-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PGzP8pP5uST1kDg2JtfpJiP5AsNXJOfbpPrqujUzfINB+/6olpgiTUjq7OoAf74h rEmce3HwTGHb3B97jf9ONg== 0000891618-01-501391.txt : 20010628 0000891618-01-501391.hdr.sgml : 20010628 ACCESSION NUMBER: 0000891618-01-501391 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATMEL CORP CENTRAL INDEX KEY: 0000872448 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770051991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-63996 FILM NUMBER: 1669238 BUSINESS ADDRESS: STREET 1: 2325 ORCHARD PKWY CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4084410311 MAIL ADDRESS: STREET 1: 2325 ORCHARD PKWY CITY: SAN JOSE STATE: CA ZIP: 95131 S-3 1 f73251s-3.txt FORM S-3 1 As filed with the Securities and Exchange Commission on June 27, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ATMEL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0051991 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 2325 ORCHARD PARKWAY SAN JOSE, CALIFORNIA 95131 (408) 441-0311 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) DONALD COLVIN VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER ATMEL CORPORATION 2325 ORCHARD PARKWAY SAN JOSE, CALIFORNIA 95131 (408) 441-0311 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) Copies to: MARK A. BERTELSEN, ESQ. JOSEPH F. DANIELS, ESQ. WILSON SONSINI GOODRICH & ROSATI PROFESSIONAL CORPORATION 650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304 (650) 493-9300 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
============================================================================================================= PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED (1) (2) PER SECURITY (3) OFFERING PRICE (3) FEE ============================================================================================================= Zero Coupon Convertible Subordinated Debentures due 2021...... $511,500,000 36.5% $186,697,500 $46,675 ============================================================================================================= Common Stock $0.001 par value... 11,755,805 shares -- -- (4) =============================================================================================================
(1) $511,500,000 in principal amount at maturity of the debentures were issued at an original price of $391.06 per $1,000 principal amount at maturity, which represents an aggregate issue price of $200,027,190. (2) Includes 11,755,805 shares of common stock initially issuable upon conversion of $511,500,000 in principal amount at maturity of the debentures at the rate of 22.983 shares of common stock per $1,000 principal amount at maturity. Pursuant to Rule 416 under the Securities Act, such number of shares of common stock 2 registered hereby shall include an indeterminate number of shares of common stock that may be issued in connection with a stock split, stock dividend, recapitalization or similar event. The Registration Statement also applies to rights issued pursuant to our amended and restated rights agreement, which rights are currently attached to and trade only with shares of our common stock. (3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c), based upon the average of the bid and asked prices of the debentures on June 21, 2001. (4) Pursuant to Rule 457(i), there is no filing fee with respect to the shares of common stock issuable upon conversion of the debentures, because no additional consideration will be received in connection with the exercise of the conversion privilege. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine. ================================================================================ 3 SUBJECT TO COMPLETION, DATED JUNE 27, 2001 $511,500,000 [ATMEL LOGO] ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2021 AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES WE ISSUED THE DEBENTURES IN A PRIVATE PLACEMENT IN MAY 2001. THIS PROSPECTUS WILL BE USED BY SELLING SECURITYHOLDERS TO RESELL THEIR DEBENTURES AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THEIR DEBENTURES. --------------------------------- THE DEBENTURES ARE CONVERTIBLE PRIOR TO MATURITY INTO COMMON STOCK AT AN INITIAL CONVERSION RATE OF 22.983 SHARES PER $1,000 PRINCIPAL AMOUNT AT MATURITY. THE CONVERSION RATE WILL NOT BE ADJUSTED FOR ACCRUED ORIGINAL ISSUE DISCOUNT, BUT WILL BE SUBJECT TO ADJUSTMENT IN CERTAIN EVENTS. --------------------------------- ON OR AFTER MAY 23, 2006, WE MAY REDEEM ANY OF THE DEBENTURES AT THE REDEMPTION PRICES SET FORTH IN THIS PROSPECTUS. HOLDERS MAY REQUIRE US TO REPURCHASE THE DEBENTURES AT THE REPURCHASE PRICES SET FORTH IN THIS PROSPECTUS ON MAY 23, 2006, MAY 23, 2011 AND MAY 23, 2016. --------------------------------- OUR COMMON STOCK IS QUOTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET UNDER THE SYMBOL "ATML." ON JUNE 26, 2001, THE LAST REPORTED SALE PRICE OF OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS 11.86 PER SHARE. --------------------------------- THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9. --------------------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This prospectus is dated _____________, 2001 4 TABLE OF CONTENTS
PAGE ---- Forward-Looking Statements ..................................................... 2 Prospectus Summary ............................................................. 3 Risk Factors ................................................................... 9 Use of Proceeds ................................................................ 21 Ratio of Earnings to Fixed Charges ............................................. 21 Description of Debentures ...................................................... 22 Description of Capital Stock ................................................... 44 Certain United States Federal Income Tax Considerations .............................................................. 46 Selling Securityholders ........................................................ 50 Plan of Distribution ........................................................... 52 Legal Matters .................................................................. 54 Experts ........................................................................ 54 Where You Can Find More Information ............................................ 54 Trademark Acknowledgements ..................................................... 55
-------------------------- REFERENCES TO "HOLDERS" REFERS TO HOLDERS OF OUR ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2021, AND REFERENCES TO "WE," "US," "OUR," OR "ATMEL" REFER TO ATMEL CORPORATION AND ITS SUBSIDIARIES, IN EACH CASE, UNLESS THE CONTEXT OTHERWISE REQUIRES OR THE TEXT INDICATES OTHERWISE. ALL OF THE INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO TWO-FOR-ONE STOCK SPLITS EFFECTED IN THE FORM OF A 100% STOCK DIVIDEND TO STOCKHOLDERS OF RECORD AS OF DECEMBER 3, 1999 AND AUGUST 11, 2000. -------------------------- FORWARD-LOOKING STATEMENTS Some of the statements in this prospectus and in the documents incorporated by reference in this prospectus constitute forward-looking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan, intend, forecast, anticipate, believe, estimate, predict, potential, continue or the negative of these terms or other comparable terminology. The forward-looking statements contained in this prospectus involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These factors include those listed under "Risk Factors" and elsewhere in this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. -------------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED HEREIN. SELLING SECURITYHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF DEBENTURES AND/OR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE DEBENTURES OR COMMON STOCK. 2 5 PROSPECTUS SUMMARY You should read the following summary together with the more detailed information concerning our company, our debentures and our common stock and our financial statements and related material appearing in this prospectus and in the documents incorporated by reference in this prospectus. Because this is only a summary, you should read the rest of this prospectus including the documents incorporated by reference in this prospectus, before you invest in our debentures or shares of common stock issuable upon conversion of the debentures. Read this entire prospectus carefully, especially the risks described under "Risk Factors." We are a global semiconductor company that designs, develops, manufactures and sells a wide range of semiconductor integrated circuit products, or ICs. We are leaders in developing and commercializing nonvolatile memory, or memory that continues to store information after power is turned off. We leverage our expertise in nonvolatile memories by combining them with microcontrollers, digital signal processors and other logic to meet the evolving and growing needs of our customers. These complex system-on-a-chip solutions for a broad array of markets are manufactured using our leading-edge multiple process technologies, including complementary metal oxide semiconductor (CMOS), double-diffused metal oxide semiconductor (DMOS), logic, CMOS logic, bipolar, bipolar CMOS (BiCMOS), silicon germanium (SiGe), SiGe BiCMOS, analog, bipolar double diffused CMOS (BCDMOS) and radiation tolerant process technologies. We develop these process technologies ourselves to ensure they provide the maximum possible performance. Our products are used primarily in the following markets: Communications. Communications, including wireless and wireline telecommunications and data networking, is currently our largest end user market, representing nearly half of our revenues for the year ended December 31, 2000. The rapid global acceptance of the wireless phone has resulted in an increased demand for our products. For the wireless market, we provide nonvolatile memory, microcontrollers, and ASICs that are used in global standard for mobile communications (GSM) and code-division multiple access (CDMA) mobile phones and their base stations, as well as two-way pagers, mobile radios, 900 MHz cordless phones and their base stations. We also have a range of products based on Bluetooth, a new short range wireless protocol that enables instant connectivity between electronic devices. Our principal customers in the wireless market include Ericsson, Kenwood, Motorola, Nokia, Panasonic, Philips, Qualcomm, Samsung, Siemens and Sony. For the data networking and wireline telecommunications markets, we provide ASIC, nonvolatile memory and programmable logic products that are used in the switches, routers, cable modem termination systems and digital subscriber line (DSL) access multiplexers that are currently being used to build Internet infrastructure. Our principal data networking and wireline telecommunications customers include Alcatel, Cisco, Nortel, Siemens and 3Com. Consumer Electronics. Our products are also used in a broad variety of consumer electronics products. We provide multimode audio processors and MPEG2 based decoders with programmable transport for complex digital audio streams used in digital TVs, set top boxes and DVD players. For digital cameras, we provide a single chip digital camera solution. We provide demodulators and decoders for cable modems. We also offer media access controllers for wireless local area networks (LANs) and baseband controllers and network protocol stacks for voice-over-internet-protocol (VoIP) telephone terminals. In addition, we provide secure, encryption enabled, tamper resistant circuits for smart cards. Our principal consumer electronics customers include FujiFilm, GemPlus, LG Electronics, Mitsubishi, Panasonic, Philips, Samsung, Schlumberger and Sony. 3 6 Computing, Storage and Printing. For computing applications, we provide Flash, universal serial bus (USB) hubs and ASICs for personal computers and servers. In late 2000, we introduced a biometric security IC that verifies a user's identity by scanning a finger. We believe this IC will find applications where access to information, equipment and similar resources needs to be controlled or monitored. For storage applications, we provide servo controllers, read channels, and data interfaces for data storage subsystems, hard drives and DVD players. We provide ASICs, nonvolatile memory and microcontrollers for laser printers, inkjet printers, copy machines and scanners. Our principal customers in these markets include ACER, Compaq, Hewlett-Packard, IBM, Intel, Lexmark, Maxtor, Microsoft, Polaroid, Seagate, Toshiba and Western Digital. We manufacture more than 90% of our products in our own wafer fabrication facilities, or fabs. We strive to continuously expand and upgrade our fabs to meet customer demand. We believe our broad portfolio of manufacturing capabilities allows us to produce ICs that enable our customers to rapidly introduce leading edge electronic products that are differentiated by higher performance, advanced features, lower cost, smaller size, longer battery life and more memory. Our wafer fabrication facilities are as follows: - Colorado Springs, Colorado: two 6-inch wafer fabs; - Rousset, France: 8-inch wafer fab; - Heilbronn, Germany: 6-inch wafer fab; - Nantes, France: 6-inch wafer fab; - Irving, Texas: 8-inch wafer fab (expected to produce wafers near the end of the third quarter of 2001); and - North Tyneside, UK: 8-inch wafer fab (expected to produce wafers by the end of 2001). Our business has four segments, each of which requires different design, development and marketing resources to produce and sell semiconductor integrated circuits. - ASIC -- The products in our application specific integrated circuit (ASIC) segment include full custom application-specific integrated circuits, semicustom gate arrays and semicustom cell based integrated circuits designed to meet specialized customer requirements for their high-performance devices in a broad variety of applications. - Logic -- The products in our Logic segment include microcontrollers, eraseable programmable logic devices (EPLDs), and field programmable gate arrays (FPGAs), for sale to customers who use them in a broad variety of applications. - Nonvolatile Memories -- The products in our Nonvolatile Memories segment include Flash memories, electrically eraseable programmable read-only memories (EEPROMs), and eraseable programmable read only memories (EPROMs), for use in a broad variety of customer applications. - Atmel Wireless and Microcontroller Group (WMG) -- WMG produces analog, microcontroller and specialty products to service the automotive, telecommunications, consumer and industrial markets. WMG focuses on designing and supplying high-frequency products using silicon-germanium technology which are used in two-way pagers, digital enhanced cordless telecommunications, and mobile telephones, among other applications. 4 7 In 2000, 36% of our sales were made to customers in North America, 28% to customers in Europe, 34% to customers in Asia and 2% to customers in other regions. We distribute our products directly through 16 U.S. sales offices and 29 international sales offices. In addition, we use distributors for indirect distribution, including All American, Arrow Electronics, Avnet, Insight and Pioneer. We were originally incorporated in California in December 1984. In October 1999, we were reincorporated in Delaware. Our principal offices are located at 2325 Orchard Parkway, San Jose, California 95131 and our telephone number is (408) 441-0311. RECENT DEVELOPMENTS Revised Outlook Announcement. Beginning late in the fourth quarter of 2000, the global semiconductor industry began to experience a downturn. Our business has already been impacted by this downturn, as reflected by our net revenues of $526 million in the first quarter of 2001 declining by $48 million from $574 million in the fourth quarter of 2000. On May 15, 2001, we announced that we currently expect our net revenues for the second quarter of 2001 to decline by approximately 10 to 15 percent from our net revenues in the first quarter of 2001. We believe that this decline is due primarily to a decline in customer end-demand for semiconductor products. 5 8 THE DEBENTURES AND COMMON STOCK Securities Offered............................. $511,500,000 aggregate principal amount at maturity of zero coupon convertible subordinated debentures due May 23, 2021 and shares of our common stock issued upon conversion of debentures that have not been resold pursuant to the registration statement of which this prospectus forms a part. We will not pay periodic interest on the debentures, except under the circumstances described in "Description of Debentures -- Optional Conversion to Semiannual Coupon Debentures Upon Tax Event." Yield to Maturity of Debentures................ 4.75% per year compounded semi-annually, calculated from May 23, 2001. Conversion..................................... Holders have the option to convert the debentures into our common stock at any time prior to maturity or their earlier redemption. Holders can convert the debentures into common stock at a fixed conversion rate of 22.983 shares per $1,000 principal amount at maturity. The conversion rate is subject to adjustment if certain events occur. See "Description of Debentures -- Conversion of Debentures by Holders." Holders may exercise the option to convert only before the debentures reach maturity and before we redeem or repurchase them. Subordination.................................. The debentures are subordinated to all existing and future senior indebtedness as that term is defined in "Description of Debentures -- Subordination." As of March 31, 2001, we had approximately $643 million of indebtedness outstanding that would have constituted senior indebtedness. As of the same date, our subsidiaries had approximately $709 million of indebtedness and other liabilities outstanding to which the debentures would have been effectively subordinated (including trade and other payables but excluding inter-company obligations). See "Description of Debentures -- Subordination." Original Issue Discount........................ The debentures were issued at original issue discount for United States federal income tax purposes equal to the excess of their principal amount at maturity over the amount of their issue price. We will not make periodic cash payments of
6 9 interest on the debentures. Nonetheless, Holders should be aware that accrued original issue discount will be included periodically in their gross income for United States federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations." Holders should be aware that they will be responsible for the payment of taxes that may be due even though they may not receive any cash payment at the time original issue discount is included in their gross income. Redemption at Our Option....................... We may not redeem the debentures before May 23, 2006. At any time on or after May 23, 2006, we may redeem all or part of the debentures for cash. Holders may convert the debentures after they are called for redemption at any time up to the redemption date. Redemption prices are equal to the issue price plus accrued original issue discount through the date of redemption. See "Description of Debentures -- Redemption of Debentures at Our Option." Fundamental Change............................. Holders may require us to repurchase the debentures if we experience a Fundamental Change. The Fundamental Change purchase price is equal to the issue price plus accrued original issue discount through the date of repurchase. See "Description of Debentures -- Repurchase at the Option of the Holder Upon a Fundamental Change." Repurchase at the Option of the Holder......... Holders may require us to repurchase the debentures on May 23, 2006, May 23, 2011 and May 23, 2016 for a purchase price equal to the issue price plus accrued original issue discount through the date of repurchase. We may elect to pay all or a portion of the purchase price in common stock instead of cash, subject to certain conditions. See "Description of Debentures -- Repurchase of Debentures at the Option of the Holder." Conversion to Semiannual Coupon Debentures..... If a tax event prevents us from deducting original issue discount payable on the debentures, we may elect to pay Holders interest in cash and terminate the further accrual of original issue discount. See "Description of Debentures -- Optional Conversion to Semiannual Coupon Debentures
7 10 Upon a Tax Event." Use of Proceeds................................ We will not receive any of the proceeds from the sale by any selling securityholders of the debentures or the underlying common stock. Registration Rights............................ We will use our reasonable efforts to keep the shelf registration statement, of which this prospectus forms a part, effective until the earlier of (i) the sale pursuant to the shelf registration statement of all the securities registered under the shelf registration statement and (ii) the expiration of the holding period applicable to such securities held by our non-affiliates under Rule 144(k) of the Securities Act, or any successor provision, subject to certain permitted exceptions. See "Description of Debentures -- Registration Rights." NASDAQ Common Stock Symbol..................... ATML
8 11 RISK FACTORS Before you invest in the debentures or shares of common stock underlying the debentures, you should be aware of the various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included or incorporated by reference in this prospectus, before you decide whether to purchase the debentures or common stock. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of the debentures and common stock could decline, and you may lose all or a part of your investment. OUR REVENUE AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY DUE TO A VARIETY OF FACTORS, WHICH MAY RESULT IN VOLATILITY OR A DECLINE IN OUR STOCK PRICE. Our future operating results will be subject to quarterly variations based upon a wide variety of factors, many of which are not within our control. These factors include: - the cyclical nature of both the semiconductor industry and the markets addressed by our products; - fluctuations in manufacturing yields; - the timing of introduction of new products; - the timing of customer orders; - price erosion; - changes in mix of products sold; - the extent of utilization of manufacturing capacity; - product obsolescence; - availability of supplies and raw materials; - price competition and other competitive factors; and - fluctuations in currency exchange rates. Any unfavorable changes in any of these factors could harm our operating results. In particular, we believe that our future sales growth will depend substantially on the success of our new products. Our new products are generally incorporated into our customers' products or systems at the design stage. However, design wins may precede volume sales by a year or more. We may not be successful in achieving design wins or any design win may not result in future revenues, which depend in large part on the success of the customer's end product or system. We expect the average selling price of each of our products to decline as individual products mature and competitors enter the market. To offset average selling 9 12 price decreases, we rely primarily on reducing costs in the manufacturing of those products, increasing unit sales 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, our operating results could be harmed. From time to time, our quarterly revenues and operating results can become more dependent upon orders booked and shipped within a given quarter and, accordingly, our quarterly results can become less predictable and subject to greater variability. In addition, our 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, data networking equipment and military equipment, and economic growth generally. Our success will also depend upon a better supply and demand balance within the semiconductor industry. In 1998 and early 1999, the semiconductor industry experienced a significant downturn, characterized by, among other things, diminished product demand, production overcapacity and decline of average selling prices of products. While sales of our ASIC and logic-related products increased during this period, continued price reduction of our commodity non-volatile 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 non-volatile memory products included our commodity EPROMs and Flash memories. These business conditions in the worldwide semiconductor industry also contributed to our decision to implement a restructuring plan, which we announced in the second quarter of fiscal 1998. The restructuring plan, which resulted in a nonrecurring charge of approximately $66 million, included a ten percent work force reduction and an impairment charge to write down the value of certain manufacturing equipment and machinery with older process technology. We also recognized an in-process research and development charge of $23 million relating to the WMG acquisition during the second quarter of fiscal 1998. Beginning late in the fourth quarter of 2000, the semiconductor industry began to experience a downturn, and worldwide semiconductor sales are projected to decline by approximately 17% in 2001 from 2000. Our business has been impacted by this recent downturn, with the effect that our net revenues of $526 million in the first quarter of 2001 declined by $48 million (or 8%) from $574 million in the fourth quarter of 2000. Many of the business conditions we experienced in the 1998 downturn are again present in our business. While our visibility is limited in the current environment, at present we expect the current downturn to negatively affect revenues through the second quarter of 2001. IF WE DO NOT SUCCESSFULLY INCREASE OUR MANUFACTURING CAPACITY, WE MAY FACE CAPACITY CONSTRAINTS THAT COULD HARM OUR BUSINESS. We currently manufacture our products at our wafer fabrication facilities located in Colorado Springs, Colorado; Heilbronn, Germany; Nantes, France; and Rousset, France. We currently expect our Irving, Texas facility to be producing wafers in the third quarter of 2001 and our new facility in North Tyneside, UK, to be operational and producing wafers by the end of 2001. We believe that we will be able to substantially meet our production needs from these facilities through the end of the fourth quarter of 2003, although this date may vary depending on, among other things, our rate of revenue growth. We will be required to hire, train and manage additional production personnel in order to increase production capacity as planned. We will also be required to successfully implement new manufacturing technologies, such as .25-micron, .18-micron, .13 micron and chemical and mechanical planarization in our wafer manufacturing facilities to increase our 10 13 manufacturing capacity and yields. If we cannot expand our capacity on a timely basis, we could experience significant capacity constraints that would prevent us from meeting customer demand. In addition, the depreciation and other expenses that we will incur in connection with the expansion of our manufacturing capacity may continue to reduce our gross margins in future periods. We are exploring alternatives for the further expansion of our manufacturing capacity, which would likely occur during and after 2001, including: - expanding our current wafer fabrication facilities; - purchasing or building one or more additional wafer fabrication facilities; and - entering into strategic relationships to obtain additional capacity. Any of these alternatives could require a significant investment by us, and none of the alternatives for expanding our manufacturing capacity may be available on a timely basis. The cost of expanding our manufacturing capacity at our existing facilities is expected to be funded through a combination of available cash resources, cash from operations and additional lease, debt or equity financing, including this offering. We may not be able to obtain the additional financing necessary to fund the expansion of our manufacturing facilities. Expanding our wafer fabrication capacity involves significant risks, including: - shortages of materials and skilled labor; - unavailability of semiconductor manufacturing and testing equipment; - unforeseen environmental or engineering problems; - work stoppages; - approvals and requirements of governmental and regulatory agencies; and - unanticipated cost increases. Any one of these risks could delay the building, equipping and production start-up of a new facility or the expansion of an existing facility, and could involve significant additional costs or reduce our anticipated revenues. In addition, the timing of commencement of operation of our North Tyneside, UK facility will depend upon the availability, timely delivery, successful installation and testing of complex process equipment. As a result of these and other factors, any expanded or new facility may not be completed and in volume production on time or within budget. Furthermore, we may be unable to achieve adequate manufacturing yields in any expanded or new facility in a timely manner, and our revenues may not increase in proportion to the anticipated increase in manufacturing capacity associated with any expanded or new facility. 11 14 IF WE ARE UNABLE TO EFFECTIVELY UTILIZE OUR WAFER MANUFACTURING CAPACITY AND FAIL TO ACHIEVE ACCEPTABLE MANUFACTURING YIELDS, OUR BUSINESS WOULD BE HARMED. The fabrication of our integrated circuits 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. We may experience problems in achieving acceptable yields in the manufacture of wafers, particularly in connection with the expansion of our manufacturing capacity and related transitions. The interruption of wafer fabrication or the failure to achieve acceptable manufacturing yields at any of our wafer fabrication facilities would harm our business. In 1997 and 1998, we made substantial capital expenditures to increase our wafer fabrication capacity at our facilities in Colorado Springs, Colorado and Rousset, France, and acquired two wafer fabrication facilities in connection with our acquisition of WMG. In 1998, our gross margin declined significantly as a result of the increase in fixed costs and operating expenses related to this expansion of capacity, and lower product margins in many of our non-volatile memory products due to severe price decline. In 1999, the declining gross margin trend reversed, primarily due to a higher unit sales volume over which to spread fixed costs and operating expenses, the inclusion of WMG's positive gross margin for all of 1999 compared to only ten months in 1998, and the stabilization of average selling prices. If the most recent downturn in the semiconductor industry experienced in the first quarter of 2001 continues into the second half of 2001 or worsens, our wafer fabrication capacity would continue to be under-utilized, and our inability to quickly reduce fixed costs such as depreciation and other fixed operating expenses necessary to operate our wafer manufacturing facilities would harm our operating results. If net revenues do not continue to increase sufficiently in future periods, our business could be harmed. We experienced production delays and yield difficulties in connection with earlier expansions of our wafer fabrication capacity. Production delays, difficulties in achieving acceptable yields at any of our fabrication facilities or overcapacity could materially and adversely affect our operating results. THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY COULD CREATE FLUCTUATIONS IN OUR OPERATING RESULTS. The semiconductor industry has historically been cyclical, characterized by wide fluctuations in product supply and demand. From time to time, the industry has also experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles and declines in general economic conditions. A downturn of this type occurred in 1998. These downturns have been characterized by diminished product demand, production overcapacity and accelerated decline of average selling prices, and in some cases have lasted for more than a year. Our business could be harmed by industry-wide fluctuations in the future. The commodity memory portion of the semiconductor industry, from which we derived 48% of our revenue in the first quarter of 2001, compared to 52% of our revenues in 2000, 46% of our revenues in 1999, and approximately half of our revenues through 1998, suffered from excess capacity in 1998, which led to substantial price reductions during that year. While these conditions improved in 1999 and 2000, another slowdown began late in the fourth quarter of 2000, and if these conditions continue or worsen, our growth and operating results would be harmed. In addition, in the past our operating results were harmed by industry-wide fluctuations in the demand for semiconductors, which resulted in under-utilization of our manufacturing capacity. Our business could be harmed in the future by cyclical conditions in the semiconductor industry or by slower growth in any of the markets served by our customer products. 12 15 OUR MARKETS ARE HIGHLY COMPETITIVE, AND IF WE DO NOT COMPETE EFFECTIVELY, WE MAY SUFFER PRICE REDUCTIONS, REDUCED REVENUES, REDUCED GROSS MARGINS AND LOSS OF MARKET SHARE. We compete in markets that are intensely competitive and characterized by rapid technological change, product obsolescence and price decline. Throughout our product line, we compete with a number of large semiconductor manufacturers, such as AMD, Fujitsu, Hitachi, Intel, LSI Logic, Microchip, Sharp and STMicroelectronics. Some of these competitors have substantially greater financial, technical, marketing and management resources than we do. As we have introduced new products, we increasingly compete directly with these companies, and we may not be able to compete effectively. We also compete with emerging companies attempting to sell products in specialized markets addressed by our products. We compete principally on the basis of the technical innovation and performance of our products, including their speed, density, power usage, reliability and specialty packaging alternatives, as well as on price and product availability. Although our average selling prices increased relative to those of the prior years in 2000 and late 1999, during 1998 and early 1999 we experienced significant price competition in our non-volatile memory business and especially for EPROM and Flash products. We expect continuing competitive pressures in our markets from existing competitors and new entrants, which, among other things, could reverse the recent trend of strengthening average selling prices for our products. In addition to the factors described above, our ability to compete successfully depends on a number of factors, including the following: - our success in designing and manufacturing new products that implement new technologies and processes; - our ability to offer integrated solutions using our advanced non-volatile memory process with other technologies; - the rate at which customers incorporate our products into their systems; - product introductions by our competitors; - the number and nature of our competitors in a given market; and - general market and economic conditions. Many of these factors are outside of our control, and we may not be able to compete successfully in the future. WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE. The average selling prices of our products historically have decreased over the products' lives and are expected to continue to do so. As a result, our future success depends on our ability to develop and introduce new products which compete effectively on the basis of price and performance and which address customer requirements. We are continually in the process of designing and commercializing new and improved products to maintain our 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. Our development of new products and our customers' decision to design them into their systems can take as long as three years, depending upon the complexity of 13 16 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 our products may be adversely affected by competing products or technologies serving markets addressed by our products. Our qualification process involves multiple cycles of testing and improving a product's functionality to ensure that our products operate in accordance with design specifications. If we experience delays in the introduction of new products, our future operating results could be harmed. In addition, new product introductions frequently depend on our development and implementation of new process technologies, and our future growth will depend in part upon the successful development and market acceptance of these process technologies. Our integrated solution products will require more technically sophisticated sales and marketing personnel to market these products successfully to customers. We are developing new products with smaller feature sizes, the fabrication of which will be substantially more complex than fabrication of our current products. If we are unable to design, develop, manufacture, market and sell new products successfully, our operating results will be harmed. Our new product development, process development, or marketing and sales efforts may not be successful, our new products may not achieve market acceptance, and price expectations for our new products may not be achieved, any of which could harm our business. OUR OPERATING RESULTS ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO VARIOUS POLITICAL AND ECONOMIC RISKS. Sales to customers outside North America accounted for approximately 72%, 64% and 65% of net revenues in the first quarter of 2001, and in 2000 and 1999. We expect that revenues derived from international sales will continue to represent a significant portion of net revenues. In recent years, we have significantly expanded our international operations, most recently through our acquisitions of a wafer fabrication facility in North Tyneside, UK in September 2000, and Atmel Grenoble in May 2000. International sales and operations are subject to a variety of risks, including: - greater difficulty in protecting intellectual property; - greater difficulty in staffing and managing foreign operations; - greater risk of uncollectible accounts; - longer collection cycles; - potential unexpected changes in regulatory practices, including export license requirements, trade barriers, tariffs and tax laws; - sales seasonality; and - general economic and political conditions in these foreign markets. Further, we purchase a significant portion of our raw materials and equipment from foreign suppliers, and we incur labor and other operating costs in foreign currencies, particularly at our French and German manufacturing facilities. As a result, our costs will fluctuate along with the currencies and general economic conditions in the countries in which we do business, which could harm our operating results. 