10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2010

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission file number 0-19032

ATMEL CORPORATION

(Registrant)

Delaware	77-0051991
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

2325 Orchard Parkway San Jose, California 95131
(Address of principal executive offices)

(408) 441-0311
(Registrant’s telephone number)

     Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting filer o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     On July 31, 2010, the Registrant had 461,533,956 outstanding shares of Common Stock.

ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 2010

	Page
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)	3
CONDENSED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2010 AND DECEMBER 31, 2009	3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND JUNE 30, 2009	4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND JUNE 30, 2009	5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4. CONTROLS AND PROCEDURES	44
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	45
ITEM 1A. RISK FACTORS	45
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	60
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	60
ITEM 4. (REMOVED AND RESERVED)	60
ITEM 5. OTHER INFORMATION	60
ITEM 6. EXHIBITS	61
SIGNATURES	62
EXHIBITS	63
EX-2.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atmel Corporation

Condensed Consolidated Balance Sheets
(Unaudited)

	June 30,			December 31,
	2010			2009
	(in thousands, except par value)
ASSETS
Current assets
Cash and cash equivalents	$	526,888		$	437,509
Short-term investments		25,361			38,631
Accounts receivable, net of allowances for doubtful accounts of $11,811 and $11,930, respectively		213,119			194,099
Inventories		198,373			226,296
Current assets held for sale		8,178			16,139
Prepaids and other current assets		81,492			83,434
Total current assets		1,053,411			996,108
Fixed assets, net		205,807			203,219
Goodwill		52,176			56,408
Intangible assets, net		24,816			29,841
Non-current assets held for sale		8,824			83,260
Other assets		43,575			24,006
Total assets	$	1,388,609		$	1,392,842
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt and capital lease obligations	$	80,373		$	85,462
Trade accounts payable		136,503			105,692
Accrued and other liabilities		216,246			152,572
Current liabilites held for sale		2,712			11,284
Deferred income on shipments to distributors		42,193			44,691
Total current liabilities		478,027			399,701
Long-term debt and capital lease obligations, less current portion		3,315			9,464
Long-term liabilites held for sale		635			4,014
Other long-term liabilities		266,277			215,256
Total liabilities		748,254			628,435
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock; par value $0.001; Authorized: 5,000 shares; no shares issued and outstanding		—			—
Common stock; par value $0.001; Authorized: 1,600,000 shares;
Shares issued and outstanding: 460,535 at June 30, 2010 and 454,586 at December 31, 2009		461			455
Additional paid-in capital		1,317,372			1,284,140
Accumulated other comprehensive income		3,008			140,470
Accumulated deficit		(680,486	)		(660,658	)
Total stockholders’ equity		640,355			764,407
Total liabilities and stockholders’ equity	$	1,388,609		$	1,392,842

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

Atmel Corporation

Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands, except per share data)
Net revenues	$	393,361		$	284,542		$	741,910		$	556,035
Operating expenses
Cost of revenues		233,715			192,718			448,490			368,806
Research and development		62,343			52,186			120,387			104,743
Selling, general and administrative		67,187			50,882			128,668			105,800
Acquisition-related charges (credits)		1,167			3,642			(734	)		9,141
Charges for grant repayments		246			249			511			1,014
Restructuring charges		1,614			2,470			2,583			4,822
Asset impairment charges		11,922			—			11,922			—
Loss (gain) on sale of assets		94,052			—			94,052			(164	)
Total operating expenses		472,246			302,147			805,879			594,162
Loss from operations		(78,885	)		(17,605	)		(63,969	)		(38,127	)
Interest and other income (expense), net		2,784			(4,539	)		7,126			(8,084	)
Loss before income taxes		(76,101	)		(22,144	)		(56,843	)		(46,211	)
Benefit from income taxes		39,658			9,737			37,015			37,430
Net loss	$	(36,443	)	$	(12,407	)	$	(19,828	)	$	(8,781	)
Basic net loss per share:
Net loss	$	(0.08	)	$	(0.03	)	$	(0.04	)	$	(0.02	)
Weighted-average shares used in basic net loss per share calculations		460,249			450,891			458,508			450,291
Diluted net loss per share:
Net loss	$	(0.08	)	$	(0.03	)	$	(0.04	)	$	(0.02	)
Weighted-average shares used in diluted net loss per share calculations		460,249			450,891			458,508			450,291

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

Atmel Corporation

Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Six Months Ended
	June 30,			June 30,
	2010			2009
	(in thousands)
Cash flows from operating activities
Net loss	$	(19,828	)	$	(8,781	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		31,820			36,643
Non-cash portion of loss on sale of Rousset manufacturing operations		(33,043	)		—
Asset impairment charges		11,922			—
Other non-cash (gains) losses, net		(8,535	)		5,233
Recovery of doubtful accounts receivable		(112	)		(2,676	)
Accretion of interest on long-term debt		315			260
Stock-based compensation expense		28,557			15,576
Changes in operating assets and liabilities
Accounts receivable		(18,904	)		17,590
Inventories		17,139			29,921
Current and other assets		(32,887	)		(19,308	)
Trade accounts payable		9,910			(22,884	)
Accrued and other liabilities		135,756			(33,259	)
Deferred income on shipments to distributors		(2,498	)		(11,122	)
Net cash provided by operating activities		119,612			7,193
Cash flows from investing activities
Acquisitions of fixed assets		(28,398	)		(7,380	)
Proceeds from the sale of fixed assets		652			—
Acquisition of Quantum Research Group		—			(3,362	)
Acquisitions of intangible assets		(2,000	)		(3,500	)
Purchases of marketable securities		(11,129	)		(17,200	)
Sales or maturities of marketable securities		24,308			21,445
Increase in long-term restricted cash		—			(2,050	)
Net cash used in investing activities		(16,567	)		(12,047	)
Cash flows from financing activities
Principal payments on debt		(10,813	)		(26,686	)
Proceeds from issuance of common stock		5,792			4,927
Tax payments related to shares withheld for vested restricted stock units		(2,211	)		(908	)
Net cash used in financing activities		(7,232	)		(22,667	)
Effect of exchange rate changes on cash and cash equivalents		(6,434	)		(534	)
Net increase (decrease) in cash and cash equivalents		89,379			(28,055	)
Cash and cash equivalents at beginning of the period		437,509			408,926
Cash and cash equivalents at end of the period	$	526,888		$	380,871
Supplemental cash flow disclosures:
Interest paid	$	1,727		$	2,336
Income taxes paid		3,493			3,175
Supplemental non-cash investing and financing activities disclosures:
Increase (decrease) in accounts payable related to fixed asset purchases		11,789			(2,169	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

Atmel Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data, employee data, and where otherwise indicated)
(Unaudited)

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     These unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to state fairly, in all material respects, the financial position of Atmel Corporation (“the Company” or “Atmel”) and its subsidiaries as of June 30, 2010 and the results of operations for the three and six months ended June 30, 2010 and 2009 and cash flows for the six months ended June 30, 2010 and 2009. All intercompany balances have been eliminated. Because all of the disclosures required by U.S. generally accepted accounting principles are not included, as permitted by the rules of the Securities and Exchange Commission (the “SEC”), these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The December 31, 2009 year-end condensed balance sheet data was derived from the audited consolidated financial statements and does not include all of the disclosures required by U.S. generally accepted accounting principles. The condensed consolidated statements of operations for the periods presented are not necessarily indicative of results to be expected for any future period, nor for the entire year.

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include provisions for excess and obsolete inventory, sales return reserves, stock-based compensation expense, allowances for doubtful accounts receivable, warranty reserves, estimates for useful lives associated with long-lived assets, charges for grant repayments, recoverability of goodwill and intangible assets, restructuring charges, certain accrued liabilities, fair value of net assets held for sale and income taxes and income tax valuation allowances. Actual results could differ materially from those estimates.

Inventories

     Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis for raw materials and purchased parts; and an average-cost basis for work in progress and finished goods) or market. Market is based on estimated net realizable value. The Company establishes provisions for lower of cost or market and excess and obsolescence write-downs. The determination of obsolete or excess inventory requires an estimation of the future demand for the Company’s products and these reserves are recorded when the inventory on hand exceeds management’s estimate of future demand for each product. Once the inventory is written down, a new cost basis is established and these inventory reserves are not relieved until the related inventory has been sold or scrapped. As of June 30, 2010, inventories totaling $7,152 were reclassified to current assets held for sale in connection with the expected sale of the Company’s SmartCard business to INSIDE Contactless S.A. As of December 31, 2009, inventories totaling $16,139 were classified as current assets held for sale in connection with the sale of the manufacturing operations in Rousset, France which was completed in June 2010 (see Note 12).

     Inventories are comprised of the following:

	June 30,		December 31,
	2010		2009
	(in thousands)
Raw materials and purchased parts	$	9,102	$	11,525
Work-in-progress		126,614		135,415
Finished goods		62,657		79,356
	$	198,373	$	226,296

6

Recent Accounting Pronouncements

     In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance that revises analysis for identifying the primary beneficiary of a variable interest entity (“VIE”), by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments. The new guidance requires the primary beneficiary of a VIE to be identified as the party that both (i) has the power to direct the activities of a VIE that most significantly impact its economic performance and (ii) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. This guidance is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after November 15, 2009. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated results of operations and financial position.

     In January 2010, the FASB issued guidance that expands the interim and annual disclosure requirements of fair value measurements, including the information about movement of assets between Level 1 and 2 of the three-tier fair value hierarchy established under its fair value measurement guidance. This guidance also requires separate disclosure for purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs using Level 3 methodologies. Except for the detailed disclosure in the Level 3 reconciliation, which is effective for the fiscal years beginning after December 15, 2010, all the other disclosures under this guidance became effective for interim and annual periods beginning after December 15, 2009. The adoption of the disclosure portion of the guidance did not have a material impact on the Company’s condensed consolidated results of operations and financial position. The Company does not expect the adoption of the portion of the guidance related to the Level 3 reconciliation to have a material impact on the Company’s consolidated results of operations and financial position.

     In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of VIEs. The elimination of the concept of a QSPE, removes the exception from applying the consolidation guidance within this amendment. This amendment requires an enterprise to perform a qualitative analysis when determining whether or not it must consolidate a VIE. The amendment also requires an enterprise to continuously reassess whether it must consolidate a VIE. Additionally, the amendment requires enhanced disclosures about an enterprise’s involvement with VIEs and any significant change in risk exposure due to that involvement, as well as how its involvement with VIEs impacts the enterprise’s financial statements. Finally, an enterprise will be required to disclose significant judgments and assumptions used to determine whether or not to consolidate a VIE. This amendment is effective for financial statements issued for fiscal years beginning after November 15, 2009. The adoption of this amendment did not have a material impact on the Company’s condensed consolidated results of operations and financial condition. See Note 12 for further discussion.

Note 2 INVESTMENTS

     Investments at June 30, 2010 and December 31, 2009 are primarily comprised of corporate equity securities, U.S. and foreign corporate debt securities, guaranteed variable annuities and auction-rate securities.

     All marketable securities are deemed by management to be available-for-sale and are reported at fair value, with the exception of certain auction-rate securities as described below. Net unrealized gains or losses that are not deemed to be other than temporary are reported within stockholders’ equity on the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive income. Gross realized gains or losses are recorded based on the specific identification method. In each of the three and six months ended June 30, 2010, the Company recorded gross realized gains of $2,155 from the sale of short-term investments in interest and other income (expense), net on the condensed consolidated statements of operations. In the three and six months ended June 30, 2009, the Company’s gross realized gains or losses on short-term investments were not material. The Company’s investments are further detailed in the table below:

7

	June 30, 2010						December 31, 2009
	Adjusted Cost			Fair Value			Adjusted Cost			Fair Value
	(in thousands)
Corporate equity securities	$	87		$	119		$	87		$	132
Auction-rate securities		4,870			4,906	*		5,370			5,392	*
Corporate debt securities and other obligations		22,779			22,592			33,506			35,373
	$	27,736		$	27,617		$	38,963		$	40,897
Unrealized gains		97						1,987
Unrealized losses		(216	)					(53	)
Net unrealized (losses) gains		(119	)					1,934
Fair value	$	27,617					$	40,897
Amount included in short-term investments				$	25,361					$	38,631
Amount included in other assets					2,256						2,266
				$	27,617					$	40,897

* Includes the fair value of the Put Option of $86 and $98 at June 30, 2010 and December 31, 2009, respectively, related to an offer from UBS Financial Services Inc, (“UBS”) to purchase auction-rate securities of $2,650 and $3,126 at June 30, 2010 and December 31, 2009, respectively.

     In the three and six months ended June 30, 2010, auctions for auction-rate securities held by the Company have continued to fail and as a result these securities have continued to be illiquid. The Company concluded that $2,220 (book value) of these securities are unlikely to be liquidated within the next twelve months and classified these securities as long-term investments, which is included in other assets on the condensed consolidated balance sheets.

     In October 2008, the Company accepted an offer from UBS Financial Services Inc. (“UBS”) to purchase certain auction-rate securities held by the Company of $2,650 at par value (the “Put Option”) at any time during a two-year time period from June 30, 2010 to July 2, 2012. As a result of this offer, the Company sold the securities to UBS at par value of $2,650 on July 1, 2010.

     Contractual maturities (at book value) of available-for-sale debt securities as of June 30, 2010, were as follows:

	(in thousands)
Due within one year	$	20,224
Due in 1-5 years		5,205
Due in 5-10 years		—
Due after 10 years		2,220
Total	$	27,649

     Atmel has classified all investments with maturity dates of 90 days or more as short-term as it has the ability and intent to redeem them within the year, with the exception of our remaining auction-rate securities which are included in other assets on the condensed consolidated balance sheets.

Note 3 FAIR VALUE OF ASSETS AND LIABILITIES

     The Company applies the accounting standard that defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).” The standard establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. The accounting standard, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

     The table below presents the balances of investments measured at fair value on a recurring basis at June 30, 2010:

8

	June 30, 2010
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash
Money market funds	$	6,490	$	6,490	$	—	$	—
Short-term investments
Corporate equity securities		119		119		—		—
Auction-rate securities		2,650		—		—		2,650
Corporate debt securities, including government backed securities		22,592		—		22,592		—
Other assets								—
Auction-rate securities		2,256		—		—		2,256
Deferred compensation plan assets		3,173		3,173		—		—
Total	$	37,280	$	9,782	$	22,592	$	4,906

     The table below presents the balances of investments measured at fair value on a recurring basis at December 31, 2009:

	December 31, 2009
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash
Money market funds	$	76,917	$	76,917	$	—	$	—
Short-term investments
Corporate equity securities		132		132		—		—
Auction-rate securities		3,126		—		—		3,126
Corporate debt securities, including government backed securities		35,373		—		35,373		—
Other assets								—
Auction-rate securities		2,266		—		—		2,266
Deferred compensation plan assets		3,109		3,109		—		—
Total	$	120,923	$	80,158	$	35,373	$	5,392

     The Company’s investments, with the exception of auction-rate securities, are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, sovereign government obligations, and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include corporate debt securities and other obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

     Auction-rate securities are classified within Level 3 as significant assumptions are not observable in the market. The total amount of assets measured using Level 3 valuation methodologies represented less than 1% of total assets as of June 30, 2010.

     A summary of the changes in Level 3 assets measured at fair value on a recurring basis is as follows:

			Total		Sales and			Balance at		Sales and								Total
	Balance at		Unrealized		Other			December 31,		Other			Balance at		Sales and Other			Unrealized		Balance at
	January 1, 2009		Gains		Settlements			2009		Settlements			March 31, 2010		Settlements			Gains		June 30, 2010
	(in thousands)
Auction-rate securities	$	8,795	$	22	$	(3,425	)	$	5,392	$	(300	)	$	5,092	$	(200	)	$	14	$	4,906

Note 4 INTANGIBLE ASSETS, NET

     Intangible assets, net, consisted of technology licenses and acquisition-related intangible assets as follows:

9

	June 30,			December 31,
	2010			2009
	(in thousands)
Core/licensed technology	$	90,718		$	90,718
Accumulated amortization		(77,121	)		(74,291	)
Total technology licenses		13,597			16,427
Acquisition-related intangible assets		22,413			22,413
Accumulated amortization		(11,194	)		(8,999	)
Total acquisition-related intangible assets		11,219			13,414
Total intangible assets, net	$	24,816		$	29,841

     Amortization expense for technology licenses totaled $1,404 and $1,186 in the three months ended June 30, 2010 and 2009, respectively, and $2,830 and $2,324 in the six months ended June 30, 2010 and 2009, respectively. Amortization expense for acquisition-related intangible assets totaled $1,136 and $1,234 in the three months ended June 30, 2010 and 2009, respectively, and $2,195 and $2,528 in the six months ended June 30, 2010 and 2009, respectively.

     The following table presents the estimated future amortization of the technology licenses and acquisition-related intangible assets:

	Technology		Acquisition-Related
Years Ending December 31:	Licenses		Intangible Assets		Total
	(in thousands)
2010 (July1 through December 31)	$	2,587	$	2,272	$	4,859
2011		4,719		4,192		8,911
2012		4,353		4,076		8,429
2013		1,938		679		2,617
Total future amortization	$	13,597	$	11,219	$	24,816

Note 5 BORROWING ARRANGEMENTS

     Information with respect to the Company’s debt and capital lease obligations as of June 30, 2010 and December 31, 2009 is shown in the following table:

	June 30,			December 31,
	2010			2009
	(in thousands)
Various interest-bearing notes and term loans	$	3,305		$	3,484
Bank lines of credit		80,000			80,000
Capital lease obligations		383			11,442
Total	$	83,688		$	94,926
Less: current portion of long-term debt and capital lease obligations		(80,373	)		(85,462	)
Long-term debt and capital lease obligations due after one year	$	3,315		$	9,464

     Maturities of long-term debt and capital lease obligations are as follows:

10

Years Ending December 31:
	(in thousands)
2010 (July 1 through December 31)	$	80,620
2011		86
2012		—
2013		—
2014		—
Thereafter		3,305
		84,011
Less: amount representing interest		(323	)
Total	$	83,688

     On March 15, 2006, the Company entered into a five-year asset-backed credit facility for up to $165,000 (reduced to $125,000 on November 6, 2009) with certain European lenders. This facility is secured by the Company’s non-U.S. trade receivables. The eligible non-US trade receivables were $103,823 at June 30, 2010, of which the amount outstanding under this facility was $80,000 at June 30, 2010. Borrowings under the facility bear interest at LIBOR plus 2% per annum (approximately 2.34% based on the one month LIBOR at June 30, 2010), while the undrawn portion is subject to a commitment fee of 0.375% per annum. The outstanding balance is subject to repayment in full on the last day of its interest period (every two months). The terms of the facility subject the Company to certain financial and other covenants and cross-default provisions. The Company was not in compliance with a financial covenant (i.e. fixed charge ratio) as of June 30, 2010. The Company obtained a waiver of such failure to comply on August 3, 2010. Commitment fees and amortization of up-front fees paid related to the facility in the three months ended June 30, 2010 and 2009 totaled $194 and $242, respectively, and $496 and $539 in the six months ended June 30, 2010 and 2009, respectively, and are included in interest and other income (expense), net, in the condensed consolidated statements of operations. The outstanding balance under this facility is classified within bank lines of credit in the summary debt table above.

     Of the Company’s remaining outstanding debt obligations of $3,688 as of June 30, 2010, $383 are classified as capital leases and $3,305 as interest bearing notes in the summary debt table.

     The fair value of the Company’s debt approximated its book value as of June 30, 2010 and December 31, 2009 due to their relatively short-term nature as well as the variable interest rates on these debt obligations.

Note 6 STOCK-BASED COMPENSATION

     Option and Employee Stock Purchase Plans

     The 2005 Stock Plan was approved by stockholders on May 11, 2005. As of June 30, 2010, 114,000 shares were authorized for issuance under the 2005 Stock Plan, and 29,161 shares of common stock remained available for grant. Under Atmel’s 2005 Stock Plan, Atmel may issue common stock directly, grant options to purchase common stock or grant restricted stock units payable in common stock to employees, consultants and directors of Atmel. Options, which generally vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date.

     Activity under Atmel’s 2005 Stock Plan is set forth below:

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				Outstanding Options					Weighted-
							Exercise		Average
	Available			Number of			Price		Exercise Price
	for Grant			Options			per Share		per Share
	(in thousands, except per share data)
Balances, December 31, 2009		28,478			18,828		$	1.68-$24.44	$	4.38
Restricted stock units issued		(462	)		—			—		—
Adjustment for restricted stock units issued		(360	)		—			—		—
Restricted stock units cancelled		636			—			—		—
Adjustment for restricted stock units cancelled		496			—			—		—
Options granted		(157	)		157		$	4.77		4.77
Options cancelled/expired/forfeited		341			(341	)	$	2.11-$24.44		6.60
Options exercised		—			(321	)	$	1.68-$4.74		3.00
Balances, March 31, 2010		28,972			18,323		$	1.68-$21.47	$	4.37
Restricted stock units issued		(386	)		—			—		—
Adjustment for restricted stock units issued		(301	)		—			—		—
Performance based restricted stock units issued		(282	)		—			—		—
Adjustment for performance based restricted stock units issued		(220	)		—			—		—
Restricted stock units cancelled		745			—			—		—
Adjustment for restricted stock units cancelled		581			—			—		—
Options granted		(82	)		82		$	5.20		5.20
Options cancelled/expired/forfeited		134			(134	)	$	2.11-$21.47		6.13
Options exercised		—			(391	)	$	1.80-$5.62		3.57
Balances, June 30, 2010		29,161			17,880		$	1.68-$20.19	$	4.38

     Restricted stock units are granted from the pool of options available for grant. On May 14, 2008, the Company’s stockholders approved an amendment to its 2005 Stock Plan whereby every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), and stock purchase rights issued on or after May 14, 2008 will be counted against the numerical limit for options available for grant as 1.78 shares in the table above. If shares issued pursuant to any restricted stock, restricted stock unit, and stock purchase right agreements are cancelled, forfeited or repurchased by the Company and would otherwise return to the 2005 Stock Plan, 1.78 times the number of shares will return to the plan and will again become available for issuance. The Company issued 25,774 restricted stock units from May 14, 2008 to June 30, 2010 (net of cancellations), resulting in a reduction of 45,877 shares available for grant under the 2005 Stock Plan.

Restricted Stock Units

     Activity related to restricted stock units is set forth below:

				Weighted-Average
	Number of			Fair Value
	Units			Per Share
	(in thousands, except per share data)
Balances, December 31, 2009		24,044		$	4.38
Restricted stock units issued		462			4.73
Restricted stock units vested		(583	)		4.80
Restricted stock units cancelled		(636	)		3.55
Balances, March 31, 2010		23,287		$	4.40
Restricted stock units issued		386			5.28
Performance based restricted stock units issued		282			5.00
Restricted stock units vested		(539	)		5.45
Restricted stock units cancelled		(745	)		4.15
Balances, June 30, 2010		22,671		$	4.40

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     In the three and six months ended June 30, 2010, 539 and 1,122 restricted stock units vested, respectively, including 194 and 376 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $5.28 and $5.11 per share on the vesting dates, respectively. As of June 30, 2010, total unearned stock-based compensation related to nonvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $65,228, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.18 years.

     In the three and six months ended June 30, 2009, 100 and 815 restricted stock units vested, respectively, including 33 and 291 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $3.62 and $3.23 on the vesting dates.

Performance-Based Restricted Stock Units

     In the year ended December 31, 2008, the Company issued performance-based restricted stock units to eligible employees for a maximum of 9,914 shares of the Company’s common stock under the 2005 Stock Plan. These restricted stock units vest on a graded scale, only if the Company achieves certain quarterly operating margin performance criteria over the performance period of July 1, 2008 to December 31, 2012. In June 2009, the performance period was extended by one additional year to December 31, 2012 which was considered a modification to the performance-based restricted stock units. In the six months ended June 30, 2009, the Company issued additional performance-based restricted stock units to eligible employees for a maximum of 83 shares of the Company’s common stock. In each of the three and six months ended June 30, 2010, the Company issued additional performance-based restricted stock units to eligible employees for a maximum of 282 shares of the Company’s common stock. Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying the awards are not considered issued and outstanding. The Company recognizes the stock-based compensation expense for the portion of its performance-based restricted stock units when management believes it is probable that the Company will achieve the performance criteria. The awards vest once the performance criteria are met. If the performance goals are unlikely to be met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the performance period and is reduced for estimated forfeitures. In the three months ended June 30, 2010, as a result of significant improvements in the Company’s current and forecasted operating results and customer order status, the Company’s management revised its estimates of the Company’s ability to meet the performance plan criteria such that they will be achieved earlier than previously estimated and at a higher vesting level. As a result, in the three months ended June 30, 2010, the Company recognized a cumulative adjustment to stock-based compensation expense for the portion of its performance-based restricted stock units related to services through March 31, 2010 totaling $8,771. The Company recorded total stock-based compensation expense related to performance-based restricted stock units of $14,058 and $15,044 in the three and six months ended June 30, 2010, respectively.

Stock Option Awards

     In the three and six months ended June 30, 2010, the number of stock options exercised under Atmel’s stock option plan was 391 and 712, respectively, which had an intrinsic value of $798 and $1,453, respectively. In the three and six months ended June 30, 2009, the number of stock options exercised under Atmel’s stock option plan was 314 and 613, respectively, which had an intrinsic value of $412 and $625, respectively. Stock options exercised in the three and six months ended June 30, 2010 had an aggregate exercise price of $1,395 and $2,356, respectively, and stock options exercised in the three and six months ended June 30, 2009 had an aggregate exercise price of $816 and $1,675, respectively.

     On August 3, 2009, the Company commenced an exchange offer whereby eligible employees were given the opportunity to exchange some or all of their outstanding stock options with an exercise price greater than $4.69 per share (which was equal to the 52-week high of the Company’s per share stock price as of the start of the offer) that were granted on or before August 3, 2008, whether vested or unvested, for restricted stock units or, for certain employees, a combination of restricted stock units and stock options and the exchange ratio was based on the per share exercise price of the eligible stock options. The Company completed the exchange offer on August 28, 2009, under which 9,484 stock options were exchanged for 1,354 stock options and 2,297 restricted stock units. The modification of these stock options did not result in a material charge to the Company’s financial results in the year ended December 31, 2009.

     The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

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	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
Risk-free interest rate		2.10	%		2.34	%		2.24	%		2.28	%
Expected life (years)		5.58			5.78			5.58			5.78
Expected volatility		53	%		57	%		54	%		57	%
Expected dividend yield		—			—			—			—

     The Company’s weighted-average assumptions for the three and six months ended June 30, 2010 and 2009 were determined in accordance with the accounting standard on stock-based compensation and are further discussed below.

     The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding and was derived based on an evaluation of the Company’s historical settlement trends including an evaluation of historical exercise and expected post-vesting employment-termination behavior. The expected life of employee stock options impacts all underlying assumptions used in the Company’s Black-Scholes option-pricing model, including the period applicable for risk-free interest and expected volatility.

     The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the Company’s employee stock options.

     The Company calculates the historic volatility over the expected life of the employee stock options and believes this to be representative of the Company’s expectations about its future volatility over the expected life of the option.

     The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

     The weighted-average estimated fair value of options granted in the three and six months ended June 30, 2010 was $2.61 and $2.50, respectively, and in the three and six months ended June 30, 2009 was $1.95 and $1.94, respectively.

Employee Stock Purchase Plan

     Under the 1991 Employee Stock Purchase Plan (“1991 ESPP”), qualified employees are entitled to purchase shares of Atmel’s common stock at the lower of 85 percent of the fair market value of the common stock at the date of commencement of the six-month offering period or at the last day of the offering period. Purchases are limited to 10 percent of an employee’s eligible compensation. There were 1,048 and 1,034 shares purchased under the 1991 ESPP in the six months ended June 30, 2010 and 2009 at an average price per share of $3.28 and $3.15, respectively. During the 2010 Annual Stockholders’ Meeting, the Company’s stockholders approved a new 2010 Employee Stock Purchase Plan (“2010 ESPP”) and authorized an additional 25,000 shares for issuance under the 2010 ESPP. Of the 42,000 shares authorized for issuance under the 1991 ESPP, 3,703 shares were available for issuance at June 30, 2010. No shares have been issued under the 2010 ESPP.

     The fair value of each purchase under the ESPP is estimated on the date of the beginning of the offering period using the Black-Scholes option pricing model. The following assumptions were utilized to determine the fair value of the Company’s ESPP shares:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
Risk-free interest rate		0.18	%		0.46	%		0.18	%		0.46	%
Expected life (years)		0.50			0.50			0.50			0.50
Expected volatility		41	%		87	%		41	%		87	%
Expected dividend yield		—			—			—			—

     The weighted-average fair value of the rights to purchase shares under the 1991 ESPP for offering periods started in the six months ended June 30, 2010 and 2009 was $0.77 and $1.13, respectively. Cash proceeds for the issuance of shares under the 1991 ESPP were $3,437 and $3,250 in the six months ended June 30, 2010 and 2009, respectively. There were no 1991 ESPP purchases in the three months ended June 30, 2010 and 2009.

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     The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock units, performance-based restricted stock units and employee stock purchases in the three and six months ended June 30, 2010 and 2009:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2010		2009		2010		2009
	(in thousands)
Cost of revenues	$	2,187	$	899	$	3,864	$	2,095
Research and development		6,301		2,795		9,585		5,457
Selling, general and administrative		13,162		2,718		18,173		4,242
Total stock-based compensation expense, before income taxes		21,650		6,412		31,622		11,794
Tax benefit		—		—		—		—
Total stock-based compensation expense, net of income taxes	$	21,650	$	6,412	$	31,622	$	11,794

     The table above excluded stock-based compensation (credit) expense of $0 and $(3,065) in the three and six months ended June 30, 2010 and $1,891 and $3,782 in the three and six months ended June 30, 2009, respectively, related to the Quantum acquisition, which is classified within acquisition-related charges (credits) in the condensed consolidated statements of operations.

     There was no significant non-employee stock-based compensation expense in the three and six months ended June 30, 2010 and 2009.

     As of June 30, 2010, total unearned compensation expense related to nonvested stock options was approximately $14,563, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.29 years.

Note 7 ACCUMULATED OTHER COMPREHENSIVE INCOME

     Comprehensive income is defined as a change in equity of a company during a period, from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The primary difference between net loss and comprehensive income for the Company arises from foreign currency translation adjustments, actuarial gains related to defined benefit pension plans and net unrealized (loss) gains on investments. The components of accumulated other comprehensive income at June 30, 2010 and December 31, 2009, net of tax, are as follows:

	June 30,			December 31,
	2010			2009
	(in thousands)
Foreign currency translation adjustments	$	1,726		$	135,839
Actuarial gains related to defined benefit pension plans		1,401			2,697
Net unrealized (loss) gain on investments		(119	)		1,934
Total accumulated other comprehensive income	$	3,008		$	140,470

     The components of comprehensive (loss) income in the three and six months ended June 30, 2010 and 2009 are as follows:

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	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands)
Net loss	$	(36,443	)	$	(12,407	)	$	(19,828	)	$	(8,781	)
Other comprehensive (loss) income:
Foreign currency translation adjustments		(19,311	)		26,588			(36,746	)		12,650
Release of currency translation adjustments*		(97,367	)		—			(97,367	)		—
Actuarial (losses) gains related to defined benefit pension plans		(423	)		122			(1,296	)		999
Unrealized (losses) gains on investments		(2,116	)		88			(2,053	)		329
Other comprehensive (loss) income		(119,217	)		26,798			(137,462	)		13,978
Total comprehensive (loss) income	$	(155,660	)	$	14,391		$	(157,290	)	$	5,197

* The release of foreign currency translation adjustments in the six months ended June 30, 2010 was related to the sale of the Company’s Rousset, France manufacturing operations (see Note 12).

Note 8 COMMITMENTS AND CONTINGENCIES

Commitments

Indemnifications

     As is customary in the Company’s industry, as provided for in local law in the United States and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of the Company’s products. From time to time, the Company will indemnify customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of the Company’s products and services, usually up to a specified maximum amount. In addition, the Company has entered into indemnification agreements with its officers and directors and certain employees, and the Company’s bylaws permit the indemnification of the Company’s agents. In the Company’s experience, the estimated fair value of the liability is not material.

     Subject to certain limitations, the Company is obligated to indemnify certain current and former directors, officers and employees in connection with litigation related to the timing of stock option grants awarded by Atmel. These obligations arise under the terms of the Company’s certificate of incorporation, its bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify in connection with this litigation generally means that the Company is required to pay or reimburse the individuals’ reasonable legal expenses incurred in defense of these matters. The Company is currently paying or reimbursing legal expenses being incurred in connection with these matters by its current and former directors, officers and employees.

Purchase Commitments

     At June 30, 2010, the Company had certain commitments which were not included on the condensed consolidated balance sheet at that date. These include outstanding capital purchase commitments of $18,601 and a purchase commitment for product wafer purchases of approximately $54,011 from Tejas Silicon Holding Limited. Wafer purchase commitments from the Company’s supply agreement with LFoundry approximated $448,000 (see Note 12).

Contingencies

Litigations

     The Company is party to various legal proceedings. While management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations, cash flows and financial position of Atmel. The estimate of the potential impact on the Company’s financial position or overall results of operations or cash flows for the legal proceedings described below could change in the future. The Company has accrued for losses related to litigation described below that the Company considers probable and for which the loss can be reasonably estimated. In the event that a loss cannot be reasonably estimated, the Company has not accrued for such losses.

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     From July through September 2006, six stockholder derivative lawsuits were filed (three in the U.S. District Court for the Northern District of California and three in Santa Clara County Superior Court) by persons claiming to be Company stockholders and purporting to act on Atmel’s behalf, naming Atmel as a nominal defendant and some of its current and former officers and directors as defendants. Additional derivative actions were filed in the United States District Court for the Northern District of California (later consolidated with the previously-filed federal derivative actions) and the Delaware Chancery Court. All the suits contain various causes of action relating to the timing of stock option grants awarded by Atmel. In June 2008, the federal district court denied the Company’s motion to dismiss for failure to make a demand on the board, and granted in part and denied in part motions to dismiss filed by the individual defendants. On March 31, 2010, that court entered an order approving a partial global settlement of these actions, and several other actions seeking to compel inspection of Company books and records. Among other things, the settlement resolved all claims against all defendants, except Atmel’s former general counsel James Michael Ross, related to the allegations and/or matters set forth in all the derivative actions. The terms of the settlement provided for: (1) a direct financial benefit to Atmel of $9,650; (2) the adoption and/or implementation of a variety of corporate governance enhancements, particularly in the way Atmel grants and documents grants of employee stock option awards; (3) the payment by Atmel of plaintiffs’ counsels’ attorneys’ fees, costs, and expenses in the amount of $4,940 (which Atmel paid on April 8, 2010); and (4) the dismissal with prejudice of all claims by and between the settling parties and releases of all claims against the settling defendants. As the Company previously disclosed on a Form 8-K filed June 28, 2010 (and incorporated by reference herein), on June 18, 2010, the Court preliminarily approved a settlement of the remaining claims between Atmel, plaintiffs and Mr. Ross related to the Company’s historical stock option granting practices. The settlement—which the Court will review at a final approval hearing on August 13, 2010—provides for: (a) payments to the Company by Atmel’s insurers totaling $2,900; (b) the dismissal with prejudice and release of the remaining claims against Mr. Ross; and (c) the dismissal without prejudice of Mr. Ross’s related lawsuit against the Company in Delaware Chancery Court (described below).

     On September 28, 2007, Matheson Tri-Gas (“MTG”) filed suit in Texas state court in Dallas County against the Company. Plaintiff alleges claims for: (1) breach of contract for the Company’s alleged failure to pay minimum payments under a purchase requirements contract; (2) breach of contract under a product supply agreement; and (3) breach of contract for failure to execute a process gas agreement. MTG seeks unspecified damages, pre- and post-judgment interest, attorneys’ fees and costs. In late November 2007, the Company filed its answer denying liability. In July 2008, the Company filed an amended answer, counterclaim and cross claim seeking among other things a declaratory judgment that a termination agreement cut off any claim by MTG for additional payments. In an Order entered on June 26, 2009, the Court granted the Company’s motion for partial summary judgment dismissing MTG’s breach of contract claims relating to the requirements contract and the product supply agreement. The parties dismissed the remaining claims and, on August 26, 2009, the Court entered a Summary Judgment Order and Final Judgment. MTG filed a Motion to Modify Judgment and Notice of Appeal on September 24, 2009. The Company intends to vigorously defend the appeal.

     On June 3, 2009, the Company filed an action in Santa Clara County Superior Court against three of its now-terminated Asia-based distributors, NEL Group Ltd. (“NEL”), Nucleus Electronics (Hong Kong) Ltd. (“NEHK”) and TLG Electronics Ltd. (“TLG”). The Company seeks, among other things, to recover $8,500 owed it, plus applicable interest and attorneys fees. On June 9, 2009, NEHK separately sued Atmel in Santa Clara County Superior Court, alleging that Atmel’s suspension of shipments to NEHK on September 23, 2008-one day after TLG appeared on the Department of Commerce, Bureau of Industry and Security’s Entity List-breached the parties’ International Distributor Agreement. NEHK also alleges that Atmel libeled it, intentionally interfered with contractual relations and/or prospective business advantage, and violated California Business and Professions Code Sections 17200 et seq. and 17500 et seq. NEHK alleges damages exceeding $10,000. Both matters now have been consolidated. On July 29, 2009, NEL filed a cross-complaint against Atmel that alleges claims virtually identical to those NEHK has alleged, and seeks unspecified damages. Discovery in the case is ongoing and no trial date has yet been set. The Company intends to prosecute its claims and defend the NEHK/NEL claims vigorously. TLG did not answer, and the Court entered a default judgment of $2,697 on November 23, 2009.

     On July 16, 2009, James M. Ross, the Company’s former General Counsel, filed a lawsuit in Santa Clara County Superior Court challenging his termination, and certain actions the Company took thereafter. The operative complaint now contains 10 causes of action, which all concern the Company’s treatment of Mr. Ross’s post-termination attempt to exercise stock options and its alleged breach of a purported oral contract to pay a bonus upon the sale of the Company’s Grenoble division. Discovery is ongoing and no trial date has yet been set. The Company intends to vigorously defend this action.

     On December 18, 2009, Mr. Ross filed another lawsuit in Delaware Chancery Court seeking (pursuant to Section 145 of the Delaware General Corporation Law) to enforce certain rights granted him under his indemnification agreement with the Company, and to recover damages for any breach of that agreement. In particular, Mr. Ross alleges that the Company breached the agreement in the way it negotiated and structured the partial global settlement in December 2009 in the backdating cases, described above. He also seeks advancement of fees and indemnification in connection with the Delaware lawsuit. Pursuant to the Settlement Agreement the

17

Company reached with him in the federal backdating cases, Mr. Ross will file a dismissal without prejudice of this action within 10 days after entry of the Final Federal Judgment in the backdating cases.

     On July 24, 2009, 56 former employees of Atmel’s Nantes facility filed claims in the First Instance labour court, Nantes, France against the Company and MHS Electronics claiming that (1) the Company’s sale of the Nantes facility to MHS (XbyBus SAS) in 2005 did not result in the transfer of their labor agreements to MHS, and (2) these employees should still be considered Atmel employees, with the right to claim related benefits from Atmel. Alternatively, each employee seeks damages of at least 45 Euro and court costs. At an initial hearing on October 6, 2009, the Court set a briefing schedule and said it will issue a ruling on October 6, 2010. These claims are similar to those filed in the First Instance labour court in October 2006 by 47 other former employees of Atmel’s Nantes facility (MHS was not named a defendant in the earlier claims). On July 24, 2008, the judge hearing the earlier claims issued an oral ruling in favor of the Company, finding that there was no jurisdiction for those claims by certain “protected employees,” and denying the claims as to all other employees. Forty of those earlier plaintiffs appealed, and on February 11, 2010, the Court of Appeal of Rennes, France affirmed the lower court’s ruling. Thirty-eight of the 40 plaintiffs have elected not to pursue any further appeal, and it is not yet clear if the remaining two plaintiffs intend to appeal to the Supreme Court of France. The Company intends to continue defending all these claims vigorously.

     From time to time, the Company is notified of claims that it may be infringing patents issued to other parties and may subsequently engage in license negotiations regarding these claims. As well, from time to time, the Company receives from customers demands for indemnification, or claims relating to the quality of our products, including claims for additional labor costs, costs for replacing defective parts, reimbursement to customers for damages incurred in correcting their defective products, costs for product recalls or other damages. The Company accrues for losses relating to such claims that the Company considers probable and for which the loss can be reasonably estimated.

Other Contingencies

     In October 2008, officials of the European Union Commission (the “Commission”) conducted an inspection at the offices of one of the Company’s French subsidiaries. The Company was informed that the Commission was seeking evidence of potential violations by Atmel or its subsidiaries of the European Union’s competition laws in connection with the Commission’s investigation of suppliers of integrated circuits for smart cards. On September 21, 2009 and October 27, 2009, the Commission requested additional information from the Company, and the Company responded to the Commission’s requests. The Company continues to cooperate with the Commission’s investigation and has not received any specific findings, monetary demand or judgment through the date of filing this Form 10-Q. As a result, the Company has not recorded any provision in its financial statements related to this matter.

     For hardware, software or technology exported from the U.S. or otherwise subject to U.S. jurisdiction, the Company is subject to U.S. laws and regulations governing international trade and exports, including, but not limited to the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and trade sanctions against embargoed countries and destinations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”). Hardware, software or technology exported from other countries may also be subject to local laws and regulations governing international trade. Under these laws and regulations, the Company is responsible for obtaining all necessary licenses or other approvals, if required, for exports of hardware, software, technology, as well as the provision of technical assistance. The Company is also required to obtain export licenses, if required, prior to transferring technical data or software to foreign persons. In addition, the Company is required to obtain necessary export licenses prior to the export or re-export of hardware, software or technology (i) to any person, entity, organization or other party identified on the U.S. Department of Commerce Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons List, or the Department of State’s Debarred List; or (ii) for use in nuclear, chemical/biological weapons, or rocket systems or unmanned air vehicle applications. A determination by the U.S. or local government that Atmel has failed to comply with one or more of these export control laws or trade sanctions, including failure to properly restrict an export to the persons, entities or countries set forth on the government restricted party lists, could result in civil or criminal penalties, including the imposition of significant fines, denial of export privileges, loss of revenues from certain customers, and debarment from participation in U.S. government contracts. Further, a change in these laws and regulations could restrict our ability to export to previously permitted countries, customers, distributors, or other third parties. Any one or more of these sanctions or a change in law or regulations could have a material adverse effect on the Company’s business, financial condition and results of operations.

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Income Tax Contingencies

     The Company’s income tax calculations are based on application of the respective U.S. Federal, state or foreign tax law. The Company’s tax filings are subject to audit by the respective tax authorities.

     In 2005, the Internal Revenue Service (“IRS”) completed the fieldwork portion of its audit of the Company’s U.S. income tax returns for the years 2000 and 2001 and has proposed various adjustments to these income tax returns, including carry back adjustments to 1996 and 1999. In January 2007, after subsequent discussions with the Company, the IRS revised its proposed adjustments for these years. The Company has protested these proposed adjustments and is currently addressing the matter with the IRS Appeals Division.

     In May 2007, the IRS completed the fieldwork portion of its audit of the Company’s U.S. income tax returns in the years 2002 and 2003 and has proposed various adjustments to these income tax returns. The Company has protested all of these proposed various adjustments and is currently addressing the matter with the IRS Appeals Division. In addition, the Company has tax audits in progress in various foreign jurisdictions.

     While the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, cash flows or financial position, the outcome is subject to significant uncertainties. The Company recognizes tax liabilities for uncertain tax positions in accordance with the requirements under U.S. GAAP, which involve evaluating the technical merits of given tax positions and the likelihood of sustaining such positions upon review by taxing authorities. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the condensed consolidated statements of operations. Income taxes and related interest and penalties due for potential adjustments may result from the resolution of these examinations.

Product Warranties

     The Company accrues for warranty costs based on historical trends of product failure rates and the expected material and labor costs to provide warranty services. Our products are generally covered by a warranty typically ranging from 90 days to two years.

     The following table summarizes the activity related to the product warranty liability in the three and six months ended June 30, 2010 and 2009.

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands)
Balance at beginning of period	$	4,394		$	5,229		$	4,225		$	5,579
Accrual for warranties during the period, net of change in estimates		493			576			2,166			1,419
Actual costs incurred		(778	)		(1,069	)		(2,282	)		(2,262	)
Balance at end of period	$	4,109		$	4,736		$	4,109		$	4,736

     Product warranty liability is included in accrued and other liabilities on the condensed consolidated balance sheets.

