<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-59261
PROSPECTUS
ATMEL CORPORATION
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018
AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
This Prospectus relates to $340,400,000 aggregate principal amount at
maturity of Zero Coupon Convertible Subordinated Debentures due 2018 (the
"Debentures") of Atmel Corporation ("Atmel" or the "Company",) and the shares of
Common Stock, no par value (the "Common Stock"), of the Company issuable upon
the conversion of the Debentures (the "Conversion Shares"). The Debentures and
the Conversion Shares may be offered from time to time for the accounts of the
holders named herein (the "Selling Securityholders").
The Debentures are convertible at any time prior to maturity, unless
previously redeemed or otherwise purchased, into Common Stock at a conversion
rate of 13.983 shares per $1,000 principal amount at maturity. The conversion
rate will not be adjusted for accrued Original issuance Discount (as defined),
but will be subject to adjustment in certain events. See "Description of
Debentures--Conversion of Debentures." The reported last sale price of the
Company's Common Stock on the Nasdaq National Market on August 6, 1999 was
$33 13/16 per share.
The Debentures were issued at an original price of $337.85 per $1,000
principal amount at maturity (the "Issue Price"), which represented at issuance
an original issue discount of 66.215% from the principal amount thereof payable
at maturity (the "Original Issue Discount"). The Issue Price represents a yield
to maturity of 5.50% per annum (computed on a semi-annual bond equivalent
basis).
Prior to April 21, 2003, the Debentures are not redeemable at the
option of the Company. Thereafter, the Debentures are redeemable at the option
of the Company at Redemption Prices (as defined) equal to the Issue Price plus
accrued Original Issue Discount to the date of redemption. See "Description of
Debentures--Redemption of Debentures at the Option of the Company."
The Debentures may be purchased by the Company, at the option of the
holder, as of April 21, 2003, April 21, 2008 and April 21, 2013 for Purchase
Prices equal to the Issue Price plus accrued Original Issue Discount from and
including the Issue Date and to but excluding such dates. Subject to certain
conditions, the Company may elect to pay any such Purchase Price in cash or
Common Stock, or any combination thereof. See "Description of
Debentures--Purchase of Debentures at the Option of the Holder." The Debentures
may also be redeemed at the option of the holder if there is a Fundamental
Change (as defined) at Redemption Prices equal to the Issue Price plus accrued
Original Issue Discount to the date of redemption, subject to adjustment in
certain circumstances as described herein. In the event of a Fundamental Change,
there can be no assurance that the Company will have or be able to acquire
sufficient funds to redeem the Debentures. See "Description of
Debentures--Redemption at Option of the Holder Upon a Fundamental Change." The
Debentures will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company and effectively subordinated in
right of payment to all indebtedness and other liabilities of the Company's
subsidiaries. At March 31, 1999, the Company had $538.7 million of
indebtedness outstanding that would have constituted Senior Indebtedness, and
the Company's subsidiaries had approximately $439.9 million of indebtedness and
other liabilities outstanding (excluding intercompany liabilities and
liabilities of a type not required to be reflected on a balance sheet in
accordance with generally accepted accounting principles) to which the
Debentures would have been effectively subordinated.
The Debentures and the Conversion Shares may be offered by the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Debentures
or Conversion Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Debentures or Conversion
Shares for whom such broker-dealers may act as agents or to whom they may sell
as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The Company will not receive any
of the proceeds from the sale of the Debentures or Conversion Shares by the
Selling Securityholders. The Company has agreed to pay all expenses incident to
the offer and sale of the Debentures and Conversion Shares offered by the
Selling Securityholders hereby, except that the Selling Securityholders will pay
all underwriting discounts and selling commissions, if any. See "Plan of
Distribution."
The Debentures have been designated for trading on The Portal Market.
Debentures sold pursuant to this Prospectus will not remain eligible for trading
on The Portal Market since they are no longer "restricted securities" within the
meaning of the Securities Act of 1933, as amended. The Company does not intend
to list the Debentures on any national securities exchange or on the Nasdaq
National Market. The Common Stock is traded on the Nasdaq National Market under
the symbol "ATML."
----------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE DEBENTURES AND
CONVERSION SHARES OFFERED HEREBY.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Prospectus is August 11, 1999
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at 500 West Madison Street, Room 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, Washington, D.C. 20549, at
prescribed rates, or on the World Wide Web at http://www.sec.gov. Copies of
other materials concerning the Company can be inspected at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Debentures and Conversion Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, the Debentures and the
Conversion Shares, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete and,
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of the Registration
Statement, including all exhibits thereto, may be obtained from the Commission's
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission, or may be examined without charge at the offices of the Commission
described above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are
hereby incorporated by reference into this Prospectus: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 (as amended on
Form 10-K/A), (ii) the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, and (iii) the Company's Forms 8-A filed February 20, 1991
(as amended on Form 8-A/A filed on March 14, 1991) and September 15, 1998. All
documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of the offering to which
this Prospectus relates shall be deemed to be incorporated by reference into
this Prospectus and to be part of this Prospectus from the date of filing
thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement. Upon
written or oral request, the Company will provide without charge to each person
to whom a copy of this Prospectus is delivered a copy of any of the documents
incorporated by reference herein (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests for such documents should be submitted to Investor Relations, at the
principal executive offices of the Company in writing at Atmel Corporation, 2325
Orchard Parkway, San Jose, California 95131 or by telephone at (408) 441-0311.
-2-
<PAGE> 3
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus or incorporated by reference in
this Prospectus are forward-looking statements that involve risks and
uncertainties. The statements contained or incorporated by reference in this
Prospectus that are not purely historical are forward- looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are based
on current expectations and projections about the semiconductor industry and
assumptions made by the management and are not guarantees of future performance.
Therefore, actual events and results may differ materially from those expressed
or forecasted in the forward-looking statements due to factors such as the
effect of changing economic conditions, material changes in currency exchange
rates, political instability -- including war -- in countries where the Company
manufactures and/or sells its products, disruptions in production or business
systems due to year 2000 issues, conditions in the overall semiconductor market
(including the historic cyclicality of the industry), continued financial
turmoil in the worldwide markets, risks associated with product demand and
market acceptance risks, the impact of competitive products and pricing, delays
in new product development, manufacturing capacity utilization, product mix and
technological risks, ability to integrate and manage acquisitions, and other
risk factors identified in "Risk Factors" and elsewhere in this Prospectus. The
Company undertakes no obligation to update any forward-looking statements in
this Prospectus.
-3-
<PAGE> 4
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed financial and other information appearing elsewhere in this Prospectus
and in the documents incorporated by reference herein. Except as otherwise
indicated, all references to the "Company" or "Atmel" refer to Atmel Corporation
and its wholly-owned subsidiaries, unless the context otherwise requires.
THE COMPANY
Atmel designs, develops, manufactures and markets a broad range of high
performance non-volatile memory and logic integrated circuits using its
proprietary complementary metal-oxide semiconductor (CMOS) technologies. CMOS
offers higher performance at a lower power and scales extremely well to small
feature size. Atmel's strategy is to offer products that provide the enabling
technology and features that allow the Company's customers to develop and bring
to market new, high value-added systems and products. Speed, density, power
usage and specialty packaging differentiate the Company's products. These
products are used in a range of applications in the telecommunications,
computing, networking, consumer and automotive electronics and other markets.
The Company's products consist primarily of advanced logic,
mixed-signal, nonvolatile memory, radio frequency and system-level integration
semiconductor solutions.
The Company has four reportable segments, each of which require
differing design, development and marketing resources to produce and sell
semiconductor integrated circuits: Nonvolatile Memories, Temic, ASICs and Logic.
The Nonvolatile Memories segment designs, develops and markets erasable
programmable read-only memories (EPROMs), electrically erasable programmable
read-only memories (EEPROMs), and Flash memories for a marketplace characterized
by standardized products and commodity pricing. The Temic segment is a wholly
owned European subsidiary producing analog, microcontroller and specialty
products to service the automotive, telecommunications, consumer and industrial
markets. The ASIC segment designs, develops and markets semicustom gate arrays
and cell-based integrated circuits as well as full custom application-specific
integrated circuits to meet specialized customer requirements for high
performance devices in a broad variety of customer-specific applications. The
Logic segment designs, develops and markets microcontrollers, erasable
programmable logic devices (EPLDs), and field programmable gate arrays (FPGAs)
for sale to customers who use them in products for telecommunications,
computers, networking, image processing, industrial and military applications,
and avionics.
The Company's products are based on its proprietary CMOS bipolar, BiCMOS
and silicon germanium (SiGe) process technologies. Within each product family,
the Company offers its customers products with a range of speed, density, power
usage, specialty packaging and other features.
Atmel was incorporated in California on December 5, 1984. Its principal
executive offices are located at 2325 Orchard Parkway, San Jose, California
95131, and its telephone number is (408) 441-0311.
RECENT DEVELOPMENTS
On March 1, 1998, the Company acquired the integrated circuit business
of Temic Telefunken Microelectronic ("Temic") of Heilbronn, Germany, a wholly
owned subsidiary of Daimler-Benz A.G., from Vishay Intertechnology for $99.3
million cash. The Company's operating results for the year ended December 31,
1998 included approximately ten months of the results of Temic, which included
$238.4 million of net revenues.
In January 1999, the Company completed the sale of certain items of
plant and equipment in Rousset, France for $17.7 million. The assets sold had
been written down to fair market value as a result of an asset impairment
reserve provided in December 1997. At the time the impairment reserve was
provided, the Company was unable to determine what period Fab 6 would cease to
be used as a manufacturing facility due to issues transitioning certain
customers who used Fab 6 as their sole source of supply of wafers. However, a
worldwide excess of semiconductor manufacturing capacity made this facility
uneconomic to operate and, during the fourth quarter of 1998, the Company agreed
to sell the manufacturing equipment in Fab 6. The Company recorded a pre-tax
gain of $14.9 million ($9.5 million after-tax), after disposal costs, in the
first quarter of 1999 in connection with this transaction.
On April 9, 1999, the Company acquired substantially all of the assets
and assumed certain associated liabilities of the Smart Information Transfer
("SIT") business of the Semiconductor Products Sector of Motorola, Inc.
("Motorola") for approximately $9.4 million. The transaction will be accounted
for as a purchase.
On July 21, 1999, the Company reported second quarter revenues of $311.1
million. Net income for the quarter was $15.4 million, or $0.15 per share, and
includes approximately $3.8 million of pre-tax income related to non-recurring
miscellaneous income. In the previous quarter (first quarter 1999), the Company
reported revenues of $290 million and net income of $16.7 million, or $0.17 per
share, before a one-time charge for the cumulative effect of an accounting
change. In last year's second quarter, the Company's revenues were $288.2
million and net loss for the quarter was $91.4 million, or $0.92 per share.
Included in last year's second quarter results were a $66.3 million
restructuring charge and one-time expense of $23.4 million for in-process
research and development associated with the acquisition of Temic.
For the first six months of 1999, Atmel reported total sales of $601.2
million and net income of $32.1 million, or $0.32 per share, before the first
quarter 1999 charge for the cumulative effect of an accounting change. For the
same period a year ago, Atmel reported total sales of $548.6 million and net
income of $15.6 million, or $0.16 per share, excluding the above-mentioned
restructuring and in-process research and development charges taken in the
second quarter of 1998.
DELAWARE REINCORPORATION AND THE 1999 ANNUAL MEETING OF SHAREHOLDERS
At the Company's 1999 Annual Meeting of Shareholders, the shareholders
of the Company approved the following actions: (i) the reincorporation of the
Company into the state of Delaware; (ii) an increase in the number of authorized
shares of Common Stock of the Company from 240 million shares to 500 million
shares, to occur upon completion of the reincorporation into the state of
Delaware; (iii) the reelection of five (5) directors to serve on the Company's
Board of Directors; (iv) an amendment to the Company's 1991 Employee Stock
Purchase Plan to increase the number of shares reserved for issuance thereunder
by 2.5 million shares; (v) an amendment to the Company's 1996 Stock Plan to
increase the number of shares reserved for issuance thereunder by 5.0 million
shares; and (vi) the ratification of the appointment of PricewaterhouseCoopers
LLP as independent accountants for the Company.
The Company expects to complete the reincorporation of the Company into
the state of Delaware in the third or fourth quarter of 1999.
THE OFFERING
Securities Offered............... $340,400,000 principal amount at maturity of
Zero Coupon Convertible Subordinated
Debentures due 2018 (the "Debentures") and the
shares of Common Stock of the Company issuable
upon conversion of the Debentures (the
"Conversion Shares"). There will be no
periodic interest payments on the Debentures.
See "Description of Debentures -- General."
Issue Price...................... The Debentures were originally sold at an
issue price of 33.785% of the principal amount
at maturity (the "Issue Price").
Yield to Maturity of
Debentures.................... 5.50% per annum (computed on a semi-annual
bond equivalent basis) calculated from April
21, 1998.
-4-
<PAGE> 5
Conversion....................... The Debentures are convertible, at the option
of the holder, at any time prior to maturity,
unless previously redeemed or otherwise
purchased by the Company, into Common Stock at
the rate of 13.983 shares per $ 1,000
principal amount at maturity of the Debentures
(the "Conversion Rate"). The Conversion Rate
will not be adjusted for accrued Original
Issue Discount (as defined), but will be
subject to adjustment upon the occurrence of
certain events. Upon conversion, the holder
will not receive any cash payment representing
accrued Original Issue Discount; such accrued
Original Issue Discount will be deemed paid by
the Common Stock received upon conversion. See
"Description of Debentures -- Conversion of
Debentures."
Subordination.................... The Debentures are subordinated in right of
payment to all existing and future Senior
Indebtedness (as defined) of the Company and
effectively subordinated in right of payment
to all indebtedness and other liabilities of
the Company's subsidiaries. At March 31, 1999,
the Company had $538.7 million of indebtedness
outstanding that constituted Senior
Indebtedness, and the Company's subsidiaries
had approximately $439.9 million of
indebtedness and other liabilities outstanding
(excluding intercompany liabilities and
liabilities of a type not required to be
reflected on a balance sheet in accordance
with generally accepted accounting principles)
to which the Debentures would have been
effectively subordinated. See "Description of
Debentures -- Subordination of Debentures."
Original Issue Discount.......... The Debentures were issued at an Original
Issue Discount for Federal income tax purposes
equal to the excess of the principal amount at
maturity of the Debentures over their Issue
Price. Prospective purchasers of Debentures
should be aware that, although there will be
no periodic payments of interest on the
Debentures, accrued Original Issue Discount
will be included periodically in a holder's
gross income for Federal income tax purposes
prior to conversion, redemption, other
disposition or maturity of such holder's
Debentures, whether or not such Debentures are
ultimately converted, redeemed, sold (to the
Company or otherwise) or paid at maturity. See
"Certain Federal Income Tax Considerations."
Sinking Fund..................... None.
Redemption....................... The Debentures are not redeemable by the
Company prior to April 21, 2003. Thereafter,
the Debentures will be redeemable for cash, at
the option of the Company, in whole at any
time or in part from time to time, at
Redemption Prices equal to the Issue Price
plus accrued Original Issue Discount to the
date of redemption. See "Description of
Debentures -- Redemption of Debentures at the
Option of the Company."
-5-
<PAGE> 6
Fundamental Change............... The Debentures may be redeemed at the option
of the holder if there is a Fundamental Change
(as defined) at a Fundamental Change
Redemption Price equal to the Issue Price plus
accrued Original Issue Discount to the date of
redemption, subject to adjustment in certain
circumstances. See "Description of Debentures
-- Redemption at Option of the Holder Upon a
Fundamental Change."
Purchase at the Option of the
Holder......................... The Debentures may be purchased by the
Company, at the option of the holder, as of
April 21, 2003, April 21, 2008 and April 21,
2013 for Purchase Prices equal to the Issue
Price plus accrued Original Issue Discount
from and including the Issue Date and to but
excluding such dates. The Company may, at its
option, elect to pay any such Purchase Price
in cash or Common Stock, or any combination
thereof. See "Description of Debentures --
Purchase of Debentures at the Option of the
Holder."