14 17 Approximately 80%, 75% and 78% of our sales in the first quarter of 2001, and in 2000 and 1999 were denominated in U.S. dollars. During these periods, our products became less price competitive in countries with currencies declining in value against the dollar. In 1998, business conditions in Asia were severely affected by banking and currency issues that adversely affected our operating results. While these conditions stabilized in 1999 and 2000, the continuance or worsening of adverse business and financial conditions in Asia, where 34% of our revenues were generated in the first quarter of 2001, and in 2000 and 1999, would likely harm our operating results. WHEN WE TAKE FOREIGN ORDERS DENOMINATED IN LOCAL CURRENCIES, WE RISK RECEIVING FEWER DOLLARS WHEN THESE CURRENCIES WEAKEN AGAINST THE DOLLAR, AND MAY NOT BE ABLE TO ADEQUATELY HEDGE AGAINST THIS RISK. When we take a foreign order denominated in a local currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we collect our funds. In addition to reducing revenue, this risk will negatively affect our operating results. In Europe, where our significant operations have costs denominated in European currencies, these negative impacts on revenue can be partially offset by positive impacts on costs. However, in Japan, while our yen denominated sales are also subject to exchange rate risk, we do not have significant operations with which to counterbalance our exposure. Sales denominated in yen were 7% of our revenue in the first quarter of 2001, as well as in the first quarter of 2000. Sales denominated in foreign currencies were 20% in the first quarter of 2001, compared to 21% in the comparable quarter of 2000. We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. IF WE FAIL TO MAINTAIN SATISFACTORY RELATIONSHIPS WITH MOTOROLA AND OTHER KEY CUSTOMERS, OUR BUSINESS MAY BE HARMED. In 2000, 1999 and 1998, 12%, 12% and 14% of our net revenues were derived from sales to Motorola. Our ability to maintain close, satisfactory relationships with Motorola and other large customers is important to our business. A reduction, delay, or cancellation of orders from Motorola or our other large customers would harm our business. For instance, sales to Motorola decreased by $26 million, or 5% of our fourth quarter 2000 net revenues, in the first quarter of 2001 from the fourth quarter of 2000. The loss of one or more of our key customers, or reduced orders by any of our key customers, could harm our business and results of operations. Moreover, our customers may vary order levels significantly from period to period, and customers may not continue to place orders with us in the future at the same levels as in prior periods. WE ARE NOT PROTECTED BY LONG-TERM CONTRACTS WITH OUR CUSTOMERS. We do not typically enter into long-term contracts with our customers, and we cannot be certain as to future order levels from our customers. When we do enter into a long-term contract, the contract is generally terminable at the convenience of the customer. In the event of an early termination by one of our major customers, it is unlikely that we will be able to rapidly replace that revenue source, which would harm our financial results. OUR FAILURE TO SUCCESSFULLY INTEGRATE BUSINESSES OR PRODUCTS WE HAVE ACQUIRED COULD DISRUPT OR HARM OUR ONGOING BUSINESS. We have from time to time acquired complementary businesses, products and technologies. 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. Moreover, 15 18 successful acquisitions in the semiconductor industry may be more difficult to accomplish than in other industries because such acquisitions require, among other things, integration of product offerings, manufacturing operations and coordination of sales and marketing and research and development efforts. The difficulties of such integration may be increased by the need to coordinate 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 any future acquisition could harm our business. Furthermore, products acquired in connection with acquisitions may not gain acceptance in our markets, and we may not achieve the anticipated or desired benefits of such transactions. WE MAY FACE THIRD PARTY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO DEFEND AND RESULT IN LOSS OF SIGNIFICANT RIGHTS. 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. We have from time to time received, and may in the future receive, communications from third parties asserting patent or other intellectual property rights covering our products or processes. In the past, we have received specific allegations from major companies alleging that certain of our products infringe patents owned by such companies. In order to avoid the significant costs associated with our defense in litigation involving such claims, we may license the use of the technologies that are the subject of these claims from such companies and be required to make corresponding royalty payments, which may harm our operating results. We have in the past been involved in intellectual property infringement lawsuits which harmed our operating results. Although we intend to vigorously defend against any such lawsuits, we may not prevail given the complex technical issues and inherent uncertainties in patent and intellectual property litigation. Moreover, the cost of defending against such litigation, both in terms of management time and attention, legal fees and product delays, could be substantial, whatever the outcome. If any patent or other intellectual property claims against us are successful, we may be prohibited from using the technologies subject to these claims, and if we are unable to obtain a license on acceptable terms, license a substitute technology, or design new technology to avoid infringement, our business and operating results may be significantly harmed. We have several cross-license agreements with other companies. In the future, it may be necessary or advantageous for us to obtain additional patent licenses from existing or other parties, but these license agreements may not be available to us on acceptable terms, if at all. OUR LONG TERM DEBT COULD HARM OUR ABILITY TO OBTAIN ADDITIONAL FINANCING, AND OUR ABILITY TO MEET OUR DEBT OBLIGATIONS WILL BE DEPENDENT UPON OUR FUTURE PERFORMANCE. As of March 31, 2001, our convertible notes and long term debt less current portion was $654 million compared to $669 million at December 31, 2000, and $654 million at December 31, 1999. Our convertible notes and long term debt less current portion increased by $200,027,190, the aggregate issue price of the debentures, when we completed the initial offering of the debentures on May 23, 2001. An increase in our debt-to-equity ratio could materially and adversely affect our ability to obtain additional financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. Our ability to meet our debt obligations will depend upon our future performance, 16 19 which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control. Since a substantial portion of our operations are conducted through our subsidiaries, the cash flow and the consequent ability to service debt are partially dependent upon the earnings of our subsidiaries and the distribution of those earnings, or upon loans or other payments of funds by those subsidiaries, to us. These subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to our long-term debt 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 us by any of our subsidiaries could, in the future, be subject to statutory or contractual restrictions and other various business considerations and contingent upon the earnings of those subsidiaries. Any right held by us to receive any assets of any of our 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 we are recognized as a creditor of such subsidiary, in which case our claims 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 us. WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE. Semiconductor companies that maintain their own fabrication facilities have substantial capital requirements. We made capital expenditures of $333 million in the first quarter of 2001, compared to $961 million in all of 2000 and $172 million in 1999. We intend to continue to make capital investments to support business growth and achieve manufacturing cost reductions and improved yields. Currently, we expect our 2001 capital expenditures to be relatively level with 2000 at approximately $900 million, of which we expect approximately $700 million will have been expended at June 30, 2001. We may seek additional equity or debt financing to fund further expansion of our 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 number of factors, including demand for products, product mix, changes in semiconductor industry conditions and competitive factors. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. WE DEPEND ON INDEPENDENT ASSEMBLY CONTRACTORS WHICH MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND WHICH MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES. We manufacture wafers for our products at our fabrication facilities, and the wafers are initially tested at our facilities. After wafer testing, we ship the wafers to one of our 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. Our reliance on independent contractors to assemble, package and test our products involves significant risks, including reduced control over quality and delivery schedules, the potential lack of adequate capacity and discontinuance or phase-out of the contractors' assembly processes. These independent contractors may not continue to assemble, package and test our products for a variety of reasons. Moreover, because our assembly contractors are located in foreign countries, we are 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. Accordingly, we may experience problems in timelines and the adequacy or quality of product deliveries, any of which could have a material adverse effect on our results of operations. 17 20 WE ARE SUBJECT TO ENVIRONMENTAL REGULATIONS WHICH COULD IMPOSE UNANTICIPATED REQUIREMENTS ON OUR BUSINESS IN THE FUTURE. ANY FAILURE TO COMPLY WITH CURRENT OR FUTURE ENVIRONMENTAL REGULATIONS MAY SUBJECT US TO LIABILITY OR SUSPENSION OF OUR MANUFACTURING OPERATIONS. We are 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 our manufacturing processes. Increasing public attention has been focused on the environmental impact of semiconductor operations. Although we have not experienced any material adverse effect on our operations from environmental regulations, any changes in such regulations or in their enforcement may impose the need for additional capital equipment or other requirements. If for any reason we fail to control the use of, or to restrict adequately the discharge of, hazardous substances under present or future regulations, we could be subject to substantial liability or our manufacturing operations could be suspended. WE DEPEND ON CERTAIN KEY PERSONNEL, AND THE LOSS OF ANY KEY PERSONNEL MAY SERIOUSLY HARM OUR BUSINESS. Our future success depends in large part on the continued service of our key technical and management personnel and on our 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 harm our business. FAILURE TO MANAGE OUR GROWTH MAY SERIOUSLY HARM OUR BUSINESS. Our business has grown in recent years through both internal expansion and acquisitions, and continued growth may cause a significant strain on our infrastructure and internal systems. To manage our growth effectively, we must continue to improve and expand our management information systems. We commenced an implementation of a new SAP enterprise resource planning and management system for our worldwide operations in 2000, which is not yet fully implemented. Our success depends to a significant extent on the management skills of our executive officers. If we are unable to manage growth effectively, our results of operations will be harmed. BUSINESS INTERRUPTIONS COULD HARM OUR BUSINESS. Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan. Our facilities in the State of California are currently subject to electrical blackouts as a consequence of a shortage of available electrical power. In the event these blackouts continue or increase in severity, they could disrupt the operations of our affected facilities. In addition, business interruption insurance may not be enough to compensate us for losses that may occur and any losses or damages incurred by us as a result of business interruptions could significantly harm our business. PROVISIONS IN OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND PREFERRED SHARES RIGHTS AGREEMENT MAY HAVE ANTI-TAKEOVER EFFECTS. Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, voting rights, preferences and privileges and restrictions of those shares without the 18 21 approval of our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control, by making it more difficult for a third party to acquire a majority of our stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders. We have no present plans to issue shares of preferred stock. We also have a preferred shares rights agreement with BankBoston, N.A., as rights agent, dated as of September 4, 1996 and amended and restated on October 18, 1999, which gives our stockholders certain rights that would likely delay, defer or prevent a change of control of Atmel in a transaction not approved by our board of directors. See "Description of Capital Stock". THE DEBENTURES ARE SUBORDINATED. The debentures are unsecured and subordinated in right of payment to all of our existing and future senior indebtedness. In the event of our bankruptcy, liquidation or reorganization or upon acceleration of the debentures due to an event of default under the indenture and in certain other events, our assets will be available to pay obligations on the debentures only after all senior indebtedness has been paid in full. As result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding debentures. The debentures are also effectively subordinated to the liabilities, including trade payables, of any of our subsidiaries. Neither we nor our subsidiaries are limited from incurring debt, including senior indebtedness, under the indenture. If we or our subsidiaries were to incur additional debt or liabilities, our ability to pay our obligations on the debentures could be adversely affected. As of March 31, 2001 we had approximately $643 million of senior indebtedness outstanding, and our subsidiaries had approximately $709 million of debt and other liabilities outstanding (including trade and other payables but excluding inter-company obligations). We may from time to time incur additional debt, including senior indebtedness. Our subsidiaries may also from time to time incur other additional debt and liabilities. WE MAY NOT BE ABLE TO REPURCHASE OR REDEEM DEBENTURES. On May 23, 2006, May 23, 2011 and May 23, 2016, we are obligated to purchase, at the Holders' election, any outstanding debentures. In addition, Holders may require us to redeem all or a portion of their debentures in the event of a Fundamental Change. We may not have enough funds to pay the repurchase price on a purchase date (in which case, we could be required to issue common stock to pay the repurchase price) or pay the Fundamental Change purchase price in the event of a Fundamental Change. Any existing or future credit agreements or other debt agreements may provide that a Fundamental Change or our obligation to purchase or redeem the debentures upon a fundamental change or otherwise would be an event of default under such agreement. As a result, we may be restricted or prohibited from repurchasing or redeeming the debentures. If we are prohibited from repurchasing or redeeming the debentures, we would seek the consent of then-existing lenders to repurchase or redeem the debentures or we would attempt to refinance the debt. If we are unable to obtain a consent or refinance the debt, we would be prohibited from repurchasing or redeeming the debentures, which would result in an event of default under the indenture. In these circumstances, if Fundamental Change resulted in an event of default under any lending agreement, the subordination provisions of the indenture would probably restrict or prohibit payments to the Holders. The term "Fundamental Change" is limited to certain specified transactions and may not include other events that might adversely affect our financial condition. Our obligation to offer to redeem the debentures upon a Fundamental Change would not necessarily afford the Holders protection in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving Atmel. 19 22 A PUBLIC MARKET MAY NOT DEVELOP FOR THE DEBENTURES. The initial purchasers have advised us that they currently make a market in the debentures. However, they are not obligated to make a market and may stop such market making at any time without notice. In addition, market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. It is possible that no active market for the debentures will develop, and even if one does develop, it may not be maintained. If an active market for the debentures does not develop or is not sustained, the trading price of such debentures could be materially adversely affected. OUR DEBENTURES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED. We believe it is likely that one or more rating agencies may rate the debentures. If one or more rating agencies assign the debentures a rating lower than expected by investors, or do not rate the debentures, the market price of the debentures and our common stock would be significantly harmed. OUR STOCK PRICE HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO FLUCTUATE IN THE FUTURE. The market price of our common stock has experienced significant fluctuations and may continue to fluctuate significantly. The market price of our common stock may be significantly affected by factors such as the announcement of new products or product enhancements by us or our competitors, technological innovations by us or our competitors, quarterly variations in our 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 we do business or relating to us specifically could result in an immediate and adverse effect on the market price of our stock. 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. 20 23 USE OF PROCEEDS We will not receive any proceeds from the sale by any selling securityholders of the debentures or the underlying common stock. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for each of the periods indicated is as follows:
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, -------------------------------------------------------------- -------------------- 1996 1997 1998(1) 1999 2000 2000 2001 ------- ------- ------- ------- ------- ------- ------- Ratio of earnings to fixed charges .................. 21.18 2.45 -- 3.43 7.91 5.87 7.04
- ---------- (1) In 1998, earnings were insufficient to cover fixed charges. These computations include us and our consolidated subsidiaries. In calculating the ratio of earnings to fixed charges, "earnings" consist of net income (loss) before provisions for income taxes plus fixed charges. Fixed charges consist of interest expense, charges and amortization of debt, expenses and discount on premium related to indebtedness, whether expensed or capitalized, and that portion of rental expense we believe to be representative of interest. 21 24 DESCRIPTION OF DEBENTURES The debentures have been issued under an indenture dated as of May 23, 2001 between us and State Street Bank and Trust Company of California, N.A., as trustee. We have summarized the material terms and provisions of the indenture in this section. You should read the indenture for additional information before you buy any of these debentures. References in this section to "us," "we" and "our" are solely to Atmel Corporation and not to our subsidiaries, and references to "you" refer to holders of the debentures. GENERAL The debentures are unsecured obligations of our company and are subordinate in right of payment to our obligations described under "-- Subordination." The debentures are limited to $511,500,000 aggregate principal amount at maturity. The debentures are scheduled to mature on May 23, 2021. The debentures were issued at a substantial discount from their principal amount at maturity and will therefore have original issue discount for U.S. Federal income tax purposes. See "Certain United States Federal Income Tax Considerations." There will be no periodic cash payments of interest on the debentures, except as described under "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event." In periods during which a debenture remains outstanding, the accrual of original issue discount (the difference between the issue price of a debenture and its principal amount at maturity) will be compounded semi-annually using a year comprised of twelve 30-day months. The accrual of original issue discount commenced on the date the debentures were issued. Original issue discount or, if the debentures are converted to semiannual coupon debentures following the occurrence of a tax event, interest on the debentures, will cease to accrue upon conversion, repurchase or redemption of the debentures under the terms of the indenture. The principal amount at maturity of each debenture is payable at the office or agency of the paying agent, in the Borough of Manhattan, The City of New York, which shall initially be an office or agency of the trustee, or any other office of the paying agent maintained for this purpose. You may present debentures for conversion into common stock at the office of the conversion agent. Debentures in definitive form may be presented for exchange for other debentures or registration of transfer at the office of the registrar. The trustee currently serves as paying agent, conversion agent and registrar. We will not impose a service charge for any registration, transfer or exchange of debentures. However, we may require the holder to pay for any tax, assessment or other governmental charge to be paid in connection with any registration, transfer or exchange of debentures. RANKING The debentures constitute subordinated debt and rank junior to all of our senior indebtedness. See "-- Subordination." As of March 31, 2001, we had approximately $643 million of outstanding senior indebtedness. The debentures are our obligations exclusively. Our subsidiaries have no payment obligations under the debentures. Since a substantial portion of our operations are conducted through our subsidiaries, our cash flow and our ability to service our debt, including the debentures, are partially dependent on the earnings of our subsidiaries and the distribution of our subsidiaries' earnings to us. Any dividends, loans or advances to 22 25 us by our subsidiaries may be subject to statutory or contractual restrictions. In addition, our right to receive assets upon a liquidation or reorganization of any subsidiary is effectively subordinated to the claims of that subsidiary's other creditors. As of March 31, 2001, our subsidiaries had approximately $709 million of outstanding indebtedness and other liabilities to which the debentures would be effectively subordinated (including trade and other payables). Our right to receive any assets of our subsidiaries upon their liquidation or reorganization is effectively subordinated to the claims of that subsidiary's creditors (including trade creditors), except to the extent that we are recognized as a creditor of our subsidiary, in which case our claims would still be subordinate to any security interest in the assets of that subsidiary and any indebtedness of that subsidiary senior to that held by us. Neither we nor our subsidiaries are restricted from incurring additional debt under the indenture. SUBORDINATION The debentures are subordinated to the prior payment of all of our senior indebtedness. If we dissolve, wind up, liquidate or reorganize our business, we will repay our senior indebtedness before we make any payment on the debentures. If the debentures are accelerated because of an event of default, we will pay the holders of any senior indebtedness in full before we pay the debenture holders. We must promptly notify the holders of any senior indebtedness if there is an event of default under the indenture. We may not make any payment on the debentures if there is: - a default in the payment of senior indebtedness beyond any applicable grace period; or - any other default of designated senior indebtedness that permits the holders of designated senior indebtedness to accelerate its maturity and the trustee receives a payment blockage notice. We are required to resume payments on the debentures: - in case of any payment default, on the date the default is cured, waived or ceases to exist; and - in the case of any non-payment default, on the earlier of (A) the date the non-payment default is cured, waived, or ceases to exist, and (B) 179 days after the date on which the trustee receives the payment blockage notice. No new period of payment blockage may be commenced unless: - 365 days have elapsed since the initial effectiveness of the immediately preceding payment blockage notice; and - all scheduled payments of principal amount at maturity, issue price, original issue discount, redemption price, repurchase price, Fundamental Change price and interest, if any, on the debentures that have become due and payable have been fully paid in cash. No non-payment default that existed on the date of delivery of any payment blockage notice to the trustee shall be the basis for any later payment blockage notice. 23 26 If the trustee or any debenture holder receives any payment or distribution, then they must hold the payment in trust for the benefit of holders of senior indebtedness. In the event of our bankruptcy, dissolution or reorganization, holders of our senior indebtedness may receive more, ratably, and holders of the debentures may receive less, ratably, than our other creditors. The subordination provisions will not prevent the occurrence of an event of default under the indenture. We pay the trustee reasonable compensation and have agreed to indemnify the trustee against certain liabilities it may incur in connection with its duties. The trustee's claims for compensation and indemnification generally are senior to the claims of debenture holders. The following defined terms have the following meanings when used in this subordination section: "designated senior indebtedness" means senior indebtedness that expressly provides that it is to be "designated senior indebtedness" for purposes of the indenture governing the debentures. The terms of the designated senior indebtedness may condition or limit the right of that particular designated senior indebtedness to exercise the rights conferred to designated senior indebtedness under the indenture "indebtedness" means: (1) all of our indebtedness, obligations and other liabilities, contingent or otherwise, (A) for borrowed money, including overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks or (B) evidenced by bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to the whole of our assets or only to a portion of our assets, other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with obtaining materials or services; (2) all of our obligations, contingent or otherwise, with respect to letters of credit, bank guarantees or bankers' acceptances; (3) all of our obligations, contingent or otherwise, under leases that are required to be accounted for as capitalized leases under generally accepted accounting principles; (4) all of our obligations, contingent or otherwise, under synthetic leases or any other leases or related documents, including purchase agreements, in connection with leases of real property that provide that we are 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 lessor and our obligations under such leases or related documents to purchase or to cause a third person to purchase the leased property; (5) all of our obligations, 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; (6) all direct or indirect guarantees or similar agreements by us in respect of, and all of our obligations, contingent or otherwise, 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 items (1) through (5) above; 24 27 (7) any indebtedness or other obligations described in items (1) through (6) above that are secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by us, regardless of whether the indebtedness or other obligation secured thereby shall have been assembled by us; and (8) any and all deferrals, renewals, extensions and refundings of, or amendments, modification or supplements to, any indebtedness, obligation or liability of the kind described in items (1) through (7) above. "senior indebtedness" means the principal, premium, if any, interest, including any interest accruing after bankruptcy, rent and all fees, costs, expenses and other amounts accrued or due on indebtedness, whether created, incurred, assumed, guaranteed or in effect guaranteed by us, including all deferrals, renewals, extensions, refundings, amendments, modifications or supplements to the above. Senior indebtedness does not include: (1) indebtedness that expressly provides that it shall not be senior in right of payment to the debentures or expressly provides that it is on the same basis or junior to the debentures; (2) indebtedness to any of our majority-owned subsidiaries; and (3) the Zero Coupon Convertible Subordinated Debentures due 2018. CONVERSION OF DEBENTURES BY HOLDERS You may convert your debenture into shares of our common stock at any time prior to maturity. However, if we elect to redeem a debenture, you may convert it only until the close of business on the last trading day prior to a redemption date, unless we fail to pay the redemption price. If you have delivered a repurchase notice exercising your option to require us to repurchase your debenture, you may not convert the debenture unless you withdraw the notice in accordance with the terms of the indenture. Similarly, if you exercise your option to require us to repurchase your debenture upon a Fundamental Change (as defined in the indenture), that debenture may be converted only if you withdraw your election to exercise your option in accordance with the terms of the indenture. You may convert your debentures in whole or in part provided that you convert them in multiples of $1,000 principal amount at maturity. The initial conversion rate is 22.983 shares of common stock per $1,000 principal amount at maturity of debentures, subject to adjustment upon the occurrence of the events described below. If, on conversion, you would be entitled to a fractional share of common stock, you will instead receive cash in an amount equal to the closing price of shares of our common stock on the trading day immediately prior to the conversion date multiplied by such fraction. You will not receive any cash payment on conversion of a debenture representing accrued original issue discount. Instead, accrued original issue discount will be deemed paid in full rather than canceled, extinguished or forfeited. Consequently, our delivery to you of the fixed number of shares of our common stock into which the debenture is convertible, together with the cash payment, if any, in lieu of a fractional share of our common stock, will be deemed to satisfy our obligation to pay the principal amount at maturity of the debenture, including accrued original issue discount attributable to the period from the issue date to the conversion date. We will not adjust the conversion ratio to account for accrued original issue discount. The 25 28 conversion date is the date on which all of the requirements for delivery of the debenture for conversion have been satisfied. The conversion rate is subject to adjustment to prevent dilution upon the occurrence of any one of the following events: (1) the issuance of our common stock as a dividend or distribution on our common stock; (2) the issuance to our stockholders of rights or warrants to purchase our common stock at below market price; (3) certain subdivisions, combinations and reclassifications of our outstanding common stock; (4) distributions to all our common stockholders of our capital stock, debt securities, or other assets, excluding distributions of: - common stock in the manner described in item (1) above; - rights or warrants in the manner described in item (2) above; or - cash in the manner described in item (5) below; (5) cash distributions, excluding any quarterly cash dividend on our common stock if the quarterly distribution does not exceed the greater of: - the cash dividend per share from the previous quarter not requiring an adjustment under this provision, as adjusted to reflect subdivisions or combinations of our common stock; or - 3.75% of the average of the last reported sales price of the common stock during the 10 trading days immediately prior to the dividend declaration date; (6) payment in respect of a tender offer or exchange offer by us or any of our subsidiaries for our common stock if the price per share exceeds the current market price of our common stock on the next trading day after the last date on which tenders or exchanges may be made; and (7) payment in respect of certain tender offers or exchange offers by a third party in which, as of the closing or expiration date of such offer, our board of directors does not recommend rejection of the offer, in which case an adjustment will be made only if: - the tender offer or exchange offer increases the ownership of the person making the offer to more than 25% of our common stock; and - the cash and other consideration paid exceeds the market price of our common stock on the next trading day after the last date on which tenders or exchanges may be made. If an adjustment were required to be made under item (5) above as a result of a quarterly distribution, the adjustment would be based upon the amount by which the cash distributed exceeded the maximum quarterly dividend permitted under that item. If an adjustment were required to be made under item (5) as 26 29 result of a distribution other than a quarterly dividend, the adjustment would be based upon the full amount of cash distributed. The adjustment referred to in item (7) above will not be made if, as of the closing of the tender offer or exchange offer, the offering documents disclose a plan or an intention to cause us to engage in consolidation, merger or sale of all or substantially all our assets. Rights or warrants distributed by us to all of our holders of common stock entitling the holder to subscribe for or purchase shares of our capital stock upon the occurrence of one or more specified trigger events shall not be deemed distributed for purposes of (4) above until the last to occur of those trigger events if the rights or warrants: - automatically transfer along with shares of our common stock; - are not exercisable; and - are to be issued along with future issuances of our common stock. If our common stockholders become entitled to receive stock, other securities, property, cash or other assets upon any reclassification of our common stock, any consolidation or merger involving us, or any sale to another entity of substantially all of our assets, then you will generally be able to convert your debentures into the same type of consideration received by our common stockholders in an amount equal to what you would have received had you done so immediately prior to the triggering event. We may increase the conversion rate for a period of at least 20 days so long as: - the increase remains irrevocable during that period; and - our board of directors determines that the increase is in our best interest, which determination shall be conclusive. We must give at least seven days' advance notice of any increase in the conversion rate. In addition to increases in the conversion rate of the type described above, we may increase the conversion rate as we deem advisable to avoid or diminish any income tax to holders of our common stock resulting from any dividend or distribution of our stock, or rights to acquire stock, or from any event treated as a dividend, distribution or right to acquire our stock for income tax purposes. See "Certain United States Federal Income Tax Considerations." No adjustment in the conversion rate will be required unless the adjustment would require a change of at least 1% in the conversion rate then in effect; provided that any adjustment that would otherwise be required to be made will 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 our common stock, any securities convertible into or exchangeable for our common stock or any rights to purchase any of the foregoing. If, following a tax event, we exercise our option to have interest accrue on a debenture in lieu of original issue discount, you will be entitled to receive on conversion the same number of shares of common stock that you would have received had we not exercised our option. If we exercise our option, debentures surrendered for conversion during the period from the close of business on the record date next preceding the 27 30 next interest payment date to the opening of business on the next interest payment date (except debentures to be redeemed on the next interest payment date) must also be accompanied by an amount equal to the accrued and unpaid interest on the debenture that you are to receive. Except where debentures surrendered for conversion must be accompanied by the payment described in this paragraph, no interest on converted debentures will be payable by us on any interest payment date subsequent to the date of conversion. See "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event." In the event of a taxable distribution to our common stockholders or in certain other circumstances requiring an adjustment to the conversion rate, the debenture holders 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 an adjustment may result in a taxable dividend to the holders of common stock. See "Certain United States Federal Income Tax Considerations." REDEMPTION OF DEBENTURES AT OUR OPTION We may not redeem the debentures before May 23, 2006. Beginning on May 23, 2006, we may redeem the debentures for cash in whole or in part at any time, by mailing a redemption notice to the debenture holders not less than 30 days nor more than 60 days prior to the redemption date. The redemption price will be an amount in cash equal to 100% of the sum of: - $391.06, the original issue price per $1,000 principal amount; and - accrued original issue discount up to and including the date of redemption. The debentures are redeemable in multiples of $1,000 principal amount at maturity. There is no sinking fund for the debentures. The table below shows redemption prices of debentures per $1,000 principal amount at maturity at May 23, 2006, and at each May 23 thereafter until maturity on May 23, 2021. These redemption prices reflect accrued original issue discount up to and including each redemption date. The redemption price of debentures redeemed between any two of the dates listed below would include an additional amount reflecting original issue discount accrued from the next preceding redemption date through the actual date of redemption.
(2) ACCRUED ORIGINAL (1) ISSUE (3) DEBENTURE DISCOUNT AT REDEMPTION DATE ISSUE PRICE 4.75% PRICE(1) + (2) - ---- ----------- ----------- -------------- May 23, 2006......................................... $ 391.06 $ 103.46 $ 494.52 May 23, 2007......................................... 391.06 127.23 518.29 May 23, 2008......................................... 391.06 152.14 543.20 May 23, 2009......................................... 391.06 178.25 569.31 May 23, 2010......................................... 391.06 205.61 596.67 May 23, 2011......................................... 391.06 234.29 625.35 May 23, 2012......................................... 391.06 264.35 655.41 May 23, 2013......................................... 391.06 295.85 686.91 May 23, 2014......................................... 391.06 328.87 719.93 May 23, 2015......................................... 391.06 363.47 754.53 May 23, 2016......................................... 391.06 399.73 790.79 May 23, 2017......................................... 391.06 437.74 828.80
28 31 May 23, 2018......................................... 391.06 477.58 868.64 May 23, 2019......................................... 391.06 519.33 910.39 May 23, 2020......................................... 391.06 563.09 954.15 At Stated Maturity (May 23, 2021).................... 391.06 608.94 1,000.00
If we elect to convert the debentures to semiannual coupon debentures following a tax event, the debentures will be redeemable at the Restated Principal Amount (as described below in "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event") plus accrued and unpaid interest, if any, to the applicable redemption date. If less than all of the outstanding debentures held in certificated form are to be redeemed, the trustee will select the debentures held in certificated form to be redeemed in principal amounts at maturity of $1,000 or integral multiples thereof by lot, pro rata or by another method the trustee considers fair and appropriate. If a portion of your certificated debentures is selected for partial redemption and you convert a portion of your debentures, the converted portion will be deemed to be the portion selected for redemption. Debentures registered in the name of DTC or its nominee will be redeemed as described under the caption entitled "Book-Entry System." REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER You have the right to require us to repurchase the debentures as of May 23, 2006, May 23, 2011 and May 23, 2016. The purchase price payable for a debenture will be equal to the issue price plus accrued original issue discount through the repurchase date. If, prior to the repurchase date, we have elected to convert the debentures to semiannual coupon debentures following a tax event, the purchase price will be equal to the Restated Principal Amount plus accrued and unpaid interest to the repurchase date. See "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event." The table below shows the purchase prices of a debenture as of the specified repurchase dates.