Guarantees

     During the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either the Company or its subsidiaries. As of June 30, 2010, the maximum potential amount of future payments that the Company could be required to make under these guarantee agreements is $2,000. The Company has not recorded any liability in connection with these guarantee arrangements. Based on historical experience and information currently available, the Company believes it will not be required to make any payments under these guarantee arrangements.

Note 9 INCOME TAXES

     For interim periods, the provision for income taxes is determined using the annual effective tax rate method which excludes entities that are not expected to realize tax benefits from certain operating losses and excludes the impact of discrete tax events during the period. As a result, the Company’s provision for income taxes, excluding discrete events, is at a higher consolidated effective rate than would have resulted if all entities were profitable or if losses from excluded entities produced realizable tax benefits.

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     In the three and six months ended June 30, 2010, the Company recorded an income tax benefit of $39,657 and $37,014, respectively. The benefits primarily related to a net discrete income tax benefit of $43,645 recorded in the three months ended June 30, 2010, associated with the sale of the Company’s wafer manufacturing operations in Rousset, France, as management determined that this benefit will more likely than not be realized in current and future periods. In the three and six months ended June 30, 2009, the Company recorded an income tax benefit of $9,737 and $37,430, respectively.

     These benefits also reflected the recognition of certain refundable R&D credits of $304 and $2,226 in the three and six months ended June 30, 2010 and $2,607 and $29,097 in the three and six months ended June 30, 2009, respectively. The receipt of these refundable R&D credits was not dependent on the existence of taxable income. For the six months ended June 30, 2009, the Company received refunds related to prior years and was able to recognize the tax benefit as a result of tax law changes and the expiration of statutes of limitations.

     In 2005, the Internal Revenue Service (“IRS”) proposed adjustments to the Company’s U.S. income tax returns for the years 2000 and 2001. In January 2007, after subsequent discussions with the Company, the IRS revised the proposed adjustments for these years. The Company has protested these proposed adjustments and is currently pursuing administrative review with the IRS Appeals Division. In May 2007, the IRS proposed adjustments to the Company’s U.S. income tax returns for the years 2002 and 2003. The Company filed a protest to these proposed adjustments and is pursuing administrative review with the IRS Appeals Division.

     In addition, the Company has tax audits in progress in other foreign jurisdictions. The Company has accrued taxes and related interest and penalties that may be due upon the ultimate resolution of these examinations and for other matters relating to open U.S. Federal, state and foreign tax years in accordance with the applicable US GAAP standards for accounting for uncertain income tax positions. While the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, cash flows or financial position, the outcome is subject to uncertainty.

     The Company recognizes tax liabilities for uncertain tax positions in accordance with the requirements under U.S. GAAP, which involve evaluating the technical merits of given tax positions and the likelihood of sustaining such positions upon review by taxing authorities. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense of benefit in the condensed consolidated statements of operations. Income taxes and related interest and penalties due for potential adjustments may result from the resolution of these examinations, and examinations of open U.S. federal, state and foreign jurisdictions. Should the Company be unable to reach agreement with the federal or foreign tax authorities on the various proposed adjustments, there exists the possibility of an adverse material impact on the Company’s results of operations, cash flows and financial position. At June 30, 2010 and December 31, 2009, the Company had $186,962 and $182,552 of unrecognized tax benefits, respectively.

     Included within long-term liabilities at June 30, 2010 and December 31, 2009 were income taxes payable totaling $121,317 and $116,404, respectively.

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     The Company believes that it is reasonably possible that the IRS audit and the audits in foreign jurisdictions may be resolved and/or there will be an expiration of the statute of limitations within the next twelve months, which could result in the potential recognition of unrecognized tax benefits within the next twelve months of up to $152,000, including tax, interest and penalties.

Note 10 PENSION PLANS

     The Company sponsors defined benefit pension plans that cover substantially all French and German employees. Plan benefits are provided in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. The plans are unfunded. Pension liabilities and charges to expense are based upon various assumptions, updated quarterly, including discount rates, future salary increases, employee turnover, and mortality rates.

     Retirement plans consist of two types of plans. The first plan type provides for termination benefits paid to employees only at retirement, and consists of approximately one to five months of salary. This structure covers the Company’s French employees. The second plan type provides for defined benefit payouts for the employee’s post-retirement life, and covers the Company’s German employees.

     The aggregate net pension expense relating to the two plan types are as follows:

	Three Months Ended					Six Months Ended
	June 30,			June 30,		June 30,			June 30,
	2010			2009		2010			2009
	(in thousands)
Service costs-benefits earned during the period	$	149		$	492	$	573		$	986
Interest cost on projected benefit obligation		219			446		595			884
Amortization of actuarial (gain) loss		(5	)		8		(4	)		5
Settlement and other related losses		907			—		907			—
Net pension expense	$	1,270		$	946	$	2,071		$	1,875

     Interest cost on projected benefit obligation decreased to $219 and $595 in the three and six months ended June 30, 2010 from $446 and $884 in the three and six months ended June 30, 2009, primarily due to reductions in interest rates.

     Settlement and other related losses of $907 in the three and six months ended June 30, 2010 was primarily related to the Company’s sale of its manufacturing operations in Rousset, France and was recorded as a charge to cost of revenues in the condensed consolidated statements of operations.

     Cash funding for benefits paid was $53 and $25 in the six months ended June 30, 2010 and 2009, respectively. Cash funding for benefits to be paid for 2010 is expected to be approximately $686.

     The Company’s pension liability represents the present value of estimated future benefits to be paid. With respect to the Company’s unfunded plans in Europe, in the six months ended June 30, 2010, a change in the interest rate assumptions used to calculate the present value of the pension obligation resulted in a net increase in the pension liability. This resulted in a decrease of $1,296, net of tax, which was recorded in accumulated other comprehensive income in stockholders’ equity on the condensed consolidated balance sheet at June 30, 2010.

Note 11 OPERATING AND GEOGRAPHICAL SEGMENTS

     The Company designs, develops, manufactures and sells a wide range of semiconductor integrated circuit products. The segments represent management’s view of the Company’s businesses and how it allocates Company resources and measures performance of its major components. In addition, each segment consists of product families with similar requirements for design, development and marketing. Each segment requires different design, development and marketing resources to produce and sell semiconductor integrated circuits. Atmel’s four reportable segments are as follows:

• Microcontrollers segment includes a variety of proprietary and standard microcontrollers, the majority of which contain embedded nonvolatile memory and integrated analog peripherals. In March 2008, the Company acquired Quantum, a supplier of capacitive sensing IP solutions. Results from the acquired operations are considered complementary to sales of microcontroller products and are included in this segment.

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• Nonvolatile Memories segment consists predominantly of serial interface electrically erasable programmable read-only memory (“SEEPROM”) and serial interface Flash memory products. This segment also includes parallel interface Flash memories as well as mature parallel interface electrically erasable programmable read-only memory (“EEPROM”) and erasable programmable ready-only memory (“EPROM”) devices. This segment also includes products with military and aerospace applications.

• Radio Frequency (“RF”) and Automotive segment includes products designed for the automotive industry. This segment produces and sells wireless and wired devices for industrial, consumer and automotive applications and it also provides foundry services which produce radio frequency products for the mobile telecommunication market.

• Application Specific Integrated Circuit (“ASIC”) segment includes custom application specific integrated circuits designed to meet specialized single-customer requirements for their high performance devices in a broad variety of specific applications. This segment also encompasses a range of products which provide security for digital data transaction, including smart cards for mobile phones, set top boxes, banking and national identity cards. This segment also includes products with military and aerospace applications. The Company also develops application specific standard products (“ASSP”) for high reliability space applications, power management and secure crypto memory products.

     The Company evaluates segment performance based on revenues and income or loss from operations excluding acquisition-related charges (credits), charges for grant repayments, restructuring charges, asset impairment charges and loss (gain) on sale of assets. Interest and other income (expenses), net, nonrecurring gains and losses, foreign exchange gains and losses and income taxes are not measured by operating segment.

     Segments are defined by the products they design and sell. They do not make sales to each other. The Company’s net revenues and segment income (loss) from operations for each reportable segment in the three and six months ended June 30, 2010 and 2009 are as follows:

Information about Reportable Segments

	Micro-			Nonvolatile			RF and
	Controllers			Memories			Automotive			ASIC			Total
	(in thousands)
Three months ended June 30, 2010
Net revenues from external customers	$	197,601		$	73,554		$	45,282		$	76,924		$	393,361
Segment income (loss) from operations		24,335			8,134			3,068			(5,421	)		30,116
Three months ended June 30, 2009
Net revenues from external customers		101,613			69,338			35,385			78,206			284,542
Segment loss from operations		(3,209	)		(985	)		(4,374	)		(2,676	)		(11,244	)
Six months ended June 30, 2010
Net revenues from external customers	$	348,508		$	151,054		$	91,755		$	150,593		$	741,910
Segment income (loss) from operations		35,694			12,423			2,424			(6,176	)		44,365
Six months ended June 30, 2009
Net revenues from external customers		198,660			133,165			67,972			156,238			556,035
Segment (loss) income from operations		(3,819	)		2,781			(4,904	)		(17,372	)		(23,314	)

     The Company does not allocate assets by segment, as management does not use asset information to measure or evaluate a segment’s performance.

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Reconciliation of Segment Information to Condensed Consolidated Statements of Operations

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands)
Total segment income (loss) from operations	$	30,116		$	(11,244	)	$	44,365		$	(23,314	)
Unallocated amounts:
Acquisition-related (charges) credits		(1,167	)		(3,642	)		734			(9,141	)
Charges for grant repayments		(246	)		(249	)		(511	)		(1,014	)
Restructuring charges		(1,614	)		(2,470	)		(2,583	)		(4,822	)
Asset impairment charges		(11,922	)		—			(11,922	)		—
(Loss) gain on sale of assets		(94,052	)		—			(94,052	)		164
Consolidated loss from operations	$	(78,885	)	$	(17,605	)	$	(63,969	)	$	(38,127	)

     Geographic sources of revenues were as follows:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2010		2009		2010		2009
	(in thousands)
United States	$	63,363	$	49,721	$	125,384	$	98,418
Germany		50,060		34,818		98,815		71,188
France		17,071		21,399		33,517		41,252
United Kingdom		3,957		2,574		6,865		5,126
Japan		10,371		9,423		19,537		17,507
China, including Hong Kong		124,013		78,387		225,259		149,157
Singapore		11,260		15,845		20,758		31,084
Rest of Asia-Pacific		67,268		39,560		117,365		75,187
Rest of Europe		39,189		28,878		81,743		58,876
Rest of the World		6,809		3,937		12,667		8,240
Total net revenues	$	393,361	$	284,542	$	741,910	$	556,035

     Net revenues are attributed to countries based on delivery locations.

     No single customer accounted for more than 10% of net revenues in each of the three and six months ended June 30, 2010 and 2009, respectively.

     Locations of long-lived assets as of June 30, 2010 and December 31, 2009 were as follows:

	June 30,		December 31,
	2010		2009
	(in thousands)
United States	$	104,302	$	105,017
Germany		16,982		21,408
France		18,517		35,505
United Kingdom		4,204		4,949
Asia-Pacific		43,674		37,726
Rest of Europe		28,004		17,366
Total	$	215,683	$	221,971

     Excluded from the table above are auction-rate securities of $2,256 and $2,266 as of June 30, 2010 and December 31, 2009, which are included in other assets on the condensed consolidated balance sheets. Also excluded from the table above as of June 30, 2010 and December 31, 2009 are goodwill of $52,176 and $56,408, respectively, intangible assets, net of $24,816 and $29,841, respectively, deferred income tax assets of $31,443 and $2,988, respectively, and assets held for sale of $8,824 and $83,260, respectively.

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Note 12 LOSS ON SALE OF ASSETS, ASSET IMPAIRMENT CHARGES AND ASSETS HELD FOR SALE

     The Company assesses the recoverability of long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the Company may not be able to recover the asset’s carrying amount. The Company measures the amount of impairment of such long-lived assets by the amount by which the carrying value of the asset exceeds the fair market value of the asset, which is generally determined based on projected discounted future cash flows or appraised values. The Company classifies long-lived assets as held and used until they are disposed. The Company reports assets and liabilities that are part of a disposal group and are to be disposed of by sale as held for sale and recognizes those assets and liabilities on the condensed consolidated balance sheet at the lower of carrying amount or fair value, less cost to sell. Long-lived assets classified as held for sale are not depreciated.

Rousset, France

Loss on Sale of Assets

     On June 23, 2010, the Company completed the sale of its manufacturing operations in Rousset, France to LFoundry GmbH (“LFoundry”). Under the terms of the agreement, the Company transferred manufacturing assets and employee liabilities to the buyer in return for nominal cash consideration. In connection with the sale, the Company entered into certain other ancillary agreements, including a Manufacturing Services Agreement (“MSA”) in which the Company will purchase wafers from LFoundry for four years following the closing on a “take-or-pay” basis. Upon closing of this transaction, the Company recorded a loss on sale of $94,052, which is summarized in the following table:

(in thousands)
Net assets transferred, including working capital adjustment	$	61,646
Fair value of the MSA		92,417
Release of currency translation adjustment		(97,367	)
Severance cost liability		27,840
Selling costs		3,173
Other related costs		6,343
Loss on Sale of Assets	$	94,052

     In connection with the sale of the manufacturing operations, the Company transferred assets and liabilities specific to the manufacturing operations totaling $61,646 to LFoundry, resulting in a working capital adjustment to be received from LFoundry of $2,678.

     As future wafer purchases under the MSA were negotiated at pricing above their fair value when compared to current pricing available from third-party foundries, the Company recorded a liability in conjunction with the sale, representing the present value of the unfavorable purchase commitment. The Company determined that the difference between the contract prices and market prices over the term of the agreement totaled $103,660. The present value of this liability, using a discount rate of 7%, which was based on a rate for unsecured subordinated debt similar to the Company’s, was determined to be $92,417, and has been included in the loss on sale. The gross value of the MSA will be recognized as a credit to cost of revenues over the term of the MSA as the wafers are purchased and the present value discount of $11,243 will be recognized as interest expense over the same term.

     The sale of the Rousset, France manufacturing operations resulted in the substantial liquidation of the Company’s investment in its European manufacturing facilities, and accordingly, the Company recorded a gain of $97,367 related to currency translation adjustments (“CTA balance”) that was previously recorded within stockholders’ equity, as the Company concluded, based on guidance related to foreign currency, that it should similarly release all remaining related currency translation adjustments.

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     Also, as part of the sale, the Company agreed to reimburse LFoundry for severance costs expected to be incurred subsequent to the sale. The Company entered into an escrow agreement in which the Company agreed to remit funds to LFoundry for the required benefits and payments to those employees who are determined to be part of the approved departure plan. The Company recorded a liability of $27,840 as a component of the loss on sale, which represents management’s best estimate of the severance amount payable under this arrangement, and which is expected to be paid by December 31, 2010.

     As part of the sale of the manufacturing operations, the Company incurred $4,746 in software/hardware and consulting costs to set up a separate, independent IT infrastructure for LFoundry. These costs were incurred based on negotiation with LFoundry, provided no benefit to the Company, and would not have been incurred if the Company was not selling the manufacturing operations. Therefore, the direct and incremental costs associated with these services were recorded as part of the loss on sale. The Company also incurred other costs related to the sale of $1,597, which included performance-based bonuses of $497 for certain employees (no executive officers were included), related to the completion of the sale of the Rousset manufacturing operations to LFoundry.

     The Company also incurred direct and incremental selling costs of $3,173, which represented broker commissions and legal fees associated with the sale to LFoundry.

     The Company has retained an equity interest in the manufacturing operations (“the entity”) sold to LFoundry which provides limited protective rights and no decision-making rights that are significant to the economic performance of the entity. The Company is an equity holder that is shielded from economic losses and does not participate fully in the entity’s residual economics, accordingly, the Company has concluded that its interest in the entity is a variable interest entity (“VIE”). A VIE must be consolidated if the Company is its primary beneficiary, which has the power to direct the activities that most significantly impact the VIE’s economic performance or the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In determining whether the Company is the primary beneficiary, it identified the significant activities and the parties that have the power to direct them, determined the equity, profit and loss participation, and reviewed the funding and operating agreements. Based on the above factors, the Company determined that it is not the primary beneficiary and hence will not consolidate the VIE. As part of the sale, the Company entered into a wafer supply agreement, an arrangement to reimburse employee severance costs that LFoundry may incur, and has leased land and a building to LFoundry. The Company’s maximum exposure related to these arrangements is not expected to be significantly in excess of the amounts recorded and it does not intend to provide any other support to the VIE, financial or otherwise.

Asset Impairment Charges

     The asset disposal group expected to be transferred to the buyer was determined as of December 31, 2009 when the Company reclassified $83,260 in long-term assets as held for sale. Following further negotiation with the buyer, the Company determined that certain assets should instead remain with the Company. As a result, the Company reclassified property and equipment to held and used in the quarter ended June 30, 2010. In connection with this reclassification, the Company assessed the fair value of these assets to be retained and concluded that the fair value of the assets was lower than its carrying value less depreciation expense that would have been recognized had the assets been continuously classified as held and used. As a result, the Company recorded an asset impairment charge of $11,922 in the second quarter of 2010, as the fair value of the assets was determined to be insignificant.

Secure Microcontroller Solutions

     In June 2010, the Company entered into a definitive agreement with INSIDE Contactless (INSIDE) for the sale of its Secure Microcontroller Solutions (SMS) business based in Rousset, France and East Kilbride, UK. Pursuant to the definitive agreement, INSIDE will pay $37,000 in cash at the closing, subject to a post-closing working capital adjustment and an additional cash consideration of up to $21,000 if certain earnout targets are met in 2010 and 2011. As part of the transaction, the Company has agreed to make a minority investment in INSIDE of approximately $4,000. The definitive agreement also provides INSIDE a royalty-based, non-exclusive license to certain business-related intellectual property in order to support the current SMS business and future product development. In addition, INSIDE will enter into a multi-year supply agreement to continue sourcing wafers from the fabrication facility in Rousset, France that the Company recently sold to LFoundry. The transaction is expected to close by the end of the third quarter of 2010, subject to certain closing conditions.

     The proposed sale of the SMS business is not expected to qualify as discontinued operations as it does not meet the requirement to be considered a component of an entity.

     The following table details the assets and liabilities within the disposal group, which are classified as held for sale on the condensed consolidated balance sheet as of June 30, 2010:

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	June 30,
	2010
	(in thousands)
Current assets
Inventory	$	7,152
Other current assets		1,026
Total current assets held for sale		8,178
Non-current assets
Fixed Assets		4,862
Other assets		3,962
Total non current assets held for sale		8,824
Total assets held for sale	$	17,002
Current liabilities
Accrued and other liabilities	$	2,712
Total current liabilities held for sale		2,712
Pension liability		635
Total non-current liabilities held for sale		635
Total liabilities held for sale	$	3,347

Note 13 RESTRUCTURING CHARGES

     The following table summarizes the activity related to the accrual for restructuring charges detailed by event in the three and six months ended June 30, 2010 and 2009.

	January 1,							Currency			March 31,							Currency			June 30,
	2010							Translation			2010							Translation			2010
	Accrual		Charges		Payments			Adjustment			Accrual		Charges		Payments			Adjustment			Accrual
	(in thousands)
Third quarter of 2002
Termination of contract with supplier	$	1,592	$	—	$	—		$	—		$	1,592	$	—	$	—		$	—		$	1,592	(2)
Second quarter of 2008
Employee termination costs		4		—		—			(1	)		3		—		—			—			3	(1)
Third quarter of 2008
Employee termination costs		557		—		—			(37	)		520		—		—			(30	)		490	(1)
First quarter of 2009
Employee termination costs		—		969		(398	)		—			571		11		(184	)		(39	)		359	(1)
Other restructuring charges		318		—		(46	)		—			272		—		(45	)		—			227	(1)
Second quarter of 2010		—		—		—			—			—		—					—			—
Employee termination costs		—		—		—			—			—		1,603		—			(76	)		1,527	(1)
Total 2010 activity	$	2,471	$	969	$	(444	)	$	(38	)	$	2,958	$	1,614	$	(229	)	$	(145	)	$	4,198

(1)	Accrued restructuring charges are classified within accrued and other liabilities on the condensed consolidated balance sheets and are expected to be paid prior to December 31, 2010.
(2)	Relates to a contractual obligation, which is currently subject to litigation.

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	January 1,							Currency			March 31,								Currency		June 30,
	2009							Translation			2009		Charges/						Translation		2009
	Accrual		Charges		Payments			Adjustment			Accrual		(Credits)			Payments			Adjustment		Accrual
	(in thousands)
Third quarter of 2002
Termination of contract with supplier	$	1,592	$	—	$	—		$	—		$	1,592	$	—		$	—		$	—	$	1,592
Fourth quarter of 2007
Other restructuring charges		218		32		(81	)		(2	)		167		104			(125	)		12		158
Second quarter of 2008
Employee termination costs		235		42		(220	)		(10	)		47		4			(34	)		3		20
Third quarter of 2008
Employee termination costs		17,575		226		(10,579	)		(1,028	)		6,194		(441	)		(3,971	)		125		1,907
Fouth quarter of 2008
Employee termination costs		3,438		567		(2,854	)		(10	)		1,141		59			(1,145	)		6		61
First quarter of 2009
Employee termination costs		—		1,485		(37	)		(11	)		1,437		(83	)		(520	)		205		1,039
Second quarter of 2009
Employee termination costs		—		—		—			—			—		2,827			(2,777	)		—		50
Total 2009 activity	$	23,058	$	2,352	$	(13,771	)	$	(1,061	)	$	10,578	$	2,470		$	(8,572	)	$	351	$	4,827

2010 Restructuring Charges

     In the three and six months ended June 30, 2010, the Company incurred restructuring charges of $1,614 and $2,583 consisting of the following:

• Charges of $1,614 and $2,583 in the three and six months ended June 30, 2010, respectively, related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

2009 Restructuring Charges

     In the three and six months ended June 30, 2009, the Company continued to implement the restructuring initiatives announced in 2008 and incurred restructuring charges of $2,470 and $4,822, respectively. The charges relating to this initiative consist of the following:

• Net charges of $2,366 and $4,686 in the three and six months ended June 30, 2009, respectively, related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standards related to costs associated with exit or disposal activities.

• Charges of $104 and $136 in the three and six months ended June 30, 2009, respectively, related to facility closure costs.

Note 14 NET LOSS PER SHARE

     Basic net loss per share is calculated by using the weighted-average number of common shares outstanding during that period. Diluted net income per share is calculated giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options, upon vesting of restricted stock units, contingent issuable shares for all periods and accrued issuance of shares under employee stock purchase plan. No dilutive potential common shares were included in the computation of any diluted per share amount when a loss from continuing operations was reported by the Company. Income or loss from operations is the “control number” in determining whether potential common shares are dilutive or anti-dilutive.

     A reconciliation of the numerator and denominator of basic and diluted net loss per share is provided as follows:

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	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands, except per share data)
Net loss	$	(36,443	)	$	(12,407	)	$	(19,828	)	$	(8,781	)
Weighted-average shares — basic		460,249			450,891			458,508			450,291
Incremental shares and share equivalents		—			—			—			—
Weighted-average shares — diluted		460,249			450,891			458,508			450,291
Net loss per share:
Basic
Net loss per share — basic	$	(0.08	)	$	(0.03	)	$	(0.04	)	$	(0.02	)
Diluted
Net loss per share — diluted	$	(0.08	)	$	(0.03	)	$	(0.04	)	$	(0.02	)

     The following table summarizes securities which were not included in the “Weighted-average shares — diluted” used for calculation of diluted net income per share, as their effect would have been anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2010		2009		2010		2009
	(in thousands)
Employee stock options and restricted stock units outstanding		40,960		53,557		41,598		54,394

Note 15 INTEREST AND OTHER INCOME (EXPENSE), NET

     Interest and other income (expense), net, are summarized in the following table:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009
	(in thousands)
Interest and other income	$	2,078		$	351		$	2,585		$	781
Interest expense		(1,109	)		(1,759	)		(2,357	)		(3,545	)
Foreign exchange transaction gains (losses)		1,815			(3,131	)		6,898			(5,320	)
Total	$	2,784		$	(4,539	)	$	7,126		$	(8,084	)

Note 16 SUBSEQUENT EVENT

     On August 4, 2010, the Company announced its board of directors has authorized up to $200,000 for a common stock repurchase program. The program authorizes the purchase of the Company’s common stock in the open market depending upon the market conditions and other factors. The program does not have an expiration date and the number of shares repurchased and the timing of repurchases will be based on the level of the Company’s cash balances, general business and market conditions, regulatory requirements, and other factors, including alternative investment opportunities.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read the following discussion and analysis in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto contained elsewhere in this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2009.

FORWARD LOOKING STATEMENTS

     You should read the following discussion in conjunction with our Condensed Consolidated Financial Statements and the related “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, particularly statements regarding our outlook for fiscal 2010, our gross margins, anticipated revenues by segment, operating expenses and capital expenditures, cash flow and liquidity measures, factory utilization, charges related to and the effect of our strategic transactions, restructuring, performance restricted stock units, and other strategic efforts, particularly the potential sale of portions of our ASIC business, and our expectations regarding tax matters and the effects of exchange rates and efforts to manage exposure to exchange rate fluctuation. Our actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, risks and uncertainties, including the risk factors set forth in this discussion and in Item 1A — Risk Factors, and elsewhere in this Form 10-Q. Generally, the words “may,” “will,” “could,” “would,” “anticipate,” “expect,” “intend,” “believe,” “seek,” “estimate,” “plan,” “view,” “continue,” the plural of such terms, the negatives of such terms, or other comparable terminology and similar expressions identify forward-looking statements. The information included in this Form 10-Q is provided as of the filing date with the Securities and Exchange Commission and future events or circumstances could differ significantly from the forward-looking statements included herein. Accordingly, we caution readers not to place undue reliance on such statements. Atmel undertakes no obligation to update any forward-looking statements in this Form 10-Q.

OVERVIEW

     We are a leading designer, developer and manufacturer of a wide range of semiconductor products and intellectual property (IP) products. Our diversified product portfolio includes our proprietary AVR microcontrollers, security and smart card integrated circuits, and a diverse range of advanced logic, mixed-signal, nonvolatile memory and radio frequency devices. Leveraging our broad IP portfolio, we are able to provide our customers with complete system solutions. Our solutions target a wide range of applications in the industrial, consumer electronics, automotive, wireless, communications, computing, storage, security, military and aerospace markets, and are used in products such as mobile handsets, automotive electronics, global positioning systems (GPS) and batteries. We design, develop, manufacture and sell our products.

     Our operating segments consist of the following: (1) microcontroller products (Microcontroller); (2) nonvolatile memory products (Nonvolatile Memory); (3) radio frequency and automotive products (RF and Automotive); and (4) application specific integrated circuits (ASICs).

     Net revenues increased to $393 million in the three months ended June 30, 2010 from $285 million in the three months ended June 30, 2009, an increase of $108 million or 38%. Net revenues increased to $742 million in the six months ended June 30, 2010 from $556 million in the six months ended June 30, 2009, an increase of $186 million or 33%. Demand in the second quarter exceeded our forecast primarily due to stronger than expected orders for Microcontroller products. During the quarter, orders exceeded our shipments, and demand increased faster than we could supply customer orders at standard lead times. Our Microcontroller segment revenues increased 94% over revenues in the second quarter of 2009. We began ramping shipments of maXTouch microcontroller products to mobile phone customers and experienced broad strength across both our 8-bit and 32-bit Microcontroller end-markets during the second quarter of 2010.

     Gross margin rose to 40.6% and 39.5% in the three and six months ended June 30, 2010, compared to 32.3% and 33.7% in the three and six months ended June 30, 2009. Gross margins in the three and six months ended June 30, 2010 were positively impacted by higher overall shipment levels, increased production levels and factory loading at our wafer fabrication facilities, and a more favorable mix of higher margin microcontroller products included in our net revenues. We believe that gross margins will further improve during the next 12 to 18 months as we continue to increase efficiencies in internal operations and continue to shift to a more favorable product mix compared to historical results.

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     We continue to take significant actions to improve operational efficiencies and further reduce costs. During the second quarter of 2010, we completed the sale of our Rousset, France wafer manufacturing operation to LFoundry GmbH. Under the terms of the agreement, we transferred manufacturing assets and employment obligations to the buyer in return for nominal cash consideration. In connection with the sale, we entered into certain other ancillary agreements, including a Manufacturing Services Agreement (“MSA”) in which we will purchase wafers from LFoundry for four years following the closing on a “take-or-pay” basis. Upon closing of this transaction, we recorded a loss on sale of $94 million in connection with certain costs and fees. As future wafer purchases under the supply agreement are negotiated at pricing above their fair value, we have recorded a charge to recognize the present value of the estimated impact of this unfavorable commitment over the term of the contract. The sale of the Rousset manufacturing operation marks a significant step in Atmel’s transformation to a “fab-lite” supply chain structure with lower fixed costs, less capital investment risk, and lower foreign exchange rate exposure. Our analysis indicated that the difference between the contract prices and market prices over the term of the agreement totaled $104 million, and when present value is considered, the fair value of the fixed price agreement resulted in a charge of $92 million, recorded in the second quarter of 2010. The gross value of the MSA will be recognized as a credit to cost of revenues over the term of the MSA as the wafers are purchased and the present value discount of $11 million will be recognized as other interest expense over the same term.

     In June 2010, we entered into a definitive agreement with INSIDE Contactless (INSIDE) for the sale of our Secure Microcontroller Solutions (SMS) business based in Rousset, France and East Kilbride, UK. Pursuant to the definitive agreement, INSIDE will pay $37 million in cash at the closing, subject to a post-closing working capital adjustment and an additional cash consideration of up to $21 million if certain earnout targets are met in 2010 and 2011. The transaction is expected to close by the end of the third quarter of 2010, subject to certain closing conditions. As a result of the definitive agreement, the assets and liabilities related to SMS business operations were classified as held for sale as of June 30, 2010.

     In the three and six months ended June 30, 2010, we also incurred $2 million and $3 million, respectively, and in the three and six months ended June 30, 2009, we incurred $2 million and $5 million, respectively, in restructuring charges related to headcount reductions and facility closure costs, primarily related to broad restructuring and cost reduction efforts in our French operations.

     Benefit from income taxes totaled $40 million and $37 million in the three and six months ended June 30, 2010, respectively, compared to a benefit for income taxes of $10 and $37 million in the three and six months ended June 30, 2009, respectively. The tax benefit recorded in the three and six months ended June 30, 2010, primarily relates to discrete tax events resulting from the sale of our Rousset, France water manufacturing facilities. The tax benefit recorded in the three and six months ended June 30, 2009 resulted primarily from recognition of refundable R&D credits related to prior years.

     Cash provided by operating activities totaled $120 million and $7 million in the six months ended June 30, 2010 and 2009, respectively. At June 30, 2010, our cash, cash equivalents and short-term investments totaled $552 million, compared to $476 million at December 31, 2009. Payments for capital expenditures totaled $28 million in the six months ended June 30, 2010, compared to $7 million in the six months ended June 30, 2009. On August 4, 2010 we announced that our Board of Directors authorized the repurchase of up to $200 million of our common stock in direct open market purchases.

RESULTS OF CONTINUING OPERATIONS

	Three Months Ended										Six Months Ended
	June 30, 2010					June 30, 2009					June 30, 2010					June 30, 2009
	(in thousands, except percentage of net revenues)
Net revenues	$	393,361		100.0	%	$	284,542		100.0	%	$	741,910		100.0	%	$	556,035		100.0	%
Gross profit		159,646		40.6	%		91,824		32.3	%		293,420		39.5	%		187,229		33.7	%
Research and development		62,343		15.8	%		52,186		18.3	%		120,387		16.2	%		104,743		18.8	%
Selling, general and administrative		67,187		17.1	%		50,882		17.9	%		128,668		17.3	%		105,800		19.0	%
Acquisition-related charges (credits)		1,167		0.3	%		3,642		1.3	%		(734	)	-0.1	%		9,141		1.6	%
Charges for grant repayments		246		0.1	%		249		0.1	%		511		0.1	%		1,014		0.2	%
Restructuring charges		1,614		0.4	%		2,470		0.9	%		2,583		0.3	%		4,822		0.9	%
Asset impairment charges		11,922		3.0	%		—		—			11,922		1.6	%		—		—
Loss (gain) on sale of assets		94,052		23.9	%		—		—			94,052		12.7	%		(164	)	0.0	%
Loss from operations	$	(78,885	)	-20.1	%	$	(17,605	)	-6.2	%	$	(63,969	)	-8.6	%	$	(38,127	)	-6.9	%

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Net Revenues

     Net revenues increased to $393 million in the three months ended June 30, 2010 from $285 million in the three months ended June 30, 2009, an increase of $108 million or 38%. Net revenues increased to $742 million in the six months ended June 30, 2010 from $556 million in the six months ended June 30, 2009, an increase of $186 million or 33%. Demand in the second quarter exceeded our forecast primarily due to stronger than expected orders for Microcontroller products. Our Microcontroller segment revenues increased 94% over revenues in the second quarter of 2009. We began ramping shipments of maXTouch microcontroller products to mobile phone customers and experienced broad strength across both our 8-bit and 32-bit Microcontroller end-markets during the second quarter of 2010.

     Average exchange rates utilized to translate foreign currency revenues and expenses in Euro were approximately 1.31 and 1.33 Euro to the dollar in the three months ended June 30, 2010 and 2009, respectively, and 1.36 and 1.33 Euro to the dollar in the six months ended June 30, 2010 and 2009, respectively. Our net revenues for the three months ended June 30, 2010 would have been approximately $2 million higher had the average exchange rate in the current quarter remained the same as the rate in effect in the three months ended June 30, 2009. Our net revenues for the six months ended June 30, 2010 would have been approximately $3 million lower had the average exchange rate in the current six months remained the same as the rate in effect in the six months ended June 30, 2009.

Net Revenues — By Operating Segment

     Our net revenues by operating segment are summarized as follows:

	Three Months Ended
	June 30,		June 30,
	2010		2009		Change			% Change
	(in thousands, except for percentages)
Microcontroller	$	197,601	$	101,613	$	95,988			94	%
Nonvolatile Memory		73,554		69,338		4,216			6	%
RF and Automotive		45,282		35,385		9,897			28	%
ASIC		76,924		78,206		(1,282	)		-2	%
Total net revenues	$	393,361	$	284,542	$	108,819			38	%

	Six Months Ended
	June 30,		June 30,
	2010		2009		Change			% Change
	(in thousands, except for percentages)
Microcontroller	$	348,508	$	198,660	$	149,848			75	%
Nonvolatile Memory		151,054		133,165		17,889			13	%
RF and Automotive		91,755		67,972		23,783			35	%
ASIC		150,593		156,238		(5,645	)		-4	%
Total net revenues	$	741,910	$	556,035	$	185,875			33	%

Microcontroller

     Microcontroller segment net revenues increased 94% to $198 million in the three months ended June 30, 2010 from $102 million in the three months ended June 30, 2009. Microcontroller segment net revenues increased 75% to $349 million in the six months ended June 30, 2010 from $199 million in the six months ended June 30, 2009. The increase in net revenues was primarily related to increased demand from customers for 8-bit and 32-bit microcontrollers which increased 74% and 90%, respectively, for the three months ended June 30, 2010, compared to the three months ended June 30, 2009 and increased 59% and 91%, respectively, in the six months ended June 30, 2010, compared to the six months ended June 30, 2009. Microcontroller demand was especially strong in the industrial, smart energy and consumer sectors during both the three and six months ended June 30, 2010. Revenue also increased for our touch products, as we began ramping shipments of our new maXTouch product line of Touch screen-related microcontrollers primarily to mobile phone customers, which is included within the 8-bit Microcontroller family. We now expect our touch product

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revenue to exceed $100 million for the year ended December 31, 2010. During the quarter, orders exceeded our shipments, and demand increased faster than we could supply customer orders at standard lead times. As a result, we expect to increase shipments for these products over the next several quarters to fulfill increased customer demand.

     In the three and six months ended June 30, 2010, our Microcontrollers operating profit was $24 million and $36 million, respectively, compared to operating loss of $(3) million and $(4) million in the three and six months ended June 30, 2009, respectively.

Nonvolatile Memory

     Nonvolatile memory segment net revenues increased 6% to $74 million in the three months ended June 30, 2010 from $69 million in the three months ended June 30, 2009. Nonvolatile memory segment net revenues increased 13% to $151 million in the six months ended June 30, 2010 from $133 million in the six months ended June 30, 2009. The increase in net revenues was primarily related to higher pricing for Serial Flash and Bios Flash memory products which increased 32% and 44%, compared to the three and six months ended June 30, 2009, respectively. This increase was somewhat offset by lower shipments of Serial EE memory products, where demand remains strong, but supply chain constraints limited available supply.

     In the three and six months ended June 30, 2010, our Nonvolatile Memories operating profit was $8 million and $12 million, respectively, compared to operating loss of $(1) million in the three months ended June 30, 2009 and operating profit of $3 million in the six months ended June 30, 2009.

RF and Automotive

     RF and Automotive segment net revenues increased 28% to $45 million in the three months ended June 30, 2010 from $35 million in the three months ended June 30, 2009. RF and Automotive segment net revenues increased 35% to $92 million in the six months ended June 30, 2010 from $68 million in the six months ended June 30, 2009. The increase in net revenues was primarily related to resumption of demand in automotive markets. Our high voltage products increased 41% over the prior year, driven by higher shipments for vehicle networking products (LIN/IVN applications). This increase was somewhat offset by lower shipments to IR receiver markets as well as the impact of foreign exchange rates (primarily the euro) on shipments to European based automotive customers compared to prior periods.

     In the three and six months ended June 30, 2010, our RF and Automotive operating profit was $3 million and $2 million, respectively, compared to operating loss of $(4) million and $(5) million in the three and six months ended June 30, 2009, respectively.

ASIC

     ASIC segment net revenues decreased 2% to $77 million in the three months ended June 30, 2010 from $78 million in the three months ended June 30, 2009. ASIC segment net revenues decreased 4% to $151 million in the six months ended June 30, 2010 from $156 million in the six months ended June 30, 2009. ASIC segment net revenues decreased primarily due to reduced SmartCard shipments of $1 million and $6 million related to lower shipments to telecom markets, where we are refocusing our efforts on higher margin secure-banking identification and system solution end-markets. Net revenues for our CASP business also declined $3 million and $11 million in the three and six months ended June 30, 2010, compared to the three and six months ended June 30, 2009 due to weakness in European consumer markets. These decreases were offset in part by increases in our Embedded Crypto products of $3 million and $7 million in the three and six months ended June 30, 2010, compared to the three and six months ended June 30, 2009 as a result of strength in PC peripheral end markets. The Aerospace business remained flat compared to prior periods. Orders remain strong, though we remain supply-chain constrained due to very specialized requirements.

     In the three and six months ended June 30, 2010, our ASIC operating loss was $(5) million and $(6) million, respectively, compared to operating loss of $(3) million and $(17) million in the three and six months ended June 30, 2009, respectively.

Net Revenues by Geographic Area

     Our net revenues by geographic areas in the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009 are summarized as follows (revenues are attributed to countries based on delivery locations; see Note 11 of Notes to Condensed Consolidated Financial Statements for further discussion):

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	Three Months Ended
	June 30,		June 30,
	2010		2009		Change		% Change
	(in thousands, except for percentages)
Europe	$	110,277	$	87,669	$	22,608		26	%
Asia		212,912		143,215		69,697		49	%
United States		63,363		49,721		13,642		27	%
Other*		6,809		3,937		2,872		73	%
Total net revenues	$	393,361	$	284,542	$	108,819		38	%

	Six Months Ended
	June 30,		June 30,
	2010		2009		Change		% Change
	(in thousands, except for percentages)
Europe	$	220,940	$	176,442	$	44,498		25	%
Asia		382,919		272,935		109,984		40	%
United States		125,384		98,418		26,966		27	%
Other*		12,667		8,240		4,427		54	%
Total net revenues	$	741,910	$	556,035	$	185,875		33	%

* Primarily includes South Africa, and Central and South America

     Net revenues outside the United States accounted for 84% and 83% of our net revenues in the three and six months ended June 30, 2010, compared to 83% and 82% in the three and six months ended June 30, 2009.

     Our net revenues in Europe increased $23 million, or 26% in the three months ended June 30, 2010, compared to the three months ended June 30, 2009, and increased by $44 million, or 25% in the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009 for the region was primarily a result of the improved automotive and aerospace markets, offset in part by declining demand in Smart Card and CBIC products when compared to the three and six months ended June 30, 2009.

     Our net revenues in Asia increased $70 million, or 49%, in the three and six months ended June 30, 2010, compared to the three and six months ended June 30, 2009, and increased by $110 million, or 40% in the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009 for the region was primarily due to higher shipments of memory and microcontroller products as a result of improved demand in customer end markets for mobile phone and consumer-based products. Our net revenues in Asia in the three and six months ended June 30, 2010 was also favorably impacted by the recognition of previously deferred revenue related to certain Asian distributors.

     Our net revenues in the United States increased by $14 million, or 27%, in the three months ended June 30, 2010, compared to the three months ended June 30, 2009, and increased by $27 million, or 27% in the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in the three and six months ended June 30, 2010 from the three and six months ended June 30, 2009 for the region was primarily a result of higher microcontroller and crypto products shipments.

Revenues and Costs — Impact from Changes to Foreign Exchange Rates

     Changes in foreign exchange rates have had a significant impact on our net revenues and operating costs. Net revenues denominated in foreign currencies were 19% and 25% of our total net revenues in the three months ended June 30, 2010 and 2009, respectively, and 20% and 24% of our total net revenues in the six months ended June 30, 2010 and 2009, respectively. Costs denominated in foreign currencies were 35% and 39% of our total costs in the three months ended June 30, 2010 and 2009, respectively, and 35% and 41% of our total costs in the six months ended June 30, 2010 and 2009, respectively.

     Net revenues denominated in Euro were 19% and 24% in the three months ended June 30, 2010 and 2009, respectively, and 20% and 23% in the six months ended June 30, 2010 and 2009, respectively. Costs denominated in Euro were 31% and 35% of our total costs in the three months ended June 30, 2010 and 2009, respectively and 31% and 37% and six months ended June 30, 2010 and 2009, respectively.

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     Net revenues included 56 million Euro and 50 million Euro in the three months ended June 30, 2010 and 2009, respectively and 109 million in Euro and 98 million Euro in the six months ended June 30, 2010 and 2009, respectively. Operating expenses included 80 million Euro and 78 million Euro in the three months ended June 30, 2010 and 2009, respectively, and 161 million Euro and 160 million Euro in the six months ended June 30, 2010 and 2009, respectively.

     Average exchange rates utilized to translate foreign currency revenues and expenses in Euro were approximately 1.31 and 1.33 Euro to the dollar in the three months ended June 30, 2010 and 2009, respectively, and 1.36 and 1.33 Euro to the dollar in the six months ended June 30, 2010 and 2009.

     In the three months ended June 30, 2010, changes in foreign exchange rates had minimal impact to our operating results. Our net revenues for the three months ended June 30, 2010 would have been approximately $2 million higher had the average exchange rate in the current quarter remained the same as the rate in effect in the three months ended June 30, 2009. In addition, in the three months ended June 30, 2010 our operating expenses would have been approximately $1 million higher (relating to an increase in cost of revenues of $1 million; an increase in research and development expenses of $0.2 million; and an increase in sales, general and administrative expenses of $0.1 million). Therefore, our loss from operations in the three months ended June 30, 2010 would have been approximately $0.2 million higher had exchange rates in the three months ended June 30, 2010 remained unchanged from the three months ended June 30, 2009. There can be no assurance that we will not experience an unfavorable impact to revenues, gross margins, or operating results due to changes in foreign exchanges rates in future periods.

     In the six months ended June 30, 2010, changes in foreign exchange rates had a favorable impact to our operating results. Our net revenues for the six months ended June 30, 2010 would have been approximately $3 million lower had the average exchange rate in the current six-month period remained the same as the rate in effect in the six months ended June 30, 2009. However, in the six months ended June 30, 2010 our operating expenses would have been approximately $8 million lower (relating to a decrease in cost of revenues of $4 million; a decrease in research and development expenses of $3 million; and a decrease in sales, general and administrative expenses of $1 million). Therefore, our loss from operations in the six months ended June 30, 2010 would have been approximately $5 million higher had exchange rates in the six months ended June 30, 2010 remained unchanged from the six months ended June 30, 2009. We may take actions in the future to reduce our exposure to exchange rate fluctuations. However, there can be no assurance that we will be able to reduce the exposure to additional unfavorable changes to exchanges rates and the results on gross margin.

Cost of Revenues and Gross Margin

     Gross margin rose to 40.6% in the three months ended June 30, 2010, compared to 32.3% in the three months ended June 30, 2009. Gross margin rose to 39.5% in the six months ended June 30, 2010, compared to 33.7% in the six months ended June 30, 2009. Gross margins in the three and six months ended June 30, 2010 were positively impacted by higher overall shipment levels, increased production levels and factory loading at our wafer fabrication facilities, and a more favorable mix of higher margin microcontroller products included in our net revenues. We believe that gross margins will further improve during the next 12 to 18 months, as we continue to increase efficiencies in internal operations and continue to shift to a more favorable product mix compared to historical results.