Use of Proceeds.................. The aggregate net proceeds to the Company from
the initial private placement of the
Debentures were approximately $111 million.
The Company used the net proceeds, together
with its existing cash, to repay approximately
$108 million outstanding under the Company's
Credit Agreement with NationsBank, N.A. (the
"Credit Agreement"), plus accrued interest
thereon to lower its cost of funds. The
Company entered into the Credit Agreement to
provide financing for the Temic acquisition.
The amounts outstanding under the Credit
Agreement matured on June 2, 1998, and bore
interest at LIBOR plus 0.90%. Upon the
repayment of the amounts due under the Credit
Agreement, the Credit Agreement was
terminated. The Company will not receive any
of the proceeds from the sale by Selling
Securityholders of the Debentures or the
Conversion Shares.
Registration Rights.............. The Company has agreed, for the benefit of the
holders of the Debentures, to file with the
Commission as soon as practicable, but in any
event within 90 days after the first date of
original issuance of the Debentures, a shelf
registration statement (the "Shelf
Registration Statement"), of which this
Prospectus forms a part, covering resales of
the Debentures and the Conversion Shares (the
"Registrable Securities"). The Company will
use its best efforts to cause the Shelf
Registration Statement to become effective as
promptly as is practicable, but in any event
within 180 days after such first date of
original issuance, and to keep the Shelf
Registration Statement effective until the
earlier of (i) the sale pursuant to the Shelf
Registration Statement of all the Registrable
Securities and (ii) the expiration of the
holding period applicable to the Registrable
Securities held by nonaffiliates of the
Company under Rule 144(k) of the Securities
Act, or any successor provision, subject to
certain permitted exceptions. See "Description
of Debentures -- Registration Rights."
-6-
<PAGE> 7
RISK FACTORS
An investment in the Debentures and underlying Conversion Shares
involves a high degree of risk. Prospective investors should carefully consider
the following risk factors, in addition to the other information set forth or
incorporated by reference in this Prospectus, in connection with an investment
in the Debentures and underlying Conversion Shares.
Factors Affecting Recent Operating Results. The semiconductor industry
is cyclical in nature, and during recent periods, the industry has experienced a
significant downturn, characterized, among other things, by diminished product
demand, production overcapacity and subsequent erosion of average selling prices
of products. While the Company's revenues in 1998 increased as compared to 1997,
the increase was primarily attributable to the inclusion of revenues from
Temic's business, which Amtel acquired in March of 1998. Excluding the results
of Temic, Atmel's revenues in 1998 decreased, reflecting the cyclical downturn
in the worldwide semiconductor industry throughout 1997 and 1998. While sales of
the Company's application-specific integrated circuits (ASIC) and logic-related
products increased, continued price erosion of The Company's commodity-oriented
nonvolatile memory products (caused by continued weakened business conditions
and excess manufacturing capacity in the semiconductor industry) more than
offset the impact of higher sales of ASIC and logic-related products in 1998.
These commodity-oriented nonvolatile memory products include erasable
programmable read-only memories (EPROMs) and Flash memories. The continued
weakened business conditions in the worldwide semiconductor industry also
contributed to the Company's decision to implement a restructuring plan, which
was announced during the second quarter of fiscal 1998. The restructuring plan,
which resulted in a nonrecurring charge of approximately $66.3 million, included
a 10 percent work force reduction and an impairment charge to write-down the
value of certain manufacturing equipment and machinery with older process
technology. The Company also recognized an in-process research and development
charge of $23.4 million relating to the Temic acquisition, during the second
quarter of 1998.
Net revenues increased 11.4 percent to $290.0 million in the quarter
ended March 31, 1999 from $260.4 million in the corresponding quarter of 1998.
This increase was primarily attributable to the inclusion of revenues from
Temic's sales for $66.1 million for the three months ended March 31, 1999 versus
$22.5 million in the corresponding quarter of 1998, which included results for
only one month.
Excluding the revenue contribution from Temic, net revenues for the
first quarter of 1999 would have decreased by 5.9 percent compared to the
corresponding quarter of 1998. The decrease was primarily due to the continued
excess manufacturing capacity in the semiconductor industry which led to average
selling prices (ASPs) to erode approximately 30.0 percent in the first quarter
of 1999 compared to the corresponding quarter of 1998 for substantially all of
the Company's business segments and products. Demand for the Company's products,
however, across all business units increased in the first quarter of 1999
compared to the same period in 1998.
Factors Generally Affecting Revenue and Quarterly Operating Results. The
Company believes that its future operating results will be subject to quarterly
variations based upon a wide variety of factors, many of which are not in the
Company's control, including fluctuations in manufacturing yields, the timing of
introduction of new products, changes in product mix, the extent of utilization
of manufacturing capacity, the cyclical nature of both the semiconductor
industry and the markets addressed by the Company's products, product
obsolescence, price erosion, competitive factors and fluctuations in currency
exchange rates. Any unfavorable changes in these factors could materially and
adversely affect the Company's operating results.
In particular, the Company believes that its future sales growth will
depend substantially on the success of its new products. New products are
generally incorporated into customers' products or systems at the design stage.
However, design wins may precede volume sales generation by a year or more. No
assurance can be given that the Company will achieve design wins or that any
design win will result in future revenues, which depend in large part on the
success of the customers' end product or system. The Company expects the average
selling price of each product to decline as individual products mature,
typically within two years, and competitors enter the market. To offset average
selling price decreases, the Company relies primarily on attaining cost
reductions in the manufacturing of those products, increased unit demand to
absorb fixed costs and introducing new, higher priced products, which
incorporate advanced features or integrated technologies to address new or
emerging markets. To the extent that such cost reductions and new product
introductions do not occur in a timely manner, the Company's operating results
could be adversely affected. In addition, due in part to overcapacity in the
semiconductor industry, the Company's quarterly revenues and operating results
have become increasingly dependent upon orders booked and shipped within a given
quarter and, accordingly, the Company's quarterly results have become less
predictable and subject to greater variability.
-7-
<PAGE> 8
In addition, the Company's continued success will depend in large part
on the continued growth of various electronics industries that use
semiconductors, including manufacturers of computers, telecommunications
equipment, automotive electronics, industrial controls, consumer electronics
equipment and military equipment. The Company's success will also depend upon a
better supply and demand balance within the industry. While the Company
experienced rapid revenues and net income growth from 1994 through 1996, there
can be no assurance that this growth will resume in future periods, as was
evidenced in 1997 and 1998 and the first quarter of 1999.
Declining Gross Margins; Risks with Fabrication of Wafers. In 1997 and
1998, the Company made substantial capital expenditures to increase its wafer
fabrication capacity at its facilities in Colorado Springs, Colorado and
Rousset, France, and acquired two wafer fabrication facilities in connection
with its acquisition of Temic. In 1998, the Company's gross margin declined
significantly as a result of (i) the increase in fixed costs and operating
expenses related to this expansion of capacity, and (ii) lower product margins
in many of the Company's non-volatile memory products due to severe price
erosion. In the first quarter of 1999, the declining gross margin trend
reversed. Gross margin improved in the first quarter of 1999 compared to the
first quarter of 1998 primarily due to a higher unit sales volume over which to
spread fixed costs and operating expenses, the inclusion of Temic's positive
gross margin for three months in 1999 compared to only one month in 1998, and
declining ASPs that stabilized in the first quarter of 1999 when compared to
1998. If the Company's revenues do not continue to increase substantially in
the remainder of 1999 and in future periods, the Company's gross margin will
continue to decline from the gross margin experienced in 1997.
The Company has lowered its capital expenditure plan to approximately
$160 million in 1999 and will focus on implementing chemical mechanical
planarization (CMP), 0.35-micron and 0.25-micron technologies in its wafer
manufacturing facilities. Successful implementation of these technologies will
enable the Company to achieve cost reductions through die shrinks. However, the
fabrication of integrated circuits, particularly non-volatile, erasable CMOS
memory and logic devices such as those manufactured by the Company, is a highly
complex and precise process, requiring production in a tightly controlled, clean
environment. Minute impurities, difficulties in the fabrication process, defects
in the masks used to print circuits on a wafer or other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
be nonfunctional. The Company may experience problems in achieving acceptable
yields in the manufacture of wafers, particularly in connection with the
expansion of its capacity and related transitions. The interruption of wafer
fabrication or the failure to achieve acceptable manufacturing yields at any of
the Company's facilities would have a material adverse effect on the Company's
operations.
There can be no assurance that market conditions will permit the
Company to fully utilize its wafer fabrication capacity or that the increases in
fixed costs and operating expenses related to manufacturing overcapacity will
not materially and adversely affect the Company's operating results, if net
revenues do not increase sufficiently from current levels. The Company
experienced production delays and yield difficulties in connection with earlier
expansions of its wafer fabrication capacity and experienced overcapacity at its
Colorado Springs facility in 1991. Production delays, difficulties in achieving
acceptable yields at any of its fabrication facilities or overcapacity could
materially and adversely affect the Company's operating results.
Cyclical Nature of Semiconductor Industry. The semiconductor industry
has historically been cyclical, characterized by wide fluctuations in product
supply and demand. From time to time, and during 1997 and 1998 the industry has
also experienced significant downturns, often in connection with, or in
anticipation of, maturing product cycles and declines in general economic
conditions. These downturns have been characterized
-8-
<PAGE> 9
by diminished product demand, production overcapacity and subsequent accelerated
erosion of average selling prices, and in some cases have lasted for more than a
year. The Company's business could be materially and adversely affected by
industry-wide fluctuations in the future. The commodity memory portion of the
semiconductor industry, from which the Company historically derived more than
half its revenues through 1998, and approximately 40 percent of its net revenues
in the first quarter of 1999, continued to suffer from excess capacity in 1998
and the first quarter of 1999, which led to substantial price erosion during
this period. If these conditions continue during 1999, the Company's growth and
operating results would continue to be adversely affected. In addition, in the
past, the Company's operating results were adversely affected by industry-wide
fluctuations in the demand for semiconductors, which resulted in
under-utilization of the Company's manufacturing capacity. The Company's
continued success will depend in large part on the continued growth of various
electronics industries that use semiconductors, including manufacturers of
computers, telecommunications equipment, automotive electronics, industrial
controls, consumer electronics equipment and military equipment, and a better
supply and demand balance within the industry. No assurance can be given that
the Company will not be materially and adversely affected in the future by
cyclical conditions in the semiconductor industry or by slower growth in any of
the markets served by the Company's products.
Competition. The semiconductor industry is intensely competitive and is
characterized by rapid technological change, rapid product obsolescence and
price erosion. Throughout its product line, the Company competes with a number
of semiconductor manufacturers, such as SGS-Thompson, Intel, AMD, Sharp and
Fujitsu, which are among the largest in the world. These competitors have
substantially greater financial, technical, marketing and management resources
than the Company. As the Company has introduced its new Flash products, it is
increasingly competing directly with SGS-Thompson, Intel, AMD, Sharp and
Fujitsu, and there can be no assurance that the Company will be able to compete
effectively. The Company also competes with emerging companies attempting to
sell products in specialized markets such as those addressed by the Company. The
Company competes principally on the basis of the technical innovation and
performance of its CMOS products, including their speed, density, power usage,
reliability and specialty packaging alternatives, as well as on price and
product availability. During recent periods, the Company has experienced
significant price competition in its non-volatile memory business and especially
for its EPROM products. The Company expects competitive pressures to increase in
its markets from existing companies and new entrants, which among other things
could further accelerate the trend of decreasing average selling prices for its
products.
In addition to the factors described above, the ability of the Company
to compete successfully depends on a number of factors, including its success in
designing and manufacturing new products that implement new technologies, its
ability to offer integrated solutions using its advanced non-volatile memory
process with other technologies, the rate at which customers incorporate the
Company's products into their systems, product introductions by the Company's
competitors, the number and nature of its competitors in a given market, and
general market and economic conditions. Many of these factors are outside of the
Company's control. There can be no assurance that the Company will be able to
compete successfully in the future.
New Product Development and Technological Change. The average selling
prices of the Company's products historically have decreased over the products'
lives and are expected to continue to do so. As a result, the Company's future
success depends on its ability to develop and introduce new products which
compete effectively on the basis of price and performance and which address
customer requirements. The Company is continually in the process of designing
and commercializing new and improved products to maintain
-9-
<PAGE> 10
its competitive position. The success of new product introductions is dependent
upon several factors, including timely completion and introduction of new
product designs, achievement of acceptable fabrication yields and market
acceptance. The development of new products by the Company and their design-in
to customers' systems can take as long as three years, depending upon the
complexity of the device and the application. Accordingly, new product
development requires a long-term forecast of market trends and customer needs,
and the successful introduction of the Company's products may be adversely
affected by competing products or technologies serving markets addressed by the
Company's products. The Company's qualification process involves multiple
iterations of testing and improving a product's functionality to ensure that the
Company's products operate in accordance with design specifications. To the
extent that the Company experiences delays in the introduction of new products
as a result of the qualification process, the Company's future operating results
could be adversely affected.
In addition, new product introductions frequently depend on the
Company's development and implementation of new process technologies. The
Company believes that its future growth will depend in part upon the development
and the market's acceptance of these products. In addition, as the Company
develops its integrated solution products, it will require more technically
sophisticated sales and marketing personnel to market these products
successfully to its customers. The Company is developing new products with
smaller feature sizes, the fabrication of which will be substantially more
complex than fabrication of the Company's current products. If the Company is
unable to design, develop, manufacture, market and sell new products
successfully, its operating results will be adversely affected. No assurance can
be given that the Company's product, process development, design, marketing and
sales efforts will be successful, that its new products will achieve market
acceptance, or that price expectations for its new products will be achieved.
International Sales and Operations. Foreign product sales to customers
accounted for approximately 65%, 60%, 65%, and 66% of net revenues in 1996,
1997, and 1998, and the first three months of 1999, respectively. Atmel expects
that revenues derived from international sales will continue to represent a
significant portion of net revenues. In addition, in recent years, Atmel has
significantly expanded its International operations, most recently through its
acquisitions of Temic in 1998 and Motorola's SIT business in the second quarter
of 1999. International sales and operations are subject to a variety of risks,
including those arising from currency fluctuations, tariffs, trade barriers,
taxes, export license requirements and foreign government regulations. Because
approximately 65% and 62% of the Company's foreign sales in 1998 and the first
quarter of 1999, respectively, were denominated in U.S. dollars, the Company's
products became less price competitive in countries with currencies declining in
value against the dollar. In 1998, the Company's revenues declined by
approximately $7.0 million due to the strengthening of the U.S. dollar against
foreign currencies in the markets in which the Company sells products. In
addition, in 1998, business conditions in Asia were severely affected by banking
and currency issues which adversely affected the Company's operating results.
Furthermore, accounts receivable increased $42.5 million in 1997 due to the
Company extending longer payment terms to its customers and a more difficult
collection environment because of the financial turmoil in Asia. While these
conditions stabilized in the first quarter of 1999, the continuance or worsening
of adverse business and financial conditions in Asia, where 36% of the Company's
revenues were generated during the first quarter of 1999, would likely have a
material adverse effect on the Company's operating results.
Customer Concentration. In 1996, 1997, 1998 and the first three months
of 1999, 12%, 12.6%, 14.0% and 11.8%, respectively, of the Company's net
revenues were derived from sales to Motorola. The ability of the Company to
maintain close, satisfactory relationships with Motorola and other large
customers is important to its business. A reduction, delay, or cancellation of
orders from Motorola could materially and adversely affect the Company's
business and results of operations. Moreover, the Company's customers may vary
order levels significantly from period to period. In addition, there can be no
assurance that customers will continue to place orders with the Company in the
future at the same levels as in prior
-10-
<PAGE> 11
periods. The loss of one or more of the Company's key customers, or reduced
orders by any of its key customers, could adversely affect the Company's
business and results of operations.