REPURCHASE DATE PURCHASE PRICE - --------------- -------------- May 23, 2006......................................... $ 494.52 May 23, 2011......................................... 625.35 May 23, 2016......................................... 790.79
We may, at our option, elect to pay the repurchase price in cash, in shares of our common stock or in any combination of the two. For a discussion of the tax treatment of debenture holders receiving cash, shares of our common stock or both, see "Certain Federal Income Tax Considerations." If we elect to pay the repurchase price, in whole or in part, in shares of our common stock, the number of shares to be delivered in exchange for the portion of the repurchase price to be paid in our common stock will be equal to that portion of the repurchase price divided by the market price (as defined below) of our common stock. We will not, however, deliver fractional shares in repurchases using shares of our common stock as consideration. Debenture holders who would otherwise be entitled to receive fractional shares will instead receive cash in an amount equal to the market price of a share of our common stock multiplied by such fraction. We will be required to repurchase any outstanding debenture for which you deliver a written repurchase notice to the paying agent. This notice must be delivered during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date until the close of business on the repurchase date. If a repurchase notice is given and withdrawn during that period, we will not 29 32 be obligated to repurchase the debentures listed in the notice. Our repurchase obligation will be subject to certain additional conditions. The paying agent initially will be the trustee. Your repurchase notice must state: (1) if certificated debentures have been issued, the debenture certificate numbers (or, if your debentures are not certificated, your repurchase notice must comply with appropriate DTC procedures); (2) the portion of the principal amount at maturity of debentures to be repurchased, which must be in $1,000 multiples; (3) that the debentures are to be repurchased by us pursuant to the applicable provisions of the debentures and the indenture; and (4) your election, in the event that we decide to pay all or a portion of the repurchase price in shares of our common stock but prove unable to satisfy the conditions for common stock payment and ultimately have to pay cash, to: - withdraw your repurchase notice with respect to all or a portion of the debentures listed therein; or - receive cash for the entire purchase price for all the debentures listed in your repurchase notice. If you fail to indicate your election under item (4) above, you will be deemed to have elected to receive cash for the entire purchase price for all the debentures listed in your repurchase notice. You may withdraw any written repurchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the repurchase date. Your withdrawal notice must state: - the principal amount at maturity of the withdrawn debentures; - if certificated debentures have been issued, the certificate numbers of the withdrawn debentures (or, if your debentures are not certificated, your withdrawal notice must comply with appropriate DTC procedures); and - the principal amount at maturity, if any, which remains subject to the repurchase notice. We must give notice of an upcoming repurchase date to all debenture holders not less than 20 business days prior to the repurchase date at their addresses shown in the register of the registrar. We will also give notice to beneficial owners as required by applicable law. This notice will state, among other things: - whether we will pay the purchase price of the debentures in cash, shares of our common stock, or both (in which case the relative percentages will be specified); - if we elect to pay all or a portion of the repurchase price in shares of our common stock, the method by which we are required to calculate "market price" of the common stock; and 30 33 - the procedures that holders must follow to require us to repurchase their debentures. The "market price" means the average sale price of our common stock for the five trading days ending on the third business day prior to the applicable repurchase date (assuming the third business day prior to the applicable repurchase date is a trading day, or if not, the five trading days ending on the last trading day prior to the third business day), appropriately adjusted to take into account the occurrence of certain events that would result in an adjustment of the conversion rate with respect to our common stock. The "sale price" of our common stock on any date means the closing sale price per share of our common stock on that date (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) as reported on the Nasdaq's National Market or, if our common stock is listed on a United States national or regional securities exchange, as reported in composite transactions for the principal United States securities exchange on which our common stock is traded. Because the market price of our common stock will be determined prior to the applicable repurchase date, debenture holders bear the market risk that our common stock will decline in value between the date the market price is calculated and the repurchase date. We may pay the repurchase price or any portion of the repurchase price in shares of our common stock only if our common stock is listed on a United States national securities exchange or quoted in an inter-dealer quotation system of any registered United States national securities association. Upon determination of the actual number of shares of our common stock to be issued in accordance with the foregoing provisions, if required, we will notify the securities exchanges or quotation systems on which our common stock is then listed or quoted and disseminate the number of shares to be issued on our website or through another public medium. Our right to repurchase your debentures, in whole or in part, with shares of our common stock is subject to various conditions, including: - registration of the shares of our common stock to be issued upon repurchase under the Securities Act and the Exchange Act, if required; and - qualification or registration of the shares of our common stock to be issued upon repurchase under applicable state securities laws, if necessary, or the availability of an exemption therefrom. If these conditions are not satisfied by a repurchase date, we will pay the purchase price of the debentures to be repurchased entirely in cash. We may not change the form or components or percentages of components of consideration to be paid for the debentures once we have given the debenture holders the required notice, except as described in the preceding sentence. Payment of the repurchase price for a debenture for which a repurchase notice has been delivered and not withdrawn is conditioned upon book-entry transfer or delivery of the 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, at any time after delivery of the repurchase notice. Payment of the repurchase price for the debenture will be made promptly following the later of the repurchase date and the time of book-entry transfer or delivery of the debenture. If the paying agent holds money or securities sufficient to pay the repurchase price of the debenture on the business day following the repurchase date, then, on and after the date: 31 34 - the debenture will cease to be outstanding; - original issue discount (or, if the debentures have been converted to interest-bearing debentures following a tax event, interest) will cease to accrue; and - all other rights of the holder will terminate. This will be the case whether or not book-entry transfer of the debenture has been made or the debenture has been delivered to the paying agent, and all other rights of the debenture holder will terminate, other than the right to receive the repurchase price upon delivery of the debenture. Our ability to repurchase debentures with cash may be limited by the terms of our then-existing loan or credit agreements. The indenture will prohibit us from repurchasing debentures for cash from debenture holders if any event of default under the indenture has occurred and is continuing, except a default in the payment of the repurchase price with respect to the debentures. Even though we become obligated to repurchase any outstanding debenture on a repurchase date, we may not have sufficient funds to pay the repurchase price on that repurchase date. If this were to occur, we could be required to issue shares of our common stock to pay the repurchase price at valuations based on then prevailing market prices for all debentures tendered by their holders. We will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act that may be applicable at the time of the tender offer. We will file a Schedule TO or any other schedule required in connection with any offer by us to repurchase the debentures. REPURCHASE AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE If we undergo a Fundamental Change (as defined below), you will have the option to require us to purchase for cash any or all of your debentures on a purchase date that is 30 days after the date we provide you with notice of such Fundamental Change. We will pay a purchase price equal to the issue price plus accrued original issue discount through the purchase date or, if applicable, the Restated Principal Amount plus accrued and unpaid interest to the date of purchase. You may require us to purchase all or any part of your debentures provided that the principal amount at maturity of the debentures being purchased is an integral multiple of $1,000. A "Fundamental Change" is the occurrence of any transaction or event in connection with which all or substantially all of our common stock will be exchanged for, converted into, acquired for or constitute solely the right to receive (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or any other method) any form of consideration 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's National Market or any similar United States system of automated dissemination of quotations of securities prices. In order to exercise your right to require us to repurchase your debentures upon a Fundamental Change, you must deliver a written notice to the paying agent prior to the close of business on the business day prior to the date on which the debentures are to be repurchased. You may withdraw the notice by delivering a written withdrawal notice to the paying agent before the repurchase date. On or before the 32 35 10th day following a Fundamental Change, we are required to mail to the trustee and all debenture holders of record a written notice: - stating that a Fundamental Change has occurred; and - explaining the repurchase rights that have arisen as a consequence of the Fundamental Change. To exercise your repurchase right, you must deliver to us (or our designated agent) within 30 days after the date of our Fundamental Change notice: - written notice of your election to exercise your repurchase right; and - the debentures to be repurchased duly endorsed for transfer. Payment for debentures surrendered for repurchase (and not withdrawn) prior to the expiration of the 30-day period will be made promptly following the repurchase date. You may withdraw any written repurchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the repurchase date. The withdrawal notice must state: - the principal amount at maturity of the withdrawn debentures; - if certificated debentures have been issued, the certificate numbers of the withdrawn debentures (or, if your debentures are not certificated, your withdrawal notice must comply with appropriate DTC procedures); and - the principal amount at maturity, if any, which remains subject to the repurchase notice. If, following a tax event, we have previously exercised our option to pay interest on the debentures instead of accruing original issue discount, we will purchase the debentures at a cash price equal to the Restated Principal Amount plus accrued and unpaid interest from the date we exercised our option. See "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event." In the event of a Fundamental Change, we will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act that may be applicable at the time we repurchase the debentures. We will also file a Schedule TO or any other schedule required in connection with any offer by us to repurchase the debentures. The repurchase rights of the debenture holders could discourage a potential acquirer from acquiring us, but the Fundamental Change repurchase feature does not result from management's knowledge of any potential acquirer's attempt to obtain control of us, and is not part of an anti-takeover strategy on the part of management. The term "Fundamental Change" is limited to specific types of transactions and does not include other events that might adversely affect our financial condition. Moreover, the Fundamental Change repurchase feature may not protect you in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving or affecting us. 33 36 Our ability to repurchase debentures with cash following a Fundamental Change may be limited by the terms of our then-existing loan or credit agreements. No debentures may be repurchased 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. However, debentures may be repurchased if the event of default is in the payment of the Fundamental Change purchase price with respect to the debentures. MERGERS AND SALES OF ASSETS We may not consolidate with or merge into any other entity or convey, transfer or lease substantially all of our assets to another entity, unless: - the successor entity, if other than Atmel Corporation, assumes all of our obligations under the debentures and the indenture; - the successor entity is organized and existing under the laws of the United States or any State thereof or the District of Columbia; - we or the successor entity will not immediately thereafter be in default under the indenture. Upon the assumption of our obligations by a successor entity as described above, we will be discharged from all obligations under the debentures and the indenture, subject to certain exceptions. Some transactions that would constitute a Fundamental Change would permit each debenture holder to require us to repurchase their debentures as described under "-- Repurchase at Option of the Holder Upon a Fundamental Change." OPTIONAL CONVERSION TO SEMIANNUAL COUPON DEBENTURES UPON A TAX EVENT We have the option to convert the debentures to interest-bearing debentures following a tax event. From and after the date a tax event occurs, we may elect to pay interest at 4.75% per year on the debentures instead of accruing original issue discount. The principal amount will be restated as the sum of (A) the issue price and (B) the amount of original issue discount accrued up to the date we exercise our conversion option. This "Restated Principal Amount" will then be the amount due at maturity. If we elect this option, interest will be based on a 360-day year comprised of twelve 30-day months. Interest will accrue from the date we exercise our conversion option and will be payable semiannually on each May 23 and November 23 to holders of record on the immediately preceding May 8 and on November 8, respectively. A tax event occurs when we receive an opinion from tax counsel stating that, for United States federal income tax purposes, there is more than an insubstantial risk that all or a portion of the interest, including original issue discount, payable on the debentures would not be deductible by us either (A) on a current accrual basis or (B) under any other method, as a result of either: - any amendment, change or announced prospective change in the laws or regulations of the United States or any of its political subdivisions or taxing authorities; or - any amendment, change, interpretation or application of the laws or regulations by any legislative body, court, government agency or regulatory authority. 34 37 EVENTS OF DEFAULT; NOTICE AND WAIVER If an event of default has occurred and is continuing, the indenture provides that either the trustee or the holders of at least 25% in aggregate principal amount at maturity of the debentures then outstanding may declare due and payable: - the issue price of the debentures (or, if the debentures are converted to interest-bearing debentures following a tax event, the Restated Principal Amount); plus - original issue discount accrued and unpaid on the debentures to the date of the declaration (or, if the debentures are converted to interest-bearing debentures following a tax event, interest accrued and unpaid on the debentures to the date of the declaration); plus - any Additional Interest owing under the Registration Rights Agreement. In the case of certain events of bankruptcy or insolvency, the issue price plus original issue discount accrued and unpaid on the debentures to the date of the event (or, if the debentures are converted to interest-bearing debentures following a tax event, the Restated Principal Amount plus interest accrued and unpaid on the debentures to the date of the event) will automatically become immediately due and payable. Under circumstances specified in the indenture, the holders of a majority in aggregate principal amount at maturity of the outstanding debentures may rescind any acceleration of the debentures so that they will not become immediately due and payable. Cash interest will accrue at the rate of 4.75% per annum and be payable on demand upon a default in the payment of any redemption price or purchase price and, after acceleration, of the issue price plus accrued original issue discount (or, if the debentures are converted to interest-bearing debentures following a tax event, Restated Principal Amount plus accrued interest) to the extent such payment of the interest is legally enforceable. Original issue discount or, if the debentures are converted to semiannual coupon debentures following the occurrence of a tax event, interest on the debentures (except as provided in the first sentence of this paragraph) will cease to accrue after declaration of acceleration. The following constitute events of default under the indenture with respect to the debentures: (1) our failure to pay any of the following when each becomes due and payable: - the principal amount of the debentures (or, if the debentures have been converted to interest-bearing debentures following a tax event, the Restated Principal Amount) at stated maturity; - the issue price; - accrued and unpaid original issue discount (or, if the debentures have been converted to interest-bearing debentures following a tax event, accrued and unpaid interest); - redemption price; - repurchase price; or 35 38 - Fundamental Change purchase price; (2) our failure for 30 days to pay any Additional Interest (under the Registration Rights Agreement) due to all holders of registrable securities or interest (assuming conversion of the debentures to interest-bearing debentures following a tax event) due on the debentures; (3) our failure to comply with any of our covenants or agreements set forth in the indenture or the debentures for 90 days after written notice by the trustee or by the holders of at least 25% in principal amount at maturity of the outstanding debentures; (4) certain events involving our bankruptcy, insolvency or reorganization. The trustee will give notice to the debenture holders of any continuing default known to the trustee within 90 days after it occurs. However, the trustee may withhold notice to the debenture holders of any default or event of default, except for defaults in any payment on the debentures, if the trustee considers it in the best interest of the debenture holders to do so. The holders of a majority in aggregate principal amount at maturity of the outstanding debentures may direct the time, place and method of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. However, such direction may not conflict with any law or the indenture and will be subject to certain other limitations. Before exercising any right or power under the indenture at the direction of the debenture holders, the trustee will be entitled to receive security or indemnity satisfactory to the trustee against the costs, expenses and liabilities incurred by the trustee in complying with the direction of the debenture holders. No debenture holder will have any right to pursue any remedy with respect to the indenture or the debentures unless: (1) the debenture holder has previously given us and the trustee written notice of a continuing event of default; (2) the holders of at least 25% in aggregate principal amount at maturity of the outstanding debentures have made a written request to the trustee to pursue the remedy; (3) the debenture holder or holders have offered the trustee indemnity satisfactory to the trustee; (4) the holders of a majority in aggregate principal amount at maturity of the outstanding debentures have not given the trustee a direction inconsistent with the request within 60 days of the trustee's receipt of the request; and (5) the trustee has failed to comply with the request within a 60-day period. However, none of the following rights of any debenture holder may be impaired or adversely affected without the debenture holder's consent: (1) the right to receive payments of principal (including the issue price and accrued original issue discount) or Additional Interest (as defined in the Registration Rights Agreement), interest in respect of any default in payment under a debenture on or after the due date; (2) the right to institute suit for the enforcement of any payments or conversion; or 36 39 (3) the right to convert debentures. The holders of at least a majority in aggregate principal amount at maturity of the outstanding debentures may waive an existing default and its consequences, other than: - any default in any payment on the debentures; - any default with respect to the conversion rights of the debentures; or - 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 under the caption entitled "-- Modification and Waiver" below. We will be required to furnish to the trustee annually a statement as to any default by us in the performance and observance of our obligations under the indenture. MODIFICATION AND WAIVER We may amend, modify or supplement the indenture with the consent of the holders of not less than majority in aggregate principal amount at maturity of all outstanding debentures. Notwithstanding the foregoing, no amendment may, without the consent of each holder affected: (1) reduce the principal amount at maturity, issue price, redemption price, repurchase price or Fundamental Change purchase price; (2) extend the stated maturity of any debenture; (3) alter the manner or rate of accrual of original issue discount, Additional Interest (under the Registration Rights Agreement), interest, if any; (4) make any debenture payable in money or securities of a type other than that stated in the debentures; (5) impair the right to institute suit for payment under, or conversion of, the debentures; (6) reduce the percentage in principal amount at maturity of the outstanding debentures the consent of whose holders (A) is required for any such amendment, modification or supplement, or (B) is required for any waiver provided for in the indenture; (7) reduce the quorum or voting requirements under the indenture; (8) change any obligation of Atmel to maintain an office or agency in the places and for the purposes specified in the indenture; (9) make any change that adversely affects the right to convert any debenture or the right to require us to repurchase a debenture or the right to require us to repurchase a debenture upon a Fundamental Change; 37 40 (10) modify the provisions of the indenture affecting the subordination of the indentures in a manner adverse to the debenture holders; or (11) subject to specified exceptions, modify certain of the provisions of the indenture relating to modification or waiver of provisions of the indenture. The indenture also provides for certain modifications of its terms without the consent of the holders. FORM, EXCHANGE, REGISTRATION AND TRANSFER The debentures were issued in registered form, without interest coupons. We will not charge a service charge for any registration of transfer or exchange of the debentures. We may, however, require the payment of any tax or other governmental charge payable for that registration. Debentures are exchangeable for other debentures, for the same total principal amount and for the same terms but in different authorized denominations in accordance with the indenture. Holders may present debentures for registration of transfer at the office of the security registrar or any transfer agent we designate. The security registrar or transfer agent will effect the transfer or exchange when it is satisfied with the documents of title and identity of the person making the request. We have appointed the trustee as security registrar for the debentures. We may at any time rescind that designation or approve a change in the location through which any registrar acts. We are required to maintain an office or agency for transfers and exchanges in each place of payment. We may at any time designate additional registrars for the debentures. In the case of any redemption, the security registrar will not be required to register the transfer or exchange of any debenture either: - during a period beginning 15 business days prior to the expected mailing of the relevant notice of redemption and ending on the close of business on the day of mailing of such notice; or - if the debentures have been called for redemption, in whole or in part, except the unredeemed portion of any debenture being redeemed in part. PAYMENT AND PAYING AGENTS Payments on the debentures not made in shares of our common stock will be made in U.S. dollars at the office of the trustee. At our option, however, we may make payments by check mailed to the holder's registered address or, with respect to global debentures, by wire transfer. We will make interest payments to the person in whose name the debenture is registered at the close of business on the record date for the interest payment. We initially designated the trustee as our paying agent for payments on debentures. We may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any paying agent acts. Subject to the requirements of any applicable abandoned property laws, the trustee and paying agent shall pay to us upon written request any money held by them for payments on the debentures that remain unclaimed for two years after the date upon which that payment has become due. After payment to us, 38 41 holders entitled to the money must look to us for payment. In that case, all liability of the trustee or paying agent with respect to that money will cease. BOOK-ENTRY SYSTEM The debentures are represented by one or more global securities (each a "global security"). Each global security was deposited with, or on behalf of, The Depository Trust Company and registered in the name of a nominee of DTC. Except under circumstances described below, the debentures will not be issued in definitive form. Upon the issuance of each global security, DTC credited on its book-entry registration and transfer system the accounts of persons designated by the initial purchasers with the respective principal amounts of the debentures represented by the global security. Ownership of beneficial interests in a global security will be limited to persons that have accounts with DTC or its nominee ("participants") or persons that may hold interests through participants. Ownership of beneficial interests in a global security will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of the securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a global security. So long as DTC or its nominee is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the debentures represented by that global security for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global security will not be entitled to have debentures represented by that global security registered in their names, will not receive or be entitled to receive physical delivery of debentures in definitive form and will not be considered the owners or holders thereof under the indenture. Principal and interest payments, if any, or payments of the redemption price or the purchase price on debentures registered in the name of DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner of the relevant global security. Neither we, the trustee, any paying agent nor the registrar for the debentures will have any responsibility or liability for any aspect of the records relating to, nor payments made on account of, beneficial interests in a global security or for maintaining, supervising or reviewing any records relating to such beneficial interests. We expect that DTC or its nominee, upon receipt of any payment of principal or interest, if any, or payments of the redemption price or the purchase price will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the relevant global security as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in a global security held through such participants will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If DTC is at any time unwilling or unable to continue as a depositary and a successor depositary is not appointed by us within 90 days, we will issue debentures in definitive form in exchange for the entire global security for the debentures. In addition, we may at any time and in our sole discretion determine not to have debentures represented by a global security and, in such event, will issue debentures in definitive form in exchange for the entire global security relating to such debentures. In any such instance, an owner of beneficial interest in a global security will be entitled to physical delivery in definitive form of debentures represented by such global security equal in principal amount to such beneficial interest and to have such 39 42 debentures registered in its name. Debentures so issued in definitive form will be issued as registered debentures in denominations of $1,000 and integral multiples thereof, unless otherwise specified by us. DTC has advised us that 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 the accounts of its participants. This practice eliminates 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. Some of the 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 security among participants, it is under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. 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 will be sent to Cede & Co., 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 the debentures in accordance with its procedures. Holders of debentures may not request certificated debentures and certificated debentures will not be issued, except at our option or in exchange for debentures represented by the global debenture if no successor depositary is appointed by us as set forth above in the fifth paragraph under this caption. See the description under "Certain United States Federal Income Tax Considerations" for a discussion of certain tax considerations relevant to a holder of debentures. REGISTRATION RIGHTS We have agreed pursuant to a Registration Rights Agreement with the initial purchasers, for the benefit of the holders of the debentures and our common stock issuable on conversion of the debentures, that we will, at our cost: (1) use our reasonable efforts to file, as promptly as practicable, but in any event within 90 days after the first date of initial issuance of the debentures, a registration statement, which we 40 43 refer to as the "Shelf Registration Statement," covering resales of the "Registrable Securities" (as defined below); (2) use our reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as promptly as practicable, but no later than 180 days after the first date of initial issuance of the debentures; and (3) use our reasonable efforts to keep the Shelf Registration Statement effective after its effective date until the date which is the earlier of: - the second anniversary of the effective date of the registration statement or the expiration of such other holding period as may be applicable under Rule 144(k) under the Securities Act or any successor rule or regulation; and - such time as all of the Registrable Securities have been sold pursuant to the Shelf Registration Statement or transferred pursuant to Rule 144 under the Securities Act. We filed the registration statement, of which this prospectus forms a part, to satisfy our obligation to file the Shelf Registration Statement under the Registration Rights Agreement. We use the term "Registrable Securities" to refer to the debentures and the shares of our common stock issuable upon conversion of the debentures until the earliest of: - the effective registration under the Securities Act and resale of all such securities in accordance with the registration statement; - the expiration of the applicable holding period under Rule 144(k), which is currently two years from the date the securities were acquired from the issuer or its affiliate; or - the sale of all such securities pursuant to Rule 144 under the Securities Act, or any similar provision then in force. Notwithstanding the foregoing, we will be permitted to suspend the use of the prospectus that is part of the Shelf Registration Statement (without incurring any obligation to pay Additional Interest) for: - 30 days in the aggregate for any three-month period; and - 90 days in the aggregate for any 12-month period. In the event of a material acquisition, financing, recapitalization or other similar transaction, we may extend the period of suspension for an additional 30 days, not to exceed 60 days in any three-month period. If we suspend the use of the prospectus or extend the period of suspension, we will provide all registered debenture holders with written notice thereof. We will provide each debenture holder for whom the Shelf Registration Statement was filed with: - copies of the prospectus that is a part of the Shelf Registration Statement; and - notice when the Shelf Registration Statement has become effective. 41 44 We will also take certain other actions required to permit resales to third parties of the debentures and shares of our common stock issuable on conversion thereof. Beneficial holders selling securities pursuant to the Shelf Registration Statement generally will be: - required to be named as selling securityholders in the related prospectus; - subject to the prospectus delivery requirements and civil liability provisions of the Securities Act; and - bound by certain provisions (including indemnification obligations) of the Registration Rights Agreement. "Additional Interest" will accrue on the debentures and any shares of our common stock into which the debentures were previously converted that are, in each case, Registrable Securities, if: (1) on or prior to the 180th day after the first date of initial issuance of the debentures, the Shelf Registration Statement has not been declared effective by the SEC; or (2) subject to our rights to suspend the use of the prospectus included in the Shelf Registration Statement as described above, after the Shelf Registration Statement has been declared effective, the Shelf Registration Statement ceases to be effective or usable in connection with resales of debentures and the common stock issuable upon the conversion thereof that are Registrable Securities in accordance with and during the periods specified in the Registration Rights Agreement. We refer to each event referred to in items (1) and (2) above as a "Registration Default." If Additional Interest accrues under the Registration Rights Agreement, it will accrue from and including the date on which each Registration Default occurs up to but excluding the date on which the Registration Default is cured at a rate of: - in respect of transfer of restricted debentures, 0.5% per annum of the principal amount at maturity of the debentures plus accrued but unpaid original issue discount (or, if the debentures have been converted to interest-bearing debentures following a tax event, accrued but unpaid interest); and - in respect of transfer of restricted shares of our common stock into which debentures have been converted, 0.5% per annum of the "applicable conversion price." The term "applicable conversion price" refers to the original issue price of a debenture plus accrued original issue discount to the date of calculation divided by the conversion rate as then in effect. Payment of Additional Interest constitutes liquidated damages and will not give rise to an event of default under the indenture. We will have no other liabilities with respect to our registration obligations for which Additional Interest is provided. This summary of certain provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which is available from us upon request. 42 45 INFORMATION CONCERNING THE TRUSTEE We appointed State Street Bank and Trust Company of California, N.A., as trustee under the indenture, and as paying agent, conversion agent, registrar and custodian with regard to the debentures. State Street Bank and Trust Company of California, N.A. is also the trustee for our Zero Coupon Convertible Subordinated Debentures due 2018. 43 46 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of Atmel consists of 1,600,000,000 shares of common stock and 5,000,000 shares of preferred stock, 500,000 shares of which are designated Series A preferred stock. The following summary of certain provisions of our common stock and preferred stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of our amended and restated certificate of incorporation, amended and restated bylaws, and amended and restated preferred shares rights agreement, dated as of October 18, 1999, which are incorporated by reference in the registration statement of which this prospectus forms a part, and by the provisions of applicable law. COMMON STOCK. The holders of shares of common stock are entitled to one vote per share on all matters to be voted on by stockholders. Stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the shares voting are able to elect all directors. Subject to preferences of any preferred stock that may be issued in the future, the holders of Atmel common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of funds legally available for that purpose, as well as any distributions to the stockholders. In the event of liquidation, dissolution or winding up of Atmel, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the prior liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Atmel common stock. We have issued the holders of our common stock certain rights to purchase our Series A preferred stock pursuant to the amended and restated preferred shares rights agreement that could delay, defer or prevent a change of control of Atmel in a transaction not approved by the board of directors. PREFERRED STOCK The Atmel board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series, and to fix the rights, preferences, privileges and restrictions thereof, and the number of shares constituting any series or the designation of such series, subject to our obligation under the amended and restated preferred shares rights agreement to use best efforts to keep reserved and authorized that number of shares of Series A preferred stock sufficient to permit the exercise in full of outstanding rights. The rights, preferences and privileges of our preferred stock may include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, and sinking fund terms, any or all of which may be greater than the rights of common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of Atmel and could impair the voting and other rights of the holders of our common stock. As of March 31, 2001, no shares of preferred stock were issued and outstanding. PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAWS Our certificate of incorporation provides that Atmel elects not to be governed by Section 203 of the Delaware General Corporation Law, so we are not subject to the provisions of Section 203 regulating corporate takeovers. This section prevents Delaware corporations from engaging, under limited 44 47 circumstances, in a business combination, which includes a merger or sale of more than 10% of the corporation's assets, with any interested stockholder, which is a stockholder who owns 15% or more of the corporation's outstanding voting stock, as well as affiliates and associates of stockholders, for three years following the date that the stockholder became an interested stockholder unless certain conditions are met. Provisions of our certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire control of Atmel. These provisions require certain advance notice of stockholder proposals and director nominations, and provide that no action may be taken by stockholders by written consent, no stockholder may cumulate votes in the election of directors, and only the board of directors, the chairman or the president may call special meetings of stockholders. These provisions may make it more difficult for stockholders to take specific corporate actions and could have an effect of delaying or preventing a change in control of Atmel. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is EquiServe, L.P. Its address is 150 Royall Street, Canton, Massachusetts 02021, and its telephone number is (781) 575-2000. 45 48 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS This section summarizes some of the U.S. federal income tax considerations relating to the purchase, ownership, and disposition of the debentures and of common stock into which the debentures may be converted. This summary does not provide a complete analysis of all potential tax considerations. The information provided below is based on existing authorities. These authorities may change, or the Internal Revenue Service (the "IRS") might interpret the existing authorities differently. In either case, the tax consequences of purchasing, owning or disposing of debentures or common stock could differ from those described below. The summary generally applies only to holders that hold the debentures or common stock as "capital assets" (generally, for investment). The summary generally does not address tax considerations that may be relevant to particular investors because of their specific circumstances, or because they are subject to special rules. Finally, the summary does not describe the effect of the federal estate and gift tax laws or the effects of any applicable foreign, state, or local laws. INVESTORS CONSIDERING THE PURCHASE OF DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FEDERAL ESTATE OR GIFT TAX LAWS, FOREIGN, STATE, OR LOCAL LAWS, AND TAX TREATIES. ORIGINAL ISSUE DISCOUNT Because the debentures do not provide for payments of fixed periodic interest, they will be sold at discount from their principal amount. Holders will in effect receive interest at maturity, unless the debentures are converted or redeemed before then, by receiving a principal amount greater than the issue price of the debentures. Because this excess of principal over issue price is economically equivalent to interest, the U.S. tax rules require that this amount (referred to as "original issue discount," or "OID") be recognized as interest income over the term of the debentures. The amount of accrued interest for each period is determined under a constant yield method, so that the accrued interest for any period equals a constant percentage of the holder's investment (including the original purchase price of the debenture plus any previously accrued interest). Because the holder's investment increases each period, the amount of interest income for each period will increase as the debentures get closer to maturity. We will be required to furnish annually to the IRS and to certain noncorporate holders information regarding the amount of original issue discount allocable to the year. For this purpose, we will use six-month accrual periods that begin or end on the maturity date of the debentures. MARKET DISCOUNT; ACQUISITION PREMIUM If a U.S. holder purchases a debenture at a discount that is greater than the discount at which the debentures were initially issued (that is, the holder pays an amount that is less than the sum of the issue price of the debenture and previously accrued OID), the holder will generally be subject to special rules that apply to "market discount." These rules will generally require the holder to treat as ordinary income that portion of any gain recognized on a sale or other disposition of debentures attributable to accrued market discount. The market discount rules may require the deferral of deductions of any interest on a borrowing incurred or continued to purchase or carry a debenture. The interest deferral rule will not apply, however, if the holder elects to include market discount in income currently as it accrues. 46 49 If a U.S. holder purchases a debenture at a discount that is less than the discount at which the debentures were initially issued (that is, the holder pays an amount that is less than the principal amount but more than the sum of the issue price and previously accrued OID), the holder will be allowed to reduce the amount of OID that would otherwise be treated as interest income, to reflect the "acquisition premium" paid by the holder. SALE, EXCHANGE OR REDEMPTION OF THE DEBENTURES Except as described below, a holder will recognize capital gain or loss if the holder disposes of debenture in a sale, redemption or exchange other than a conversion of the debenture into common stock. The holder's gain or loss will equal the difference between the proceeds received by the holder and the holder's adjusted tax basis in the debenture. The proceeds received by the holder will include the amount of any cash and the fair market value of any other property received for the debenture. The holder's tax basis in the debenture will generally equal the amount the holder paid for the debenture, increased by previously accrued original issue discount. The gain or loss recognized by a holder on a disposition of the debenture will be long-term capital gain or loss if the holder held the debenture for more than one year. Long-term capital gains of individual taxpayers are generally taxed at a maximum rate of 20 percent. The deductibility of capital losses is subject to limitation. If a holder purchased a debenture with market discount, however, that portion of a holder's gain attributable to accrued market discount not previously included in income will be treated as ordinary income rather than capital gain, as described above under "Original Issue Discount." If a holder elects to exercise his option to tender debentures to us on a May 23, 2006, May 23, 2011 or May 23, 2016 purchase date and we issue 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. If we pay the purchase price solely in common stock, the holder generally should not recognize any gain or loss. If we pay the purchase price with a combination of common stock and cash, the holder would be required to recognize any gain realized, but only to the extent of the cash received. The holder would not be allowed to recognize any loss. Because the price we will pay will equal the issue price plus accrued original issue discount, however, the amount received by the holder should equal the holder's tax basis and the holder should not realize any gain or loss. If we pay all or part of the purchase price with common stock and the holder receives cash in lieu of a fractional share of stock, the holder would be treated as if he received the fractional share and then had the fractional share redeemed for the cash. The holder would recognize capital gain or loss equal to the difference between the cash received and that portion of his basis in the stock attributable to the fractional share. A holder's initial tax basis in his common stock (including any fractional share) should equal the holder's adjusted basis in the debentures tendered, increased by the amount of gain recognized and decreased by the amount of cash received. The holder's holding period for his common stock should include the period during which the holder held his debentures. The holding period for common stock attributable to original issue discount, however, might begin on the day following the exchange date. CONVERSION OF THE DEBENTURES A holder generally will not recognize any income, gain or loss on converting a debenture into common stock. If the holder receives cash in lieu of a fractional share of stock, however, the holder would be treated as described in the preceding paragraph. The holder's holding period for the stock will include the period during which he or she held the debenture. The holding period for common stock attributable to original issue discount, however, might begin on the day following conversion. 47 50 DIVIDENDS If, after a holder converts a debenture into common stock, we make a distribution in respect of that stock, the distribution will be treated as a dividend, taxable to the holder as ordinary income, to the extent it is paid from our current or accumulated earnings and profits. If the distribution exceeds our current and accumulated profits, the excess will be treated first as a tax-free return of the holder's investment, up to the holder's basis in its common stock. Any remaining excess will be treated as capital gain. If the holder is a U.S. corporation, it would generally be able to claim a deduction equal to a portion of any dividends received. The terms of the debentures allow for changes in the conversion rate of the debentures in certain circumstances. A change in conversion price that allows debentureholders to receive more shares of common stock on conversion may increase the debentureholders' proportionate interests in our earnings and profits or assets. In that case, the debentureholders would be treated as though they received a dividend in the form of our stock. Such a constructive stock dividend could be taxable to the debentureholders, although they would not actually receive any cash or other property. A taxable constructive stock dividend would result, for example, if the conversion rate is adjusted to compensate debentureholders for distributions of cash or property to our shareholders. Not all changes in conversion rate that allow debentureholders to receive more stock on conversion, however, increase the debentureholders' proportionate interests in the company. For instance, a change in conversion rate could simply prevent the dilution of the debentureholders' interests upon a stock split or other change in capital structure. Changes of this type, if made by a bona fide, reasonable adjustment formula, are not treated as constructive stock dividends. Conversely, if an event occurs that dilutes the debentureholders' interests and the conversion rate is not adjusted, the resulting increase in the proportionate interests of our shareholders could be treated as a taxable stock dividend to them. Any taxable constructive stock dividends resulting from change to, or failure to change, the conversion rate would be treated like dividends paid in cash or other property. They would result in ordinary income to the recipient, to the extent of our current or accumulated earnings and profits, with any excess treated as a tax-free return of capital or as capital gain. SALE OF COMMON STOCK A holder will generally recognize capital gain or loss on a sale or exchange of common stock. The holder's gain or loss will equal the difference between the proceeds received by the holder and the holder's adjusted tax basis in the stock. The proceeds received by the holder will include the amount of any cash and the fair market value of any other property received for the stock. The gain or loss recognized by a holder on a sale or 46. exchange of stock will be long-term capital gain or loss if the holder held the stock for more than one year. In the case of individuals, long-term capital gains are generally taxed at a maximum rate of 20 percent, while the deductibility of capital losses is subject to limitation. If a holder purchased debentures with market discount, the holder would be required to treat as ordinary income that portion of any gain recognized on a sale of the common stock received on conversion of the debentures attributable to market discount accrued before the conversion and not previously included in income. BACKUP WITHHOLDING AND INFORMATION REPORTING The Internal Revenue Code and the Treasury regulations require those who make specified payments to report the payments to the IRS. Among the specified payments are interest, dividends, and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by "backup withholding" rules. These rules require the payors to withhold tax at a 31 percent rate from payments subject 48 51 to information reporting if the recipient fails to cooperate with the reporting regime by failing to provide his taxpayer identification number to the payor, furnishing an incorrect identification number, or repeatedly failing to report interest or dividends on his returns. The information reporting and backup withholding rules do not apply to payments to corporations, whether domestic or foreign. Payments of dividends to individual holders of common stock will generally be subject to information reporting, and will be subject to backup withholding unless the holder provides us or our paying agent with correct taxpayer identification number. Payments made to holders by a broker upon a sale of debentures or common stock will generally be subject to information reporting and backup withholding. If, however, the sale is made through a foreign office of a U.S. broker, the sale will be subject to information reporting but not backup withholding. If the sale is made through a foreign office of a foreign broker, the sale will generally not be subject to either information reporting or backup withholding. This exception may not apply, however, if the foreign broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or business. Any amounts withheld from payment to a holder of debentures or common stock under the backup withholding rules can be credited against any U.S. federal income tax liability of the holder. TAX EVENT The modification of the terms of the debentures by us upon a tax event as described in "Description of Debentures --Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event, "could alter the timing of income recognition by the holders regarding the semiannual payments of interest due after the option exercise date. THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR DEBENTURES OR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS. 49 52 SELLING SECURITYHOLDERS We originally issued the debentures in a private placement in May 2001. The debentures were resold by the initial purchasers to qualified institutional buyers under Rule 144A under the Securities Act in transactions exempt from registration under the Securities Act. Selling securityholders may offer and sell the debentures and the underlying common stock pursuant to this prospectus. The following table contains information as of June 26, 2001, with respect to the selling securityholders and the principal amount of debentures and the underlying common stock beneficially owned by each selling security holder that may be offered using this prospectus.