     In the six months ended June 30, 2010, we manufactured approximately 86% of our products in our own wafer fabrication facilities compared to 89% in the six months ended June 30, 2009.

     Our cost of revenues includes the costs of wafer fabrication, assembly and test operations, changes in inventory reserves, royalty expense, freight costs and stock compensation expense. Our gross margin as a percentage of net revenues fluctuates depending on product mix, manufacturing yields, utilization of manufacturing capacity, and average selling prices, among other factors.

Research and Development

     Research and development (“R&D”) expenses increased 19%, or $10 million, to $62 million in the three months ended June 30, 2010 from $52 million in the three months ended June 30, 2009. R&D expenses increased 15%, or $16 million, to $120 million in the six months ended June 30, 2010 from $105 million in the six months ended June 30, 2009.

     R&D expenses in the three months ended June 30, 2010, compared to the three months ended June 30, 2009, increased primarily due to increased headcount for new product development of $3 million, increases in stock-based compensation of $4 million (primarily due to performance-based restricted stock units), mask spending of $2 million and depreciation expenses of $1 million. R&D expenses in the

34

six months ended June 30, 2010, compared to the six months ended June 30, 2009, increased primarily due to increased headcount for new product development of $11 million, stock-based compensation of $4 million (primarily due to performance-based restricted stock units) and depreciation expenses of $2 million.

     R&D expenses, including items described above, in the three and six months ended June 30, 2010, were unfavorably impacted by approximately $0.2 million and favorably impacted by $3 million, respectively, due to foreign exchange rate fluctuations, compared to rates in effect and the related expenses incurred in the three and six months ended June 30, 2009. As a percentage of net revenues, R&D expenses totaled 16% and 18% in the three months ended June 30, 2010 and 2009, respectively, and 16% and 19% in the six months ended June 30, 2010 and 2009, respectively.

     We receive R&D grants from various European research organizations, the benefit of which is recognized as an offset to related research and development costs. We recognized benefits of $1 million and $3 million in the three months ended June 30, 2010 and 2009, respectively and $3 million and $6 million in the six months ended June 30, 2010 and 2009, respectively.

     We have continued to invest in developing a variety of product areas and process technologies, including embedded CMOS technology, logic and nonvolatile memory to be manufactured at 0.13 and 0.09 micron line widths, as well as investments in SiDe BiCMOS technology to be manufactured at 0.18 micron line widths. We have also continued to purchase or license technology when necessary in order to bring products to market in a timely fashion. We believe that continued strategic investments in process technology and product development are essential for us to remain competitive in the markets we serve. We are continuing to re-focus our R&D resources on fewer, but more profitable development projects.

Selling, General and Administrative

     Selling, general and administrative (“SG&A”) expenses increased 32%, or $16 million, to $67 million in the three months ended June 30, 2010 from $51 million in the three months ended June 30, 2009. SG&A expenses increased 22%, or $23 million, to $129 million in the six months ended June 30, 2010 from $106 million in the six months ended June 30, 2009.

     SG&A expenses in the three months ended June 30, 2010, compared to the three months ended June 30, 2009, increased primarily due to increased employee-related costs of $6 million, increases in stock-based compensation of $10 million (primarily due to performance-based restricted stock units) and outside services of $2 million. SG&A expenses in the six months ended June 30, 2010, compared to the six months ended June 30, 2009, increased primarily due to increased employee-related costs of $7 million, increases in stock-based compensation of $14 million and outside services of $3 million.

     SG&A expenses, including items described above, in the three and six months ended June 30, 2010, were unfavorably impacted by approximately $0.1 million and favorably impacted by $1 million, respectively, due to foreign exchange rate fluctuations, compared to rates in effect and the related expenses incurred in the three and six months ended June 30, 2009.

     As a percentage of net revenues, SG&A expenses totaled 17% and 18% of net revenues in the three months ended June 30, 2010 and 2009, respectively, and 17% and 19% in the six months ended June 30, 2010 and 2009, respectively.

Stock-Based Compensation

     Stock-based compensation cost is measured at the measurement date (grant date), based on the fair value of the award, which is computed using a Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period. The fair value of a restricted stock unit is equivalent to the market price of our common stock on the measurement date.

     The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock units and employee stock purchases in the three and six months ended June 30, 2010 and 2009:

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	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2010		2009		2010		2009
	(in thousands)
Cost of revenues	$	2,187	$	899	$	3,864	$	2,095
Research and development		6,301		2,795		9,585		5,457
Selling, general and administrative		13,162		2,718		18,173		4,242
Total stock-based compensation expense, before income taxes		21,650		6,412		31,622		11,794
Tax benefit		—		—		—		—
Total stock-based compensation expense, net of income taxes	$	21,650	$	6,412	$	31,622	$	11,794

     The table above excluded stock-based compensation expense (credit) of $0 and $2 million in the three months ended June 30, 2010 and 2009, respectively, and $(3) million and $4 million in the six months ended June 30, 2010 and 2009, respectively, for former Quantum executives related to the acquisition, which are classified within acquisition-related charges (credits) in the condensed consolidated statements of operations.

     We have issued performance-based restricted stock units to eligible employees for a maximum of 9 million shares of our common stock under the 2005 Stock Plan. These restricted stock units vest on a graded scale, only if we achieve certain quarterly operating margin performance criteria over the performance period of July 1, 2008 to December 31, 2012. In June 2009, the performance period was extended by one additional year to December 31, 2012 which was considered a modification to the performance-based restricted stock units. In the six months ended June 30, 2010, we issued additional performance-based restricted stock units to eligible employees for a maximum of 0.1 million shares of our common stock. In each of the three and six months ended June 30, 2010, we issued additional performance-based restricted stock units to eligible employees for a maximum of 0.3 million shares of our common stock. Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying the awards are not considered issued and outstanding. We recognize the stock-based compensation expense for our performance-based restricted stock units when we believe it is probable that we will achieve the performance criteria. The awards vest once the performance criteria are met. If the performance goals are unlikely to be met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the performance period and is reduced for estimated forfeitures. In the three months ended June 30, 2010, as a result of significant improvements in our current and forecast operating results and customer order status, we revised our estimates of our ability to meet the performance plan criteria, such that they will be achieved earlier than previously estimated and at a higher vesting level. As a result, in the three months ended June 30, 2010, we recognized a cumulative adjustment to stock-based compensation expense for the portion of performance-based restricted stock units related to service through March 31, 2010 totaling $9 million. We recorded total stock-based compensation expense related to performance-based restricted stock units of $14 million and $15 million in the three and six months ended June 30, 2010, respectively.

Charges for Grant Repayments

     In each of the three months ended June 30, 2010 and 2009, we recorded accrued interest of $0.2 million. In the six months ended June 30, 2010 and 2009, we recorded accrued interest of $0.5 million and $1 million, respectively. These charges are primarily related to interest on estimated grant repayment requirements for our former Greece facility and are recorded as charges for grant repayments on the condensed consolidated statements of operations.

     We receive economic incentive grants and allowances from European governments targeted at increasing employment at specific locations. The subsidy grant agreements typically contain economic incentive and other covenants that must be met to receive and retain grant benefits. Noncompliance with the conditions of the grants could result in the forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date. In addition, we may need to record charges to reverse grant benefits recorded in prior periods as a result of changes to previously committed plans for headcount, project spending, or capital investment at any of these specific locations. Certain grant repayments also require interest from the date funds were awarded. If we are unable to comply with any of the covenants in the grant agreements, our results of operations and financial position could be materially adversely affected.

Acquisition-Related Charges

     We recorded total acquisition-related charges (credits) of $1 million and $4 million in the three months ended June 30, 2010 and 2009, respectively, and $(1) million and $9 million in the six months ended June 30, 2010 and 2009, respectively, related to the acquisition of Quantum, which is comprised of the following components:

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     We recorded amortization of intangible assets of $1 million and $1 million in the three months ended June 30, 2010 and 2009, respectively, and $2 million and $3 million in the six months ended June 30, 2010 and 2009, respectively, associated with customer relationships, developed technology, trade name, non-compete agreements and backlog.

     We recorded no stock based compensation expense for the three months ended June 30, 2010. We recorded stock-based compensation expense of $2 million in the three months ended June 30, 2009. We recorded a stock based compensation credit of ($3) million and an expense of $4 million in the six months ended June 30, 2010 and 2009, respectively. These assets are amortized over three to five years.

     We estimate charges related to amortization of intangible assets will be approximately $1 million for each of the remaining quarters in 2010.

     In the three months ended March 31, 2010, we recorded a credit of $5 million related to the reversal of the expenses previously recorded for shares that were expected to be issued in March 2011 to a former executive of Quantum related to contingent employment through March 2011. The credit was recorded due to forfeiture as a result of a change in employment status.

     We made cash payments of $4 million and $11 million to the former Quantum employees in the three months ended March 31, 2010 and 2009.

Loss on Sale of Assets

     On June 23, 2010, we completed the sale of our manufacturing operations in Rousset, France to LFoundry GmbH (“LFoundry”). Under the terms of the agreement, we transferred manufacturing assets and employee liabilities to the buyer in return for nominal cash consideration. In connection with the sale, we entered into certain other ancillary agreements, including a Manufacturing Services Agreement (“MSA”) in which we will purchase wafers from LFoundry for four years following the closing on a “take-or-pay” basis. Upon closing of this transaction, we recorded a loss on sale of $94 million which is summarized in the following table:

(in thousands)
Net assets transferred, including working capital adjustment	$	61,646
Fair value of the MSA		92,417
Release of currency translation adjustment		(97,367	)
Severance cost liability		27,840
Selling costs		3,173
Other related costs		6,343
Loss on Sale of Assets	$	94,052

     In connection with the sale of the manufacturing operations, we transferred assets and liabilities specific to the manufacturing operations totaling $62 million to LFoundry, resulting in a working capital adjustment to be received from LFoundry of $3 million.

     As future wafer purchases under the MSA were negotiated at pricing above their fair value when compared to current pricing available from third-party foundries, we recorded a liability in conjunction with the sale, representing the present value of the unfavorable purchase commitment. We determined that the difference between the contract prices and market prices over the term of the agreement totaled $104 million. The present value of this liability, using a discount rate of 7%, which was based on a rate for unsecured subordinated debt similar to ours, was determined to be $92 million, and has been included in the loss on sale. The gross value of the MSA will be recognized as a credit to cost of revenues over the term of the MSA as the wafers are purchased and the present value discount of $11 million will be recognized as interest expense over the same term.

     The sale of the Rousset, France manufacturing operations resulted in the substantial liquidation of our investment in our European manufacturing facilities, and accordingly, we recorded a gain of $97 million related to currency translation adjustments (“CTA balance”) that was previously recorded within stockholders’ equity, as we concluded, based on guidance related to foreign currency, that we should similarly release all remaining related currency translation adjustments.

     Also, as part of the sale, we agreed to reimburse LFoundry for severance costs expected to be incurred subsequent to the sale. We entered into an escrow agreement in which we agreed to remit funds to LFoundry for the required benefits and payments to those employees who are determined to be part of the approved departure plan. We recorded a liability of $28 million as a component of the loss on sale, which represents our best estimate of the severance amount payable under this arrangement, and which is expected to be paid by December 31, 2010.

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     As part of the sale of the manufacturing operations, we incurred $5 million in software/hardware and consulting costs to set up a separate, independent IT infrastructure for LFoundry. These costs were incurred based on negotiation with LFoundry, provided no benefit to us, and would not have been incurred if we were not selling the manufacturing operations. Therefore, the direct and incremental costs associated with these services were recorded as part of the loss on sale. We also incurred other costs related to the sale of $2 million, which included performance-based bonuses of $0.5 million for certain employees (no executive officers were included), related to the completion of the sale of the Rousset manufacturing operations to LFoundry.

     We also incurred direct and incremental selling costs of $3 million, which represented broker commissions and legal fees associated with the sale to LFoundry.

Asset Impairment Charges

     The asset disposal group expected to be transferred to the buyer was determined as of December 31, 2009 when we reclassified $83 million in long term assets as held for sale. Following further negotiation with the buyer, we determined that certain assets should instead remain with us. As a result, we reclassified $12 million of property and equipment to held and used in the quarter ended June 30, 2010. In connection with this reclassification, we assessed the fair value of these assets to be retained and concluded that the fair value of the assets was lower than its carrying value less depreciation expense that would have been recognized had the assets been continuously classified as held and used. As a result, we recorded an asset impairment charge of $12 million in the second quarter of 2010.

Restructuring Charges

     The following table summarizes the activity related to the accrual for restructuring charges detailed by event for the three and six months ended June 30, 2010 and 2009:

	January 1,							Currency			March 31,							Currency			June 30,
	2010							Translation			2010							Translation			2010
	Accrual		Charges		Payments			Adjustment			Accrual		Charges		Payments			Adjustment			Accrual
	(in thousands)
Third quarter of 2002
Termination of contract with supplier	$	1,592	$	—	$	—		$	—		$	1,592	$	—	$	—		$	—		$	1,592
Second quarter of 2008
Employee termination costs		4		—		—			(1	)		3		—		—			—			3
Third quarter of 2008
Employee termination costs		557		—		—			(37	)		520		—		—			(30	)		490
First quarter of 2009
Employee termination costs		—		969		(398	)		—			571		11		(184	)		(39	)		359
Other restructuring charges		318		—		(46	)		—			272		—		(45	)		—			227
Second quarter of 2010				—		—			—			—		—		—			—			—
Employee termination costs		—		—		—			—			—		1,603		—			(76	)		1,527
Total 2010 activity	$	2,471	$	969	$	(444	)	$	(38	)	$	2,958	$	1,614	$	(229	)	$	(145	)	$	4,198

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	January 1,							Currency			March 31,								Currency		June 30,
	2009							Translation			2009		Charges/						Translation		2009
	Accrual		Charges		Payments			Adjustment			Accrual		(Credits)			Payments			Adjustment		Accrual
	(in thousands)
Third quarter of 2002
Termination of contract with supplier	$	1,592	$	—	$	—		$	—		$	1,592	$	—		$	—		$	—	$	1,592
Fourth quarter of 2007
Other restructuring charges		218		32		(81	)		(2	)		167		104			(125	)		12		158
Second quarter of 2008
Employee termination costs		235		42		(220	)		(10	)		47		4			(34	)		3		20
Third quarter of 2008
Employee termination costs		17,575		226		(10,579	)		(1,028	)		6,194		(441	)		(3,971	)		125		1,907
Fouth quarter of 2008
Employee termination costs		3,438		567		(2,854	)		(10	)		1,141		59			(1,145	)		6		61
First quarter of 2009
Employee termination costs		—		1,485		(37	)		(11	)		1,437		(83	)		(520	)		205		1,039
Second quarter of 2009
Employee termination costs		—		—		—			—			—		2,827			(2,777	)		—		50
Total 2009 activity	$	23,058	$	2,352	$	(13,771	)	$	(1,061	)	$	10,578	$	2,470		$	(8,572	)	$	351	$	4,827

2010 Restructuring Charges

     In the three and six months ended June 30, 2010, we incurred restructuring charges of $2 million and $3 million consisting of the following:

• Charges of $2 million and $3 million in the three and six months ended June 30, 2010 related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

2009 Restructuring Charges

     In the three and six months ended June 30, 2009, we continued to implement the restructuring initiatives announced in 2008 and incurred restructuring charges of $2 million and $5 million, respectively. The charges relating to this initiative consist of the following:

• Net charges of $2 million and $5 million in the three and six months ended June 30, 2009, respectively, related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

• Charges of $0.1 million in both the three and six months ended June 30, 2009 related to facility closure costs.

Interest and Other Income (Expense), Net

     Interest and other income (expense), net, was an income of $3 million in the three months ended June 30, 2010, compared to an expense of $5 million in the three months ended June 30, 2009, and an income of $7 million in the six months ended June 30, 2010, compared to an expense of $8 million in the six months ended June 30, 2009. The change to an income in the three months ended June 30, 2010 from an expense in the three months ended June 30, 2009 as well as an income in the six months ended June 30, 2010 from an expense in the six months ended June 30, 2009 was primarily due to the favorable impact of $5 million and $12 million, respectively, from foreign exchange exposures from intercompany balances between our subsidiaries. Interest and other income (expense), net in the three and six months ended June 30, 2010 was also favorably impacted by a realized gain of $2 million for the sale of short-term investments in the second quarter of 2010. However, we continue to have balances in foreign currencies subject to exchange rate fluctuations and may incur further gains or losses in the future.

Benefit from Income Taxes

     For interim periods, the provision for income taxes is determined using the annual effective tax rate method which excludes entities that are not expected to realize tax benefits from certain operating losses and excludes the impact of discrete tax events during the period.

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during the quarter. As a result, our provision for income taxes, excluding discrete events, is at a higher consolidated effective rate than would have resulted if all entities were profitable or if losses from excluded entities produced realizable tax benefits.

     In the three and six months ended June 30, 2010, we recorded an income tax benefit of $40 million and $37 million, respectively. The benefits primarily related to a net discrete income tax benefit of $44 million recorded in the three months ended June 30, 2010, associated with the sale of our wafer manufacturing operations in Rousset, France, as we determined that this benefit will more likely than not be realized in current and future periods. In the three and six months ended June 30, 2009, we recorded an income tax benefit of $10 million and $37 million, respectively.

     These benefits also reflected the recognition of certain refundable R&D credits of $0.3 million and $2 million in the three and six months ended June 30, 2010 and $3 million and $29 million in the three and six months ended June 30, 2009, respectively. The receipt of these refundable R&D credits was not dependent on the existence of taxable income. For the six months ended June 30, 2009, we received refunds related to prior years and were able to recognize the tax benefit as a result of tax law changes and the expiration of statutes of limitations.

     On January 1, 2007, we adopted the accounting standard related to uncertain income tax provisions. Under the accounting standard, the impact of an uncertain income tax position on income tax expense must be evaluated based on its technical merits and likelihood of being sustained upon review by the applicable taxing authority. At June 30, 2010 and December 31, 2009, we had $187 million and $183 million of unrecognized tax benefits, respectively.

     Included within long-term liabilities at June 30, 2010 and December 31, 2009 were income taxes payable totaling $121 million and $116 million, respectively.

     We believe that it is reasonably possible that the IRS audit and the audits in foreign jurisdictions may be resolved and/or there will be an expiration of the statute of limitations within the next twelve months, which could result in the potential recognition of unrecognized tax benefits within the next twelve months of up to $152 million, including tax, interest and penalties.

Liquidity and Capital Resources

     At June 30, 2010, we had $552 million of cash, cash equivalents and short-term investments, compared to $476 million at December 31, 2009. Our current ratio, calculated as total current assets divided by total current liabilities, was 2.20 at June 30, 2010, compared to 2.49 at December 31, 2009. We reduced our short-term and long-term debt obligations to $84 million at June 30, 2010 from $95 million at December 31, 2009. Working capital, calculated as total current assets less total current liabilities, decreased to $575 million at June 30, 2010, compared to $596 million at December 31, 2009. Cash provided by operating activities totaled $120 million and $7 million in the six months ended June 30, 2010 and 2009, respectively, and capital expenditures totaled $28 million and $7 million in the six months ended June 30, 2010 and 2009, respectively.

     Approximately $5 million of our investment portfolio at June 30, 2010 and December 31, 2009 was invested in auction-rate securities. In the six months ended June 30, 2010 approximately $0.2 million of auction-rate securities were redeemed at par value. Approximately $2 million of our auction-rate securities are classified as long-term investments within other assets on the condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009, as they are not expected to be liquidated within the next twelve months. In October 2008, we accepted an offer from UBS Financial Services Inc. (“UBS”) to purchase our remaining eligible auction-rate securities of $3 million at par value at any time during a two-year time period from June 30, 2010 to July 2, 2012. As a result of this offer, we sold these auction-rate securities to UBS at par value of $3 million on July 1, 2010.

Operating Activities

     Net cash provided by operating activities was $120 million in the six months ended June 30, 2010, compared to $7 million in the six months ended June 30, 2009. Net cash provided by operating activities in the six months ended June 30, 2010 was primarily due to improved operating results, adjusting the six months ended net loss of $20 million to exclude asset impairment charges of $12 million, certain non-cash depreciation and amortization charges of $32 million, stock-based compensation charges of $29 million, and $33 million related to the non-cash portion of loss on sale related to the sale of Rousset, France manufacturing operations. In addition, operating cash flows were increased by reduced inventories of $17 million.

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     Accounts receivable increased by 10% or $19 million to $213 million at June 30, 2010, from $194 million at December 31, 2009. The average days of accounts receivable outstanding (“DSO”) decreased to 49 days at June 30, 2010 from 51 days at December 31, 2009. Our accounts receivable and DSO were primarily impacted by higher revenue levels and uneven shipment linearity during the quarter.

     Decrease in inventories provided $17 million of operating cash flows in the six months ended June 30, 2010, compared to $30 million in the six months ended June 30, 2009. Our days of inventory (including inventory classified as current assets held for sale) decreased to 80 days at June 30, 2010 from 102 days at December 31, 2009, primarily due to increased shipment levels experienced during the first half of 2010. Inventories consist of raw wafers, purchased specialty wafers, work-in-process and finished units. We are continuing to take measures to reduce manufacturing cycle times and improve production planning efficiency. However, the strategic need to offer competitive lead times may result in an increase in inventory levels in the future.

     In the six months ended June 30, 2010 and 2009, we made cash payments of $4 million and $11 million, respectively to former Quantum employees in connection with contingent employment arrangements resulting from the acquisition in 2008. We also received cash payments of $6 million related to litigation-related insurance settlements that were recorded as a reduction of operating expenses in the six months ended June 30, 2010.

Investing Activities

     Net cash used in investing activities was $17 million in the six months ended June 30, 2010, compared to $12 million in the six months ended June 30, 2009. In the six months ended June 30, 2010, we paid $28 million for acquisitions of fixed assets and $2 million for intangible assets, offset in part by net proceeds of $13 million from the sale of short-term investments. In the six months ended June 30, 2009, we paid approximately $3 million related to contingent consideration earned by a former Quantum employee, $7 million for acquisitions of fixed assets and $4 million for intangible assets, offset in part by net proceeds of $4 million for the sale of short-term investments.

Financing Activities

     Net cash used in financing activities was $7 million in the six months ended June 30, 2010, compared to $23 million in the six months ended June 30, 2009. We continued to reduce debt, with repayments of principal balances on our capital leases totaling $11 million in the six months ended June 30, 2010 (primarily related to our real property in Rousset, France), compared to $27 million in the six months ended June 30, 2009 for capital leases. Net proceeds from the issuance of common stock totaled $6 million and $5 million in the six months ended June 30, 2010 and 2009, respectively.

     We believe our existing balances of cash, cash equivalents and short-term investments, together with anticipated cash flow from operations, available equipment lease financing, and other short-term and medium-term bank borrowings, will be sufficient to meet our liquidity and capital requirements over the next twelve months.

     During the next twelve months, we expect our operations to generate positive cash flow. However, a portion of cash may be used to further repay debt, make capital investments or satisfy restructuring commitments or repurchase of our common stock. We expect that we will have sufficient cash from operations and financing sources to satisfy all debt obligations. We made $28 million in cash payments for capital equipment in the six months ended June 30, 2010, and we expect total cash payments for capital expenditures of $80 million to $90 million in 2010. Debt obligations outstanding at June 30, 2010, which are classified as short-term, totaled $80 million. We paid $11 million to reduce debt in the six months ended June 30, 2010. We paid $1 million in restructuring payments, primarily for employee severance in the six months ended June 30, 2010. We expect to pay out approximately $32 million in further restructuring and fab-sale related payments during the remainder of 2010. During 2010 and future years, our capacity to make necessary capital investments or strategic acquisitions will depend on our ability to continue to generate sufficient cash flow from operations and on our ability to obtain adequate financing if necessary. In the event that we cannot obtain adequate financing due to credit market conditions or must pay down our $80 million in a line of credit, we believe we have sufficient working capital funds due to the $552 million in cash, cash equivalents and short-term investments we held as of June 30, 2010 together with expected future cash flows from operations, which amounted to $120 million for the six months ended June 30, 2010.

     On March 15, 2006, we entered into a five-year asset-backed credit facility for up to $165 million (subsequently reduced to $125 million on November 6, 2009) with certain European lenders. This facility is secured by our non-U.S. trade receivables. The eligible non-US trade receivables were $104 million at June 30, 2010, of which the amount outstanding under this facility was $80 million at June 30, 2010. Borrowings under the facility bear interest at LIBOR plus 2% per annum (approximately 2.34% based on the one

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month LIBOR at June 30, 2010), while the undrawn portion is subject to a commitment fee of 0.375% per annum. The outstanding balance is subject to repayment in full on the last day of its interest period (every two months). The terms of the facility subject us to certain financial and other covenants and cross-default provisions. We were not in compliance with a financial covenant (i.e. fixed charge ratio) as of June 30, 2010. We obtained a waiver of such failure to comply on August 3, 2010. Commitment fees and amortization of up-front fees paid related to the facility in the three months ended June 30, 2010 and 2009 totaled $0.2 million and $0.2 million, respectively, and $0.5 million and $0.5 million in the six months ended June 30, 2010 and 2009, respectively, and are included in interest and other income (expense), net, in the condensed consolidated statements of operations.

     There were no material changes in our contractual obligations and rights outside of the ordinary course of business or other material changes in our financial condition in the six months ended June 30, 2010 to those described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K filed with the SEC on March 1, 2010.

Contractual Obligations

     The following table describes new material commitments to settle contractual obligations in cash as of June 30, 2010 (see Note 8 of Notes to Condensed Consolidated Financial Statements for further discussion):

	Payments Due by Period
	Less than		1-3		3-5
Contractual Obligations:	1 Year		Years		Years		Total
	(in thousands)
Manufacturing supply agreement with LFoundry	$	157,153	$	233,060	$	57,765	$	447,978

Off-Balance Sheet Arrangements (Including Guarantees)

     See the paragraph under the heading “Guarantees” in Note 8 of Notes to Condensed Consolidated Financial Statements for a discussion of off-balance sheet arrangements.

Recent Accounting Pronouncements

     See Note 1 of Notes to Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

Critical Accounting Policies and Estimates

     Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Condensed Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts and sales returns, accounting for income taxes, valuation of inventories, fixed assets, stock-based compensation, restructuring charges and litigation have the greatest potential impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. The critical accounting estimates associated with these policies are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K filed with the SEC on March 1, 2010.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

     When we take an order denominated in a foreign currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we ship our product, which will reduce revenue. Conversely, revenues will be positively impacted if the local currency strengthens against the dollar. In Europe, where our significant operations have costs denominated in European currencies, costs will decrease if the local currency weakens. Conversely, costs will increase if the local currency strengthens against the dollar. The net effect of average exchange rates in the three and six months ended June 30, 2010, compared to the average exchange rates in the three and six months ended June 30, 2009, resulted in a decrease in income from operations of $1 million and $3 million, respectively. This impact is determined assuming that all foreign currency denominated transactions that occurred in the three and six months ended June 30, 2010 were recorded using the average foreign currency exchange rates in the same period in 2009.

     Approximately 19% and 25% of our net revenues in the three months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Approximately 20% and 24% of our net revenues in the six months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Operating costs denominated in foreign currencies were approximately 35% of total operating costs in both the three months ended June 30, 2010 and 2009. Operating costs denominated in foreign currencies were approximately 35% and 37% of total operating costs in the six months ended June 30, 2010 and 2009, respectively.

     Average exchange rates utilized to translate foreign currency revenues and expenses in Euro were approximately 1.31 and 1.33 Euro to the dollar in the three months ended June 30, 2010 and 2009, respectively, and 1.36 and 1.33 Euro to the dollar in the six months ended June 30, 2010 and 2009.

     In the three and six months ended June 30, 2010, changes in foreign exchange rates had a minimal impact to our operating results. Our net revenues for the three months ended June 30, 2010 would have been approximately $2 million higher had the average exchange rate in the current quarter remained the same as the rate in effect in the three months ended June 30, 2009. However, in the three months ended June 30, 2010 our operating expenses would have been approximately $1 million higher (relating to an increase in cost of revenues of $1 million; an increase in research and development expenses of $0.2 million; and an increase in sales, general and administrative expenses of $0.1 million). Therefore, our loss from operations in the three months ended June 30, 2010 would have been approximately $0.2 million higher had exchange rates in the three months ended June 30, 2010 remained unchanged from the three months ended June 30, 2009.

     In the six months ended June 30, 2010, changes in foreign exchange rates had a favorable impact to our operating results. Our net revenues for the six months ended June 30, 2010 would have been approximately $3 million lower had the average exchange rate in the current six-month period remained the same as the rate in effect in the six months ended June 30, 2009. However, in the six months ended June 30, 2010 our operating expenses would have been approximately $8 million lower (relating to a decrease in cost of revenues of $4 million; a decrease in research and development expenses of $3 million; and a decrease in sales, general and administrative expenses of $1 million). Therefore, our loss from operations in the six months ended June 30, 2010 would have been approximately $5 million higher had exchange rates in the six months ended June 30, 2010 remained unchanged from the six months ended June 30, 2009. We may take actions in the future to reduce our exposure to exchange rate fluctuations. However, there can be no assurance that we will be able to reduce the exposure to additional unfavorable changes to exchanges rates and the results on gross margin.

     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. Approximately 30% and 29% of our accounts receivables were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively.

     We also face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. Approximately 19% and 27% of our accounts payable were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively. Approximately 4% and 15% of our debt obligations were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively.

Liquidity and Valuation Risk

     Approximately $5 million of our investment portfolio at June 30, 2010 and December 31, 2009 was invested in auction-rate securities. In the six months ended June 30, 2010 approximately $0.2 million of auction-rate securities were redeemed at par value. Approximately $2 million of auction-rate securities are classified as long-term investments within other assets on the condensed consolidated balance sheet as of June 30, 2010 and December 31, 2009, as they are not expected to be liquidated within the next twelve months. In October 2008, we accepted an offer from UBS Financial Services Inc. (“UBS”) to purchase our remaining eligible

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auction-rate securities of $3 million at par value at any time during a two-year time period from June 30, 2010 to July 2, 2012. As a result of this offer, we sold the securities to UBS at par value of $3 million on July 1, 2010.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

     As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934 (“Disclosure Controls”). Based on this evaluation our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information we are required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Limitations on the Effectiveness of Controls

     Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Atmel have been detected.

Changes in Internal Control over Financial Reporting

     There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     We are party to various legal proceedings. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations, cash flows and financial position of Atmel. For more information regarding certain of these proceedings, see Note 8 of Notes to Condensed Consolidated Financial Statements. The estimate of the potential impact on our financial position or overall results of operations or cash flows for the legal proceedings described in Note 8 of Notes to Condensed Consolidated Financial Statements could change in the future. We have accrued for losses related to litigation that we consider probable and for which the loss can be reasonably estimated.

     ITEM 1A. RISK FACTORS

     In addition to the other information contained in this Form 10-Q, we have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, or results of operations. Investors should carefully consider the risks described below before making an investment decision. The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment. In addition, these risks and uncertainties may impact the “forward-looking” statements described elsewhere in this Form 10-Q and in the documents incorporated herein by reference. They could also affect our actual results of operations, causing them to differ materially from those expressed in “forward-looking” statements.

OUR REVENUES AND OPERATING RESULTS MAY 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 nature of both the semiconductor industry and the markets addressed by our products;

• our transition to a fab-lite strategy;

• our dependence on selling through distributors;

• our increased dependence on outside foundries and their ability to meet our volume, quality and delivery objectives, particularly during times of increasing demand along with inventory excesses or shortages due to reliance on third party manufacturers;

• global economic and political conditions;

• compliance with U.S. and international antitrust trade and export laws and regulations by us and our distributors;

• fluctuations in currency exchange rates and revenues and costs denominated in foreign currencies;

• ability of independent assembly contractors to meet our volume, quality and delivery objectives;

• success with disposal or restructuring activities;

• fluctuations in manufacturing yields;

• the average margin of the mix of products we sell;

• third party intellectual property infringement claims;

• the highly competitive nature of our markets;

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• the pace of technological change;

• natural disasters or terrorist acts;

• assessment of internal controls over financial reporting;

• ability to meet our debt obligations;

• our ability to maintain good relationships with our customers and suppliers;

• contracts with our customers and suppliers;

• our compliance with international, federal and state, environmental, privacy and other regulations;

• personnel changes;

• performance-based restricted stock units;

• business interruptions;

• system integration disruptions;

• anti-takeover effects in our certificate of incorporation and bylaws;

• the unfunded nature of our foreign pension plans and that any requirement to fund these plans could negatively impact our cash position;

• the effects of our acquisition strategy, such as unanticipated accounting charges, which may adversely affect our results of operations;

• utilization of our manufacturing capacity;

• disruptions to the availability of raw materials which could impact our ability to supply products to our customers;

• costs associated with, and the outcome of, any litigation to which we are, or may become, a party;

• product liability claims that may arise, which could result in significant costs and damage to our reputation;

• audits of our income tax returns, both in the U.S. and in foreign jurisdictions;

• complexity of our legal entity organizational structure; and

• compliance with economic incentive terms in certain government grants.

     Any unfavorable changes in any of these factors could harm our operating results and may result in volatility or a decline in our stock price.

     We believe that our future sales will depend substantially on the success of our new products. Our new products are generally incorporated into our customers’ products or systems at their design stage. However, design wins can precede volume sales by a year or more. We may not be successful in achieving design wins or design wins may not result in future revenues, which depend in large part on the success of the customer’s end product or system. The average selling price of each of our products usually declines as individual products mature and competitors enter the market. To offset average selling price decreases, we rely primarily on reducing costs to manufacture those products, increasing unit sales to absorb fixed costs and introducing new, higher priced products that incorporate advanced features or integrated technologies to address new or emerging markets. Our operating results could be harmed if such cost reductions and new product introductions do not occur in a timely manner. 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.

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     In addition, our future success will depend in large part on the recovery of global economic growth generally and on growth in various electronics industries that use semiconductors specifically, including manufacturers of computers, telecommunications equipment, automotive electronics, industrial controls, consumer electronics, data networking equipment and military equipment. The semiconductor industry has the ability to supply more products than demand requires. Our ability to be profitable will depend heavily upon a better supply and demand balance within the semiconductor industry.

THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY CREATES FLUCTUATIONS IN OUR OPERATING RESULTS.

     The semiconductor industry has historically been cyclical, characterized by wide fluctuations in product supply and demand. The industry has also experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles and declines in general economic conditions. Global semiconductor sales increased 9% to $248 billion in 2006, and 3% to $256 billion in 2007. Global semiconductor sales decreased by 3% to $249 billion in 2008, and 9% to $226 billion in 2009. The Semiconductor Industry Association predicts that the semiconductor industry is well positioned for growth in 2010.

     Our operating results have been harmed by industry-wide fluctuations in the demand for semiconductors, which resulted in under-utilization of our manufacturing capacity and declining gross margins. In the past we have recorded significant charges to recognize impairment in the value of our manufacturing equipment, the cost to reduce workforce, and other restructuring costs. Our business may be harmed in the future not only by cyclical conditions in the semiconductor industry as a whole but also by slower growth in any of the markets served by our products.

     The semiconductor industry is increasingly characterized by annual seasonality and wide fluctuations of supply and demand. A significant portion of our revenue comes from sales to customers supplying consumer markets and international sales. As a result, our business may be subject to seasonally lower revenues in particular quarters of our fiscal year. The industry has also been impacted by significant shifts in consumer demand due to economic downturns or other factors, which may result in diminished product demand and production over-capacity. We have experienced substantial quarter-to-quarter fluctuations in revenues and operating results and expect, in the future, to continue to experience short term period-to-period fluctuations in operating results due to general industry or economic conditions.

THE EFFECTS OF THE RECENT GLOBAL RECESSIONARY MACROECONOMIC ENVIRONMENT HAVE IMPACTED OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION.

     The recent global recessionary macroeconomic environment has impacted levels of consumer spending, caused disruptions and extreme volatility in global financial markets and increased rates of default and bankruptcy. These macroeconomic developments could continue to negatively affect our business, operating results, or financial condition in a number of ways. For example, current or potential customers or distributors may not pay us or may delay paying us for previously purchased products. In addition, if consumer spending continues to decrease, we could experience diminished demand for our products. Finally, if the banking system or the financial markets continue to deteriorate or remain volatile, our investment portfolio may be impacted and the values and liquidity of our investments could be adversely affected.

WE COULD EXPERIENCE DISRUPTION OF OUR BUSINESS AS WE TRANSITION TO A FAB-LITE STRATEGY AND INCREASE DEPENDENCE ON OUTSIDE FOUNDRIES, WHERE SUCH FOUNDRIES MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES OR MAY ABANDON FABRICATION PROCESSES THAT WE REQUIRE.

     As part of our fab-lite strategy, we have reduced the number of manufacturing facilities we own. In May 2008, we completed the sale of our North Tyneside, United Kingdom wafer fabrication facility. In December 2008, we sold our wafer fabrication operation in Heilbronn, Germany, and in June 2010, we sold our Rousset, France manufacturing operations. In the future, we will be increasingly relying on the utilization of third-party foundry manufacturing partners. As part of this transition we have expanded and will continue to expand our foundry relationships by entering into new agreements with third-party foundries. If these agreements are not completed on a timely basis, or the transfer of production is delayed for other reasons, the supply of certain of our products could be disrupted, which could harm our business. In addition, difficulties in production yields can often occur when transitioning to a new third-party manufacturer. If such foundries fail to deliver quality products and components on a timely basis, our business could be harmed.

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     Implementation of our new fab-lite strategy will expose us to the following risks:

• reduced control over delivery schedules and product costs;

• manufacturing costs that are higher than anticipated;

• inability of our manufacturing subcontractors to develop manufacturing methods appropriate for our products and their unwillingness to devote adequate capacity to produce our products;

• possible abandonment of fabrication processes by our manufacturing subcontractors for products that are strategically important to us;

• decline in product quality and reliability;

• inability to maintain continuing relationships with our suppliers;

• restricted ability to meet customer demand when faced with product shortages; and

• increased opportunities for potential misappropriation of our intellectual property.

     If any of the above risks are realized, we could experience an interruption in our supply chain or an increase in costs, which could delay or decrease our revenue or harm our business.

     We hope to mitigate these risks with a strategy of qualifying multiple subcontractors. However, there can be no guarantee that any strategy will eliminate these risks. Additionally, since most outside foundries are located in foreign countries, we are subject to certain risks generally associated with contracting with foreign manufacturers, 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.

     The terms on which we will be able to obtain wafer production for our products, and the timing and volume of such production will be substantially dependent on future agreements to be negotiated with semiconductor foundries. We cannot be certain that the agreements we reach with such foundries will be on terms reasonable to us. Therefore, any agreements reached with semiconductor foundries may be short-term and possibly non-renewable, and hence provide less certainty regarding the supply and pricing of wafers for our products.

     During economic upturns in the semiconductor industry we will not be able to guarantee that our third party foundries will be able to increase manufacturing capacity to a level that meets demand for our products, which would prevent us from meeting increased customer demand and harm our business. Also during times of increased demand for our products, if such foundries are able to meet such demand, it may be at higher wafer prices, which would reduce our gross margins on such products or require us to offset the increased price by increasing prices for our customers, either of which would harm our business and operating results.

OUR REVENUES ARE DEPENDENT ON SELLING THROUGH DISTRIBUTORS.

     Sales through distributors accounted for 55% and 50% of our net revenues for the three months ended June 30, 2010 and 2009, respectively, and 55% and 49% in the six months ended June 30, 2010 and 2009, respectively. We market and sell our products through third-party distributors pursuant to agreements that can generally be terminated for convenience by either party upon relatively short notice to the other party. These agreements are non-exclusive and also permit our distributors to offer our competitors’ products.

     Our revenue reporting is highly dependent on receiving pertinent, accurate and timely data from our distributors. Distributors provide us periodic data regarding the product, price, quantity, and end customer when products are resold as well as the quantities of our products they still have in stock. Because the data set is large and complex and because there may be errors in the reported data, we must use estimates and apply judgments to reconcile distributors’ reported inventories to their activities. Actual results could vary from those estimates.

     We are dependent on our distributors to supplement our direct marketing and sales efforts. If any significant distributor or a substantial number of our distributors terminated their relationship with us, decided to market our competitors’ products over our products, were unable to sell our products or were unable to pay us for products sold for any reason, our ability to bring our products

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to market would be negatively impacted, we may have difficulty in collecting outstanding receivable balances, and we may incur other charges or adjustments resulting in a material adverse impact to our revenues and operating results. For example, in the three months ended December 31, 2008, we recorded a one time bad debt charge of $12 million related to an Asian distributor whose business was extraordinarily impacted following their addition to the U.S. Department of Commerce Entity List, which prohibits us from shipping products to the distributor.

     Additionally, distributors typically maintain an inventory of our products. For certain distributors, we have signed agreements that protect the value of their inventory of our products against price reductions, as well as provide for rights of return under specific conditions. In addition, certain agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to these distributors until the applicable products are re-sold by the distributors. However, in the event of an unexpected significant decline in the price of our products or significant return of unsold inventory, we may experience inventory write-downs, charges to reimburse costs incurred by distributors, or other charges or adjustments which could harm our revenues and operating results.

WE BUILD SEMICONDUCTORS BASED ON FORECASTED DEMAND, AND AS A RESULT, CHANGES TO FORECASTS FROM ACTUAL DEMAND MAY RESULT IN EXCESS INVENTORY OR OUR INABILITY TO FILL CUSTOMER ORDERS ON A TIMELY BASIS, WHICH MAY HARM OUR BUSINESS.

     We schedule production and build semiconductor devices based primarily on our internal forecasts, as well as non-binding forecasts from customers for orders that may be cancelled or rescheduled with short notice. Our customers frequently place orders requesting product delivery in a much shorter period than our lead time to fully fabricate and test devices. Because the markets we serve are volatile and subject to rapid technological, price and end user demand changes, our forecasts of unit quantities to build may be significantly incorrect. Changes to forecasted demand from actual demand may result in us producing unit quantities in excess of orders from customers, which could result in the need to record additional expense for the write-down of inventory, negatively affecting gross margins and results of operations.

     As we transition to increased dependence on outside foundries, we will have less control over modifying production schedules to match changes in forecasted demand. If we commit to obtaining foundry wafers and cannot cancel or reschedule commitments without material costs or cancellation penalties, we may be forced to purchase inventory in excess of demand, which could result in a write-down of inventories, negatively affecting gross margins and results of operations.

     Conversely, failure to produce or obtain sufficient wafers for increased demand could cause us to miss revenue opportunities and, if significant, could impact our customers’ ability to sell products, which could adversely affect our customer relationships and thereby materially adversely affect our business, financial condition and results of operations.

OUR INTERNATIONAL SALES AND OPERATIONS ARE SUBJECT TO APPLICABLE LAWS RELATING TO TRADE AND EXPORT CONTROLS, AND A VIOLATION OF, OR CHANGE IN, THESE LAWS COULD ADVERSELY AFFECT OUR OPERATIONS.

     For hardware, software or technology exported from the U.S. or otherwise subject to U.S. jurisdiction, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and trade sanctions against embargoed countries and destinations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”). Hardware, software and technology exported from other countries may also be subject to local laws and regulations governing international trade. Under these laws and regulations, we are responsible for obtaining all necessary licenses or other approvals, if required, for exports of hardware, software and technology, as well as the provision of technical assistance. We are also required to obtain export licenses, if required, prior to transferring technical data or software to foreign persons. In addition, we are required to obtain necessary export licenses prior to the export or re-export of hardware, software and technology (i) to any person, entity, organization or other party identified on the U.S. Department of Commerce Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons List or the Department of State’s Debarred List; or (ii) for use in nuclear, chemical/biological weapons, rocket systems or unmanned air vehicle applications. We are enhancing our export compliance program, including analyzing product shipments and technology transfers, working with U.S. government officials to ensure compliance with applicable U.S. export laws and regulations and developing additional operational procedures. A determination by the U.S. or local government that we have failed to comply with one or more of these export control laws or trade sanctions, including failure to properly restrict an export to the persons, entities or countries set forth on the government restricted party lists, could result in civil or criminal penalties, including the imposition of significant fines, denial of export privileges, loss of revenues from certain customers, and debarment from participation

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in U.S. government contracts. Further, a change in these laws and regulations could restrict our ability to export to previously permitted countries, customers, distributors or other third parties. Any one or more of these sanctions or a change in law or regulations could have a material adverse effect on our business, financial condition and results of operations.

