as indemnity against any claim that may be made against Infogrames on account of the alleged loss, theft or destruction of such certificate, the paying agent will pay you the merger consideration in exchange for such lost, stolen or destroyed certificate.
Q:		What rights do I have to seek appraisal of my shares ?
A:		Shares of Atari common stock that are held by a stockholder who has perfected a demand for appraisal rights pursuant to Section 262 of the DGCL will not be converted into the right to receive the merger consideration, unless and until the dissenting holder effectively withdraws his or her request for, or loses his or her right to, appraisal under the DGCL. Each such dissenting stockholder will be entitled to receive only the payment

		provided by Section 262 of the DGCL with respect to shares owned by such dissenting stockholder. See “Special Factors—Appraisal Rights” for a description of the procedures that you must follow if you desire to exercise your appraisal rights under Delaware law.
Q:		Where can I get additional copies of this proxy statement and who can help answer my questions?
A:		If you would like additional copies, without charge, of this proxy statement, or if you have questions about the merger agreement or the merger, including the procedures for voting your shares, you may contact Atari by telephone at (212) 726-6500 or in writing at Atari, Inc., 417 Fifth Avenue, New York, New York 10016, Attention: Arturo Rodriguez.
Q:		Who is soliciting my vote?
A:		Atari is soliciting your vote.
Q:		Who will act as inspector of election at the special meeting ?
A:		A representative of Broadridge Financial Solutions, Inc. has been chosen to act as the inspector of election at the special meeting.
Q:		Who will pay the costs relating to the solicitation of proxies from Atari stockholders?
A:		Atari and Infogrames will share all costs relating to the solicitation equally.

SPECIAL FACTORS

Structure of the Transaction

     The proposed transaction is a merger of Merger Sub with and into Atari. Atari will continue its corporate existence under Delaware law as the surviving corporation in the merger and Atari will become a wholly owned indirect subsidiary of Infogrames.

     The principal steps that will accomplish the merger are as follows:

      The Merger. Following the satisfaction or waiver of all conditions to the merger, the following will occur in connection with the merger:

	•		all shares of Atari common stock that are held by Infogrames, Atari or any of their wholly owned subsidiaries will be cancelled and retired without any consideration payable therefor;
	•		each other share of Atari common stock issued and outstanding immediately before the effective time of the merger (other than any share as to which a dissenting stockholder has perfected and not withdrawn appraisal rights under Delaware law) will be converted into the right to receive US$1.68 in cash without interest;
	•		each option holder will be entitled to receive an amount in cash equal to the product of (x) the number of shares into which each option was exercisable prior to the effective time subject to such stock option, multiplied by (y) the excess, if any, of the per share merger consideration of US$1.68 over the per share exercise price of such stock option, less applicable taxes required to be withheld with respect to such payment, and, to the extent permitted under the applicable option plans, each outstanding and unexercised option to purchase shares of Atari common stock granted under Atari’s stock incentive plans (whether vested or unvested) at the effective time of the merger will be cancelled;
	•		Atari will use its reasonable best efforts to effect a tender offer to purchase all outstanding options to acquire shares of Atari common stock granted under Atari’s employee stock incentive plans (whether or not vested or exercisable) that Atari does not have the right to cancel and that have exercise prices that exceed US$1.68 per share;
	•		each share of Merger Sub common stock will be converted into one share of common stock of Atari, the surviving corporation in the merger; and
	•		shares of Atari common stock, the holders of which perfect their appraisal rights in the manner prescribed by Section 262 of the DGCL, will be cancelled and each holder of such shares will be entitled to receive a cash payment equal to the fair value of such shares, as determined pursuant to court appraisal proceedings.

See “The Merger Agreement”.

As a result of the merger:

	•		the stockholders of Atari (other than Infogrames and its affiliates) will no longer have any interest in, and will no longer be stockholders of, Atari and will not participate in any future earnings or growth of Atari;
	•		Infogrames will beneficially own all of the outstanding shares of Atari;
	•		shares of Atari common stock will no longer be listed on any exchange or quotation service, and price quotations with respect to sales of shares of Atari common stock in the public market will no longer be available; and
	•		the registration of Atari’s common stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated, and Atari will cease filing reports and other information with the SEC.

      Board of Directors of Atari. The board of directors of Atari after the completion of the merger will consist of the directors of Merger Sub at the effective time of the merger, until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal.

     For additional details regarding the merger and interests of Infogrames in the transaction, see “Special Factors—Interests of Certain Persons in the Merger” and “The Merger Agreement”.

Background of the Merger

     Prior to Infogrames’ acquisition of an interest in Atari in 1999, Infogrames and Atari completed a series of transactions that were intended to provide Infogrames with a distribution platform for Infogrames’ products in North America and to strengthen the respective businesses of Infogrames and Atari.

     On December 16, 1999, GT Interactive Software Corp. (Atari’s predecessor) (“GTI”) entered into an exclusive distribution agreement with Infogrames. Shortly thereafter, Infogrames, through its wholly owned subsidiary CUSH, became the majority stockholder of GTI by purchasing via various transactions common stock and convertible securities of GTI. As of May 15, 2000, Infogrames beneficially held 71.8% of the voting securities of GTI.

     On February 11, 2000, Bruno Bonnell, chairman of the board of directors and Chief Executive Officer of Infogrames, also became the chairman of the board of directors and Chief Executive Officer of GTI.

     In May 2000, in connection with Infogrames’ acquisition of its majority stake, GTI changed its name to Infogrames, Inc. and announced that all of its products would be marketed under the Infogrames brand. Infogrames’ European presence allowed Infogrames, Inc. to begin the process of closing its European operations. Infogrames, Inc. also amended its exclusive distribution agreement with Infogrames, expanding Infogrames’ distribution territories to include Asia, South America and other regions. Infogrames, Inc. also entered into an agreement with Infogrames North America, Inc. (“INA”), a wholly owned subsidiary of Infogrames, to act as sales agent for INA’s products in North America.

     On October 2, 2000, INA merged with and into Infogrames, Inc., with Infogrames, Inc. the surviving corporation. In connection with this merger, Infogrames, Inc. and Infogrames entered into a new distribution agreement that provided for the distribution by Infogrames, Inc. of Infogrames’ products in North America. Under the agreement, Infogrames, Inc. was entitled to retain 70% of the gross profit for the distribution of the products by it, subject to certain adjustments.

     In December 2000, Infogrames acquired Hasbro Interactive and the rights to the “Atari” name. In May 2003, Infogrames licensed the rights to use the “Atari” name to Infogrames, Inc., which then changed its name to Atari, Inc. and its trading symbol on the Nasdaq National Market to “ATAR”. Subsequently, in September 2003, Infogrames and Atari extended the term and expanded the scope of the trademark license.

     Between 2000 and 2006, Infogrames and Atari amended their distribution agreements with each other and entered into various intercompany management and services agreements.

     By 2001, Infogrames, through CUSH’s acquisitions of additional common stock and convertible securities, beneficially held 89.8% of Atari’s outstanding voting securities.

     In September 2003, Atari completed a recapitalization through the issuance of new shares pursuant to an agreement with Infogrames and a secondary public offering. On September 18, 2003, Atari converted certain outstanding indebtedness to Infogrames into shares of common stock, and on September 24, 2003, Infogrames sold shares of Atari common stock in the secondary offering, which reduced its beneficial ownership percentage to approximately 67.6% of Atari’s outstanding voting securities immediately following the completion of the offering. From time to time thereafter, Infogrames sold additional shares of Atari common stock, until its beneficial ownership interest was reduced in September 2005 to approximately 51.6% of the outstanding voting securities of Atari.

     Between 2004 and 2007, Atari experienced significant declines in annual net revenue and operating income due to, among other reasons, underperformance from new product launches, product launch delays and reduced revenue after discontinued product development and sales of intellectual property assets. As a result of these declines and its limited ability to raise additional capital, Atari experienced significant financial difficulties.

     Until 2005, Atari was actively involved in developing video games and in financing development of video games by independent developers, which Atari and Infogrames would publish and distribute under licenses from the developers. In 2005, Atari’s board determined that because of cash constraints, Atari should substantially reduce its involvement in development of video games and to divest itself of internal development studios. Other than the participation on Atari’s board by directors affiliated with Infogrames, Infogrames did not play a role in Atari’s strategy for the development studio divestments. During fiscal 2006 and 2007, Atari sold a number of intellectual properties and development facilities in order to obtain cash to fund its operations. During fiscal 2006, Atari sold the Humongous Entertainment Studio to Infogrames. The sale of Humongous followed significant marketing efforts by Atari, including the retention of Morgan Joseph & Co., Inc. as a broker. The consideration received for the sale, approximately 4.7 million shares of Infogrames stock, was valued at $8.3 million at the time of the transaction and was sold in the open market for $10.1 million the following month. The consideration offered by Infogrames was significantly higher than any price offered by any other potential buyer. Furthermore, in connection with the transaction, Atari entered into a distribution agreement with respect to Humongous, which provided that Atari would be the exclusive North American distributor of Humongous’ products. Other than Humongous, Infogrames did not purchase any Atari assets during this period. During fiscal 2007, Atari sold the rights to its “Driver” game franchise and certain other intellectual property, and sold its Reflections Interactive and Shiny Entertainment studios. By the end of fiscal 2007, Atari did not own any development studios.

     On May 9, 2006, Atari’s board established the Special Committee of directors unaffiliated with Infogrames and empowered it to review and approve any transaction outside the ordinary course of business, including any proposal by Infogrames and/or its affiliated entities to acquire Atari or any of its material assets, any other transactions with Infogrames or in which Infogrames may have different interests and any other related party transactions.

     On November 3, 2006, Atari established a secured credit facility for which Guggenheim Corporate Funding LLC (“Guggenheim”) was the administrative agent. The credit facility consisted of a secured, committed, revolving line of credit in the initial amount of up to US$15 million. As of June 30, 2007, Atari was not in compliance with the financial covenants of the credit facility. On October 1, 2007, Guggenheim provided a waiver of covenants of default as of June 30, 2007 but reduced the aggregate loan availability under the credit facility to US$3 million, representing the then-current outstanding balance. As a result of these events and restrictions in the credit agreement, Atari did not have the liquidity necessary to sustain its operations over the long term and had limited prospects for raising additional capital.