PRINCIPAL AMOUNT AT NUMBER OF MATURITY OF SHARES OF DEBENTURES PERCENTAGE COMMON PERCENTAGE OF BENEFICIALLY OF STOCK THAT COMMON OWNED THAT DEBENTURES MAY BE STOCK NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2) - ----------------------------------------------------- ------------ ----------- ----------- -------------- Alexandra Global Investment Fund I, LTD ............. 5,000,000 * 114,915 * Aventis Pension Master Trust ........................ 340,000 * 7,814 * Bear Stearns & Co., Inc. ............................ 1,250,000 * 28,729 * Boilermaker-Blacksmith Pension Trust ................ 2,150,000 * 49,413 * CALAMOS(R) Convertible Fund - CALAMOS(R) Investment Trust ................................. 8,000,000 1.56% 183,864 * CALAMOS(R) Convertible Growth and Income Fund - CALAMOS(R) Investment Trust .................... 3,500,000 * 80,441 * CALAMOS(R) Convertible Portfolio - CALAMOS(R) Advisors Trust ....................... 200,000 * 4,597 * CALAMOS(R) Convertible Technology Fund - CALAMOS(R) Investment Trust ...................... 55,000 * 1,264 * CALAMOS(R) Global Convertible Fund - CALAMOS(R) Investment Trust ...................... 225,000 * 5,171 * CFFX, LLC ........................................... 9,690,000 1.89% 222,705 * City of Albany Pension Plan ......................... 190,000 * 4,367 * City of Knoxville Pension System .................... 440,000 * 10,113 * Clarica Life Insurance Co. - U.S. ................... 535,000 * 12,296 * The Cockrell Foundation ............................. 200,000 * 4,597 * Commerzbank Financial Products Frankfurt ............ 25,000,000 4.89% 574,575 * Delta Airlines Master Trust ......................... 3,700,000 * 85,037 * Delta Pilots Disability and Survivorship Trust ...... 720,000 * 16,548 * Dorinco Reinsurance Company ......................... 2,250,000 * 51,712 * The Dow Chemical Company Employee's Retirement Plan ............................................. 4,200,000 * 96,529 * Drury University .................................... 70,000 * 1,609 * Fidelity Financial Trust: Fidelity Convertible Securities Fund .................................. 13,150,000 2.57% 302,226 * Fidelity Securities Fund: Fidelity Advisor Aggressive Growth Fund ...................................... 550,000 * 12,641 * First Union National Bank ........................... 32,000,000 6.26% 735,456 * The Fondren Foundation .............................. 130,000 * 2,988 * H. K. Porter Company, Inc. .......................... 50,000 * 1,149 * J.P. Morgan Securities, Inc. ........................ 17,500,000 3.42% 402,203 * Kentfield Trading, Ltd. ............................. 11,700,000 2.29% 268,901 * Kettering Medical Center Funded Depreciation Account .......................................... 130,000 * 2,988 * Knoxville Utilities Board Retirement System ......... 300,000 * 6,895 * Lydian Overseas Partners Master Fund ................ 12,500,000 2.44% 287,288 * Louisiana Workers' Compensation Corporation ......... 290,000 * 6,665 * Merrill Lynch Investment Managers - Quantitative Advisors ......................................... 25,000,000 4.89% 574,575 * Morgan Stanley & Co.(3) ............................. 65,000,000 12.71% 1,493,895 * New York Life Insurance and Annuity Corporation ..... 3,700,000 * 85,037 * New York Life Insurance Company ..................... 23,100,000 4.52% 530,907 *
50 53
PRINCIPAL AMOUNT AT NUMBER OF MATURITY OF SHARES OF DEBENTURES PERCENTAGE COMMON PERCENTAGE OF BENEFICIALLY OF STOCK THAT COMMON OWNED THAT DEBENTURES MAY BE STOCK NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2) - ----------------------------------------------------- ------------ ----------- ----------- -------------- Onyx Fund Holdings, LDC ............................. 7,500,000 1.47% 172,373 * Port Authority of Allegheny County Retirement and Disability Allowance Plan for the Employees Represented by Local 85 of the Amalgamated Trust Company .......................................... 2,200,000 * 50,563 * Salomon Brothers Asset Management, FNC. ............. 12,500,000 2.44% 287,288 * SCI Endowment Care Common Trust Fund - National Fiduciary Services ............................... 625,000 * 14,364 `* SCI Endowment Care Common Trust Fund - Suntrust ..... 70,000 * 1,609 * Southern Farm Bureau Life Insurance Company ......... 2,000,000 * 45,966 * SPT ................................................. 1,700,000 * 39,071 * TQA Master Fund Ltd. ................................ 2,500,000 * 57,458 * TQA Master Plus Fund Ltd. ........................... 1,500,000 * 34,475 * UBKAM Arbitrage Fund ................................ 1,125,000 * 25,856 * UBS O'Connor F/B/O O'Connor Global Convertible Portfolio ........................................ 1,600,000 * 36,773 * UBS O'Connor F/B/O UBS Global Equity Arbitrage Master Ltd. ..................................... 18,400,000 3.60% 422,887 * Unifi, Inc. Profit Sharing Plan and Trust ........... 200,000 * 4,597 * Union Carbide Retirement Account .................... 4,800,000 * 110,318 * United Food and Commericial Workers Local 1262 and Employers Pension Fund ....................... 1,000,000 * 22,983 * Van Waters & Rogers, Inc. Retirement Plan ........... 580,000 * 13,330 * Variable Insurance Products Fund III: Aggressive Growth Portfolio ................................. 80,000 * 1,839 * White River Securities L.L.C. ....................... 8,750,000 1.71% 201,101 * Any other holder of Debentures or future transferee, pledgee, donee or successor of any holder (4)(5) . 171,555,000 33.54% 3,942,849 *
* Less than 1%. (1) Assumes conversion of all of the holder's debentures at a conversion price of $17.02 per share of common stock. However, this conversion price will be subject to adjustment as described under "Description of Debentures -- Right of Conversion." As a result, the amount of common stock issuable upon conversion of the debentures may increase or decrease in the future. Under the terms of the Indenture, cash will be paid in lieu of issuing fractional shares, if any, upon conversion of the debentures. (2) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act using 463,708,515 shares of common stock outstanding as of March 31, 2001. In calculating this amount, we treated as outstanding the number of shares of common stock issuable upon conversion of all of that particular holder's debentures. However, we did not assume the conversion of any other holder's debentures. (3) Does not include 369,710 shares of common stock issuable upon conversion of $6,610,000 in principal amount at maturity of our Zero Coupon Convertible Subordinated Debentures due 2018 beneficially owned by Morgan Stanley & Co. (4) Information about other selling security holders will be set forth in prospectus supplements, if required. (5) 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 common stock issuable upon conversion of the debentures at the initial conversion rate. We prepared this table based on the information supplied to us by the selling securityholders named in the table. Unless otherwise indicated, none of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with us or our affiliates. From time to time, Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce Fenner & Smith Incorporated, or their affiliates, have provided, and may continue to provide us with investment banking services, for which they received or will receive customary fees. The selling securityholders listed in the above table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their debentures since the date on which the information in the above table is presented. Information about the selling securityholders may change from over time. Any changed information will be set forth in prospectus supplements. Because the selling securityholders may offer all or some of their debentures or the underlying common stock from time to time, we cannot estimate the amount of the debentures or underlying common stock that will be held by the selling securityholders upon the termination of any particular offering. See "Plan of Distribution." 51 54 PLAN OF DISTRIBUTION We will not receive any of the proceeds of the sale of the debentures or the underlying common stock offered by this prospectus. The debentures and the underlying common stock may be sold from time to time to purchasers: - directly by the selling securityholders; - through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers of the debentures and the underlying common stock. The selling securityholders and any such broker-dealers or agents who participate in the distribution of the debentures and the underlying common stock may be deemed to be "underwriters." As a result, any profits on the sale of the debentures and underlying common stock by selling securityholders 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. If the selling securityholders were to be deemed 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. If the debentures and underlying common stock are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions. The debentures and underlying common stock may be sold in one or more transactions at: - fixed prices; - prevailing market prices at the time of sale; - varying prices determined at the time of sale; or - negotiated prices. These sales may be effected in transactions: - on any national securities exchange or quotation service on which the debentures and underlying common stock may be listed or quoted at the time of the sale, including the Nasdaq National Market System in the case of the common stock; - in the over-the-counter market; - in transactions otherwise than on such exchanges or services or in the over-the-counter market; or - through the writing of options. 52 55 These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with sales of the debentures and underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the debentures and underlying common stock in the course of hedging their positions. The selling securityholders may also sell the debentures and underlying common stock short and deliver debentures and underlying common stock to close out short positions, or loan or pledge debentures and underlying common stock to broker-dealers that in turn may sell the debentures and underlying common stock. To our knowledge, there are currently no plans, arrangement or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the debentures and the underlying common stock by the selling securityholders. Selling securityholders may not sell any or all of the debentures and the underlying common stock offered by them pursuant to this prospectus. Any selling securityholder may instead transfer, devise or gift the debentures and the underlying common stock by other means not described in this prospectus. In addition, any debentures or underlying common stock covered by this prospectus 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. Our common stock trades on the Nasdaq National Market under the symbol "ATML.". No assurance can be given as to the development of liquidity or any trading market for the debentures. See "Risk Factors -- A public market may not develop for the debentures." The selling securityholders and any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the debentures and the underlying common stock by the selling securityholders and any other such person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the debentures and the underlying common stock to engage in market-making activities with respect to the particular debentures and the underlying common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the debentures and the underlying common stock and the ability of any person or entity to engage in market-making activities with respect to the debentures and the underlying common stock. Pursuant to the registration rights agreement filed as an exhibit to this registration statement, we 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 with these liabilities. We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the debentures and underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents. 53 56 LEGAL MATTERS The validity of the issuance of the securities offered hereby will be passed upon for Atmel by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. EXPERTS The consolidated financial statements incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2000, 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. WHERE YOU CAN FIND MORE INFORMATION We file reports, proxy statements and other information with the Commission, in accordance with the Securities Exchange Act of 1934. You may read and copy our reports, proxy statements and other information filed by us at the public reference facilities of the Commission in Washington, D.C. , New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information about the public reference rooms. Our reports, proxy statements and other information filed with the Commission are available to the public over the Internet at the Commission's World Wide Web site at http://www.sec.gov. Our web address is http://www.atmel.com. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later with the Commission will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made by us with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete. - The description of our Preferred Shares Rights Agreement, in our Registration Statement on Form 8-A/12G filed on September 15, 1998, as amended on Form 8-A/12G/A filed on December 6, 1999, under Section 12(g) of the Exchange Act; - Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000; - Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001; - Our definitive Proxy Statement on Schedule 14A filed on March 15, 2001; and - Our Current Reports on Form 8-K, dated May 17, 2001 and May 18, 2001. Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the extent that a statement contained in this prospectus (or in any other document that is subsequently filed with the Commission and incorporated by reference) modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectus except as so modified or superseded. 54 57 You may request a copy of these filings, at no cost, by writing or telephoning us at the following address: Investor Relations, Atmel Corporation, 2325 Orchard Parkway, San Jose, California 95131, (408) 441-0311. TRADEMARK ACKNOWLEDGEMENTS Atmel and the Atmel logo design are trademarks of Atmel. All other brand and product names appearing in this prospectus are the trademarks of their respective companies. 55 58 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The aggregate estimated (other than the registration fee) expenses to be paid by the Registrant in connection with this offering are as follows: Securities and Exchange Commission registration fee....................... $ 46,675 ----------- Trustee's fees and expenses............................................... 25,000 ----------- Accounting fees and expenses.............................................. 30,000 ----------- Legal fees and expenses................................................... 35,000 ----------- Miscellaneous............................................................. 20,000 ----------- Total.................................................................. $ 156,675 -----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF ATMEL CORPORATION CERTIFICATE OF INCORPORATION Article XI of our Certificate of Incorporation provides that, to the fullest extent permitted by Delaware law, as the same now exists or may hereafter be amended, a director shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability: - for any breach of their duty of loyalty to the corporation or its stockholders, - for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, - for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law, or - for any transaction from which the director derived an improper personal benefit. BYLAWS Our bylaws provide that our directors, officers and agents shall be indemnified against expenses including attorneys' fees, judgments, fines, settlements actually and reasonably incurred in connection with any proceeding arising out of their status as such, if such director, officer or agent acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Atmel Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. We have entered into agreements to indemnify our directors and officers, in addition to the indemnification provided for in our Certificate of Incorporation and Bylaws. These agreements, among other things, indemnify our directors and officers for certain expenses, including attorney's fees, judgments, fines II-1 59 and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Atmel, arising out of such person's services as a director or officer of Atmel, any subsidiary of Atmel or any other company or enterprise to which the person provides services at the request of Atmel. ITEM 16. EXHIBITS The following exhibits are filed herewith or incorporated by reference herein:
EXHIBIT NUMBER EXHIBIT TITLE -------------- ------------- 3.1 Certificate of Incorporation. (1) 3.2 Bylaws. (2) 4.1 Indenture 4.2 Form of Debenture (included in Exhibit 4.1) 4.3 Registration Rights Agreement 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 12.1 Computation of Earnings to Fixed Charges 23.1 Consent of PricewaterhouseCoopers, independent accountants. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1) 24.1 Power of Attorney (see page II-4). 25.1 Form T-1 Statement of Eligibility of Trustee for Indenture under the Trust Indenture Act of 1939
- ---------- (1) Incorporated by reference to the Registration Statement on Form 8-A/12G/A filed on December 6, 1999, under Section 12(g) of the Exchange Act. (2) Incorporated by reference to exhibits to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. ITEM 17. UNDERTAKINGS A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a)To include any prospectus required by Section 10(a)(3) of the Securities Act, II-2 60 (b)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a Fundamental Change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that clauses (a) and (b) do not apply if the information required to be included in a post-effective amendment by such clauses is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 61 B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. D. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 62 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on June 27, 2001. ATMEL CORPORATION By: /s/ GEORGE PERLEGOS ------------------------------------- Name: George Perlegos Title: President and Chief Executive Officer and Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints George Perlegos and Donald Colvin, and each of them, as his true and lawful attorneys-in-fact and agents, each with power of substitution, for him in his name, place and stead, in any and all capacities, to sign the Registration Statement filed herewith and any and all amendments (including post-effective amendments to this Registration Statement) and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933 and all post-effective amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each of them with full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ George Perlegos President, Chief Executive Officer - ----------------------------------- and Chairman of the Board of George Perlegos Directors (Principal Executive June 27, 2001 Officer) /s/ Donald Colvin Vice President, Finance, and Chief June 27, 2001 - ----------------------------------- Financial Officer (Principal Donald Colvin Financial Officer and Accounting Officer) /s/ Gust Perlegos Director June 27, 2001 - ----------------------------------- Gust Perlegos /s/ Tsung-Ching Wu Director June 27, 2001 - ----------------------------------- Tsung-Ching Wu /s/ Norm Hall Director June 27, 2001 - ----------------------------------- Norm Hall /s/ T. Peter Thomas Director June 27, 2001 - ----------------------------------- T. Peter Thomas /s/ Pierre Fougere Director June 27, 2001 - ----------------------------------- Pierre Fougere
II-5 63 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT TITLE -------------- ------------- 3.1 Certificate of Incorporation. (1) 3.2 Bylaws. (2) 4.1 Indenture 4.2 Form of Debenture (included in Exhibit 4.1) 4.3 Registration Rights Agreement 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 12.1 Computation of Earnings to Fixed Charges 23.1 Consent of PricewaterhouseCoopers, independent accountants. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1) 24.1 Power of Attorney (see page II-4). 25.1 Form T-2 Statement of Eligibility of Trustee for Indenture under the First Indenture Act of 1939
- ---------- (1) Incorporated by reference to the Registration Statement on Form 8-A/12G/A filed on December 6, 1999, under Section 12(g) of the Exchange Act. (2) Incorporated by reference to exhibits to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. II-6 EX-4.1 2 f73251ex4-1.txt EXHIBIT 4.1 1 EXHIBIT 4.1 EXECUTION COPY ================================================================================ Zero Coupon Convertible Subordinated Debentures due 2021 Atmel Corporation Issuer ---------------- INDENTURE Dated as of May 23, 2001 ---------------- State Street Bank and Trust Company of California, N.A. Trustee 2 CROSS REFERENCE TABLE*
INDENTURE TIA SECTION SECTION - ------------------------------------------------------------------------- --------- 310 (a)(1)............................................................... 7.10 (a)(2)............................................................... 7.10 (a)(3)............................................................... N.A.** (a)(4)............................................................... N.A. (b).................................................................. 7.10 (c).................................................................. N.A. 311 (a).................................................................. 7.11 (b).................................................................. 7.11 (c).................................................................. N.A. 312 (a).................................................................. N.A. (b).................................................................. 12.3 (c).................................................................. 12.3 (d).................................................................. N.A. 313 (a).................................................................. 7.6 (b).................................................................. 7.6 (b)(1)............................................................... N.A. (b)(2)............................................................... N.A. (c).................................................................. N.A. (d).................................................................. N.A. 314 (a).................................................................. N.A. (b).................................................................. N.A. (c)(1)............................................................... N.A. (c)(2)............................................................... N.A. (c)(3)............................................................... N.A. (d).................................................................. N.A. (e).................................................................. N.A. (f).................................................................. N.A. 315 (a).................................................................. 7.1 (b).................................................................. 7.5 (c).................................................................. 7.1 (d)(1)............................................................... 7.1 (d)(2)............................................................... 7.1 (d)(3)............................................................... 7.1 (e).................................................................. N.A. 316 (a)(last sentence)................................................... N.A. (a)(1)(A)............................................................ N.A. (a)(1)(B)............................................................ N.A. (a)(2)............................................................... N.A. (b).................................................................. N.A. 317 (a)(1)............................................................... N.A. (a)(2)............................................................... N.A. (b).................................................................. N.A. 318 (a).................................................................. N.A. - ---------------------------------------------------------------------------------------
* Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture ** Note: N.A. means Not Applicable 3 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.............................................1 Section 1.1. Definitions................................................................1 Section 1.2. Other Definitions..........................................................8 Section 1.3. Incorporation by Reference of Trust Indenture Act..........................9 Section 1.4. Rules of Construction......................................................9 ARTICLE 2 THE SECURITIES.........................................................................9 Section 2.1. Form and Dating............................................................9 Section 2.2. Execution and Authentication..............................................10 Section 2.3. Registrar, Paying Agent and Conversion Agent..............................11 Section 2.4. Paying Agent to Hold Money and Securities in Trust........................12 Section 2.5. Holder Lists..............................................................12 Section 2.6. Exchange and Registration of Transfer of Securities; Restrictions on Transfers; Depositary..................................................12 Section 2.7. Replacement Securities....................................................19 Section 2.8. Outstanding Securities, Determinations of Holders' Action.................20 Section 2.9. Temporary Securities......................................................20 Section 2.10. Cancellation..............................................................21 Section 2.11. Persons Deemed Owners.....................................................21 ARTICLE 3 REDEMPTION AND PURCHASES..............................................................21 Section 3.1. Right to Redeem; Notices to Trustee.......................................21 Section 3.2. Selection of Securities to be Redeemed....................................22 Section 3.3. Notice of Redemption......................................................22 Section 3.4. Effect of Notice of Redemption............................................23 Section 3.5. Deposit of Redemption Price...............................................23 Section 3.6. Securities Redeemed in Part...............................................24 Section 3.7. Conversion Arrangement on Call for Redemption.............................24 Section 3.8. Purchase of Securities at Option of the Holder............................25 Section 3.9. Redemption at Option of the Holder upon a Fundamental Change..............30 Section 3.10. Effect of Purchase Notice or Fundamental Change Redemption Notice.........31 Section 3.11. Deposit of Purchase Price or Fundamental Change Redemption Price..........32 Section 3.12. Securities Purchased in Part..............................................32 Section 3.13. Covenant to Comply with Securities Laws upon Purchase of Securities.......33 Section 3.14. Repayment to the Company..................................................33 Section 3.15. Modification to Fundamental Change Definitions............................33
-i- 4 TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE 4 COVENANTS.............................................................................34 Section 4.1. Payment of Securities.....................................................34 Section 4.2. Financial Information; SEC Reports........................................34 Section 4.3. Compliance Certificate....................................................35 Section 4.4. Further Instruments and Acts..............................................35 Section 4.5. Maintenance of Office or Agency...........................................35 Section 4.6. Existence.................................................................36 Section 4.7. Maintenance of Properties.................................................36 Section 4.8. Payment of Taxes and Other Claims.........................................36 Section 4.9. Additional Interest.......................................................37 ARTICLE 5 SUCCESSOR CORPORATION.................................................................37 Section 5.1. When the Company May Merge or Transfer Assets.............................37 ARTICLE 6 DEFAULTS AND REMEDIES.................................................................38 Section 6.1. Events of Default.........................................................38 Section 6.2. Acceleration..............................................................39 Section 6.3. Other Remedies............................................................39 Section 6.4. Waiver of Past Defaults...................................................40 Section 6.5. Control by Majority.......................................................40 Section 6.6. Limitation on Suits.......................................................40 Section 6.7. Rights of Holders to Receive Payment......................................41 Section 6.8. Collection Suit by Trustee................................................41 Section 6.9. Trustee May File Proofs of Claim..........................................41 Section 6.10. Priorities................................................................42 Section 6.11. Undertaking for Costs.....................................................42 Section 6.12. Waiver of Stay, Extension or Usury Laws...................................43 ARTICLE 7 TRUSTEE...............................................................................43 Section 7.1. Duties of Trustee.........................................................43 Section 7.2. Rights of Trustee.........................................................44 Section 7.3. Individual Rights of Trustee..............................................45 Section 7.4. Trustee Disclaimer........................................................45 Section 7.5. Notice of Defaults........................................................45 Section 7.6. Reports by Trustee to Holders.............................................45 Section 7.7. Compensation and Indemnity................................................46 Section 7.8. Replacement of Trustee....................................................46
-ii- 5 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 7.9. Successor Trustee by Merger...............................................47 Section 7.10. Eligibility; Disqualification.............................................48 Section 7.11. Preferential Collection of Claims Against Company.........................48 ARTICLE 8 DISCHARGE OF INDENTURE................................................................48 Section 8.1. Discharge of Liability on Securities......................................48 Section 8.2. Repayment to the Company..................................................49 ARTICLE 9 AMENDMENTS.............................................................................49 Section 9.1. Without Consent of Holders................................................49 Section 9.2. With Consent of Holders...................................................50 Section 9.3. Compliance with Trust Indenture...........................................51 Section 9.4. Revocation and Effect of Consents, Waivers and Actions....................51 Section 9.5. Trustee to Sign Supplemental Indentures...................................51 Section 9.6. Trustee's Discretion to Execute Supplemental Indentures..................51 Section 9.7. Effect of Supplemental Indentures.........................................52 ARTICLE 10 SUBORDINATION.........................................................................52 Section 10.1. Agreement of Subordination................................................52 Section 10.2. Payments to Holders.......................................................52 Section 10.3. Subrogation of Securities.................................................55 Section 10.4. Authorization to Effect Subordination.....................................56 Section 10.5. Notice to Trustee.........................................................56 Section 10.6. Trustee's Relation to Senior Indebtedness.................................57 Section 10.7. No Impairment of Subordination............................................58 Section 10.8. Certain Conversions Not Deemed Payment....................................58 Section 10.9. Article Applicable to Paying Agents.......................................58 Section 10.10. Senior Indebtedness Entitled to Rely......................................58 ARTICLE 11 CONVERSION............................................................................59 Section 11.1. Conversion Privilege......................................................59 Section 11.2. Conversion Procedure......................................................59 Section 11.3. Fractional Shares.........................................................60 Section 11.4. Taxes on Conversion.......................................................60 Section 11.5. Company to Provide Stock..................................................60 Section 11.6. Conversion to Semiannual Coupon Upon a Tax Event..........................61 Section 11.7. Adjustment for Change in Capital Stock....................................63
-iii- 6 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 11.8. Adjustment for Rights Issue...............................................63 Section 11.9. Adjustment for Other Distributions........................................64 Section 11.10. When Adjustment May be Deferred...........................................67 Section 11.11. When No Adjustment Required...............................................67 Section 11.12. Notice of Adjustment......................................................68 Section 11.13. Voluntary Increase........................................................68 Section 11.14. Notice of Certain Transactions............................................68 Section 11.15. Effect Reclassification, Consolidation, Merger or Sale....................68 Section 11.16. Company Determination Final...............................................69 Section 11.17. Trustee's Adjustment Disclaimer...........................................69 Section 11.18. Simultaneous Adjustments..................................................70 Section 11.19. Successive Adjustments....................................................70 Section 11.20. Rights Issued in Respect of Common Stock Issued Upon Conversion...........70 Section 11.21. General Considerations....................................................71 ARTICLE 12 MISCELLANEOUS.........................................................................71 Section 12.1. Trust Indenture Act.......................................................71 Section 12.2. Notices...................................................................71 Section 12.3. Communication by Holders with Other Holders...............................72 Section 12.4. Certificate and Opinion as to Conditions Precedent........................72 Section 12.5. Statements Required in Certificate or Opinion.............................73 Section 12.6. Separability Clause.......................................................73 Section 12.7. Rules by Trustee, Paying Agent, Conversion Agent and Registrar............73 Section 12.8. Governing Law.............................................................73 Section 12.9. No Recourse Against Others................................................73 Section 12.10. Successors................................................................74 Section 12.11. Multiple Originals........................................................74
-iv- 7 THIS INDENTURE, dated as of May 23, 2001, is between Atmel Corporation, a Delaware corporation (the "Company"), and State Street Bank and Trust Company of California, N.A., a national banking association organized and existing under the laws of the United States of America (the "Trustee"). RECITALS OF THE COMPANY WHEREAS, the Company desires to issue its Zero Coupon Convertible Subordinated Debentures due May 23, 2021 (the "Securities"), the issuance of which was authorized by resolutions of the Board of Directors (as defined below); and WHEREAS, all things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company in accordance with their terms, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW THEREFORE, in consideration of the premises provided for herein, each of the Company and the Trustee agrees as follows for the benefit of the other party hereto and for the equal and ratable benefit of the Holders of the Securities: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS. "Additional Interest" shall have the meaning specified in the Registration Rights Agreement. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which the banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or obligated by law or executive order to close or be closed. 8 "Common Stock" means any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Subject to the provisions of Section 11.15, however, shares issuable upon conversion of the Securities shall include only shares of Common Stock, par value of $0.001 per share, of the Company as such shares exist on the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preferences in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means Atmel Corporation, a Delaware corporation, having its principal office at 2325 Orchard Parkway, San Jose, California 95131, until replaced by a successor entity pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor entity. The foregoing sentence shall likewise apply to any subsequent such successor entity or entities. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, the Chief Executive Officer, a Vice Chairman, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Conversion Rate" has the meaning specified in Section 11.1. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office is, as of the date hereof, located at 633 West 5th Street, 12th Floor, Los Angeles, California 90071, Attention: Corporate Trust Department (Atmel Corporation - Zero Coupon Convertible Subordinated Debentures due 2021). "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 ten 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 -2- 9 Common Stock on at least five of the ten 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. "Custodian" shall mean State Street Bank and Trust Company of California, N.A., as custodian with respect to the Securities in global form, or any successor entity thereto. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.6 as the Depositary with respect to the Securities, 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. "Designated Senior Indebtedness" means the Company's obligations under 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 this 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). "DTC" means The Depository Trust Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "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 (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger , combination, reclassification, recapitalization or otherwise) consideration 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). "Holder" means a Person in whose name a Security is registered on the Registrar's books. "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 -3- 10 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 the balance sheet of the Company and all obligations and other liabilities (contingent or otherwise) under any synthetic lease or other 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 (e) 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). "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Initial Purchasers" means Morgan Stanley & Co. Incorporated, Credit Lyonnais Securities (USA) Inc. and Needham & Company, Inc. "Institutional Accredited Investor" means an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security. "Issue Price" of any Security means, in connection with the original issuance of such Security, the initial issue price at which the Security is issued as set forth on the face of the Security. "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding date that is not -4- 11 a Legal Holiday, and to the extent applicable no Original Issue Discount or interest, if any, shall accrue for the intervening period. "Nasdaq" or "Nasdaq National Market" means the electronic inter-dealer quotation system operated by Nasdaq Stock Market, Inc., a subsidiary of the National Association of Securities Dealers, Inc. "NYSE" means The New York Stock Exchange, Inc. "Officer" means the Chairman of the Board, the Chief Executive Officer, any Vice Chairman, the President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company. "Officers' Certificate" means a written certificate containing the information specified in Sections 12.4 and 12.5, signed in the name of the Company by its Chairman of the Board, the Chief Executive Officer, a Vice Chairman, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Opinion of Counsel" means a written opinion containing the information specified in Sections 12.4 and 12.5, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee. "Original Issue Discount" of any Security means the difference between the Issue Price and the Principal Amount of the Security as set forth on the face of the Security. For purposes of this Indenture and the Securities, accrual of Original Issue Discount shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. "Payment Blockage Notice" has the meaning specified in Section 10.2. "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. "Portal Market" means The Portal Market operated by the National Association of Securities Dealers, Inc. or any successor thereto. "Principal" or "Principal Amount" of a Security means the Principal Amount as set forth on the face of such Security, or on Schedule A thereto in the case of a Security in global form. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Redemption Date" means a date specified for redemption of the Securities (other than redemption upon a Fundamental Change at the option of the Holder) in accordance with the terms of the Securities and Section 3.1 of this Indenture. "Redemption Price" shall have the meaning set forth in paragraph 5 of the Securities. -5- 12 "Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of the date hereof, among the Company and the Initial Purchasers. "Representative" means (a) the indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required Persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness. "Rule 144A" means Rule 144A as promulgated under the Securities Act, or any successor rule. "Rule 144(k)" means Rule 144(k) as promulgated under the Securities Act, or any successor rule. "SEC" means the Securities and Exchange Commission. "Securities" means the Company's Zero Coupon Convertible Subordinated Debentures due 2021. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "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 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 of the Company, whether outstanding on the date of this 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 Securities or expressly provides that such Indebtedness is "pari passu" or "junior" to the Securities. Notwithstanding the foregoing, the Senior Indebtedness shall not include (i) 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 (ii) the Company's obligations under its Zero-Coupon Convertible Subordinated Notes Due 2018. "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. -6- 13 "Stated Maturity", when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the Principal of such Security is due and payable. "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). "TIA" means the Trust Indenture Act of 1939, as amended, as in effect on the date of this Indenture, except as provided in Section 9.3. "Tax Event" means that the Company shall have received an opinion from independent tax counsel experienced in such matters to the effect that, on or after May 23, 2001, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case, which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, on or after May 23, 2001, there is more than an insubstantial risk that interest, including Original Issue Discount, payable on the Securities either (i) would not be deductible on a current accrual basis or (ii) would not be deductible under any other method, in either case, in whole or in part, by the Company (by reason of deferral, disallowance or otherwise) for United States Federal income tax purposes. "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. "Trust Officer" means any officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means State Street Bank and Trust Company of California, N.A. until a successor entity replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor entity. The foregoing sentence shall likewise apply to any subsequent such successor entity or entities. -7- 14 "Voting Stock" means stock of any class or classes, however designated, having ordinary voting power for the election of a majority of the board of directors of a corporation, other than stock having such power only by reason of the occurrence of a contingency. SECTION 1.2. OTHER DEFINITIONS.