Risks Associated with Acquisitions. The Company has from time to time
acquired complementary businesses, products and technologies, including the
acquisition of Temic in March 1998. Achieving the anticipated benefits of an
acquisition depends, in part, upon whether the integration of the acquired
business, products or technology is accomplished in an efficient and effective
manner, and there can be no assurance that this will occur. Moreover, successful
acquisitions in the semiconductor industry may be more difficult to accomplish
than in other industries. Combining a merged or acquired company requires, among
other things, integration of product offerings, manufacturing operations and
coordination of sales and marketing and research and development efforts. There
can be no assurance that such an integration can be accomplished smoothly or
successfully. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations, the complexity
of the technologies being integrated, and the necessity of integrating personnel
with disparate business backgrounds and combining two different corporate
cultures. The integration of operations following an acquisition requires the
dedication of management resources that may distract attention from the
day-to-day business, and may disrupt key research and development, marketing or
sales efforts. The inability of management to successfully integrate the Temic
acquisition or any future acquisition could have a material adverse effect on
the business, operating results and financial condition of the Company.
Furthermore, there can be no assurance that any products acquired in connection
with any such acquisition will gain acceptance in the Company's markets or that
the Company will obtain the anticipated or desired benefits of such
transactions.
Intellectual Property Matters. The Company has from time to time
received, and may in the future receive, communications from third parties
asserting patent or other intellectual property rights covering the Company's
products or processes. In the past, the Company has received specific
allegations from major companies alleging that certain of the Company's products
infringe patents owned by such companies. No assurance can be given that the
Company would prevail if any litigation were to occur as a result of such
allegations in the future or that a license could be obtained on reasonable
terms or at all. If the Company does not prevail in any such litigation, the
Company's results of operations may be adversely affected.
In addition, the semiconductor industry is characterized by vigorous
protection and pursuit of intellectual property rights or positions, which have
on occasion resulted in significant and often protracted and expensive
litigation. In the past, the Company has been involved in such litigation, which
adversely affected its operating results. There can be no assurance that
intellectual property claims will not be made against the Company in the future
or that the Company will not be prohibited from using the technologies subject
to any such claims or required to obtain licenses and make corresponding royalty
payments. In addition, the necessary management attention to and legal costs
with litigation can have a significant adverse effect on operating results.
Future Capital Needs. Semiconductor companies that maintain their own
fabrication facilities have substantial capital requirements. The Company made
capital expenditures of $312.1 million in 1997, $187.7 million in 1998 and $15.6
million in the first quarter of 1999, and intends to continue to make capital
investments to support business growth and achieve manufacturing cost reductions
and improved yields. The Company's capital expenditures plan for 1999 is
approximately $160 million. The Company may seek additional equity or debt
financing to fund further expansion of its wafer fabrication capacity or to fund
other projects. The timing and amount of such capital requirements cannot be
precisely determined at this time and will depend on a number of factors,
including demand for the Company's products, product mix, changes in
-11-
<PAGE> 12
semiconductor industry conditions and competitive factors. There can be no
assurance that such additional financing will be available when needed or, if
available, will be on satisfactory terms.
Dependence on Independent Assembly Contractors. The Company
manufactures wafers for its products at its fabrication facilities. The wafers
are then sorted and probed at the Company's facilities. After wafer probing, the
Company ships the wafers to one of the Company's independent assembly
contractors located in China, Malaysia, the Philippines, South Korea, Taiwan
and Thailand where the wafers are separated into die, packaged and, in some
cases, tested. The Company's reliance on independent contractors to assemble,
package and test its products involves significant risks, including reduced
control over quality and delivery schedules, the potential lack of adequate
capacity and discontinuance or phase-out of such contractors' assembly
processes. There can be no assurance that such contractors will continue to
assemble, package and test products for the Company. Moreover, because the
Company's assembly contractors are located in foreign countries, the Company is
subject to certain risks generally associated with contracting with foreign
suppliers, including currency exchange fluctuations, political and economic
instability, trade restrictions and changes in tariff and freight rates. There
can be no assurance that the Company will not experience problems in timelines,
adequacy or quality of product deliveries, any of which could have a material
adverse effect on the Company's results of operations.
Environmental Regulations. The Company is subject to a variety of
federal, state and local governmental regulations related to the discharge or
disposal of toxic, volatile or otherwise hazardous chemicals used in its
manufacturing process. While the Company believes that it has all environmental
permits necessary to conduct its business and that its activities conform to
present environmental regulations, increasing public attention has been focused
on the environmental impact of semiconductor operations. Although the Company
has not experienced any material adverse effect on its operations from
environmental regulations, there can be no assurance that changes in such
regulations will not impose the need for additional capital equipment or other
requirements. Any failure by the Company to control the use of, or to restrict
adequately the discharge of, hazardous substances under present or future
regulations could subject the Company to substantial liability or cause its
manufacturing operations to be suspended.
Dependence on Key Personnel. The Company's future success depends in
large part on the continued service of its key technical and management
personnel and on its ability to continue to attract and retain qualified
employees, particularly those highly skilled design, process and test engineers
involved in the manufacture of existing products and the development of new
products and processes. The competition for such personnel is intense, and the
loss of key employees, none of whom is subject to an employment agreement for a
specified term or a post-employment non-competition agreement, could have a
material adverse effect on the Company.
Management of Growth. The Company business has grown in recent years
through both internal expansion and acquisitions, and continued growth may cause
a significant strain on the Company's infrastructure and internal systems. To
manage its growth effectively, the Company must continue to improve and expand
its management information systems. The Company's success depends to a
significant extent on the management skills of its executive officers. If the
Company is unable to manage growth effectively, the Company's results of
operations will be materially and adversely affected.
Year 2000 Risks. The Company initiated a program during 1997 to review
its computer hardware and software systems, to prioritize and determine the
impact of, and to provide solutions for, Year 2000 ("Y2K") requirements. The Y2K
program is being conducted in five parallel phases -- (i) planning, (ii)
inventory/impact, (iii) remediation, (iv) testing, and (v) implementation.
As of March 1999, the Company had completed the planning and
inventory/impact phases of the Y2K program for both information technology (IT)
and non-information technology (Non-IT) systems. As of June 1999, the Company
had completed the remediation and testing phases for approximately 95 percent of
all IT systems (i.e., factory and equipment management systems, order entry
system (OES), lot tracking system, electronic data interchange (EDI), and
financial information systems). The remediation, test, and implementation phases
for all IT systems is expected to be completed by September 30, 1999. The
Company has also completed the remediation and testing phases for approximately
95 percent of all Non-IT systems (i.e., facility systems, suppliers, and safety
systems). The testing phase has been completed for the EDI, financial
information, and OES systems, with the OES and financial information systems Y2K
compliant and in production in all locations. The lot tracking system is Y2K
compliant and in production in all locations except Rousset, France, where an
appropriate contingency plan is ready if required. The factory and equipment
management system is 90 percent remediated and tested. The remaining IT and
Non-IT systems are awaiting vendor fixes. The Company expects to have all fixes
in place by the end of September 1999 or appropriate contingency plans will be
implemented.
The Company expects that all IT and Non-IT systems will be Y2K
compliant and in production by September 30, 1999. The Company has surveyed and
received statements from all of its critical vendors and material and utility
suppliers for Y2K compliance. The Company continues to monitor suppliers and
develop contingency plans to obtain the goods and services provided by any
vendor determined to be Y2K non-compliant. The Company has established a
contingency plan for Y2K issues that may arise.
The Company estimates the cost related to identifying and addressing Y2K
issues will be $7 million. Thus far, the major cost associated with identifying
and addressing Y2K issues has been in-house labor costs. The Company does not
anticipate costly replacements for Non-IT equipment, since the Company expects
that substantially all of this equipment can be upgraded to be Y2K compliant. If
the Company were unable to successfully upgrade its IT and Non-IT systems to be
Y2K compliant, its wafer productions systems and business and financial
information systems could be materially and adversely affected, which in turn
could result in a material adverse effect on the Company's business, operating
results and financial condition.
-12-
<PAGE> 13
Long-Term Debt; Leverage. The Company financed its 1997 capital
expenditures with long-term debt, which more than doubled during the year,
increasing from $278.6 million at December 31, 1996 to $571.4 million at
December 31, 1997. Long-term debt increased again in 1998 to $771.1 million at
December 31, 1998, due primarily to the issuance of $115.0 million of debt
securities and $142.2 million of lease financing related to asset acquisitions.
The degree to which the Company is leveraged could materially and adversely
affect the Company's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to industry
downturns and competitive pressures. The Company's ability to meet its debt
obligations will be dependent upon the Company's future performance, which will
be subject to financial, business and other factors affecting the operations of
the Company, many of which are beyond its control.
Possible Volatility of Debentures and Share Price. The market price of
the Company's Common Stock has experienced significant fluctuations and may
continue to fluctuate significantly. The market price of the Debentures and the
Conversion Shares may be significantly affected by factors such as the
announcement of new products or product enhancements by the Company or its
competitors, technological innovations by the Company or its competitors,
quarterly variations in the Company's results of operations, changes in earnings
estimates by market analysts and general market conditions or market conditions
specific to particular industries. Statements or changes in opinions, ratings,
or earnings estimates made by brokerage firms or industry analysts relating to
the market in which the Company does business or relating to the Company
specifically could result in an immediate and adverse effect on the market
price of the Debentures and the Conversion Shares. In addition, in recent years
the stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many high
technology companies, often unrelated to the operating performance of the
specific companies.
Subordination. The Debentures are unsecured and subordinated in right
of payment to all existing and future Senior Indebtedness (as defined) of the
Company. As a result of such subordination, in the event of bankruptcy,
liquidation or reorganization of the Company and in certain other events, the
assets of the Company will be available to pay its obligations with respect to
the Debentures only after all Senior Indebtedness has been paid in full in cash
or other payment satisfactory to the holders of Senior Indebtedness, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Debentures then outstanding.
Since a substantial portion of the operations of the Company are
conducted through its subsidiaries, the cash flow and the consequent ability to
service debt, including the Debentures, are partially dependent upon the
earnings of its subsidiaries and the distribution of those earnings, or upon
loans or other payments of funds by those subsidiaries, to the Company. Such
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debentures or to
make any funds available therefor, whether by dividends, distributions, loans or
other payments. In addition, the payment of dividends or distributions and the
making of loans and advances to the Company by any such subsidiaries could in
the future be subject to statutory or contractual restrictions, could in the
future be contingent upon the earnings of those subsidiaries and could in the
future be subject to various business considerations. Any right of the Company
to receive any assets of any of its subsidiaries upon its liquidation or
reorganization will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent that
the Company is itself recognized as a creditor of such subsidiary, in which case
the claims of the Company would still be subordinate to any security interest in
the assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company.
The Indenture does not prohibit or limit the incurrence of Senior
Indebtedness by the Company or the incurrence of other indebtedness and other
liabilities by the Company or its subsidiaries, and the incurrence of additional
indebtedness and other liabilities by the Company or its subsidiaries could
adversely affect the
-13-
<PAGE> 14
Company's ability to pay its obligations with respect to the Debentures. As of
March 31, 1999, the Company had $538.7 million of indebtedness outstanding
that would have constituted Senior Indebtedness, and as of the same date the
Company's subsidiaries had approximately $439.9 million of indebtedness and
other liabilities outstanding (excluding intercompany liabilities and
liabilities of a type not required to be reflected on a balance sheet in
accordance with generally accepted accounting principles) to which the
Debentures would have been effectively subordinated. The Company anticipates
that from time to time it will incur indebtedness, including Senior
Indebtedness, and that it and its subsidiaries will from time to time incur
other additional indebtedness and liabilities. See "Description of
Debentures-Subordination of Debentures."
Limitations on Repurchases and Redemptions of Debentures. On April 21,
2003, April 21, 2008 and April 21, 2013 (each, a "Purchase Date"), the Company
will become obligated to purchase, at the option of the holder thereof, any
outstanding Debenture, subject to certain conditions. In addition, upon a
Fundamental Change (as defined), each holder of the Debentures will have certain
rights, at such holder's option, to require the Company to redeem all or a
portion of such holder's Debentures. There can be no assurance that the Company
will have sufficient funds to pay the repurchase price on any Purchase Date (in
which case, the Company could be required to issue shares of Common Stock to pay
the repurchase price at valuations based on then prevailing market prices) or,
in the event of a Fundamental Change, the redemption price for all the
Debentures tendered by the holders thereof. Any future credit agreements or
other agreements relating to other indebtedness (including Senior Indebtedness)
to which the Company becomes a party may contain restrictions or prohibitions on
the repurchase or redemption of the Debentures. In the event a Purchase Date or
a Fundamental Change occurs at a time when the Company is prohibited from
repurchasing or redeeming the Debentures, the Company could seek the consent of
its then existing lenders to repurchase or redeem the Debentures or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from repurchasing the Debentures or redeeming the
Debentures. In such case, the Company's failure to repurchase or redeem
Debentures required to be repurchased or redeemed under the terms of the
Indenture would constitute an Event of Default under the Indenture and would
likely constitute a default under the terms of any other indebtedness of the
Company outstanding at such time. In such circumstances, or if a Fundamental
Change would in and of itself constitute an event of default under Senior
Indebtedness then outstanding, the subordination provisions in the Indenture
would likely prohibit or restrict payments to the holders of Debentures. The
term "Fundamental Change" is limited to certain specified transactions and does
not include all events that could adversely affect the Company's financial
condition or operating results. The requirement that the Company offer to redeem
the Debentures upon a Fundamental Change will not necessarily protect holders of
the Debentures in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company. See "Description of
Debentures -- Redemption at Option of the Holder Upon a Fundamental Change."
Absence of a Public Market for the Debentures. The Debentures issued
in the April 1998 private placement are eligible for trading on The Portal
Market. Debentures sold pursuant to this Prospectus will not remain eligible for
trading on The Portal Market since they are no longer "restricted securities"
within the meaning of the Securities Act of 1933, as amended. The Company does
not intend to list the Debentures on any national securities exchange or on the
Nasdaq National Market. There can be no assurance that an active trading market
for the Debentures will develop or, if one does develop, that it will be
maintained. If an active trading market for the Debentures fails to develop or
be sustained, the trading price of such Debentures could be adversely affected,
and holders of the Debentures may experience difficulty in reselling the
Debentures or may be unable to sell them at all. If a public trading market
develops for the Debentures, future trading prices of the Debentures will depend
upon many factors, including, among other things, prevailing interest rates and
the market price of the shares of Common Stock.
Initial Ratings Risks. The Company believes it is likely that one or
more rating agencies may rate the Debentures. There can be no assurance that any
such agency or agencies will rate the Debentures or, if they do, what rating or
ratings they will assign to the Debentures. If one or more rating agencies
assign the Debentures a rating lower than generally expected by investors, or if
the rating on the 3.25% Convertible Subordinated
-14-
<PAGE> 15
Guaranteed Step-Up Notes due 2002 issued by Atmel S.A., a wholly-owned
subsidiary of the Company, is lowered, such event would likely have an adverse
effect on the market price of the Debentures and the Conversion Shares.
Original Issue Discount. The Debentures are being sold at a
substantial discount from their principal amount. Although cash interest will
not be paid on the Debentures until maturity, original issue discount (the
difference between the stated redemption price at maturity and the issue price
of the Debentures) will accrue from the issue date of the Debentures. Original
issue discount will be includible as interest income periodically in a U.S.
holder's gross income for U.S. federal income tax purposes in advance of
receipt of the cash payments to which the income is attributable. See "Certain
Federal Income Tax Considerations."
European Monetary Union. On January 1, 1999, eleven member states of
the European Union converted to a common currency called the "euro." The
participating countries have agreed to adopt the euro as their common legal
currency on that date. The Company does not anticipate that the euro conversion
will have a material effect on its revenues, expenses or income from continuing
operations, since over 75% of the Company's business is denominated in U.S.
dollars. Moreover, the Company's internal business information systems allow for
multiple currency reporting and information management. Although the Company is
not aware of any material operational issues or costs associated with preparing
internal systems for the euro, no assurance can be given that the failure of any
critical technology components to operate properly after the euro conversion
will not have an adverse impact on the Company's business operations or require
the Company to incur unanticipated expenses to remedy these problems.
-15-
<PAGE> 16
USE OF PROCEEDS
The aggregate net proceeds to the Company from the initial private
placement of the Debentures were approximately $111 million. The Company used
the net proceeds, together with its existing cash, to repay approximately $108
million outstanding under the Company's Credit Agreement with NationsBank, N.A.