     In May 2007, Atari undertook a plan to reduce its total workforce by approximately 20%, primarily from general and administrative functions. Also in May 2007, Infogrames engaged Lazard Frères SAS (“Lazard”) to provide it advice regarding its strategic alternatives, including, among other things, with respect to its majority interest in Atari. On September 18, 2007, Atari filed its Annual Report on Form 10-K for the fiscal year ending March 31, 2007, in which Atari’s auditor, Deloitte & Touche LLP, gave a qualified opinion expressing doubt that Atari could continue as a going concern.

     On October 5, 2007, Infogrames, through its wholly owned subsidiary CUSH, executed a stockholder action by written consent removing the five directors of Atari unaffiliated with Infogrames. In a letter dated October 5, 2007 (attached as an exhibit to its amended Schedule 13D filed with the SEC on October 9, 2007), Infogrames stated that it was taking this action in order to preserve the value of Atari for all stockholders and to take immediate action to implement necessary restructuring of Atari’s operations.

     Between October 10, 2007 and October 12, 2007, Wendell Adair, Eugene Davis, Bradley Scher and James Shein were appointed by the remaining members of Atari’s board as new independent directors to fill four of the five vacancies on Atari’s board of directors created after removal of the previous directors. None of Messrs. Adair, Davis, Scher or Schein has a relationship with BlueBay or Infogrames, except that Mr. Davis is a director of Cherry Luxembourg S.A., a company in which entities affiliated with the BlueBay Funds hold 43% of the common stock, 50.4% of the preferred shares and 55.6% of the debt.

     On October 10, 2007, Atari retained AlixPartners LLP, a restructuring consulting firm, to assist Atari in evaluating and implementing strategic and tactical options through Atari’s restructuring process. Also on October 10, 2007, Curtis G. Solsvig III, a managing director at AlixPartners LLP, was appointed Atari’s Chief Restructuring Officer. Between October 2007 and April 2008, AlixPartners LLP and Mr. Solsvig worked with Atari management to create and implement a restructuring plan, which included refocusing Atari’s operations on its distribution business and phasing out development of new titles.

     On October 11, 2007, Atari’s board of directors appointed Messrs. Wendell Adair, Eugene Davis, Bradley Scher and James Shein, the four independent members of the board of directors, to Atari’s Special Committee to make recommendations regarding and to approve transactions with related parties, particularly Infogrames and its affiliates.

     On October 18, 2007, Guggenheim, with the consent of Atari, transferred the US$3 million in outstanding loans under the credit facility to BlueBay High Yield and agreed to the appointment of BlueBay High Yield as successor administrative agent. The BlueBay Funds, investment funds affiliated with BlueBay High Yield, are stockholders of Infogrames. See “Security Ownership of Certain Beneficial Owners and Management”. On October 23, 2007, BlueBay High Yield and Atari entered into a waiver and amendment agreement to waive the existing defaults, amend the financial and other covenants, amend the conditions to availability of loans under the credit facility and increase the credit facility to US$10 million.

     On October 18, 2007, FUNimation Productions, Ltd. (“FUNimation”) delivered a notice purporting to terminate its license agreements with Atari, under which Atari distributes the Dragonball Z software titles, based on alleged breaches of the license agreements. From October 2007 to December 2007, Atari and FUNimation discussed the terms of a resolution of the dispute.

     On October 30, 2007, David Pierce informed Atari that he was resigning from his position as President and Chief Executive Officer of Atari. In his resignation notice, Mr. Pierce cited provisions in his employment agreement regarding the termination of his employment under certain circumstances, and referred specifically to the provisions regarding (i) a material diminution or adverse change in his position, office or duties, which he believed would be caused by the October 10, 2007 appointment of Mr. Solsvig as Atari’s Chief Restructuring Officer, and (ii) the replacement of a majority of Atari’s board of directors in a given year, where such replacement was not approved by the board of directors as constituted at the beginning of such year, which replacement he noted Infogrames had effected earlier in the month. To Atari’s and Infogrames’ knowledge, Mr. Pierce did not have any other specific objections to the change in the board’s composition. Later that day, members of the board and Mr. Pierce discussed, among other things, the need to ensure a smooth transition to the newly composed board and the development and implementation of Atari’s restructuring plan. As a result of the discussion, Mr. Pierce rescinded any purported resignation but reserved his rights to take subsequent action. Two weeks later, Atari and Mr. Pierce entered into a separation agreement that substantively memorialized the terms of Mr. Pierce’s employment agreement in connection with his resignation, including: (i) severance payments of $43,611 per month for the first six months after termination and $50,000 per month for up to two three month periods thereafter should Mr. Pierce be unable to find substitute employment; and (ii) medical benefits for each month during which Mr. Pierce is entitled to receive a severance payment. Further, Mr. Pierce agreed that he was not entitled to any bonus and agreed to a general release and other terms.

     In November 2007, Atari undertook a plan to lower operating expenses by, among other things, reducing headcount. The plan included (i) a reduction in force to consolidate certain operations, eliminate certain non-critical functions, and refocus certain engineering and support functions, and (ii) the transfer of certain product development and business development employees to Infogrames in connection with the termination of a production services agreement between Atari and Infogrames. The plan, when completed, is expected to reduce headcount by 30%.

     On November 4, 2007, the board of directors of Atari determined that each member of the Special Committee shall receive a retainer of US$10,000 (with the exception of the Chairman of the Special Committee, who shall receive US$25,000). In addition, each member of the Special Committee will receive US$2,000 for each Special Committee meeting attended in person and US$1,000 for each Special Committee meeting attended by telephone. Such fees are payable whether or not the merger is completed, and were approved prior to the receipt of Infogrames’ proposal and were not changed by the board of directors thereafter.

     Also on November 4, 2007, the Special Committee received the preliminary results of AlixPartners LLP’s evaluation of Atari’s operations, prospects and capital resources and its recommendations of changes to Atari’s business strategy in order to provide additional value to stockholders. AlixPartners LLP observed that Atari’s relationship with Infogrames was complex, because of Infogrames’ ownership interests and Atari’s reliance on Infogrames for a large proportion of the products Atari distributes and as the owner of Atari’s material trademarks. AlixPartners LLP also observed that the relationship had not historically functioned well, particularly with respect to coordination and communication between them, which was necessary given the distribution relationship and the fact that both were reporting companies required to prepare public reports in their respective home jurisdictions. AlixPartners LLP’s recommendations included a recommendation that Atari focus on its distribution business and reduce its production operations, which would require renegotiation of key agreements between Atari and Infogrames. The Special Committee discussed the near-term and long-term goals of Atari and directed AlixPartners LLP and Atari management to continue its analysis and engage in preliminary discussions with Infogrames regarding the changes in Atari’s strategy and the renegotiation of key agreements.

     In light of its extremely limited liquidity and its need to raise additional capital, on November 8, 2007, Atari and Infogrames entered into exclusive licensing agreements under which Atari granted Infogrames the exclusive right to develop and distribute licensed products derived from Atari’s “Test Drive” video game franchise for a term of seven years. Atari also granted Infogrames the exclusive right to distribute any versions of the “Test Drive” and “Test Drive Unlimited” games throughout the world (except in North America). Infogrames paid Atari a non-refundable advance royalty of US$5 million and Infogrames agreed to develop and commercially release at least two games based on the franchise during the five years following the licensing agreements. The transaction was reviewed and approved by the Special Committee.

     Also on November 8, 2007, Atari entered into a Waiver and Second Amendment to the Credit Agreement between Atari and BlueBay High Yield in order to obtain the waiver of its violations of certain operating covenants under its credit facility that had occurred and were existing as of that date and to obtain BlueBay High Yield’s consent to Atari’s entering into the licensing agreements with Infogrames.

     On November 13, 2007, Mr. Pierce’s resignation and separation agreement became effective. Atari’s board of directors began an executive search for Mr. Pierce’s replacement.

     During the period from November 2007 to early December 2007, representatives of Atari together with AlixPartners LLP had discussions regarding the terms of new intercompany arrangements and the repositioning of Atari’s business strategy to focus on its distribution business and reduce its production operations.

     At the end of November 2007, Atari and FUNimation had agreed in principle to the settlement of the outstanding dispute regarding the license agreements with FUNimation. As part of the proposed settlement, FUNimation required a guarantee of Atari’s obligations under the settlement by Infogrames in the event of Atari’s inability to fulfill its obligations. Infogrames agreed to provide such guarantee, so long as Atari developed a business plan to achieve profitability in fiscal 2009 and Infogrames and Atari reached an agreement, at least in principle, on the changes to key agreements that were being discussed. On November 25, 2007, the Special Committee reviewed with AlixPartners LLP the proposed terms of the arrangement with Infogrames and approved the material terms of the arrangement subject to finalization of the negotiations and certain additional information. Thereafter, Atari management, with outside counsel, worked with Infogrames and its counsel to memorialize the proposed arrangement in a series of agreements.

     On November 30, 2007, the Special Committee reviewed, discussed and approved the terms of a Global Memorandum of Understanding Regarding Restructuring (“GMU”) with Infogrames. The Special Committee considered, among other things, the need to obtain additional financing for Atari’s operations, the terms of the existing and new distribution agreements, the need to obtain the guarantee of the FUNimation settlement and the current financial position of Atari. Pursuant to the GMU and its underlying agreements, Atari agreed to terminate its existing distribution agreements with respect to new products as well as other intercompany agreements that it had previously entered into with Infogrames. Atari and Infogrames would then enter into a new distribution agreement under which Atari would be given the exclusive right to contract with Infogrames for distribution rights in North America and Mexico for all interactive software games developed by or on behalf of Infogrames that are released in packaged media format. The GMU also contemplated the execution of a Waiver, Consent and Third Amendment to

the Credit Agreement between Atari and BlueBay High Yield. Under the Waiver, Consent and Third Amendment, BlueBay High Yield increased the availability under Atari’s credit facility to US$14 million and again waived Atari’s violations of certain operating covenants that had occurred and were existing as of that date, conditioned on the entry into the new agreements. Furthermore, the GMU contemplated Atari’s entering into settlement agreements with FUNimation regarding the outstanding disputes that provided for the continuation of the license agreements at issue. Upon execution of the GMU, the settlement agreements would become effective.

     On December 4, 2007, Atari entered into the GMU and related agreements with Infogrames, BlueBay High Yield and FUNimation.