DEFINED IN TERM SECTION --------------------------------------------------------------- ---------- "Agent Members"................................................ 2.1 "Cash"......................................................... 3.8(b) "Commission"................................................... 1.3 "Company Notice"............................................... 3.8(e) "Company Notice Date".......................................... 3.8(c) "Conversion Agent"............................................. 2.3 "Defaulted Interest"........................................... 11.6(d) "Expiration Time".............................................. 11.9(c) "Event of Default"............................................. 6.1 "Fundamental Change Redemption Date"........................... 3.9(a) "Fundamental Change Redemption Notice"......................... 3.9(a) "Fundamental Change Redemption Price".......................... 3.9(a) "Indenture to be Qualified".................................... 1.3 "Indenture Securities"......................................... 1.3 "Indenture Security Holder".................................... 1.3 "Indenture Trustee"............................................ 1.3 "Junior Securities"............................................ 10.12 "Market Price"................................................. 3.8(d) "Notice of Default"............................................ 6.1 "Option Exercise Rate"......................................... 11.6(a) "Over-Allotment Option"........................................ 2.2 "Payment Default".............................................. 10.2 "Paying Agent"................................................. 3.8(a) "Purchase Date"................................................ 3.8(a) "Purchase Notice".............................................. 3.8(a) "Purchase Price"............................................... 3.8(a) "Purchased Shares"............................................. 11.9(c) "Registrar".................................................... 2.3 "Restricted Securities"........................................ 2.6(d) "Sale Price"................................................... 3.8(d) "Tender Expiration Time"....................................... 11.9(d) "Tender Purchased Shares"...................................... 11.9(d)
-8- 15 SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "Indenture Securities" means the Securities. "Indenture Security Holder" means a Holder. "Indenture to be Qualified" means this Indenture. "Indenture Trustee" or "Institutional Trustee" means the Trustee. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rules have the meanings assigned to them by such definitions. SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (3) "or" is not exclusive; (4) "including" means including, without limitation; and words in the singular include the plural, and words in the plural include the singular. ARTICLE 2 THE SECURITIES SECTION 2.1. FORM AND DATING. The Securities and the Trustee's certificate of authentication for the Securities shall be substantially in the form of Exhibit A, which is incorporated into and shall be deemed a part of this Indenture, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any automated quotation system or securities exchange or as may, consistently herewith, -9- 16 be determined by the officers of the Company executing such Securities, as evidenced by their execution of the Securities. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. Any Security in global form shall represent such of the outstanding Securities as shall be specified therein and shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be increased or reduced to reflect exchanges, redemptions, purchases or conversions of such Securities permitted by this Indenture. Any endorsement of a Security in global form to reflect the amount of any increase or decrease in the Principal Amount of outstanding Securities represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Security in accordance with the standing instructions and procedures existing between the Depositary and the Custodian. Payment of Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, on any Security in global form shall be made to the Holder of such Security. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Security in global form held on their behalf by the Depositary or under the Security in global form, and the Depositary (including, for this purpose, its nominee) may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Security in global form for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (A) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (B) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Securities. Any Security in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the National Association of Securities Dealers, Inc. in order for such Securities to be tradeable on any market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any automated quotation system or securities exchange upon which the Securities may be quoted, listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Securities are subject. The Company initially appoints DTC to act as Depositary with respect to the Securities in global form. SECTION 2.2. EXECUTION AND AUTHENTICATION. The Securities shall be executed on behalf of the Company by its Chairman of the Board, the Chief Executive Officer, one of its Vice Chairmen, its President or one of its Vice Presidents. The signature of any of these officers may be manual or facsimile. -10- 17 Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount of $511,500,000 upon a Company Order without any further action by the Company (or an aggregate Principal Amount not to exceed $588,225,000 if the over-allotment option set forth in Section 2 of the Purchase Agreement dated May 17, 2001 (as amended from time to time by the parties thereto) by and among the Company and the Initial Purchasers (the "Over-Allotment Option") is exercised in full). The aggregate Principal Amount of Securities outstanding at anytime may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.7. SECTION 2.3. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion into Common Stock ("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent. The term Conversion Agent includes any additional conversion or agent, including any named pursuant to Section 4.5. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (if not the Trustee or an Affiliate of the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent and the relevant Security. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or an Affiliate of the Company may act as Paying Agent, Registrar, Conversion Agent or co-registrar. The Company initially appoints the Trustee as Registrar, Conversion Agent and Paying Agent in connection with the Securities. -11- 18 SECTION 2.4. PAYING AGENT TO HOLD MONEY AND SECURITIES IN TRUST. Except as otherwise provided in this Indenture, prior to or on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money or securities sufficient to make such payments when such payments are due. The Company shall require the Paying Agent (if not the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money and securities held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and securities so held in trust. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the money and securities held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require the Paying Agent to pay all money and securities held by it to the Trustee and to account for any funds and securities disbursed by it. Upon doing so, the Paying Agent shall have no further liability for such money or securities. SECTION 2.5. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on March 12 and September 12 a listing of Holders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Holders. SECTION 2.6. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES; RESTRICTIONS ON TRANSFERS; DEPOSITARY. (a) Upon surrender for registration of transfer of any Security at any office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.3 and satisfaction of the requirements for such transfer set forth in this Section 2.6, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate Principal Amount and bearing such restrictive legends as may be required by this Indenture. Securities may be exchanged for a like aggregate Principal Amount of Securities of other authorized denominations. Securities to be exchanged shall be surrendered at any office or agency to be maintained by the Company designated as Registrar or co-registrar pursuant to Section 2.3 and the Company shall execute and register, and the Trustee shall authenticate and deliver in exchange therefor, the Security or Securities which the Holder making the exchange shall be entitled to receive, bearing registration numbers not contemporaneously outstanding. All Securities presented for registration of transfer or for exchange into like Securities, purchase, redemption or conversion into Common Stock or payment shall (if so required by the Company, the Trustee, the Registrar or any co-registrar) be duly endorsed by, or be accompanied by -12- 19 a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or such Holder's attorney duly authorized in writing. No service charge shall be charged to the Holder for any exchange for like Securities or registration of transfer of Securities, but the Company may require payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith. None of the Company, the Trustee, the Registrar or any co-registrar shall be required to exchange for like Securities or register a transfer of (a) any Securities for a period of 15 days next preceding any selection of Securities to be redeemed, or (b) any Securities or portions thereof selected or called for redemption, except the unredeemed portion of any Security redeemed in part. All Securities issued upon any transfer or exchange for like Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Securities surrendered upon such exchange or transfer. (b) So long as the Securities are eligible for book-entry settlement with the Depositary (as defined below), or unless otherwise required by law, all Securities that are so eligible may be represented by a Security in global form registered in the name of the Depositary or the nominee of the Depositary, except as otherwise specified below. The transfer and exchange of beneficial interests in such Security in global form shall be effected through the Depositary in accordance with this Indenture and the procedures of the Depositary therefore. Securities that upon initial issuance are beneficially owned by QIBs will be represented by one or more Securities in global form. Transfers of interests in a Security in global form will be made in accordance with the standing instructions and procedures of the Depositary and its participants. The Trustee shall make appropriate endorsements to reflect increases or decreases in the Principal Amounts of such Securities in global form as set forth on the face of the Security in global form to reflect any such transfers. Except as provided below, beneficial owners of a Security in global form shall not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered Holders of such Securities in global form. (c) So long as the Securities are eligible for book-entry settlement, or unless otherwise required by law, upon any transfer of a definitive Security to a QIB in accordance with Rule 144A and upon receipt of the definitive Security or Securities being so transferred, together with a certification, substantially in the form of the reverse of the Security, from the transferor that the transfer is being made in compliance with Rule 144A (or other evidence satisfactory to the Trustee), the Trustee shall make an endorsement on the Security in global form to reflect an increase in the aggregate Principal Amount of the Securities represented by the Security in global form, the Trustee shall cancel such Security or Securities in certificated form in accordance with the standing instructions and procedures of the Depositary and the aggregate Principal Amount of Securities represented by the Security in global form will be increased accordingly; provided that no definitive Security, or portion thereof, in respect of which the Company or an Affiliate of the Company held -13- 20 any beneficial interest shall be included in such Security in global form until such definitive Security is freely tradable in accordance with Rule 144(k); provided further that upon any transfer of a beneficial interest in any Security in global form to the Company or any Affiliate of the Company, the Company shall issue and the Trustee, upon receipt of an Officers' Certificate and Company Order for authentication and delivery of Securities, shall authenticate and deliver, Securities in certificated form, in an aggregate Principal Amount equal to the Principal Amount of the Security in global form, in exchange for such Security in global form. (d) Upon any sale or transfer of a Security to an Institutional Accredited Investor (other than pursuant to a registration statement that has been declared effective under the Securities Act), such Institutional Accredited Investor shall, prior to such sale or transfer, furnish to the Company and/or the Trustee a signed letter containing representations and agreements relating to restrictions on transfer substantially in the form set forth in Exhibit B to this Indenture. Any Security in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary, by the National Association of Securities Dealers, Inc. or by the NYSE in order for the Securities to be tradeable on The Portal Market or as may be required for the Securities to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange upon which the Securities may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Securities are subject. (e) Every Security that bears or is required under this Section 2.6(d) to bear the legend set forth in this Section 2.6(d) (together with any Common Stock issued upon conversion of the Securities and required to bear the legend set forth in Section 2.6(e), collectively, the "Restricted Securities") shall be subject to the restrictions on transfer set forth in this Section 2.6(d) (including those set forth in the legend set forth below) unless such restrictions on transfer shall be waived by written consent of the Company, and the holder of each such Restricted Security, by such Holder's acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Sections 2.6(d) and 2.6(e), the term "transfer" encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security. Until the expiration of the holding period applicable to sales thereof under Rule 144(k), any certificate evidencing such Security (and all securities issued in exchange therefore or substitution thereof, other than Common Stock, if any, issued upon conversion therefore, which shall bear the legend set forth in Section 2.6(e), if applicable) shall bear a legend in substantially the following form, unless such Security has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer), or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE -14- 21 OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (K)(2) OF RULE 902 UNDER REGULATION S UNDER THE SECURITIES ACT) OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR"); (4) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITIES WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OF A U.S. PERSON EXCEPT (A) TO ATMEL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a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ny Security (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the foregoing legend set forth therein have been satisfied may, upon surrender of such Securities for exchange to the Registrar in accordance with the provisions of this Section 2.6, be exchanged for a new Security or Securities, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.6(d). Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.6(d)), a Security in global form may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee or to a successor Depositary or a nominee of such successor Depositary. The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Securities in global form. Initially, a Security in global form shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Custodian for Cede & Co. If at any time the Depositary for a Security in global form notifies the Company that it is unwilling or unable to continue as Depositary for such Security, the Company may appoint a successor Depositary with respect to such Security. If (A) a successor Depositary for the Security is not appointed by the Company within 90 days after the Company receives such notice or (B) the -16- 23 Company in its sole discretion determines not to have the Securities represented by a Security in global form, the Company will execute, and the Trustee, upon receipt of an Officers' Certificate and Company Order for authentication and delivery of Securities, will authenticate and deliver, Securities in certificated form, in an aggregate Principal Amount equal to the Principal Amount of the Security in global form, in exchange for such Security in global form. Such exchange shall be effected in accordance with such rules and procedures of the Depositary as are applicable to the exchange. Only Restricted Securities shall be issued in exchange for Securities in global form that are restricted under Rule 144. Securities in certificated form issued in exchange for all or a part of a Security in global form pursuant to this Section 2.6 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Securities in certificated form to the Persons in whose names such Securities in certificated form are so registered. At such time as all interests in a Security in global form have been redeemed, converted, exchanged, repurchased or canceled for Securities in certificated form, or transferred to a transferee who receives Securities in certificated form, such Security in global form shall be, upon receipt thereof, canceled by the Trustee in accordance with the standing procedures and instructions existing between the Custodian and Depositary. At any time prior to such cancellation, if any interest in a Security in global form is exchanged for Securities in certificated form, redeemed, converted, exchanged, repurchased by the Company or canceled, or transferred for part of a Security in global form, the Principal Amount of such Security in global form shall, in accordance with the standing procedures and instructions existing between the Custodian and the Depositary, be reduced or increased, as the case may be, and an endorsement shall be made on such Security in global form, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction or increase. (f) Until the expiration of the holding period applicable to sales thereof under Rule 144(k), any stock certificate representing Common Stock issued upon conversion of a Security shall bear a legend in substantially the following form, unless such Common Stock has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or such Common Stock has been issued upon conversion of Securities that have been transferred pursuant to a registration statement that has been declared effective under the Securities Act, or unless otherwise agreed by the Company in writing with written notice thereof to the transfer agent for the Common Stock: THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES -17- 24 ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U.S. PERSONS EXCEPT (A) TO ATMEL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a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k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. -18- 25 Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the foregoing legend set forth therein have been satisfied may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 2.6(e). (g) Any Security or Common Stock issued upon the conversion or exchange of a Security that, prior to the expiration of the holding period applicable to sales thereof under Rule 144(k), is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Securities or Common Stock, as the case may be, no longer being "restricted securities" (as defined under Rule 144). SECTION 2.7. REPLACEMENT SECURITIES. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and, upon its written request, the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased or redeemed by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay, purchase or redeem such Security, as the case maybe. Upon the issuance of any new Securities under this Section 2.7, the Company may, as a condition to such issuance, require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. -19- 26 SECTION 2.8. OUTSTANDING SECURITIES, DETERMINATIONS OF HOLDERS' ACTION. Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9). If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Purchase Date or a Fundamental Change Redemption Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then on and after that date such Securities shall cease to be outstanding and Original Issue Discount and interest, if any, on such Securities shall cease to accrue; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Security is converted in accordance with Article 11, then from and after such conversion such Security shall cease to be outstanding and Original Issue Discount and interest, if any, shall cease to accrue on such Security. SECTION 2.9. TEMPORARY SECURITIES. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company shall cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.3, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like -20- 27 Principal Amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.10. CANCELLATION. All Securities surrendered for payment, purchase, conversion, redemption or registration of transfer or exchange for the Securities shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. The Company may not issue new Securities to replace Securities it has paid for or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 11. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 2. 10, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed by the Trustee and, following such destruction, the Trustee shall deliver a certificate of destruction to the Company, unless the Company. SECTION 2.11. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, in respect thereof, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary. ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.1. RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at its option, may redeem the Securities in accordance with paragraphs 5 and 7 of the Securities and the provisions of this indenture. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount of Securities to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.1 (i) in the case of any redemption of fewer than all of the Securities, at least 45 days before the Redemption Date and (ii) in the case of a redemption of all of the Securities, no later than the date that the -21- 28 Company is required to give notice to the Holders pursuant to Section 3.3, in each case unless a shorter notice shall be satisfactory to the Trustee. SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities held in definitive form are to be redeemed pursuant to Section 3.1, the Trustee shall select the definitive Securities to be redeemed pro rata or by lot or by another method the Trustee considers fair and appropriate (as long as such method is not prohibited by the rules of any quotation system or securities exchange on which the Securities are then quoted or listed). The Trustee shall make the selection at least 35 days, but not more than 60 days, before the Redemption Date from outstanding definitive Securities not previously called for redemption. The Trustee may select for redemption portions of the Principal Amount of Securities that have denominations larger than $ 1,000. Securities and portions of them the Trustee selects shall be in Principal Amounts of $ 1,000 or an integral multiple of $ 1,000. Provisions of this Indenture that apply to definitive Securities called for redemption also apply to portions of definitive Securities called for redemption. The Trustee shall notify the Company promptly of the definitive Securities or portions of definitive Securities to be redeemed. Any interest in a Security held in global form by and registered in the name of the Depositary or its nominee to be redeemed in whole or in part will be redeemed in accordance with the procedures of the Depositary. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed to be (to the fullest extent possible) the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. SECTION 3.3. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the Conversion Rate; (4) the name and address of the Paying Agent and Conversion Agent; -22- 29 (5) that Securities called for redemption may be converted at any time before the close of business on the last Trading Day prior to the Redemption Date; (6) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (8) if fewer than all the outstanding Securities are to be redeemed, the certificate number and Principal Amounts of the particular Securities to be redeemed; (9) that Original Issue Discount on Securities called for redemption will cease to accrue on and after the Redemption Date; and (10) the CUSIP number or numbers for the Securities. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. At the Company's written request delivered to the Trustee at least 45 days before the Redemption Date, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is given, pursuant to Section 3.3, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon the later of the Redemption Date or the date such Securities are surrendered to the Paying Agent, such Securities shall be paid at the Redemption Price stated in the notice. SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. Prior to or on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted into Common Stock, and on or after the Redemption Date (unless the Company shall default in the payment of the Securities at the Redemption Price), Original Issue Discount on the Securities or portion of Securities called for redemption shall cease to accrue and such Securities shall cease after the close of business on the -23- 30 Business Day immediately preceding the Redemption Date to be convertible into Common Stock and, except as provided in Section 8.2, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the Redemption Price thereof and unpaid interest up to and including the Redemption Date. The Paying Agent shall as promptly as practicable return to the Company any money, with interest, if any, thereon, not required for that purpose because of conversion of Securities. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust. SECTION 3.6. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount to the unredeemed portion of the Security surrendered. SECTION 3.7. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In connection with any redemption of Securities, the Company may arrange for the purchase and conversion into Common Stock of any Securities called for redemption by an agreement with one or more investment bankers or other purchasers to purchase such Securities by paying to the Paying Agent in trust for the Holders, on or before the close of business on the Redemption Date, an amount that, together with any amounts deposited with the Paying Agent by the Company for the redemption of the Securities, is not less than the Redemption Price up to and including the Redemption Date of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Securities shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 11) surrendered by such purchasers for conversion, all immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it in the same manner as it would money deposited with it by the Company for the redemption of Securities. Without the Paying Agent's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Paying Agent as set forth in this Indenture, and the Company agrees to indemnify the Paying Agent from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Paying Agent in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. -24- 31 SECTION 3.8. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER. (a) General. Securities shall be purchased by the Company pursuant to paragraph 6 of the Securities as of May 23, 2006, May 23, 2011 and May 23, 2016 (each, a "Purchase Date"), at the purchase price specified therein (each, a "Purchase Price") at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") at any time from the opening of business on the date that is 20 Business Days prior to a Purchase Date until the close of business on such Purchase Date, stating: (A) the certificate number of the Security which the Holder will deliver to be purchased (or, if the Security is not certificated, such other identification necessary to comply with appropriate DTC procedures); (B) the portion of the Principal Amount of the Security which the Holder will deliver to be purchased, which portion must be $ 1,000 in Principal Amount or a multiple thereof; (C) that such Security shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in paragraph 6 of the Securities and the provisions of this Indenture; and (D) if the Company elects, pursuant to a Company Notice, to pay the Purchase Price to be paid as of such Purchase Date, in whole or in part, in Common Stock but such portion of the Purchase Price shall ultimately be payable to such Holder in Cash because any of the conditions to the payment of the Purchase Price in Common Stock are not satisfied prior to or on the Purchase Date, as set forth in Section 3.8(d), whether such Holder elects (x) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the Principal Amount and certificate numbers of the Securities as to which such withdrawal shall relate), or (y) to receive Cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and (2) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.8 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice. If a Holder, in such Holder's Purchase Notice (and in any written notice of withdrawal of a portion of such Holder's Securities previously submitted for purchase pursuant to a Purchase Notice, the portion that remains subject to the Purchase Notice), fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.8(a)(1), such Holder shall be deemed to -25- 32 have elected to receive Cash in respect of the entire Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.8 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.8(a) shall have the right at any time prior to the close of business on the Purchase Date to withdraw such Purchase Notice by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price. The Company may elect with respect to any Purchase Date to pay the Purchase Price in respect of the Securities to be purchased pursuant to Section 3.8(a) as of such Purchase Date, in U.S. legal tender ("Cash") or Common Stock, or in any combination of Cash and Common Stock, subject to the conditions set forth in Sections 3.8(c) and (d). The Company shall designate, in the Company Notice delivered pursuant to Section 3.8(e), whether the Company will purchase the Securities for Cash or Common Stock, or, if a combination thereof, the percentages of the Purchase Price of Securities in respect of which it will pay in Cash and/or Common Stock; provided that the Company will pay Cash for fractional interests in shares of Common Stock. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.8 shall receive the same percentage of Cash and/or Common Stock in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.8(d) with regard to the payment of Cash in lieu of fractional interests in Common Stock and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable federal or state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for Cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Holders except pursuant to this Section 3.8(b) or Section 3.8(d). At least two Business Days before the Company Notice Date (as defined in Section 3.8(c)), the Company shall deliver an Officers' Certificate to the Trustee specifying: -26- 33 (i) the manner of payment selected by the Company, (ii) the information required by Section 3.8(e), (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in Common Stock, that the conditions to such manner of payment set forth in Section 3.8(d) have been or will be complied with, and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.8(e). (c) Purchase with Cash. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.8(a) has been given, or a specified percentage thereof, may be paid by the Company with Cash equal to the aggregate Purchase Price, or such specified percentage thereof, as the case may be, of such Securities. If the Company elects to purchase Securities with Cash, a Company Notice as provided in Section 3.8(e) shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to the Purchase Date (the "Company Notice Date"). (d) Payment by Issuance of Common Stock. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.8(a) has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount of Cash to which the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Securities in Cash by (ii) the Market Price of a share of Common Stock, subject to the next succeeding paragraph. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay Cash for the current market value of the fractional share. The current market value of a fraction of a share shall be determined by multiplying the Market Price by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of shares of Common Stock shall be based on the aggregate amount of Securities to be purchased. If the Company elects to purchase the Securities by the issuance of shares of Common Stock, a Company Notice as provided in Section 3.8(e) shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date. The Company's right to exercise its election to purchase the Securities pursuant to Section 3.8 through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company having given timely Company Notice of election to purchase all or a specified percentage of the Securities with Common Stock as provided herein; -27- 34 (ii) the registration of the shares of Common Stock to be issued in respect of the payment of the specified percentage of the Purchase Price under the Securities Act; unless the shares of Common Stock so issued can be freely resold by the Holder (unless such Holder is the Company or an Affiliate of the Company) receiving such shares without registration under the Securities Act; (iii) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (iv) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the specified percentage of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the specified percentage of the Purchase Price in respect of Securities, will be validly issued, fully paid and nonassessable, and, in the case of such Officers' Certificate, stating that conditions (i), (ii) and (iii) above have been satisfied and, in the case of such Opinion of Counsel, stating that conditions (ii) and (iii) above have been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $ 1,000 Principal Amount of Securities, the Market Price and the Sale Price of a share of Common Stock on each Trading Day during the period during which the Market Price is calculated and ending on the Purchase Date. If such conditions are not satisfied with respect to a Holder or Holders prior to or on the Purchase Date and the Company elected to purchase the Securities to be purchased as of such Purchase Date pursuant to this Section 3.8 through the issuance of shares of Common Stock, the Company shall pay the entire Purchase Price in respect of such Securities of such Holder or Holders in Cash. The "Market Price" means the average of the Sale Prices 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, the five Trading Days ending on the last Trading Day prior to the 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 any event described in Section 11.7, 11.8 or 11.9; subject, however, to the conditions set forth in Sections 11.10 and 11.11. 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 of the 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 Nasdaq National Market or, if the Common Stock is listed on a U.S. national or regional securities exchange, as reported in composite transactions for the principal United States securities exchange on which the Common Stock is traded. (e) Notice of Election. Company's notices of election to purchase with Cash or Common Stock, or any combination thereof, shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 12.2 at the time specified in -28- 35 Section 3.8(c) or (d), as applicable (each, a "Company Notice"). Such Company Notices shall state the manner of payment elected and shall contain the following information: In the event the Company has elected to pay a Purchase Price (or a specified percentage thereof) with Common Stock, the Company Notice shall: (1) state that each Holder will receive Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any Cash amount to be paid in lieu of fractional share); and (2) set forth the method by which the Company is required to calculate the Market Price and state that because the Market Price of Common Stock will be determined prior to the Purchase Date, the Holders will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Purchase Date. In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Holder and shall state: (i) the Purchase Price and Conversion Rate; (ii) the name and address of the Paying Agent and the Conversion Agent; (iii) that Securities as to which a Purchase Notice has been given may be converted only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Securities must be surrendered to the Paying Agent to collect payment; (v) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (iv); (vi) the procedures the Holder must follow under this Section 3.8; (vii) briefly, the conversion rights of the Securities; and (viii) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.8(a)(1)(D) or Section 3.10). At the Company's request, the Trustee shall give the Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of the Company Notice shall be prepared by the Company. -29- 36 (f) Covenants of the Company. All shares of Common Stock delivered upon conversion or purchase of the Securities shall be newly issued shares or treasury shares, shall be fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company shall use its best efforts to list or cause to have quoted all such shares of Common Stock on each United States over-the-counter or other domestic market on which the Common Stock is then quoted or national securities exchange on which the Common Stock is then listed. Upon determination of the actual number of shares of Common Stock to be delivered pursuant to this Section 3.8, the Company shall notify the securities exchange or quotation systems on which the Common Stock is then listed or quoted and disseminate the number of shares of Common Stock to be issued on the Company's website or through an alternative public medium. (g) Procedure upon Purchase. On the Business Day following the Purchase Date, the Company shall deposit with the Paying Agent (A) Cash (in respect of a Cash purchase under Section 3.8(c) or for fractional interests, as applicable), or (B) shares of Common Stock, or a combination of (A) and (B), as applicable, sufficient to pay the aggregate Purchase Price in respect of the Securities to be purchased pursuant to this Section 3.8. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Common Stock, through the Paying Agent, a certificate for the number of full shares of Common Stock, as applicable, issuable in payment of such Purchase Price and Cash in lieu of any fractional interests. The Person in whose name the certificate for Common Stock is registered shall be treated as a holder of record following the Purchase Date. Subject to Section 3.8(d), no payment or adjustment will be made for dividends on the Common Stock the record date for which occurred on or prior to the Purchase Date. (h) Taxes. If a Holder of a Security is paid in Common Stock, the Company shall- pay any documentary, stamp or similar issue or transfer tax due on such issue of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 3.9. REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE. (a) If a Fundamental Change shall occur at any time prior to May 23, 2021, each Holder of Securities shall have the right, at such Holder's option, to require the Company to redeem any or all of such Holder's Securities for Cash on the date that is 30 days after the date of the Company's notice of such Fundamental Change (the "Fundamental Change Redemption Date") (or if such date is not a Business Day, the next succeeding Business Day). The Securities will be redeemable in integral multiples of $1,000 of Principal Amount. The Company shall redeem such Securities at a price (the "Fundamental Change Redemption Price") equal to the Issue Price plus accrued Original Issue Discount up to and including the Fundamental Change Redemption Date (or, -30- 37 if the Securities are converted to interest-bearing debentures following a Tax Event pursuant to Section 11.6 and paragraph 9(b) of the Securities, a price equal to the Restated Principal Amount plus accrued interest from the date the Company exercised its right to convert the Securities up to and including the Fundamental Change Redemption Date). Payment for Securities surrendered for purchase (and not withdrawn) prior to the expiration of the 30-day period referenced in the first sentence of this subsection (a) shall be made promptly following the Fundamental Change Repurchase Date. No Securities may be redeemed at the option of the Holders as a result of a Fundamental Change if there has occurred and is continuing an Event of Default (other than a default in the payment of the Fundamental Change Redemption Price with respect to such Securities). (b) The Company, or at its request (which must be received by the Trustee at least three Business Days prior to the date the Trustee is requested to give such notice as described below) the Trustee in the name of and at the expense of the Company, shall mail to the Trustee and all Holders of record of the Securities a notice (a "Fundamental Change Redemption 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. (c) For a Security to be so redeemed at the option of the Holder, the Paying Agent must receive such Security with the form entitled "Option to Elect Redemption Upon a Fundamental Change" on the reverse thereof duly completed, together with such Security duly endorsed for transfer, on or before the 30th day after the date of such notice (or if such 30th day is not a Business Day, the next succeeding Business Day). SECTION 3.10. EFFECT OF PURCHASE NOTICE OR FUNDAMENTAL CHANGE REDEMPTION NOTICE. Upon receipt by the Company of the Purchase Notice or Fundamental Change Redemption Notice specified in Section 3.8(a) or Section 3.9(b), as applicable, the Holder of the Security in respect of which such Purchase Notice or Fundamental Change Redemption Notice, as the case may be, was given shall (unless such Purchase Notice or Fundamental Change Redemption Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Fundamental Change Redemption Price, as the case may be, with respect to such Security. Such Purchase Price or Fundamental Change Redemption Price shall be paid to such Holder promptly following the later of (x) the Purchase Date or the Fundamental Change Redemption Date, as the case may be, with respect to such Security (provided the conditions in Section 3.8(a) or Section 3.9(c), as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.8(a) or Section 3.9(c), as applicable. Securities in respect of which a Purchase Notice or Fundamental Change Redemption Notice, as the case may be, has been given by the Holder thereof may not be converted for shares of Common Stock on or after the date of the delivery of such Purchase Notice (or Fundamental Change Redemption Notice, as the case may be), unless such Purchase Notice (or Fundamental Change Redemption Notice, as the case may be) has first been validly withdrawn as specified in the following two paragraphs. -31- 38 A Purchase Notice or Fundamental Change Redemption Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business on the Purchase Date or the Fundamental Change Redemption Date, as the case may be, to which it relates specifying: (1) the certificate number of the Security in respect of which such notice of withdrawal is being submitted, (2) the Principal Amount of the Security with respect to which such notice of withdrawal is being submitted, and (3) the Principal Amount, if any, of such Security which remains subject to the original Purchase Notice or Fundamental Change Redemption Notice, as the case may be, and which has been or will be delivered for purchase or redemption by the Company. A written notice of withdrawal of a Purchase Notice may be in the form of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.8(a)(1)(D) or (ii) a conditional withdrawal containing the information set forth in Section 3.8(a)(1)(D) and the preceding paragraph and contained in a written notice of withdrawal delivered to the Paying Agent as set forth in the preceding paragraph. There shall be no purchase of any Securities pursuant to Section 3.8 (other than through the issuance of Common Stock in payment of the Purchase Price, including Cash in lieu of any fractional shares) or redemption pursuant to Section 3.9 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Fundamental Change Redemption Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Fundamental Change Redemption Price, as the case may be, with respect to such Securities). SECTION 3.11. DEPOSIT OF PURCHASE PRICE OR FUNDAMENTAL CHANGE REDEMPTION PRICE. On or before the Business Day following a Purchase Date or a Fundamental Change Redemption Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an amount of money and/or securities, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Fundamental Change Redemption Price, as the case may be, of all the Securities or portions thereof which are to be purchased as of such Purchase Date or Fundamental Change Redemption Date, as the case may be. SECTION 3.12. Securities Purchased in Part. Any Security that is to be purchased or redeemed only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall -32- 39 execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of the Security so surrendered which is not purchased or redeemed. SECTION 3.13. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES. In connection with any purchase or redemption of Securities under Section 3.8 or 3.9 hereof, the Company shall (i) comply with Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act, if applicable, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, if applicable, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Section 3.8 and 3.9 to be exercised in the time and in the manner specified in Section 3.8 and 3.9. SECTION 3.14. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall return to the Company any cash or shares of Common Stock (in the case of the Purchase Price that remain unclaimed as provided in paragraph 14 of the Securities, together with interest or dividends, if any, thereon, held by them for the payment of a Purchase Price or Fundamental Change Redemption Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 3.11 exceeds the aggregate Purchase Price or Fundamental Change Redemption Price, as the case may be, of the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Fundamental Change Redemption Date, as the case may be, then promptly after the Business Day following the Purchase Date or Fundamental Change Redemption Date, as the case may be, the Trustee and the Paying Agent shall return any such excess to the Company together with interest or dividends, if any, thereon. SECTION 3.15. MODIFICATION TO FUNDAMENTAL CHANGE DEFINITIONS. In the case of a reclassification, change, consolidation, merger, combination, sale or conveyance to which Section 11.15 applies, in which the Common Stock of the Company is changed or exchanged as a result into the right to receive stock, securities or other property or assets (including Cash), which includes shares of common stock of another person that are, or upon issuance will be, traded on a United States national securities exchange or approved for trading on an established automated over-the-counter trading market in the United States and such shares of common stock constitute at the time such change or exchange becomes effective in excess of 50% of the aggregate fair market value of such stock, securities or other property or assets (including Cash) into which the Common Stock of the Company is or is to be changed or exchanged for (as determined by the Company, which determination shall be conclusive and binding), then the person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture (accompanied by an Opinion of Counsel that such supplemental indenture complies with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) modifying the provisions of this Indenture relating to the right of holders of the Securities to cause the Company to repurchase the -33- 40 Securities in the event of a Fundamental Change, including, without limitation, the applicable provisions of this Article 3 and the definitions of Common Stock and Fundamental Change, as appropriate, as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions apply to such other person if different from the Company and the common stock issued thereby (in lieu of the Company and the Common Stock of the Company). ARTICLE 4 COVENANTS SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly pay or cause to be paid all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, shall be considered paid on the applicable date due or, in the case of a Purchase Price or Fundamental Change Redemption Price, on the Business Day following the applicable Purchase Date or Fundamental Change Redemption Date, as the case may be, if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, money or securities, if permitted hereunder, sufficient to pay all such amounts then due. The Company shall pay interest on overdue amounts at the rate set forth in paragraph I of the Securities and it shall pay interest on overdue interest at the same rate compounded semiannually (to the extent that the payment of such interest shall be legally enforceable), which interest on overdue interest shall accrue from the date such amounts became overdue and shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. SECTION 4.2. FINANCIAL INFORMATION; SEC REPORTS. The Company will deliver to the Trustee (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company (i) a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, stockholders' equity and cash flows for such fiscal year, all reported on by an independent public accountant of nationally recognized standing and (ii) a report containing a management's discussion and analysis of the financial condition and results of operations and a description of the business and properties of the Company and (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company (i) an unaudited consolidated financial report for such quarter and (ii) a report containing a management's discussion and analysis of the financial condition and results of operations of the Company; provided that the foregoing shall not be required for any fiscal year or quarter, as the case may be, with respect to which the Company files or expects to file with the Trustee an annual report or quarterly report, as the case may be, pursuant to the third paragraph of this Section 4.2. -34- 41 So long as the Securities or the Common Stock issued upon conversion of the Securities are Restricted Securities, if the Company is not subject to either Section 13 or 15(d) of the Exchange Act, the Company shall at the request of any Holder (or holders of Common Stock issued upon conversion of the Securities) provide to such Holder (or holders of such Common Stock) and any prospective purchaser designated by such Holders (or holders of such Common Stock), as the case may be, such information, if any, required by Rule 144A(d)(4) under the Securities Act. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. SECTION 4.3. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officers' Certificate in which one of the two Officers signing such certificate is either the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not to the knowledge of the signers thereof the Company is in Default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in Default, specifying all such Defaults and the nature and status thereof of which the signers may have knowledge. The Company will deliver to the Trustee, forthwith upon becoming aware of any Default in the performance or observance of any covenant, agreement or condition contained in this Indenture, or any Event of Default, an Officers' Certificate specifying with particularity such Default or Event of Default and further stating what action the Company has taken, is taking or proposes to take with respect thereto. Any notice required to be given under this Section 4.3 shall be delivered to the Trustee at its Corporate Trust Office. SECTION 4.4. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the respective Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.5. MAINTENANCE OF OFFICE OR AGENCY. The Company will appoint in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be -35- 42 served. The office or agency in the Borough of Manhattan, the City of New York, shall initially be State Street Bank and Trust Company, N.A., an Affiliate of the Trustee located at 61 Broadway, 15th Floor, New York, New York 10006 (Attention: Corporate Trust Department - Atmel Corporation, Zero Coupon Convertible Subordinated Debentures due 2021), and shall be the office or agency for all of the aforesaid purposes unless the Company shall appoint some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. SECTION 4.6. EXISTENCE. Subject to Article 5, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights (charter and statutory); provided, however, that the Company shall not be required to preserve any such right if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 4.7. MAINTENANCE OF PROPERTIES. The Company will cause all properties used or useful in the conduct of its business or the business of any Significant Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.7 shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Significant Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 4.8. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge, or cause to be paid or discharged, before the same may become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Company or any Significant Subsidiary or upon the income, profits or property, of the Company or any Significant Subsidiary, (ii) all claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the property of the Company or any Significant Subsidiary, and -36- 43 (iii) all stamps and other duties, if any, which may be imposed by the United States or any political subdivision thereof or therein in connection with the issuance, transfer, exchange or conversion of any Securities or with respect to this Indenture; provided however, that, in the case of clauses (i) and (ii), the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (A) if the failure to do so will not, in the aggregate, have a material adverse impact on the Company, or (B) if the amount applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.9. ADDITIONAL INTEREST. If Additional Interest is payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such interest is payable. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Additional Interest is payable. If the Company has paid Additional Interest directly to the persons entitled to it, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment. ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.1. WHEN THE COMPANY MAY MERGE OR TRANSFER ASSETS. The Company shall not consolidate with, merge with or into any other Person (other than in a merger or consolidation in which the Company is the surviving Person) or convey, transfer or lease all or substantially all of its properties and assets to any Person, unless: (i) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease all or substantially all of the properties and assets of the Company shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any State thereof or the District of Columbia, and shall expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, the due and punctual payment of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, on the Securities, according to their tenor, and the due and punctual performance of all of the covenants and obligations of the Company under the Securities and this Indenture, and shall have provided for conversion rights in accordance with this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and -37- 44 (iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. The successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if: (1) the Company defaults in the payment of the Principal Amount, Issue Price (or, if the Securities have been converted to interest-bearing Securities following a Tax Event pursuant to Section 11.6, the Restated Principal Amount), accrued Original Issue Discount (or, if the Securities have been converted to interest-bearing Securities following a Tax Event, accrued and unpaid interest), accrued Additional Interest, if any, Redemption Price, Purchase Price or a Fundamental Change Redemption Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise (provided that in the case of a default in the payment of Additional interest, such default in payment of Additional Interest continues for a period of 30 days), whether or not such payment shall be prohibited by Article 10; (2) the Company fails to comply with any of its agreements or covenants in the Securities or this Indenture (other than those referred to in clause (1) above) and such failure continues for 90 days after receipt by the Company of a Notice of Default; (3) the Company shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of the property of the Company, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or -38- 45 (4) an involuntary case or other proceeding shall be commenced against the Company seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of the property of the Company, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of ninety (90) consecutive days; A Default under clause (2) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (2) above after actual receipt of such notice (a "Notice of Default"). Any such notice must specify the Default, demand that it be remedied and state that such notice is a Notice of Default. SECTION 6.2. ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 6.1(3) or (4)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Issue Price and accrued Original Issue Discount up to and including the date of declaration (and Additional Interest, if any) on all the Securities to be immediately due and payable. Upon such a declaration, such Issue Price and accrued Original Issue Discount shall become and be due and payable immediately. If an Event of Default specified in Section 6.1(3) or (4) occurs and is continuing, the Issue Price and accrued Original Issue Discount (and Additional Interest, if any) on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Company and the Trustee (and without notice to any other Holder), may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Issue Price and accrued Original Issue Discount (and Additional Interest, if any) that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.7 have been paid. No such rescission shall affect any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Issue Price and accrued Original Issue Discount on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not -39- 46 impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.4. WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Company and the Trustee (and without notice to any other Holder), may waive an existing Default or Event of Default and its consequences except (1) an Event of Default described in Section 6.1(1), (2) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Holder affected or (3) a Default that constitutes a failure to convert any Security in accordance with the terms of Article 11. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.5. CONTROL BY MAJORITY. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. SECTION 6.6. LIMITATION ON SUITS. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Company and the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense satisfactory to the Trustee; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and (5) the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. A Holder may not use this Indenture to prejudice the rights of any other Holder or to obtain a preference or priority over any other Holder. -40- 47 SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, but subject to Article 10, the right of any Holder to (i) receive payment of the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Fundamental Change Redemption Price, Additional Interest (under the Registration Rights Agreement) or interest, if any, in respect of the Securities held by such Holder on or after the respective due dates expressed in the Securities or any date of redemption, (ii) convert the Securities in accordance with Article 11, or (ii) bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default described in Section 6.1(1) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.7. SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price, Additional Interest (under the Registration Rights Agreement) or interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and -41- 48 advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7. If the Trustee does not file a claim or proof of debt in the form required in such proceedings prior to 30 days before the expiration of the time to file such claims or proofs, then any holder or holders of Senior Indebtedness or their representative or representatives shall have the right to demand, sue for, collect, receive and receipt for the payments and distributions in respect of the Securities which are required to be paid or delivered to the holders of Senior Indebtedness as provided in this Article and to file and prove all claims therefor and to take all such other action in the name of the holders or otherwise, as such holders of Senior Indebtedness or representative thereof may determine to be necessary or appropriate for the enforcement of the provisions of this Article. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claims of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.7; Second: to holders of Senior Indebtedness to the extent required by Article 10; Third: to Holders for amounts due and unpaid on the Securities for the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and Fourth: the balance, if any, to the Company. The Trustee may fix a proposed record date and payment date for any payment to Holders pursuant to this Section 6.10 and shall notify the Company in writing with respect to such proposed record date and payment date. At least 15 days before such record date, the Company (or the Trustee at the request of the Company) shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may -42- 49 require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, any suit by a Holder for the enforcement of the payment of the Principal Amount, accrued Original Issue Discount, Redemption Price, Purchase Price, Fundamental Change Redemption Price, Additional Interest (under the Registration Rights Agreement) or interest, if any, on or after the due date expressed in such Security or to any suit for the enforcement of the right to convert the Security pursuant to Article 11, or a suit by Holders of more than 10% in aggregate Principal Amount of the Securities at the time outstanding. SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price or Fundamental Change Redemption Price in respect of Securities, or any interest on any such amounts, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such laws and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.1. DUTIES OF TRUSTEE. If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (a) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this -43- 50 Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. This Section 7.1(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (b) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (c) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. (d) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense. (e) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. SECTION 7.2. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require a Company Order, an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on a Company Order, Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. -44- 51 (d) Subject to the provisions of Section 7.1(c), the Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, unless the Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with the like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.4. TRUSTEE DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for Company's use of the proceeds from the Securities; and it shall not be responsible for any statement in the offering memorandum for the Securities or in this Indenture or the Securities (other than its certificate of authentication), the acts of a prior Trustee hereunder, or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.5. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall give to each Holder notice of the Default within 90 days after the Trustee becomes aware of such Default. Except in the case of a Default described in Section 6.1(1), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the best interests of the Holders. The second sentence of this Section 7.5 shall be in lieu of the proviso to Section 315(b) of the TIA and such provision is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not give notice of a Default pursuant to Section 6.1(2) until at least sixty days have passed since its occurrence. SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each October 1, beginning with the October 1 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such October 1 that -45- 52 complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each securities exchange on which the Securities are listed. The Company agrees to notify the Trustee whenever the Securities become listed on any securities exchange and of any delisting thereof SECTION 7.7. COMPENSATION AND INDEMNITY. The Company agrees: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expense, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.7 the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(3) or (4), the expenses are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws. SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.8. The Holders of a majority in aggregate Principal Amount of the Securities at the time -46- 53 outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if- (1) the Trustee fails to comply with, or ceases to be eligible under Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge or control of the Trustee or its property or affairs; or (4) the Trustee otherwise in the Company's reasonable judgment becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject to the lien provided for in Section 7.7. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trustee business (including the trust created by this Indenture) or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the -47- 54 successor Trustee hereunder, provide such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee shall have a combined capital and surplus of at least $50,000,000 (or if the Trustee is a member of a bank holding company system, its bank holding company shall have a combined capital and surplus of at least $50,000,000) as set forth in its most recent published annual report of conditions. Nothing herein contained shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, it shall correct such ineligibility or resign immediately in the manner and with the effect specified in this Article 7. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 DISCHARGE OF INDENTURE. SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES. When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee Cash and/or securities, as permitted by the terms hereof, sufficient to pay at Stated Maturity the Principal Amount of all outstanding Securities (other than Securities replaced pursuant to Section 2.7), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.7, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. -48- 55 SECTION 8.2. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years; provided, however, that the Trustee or such Paying Agent, before being required to make any such return, shall, in the event that the Securities are no longer held in global form, at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each such Holder notice that such money or securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed money or securities then remaining will be returned to the Company. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. ARTICLE 9 AMENDMENTS SECTION 9.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may amend this Indenture and the Securities without the consent of any Holder: (1) to cure any ambiguity or to correct or supplement any provision contained, herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions with regard to matters or questions arising under this Indenture which shall not materially affect the interests of the Holders; (2) to comply with Article 5 or Section 11.15 or Section 3.15; (3) to provide for uncertificated Securities in addition to certificated Securities so long as such uncertificated Securities are in registered form for purposes of the Internal Revenue Code of 1996, as amended; (4) to make any change that does not adversely affect the right of any Holder; or (5) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification, if any, of the indenture under the TIA. -49- 56 SECTION 9.2. WITH CONSENT OF HOLDERS. The Company and the Trustee, with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding, may amend this indenture or the Securities. However, without the consent of each Holder affected, an amendment or supplement to this Indenture or the Securities may not: (1) make any change to the Principal Amount of Securities whose Holders must consent to an amendment; (2) make any change to the manner or rate of accrual in connection with Original Issue Discount or interest, if any, reduce the rate of interest referred to in paragraph 1 of the Securities or extend the time for payment of Original Issue Discount or interest, if any, on any Security; (3) reduce the Principal Amount or the Issue Price of or extend the Stated Maturity of any Security; (4) reduce the Redemption Price, Purchase Price or Fundamental Change Redemption Price of any Security; (5) reduce the rate of, or make any change in the manner of paying, Additional Interest; (6) make any Security payable in money or securities other than that stated in the Security; (7) make any change in Article 10 that adversely affects the rights of any Securityholder; (8) make any change in Section 6.4, Section 6.7 or this Section 9.2, except to increase any such percentage; (9) make any change that adversely affects the right to convert any Security; (10) make any change that adversely affects the right to require the Company to purchase the Securities, or the right to require the Company to redeem the Securities upon a Fundamental Change, in accordance with the terms thereof and this Indenture, or (11) change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in this Indenture. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. -50- 57 An amendment under this Section 9.2 or Section 9.1 may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the requisite holders of such Senior Indebtedness consent to such change pursuant to the terms of such Senior Indebtedness. After an amendment under this Section 9.2 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE. Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA as then in effect, if then required to so comply. SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS. Until an amendment, waiver or other action becomes effective, a consent to it or any other action by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Holder. SECTION 9.5. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities. SECTION 9.6. TRUSTEE'S DISCRETION TO EXECUTE SUPPLEMENTAL INDENTURES. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such amendment the Trustee shall be entitled to receive, and (subject to the provisions of Section 7.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. -51- 58 SECTION 9.7. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. ARTICLE 10 SUBORDINATION SECTION 10.1. AGREEMENT OF SUBORDINATION. The Company covenants and agrees, and each Holder of Securities issued hereunder by acceptance thereof likewise covenants and agrees, that all payments by the Company in respect of the Securities shall be subject to the provisions of this Article 10; and each Person holding any Security whether upon original issue or upon transfer, or assignment or exchange thereof, accepts and agrees to be bound by such provisions. The payment of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, in respect to the Securities shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article 10 shall prevent the occurrence of any Default or Event of Default hereunder. SECTION 10.2. PAYMENTS TO HOLDERS. No payment shall be made with respect to the Principal Amount, Issue Price, accrued Additional Interest, if any, Original Issue Discount, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, on the Securities, except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 10.5, if: (i) a default in the payment of principal, premium, interest, rent or other obligations due on any Senior Indebtedness has occurred and is continuing (or, in the case of Senior Indebtedness for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Indebtedness) (a "Payment Default"), unless and until such Payment Default shall have been cured or waived or shall have ceased to exist; or (ii) a default, other than a payment default, on Designated Senior Indebtedness occurs and is continuing that permits the holders of such Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a "Payment -52- 59 Blockage Notice") a Representative of Designated Senior Indebtedness or the Company (a "Non-Payment Default"). If the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (A) at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice, and (B) all scheduled payments of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any on the Securities that have come due have been paid in full in cash. No Non-Payment Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (unless such default was waived, cured or otherwise ceased to exist and thereafter subsequently reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage Notice. The Company may and shall resume payments on and distributions in respect of the Securities upon the earlier of: (1) in the case of a Payment Default, the date upon which the default is cured or waived or ceases to exist, or (2) in the case of a Non-Payment Default, the earlier of (a) date on which such default is cured or waived or ceases to exist or (b) 179 days after the date on which the applicable Payment Blockage Notice is received, if the maturity of such Designated Senior Indebtedness has not been accelerated unless this Article 10 otherwise prohibits the payment or distribution at the time of such payment or distribution (including, without limitation, in the case of a default referred to in clause (ii) above, as a result of a payment default with respect to the applicable Senior Indebtedness as a consequence of the acceleration of the maturity thereof or otherwise). Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization, of the Company, whether voluntary or involuntary or in bankruptcy, moratorium of payments, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in Cash or other payment satisfactory to the holders of such Senior Indebtedness, or payment thereof in accordance with its terms provided for in Cash or other payment satisfactory to the Holders of such Senior Indebtedness before any payment is made on account of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price, interest, if any, in respect to the Securities, (except payments made pursuant to Article 8 from monies deposited with the Trustee pursuant thereto prior to commencement of proceedings for such dissolution, winding-up, liquidation or reorganization); and upon any such dissolution or winding-up or liquidation or reorganization of the Company or bankruptcy, insolvency, receivership or other proceeding, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or -53- 60 securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provisions of this Article 10, shall (except as aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, or as otherwise required by law or court order) or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any such Senior Indebtedness may have been issued, as their respective interests may appear or to the extent necessary to pay all such Senior Indebtedness in full, in Cash or other payment satisfactory to the holders of such Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the Securities or to the Trustee. In the event of the acceleration of the Securities because of an Event of Default pursuant to Section 6.2, no payment or distribution shall be made to the Trustee or any Holder in respect of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price or interest, if any, on the Securities, except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 10.5, until all Senior Indebtedness has been paid in full in Cash or other payment satisfactory to the holders of Senior Indebtedness or such acceleration is rescinded in accordance with the terms of this Indenture. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the Company of the acceleration. In the event that, notwithstanding the foregoing provisions, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise), prohibited by the foregoing, shall be received by the Holders of the Securities before all Senior Indebtedness is paid in full in Cash or other payment satisfactory to the holders of such Senior Indebtedness, or provision is made for such payment thereof in accordance with its terms in Cash or other payment satisfactory to holders of such Senior Indebtedness, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness of the Company or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all such Senior Indebtedness remaining unpaid to the extent necessary to pay all such Senior Indebtedness in full in Cash or other payment satisfactory to the holders of such Senior Indebtedness, after giving effect to any concurrent payment or distribution, or provision thereof, to or for the holders of such Senior Indebtedness. For purposes of this Article 10, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article 10 with respect to the Securities to the payment of all Senior Indebtedness of the Company which may at the time be outstanding; -54- 61 provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness (other than leases that are not assumed by the Company or the new corporation, as the case may be) are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article 5 hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 10.2 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article 5 hereof. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7. This Section 10.2 shall be subject to the further provisions of Section 10.5. SECTION 10.3. SUBROGATION OF SECURITIES. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article 10 (equally and ratably with the holders of all Indebtedness of the Company which by its express terms is subordinated to other Indebtedness of the Company to substantially the same extent as the Securities are subordinated and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Fundamental Change Redemption Price or interest, if any, on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article 10, and no payment over pursuant to the provisions of this Article 10, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Senior Indebtedness; and no payments or distributions of cash, property or securities to or for the benefit of the Holders of the Securities pursuant to the subrogation provisions of this Article 10, which would otherwise have been paid to the holders of Senior Indebtedness shall be deemed to be a payment by the Company to or for the account of the Securities. It is understood that the provisions of this Article 10 are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand. Nothing contained in this Article 10 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities amounts due on the Securities as and when -55- 62 the same shall become due payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 10 of the holders of Senior Indebtedness in respect of Cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee, subject to the provisions of Section 7.1 and the holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.4. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Security by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 10 and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.9 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Indebtedness or their Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities. SECTION 10.5. NOTICE TO TRUSTEE. The Company shall give prompt written notice in a form of an Officers' Certificate to a Trust Officer and to any Paying Agent of any fact known to the Company which would prohibit the making of any payment of monies deposited by the Company to or by the Trustee or any Paying Agent in respect of the Securities pursuant to the provisions of this Article 10. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article 10, unless and until a Trust Officer shall have received written notice thereof at the Corporate Trust Office from the Company (in the form of an Officers' Certificate) or a Representative or a holder or holders of Senior Indebtedness or a Representative or from any trustee thereof; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.1, shall be entitled in all respects to assume that no such facts exist; provided that if on a date not fewer than two Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of the Principal Amount, Issue -56- 63 Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, in respect of the Securities) the Trustee shall not have received, with respect to such monies, the notice provided for in this Section 10.5, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Notwithstanding anything in this Article 10 to the contrary herein set forth, nothing shall prevent any payment by the Trustee to the Holders of monies deposited with it pursuant to Section 8.1, and any such payment shall not be subject to the provision of Section 10.1 or 10.2. The Trustee, subject to the provisions of Section 7.1, shall be entitled to rely on the delivery to it of a written notice by a Representative or a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a Representative or a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 10, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.6. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 10 in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and, subject to the provisions of Section 7.1, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Holders of Securities, the Company or any other Person money or assets to which any holder of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise. -57- 64 SECTION 10.7. NO IMPAIRMENT OF SUBORDINATION. No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. SECTION 10.8. CERTAIN CONVERSIONS NOT DEEMED PAYMENT. For the purposes of this Article 10 only, (1) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article 11 shall not be deemed to constitute a payment or distribution on account of the Principal Amount, Issue Price, Accrued Original Issue Discount, Accrued Additional Interest, if any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and interest, if any, or on account of the purchase or other acquisition of Securities, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 15.3 or 3.8(d)), property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section 10.8, the term "junior securities" means (a) shares of any stock of any class of the Company or (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. Nothing contained in this Article 10 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors (other than holders of Senior Indebtedness) and the Holders, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article 11. SECTION 10.9. ARTICLE APPLICABLE TO PAYING AGENTS. If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that the first paragraph of Section 10.5 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 10.10. SENIOR INDEBTEDNESS ENTITLED TO RELY. The holders of Senior Indebtedness (including, without limitation, Designated Senior Indebtedness) shall have the right to rely upon this Article 10, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless such holders shall have agreed in writing thereto. -58- 65 ARTICLE 11 CONVERSION SECTION 11.1. CONVERSION PRIVILEGE. A Holder of a Security may convert such Security for Common Stock at any time during the period stated in paragraph 9 of the Securities. The number of shares of Common Stock issuable upon conversion of a Security per $1,000 of Principal Amount thereof (the "Conversion Rate") shall be that set forth in paragraph 9 in the Securities, subject to adjustment as herein set forth. A Holder may convert a portion of the Principal Amount of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. SECTION 11.2. CONVERSION PROCEDURE. To convert a Security, a Holder must satisfy the requirements in paragraph 9 of the Securities. The date on which the Holder of Securities satisfies all those requirements is the conversion date (the "Conversion Date"). As soon as practicable after the Conversion Date the Company shall deliver to the Holder, through the Conversion Agent, a certificate for the number of full shares of Common Stock issuable upon the conversion and Cash in lieu of any fractional share determined pursuant to Section 11.3. The Person in whose name the certificate is registered shall be treated as the stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such Person shall no longer be a Holder of such Security. No payment on the Securities or adjustment of the Conversion Rate will be made for dividends on or other distributions with respect to any Common Stock except as provided in this Article 11. On conversion of a Security, that portion of accrued Original Issue Discount attributable to the period from the Issue Date of the Security to the Conversion Date with respect to the converted Security shall not be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock (together with the Cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the provisions hereof. -59- 66 If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total Principal Amount of the Securities converted. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount to the unconverted portion of the Security surrendered. If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding day that it is not a Legal Holiday. SECTION 11.3. FRACTIONAL SHARES. The Company will not issue a fractional share of Common Stock upon conversion of a Security. Instead the Company will deliver Cash for the current market value of the fractional share. The current market value of a fractional share shall be determined to the nearest 1/10,000th of a share by multiplying the last reported sale price (determined as set forth in the definition of Current Market Price) on the last Trading Day prior to the Conversion Date of a full share by the fractional amount and rounding the product to the nearest whole cent. SECTION 11.4. TAXES ON CONVERSION. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. SECTION 11.5. COMPANY TO PROVIDE STOCK. The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company covenants that if any shares of Common Stock to be provided for the purpose of conversion of Securities hereunder require registration with or approval of any governmental authority under any federal or state law before such shares may be validly issued upon conversion, -60- 67 the Company will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be. The Company further covenants that if at any time the Common Stock shall be quoted on the Nasdaq National Market or any other automated quotation system or listed on the NYSE or any other national or regional securities exchange, the Company will, if permitted by the rules of such automated quotation system or exchange, list and keep listed, so long as the Common Stock shall be so listed on such automated quotation system or exchange, all shares of Common Stock issuable upon conversion of the Securities; provided, however, that if the rules of such automated quotation system or exchange permit the Company to defer the listing of such Common Stock until the first conversion of the Securities into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Securities in accordance with the requirements of such automated quotation system or exchange at such time. SECTION 11.6. CONVERSION TO SEMIANNUAL COUPON UPON A TAX EVENT. (a) If at any time after the date (the "Tax Event Date") of the occurrence of a Tax Event the Company exercises its option (the date of such exercise, (the "Option Exercise Date") to pay interest in lieu of Original Issue Discount, interest in lieu of future Original Issue Discount shall accrue at the rate of 4.75% per annum on a Principal Amount per Security (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Option Exercise Date (as calculated by the Company and set forth in an Officer's Certificate delivered to the Trustee) and shall be payable semiannually on May 23 and November 23 of each year (each an "Interest Payment Date") to holders of record of the Securities on the May 8 or November 8 immediately preceding Interest Payment Date (each a "Regular Record Date"), immediately proceeding such Interest Payment Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. Interest on any Security that is payable on any Interest Payment Date shall be paid to the Person in whose name that Security is registered at the close of business on the Regular Record Date. (b) Within 15 days of the occurrence of a Tax Event, the Company shall mail a written notice of such Tax Event by first class mail to the Trustee and within 15 days of its exercise of such option the Company shall mail a written notice of the Option Exercise Date by first-class mail to the Trustee and the Holders of the Securities. From and after the Option Exercise Date, (i) the Company shall be obligated to pay at Stated Maturity, in lieu of the Principle Amount of a Security, the Restated Principal Amount thereof and (ii) "Issue Price and accrued Original Issue Discount," "Issue Price plus Original Issue Discount," or similar words, as used herein, shall mean Restated Principal Amount plus accrued and unpaid interest with respect to any Security. Securities authenticated and delivered after the Option Exercise Date may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to the conversion of the Securities to semiannual coupon notes. (c) Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security is -61- 68 registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose. Each installment of interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States. In the case of a permanent Global Security, in global form, interest payable on any Interest Payment Date will be paid to the Depositary, with respect to that portion of such permanent Global Security, in global form, held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Security in global form to the accounts of the beneficial owners thereof. (d) Except as otherwise specified with respect to the Security, any interest on any Security that is payable, but is not punctually paid or duly provided for, within 30 days following on any Interest Payment Date (herein called "Defaulted Interest", which term shall include any accrued and unpaid interest that has accrued on such defaulted amount in accordance with paragraph 1 of the Securities), shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities at his address as it appears on the list of Securityholders maintained pursuant to Section 2.5 not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such -62- 69 exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section 11.6 and Section 2.6, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. (e) In the event that the Company exercises its option following a Tax Event, any Security or portion thereof surrendered for conversion during the period from the close of business on the Regular Record Date to the opening of business on the immediately following Interest Payment Date (unless such Security or portion thereof being converted shall have been called for redemption on a date in such period) must be accompanied by a payment, in funds acceptable to the Company, of an amount of interest otherwise payable on such Interest Payment Date on the amount of principal being converted. Interest on any Security that is payable on any Interest Payment Date shall be paid to the Person in whose name that Security is registered at the close of business on the Regular Record Date. SECTION 11.7. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. In case the Company shall (i) pay a dividend, or make a distribution, in shares of its Common Stock, on its Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, or (iii) combine its outstanding Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior thereto shall be adjusted so that the holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which such Holder would have owned or have been entitled to receive after the occurrence of any of the events described above had such Security been converted immediately prior to the occurrence of such event. If any dividend or distribution of the type described in clause (i) above is not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate which would then be in effect if such dividend as distribution had not been declared. An adjustment made pursuant to this Section 11.7 shall become effective immediately after the record date in the case of a dividend and still shall become effective immediately after the effective date in the case of a subdivision or combination. SECTION 11.8. ADJUSTMENT FOR RIGHTS ISSUE. In case the Company shall issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase Common Stock at a price per share less than the Current Market Price per share of Common Stock at the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Rate in effect immediately prior thereto shall be adjusted so that the same shall equal the Conversion Rate determined by multiplying the Conversion Rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the -63- 70 numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered to holders of Common Stock for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price. Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after the opening of business on the day following the record date for the determination of the stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such record date for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price of such Common Stock, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights or warrants, the value of such consideration, if other than Cash, to be determined by the Board of Directors. SECTION 11.9. ADJUSTMENT FOR OTHER DISTRIBUTIONS. (a) In case the Company shall distribute to all holders of its Common Stock (excluding any distribution in connection with the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary) any shares of any class of capital stock of the Company (other than Common Stock), of evidences of indebtedness of the Company or of assets (other than cash) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in Section 11.8 hereof) (any of the foregoing hereinafter in this Section 11.9(a) called the "Distributed Securities"), then, the Conversion Rate shall be adjusted so that the same shall equal the Conversion Rate determined by multiplying the Conversion Rate in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the record date mentioned below, and the denominator shall be the Current Market Price per share of the Common Stock on such record date less the fair market value on such record date (as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a certificate filed with the Trustee) of the Distributed Securities so distributed applicable to one share of Common Stock. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. Notwithstanding the foregoing, in the event that the then fair market value (as so determined) of the portion of the Distributed Securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion the amount of Distributed Securities such Holder would have received had such Holder converted each Security immediately prior to such -64- 71 record date. In the event that such distribution is not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate which would then be in effect if such distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 11.9(a) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price of the Common Stock. Notwithstanding the foregoing provisions of this Section 11.9(a), no adjustment shall be made thereunder for any distribution of Distributed Securities if the Company makes proper provision so that each Holder of a Security who converts such Security (or any portion thereof) after the record date for such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of Distributed Securities that such Holder would have been entitled to receive if such Holder had, immediately prior to such record date, converted such Security for Common Stock; provided that, with respect to any Distributed Securities that are convertible, exchangeable or exercisable, the foregoing provision shall only apply to the extent (and so long as) the Distributed Securities receivable upon conversion of such Security would be convertible, exchangeable or exercisable, as applicable, without any loss of rights or privileges for a period of at least 60 days following conversion of such Security. (b) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock Cash (excluding (x) any quarterly Cash dividend on the Common Stock to the extent the aggregate Cash dividend per share of Common Stock in any fiscal quarter does not exceed the greater of (A) the amount per share of Common Stock of the next preceding quarterly Cash dividend on the Common Stock to the extent such preceding quarterly dividend did not require any adjustment of the Conversion Rate pursuant to this Section 11.9(b) (as adjusted to reflect subdivisions or combinations of the Common Stock), and (B) 3.75% of the average of the last reported sales price of the Common Stock (determined as provided in the definition of Current Market Price) during the ten Trading Days immediately prior to the date of declaration of such dividend and (y) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary), then, in such case, unless the Company elects to reserve such Cash for distribution to the holders of the Securities upon the conversion of the Securities so that any such holder converting Securities will receive upon such conversion in addition to the shares of Common Stock to which such holder is entitled, the amount of Cash which such holder would have received if such holder had, immediately prior to the record date for such distribution of Cash, converted its Securities for Common Stock, the Conversion Rate shall be increased so that the same shall equal the Conversion Rate determined by multiplying the Conversion Rate in effect immediately prior to the record date by a fraction of which the numerator shall be such Current Market Price of the Common Stock and the denominator shall be the Current Market Price of the Common Stock on the record date less the amount of Cash so distributed (and not excluded as provided above) applicable to one share of Common Stock, such increase to be effective immediately prior to the opening of business on the day following the record date; provided, however, that in the event that the portion of the Cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each -65- 72 Holder shall have the right to receive upon conversion the amount of Cash such Holder would have received had such Holder converted each Security on the record date. If such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such dividend or distribution had not been declared. If any adjustment is required to be made as set forth in this Section 11.9(b) as a result of a distribution that is a quarterly dividend, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the quarterly Cash dividend permitted to be excluded pursuant hereto. If an adjustment is required to be made as set forth in this Section 11.9(b) above as a result of a distribution that is not a quarterly dividend, such adjustment shall be based upon the full amount of the distribution. (c) In case a tender or exchange offer made by the Company or any Subsidiary of the Company for all or any portion of the Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Common Stock having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a resolution of such Board of Directors at the last time (the "Expiration Time") tenders or exchanges maybe made pursuant to such tender or exchange offer (as it shall have been amended)) that exceeds the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, the Conversion Rate shall be increased so that the same shall equal the Conversion Rate determined by multiplying the Conversion Rate in effect immediately prior to the Expiration Time by a fraction of which the numerator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to holders of Common Stock based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares of Common Stock validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such increase to become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company is obligated to purchase shares pursuant to any such tender or exchange offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be effect if such tender or exchange offer had not been made. (d) In case of a tender or exchange offer by a Person other than the Company or any Subsidiary for an amount which increases the offeror's ownership of Common Stock to more than 25% of the Common Stock outstanding and shall involve the payment by such Person of consideration per share of Common Stock having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a resolution of the Board of Directors at the last time (the "Tender Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended)) at the Tender Expiration -66- 73 Time that exceeds the Current Market Price of the Common Stock on the Trading Day next succeeding the Tender Expiration Time, and in which, as of the Tender Expiration Time the Board of Directors is not recommending rejection of the offer, the Conversion Rate shall be increased so that the same shall equal the Conversion Rate determined by multiplying the Conversion Rate in effect immediately prior to the Tender Expiration Time by a fraction of which the numerator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to holders of Common Stock based on the acceptance (up to an maximum specified in the terms of the tender or exchanged offer) of all shares of Common Stock validly tendered or exchanged and not withdrawn as of the Tender Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Tender Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Tender Purchased Shares) on the Tender Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Tender Expiration Time and the denominator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Tender Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Tender Expiration Time, such increase to become effective immediately prior to the opening of business on the day following the Tender Expiration Time. in the event that such Person is obligated to purchase shares pursuant to any such tender or exchange offer, but such Person is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such tender or exchange offer had not been made. Notwithstanding the foregoing, the adjustment described in this Section 11.9(d) shall not be made if, as of the Tender Expiration Time, the offering documents with respect to such offer disclose a plan or intention to cause the Company to engage in any transaction described in Article 5. SECTION 11.10. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are made shall be carried forward and taken into account any subsequent adjustment. All calculations under this Article 11 shall be made to the nearest cent or to the nearest 1/10,000th of a share, as the case may be. SECTION 11.11. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value of the Common Stock. To the extent the Securities become convertible into Cash, assets, property or securities (other than capital stock of the Company), no adjustment need be made thereafter as to the cash, assets, property or such securities. Interest will not accrue on the Cash. -67- 74 SECTION 11.12. NOTICE OF ADJUSTMENT. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Holders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice. The certificate shall, absent manifest error, be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 11.13. VOLUNTARY INCREASE. The Company may make such increases in the Conversion Rate, in addition to those required by Sections 11.7, 11.8 and 11.9, as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase 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. To the extent permitted by applicable law, the Company may from time to time increase the Conversion Rate by any amount for any period of time if the period is at least 20 days, the increase is irrevocable during the period and the Board of Directors shall have made a determination that such increase would be in the best interests of the Company, which determination shall be conclusive. Whenever the Conversion Rate is so increased, the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice of such increase. The Company shall mail such notice at least seven days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. SECTION 11.14. NOTICE OF CERTAIN TRANSACTIONS. If: (1) the Company makes any distribution or dividend that would require an adjustment in the Conversion Rate pursuant to Section 11.7, 11.8 or 11.9; or (2) the Company takes any action that would require a supplemental indenture pursuant to Section 11.15; or (3) there is a liquidation, dissolution or winding-up of the Company; then the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 11.15. EFFECT RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any of the following events occur, namely (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or -68- 75 from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or combination of the Company with another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including Cash) with respect to or in exchange for such Common Stock, or (iii) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including Cash) with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing corporation, as the case may be, shall execute with the Trustee a supplemental indenture, providing that each Security shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including Cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of such Securities immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder of Securities, at such Holder's address appearing on the Security register provided for in Section 2.3 of this Indenture. The above provisions of this Section shall similarly apply to successive reclassifications, consolidations, mergers, combinations, and sales. If this Section applies, neither Section 11.7, 11.8 nor 11.9 applies. SECTION 11.16. COMPANY DETERMINATION FINAL. Any determination that the Company or the Board of Directors must make pursuant to Section 11.3, 11.7, 11.8, 11.9, 11.10, 11.11, 11.15 or 11.18 is conclusive. SECTION 11.17. TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no duty to determine when an adjustment under this Article 11 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 11.15 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article 11, and shall not be deemed to have knowledge of any adjustment unless and until it shall have received a notice of adjustment pursuant to Section 11.12. Each Conversion Agent shall have the same protection under this Section 11.7 as the Trustee. -69- 76 SECTION 11.18. SIMULTANEOUS ADJUSTMENTS. In the event that this Article 11 requires adjustments to the Conversion Rate under more than one of Sections 11.7, 11.8, 11.9(a) or 11.9(b), and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 11.9(a), second, the provisions of Section 11.9(b), third the provisions of Section 11.7 and, fourth, the provisions of Section 11.8. SECTION 11.19. SUCCESSIVE ADJUSTMENTS. After an adjustment to the Conversion Rate under this Article 11, any subsequent event requiring an adjustment under this Article 11 shall cause an adjustment to the Conversion Rate as so adjusted. SECTION 11.20. RIGHTS ISSUED IN RESPECT OF COMMON STOCK ISSUED UPON CONVERSION. Notwithstanding any other provision hereof, in the event that the Company implements a stockholders' rights plan, such rights plan shall provide that upon conversion of the Securities the Holders will receive, in addition to the Common Stock issuable upon such conversion, such rights whether or not such rights have separated from the Common Stock at the time of such conversion. In the event that provision is made that a Holder of Securities will receive such rights upon conversion, whether or not the rights have separated from the Common Stock at the time of such conversion, no adjustment shall be made to the Conversion Rate pursuant to this Article 11 as a result of such rights distribution. Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable, and (iii) are also issued in respect of future issuances of Common Stock, shall not be deemed distributed for purposes of Section 11.9(a) until the occurrence of the earliest Trigger Event. In addition, in the event of any distribution of rights or warrants, or any Trigger Event with respect thereto, that shall have resulted in an adjustment to the Conversion Rate under Section 11.9(a), (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such -70- 77 redemption or repurchase, and (2) in the case of any such rights or warrants all of which shall have expired without exercise by any holder thereof, the Conversion Rate shall be readjusted as if such issuance had not occurred. SECTION 11.21. GENERAL CONSIDERATIONS. Whenever successive adjustments to the Conversion Rate are called for pursuant to this Article 11, such adjustments shall be made to the Current Market Price or the conversion rate adjustment provisions of 11.7, 11.8, 11.9 and 11.18 as may be necessary or appropriate to effectuate the intent of this Article 11 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. ARTICLE 12 MISCELLANEOUS SECTION 12.1. TRUST INDENTURE ACT. This Indenture is hereby made subject to, and shall be governed by, the provisions of the TIA required to be part of and to govern indentures qualified under the TIA; provided, however that this Section 12.1 shall not require this Indenture or the Trustee to be qualified under the TIA prior to the time such qualification is in fact required under the terms of the TIA, nor shall it constitute any admission or acknowledgment by any party that any such qualification is required prior to the time such qualification is in fact required under the terms of the TIA. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in an indenture qualified under the TIA, such required provision shall control. SECTION 12.2. NOTICES. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in Person or mailed by first class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by overnight courier) to the following facsimile numbers: if to the Company: Atmel Corporation 2325 Orchard Parkway San Jose, California 95131 Attn: General Counsel Telephone Number: (408) 441-0311 Facsimile Number: (408) 436-4377 -71- 78 if to the Trustee: State Street Bank and Trust Company of California, N.A. 633 West 5th Street, 12th Floor Los Angeles, California 90071 (Attention: Atmel Corporation, Zero Coupon Convertible Subordinated Debentures due 2021) Telephone Number: (213) 362-7338 Facsimile Number: (213) 362-7357 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Holder shall be mailed to the Holder, by first class mail, postage prepaid, at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar. SECTION 12.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall finish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. -72- 79 SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each individual making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such individual, such covenant or condition has been complied with. SECTION 12.6. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.7. RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions. SECTION 12.8. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. -73- 80 SECTION 12.10. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.11. MULTIPLE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. -74- 81 IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed this Indenture on behalf of the respective parties hereto as of date first written above. ATMEL CORPORATION By: ____________________________________ Title: 82 STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. By: ____________________________________ Authorized Signatory 83 EXHIBIT A [FORM OF FACE OF SECURITY] FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. INFORMATION INCLUDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY WILL BE MADE AVAILABLE TO HOLDERS UPON REQUEST TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY AT (408) 441-0311. [FORM OF LEGEND FOR GLOBAL SECURITY] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.(1) [FORM OF RESTRICTIVE LEGEND] THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR - ------------------ (1) The first and second paragraphs should be included only if the Security is in global form. A-1 84 SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (K)(2) OF RULE 902 UNDER REGULATION S UNDER THE SECURITIES ACT) OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITIES WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OF A U.S. PERSON EXCEPT (A) TO ATMEL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a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o. R- Issue Date: May 23, 2001 Original Issue Discount: $608.94 Issue Price: $391.06 (for each $1,000 Principal Amount) (for each $1,000 Principal Amount) CUSIP: 049513AD6 Atmel Corporation, a Delaware corporation (the "Company") for value received, hereby promises to pay to Cede & Co., or registered assigns, the Principal Amount of _______________ Dollars ($________) on May 23, 2021. The principal of this Security shall not bear interest except in the case of default in payment of principal upon acceleration, redemption or maturity or as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Payment of the principal of and interest, if any, on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest, if any, may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. [Payments in respect of this Security shall be made by transfer of immediately available funds to the account specified by the Holder.](2) Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. - ------------------ (2) This sentence should be included only if the Security is in global form s A-4 87 IN WITNESS WHEREOF, Atmel Corporation has caused this instrument to be duly executed. Dated: ATMEL CORPORATION By: ____________________________________ Name: __________________________________ Title: _________________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By: ____________________________________ Authorized Signatory Dated: A-5 88 [FORM OF REVERSE SIDE OF SECURITY] ATMEL CORPORATION ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE DUE 2021 1. INTEREST This Security shall not bear interest, except as specified in this paragraph or as described in paragraph 9(b) hereof If the Principal Amount hereof or any portion of such Principal Amount is not paid when due (whether upon acceleration pursuant to Section 6.2 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 5 hereof, upon the date set for payment of a Purchase Price or Fundamental Change Redemption Price pursuant to paragraph 6 hereof or upon the Stated Maturity of this Security), then in each such case the overdue amount shall bear interest at the rate of 4.75% per annum compounded semiannually (to the extent that the payment of such interest shall be legally enforceable), which interest shall accrue from the date such overdue amount was due up to and including the date that payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable as set forth in the Indenture. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. Original Issue Discount, or if the Security is converted to a semiannual interest Security following the occurrence of a Tax Event (as defined in the Indenture) interest on the Security (except as provided in the second sentence of this paragraph) will cease to accrue after the declaration of acceleration of the Securities. Original Issue Discount (the difference between the Issue Price and the Principal Amount of the Security) in the period during which a Security remains outstanding, shall accrue at the rate of 4.75% per annum, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months, commencing on the Issue Date of this Security. 2. METHOD OF PAYMENT Subject to the terms and conditions of the Indenture, the Company will make payments in respect of the Securities to the Persons who are registered Holders of Securities at the close of business on the Business Day preceding the Redemption Date or Stated Maturity, as the case may be, or at the close of business on a Purchase Date or Fundamental Change Redemption Date, as the case may be. Holders must surrender Securities to the Paying Agent to collect such payments in respect of the Securities. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by check payable in such money. 3. PAYING AGENT, CONVERSION AGENT AND REGISTRAR Initially, State Street Bank and Trust Company of California, N.A., a national banking association organized under the laws of the United States of America (the "Trustee"), will act as A-6 89 Paying Agent, Conversion Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar without notice, other than notice to the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. 4. INDENTURE The Company issued the Securities under an Indenture (the "Indenture"), dated as of May 23, 2001, between the Company and the Trustee. Capitalized terms used but not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $511,500,000 aggregate Principal Amount (subject to exercise of the Over-Allotment Option and to Sections 2.2 and 2.7 of the Indenture). The Indenture does not limit other indebtedness of the Company, secured or unsecured, including Senior Indebtedness of the Company. 5. REDEMPTION AT THE OPTION OF THE COMPANY No sinking fund is provided for the Securities. The Securities are redeemable as a whole, or from time to time in part, at any time at the option of the Company at the redemption prices (in each case, the "Redemption Price") set forth below, provided that the Securities are not redeemable prior to May 23, 2006. The table below shows Redemption Prices of a Security per $1,000 Principal Amount on the dates shown below and at Stated Maturity, which prices reflect accrued Original Issue Discount calculated through each such date. The Redemption Price of a Security redeemed between such dates would include an additional amount reflecting the additional Original Issue Discount accrued from the next preceding date in the table through the actual Redemption Date.
(2) ACCRUED (3) (1) ORIGINAL ISSUE REDEMPTION SECURITY DISCOUNT PRICE REDEMPTION DATE ISSUE PRICE AT 4.75% (1) + (2) ------------------------------ ----------- -------------- ---------- May 23, 2006 $ 391.06 $ 103.46 $ 494.52 May 23, 2007 $ 391.06 $ 127.23 $ 518.29 May 23, 2008 $ 391.06 $ 152.14 $ 543.20 May 23, 2009 $ 391.06 $ 178.25 $ 569.31 May 23, 2010 $ 391.06 $ 205.61 $ 596.67 May 23, 2011 $ 391.06 $ 234.29 $ 625.35 May 23, 2012 $ 391.06 $ 264.35 $ 655.41 May 23, 2013 $ 391.06 $ 295.85 $ 686.91 May 23, 2014 $ 391.06 $ 328.87 $ 719.93
A-7 90
(2) ACCRUED (3) (1) ORIGINAL ISSUE REDEMPTION SECURITY DISCOUNT PRICE REDEMPTION DATE ISSUE PRICE AT 4.75% (1) + (2) ------------------------------ ----------- -------------- ---------- May 23, 2015 $ 391.06 $ 363.47 $ 754.53 May 23, 2016 $ 391.06 $ 399.73 $ 790.79 May 23, 2017 $ 391.06 $ 437.74 $ 828.80 May 23, 2018 $ 391.06 $ 477.58 $ 868.64 May 23, 2019 $ 391.06 $ 519.33 $ 910.39 May 23, 2020 $ 391.06 $ 563.09 $ 954.15 May 23, 2021 $ 391.06 $ 608.94 $ 1,000.00
If converted to an interest-bearing debenture following a Tax Event as described in paragraph 9(b) hereof, this Security will be redeemable at the Restated Principal Amount plus accrued and unpaid interest from the date of this conversion through the Redemption Date. If the Company redeems less than all of the outstanding Securities, the Trustee will select the Securities to be redeemed (i) by lot; (ii) pro rata; or (iii) by another method the Trustee considers fair and appropriate. If the Trustee selects a portion of a Holder's Securities for partial redemption and the Holder converts a portion of the same Securities, the converted portion will be deemed to be from the portion selected for redemption. 6. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER; REDEMPTION AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE (a) Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices per $1,000 Principal Amount, upon delivery of a Purchase Notice containing the information set forth in the Indenture, from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture. Such Purchase Prices may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock of the Company, or in any combination thereof.