WE ARE EXPOSED TO FLUCTUATIONS IN CURRENCY EXCHANGE RATES THAT COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS AND CASH FLOWS, AND REVENUES AND COSTS DENOMINATED IN FOREIGN CURRENCIES COULD ADVERSELY IMPACT OUR OPERATING RESULTS WITH CHANGES IN THESE FOREIGN CURRENCIES AGAINST THE DOLLAR.

     Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results and cash flows. Our primary exposure relates to operating expenses in Europe, where a significant amount of our manufacturing is located.

     When we take an order denominated in a foreign currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we ship our product, which will reduce revenue. Conversely, revenues will be positively impacted if the local currency strengthens against the dollar. In Europe, where our significant operations have costs denominated in European currencies, costs will decrease if the local currency weakens. Conversely, costs will increase if the local currency strengthens against the dollar. The net effect of average exchange rates in the three and six months ended June 30, 2010, compared to the average exchange rates in the three and six months ended June 30, 2009, resulted in a decrease in income from operations of $1 million and $3 million, respectively. This impact is determined assuming that all foreign currency denominated transactions that occurred in the three and six months ended June 30, 2010 were recorded using the average foreign currency exchange rates in the same period in 2009.

     Approximately 19% and 25% of our net revenues in the three months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Approximately 20% and 24% of our net revenues in the six months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Operating costs denominated in foreign currencies were approximately 35% of total operating costs in both the three months ended June 30, 2010 and 2009. Operating costs denominated in foreign currencies were approximately 35% and 37% of total operating costs in the six months ended June 30, 2010 and 2009, respectively.

     Average exchange rates utilized to translate foreign currency revenues and expenses in Euro were approximately 1.31 and 1.33 Euro to the dollar in the three months ended June 30, 2010 and 2009, respectively, and 1.36 and 1.33 Euro to the dollar in the six months ended June 30, 2010 and 2009.

     In the three and six months ended June 30, 2010, changes in foreign exchange rates had a minimal impact to our operating results. Our net revenues for the three months ended June 30, 2010 would have been approximately $2 million higher had the average exchange rate in the current quarter remained the same as the rate in effect in the three months ended June 30, 2009. However, in the three months ended June 30, 2010 our operating expenses would have been approximately $1 million higher (relating to an increase in cost of revenues of $1 million; an increase in research and development expenses of $0.2 million; and an increase in sales, general and administrative expenses of $0.1 million). Therefore, our loss from operations in the three months ended June 30, 2010 would have been approximately $0.2 million higher had exchange rates in the three months ended June 30, 2010 remained unchanged from the three months ended June 30, 2009.

     In the six months ended June 30, 2010, changes in foreign exchange rates had a favorable impact to our operating results. Our net revenues for the six months ended June 30, 2010 would have been approximately $3 million lower had the average exchange rate in the current six-month period remained the same as the rate in effect in the six months ended June 30, 2009. However, in the six months ended June 30, 2010 our operating expenses would have been approximately $8 million lower (relating to a decrease in cost of revenues of $4 million; a decrease in research and development expenses of $3 million; and a decrease in sales, general and administrative expenses of $1 million). Therefore, our loss from operations in the six months ended June 30, 2010 would have been approximately $5 million higher had exchange rates in the six months ended June 30, 2010 remained unchanged from the six months ended June 30, 2009. We may take actions in the future to reduce our exposure to exchange rate fluctuations. However, there can be no assurance that we will be able to reduce the exposure to additional unfavorable changes to exchanges rates and the results on gross margin.

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     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. Approximately 30% and 29% of our accounts receivables were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively.

     We also face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. Approximately 19% and 27% of our accounts payable were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively. Approximately 4% and 15% of our debt obligations were denominated in foreign currency as of June 30, 2010 and December 31, 2009, respectively.

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 currently manufacture a majority of the wafers for our products at our fabrication facilities. The wafers are then sorted and tested at our facilities. After wafer testing, we ship the wafers to one of our independent assembly contractors located in China, Indonesia, Japan, Malaysia, the Philippines, South Korea, Taiwan or 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, including export controls, 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.

WE FACE BUSINESS DISRUPTION RISKS AS WELL AS THE RISK OF SIGNIFICANT UNANTICIPATED COSTS ASSOCIATED WITH DISPOSAL OR RESTRUCTURING ACTIVITIES.

     In the first quarter of 2009, we announced our intention to pursue strategic alternatives for our ASIC business and related manufacturing assets as part of our transformation plan, which is aimed at focusing on our high-growth and high-margin businesses. In June 2010, we sold our Rousset, France manufacturing operations. In January 2010, we announced that following a comprehensive review of alternatives for our ASIC business, we would continue to explore the potential sale of our Smart Card (SMS) business located in Rousset, France and East Kilbride, UK and that we intended to discontinue potential sale discussions for our Customer Specific Products (CSP) and Aerospace businesses. On June 28, 2010, we announced that we entered into a definitive agreement with INSIDE Contactless S.A. (“INSIDE”) to purchase, for cash consideration, our Secure Microcontroller Solutions (“SMS”) business based in Rousset, France and East Kilbride, U.K. We are continually reviewing potential changes in our business and asset portfolio throughout our worldwide operations, including those located in Europe in order to enhance our overall competitiveness and viability. However, reducing our wafer fabrication capacity involves significant potential costs and delays, particularly in Europe, where the extensive statutory protection of employees imposes substantial restrictions on employers when the market requires downsizing. We may incur additional costs including compensation to employees and the potential requirement to repay governmental subsidies. We have in the past and may in the future experience labor union or workers council objections, or labor unrest actions (including possible strikes), which could result in reduced production output. Significant reductions to output or increases in cost could harm our business and operating results.

     We continue to evaluate the existing restructuring accruals related to previously implemented restructuring plans. As a result, there may be additional restructuring charges or reversals or recoveries of previous charges. However, we may incur additional restructuring and asset impairment charges in connection with additional restructuring plans adopted in the future. Any such restructuring or asset impairment charges recorded in the future could significantly harm our business and operating results.

OUR PERIODIC DISPOSAL ACTIVITIES HAVE IN THE PAST AND MAY IN THE FUTURE TRIGGER IMPAIRMENT CHARGES AND/OR RESULT IN A LOSS ON SALE OF ASSETS.

We are continually reviewing potential changes in our business and asset portfolio throughout our worldwide operations, including those located in Europe, in order to enhance our overall competitiveness and viability. Our disposal activities have in the past and may in the future trigger restructuring, impairment and other accounting charges and/or result in a loss on sale of assets. Any of these charges or losses could cause the price of our common stock to decline.

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     For example, in the fourth quarter of 2009, we announced that we entered into an exclusivity agreement with LFoundry GmbH for the purchase of our manufacturing operations in Rousset, France. As a result of this agreement, we determined that certain assets and liabilities were no longer included in the disposal group as they were not being acquired or assumed by the buyer, and as result, we reclassified these assets and liabilities back to held and used as of December 31, 2009 and recorded an asset impairment charge of $80 million. In determining any potential write down of these assets and liabilities, we considered both the net book value of the disposal group, which was $78 million, and the related credit balance of $120 million for foreign currency translation adjustments (“CTA balance”) that is recorded within stockholders’ equity. As a result, no impairment charge was recorded for the disposal group as its carrying value, net of the CTA balance, could not be reduced to below zero. In the three months ended June 30, 2010, the CTA balance remaining in stockholders’ equity of $97 million was released. In the three months ended June 30, 2010, we recorded an additional $12 million asset impairment charge.

     In addition, in connection with the closing of the sale of the manufacturing operations in Rousset, France in the three months ended June 30, 2010, we entered into a Manufacturing Services Agreement pursuant to which we will purchase wafers from LFoundry for four years following the closing on a “take-or-pay” basis. The purchase price of the wafers under the agreement is higher than the fair value of the wafers, which is determined based on the pricing we could have obtained from third-party foundries. As a result, we recorded a charge of $92 million in the three months ended June 30, 2010.

     In addition, in the three months ended June 30, 2010, we announced that we entered into an exclusivity agreement with INSIDE Contactless (“INSIDE”) for the purchase of our Secure Microcontroller Solutions (“SMS”) business in Rousset, France. The assets and liabilities related to the disposal group are classified as held for sale and are carried on the condensed consolidated balance sheet at June 30, 2010, at the lower of their carrying amount or fair value less cost to sell. There can be no assurance that the closing of this transaction will not result in impairment charges and/or result in a loss on sale of assets.

IF WE ARE UNABLE TO IMPLEMENT NEW MANUFACTURING TECHNOLOGIES OR FAIL TO ACHIEVE ACCEPTABLE MANUFACTURING YIELDS, OUR BUSINESS WOULD BE HARMED.

     Whether demand for semiconductors is rising or falling, we are constantly required by competitive pressures in the industry to successfully implement new manufacturing technologies in order to reduce the geometries of our semiconductors and produce more integrated circuits per wafer. We are developing processes that support effective feature sizes as small as 0.13-microns, and we are studying how to implement advanced manufacturing processes with even smaller feature sizes such as 0.065-microns.

     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. Whether through the use of our foundries or third-party manufacturers, we may experience problems in achieving acceptable yields in the manufacture of wafers, particularly during a transition in the manufacturing process technology for our products.

     We have previously experienced production delays and yield difficulties in connection with earlier expansions of our wafer fabrication capacity or transitions in manufacturing process technology. Production delays or difficulties in achieving acceptable yields at any of our fabrication facilities or at the fabrication facilities of our third-party manufacturers could materially and adversely affect our operating results. We may not be able to obtain the additional cash from operations or external financing necessary to fund the implementation of new manufacturing technologies.

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 IP rights or positions, which have on occasion resulted in significant and often protracted and expensive litigation. We from time to time receive communications from third parties asserting patent or other IP rights covering our products or processes. 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. It is possible that we will be involved in other intellectual property infringement lawsuits in the future. The cost of defending against such lawsuits, in terms of management time and attention, legal fees and product delays, can be substantial. Moreover, if such infringement lawsuits are successful, we may be prohibited from using the technologies at issue in the lawsuits, and if we are unable to (1) obtain a license

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on acceptable terms, (2) license a substitute technology or (3) 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 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, Cypress, Freescale, Fujitsu, Hitachi, IBM, Infineon, Intel, LSI Logic, Microchip, Philips, Renesas, Samsung, Sharp, Spansion, STMicroelectronics, Synaptics, Texas Instruments and Toshiba. Some of these competitors have substantially greater financial, technical, marketing and management resources than we do. As we have introduced new products we are increasingly competing directly with these companies, and we may not be able to compete effectively. We also compete with emerging companies that are attempting to sell products in specialized markets that our products address. 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. During the last several years, we have experienced significant price competition in several business segments, especially in our nonvolatile memory segment for EPROM, Serial EEPROM and Flash memory products, as well as in our commodity microcontrollers and smart cards. We expect continuing competitive pressures in our markets from existing competitors, new entrants, new technology and cyclical demand, among other factors, will likely maintain the recent trend of declining 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 nonvolatile 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;

• the incumbency of our competitors as potential new customers;

• our ability to minimize production costs by outsourcing our manufacturing, assembly and testing functions; and

• general market and economic conditions.

     Many of these factors are outside of our control, and may cause us to be unable 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 designing and commercializing new and improved products to maintain our competitive position. These new products typically are more technologically complex than their predecessors, and thus have increased potential for delays in their introduction.

     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’ decisions to design them into their systems can take as long as three years, depending upon the complexity of the device

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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 by technologies serving the 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 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 RISKS.

     Net revenues outside the United States accounted for 84% and 83% of our net revenues in the three and six months ended June 30, 2010 and 2009, respectively, compared to 83% and 82% in the three and six months ended June 30, 2009. We expect that revenues derived from international sales will continue to represent a significant portion of net revenues. International sales and operations are subject to a variety of risks, including:

• greater difficulty in protecting intellectual property;

• reduced flexibility and increased cost of staffing adjustments, particularly in France;

• longer collection cycles;

• legal and regulatory requirements, including antitrust laws, export license requirements, trade barriers, tariffs and tax laws, and environmental and privacy regulations and changes to those laws and regulations; and

• general economic and political conditions in these foreign markets.

     Some of our distributors, third-party foundries, independent assembly operators and other business partners also have international operations and are subject to the risks described above. Even if we are able to manage the risks of international operations successfully, our business may be materially adversely affected if our distributors, third-party foundries and other business partners are not able to manage these risks successfully.

     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 manufacturing facility. 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.

     Approximately 19% and 25% of our net revenues in the three months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Approximately 20% and 24% of our net revenues in the six months ended June 30, 2010 and 2009, respectively, were denominated in foreign currencies. Operating costs denominated in foreign currencies were approximately 35% of total operating costs in both the three months ended June 30, 2010 and 2009. Operating costs denominated in foreign currencies were approximately 35% and 37% of total operating costs in the six months ended June 30, 2010 and 2009, respectively.

OUR OPERATIONS AND FINANCIAL RESULTS COULD BE HARMED BY BUSINESS INTERRUPTIONS, NATURAL DISASTERS OR TERRORIST ACTS.

     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. 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.

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     Since the terrorist attacks on the World Trade Center and the Pentagon in 2001, certain insurance coverage has either been reduced or made subject to additional conditions by our insurance carriers, and we have not been able to maintain all necessary insurance coverage at a reasonable cost. Instead, we have relied to a greater degree on self-insurance. For example, we now self-insure property losses up to $10 million per event. Our headquarters, some of our manufacturing facilities, the manufacturing facilities of third party foundries and some of our major vendors’ and customers’ facilities are located near major earthquake faults and in potential terrorist target areas. If a major earthquake, other disaster or a terrorist act impacts us and insurance coverage is unavailable for any reason, we may need to spend significant amounts to repair or replace our facilities and equipment, we may suffer a temporary halt in our ability to manufacture and transport products and we could suffer damages of an amount sufficient to harm our business, financial condition and results of operations.

A LACK OF EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING COULD RESULT IN AN INABILITY TO ACCURATELY REPORT OUR FINANCIAL RESULTS, WHICH COULD LEAD TO A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

     Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, deficiencies in our internal controls. Evaluations of the effectiveness of our internal controls in the future may lead our management to determine that internal control over financial reporting is no longer effective. Such conclusions may result from our failure to implement controls for changes in our business, or deterioration in the degree of compliance with our policies or procedures.

     A failure to maintain effective internal control over financial reporting, including a failure to implement effective new controls to address changes to our business, could result in a material misstatement of our condensed consolidated financial statements or cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

OUR DEBT LEVELS 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 June 30, 2010, our total debt was $84 million, compared to $95 million at December 31, 2009. Our debt-to-equity ratio was 1.17 at June 30, 2010 and 0.82 at December 31, 2009. Increases in our debt-to-equity ratio could adversely affect our ability to obtain additional financing for working capital, acquisitions or other purposes and make us more vulnerable to industry downturns and competitive pressures.

     From time to time our ability to meet our debt obligations will depend upon our ability to raise additional financing and on our future performance and ability to generate substantial cash flow from operations, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to meet debt obligations or otherwise are obliged to repay any debt prior to its due date, our available cash would be depleted, perhaps seriously, and our ability to fund operations harmed. In addition, our ability to service long-term debt in the U.S. or to obtain cash for other needs from our foreign subsidiaries may be structurally impeded, as a substantial portion of our operations are conducted through our foreign subsidiaries. Our cash flow and ability to service debt are partially dependent upon the liquidity and earnings of our subsidiaries as well as the distribution of those earnings, or repayment of loans or other payments of funds by those subsidiaries, to the U.S. parent corporation. These foreign subsidiaries are separate and distinct legal entities and may have limited or no obligation, contingent or otherwise, to pay any amount to us, whether by dividends, distributions, loans or any other form.

     We intend to continue to make capital investments to support new products and manufacturing processes that achieve manufacturing cost reductions and improved yields. We may seek additional equity or debt financing to fund operations, strategic transactions, or other projects. The timing and amount of such capital requirements cannot be precisely determined at this time and will depend on a number of factors, including demand for 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.

PROBLEMS THAT WE EXPERIENCE WITH KEY CUSTOMERS OR DISTRIBUTORS MAY HARM OUR BUSINESS.

     Our ability to maintain close, satisfactory relationships with large customers is important to our business. A reduction, delay, or cancellation of orders from our large customers would harm our business. 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.

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     We sell many of our products through distributors. Our distributors could experience financial difficulties, including lack of access to credit, or otherwise reduce or discontinue sales of our products. Our distributors could commence or increase sales of our competitors’ products. Distributors typically are not highly capitalized and may experience difficulties during times of economic contraction. If our distributors were to become insolvent, their inability to maintain their business and sales could negatively impact our business and revenue. Also, one or more of our distributors or their affiliates may be identified in the future on the U.S. Department of Commerce Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons Lists, or the Department of State’s Debarred Parties List, in which case we would not be permitted to sell our products through such distributors. In any of these cases, our business or results from operations could be materially harmed. For example, in the three months ended December 31, 2008, we took a one-time charge for a bad debt provision of $12 million related to an Asian distributor whose business was impacted following their addition to the U.S. Department of Commerce Entity List, which prohibits us from shipping products to the distributor.

     Our sales terms for Asian distributors generally include no rights of return and no stock rotation privileges. However, as we evaluate how to refine our distribution strategy, we may need to modify our sales terms or make changes to our distributor base, which may impact our future revenues in this region. It may take time for us to convert systems and processes to support modified sales terms. It may also take time for us to identify financially viable distributors and help them develop high quality support services. There can be no assurances that we will be able to manage these changes in an efficient and timely manner, or that our net revenues, result of operations and financial position will not be negatively impacted as a result.

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.

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 international, 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 also could face significant costs and liabilities in connection with product take-back legislation. We record a liability for environmental remediation and other environmental costs when we consider the costs to be probable and the amount of the costs can be reasonably estimated. The European Union (“EU”) has enacted the Waste Electrical and Electronic Equipment Directive, which makes producers of electrical goods, including computers and printers, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. The deadline for the individual member states of the EU to enact the directive in their respective countries was August 13, 2004 (such legislation, together with the directive, the “WEEE Legislation”). Producers participating in the market became financially responsible for implementing these responsibilities beginning in August 2005. Our potential liability resulting from the WEEE Legislation may be substantial. Similar legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China and Japan, the cumulative impact of which could be significant.

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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 in 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.

ACCOUNTING FOR OUR PERFORMANCE-BASED RESTRICTED STOCK UNITS IS SUBJECT TO JUDGMENT AND MAY LEAD TO UNPREDICTABLE EXPENSE RECOGNITION.

     We have issued performance-based restricted stock units to eligible employees payable to a maximum of 9 million shares of our common stock under the 2005 Stock Plan. These restricted stock units vest only if we achieve certain quarterly operating margin performance criteria over the performance period of July 1, 2008 to December 31, 2012. Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying the awards are not considered issued and outstanding. We recognize the stock-based compensation expense for performance-based restricted stock units when we believe it is probable that we will achieve certain future quarterly operating margin performance criteria. If achieved, the award vests. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the performance period and is reduced for estimated forfeitures.

     In the fourth quarter of 2009, after significant improvement to operating results and customer order rates, we recorded stock-based compensation expense of $3 million, as we re-assessed the probability of achieving the performance criteria and estimated that it is probable that a portion of the performance criteria will be achieved by December 31, 2012. We are required to reassess this probability at each reporting date, and any change in our forecasts may result in an increase or decrease to the expense recognized. In the three and six months ended June 30, 2010, we recorded stock-based compensation expense of $14 million and $15 million, as we believe that it is probable that the performance criteria will be achieved earlier than previously estimated and at a higher vesting level, due to significant improvement to operating results and customer order status.

SYSTEM INTEGRATION DISRUPTIONS COULD HARM OUR BUSINESS.

     We periodically make enhancements to our integrated financial and supply chain management systems. This process is complex, time-consuming and expensive. Operational disruptions during the course of this process or delays in the implementation of these enhancements could impact our operations. Our ability to forecast sales demand, ship products, manage our product inventory and record and report financial and management information on a timely and accurate basis could be impaired while we are making these enhancements.

PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS MAY HAVE ANTI-TAKEOVER EFFECTS.

     Certain provisions of our Restated Certificate of Incorporation, our Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. Our board of directors has the authority to issue up to 5 million shares of preferred stock and to determine the price, voting rights, preferences and privileges and restrictions of those shares without the 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.

OUR FOREIGN PENSION PLANS ARE UNFUNDED, AND ANY REQUIREMENT TO FUND THESE PLANS IN THE FUTURE COULD NEGATIVELY IMPACT OUR CASH POSITION AND OPERATING CAPITAL.

     We sponsor defined benefit pension plans that cover substantially all of our French and German employees. Plan benefits are managed in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. Pension benefits payable totaled $24 million at June 30, 2010 and $29 million at December 31, 2009. The plans are non-funded, in compliance with local statutory regulations, and we have no immediate intention of funding these plans. Benefits are paid when amounts become due, commencing when participants retire. We expect to pay approximately $1 million in 2010 for benefits paid. Should legislative regulations require complete or partial funding of these plans in the future, it could negatively impact our cash position and operating capital.

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FUTURE ACQUISITIONS MAY RESULT IN UNANTICIPATED ACCOUNTING CHARGES OR OTHERWISE ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND RESULT IN DIFFICULTIES IN ASSIMILATING AND INTEGRATING THE OPERATIONS, PERSONNEL, TECHNOLOGIES, PRODUCTS AND INFORMATION SYSTEMS OF ACQUIRED COMPANIES OR BUSINESSES, OR BE DILUTIVE TO EXISTING STOCKHOLDERS.

     A key element of our business strategy includes expansion through the acquisition of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our skilled engineering workforce or enhance our technological capabilities. Between January 1, 1999 and June 30, 2010, we acquired four companies and certain assets of three other businesses. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, including tangible and intangible assets such as intellectual property. For example, on March 6, 2008, we completed the purchase of Quantum, a developer of capacitive sensing IP and solutions for user interfaces.

     Acquisitions may require significant capital infusions, typically entail many risks and could result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses. We have in the past experienced and may in the future experience, delays in the timing and successful integration of an acquired company’s technologies and product development through volume production, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic partners, or contractual, intellectual property or employment issues. In addition, key personnel of an acquired company may decide not to work for us. The acquisition of another company or its products and technologies may also require us to enter into a geographic or business market in which we have little or no prior experience. These challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and increase our expenses. These challenges are magnified as the size of the acquisition increases. Furthermore, these challenges would be even greater if we acquired a business or entered into a business combination transaction with a company that was larger and more difficult to integrate than the companies we have historically acquired.

     Acquisitions may require large one-time charges and can result in increased debt or contingent liabilities, adverse tax consequences, additional stock-based compensation expense and the recording and later amortization of amounts related to certain purchased intangible assets, any of which items could negatively impact our results of operations. In addition, we may record goodwill in connection with an acquisition and incur goodwill impairment charges in the future. Any of these charges could cause the price of our common stock to decline. Effective January 1, 2009, we adopted an amendment to the accounting standard on business combinations. The accounting standard will have an impact on our condensed consolidated financial statements, depending upon the nature, terms and size of the acquisitions we consummate in the future.

     Acquisitions or asset purchases made entirely or partially for cash may reduce our cash reserves. We may seek to obtain additional cash to fund an acquisition by selling equity or debt securities. Any issuance of equity or convertible debt securities may be dilutive to our existing stockholders.

     We cannot assure you that we will be able to consummate any pending or future acquisitions or that we will realize any anticipated benefits from these acquisitions. We may not be able to find suitable acquisition opportunities that are available at attractive valuations, if at all. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms, and any decline in the price of our common stock may make it significantly more difficult and expensive to initiate or consummate additional acquisitions.

     We are required under U.S. GAAP to test goodwill for possible impairment on an annual basis and at any other time that circumstances arise indicating the carrying value may not be recoverable. At June 30, 2010, we had $52 million of goodwill. We completed our annual test of goodwill impairment in the fourth quarter of 2009 and concluded that we did not have any impairment at that time. However, if we continue to see deterioration in the global economy and the current market conditions in the semiconductor industry worsen, the carrying amount of our goodwill may no longer be recoverable, and we may be required to record a material impairment charge, which would have a negative impact on our results of operations.

WE MAY NOT BE ABLE TO EFFECTIVELY UTILIZE ALL OF OUR MANUFACTURING CAPACITY, WHICH MAY NEGATIVELY IMPACT OUR BUSINESS.

     The manufacture and assembly of semiconductor devices requires significant fixed investment in manufacturing facilities, specialized equipment, and a skilled workforce. If we are unable to fully utilize our own fabrication facilities due to decreased demand, significant shift in product mix, obsolescence of the manufacturing equipment installed, lower than anticipated

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manufacturing yields, or other reasons, our operating results will suffer. Our inability to produce at anticipated output levels could include delays in the recognition of revenue, loss of revenue or future orders or customer-imposed penalties for failure to meet contractual shipment deadlines.

     Our operating results are also adversely affected when we operate at production levels below optimal capacity. Lower capacity utilization results in certain costs being charged directly to expense and lower gross margins. During 2007, we lowered production levels significantly at our North Tyneside, United Kingdom manufacturing facility to avoid building more inventory than we were forecasting orders for. As a result, operating costs for these periods were higher than in prior periods negatively impacting gross margins. We closed our North Tyneside manufacturing facility in the first quarter of 2008. In addition, our other manufacturing facilities could experience conditions requiring production levels to be reduced below optimal capacity levels. If we are unable to operate our manufacturing facilities at optimal production levels, our operating costs will increase and gross margin and results from operations will be negatively impacted. Gross margins were positively impacted in the three and six months ended June 30, 2010 primarily due to higher overall shipment levels, increased production levels and factory loading at our wafer fabrication facilities, and a more favorable mix of higher margin microcontroller products included in our net revenues.

     Our manufacturing facilities could experience conditions in the future requiring production levels to be reduced below optimal capacity levels. If we are unable to operate our manufacturing facilities at optimal production levels, our operating costs will increase and gross margin and results from operations will be negatively impacted.

DISRUPTIONS TO THE AVAILABILITY OF RAW MATERIALS CAN IMPACT OUR ABILITY TO SUPPLY PRODUCTS TO OUR CUSTOMERS, WHICH COULD SERIOUSLY HARM OUR BUSINESS.

     The manufacture of semiconductor devices requires specialized raw materials, primarily certain types of silicon wafers. We generally utilize more than one source to acquire these wafers, but there are only a limited number of qualified suppliers capable of producing these wafers in the market. The raw materials and equipment necessary for our business could become more difficult to obtain as worldwide use of semiconductors in product applications increases. We have experienced supply shortages from time to time in the past, and on occasion our suppliers have told us they need more time than expected to fill our orders. Any significant interruption of the supply of raw materials could harm our business.

WE COULD FACE PRODUCT LIABILITY CLAIMS THAT RESULT IN SIGNIFICANT COSTS AND DAMAGE TO OUR REPUTATION WITH CUSTOMERS, WHICH WOULD NEGATIVELY IMPACT OUR OPERATING RESULTS.

     All of our products are sold with a limited warranty. However, we could incur costs not covered by our warranties, including additional labor costs, costs for replacing defective parts, reimbursement to customers for damages incurred in correcting their defective products, costs for product recalls or other damages. These costs could be disproportionately higher than the revenue and profits we receive from the sales of these devices.

     Our products have previously experienced, and may in the future experience, manufacturing defects, software or firmware bugs, or other similar defects. If any of our products contain defects or bugs, or have reliability, quality or compatibility problems, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers. In addition, these defects or bugs could interrupt or delay sales or shipment of our products to our customers.

     We have implemented significant quality control measures to mitigate this risk; however, it is possible that products shipped to our customers will contain defects or bugs. In addition, these problems may divert our technical and other resources from other development efforts. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional costs or delay shipments for revenue, which would negatively affect our business, financial condition and results of operations.

THE OUTCOME OF CURRENTLY ONGOING AND FUTURE AUDITS OF OUR INCOME TAX RETURNS, BOTH IN THE U.S. AND IN FOREIGN JURISDICTIONS, COULD HAVE AN ADVERSE EFFECT ON OUR NET INCOME (LOSS) AND FINANCIAL CONDITION.

     We are subject to continued examination of our income tax returns by the Internal Revenue Service and other foreign/domestic tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. While we believe that the resolution of these audits will not have a material adverse impact on our

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results of operations, the outcome is subject to significant uncertainties. If we are unable to obtain agreements with the tax authority on the various proposed adjustments, there could be an adverse material impact on our results of operations, cash flows and financial position.

OUR LEGAL ENTITY ORGANIZATIONAL STRUCTURE IS COMPLEX, WHICH COULD RESULT IN UNANTICIPATED UNFAVORABLE TAX OR OTHER CONSEQUENCES, WHICH COULD HAVE AN ADVERSE AFFECT ON OUR NET INCOME(LOSS) AND FINANCIAL CONDITION. WE CURRENTLY HAVE OVER 40 ENTITIES GLOBALLY AND SIGNIFICANT INTERCOMPANY LOANS BETWEEN ENTITIES.

     We currently operate legal entities in countries where we conduct manufacturing, design, and sales operations around the world. In some countries, we maintain multiple entities for tax or other purposes. Certain entities have significant unsettled intercompany balances that could result in adverse tax or other consequences related to capital structure, loan interest rates and legal entity structure changes. We expect to reduce the level of complexity of our legal entity structure over time, as well as reduce intercompany loan balances. However, we may incur additional income tax or other expense related to loan settlement or loan restructuring actions, or incur additional costs related to legal entity restructuring or dissolution efforts.

IF WE ARE UNABLE TO COMPLY WITH ECONOMIC INCENTIVE TERMS IN CERTAIN GOVERNMENT GRANTS, WE MAY NOT BE ABLE TO RECEIVE OR RECOGNIZE GRANT BENEFITS OR WE MAY BE REQUIRED TO REPAY GRANT BENEFITS PREVIOUSLY PAID TO US AND RECOGNIZE RELATED CHARGES, WHICH WOULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL POSITION.

     We receive economic incentive grants and allowances from European governments targeted at increasing employment at specific locations. The subsidy grant agreements typically contain economic incentive and other covenants that must be met to receive and retain grant benefits. Noncompliance with the conditions of the grants could result in the forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date. For example, in the three months ended March 31, 2008, we repaid $40 million of government grants as a result of closing our North Tyneside manufacturing facility. In addition, we may need to record charges to reverse grant benefits recorded in prior periods as a result of changes to our plans for headcount, project spending, or capital investment relative to target levels agreed with government agencies at any of these specific locations. If we are unable to comply with any of the covenants in the grant agreements, our results of operations and financial position could be materially adversely affected.

CURRENT AND FUTURE LITIGATION AGAINST US COULD BE COSTLY AND TIME CONSUMING TO DEFEND.

     We are subject to legal proceedings and claims that arise in the ordinary course of business. See Part II, Item 1 of this Form 10-Q. Litigation may result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, results of operations, financial condition and liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

Amendment of Material Agreement

     On August 3, 2010, the parties to the Facility Agreement, dated as of March 15, 2006, by and among Atmel Corporation, Atmel Sarl, Atmel Switzerland Sarl, the financial institutions listed therein, and Bank of America, N.A., as facility agent and security agent (the “Agreement”), entered into a waiver letter. Pursuant to the waiver letter, the parties to the Agreement waived (i) Atmel Corporation’s obligation not to permit the “Fixed Charge Coverage Ratio,” as defined in the Agreement, to fall below 1.10:1 for the fiscal quarter ended June 30, 2010, and (ii) any “Event of Default,” as defined in the Agreement, that occurred prior to the date of the

60

waiver letter resulting from the failure to comply with the Fixed Charge Coverage Ratio. Bank of America, N.A. has provided, and in the future may provide banking and related services to Atmel.

ITEM 6. EXHIBITS

     The following Exhibits have been filed with, or incorporated by reference into, this Report:

2.1*	Share and Asset Purchase and Sale Agreement by and among Inside Contactless S.A., Atmel Corporation and solely for purposes of Section 2.2, Atmel Rousset S.A.S.
10.1	Description of Fiscal 2010 Executive Bonus Plan (which is incorporated herein by reference to Item 5.02 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on April 28, 2010).
10.2	Atmel Corporation 2010 Employee Stock Purchase Plan (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on May 25, 2010)
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS †	XBRL Instance Document
101.SCH †	XBRL Taxonomy Extension Schema
101.CAL †	XBRL Taxonomy Extension Calculation Linkbase
101.DEF †	XBRL Taxonomy Definition Linkbase
101.LAB †	XBRL Taxonomy Extension Label Linkbase
101.PRE †	XBRL Taxonomy Extension Presentation Linkbase

*	Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.
†	The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Commission.

61

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ATMEL CORPORATION (Registrant)
August 9, 2010	/s/ STEVEN LAUB
	Steven Laub
	President & Chief Executive Officer
	(Principal Executive Officer)
August 9, 2010	/s/ STEPHEN CUMMING
	Stephen Cumming
	Vice President Finance & Chief Financial Officer
	(Principal Financial Officer)
August 9, 2010	/s/ DAVID MCCAMAN
	David McCaman
	Vice President Finance & Chief Accounting Officer
	(Principal Accounting Officer)

62

EXHIBIT INDEX

2.1*	Share and Asset Purchase and Sale Agreement by and among Inside Contactless S.A., Atmel Corporation and solely for purposes of Section 2.2, Atmel Rousset S.A.S.
10.1	Description of Fiscal 2010 Executive Bonus Plan (which is incorporated herein by reference to Item 5.02 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on April 28, 2010).
10.2	Atmel Corporation 2010 Employee Stock Purchase Plan (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on May 25, 2010)
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS †	XBRL Instance Document
101.SCH †	XBRL Taxonomy Extension Schema
101.CAL †	XBRL Taxonomy Extension Calculation Linkbase
101.DEF †	XBRL Taxonomy Definition Linkbase
101.LAB †	XBRL Taxonomy Extension Label Linkbase
101.PRE †	XBRL Taxonomy Extension Presentation Linkbase

*	Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.
†	The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Commission.

63

EX-2.1

Exhibit 2.1

HIGHLY CONFIDENTIAL

FINAL VERSION

NOTE: Information in this document marked with an “[*]” has been omitted and filed separately with
the Commission. Confidential Treatment has been requested with respect to the omitted portions.

SHARE AND ASSET PURCHASE AND SALE AGREEMENT

by and among

INSIDE CONTACTLESS S.A.,

ATMEL CORPORATION

and solely for purposes of Section 2.2,

ATMEL ROUSSET S.A.S.

Dated: June 25, 2010

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION			2
1.1	Definitions		2
1.2	Rules of Construction		25
ARTICLE II PURCHASE AND SALE			26
2.1	Closing		26
2.2	French Dropdown		27
2.3	Sale and Purchase of Shares and the Assets Other than Those Owned by the Transferred Entities		27
2.4	Non-Assignability		29
2.5	Excluded Assets		31
2.6	Assumption of Liabilities		32
2.7	Excluded Liabilities		34
2.8	Payments at the Closing		34
2.9	Purchase Price Adjustment		35
2.10	Earnout Payment		38
2.11	Allocation of the Purchase Price		41
2.12	Adjustment of the Purchase Price		41
ARTICLE III INTELLECTUAL PROPERTY MATTERS			41
3.1	License to Buyer		41
3.2	Restrictions and Conditions on License to Buyer		41
3.3	Transfers to Restricted Entity		42
3.4	Licenses Back		42
3.5	Restrictions and Conditions on License Back		43
3.6	Existing Licenses		44
3.7	Reservation of Rights and Limitation on Licenses		44
3.8	Licensed Patent List		44
3.9	Trade Secret Protection and Use		44
3.10	Trademark Use		45
3.11	Abandonment of Licensed and Transferred Patents		46
3.12	Limited License-Back Patents		46
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING ATMEL UK			47
4.1	Organization		47
4.2	Power and Authority		47
4.3	Capitalization		47
4.4	No Violation		48
4.5	Authorizations and Consents		48
4.6	UK Financial Statements		49
4.7	Absence of Certain Changes in the UK		49

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TABLE OF CONTENTS
(Continued)

		Page
4.8	UK Real Property		49
4.9	UK Contracts		50
4.10	Compliance with UK Laws		51
4.11	UK Assets		52
4.12	UK Litigation		52
4.13	UK Employees		52
4.14	UK Taxes and UK Tax Matters		55
4.15	Insurance		56
4.16	UK Environmental Matters		56
4.17	Transactions with Affiliates		56
4.18	No Other UK Representations and Warranties		57
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING ATMEL FRANCE			57
5.1	Organization		57
5.2	Power and Authority		58
5.3	Authorization and Enforceability		58
5.4	Authorizations and Consents		58
5.5	Absence of Certain Changes in France		59
5.6	France Real Property		59
5.7	France Transferred Contracts		59
5.8	Compliance with French Law (Other than Employee Matters)		60
5.9	French Assets		60
5.10	France Employees		61
5.11	French Environmental Matters		63
5.12	Transactions with Affiliates		63
5.13	French Taxes and French Tax Matters – Atmel France		63
5.14	No Other Atmel France Representations and Warranties		64
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING VAULT-IC			64
6.1	Organization		64
6.2	Power and Authority		65
6.3	Capitalization		65
6.4	Contribution Agreement		65
6.5	Vault-IC Assets		66
6.6	Vault-IC Employees		66
6.7	French Taxes and French Tax Matters – Vault-IC		67
6.8	No Other Vault-IC Representations and Warranties		67
ARTICLE VII REPRESENTATIONS AND WARRANTIES REGARDING ATMEL			68
7.1	Organization		68
7.2	Power and Authority		68
7.3	Authorization and Enforceability		68

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TABLE OF CONTENTS
(Continued)

		Page
7.4	Atmel Transferred Contracts		69
7.5	Absence of Certain Changes in the United States		69
7.6	Intellectual Property		69
7.7	Financial Statements		72
7.8	Insurance		73
7.9	Transactions with Affiliates		73
7.10	No Brokers		73
7.11	US Tax Election		73
7.12	Disclosure Schedules		74
7.13	No Other United States Representations and Warranties		74
ARTICLE VIII REPRESENTATIONS AND WARRANTIES REGARDING THE SWISS ENTITIES			74
8.1	Atmel Switzerland		74
8.2	Atmel Sarl		76
ARTICLE IX REPRESENTATIONS AND WARRANTIES REGARDING ACP			79
9.1	Organization		79
9.2	Power and Authority		79
9.3	ACP Equipment		79
9.4	No Other Philippines Representations and Warranties		80
ARTICLE X REPRESENTATIONS AND WARRANTIES REGARDING ATMEL TAIWAN			81
10.1	Taiwan Employees		81
10.2	No Other Taiwan Representations and Warranties		81
ARTICLE XI REPRESENTATIONS AND WARRANTIES OF BUYER			82
11.1	Organization and Power		82
11.2	Authorization and Enforceability		82
11.3	No Violation		82
11.4	Governmental Authorizations and Consents		82
11.5	Capitalization of Buyer		83
11.6	Litigation		83
11.7	Financial Capacity		83
11.8	Solvency		83
11.9	No Brokers		84
11.10	Investment Intent		84
11.11	Investigation		84
11.12	Investment Agreement		84
11.13	No Inducement or Reliance; Independent Assessment		85

-iii-

TABLE OF CONTENTS
(Continued)

		Page
ARTICLE XII COVENANTS			86
12.1	Conduct of the Business		86
12.2	Access to Information Prior to the Closing		88
12.3	Regulatory Filings; Efforts		88
12.4	Certain Tax Matters		89
12.5	Certain Employee Matters		92
12.6	Preservation of Books and Records		94
12.7	Non-Competition and Business Restrictions		95
12.8	Non-Solicitation		96
12.9	Contacts with Third Parties		97
12.10	Mail; Payments		97
12.11	Public Announcements		97
12.12	Commercially Reasonable Efforts		98
12.13	Board Meetings		98
12.14	Delivery of Financial Statements		99
12.15	Further Post-Closing Agreements		99
12.16	Intercompany Payments		99
12.17	Incorporation of Vault-IC		99
12.18	Registered Office of Vault-IC		99
12.19	Merger		99
12.20	Other Transaction Matters		99
12.21	Exclusivity		100
12.22	Atmel Philippines Authorizations		101
12.23	Buyer Philippines Authorizations		101
12.24	Equity Investment		101
12.25	Breach of Representation, Warranty or Covenant		101
12.26	Confidential Information		101
ARTICLE XIII CONDITIONS TO CLOSING			102
13.1	Conditions to All Parties’ Obligations		102
13.2	Conditions to Atmel’s Obligations		103
13.3	Conditions to Buyer’s Obligations		104
ARTICLE XIV DELIVERIES BY ATMEL AT CLOSING			104
14.1	Atmel UK		104
14.2	Atmel France		105
14.3	Certain Atmel Paris Employee Documents		105
14.4	Atmel		105
14.5	Further Instruments		106
14.6	Atmel Switzerland Sale Agreement		106
14.7	Atmel Sarl Assignment Agreement		106
14.8	ACP Bill of Sale		106

-iv-

TABLE OF CONTENTS
(Continued)

		Page
14.9	Certain Atmel Taiwan Employee Documents	106
14.10	Non-Assignable Assets, Transferred Contracts and Restricted IPR	106
ARTICLE XV DELIVERIES BY BUYER AT CLOSING		107
15.1	Officer’s Certificate	107
15.2	Closing Date Consideration Amount	107
15.3	Assumption Agreement	107
15.4	Certain Documents	107
15.5	Escrow Amount	107
15.6	Further Instruments	107
15.7	IP Transfer Costs	107
ARTICLE XVI INDEMNIFICATION; SURVIVAL		107
16.1	Expiration of Representations and Warranties	107
16.2	Special IP Indemnities	108
16.3	Indemnification	111
ARTICLE XVII TERMINATION		116
17.1	Termination	116
17.2	Procedure and Effect of Termination	117
ARTICLE XVIII MISCELLANEOUS		118
18.1	Expenses	118
18.2	Notices	118
18.3	Governing Law	119
18.4	Entire Agreement	119
18.5	Severability	119
18.6	Amendment	119
18.7	Effect of Waiver or Consent	120
18.8	Bulk Transfer Laws	120
18.9	Parties in Interest; Limitation on Rights of Others	120
18.10	Assignability	120
18.11	Disclosure Schedules	120
18.12	Dispute Resolution and Venue	121
18.13	No Other Duties	122
18.14	Reliance on Counsel and Other Advisors	122
18.15	Remedies	122
18.16	Specific Performance	123
18.17	Counterparts	123
18.18	Further Assurance	123

-v-

SCHEDULES*

Schedule 1	Property
Schedule 1.1(a)	Accounting Principles
Schedule 1.1(b)	Products (Business Products, Existing Products and Roadmap Products)
Schedule 1.1(c)	Current Assets and Current Liabilities
Schedule 1.1(d)	Form of Working Capital Statement
Schedule 2.2(a)	France Transferred Equipment
Schedule 2.2(b)	Funded Projects
Schedule 2.2(c)	France Transferred Technology
Schedule 2.2(d)	Atmel France Employees
Schedule 2.3(b)(i)(A)	France Transferred Contracts
Schedule 2.3(b)(i)(B)	Consortium Agreements
Schedule 2.3(b)(ii)(A)(1)	Transferred Patents
Schedule 2.3(b)(ii)(A)(2)	Transferred Copyrights
Schedule 2.3(b)(ii)(B)	Transferred Trademarks
Schedule 2.3(b)(ii)(C)	Transferred Technology
Schedule 2.3(b)(ii)(D)	Atmel Transferred Contracts
Schedule 2.3(b)(iii)(B)(2)	Atmel Sarl Transferred Contracts
Schedule 2.3(b)(iv)	ACP Equipment
Schedule 2.5(a)(ii)	Restricted IPR
Schedule 3.1(a)	Licensed Patents
Schedule 3.8	Licensed Trademarks
Schedule 3.12	Limited Licensed-Back Patents
Schedule 12.5(h)	Atmel Taiwan Employees and Atmel Paris Employees
Schedule 12.22	Atmel Philippines Authorizations
Schedule 12.23	Buyer Philippines Authorizations

* Such attachments to the Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Atmel Corporation hereby undertakes to provide to the Securities and Exchange Commission copies of such documents upon request; provided, however, that Atmel Corporation reserves the right to request confidential treatment for portions of any such documents.

-i-

EXHIBITS*

Exhibit A:	Form of Escrow Agreement
Exhibit B:	Form of Core License Agreement
Exhibit C:	Form of Wafer Purchase Agreement
Exhibit D:	Signed LFoundry Term Sheet
Exhibit E:	Form of Foundry Agreement
Exhibit F:	Form of Probe and Test Services Agreement
Exhibit G:	Form of Transition Services Agreement
Exhibit H:	Form of IT Apps License Agreement
Exhibit I:	Form of Standard Cell Library License Agreement
Exhibit J:	Form of Lease Agreement
Exhibit K:	Form of Contribution Agreement
Exhibit L:	Form of Vault-IC Articles of Association
Exhibit M:	Atmel Disclosure Schedule
Exhibit N:	Buyer Disclosure Schedule
Exhibit O:	Investment Agreement

* Such attachments to the Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Atmel Corporation hereby undertakes to provide to the Securities and Exchange Commission copies of such documents upon request; provided, however, that Atmel Corporation reserves the right to request confidential treatment for portions of any such documents.