     On December 21, 2007, Atari received a notice from The Nasdaq Stock Market advising that Atari was not in compliance with Nasdaq Marketplace Rule 4450(b)(3) because the aggregate market value of Atari’s publicly held shares was less than US$15 million for 30 consecutive business days prior to such date.

     As of December 31, 2007, Atari was in violation of certain weekly cash flow covenants contained in its credit facility with BlueBay High Yield. These violations continued until April 30, 2008. BlueBay High Yield entered into two forbearance agreements with Atari and on April 30, 2008, as further discussed below, entered into the Fourth Credit Facility Amendment.

     Between 2000 and 2007, in addition to credit facilities with, among others, Guggenheim and BlueBay High Yield, Atari has relied on Infogrames to provide it financial support through loans or purchases of Atari assets. In order to explore opportunities that might provide value for Atari’s stockholders, Atari’s management engaged from time to time in discussions with representatives of Infogrames regarding possible strategic relationships and other transactions. Representatives from Atari met with representatives from Infogrames and Blue Bay from time to time between December 2007 and February 2008.

     On March 2, 2008, Lazard made a presentation to the board of directors of Infogrames, as described below under “Special Factors—Summary of Presentation by the Financial Advisor to Infogrames”.

     On March 5, 2008, Atari received the following letter from Infogrames:

March 5, 2008

Board of Directors
Atari, Inc.
417 Fifth Avenue
New York, NY 10016

Gentlemen:

     We are pleased to submit this letter summarizing the principal terms upon which Infogrames Entertainment S.A. (“IESA”) and/or our affiliates would potentially acquire the remaining equity interests in Atari, Inc. (“Atari”)). As Atari’s largest single shareholder, IESA is prepared to work expeditiously on the Acquisition (defined below) which we believe will be in the best interests of Atari and its public shareholders.

     1.  Proposed Terms . We are proposing to acquire all of the remaining outstanding shares of common stock of Atari, other than the shares held IESA and its affiliates (which would be cancelled), for a cash amount per share of US$1.68 (the “Acquisition”). The Acquisition would not be subject to any financing condition.

     2.  Due Diligence . IESA would only require a limited amount of due diligence. IESA intends to have its due diligence investigation completed prior to entering into a definitive agreement regarding the Acquisition.

THIS LETTER IS A NON-BINDING EXPRESSION OF INTENT. IESA RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO REVISE OR WITHDRAW THE PROPOSAL CONTAINED IN THIS LETTER AT ANY

TIME AND FOR ANY REASON PRIOR TO THE EXECUTION AND DELIVERY OF A SEPARATE DEFINITIVE AGREEMENT REGARDING THE ACQUISITION. THE PARTIES SHALL HAVE NO OBLIGATION TO CONSUMMATE THE ACQUISITION UNLESS AND UNTIL A SEPARATE DEFINITIVE AGREEMENT IS EXECUTED AND DELIVERED BY EACH PARTY HERETO AND SUBJECT IN ALL RESPECTS TO THE SATISFACTION OF THE CONDITIONS CONTAINED IN SUCH AGREEMENT.

     IESA and its advisors are prepared to work diligently on the Acquisition. We would appreciate a response prior to 5:00 pm EST on March 11, 2008.

     Please contact me at * * * if you have any questions regarding the contents of this letter. I look forward to the successful completion of the discussions contemplated by this letter.

Very truly yours,

/s/ David Gardner               
David Gardner
Chief Executive Officer
Infogrames Entertainment S.A.

     The closing price per share of the Atari common stock on March 5, 2008 was US$1.68. On March 6, 2008, Atari issued a press release announcing Atari’s receipt of Infogrames’ non-binding indication of intent and that it intended a thorough evaluation of the proposal.

     At a meeting of the Special Committee held on March 6, 2008, Mr. Davis conveyed Infogrames’ offer to the Special Committee, and with Atari’s outside counsel, Milbank, Tweed, Hadley & McCloy LLP (“Milbank”), discussed a possible timeline for the transaction and retaining a financial advisor to assist the Special Committee’s evaluation of the offer. Between March 6, 2008 and March 8, 2008, the Special Committee requested and received proposals from various financial advisors to assist Atari’s evaluation and to issue a fairness opinion to the Special Committee.

     At a meeting of the Special Committee held on March 9, 2008, the Special Committee discussed the proposals it had received from Duff & Phelps LLC (“Duff & Phelps”) and another financial advisor. After considering, among other things, the services offered by each advisor, the fees for such services and the backgrounds and capabilities of the members of the advisors’ teams, the Special Committee determined to engage Duff & Phelps.

     On March 11, 2008, the Special Committee engaged Duff & Phelps as its financial advisor to provide an opinion to the Special Committee as to the fairness, from a financial point of view, of the merger consideration to the unaffiliated stockholders of Atari.

     Between March 11, 2008 and March 18, 2008, Duff & Phelps held meetings and discussions with Atari management, evaluated the Company and reached preliminary valuation findings. At the direction of the Special Committee, Duff & Phelps engaged in informal discussions with Lazard, Infogrames’ financial advisor with respect to the proposed transaction, regarding the US$1.68 per share consideration. On March 18, 2008, Lazard informed Duff & Phelps that Infogrames was not willing to increase the per share consideration. Lazard communicated on behalf of Infogrames their view that the per share consideration, while not at a premium to the March 5, 2008 closing price of Atari common stock, provided a premium to (i) Atari’s trading price five days and thirty days prior to the announcement and (ii) Atari’s net asset value per share at that date.

     On March 17, 2008, BlueBay High Yield’s then current forbearance agreement with Atari expired.

     On March 19, 2008, the Special Committee held a telephonic meeting, with all members present, in which Milbank and Duff & Phelps discussed with the Special Committee the Infogrames offer. Duff & Phelps also provided the Special Committee with its preliminary analysis of Atari’s valuation and Infogrames’ proposal. The March 19, 2008 presentation included Duff & Phelps’ preliminary analysis of Atari’s historical (between March 31, 2003 and March 31, 2007) and projected (Atari management’s projections through March 31, 2009) financial information; current and historical common stock trading statistics during the period March 19, 2007 through March

18, 2008; and analysis of comparable mergers and acquisition transactions with respect to both multiples of revenue and EBITDA and premiums paid by buyer. After discussion, the Special Committee directed Milbank to engage in discussions with Infogrames’ legal counsel, Morrison & Foerster LLP (“Morrison & Foerster”), to request clarification on: (i) Infogrames’ intention with respect to funding the Company’s operating losses and working capital needs through the completion of the transaction; (ii) Infogrames’ intention with respect to obtaining an extension of the forbearance agreements with BlueBay High Yield; and (iii) the Atari stockholder approval Infogrames was contemplating in order to approve the transaction.

     Milbank subsequently discussed with Morrison & Foerster Atari’s need for funding between signing and closing the transaction, the legal form of the transaction, the closing conditions Infogrames would require (including the required stockholder vote), the proposed timeline for the transaction, any necessary regulatory approvals and any due diligence on Atari that Infogrames would require.

     Effective March 21, 2008, Thomas Schmider, deputy managing director of Infogrames, resigned as a member of Atari’s board of directors.

     From mid-March to mid-April 2008, Infogrames and its legal counsel conducted due diligence on areas identified by Infogrames, particularly Atari’s intellectual property assets.

     On March 24, 2008, Mr. Davis, Milbank and members of Atari management discussed the need for a meeting among Atari, Infogrames and BlueBay High Yield to discuss major outstanding points regarding the primary terms of the merger transaction.

     Also on March 24, 2008, Atari received a Staff Determination Letter from the Nasdaq Listing Qualifications Department stating that Atari had not gained compliance with the requirements of Nasdaq Marketplace Rule 4450(b)(3) and that its securities were subject to delisting from The Nasdaq Global Market.

     On March 25, 2008, representatives of the Special Committee, Infogrames and BlueBay High Yield, and their respective legal counsel, held a telephonic conference call to discuss open issues regarding the primary terms of the merger transaction, including Atari’s need for funding, the legal form of the transaction, the closing conditions Infogrames would require (including the required stockholder vote), and required due diligence. BlueBay High Yield agreed to discuss extending further credit to Atari and committed to work with Atari management to analyze Atari’s cash needs. Infogrames’ counsel indicated that the intended form of transaction would be by reverse triangular merger, wherein a wholly owned subsidiary of Infogrames would be merged with and into Atari, with Atari surviving the merger and becoming a wholly owned subsidiary of Infogrames. Infogrames’ counsel further indicated that Infogrames was requiring that the only vote required to approve the transaction was the affirmative vote of the holders of a majority of Atari’s outstanding voting securities.

     On March 31, 2008, Jim Wilson was appointed as Atari’s Chief Executive Officer and President.

     Between March 25, 2008 and April 7, 2008, BlueBay High Yield and Atari management had numerous discussions regarding Atari’s cash disbursement projections and near-term cash needs. During that time, BlueBay High Yield approached Infogrames regarding Infogrames’ providing funding to Atari, as opposed to BlueBay High Yield’s increasing the availability under existing credit facility.

     On April 7, 2008, the Special Committee and Infogrames, with the Special Committee’s and Infogrames’ respective legal counsel, held a telephonic meeting to discuss Infogrames’ offer, Infogrames’ interim funding to Atari and the parties’ next steps. It was agreed that Milbank would discuss with BlueBay High Yield’s counsel terms of a waiver or forbearance of Atari’s continuing violations of its financial and operational covenants under the BlueBay High Yield credit facility, as well as coordinate with Morrison & Foerster any required amendments to the BlueBay High Yield credit facility and any intercreditor agreements between BlueBay High Yield and Infogrames. Infogrames’ counsel also indicated that a draft merger agreement was forthcoming.

     On April 11, 2008, Atari received the first draft of the merger agreement from Infogrames.

     Between April 11 and April 30, 2008, Atari, Infogrames, BlueBay High Yield, the Special Committee and their respective legal counsel engaged in numerous discussions and draft revisions of the transaction documents.