PURCHASE DATE PURCHASE PRICE ------------- -------------- May 23, 2006 $ 494.52 May 23, 2011 $ 625.35 May 23, 2016 $ 790.79
Securities in denominations larger than $1,000 of Principal Amount may be purchased in part, but only in integral multiples of $1,000 of Principal Amount. A-8 91 (b) At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to redeem the Securities held by such Holder 30 days after the date of the Company's notice of a Fundamental Change occurring on or prior to May 23, 2021 for a Fundamental Change Redemption Price equal to the Issue Price plus accrued Original Issue Discount through the Fundamental Change Redemption Date (or, if the Securities are converted to interest-bearing debentures following a Tax Event as described in paragraph 9(b) hereof, a Fundamental Change Redemption Price equal to the Restated Principal Amount plus accrued interest through the Fundamental Change Redemption Date) which Fundamental Change Redemption Price shall be paid in cash. Securities in denominations larger than $1,000 of Principal Amount may be redeemed in part in connection with a Fundamental Change, but only in integral multiples of $1,000 of Principal Amount. (c) Holders have the right to withdraw any Purchase Notice or Fundamental Change Redemption Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. (d) If Cash (and/or securities if permitted under the Indenture with respect to the payment of the Purchase Price) sufficient to pay a Purchase Price or Fundamental Change Redemption Price, as the case may be, of all Securities or portions thereof to be purchased as of the Purchase Date or the Fundamental Change Redemption Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Fundamental Change Redemption Date, as the case may be, Original Issue Discount ceases to accrue on such Securities (or portions thereof) on and after such date, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Fundamental Change Redemption Price, as the case maybe, upon surrender of such Security). 7. NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at its registered address. Securities in denominations larger than $1,000 Principal Amount maybe redeemed in part, but only in whole multiples of $1,000. On and after the Redemption Date, subject to the deposit with the paying Agent of funds sufficient to pay the Redemption Price, Original Issue Discount (or interest, if the Security is converted to an interest-bearing debenture as described in paragraph 9(b)) ceases to accrue on Securities or portions thereof called for redemption. 8. SUBORDINATION The Securities are subordinated to all existing and future Senior Indebtedness of the Company. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. The Indenture does not limit the present or future amount of Senior Indebtedness that the Company may have. The Company agrees, and each Holder by accepting a Security agrees, to the subordination and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. A-9 92 9. CONVERSION AT THE OPTION OF THE HOLDER; CONVERSION AT THE OPTION OF THE COMPANY FOLLOWING A TAX EVENT (a) Subject to the next two succeeding sentences, a Holder of a Security may convert this Security for Common Stock of the Company at any time prior to maturity. If this Security is called for redemption, the Holder may convert it at any time before the close of the last Trading Day prior to the Redemption Date. A Security in respect of which a Holder has delivered a notice of exercise of the option to require the Company to purchase such Security or to redeem such Security in the event of a Fundamental Change may be converted only if the notice of exercise is withdrawn in accordance with the terms of the Indenture. The initial Conversion Rate is 22.983 shares of Common Stock per $1,000 Principal Amount, subject to adjustment in certain events described in the Indenture. The Company will deliver Cash or a check in lieu of any fractional share of Common Stock. To convert this Security a Holder must (1) complete and manually sign the conversion notice on the back of this Security (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender this Security to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (4) pay any transfer or similar tax, if required. A Holder may convert a portion of this Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of this Security, that portion of accrued Original Issue Discount attributable to the period from the Issue Date through the Conversion Date with respect to the converted portion of this Security shall not be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through the delivery of the Common Stock (together with any cash payment in lieu of fractional shares) in exchange for the portion of this Security being converted pursuant to the terms hereof. (b) From and after the date (the "Option Exercise Date") that the Company exercises such option, at the option of the Company, interest in lieu of future Original Issue Discount shall accrue at the rate of 4.75% per annum on a Principal Amount per Security (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued to the Option Exercise Date and shall be payable semiannually on May 23 and November 23 of each year (each an "Interest Payment Date") to holders of record at the close of business on the May 8 and the November 8, respectively (each a "Regular Record Date"), immediately preceding such Interest Payment Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. Interest on any Security that is payable on any Interest Payment Date shall be paid to the person in whose name that Security is registered at the close of business on the Regular Record Date. A-10 93 10. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION Any Securities called for redemption, unless surrendered for conversion before the close of business on the last Trading Day prior to the Redemption Date, may be deemed to be purchased from the Holders of such Securities at an amount not less than the Redemption Price, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Securities from the Holders, to convert them for Common Stock and to make payment for such Securities to the Trustee in trust for such Holders. 11. REGISTRATION RIGHTS The Holder of this Security and the Common Stock issuable upon conversion thereof is entitled to the benefits of a Registration Rights Agreement (subject to the provisions thereof), dated as of May 23, 2001, among the Company and the Initial Purchasers. 12. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form, without coupons, in denominations of $1,000 of Principal Amount and integral multiples of $1,000. A Holder may transfer or convert Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to famish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Fundamental Change Redemption Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before a selection of Securities to be redeemed. 13. PERSONS DEEMED OWNERS The registered Holder of this Security may be treated as the owner of this Security for all purposes. 14. UNCLAIMED MONEY OR SECURITIES The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, provided, however, that the Trustee or such Paying Agent, before being required to make any such return, shall at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each such Holder notice that such money or securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed money or securities then remaining will be returned to the Company. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. A-11 94 15. AMENDMENT; WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding and (ii) certain Defaults and Events of Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, defect or inconsistency, or to comply with Article 5 or Section 11.15 of the Indenture, to provide for uncertificated Securities in addition to or in place of certificated Securities or to make any change that does not adversely affect the rights of any Holder or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA. 16. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default in payment of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued Additional Interest, if any, Redemption Price, Purchase Price or Fundamental Change Redemption Price, as the case may be, in respect of the Securities when the same becomes due and payable, provided that in the case of any failure to pay Additional Interest, such failure to pay continues for a period of 30 days; (ii) failure by the Company to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; and (iii) certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being declared due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) above) if it determines that withholding notice is in their interests. 17. DEALINGS WITH THE COMPANY The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. A-12 95 18. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 19. AUTHENTICATION This Security shall not be valid until an authorized officer of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 20. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 21. GOVERNING LAW THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK The Company will furnish to any Holder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Atmel Corporation 2325 Orchard Parkway San Jose, California 95131 Attn: Investor Relations A-13 96 [FORM OF CONVERSION NOTICE] CONVERSION NOTICE To: Atmel Corporation The undersigned registered holder of this Security hereby irrevocably exercises the option to convert this Security, or portion hereof (which is $1,000 principal amount or an integral multiple thereof) below designated, for shares of Common Stock of Atmel Corporation in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Security not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: ______________________________________ Name: __________________________ Signature: _____________________ Fill in name and address for registration of shares if to be delivered to, and Securities if to be issued to and in the name of an entity other than the registered holder: Name: ______________________________________ Street Address: ____________________________ City: ______________________________________ Social Security or Other Taxpayer Identification Number: _____________________ Principal amount to be converted (if less than all): $_____,000 -Conversion Notice- 97 [FORM OF OPTION TO ELECT REDEMPTION UPON A FUNDAMENTAL CHANGE] To: Atmel Corporation The undersigned registered holder of this Security hereby acknowledges receipt of a notice from Atmel Corporation (the "Company") as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to redeem this Security, or the portion hereof (which is $1,000 Principal Amount or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security. Dated: _____________________________ Name: ______________________________ Signature(s): ______________________ Signature(s) must be guaranteed by an eligible Guarantor Institution (a bank, a stock broker, a savings and loan association or a credit union) with membership in an approved signature guarantee program pursuant to Securities and Exchange Commission Rule 17Ad-15) if shares of Common Stock are to be issued, or Securities to be delivered, other than to or in the name of the registered holder. By: _________________________________ Signature Guarantor Principal amount to be redeemed (if less than all): $________________ Social Security or Other Taxpayer Identification Number: ______________ - Redemption Election - 98 ASSIGNMENT For value received _____________________ hereby sell(s), assign(s) and transfer(s) unto _________________ (Please insert social security or other Taxpayer Identification Number of assignee) the within Security, and hereby irrevocably constitutes and appoints _________________ as attorney-in-fact to transfer such Security on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the Security within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) (other than any transfer pursuant to a registration statement that has been declared effective under the Securities Act) under the Securities Act of 1933, as amended, (or any successor provision), the undersigned confirms that such Security is being transferred: [ ] To Atmel Corporation or a subsidiary thereof; or [ ] Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or [ ] To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or [ ] Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; and unless the box below is checked, the undersigned confirms that to its knowledge such Security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"). [ ] The transferee is an Affiliate of the Company. Dated: _____________________________ Name: ______________________________ Signature(s): ______________________ Signature(s) must be guaranteed by an eligible Guarantor Institution (a bank, a stock broker, a savings and loan association or a credit union) with membership in an approved signature guarantee program pursuant to Securities and Exchange Commission Rule 17Ad-15) if shares of Common Stock are to be issued, or Securities to be delivered, other than to or in the name of the registered holder. By: _________________________________ Signature Guarantor NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatever. - Assignment - 99 [FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITY TO REFLECT CHANGES IN PRINCIPAL AMOUNT] Schedule A Changes to Principal Amount of Global Security
===================================================================================================== PRINCIPAL AMOUNT OF SECURITIES BY WHICH THIS GLOBAL SECURITY IS TO BE REDUCED OR INCREASED, AND REMAINING PRINCIPAL AMOUNT OF NOTATION DATE REASON FOR REDUCTION OR INCREASE THIS GLOBAL SECURITY MADE BY - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- =====================================================================================================
- Endorsement Schedule - 100 EXHIBIT B [FORM OF INSTITUTIONAL ACCREDITED INVESTOR LETTER] Atmel Corporation 2325 Orchard Parkway San Jose, California 95131 Ladies and Gentlemen: We are delivering this letter in connection with an offering of Zero Coupon Convertible Subordinated Debentures due 2021 (the "Securities") which are convertible into shares of Common Stock, $0.01 par value (the "Common Stock"), of Atmel Corporation (the "Company"). We hereby confirm that: 1. we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act") or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor"); 2. (A) any purchase of Debentures by us will be for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(1)(5)(a) of the Securities Act that is acquiring Securities as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; 3. in the event that we purchase any Securities, we will acquire Securities having a minimum principal amount of not less than $250,000 for our own account or for any separate account for which we are acting; 4. we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Securities; and 5. we are not acquiring Securities with a view to distribution thereof or with any present intention of offering or selling Securities or the Common Stock issuable upon conversion thereof, except as permitted below; provided that the disposition of our property and property of any accounts for which we are acting as fiduciary shall remain at all times within our control. We understand that the Securities are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Securities and B-1 101 the shares of Common Stock issuable upon conversion thereof have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Securities, that if in the future we decide to resell or otherwise transfer such Securities or the Common Stock issuable upon conversion thereof, such Securities or Common Stock may be resold or otherwise transferred only (i) to the Company or any subsidiary thereof, or (ii) to a person who is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, or (iii) to an Institutional Accredited Investor that, prior to such transfer, furnishes to the Trustee or transfer agent for such securities a signed letter containing certain representations and agreements relating to the restrictions on transfer of such securities (the form of which letter can be obtained from such Trustee or transfer agent), or (iv) pursuant to the exemption from registration provided by Rule 144 under the Securities Art (if applicable), or (v) pursuant to a registration statement which has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer), and in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction and in accordance with the legends set forth on the Securities or the Common Stock issuable upon conversion thereof, as the case may be. We further agree to provide any person purchasing any of the Securities or the Common Stock issuable upon conversion thereof other than pursuant to clause (v)above from us a notice advising such purchaser that resales of such securities are restricted as stated herein. We understand that the Trustee or transfer agent for the Securities and the Common Stock will not be required to accept for registration of transfer any Securities or any shares of Common Stock issued upon conversion of the Securities except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that any Securities and any certificates representing Common Stock will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph other than certificates representing Common Stock transferred pursuant to clause (v) above. We acknowledge that the Company, others and you will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ________________________________________ (Name of Purchaser) By:_____________________________________ Name:___________________________________ Title:__________________________________ Address:________________________________ B-2 EX-4.3 3 f73251ex4-3.txt EXHIBIT 4.3 1 EXHIBIT 4.3 REGISTRATION RIGHTS AGREEMENT BY AND AMONG ATMEL CORPORATION AS ISSUER, AND MORGAN STANLEY & CO. INCORPORATED, CREDIT LYONNAIS SECURITIES (USA) INC. AND NEEDHAM & COMPANY, INCORPORATED AS INITIAL PURCHASERS DATED MAY 23, 2001 2 THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of May 23, 2001 by and among Atmel Corporation, a Delaware corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Credit Lyonnais Securities (USA) Inc. and Needham & Company, Inc. pursuant to the Purchase Agreement, dated May 17, 2001 (the "Purchase Agreement"), among the Company and the Initial Purchasers. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company agrees with the Initial Purchasers, (i) for their benefit as Initial Purchasers and (ii) for the benefit of the beneficial owners (including the Initial Purchasers) from time to time of the Debentures (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the Debentures (each of the foregoing a "Holder" and together the "Holders"), as follows: SECTION 1. DEFINITIONS. Capitalized terms used herein without definition shall have their respective meanings set forth in the Placement Agreement. As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 2(e) hereof. Affiliate: With respect to any specified person, an "affiliate," as defined in Rule 144, of such person. Amendment Effectiveness Deadline Date: See Section 2(d) hereof. Applicable Conversion Price: The Applicable Conversion Price as of any date of determination means the Conversion Price in effect as of such date of determination or, if no Debentures are then outstanding, the Conversion Price that would be in effect were Debentures then outstanding. Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. Common Stock: The shares of common stock, par value $0.001 per share, of the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock. Conversion Price: Conversion Price shall have the meaning assigned such term in the Indenture. Damages Accrual Period: See Section 2(e) hereof. Damages Payment Date: Each May 23 and November 23. Debentures: The Zero Coupon Convertible Subordinated Debentures due 2021 of the Company to be purchased pursuant to the Purchase Agreement. 2 3 Deferral Notice: See Section 3(i) hereof. Deferral Period: See Section 3(i) hereof. Effectiveness Deadline Date: See Section 2(a) hereof. Effectiveness Period: The period of two years from the later of (a) the Issue Date and (b) the last date of original issuance of the Debentures, or such shorter period ending on the date that all Registrable Securities have ceased to be Registrable Securities. Event: See Section 2(e) hereof. Event Date: See Section 2(e) hereof. Event Termination Date: See Section 2(e) hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Filing Deadline Date: See Section 2(a) hereof. Holder: See the second paragraph of this Agreement. Indenture: The Indenture, dated as of the date hereof, between the Company and State Street Bank and Trust Company of California, N.A., as trustee, pursuant to which the Debentures are being issued. Initial Purchasers: Means Morgan Stanley & Co. Incorporated, Credit Lyonnais Securities (USA) Inc. and Needham & Company, Inc. Initial Shelf Registration Statement: See Section 2(a) hereof. Issue Date: May 23, 2001. Losses: See Section 6 hereof. Material Event: See Section 3(i) hereof. Notice and Questionnaire: A written notice delivered to the Company containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Annex A to the Offering Memorandum of the Company issued May 18, 2001 relating to the Debentures. Notice Holder: On any date, any Holder that has delivered an appropriately completed Notice and Questionnaire to the Company on or prior to such date. Purchase Agreement: See the preamble hereof. 3 4 Prospectus: The prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus. Record Holder: (i) With respect to any Damages Payment Date relating to any Debentures as to which any such Additional Interest has accrued, the holder of record of such Debenture on the record date fifteen (15) days prior to such Damages Payment Date and (ii) with respect to any Damages Payment Date relating to the Underlying Common Stock as to which any such Additional Interest has accrued, the registered holder of such Underlying Common Stock fifteen (15) days prior to such Damages Payment Date. Registrable Securities: The Debentures until such Debentures have been converted or exchanged into the Underlying Common Stock and, at all times subsequent to any such conversion or exchange the Underlying Common Stock and any securities into or for which such Underlying Common Stock 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 or such legends, as the case may be. Registration Expenses: See Section 5 hereof. Registration Statement: Any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. Restated Principal Amount: As this term is defined in the Indenture. Restricted Securities: As this term is defined in Rule 144. Rule 144: Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. 4 5 Securities Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. Shelf Registration Statement: See Section 2(a) hereof. Subsequent Shelf Registration Statement: See Section 2(b) hereof. Tax Event: As this term is defined in the Indenture. TIA: The Trust Indenture Act of 1939, as amended. Trustee: Norwest Bank Minnesota, N.A. (or any successor entity), the Trustee under the Indenture. Underlying Common Stock: The Common Stock into which the Debentures are convertible or issued upon any such conversion. SECTION 2. SHELF REGISTRATION. (a) The Company shall use its reasonable efforts to prepare and file or cause to be prepared and filed with the SEC, as soon as practicable but in any event by the date (the "Filing Deadline Date") ninety (90) days after the Issue Date, a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration Statement") registering the resale from time to time by Holders thereof of all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders and set forth in the Initial Shelf Registration Statement. The Company shall use its reasonable efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date (the "Effectiveness Deadline Date") that is one hundred eighty (180) days after the Issue Date, and to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period. At the time the Initial Shelf Registration Statement is declared effective, each Holder that became a Notice Holder on or prior to the date ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. None of the Company's security holders (other than the Holders of Registrable Securities) shall have the right to include any of the Company's securities in the Shelf Registration Statement. (b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Registrable Securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Registrable Securities), the Company shall use its reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of 5 6 effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Company shall use reasonable efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period. (c) The Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement, if required by the Securities Act or as reasonably requested by the Initial Purchasers or by the Trustee on behalf of the registered Holders or by any managing underwriter in the event of an underwritten offering. (d) Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least three (3) Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a Notice and Questionnaire is delivered, and in any event upon the later of (x) five (5) Business Days after such date or (y) five (5) Business Days after the expiration of any Deferral Period in effect when the Notice and Questionnaire is delivered or put into effect within five (5) Business Days of such delivery date, (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the "Amendment Effectiveness Deadline Date") that is forty-five (45) days after the date such post-effective amendment is required by this clause to be filed; (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided, that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(i). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Registration Statement or related Prospectus and (ii) the Amendment Deadline Effective Date shall be extended by up to ten (10) Business Days from the expiration of 6 7 a Deferral Period (and the Company shall incur no obligation to pay Additional Interest during such extension) if such Deferral Period shall be in effect on the Amendment Deadline Effective Date. (e) The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (i) the Initial Shelf Registration Statement has not been filed on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company has failed to perform its obligations set forth in Section 2(d) within the time period required therein, (iv) the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof or (v) the number of Deferral Periods in any period exceeds the number permitted in respect of such period pursuant to Section 3(i) hereof (each of the events of a type described in any of the foregoing clauses (i) through (v) are individually referred to herein as an "Event," and the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the case of clause (ii), the date by which the Company is required to perform its obligations set forth in Section 2(d) in the case of clause (iii) (including the filing of any post-effective amendment prior to the Amendment Effectiveness Deadline Date), the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i) hereof in the case of clause (iv), and the date of the commencement of a Deferral Period that causes the limit on the number of Deferral Periods in any period under Section 3(i) hereof to be exceeded in the case of clause (v), being referred to herein as an "Event Date"). Events shall be deemed to continue until the "Event Termination Date," which shall be the following dates with respect to the respective types of Events: the date the Initial Shelf Registration Statement is filed in the case of an Event of the type described in clause (i), the date the Initial Shelf Registration Statement is declared effective under the Securities Act in the case of an Event of the type described in clause (ii), the date the Company performs its obligations set forth in Section 2(d) in the case of an Event of the type described in clause (iii) (including, without limitation, the date the relevant post-effective amendment to the Shelf Registration Statement is declared effective under the Securities Act), termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(i) to be exceeded in the case of the commencement of an Event of the type described in clause (iv), and termination of the Deferral Period the commencement of which caused the number of Deferral Periods in a period permitted by Section 3(i) to be exceeded in the case of an Event of the type described in clause (v). Accordingly, commencing on (and including) any Event Date and ending on (but excluding) the next date on which there are no Events that have occurred and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as additional interest and not as a penalty, an amount (the "Additional Interest"), payable on the Damages Payment Dates to Record Holders of Debentures that are Registrable Securities and of shares of Underlying Common Stock issued upon conversion of Debentures that are Registrable Securities, as the case may be, accruing, for each portion of such Damages Accrual Period beginning on and including a Damages Payment Date (or, in respect of the first time that the Additional Interest is to be paid to Holders on a Damages Payment Date as a result of the occurrence of any particular Event, from the Event Date) and ending on but excluding the first to occur of (A) the date of the end of the Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum equal 7 8 to one-half of one percent (0.5%) of the principal amount at maturity of such Debentures (or, following a Tax Event, of the Restated Principal Amount plus accrued but unpaid interest) or one-half of one percent (0.5%) of the Applicable Conversion Price of such shares of Underlying Common Stock, as the case may be, in each case determined as of the Business Day immediately preceding the next Damages Payment Date; provided, that in the case of a Damages Accrual Period that is in effect solely as a result of an Event of the type described in clause (iii) of the immediately preceding paragraph, such Additional Interest shall be paid only to the Holders that have delivered Notice and Questionnaires that caused the Company to incur the obligations set forth in Section 2(d) the non-performance of which is the basis of such Event, provided further, that any Additional Interest accrued with respect to any Debenture or portion thereof called for redemption on a redemption date or converted into Underlying Common Stock on a conversion date prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Debenture or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). Notwithstanding the foregoing, no Additional Interest shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Additional Interest with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events. Following the cure of all Events requiring the payment by the Company of Additional Interest to the Holders of Registrable Securities pursuant to this Section, the accrual of Additional Interest will cease (without in any way limiting the effect of any subsequent Event requiring the payment of Additional Interest by the Company). The Trustee shall be entitled, on behalf of Holders of Debentures or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Additional Interest. Notwithstanding the foregoing, the parties agree that the sole damages payable for a violation of the terms of this Agreement with respect to which Additional Interest are expressly provided shall be such Additional Interest. Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. All of the Company's obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)). The parties hereto agree that the Additional Interest provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof. SECTION 3. REGISTRATION PROCEDURES. In connection with the registration obligations of the Company under Section 2 hereof, the Company shall: 8 9 (a) A reasonable time before filing any Registration Statement or Prospectus or any amendments or supplements thereto with the SEC, furnish to counsel to the Initial Purchasers copies of all such documents proposed to be filed and use reasonable efforts to reflect in each such document when so filed with the SEC such comments as counsel to the Initial Purchasers reasonably shall propose within five (5) Business Days of the delivery of such copies to the Initial Purchasers. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period specified in Section 2(a); cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use its reasonable efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or such Prospectus as so supplemented. (c) As promptly as practicable give notice to counsel to the Notice Holders and the Initial Purchasers (i) when any Prospectus, Prospectus supplement, Registration Statement or post-effective amendment to a Registration Statement has been filed with the SEC and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared effective, (ii) of any request, following the effectiveness of the Initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of (but not the nature of or details concerning) a Material Event and (vi) of the determination by the Company that a post-effective amendment to a Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company (or as required pursuant to Section 3(i)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(i) shall apply. (d) Use reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case at the earliest possible moment. (e) If reasonably requested by any Initial Purchaser or any Notice Holder, as promptly as practicable incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as the Initial Purchaser or such Notice Holder shall, on the basis of a written opinion of nationally-recognized counsel experienced in such matters, 9 10 determine to be required to be included therein by applicable law and make any required filings of such Prospectus supplement or such post-effective amendment. (f) As promptly as practicable furnish to each Notice Holder and the Initial Purchasers, without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder or the Initial Purchasers, as the case may be). (g) During the Effectiveness Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein. (h) Prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire); prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant Registration Statement and the related Prospectus; provided, that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject. (i) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a "Material Event") as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development that, in the reasonable discretion of the Company, makes it appropriate to suspend the availability of the Shelf Registration 10 11 Statement and the related Prospectus, (i) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file, if necessary pursuant to applicable law, a post-effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use its reasonable efforts to cause it to be declared effective as promptly as is practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until such Notice Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company will use all reasonable efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate. The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of the Shelf Registration Statement or any Prospectus, without incurring or accruing any obligation to pay Additional Interest pursuant to Section 2(e), no more than one (1) time in any three month period or four (4) times in any twelve month period, and any such period during which the availability of the Registration Statement and any Prospectus is suspended (the "Deferral Period") shall, without incurring any obligation to pay Additional Interest pursuant to Section 2(e), not exceed 30 days; provided, that in the case of a Material Event relating to an acquisition or a probable acquisition or financing, recapitalization, business combination or other similar transaction, the Company may, without incurring any obligation to pay Additional Interest pursuant to Section 2(e), deliver to Notice Holders a second notice to the effect set forth above, which shall have the effect of extending the Deferral Period by up to an additional 30 days, or such shorter period of time as is specified in such second notice, provided, that the aggregate duration of any Deferral Periods shall not, without incurring any obligation to pay Additional Interest pursuant to Section 2(e), exceed 60 days in any three month period or 90 days in any twelve (12) month period. (j) If requested in writing in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make reasonably available for inspection during normal business hours by a representative for the Notice Holders of such Registrable Securities and any broker-dealers, attorneys and accountants retained by such Notice Holders, all relevant financial and other records, pertinent corporate documents and properties of the Company and its 11 12 subsidiaries, and cause the appropriate officers, directors and employees of the Company and its subsidiaries to make reasonably available for inspection during normal business hours on reasonable notice all relevant information reasonably requested by such representative for the Notice Holders or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement, and provided further, that the foregoing inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of all the Notice Holders and the other parties entitled thereto by the counsel referred to in Section 5. (k) Use reasonable efforts to comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 3-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statements shall cover said periods. (l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold or to be sold pursuant to a Registration Statement, which certificates shall not bear any restrictive legends, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least two (2) Business Days prior to any sale of such Registrable Securities. (m) Provide a CUSIP number for all Registrable Securities covered by each Registration Statement not later than the effective date of such Registration Statement and provide the Trustee and the transfer agent for the Common Stock with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company. (n) Provide such information as is required for any filings required to be made with the National Association of Securities Dealers, Inc. (o) Upon (i) the filing of the Initial Registration Statement and (ii) the effectiveness of the Initial Registration Statement, announce the same, in each case by release to Reuters Economic Services and Bloomberg Business News. 12 13 SECTION 4. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading. SECTION 5. REGISTRATION EXPENSES. The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under Sections 2 and 3 of this Agreement whether or not any of the Registration Statements are declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company in connection with the Shelf Registration Statement, (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock and (vi) Securities Act liability insurance obtained by the Company in its sole discretion. In addition, the Company shall bear or reimburse the Notice Holders for the reasonable fees and disbursements of one firm of legal counsel for the Holders, which shall initially be Gray, Cary, Ware & Freidenrich LLP, but which may, with the written consent of the Initial Purchasers (which shall not be unreasonably withheld), be another nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the 13 14 Company. Notwithstanding the provisions of this Section 5, each seller of Registrable Securities shall pay selling expenses and all registration expenses to the extent required by applicable law. SECTION 6. INDEMNIFICATION. (a) Indemnification by the Company. The Company shall indemnify and hold harmless each Notice Holder and each person, if any, who controls any Notice Holder (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) from and against any losses, liabilities, claims, damages and expenses (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (collectively, "Losses"), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided, however, that the Company shall not be liable in any such case to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement contained in or omission or alleged omission from any of such documents in reliance upon and conformity with any of the information relating to the Holders furnished to the Company in writing by a Holder expressly for use therein; provided further, that the indemnification contained in this paragraph shall not inure to the benefit of any Holder of Registrable Securities (or to the benefit of any person controlling such Holder) on account of any such Losses arising out of or based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus provided in each case the Company has performed its obligations under Section 3(a) hereof if either (A) (i) such Holder failed to send or deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale by such Holder to the person asserting the claim from which such Losses arise and (ii) the Prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (B) (x) such untrue statement or alleged untrue statement, omission or alleged omission is corrected in an amendment or supplement to the Prospectus and (y) having previously been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, such Holder thereafter fails to deliver such Prospectus as so amended or supplemented, with or prior to the delivery of written confirmation of the sale of a Registrable Security to the person asserting the claim from which such Losses arise. (b) Indemnification by Holders of Registrable Securities. Each Holder agrees severally and not jointly to indemnify and hold harmless the Company and its respective directors and officers, and each person, if any, who controls the Company (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) or any other Holder, from and against all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished to the Company by such Holder expressly for use in such Registration Statement or Prospectus or amendment or 14 15 supplement thereto. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. Such separate firm shall be designated in writing by, in the case of parties indemnified pursuant to Section 6(a), the Holders of a majority (with Holders of Debentures deemed to be the Holders, for purposes of determining such majority, of the number of shares of Underlying Common Stock into which such Debentures are or would be convertible or exchangeable as of the date on which such designation is made) of the Registrable Securities covered by the Registration Statement held by Holders that are indemnified parties pursuant to Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b), the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel and the indemnified party would be entitled thereto pursuant to the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 15 16 (d) Contribution. To the extent that the indemnification provided for in this Section 6 is unavailable to an indemnified party under Section 6(a) or 6(b) hereof in respect of any Losses or is insufficient to hold such indemnified party harmless, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the initial placement pursuant to the Purchase Agreement (before deducting expenses) of the Registrable Securities to which such Losses relate. Benefits received by any Holder shall be deemed to be equal to the value of receiving Registrable Securities that are registered under the Securities Act. The relative fault of the Holders on the one hand and the Company on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Holders or by the Company, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this paragraph are several in proportion to the respective number of Registrable Securities they have sold pursuant to a Registration Statement, and not joint. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method or allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding this Section 6(d), an indemnifying party that is a selling Holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such indemnifying party and distributed to the public were offered to the public exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The indemnity, contribution and expense reimbursement obligations of the parties hereunder shall be in addition to any liability any indemnified party may otherwise have hereunder, under the Purchase Agreement or otherwise. (f) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this 16 17 Agreement, (ii) any investigation made by or on behalf of any Holder or any person controlling any Holder, or the Company, or the Company's officers or directors or any person controlling the Company and (iii) the sale of any Registrable Securities by any Holder. SECTION 7. INFORMATION REQUIREMENTS. The Company covenants that, if at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company's most recent report filed pursuant to Section 13 or Section 15(d) of the Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities (other than the Common Stock) under any section of the Exchange Act. SECTION 8. MISCELLANEOUS. (a) No Conflicting Agreements. The Company is not, as of the date hereof, a party to, nor shall it, on or after the date of this Agreement, enter into, any agreement with respect to its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement. The Company represents and warrants that the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of Debentures deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such Debentures are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, 17 18 supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows: (w) if to a Holder of Registrable Securities, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto; (x) if to the Company, to: Atmel Corporation 2325 Orchard Parkway San Jose, CA 95131 Attention: Chief Financial Officer Telecopy No.: (408) 441-0311 and Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 Attention: Mark A. Bertelsen, Esq. Telecopy No.: (650) 493-6811 (y) if to the Initial Purchasers, to: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Attention: Equity Capital Markets Telecopy No.: (212) 761-0356 and Gray Cary Ware & Freidenrich LLP 400 Hamilton Avenue Palo Alto, California 94301-1825 Attention: Gregory Gallo, Esq. Telecopy No.: (650) 833-2001 18 19 or to such other address as such person may have furnished to the other persons identified in this Section 8(c) in writing in accordance herewith. (d) Approval of Holders. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) (other than the Initial Purchasers or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holdings f such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (e) Successors and Assigns. Any person who purchases any Registrable Securities from the Initial Purchasers shall be deemed, for purposes of this Agreement, to be an assignee of the Initial Purchasers. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and shall inure to the benefit of and be binding upon each Holder of any Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (i) Severability. If any term provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and the registration rights granted by the Company with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the parties with respect to such registration rights. No party hereto shall have any rights, duties or obligations other than 19 20 those specifically set forth in this Agreement. In no event will such methods of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company. (k) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Effectiveness Period, except for any liabilities or obligations under Section 4, 5 or 6 hereof and the obligations to make payments of and provide for Additional Interest under Section 2(e) hereof to the extent such damages accrue prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. 20 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. ATMEL CORPORATION By: ____________________________________ Name: Title: Confirmed and accepted as of the date first above written: MORGAN STANLEY & CO. INCORPORATED CREDIT LYONNAIS SECURITIES (USA) INC. NEEDHAM & COMPANY, INC. By: Morgan Stanley & Co. Incorporated By: ____________________________________ Name: Title: EX-5.1 4 f73251ex5-1.txt EXHIBIT 5.1 1 EXHIBIT 5.1 June 25, 2001 Atmel Corporation 2325 Orchard Parkway San Jose, California 95131 RE: REGISTRATION STATEMENT ON FORM S-3 Ladies and Gentlemen: We are acting as counsel for Atmel Corporation, a Delaware corporation (the "Company") in connection with the registration under the Securities Act of 1933, as amended, of $511,500,000 aggregate principal amount of Zero Coupon Convertible Subordinated Debentures due 2021 (the "Debentures"), and such indeterminate number of shares of Common Stock, $0.001 par value (the "Common Stock"), of the Company, as may be required for issuance upon conversion of the Debentures (the "Conversion Shares"). The Debentures and the Conversion Shares are to be offered and sold by certain securityholders of the Company (the "Selling Securityholders"). In this regard we have participated in the preparation of a Registration Statement on Form S-3 relating to the Debentures and the Conversion Shares (such Registration Statement, as it may be amended from time to time, is herein referred to as the "Registration Statement"). We are of the opinion that the Debentures have been duly authorized and are binding obligations of the Company entitled to the benefits of the Indenture dated as of May 23, 2001, between the Company and State Street Bank and Trust Company of California, N.A., as Trustee. We are of the further opinion that the Conversion Shares have been duly authorized and, when issued by the Company upon conversion of the Debentures in accordance with the Indenture, will be legally issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Registration Statement and the Prospectus included therein. Very truly yours, WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ Wilson Sonsini Goodrich & Rosati P.C. EX-12.1 5 f73251ex12-1.txt EXHIBIT 12.1 1 EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31 ------------------------------------------------------------ -------------------- 1996 1997 1998 1999 2000 2000 2001 -------- ------- -------- -------- -------- ------- -------- Income before income taxes and cumulative effects of accounting changes .. $309,153 $ 6,001 $(50,931) $128,821 $415,586 $65,393 $ 87,522 -------- ------- -------- -------- -------- ------- -------- Fixed charges: Interest expense and amortization of debt issuance costs ..................... $ 12,851 $31,155 $ 47,577 $ 49,903 $ 54,185 $11,923 $ 13,422 Interest portion of leases ................ 2,467 2,529 2,665 3,104 5,998 1,499 1,059 -------- ------- -------- -------- -------- ------- -------- Total fixed charges(B) ...................... $ 15,318 $33,684 $ 50,242 $ 53,007 $ 60,183 $13,422 14,481 ======== ======= ======== ======== ======== ======= ======== Income before income taxes and cumulative effects of accounting changes plus fixed charges(A) ............. $324,471 $39,685 $ (689) $181,828 $475,769 $78,815 $102,003 -------- ------- -------- -------- -------- ------- -------- Ratio of earnings to fixed charges (A/B) ..................................... 21.18x 1.18x -- 3.43x 7.91x 5.87x 7.04X
EX-23.1 6 f73251ex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated January 25, 2001 relating to the financial statements, which appears in Atmel Corporation's Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the incorporation by reference of our report dated January 25, 2001 relating to the financial statement schedule, which appears in such Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP - ------------------------------------- PricewaterhouseCoopers LLP San Jose, California June ___, 2001 EX-25.1 7 f73251ex25-1.txt EXHIBIT 25.1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) [X] STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter)
United States 06-1143380 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.)
633 West 5th Street, 12th Floor, Los Angeles, California 90071 (Address of principal executive offices) (Zip Code) Lynda A. Vogel, Senior Vice President and Managing Director 633 West 5th Street, 12th Floor, Los Angeles, California 90071 (213) 362-7399 (Name, address and telephone number of agent for service) ATMEL CORPORATION (Exact name of obligor as specified in its charter)
DELAWARE 77-0051991 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
2325 ORCHARD PARKWAY, SAN JOSE, CA 95131 (Address of principal executive offices) (Zip Code) Zero Coupon Convertible Subordinated Debentures Due 2021 (TYPE OF SECURITIES) 1 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of the Currency, Western District Office, 50 Fremont Street, Suite 3900, San Francisco, California, 94105-2292 (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Bank and Trust Company. (See notes on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as an Exhibit with corresponding exhibit number to the Form T-1of Western Digital Corporation, filed pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939, as amended (the "Act"), on May 12, 1998 (Registration No. 333-52463), and is incorporated herein by reference. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A Certificate of Corporate Existence (with fiduciary powers) from the Comptroller of the Currency, Administrator of National Banks is on file with the Securities and Exchange Commission as an Exhibit with corresponding exhibit number to the Form T-1 of Western Digital Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration No. 333-52463), and is incorporated herein by reference. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. Authorization of the Trustee to exercise fiduciary powers (included in Exhibits 1 and 2; no separate instrument). 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as an Exhibit with corresponding exhibit number to the Form T-1 of Western Digital Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration No. 333-52463), and is incorporated herein by reference. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(B) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts, which differ from those, stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company of California, National Association, a national banking association, organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Los Angeles, and State of California, on June 5, 2001. STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION By: /s/ Paula Oswald --------------------------------------- PAULA OSWALD VICE PRESIDENT 3 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by Atmel Corporation of its Zero Coupon Convertible Subordinated Debentures due 2021, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION By: /s/ Paula Oswald ------------------------------------- PAULA OSWALD VICE PRESIDENT DATED: JUNE 5, 2001 4 5 EXHIBIT 7 Consolidated Report of Condition and Income for A Bank With Domestic Offices Only and Total Assets of Less Than $100 Million of State Street Bank and Trust Company of California, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at the close of business March 31,2001, published in accordance with a call made by the Federal Deposit Insurance Corporation pursuant to the required law: 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National banks). Thousands of Dollars ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .......................... 6,983 Interest-bearing balances ................................................... 0 Securities ...................................................................... 0 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ...................... 0 Loans and lease financing receivables: Loans and leases, net of unearned income ............................ 0 Allowance for loan and lease losses ................................. 0 Allocated transfer risk reserves .................................... 0 Loans and leases, net of unearned income and allowances .................... 0 Assets held in trading accounts ................................................. 0 Premises and fixed assets ....................................................... 12 Other real estate owned ......................................................... 0 Investments in unconsolidated subsidiaries ...................................... 0 Customers' liability to this bank on acceptances outstanding .................... 0 Intangible assets ............................................................... 0 Other assets .................................................................... 1,053 -------- Total assets .................................................................... 8,048 ======== LIABILITIES Deposits: In domestic offices ......................................................... 0 Noninterest-bearing .............................................. 0 Interest-bearing ................................................. 0 In foreign offices and Edge subsidiary ...................................... 0 Noninterest-bearing .............................................. 0 Interest-bearing ................................................. 0 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ......................................... 0 Demand notes issued to the U.S. Treasury and Trading Liabilities ................ 0 Other borrowed money ............................................................ 0 Subordinated notes and debentures ............................................... 0 Bank's liability on acceptances executed and outstanding ........................ 0 Other liabilities ............................................................... 3,231 Total liabilities ............................................................... 3,231 -------- EQUITY CAPITAL Perpetual preferred stock and related surplus.................................... 0 Common stock .................................................................... 500 Surplus ......................................................................... 750 Undivided profits and capital reserves/Net unrealized holding gains (losses) ....................................................................... 3,567 Cumulative foreign currency translation adjustments ............................. 0 Total equity capital ............................................................ 4,817 -------- Total liabilities and equity capital ............................................ 8,048 ========
5 6 I, John J. Saniuk, Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition and Income for this report date have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. /s/ John J. Saniuk We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ Alan D. Greene /s/ Bryan R. Calder /s/ Lynda A. Vogel -----END PRIVACY-ENHANCED MESSAGE-----