-ii-

SHARE AND ASSET PURCHASE AND SALE AGREEMENT

     SHARE AND ASSET PURCHASE AND SALE AGREEMENT, dated as of the date of last signature on the signature page hereto, by and among:

               (i) Inside Contactless S.A., a French société anonyme à directoire et conseil de surveillance governed by the laws of France registered with the registry of commerce and companies of Aix-en-Provence under number 399 275 395 (“Buyer”);

               (ii) Atmel Corporation, a Delaware corporation, with its principal place of business at 2325 Orchard Parkway, San Jose, CA 95131, USA (“Atmel”); and

               (iii) Atmel Rousset S.A.S., a French société par actions simplifiée governed by the laws of France registered with the Registre du commerce et des sociétés of Aix-en-Provence under trade number 333 353 738 (“Atmel France”), solely for purposes of Section 2.2.

RECITALS

     WHEREAS, Atmel France and Atmel UK currently operate the Business (as defined below);

     WHEREAS, prior to the Closing, Atmel France will incorporate a company, which will be a French société par actions simplifiée registered with the registry of commerce and companies of Paris, France, with its registered office located at Paris, France (“Vault-IC”);

     WHEREAS, upon its incorporation, Vault-IC will have a share capital of one thousand Euros (€1,000) divided into one thousand (1,000) Vault-IC Shares with a nominal value of one euro (€1) each (the “Vault-IC Shares”);

     WHEREAS, upon its incorporation, an election will be made to treat Vault-IC as an entity disregarded as separate from its owner for US federal income tax purposes under Section 7701 of the United States Internal Revenue Code of 1986, as amended, and United States Treasury Regulation § 301.7701-3 (a “check-the-box election”), effective as of the date of its formation;

     WHEREAS, as of the Incorporation Date and the Closing Date, the Vault-IC Shares will represent the entire share capital of Vault-IC;

     WHEREAS, prior to the Closing, pursuant to the Contribution Agreement and as provided by French Law, (i) Atmel France shall cause all of its Assets (other than Excluded Assets) related to the Business and all of its Assumed Liabilities (other than Excluded Liabilities) related to the Business to be transferred and assigned to Vault-IC, (ii) Vault-IC shall absolutely and irrevocably assume and be solely liable and responsible for, and thereafter pay, perform and discharge when due all of such

-1-

Assumed Liabilities, and (iii) pursuant to Article L. 1224-1 of the French Labor Code, all of the Atmel France Employees (as defined below) shall transfer to Vault-IC by operation of law (such series of transactions referred to herein as the “Dropdown”);

     WHEREAS, Buyer desires to purchase from Atmel and certain of its direct and indirect Subsidiaries, Atmel Europe SARL (“Atmel Paris”), ACP Test Co., Inc. (“ACP”), Atmel Switzerland Sarl (“Atmel Switzerland”), Atmel Sarl (“Atmel Sarl”) and Atmel Taiwan Ltd. (“Atmel Taiwan”) (such Subsidiaries collectively referred to herein as the “Selling Subsidiaries”), and Atmel and the Selling Subsidiaries desire to sell to Buyer, upon the terms and subject to the conditions hereinafter set forth, (i) the Business, (ii) all of the issued and outstanding Vault-IC Shares and (iii) the entire issued share capital of Atmel Smart Card ICS Limited, a private company with liability limited by shares incorporated in England and Wales with the Company Number 3693883 and its registered office at Level 1, Exchange House, Primrose Street, London EC2A 2HS (“Atmel UK”);

     WHEREAS, prior to the Incorporation Date, the works council of Atmel France has been informed and consulted and has issued an opinion (avis) with respect to the Contemplated Transactions (as defined below), including, without limitation, the incorporation of Vault-IC, the Dropdown (including the transfer by operation of law of the Atmel France Employees to Vault-IC) and the sale by Atmel France, and the purchase by Buyer, of the Vault-IC Shares (the “Opinion”);

     WHEREAS, prior to the Closing, the Board of Directors of Atmel shall have authorized and approved this Agreement, the Ancillary Agreements and the Contemplated Transactions, which approval shall be requested after the date on which the Opinion is issued;

     WHEREAS, the Business as acquired hereunder by Buyer will be owned and operated by Buyer after the Closing; and

     WHEREAS, concurrently with or prior to the closing of the transactions contemplated hereby, Atmel, the Selling Subsidiaries and/or their respective Affiliates, as applicable, and Buyer and/or its Affiliates, as applicable, shall enter into all of the Ancillary Agreements.

     NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

     1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

     “Accounting Expert” has the meaning set forth in Section 2.9(d).

     “Accounting Principles” means the financial and accounting principles, practices and policies set forth on Schedule 1.1(a).

-2-

     “ACP Equipment” means all Fixed Assets owned by ACP, used exclusively in the Business as of the Closing and which if material is listed on Schedule 2.3(b)(iv).

     “ACP” has the meaning set forth in the Recitals.

     “Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 30% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by Contract or otherwise.

     “Agreed Final Net Balance” has the meaning set forth in Section 2.9(d).

     “Agreement” means this Share and Asset Purchase and Sale Agreement.

     “Ancillary Agreements” means the documents being executed and delivered in connection with this Agreement and the transactions contemplated hereby, including, without limitation, the Escrow Agreement, the Core License Agreement, the Wafer Purchase Agreement, the Signed LFoundry Term Sheet, the Foundry Agreement, the Probe and Test Services Agreement, the Transition Services Agreement, the IT Apps License Agreement, the Standard Cell Library License Agreement, the Lease Agreement, the Contribution Agreement and any other agreements or documents as may be mutually agreed by the Parties hereto in connection with the Contemplated Transactions.

     “Annex A Contracts” has the meaning set forth in Section 7.6(m).

     “Assets” has the meaning set forth in Section 2.3(b). For the avoidance of doubt, the term “Assets” does not include the UK Ordinary Shares and the Vault-IC Shares being sold pursuant to this Agreement.

     “Assumed Liabilities” has the meaning set forth in Section 2.6.

     “Atmel Disclosure Schedule” means the disclosure schedule of even date herewith delivered by Atmel to Buyer in connection with the execution and delivery of this Agreement.

     “Atmel Foundry” means a foundry owned by Atmel that is identified as an Atmel Foundry on Exhibit D attached to the Core License Agreement, provided that in the event that an Atmel Foundry is later sold to a third party, it will then be deemed to be and will be treated as an Authorized Foundry for the purposes of this Agreement.

     “Atmel France Employees” means the Business Employees of Atmel France, who, following the effective date of the Dropdown (including the transfer by operation of law of the Atmel France Employees to Vault-IC), will become employees of Vault-IC.

-3-

     “Atmel France” has the meaning set forth in the Preamble.

     “Atmel Indemnitees” has the meaning set forth in Section 16.3(a).

     “Atmel Paris Employees” means the Business Employees who are employees of Atmel Paris as of the Closing.

     “Atmel Paris” has the meaning set forth in the Recitals.

     “Atmel Sarl Transferred Contracts” means the Contracts listed on Schedule 2.3(b)(iii)(B)(2).

     “Atmel Sarl” has the meaning set forth in the Recitals.

     “Atmel Switzerland” has the meaning set forth in the Recitals.

     “Atmel Taiwan Employees” means the Business Employees who are employees of Atmel Taiwan as of the Closing.

     “Atmel Taiwan” has the meaning set forth in the Recitals.

     “Atmel Transferred Contracts” means the Contracts listed on Schedule 2.3(b)(ii)(D).

     “Atmel UK Employees” means all of the employees of Atmel UK.

     “Atmel UK” has the meaning set forth in the Recitals.

     “Atmel” has the meaning set forth in the Preamble.

     “Atmel’s Taxes” means (a) all amounts of or in respect of Taxes of Atmel, Transferred Entities and the Selling Subsidiaries with respect to taxable periods ending on or before the Closing Date and (b) the Pre-Closing Date Share of all amounts of or in respect of Taxes of Atmel, Transferred Entities and the Selling Subsidiaries with respect to Straddle Periods; provided, that Atmel’s Taxes shall not include any Taxes to the extent (i) resulting from events or transactions occurring or deemed to occur or in respect of any gross receipts, income, profits or gains earned or accrued after the Closing Date, (ii) a provision or reserve in respect of which is made in the Final Working Capital (iii) which arise or are increased as a result only of any change in the law of Tax announced and coming into force after Closing or the withdrawal after Closing of any extra-statutory concession previously made by a Taxing Authority (iv) which would not have arisen but for a change after Closing in the accounting policies or bases adopted by any Transferred Entity or (v) which would not have arisen but for a voluntary act or transaction carried out by Buyer, any Affiliate of the Buyer or any Transferred Entity after Closing being an act which (x) is not in the ordinary course of business; or (y) could reasonably have been avoided.

     “Audited Balance Sheet” has the meaning set forth in Section 14.1(c).

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     “Authorized Foundry” means the Atmel Foundries and Other Foundries identified in Exhibit D attached to the Core License Agreement, and any Subsequently Authorized Foundries. Atmel will authorize the Other Foundries to manufacture Licensed Products for Licensee using the applicable manufacturing process to the extent such manufacturing process is co-owned, or licensed to the Other Foundry, by Atmel.

     “Benefit Plan” means each pension plan, welfare plan and any other employment, bonus, profit sharing, deferred compensation, incentive compensation, stock ownership, stock option, stock purchase, performance, retirement, savings, stock bonus, excess benefit, supplemental unemployment, paid time off, perquisite, fringe benefit, vacation, sick leave, severance, disability, death benefit, hospitalization, medical, dental, life insurance, welfare benefit or any other written plan, program or arrangement, in each case, maintained or contributed to, or required to be maintained or contributed to, for the benefit of any present or former Employees, as required by applicable Laws, or pursuant to collective bargaining agreements or other contractual obligations.

     “Books and Records” has the meaning set forth in Section 12.6(a)(i).

     “Business” means Atmel’s current business of designing, developing, making, having made, selling, marketing, distributing and maintaining the Business Products, including the Existing Products, and designing and developing, Roadmap Products.

     “Business Assets” means all of the Assets and any assets of any kind or type owned by the Transferred Entities as of the Closing that are not Excluded Assets.

     “Business Customers” means customers of the Business who have entered into Contracts for or who have ordered, procured or purchased (through purchase orders or otherwise) products and services offered and sold in the Business.

     “Business Day” means any day other than a Saturday, Sunday or other than a day on which banks are closed in New York, New York, USA, London, UK or Paris, France. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.

     “Business Employees” means the employees of Atmel France, Atmel Paris, Atmel Taiwan and Affiliates of Atmel (other than Atmel UK) who exclusively or primarily work for or whose functions are exclusively or primarily related to the Business and who will be transferred to Buyer or Vault-IC on or before the Closing as contemplated in Section 12.5.

     “Business IPR” means the Transferred IPR and any other Intellectual Property Rights owned by or licensed to the Transferred Entities as of the Closing.

     “Business Material Adverse Effect” means any effect that is or is reasonably likely to be materially adverse to the business, assets, liabilities, operations or financial condition of the Business

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taken as a whole; provided, that none of the following events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts shall be taken into account in determining whether there has been or may be a Business Material Adverse Effect: (i) any changes or developments occurring as a result of general financial or securities markets conditions, general economic or business conditions, or general political or regulatory conditions in the US or in other countries or economies or in the international context, (ii) any act of war, armed hostilities or terrorism, (iii) any change or development in the industry which the Business operates, (iv) any change in Law or UK GAAP or the interpretation or enforcement of either, (v) the negotiation, execution, delivery, performance or public announcement of this Agreement (including, without limitation, any litigation related thereto and/or any adverse change in customer, employee, works council, union, supplier, financing source, licensor, licensee, stockholder, joint venture partner or any other similar relationships), (vi) any change resulting from the failure of Buyer to consent to any acts or actions requiring Buyer’s consent under this Agreement and for which Atmel has sought such consent, (vii) any failure of Atmel or any of its Affiliates to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates of earnings or revenues, or business plans, (viii) any change, in and of itself, in the market price or trading volume of Atmel’s common stock or (ix) events or conditions that are beyond reasonable control, including, without limitation, any Act of God, strike, work stoppage or slow down, sit-in, factory occupation or other labor unrest, civil disturbance, weather conditions, or other interruption, except, in the case of clauses (i), (iii) or (iv), to the extent such events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts have a materially disproportionate effect on the Business, taken as a whole, relative to other Persons engaged in the industry which the Business operates, then, the incremental impact of such events, changes, developments, effects, conditions, circumstance, matters, occurrences or state of facts on the Business relative to other participants in the industry which the Business operates shall be taken into account for purposes of determining whether a Business Material Adverse Effect has occurred or is reasonably expected to occur.

     “Business Products” means the products sold by the Business as of the date hereof as listed on Schedule 1.1(b) hereto.

     “Business Technology” means the Transferred Technology and any other Technology owned by a Transferred Entity as of the Closing.

     “Buyer Capital Stock” has the meaning set forth in Section 11.5.

     “Buyer Capitalization Table” has the meaning set forth in Section 11.5.

     “Buyer Disclosure Schedule” means the disclosure schedule of even date herewith delivered by Buyer to Atmel in connection with the execution and delivery of this Agreement.

     “Buyer Indemnitees” has the meaning set forth in Section 16.3(b).

     “Buyer Investors” has the meaning set forth in Section 11.5.

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     “Buyer Licensees” means Buyer and its Subsidiaries (including the Transferred Entities and their respective successors).

     “Buyer Material Adverse Effect” means (i) a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby and fulfill its obligations hereunder or (ii) any fact, event or circumstance that would be reasonably likely to delay in any material respect the consummation of the transactions contemplated hereby.

     “Buyer Shares” has the meaning set forth in Section 11.5.

     “Buyer” has the meaning set forth in the Preamble.

     “Closing Date Consideration Amount” means Thirty-Seven Million US dollars (US$37,000,000) minus the Escrow Amount, as adjusted pursuant to Section 2.9(a).

     “Closing Date” has the meaning set forth in Section 2.1.

     “Closing” has the meaning set forth in Section 2.1.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding federal revenue Laws.

     “Competing Business” means (A) the sale or licensing of: (i) Smart Cards or Secure Microcontrollers specifically designed for incorporation into Smart Cards, except for pay TV application specific integrated circuits (“ASICs”) for NDS; or (ii) the Secure AVR Core, devices incorporating the Secure AVR Core or Secure Microcontrollers that are fully binary code compatible with the Secure AVR Core, or (iii) Stand-alone devices that serve solely as readers of Smart Cards using the ISO 7816 standard; or (B) the express grant of a license to a third party to use the Standard AVR Core in a Smart Card.

     “Confidential Information” has the meaning set forth in Section 12.26(d).

     “Confidentiality Agreement” means the Confidentiality Agreement between Atmel and Buyer dated February 14, 2010.

     “Consortium Agreements” means the agreements, terms and conditions and other arrangements related to and entered into as part of the Funded Projects and listed on Schedule 2.3(b)(i)(B).

     “Contemplated Transactions” means the transactions and series of transactions contemplated by this Agreement and the Ancillary Agreements.

     “Contract” means any written agreement, contract, license, purchase order, obligation or commitment to which a party thereto is bound.

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     “Contribution Agreement” means the Contribution Agreement, between Atmel France and Vault-IC, substantially in the form attached hereto as Exhibit K.

     “Copyable Technology” means tangible embodiments and tangible forms of technology, other than Equipment, capable of being copied without incurring material costs, such as documents, works of authorship, files, Software, lab notebooks and designs.

     “Copyrights” has the meaning set forth in the definition of Intellectual Property Rights.

     “Core License Agreement” means the Core License Agreement by and between Atmel and Buyer, substantially in the form attached hereto as Exhibit B.

     “Current Assets” means the aggregate sum of the line items as set forth on Schedule 1.1(c) attached hereto, which shall represent the actual current assets of the Business, including, but not limited to cash held by Atmel UK, deferred expenses, prepaid expenses and Inventory and Other Current Assets; provided that inventory shall be stated on a gross cost basis, excluding any financial reserves.

     “Current Liabilities” means the aggregate sum of the line items as set forth on Schedule 1.1(c) attached hereto, which shall represent the actual current liabilities of the Business, including, but not limited to trade account payables, accrued liabilities, deferred revenue, accrued short term employee related obligations and accrued taxes other than income tax.

     “Deductible” has the meaning set forth in Section 16.3(c)(i).

     “Designated IP Claim Liability Cap” has the meaning set forth in Section 16.2(b)(ii).

     “Designated IP Claim” has the meaning set forth in Section 7.6(d) of the Atmel Disclosure Schedule.

     “Designated IP Losses” has the meaning set forth in Section 16.2(b)(i).

     “Direct Cost of Sales” means all direct manufacturing costs associated with the Business, including wafers, assembly, probe, test and finishing, freight and shipping, and royalties (excluding, for the avoidance of doubt, those royalties paid to Atmel), inventory writedowns, piece parts, module costs, and standard cost of sales for timing cut-off adjustments.

     “Dispute Notice” has the meaning set forth in Section 18.12(a).

     “Dropdown” has the meaning set forth in the Recitals.

     “Earnings” means, for any Earnout Period, (A) all net revenue that, in accordance with US GAAP, is or should be recognized or recorded by Buyer and its Subsidiaries and that is attributable to the Business minus (B) all Direct Cost of Sales applicable to the net revenue of the Business; except that any amount of Losses incurred by any of the Buyer Indemnitees and paid or payable by

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Atmel to any Buyer Indemnitee pursuant to any claim for indemnification under Article XVI of this Agreement that constitute Direct Cost of Sales shall be added back to Direct Cost of Sales for the purposes of calculating the Earnings hereunder. For the avoidance of doubt, NFC-SIM products to be developed and marketed by Buyer and dual-interface products sold to the banking market will be excluded from both net revenue and the Direct Cost of Sales.

     “Earnout Dispute Notice” has the meaning set forth in Section 2.10(c).

     “Earnout Dispute Period” has the meaning set forth in Section 2.10(c).

     “Earnout Dispute” has the meaning set forth in Section 2.10(c).

     “Earnout Expiration Date” means December 31, 2011.

     “Earnout Payment” means the 2010 Earnout Payment, the 2011 Earnout Payment and the 2011 Additional Earnout Payment.

     “Earnout Period” means each of the 2010 Earnout Period and the 2011 Earnout Period.

     “Earnout Statement” has the meaning set forth in Section 2.10(b).

     “Earnout Targets” means the 2010 Earnout Target and the 2011 Earnout Target.

     “Effective Date” means the date of the Core License Agreement.

     “Employee Advances” means loans or advances to any officer, director, employee or agent with respect to the Business.

     “Employee Liabilities” means liabilities related to salaries, benefits, and other compensation related amounts due to Employees or due to be paid to third parties on behalf of such Employees. These liabilities include, but are not limited to, earned but unpaid salaries or bonuses, accrued vacation, social taxes, employer-paid profit sharing, pension payments, contributions withheld from employee pay to be remitted, and other similar items relating to the Employees.

     “Employees” means the Business Employees and the Transferred Entity Employees.

     “End Date” has the meaning set forth in Section 17.1(c).

     “Environmental Law” means any Law or other legal requirement relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any Law relating to emissions, discharges, releases or threatened releases of Hazardous Materials or otherwise relating to the processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

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     “Equipment” means all machinery, equipment, tools, furniture and furnishings, leasehold improvements, vehicles, office equipment and supplies, computers and related equipment, telephones, telecopiers, and other similar fixed assets of any kind purchased or leased from third parties.

     “Equity Investment” has the meaning set forth in Section 11.12.

     “Escrow Account” means the segregated account at JP Morgan Chase Bank, N.A. in which the Escrow Amount will be deposited at Closing.

     “Escrow Agent” means the escrow agent, whose name is set forth in the Escrow Agreement.

     “Escrow Agreement” means the Escrow Agreement among Atmel, Buyer and the Escrow Agent, substantially in the form attached hereto as Exhibit A.

     “Escrow Amount” means Five Million US dollars (US$5,000,000).

     “Excluded Assets” has the meaning set forth in Section 2.5(a).

     “Excluded Liabilities” has the meaning set forth in Section 2.7.

     “Excluded Technology” means (i) any Technology licensed or made available by Atmel or the Selling Subsidiaries to Buyer or any Transferred Entity under any Ancillary Agreement, (ii) any Technology in any design, software (including net lists, RTL, and GDSII) component, part or device which otherwise is or will be generally available from Atmel, or the Selling Subsidiaries or a third party and that has in the past been generally made available to the Business by such third party or an Atmel Subsidiary (other than the Transferred Entities) in the ordinary course, or (iii) any Process Technology; and (iv) copies of any Copyable Technology retained by Atmel or the Selling Subsidiaries that is Transferred Technology. It is understood that any Technology provided or licensed to Atmel pursuant to the Core License Agreement or the Standard Cell Library License Agreement, and any Technology in the possession of Atmel UK that is not related to the Business or the Licensed Products, shall be deemed Excluded Technology.

     “Exclusivity Period” has the meaning set forth in Section 12.21.

     “Existing Product” means a product listed as such on Schedule 1.1(b) hereto.

     “Existing Secure Product” has the meaning set forth in the Core License Agreement.

     “Final Determination” has the meaning set forth in Section 2.10(c).

     “Final Working Capital Statement” means a net working capital statement setting forth the Current Assets and Current Liabilities as of the opening of business on the Closing Date (without giving effect to the Closing), prepared in accordance with the Accounting Principles, with the exception that inventory shall be stated on a gross cost basis, excluding any financial reserves.

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     “Final Working Capital” has the meaning set forth in Section 2.9(b).

     “Financial Statements” has the meaning set forth in Section 7.7(a).

     “Finished Goods” means those assets of the Business consisting of silicon wafers completed, tested and in inventory for sale to Business Customers.

     “Fixed Assets” means all equipment, tools and other fixed assets used in the Business and as listed on the fixed assets registry of Atmel UK, Atmel France or ACP as of the date hereof and all additional equipment, tools and other fixed assets purchased, acquired or otherwise added to the fixed assets registry of Atmel UK, Vault-IC and ACP before the Closing Date.

     “Foundry Agreement” means the Foundry Agreement between Buyer and Atmel, substantially in the form attached hereto as Exhibit E.

     “France Employees” means (i) the Business Employees who are employees of Atmel Paris or (ii) employees of Atmel France who, following the effective date of the Dropdown, will be employees of Vault-IC.

     “France Transferred Contracts” means the Contracts listed on Schedule 2.3(b)(i)(A).

     “France Transferred Equipment” means all of the Fixed Assets owned by Atmel France used exclusively in the Business as of the Closing (whether material or not), each of which are listed or generally described in Schedule 2.2(a) as required by French Law applicable to asset transfers (apport simple).

     “France Transferred Technology” means the Transferred Technology owned by Atmel France listed on Schedule 2.2(c).

     “France” means the French Republic (République Française).

     “French Governmental Consents” has the meaning set forth in Section 5.4(a).

     “French Property” has the meaning set forth in Section 5.6(a).

     “Funded Projects” means the projects exclusively related to technology development for the Business and listed on Schedule 2.2(b), funded or subsidized by Government Authorities in France pursuant to which Atmel France receives rights and benefits for technology research and development, including reimbursement of costs or grants of money.

     “Future Form Factor Product” means a personally portable device that is powered solely from an external host power source (except in the case of an NFC Secure Element) or by an RF signal and that is designed, marketed and sold solely for personal use by the end customer to implement a secure transaction, which device incorporates a Secure Microcontroller that is certified

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at common criteria EAL 4+ or higher, has received EMVco certification, or is certified under another comparable security standard at time of sale by Licensee.

     “Governmental Authority” means any nation or government, any foreign or domestic federal, state, regional, provincial, county, local, municipal or other political instrumentality, agency, body,

authority or subdivision thereof and any foreign or domestic entity or body exercising executive, legislative, judicial, regulatory, administrative or taxing functions of or pertaining to government, including any court or tribunal.

     “GPEC Agreements” has the meaning set forth in Section 12.5(c).

     “Hazardous Materials” means any substance that is currently regulated by any Environmental Law and that is otherwise an imminent threat of damage, a damage, a danger to health, reproduction or the environment.

     “Income Taxes” means all federal, state, local and foreign (a) Taxes that are based on or measured by income (or that include as one of their alternative bases a Tax based on or measured by income), and (b) franchise Taxes.

     “Incorporation Date” has the meaning set forth in Section 12.17.

     “Indebtedness” means all indebtedness of the Business or Atmel UK for borrowed money; provided, that Indebtedness shall not include (a) accounts payable to trade creditors and deferred revenues arising in the Ordinary Course, (b) the endorsement of negotiable instruments for collection in the Ordinary Course, and (c) capitalized lease obligations or liabilities.

     “Indemnitee” has the meaning set forth in Section 16.3(d)(i).

     “Indemnitor” has the meaning set forth in Section 16.3(d)(i).

     “Intellectual Property Rights” or “IPR” means rights anywhere in the world, whether registered or unregistered, arising under or associated with (a) Patents, (b) trade and business names, trademarks, service marks, logos and related registrations and applications therefor (including as the context requires, all goodwill associated with any of the foregoing) (“Trademarks”), (c) copyrights and equivalent rights, moral rights and rights in works of authorship (“Copyrights”), and (d) registered designs, design rights, mask work, semiconductor and other topography rights and utility models, databases, domain names, and (e) trade secrets and equivalent rights in confidential know-how and technology or other confidential, technical and/or proprietary information (“Trade Secrets”), and (f) all applications for and registrations of any of the foregoing anywhere in the world. Intellectual Property Rights shall not include express or implied rights and licenses under contract.

     “Inventory” means those assets of the Business comprising the inventory of Finished Goods and WIP relating to the Existing Products owned by Atmel Switzerland.

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     “Investment Agreement” means the Investment Agreement, among Buyer, Atmel, Gimv, Adviesbeheer Gimv Technology 2004 NV, FCPR Sofinnova Capital V and the other parties thereto as attached hereto as Exhibit O.

     “IP Agreement” means any Contract currently in effect between Atmel, a Selling Subsidiary or a Transferred Entity and a third party under which either (i) such third party licenses Intellectual Property Rights to Atmel or such Selling Subsidiary or Transferred Entity that are material to the Business; or (ii) Atmel, a Selling Subsidiary or Transferred Entity has licensed to such third party material Transferred IPR (other than non-exclusive licenses granted in the ordinary course of business related to the manufacture or sale of products).

     “IT Apps License” means the IT Apps License, among Atmel, Buyer and Buyer’s Affiliates, substantially in the form attached hereto as Exhibit H.

     “JAMS Rules” has the meaning set forth in Section 18.12(a).

     “JAMS” has the meaning set forth in Section 18.12(a).

     “Knowledge of Atmel” means the actual knowledge of any of the following personnel of Atmel, and such knowledge any such person would have after reasonable inquiry and investigation: Jean Vaylet, Christian Fleutelot and Andy Bear; and, solely for the purposes of Section 7.6 (Intellectual Property), the actual knowledge of any of the following personnel of Atmel, and such knowledge any such person would have after reasonable inquiry and investigation of the matters set forth in Section 7.6 (Intellectual Property) it being understood that with respect to Sections 7.6(d) and 7.6(g), 7.6(k), and 7.6(l) reasonable inquiry and investigation does not imply any obligation or duty to conduct any freedom to operate, infringement or other inquiry or investigation or to engage counsel to perform any of the same: Leo Merken, Sheri Frank, Steve Shumann, Christian Fleutelot, Laurent Paris and Ewart Gray, it being understood that nothing in this Agreement obligates any person to reveal information or material subject to the attorney-client privilege, work product doctrine or any other applicable privilege.

     “Knowledge of Buyer” means the actual knowledge of any of the following personnel of Buyer, and such knowledge any such person would have after reasonable inquiry and investigation: Remy de Tonnac, Richard Vacher Detourniére and Pascal Didier.

     “Laws” means all laws, Orders, statutes, codes, regulations, ordinances, decrees, rules, or other requirements with similar effect of any Governmental Authority.

     “Lease Agreement” has the meaning set forth in Section 12.20(c).

     “Liability Cap” has the meaning set forth in Section 16.3(c)(i).

     “License-Back Other IPR” means (i) the Transferred Other IPR, and (ii) any and all Intellectual Property Rights (other than Patents and Trademarks) owned or licensable (without the consent of or material payment of any consideration to any third party) by the Transferred Entities

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immediately following the Closing, or if such Intellectual Property Rights (other than Patents and Trademarks) are transferred after the Closing, at the point in time immediately following such transfer.

     “License-Back Patents” means any Transferred Patents and any Patent that claims priority from any Transferred Patents, and any Patent filed by Buyer, the Transferred Entities or any Affiliate of any of the foregoing within eighteen (18) months of the Closing Date that is based on or arising from any Transferred Technology or any invention owned by either of the Transferred Entities as of the Closing Date.

     “Licensed Field” means the field of designing, developing, making, having made, marketing distributing and selling or maintaining Licensed Products.

     “Licensed IPR” means the Licensed Patents, Licensed Other IPR and Licensed Trademarks.

     “Licensed Modifications” means Security modifications to the Secure AVR Core design, at the RTL level, gate level or layout level that either (i) add or upgrade (by replacement or otherwise) existing Security features in the Secure AVR Core, or are to mitigate newly discovered Security attacks, or (ii) are to allow the Secure AVR Core to properly function with changes made to the Licensed Secure Product, external to the Secure AVR Core, in order to add or upgrade (by replacement or otherwise) existing Security features in the Licensed Secure Product or to mitigate newly discovered Security attacks, provided that in no event shall “Licensed Modifications” include (A) any modification (including without limitation adding or removing instructions) to the Secure AVR Core instruction set, or (B) any modification to the architecture or function of the Secure AVR Core. By way of example, removal of security features of the Secure AVR Core is not a Licensed Modification.

     “Licensed Other IPR” means all Intellectual Property Rights owned or licensable (without the consent of or material payment of any consideration to any third party) by Atmel or the Selling Subsidiaries as of the Closing, that are embodied by any of the Transferred Technology and used in the operation of the Business as of the Closing, other than (i) Patents, (ii) Trademarks, (iii) Business IPR, (iv) Restricted IPR and (v) Separately Provided IPR.

     “Licensed Patents” means the Patents (including Patent applications) identified on Schedule 3.1(a), and such other Patents, including Patents that claim priority from any of the Patents listed on such Schedule filed within eighteen (18) months of the Closing Date that are required to be added to such Schedule as such Schedule is amended in accordance with Section 3.8 or 3.11.

     “Licensed Product” means Smart Secure Products and functionally similar products, and new versions, enhancements and improvements thereof.

     “Licensed Secure Microcontroller” means a Secure IC made by an Authorized Foundry for Licensee that (i) is a Secure Microcontroller in which the primary purpose of the Secure AVR Core is to enable Security, (ii) at the time of Sale by Licensee is certified at common criteria EAL 4+ or higher, and (iii) either (A) is an Existing Secure Product, or (B) both (1) a Roadmap Secure Product

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(or a version of a Roadmap Secure Product that includes only the following changes: corrections to make the product conform to specifications as of the Effective Date or modifications to the memory configuration of the product) and (2) is submitted for certification within the Secure Microcontroller Commercialization Term; provided, that such Secure IC is released for commercial Sale no later than six (6) months after the end of the Secure Microcontroller Commercialization Term.

     “Licensed Secure Product” means a Licensed Secure Microcontroller and/or a Licensed Smart Secure Chip.

     “Licensed Smart Secure Chip” means a Secure IC made by an Authorized Foundry for Licensee that (i) is designed, manufactured, and Sold solely for the purpose of incorporation by the purchaser into a Smart Secure Product, and (ii) either (A) is an Existing Secure Product, or (B) is a new product submitted for certification within the Smart Secure Chip Commercialization Term; provided, that such Secure IC is released for commercial Sale no later than six (6) months after the end of the Smart Secure Chip Commercialization Term.

     “Licensed Trademarks” means the Trademarks identified on Schedule 3.8.

     “Licensee Party” has the meaning set forth in Section 3.7(a).

     “Licensee” means Buyer and/or its current and future wholly-owned Subsidiaries.

     “Licensor Party” has the meaning set forth in Section 3.7(a).

     “Lien” means any lien, security interest, pledge or other similar encumbrance.

     “Limited License-Back Patents” means those Patents on Schedule 3.12, as such Schedule is created in accordance with Section 3.12.

     “Litigation” means any action, suit, litigation, arbitration proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving any court or other Governmental Authority or any arbitrator or arbitration panel.

     “Loss” or “Losses” means all claims, losses, liabilities, damages, costs and expenses, including, without limitation, reasonable attorneys’ fees; provided, that (i) Losses shall not include consequential damages, special damages, punitive damages or lost profit and other indirect damages; provided, however, that in the event any Losses are incurred by the Atmel Indemnitees arising out of or relating to breach or violation by Buyer of its covenants and agreements contained in Section 12.5(a) or (c) of this Agreement, Atmel’s Losses shall include any damages suffered by directors, officers or employees of Atmel as a result of Buyer’s breach or violation thereof as enforced in the US against such individual directors, officers or employees and (ii) for purposes of computing Losses incurred by an Indemnitee, there shall be deducted an amount equal to the amount of any insurance proceeds, indemnification payments, contribution payments or reimbursements, and

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any Tax benefits, actually received or receivable by such Indemnitee or any of such Indemnitee’s Affiliates in connection with such Losses or the circumstances giving rise thereto.

     “Net Balance” means the difference between the Current Assets and the Current Liabilities.

     “NFC Secure Element” means a Secure IC that (i) is sold in die form, (ii) is certified at common criteria EAL 4+ or higher, has received EMVco certification, or is certified under another comparable security standard at the time of sale by Licensee; and (iii) has, as its sole external interface, a secure integrated digital interface to a Near Field Communication standard (“NFC”) integrated circuit (or a functionally equivalent near field communication integrated circuit).

     “Non-Compete Term” has the meaning set forth in Section 12.7(a).

     “Non-Copyable Technology” means tangible embodiments and tangible forms of technology other than Equipment not capable of being copied without incurring material costs, such as hardware, prototypes, models and reticles.

     “Open Purchase Orders” means Contracts with Business Customers or under purchase orders, offers to purchase or other purchase requests or commitments (such as RFQs) with Business Customers related exclusively to the Business and issued to Atmel Sarl for products manufactured and sold in the Business that remain unfulfilled or for which invoices have not been issued and products not yet shipped as of the Closing Date.

     “Opinion” has the meaning set forth in the Recitals.

     “Orders” means all judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of any Governmental Authority.

     “Ordinary Course” means the ordinary course of business consistent with the past custom and practice of the Business as conducted by Atmel France and Atmel UK.

     “Other Current Assets” means receivables from employee loans and advances, non-trade accounts receivables, prepaid VAT, prepaid royalties, other prepayments and receivables from Government Authorities with respect to R&D grants and subsidies related to the Business.

     “Other Foundry” means each foundry not owned by Atmel that is identified as an Other Foundry on Exhibit D attached to the Core License Agreement.

     “Party” means any of the parties to this Agreement, and “Parties” means all of the parties to this Agreement.

     “Patents” means any issued patent or any pending patent application (including, without limitation, provisional patent applications, continuations, continuations in part, divisionals and reissues), or any similar intellectual property rights in any jurisdiction.

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     “Permitted Lien” shall mean any (i) Lien in respect of Taxes, if due, the validity of which is being contested in good faith by appropriate proceedings during which collection or enforcement is stayed, or Liens in respect of Taxes not yet due and payable, (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, (iii) with respect to leasehold interests, mortgages and other Liens incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased real property, (iv) limitations on the rights of Atmel, any Selling Subsidiary or Transferred Entity under any Material Contract that are expressly set forth in such contract, (v) any non-exclusive licenses or non-exclusive grants to use any Intellectual Property Rights in ordinary course, (vi) any Lien in respect of capital and operating leases or similar arrangements, and (vi) any Lien which would not have, or would not be reasonably expected to have, a Business Material Adverse Effect.

     “Person” means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, works council, committee of works council, labor union, other employee representative body, foreign trust or foreign business organization.

     “PEZA” means the Philippine Economic Zone Authority.

     “Philippines” means the Republic of the Philippines (Republika ng Pilipinas).

     “Potential Transaction” has the meaning set forth in Section 12.21.

     “Pre-Closing Date Share” means (a) with respect to any Income Tax liability for a Straddle Period, the amount that would be due for the portion of the tax period beginning on the first day of the Straddle Period and ending on the Closing Date, based on an interim closing of the books as of the close of business on the Closing Date, and (b) with respect to any other Tax liability for a Straddle Period, the total amount due for the entire Straddle Period, multiplied by (x) the number of days in the Straddle Period on or before the Closing Date divided by (y) the total number of days in the Straddle Period.

     “Preliminary Earnout Payment” has the meaning set forth in Section 2.10(b).

     “Preliminary Working Capital Statement” means a net working capital statement including only those line items as set forth in Schedule 1.1(d) attached hereto, setting forth the calculation of the amount, if any, by which the Current Assets as of the opening of business on a date no later than five (5) Business Days prior to the Closing Date exceed the Current Liabilities as of the opening of business on a date no later than five (5) Business Days prior to the Closing Date prepared in accordance with the Accounting Principles, with the exception that inventory shall be stated on a gross cost basis, excluding any financial reserves, and to the extent such Current Assets and Current Liabilities exist with respect to the Business and should be accounted for as of the Closing Date in accordance with the Accounting Principles, with the exception that inventory shall be stated on a gross cost basis, excluding any financial reserves.

     “Preliminary Working Capital” has the meaning set forth in Section 2.9(a).

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     “Probe and Test Services Agreement” means the Probe and Test Services Agreement between ACP and Buyer, substantially in the form attached hereto as Exhibit F.

     “Process Technology” means any semiconductor wafer manufacturing process Technology.

     “Project Nevis” means the transfer of backend operations from Atmel UK to ACP, completed as of August 19, 2009.

     “Project Nevis Redundancy Program” means the collective redundancy program implemented by Atmel UK as a part of Project Nevis from April 10, 2009 to August 28, 2009, pursuant to which 63 former employees of Atmel UK were terminated.

     “Property” means the underlying land and Building 0 and the parking spaces situated on such land and near such building, which land and building are described in Schedule 1 to this Agreement.

     “Purchase Price” has the meaning set forth in Section 2.8.

     “Real Property Leases” has the meaning set forth in Section 4.8(a).

     “Recipients” has the meaning set forth in Section 12.26(c).

     “Restraints” has the meaning set forth in Section 13.1(a).

     “Restricted Entity” means one of the following Persons or their Affiliates or successors: Freescale, Microchip, NXP, Renesas, Samsung, ST Micro and Texas Instruments.

     “Restricted IPR” means any Intellectual Property Rights or Technology of Atmel, the Selling Subsidiaries or the Transferred Entities which but for the restrictions imposed by a Governmental Authority or a third party (including other co-owners of the Intellectual Property Rights or Technology and consortium partners) will be transferred to Buyer in accordance with the terms of this Agreement, and includes in the case of Patents those listed, and in the case of the other Intellectual Property Rights or Technology that which is described, on Schedule 2.5(a)(ii).

     “Restriction Period” has the meaning set forth in Section 12.7(d).

     “Roadmap Product” means a product listed as such on Schedule 1.1(b) hereto.

     “Roadmap Secure Product” has the meaning set forth in the Core License Agreement.

     “Sale” of an item means the sale, or other transfer of that item (“Sold,” “Sell,” and other forms of “Sale” shall have the same meaning).

     “Secure AVR Core” has the meaning set forth in the Core License Agreement.

     “Secure IC” means an integrated circuit marketed and Sold only for Security applications that includes both (i) an implementation of the Secure AVR Core (including Licensed Modifications

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thereto) and (ii) substantial features or functionality beyond those provided by the Secure AVR Core alone, where either (A) the design of such features and functionality is either owned by, or licensed to, Licensee without restriction as to whom Licensee may Sell the Licensed Product (other than restrictions intended to maintain the Security of the design or the secure nature of the product into which the third party’s design is incorporated) that incorporates such design or (B) the design of such features and functionality is, in whole or in part, either owned or controlled by a third party, but the integrated circuit is Sold only to such third party and only for incorporation by such third party into its boards or systems that add material value to the integrated circuit.

     “Secure Microcontroller Commercialization Term” means from the Effective Date until three (3) years thereafter.

     “Secure Microcontroller” means an integrated circuit comprised of a general purpose microcontroller with additional processing and logic circuitry (irrespective of whether such integrated circuit is contained in a wafer, die or integrated with other parts in a module or system) designed primarily to enable Security.

     “Security” means protection against unauthorized reading, modification or replay of encrypted, authenticated or other content.

     “Selling Subsidiaries” has the meaning set forth in the Recitals.

     “Separately Provided IPR” means Intellectual Property Rights licensed or made available by Atmel to Buyer or any of the Transferred Entities under any Ancillary Agreement.

     “Signed LFoundry Term Sheet” has the meaning set forth in Section 12.20(a).

     “Smart Card Reader” means an integrated circuit made by a Standard Core Foundry for Licensee that (i) is Sold by Licensee under Licensee’s own brand name, (ii) includes an implementation of the Standard AVR Core, (iii) is a product listed on Exhibit C-2 attached to the Core License Agreement, and (iv) is specifically identified, marketed and Sold by Licensee as intended, licensed, Sold, supported and warranted only for use as a smart card reader.

     “Smart Card” means a portable card (including, without limitation, a personal banking card, a credit card, a transport or fare card, an identification card or passport, a pay television card or a mobile telephony SIM card), that is powered solely from an external host power source or by an RF signal, and that incorporates a Secure Microcontroller containing either (i) an integrated ISO 7816, 14443 or 15693 interface, or (ii) an integrated digital interface to an NFC integrated circuit.

     “Smart Display Token” means a personally portable card that is powered from an integrated battery power source and that is designed, marketed and sold solely for personal use by the end customer to implement a secure transaction, which card incorporates a Secure Microcontroller that (i) is certified at common criteria EAL 4+ or higher, has received EMVco certification, or is certified under another comparable security standard at the time of sale by Licensee, (ii) interfaces to an integrated limited text only display unit the only purpose of which is to show a calculated

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cryptogram that is initiated by itself or by an external event, and (iii) has, as its sole external interface, a secure integrated digital interface to either or both (i) an integrated ISO 7816, 14443 or 15693 interface, or (ii) an NFC integrated circuit (or a functionally equivalent near field communication integrated circuit).

     “Smart Secure Chip Commercialization Term” means from the Effective Date until six (6) years thereafter.

     “Smart Secure Product” means a portable card (including, without limitation, a personal micro SD or other banking card, a credit card, a transport or fare card, an identification card or passport, a pay television card or a mobile telephony SIM card), USB dongle, keyring, or contactless key fob that are powered solely from an external host power source or by an RF signal, a Smart Display Token, or a Future Form Factor Product, and that incorporates a Secure Microcontroller containing either or both (i) an integrated ISO 7816, 14443 or 15693 interface, or (ii) an integrated digital interface to an NFC integrated circuit.

     “Software” means computer software or firmware in either or both object and source code forms and associated documentation.

     “Special IP Claim Liability Cap” has the meaning set forth in Section 16.2(a)(ii).

     “Special IP Claim” has the meaning set forth in Section 16.2(a)(iii).

     “Special IP Losses” has the meaning set forth in Section 16.2(a)(i).

     “Standard AVR Core” has the meaning set forth in the Core License Agreement.

     “Standard Cell Library License Agreement” means the Standard Cell Library License Agreement by and between Atmel and Buyer, substantially in the form attached hereto as Exhibit I.

     “Standard Core Foundry” means each Standard Core Foundry identified in Exhibit D attached to the Core License Agreement, including any Subsequently Authorized Foundries specifically approved and designated in writing in advance by Atmel to be a Standard Core Foundry.

     “Straddle Period” means any taxable period beginning on or before the Closing Date and ending after the Closing Date.

     “Subsequently Authorized Foundry” means a foundry not owned by Atmel that has been approved by Atmel in writing to be an Authorized Foundry. As of the Effective Date Atmel has approved each of the following foundries to be a Subsequently Authorized Foundry (but only with respect to Licensed Secure Products): Taiwan Semiconductor Manufacturing Company, Ltd., GlobalFoundries, Inc., Semiconductor Manufacturing International Corporation, and Grace Semiconductor Manufacturing Corporation. It is understood and agreed that implementation and manufacturing of Licensed Products at Subsequently Authorized Foundries shall be the

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responsibility of Licensee, and that no license is granted to Licensee or any Subsequently Authorized Foundry to use any Atmel manufacturing process.