     At a meeting of the Special Committee held on April 16, 2008, the Special Committee discussed with Milbank the remaining major open points on the merger agreement. After further discussion, the Special Committee determined, among other things, to seek: (i) broader exceptions to and qualifications of Atari’s representations and warranties; (ii) limitations on Atari’s pre-closing covenants, in order to effectively narrow Atari’s obligations to performance of the covenants already made under the existing credit agreement with BlueBay; (iii) limitations on the ability of Infogrames to terminate the merger agreement, including elimination of Infogrames’ right to terminate the merger agreement based on (a) breaches of the BlueBay or Infogrames credit facilities or any other material contract, (b) failure to obtain third party consents, (c) the acquisition by a third party of 15% or more of Atari’s outstanding shares, (d) the impairment of key Atari intellectual property assets, and (e) the occurrence of an event having a “material adverse effect” on Atari’s business or financial condition; (iv) changes to the “no shop” provision in order to clearly give Atari’s board the ability to change its recommendation of the transaction and to terminate the merger agreement based on such a change and (v) the elimination of the termination fee. The Special Committee also discussed timing of the closing of the transaction and the need for more flexibility with respect to the pre-closing covenants regarding filing the merger proxy statement and Schedule 13E-3, as well as the outside termination date of the merger agreement if the transaction is not closed by such date.

     Also on April 16, 2008, Jean-Michel Perbet resigned as a member of Atari’s board of directors.

     On April 19, 2008, Mr. Davis and Mr. Gardner, together with the Special Committee’s and Infogrames’ respective legal counsel, conducted a telephonic meeting at which the material terms of the merger agreement were discussed. Mr. Davis conveyed to Infogrames and its counsel the position of the Special Committee on such material terms, as determined at the April 16, 2008 Special Committee meeting. Infogrames agreed in principle to (i) generally limit in certain respects Atari’s representations and warranties, (ii) limit in certain respects Atari’s pre-closing covenants to those given in the credit agreements, (iii) changes to the “no shop” provision giving Atari a termination right based on an adverse recommendation of the board, (iv) eliminate the termination right with respect to the acquisition by a third party of 15% or more of Atari’s outstanding shares, (v) eliminate rigid deadlines in the pre-closing covenants regarding filing the merger proxy statement and Schedule 13E-3 and (vi) extend the outside termination date of the merger agreement. Infogrames also agreed to limit third party consents required for closing to those specifically identified by Infogrames and Atari. The parties did not come to an agreement, however, regarding the ability of Infogrames to accelerate Atari’s obligations under the proposed credit agreement, Infogrames’ termination rights relating to breaches of material contracts, impairment of key intellectual property assets and the occurrence of events having a “material adverse effect” on Atari and the elimination of the termination fee. The parties also discussed the treatment of outstanding options to acquire Atari common stock granted under Atari’s stock incentive plans and the assumption of indemnification obligations and maintenance of the “tail” in Atari’s directors and officers liability insurance policy. Atari agreed to conduct a tender offer for outstanding options to acquire Atari common stock that were not terminable by Atari and had exercise prices below the merger consideration, so long as Infogrames paid expenses incurred. Infogrames agreed to assume all director and officer indemnification obligations and to maintain the “tail” of Atari’s directors and officers liability insurance policy. Finally, Milbank and Mr. Davis discussed with Infogrames Atari’s need for additional financing and requested that the proposed terms of interim financing to be provided by Infogrames be provided to Atari and its advisors as soon as possible.

     On April 21, 2008, Infogrames’ counsel communicated that Infogrames insisted on a termination fee but would be willing to reduce it from approximately 15% to approximately 5% of the aggregate purchase price. Milbank agreed to convey Infogrames’ position to the Special Committee. Later that day, Atari received the first draft of the credit agreement from Infogrames.

     On April 22, 2008, Milbank and Morrison & Foerster discussed issues regarding the draft credit agreement, including the restrictiveness of the representations, warranties, covenants and conditions, the required use of proceeds and the proposed terms of the intercreditor agreement between Infogrames and BlueBay High Yield.

     Later that day, Atari delivered a revised draft merger agreement to Infogrames, in which Atari proposed, among other things, to (i) significantly narrow the definition of “material adverse effect,” in order to make it applicable only in very adverse circumstances, and to qualify many of Atari’s representations and warranties with such definition; (ii) eliminate the termination rights based on the occurrence of an event having a “material adverse effect” on Atari, breaches of material contracts and impairment of key intellectual property assets; (iii) remove the requirement that Atari hold a stockholder meeting regardless of whether Atari’s board gives an adverse recommendation of the

transaction and require Infogrames to take action with respect to the transaction only at the stockholder meeting called for such purpose; and (iv) give Atari the ability to terminate the merger agreement based on an adverse recommendation of Atari’s board regarding the transaction.

     On April 23, 2008, Atari received a draft intercreditor agreement from BlueBay High Yield.

     Later that day, Morrison & Foerster conveyed Infogrames’ positions on material open issues on the latest draft merger agreement. Among other things, Infogrames continued to resist elimination of the termination rights proposed by Atari in its revised draft merger agreement. Furthermore, Morrison & Foerster expressed Infogrames’ view that Atari’s right to terminate the agreement based on an adverse recommendation of the board should be limited to recommendations of superior proposals. Also, Infogrames was not willing to accept the elimination of the obligation to hold a stockholders meeting, but would agree to withhold taking any action except at a stockholders meeting held to approve the transaction.

     On April 24, 2008, Infogrames’ management made a presentation to its board of directors about the current status of the proposed merger and merger agreement, which included an update to Lazard’s valuation analysis presented to the board on March 2, 2008, as described below under “Special Factors—Summary of Presentation by the Financial Advisor to Infogrames”.

     Between April 24, 2008 and April 27, 2008, the parties exchanged several further drafts of the merger agreement, narrowing the set of material open issues to the breadth of Infogrames’ conditions to closing and termination rights and Atari’s ability to terminate the agreement based on an adverse recommendation of the board.

     During the same period, the parties also exchanged several drafts of the credit agreement and intercreditor agreement and continued to negotiate the material terms of such transaction documents. In particular, the parties discussed the breadth of Atari’s representations, warranties and covenants, the covenant regarding Atari’s budget during the period before closing, the ability of Infogrames to declare a default under certain circumstances and accelerate Atari’s obligations under the credit agreement and the mechanism followed by Infogrames and BlueBay with respect to payment of amounts owed after all obligations have been accelerated under their respective credit agreements.

     On April 28, 2008, the Special Committee held a meeting to evaluate the transaction documents and the terms of the transaction. Milbank summarized for the Special Committee the principal terms of each of the transaction documents. Duff & Phelps presented its fairness opinion to the Special Committee, which is summarized under “Special Factors—Opinion of the Financial Advisor to the Special Committee”, that, subject to the qualifications and limitations set forth therein, as of April 28, 2008, the per share merger consideration was fair from a financial point of view to the public stockholders of Atari, other than Infogrames and its affiliates.

     Following Milbank’s and Duff & Phelps’ presentations, the Special Committee discussed the benefits and risks associated with the proposed transaction to Atari’s unaffiliated stockholders and the Special Committee’s reasons for entering into the proposed transactions. After due deliberation, the Special Committee determined that the transaction was fair to the Atari stockholders (other than Infogrames and its affiliates) and recommended to the Board of Directors that the transaction be consummated. Also on April 28, 2008, the Board of Directors (with Mr. Coppee absent), following the recommendation of the Special Committee, approved the transaction.

     On April 30, 2008, Atari, Infogrames, and BlueBay High Yield executed the transaction documents and on May 1, 2008, Atari and Infogrames issued press releases announcing the execution of the merger agreement. See “Certain Transactions with Directors, Executive Officers and Affiliates—Agreements Related to the Merger”.

Purposes for the Merger

      Atari’s Purpose for the Merger

     Atari’s purpose in undertaking the merger is to allow its stockholders (other than Infogrames and its affiliates) to realize the value of their investment in Atari in cash at a price that represents a 6.3% premium to the 5-day trading price prior to the date of Infogrames’ announcement of its offer, and a 58.5% premium to the 30-day trading price prior to the date of Infogrames’ announcement of its offer, of Atari’s common stock on the Nasdaq Stock Market.

      The Infogrames Parties’ Purpose for the Merger

     The Infogrames Parties’ purpose for engaging in the merger is to acquire all of the shares of common stock not already beneficially owned by Infogrames. In reaching its decision to effect the merger, the Infogrames board, in consultation with its management, focused on the following material factors:

	•		that a combination of the businesses of Infogrames and Atari would result in substantial savings of operating costs that currently burden Atari;
	•		that the combined businesses of Infogrames and Atari would benefit from synergies in marketing, technology, and research and development opportunities, and savings on public company costs such as legal, auditing, accounting and other expenses involved in the preparation, filing, and dissemination of annual and other periodic reports, as well as compliance with the provisions of the Sarbanes-Oxley Act and the regulations resulting from that law;
	•		the ability of Infogrames to rebuild and develop Atari for the long term without immediate concerns about its potential liquidation or bankruptcy; and
	•		the matters described under “Special Factors—Position of Infogrames as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders; Intent of Infogrames to Vote in Favor of the Merger Transaction”.

Atari’s Reasons for the Merger; Recommendations of the Special Committee and the Atari Board of Directors

     Prior to and at the time of Infogrames’ proposal, three of Atari’s directors also served as directors of Infogrames or its direct or indirect subsidiaries. Because these directors had financial and other interests that could be different from, and in addition to, the interests of Atari stockholders (other than Infogrames and its affiliates) in transactions with Infogrames and its affiliates, including the proposed merger transaction, Atari’s board of directors decided that, in order to protect the interests of Atari’s unaffiliated stockholders in evaluating and negotiating the merger agreement, the Special Committee of independent directors who are not affiliated with Infogrames should evaluate and negotiate the merger agreement and, if appropriate, to recommend the merger and the terms of the merger agreement to Atari’s board. See “Special Factors—Interests of Certain Persons in the Merger—Atari Directors”.

     Both the Special Committee and the board of directors of Atari (with Mr. Coppee absent) have determined that the merger agreement and the merger are fair and advisable to and in the best interests of the stockholders of Atari other than Infogrames and its affiliates. The Special Committee unanimously recommended that the board of directors:

	•		approve and adopt the merger agreement;
	•		approve the merger; and
	•		recommend that the stockholders of Atari vote for the adoption and approval of the merger agreement.

     Based on the recommendation of the Special Committee, the board of directors (of which the directors present were the same as the Special Committee because of Mr. Coppee’s absence) approved and adopted the merger agreement, approved the merger and resolved to recommend to Atari’s stockholders that they vote for the adoption and approval of the merger agreement.

     In reaching their determinations and making their recommendations, the Special Committee and the board of directors relied on Atari’s management including the Chief Restructuring Officer to provide financial information, projections and assumptions (based on the best information available to management at that time).