(the "Credit Agreement"), plus accrued interest thereon to lower its cost of
funds. The Company entered into the Credit Agreement to provide financing for
the Temic acquisition. The amounts outstanding under the Credit Agreement
matured on June 2, 1998, and bore interest at LIBOR plus 0.90%. Upon the
repayment of the amounts due under the Credit Agreement, the Credit Agreement
was terminated. The Company will not receive any proceeds from the sale by the
Selling Securityholders of the Debentures or the Conversion Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ----------------------
------------------------------------------ MARCH 31, MARCH 31,
1994 1995 1996 1997 1998 1998 1999
----- ----- ----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges ...... 14.6x 17.8x 15.9x 1.2x -- 3.3x 2.8x
</TABLE>
The ratio of earnings to fixed charges is computed by dividing (a)
earnings before taxes plus fixed charges by (b) fixed charges. Fixed charges
consist of interest expense, capitalized interest and the estimated portion of
rental expense deemed by the Company to be representative of the interest factor
of rental payments under operating leases. Pretax income for the three months
ended March 31, 1999 excludes a charge for a cumulative effect of change in
accounting principle, net of tax effect, of $29.1 million. The amount of the
deficiency for fiscal year ended 1998 is $49.8 million. The deficiency
represents the amount of additional earnings, as defined in (a), necessary to
cover fixed charges such that the ratio is equal to 1.0.
-16-
<PAGE> 17
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture dated as of April 21,
1998 (the "Indenture"), between the Company and State Street Bank and Trust
Company of California, N.A., as trustee (the "Trustee"). A copy of the
Indenture, the form of Debenture and the Registration Rights Agreement have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. The following summaries of certain provisions of the Indenture, the form
of Debenture and the Registration Rights Agreement do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, the form of Debenture and the Registration Rights
Agreement, including the definitions therein of certain terms. Wherever
particular provisions or defined terms of the Indenture (or of the form of
Debenture which is a part thereof) or the Registration Rights Agreement are
referred to, such provisions or defined terms are incorporated herein by
reference. As used in this "Description of Debentures," the "Company" refers to
Atmel Corporation and does not, unless the context otherwise indicates, include
its subsidiaries.
GENERAL
The Debentures are unsecured obligations of the Company limited to
$340,400,000 aggregate principal amount at maturity and will mature on April 21,
2018.
The Debentures were issued at a substantial discount from their
principal amount at maturity. See "Certain Federal Income Tax Considerations."
There will be no periodic payments of interest on the Debentures. The
calculation of the accrual of Original Issue Discount (the difference between
the Issue Price of the Debentures and the principal amount at maturity of a
Debenture) in the period during which a Debenture remains outstanding will be on
a semi-annual bond equivalent basis using a year composed of twelve 30-day
months; such accrual will commence on the Issue Date of the Debentures.
Maturity, conversion, purchase by the Company at the option of a holder or
redemption of a Debenture will cause Original Issue Discount and interest, if
any, to cease to accrue on such Debenture, under the terms and subject to the
conditions of the Indenture. The Company may not reissue a Debenture that has
matured or been converted, purchased by the Company at the option of a holder,
redeemed or otherwise canceled (except for registration of transfer, exchange or
replacement thereof).
The principal amount at maturity of each Debenture will be payable at
the office or agency of the paying agent, initially the Trustee, in the Borough
of Manhattan, The City of New York, or any other office of the paying agent
maintained for such purpose. Debentures may be presented for conversion or
exchange into Common Stock at the office of the conversion agent, and Debentures
in definitive form may be presented for exchange for other Debentures or
registration of transfer at the office of the registrar, each such agent
initially being the Trustee. The Company will not charge a service charge for
any registration of transfer or exchange of Debentures; however, the Company may
require payment by a holder of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection therewith.
FORM, DENOMINATION AND REGISTRATION
The Debentures are issuable in fully registered form, without coupons,
in denominations of $1,000 principal amount and multiples thereof.
Global Debenture; Book-Entry Form. Debentures sold by the Selling
Securityholders pursuant to the Registration Statement of which this Prospectus
forms a part may be represented by a global Debenture (the "Global Debenture").
The Global Debenture will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC") and registered in the name of Cede and
Co. ("Cede") as DTC's nominee. Except as set forth below, the Global Debenture
may be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
-17-
<PAGE> 18
Purchasers of the Debentures may hold their interests in the Global
Debenture directly through DTC if such holder is a participant in DTC, or
indirectly through organizations which are participants in DTC (the
"Participants"). Transfers between Participants will be effected in the ordinary
way in accordance with DTC rules and will be settled in clearing house funds.
The laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests into the Global Debenture to such persons may be limited.
Persons who are not Participants may beneficially own interests in the
Global Debenture held by DTC only though Participants, or certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC, is
the registered owner of the Global Debenture, Cede for all purposes will be
considered the sole holder of the Global Debenture. Except as provided below,
owners of beneficial interests in the Global Debenture will not be entitled to
have certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive registered form, will
not be considered the holders thereof, and will not be entitled to exercise the
rights of holders of the Debentures, including the rights upon any default, in
accordance with applicable DTC procedures.
Payment of Original Issue Discount and interest (if any) on and the
redemption price and the purchase price of the Global Debenture will be made to
Cede, the nominee for DTC, as the registered owner of the Global Debenture by
wire transfer of immediately available funds on the payment date therefor.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Debenture or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment
of interest (if any) on and the redemption price or the purchase price of, the
Global Debenture, DTC 's practice is to credit Participants' accounts on the
payment date therefor with payments in amounts proportionate to their respective
beneficial interests in the principal amount represented by the Global Debenture
as shown on the records of DTC, unless DTC has reason to believe that it will
not receive payment on such payment date. Payments by Participants to owners of
beneficial interests in the principal amount represented by the Global Debenture
held through such Participants will be the responsibility of such Participants,
as is now the case with securities held for the accounts of customers registered
in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the Global
Debenture to pledge such interest to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of physical certificates evidencing such interest.
Neither the Company nor the Trustee (nor any registrar, paying agent
nor conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debentures (including, without limitation, the
presentation of Debentures for exchange as described below), only at the
direction of one or more Participants to whose account with DTC interests in the
Global Debenture are credited, and only in respect of the principal amount of
the Debentures represented by the Global Debenture as to which such Participant
or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to
-18-
<PAGE> 19
the accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations. Certain of such Participants (or their representatives), together
with other entities, own DTC. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through,
or maintain a custodial relationship with, a Participant, either directly or
indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Debenture among Participants, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. If DTC is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will cause the Debentures to be
issued in definitive registered form in exchange for the Global Debenture.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants and Indirect Participants to beneficial
owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices shall be sent to Cede, as nominee of DTC. If less than all of the
Debentures are being redeemed, DTC will reduce the amount of interest of each
Participant in such Debentures in accordance with its procedures.
Certificated Debentures. Holders of Debentures may request that
certificated Debentures be issued in exchange for Debentures represented by the
Global Debenture. Furthermore, certificated Debentures may be issued in exchange
for Debentures represented by the Global Debenture if no successor depositary is
appointed by the Company as set forth above under "Global Debenture, Book-Entry
Form."
CONVERSION OF DEBENTURES
A holder of a Debenture may convert it into Common Stock of the Company
at any time after 90 days following the latest date of original issuance of the
Debentures and prior to maturity, provided that if a Debenture is called for
redemption, the holder may convert it only until the close of business on the
last trading day prior to the Redemption Date unless the Company defaults in the
payment of the redemption price. A Debenture in respect of which a holder has
delivered a Purchase Notice exercising the option of such holder to require the
Company to purchase such Debenture may be converted only if such notice is
withdrawn in accordance with the terms of the Indenture. Similarly, a Debenture
in respect of which a holder is exercising its option to require redemption upon
a Fundamental Change may be converted only if such holder withdraws its election
to exercise its option in accordance with the terms of the Indenture. A holder
may convert such holder's Debentures in part so long as such part is $1,000
principal amount at maturity or a multiple thereof.
The initial Conversion Rate is 13.983 shares of Common Stock per $1,000
principal amount at maturity of Debentures, subject to adjustment upon the
occurrence of certain events, as described below. A holder entitled to a
fractional share of Common Stock shall receive cash equal to the then current
market value of such fractional share.
On conversion of a Debenture, a holder will not receive any cash
payment representing accrued Original Issue Discount. The Company's delivery to
the holder of the fixed number of shares of Common Stock into which the
Debenture is convertible (together with the cash payment, if any, in lieu of
fractional Common Stock) will be deemed to satisfy the Company's obligation to
pay the principal amount of the Debenture including the accrued Original Issue
Discount attributable to the period from the Issue Date to the Conversion Date.
Thus, the accrued Original Issue Discount is deemed to be paid in full rather
than canceled, extinguished or forfeited. The Conversion Rate will not be
adjusted at any time during the term of the Debentures for such accrued Original
Issue Discount.
-19-
<PAGE> 20
To convert a certificated Debenture into Common Stock, a holder must
(i) complete and manually sign the conversion notice on the back of the
Debenture (or complete and manually sign a facsimile thereof) and deliver such
notice to the conversion agent, (ii) surrender the Debenture to the conversion
agent, (iii) if required, furnish appropriate endorsements and transfer
documents, and (iv) if required, pay all transfer or similar taxes. Pursuant to
the Indenture, the date on which all of the foregoing requirements have been
satisfied is the Conversion Date.
The Conversion Rate is subject to adjustment under formulae as set
forth in the Indenture in certain events, including: (i) the issuance of Common
Stock of the Company as a dividend or distribution on the Common Stock; (ii)
certain subdivisions and combinations of the Common Stock; (iii) the issuance to
all holders of Common Stock of certain rights or warrants to purchase Common
Stock; (iv) the distribution to all holders of Common Stock of capital stock
(other than Common Stock) or evidences of indebtedness of the Company or of
assets (including securities; but excluding those rights, warrants, dividends
and distributions referred to above or paid in cash); (v) distributions
consisting of cash, excluding any quarterly cash dividend on the Common Stock to
the extent that the aggregate cash dividend per share of Common Stock in any
quarter does not exceed the greater of (x) the amount per share of Common Stock
of the next preceding quarterly cash dividend on the Common Stock to the extent
that such preceding quarterly dividend did not require an adjustment of the
Conversion Rate pursuant to this clause (v) (as adjusted to reflect subdivisions
or combinations of the Common Stock), and (y) 3.75 percent of the average of the
last reported sales price of the Common Stock during the ten trading days
immediately prior to the date of declaration of such dividend, and excluding any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company; (vi) payment in respect of a tender offer or exchange
offer by the Company or any Subsidiary of the Company for the Common Stock to
the extent that the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the Current Market Price (as defined)
per share of Common Stock on the trading day next succeeding the last date on
which tenders or exchanges may be made pursuant to such tender or exchange
offer; and (vii) payment in respect of a tender offer or exchange offer by a
person other than the Company or any Subsidiary of the Company in which, as of
the closing date of the offer, the Board of Directors is not recommending
rejection of the offer. If an adjustment is required to be made as set forth in
clause (v) above as a result of a distribution that is a quarterly dividend,
such adjustment would be based upon the amount by which such distribution
exceeds the amount of the quarterly cash dividend permitted to be excluded
pursuant to clause (v) above. If an adjustment is required to be made as set
forth in clause (v) above as a result of a distribution that is not a quarterly
dividend, such adjustment would be based upon the full amount of the
distribution. The adjustment referred to in clause (vii) above will only be made
if the tender offer or exchange offer is for an amount that increases the
offeror's ownership of Common Stock to more than 25% of the total shares of
Common Stock outstanding, and if the cash and value of any other consideration
included in such payment per share of Common Stock exceeds the Current Market
Price per share of Common Stock on the business day next succeeding the last
date on which tenders or exchanges may be made pursuant to such tender or
exchange offer. The adjustment referred to in clause (vii) above will generally
not be made, however, if as of the closing of such offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in a consolidation or merger of the Company or a sale of all or
substantially all of the Company's assets. The adjustments to the Conversion
Rate under the formula set forth in the Indenture that are summarized above in
this paragraph are generally designed to increase the Conversion Rate to protect
the holders of Debentures against certain dilutive events, and provide the
holders of Debentures with similar economic treatment as holders of Common
Stock in the event of the occurrence of certain future events.
No adjustment in the Conversion Rate will be required unless such
adjustment would require a change of at least 1% in the rate then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the Conversion Rate will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation or merger involving the Company or a sale or conveyance to another
corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, securities, other property or
assets (including cash) with respect to or in exchange for such Common
-20-
<PAGE> 21
Stock, the holders of the Debentures then outstanding will be entitled
thereafter to convert such Debentures into the kind and amount of shares of
stock, securities or other property or assets (including cash) which they would
have owned or been entitled to receive upon such reclassification,
consolidation, merger, sale or conveyance had such Debentures been converted
immediately prior to such reclassification, consolidation, merger, sale or
conveyance assuming that a holder of Debentures would not have exercised any
rights of election as to the stock, securities or other property or assets
(including cash) receivable in connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring an adjustment to the Conversion Rate, the
holders of Debentures may, in certain circumstances, be deemed to have received
a distribution subject to United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations" below.
The Company from time to time may to the extent permitted by law
increase the Conversion Rate by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such increase,
if the Board of Directors has made a determination that such increase would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such increases in the Conversion Rate, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations."
REDEMPTION OF DEBENTURES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Debentures. Prior to April 21,
2003, the Debentures will not be redeemable at the option of the Company.
Beginning on April 21, 2003, the Company may redeem the Debentures for cash as a
whole at any time, or from time to time in part, upon not less than 30 days' nor
more than 60 days' notice of redemption given by mail to holders of Debentures.
The Debentures will be redeemable in multiples of $1,000 principal amount at
maturity.
The table below shows Redemption Prices of Debentures per $1,000
principal amount at maturity thereof at April 21, 2003 and at each April
thereafter prior to maturity and at maturity on April 21, 2018, which prices
reflect the accrued Original Issue Discount calculated to each such date. The
Redemption Price of a Debenture redeemed between such dates would include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to the actual Redemption Date.
-21-
<PAGE> 22
<TABLE>
<CAPTION>
(2)
Accrued
(1) Original Issue (3)
Debenture Discount at Redemption
Redemption Issue Price 5.50% Price (1) + (2)
- ------------------------------------------------ ------------------- ----------------- -----------------
<S> <C> <C> <C>
April 21, 2003................................. $337.85 $105.30 $443.15
April 21, 2004................................. 337.85 130.00 467.85
April 21, 2005................................. 337.85 156.09 493.94
April 21, 2006................................. 337.85 183.63 521.48
April 21, 2007................................. 337.85 212.71 550.56
April 21, 2008................................. 337.85 243.40 581.25
April 21, 2009................................. 337.85 275.81 613.66
April 21, 2010................................. 337.85 310.02 647.87
April 21, 2011................................. 337.85 346.15 684.00
April 21, 2012................................. 337.85 384.28 722.13
April 21, 2013................................. 337.85 424.55 762.40
April 21, 2014................................. 337.85 467.06 804.91
April 21, 2015................................. 337.85 511.93 849.78
April 21, 2016................................. 337.85 559.32 897.17
April 21, 2017................................. 337.85 609.34 947.19
April 21, 2018................................. 337.85 662.15 1,000.00
</TABLE>
If less than all of the outstanding Debentures held in certificated
form are to be redeemed, the Trustee shall select the Debentures held in such
form to be redeemed in principal amounts at maturity of $1,000 or multiples
thereof by lot, pro rata or by another method the Trustee considers fair and
appropriate (as long as such method is not prohibited by the rules of any stock
exchange on which the Debentures are then listed). If a portion of a holder's
certificated Debentures is selected for partial redemption and such holder
converts a portion of such certificated Debentures, such converted portion shall
be deemed to be the portion selected for redemption. Debentures registered in
the name of DTC or its nominee will be redeemed pro rata as described under "--
Form, Denomination and Registration -- Global Debenture; Book-Entry Form."
REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs at any time prior to April
21, 2018, each holder of Debentures shall have the right, at the holder's
option, to require the Company to redeem any or all of such holder's Debentures
on the date (the "Repurchase Date") that is 45 days after the date of the
Company's notice of such Fundamental Change. The Debentures will be redeemable
in multiples of $1,000 principal amount at maturity.
The Company shall redeem such Debentures at a price (the "Fundamental
Change Redemption Price") equal to the Issue Price plus accrued Original Issue
Discount to the Repurchase Date; provided that if the Applicable Price (as
defined) in connection with the Fundamental Change is less than the Reference
Market Price (as defined), the Company shall redeem such Debentures at a price
equal to the foregoing Fundamental Change
-22-
<PAGE> 23
Redemption Price multiplied by the fraction obtained by dividing the Applicable
Price by the Reference Market Price. The effect of the adjustment to the
redemption price set forth in the previous sentence is to decrease the
redemption price paid to holders of Debentures in a Fundamental Change in which
the Applicable Price is less than the Reference Market Price. The Reference
Market Price is initially $12.58 (equal to two-thirds of the price of the
Company's Common Stock at the time of the initial private placement in April
1998), and is subject to adjustment as set forth below. Such a decrease in the
redemption price would occur if and when a transaction that constituted a
Fundamental Change resulted in the holders of Common Stock receiving an amount
per share in the transaction less than the, for example, initial Reference
Market Price of $12.58. For example, in the event of a Fundamental Change in
which the holders of Common Stock received cash in the amount of $10 per share,
the redemption price of $443.15 in April 20, 2003 would be adjusted to equal
$443.15 x $10/$12.58 = $352.59.
The Company shall mail to all holders of record of the Debentures a
notice of the occurrence of a Fundamental Change and of the redemption right
arising as a result thereof on or before the tenth day after the occurrence of
such Fundamental Change. The Company shall deliver to the Trustee a copy of such
notice. To exercise the redemption right, holders of Debentures must deliver, on
or before the 30th day after the date of the Company's notice of a Fundamental
Change, the Debentures to be so redeemed, duly endorsed for transfer, together
with the form entitled "Option to Elect Redemption Upon a Fundamental Change" on
the reverse thereof duly completed, to the Company (or an agent designated by
the Company for such purpose).
The term "Fundamental Change" means the occurrence of any transaction
or event in connection with which all or substantially all Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all Common
Stock listed (or, upon consummation of or immediately following such transaction
or event, which will be listed) on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices. The
term "Applicable Price" means (i) in the event of a Fundamental Change in which
the holders of the Common Stock receive only cash, the amount of cash received
by the holder of one share of Common Stock and (ii) in the event of any other
Fundamental Change, the average of the reported last sale price for the Common
Stock during the ten trading days prior to the record date for the determination
of the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Fundamental Change, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets in connection
with the Fundamental Change. The term "Reference Market Price" shall initially
mean $12.58 and in the event of any adjustment to the Conversion Rate pursuant
to the provisions of the Indenture, the Reference Market Price shall also be
adjusted so that the Reference Market Price shall be equal to the initial
Reference Market Price multiplied by a fraction the numerator of which is the
Conversion Rate specified on the cover of this Prospectus (without regard to any
adjustment thereto) and the denominator of which is the Conversion Rate
following such adjustment.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the redemption rights of Debenture holders in the event of a
Fundamental Change.
The redemption rights of the holders of Debentures could discourage a
potential acquiror of the Company. The Fundamental Change redemption feature,
however, is not the result of management's knowledge of any specific effort to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions.
The term "Fundamental Change" is limited to certain specified
transactions and may not include other events that might adversely affect the
financial condition of the Company, nor would the requirement that the Company
offer to repurchase the Debentures upon a Fundamental Change necessarily afford
the holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
No Debentures may be redeemed at the option of holders upon a
Fundamental Change if there has occurred and is continuing an Event of Default
described under " -- Events of Default; Notice and Waiver" below (other than a
default in the payment of the Fundamental Change Redemption Price with respect
to such Debentures). In the event of a Fundamental Change and exercise by
holders of the Debentures of their associated rights to require
-23-
<PAGE> 24
the Company to redeem all or a portion of their Debentures, there can be no
assurance that the Company would have sufficient funds to pay the redemption
price for all the Debentures tendered by the holders thereof. Any future credit
agreements or other agreements relating to indebtedness (including Senior
Indebtedness) to which the Company becomes a party may provide that a
Fundamental Change would constitute an event of default thereunder and also
provide that the maturing of any obligation to redeem the Debentures would
constitute an event of default and cause the subordination provisions in the
Indenture to apply, preventing redemption of the Debentures until all Senior
Indebtedness is paid in full. Any such provisions could restrict or prohibit the
redemption of the Debentures. In the event a Fundamental Change occurs at a time
when the Company is prohibited from redeeming the Debentures, the Company could
seek the consent of its then existing lenders to redeem the Debentures or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from redeeming the Debentures. In such case, the
Company's failure to redeem Debentures required to be redeemed under the terms
of the Indenture would constitute an Event of Default under the Indenture and
would likely constitute a default under the terms of any other indebtedness of
the Company outstanding at such time. In such circumstances, or if a Fundamental
Change would in and of itself constitute an event of default under agreements
governing Senior Indebtedness then outstanding, the subordination provisions in
the Indenture would likely prohibit or restrict payments to the holders of
Debentures. As of the date of this Prospectus, a Fundamental Change would not
constitute an event of default under any Senior Indebtedness.
PURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER
On April 21, 2003, April 21, 2008 and April 21, 2013 (each, a "Purchase
Date"), the Company will become obligated to purchase, at the option of the
holder thereof, any outstanding Debenture for which a written Purchase Notice
has been delivered by the holder to the office of the paying agent (initially
the Trustee) at any time from the opening of business on the date that is 20
Business Days (as defined) prior to such Purchase Date until the close of
business on such Purchase Date and for which such Purchase Notice has not been
withdrawn, subject to certain additional conditions.
The Purchase Notice shall state (i) the certificate numbers of the
Debentures to be delivered by the holder thereof for purchase by the Company;
(ii) the portion of the principal amount at maturity of Debentures to be
purchased, which portion must be $1,000 or a multiple thereof; (iii) that such
Debentures are to be purchased by the Company pursuant to the applicable
provisions of the Debentures; and (iv) in the event the Company elects, pursuant
to the Company Notice (as defined), to pay the Purchase Price to be paid as of
such Purchase Date in Common Stock, in whole or in part, but such Purchase Price
is ultimately to be paid to such holder entirely in cash because any of the
conditions to payment of the Purchase Price (or portion thereof) in Common Stock
is not satisfied by the Purchase Date, as described below, whether such holder
elects (x) to withdraw such Purchase Notice as to some or all of the Debentures
to which it relates (stating the principal amount at maturity and certificate
numbers of the Debentures as to which such withdrawal shall relate), or (y) to
receive cash in respect of the entire Purchase Price for all Debentures subject
to such Purchase Notice. If the holder fails to indicate, in the Purchase Notice
and in any written notice of withdrawal relating to such Purchase Notice, such
holder's choice with respect to the election described in clause (iv) above,
such holder shall be deemed to have elected to receive cash in respect of the
entire Purchase Price for all Debentures subject to such Purchase Notice in such
circumstances. For a discussion of the tax treatment of a holder receiving cash
or Common Stock pursuant to its election to tender its Debentures to the Company
on a Purchase Date, see "Certain Federal Income Tax Considerations."
Any Purchase Notice may be withdrawn by the holder by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the Debentures as to which the
withdrawal notice relates and the principal amount at maturity, if any, which
remains subject to the Purchase Notice.
-24-
<PAGE> 25
The Purchase Price payable in respect of a Debenture shall be equal to
the Issue Price plus accrued Original Issue Discount to the Purchase Date. The
table below shows the Purchase Prices of a Debenture as of the specified
Purchase Dates. The Company may elect to pay the Purchase Price payable as of
any Purchase Date in cash or Common Stock or any combination thereof.
<TABLE>
<CAPTION>
Purchase Date Price
- ------------------------------------- --------
<S> <C>
April 21, 2003....................... $443.15
April 21, 2008....................... 581.25
April 21, 2013....................... 762.40
</TABLE>
If the Company elects to pay the Purchase Price, in whole or in part,
in Common Stock, the number of shares to be delivered in respect of the portion
of the Purchase Price to be paid in Common Stock shall be equal to such portion
of the Purchase Price divided by the Market Price (as defined) of the Common
Stock. However, no fractional Common Stock will be delivered upon any purchase
by the Company of Debentures through the delivery of Common Stock in payment, in
whole or in part, of the Purchase Price. Instead, the Company will pay cash
based on the Market Price for all fractional Common Stock.
The Company will give notice (the "Company Notice") not less than 20
Business Days prior to the Purchase Date (the "Company Notice Date") to all
holders at their addresses shown in the register of the registrar (and to
beneficial owners as required by applicable law) stating, among other things,
whether the Company will pay the Purchase Price of the Debentures in cash or
Common Stock, or any combination thereof (specifying the percentage of each)
and, if the Company elects to pay in Common Stock, in whole or in part, the
method of calculating the Market Price of the Common Stock.
The "Market Price" means the average of the Sale Prices (as defined) of
the Common Stock for the five trading day period ending on the third Business
Day prior to the applicable Purchase Date (if the third Business Day prior to
the applicable Purchase Date is a trading day or, if it is not a trading day,
then on the last trading day prior to such third Business Day), appropriately
adjusted to take into account the occurrence during the period commencing on the
first of such trading days during such five trading day period and ending on
such Purchase Date of certain events that would result in an adjustment of the
Conversion Rate under the Indenture with respect to the Common Stock. The "Sale
Price" of the Common Stock on any date means the closing per share sale price
(or if no closing sale price is reported, the average bid and ask prices or, if
more than one in either case, the average of the average bid and average ask
prices) on such date as reported in the composite transactions for the principal
United States securities exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or regional stock
exchange, as reported by the National Association of Securities Dealers
Automated Quotation System. Because the Market Price of the Common Stock is
determined prior to the applicable Purchase Date, holders of Debentures bear the
market risk with respect to the value of the Common Stock to be received from
the date of determination of such Market Price to such Purchase Date. The
Company may elect to pay the Purchase Price in Common Stock only if the
information necessary to calculate the Market Price is reported in a daily
newspaper of national circulation.
Upon determination of the actual number of shares of Common Stock in
accordance with the foregoing provisions, the Company will publish such
determination in a daily newspaper of national circulation.
The Company's right to purchase Debentures with Common Stock is subject
to the satisfaction of various conditions, including: (i) the registration of
the Common Stock under the Securities Act, if required; and (ii) compliance with
other applicable federal and state securities laws, if any. If such conditions
are not satisfied by a Purchase Date, the Company will pay the Purchase Price of
the Debentures to be purchased on such Purchase
-25-
<PAGE> 26
Date entirely in cash. See "Certain Federal Income Tax Considerations." The
Company will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act which may then be applicable and will file a
Schedule 13E-4 or any other schedule required thereunder in connection with any
offer by the Company to purchase Debentures at the option of holders.
Payment of the Purchase Price for a Debenture for which a Purchase
Notice has been delivered and not withdrawn is conditioned upon book-entry
transfer or delivery of such Debenture (together with necessary endorsements) to
the paying agent at its office in the Borough of Manhattan, The City of New
York, or any other office of the paying agent maintained for such purpose, at
any time (whether prior to, on or after the Purchase Date) after delivery of
such Purchase Notice. Payment of the Purchase Price for such Debenture will be
made promptly following the later of the Purchase Date or the time of book-entry
transfer or delivery of such Debenture. If the paying agent holds, in accordance
with the terms of the Indenture, money or securities sufficient to pay the
Purchase Price of such Debenture on the Business Day following the Purchase
Date, then, on and after such date, such Debenture will cease to be outstanding
and Original Issue Discount on such Debenture will cease to accrue whether or
not book-entry transfer of such Debenture is made or such Debenture is delivered
to the paying agent, and all other rights of the holder shall terminate (other
than the right to receive the Purchase Price upon delivery of the Debenture).
No Debentures may be purchased at the option of the holder for cash if
there has occurred (prior to, on or after the giving by the holders of such
Debentures of the required Purchase Notice) and is continuing an Event of
Default described under "Events of Default; Notice and Waiver" below (other than
a default in the payment of the Purchase Price with respect to such Debentures).
If the Company becomes obligated to purchase any outstanding Debenture
on a Purchase Date, there can be no assurance that the Company would have
sufficient funds to pay the Purchase Price on that Purchase Date (in which case,
the Company could be required to issue shares of Common Stock to pay the
Purchase Price at valuations based on then prevailing market prices) for all the
Debentures tendered by the holders thereof. There can be no assurance that any
future credit agreements or other agreements relating to indebtedness (including
Senior Indebtedness) to which the Company becomes a party will not contain
prohibitions on or defaults with respect to the repurchase of the Debentures or
provide that prepayment or redemption would constitute an event of default. In
the event a Purchase Date occurs at a time when the Company is prohibited from
repurchasing the Debentures, the Company could seek the consent of its then
existing lenders to repurchase the Debentures or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company would remain prohibited from
repurchasing the Debentures. The Company's failure to repurchase Debentures
required to be repurchased under the terms of the Indenture would constitute an
Event of Default under the Indenture and would likely constitute a default under
the terms of any other indebtedness of the Company outstanding at such time,
including Senior Indebtedness. In such circumstances, the subordination
provisions in the Indenture would likely prohibit or restrict payments to the
holders of Debentures.
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures is subordinated in right
of payment to the extent provided in the Indenture to the prior payment in full
of all Senior Indebtedness (as defined) of the Company. Upon any distribution of
assets of the Company upon any dissolution, winding up, liquidation or
reorganization (including any of the foregoing as a result of bankruptcy or
moratorium of payment), the payment of the principal amount at maturity, Issue
Price, accrued Original Issue Discount, Redemption Price, Purchase Price,
Fundamental Change Redemption Price and accrued interest, if any (including
liquidated damages, if any) on the Debentures is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full in cash of all Senior Indebtedness. In the event of any acceleration of the
Debentures because of an Event of Default, the holders
-26-
<PAGE> 27
of any Senior Indebtedness then outstanding would be entitled to payment in full
in cash of all obligations in respect of such Senior Indebtedness before the
holders of the Debentures are entitled to receive any payment or distribution in
respect thereof. The Indenture will require that the Company promptly notify
holders of Senior Indebtedness if payment of the Debentures is accelerated
because of an Event of Default.
The Company also may not make any payment upon or in respect of the
Debentures if (i) a default in the payment of the principal of, premium, if any,
interest, rent or other obligations in respect of Senior Indebtedness occurs and
is continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined) that permits holders of the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or other
person permitted to give such notice under the Indenture. Payments on the
Debentures may and shall be resumed (a) in case of a payment default, upon the
date on which such default is cured or waived or ceases to exist and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received (unless the other
subordination provisions of the Indenture otherwise prohibit such payment
(including, without limitation, in the case of a nonpayment default referred to
in clause (b) above, as a result of a payment default with respect to the Senior
Indebtedness as a consequence of the acceleration of the maturity thereof or
otherwise)). No new period of payment blockage may be commenced unless and until
(i) 365 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of the principal amount
at maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Purchase Price, Fundamental Change Redemption Price and accrued interest, if any
(including liquidated damages, if any) on the Debentures that have come due have
been paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Debentures, or expressly provides that such
Indebtedness is "pari passu" or "junior" to the Debentures. Notwithstanding the
foregoing, Senior Indebtedness shall not include any Indebtedness of the Company
to any subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company or the Company's obligations under
its guarantee of the 3.25% Convertible Subordinated Guaranteed Step-Up Notes due
2002 issued by its subsidiary Atmel, S.A.