     “Subsidiary” means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, (a) of which such Person or any other Subsidiary of such Person is a general partner (excluding partnerships, the general partnership interests of which held by such Person or any Subsidiary of such Person do not have a majority of the voting interests in such partnership), or (b) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

     “Switzerland” means the Swiss Confederation (Confoederatio Helvetica).

     “Target Working Capital” means Twenty Five Million Two Hundred Thirty-Three Thousand US dollars (US$25,233,000).

     “Tax Contest” shall mean any audit, hearing, proposed adjustment, arbitration, deficiency, assessment, suit, dispute, claim, proceeding or other Litigation commenced, filed or otherwise initiated or convened to investigate or resolve the existence and extent of a liability for Taxes.

     “Tax Liabilities” means trade tax and other Tax liabilities attributed to the Business and accrued but not yet paid by Atmel, the Selling Subsidiaries or the Transferred Entities.

     “Tax Return” means any report, return, statement or other written information (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied by Atmel or a Selling Subsidiary to a Taxing Authority in connection with any Taxes as related only to transactions specified within this agreement and any amendment thereto. For avoidance of doubt, this includes VAT taxes, sales taxes, stamp taxes, transfer taxes, withholding taxes, and similar tax returns that are required to be reported as a direct result of the Contemplated Transactions. This does not include normal income tax and payroll tax returns of Atmel or Selling Subsidiaries which remain the liability of Atmel and not Buyer’s Tax Returns.

     “Tax” or “Taxes” means all federal, state, local and foreign income (including but not limited to corporate income and alternative minimum tax), capital gains, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, social security, sales, employment, unemployment, disability, use, property, withholding, excise production, value added, occupancy, transfer taxes, and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties or additions to tax attributable to such taxes and any liability arising under any tax sharing agreement or any liability for Taxes of another Person by Contract, as a transferee or successor, under Treasury Regulation §1.1502-6 or analogous state, local or foreign Law, whether disputed or not including but not restricted to Law of countries where Assets are located or the Business is operated. For the avoidance of doubt, payroll Taxes shall include all mandatory

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payments and contributions under French Law, including wage withholding tax (retenue à la source sur traitements et salaires), national social security contributions (cotisations de sécurité sociale), employee social security contributions (cotisations de sécurité sociale part employé) and any other social contribution (CSG, CRDS). In addition, and without limiting the foregoing, (i) the following Taxes under French Law are also included: value added tax (TVA), customs and excise duties (droits de douanes et accises), capital tax and other legal transaction taxes (impôts sur plus-values et transactions et autres droits d’actes), withholding tax (retenue à la source ) on royalties, dividends and other revenue, dividend withholding tax (retenue à la source sur dividendes), business tax (taxe professionnelle), equalization tax (précompte), property tax (taxe foncière), registration tax (droits d’enregistrement), stamp duties (droits de timbre), customs duties (droits de douanes), taxes based on salaries (taxe sur les salaires), tax-assimilated levies (taxes parafiscales), excise (accise), real estate taxes (taxes immobilières locales), other municipal taxes and duties (autres droits et taxes locales), environmental taxes (taxes environementales) and duties and any other type of taxes, levies, imposts, charges or duties in any relevant jurisdiction together with any interest (intérêt de retard), penalties (pénalités), surcharges (contributions additionnelles) or fines (amendes) as those terms are defined under French Law, (ii) the following Taxes under the Laws of England and Wales are also included: corporation tax, income tax, value added tax and capital gains tax, stamp duty, stamp duty reserve tax, stamp duty land tax and national land insurance contributions, and (iii) the following Taxes under Swiss Law are also included: corporate income and capital tax (impôt fédéral direct, impôts directs des cantons et des communes), withholding taxes (impôt anticipé) and value added tax (taxe sur la valeur ajoutée).

     “Taxing Authority” shall mean any government or any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body, having jurisdiction over the assessment, determination, collection or other imposition of Taxes.

     “Technology” means Copyable Technology and Non-Copyable Technology, it being understood that Technology does not include Intellectual Property Rights.

     “Third Party Licensor” has the meaning set forth in Section 16.2(a)(iii).

     “Trade Secrets” has the meaning set forth in the definition of Intellectual Property Rights.

     “Trademarks” has the meaning set forth in the definition of Intellectual Property Rights.

     “Transaction Confidential Information” means has the meaning set forth in Section 12.26(a).

     “Transfer Taxes” means all transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with the purchase and sale of the Assets and/or the UK Ordinary Shares or the Vault-IC Shares (including any transfer or similar Tax imposed by any Governmental Authority). For the avoidance of doubt, Transfer Taxes do not include any taxes based upon or measured by income or gains, which shall be paid entirely by Atmel and the Selling Subsidiaries.

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     “Transferred Contracts” means the Atmel Transferred Contracts, the France Transferred Contracts and the Atmel Sarl Transferred Contracts.

     “Transferred Copyrights” has the meaning set forth in the definition of Transferred Other IPR.

     “Transferred Entities” means Atmel UK and Vault-IC.

     “Transferred Entity Employees” means the employees of Atmel UK and Vault-IC.

     “Transferred Equipment” means the France Transferred Equipment and the UK Transferred Equipment.

     “Transferred IPR” means (a) the Transferred Patents, and (b) the Transferred Other IPR.

     “Transferred Other IPR” means, other than Intellectual Property Rights that are Excluded Assets: (A) the Intellectual Property Rights (other than Patents, Copyrights and Trademark Rights) owned by Atmel or the Selling Subsidiaries exclusively embodied by the Transferred Technology and Intellectual Property Rights (other than Patents, Copyrights and Trademark Rights) owned by the Transferred Entities, and (B) the Copyrights owned by Atmel or the Selling Subsidiaries to the extent embodied by Software that is exclusively used in Business and listed on Schedule 2.3(b)(ii)(A)(2) and Copyrights owned by the Transferred Entities (“Transferred Copyrights”).

     “Transferred Patents” means the Patents (including applications) identified on Schedule 2.3(b)(ii)(A)(1).

     “Transferred Technology” means all Technology (other than Technology that is an Excluded Asset) owned by Atmel that (i) if Non-Copyable Technology, is used exclusively in the Business as of the Closing and which if material is listed in Schedule 2.3(b)(ii)(C), and (ii) if Copyable Technology, a copy thereof is used in the Business as of the Closing. Transferred Technology does not include any Technology that is an Excluded Asset.

     “Transferred Trademarks” means the (i) registered Trademarks (including applications); and (ii) such trademark rights as Atmel may have in the terms identified as “Unregistered Marks”, as set forth on Schedule 2.3(b)(ii)(B).

     “Transition Services Agreement” means the Transition Services Agreement between Atmel and Buyer, substantially in the form attached hereto as Exhibit G.

     “Transaction Confidential Information” has the meaning set forth in Section 12.26.

     “Treasury Regulations” means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).

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     “UK Ordinary Shares” has the meaning set forth in Section 4.3(a).

     “UK GAAP” means generally accepted accounting principles in the UK, being all laws and regulations, including accounting standards and published practice and guidance, establishing how company accounts must be prepared in the UK.

     “UK Governmental Consents” has the meaning set forth in Section 4.5(a).

     “UK Leased Real Property” has the meaning set forth in Section 4.8(a).

     “UK Liabilities” means the trade accounts payables of Atmel UK (both accrued and invoiced from vendors), Employee Liabilities related to the Atmel UK Employees, tax liabilities, and the potential repayment claim under the Regional Selective Assistance (RSA) grants from the Enterprise, Energy and Tourism Directorate of the Scottish government.

     “UK Material Contracts” has the meaning set forth in Section 4.9(a).

     “UK Real Property Leases” has the meaning set forth in Section 4.8(a).

     “UK Transferred Equipment” means all Fixed Assets owned by Atmel UK, used exclusively in the Business as of the Closing and which if material are listed in Section 4.13(a) of the Atmel Disclosure Schedule.

     “UK” or “United Kingdom” means the United Kingdom of Great Britain and Northern Ireland.

     “Unaudited Balance Sheet” has the meaning set forth in Section 7.7(a).

     “US GAAP” means generally accepted accounting principles in the United States applied on a consistent basis.

     “US” or “United States” means the United States of America.

     “Vault-IC Articles of Association” has the meaning set forth in Section 12.17.

     “Vault-IC Employees” has the meaning set forth in Section 6.6(a).

     “Vault-IC Shares” has the meaning set forth in the Recitals.

     “Vault-IC” has the meaning set forth in the Recitals.

     “Wafer Purchase Agreement” means the Wafer Purchase Agreement between Atmel and Buyer, substantially in the form attached hereto as Exhibit C.

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     “WIP” means those assets of the Business consisting of (i) silicon wafers that have been delivered from a wafer fab or foundry and (ii) semiconductor die that are in the process of being assembled into modules or packages.

     “2010 Earnout Payment” has the meaning set forth in Section 2.10(a).

     “2010 Earnout Period” means the period from July 1, 2010 and ending on December 31, 2010.

     “2010 Earnout Target” has the meaning set forth in Section 2.10(a).

     “2011 Additional Earnout Payment” has the meaning set forth in Section 2.10(a).

     “2011 Earnout Payment” has the meaning set forth in Section 2.10(a).

     “2011 Earnout Period” means the period from January 1, 2011 and ending on December 31, 2011.

     “2011 Earnout Target” has the meaning set forth in Section 2.10(a).

      1.2 Rules of Construction. Unless the context otherwise requires:

          (a) A capitalized term has the meaning assigned to it;

          (b) An accounting term not otherwise defined has the meaning assigned to it in accordance with the Accounting Principles;

          (c) References in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;

          (d) References to Articles and Sections and Exhibits shall refer to articles and sections and exhibits of this Agreement, unless otherwise specified;

          (e) The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof;

          (f) This Agreement shall be construed without regard to any presumption or other rule requiring construction against the Party that drafted and caused this Agreement to be drafted;

          (g) No prior draft of this Agreement nor any course of performance or course of dealing will be used in the interpretation or construction hereof;

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          (h) All monetary figures shall be in United States dollars unless otherwise specified;

          (i) References to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified;

          (j) References to “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

          (k) References to any Law or to any provision of any Law will include any modification, amendment or re-enactment thereof, any legislative provision substituted therefore and all rules, regulations and statutory instruments issued or related to such Law;

          (l) References to a Person are also to its permitted successors and assigns;

          (m) The contents of the Atmel Disclosure Schedule, Buyer Disclosure Schedule and the other schedules form an integral part of this Agreement and shall have as full effect as if they were incorporated in the body of this Agreement and any reference to “this Agreement” shall be deemed to include such schedules;

          (n) No parol evidence will be introduced in the construction or interpretation of this Agreement unless the ambiguity or uncertainty in issue is plainly discernable from a reading of this Agreement without consideration of any extrinsic evidence; and

          (o) The phrase “made available to Buyer” in this Agreement shall mean (i) either posted or existing in the electronic data room established by Atmel to the extent Buyer or its advisors or counsel had access to such materials prior to the date hereof or actually delivered or presented to Buyer or its advisors or counsel prior to the date hereof or (ii) delivered to Buyer or its advisors or counsel in connection with the modification, amendment and/or supplement to the Atmel Disclosure Schedule as contemplated by this Agreement.

ARTICLE II
PURCHASE AND SALE

     2.1 Closing. The closing of the Contemplated Transactions (the “Closing”) will take place at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, located at 65-67, Avenue des Champs Elysées, 75008, Paris, France or any other location that Atmel and Buyer agree, at 1:00 P.M. Paris time on the tenth Business Day immediately following the day on which the last of the conditions set forth in ARTICLE XIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) are satisfied or waived in accordance with this Agreement, or on such other date as Buyer and Atmel may otherwise agree. The day on which the Closing actually occurs is referred to herein as the “Closing Date”.

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     2.2 French Dropdown. On or before the Closing Date, Atmel shall have procured that the assets set forth in the Contribution Agreement, the form of which is attached hereto as Exhibit K, shall have been contributed in kind by means of an apport simple pursuant to the provisions of Article L. 236-22 and Article R. 236-1 of the French Commercial Code to Vault-IC, a French société par actions simplifiée registered with the registry of commerce and companies of Paris, France, with its registered office located at Paris, France, with a share capital of one thousand Euros (€1,000) divided into one thousand (1,000) Vault-IC Shares with a nominal value of one euro (€1), which shall be incorporated between the day of execution hereof and the Closing Date. In particular, without limitation, the following items shall be transferred to Vault-IC whether by contribution by means of an asset transfer under French Law (apport simple) as described in this Section 2.2 or by virtue of this ARTICLE II:

          (a) the France Transferred Equipment as listed in Schedule 2.2(a);

          (b) Atmel France’s right, title and interest in and to the Intellectual Property Rights resulting from Funded Projects that relate to the Business as listed in Schedule 2.2(b);

          (c) the France Transferred Technology; and

          (d) all Atmel France Employees who exclusively or primarily work for or whose functions are exclusively or primarily related to the Business as conducted by Atmel France, including all support employees whose skills and responsibilities are exclusively or primarily related to the Business as conducted by Atmel France, and who are listed on Schedule 2.2(d) hereto, together with any contracts, agreements, commitments and all other legally binding arrangements relating to such Atmel France Employees, including without limitation with respect to the employment, severance, bonus, compensation, pension, or collective rights of such Atmel France Employees.

     2.3 Sale and Purchase of Shares and the Assets Other than Those Owned by the Transferred Entities.

          (a) Sale and Purchase of Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall:

               (i) sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel’s right, title and interest in and to the UK Ordinary Shares; and

               (ii) cause Atmel France to sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel France’s right, title and interest in and to the Vault-IC Shares.

          (b) Sale and Purchase of Assets Other than Those Owned by the Transferred Entities. For the purposes of this Agreement, “Assets” shall mean the assets and properties set forth in Sections 2.3(b)(i) through (iv) below used in the Business (which shall not in any event include

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the Vault-IC Shares, the UK Ordinary Shares or any of the Excluded Assets), together with such changes, deletions or additions occurring between the date hereof and the Closing Date in the ordinary course of business (provided, however, that for the purposes of this Section 2.3(b), and notwithstanding anything to the contrary, none of the assets and properties owned or held by Atmel UK shall be included within any of the assets set forth in Sections 2.3(b)(i) through (iv) below).

               (i) France. Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall cause Atmel France to sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel France’s right, title and interest in and to:

                    (A) the France Transferred Contracts; and

                    (B) Atmel France’s right, title and interest in and to the Consortium Agreements listed in Schedule 2.3(b)(i)(B).

               (ii) United States. Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel’s right, title and interest in and to:

                    (A) the Transferred IPR;

                    (B) the Transferred Trademarks, and all goodwill of the Business appurtenant thereto;

                    (C) the Transferred Technology; and

                    (D) the Atmel Transferred Contracts.

               (iii) Switzerland.

                    (A) Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall cause Atmel Switzerland to sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel Switzerland’s right, title and interest in and to the Inventory related to the Existing Products.

                    (B) Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall cause Atmel Sarl to sell and transfer to Buyer, and Buyer shall purchase and acquire, all of Atmel Sarl’s right, title and interest in and to:

                         1. the rights, benefits and interests under Open Purchase Orders; and

                         2. the Atmel Sarl Transferred Contracts.

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               (iv) Philippines. Subject to the terms and conditions set forth in this Agreement, at the Closing, Atmel shall cause ACP to sell and transfer to Buyer, and Buyer shall purchase and acquire, all of ACP’s right, title and interest in and to the ACP Equipment.

     2.4 Non-Assignability.

          (a) Non-Assignable Assets. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement, requirement or obligation to transfer or assign any property or asset to Buyer or Vault-IC if the attempted transfer thereof, without the consent or approval of any Person other than the Parties and their Affiliates (including approvals by Government Authorities), would constitute a breach of any Contract or obligation of Atmel or any of the Selling Subsidiaries, would constitute a violation of any Laws or Contracts, or would in any way adversely affect the rights of Atmel or any of the Selling Subsidiaries. Atmel and the Selling Subsidiaries shall use their respective commercially reasonable best efforts to obtain such consents or approvals. If such consent or approval is not obtained, or if an attempted transfer of any property or asset would be ineffective, would constitute a breach or violation of any Law or Contract or would adversely affect the rights (other than those rights to be transferred under the Transferred Contracts) of Atmel or any of the Selling Subsidiaries, Atmel will, or will cause the Selling Subsidiaries to, to the extent not prohibited by or not in breach of any Contract or violation of any Laws, (a) cooperate with Buyer in any commercially reasonable arrangement which does not materially adversely impact Atmel and the Selling Subsidiaries and which is designed to provide for Buyer the benefits in relation to any such property or asset, including, to the extent reasonably necessary and to the extent that such arrangement does not violate any Law or Contract, the right to use such property or asset and, enforcement for the benefit of Buyer (at Buyer’s cost) of any and all rights of Atmel and/or the Selling Subsidiaries against a third party thereto, (b) hold all monies paid to Atmel and/or the Selling Subsidiaries thereunder on and after the Closing Date in trust for the account of Buyer, and (c) remit such money to Buyer as promptly as possible after receipt. Any transfer or assignment to Buyer or Vault-IC by Atmel and/or the Selling Subsidiaries of any property or assets which shall require the consent or approval of any third party (including approvals by Governmental Authorities) shall be made subject to such consent or approval being obtained; provided, that such transfer or assignment shall not require Buyer to make any additional payments to Atmel for such transfer, it being understood that Buyer shall be responsible for the costs and expenses of registration, perfection or other costs and expenses related to owning or exercising the rights and benefits acquired herein.

          (b) Non-Assignable Contracts. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement, requirement or obligation to transfer or assign any Transferred Contract or Consortium Agreement to Buyer or Vault-IC if the attempted transfer or assignment thereof, without the consent or approval of a third party thereto (including approvals by Government Authorities), would constitute a breach of any Contract or obligation of Atmel or any of the Selling Subsidiaries, would constitute a violation of any Laws or Contracts, or would in any way adversely affect the rights (other than those rights to be transferred under the Transferred Contracts) of Atmel or any of the Selling Subsidiaries thereunder. Atmel and the Selling Subsidiaries shall use their respective commercially reasonable best efforts to obtain such consents

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or approvals. If such consent or approval is not obtained, or if an attempted transfer or assignment of any Transferred Contract or Consortium Agreement would be ineffective, would constitute a breach or violation of any Law or Contract or would adversely affect the rights of Atmel or any of the Selling Subsidiaries thereunder, Atmel will, or will cause the Selling Subsidiaries to, to the extent not prohibited by or not in breach of any Contract or violation of any Laws, (a) cooperate with Buyer in any commercially reasonable arrangement which does not materially adversely impact Atmel and the Selling Subsidiaries and which is designed to provide for Buyer the benefits under or in relation to any such Transferred Contract or Consortium Agreement, including, to the extent reasonably necessary and to the extent that such arrangement does not violate any Law or Contract, the right to enjoy the benefits under those Transferred Contracts or Consortium Agreements and enforcement for the benefit of Buyer (at Buyer’s cost) of any and all rights of Atmel and/or the Selling Subsidiaries against a third party thereto, (b) hold all monies paid to Atmel and/or the Selling Subsidiaries thereunder on and after the Closing Date in trust for the account of Buyer, and (c) remit such money to Buyer as promptly as possible after receipt. Any transfer or assignment to Buyer or Vault-IC by Atmel and/or the Selling Subsidiaries of any Transferred Contract or Consortium Agreement which shall require the consent or approval of any third party (including approvals by Governmental Authorities) shall be made subject to such consent or approval being obtained; provided, that such transfer or assignment shall not require Buyer to make any additional payments to Atmel for such transfer, it being understood that Buyer shall be responsible for the costs and expenses of registration, perfection or other costs and expenses related to owning or exercising the rights and benefits acquired herein.

          (c) Restricted IPR.

               (i) Atmel and the Selling Subsidiaries shall use their respective commercially reasonable best efforts to obtain such consents or approvals as are necessary to transfer the Restricted IPR to Buyer, provided that Atmel’s sole obligation to incur costs in doing so is as set forth in this Section 2.4(c). Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement, requirement or obligation to transfer any of the Restricted IPR. Subject to Section 2.4(c)(ii) of this Agreement, if the Restricted IPR remains subject to the particular restriction which had initially caused such Intellectual Property Rights or Technology to be Restricted IPR or if the relevant Governmental Authority or third party (including other co-owners of Intellectual Property Rights or Technology and consortium partners) does not approve the transfer and assignment to Buyer or Vault-IC of the Restricted IPR pursuant to the agreements, terms and conditions and other requirements of such Governmental Authority or third party, Atmel will, or will cause the Selling Subsidiaries to (a) to the extent not prohibited by or not in breach of any Contract or violation of any Laws, cooperate with Buyer in any commercially reasonable arrangement which does not materially adversely impact Atmel and the Selling Subsidiaries and which is designed to provide for Buyer the benefits in relation to the Restricted IPR and (b) for Restricted IPR that would otherwise be Transferred IPR grant as of the Closing Date a worldwide, irrevocable, non-terminable (except as terminated under Section 2.4(c)(ii) below), royalty-free, fully paid up, non-exclusive, right and license to use all rights in said Restricted IPR, to conduct the Business and future businesses and operations of Buyer or Vault-IC. If the transfer of Restricted IPR would require payment to a third party, Atmel will be responsible for the payment of

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up to the first Five Hundred Thousand US dollars (US$500,000) plus 50% of each dollar in excess of such amount up to an additional Five Hundred Thousand US dollars (US$500,000) (with Buyer paying the other 50%) in aggregate required for such transfer or transfers of Restricted IPR. Accordingly, Atmel shall not be required to pay in excess of One Million US dollars (US$1,000,000) in the aggregate for the transfer of any Restricted IPR.

               (ii) To the extent that within twelve (12) months of the Closing any Intellectual Property Right or Technology that is Restricted IPR becomes no longer subject to the particular restriction which had initially caused such Intellectual Property Rights or Technology to be Restricted IPR or if the relevant Governmental Authority or third party (including other co-owners of Intellectual Property Rights or Technology and consortium partners) approves the transfer and assignment to Buyer and Vault-IC of the Restricted IPR pursuant to the agreements, terms and conditions and other requirements of such Governmental Authority or third party, then any such Restricted IPR shall become Transferred IPR and the Parties shall execute a written instrument and any other document to transfer and/or license such Intellectual Property Rights consistent with the terms of this Agreement and the requirements of any Governmental Authority or third party and terminate consequently the license to the Restricted IPR provided in Section 2.4(c)(i) above. Notwithstanding the foregoing, no rights are transferred, granted or implied with respect to Restricted IPR until the required approvals are obtained and such written instrument or document is executed.

     2.5 Excluded Assets.

          (a) Other than the Assets, Buyer shall not acquire, and Atmel and the Selling Subsidiaries shall not sell, transfer, assign or deliver to Buyer or Vault-IC, as the case may be, any right, title to or interest in any of the following assets, regardless of whether such assets are owned by Atmel, the Selling Subsidiaries or the Transferred Entities (the “Excluded Assets”):

               (i) all Trademarks other than the Transferred Trademarks (including “Atmel,” “AVR,” “SecureAVR” or any of the trade names or common law names of Atmel, the Selling Subsidiaries or their Affiliates on any product, services or technology developed, held or sold by Atmel, Selling Subsidiaries and their Affiliates);

               (ii) all Restricted IPR (other than Restricted IPR that becomes Transferred IPR as a result of approvals from Government Authorities and third parties under Section 2.4(c) above);

               (iii) all Licensed IPR, Separately Provided IPR and all Intellectual Property Rights that are not Business IPR;

               (iv) all Excluded Technology;

               (v) any rights to refunds of Atmel’s Taxes paid or owed by Atmel, the Transferred Entities, the Selling Subsidiaries or their Affiliates;

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               (vi) any data and records to the extent relating to Tax liabilities, potential Tax liabilities, or refunds of Taxes relating to the Business or the Transferred Entities with respect to taxable periods or portions thereof, ending on or before the Closing Date;

               (vii) all minute books, stock records and charter documents, corporate seals and other books, records or documents relating to the corporate organization of Atmel and the Selling Subsidiaries, existence or capitalization of Atmel and the Selling Subsidiaries, as well as any other records or materials relating to Atmel and the Selling Subsidiaries generally and not relating exclusively to the Assets, the Business, or the Transferred Entities;

               (viii) all consideration received by, and all rights of, Atmel and the Selling Subsidiaries pursuant to this Agreement or the Ancillary Agreements;

               (ix) all cash (including checks received before the Closing Date, whether or not deposited or cleared before such date) and cash equivalents (including marketable securities, commercial paper, certificates of deposit and other bank deposits and other short term investments) and deposits (or rights thereto) held by Atmel, the Transferred Entities and the Selling Subsidiaries whether or not related to the Business;

               (x) any amounts due to Atmel, the Transferred Entities or the Selling Subsidiaries from their Affiliates before Closing;

               (xi) all rights of Atmel and the Selling Subsidiaries relating to deposits and prepaid expenses, claims for refunds or credits and rights to offset in respect thereof, of the Business;

               (xii) all accounts and notes receivable, unbilled revenues, reimbursable costs and expenses and other claims for money due to Atmel, the Selling Subsidiaries or the Transferred Entities other than those under Open Purchase Orders; and

               (xiii) all insurance benefits, including rights and proceeds from insurance policies applicable to the Business.

          (b) It is acknowledged and agreed that prior to the Closing, Atmel will divest the Transferred Entities of any tangible or intangible asset owned or leased by a Transferred Entity that would not otherwise be considered an Asset if not owned by such entity, and any such tangible or intangible asset held by a Transferred Entity before Closing shall not transfer pursuant to this Agreement. For the avoidance of doubt, none of the assets of Atmel UK at the time of the Closing, all of which will be transferred to Buyer by virtue of its purchase of the UK Ordinary Shares, will be considered Excluded Assets for purposes of this Agreement.

     2.6 Assumption of Liabilities. Effective as of the Closing, none of Atmel, Atmel France or the Selling Subsidiaries or any of Atmel’s or the Selling Subsidiaries’ respective directors, shareholders, officers, employees, agents, consultants, representatives, Affiliates, successors or assigns shall have any liability or obligation with respect to, and Buyer shall absolutely and irrevocably assume and be solely liable and responsible for, and thereafter pay, perform and

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discharge when due, all liabilities, duties and obligations of Atmel and the Selling Subsidiaries, to the extent related to or arising from, the Assets and/or the Business, and of the Transferred Entities (including all and any liability for or in relation to Taxes, whenever arising), other than the Excluded Liabilities, as set forth below (collectively, the “Assumed Liabilities”):

          (a) The Assumed Liabilities shall include, without limitation, the following obligations and liabilities arising prior to or at the Closing:

               (i) all obligations and liabilities arising under the Transferred Contracts;

               (ii) all obligations and liabilities under Contracts entered into after the Closing Date;

               (iii) all obligations and liabilities under Open Purchase Orders and related Contracts;

               (iv) all obligations and liabilities with respect to the Business Employees, including, without limitation, liabilities, expenses, costs and obligations arising under or required by the Benefit Plans, collective bargaining agreements, employment agreements, applicable Law or relating to payroll, vacation, sick leave, workers’ compensation and unemployment benefits of any kind applicable to the Business Employees, including Employee Advances, but not including obligations and liabilities related to or arising out of the settlement of all options, restricted stock units or other right to purchase shares of common stock of Atmel which were granted to any Atmel UK Employee or France Employee by Atmel, Atmel UK or Atmel France and which are exercised, in accordance with the terms of the plan, program or arrangement under which such options, restricted stock units or rights were granted, after the Closing Date; and

               (v) all other liabilities set forth on the Audited Balance Sheet.

          (b) The Assumed Liabilities shall include, without limitation the following obligations and liabilities arising after the Closing:

               (i) any liabilities relating to the Business in connection with any Litigation;

               (ii) any liabilities arising under Environmental Law and relating to or arising out of the ownership or operation of the Business or the ownership, use, scrapping, destruction, possession or condition of the Assets;

               (iii) any liabilities for personal injury or property damage, whether in Contract, tort, strict liability or under any other theory, arising from products sold or services rendered by the Business; and

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               (iv) any liabilities from the making, using, selling and purchase or use by customers and end users of any product made, used, sold, purchased or distributed in the Business, including those related to product warranty or quality.

     2.7 Excluded Liabilities. Notwithstanding anything contained in this Agreement to the contrary, the following liabilities and obligations shall be excluded from the Assumed Liabilities (collectively, the “Excluded Liabilities”):

          (a) all liabilities relating to or arising out of the Excluded Assets;

          (b) all liabilities for Taxes with respect to the Business that are Atmel’s Taxes;

          (c) all liabilities with respect to bonus or incentive payments related to the Contemplated Transactions that Atmel has agreed to pay to any of the Employees to the extent not already paid to such Employees before the Closing Date;

          (d) any liabilities relating to the regional aid third Regional Selective Assistance grant referred as “RSA3” received by Atmel UK under the Enterprise, Energy and Tourism Directorate of the Scottish Government, which project started on June 8, 2004;

          (e) any tax liability which may derive from the incorporation of Vault-IC and the Dropdown described in Section 2.2 above;

          (f) any liability directly relating to a conclusive finding that Atmel is liable for infringing the EU competition rules in Case No. COMP/39574 – Smart Card Chips; and

          (g) any liability related to disputes or claims made by the former employees of Atmel UK who were previously terminated by Atmel UK through the Project Nevis Redundancy Program; provided, that, for the avoidance of doubt, Buyer acknowledges that, pursuant to the terms and conditions of this Agreement and as required by applicable Law, Buyer shall be liable for all liabilities and obligations related to the Employees and any future Employees and the terms and conditions of their employment and arising from any collective redundancy or individual termination of such Employees implemented after the Closing.

     2.8 Payments at the Closing. The consideration to be provided by Buyer for the Vault-IC Shares, the UK Ordinary Shares and the Assets shall be a cash payment of Thirty-Seven Million US dollars (US$37,000,000) and the assumption of the Assumed Liabilities, subject to adjustment in accordance with Sections 2.9 and 2.10 below (the “Purchase Price”). At the Closing, Buyer shall make a cash payment to Atmel of the amount of the Closing Date Consideration Amount. The Closing Date Consideration Amount shall be paid by wire transfer of immediately available funds to such account or accounts as Atmel shall designate not later than two (2) Business Days prior to the Closing. Upon receipt of such Closing Date Consideration Amount, Atmel shall allocate the Closing Date Consideration Amount among Atmel, Atmel France and the Selling Subsidiaries in the manner agreed between Atmel and Buyer pursuant to Section 2.11. It is expressly acknowledged and agreed by Atmel that Buyer will be released from its obligation regarding the payment of the Closing Date Consideration Amount upon confirmation of receipt of such Closing Date Consideration Amount by Atmel. Buyer shall not be held liable for Atmel’s allocation of the Closing Date

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Consideration Amount, any payments made in accordance with Section 2.9 or any Earnout Payment, between and among Atmel, Atmel France and the Selling Subsidiaries as provided under this Section 2.8. It is expressly provided that the receipt of the funds by Atmel is “on behalf of” Atmel, Atmel France and the Selling Subsidiaries in proportion to the amount of the Purchase Price allocated to each of them pursuant to Section 2.11. As another transfer of separate funds at Closing, Buyer agrees to pay the Escrow Amount to the Escrow Agent at the Closing in cash payable by wire transfer or delivery of other immediately available funds for deposit into the Escrow Account.

     2.9 Purchase Price Adjustment.

          (a) Pre-Closing Adjustment. At least three (3) Business Days prior to the Closing Date, Atmel shall deliver to Buyer the Preliminary Working Capital Statement (including the components thereof in reasonable detail) and a certificate, signed by the Chief Accounting Officer of Atmel, certifying and setting forth Atmel’s calculation of the Net Balance as of the date of the Preliminary Working Capital Statement (the “Preliminary Working Capital”).

               (i) If the Preliminary Working Capital is greater than the Target Working Capital, then Buyer shall pay to Atmel at the Closing, as an adjustment to the Purchase Price, an amount equal to the difference between the Preliminary Working Capital and the Target Working Capital.

               (ii) If the Preliminary Working Capital is less than the Target Working Capital, then Atmel shall deduct from the Purchase Price payable at the Closing, as an adjustment to the Purchase Price, an amount equal to the difference between the Target Working Capital and the Preliminary Working Capital.

               (iii) If the Preliminary Working Capital is equal to Target Working Capital, then there shall be no adjustment to the Purchase Price at the Closing.

          (b) Post-Closing Adjustment. Within sixty (60) days after the Closing Date, Atmel shall prepare and deliver to Buyer the Final Working Capital Statement (including the components thereof in reasonable detail, but without giving effect to the Closing) and a certificate, signed by the Chief Accounting Officer of Atmel, certifying and setting forth Atmel’s calculation of the Net Balance as of the opening of business on the Closing Date (the “Final Working Capital”). During the preparation of the Final Working Capital Statement, and the period of any dispute contemplated herein, (i) Buyer shall provide Atmel and its employees, accountants, attorneys, agents, representatives and financial advisors with reasonable access, on-site or otherwise, during normal business hours, to the books, records and work papers (including to take copies of the same), facilities and employees of the Business as may be necessary in calculating the Final Working Capital or resolving any dispute referred in Section 2.9(d) below, and (ii) pursuant to written request by Buyer, which shall be submitted to Atmel at least five (5) Business Days before the date of any on-site visit, Atmel shall provide Buyer and its employees, accountants, attorneys, agents,

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representatives and financial advisors with reasonable on-site access during normal business hours, for the purpose of conducting an inventory audit of the Inventory and ACP Equipment to confirm the receipt of such assets transferred hereunder.

          (c) Buyer may dispute Atmel’s calculation of the Final Working Capital, but only on the basis that the amounts reflected thereon were not calculated in accordance with this Section 2.9 or were calculated based on a mathematical or clerical error. If Buyer in good faith disagree with Atmel’s calculation of the Final Working Capital, Buyer may, within sixty (60) days after receipt thereof, deliver a written notice of disagreement to Atmel which shall set forth in reasonable detail those amounts or items included in the Final Working Capital as to which Buyer disagrees. If no such notice of disagreement is timely delivered or if Buyer does not dispute Atmel’s calculation of the Final Working Capital, the calculation of the Final Working Capital delivered by Atmel to Buyer pursuant to Section 2.9(b) shall be deemed to be final, conclusive and binding upon the Parties in the form in which it was delivered to Buyer pursuant to Section 2.9(b), and Buyer shall promptly, and in any event within five (5) Business Days after the expiration of the sixty (60) day period referred to above or the receipt of the calculation of the Final Working Capital, pay the amount set forth in Section 2.9(e) to Atmel by wire transfer of immediately available funds to an account or accounts designated by Atmel if the Final Working Capital is greater than the Preliminary Working Capital, or Atmel shall promptly, and in any event within five (5) Business Days after the expiration of the sixty (60) day period referred to above or the receipt of the calculation of the Final Working Capital, pay the amount set forth in Section 2.9(f) to Buyer by wire transfer of immediately available funds to an account or accounts designated by Buyer if the Final Working Capital is less than the Preliminary Working Capital.

     (d) If a notice of disagreement shall be timely delivered pursuant to Section 2.9(c), Atmel and Buyer shall, during the thirty (30) days following such delivery, use their commercially reasonable efforts to reach a written agreement on the disputed items or amounts. If the Parties are unable to reach an agreement in writing during such thirty (30) day period, the London office of a nationally recognized accounting firm not then acting as an outside accountant for either of Atmel or Buyer and as mutually agreed by Atmel and Buyer (the “Accounting Expert”) shall be jointly retained to review promptly this Agreement, the Final Working Capital and the disputed items or amounts. The Accounting Expert shall consider only those items or amounts as to which the Parties have disagreed. The Accounting Expert, acting as an expert and not as an arbitrator, shall apply the terms of this Section 2.9, and may not assign a value to any item greater than the greatest value for such item claimed by any Party or less than the smallest value for such item claimed by any Party. The Accounting Expert’s determination shall be based solely on written submissions by Atmel and Buyer (i.e., not on independent review) and on the definitions and provisions included herein. The Parties agree to cooperate fully with the Accounting Expert in order to facilitate the receipt of a report of its adjustments, if any, to the Final Working Capital, and the calculations supporting such adjustments within thirty (30) days following submission of any dispute pursuant to this Section 2.9 to the Accounting Expert. The Final Working Capital, as adjusted by the Accounting Expert in the report, shall be final, conclusive and binding on Atmel and Buyer (except in the event of manifest error by the Accounting Expert). Each of the Parties shall bear its own expenses in connection with the review and resolution by the Accounting Expert, except that the fees

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and expenses of the Accounting Expert incurred in connection with the resolution of any dispute pursuant to this Section 2.9 shall be allocated between Atmel, on one hand, and Buyer, on the other hand, by the Accounting Expert in proportion to the extent such Parties did not prevail on items or amounts in dispute; provided, however, that in the event of a compromise between the positions of the Parties, said fees and expenses shall be allocated equally between the Parties. The “Agreed Final Net Balance” shall mean (i) the Final Working Capital as determined by Atmel pursuant to Section 2.9(b) in the event that no notice of disagreement is delivered, (ii) the Final Working Capital as agreed by Atmel and Buyer pursuant to this Section 2.9(d) in the event that a notice of disagreement is delivered and the Parties reach a written agreement with respect to the disputed items or amounts, or (iii) the Final Working Capital as determined by the Accounting Expert in the event that the disputed items or amounts are submitted to the Accounting Expert.

          (e) If the Agreed Final Net Balance is greater than the Preliminary Working Capital, then Buyer shall pay to Atmel within five (5) Business Days after the final determination of the Agreed Final Net Balance, as an adjustment to the Purchase Price, an amount equal to the difference between the Agreed Final Net Balance and the Preliminary Working Capital, by wire transfer of immediately available funds to accounts designated by Atmel.

          (f) If the Final Working Capital Statement is less than the Preliminary Working Capital, then Atmel shall instruct the Escrow Agent to pay to Buyer within five (5) Business Days after the final determination of the Agreed Final Net Balance, as an adjustment to the Purchase Price, a portion of the Escrow Amount equal to the difference between the Preliminary Working Capital and the Agreed Final Net Balance by wire transfer of immediately available funds to accounts designated by Buyer; provided, however, that such amount shall not exceed the Escrow Amount.

          (g) If the Agreed Final Net Balance is equal to the Preliminary Working Capital, then no adjustment shall be made to the Purchase Price and the amount paid by Buyer to Atmel at the Closing shall constitute the Purchase Price.

          (h) If, on or before the seventh anniversary of Closing, the auditors for the time being of the Transferred Entity certify (at the request and expense of Atmel) that any provision for Tax in the Final Working Capital Statement has proved to be an overprovision, then (x) the amount of any overprovision shall first be set off against any payment then due from Atmel or any Affiliate of Atmel under this Agreement in relation to Tax matters; (y) to the extent that there is an excess, a refund shall be made to Atmel of any previous payment or payments made by Atmel or any Affiliate of Atmel under this Agreement in relation to Tax matters (and not previously refunded) up to the amount of such excess; and (z) to the extent that excess referred to in subsection 2.9(h)(y) is not exhausted, the remainder of that excess will be carried forward and set off against any future payment or payments which become due from Atmel or any Affiliate of Atmel under this Agreement in relation to Tax matters.

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     2.10 Earnout Payment.

          (a) In addition to the Purchase Price payable by Buyer to Atmel pursuant to Section 2.8, Atmel shall be entitled to receive additional cash payments from Buyer or its successors or assigns in accordance with this Section 2.10. In the event that the Earnings for the 2010 Earnout Period exceed the estimated Earnings for the 2010 Earnout Period as set forth below (the “2010 Earnout Target”), Buyer shall pay to Atmel an amount in cash equal to Six Million US dollars (US$6,000,000) (the “2010 Earnout Payment”). In the event the Earnings for the 2011 Earnout Period exceed Fifty One Million One Hundred Seventy-Nine Thousand US dollars (US$51,179,000), Buyer shall pay to Atmel an amount in cash equal to (A) the difference between (i) the Earnings for the 2011 Earnout Period less (ii) Fifty One Million One Hundred Seventy-Nine Thousand US dollars (US$51,179,000) multiplied by (B) 0.8787 (the “2011 Earnout Payment”). The 2011 Earnout Payment will be capped at Six Million US dollars (US$6,000,000). In addition to the 2011 Earnout Payment, in the event that the Earnings for the 2011 Earnout Period exceed the estimated Earnings for the 2010 Earnout Period as set forth below (the “2011 Earnout Target”), Buyer shall pay to Atmel an additional amount in cash equal to Nine Million US dollars (US$9,000,000) (the “2011 Additional Earnout Payment”).

Earnout Period:	Earnout Targets:
2010 Earnout Period	$26,633,000, consistent with the financial projections presented to Buyer by Atmel on February 19, 2010.
2011 Earnout Period	$58,008,000, consistent with the financial projections presented to Buyer by Atmel on February 19, 2010.

          (b) On or prior to each of March 31, 2011 and March 31, 2012, Buyer shall (i) deliver a statement to Atmel containing Buyer’s calculation of the Earnings and the Earnout Payment for the applicable Earnout Period (each, an “Earnout Statement”) and a certificate, signed by the Chief Financial Officer of Buyer, certifying and setting forth Buyer’s calculation of Earnings and Earnout Payment for the applicable Earnout Period and (ii) pay to Atmel by wire transfer of immediately available funds to accounts designated by Atmel, an amount equal to the Earnout Payment reflected in such Earnout Statement (a “Preliminary Earnout Payment”). Each Preliminary Earnout Payment shall be subject to adjustment as provided in Section 2.10(c). In the event that Buyer fails to pay a Preliminary Earnout Payment on or prior to March 31, 2011 or March 31, 2012, as applicable, interest shall be compounded annually on the amount of such Preliminary Earnout Payment from and including the date such amount was due, calculated using a 365 day year, through one (1) day prior to the actual date of such payment at the prime rate offered by JP Morgan Chase Bank on such date, plus two percentage points.

          (c) Buyer shall permit Atmel and their respective employees, accountants, attorneys, agents, representatives and financial advisors to review promptly upon request, on-site or otherwise, during normal business hours, all books, records and work papers prepared or used by Buyer in connection with the preparation of each Earnout Statement and to take copies of the same.

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Atmel shall have sixty (60) days after receipt of each Earnout Statement and all requested records and work papers (the “Earnout Dispute Period”) to dispute any or all amounts or items of such Earnout Statement (the “Earnout Dispute”). Atmel shall provide to Buyer, prior to the end of the Earnout Dispute Period, written notice of the Earnout Dispute (an “Earnout Dispute Notice”), which shall set forth in reasonable detail the amounts or items included in the applicable Earnout Statement with which Atmel disagrees. If Atmel does not deliver an Earnout Dispute Notice to Buyer prior to the end of the Earnout Dispute Period, the Parties agree that the Earnout Statement for the applicable Earnout Period shall be deemed to be final, conclusive and binding upon the Parties in the form in which it was delivered to Atmel pursuant to Section 2.10(b). If Atmel delivers to Buyer an Earnout Dispute Notice prior to the end of the Earnout Dispute Period, Atmel and Buyer shall use commercially reasonable efforts to resolve the Earnout Dispute and agree in writing upon the final content of the applicable Earnout Statement within thirty (30) days following the delivery by Atmel of the Earnout Dispute Notice to Buyer. Items and amounts not objected to by Atmel shall be deemed resolved. If Atmel and Buyer are unable to resolve the items or amounts in dispute within such thirty (30) day period, then Atmel and Buyer shall submit the Earnout Dispute for resolution to the Accounting Expert. The Parties agree to cooperate fully with the Accounting Expert in order to facilitate the receipt of the final determination of the Accounting Expert within thirty (30) days following submission of an Earnout Dispute to the Accounting Expert. The Accounting Expert, acting as an expert and not as an arbitrator, shall apply the terms of this Section 2.10, and may not assign a value to any item greater than the greatest value for such item claimed by any Party or less than the smallest value for such item claimed by any Party. The Accounting Expert’s determination shall be based solely on written submissions by Atmel and Buyer (i.e., not on independent review) and on the definitions and provisions included herein. All determinations of the Accounting Expert with respect to an Earnout Statement shall be final, conclusive and binding on the Parties (except in the event of manifest error by the Accounting Expert). For purposes of this Agreement, “Final Determination” of an Earnout Statement shall mean the final determination pursuant to this Section 2.10(c). Each of the Parties shall bear its own expenses in connection with the review and resolution by the Accounting Expert, except that the fees and expenses of the Accounting Expert incurred in connection with the resolution of an Earnout Dispute shall be allocated between Atmel, on one hand, and Buyer, on the other hand, by the Accounting Expert in proportion to the extent such Parties did not prevail on items or amounts in dispute with respect to the Earnout Statement as submitted to the Accounting Expert provided, however, that in the event of a compromise between the positions of the Parties, said fees and expenses shall be allocated equally between the Parties.