     In reaching its determination and making its recommendation, the Special Committee considered factors including:

	•		the terms of the merger agreement, pursuant to which the stockholders will have the right to receive US$1.68 per share as merger consideration;
	•		the fact that since the merger consideration consists entirely of cash, Atari stockholders will not be subject to uncertainty as to the value of the merger consideration to be received;
	•		the opinion of Duff & Phelps to the effect that, as of the date such opinion was delivered and based upon and subject to the assumptions, factors, limitations and qualifications set forth in the opinion, the merger consideration is fair, from a financial point of view, to the holders of the common stock of Atari (other than Infogrames and its affiliates), of which the conclusions and analyses underlying such opinion were expressly adopted by the Special Committee;
	•		the Special Committee’s belief, based on, among other things, the detailed financial and valuation advice provided by Duff & Phelps described below under “Special Factors— Opinion of the Financial Advisors to the Special Committee”, which included that the merger consideration:

	¡		represented a 6.3% premium to the 5-day trading price prior to the date of Infogrames’ announcement of its offer, and a 58.5% premium to the 30-day trading price prior to the date of Infogrames’ announcement of its offer, of Atari’s common stock on the Nasdaq Stock Market;
	¡		was within the range of implied valuation multiples for selected packaged media distributors; and
	¡		was significantly above Atari’s per share liquidation value, assuming an orderly liquidation of Atari’s assets in a Chapter 11 or Chapter 7 proceeding;

	•		the historical trading prices and other trading characteristics of Atari’s common stock, including Atari’s small public float and the very low average trading volumes;
	•		Atari’s current financial condition and recent results of operations, which raise substantial doubt as to Atari’s ability to continue as a going concern, and which the Special Committee believed would not be likely to improve, and may in fact worsen based on the availability, or lack thereof, of third party financing, in the foreseeable future;
	•		the risks of implementing a business plan to provide any growth opportunities;
	•		Atari’s dependence on third parties, including Infogrames, for products to distribute;
	•		the limited funds available to Atari to continue its operations and implement its business plan;
	•		the lack of available financing from parties other than affiliates of Atari;
	•		the fact that Atari’s existing senior lender was unwilling to extend additional credit to Atari and had the right to accelerate amounts then outstanding, which right is being waived as a result of the transaction;
	•		the fact that, without additional financing, Atari would likely be required to either liquidate or seek protection under bankruptcy laws, which would likely lead to little, if any, recovery by the holders of Atari’s common stock;
	•		conditions generally in the game development and distribution industry;
	•		the ability of Atari to compete successfully in its industry given its size and the size and resulting financial resources of its competitors;
	•		trends towards consolidation in the industry, which make it increasingly difficult for Atari to compete successfully;

	•		the fact that at that time Atari’s common stock was subject to delisting from the Nasdaq Stock Market, and the lack of realistic alternatives to avoid delisting, including the anticipated negative effects on the liquidity and trading prices of Atari’s common stock that would likely occur as a result of delisting;
	•		that Atari stockholders who do not vote in favor of the merger or otherwise waive their rights will have the right under Delaware law to seek court appraisal of the fair value of their shares;
	•		the fact that the merger agreement and the terms of the merger were negotiated by a Special Committee of the Board that was comprised entirely of independent directors;
	•		the fact that Infogrames has indicated it was not willing to consider a sale to another third party of its position, which makes it unlikely that third parties would make competing offers and makes it very difficult for the Special Committee to seek alternatives;
	•		the fact that, despite wide-spread publicity about Infogrames’ offer, no third parties made any other proposal to acquire Atari or any interest therein or to extend financing to Atari;
	•		the terms of the merger agreement that, among other things:

	¡		permit the Special Committee to respond to unsolicited offers and to terminate the merger agreement in the event that the Special Committee determines that an alternative proposal is superior to the Infogrames proposal, subject to certain match rights;
	¡		limit the ability of Infogrames to terminate the merger agreement; and
	¡		permit the Special Committee to withdraw or change its recommendation under certain circumstances; and

•

the fact that, in conjunction with the entry into the merger agreement, Infogrames has agreed to extend a loan of up to US$20 million to Atari to cover expected capital requirements.

     The Special Committee believes that each of these factors supported its conclusion that the merger is fair and advisable to and in the best interests of Atari’s stockholders (other than Infogrames and its affiliates). The Special Committee considered the valuation analyses presented by Duff & Phelps, some of which represented the sale of Atari as a continuing business and some of which represented Atari remaining as a stand-alone entity, and which included Duff & Phelps’ determination of Atari’s liquidation value, assuming an orderly liquidation of Atari. While the Special Committee did not believe that there is a single method for determining “going concern value”, the Special Committee believed that most of Duff & Phelps’ valuation methodologies represented a valuation of Atari as it continues to operate its business, and, to that extent, such analyses could be collectively characterized as forms of going concern valuations. For example, the Special Committee considered the public market trading analysis, which could be considered to represent the “stand-alone” valuation of Atari if it traded at the multiples calculated for the comparable companies. In addition, the net asset value analysis could be considered a “stand-alone” valuation of Atari based on Atari’s December 31, 2007 unaudited balance sheet and Atari’s estimated internal March 31, 2008 balance sheet. The Special Committee considered these analyses in the context of the other valuation analyses performed by Duff & Phelps in the preparation of its opinion, and, in that regard, such analyses factored into the Special Committee’s conclusions as to the fairness of the merger to the unaffiliated stockholders.

     The Special Committee also considered a variety of risks and other potentially negative factors concerning the merger agreement and the transactions contemplated by it, including the merger. These factors included:

	•		Atari’s stockholders (other than Infogrames and its affiliates) will no longer have an equity interest in Atari and will therefore lose any rights to participate in Atari’s future growth;
	•		that, for U.S. federal income tax purposes, the merger will be taxable to Atari stockholders receiving merger consideration;

	•		that the merger consideration does not reflect a premium over the trading price on the day preceding the delivery and announcement of Infogrames’ offer;
	•		that Infogrames was unwilling to increase the merger consideration;
	•		that the merger agreement does not include a “majority of the minority” stockholder approval provision, and therefore the merger can be approved by Infogrames regardless of the vote of any other Atari stockholders;
	•		that Infogrames’ controlling interest made competing third party proposals unlikely; and
	•		the risk that the merger would not be consummated.

     This discussion of the information and factors considered by the Special Committee in reaching its conclusions and recommendation includes the material factors considered by the Special Committee, but is not intended to be exhaustive. In view of the wide variety of factors considered by the Special Committee in evaluating the merger agreement and the transactions contemplated by it, including the merger, and the complexity of these matters, the Special Committee did not find it practicable, and did not attempt, to quantify, rank or otherwise assign relative weight to those factors. In addition, different members of the Special Committee may have given different weight to different factors.

     The Special Committee believes that sufficient procedural safeguards were and are present to ensure the fairness of the merger and to permit the Special Committee to represent effectively the interests of Atari’s unaffiliated stockholders, without the retention of an unaffiliated representative, even though (x) the merger does not require approval of Atari’s unaffiliated stockholders and (y) Infogrames holds approximately 51.6% of Atari’s common stock, has the power to control Atari and has indicated its intention not to sell any portion of those shares. These procedural safeguards include the following:

	•		the Special Committee was established by the board of directors to consider and approve transactions with Infogrames, including the merger agreement, and given full authority to evaluate the proposed transaction and any alternative transactions;
	•		the Special Committee is comprised of four directors who are not affiliated with Infogrames and are not current employees of Atari or any of its subsidiaries or affiliates;
	•		the Special Committee’s active negotiations with representatives of Infogrames regarding the merger consideration and the other terms of the merger and the merger agreement;
	•		other than their receipt of fees paid to members of the board of directors and the Special Committee (which were agreed upon prior to Atari’s receipt of Infogrames’ proposal, and are not contingent upon consummation of the merger and were not contingent upon the Special Committee recommending the merger agreement) and their indemnification and liability insurance rights under existing agreements, policies and the merger agreement, members of the Special Committee do not have an interest in the merger different from that of Atari’s unaffiliated stockholders;
	•		the Special Committee retained and received the advice and assistance of Duff & Phelps as its financial advisor and requested and received from Duff & Phelps, on April 28, 2008, an opinion that, as of that date and based upon and subject to the assumptions, factors, limitations and qualifications set forth therein, the per share merger consideration to be paid to the holders of shares of Atari’s common stock (other than Infogrames and its affiliates) in the merger is fair to such holders from a financial point of view;
	•		the recognition by the Special Committee that it had no obligation to recommend the approval of the merger proposal or any other transaction;
	•		the recognition by the Special Committee that it could consider and recommend a superior proposal and terminate the merger agreement; and

•

the availability of appraisal rights under Delaware law for Atari’s stockholders who oppose the merger.

     In light of the procedural safeguards described above, the Special Committee did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the Company’s unaffiliated stockholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger agreement and the merger, or to require a separate affirmative vote of a majority of the Company’s unaffiliated stockholders.

     In reaching its determination that the merger agreement and the merger are advisable, substantively and procedurally fair to and in the best interests of Atari’s unaffiliated stockholders, the board of directors (whose members in attendance were identical to the Special Committee because of Mr. Coppee’s absence) determined that the analysis of the Special Committee was reasonable and expressly adopted the analysis of the Special Committee as to the fairness to Atari’s unaffiliated stockholders of the merger consideration of US$1.68 per share and the other matters discussed above.

     In view of the wide variety of factors considered by the board of directors in evaluating the merger and the complexity of these matters, the board of directors did not find it practicable, and did not attempt, to quantify, rank or otherwise assign relative weight to those factors. In addition, different members of the board of directors may have given different weight to different factors.

     Based in part upon the recommendation of the Special Committee, the board of directors (with Mr. Coppee absent) voted to approve and adopt the merger agreement and resolved to recommend that you vote FOR the adoption and approval of the merger agreement.

     The members of the Special Committee and the Board do not own any shares of Atari common stock, and, accordingly, will not receive any consideration in the merger. Members of the Special Committee and the Board own, in the aggregate, 11,000 options to purchase Atari common stock. If the merger is consummated, members of the board of directors of Atari, based on their ownership of options to acquire Atari common stock, will be entitled to receive an aggregate of US$[___] if such members choose to tender their options pursuant to the tender offer described in “The Merger Agreement—Stock Options”, but will not otherwise receive any merger consideration in respect of such options since the per share exercise price of such options exceeds US$1.68.