The term "Indebtedness" means, with respect to the Company, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of the Company for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of the Company or to only a portion
thereof) (other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services), (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of the Company with respect to letters of
credit, bank guarantees or bankers' acceptances, (c) all obligations and
liabilities (contingent or otherwise) in respect of leases of the Company
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on
-27-
<PAGE> 28
the balance sheet of the Company and all obligations and other liabilities
(contingent or otherwise) under any lease or related document (including a
purchase agreement) in connection with the lease of real property which provides
that the Company is contractually obligated to purchase or cause a third party
to purchase the leased property and thereby guarantee a minimum residual value
of the leased property to the landlord and the obligations of the Company under
such lease or related document to purchase or to cause a third party to purchase
such leased property, (d) all obligations of the Company (contingent or
otherwise) with respect to an interest rate or other swap, cap or collar
agreement or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement, (e) all direct or
indirect guaranties or similar agreements by the Company in respect of, and
obligations or liabilities (contingent or otherwise) of the Company to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (d), (f) any indebtedness or other obligations described
in clauses (a) through (d) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by the Company,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by the Company and (g) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
By reason of the subordination provisions described above, in the event
of the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and holders of the Debentures may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Event of Default under the
Indenture.
In the event that, notwithstanding the foregoing, the Trustee or any
holder of Debentures receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Debentures before
all Senior Indebtedness is paid in full in cash, then such payment or
distribution will be held by the recipient in trust for the benefit of holders
of Senior Indebtedness or their representative or representatives to the extent
necessary to make payment in full in cash or other payment satisfactory to
holders of Senior Indebtedness of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Indebtedness.
Since a substantial portion of the operations of the Company are
conducted through its subsidiaries, the cash flow and the consequent ability to
service debt, including the Debentures, are partially dependent upon the
earnings of its subsidiaries and the distribution of those earnings, or upon
loans or other payments of funds by those subsidiaries, to the Company. Such
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debentures or to
make any funds available therefor, whether by dividends, distributions, loans or
other payments. In addition, the payment of dividends or distributions and the
making of loans and advances to the Company by any such subsidiaries could be
subject to statutory or contractual restrictions, could be contingent upon the
earnings of those subsidiaries and are subject to various business
considerations. Any right of the Company to receive any assets of any of its
subsidiaries upon their liquidation or reorganization will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such
-28-
<PAGE> 29
subsidiary, in which case the claims of the Company would still be subordinate
to any security interest in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
As of March 31, 1999, the Company had approximately $538.7 million of
indebtedness outstanding that constituted Senior Indebtedness. As of March 31,
1999, the Company's subsidiaries had approximately $439.9 million of
indebtedness and other liabilities (excluding intercompany liabilities and
liabilities of a type not required to be reflected as a liability on the balance
sheet of such subsidiaries in accordance with generally accepted accounting
principles) as to which the Company's obligations pursuant to the Debentures
would have been effectively subordinated. As of March 31, 1999, the Company had
approximately $659.0 million of Indebtedness and no Designated Senior
Indebtedness outstanding. The Indenture does not prohibit or limit the
incurrence of Senior Indebtedness or the incurrence of other indebtedness and
other liabilities by the Company or its subsidiaries, and the incurrence of any
such additional indebtedness and other liabilities could adversely affect the
Company's ability to perform its obligations pursuant to the Debentures. The
Company expects from time to time to incur additional indebtedness, including
Senior Indebtedness, and that it and its subsidiaries will from time to time
incur additional indebtedness and other liabilities.
The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against any losses, liabilities or expenses
incurred by it in connection with its duties relating to the Debentures. The
Trustee's claims for such payments will be senior to those of holders of the
Debentures in respect of all funds collected or held by the Trustee.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein
shall have happened and be continuing, either the Trustee or the holders of not
less than 25% in aggregate principal amount at maturity of the Debentures then
outstanding may declare the Issue Price of the Debentures plus the Original
Issue Discount on the Debentures and any liquidated damages under the
Registration Rights Agreement accrued to the date of such declaration to be
immediately due and payable. In the case of certain events of bankruptcy or
insolvency, the Issue Price of the Debentures plus the Original Issue Discount
accrued thereon to the occurrence of such event shall automatically become and
be immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount at maturity of the outstanding Debentures
may rescind any such acceleration with respect to the Debentures and its
consequences. Interest shall accrue at the rate of 5.50% per annum and be
payable on demand upon a default in the payment of the Issue Price, accrued
Original Issue Discount, accrued liquidated damages, if any, or any Redemption
Price, Purchase Price or Fundamental Change Redemption Price to the extent that
payment of such interest shall be legally enforceable.
Under the Indenture, Events of Default are defined as: (i) default in
payment of the principal amount at maturity, Issue Price, accrued Original Issue
Discount, accrued liquidated damages, if any, Redemption Price, Purchase Price
or Fundamental Change Redemption Price with respect to any Debenture when such
becomes due and payable (whether or not payment is prohibited by the provisions
of the Indenture), provided that in the case of any failure to pay liquidated
damages, such failure continues for a period of 30 days; (ii) failure by the
Company to comply with any of its other agreements in the Debentures or the
Indenture upon the receipt by the Company of notice of such default by the
Trustee or by holders of not less than 25% in aggregate principal amount at
maturity of the Debentures then outstanding and the Company's failure to cure
such default within 60 days after receipt by the Company of such notice; or
(iii) certain events of bankruptcy or insolvency.
The Trustee shall give notice to holders of the Debentures of any
continuing Event of Default known to the Trustee within 90 days after the
occurrence thereof, provided that the Trustee may withhold such notice if it
determines in good faith that withholding the notice is in the interests of the
holders.
-29-
<PAGE> 30
The holders of a majority in aggregate principal amount at maturity of
the outstanding Debentures may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee; provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other limitations.
Before proceeding to exercise any right or power under the Indenture at the
direction of such holders, the Trustee shall be entitled to receive from such
holders reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction. No holder of any Debenture will have any right to pursue any
remedy with respect to the Indenture or the Debentures, unless (i) such holder
shall have previously given the Trustee written notice of a continuing Event of
Default; (ii) the holders of at least 25% in aggregate principal amount at
maturity of the outstanding Debentures shall have made a written request to the
Trustee to pursue such remedy; (iii) such holder or holders have offered to the
Trustee reasonable indemnity satisfactory to the Trustee; (iv) the holders of a
majority in aggregate principal amount at maturity of the outstanding Debentures
have not given the Trustee a direction inconsistent with such request within 60
days after receipt of such request; and (v) the Trustee shall have failed to
comply with the request within such 60-day period.
However, the right of any holder (x) to receive payment of the
principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Purchase Price, Fundamental Change Redemption Price and any
interest in respect of a default in the payment of any such amounts on a
Debenture, on or after the due date expressed in such Debenture, (y) to
institute suit for the enforcement of any such payments or conversion or (z) to
convert Debentures shall not be impaired or adversely affected without such
holder's consent. The holders of at least a majority in aggregate principal
amount at maturity of the outstanding Debentures may waive an existing Event of
Default and its consequences, other than (i) any default in any payment on the
Debentures, (ii) any default with respect to the conversion rights of the
Debentures or (iii) any default in respect of certain covenants or provisions in
the Indenture which may not be modified without the consent of the holder of
each Debenture as described in "Modification" below. The Company will be
required to furnish to the Trustee annually a statement as to any default by the
Company in the performance and observance of its obligations under the
Indenture.
REGISTRATION RIGHTS
The Company entered into a registration rights agreement, dated April
21, 1998, with the initial purchaser in the initial private placement (the
"Registration Rights Agreement") pursuant to which the Company, at its expense,
will, for the benefit of the holders, file with the Commission the Shelf
Registration Statement covering resale of the Registrable Securities as soon as
practicable, but in any event within 90 days after the first date of original
issuance of the Debentures. The Company will use its best efforts to cause the
Shelf Registration Statement to become effective as promptly as is practicable,
but in any event within 180 days of such first date of original issuance and to
keep the Shelf Registration Statement effective until the earlier of (i) the
sale pursuant to the Shelf Registration Statement of all the securities
registered thereunder and (ii) the expiration of the holding period applicable
to such securities held by persons that are not affiliates of the Company under
Rule 144(k) under the Securities Act, or any successor provision, subject to
certain permitted exceptions. The Company will be permitted to suspend the use
of the prospectus that is a part of the Shelf Registration Statement under
certain circumstances relating to pending corporate developments, public filings
with the Commission and similar events for a period not to exceed 30 days in any
three-month period or not to exceed an aggregate of 90 days in any 12-month
period; provided, however, that the Company will be permitted to suspend the use
of the prospectus for a period not to exceed 60 days in any 3-month period or 90
days in any 12-month period under certain circumstances relating to probable
acquisitions, acquisitions, financings or similar transactions. The Company has
agreed to pay predetermined liquidated damages as described herein ("Liquidated
Damages") to holders of Debentures and holders of Conversion Shares if the Shelf
Registration Statement is not timely filed or made effective or if the
prospectus is unavailable for periods in excess of those permitted above. Such
Liquidated Damages shall accrue until such failure to file or become effective
or unavailability is cured, (i) in respect of any Debenture, at a rate per annum
equal to 0.25% for the first 90 day period after the occurrence of such event
and 0.5% thereafter of the
-30-
<PAGE> 31
Applicable Principal Amount (as defined) at maturity thereof and, (ii) in
respect of any shares of Common Stock, at a rate per annum equal to 0.25% for
the first 90 day period and 0.5% thereafter of the then Applicable Conversion
Price (as defined). A holder who sells Debentures and Conversion Shares pursuant
to the Shelf Registration Statement generally will be required to be named as a
selling stockholder in the related prospectus, deliver a prospectus to
purchasers of such Debentures and/or Conversion Shares and be bound by certain
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification provisions). The Company will pay all
expenses of the Shelf Registration Statement, provide to each registered holder
copies of such prospectus, notify each registered holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit, subject to the foregoing, unrestricted resales of the
Debentures and the Conversion Shares. The plan of distribution of the Shelf
Registration Statement will permit resales of Registrable Securities by selling
security holders through brokers and dealers. The term "Applicable Principal
Amount" means, as of any date of determination, with respect to each $1,000
principal amount at maturity of Debentures, the sum of the initial issue price
of such Debenture ($337.85) plus accrued Original Issue Discount with respect to
such Debenture through such date of determination or, if no Debentures are then
outstanding, such sum calculated as if such Debentures were then outstanding.
The term "Applicable Conversion Price" means, as of any date of determination,
the Applicable Principal Amount per $1,000 principal amount at maturity of
Debentures as of such date of determination divided by the Conversion Rate in
effect as of such date of determination or, if no Debentures are then
outstanding, the Conversion Rate that would be in effect were Debentures then
outstanding.
The summary herein of certain provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to another person, unless, among other items, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) such successor person assumes all obligations of the Company under the
Debentures and the Indenture and (iii) the Company or such successor person
shall not immediately thereafter be in default under the Indenture. Upon the
assumption of the Company's obligations by such person in such circumstances,
subject to certain exceptions, the Company shall be discharged from all
obligations under the Debentures and the Indenture. Certain such transactions
which would constitute a Fundamental Change would permit each holder to require
the Company to redeem the Debentures of such holder as described under
"Redemption at Option of the Holder Upon a Fundamental Change."
MODIFICATION
Modification and amendment of the Indenture or the Debentures may be
effected by the Company and the Trustee with the consent of the holders of not
less than a majority in aggregate principal amount at maturity of the Debentures
then outstanding. Notwithstanding the foregoing, no such amendment may, without
the consent of each holder affected thereby: (i) reduce the principal amount at
maturity, Issue Price, Purchase Price, Fundamental Change Redemption Price or
Redemption Price, or extend the stated maturity of any Debenture or alter the
manner or rate of accrual of Original Issue Discount or interest, or make any
Debenture payable in money or securities other than that stated in the
Debenture; (ii) make any change to the principal amount at maturity of
Debentures whose holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to such amendments or
waivers; (iii) make any change that adversely affects the right to convert any
Debenture or the right to require the Company to purchase a Debenture or the
right to require the Company to redeem a Debenture upon a Fundamental Change;
(iv) modify the provisions of the Indenture relating to the
-31-
<PAGE> 32
subordination of the Debentures in a manner adverse to the holders of the
Debentures in any material respect; or (v) impair the right to institute suit
for the enforcement of any payment with respect to, or conversion of, the
Debentures. The Indenture also provides for certain modifications of its terms
without the consent of the holders. No amendment may be made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding, unless the holders of such
Senior Indebtedness (as required pursuant to the terms of such Senior
Indebtedness) consent to such change.
TAXATION OF DEBENTURES
See "Certain Federal Income Tax Considerations" for a discussion of
certain tax considerations relevant to a holder of Debentures.
INFORMATION CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., as Trustee
under the Indenture, has been appointed by the Company as paying agent,
conversion agent, registrar and custodian with regard to the Debentures.
DEFINITION OF CERTAIN TERMS
"Business Day" means each day of the year on which banking institutions
are not required or authorized to close in The City of New York or the city in
which the Corporate Trust Office is located.
"Conversion Agent" means an office or agency where Debentures may be
presented for conversion into Common Stock.
"Corporate Trust Office" or other similar term, shall mean the principal
office of the Trustee at which at any particular time its corporate trust
business shall be principally administered, which office is, at the date as of
which this Indenture is dated, located at 633 West 5th Street, 12th Floor, Los
Angeles, California 90071, Attention: Corporate Trust Department (Atmel
Corporation, Zero Coupon Convertible Subordinated Debentures due 2018).
"Current Market Price" per share of the Common Stock on any date of
determination means the average of the daily closing prices of the Common Stock
on the Nasdaq National Market for the 5 consecutive trading days ending on and
including such date of determination. The last reported sale price for each day
shall be (i) if the Common Stock is listed on the Nasdaq National Market, the
last reported sale price of Common Stock on the Nasdaq National Market, or any
similar system of automated dissemination of quotations of securities prices
then in common use, if so quoted, (ii) if the Common Stock is not listed or
admitted for trading as described in clause (i), the last reported sale price of
the Common Stock on the NYSE or if the Common Stock is listed or admitted for
trading on any other national securities exchange, the last sale price, or the
closing bid price if no sale occurred, of the Common Stock on the principal
securities exchange on which the Common Stock is listed, or (iii) if not quoted
or listed as described in clauses (i) or (ii), the mean between the high bid and
low asked quotations for Common Stock as reported by the National Quotation
Bureau Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least 5 of the 10 preceding
Trading Days. If none of the conditions set forth above is met, the last
reported sale price of Common Stock on any day or the average of such last
reported sale prices for any period shall be the fair market value of the Common
Stock as determined by a member firm of the NYSE selected by the Company.
"Depositary" means, with respect to the Debentures issuable or issued in
whole or in part in global form, the Depository Trust Company with respect to
the Debentures, until a successor shall have been appointed and become such
pursuant to the applicable provisions of this Indenture, and thereafter,
"Depositary" shall mean or include such successor.
"Holder" or "Securityholder" means a Person in whose name a Debenture is
registered on the Registrar's books.
"Paying Agent" means an office or agency where Debentures may be
presented for purchase or payment.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Principal" or "Principal Amount" of a Debenture means the principal
amount as set forth on the face of the Debenture.
"Purchase Notice" means a written notice delivered to the Paying Agent
by the Holder.
"Registrable Securities" means the Debentures and the Conversion Shares,
until such securities have been converted or exchanged, and, at all times
subsequent to any such conversion or exchange, any securities into or for which
such securities have been converted or exchanged, and any security issued with
respect thereto upon any stock dividend, split or similar event until, in the
case of any such security, (A) the earliest of (i) its effective registration
under the Securities Act and resale in accordance with the Registration
Statement covering it, (ii) expiration of the holding period that would be
applicable thereto under Rule 144(k) were it not held by an Affiliate of the
Company or (iii) its sale to the public pursuant to Rule 144, and (B) as a
result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legends with respect to transfer restrictions required
under the Indenture are removed or removable in accordance with the terms of the
Indenture.
"Significant Subsidiary" means, with respect to any Person, a Subsidiary
of such Person organized under the laws of the United States of America, any
state thereof, or the District of Columbia that would constitute a "significant
subsidiary" as such term is defined under Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or managing
general partner of which is such Person or a subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
subsidiaries of such Person (or any combination thereof).