          (d) With respect to each Earnout Statement:

               (i) if the Earnout Payment due pursuant to the Final Determination of such Earnout Statement is greater than the Preliminary Earnout Payment, no later than five (5) days following the Final Determination of such Earnout Statement, Buyer shall pay to Atmel by wire transfer of immediately available funds to accounts designated by Atmel, an amount equal to the excess of the Earnout Payment due over the Preliminary Earnout Payment received; and

               (ii) if the Earnout Payment due pursuant to the Final Determination of such Earnout Statement is less than the Preliminary Earnout Payment, no later than five (5) days

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following the Final Determination of such Earnout Statement, Atmel shall pay to Buyer by wire transfer of immediately available funds to an account designated by Buyer, an amount equal to the excess of the Preliminary Earnout Payment received over the Earnout Payment due.

          (e) The Parties agree that it is the Parties’ intention to allow Buyer to operate the Business after the Closing in accordance with its legitimate business interests while, at the same time, recognizing Atmel’s or its Affiliates’ right to receive additional consideration based on the Earnings in accordance with this Section 2.10.

          (f) During the period from and after the Closing through the Earnout Expiration Date:

               (i) neither Buyer nor any Affiliates of Buyer shall take any actions that are motivated for the purpose of adversely affecting any Earnout Payment; provided, however, that nothing in this Agreement shall require Buyer to take any action that Buyer determines would constitute a breach of corporate interest (interêt social) of the Buyer;

               (ii) Buyer shall apply US GAAP in calculating the Earnings and the Earnout Payments;

               (iii) in the event of the sale of 50% or more of the capital stock of either of the Transferred Entities or a material portion of the assets (tangible or intangible) or business of the Business (other than sales of inventory or equipment in the Ordinary Course), as a condition to such sale, Buyer shall cause the purchaser thereof to expressly assume in writing, in form and substance reasonably acceptable to Atmel, all of the obligations of Buyer under this Section 2.10, and a copy of such written assumption shall be delivered to Atmel; provided, that Buyer and its successors and assigns shall continue to be bound by the terms of this Section 2.10;

               (iv) Buyer shall not sell all or substantially all of its assets, consummate a merger with another entity (unless Buyer is the surviving entity in such merger) or consummate any similar corporate transaction;

               (v) Buyer shall not take any action, and refrain from taking any action, that would have the effect of shifting sales of the Business or either of the Transferred Entities for any calendar or fiscal year to any other calendar or fiscal year;

               (vi) Buyer shall, and shall cause its Affiliates to, maintain a sufficient level of working capital as necessary to support the Earnout Targets;

               (vii) Buyer shall promote the Business and shall not make any material change to the Business;

               (viii) Buyer shall not enter into any transaction or arrangement in relation to the Business or involving either of the Transferred Entities other than a bona fide commercial transaction or arrangement on an arm’s length basis; and

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               (ix) Buyer shall deliver to Atmel, within twenty (20) Business Days following the last day of each quarter, a statement setting forth Buyer’s calculation of the Earnings for each such quarter, which statement shall include the amounts of net revenues, Direct Costs of Sales (itemizing each cost associated with the Business and included in such Direct Costs of Sales), and to the extent applicable, any amount of Losses paid or payable by Atmel that constitute Direct Cost of Sales.

     2.11 Allocation of the Purchase Price. Prior to the Closing, Atmel and Buyer shall use their respective commercially reasonable efforts, in good faith, to agree on the allocation of the Purchase Price among the Assets, the UK Ordinary Shares, the Vault-IC Shares and the Assumed Liabilities. Any adjustment of the Purchase Price as referred to in Section 2.12, shall be allocated among the Assets, the UK Ordinary Shares and the Assumed Liabilities in the same proportions as the Purchase Price was so allocated. Neither Buyer nor Atmel shall take any position (whether in audits, tax returns or otherwise) that is inconsistent with such allocation (unless required to do so by applicable Law).

     2.12 Adjustment of the Purchase Price. The Purchase Price shall be deemed to be adjusted by the amount of (i) any payment made to the Buyer Indemnitees pursuant to Section 16.3(b) and to Buyer pursuant to any other provision contained in this Agreement, (ii) any payments made in accordance with Section 2.9 and (iii) any Earnout Payment, except that a portion of each Earnout Payment shall constitute interest as determined using the appropriate applicable federal rate (as defined in Section 1274(d) of the Code and the Treasury Regulations thereunder) and shall be treated and reported by Atmel and Buyer as interest for such purposes. For US, UK, French and Swiss tax purposes, all payments made under any indemnity, warranty, representation or covenant hereunder shall be treated, so far as possible, as an adjustment to the Purchase Price.

ARTICLE III
INTELLECTUAL PROPERTY MATTERS

     3.1 License to Buyer. Subject to the terms and conditions of this Agreement, including Section 3.2, effective as of the Closing, Atmel and the Selling Subsidiaries hereby do grant and agree to grant to Buyer Licensees a worldwide, perpetual (except as provided in Section 3.3), royalty-free, fully paid-up, non-exclusive, right and license:

          (a) under the Licensed Patents, to make, have made, use, sell (including through multiple tiers of distribution), offer for sale, and import Licensed Products; and

          (b) under all of Atmel’s rights in the Licensed Other IPR (and associated Transferred Technology), to copy, use, perform, display, distribute, correct, modify, adapt, improve, and otherwise exploit the Business Technology for all purposes within the Licensed Field.

     3.2 Restrictions and Conditions on License to Buyer.

          (a) The licenses granted to Buyer Licensees pursuant to Section 3.1 may not be transferred in whole or part by the Buyer Licensees to a third party; provided, that such licenses

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may, upon written notice to Atmel, be transferred in whole or in part to, or assumed in whole or in part by, a third party that is not a Restricted Entity, that acquires or succeeds to a business, assets, products, technology or operations of Buyer Licensees or any of their respective Affiliates to which such license relates, including as a result of, or by means of, a corporate reorganization, merger, stock purchase or purchase of all or substantially all of the assets of any Buyer Licensee or any of its Affiliates. Any transfer in accordance with the foregoing shall be subject to the transferee’s agreement to being bound by the restrictions on transfers to Restricted Entities. Notwithstanding the foregoing, subject to Buyer complying with all requirements with respect to Atmel Confidential Information, Buyer shall not require Atmel’s consent to engage a third party contractor to design, develop, test or manufacture, or assist in the design, development, manufacture or testing of Licensed Products, solely for the benefit of Buyer.

          (b) The Licensed Patents and licenses granted pursuant to shall not be sublicensable by Buyer Licensees without the prior written consent of Atmel, and the Buyer Licensees shall not exercise their make or have made rights in a manner that would circumvent or vitiate the foregoing restriction.

          (c) The license granted to Buyer Licensees pursuant to Section 3.1(a) may be sublicensed or transferred to a third party that is not a Restricted Entity by Buyer in the ordinary course of business; provided, Buyer Licensees take reasonable measures to maintain the confidentiality of any Trade Secrets included in the Licensed Other IPR including as set forth in Section 3.9 (Trade Secret Protection and Use) and the sublicensee or transferee, as the case may be, agrees to be bound by any restrictions on such license as applicable to Buyer.

          (d) To the extent that any Intellectual Property Rights of Atmel or the Selling Subsidiaries are licensed pursuant to any Ancillary Agreement or any other agreement specifically for the licensing of such Intellectual Property Rights, including the Core License Agreement, the terms of such agreement shall prevail over the terms of this Agreement, and such Intellectual Property Rights shall be deemed to be excluded from the licenses granted herein.

     3.3 Transfers to Restricted Entity. In the event of a sale or change of control of Buyer or Vault-IC (as a result of, or by means of, a corporate reorganization, merger, stock purchase or purchase of all or substantially all of the assets of Buyer or Vault-IC as the case may be) to a Restricted Entity, regardless of whether Buyer or Vault-IC is a surviving entity, the term of the licenses granted in Section 3.1 shall be limited to the shorter of three (3) years from the date of such transaction or the balance of the existing term of the license.

     3.4 Licenses Back. Subject to the terms and conditions of this Agreement, including Section 3.5, effective as of the Closing, Buyer, on behalf of themselves and their Subsidiaries, including without limitation the Transferred Entities, hereby do grant and agree to grant to Atmel and the Selling Subsidiaries and their respective Affiliates, and Atmel and the Selling Subsidiaries and their respective Affiliates retain, a worldwide, perpetual, irrevocable, non-terminable, royalty-free, fully paid up, non-exclusive, right and license:

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          (a) under all rights in the License-Back Patents, to make, have made, use, sell, offer for sale, and import any product, and to practice any claimed method within the License-Back Patents; and

          (b) under all rights in the License-Back Other IPR (and associated Technology retained by Atmel or the Selling Subsidiaries) to copy, use, perform, display, distribute, modify, and otherwise exploit any License-Back Other IPR and any Technology retained by Atmel or the Selling Subsidiaries (including copies of Copyable Technology that is Transferred Technology) and to conduct the current and future businesses and operations of Atmel, the Selling Subsidiaries and their respective Affiliates.

     3.5 Restrictions and Conditions on License Back. The exercise by Atmel, the Selling Subsidiaries and their respective Affiliates of the licenses granted to it pursuant to Section 3.4 shall be subject to the following:

          (a) The restrictions on the conduct of the businesses of Atmel, the Selling Subsidiaries and their respective Affiliates set forth in Section 12.7 (Non-Competition and Business Restrictions);

          (b) The licenses granted under Section 3.4(a) may not be transferred in whole or in part to a third party; provided, that such licenses may, upon written notice to Buyer, be transferred in whole or part to, or assumed in whole or in part by, a third party that acquires or succeeds to a business, assets, products, technology or operations of Atmel, any Selling Subsidiary or any of their respective Affiliates to which such licenses relate, including as a result of, or by means of, a merger, stock purchase involving Atmel, a Selling Subsidiary or any such Affiliate, purchase of all or substantially all of the assets of such business or any other reorganization; further provided that such third party agrees, on behalf of itself and its Affiliates and successors) to be bound by the same restrictions on the conduct of its businesses and the businesses of its Affiliates as set out in Section 12.7 (Non-Competition and Business Restrictions) and the relevant restrictions set forth in Sections 3.5(c) and (e);

          (c) Atmel shall not sublicense the License-Back Patents granted in Section 3.4(a) to a third party except in connection with a grant of a license that includes at least an equal number of other Patents owned by Atmel; provided such third party agrees to be bound by the same restrictions on the conduct of its businesses and the businesses of its Affiliates as set out in Section 12.7 (Non-Competition and Business Restrictions) and agrees to not further sublicense such Patents;

          (d) Without limiting the restrictions set forth herein with respect to the Limited License-Back Patents, Atmel further agrees that it shall not grant to any third party a sublicense in the Licensed Field to any Limited License Back Patents;

          (e) The license granted under Section 3.4(b) may be sublicensed or transferred to a third party by Atmel or any of its Affiliates in the ordinary course of business; provided, that

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Atmel takes reasonable measures to maintain the confidentiality of any Trade Secrets included in the Transferred Other IPR retained by Atmel or its Affiliates; provided such third party agrees to be bound by the same restrictions on the conduct of its businesses and the businesses of its Affiliates as set out in Section 12.7 (Non-Competition and Business Restrictions); and

          (f) Any purported transfer, assignment or sublicense by Atmel to a third party in breach of the foregoing restrictions shall be null and void ab initio.

     3.6 Existing Licenses. All licenses granted by Atmel and the Selling Subsidiaries under this ARTICLE III (Intellectual Property Matters) are subject to any and all Contracts between the Atmel and/or the Selling Subsidiaries and any third party entered into prior to the date hereof and to any restrictions, requirements or rights held by Government Authorities and third parties with respect to the Restricted IPR.

     3.7 Reservation of Rights and Limitation on Licenses.

          (a) Each Party (“Licensor Party”) granting a license to the other Party (“Licensee Party”) hereunder hereby reserves all rights not expressly granted hereunder. Subject to Section 7.6, no implied licenses are granted by Atmel and the Selling Subsidiaries with respect to any of the Assets or pursuant to any term of this Agreement or any of the Ancillary Agreements.

          (b) It is understood and agreed that any Intellectual Property Rights or Technology that is licensed, restricted or that is otherwise the subject of, the Core License Agreement or the Standard Cell Library License Agreement or any other Ancillary Agreement is not included within the scope of the foregoing licenses granted by Atmel to Buyer Licensees and the terms of such agreements shall prevail over the terms of this Agreement.

          (c) The license granted to Buyer pursuant to Section 3.1(a) may be terminated by Atmel in the event of a material breach by Buyer of the terms of such license (including acting outside the scope of such license) if such breach has not been cured within ninety (90) days of notice thereof from Atmel to Buyer.

     3.8 Licensed Patent List. If Schedule 3.1(a) (the “Licensed Patents List”) omits any Patents (other than a Patent that is Restricted IPR or Separately Provided IPR) owned and licensable by Atmel or the Selling Subsidiaries as of the Closing that, absent a license, would be infringed by the operation of the Business by Buyer immediately following the Closing when such Business is conducted in substantially the same manner as such Business was conducted prior to the Closing. In case Atmel has omitted any such Patent in the Licensed Patents List, then, such Patent shall be forthwith added to the Licensed Patent List and be deemed a “Licensed Patent” as of the Closing, provided that Atmel receives notice of the request to add such patent within 36 months of the Closing. The foregoing shall constitute Buyer’s sole and exclusive remedy in the event that any Patent is omitted from Schedule 3.1(a) or with respect to any breach of the representation and warranty set forth in Section 7.6(b) and (k).

     3.9 Trade Secret Protection and Use.

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          (a) In General. Notwithstanding the transfer of ownership of a Trade Secret by Atmel or the Selling Subsidiaries to Buyer hereunder, or the grant or retention of license to a Trade Secret by a Party (or its Subsidiaries) hereunder, each Party agree that (A) nothing set forth herein shall limit a Party’s (as either owner or licensee of such Trade Secret) rights to such Trade Secrets including all rights in the event such Trade Secret is misappropriated by a third party following the Closing, or to otherwise protect the confidentiality of such Trade Secret as if such Party were the sole owner of such Trade Secret, and (B) each Party and its Subsidiaries shall treat the Trade Secrets of the other Party and its Subsidiaries with at least the same degree of care as they do their own Trade Secrets, but in no event with less than reasonable care; provided, that each Party and its Subsidiaries may use and disclose the Trade Secrets of the other Party and its Subsidiaries in compliance with the terms and conditions of this Agreement and the Ancillary Agreements.

          (b) Unrelated Atmel Trade Secrets. Prior to the Closing, the Business and Transferred Entities were routinely supplied copies of or had access to Technology and Trade Secrets of Atmel, the Selling Subsidiaries and their respective Affiliates and their various operations unrelated to the Business. Although Atmel has attempted to recover such information from the Business and the Transferred Entities, some may still be present within the Business or the Transferred Entities. Buyer therefore agrees that it will not, and will cause its Affiliates not to, use or disclose such Confidential Information that is clearly unrelated to the Business for any purpose whatsoever, and shall destroy any remaining copies in its possession after Closing.

     3.10 Trademark Use.

          (a) Atmel hereby grants to Buyer Licensees, effective as of the Closing for a period of 135 days from the Closing Date, worldwide, royalty free, non-exclusive license to use the Licensed Trademarks, in such territories as such Licensed Trademarks are currently being used, without modification solely in connection with the marketing, support, offering, sale and promotion of the units of Finished Goods acquired by Buyer from Atmel pursuant to this Agreement, including any use in connection with Buyer Licensees’ use and sale of any products, packaging and collateral material acquired from Atmel, and solely in the manner and forms in which such Licensed Trademarks are used by Atmel immediately prior to the Closing.

          (b) Without limiting, and in addition to, the foregoing, Buyer Licensees may continue to use indefinitely the Licensed Trademarks on any tangible reticle, circuit board layout, mold, and other tangible materials acquired from Atmel or the Selling Subsidiaries that include Licensed Trademarks if such Licensed Trademark is not readily apparent to a purchaser of products manufactured using such reticle, circuit board layout, mold or other tangible material (but only to the extent that Buyer otherwise has the right to use such reticle, circuit board layout, mold or other tangible material).

          (c) Buyer Licensee shall maintain the quality of the goods with which such Licensed Trademarks are used and visible at at least the same level maintained by Atmel prior to the Closing. Without limiting the foregoing, the Buyer Licensees shall not use the Licensed Trademarks in a manner that detracts from the goodwill associated with such Licensed Trademarks. Licensee’s

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use of the Licensed Trademarks must comply with all instructions, practices or requirements of Atmel, including any and all trademark usage guidelines (available as of the date hereof at http://atmel.com/general/trademark_guidelines.asp) provided or made available to Licensee by Atmel. All goodwill associated with the use of such Licensed Trademarks shall inure to the sole benefit of Atmel.

          (d) Atmel shall have the right to monitor the quality of Buyer Licensees’ goods and services that are offered in connection with the Licensed Trademarks, and Buyer Licensees shall provide reasonable assistance to Atmel in such monitoring by providing, at Atmel’s request and expense, samples of such goods and services and extending other reasonable cooperation to Atmel.

          (e) Buyer will not use as a Trademark any Trademarks of Atmel except as expressly permitted in this Section 3.10.

     3.11 Abandonment of Licensed and Transferred Patents. Prior to the fifth (5^th) anniversary of the Closing Date:

          (a) If Buyer intends to abandon the prosecution or maintenance of any Transferred Patent, it shall use reasonable commercial efforts to provide Atmel with timely advanced notice of such intention, and upon Atmel’s request shall assign such Patent to Atmel at no cost or charge. Such re-assigned Patent shall then be deemed a Licensed Patent. Such notice shall be provided at least thirty (30) days before the occurrence of any event or deadline that would result in such Transferred Patent lapsing or going abandoned.

          (b) If Atmel intends to abandon the prosecution or maintenance of any Licensed Patent, it shall use reasonable commercial efforts to provide Buyer with timely advanced notice of such intention, and upon Buyer’s request shall assign such Patent to Buyer at no cost or charge. Such assigned Patent shall then be deemed a Transferred Patent and a Licensed Back Patent licensed to Atmel pursuant to Section 3.4. Such notice shall be provided at least thirty (30) days before the occurrence of any event or deadline that would result in such Transferred Patent lapsing or going abandoned.

     3.12 Limited License-Back Patents. Within 90 days of the Effective Date, Buyer may designate in writing to Atmel up to a total of 15 Patents and Patent applications listed on Schedule 2.3(b)(ii)(A)(1) (Transferred Patents) or on the Restricted IPR schedule (Schedule 2.5(a)(ii)), as “Limited License-Back Patents”. The Parties shall discuss in good faith the designation of such Patent, provided that ultimately the designation of such Patents as Limited License-Back Patents shall be in Buyer’s sole discretion. Once the list of Limited License-Back Patents has been established, such Patents (or Patent Applications, as the case may be) shall be listed on Schedule 3.12 which shall become part of this Agreement. If a Patent on the Restricted IPR Schedule is selected by Buyer but cannot be transferred to Buyer, then, notwithstanding the retention of such Patent by Atmel, it shall be deemed a Limited License-Back Patent and the restrictions set forth in Section 3.5(d) with respect to Atmel licensing such Patents to third parties, shall apply.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING ATMEL UK

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     4.1 Organization.

          (a) Atmel UK is a private company duly incorporated and validly existing under the Laws of England and Wales.

          (b) The copies of the memorandum and articles of association or other constitutional and corporate documents of Atmel UK provided to Buyer are true and accurate in all material respects. All statutory books, financial records and registers of Atmel UK have been properly kept and all returns, particulars, resolutions and other documents which Atmel UK is required by Law in England and Wales to file with or deliver to any authority in such jurisdictions (including, in particular, the Registrar of Companies in England and Wales) have been correctly made up and filed or, as the case may be, delivered.

          (c) Notwithstanding any other provisions of this Agreement, this Section 4.1 contains Atmel’s sole representations and warranties regarding the organization of Atmel UK.

     4.2 Power and Authority.

          (a) Atmel UK has the requisite power and authority to own its property and assets and to carry on its business. Atmel UK possesses all governmental licenses and permits necessary to carry on the Business as conducted in the UK as currently conducted, except such licenses and permits the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 4.2 contains Atmel’s sole representations and warranties regarding power and authority of Atmel UK.

     4.3 Capitalization.

          (a) The authorized share capital of Atmel UK is £1,000 consisting of 1,000 ordinary shares of £1.00 nominal value per share (“UK Ordinary Shares”). As of the date hereof, there was one (1) UK Ordinary Share in issue, the beneficial and legal owner of which is Atmel, and such UK Ordinary Share is the only issued and outstanding share of capital stock of Atmel UK. Other than the UK Ordinary Shares, there are no other shares or other equity securities of Atmel UK in issue and no other options, warrants, calls, conversion rights, claims from third parties, commitments or agreements of any character to which Atmel UK is a party or by which Atmel UK may be bound that do or may obligate Atmel UK to issue, deliver or sell, or cause to be

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issued, delivered or sold, additional shares in Atmel UK’s share capital or securities convertible into or exchangeable for Atmel UK’s share capital or that do or may obligate Atmel UK to grant, extend, accelerate the vesting or waive any repurchase rights of, or change the price of the share capital or otherwise amend or enter into any such rights, commitments, subscriptions, options or agreements. The sole UK Ordinary Share in issue was validly issued in compliance with all applicable English and Welsh Laws and duly authorized, and is fully paid.

          (b) Except as set forth in Section 4.3(b) of the Atmel Disclosure Schedule, Atmel UK does not own any share, interest or participation in any company, trust or entity of any kind, is not a party to any joint venture, cooperation or unincorporated association, and does not have any branch or permanent establishment outside of the UK.

          (c) Notwithstanding any other provisions of this Agreement, this Section 4.3 contains Atmel’s sole representations and warranties regarding capitalization of Atmel UK.

     4.4 No Violation.

          (a) The consummation by Atmel UK of the Contemplated Transactions will not (a) conflict with or violate any provision of the memorandum and articles of association or other similar organizational documents of Atmel UK, (b) assuming that all consents, approvals and authorizations contemplated by Section 4.5 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Atmel UK in any country where the Business has material business operations as of the date hereof, except to the extent such conflict or violation would not have, or be reasonably expected to have, a Business Material Adverse Effect, or (c) result in the creation of, or require the creation of, any Lien upon the UK Ordinary Shares.

          (b) Atmel UK is not subject to any Contract that would impair its ability to consummate the Contemplated Transactions. Except as set forth in Section 4.4(b) of the Atmel Disclosure Schedule, the consummation by Atmel UK of the Contemplated Transactions will not constitute a breach or a default under any of the Material Contracts (as defined below), except for such breach or default as would not have, or be reasonably expected to have, a Business Material Adverse Effect.

     4.5 Authorizations and Consents.

          (a) No consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, any Governmental Authority in the UK (“UK Governmental Consents”) are required to be obtained or made by Atmel UK, in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Agreements to which Atmel UK is, or is to be, a party or the consummation by Atmel UK of the Contemplated Transactions, other than UK Governmental Consents set forth in Section 4.5(a) of the Atmel Disclosure Schedule or required in connection with Restricted IPR, and except for those UK Governmental Consents the failure (in part or in whole) of which to obtain would not have, or be

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reasonably expected to have, a Business Material Adverse Effect. All representations, warranties, statements or other communications, whether express or implied, made by Atmel UK to any Governmental Authority in the UK in requesting the UK Governmental Consents shall be true and correct.

          (b) Notwithstanding any other provisions of this Agreement, this Section 4.5 contains Atmel’s sole representations and warranties regarding UK Governmental Consents.

     4.6 UK Financial Statements.

          (a) As of the Closing, Atmel shall attach as Section 4.6(a) of the Atmel Disclosure Schedule the Audited Balance Sheet. At the time of the Closing, the Audited Balance Sheet fairly presents, in all material respects, the financial condition of Atmel UK as of the date of such Audited Balance Sheet, subject to the absence of footnote disclosure and to other required adjustments as if the Business as conducted in the UK had operated as an unaffiliated entity during the periods presented therein.

          (b) The Audited Balance Sheet has been prepared in accordance with accounting standards, policies, principles and practices generally accepted in the UK and on a basis consistent with the audited accounts of Atmel UK for the three prior accounting periods ending prior to the date of this Agreement.

          (c) The Audited Balance Sheet contains either provision adequate to cover, or full particulars in notes of, all Taxation (whether quantified, contingent, disputed or otherwise) of Atmel UK as required under the Laws of England and Wales or under UK GAAP, as at December 31, 2009.

          (d) Notwithstanding any other provisions of this Agreement, this Section 4.6 contains Atmel’s sole representations and warranties regarding financial statements of Atmel UK.

     4.7 Absence of Certain Changes in the UK. Except as set forth in Section 4.7 of the Atmel Disclosure Schedule or as reflected on the Audited Balance Sheet, since December 31, 2009 through the date hereof, (i) Atmel UK has conducted its business in the Ordinary Course, and (ii) there has not been any change in the business of Atmel UK that has resulted in a Business Material Adverse Effect.

     4.8 UK Real Property.

          (a) Section 4.8(a) of the Atmel Disclosure Schedule includes a true and complete list of all real property leases, subleases or other occupancies to which Atmel UK is a party as lessee or lessor, used in the Business as conducted in the UK (the “UK Real Property Leases,” and the properties leased thereunder, the “UK Leased Real Property”). The leasehold interests relating to the UK Real Property Leases are free and clear of all Liens, other than Permitted Liens. As of the date hereof, all amounts due and payable by Atmel UK in connection with the UK Leased Real Property have been paid and no amount shall be payable after the

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Closing other than in the Ordinary Course. The UK Leased Real Property is being used for its permitted use and all planning permissions necessary for its operation have been obtained, except to the extent the failure to obtain such planning permissions would not have, or be reasonably expected to have, a Business Material Adverse Effect. Atmel UK has not received any written notice from the other party to any UK Real Property Lease of the termination or proposed termination thereof.

          (b) To the Knowledge of Atmel, there is no pending or threatened condemnation, expropriation, eminent domain or similar proceeding affecting all or any part of the UK Leased Real Property, and Atmel UK has not received any written notice thereof.

          (c) Notwithstanding any other provisions of this Agreement, this Section 4.8 contains Atmel’s sole representations and warranties regarding real property in the UK.

     4.9 UK Contracts.

          (a) UK Material Contracts. Section 4.9(a) of the Atmel Disclosure Schedule is a true and correct list, as of the date hereof, of all of the following Contracts to which Atmel UK, is a party or by which Atmel UK is bound that is material to the Business as conducted in the UK (the “UK Material Contracts”):

               (i) all UK Real Property Leases;

               (ii) all company-wide collective bargaining agreements applicable to the Atmel UK Employees to which Atmel UK is a party;

               (iii) capital and operating leases or similar financial arrangements with respect to office equipment used by Atmel UK under which Atmel UK is the lessee and is obligated to make payments of more than Three Hundred Thousand US dollars (US$300,000) per annum;

               (iv) Contracts for the acquisition of any material assets with respect to the Business as conducted in the UK entered into by Atmel UK at any time during the last twelve (12) months with any third party, other than Contracts for acquisitions of assets in the Ordinary Course;

               (v) Contracts limiting or purporting to limit the freedom of Atmel UK to (A) engage in the Business as conducted by Atmel UK in the countries where Atmel UK has material business operations as of the date hereof, or (B) acquire any Person or compete with any Person in the countries where Atmel UK has material business operations as of the date hereof;

               (vi) Contracts for the appointment of any distributor, sales representative, joint venturer or co-developer of Transferred IPR owned by Atmel UK;

               (vii) IP Agreements to which Atmel UK is a party (other than (a) non-exclusive licenses to commercially available Software or Technology for which Atmel UK

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or its Subsidiaries has paid less than Three Hundred Thousand US dollars (US$300,000) or (b) non-exclusive licenses of Intellectual Property Rights incidental to the purchase or license of Technology or services in the ordinary course of business);

               (viii) Consortium Agreements to which Atmel UK is a party;

               (ix) Contracts which are not (A) on arm’s length terms and (B) with respect to a bona fide commercial transaction;

               (x) any Contract between Atmel UK and another Affiliate of Atmel;

               (xi) any Contract between any UK Governmental Authority and Atmel UK; or

               (xii) any Contract not otherwise listed above with respect to the Business as conducted in the UK by Atmel UK to which Atmel UK is a party involving reasonably anticipated payments in excess of Three Hundred Thousand US dollars (US$300,000) per annum.

          (b) Status of UK Material Contracts. A true and correct copy of each UK Material Contract has been made available to Buyer. Each UK Material Contract, (i) is valid and binding on Atmel UK (assuming compliance with each of the terms in such UK Material Contract by the other parties thereto), (ii) as of the date hereof, there is no breach or default on the part of Atmel UK under such UK Material Contract, including, for the purposes of clarity, the Regional Selective Assistance grants from the Scottish Government and Scottish Enterprise Lanarkshire as referred to in Section 4.9(a)(xi) in the Atmel Disclosure Schedule, (iii) Atmel UK has not received written notice of any breach or default by any other party to such UK Material Contract and (iv) except as set forth in Section 4.9(b) of the Atmel Disclosure Schedule, no written notice of termination has been received or served by Atmel UK, except in the case of clauses (ii) and (iii), for such breach or default which would not, individually or in the aggregate, have or be reasonably expected to have, a Business Material Adverse Effect. Other than the grants from the Scottish Government and Scottish Enterprise Lanarkshire described in Sections 4.9(a)(xi) and 12.3(a) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, as of the date hereof, there are no projects related to technology development for the Business funded or subsidized by a Governmental Authority pursuant to which Atmel UK receives rights and benefits for technology research and development, including reimbursement of costs or grants of money.

     4.10 Compliance with UK Laws.

          (a) To the Knowledge of Atmel, as of the date hereof, Atmel UK is not in violation of any Law that is applicable to the conduct or operation of the Business as conducted by Atmel UK in the countries where Atmel UK has material business operations as of the date hereof, or the ownership or use of any of the assets of Atmel UK in the Business as conducted by Atmel UK in the countries where Atmel UK has material business operations as of the date hereof, which violation has had, or would reasonably be expected to have, a Business Material Adverse Effect.

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     4.11 UK Assets.

          (a) Section 4.11(a) of the Atmel Disclosure Schedule sets forth a true and correct list of Fixed Assets as of the date hereof, including the Transferred Equipment, owned by Atmel UK.

          (b) Except as set forth in Section 4.11(b) of the Atmel Disclosure Schedule, Atmel UK is the legal owner of and has good title to all material Fixed Assets owned by Atmel UK listed in Section 4.11(a) of the Atmel Disclosure Schedule. Except as set forth in Section 4.11(b) of the Atmel Disclosure Schedule, none of such material Fixed Assets is the subject of any lease, lease hire agreement, hire purchase agreement or agreement for payment on deferred terms or is the subject of any licence or factoring arrangement.

          (c) Each material item of Fixed Assets is (i) in good operating condition (subject to normal wear and tear and consistent with the age of such tangible assets) and (ii) suitable for the purposes for which it is currently being used in the Business as conducted by Atmel UK as of the date hereof. Except for the foregoing, all such Equipment (A) is being transferred on a “where is” and, as to condition, “as is” basis, without warranty of any kind, except for such failures to be in such condition, and (B) with respect to hardware and software assets, are, to the Knowledge of Atmel, free from any bugs, errors and enhancements, that, individually or in the aggregate, have had or could reasonably be expected to have a Business Material Adverse Effect.

     4.12 UK Litigation.

          (a) Except as set forth in Section 4.12(a) of the Atmel Disclosure Schedule, as of the date hereof, there is no actual or pending Litigation in the UK involving Atmel UK or, to the Knowledge of Atmel, threatened against or involving Atmel UK.

          (b) Except as set forth in Section 4.12(b) of the Atmel Disclosure Schedule, as of the date hereof, none of Atmel UK or its officers or its directors have received written notice of any UK judicial, administrative, investigative, arbitration, dispute or complaint of any nature whatsoever (including any dispute with the UK tax authorities), including arbitration or settlement that had had, or would reasonably be expected to have, a Business Material Adverse Effect.

          (c) As of the date hereof, Atmel UK is not being prosecuted for a felony offence nor to the Knowledge of Atmel, are there any circumstances which would result in prosecution for a felony offence or which would reasonably be expected to result in a felony offence or other action by a UK Governmental Authority.

     4.13 UK Employees.

          (a) Section 4.13(a) of the Atmel Disclosure Schedule sets forth a true and correct anonymized list of all Atmel UK Employees, as redacted pursuant to applicable UK Laws relating to data privacy, showing for each Atmel UK Employee, the employee number, position

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held, employment commencement date, monthly gross salary or wages and aggregate annual compensation for the last fiscal year.

          (b) Section 4.13(b) of the Atmel Disclosure Schedule sets forth a true and correct anonymized list of all persons providing services to Atmel UK material to the Business under an agreement which is not a contract of employment (in particular consultants), as redacted pursuant to applicable UK Laws relating to data privacy, showing for each such service provider, the company which engages them, the remuneration provided to each individual, the length of notice to terminate such agreement or the expiry date of such agreement.

          (c) Section 4.13(c) of the Atmel Disclosure Schedule lists all collective bargaining agreements to which Atmel UK is a party applicable to the Atmel UK Employees and all handbooks and current sample standard form contracts which apply to any of the Atmel UK Employees.

          (d) Section 4.13(d) of the Atmel Disclosure Schedule lists all of the Benefit Plans of which the Atmel UK Employees are beneficiaries or participants. With respect to each of the Benefit Plans identified on Section 4.13(d) of the Atmel Disclosure Schedule, Atmel UK has made available to Buyer true and correct copies or a written description or summary thereof. Each Benefit Plan listed on Section 4.13(d) of the Atmel Disclosure Schedule has been maintained in compliance in all material respects with all applicable Laws of England and Wales.

          (e) All contributions, insurance premiums, tax and expenses due to and in respect of such Benefit Plans have been duly paid by Atmel UK, and except as set forth in Section 4.13(e) of the Atmel Disclosure Schedule, there are no liabilities outstanding in respect of the Benefit Plans as of the date hereof.

          (f) Section 4.13(f) of the Atmel Disclosure Schedule lists all stock-based employee compensation plans or incentive scheme (including, without limitation, any commission, profit sharing or bonus scheme) which are maintained, or contributed to, for the benefit of or relating to Atmel UK Employees as of the date hereof.

          (g) Except as set forth in Section 4.13(g) of the Atmel Disclosure Schedule, as of the date hereof, Atmel UK is not in violation of any Laws applicable to Atmel UK Employees, collective agreements (if any) or employment agreements of such Atmel UK Employees, in particular in relation to employees’ representation (including works councils), compensation, working time, overtime, paid vacation, medical care and social security, employee participation or profit sharing, except such violations which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

          (h) To the Knowledge of Atmel, there are no material sums owing to or from any Atmel UK Employees other than reimbursement of expenses, wages for the current salary period and holiday pay for the current holiday year. The Contemplated Transactions will not

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entitle any Atmel UK Employees to terminate their employment or receive any payment or other benefit.

          (i) Except as set forth in Section 4.13(i) of the Atmel Disclosure Schedule, there has been no collective employment dispute with Atmel UK Employees or their employee representatives, including any works councils at Atmel UK, over the last two (2) years and no collective dismissal procedure pursuant to any Law during such period.

          (j) Except as set forth in Section 4.13(j) of the Atmel Disclosure Schedule, no notice to terminate employment contract of any Atmel UK Employee is pending, outstanding or, to the Knowledge of Atmel, threatened and, to the Knowledge of Atmel, no dispute is outstanding between Atmel UK and any of the Atmel UK Employees or former employees relating to their employment terms or termination of their employment, except such disputes which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

          (k) Except as set forth in Section 4.13(k) of the Atmel Disclosure Schedule, as of the date hereof, none of Atmel UK or its officers or directors has received any written notice from any person or any UK Government Authority regarding any actual or alleged violation of any Laws relating to labor and employment matters in the UK, including any collective dismissal procedure under any Law applicable to Atmel UK Employees.

          (l) Except as set forth in Section 4.13(l) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, to the extent permissible by law, no Atmel UK Employee or former employee of Atmel UK is entitled to validly claim any ownership, joint ownership, indemnification or else in and to any IPR and no Atmel UK Employee, consultant or service provider, or former employee, consultant or service provider of Atmel UK is entitled under his/her employment, consulting or services contract, as applicable, to validly claim any rights (ownership, joint ownership, indemnification or else) in and to any IPR resulting from an invention or a creation performed within his/her professional activities for Atmel UK. Except as set forth in Section 4.13(l) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, no outstanding amount is currently owed by Atmel UK in relation to such work under any contractual provision.

          (m) To the Knowledge of Atmel, except as set forth in Section 4.13(m) of the Atmel Disclosure Schedule, Atmel UK has not entered into any agreement or undertaking or commitment of any kind with any of the Atmel UK Employees which provide, in the event of termination or retirement, (i) for a notice period which exceeds 6 months (from the employer), or (ii) for a payment of any severance benefits in connection with their termination of employment or service.

          (n) Except as reflected in the Audited Balance Sheet, as of the date hereof, Atmel UK has not incurred any actual or, to the Knowledge of Atmel, contingent liability in connection with any termination of employment of its former employees (including redundancy payments) as part of Project Nevis.

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          (o) Atmel is responsible for the settlement of any options, restricted stock units or other right to purchase shares of common stock of Atmel which were granted to any Atmel UK Employee by Atmel and which are exercised, in accordance with the terms of the plan, program or arrangement under which such options, restricted stock units or rights were granted, after the Closing Date. Atmel UK shall have no liability to settle such options, restricted stock units or rights or any plan, program or arrangement related thereto.

          (p) To the Knowledge of Atmel, Atmel UK has not received any notice or complaint alleging non-compliance with the Data Protection Act 1998 with respect to any Atmel UK Employee or any notification of an application for rectification or erasure of personal data with respect to any Atmel UK Employee.

          (q) Notwithstanding any other provisions of this Agreement, this Section 4.13 contains Atmel’s sole representations and warranties regarding Atmel UK Employee matters.

     4.14 UK Taxes and UK Tax Matters.

          (a) Except as described in Section 4.14(a) of the Atmel Disclosure Schedule or as would not reasonably be expected to have a Business Material Adverse Effect, all UK Tax Returns required to be filed by Atmel UK with respect to the Business as conducted in the UK have been duly and timely filed (taking into account applicable extensions) and all such UK Tax Returns are true, correct and complete in all material respects. Atmel UK has paid (or caused to be paid) all Taxes with respect to the Business as conducted in the UK that are due and payable (other than Taxes that are being contested in good faith and are reserved for in the UK portion of the Financial Statements).

          (b) To the Knowledge of Atmel, no challenge or audit of any UK Tax Return by any Governmental Authority in the UK is currently in progress or otherwise threatened in writing. Atmel UK has not waived any statute of limitations with respect to UK Taxes or agreed to an extension of time with respect to a UK Tax assessment or deficiency affecting Atmel UK which waiver or extension of time is currently outstanding.

          (c) To the Knowledge of Atmel, Atmel UK is a taxable person for value added tax purposes and is registered for the purposes of VAT.

          (d) Atmel UK is not a large company within the meaning of regulation 3 of the Corporation Tax (Installment Payment) Regulations 1998.

          (e) Atmel UK is not a close company within the meaning of Section 439 of the Corporation Tax Act 2010.

          (f) Atmel UK has, throughout the past seven years, been resident in the UK for corporation tax purposes and has not, at any time in the past seven years, been treated as resident in any other jurisdiction for the purposes of any double taxation arrangements.

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          (g) Notwithstanding any other provisions of this Agreement, this Section 4.14 contains Atmel’s sole representations and warranties regarding UK Taxes.

     4.15 Insurance.

          (a) As of the date hereof, Atmel UK maintains, with respect to the Business conducted in the UK, general liability, professional liability, product liability, fire, casualty, workers’ compensation, and other types of insurance applicable to Atmel UK which is in full force and effect and, to the Knowledge of Atmel, comprised of the types and in the amounts customarily carried by businesses of similar size in the same industry operating in the UK. As of the Closing Date, Atmel UK will maintain, with respect to the Business conducted in the UK, general liability, professional liability, product liability, fire, casualty, workers’ compensation, and other types of insurance which will be in full force and effect and, to the Knowledge of Atmel, comprised of the types and in the amounts customarily carried by businesses of similar size in the same industry operating in the UK.

          (b) Notwithstanding any other provisions of this Agreement, this Section 4.15 contains Atmel’s sole representations and warranties regarding Insurance of Atmel UK.

     4.16 UK Environmental Matters.

          (a) Except as set forth in Section 4.16(a) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, Atmel UK has not received any written notice from a Governmental Authority in the UK regarding any actual or alleged violation of Environmental Law or any actual, potential or alleged liabilities relating to or arising under any Environmental Law, except where such violation or liability would not result in a Business Material Adverse Effect or has been cured.

          (b) Notwithstanding any other provisions of this Agreement, this Section 4.16 contains Atmel’s sole representations and warranties regarding environmental matters in the UK.

     4.17 Transactions with Affiliates.

          (a) To the Knowledge of Atmel, except as set forth in Section 4.17(a) of the Atmel Disclosure Schedule, no managing director or president of Atmel UK in office as of the date hereof (i) owns any material tangible or intangible property which is used by Atmel UK in the Business in the conduct of its operations in the UK, (ii) has any cause of action against Atmel UK, or (iii) owes any money to Atmel UK or is owed money by Atmel UK (other than compensation, reimbursement and benefits owed to employees in the Ordinary Course).

          (b) As of the Closing, neither (i) Atmel or any of its Affiliates, nor (ii) any officer, director, employee of Atmel or of any of its Affiliates (other than Atmel UK) will be entitled to a claim for Employee Advances from Atmel UK or has assigned to any Person the benefit of such a claim against Atmel UK.

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          (c) Notwithstanding any other provisions of this Agreement, this Section 4.17 contains Atmel’s sole representations and warranties regarding Atmel UK’s transactions with Affiliates.

     4.18 No Other UK Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE IV or in Section 7.6, none of Atmel, Atmel UK or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel and Atmel UK hereby disclaim any and all other representations or warranties, whether made by one or more of Atmel, Atmel UK or any of their respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in the UK, the Assets owned by Atmel UK, the UK Ordinary Shares or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in the UK concerning the Contemplated Transactions, including whether or not the Atmel UK Employees would elect or organize employee representatives, works council, unions or other employee representative bodies, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING ATMEL FRANCE

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     5.1 Organization.

          (a) Atmel France is a private company duly incorporated and validly existing under the Laws of France.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.1 contains Atmel’s sole representations and warranties regarding the organization of Atmel France.

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     5.2 Power and Authority.

          (a) Atmel France has the requisite power and authority to own its property and assets and to carry on its business except such power and authority the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Atmel France possesses all governmental licenses and permits necessary to carry on the Business as conducted in France as currently conducted, except such licenses and permits the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.2 contains Atmel’s sole representations and warranties regarding power and authority of Atmel France.

     5.3 Authorization and Enforceability.

          (a) The execution, delivery and performance by Atmel France of this Agreement solely for the purposes of Section 2.2 and the consummation by Atmel France of the Contemplated Transactions, including execution, delivery and performance by Atmel France of the Contribution Agreement, have been or will be prior to the Closing duly authorized by all necessary corporate action on the part of Atmel France and no other corporate proceedings on the part of Atmel France are or will be necessary to authorize the execution, delivery and performance of this Agreement and the Contribution Agreement or the consummation of the Contemplated Transactions. This Agreement constitutes, solely for purposes of Section 2.2, and the Contribution Agreement will, upon execution and delivery by Atmel France, constitute a legal, valid and binding obligation of Atmel France enforceable against Atmel France in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law).

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.3 contains Atmel’s sole representations and warranties regarding authorization and enforceability with regard to Atmel France, of the Agreement, the Contemplated Transactions and the Contribution Agreement.

     5.4 Authorizations and Consents.

          (a) No consents, licenses, approvals or authorizations of, or registrations or filings with, any Governmental Authority in France (“French Governmental Consents”) are required to be obtained or made by Atmel France, in connection with the execution, delivery, performance, validity and enforceability of this Agreement solely for the purposes of Section 2.2 or the Contribution Agreement or the consummation by Atmel France of the Contemplated Transactions, other than the French Governmental Consents set forth in Section 5.4(a) of the Atmel Disclosure Schedule or required in connection with Restricted IPR, and except for those for which the failure

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(in part or in whole) to obtain such French Governmental Consents would not have, or be reasonably expected to have, a Business Material Adverse Effect. All representations, warranties, statements or other communications, whether express or implied, made by Atmel France to any Governmental Authority in France in requesting the French Governmental Consents shall be true and correct.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.4 contains Atmel’s sole representations and warranties regarding French Governmental Consents.

     5.5 Absence of Certain Changes in France.

          (a) Except as set forth in Section 5.5(a) of the Atmel Disclosure Schedule or as reflected on the Unaudited Balance Sheet, since December 31, 2009 through the date hereof, (i) Atmel France has conducted its business in the Ordinary Course, and (ii) there has not been any change in the business of Atmel France that has resulted in a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.5 contains Atmel’s sole representations and warranties regarding the absence of certain changes in France.