      The board of directors, based on the recommendation of the Special Committee, recommends that Atari’s stockholders vote FOR the adoption and approval of the merger agreement . The recommendation of the board of directors was made after consideration of all the material factors, both positive and negative, as described above.

Position of the Infogrames Parties as to the Fairness of the Merger to Atari’s Unaffiliated Stockholders; Intent of Infogrames to Vote in Favor of the Merger Transaction

     Each of the Infogrames Parties believes and has determined that the merger is financially and procedurally fair to Atari’s unaffiliated stockholders. In reaching its determination regarding the substantive fairness of the merger, The Infogrames Parties considered the following factors:

	•		the merger does not involve a change of control of Atari and Infogrames is not willing to sell its stake in Atari to a third party or allow Atari to merge with or be acquired by another entity. However, Infogrames has not applied a minority discount to the merger consideration even though Infogrames believes that the possibility of a competing bid by another party is highly unlikely;
	•		the merger consideration represents a premium of approximately 6.3% over the five-day average trading price per share of Atari common stock reported by the Nasdaq Stock Market prior to March 5, 2008, the date Infogrames delivered its offer letter to Atari. The merger consideration also represents a premium of approximately 58.5% over the 30-day average trading price reported by the Nasdaq Stock Market for Atari common stock prior to such date;
	•		the merger consideration represents a premium over Atari’s negative book value of US$1.25 per share as of December 31, 2007;

	•		the merger consideration represents a significant premium over the range of values calculated by Infogrames management for Atari of between US$0.25 and US$0.62 per share or even a negative value per share if Infogrames were to lose the tax benefit of Atari’s net operating loss, as discussed below under “Special Factors—Summary of Presentation by the Financial Advisor to Infogrames”.
	•		the continuing decline in the market price of Atari’s common stock in accordance with its continuing weak financial results. For the nine months ended December 31, 2007, Atari’s net revenues declined approximately 32% over the prior year period, its net loss increased nearly 15% and its cash position declined by approximately 29%;
	•		the merger provides the unaffiliated stockholders with certainty of value and eliminates their exposure to further fluctuations in the market price of shares of common stock, given the recently declining fundamentals and valuation of Atari;
	•		the merger allows stockholders to receive value for their stock, which would likely not be available if Atari voluntarily or involuntarily liquidated;
	•		the merger shifts the risks relating to Atari’s ability to continue as a going concern from the unaffiliated stockholders to Infogrames;
	•		the merger shifts the risk of future financial performance from the unaffiliated stockholders to Infogrames;
	•		the merger can be accomplished quickly and carries very limited execution risk, as it will be fully financed by Infogrames’ cash on hand;
	•		Atari has not declared a dividend to its stockholders since becoming a public company, and it is expected that no such dividends will be paid in the foreseeable future; and
	•		the strong likelihood at the time of the offer and at the time the merger agreement was executed that Atari’s stock would be delisted from Nasdaq, leading to less liquidity in the market for the shares, as certain institutional investors are no longer permitted to hold such shares, which event occurred on May 9, 2008.

     In addition to the factors listed above, the Infogrames Parties also considered certain negative factors, including:

	•		the consummation of the merger will eliminate the opportunity for unaffiliated stockholders to participate in any potential future growth in the value of Atari;
	•		the receipt of the US$1.68 net per share in cash by the unaffiliated stockholders in the merger is generally taxable to Atari’ s stockholders; and
	•		the risk that conditions to the merger may not be satisfied and, therefore, that the merger may not be consummated.

     The Infogrames Parties also considered various factors in determining the procedural fairness of the merger. The Infogrames Parties believe that the merger is procedurally fair to the unaffiliated stockholders because:

	•		the Special Committee acted on behalf of Atari in considering and negotiating the terms and conditions of the merger and the merger agreement, and recommended to the full board of directors of Atari that it approve the merger;
	•		the Special Committee consists of Company directors who are not officers or employees of Atari or Infogrames and who are independent of Atari and Infogrames;
	•		the Special Committee retained its own legal and financial advisors in evaluating and negotiating the terms and conditions of the merger and the merger agreement;

	•		Infogrames did not participate in, or have any influence over, the deliberative process of, or the conclusions reached by, the Special Committee;
	•		pursuant to the merger agreement, prior to the approval and adoption of the merger and the merger agreement by Atari’s stockholders, the Special Committee is not prohibited from agreeing to a proposal to acquire the shares of capital stock of Atari that it determines is a “superior proposal” to that of Infogrames; and
	•		pursuant to Delaware law, those stockholders of Atari who do not wish to consent to the merger may demand appraisal of their shares.

     In making their respective determinations regarding the financial and procedural fairness of the merger to Atari’s unaffiliated stockholders, each of Merger Sub and CUSH, as wholly owned subsidiaries of Infogrames, did not retain a separate financial advisor from Lazard nor did they perform any separate valuation or other analyses. Each of Merger Sub and CUSH has reviewed the presentation by Lazard on March 2, 2008 and the presentation by Infogrames’ management on April 24, 2008, and expressly adopts the reasons and analyses of Infogrames as set forth above. Each of Merger Sub and CUSH are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

     Based on the foregoing and the factors described in “Special Factors—Summary of Presentation by the Financial Advisor to Infogrames”, as the beneficial owner of 51.6% of the outstanding voting securities of Atari, Infogrames has advised Atari that it intends to vote in favor of adopting the merger and the merger agreement at the Special Meeting. However, none of the Infogrames Parties is making any recommendation to any Atari stockholder as to how such stockholder should vote on the proposal to adopt the merger and the merger agreement at the Special Meeting.

Opinion of the Financial Advisor to the Special Committee of the Board of Directors

     The Special Committee retained Duff & Phelps LLC to act as its financial advisor to provide an opinion to the Special Committee regarding the fairness, from a financial point of view, to the public stockholders of Atari (other than Infogrames and its affiliates) of the US$1.68 per share consideration to be received by such public stockholders in the proposed merger (without giving effect to any impact of the proposed merger on any particular stockholder other than in its capacity as a stockholder). Duff & Phelps, a New York Stock Exchange listed company, is an internationally recognized independent financial advisory firm serving client needs in the areas of valuation, investment banking, transaction advice and dispute consulting.

     On March 19, 2008, Duff & Phelps met with the Special Committee to give an initial presentation regarding its preliminary financial analysis with respect to the proposed consideration that would be payable to Atari’s public stockholders (other than Infogrames and its affiliates) in the proposed merger.

     On April 28, 2008, the Special Committee met again with Duff & Phelps to review the proposed merger. During this meeting, Duff & Phelps reviewed with the Special Committee its financial analyses, as described below, and rendered its oral opinion to the Special Committee, which was subsequently confirmed in writing, that, as of April 28, 2008, and based upon and subject to the various considerations and assumptions described in the opinion, the consideration to be received by Atari’s public stockholders (other than Infogrames and its affiliates) in the proposed merger was fair, from a financial point of view, to such public stockholders (without giving effect to any impact of the proposed merger on any particular stockholder other than in its capacity as a stockholder). The presentation given by Duff & Phelps at the April 28, 2008 meeting was a more detailed version of the presentation given by Duff & Phelps at the March 19, 2008 meeting of the Special Committee and was consistent with that earlier presentation.

      The full text of the written opinion of Duff & Phelps, dated April 28, 2008, is attached to this proxy statement as Annex B , and should be read carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. The opinion of Duff & Phelps was directed to the Special Committee and addressed only the fairness, from a financial point of view, to Atari’s unaffiliated stockholders of the consideration to be received by such unaffiliated stockholders in the proposed merger (without giving effect to any impact of the proposed merger on any

particular stockholder other than in its capacity as a stockholder), and did not constitute a recommendation as to how any stockholder should vote or act with respect to any matter relating to the proposed merger. Duff & Phelps’ opinion did not address any other aspect or implication of the proposed merger or any other agreement, arrangement or understanding entered into in connection with the proposed merger or otherwise. Furthermore, Duff & Phelps did not address the relative merits of the proposed merger as compared with any alternative transactions or business strategies that may have been considered by the Special Committee as alternatives to the proposed merger, nor did it address the underlying business decision of the Special Committee to proceed with the merger.

     In connection with its fairness opinion, Duff & Phelps made such reviews, analyses and inquiries as Duff & Phelps deemed necessary and appropriate under the circumstances. No limits were placed on Duff & Phelps by Atari or the Special Committee with respect to the information to which Duff & Phelps had access or the matters Duff & Phelps could consider. Duff & Phelps’ due diligence with respect to the proposed merger included, but was not limited to, the items summarized below.

	1.		Discussed the operations, financial conditions, future prospects and projected operations and performance of Atari and regarding the proposed merger with the management of Atari;
	2.		Reviewed a draft dated April 23, 2008 of the merger agreement;
	3.		Reviewed a draft dated April 22, 2008 of the proposed credit agreement between Atari and Infogrames;
	4.		Reviewed certain publicly available financial statements and other business and financial information regarding Atari and Infogrames, respectively, and the industries in which they operate;
	5.		Reviewed certain internal financial statements and other financial and operating data concerning Atari, which Atari had identified as being the most current financial statements available;
	6.		Reviewed certain financial forecasts for fiscal year 2009 as well as information relating to certain strategic, financial and operational benefits anticipated from the proposed merger, all as prepared by the management of Atari;
	7.		Reviewed the historical trading price and trading volume of Atari common stock, and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant;
	8.		Compared the financial performance of Atari and the recent prices and trading activity of Atari common stock with those of certain other publicly traded companies that Duff & Phelps deemed relevant;
	9.		Compared certain financial terms of the proposed merger to financial terms, to the extent publicly available, of certain other business combination transactions that Duff & Phelps deemed relevant; and
	10.		Reviewed such other information and conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

     In connection with its review, Duff & Phelps did not independently verify any of the foregoing information and assumed that all information reviewed by it with respect to Atari and the proposed merger, whether supplied by Atari or its advisors or obtained by Duff & Phelps from publicly available sources, was true, correct and complete in all material respects and did not contain any untrue statements of material fact or omit to state a material fact necessary to make the information supplied to Duff & Phelps not misleading. Any inaccuracies in or omissions from the information on which Duff & Phelps relied could materially affect the conclusions reached by Duff & Phelps. In performing its analyses, Duff & Phelps made numerous assumptions with respect to industry performance and general business, market and economic conditions and other matters, many of which are beyond the control of any party to the proposed merger.