"Trading Day" means a day during which trading in securities generally
occurs on the Nasdaq National Market or, if the applicable security is not
quoted on the Nasdaq National Market, on the NYSE, or if the applicable security
is not listed on the NYSE, on the principal other national or regional
securities exchange on which the applicable security is then listed or, if the
applicable security is not listed on a national or regional securities exchange,
on the principal other market on which the applicable security is then traded.
-32-
<PAGE> 33
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal
income tax considerations relating to the purchase, ownership and disposition of
the Debentures and Common Stock to U.S. Holders (as defined below), and certain
material U.S. federal income and estate tax consequences relating to the
purchase, ownership and disposition of the Debentures and Common Stock to
Non-U.S. Holders (as defined below), but does not purport to be a complete
analysis of all the potential tax considerations relating thereto. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations, and judicial decisions and
administrative interpretations thereunder, as of the date hereof, all of which
are subject to change, possibly with retroactive effect, or different
interpretations. There can be no assurance that the Internal Revenue Service
(the "IRS") will not challenge one or more of the tax results described herein,
and the Company has not obtained, nor does it intend to obtain, a ruling from
the IRS or an opinion of counsel with respect to the U.S. federal tax
consequences of acquiring or holding Debentures or Common Stock.
This discussion does not purport to address all tax considerations that
may be important to a particular holder in light of the holder's circumstances
(such as the alternative minimum tax provisions of the Code), or to certain
categories of investors (such as certain financial institutions, insurance
companies, tax-exempt organizations, dealers in securities, or persons who hold
Debentures or Common Stock as part of a hedge, conversion or constructive sale
transaction, or straddle or other risk reduction transaction) that may be
subject to special rules. This discussion is limited to holders of Debentures
who hold the Debentures and any Common Stock into which the Debentures are
converted as capital assets. This discussion also does not address the tax
consequences arising under the laws of any foreign, state or local jurisdiction.
PERSONS CONSIDERING THE PURCHASE OF A DEBENTURE SHOULD CONSULT THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING,
HOLDING, CONVERTING OR OTHERWISE DISPOSING OF THE DEBENTURES AND COMMON STOCK,
INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX LAWS.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of a Debenture or
Common Stock that is for U.S. federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate, the income of which is subject
to United States federal income taxation regardless of its source, or (iv) a
trust, the administration of which is subject to the primary supervision of a
court within the United States and which has one or more United States persons
with authority to control all substantial decisions. As used herein, the term
Non-U.S. Holder means a holder of a Debenture or Common Stock that is not a U.S.
Holder.
Original Issue Discount on the Debentures. The Debentures were issued
at a substantial discount from their stated redemption price at maturity. For
federal income tax purposes, the excess of the stated redemption price at
maturity of each Debenture over its issue price constitutes original issue
discount ("Original Issue Discount"). The issue price of the Debentures is equal
to the initial price at which a substantial amount of the Debentures were sold
(not including sales to underwriters or placement agents, including the Initial
Purchaser). U.S. Holders of the Debentures will be required to include Original
Issue Discount in income as it accrues, in accordance with the constant yield
method described below, before receipt of the cash attributable to such income,
regardless of such U.S. Holder's regular method of accounting for U.S. federal
income tax purposes. A U.S. Holder of a Debenture must include in gross income
for U.S. federal income tax purposes the sum of the daily portions of Original
Issue Discount with respect to the Debenture for each day during the taxable
year or portion of a taxable year on which such U.S. Holder holds the Debenture.
The daily portion is determined by allocating to each day of each accrual period
a pro rata portion of an amount equal to the adjusted issue price of the
Debenture
-33-
<PAGE> 34
at the beginning of the accrual period multiplied by the yield to maturity of
the Debenture (determined by compounding at the close of each accrual period and
adjusted for the length of the accrual period). The adjusted issue price of a
Debenture at the start of any accrual period will be the issue price of the
Debenture increased by the accrued Original Issue Discount for each prior
accrual period. Under these rules, U.S. Holders will have to include in gross
income increasingly greater amounts of Original Issue Discount in each
successive accrual period. A U.S. Holder's original tax basis for determining
gain or loss on the sale or other disposition of a Debenture will be increased
by any accrued Original Issue Discount includible in such U.S. Holder's gross
income.
There are several circumstances under which the Company could make a
payment on a Debenture which would affect the yield to maturity of a Debenture,
including (as described under "Description of Debentures") the payment of
Liquidated Damages due to the failure to effect the Shelf Registration
Statement, or certain redemptions or repurchases of Debentures. According to
Treasury Regulations, the possibility of a change in the yield will not be
treated as affecting the amount of Original Issue Discount required to be
realized by a holder (or the timing of such recognition) if the likelihood of
the change, as of the date the debt obligations are issued, is remote. The
Company intends to report on the basis that the likelihood of any change in the
yield on the Notes is remote. The Company also intends to report on the basis
that there is no alternative payment schedule that would minimize the yield on
the Debentures to the Company.
Market Discount. Any principal payment or gain realized by a U.S.
Holder on disposition or retirement of a Debenture will be treated as ordinary
income to the extent that there is accrued market discount on the Debenture. The
amount of market discount on a Debenture for a holder will equal the excess of
the adjusted issue price of such Debenture over the initial tax basis of such
Debentures in the hands of such holder. To the extent a holder exchanges or
converts a Debenture into Common Stock in a transaction that is otherwise tax
free, any accrued market discount will carry over and generally be recognized
upon a disposition of the Common Stock. Unless a U.S. Holder irrevocably elects
to accrue market discount under a constant-interest method, accrued market
discount is the total market discount multiplied by a fraction, the numerator of
which is the number of days the U.S. Holder has held the obligation and the
denominator of which is the number of days from the date the holder acquired the
obligation until its maturity. A U.S. Holder may be required to defer a portion
of its interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry a Debenture purchased with market
discount. Any such deferred interest expense would not exceed the market
discount that accrues during such taxable year and is, in general, allowed as a
deduction not later than the year in which such market discount is includable in
income. If the holder elects to include market discount in income currently as
it accrues on all market discount instruments acquired by the U.S. Holder in
that taxable year or thereafter, (i) the interest deferral described above will
not apply and (ii) market discount will not carry over into Common Stock as
described above. Any such election is terminable only with the consent of the
IRS and applies to all market discount bonds acquired during or after the year
for which it is made.
Acquisition Premium. A U.S. Holder will be considered to have
"acquisition premium" to the extent the U.S. Holder's initial tax basis in a
Debenture is greater than (x) the adjusted issue price of such Debenture but
less than (y) the stated redemption price at maturity of such Debenture.
Acquisition premium may offset the amount of Original Issue Discount received on
such Debenture that the U.S. Holder is required to include in income.
Amortizable Bond Premium. If a U.S. Holder's initial tax basis in a
Debenture (less an amount attributable to the conversion feature of the
Debenture) is greater than the stated redemption price at maturity, such U.S.
Holder generally will not be required to include Original Issue Discount in
income.
Sale, Exchange or Retirement of the Debentures. Upon the sale, exchange
or retirement of a Debenture, including as a result of a tender upon the
occurrence of a Fundamental Change, and, except as discussed in the next
paragraph on a Purchase Date, a holder will recognize gain or loss equal to the
difference between the sale or redemption proceeds and the U.S. Holder's
adjusted tax basis in the Debenture.
-34-
<PAGE> 35
If a U.S. Holder elects to exercise its option to tender the Debentures
to the Company on a Purchase Date and the Company issues Common Stock in
satisfaction of all or part of the Purchase Price, the exchange of the
Debentures for Common Stock should qualify as a reorganization for federal
income tax purposes. Thus, if the Purchase Price is paid solely in Common Stock,
except to the extent the Common Stock is considered attributable to Original
Issue Discount not previously included in income (which is taxable as ordinary
income), or in the case of a fractional share described below, a U.S. Holder
should not be required to recognize any gain and would not be permitted to
recognize any loss. If the Purchase Price is paid in a combination of Common
Stock and cash (other than cash received in lieu of a fractional share), gain
(but not loss) realized by the U.S. Holder would be recognized, but only to the
extent of the cash received. A U.S. Holder's initial tax basis in the Common
Stock received would be equal to such U.S. Holder's adjusted tax basis in the
Debenture tendered (except for any portion allocable to a fractional share of
Common Stock), increased by the amount of gain recognized (other than with
respect to a fractional share) and decreased by the amount of any cash received
(except cash received in lieu of a fractional share). The holding period for
Common Stock received in the exchange would include the holding period of the
Debenture tendered to the Company in exchange therefor. The receipt of cash in
lieu of a fractional share of Common Stock should generally result in capital
gain or loss, measured by the difference between the amount of cash received for
the fractional share and the U.S. Holder's tax basis in the fractional share
interest.
A holder's adjusted tax basis in a Debenture will generally equal the
holder's cost of the Debenture increased by any original issue discount and
accrued market discount previously included in income by such holder with
respect to such Debenture and decreased by any payments received thereon. Except
to the extent of any accrued market discount, gain or loss realized on the sale,
exchange or retirement of a Debenture will generally be capital gain or loss and
will be long-term capital gain or loss if the Debenture is held for more than
one year. For individual U.S. Holders, the maximum rate of United States federal
income tax generally is 28% if the Debenture disposed of is held for more than
one year but not more than 18 months, and the maximum rate is 20% if the
Debenture disposed of is held more than 18 months.
Conversion of Debentures. A U.S. Holder's conversion of a Debenture
into Common Stock will generally not be a taxable event (except to the extent
the Common Stock is considered attributable to Original Issue Discount not
previously included in income (which is taxable as ordinary income), or with
respect to cash received in lieu of a fractional share). A U.S. Holder's basis
in the Common Stock received on conversion of a Debenture will be the same as
the U.S. Holder's basis in the Debenture at the time of conversion (exclusive of
any tax basis allocable to a fractional share), and the holding period for the
Common Stock received on conversion will include the holding period of the
Debenture converted. The receipt of cash in lieu of fractional Common Stock
should generally result in capital gain or loss (measured by the difference
between the cash received for the fractional share interest and the U.S.
Holder's tax basis in the fractional share interest).
Dividends; Adjustment of Conversion Price. Dividends, if any, paid on
the Common Stock generally will be includable in the income of a U.S. Holder as
ordinary income to the extent of the U.S. Holder's ratable share of the
Company's current or accumulated earnings and profits.
If at any time the Company makes a distribution of property to
shareholders that would be taxable to such shareholders as a dividend for
federal income tax purposes (for example, distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the Conversion Rate of the Debentures is increased,
such increase may be deemed to be the payment of a taxable dividend to U.S.
Holders of Debentures. If the Conversion Rate is increased at the discretion of
the Company or in certain other circumstances, such increase also may be deemed
to be the payment of a taxable dividend to U.S. Holders of Debentures.
Sale of Common Stock. Upon the sale or exchange of Common Stock, U.S.
Holders generally will recognize capital gain or capital loss (except to the
extent of any accrued market discount not previously included
-35-
<PAGE> 36
in income) equal to the difference between the amount realized on such sale or
exchange and the holder's adjusted tax basis in such shares. For individual U.S.
Holders, the maximum rate of United States federal income tax generally is 28%
if the Common Stock disposed of is held for more than one year but not more than
18 months, and the maximum rate is 20% if the Common Stock disposed of is held
more than 18 months.
NON-U.S. HOLDERS
The following discussion is a summary of the principal United States
federal income and estate tax consequences resulting from the ownership of the
Debentures or Common Stock by Non-U.S. Holders.
Withholding Tax on Payments of Principal and Original Issue Discount on
Debentures. The payment of principal (including any Original Issue Discount
included therein) of a Debenture by the Company or any paying agent of the
Company to any Non-U.S. Holder will not be subject to United States federal
withholding tax, provided that in the case of the payment of cash in respect of
Original Issue Discount (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company, (ii) the Non-U.S. Holder is not a controlled foreign
corporation that is related to the Company within the meaning of the Code and,
(iii) either (A) the beneficial owner of the Debenture certifies to the
applicable payor or its agent, under penalties of perjury, that it is not a U.S.
Holder and provides its name and address on United States Treasury Form W-8 (or
a suitable substitute form), or (B) a securities clearing organization, bank or
other financial institution, that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the
Debenture, certifies under penalties of perjury that such a Form W-8 (or
suitable substitute form) has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof. Except to the extent otherwise provided under an
applicable tax treaty, a Non-U.S. Holder generally will be taxed in the same
manner as a U.S. Holder with respect to Original Issue Discount on a Debenture
if such Original Issue Discount is effectively connected with a U.S. trade or
business of the Non-U.S. Holder. Effectively connected Original Issue Discount
received by a corporate Non- U.S. Holder may also, under certain circumstances,
be subject to an additional "branch profits tax" at a 30% rate (or, if
applicable, a lower treaty rate). Such effectively connected Original Issue
Discount will not be subject to withholding tax if the holder delivers an IRS
Form 4224 (and, beginning January 1, 2000, a Form W-8) to the payor.
Dividends. Dividends, if any, paid on the Common Stock to a Non-U.S.
Holder generally will be subject to a 30% United States federal withholding tax,
subject to reduction for Non-U.S. Holders eligible for the benefits of certain
income tax treaties. Currently, for purposes of determining whether tax is to be
withheld at the 30% rate or at a reduced treaty rate, the Company will
ordinarily presume that dividends paid to an address in a foreign country are
paid to a resident of such country absent knowledge that such presumption is not
warranted. Under Treasury Regulations effective for payments after December 31,
1999, holders will be required to satisfy certain applicable certification
requirements to claim treaty benefits. Except to the extent otherwise provided
under an applicable tax treaty, a Non-U.S. Holder generally will be taxed in the
same manner as a U.S. Holder on dividends paid (or deemed paid) that are
effectively connected with the conduct of a trade or business in the U.S. by the
Non- U.S. Holder. If such Non-U.S. Holder is a foreign corporation, it may also
be subject to a United States branch profits tax on such effectively connected
income at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.
Gain on Disposition of the Debentures and Common Stock. A Non-U.S.
Holder generally will not be subject to United States federal income tax on gain
realized on the sale, exchange or redemption of a Debenture, including the
exchange of a Debenture for Common Stock, or the sale or exchange of Common
Stock unless (i) in the case of an individual Non-U.S. Holder, such holder is
present in the United States for 183 days or more in the year of such sale,
exchange or redemption and either (A) has a "tax home" in the United States and
certain other requirements are met, or (B) the gain from the disposition is
attributable to an office or other fixed place of
-36-
<PAGE> 37
business in the United States, (ii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates, (iii) the gain is effectively connected with the conduct of a
United States trade or business of the Non-U.S. Holder, or (iv) in the case of
the disposition of Common Stock, the Company is a U.S. real property holding
corporation. The Company does not believe that it is currently a "United States
real property holding corporation" or that it will become one in the future.
U.S. Federal Estate Tax. A Debenture held by an individual who at the
time of death is not a citizen or resident of the United States (as specially
defined for United States federal estate tax purposes) will not be subject to
United States federal estate tax if the individual did not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company and, at the time of the individual's death, payments
with respect to such Debenture would not have been effectively connected with
the conduct by such individual of a trade or business in the United States.
Common Stock held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for United States federal
estate tax purposes) will be included in such individual's estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty otherwise
applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders. Information reporting will apply to payments of interest
or dividends on or the proceeds of the sale or other disposition of the
Debentures or shares of Common Stock made by the Company with respect to certain
noncorporate U.S. Holders, and backup withholding at a rate of 31% may apply
unless the recipient of such payment supplies a taxpayer identification number,
certified under penalties of perjury, as well as certain other information or
otherwise establishes an exemption from backup withholding. Any amount withheld
under the backup withholding rules is allowable as a credit against the U.S.
Holder's federal income tax, provided that the required information is provided
to the IRS.
