Expands company interests to growing disk drive market

SUNNYVALE, Calif., February 13, 1996 -- Atari Corporation (AMEX: ATC) and JTS Corporation today agreed to merge the two companies. Atari is the pioneer in multimedia video entertainment and JTS is a manufacturer of computer disk drives.

“This merger puts us in a great position to capitalize on a very experienced management team and a rapidly growing disk drive market. JTS is using innovative technology, particularly in the 3” disk drive market, and we are excited about its prospects,” said Jack Tramiel, Chairman of Atari.

“Our partnership gives us the ability to expand our capabilities and pursue new opportunities,” said Tom Mitchell, president and chief executive officer of JTS. “Dataquest has predicted that 115 million disk drive units will be shipped worldwide in 1996, and it is a great time for us to be participating in this market,” said Mitchell.

Terms of the Agreement

Under the terms of the agreement, the new corporation will operate under the name of JTS Corporation and the officers of JTS will become the officers of the merged company. The Atari entertainment business and the JTS disk drive business will operate as separate divisions of the new merged company.

Atari has extended a bridge loan to JTS in the amount of $25,000,000. In the event that the merger is not consummated, the bridge loan will be convertible into shares of JTS Series A Preferred Stock at the option of Atari or JTS and subject to certain conditions.

As a result of the transaction, Atari stockholders will hold approximately 60% of the outstanding shares of the new company following the merger. The transaction is structured to qualify as a tax-free reorganization and will be accounted for as a purchase.

The board of directors of Atari and JTS have approved the definitive agreement. The merger is subject to certain shareholder and regulatory approvals and other conditions to closing. The parties anticipate the transaction will close toward the end of the second calendar quarter of 1996.

JTS Management Team

JTS was formed in 1994 by Jugi Tandon, the company's current chairman of the board. Tandon is well-known in the computer storage industry for his ability to develop innovative products for the marketplace. Tandon will remain chairman of the board of the new company.

Tom Mitchell was a cofounder of Seagate Technology and president and chief operations officer of both Seagate and Conner Peripherals. Mitchell brings unparalleled industry and operational experience in the high-volume disk drive market. He is a pioneer in disk drive manufacturing in Singapore, Thailand, China and India.

About Atari Corporation

For more than twenty years, Atari has provided consumers with high-quality, value-priced entertainment. Atari markets Jaguar, the only American-made, advanced 64-bit entertainment system and licenses and markets software in the multi-platform, multimedia market. Atari is located in Sunnyvale, California.

About JTS Corporation

Founded in 1994, JTS Corporation develops and manufactures hard disk drives for the computer industry. JTS has recently introduced its new 3” Nordic product for the portable computer market. Headquartered in San Jose, California, with manufacturing facilities in Madras, India, JTS employs 1,300 people worldwide.

The above statements regarding the disk drive industry and JTS' prospects are forward looking statements and involve a number of risks and uncertainties. Among the factors that would cause actual results to differ materially are the following: business conditions and growth in the portable computer industry and in the general economy; competitive factors, including pricing pressures; availability of components from third parties; risks associated with manufacturing of products in India or other overseas jurisdictions and risks associated with JTS' ability to ramp its manufacturing operations, including cost and yield issues.