     In advising the Special Committee, Duff & Phelps was not requested to make, and did not make, an independent evaluation of Atari’s solvency or an evaluation, appraisal or physical inspection of any of Atari’s

specific assets or liabilities (contingent or otherwise). In addition, Duff & Phelps was not requested to, and did not, provide a valuation opinion, credit rating or solvency opinion, nor did Duff & Phelps undertake an analysis of Atari’s or Infogrames’ creditworthiness or provide any tax advice or accounting advice.

     With respect to the financial forecasts for Atari that Duff & Phelps reviewed, with respect to fiscal year 2009, Duff & Phelps was advised by management of Atari, and assumed, that such forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Atari’s management as to the future financial performance of Atari. Duff & Phelps assumed that the final merger agreement would conform to the draft dated April 23, 2008 of the proposed merger agreement reviewed by Duff & Phelps in all respects material to its analyses. Duff & Phelps also assumed that in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no modification, delay, limitation, restriction or condition would be imposed that would have an adverse effect on Atari or the proposed merger.

     The Duff & Phelps opinion was necessarily based upon information available to Duff & Phelps as of the date of the opinion and upon financial, economic, market and other conditions as they existed and could be evaluated on the date of the opinion. It should be understood that developments subsequent to the date of the Duff & Phelps opinion may affect the conclusion expressed in the Duff & Phelps opinion, and that Duff & Phelps assumed no undertaking or obligation to update, revise or reaffirm its opinion or to advise any person of any change in any fact or matter affecting its opinion . Additionally, the Duff & Phelps opinion was not intended to confer any rights or remedies upon any employee, stockholder or creditor of Atari.

     The Special Committee selected Duff & Phelps to act as its financial advisor in connection with the merger based on Duff & Phelps’ qualifications, experience and reputation. During the past two years, Duff & Phelps has not provided financial advisory or financing services to Atari, Infogrames or Blue Bay High Yield or their respective affiliates other than with respect to the services Duff & Phelps rendered to the Special Committee in connection with the delivery of its fairness opinion.

     Atari agreed to pay Duff & Phelps, for its financial advisory services in connection with the proposed merger, an aggregate fee of US$290,000, US$145,000 of which was paid in cash upon execution of the engagement letter and the remaining US$145,000 of which was paid in cash upon Duff & Phelps’ informing the Special Committee that it was prepared to deliver its opinion. Furthermore, Duff & Phelps is to be paid additional fees at Duff & Phelps’ standard hourly rates for any time incurred reviewing or assisting in the preparation of any proxy materials or other SEC filings or documents associated with the proposed merger. Atari has also agreed to reimburse Duff & Phelps for its out-of-pocket expenses and to indemnify and hold harmless Duff & Phelps and its affiliates and any other person, director, employee or agent of Duff & Phelps or any of its affiliates, or any person controlling Duff & Phelps or its affiliates, for certain losses, claims, damages, expenses and liabilities relating to or arising out of services provided by Duff & Phelps as financial advisor to the Special Committee. The terms of the fee arrangement with Duff & Phelps, which the Special Committee and Duff & Phelps believe are customary for transactions of this nature, were negotiated at arm’s length between the Special Committee and Duff & Phelps.

Financial Projections

     In conducting its analysis, Duff & Phelps reviewed certain financial projections provided by Atari’s management for fiscal year 2009 (ending March 31, 2009). Atari management advised Duff & Phelps that these projections were reflected in the fiscal 2009 budget that was prepared in March 2008 and assumed the timely release and success of new games as well as Atari’s ability to secure additional financing beyond the financing BlueBay High Yield had previously provided to Atari. Atari’s budget for fiscal year 2009 projected net revenue of $126.5 million and EBITDA of $0.2 million, as reflected in the following table:

Atari, Inc.
Historical and Projected Financial Performance
Fiscal Year Ended March 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	%
Cost of Goods Sold			257.6				260.1				203.6				136.7				74.8				52.7				41.4				80.4
Gross Profit			248.9				208.8				140.2				70.1				47.5				39.1				37.9				43.8
Gross Margin			49.1	%			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				39.2				43.2
R&D			75.4				78.2				58.3				51.9				27.7				20.1				9.4				0.5
D& A			7.5				9.2				7.0				5.2				3.0				1.9				3.8				2.7
Total Operating Expenses			212.4				205.1				159.3				130.5				77.8				61.7				52.4				46.5
EBIT			36.5				3.7				(19.1	)			(60.4	)			(30.3	)			(22.6	)			(14.5	)			(2.7	)
EBIT Margin			7.2	%			0.8	%			(5.6	%)			(29.2	%)			(24.8	%)			(24.0	%)			(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 = As of December 31, 2007 (3rd Quarter FY 2008)

EBITDA = Earnings before interest, taxes, depreciation and amortization, adjusted for one-time gains or losses on the sale of assets and investments, discontinued operations, restructuring expenses and goodwill write-downs. In FY2007, the Company incurred a $54.1 million goodwill write-down.

Source: Company SEC Filings and Company Management projections.

     In addition, Duff & Phelps reviewed Atari’s projected fiscal year 2009 monthly budget, which projection was based upon, and dependent upon, (i) Atari’s development partners (principally Infogrames) releasing their respective game titles on time and the performance of these titles, (ii) Atari’s ability to streamline its operations, (iii) Atari’s ability to achieve stability in many senior management roles and (iv) Atari’s ability to secure additional financing. Finally, Duff & Phelps also reviewed an analysis of projected cash receipts and disbursements for fiscal year 2009 through September 2008, prepared by Atari, which indicated that Atari’s cash funding requirements would be highest in June 2008 ($19 million).

Opinion and Analyses by Duff & Phelps

     The discussion below summarizes the analyses and factors that Duff & Phelps deemed material in its presentation to the Special Committee. This discussion does not contain a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or a summary description. The process of rendering a fairness opinion involves judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. To evaluate the fairness of the proposed merger consideration, Duff & Phelps employed several different analytical methodologies and no one methodology should be regarded as critical to the overall conclusion reached by Duff & Phelps. In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any particular analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor that it considered. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all analyses and factors may not provide a complete or accurate understanding of the evaluation process underlying its opinion.

     Each analytical methodology has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular methodologies. The conclusion reached by Duff & Phelps was based on all analyses and factors, taken as a whole, and also on application of Duff & Phelps’ own experience and judgment. This conclusion inherently involved significant elements of subjective judgment and qualitative analysis. Duff & Phelps gave no opinion as to the value or merit standing alone of any one or more parts of the analysis it performed. The estimates contained in the analyses of Duff & Phelps and the range of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be

significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold in the future. Accordingly, the estimates used in, and the results derived from, Duff & Phelps’ analyses are inherently subject to uncertainty.

Financial Analyses

     Set forth below is a summary of the material financial analyses performed by Duff & Phelps in reaching its fairness conclusions as of April 28, 2008, which were reviewed with the Special Committee on April 28, 2008. The financial analyses summarized below include information in tabular format. In order to fully understand Duff & Phelps’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the methodologies, may not provide a complete or accurate understanding of Duff & Phelps’ financial analyses.

     In determining whether the merger consideration to be received in the proposed merger would be fair, from a financial point of view, to Atari’s public stockholders (other than Infogrames and its affiliates), Duff & Phelps considered, among other factors, the current, historical and projected financial performance of Atari based on a review of information relating to Atari, as well as Duff & Phelps’ discussions with Atari’s management and Atari’s advisors.

     No company, transaction or business used for comparative purposes in Duff & Phelps’ analyses is identical to Atari, its business or the proposed merger, and therefore an evaluation of the results of those analyses is not entirely mathematical.

     Duff & Phelps considered several generally accepted valuation approaches to establish valuation benchmarks against which to compare the proposed merger. A discounted cash-flow analysis was not utilized, as Atari’s management does not prepare projections past one year. The valuation approaches used by Duff & Phelps are discussed below.

      Public Market Valuation – Duff & Phelps analyzed the closing price and trading volume of Atari common stock over the past 12 months. This analysis was used to determine the fair market value ascribed to Atari’s common stock by the public market prior to and on the date of the announcement of the proposed merger.

     Duff & Phelps noted that Atari, a NASDAQ listed company, had 13,477,920 shares outstanding. Atari’s shares had been thinly traded, with average daily trading volume of 27,424 shares in the three months preceding April 25, 2008. In the twelve months preceding the execution of the merger agreement, Atari’s shares had traded above and below the proposed merger consideration and Atari’s volume weighted share price was US$1.45. On April 22, 2008, Atari’s common stock closed at US$1.50, below the merger consideration and down approximately 61% from its 52-week high of US$3.84.

     Duff & Phelps noted that during the period from the release of Atari’s most recent quarterly report on Form 10-Q on February 13, 2008 (covering the quarter ended December 31, 2007) through April 22, 2008, Atari’s volume-weighted share price was US$1.55. Duff & Phelps observed that the proposed merger consideration was in excess of this amount.

      Selected Public Company Analysis – Duff & Phelps reviewed valuation multiples of selected publicly traded companies that were similar to Atari and applied these valuation multiples to selected recent operating results of Atari. Duff & Phelps noted that, unlike most of the peer group companies, Atari had experienced negative earnings before interest, taxes, depreciation and amortization (“EBITDA”), so that the selected public company analysis, which involves the application of enterprise value to revenue multiples for the selected companies, was of limited relevance to Atari.

     The companies selected by Duff & Phelps consisted of six publicly traded entities that Duff & Phelps determined to be relevant to its analysis, falling under two categories: small-cap video game developers, publishers and distributors and packaged media distributors. Duff & Phelps used certain methodologies to select companies, including the following Primary and Secondary SIC Codes: 7372 (prepackaged software), 5045 (computers and

computer peripheral equipment and software) and 7822 (motion picture and video tape distribution. Duff & Phelps reviewed various SEC documents and equity research reports for details regarding the nature of each selected company’s business and financial performance. Duff & Phelps excluded companies with a market capitalization equal to or greater than US$1 billion. In view of Atari’s decision to reduce its involvement in the development of games, Duff & Phelps deemed the analysis of selected video game developers, publishers and distributors to be of less relevance than the analysis of packaged media distributors.

     The public companies selected by Duff & Phelps were as follows:

     Small-Cap Video Game Developers, Publishers and Distributors:

	•		Majesco Entertainment Co.
	•		Midway Games Inc.