Non-U.S. Holders. The Company must report annually to the IRS and to
each Non-U.S. Holder the amount of any dividends paid to, and the tax withheld
with respect to, such holder, regardless of whether any tax was actually
withheld. Copies of these information returns may also be made available under
the provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments of principal, including cash payments in
respect of Original Issue Discount, on the Debentures by the Company or any
agent thereof to a Non-U.S. Holder if the Non-U.S. Holder certifies as to its
Non-U.S. Holder status under penalties of perjury or otherwise establishes an
exemption (provided that neither the Company nor its agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemptions
are not in fact satisfied). The payment of the proceeds on the disposition of
Debentures or shares of Common Stock to or through the United States office of a
United States or foreign broker will be subject to information reporting and
backup withholding unless the owner provides the certification described above
or otherwise establishes an exemption. The proceeds of the disposition by a
Non-U.S. Holder of Debentures or shares of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding or information
reporting. However, if such broker is a U.S. person, a controlled foreign
corporation for United States tax purposes, or a foreign person, 50% or more of
whose gross income from all sources for certain periods is from activities that
are effectively connected with a U.S. trade or business, information reporting
requirements will apply unless such broker has documentary evidence in its files
of the holder's Non-U.S. status and has no actual knowledge to the contrary or
unless the holder otherwise establishes an exemption. Any amount withheld under
the backup withholding rules is allowable as a credit against the Non-U.S.
Holder's federal income tax, provided that the required information is provided
to the IRS. Recently finalized Treasury Regulations would modify the application
of information reporting requirements and the back-up withholding tax to
Non-U.S. Holders effective January 1, 2000.
-37-
<PAGE> 38
SELLING SECURITYHOLDERS
The Debentures were originally issued by the Company in a private
placement and were resold by the initial purchaser thereof to qualified
institutional buyers (within the meaning of Rule 144A under the Securities Act).
The Debentures and the Conversion Shares that may be offered pursuant to this
Prospectus will be offered by the Selling Securityholders. The following table
sets forth certain information concerning the principal amount at maturity of
Debentures beneficially owned by each Selling Securityholder and the number of
Conversion Shares that may be offered from time to time pursuant to this
Prospectus.
From time to time, Deutsche Bank Securities Inc. or its affiliates,
have provided, and may continue to provide, investment banking services to the
Company, for which they received or will receive customary fees. None of the
Selling Securityholders has had any position, office or other material
relationship with the Company or its affiliates within the past three years.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT AT
MATURITY OF NUMBER OF
DEBENTURES CONVERSION
BENEFICIALLY PERCENTAGE OF SHARES THAT AMOUNT OF
OWNED THAT DEBENTURES MAY BE COMMON STOCK
NAME OF SELLING SECURITYHOLDER MAY BE SOLD OUTSTANDING SOLD(1)(2) OWNED
- ----------------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allstate Insurance Company................................ $ 5,000,000 1.5 69,915 *
Argent Classic Convertible Arbitrage Fund L.P.(3).......... 25,200,000 7.4 352,372 *
Argent Classic Convertible Arbitrage Fund
(Bermuda) L.P.(4)........................................ 16,800,000 4.9 234,914 *
Associated Electric & Gas Ins. Services Ltd. .............. 1,400,000 * 19,576 *
BancAmerica Robertson Stephens............................. 500,000 * 6,992 *
Black Diamond, Ltd. ....................................... 2,367,000 * 33,098 *
Black Diamond Partners, L.P.(5)............................ 2,107,000 * 29,462 *
BS Debt Income Fund-Class A................................ 20,000 * 280 *
Calamos Convertible Fund................................... 7,900,000 2.3 110,466 *
Calamos Convertible Portfolio.............................. 9,000 * 126 *
Calamos Growth and Income Fund............................. 1,350,000 * 18,877 *
Calamos Strategic Income Fund.............................. 40,000 * 559 *
CGCM Market Neutral Fund................................... 100,000 * 1,398 *
CFW-C, L.P.(6)............................................. 10,000,000 2.9 139,830 *
Champion Int'l Corp. Master Retirement Trust............... 3,050,000 * 42,648 *
Chrysler Corporation Master Retirement Trust............... 9,535,000 2.8 133,328 *
City of Knoxville Pension System........................... 1,900,000 * 26,568 *
Delta Air Lines Master Trust............................... 13,940,022 4.1 194,923 *
Deutsche Bank A.G. ........................................ 15,000,000 4.4 209,745 *
Deutsche Bank Securities Inc. ............................. 8,500,000 2.5 118,856 *
Donaldson Lufkin & Jenrette Securities Corporation......... 11,000,000 3.2 153,813 *
Dorinco Reinsurance Co. ................................... 2,000,000 * 27,966 *
Double Black Diamond Offshore LDC.......................... 998,000 * 13,955 *
Foundation Account No. 1................................... 425,000 * 5,943 *
Genesee County Employees' Retirement System................ 725,000 * 10,138 *
GPZ Trading LLC............................................ 10,000,000 2.9 139,830 *
Greek Catholic Union....................................... 50,000 * 699 *
Hamilton Partners Limited.................................. 5,000,000 1.5 69,915 *
HBK Cayman L.P.(7)......................................... 34,320,000 10.1 479,897 *
HBK Offshore Fund Ltd. .................................... 75,180,000 22.1 1,051,242 *
Highbridge Capital Corp. .................................. 15,160,000 4.5 211,982 *
Inland Foundation Inc. .................................... 30,000 * 419 *
Jackson Investment Fund Ltd. .............................. 5,800,000 1.7 81,101 *
Jackson County Employees' Retirement System,............... 300,000 * 4,195
Kettering Medical Center Funded Depreciation Acct. ........ 225,000 * 3,146 *
Lehman Brothers, Inc. ..................................... 4,000,000 1.2 55,932 *
LLC Account No. 1.......................................... 305,000 * 4,265 *
Macomb County Employees' Retirement System................. 475,000 * 6,642 *
Merrill Lynch Pierce Fenner & Smith Inc. .................. 5,000,000 1.5 69,915 *
Minnesota Mutual Life Insurance Company.................... 2,270,000 * 31,741 *
Morgan Stanley Dean Witter................................. 30,000,000 8.8 419,490 *
Motion Picture Industry Health Plan -- Active.............. 1,115,000 * 15,591 *
Motion Picture Industry Health Plan -- Retired............. 510,000 * 7,131 *
NationsBanc Montgomery Securities LLC...................... 10,000,000 2.9 139,830 *
New York Life Insurance Co. ............................... 4,000,000 1.2 55,932 *
New York Life Insurance & Annuity Corp. ................... 1,500,000 1.2 20,975 *
OCM Convertible L.P.(8).................................... 285,000 * 3,985 *
OCM Convertible Trust...................................... 5,300,000 1.6 74,110 *
Orrington Investments...................................... 2,100,000 * 29,364 *
Orrington International Fund Ltd. ......................... 1,409,000 * 19,702 *
Paloma Securities L.L.C. .................................. 4,500,000 1.3 62,924 *
Partner Reinsurance Company, Ltd. ......................... 1,080,000 * 15,102 *
Port Authority of Alleghany County Retirement and
Disability Allowance Plan............................... 5,000,000 1.5 69,915 *
Q. Investments, L.P.(9).................................... 8,250,000 2.4 115,360 *
R2 Investments, L.D.C. .................................... 6,750,000 2.0 94,385 *
Raytheon Company Master Pension Trust...................... 4,875,000 1.4 68,167 *
SG Cowen................................................... 7,000,000 2.1 97,881 *
Shepherd Investments International, Ltd. .................. 4,850,000 1.4 67,818 *
Silverton International Fund Limited....................... 4,500,000 1.3 62,924 *
SoundShore Partners L.P.(10)............................... 1,500,000 * 20,975 *
Southern Farm Bureau Life Ins. Co. ........................ 2,000,000 * 27,966 *
SPT........................................................ 2,950,000 * 41,250 *
Stark International........................................ 4,850,000 1.4 67,818 *
</TABLE>
-38-
<PAGE> 39
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT AT
MATURITY OF NUMBER OF
DEBENTURES CONVERSION
BENEFICIALLY PERCENTAGE OF SHARES THAT AMOUNT OF
OWNED THAT DEBENTURES MAY BE COMMON STOCK
NAME OF SELLING SECURITYHOLDER MAY BE SOLD OUTSTANDING SOLD(1)(2) OWNED
- ----------------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
State of Connecticut Combined Investment Funds............. 11,545,000 3.4 161,434 *
State Employees' Retirement Fund of the State of Delaware.. 3,290,000 1.0 46,004 *
The Classic IC Company, Ltd. .............................. 2,200,000 * 30,763 *
The Dow Chemical Co. Employees' Retirement Plan............ 7,800,000 2.3 109,067 *
The Fondren Foundation..................................... 200,000 * 2,797 *
TQA Leverage Fund, L.P.(11)................................ 2,000,000 * 27,966 *
TQA Vantage Fund, Ltd...................................... 3,000,000 * 41,949 *
TQA Vantage Plus Fund, Ltd................................. 1,000,000 * 13,983 *
UBS A.G. (London).......................................... 3,500,000 1.0 48,941 *
United Fund and Commercial Workers Local 1262.............. 1,300,000 * 18,178 *
Vanguard Convertible Securities Fund, Inc. ................ 7,155,000 2.1 100,048 *
Unifi, Inc. Profit Sharing Plan and Trust.................. 325,000 * 4,544 *
Van Waters & Rogers, Inc. Retirement Plan.................. 1,175,000 * 16,430 *
Warburg Dillon Read LLC.................................... 10,750,000 3.2 150,317 *
Winchester Convertible Plus................................ 770,000 * 10,767 *
Worldwide Transactions, Ltd................................ 368,000 * 5,146 *
Any other holders of Debentures or future transferees,
pledgees, donees of or from any such holder(12)(13)........ -- -- -- --
</TABLE>
- ----------
* Less than 1%.
(1) Assumes conversion of the full amount of Debentures held by such holder at
the initial conversion rate of 13.983 shares per $1,000 principal amount
at maturity of Debentures; such conversion rate is subject to adjustment
as described under "Description of Debentures--Conversion of Debentures."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Debentures may increase or decrease from time to time. Under the
terms of the Indenture, cash will be paid in lieu of issuing fractional
shares, if any, upon conversion of the Debentures.
(2) The number of Conversion Shares held by each holder named herein, except
HBK Offshore Fund Ltd., is less than 1% of the Company's outstanding
Common Stock as of March 31, 1999.
(3) Argent Classic Management Co., LLC is the General Partner.
(4) Argent Financial Group (Bermuda) Ltd. is the General Partner.
(5) Carlson Capital L.P. is the General Partner. Asgard Investment Corporation
is the General Partner of Carlson Capital L.P.
(6) Thomas M. Taylor & Company is the General Partner.
(7) HBK Fund L.P. is the General Partner. HBK Management, LLC is the General
Partner of HBK Fund L.P.
(8) OakTree Capital Management, LLC is the General Partner.
(9) Acme Widget L.P. is the General Partner. Sceptor Holdings, Inc. is the
General Partner of Acme Widget L.P.
(10) AIG International Asset Management Ltd. is the General Partner.
(11) TQA Investors LLC is the General Partner.
(12) Information concerning other Selling Securityholders will be set forth in
supplements to this Prospectus from time to time, if required.
(13) Assumes that any other holders of Debentures, or any future transferees,
pledgees, donees or successors of or from any such other holders of
Debentures, do not beneficially own any Common Stock other than the
Conversion Shares issuable upon conversion of the Debentures at the
initial conversion rate.
The preceding table has been prepared based upon the information
furnished to the Company by the Selling Securityholders named therein. Unless
otherwise indicated, none of the Selling Securityholders has, or within the past
three years has had, any position, office of other material relationship with
the Company or any of its affiliates.
Generally, only Selling Securityholders identified in the foregoing
table who beneficially own the Debentures set forth opposite their respective
names may sell such Debentures pursuant to the Shelf Registration Statement, of
which this Prospectus forms a part. The Company may from time to time include
additional Selling Securityholders in supplements or amendments to this
Prospectus.
The Selling Securityholders identified above may have sold, transferred
or otherwise disposed of, in transactions exempt from the registration
requirements of the Securities Act, all or a portion of their Debentures since
the date on which the information in the preceding table is presented.
Information concerning the Selling Securityholders may change from time to time
and any such changed information will be set forth in supplements to this
Prospectus if and when necessary. Because the Selling Securityholders may offer
all or some of the Debentures that they hold and/or Conversion Shares pursuant
to the offering contemplated by this Prospectus, no estimate can be given as to
the amount of the Debentures or Conversion Shares that will be held by the
Selling Securityholders upon the termination of this offering. See "Plan of
Distribution."
-39-
<PAGE> 40
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Debentures and the Conversion Shares (the "Securities") offered hereby. The
Securities may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer the Securities through underwriters, broker-dealers or agents who may
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of the Securities for whom
they may act as agent. The Selling Securityholders and any such broker-dealers
or agents who participate in the distribution of the Securities may be deemed to
be "underwriters," and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such broker-dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act.
The Registrable Securities offered hereby may be sold from time to time
directly by the Selling Securityholders or, alternatively, through underwriters,
broker-dealers or agents. If the Securities are sold through underwriters or
broker-dealers, the Selling Securityholders will be responsible for underwriting
discounts or commissions or agent's commissions. Such Securities may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve block
transactions or crosses, i.e., transactions in which the same broker acts as an
agent in both sides of the trade) (i) on any national securities exchange or
quotation service on which the Securities may be listed or quoted at the time of
the sale (including the Nasdaq National Market in the case of the Common Stock),
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Securities or otherwise,
the Selling Securityholders may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Securities in the
course of hedging in positions they assume. The Selling Securityholders may also
sell Securities short and deliver Securities to close out short positions, or
loan or pledge Securities to broker-dealers that in turn may sell such
Securities.
To the best knowledge of the Company, there are currently no plans,
arrangement or understandings between any Selling Securityholders and any
underwriter, broker-dealer or agent regarding the sale of the Securities by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Securities offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Securities by
other means not described herein.
The outstanding Common Stock is listed for trading on the Nasdaq
National Market under the symbol "ATML". The Company does not intend to apply
for listing of the Debentures on any securities exchange or for quotation
through Nasdaq. Accordingly, no assurance can be given as to the development of
liquidity or any trading market for the Debentures. See "Risk Factors--Absence
of Public Market."
There can be no assurance that any Selling Securityholder will sell any
or all of the Debentures or Conversion Shares registered pursuant to the
Registration Statement of which this Prospectus forms a part. In addition, any
securities covered by the Registration Statement of which this Prospectus forms
a part that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities
Act may be sold under Rule 144 or Rule 144A rather than pursuant to this
Prospectus.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. Furthermore, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to
-40-
<PAGE> 41
the particular Securities being distributed for a period of up to five business
days prior to the commencement of such distribution. All of the foregoing may
affect the marketability of the Securities and the ability of any person or
entity to engage in market-making activities with respect to the Securities.
Pursuant to the Registration Rights Agreement entered into in
connection with the offer and sale of the Debentures by the Company, each of the
Company and the Selling Securityholders will be indemnified by the other against
certain liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the Securities to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Debentures
and the Conversion Shares offered hereby will be passed upon for the Company by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.
EXPERTS
The financial statements incorporated in the Prospectus by reference
to the Annual Report on Form 10-K/A for the year ended December 31, 1998, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-41-
<PAGE> 42
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Company or the Selling Stockholders. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy the
securities described herein by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in and which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Under no circumstances shall the delivery of
this Prospectus or any sale made pursuant to this Prospectus create any
implication that the information contained in this Prospectus is correct as of
any time subsequent to the date of this Prospectus.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information ................................................ 2
Documents Incorporated by Reference .................................. 2
Forward-Looking Statements ........................................... 3
Prospectus Summary ................................................... 4
Risk Factors ......................................................... 7
Use of Proceeds ...................................................... 16
Ratio of Earnings to Fixed Charges ................................... 16
Description of Debentures ............................................ 17
Certain Federal Income Tax Considerations ............................ 33
Selling Securityholders .............................................. 38
Plan of Distribution ................................................. 40
Legal Matters ........................................................ 41
Experts .............................................................. 41
</TABLE>
================================================================================
================================================================================
ATMEL CORPORATION
$340,400,000 AT MATURITY OF
ZERO COUPON CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2018
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
-----------------------
PROSPECTUS
-----------------------
August 11, 1999
================================================================================
-42-