     Packaged Media Distributors:

	•		Handleman Co.
	•		Image Entertainment Inc.
	•		Navarre Corp.
	•		Source Interlink Companies, Inc.

     None of the companies utilized for comparative purposes, as reflected in Duff & Phelps’ analysis, is identical to Atari. Accordingly, Duff & Phelps concluded that a complete valuation analysis cannot be limited to a quantitative review of the selected companies and involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their values relative to that of Atari.

     Duff & Phelps analyzed the last twelve months (“LTM”) revenues and EBITDA for each of these six publicly traded companies as well as their projected revenues and EBITDA. For each peer group company, Duff & Phelps calculated the enterprise value as the sum of the company’s equity market value (diluted shares outstanding multiplied by the current stock price) and net indebtedness. Duff & Phelps then computed each peer group member’s enterprise value as a multiple of its respective LTM and projected revenues and of its EBITDA. (Although Duff & Phelps recognized that revenue multiples may have limited relevance as a valuation metric, Duff & Phelps believed that EBITDA multiples were not applicable to Atari as Atari had experienced negative EBITDA over the preceding twelve-month period.) The following table summarizes the enterprise values calculated for each of the public companies used in Duff & Phelps’ analysis:

Selected Public Company Analysis

Publicly Traded Company Analysis

($ in millions except per share data)

		23-Apr-08				% of												Enterprise Value as a Multiple of																								LTM
		Stock				52 Wk				Market				Enterprise				Revenue												EBITDA												EBITDA				Revenue
Company		Price				High				Value				Value				2007A				2008E				2009E				2007A				2008E				2009E				Margin				Growth
Small Cap Video Game Developers, Publishers and Distributors
Majesco Entertainment Co.		$	1.11				43.2	%		$	31.9			$	23.7				0.43x				0.36x.				0.34x				4.6x			NM				NM					9.3	%			(7.4	)%
Midway Games Inc.			2.39				31.7	%			220.0				293.9				1.87x				1.29x				1.16x			NM				NM				NM				NM					(5.1	)%
High							43.2x	%											1.87x				1.29x				1.16x				4.6x			NA				NA					9.3	%			(5.1	)%
Median							37.4	%											1.15x				0.83x				0.75x				4.6x			NA				NA					9.3	%			(6.2	)%
Mean							37.4	%											1.15x				0.83x				0.75x				4.6x			NA				NA					9.3	%			(6.2	)%
Low							31.7	%											0.43x				0.36x				0.34x				4.6x			NA				NA					9.3	%			(7.4	)%
Packaged Media Distributors
Handleman Co.		$	0.44				5.8	%		$	9.0			$	66.6				0.06x			NM				NM					9.7x			NM				NM					0.6	%			(10.1	)%
Image Entertainment Inc.			1.31				29.1	%			28.5				54.3				0.54x			NM				NM				NM				NM				NM					1.1	%			0.1	%
Navarre Corp.			1.62				36.0	%			58.7				111.8				0.16x				0.17x				0.17x				3.4x				3.8x			NM					4.6	%			7.9	%
Source Interlink Companies, Inc.			1.44				19.5	%			75.3				1,444.5				0.64x			NM				NM					10.6x			NM				NM					6.0	%			23.3	%
High							36.0	%											0.64x				0.17x				0.17x				10.6x				3.8x			NA					6.0	%			23.3	%
Median							24.3	%											0.35x				0.17x				0.17x				9.7x				3.8x			NA					2.8	%			4.0	%
Mean							22.6	%											0.35x				0.17x				0.17x				7.9x				3.8x			NA					3.1	%			5.3	%
Low							5.8	%											0.06x				0.17x				0.17x				3.4x				3.8x			NA					0.6	%			(10.1	)%
Atari, Inc.		$	1.50				39.2	%		$	20.2			$	28.8				0.31x				0.38x				0.40x			NM				NM				NM				NM					(34.4	)%

     Duff & Phelps then used this information to determine an implied enterprise value of Atari by considering the enterprise value to LTM revenue multiples of the packaged media distributors included in the peer group. In determining Atari’s enterprise value under this methodology, Duff & Phelps applied a range of LTM revenue multiples for Atari, which represented a lower portion of the range of revenue multiples observed for the peer group companies. Duff & Phelps selected this range of multiples for Atari based upon Atari’s financial and operating performance in comparison to the peer group companies. These steps yielded a per share equity value range for Atari of US$0.38 to US$1.75, as indicated in the following table. Duff & Phelps noted that the proposed merger consideration was at the high end of this range.

Atari, Inc.
Selected Public Company Analysis
($ in 000s except Equity Value Per Share Outstanding)

						Multiples												Selected								Enterprise Value
Performance Measure		Atari				Low				Median				High				Multiple Range								Range
Packaged Media Distributor — LTM Revenue 1		$	91.8				0.06x				0.35x				0.64x				0.15x				0.35x			$	13.8				—			$	32.1
Enterprise Value Range																										$	13.8				—			$	32.1
Less: Net Debt 2																										$	8.6				—			$	8.6
Total Equity Value																										$	5.2				—			$	23.5
Equity Value Per Share Outstanding 3																										$	0.38				—			$	1.75

      Selected M&A Transaction Analysis (Multiples Valuation) – Duff & Phelps reviewed valuation multiples of selected merger and acquisition transactions involving target companies that Duff & Phelps determined to be relevant to its analysis and applied these valuation multiples to selected recent operating results of Atari. Duff & Phelps identified eight relevant transactions in the video game development, publishing and distribution and

packaged media distribution industries that had been announced since January 1, 2002 and for which adequate information was available to derive meaningful valuation multiples. Duff & Phelps restricted the search to include only transactions with enterprise values less than US$500 million.

     In determining the relevant comparable transactions, Duff & Phelps considered the Primary and Secondary SIC Codes: 7372 (prepackaged software), 5045 (computers and computer peripheral equipment and software) and 7822 (motion picture and video tape distribution). Duff & Phelps reviewed the transaction histories of the relevant comparable companies. Because of a limited sample size, Duff & Phelps included transactions involving foreign targets as well as U.S.-based targets. In view of Atari’s decision to reduce its involvement in the development of games, Duff & Phelps deemed the analysis of selected video game developers, publishers and distributors to be of less relevance than the analysis of packaged media distributors. Duff & Phelps included all transactions that fit these criteria. The eight relevant transactions considered by Duff & Phelps were as follows: (i) Entertainment One Ltd./Contender Entertainment Group, (ii) Mattel Inc./Radica Games Ltd., (iii) Electronic Arts Inc./Digital Illusions CE AB, (iv) Take-Two Interactive Software, Inc./TDK Mediactive, Inc., (v) Atari, Inc./Shiny Entertainment, Inc., (vi) Peace Arch Entertainment/Trinity Home Entertainment, LLC, (vii) Marwyn Investment Management LLP/Entertainment One Ltd., and (viii) Handleman Co./Crave Entertainment Group, Inc.

     None of the transactions utilized for comparative purposes in the following analysis is, of course, identical to the proposed merger. Accordingly, a complete valuation analysis cannot be limited to a quantitative review of the selected transactions and involves complex considerations and judgments.

     Duff & Phelps computed the LTM revenues and EBITDA for each of the eight target companies. Duff & Phelps then calculated the implied enterprise value for each transaction as a multiple of the target’s LTM revenue and of its EBITDA. Duff & Phelps calculated an implied enterprise value of Atari by considering the enterprise value to LTM revenue multiples of the selected transactions in which the target was a packaged media distributor. (Although Duff & Phelps recognized that revenue multiples may have limited relevance as a valuation metric, EBITDA multiples were considered inapplicable to Atari as Atari had experienced negative EBITDA over the prior twelve-month period.) In determining Atari’s enterprise value under his methodology, Duff & Phelps applied a range of LTM revenue multiples for Atari which was below the range of revenue multiples observed for the peer group companies. Duff & Phelps selected this range of multiples for Atari based upon Atari’s financial and operating performance in comparison to the peer group companies. These steps yielded a per share equity value range of US$0.72 to US$1.41, as shown in the following table. Duff & Phelps noted that the proposed merger consideration was above this range.

Atari, Inc.
Selected M&A Transaction Analysis
($ in 000s except Equity Value Per Share Outstanding)

						Multiples												Selected								Enterprise Value
Performance Measure		Atari, Inc.				Low				Median				High				Multiple Range								Range
Packaged Media Distributors — LTM Revenue  1		$	91.8				0.33x				0.43x				0.53x				0.20x				0.30x			$	18.4				—			$	27.5
Enterprise Value Range																										$	18.4				—			$	27.5
Less: Net Debt  2																										$	8.6				—			$	8.6
Total Equity Value																										$	9.8				—			$	18.9
Equity Value Per Share Outstanding  3																										$	0.72				—			$	1.41

      Selected M&A Transaction Analysis (Premiums Paid) - Duff & Phelps reviewed the premiums paid over market price for 26 public-to-private transactions announced from January 1, 2003 through April 22, 2008 in which the majority stockholder acquired the remaining outstanding minority shares in a U.S. publicly traded company. In each case, the transaction involved at least 10% of the outstanding shares.

     Duff & Phelps also reviewed the transaction premiums paid over market price for 36 public-to-private transactions of a U.S. publicly traded company announced from October 1, 2007 through April 22, 2008. These

transactions involved an acquisition of 100% of the outstanding shares or situations in which the acquirer held a minority and acquired the majority of the outstanding shares. In addition, Duff & Phelps analyzed premiums paid in eleven situations in which the target business was deemed to be distressed (defined as situations in which the target company had a negative EBITDA margin).

     Duff & Phelps compared the premiums over the 1-day, 5-day, and 30-day trading prices prior to the announcement of such public-to-private transaction to the implied premium associated with the proposed merger. In reviewing the 26 transactions in which the majority stockholder purchased the remaining outstanding shares of a publicly traded subsidiary, Duff & Phelps observed the mean and median of the premiums paid over the 1-day, 5-day and 30-day trading prices prior to announcement.

		1-Day Premium				5 -Day Premium				30-Day Premium
Median			25.8	%			23.7	%			34.1	%
Mean			28.4	%			29.1	%			34.6	%

		1-Day Premium				5 -Day Premium				3 0-Day Premium
Median			29.1	%			25.9	%			41.3	%
Mean			25.0	%			26.7	%			38.1	%