     5.6 France Real Property.

          (a) Atmel France is the owner of the Property that is used in the Business as conducted in France listed in Section 5.6(a) of the Atmel Disclosure Schedule (the “French Property”). The freehold interest relating to the French Property is free and clear of all Liens, other than Permitted Liens.

          (b) Atmel France and Vault-IC shall enter into the Lease Agreement prior to Closing. At the Closing, the Lease Agreement shall comply with all applicable provisions of French Law and constitute a valid commercial lease (bail commercial) (as that term is defined in French law) in all material respects.

          (c) Notwithstanding any other provisions of this Agreement, this Section 5.6 contains Atmel’s sole representations and warranties regarding real property in France.

     5.7 France Transferred Contracts.

          (a) Status of France Transferred Contracts.

               (i) A true and complete copy of each France Transferred Contract as listed on Schedule 2.3(b)(i)(A) has been made available to Buyer. As to each France Transferred Contract there does not exist thereunder as of the date hereof any breach or default on the part of Atmel France and Atmel France has not received written notice of any breach or default by any other party to such France Transferred Contract, except for such breach or default which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

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               (ii) Except as set forth in Section 5.7(a)(ii) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, all France Transferred Contracts are valid, binding and in full force and effect and enforceable by Atmel France in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law), except for such failure to be valid, binding or in full force and effect or enforceable by Atmel France in accordance with their respective terms, as would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Other than the Funded Projects listed in Schedule 2.2(b) and described in Section 12.3(a) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, as of the date hereof, there are no projects related to technology development for the Business funded or subsidized by a Governmental Authority pursuant to which Atmel France receives rights and benefits for technology research and development, including reimbursement of costs or grants of money.

               (iii) Except as set forth in Section 5.7(a)(iii) of the Atmel Disclosure Schedule, the consummation of the Contemplated Transactions will not require the consent of any third party that is a party to any of the France Transferred Contracts, or give rise to a right or claim of termination or cancellation by any third party that is a party to any of the France Transferred Contracts.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.7 contains Atmel’s sole representations and warranties regarding Contracts of Atmel France.

     5.8 Compliance with French Law (Other than Employee Matters).

          (a) To the Knowledge of Atmel, as of the date hereof, Atmel France is not in violation of any Law of France (i) that does not relate to any labor or employment matters in general or that is not applicable to the France Employees and (ii) that is applicable to the conduct or operation of the Business as conducted in France by Atmel France or the ownership or use of any of the assets of Atmel France which violation has had, or would reasonably be expected to have, a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.8 contains Atmel France’s sole representations and warranties regarding France Transferred Contracts with respect to those matters (i) that do not relate to labor or employment matters in general or that is not applicable to the France Employees and (ii) that is applicable to the conduct or operation of the Business as conducted in France by Atmel France or the ownership or use of any of the assets of Atmel France.

     5.9 French Assets.

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          (a) Section 5.9(a) of the Atmel Disclosure Schedule sets forth a true and correct list of the France Transferred Equipment all of which is owned by Atmel France free and clear of all Liens other than Permitted Liens.

          (b) Each material item of France Transferred Equipment that is owned by Atmel France, is (i) in good operating condition (subject to normal wear and tear and consistent with the age of such tangible assets), (ii) suitable for the purposes for which it is currently being used. Except for the foregoing, all such Equipment is being transferred on a “where is” and, as to condition, “as is” basis, without warranty of any kind, except for such failures to be in such condition, including with respect to hardware and software assets, any bugs, errors and enhancements, that, individually or in the aggregate, have not and would not reasonably be expected to have a Business Material Adverse Effect.

          (c) Notwithstanding any other provisions of this Agreement, this Section 5.9 contains Atmel’s sole representations and warranties regarding the Assets with respect to those matters that are applicable to the conduct or operation of the Business as conducted in France or the ownership or use of any of the assets of Atmel France.

     5.10 France Employees.

          (a) Section 5.10(a) of the Atmel Disclosure Schedule sets forth a true and correct anonymized list of all France Employees (such list as redacted pursuant to applicable Laws relating to data privacy) showing for each France Employee, the employee number, position held, employment commencement date, monthly gross salary or wages and aggregate annual compensation for the last fiscal year.

          (b) Section 5.10(b) of the Atmel Disclosure Schedule lists all collective bargaining agreements (including the GPEC Agreements) to which Atmel France or Atmel Paris is a party applicable to the France Employees.

          (c) Section 5.10(c) of the Atmel Disclosure Schedule lists all of the Benefit Plans of which the France Employees are beneficiaries or participants. With respect to each of the Benefit Plans identified on Section 5.10(c) of the Atmel Disclosure Schedule, Atmel has made available to Buyer true and correct copies or a written description or summary thereof. Each Benefit Plan listed on Section 5.10(c) of the Atmel Disclosure Schedule has been maintained in compliance in all material respects with all applicable French Laws.

          (d) Section 5.10(d) of the Atmel Disclosure Schedule lists all stock-based employee compensation arrangements which are maintained, or contributed to, for the benefit of or relating to current and former France Employees.

          (e) As of the date hereof, there has not been any amendment of or modification to the GPEC Agreements other than Avenant No. 1 au Protocole d’Accord GPEC and Avenant No. 2 au Protocole d’Accord GPEC.

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          (f) To the Knowledge of Atmel, as of the date hereof, neither Atmel France nor Atmel Paris is in violation of French Law applicable to France Employees or collective agreements (including the GPEC Agreements) and employment agreements applicable to such France Employees, in particular in relation to employees’ representation (including works councils), compensation, working time, overtime, paid vacation, medical care and social security, employee participation or profit sharing which violation has had, or would reasonably be expected to have, a Business Material Adverse Effect.

          (g) Atmel and Atmel France are responsible for the settlement of any options, restricted stock units or other right to purchase shares of common stock of Atmel which were granted to any Atmel France Employee by Atmel or Atmel France and which are exercised, in accordance with the terms of the plan, program or arrangement under which such options, restricted stock units or rights were granted, after the Closing Date. Buyer shall have no liability whatsoever with respect to such options, restricted stock units or rights or any plan, program or arrangement related thereto.

          (h) Atmel France shall be liable for any and all liabilities and obligations under applicable French labor or employment Laws arising from actions taken by Atmel France or its directors, officers or employees prior to the Closing that result in violation of such French Laws, and such liabilities and obligations arising from such pre-Closing actions taken by Atmel France or its directors, officers or employees shall not be included in the Dropdown and contribution of employee liabilities referred to in Section 2.2(d) above.

          (i) Except as set forth in Section 5.10(i) of the Atmel Disclosure Schedule, neither Atmel France nor Atmel Paris has entered into any contract with any of the France Employees which provides for a notice period or indemnity which exceeds the notice period or indemnity provided for by applicable French Law, the applicable collective bargaining agreements (including the GPEC Agreements) and the employment agreements for such employees in the event of a termination or retirement.

          (j) To the Knowledge of Atmel, except as set forth on Section 5.10(j) of the Atmel Disclosure Schedule, there are no pending or threatened claims by any France Employees or former France Employees.

          (k) Except as set forth in Section 5.10(k) of the Atmel Disclosure Schedule, to the Knowledge of Atmel and to the extent permissible by Law, no France Employee or former employee of Atmel France or Atmel Paris is entitled to validly claim any ownership, joint ownership, indemnification or else in and to any Intellectual Property Right and no France Employee, or consultant or service provider of Atmel France or Atmel Paris, or former employee, consultant or service provider of Atmel France or Atmel Paris is entitled under his/her employment, consulting or services contract, as applicable, to validly claim any rights (ownership, joint ownership, indemnification or else) in and to any Intellectual Property Right resulting from an invention or a creation performed within his/her professional activities for Atmel France or Atmel Paris. Except as set forth in Section 5.10(k) of the Atmel Disclosure Schedule, to the Knowledge of

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Atmel, no outstanding amount is currently owed by Atmel France or Atmel Paris in relation to such work under any contractual provision.

          (l) Notwithstanding any other provisions of this Agreement, this Section 5.10 contains Atmel’s sole representations and warranties regarding France Employee matters.

     5.11 French Environmental Matters.

          (a) Except as set forth in Section 5.11(a) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, Atmel France has not received any written notice from a Governmental Authority in France regarding any actual or alleged violation of Environmental Law or any actual, potential or alleged liabilities relating to or arising under any Environmental Law, except where such violation or liability would not result in a Business Material Adverse Effect or has been cured.

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.11 contains Atmel’s sole representations and warranties regarding environmental matters in France.

     5.12 Transactions with Affiliates.

          (a) To the Knowledge of Atmel, except as set forth in Section 5.12(a) of the Atmel Disclosure Schedule, no managing director or president of Atmel France in office as of the date hereof (a) owns any material tangible or intangible property which is used in the Business as conducted in France in the conduct of its operations, (b) has any cause of action against Atmel France or (c) owes any money to Atmel France or is owed money by Atmel France (other than compensation, reimbursement and benefits owed to employees in the Ordinary Course).

          (b) Notwithstanding any other provisions of this Agreement, this Section 5.12 contains Atmel’s sole representations and warranties regarding money owed by or to the managing directors or president of Atmel France.

     5.13 French Taxes and French Tax Matters — Atmel France.

          (a) Except as set forth in Section 5.13(a) of the Atmel Disclosure Schedule and except as would not reasonably be expected to have a Business Material Adverse Effect, all material Tax Returns with respect to the Business and Transferred Entities required to be filed by Atmel France have been duly and timely filed (taking into account applicable extensions) and all such Tax Returns are true, correct and complete in all material respects. Atmel France has paid (or caused to be paid) all Taxes that are due and payable by Atmel France with respect to the Business and Transferred Entities (other than Taxes that are being contested in good faith and are reserved for in the Financial Statements).

          (b) Except as set forth in Section 5.13(b) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, no challenge or audit of any Tax Return by any Governmental Authority is currently in progress or otherwise threatened in writing. Atmel France has not waived any statute of limitations with respect to Taxes.

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          (c) To the Knowledge of Atmel, Atmel France is a taxable person for value added tax purposes and is registered for the purposes of VAT.

          (d) Notwithstanding any other provisions of this Agreement, this Section 5.13 contains Atmel’s sole representations and warranties regarding Taxes.

     5.14 No Other Atmel France Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE V, none of Atmel, Atmel France or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel and Atmel France hereby disclaim any and all other representations or warranties, whether made by one or more of Atmel, Atmel France or any of their respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in France, the Assets owned by Atmel France, the Vault-IC Shares, the execution and delivery of this Agreement or any Ancillary Agreement or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in France concerning the Contemplated Transactions, including whether or not the works council of Atmel France would render an opinion with respect thereto, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING VAULT-IC

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     6.1 Organization.

          (a) As of the Incorporation Date and the Closing Date, Vault-IC will be duly organized and validly existing under the Laws of France.

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          (b) Notwithstanding any other provisions of this Agreement, this Section 6.1 contains Atmel’s sole representations and warranties regarding the organization of Vault-IC.

     6.2 Power and Authority.

          (a) Except as set forth in Section 6.2(a) of the Atmel Disclosure Schedule, as of the Incorporation Date and the Closing Date, Vault-IC will have the requisite power and authority to own its property and assets and to carry on its business.

          (b) Notwithstanding any other provisions of this Agreement, this Section 6.2 contains Atmel’s sole representations and warranties regarding power and authority of Vault-IC.

     6.3 Capitalization.

          (a) As of the Incorporation Date, the authorized share capital of Vault-IC will be one thousand Euros (€1,000) consisting of one thousand (1,000) Vault-IC Shares, the beneficial and legal owner of which will be Atmel France. Other than the Vault-IC Shares, there will be no other shares or other equity securities of Vault-IC in issue. As of the Incorporation Date and the Closing Date, Vault-IC will have no Subsidiaries. As of the Incorporation Date and the Closing Date, all Vault-IC Shares will be validly issued in compliance with all applicable French Laws, duly authorized, fully paid and non-assessable.

          (b) Except for this Agreement, As of the Incorporation Date and the Closing Date, there will be no options, warrants, calls, conversion rights, commitments or agreements of any character to which Vault-IC will be a party or by which Vault-IC will be bound that will or may obligate Vault-IC to issue, deliver or sell, or cause to be issued, delivered or sold, additional Vault-IC Shares or securities convertible into or exchangeable for Vault-IC Shares or that will or may obligate Vault-IC to grant, extend, accelerate the vesting or waive any repurchase rights of, or change the price of the Vault-IC Shares or otherwise amend or enter into any such rights, commitments, subscriptions, options or agreements. The Vault-IC Shares to be sold and transferred hereunder are not subject to any preemptive rights or rights of first refusal, co-sale, first offer, option or other restriction on transfer. In compliance with applicable French Law, the Vault-IC Shares are transferable and free of any Liens.

          (c) Notwithstanding any other provisions of this Agreement, this Section 6.3 contains Atmel’s sole representations and warranties regarding capitalization of Vault-IC.

     6.4 Contribution Agreement. Immediately prior to the Closing Date, the Contribution Agreement will be a valid, binding and enforceable agreement in compliance with all applicable provisions of the French Commercial Code in all material respects. As of the effective date of the Dropdown, the contribution in kind (apport simple) of assets pursuant to the Contribution Agreement into Vault-IC will have been executed in all material respects in compliance with all applicable provisions of French Law.

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     6.5 Vault-IC Assets. Except for those assets the benefits of which Buyer obtains through the Ancillary Agreements, those assets which shall be transferred to Vault-IC as a result of the Dropdown and the Fixed Assets that will be owned by Vault-IC as of the Closing are all of the tangible assets that were owned by Atmel France prior to the Dropdown, that are material to the operation of the Business in France as of the Closing in materially the same manner as Atmel France conducted the Business in France immediately prior to the Closing and are sufficient to operate the Business in France as of the Closing in materially the same manner as Atmel France conducted the Business in France immediately prior to the Closing.

     6.6 Vault-IC Employees.

          (a) Section 6.6(a) of the Atmel Disclosure Schedule sets forth a true and correct anonymized list of all Atmel France Employees who will be Vault-IC Employees immediately following the effectiveness of the Dropdown; provided that such individuals’ employment with Atmel France has not ceased or been terminated prior to the effectiveness of the Dropdown (the “Vault-IC Employees”) (such list as redacted pursuant to applicable Laws relating to data privacy) showing for each Vault-IC Employee, the employee number, monthly gross salary or wages and aggregate annual compensation for the last fiscal year.

          (b) Following the Closing, Atmel and Atmel France will be responsible for the settlement of any options, restricted stock units or other right to purchase shares of common stock of Atmel which were granted to any Vault-IC Employee by Atmel or Atmel France and which are exercised, in accordance with the terms of the plan, program or arrangement under which such options, restricted stock units or rights were granted, after the Closing Date. Buyer shall have no liability whatsoever with respect to such options, restricted stock units or rights or any plan, program or arrangement related thereto.

          (c) Prior to the Closing, Vault-IC will have reserves for wages, bonuses, paid vacation and retirement indemnity with respect to the Vault-IC Employees as required by French Law and the Accounting Principles applicable to reserving for certain liabilities related to such Vault-IC Employees.

          (d) Except as set forth in Section 6.6(d) of the Atmel Disclosure Schedule, from and after the effective date of the Dropdown and prior to the Closing, Atmel France will not cause Vault-IC to enter into any contract with any of the Vault-IC Employees which provides for a notice period or indemnity which exceeds the notice period or indemnity provided for by applicable French Law, the applicable collective bargaining agreements (including the GPEC Agreement) and the employment agreements for such employees in the event of termination or retirement.

          (e) As of the effective date of the Dropdown, the transfer of Atmel France Employees as contemplated in Section 2.2(d) and pursuant to the Contribution Agreement will have been executed in all material respects in compliance with Article L. 1224-1 of the French Labor Code.

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          (f) Notwithstanding any other provisions of this Agreement, this Section 6.6 contains Atmel’s sole representations and warranties regarding Vault-IC Employee matters.

     6.7 French Taxes and French Tax Matters — Vault-IC.

          (a) Except as would not reasonably be expected to have a Business Material Adverse Effect, all material Tax Returns with respect to the Business and Transferred Entities required to be filed by Vault-IC have been duly and timely filed (taking into account applicable extensions) and all such Tax Returns are true, correct and complete in all material respects. Vault-IC has paid (or caused to be paid) all Taxes that are due and payable by Vault-IC with respect to the Business and Transferred Entities (other than Taxes that are being contested in good faith and are reserved for in the Financial Statements).

          (b) To the Knowledge of Atmel, no challenge or audit of any Tax Return by any Governmental Authority is currently in progress or otherwise threatened in writing. Vault-IC has not waived any statute of limitations with respect to Taxes.

          (c) To the Knowledge of Atmel, Vault-IC is a taxable person for value added tax purposes and is registered for the purposes of VAT.

          (d) Notwithstanding any other provisions of this Agreement, this Section 6.7 contains Vault-IC’s sole representations and warranties regarding French Taxes.

     6.8 No Other Vault-IC Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE VI and Section 7.6, none of Atmel or any of its Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel hereby disclaims any and all other representations or warranties, whether made by one or more of Atmel or any of its Affiliates, representatives, agents or advisors, with respect to the Business as conducted in France, Vault-IC, the Assets that will be owned by Vault-IC following the Incorporation Date, the Vault-IC Shares or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in France concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

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ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING ATMEL

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     7.1 Organization.

          (a) Atmel is a corporation duly incorporated and validly existing under the Laws of the State of Delaware.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.1 contains Atmel’s sole representations and warranties regarding its organization.

     7.2 Power and Authority.

          (a) Atmel has the requisite power and authority to execute, deliver and perform this Agreement and the Ancillary Agreements to which it is or will be a party and to consummate the Contemplated Transactions. Atmel has full power and authority to perform its obligations under the Ancillary Agreements to which it is or will be party and to consummate the Contemplated Transactions.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.2 contains Atmel’s sole representations and warranties regarding its power and authority.

     7.3 Authorization and Enforceability.

          (a) The execution, delivery and performance by Atmel of this Agreement and the consummation by Atmel of the Contemplated Transactions have been or will be prior to the Closing duly authorized by all necessary corporate action on the part of Atmel and no other corporate proceedings on the part of Atmel are or will be necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Atmel is or will be a party or the consummation of the Contemplated Transactions. This Agreement constitutes, and each Ancillary Agreement executed and delivered or to be executed and delivered by Atmel pursuant to this Agreement will, upon such execution and delivery, constitute a legal, valid and binding obligation of Atmel enforceable against Atmel in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law).

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.3 contains Atmel’s sole representations and warranties regarding authorization and enforceability with regard to Atmel, of the Agreement and the Contemplated Transactions.

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     7.4 Atmel Transferred Contracts.

          (a) Status of Atmel Transferred Contracts.

               (i) A true and complete copy of each Atmel Transferred Contract has been made available to Buyer. As to each Atmel Transferred Contract, (i) there does not exist thereunder as of the date hereof any breach or default on the part of Atmel and (ii) Atmel has not received written notice of any breach or default by any other party to such Atmel Transferred Contract, except, in the case of clauses (i) and (ii), for such breach or default which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

               (ii) Except as set forth in Section 7.4(a)(ii) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, all Atmel Transferred Contracts are valid, binding and in full force and effect and enforceable by Atmel in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law), except for such failure to be valid, binding or in full force and effect or enforceable by Atmel in accordance with their respective terms, as would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

               (iii) Except as set forth in Section 7.4(a)(iii) of the Atmel Disclosure Schedule, the consummation of the Contemplated Transactions will not require the consent of any third party that is a party to any of the Atmel Transferred Contracts, or give rise to a right or claim of termination or cancellation by any third party that is a party to any of the Atmel Transferred Contracts.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.4 contains Atmel’s sole representations and warranties regarding Contracts of Atmel.

     7.5 Absence of Certain Changes in the United States.

          (a) Except as set forth in Section 7.5(a) of the Atmel Disclosure Schedule or as reflected on the Unaudited Balance Sheet, since December 31, 2009 through the date hereof, (i) Atmel has conducted the Business as conducted in the United States in the Ordinary Course, and (ii) there has not been any change in the businesses or operations of the Business as conducted in the United States that has resulted in a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.5 contains Atmel’s sole representations and warranties regarding the absence of certain changes in the United States.

     7.6 Intellectual Property.

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          (a) Section 7.6(a) of the Atmel Disclosure Schedule sets forth a list of the (i) Transferred Patents, (ii) Transferred Trademarks that have been registered with the United States Patent and Trademark Office or other equivalent authority in any other country, and (iii) Copyrights included in the Business IPR that have been registered with the United States Copyright Office or other equivalent authority in any other country. Except as set forth in Section 7.6(a) of the Atmel Disclosure Schedule, there are no actions that are required to be taken by Atmel within one hundred eighty (180) days of the date hereof with respect to the Transferred IPR that, if not taken will have a material adverse effect on any of the foregoing registered Transferred IPR or the prosecution of applications or registrations relating thereto. Except as set forth in Section 7.6(a) of the Atmel Disclosure Schedule, the Transferred IPR is not the subject of any claims, orders, judgments or decrees, and Atmel has not received any notice of claims orders, judgments or decrees, or actions by any Third Party seeking to, invalidate the Transferred IPR.

          (b) The Licensed Patents are, to the Knowledge of Atmel, all of the Patents (other than the Transferred Patents) owned or licensable by Atmel that absent the licenses granted hereunder would be infringed by the operation of the Business by Buyer as of the Closing.

          (c) Section 7.6(c) of the Atmel Disclosure Schedule sets forth a list of all material Restricted IPR that would, but for the restrictions thereon, be (i) Transferred IPR or (ii) Licensed IPR.

          (d) Except as set forth on Section 7.6(d) of the Atmel Disclosure Schedule, to the Knowledge of Atmel (i) the Existing Products and the operation of the Business have not infringed or misappropriated and do not infringe or misappropriate, the Intellectual Property Rights of any third party, and (ii) the Buyer’s operation of the Business (including making, having made and selling Existing Products) following the Closing will not infringe or misappropriate any third party’s Intellectual Property Rights existing as of or prior to the Closing when such Business is operated as it is operated as of the Closing by Atmel. Neither Atmel nor any of the Selling Subsidiaries or Atmel UK has received any written notice of any pending or threatened claim, action or suit alleging that the products or operations of the Business or the Business Assets infringe or misappropriate the Intellectual Property Rights of any third party, nor, to the Knowledge of Atmel, is there any reasonable basis for any such claim, action or suit.

          (e) Except as set forth on Section 7.6(e) of the Atmel Disclosure Schedule, Atmel owns all right, title and interest in and to all of the Transferred IPR and has the right and authority to transfer such Transferred IPR free and clear of any and all Liens but subject to any Permitted Liens, and restrictions with respect to the Restricted IPR.

          (f) Except as set forth on Section 7.6(f) of the Atmel Disclosure Schedule, Atmel has the right to grant the licenses to the Licensed IPR granted to the Buyer hereunder in accordance with the terms hereof but subject to restrictions with respect to the Restricted IPR.

          (g) Except as set forth on Section 7.6(g) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, (i) no third party is infringing or misappropriating any material Business

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IPR in any material respect, and (ii) none of the Business IPR is currently the subject of any pending or active Litigation.

          (h) Atmel has taken reasonable commercial steps to protect its rights in existing Trade Secrets currently material to the Business as conducted in the United States, including having a policy or practice requiring Employees and consultants materially involved in the development of material Technology or material Trade Secrets used in the Business as conducted in the United States or in any jurisdiction in which the Business is conducted in a material respect as of the date hereof to execute nondisclosure of proprietary information and confidentiality agreements or to protect proprietary or confidential information from disclosure.

          (i) Section 7.6(i) of the Atmel Disclosure Schedule sets forth sets forth the list of United States government funding received by Atmel used in the development of any material Transferred IPR. No Governmental Authority, university, college, other educational institution or research center in the United States or in any jurisdiction in which the Business is conducted in a material respect as of the date hereof has any claim or right in or to any material Transferred IPR. Except as set forth in Section 7.6(i) of the Atmel Disclosure Schedule, the execution, delivery, performance of the Agreement and of the Ancillary Agreements will not give the right for any Governmental Authority, university, college, other educational institution or research center in the United States or in any jurisdiction in which the Business is conducted in a material respect as of the date hereof to request from Buyer the reimbursement of any material funding provided by such Governmental Authority or institution.

          (j) Except as set forth in Section 7.6(j) of the Atmel Disclosure Schedule, Atmel has not contributed or licensed, or agreed to contribute or license, any Transferred IPR to or through any standards body, standard setting organization, industry consortium, licensing pool, Governmental Authority in any territory in which the Business is conducted in a material respect as of the date hereof.

          (k) The Business IPR, the Licensed IPR, the Restricted IPR, any Intellectual Property Rights licensed to Buyer by Atmel or its Affiliates pursuant to an Ancillary Agreement, and any services provided by Atmel to Buyer pursuant to any Ancillary Agreement, include all of the Intellectual Property Rights (other than Trademarks) of Atmel or its Affiliates, that absent ownership thereof by, or the licenses granted to, Buyer hereunder or under the Ancillary Agreements, would be infringed by the operation of the Business as conducted in the United States or in any jurisdiction in which the Business is conducted in a material respect as of the date hereof immediately following the Closing when such Business is operated by Buyer in substantially the same manner as such Business was operated by Atmel immediately prior to the Closing. To the Knowledge of Atmel, the Business IPR, the Licensed IPR, the Restricted IPR, any Intellectual Property Rights licensed to Buyer pursuant to an Ancillary Agreement, any services provided by Atmel to Buyer pursuant to any Ancillary Agreement, any Intellectual Property Right licensed to Atmel pursuant to a Transferred Contract, any Intellectual Property Rights that are licensed to Atmel by a third party pursuant to an Annex A Contract, any rights available to Buyer pursuant to off-the-shelf commercially available licenses, will be sufficient to enable Buyer to conduct the Business immediately following the

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Closing in substantially the same manner as such Business was operated by Atmel immediately prior to the Closing.

          (l) To the Knowledge of Atmel, no Employee or third party contractor engaged in the development of any Transferred IPR is, in the case of such Employee, in material breach of his or her employment agreement, or in the case of a contractor its Contract, with Atmel where such breach would have, or be reasonably expected to have, a Business Material Adverse Effect. All material Transferred IPR created by any Employee of, or to the Knowledge of Atmel, Contractor to, Atmel, was properly transferred to, or vested in, Atmel in the ordinary course.

          (m) Section 7.6(m) of the Atmel Disclosure Schedule is a list of all Contracts pursuant to which Atmel has expressly licensed material Transferred Patents to a third party other than licenses in which Atmel has granted a license to all, or a substantial portion, of its Patent portfolio. Annex A includes a list of all Contracts (the “Annex A Contracts”) pursuant to which a third party has licensed to Atmel Intellectual Property Rights that are material or necessary to the operation of the Business as of the date hereof.

          (n) Other than the licenses granted hereunder or under the Ancillary Agreements and other licenses that may be necessary or appropriate for the purpose of providing transition support to Buyer (such licenses for transition to be granted at no charge to Buyer), Atmel or its Affiliates will not require Buyer to license any additional Intellectual Property Rights from Atmel or its Affiliates in order to enable Buyer to operate the Business immediately following the Closing substantially in the same manner as such Business was operated by Atmel immediately prior to the Closing.

          (o) Notwithstanding any other provisions of this Agreement, this Section 7.6 contains Atmel’s sole representations and warranties regarding Intellectual Property Rights.

     7.7 Financial Statements.

          (a) Section 7.7(a) of the Atmel Disclosure Schedule sets forth the following consolidated financial statements of the Business (the “Financial Statements”): (i) the unaudited consolidated balance sheet of the Business as of December 31, 2009 (the “Unaudited Balance Sheet”) and (ii) the unaudited consolidated statements of direct revenues and costs associated with the Business for the years ended December 31, 2008 and December 31, 2009. Except as set forth in Section 7.7(a) of the Atmel Disclosure Schedule, each of the Financial Statements has been prepared from Atmel’s consolidated financial records, which are based on the Accounting Principles and adjusted and estimated by Atmel to reflect the expected financial statements of the Business as owned and operated by Buyer after the Closing. The Unaudited Balance Sheet fairly presents, in all material respects, the consolidated financial condition of the Business as of its respective date and the unaudited consolidated statements of direct revenues and costs fairly present, in all material respects, the operating results of the Business to be sold to Buyer pursuant to this Agreement, for the periods covered thereby, subject to the absence of footnote disclosure and to other required

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adjustments as if the Business had operated as an unaffiliated entity during the periods presented therein.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.7 contains Atmel’s sole representations and warranties regarding financial statements of the Business.

     7.8 Insurance.

          (a) As of the date hereof, Atmel maintains, with respect to the Business conducted in the United States, general liability, professional liability, product liability, fire, casualty, workers’ compensation, and other types of insurance applicable to Atmel which is in full force and effect and, to the Knowledge of Atmel, comprised of the types and in the amounts customarily carried by businesses of similar size in the same industry operating in the United States. As of the Closing Date, Atmel will maintain, with respect to the Business conducted in the United States, general liability, professional liability, product liability, fire, casualty, workers’ compensation, and other types of insurance which will be in full force and effect and, to the Knowledge of Atmel, comprised of the types and in the amounts customarily carried by businesses of similar size in the same industry operating in the United States.

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.8 contains Atmel’s sole representations and warranties regarding Insurance of Atmel.

     7.9 Transactions with Affiliates.

          (a) To the Knowledge of Atmel, except as set forth in Section 7.9(a) of the Atmel Disclosure Schedule, no managing director or president of Atmel in office as of the date hereof (i) owns any material tangible or intangible property which is used in the Business in the conduct of its operations in the United States, (ii) has any cause of action against Atmel or (iii) owes any money to Atmel or is owed money by Atmel (other than compensation, reimbursement and benefits owed to employees in the Ordinary Course).

          (b) Notwithstanding any other provisions of this Agreement, this Section 7.9 contains Atmel’s sole representations and warranties regarding Atmel’s transactions with Affiliates.

     7.10 No Brokers. Except for Morgan Stanley & Co. Incorporated (as to which Atmel shall have full responsibility and to whom Buyer shall not have any liability in connection with the Contemplated Transactions), Atmel has not employed or incurred any liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Agreements or the Contemplated Transactions.

     7.11 US Tax Election.

          (a) Atmel and Vault-IC shall cooperate in the timely preparation and filing of the necessary forms with the US Internal Revenue Service in connection with the election referred to in the fourth Recital to this Agreement.

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          (b) Notwithstanding any other provisions of this Agreement, this Section 7.11 contains Vault-IC’s sole representations and warranties regarding US Taxes.

     7.12 Disclosure Schedules. The statements contained in the Atmel Disclosure Schedule are true and correct in all material respects as of the date hereof (except for statements contained in the Atmel Disclosure Schedule which address matters only as of a specific date, which statements are true and correct in all material respects as of such specific date). Except as otherwise provided in the Atmel Disclosure Schedule, the statements contained in the Atmel Disclosure Schedule, as modified supplemented or amended pursuant to Section 16.3(j), will be true and correct in all material respects as of the Closing as though made as of the Closing (except for statements contained in the Atmel Disclosure Schedule which address matters only as of a specific date, which statements shall continue as of the Closing Date to be true and correct in all material respects as of such specific date).

     7.13 No Other United States Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE VII, none of Atmel or any of its Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel hereby disclaims any and all other representations or warranties, whether made by one or more of Atmel or any of its Affiliates, representatives, agents or advisors, with respect to Atmel or the Business as conducted in the United States, the Assets owned by Atmel, the UK Ordinary Shares, the execution and delivery of this Agreement or any Ancillary Agreement or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in the United States concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

ARTICLE VIII
REPRESENTATIONS AND WARRANTIES REGARDING THE SWISS ENTITIES

     8.1 Atmel Switzerland. Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

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          (a) Organization.

               (i) Atmel Switzerland is a corporation duly incorporated and validly existing under the Laws of Switzerland.

               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.1(a) contains Atmel’s sole representations and warranties regarding Atmel Switzerland’s organization.

          (b) Power and Authority.

               (i) Atmel Switzerland has the requisite power and authority to own its property and assets and to carry on its business except such power and authority the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Atmel Switzerland possesses all governmental licenses and permits necessary to carry on its business as conducted in Switzerland as currently conducted, except such licenses and permits the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.1(b) contains Atmel’s sole representations and warranties regarding Atmel Switzerland’s power and authority.

          (c) Atmel Switzerland Assets.

               (i) Section 8.1(c)(i) of the Atmel Disclosure Schedule sets forth a true and correct list of the Inventory as of the date hereof.

               (ii) The Inventory is of a quality and quantity useable and saleable in the normal and Ordinary Course and suitable for the purpose for which is used as such purpose and use relate to the Existing Products, subject to appropriate and adequate allowances reflected on the Atmel Switzerland portion of the Financial Statements for obsolete, excess, slow-moving and other irregular items.

               (iii) Atmel Switzerland owns the legal right, title and interest in and to all of the Inventory related to the Existing Products to be transferred under Section 2.3(b)(iii)(A) free and clear of any and all Liens other than Permitted Liens and Atmel Switzerland has, or will at the Closing have, all requisite power and authority under Swiss Law to sell and transfer to Buyer all of its legal right, title and interest in and to such Inventory.

               (iv) Notwithstanding any other provisions of this Agreement, this Section 8.1(c) contains Atmel’s sole representations and warranties regarding the Assets with respect to those matters that are applicable to the ownership or use of any of the assets of Atmel Switzerland.

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          (d) Swiss Taxes and Swiss Tax Matters.

               (i) Except as would not reasonably be expected to have a Business Material Adverse Effect, all material Tax Returns with respect to the Business required to be filed by Atmel Switzerland have been duly and timely filed (taking into account applicable extensions) and all such Tax Returns are true, correct and complete in all material respects. Atmel Switzerland has paid (or caused to be paid) all Taxes that are due and payable by Atmel Switzerland with respect to the Business (other than Taxes that are being contested in good faith and are reserved for in the Financial Statements).

               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.1(d) contains Atmel’s sole representations and warranties regarding Swiss Taxes.

          (e) No Other Atmel Switzerland Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this Section 8.1, none of Atmel, Atmel Switzerland or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel hereby disclaims any and all other representations or warranties, whether made by one or more of Atmel, Atmel Switzerland or any of their respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in Switzerland, the Assets owned by Atmel Switzerland or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in Switzerland concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

     8.2 Atmel Sarl. Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

          (a) Organization.

               (i) Atmel Sarl is a corporation duly incorporated and validly existing under the Laws of Switzerland.

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               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.2(a) contains Atmel’s sole representations and warranties regarding Atmel Sarl’s organization.

          (b) Power and Authority.

               (i) Atmel Sarl has the requisite power and authority to own its property and assets and to carry on its business except such power and authority the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Atmel Sarl possesses all governmental licenses and permits necessary to carry on its business as conducted in Switzerland as currently conducted, except such licenses and permits the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.2(b) contains Atmel’s sole representations and warranties regarding Atmel Sarl’s power and authority.

          (c) Atmel Sarl Contracts.

               (i) Status of Atmel Sarl Transferred Contracts.

                    (A) A true and complete copy of each Atmel Sarl Transferred Contract has been made available to Buyer. As to each Atmel Sarl Transferred Contract, (i) there does not exist thereunder as of the date hereof any breach or default on the part of Atmel Sarl and (ii) Atmel Sarl has not received written notice of any breach or default by any other party to such Atmel Sarl Transferred Contract, except, in the case of clauses (i) and (ii), for such breach or default which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

                    (B) Except as set forth in Section 8.2(c)(i)(B) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, all Atmel Sarl Transferred Contracts are valid, binding and in full force and effect and enforceable by Atmel Sarl in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law), except for such failure to be valid, binding or in full force and effect or enforceable by Atmel Sarl in accordance with their respective terms, as would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

                    (C) Except as set forth in Section 8.2(c)(i)(C) of the Atmel Disclosure Schedule, the consummation of the Contemplated Transactions will not require the consent of any third party that is a party to any of the Atmel Sarl Transferred Contracts, or give rise to a right or claim of termination or cancellation by any third party that is a party to any of the Atmel Sarl Transferred Contracts.

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               (ii) Notwithstanding any other provisions of this Agreement, this Section 8.2(c) contains Atmel’s sole representations and warranties regarding Contracts of Atmel Sarl.

          (d) Certain Customers. Section 8.2(d) of the Atmel Disclosure Schedule sets forth a true and correct list of the top ten customers of the Business as conducted in Switzerland by revenue for the twelve (12) month period ended December 31, 2009, and the amount of revenue accounted for by each such customer during that period.

          (e) Product Liability and Defects in Quality.

               (i) Except as set forth in Section 8.2(e)(i) of the Atmel Disclosure Schedule, to the Knowledge of Atmel, each Existing Product made, produced, manufactured, sold or distributed by Atmel Sarl prior to the Closing has been in material conformity with all applicable contractual commitments (including product warranties and other commitments related to the quality of such Existing Products) under Contracts with Business Customers except for any nonconformity which has not, individually or in the aggregate, or be reasonably expected to have, a Business Material Adverse Effect.

               (ii) Section 8.2(e)(ii) of the Atmel Disclosure Schedule lists all material pending warranty, guaranty, indemnity, product liability claims (whether satisfied or to be satisfied by a payment in cash, replacement or repair of defective, broken or malfunctioning Existing Products) made against Atmel Sarl, Atmel France or Atmel Paris as of the date hereof.

               (iii) To the Knowledge of Atmel, as of the date hereof, none of Atmel Sarl, Atmel France or Atmel Paris has any material liability or received any claim or demand from a Business Customer giving rise to material liability arising out of any personal injury suffered by an individual person or damage to property as a result of the use, replacement or repair of an Existing Product made, produced, manufactured, sold or distributed by Atmel Sarl prior to the Closing except for any such liability, claim or demand which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Atmel, Atmel Sarl, Atmel France and Atmel Paris have made available to Buyer (through the Atmel Disclosure Schedule) all relevant information relating to any material defect or quality problems reported by Business Customers with respect to the Existing Products made, produced, manufactured, sold or distributed by Atmel Sarl to such Business Customers prior to the Closing.

          (f) No Other Atmel Sarl Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this Section 8.2, Atmel, Atmel Sarl or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel and Atmel Sarl hereby disclaim any and all other representations or warranties, whether made by one or more of Atmel, Atmel Sarl or any of their respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in Switzerland, the

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Assets owned by Atmel Sarl or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in Switzerland concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

ARTICLE IX
REPRESENTATIONS AND WARRANTIES REGARDING ACP

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     9.1 Organization.

          (a) ACP is a corporation duly incorporated and validly existing under the Laws of the Philippines.

          (b) Notwithstanding any other provisions of this Agreement, this Section 9.1 contains Atmel’s sole representations and warranties regarding ACP’s organization.

     9.2 Power and Authority.

          (a) ACP has the requisite power and authority to own its property and assets and to carry on its business except such power and authority the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect. Except as set forth in Section 9.2(a) of the Disclosure Schedule, ACP possesses all governmental licenses and permits necessary to carry on its business as conducted in the Philippines as currently conducted, except such licenses and permits the absence of which would not, individually or in the aggregate, have, or be reasonably expected to have, a Business Material Adverse Effect.

          (b) Notwithstanding any other provisions of this Agreement, this Section 9.2 contains Atmel’s sole representations and warranties regarding ACP’s power and authority.

     9.3 ACP Equipment.

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          (a) Schedule 2.3(b)(iv) sets forth a true and correct list of ACP Equipment as of the date hereof.

          (b) Each material item of ACP Equipment that is owned by ACP is (i) in good operating condition (subject to normal wear and tear and consistent with the age of such tangible assets), (ii) suitable for the purposes for which it is currently being used. Except for the foregoing, all such Equipment is being transferred on a “where is” and, as to condition, “as is” basis, without warranty of any kind, except for such failures to be in such condition, including with respect to hardware and software assets, any bugs, errors and enhancements, that, individually or in the aggregate, have not had and would not reasonably be expected to have a Business Material Adverse Effect.

          (c) ACP owns all right, title and interest in and to all of the ACP Equipment free and clear of any and all Liens other than Permitted Liens and ACP has, or will at the Closing have, all requisite power and authority to sell and transfer to Buyer all of its right, title and interest in and to all of the ACP Equipment.

          (d) Notwithstanding any other provisions of this Agreement, this Section 9.1 contains Atmel’s sole representations and warranties regarding the Assets with respect to those matters that are applicable to the ownership or use of the ACP Equipment.

     9.4 No Other Philippines Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE IX, Atmel, ACP or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel and ACP hereby disclaim any and all other representations or warranties, whether made by one or more of Atmel, ACP or any of their Respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in the Philippines, the ACP Equipment or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in the Philippines concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

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ARTICLE X
REPRESENTATIONS AND WARRANTIES REGARDING ATMEL TAIWAN

     Except as set forth in the Atmel Disclosure Schedule (it being agreed that any matter disclosed in the Atmel Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Atmel hereby represents and warrants as follows:

     10.1 Taiwan Employees.

          (a) Section 10.1(a) of the Atmel Disclosure Schedule sets forth a true and correct anonymized list of all Atmel Taiwan Employees (such list as redacted pursuant to applicable Taiwanese Laws relating to data privacy) showing for each Atmel Taiwan Employee, the employee number, position held, employment commencement date, monthly gross salary or wages and aggregate annual compensation for the last fiscal year.

          (b) To the Knowledge of Atmel, as of the date hereof, Atmel Taiwan is not in violation of Taiwanese Law applicable to Atmel Taiwan Employees where such violation has had, or would reasonably be expected to have, a Business Material Adverse Effect.

          (c) Notwithstanding any other provisions of this Agreement, this Section 10.1 contains Atmel’s sole representations and warranties regarding Atmel Taiwan Employee matters.

     10.2 No Other Taiwan Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, except for the representations and warranties expressly made by Atmel in this ARTICLE X, Atmel, Atmel Taiwan or any of their respective Affiliates, directors, officers, employees, representatives, agents, counsel or advisors has made, or shall be deemed to have made, any representations or warranties, express or implied, to Buyer or any other Person and Atmel and Atmel Taiwan hereby disclaim any and all other representations or warranties, whether made by one or more of Atmel, Atmel Taiwan or any of their respective Affiliates, representatives, agents or advisors, with respect to the Business as conducted in Taiwan or any of the Contemplated Transactions, notwithstanding the delivery or disclosure to Buyer, its Affiliates or their respective directors, officers, employees, consultants, counsel, financial advisors (including any brokers or finders), accountants, other advisors, agents, or representatives of any documentation or other information with respect to one or more of the foregoing. Without limiting the generality of the foregoing, no representation or warranty has been made or is being made herein to Buyer or any other Person (i) as to merchantability, suitability or fitness for a particular purpose, or quality, with respect to any tangible assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent, (ii) with respect to any projections, forecasts, business plans, financial models, pro forma financials, estimates or budgets delivered to or made available to Buyer or any other Person, (iii) regarding any labor and employment matters in Taiwan concerning the Contemplated Transactions, or (iv) with respect to any other information or documents made available at any time to Buyer or any other Person.

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ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF BUYER

     Except as set forth in the Buyer Disclosure Schedule (it being agreed that any matter disclosed in the Buyer Disclosure Schedule with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other Section to the extent the applicability thereto is reasonably apparent), Buyer hereby represents and warrants to Atmel as follows:

     11.1 Organization and Power. Buyer is a société anonyme à directoire et conseil de surveillance duly formed, validly existing and in good standing under the Laws of France and has full power and authority to execute, deliver and perform this Agreement and the Ancillary Agreements to which it is or will be party and to consummate the Contemplated Transactions.

     11.2 Authorization and Enforceability. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the Contemplated Transactions have been or will be prior to the Closing duly authorized by all necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are or will be necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Buyer is or will be a party or the consummation of the Contemplated Transactions. This Agreement constitutes, and each Ancillary Agreement executed and delivered or to be executed and delivered by Buyer pursuant to this Agreement will, upon such execution and delivery, constitute a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law).

     11.3 No Violation. The execution, delivery and performance of this Agreement by Buyer does not, the execution, delivery and performance of each Ancillary Agreement executed and delivered or to be executed and delivered by Buyer pursuant to this Agreement will not, and the consummation by Buyer of the Contemplated Transactions will not (a) conflict with or violate any provision of the certificate of incorporation, bylaws or other similar organizational documents of Buyer, or (b) assuming that all consents, approvals and authorizations contemplated by Section 11.4 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Buyer except to the extent such conflict or violation would not have, or be reasonably expected to have, a Buyer Material Adverse Effect. Neither Buyer nor its Affiliates are subject to any Contract that would impair Buyer’s ability to consummate the Contemplated Transactions.

     11.4 Governmental Authorizations and Consents. No Governmental Consents are required to be obtained or made by Buyer in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Agreements to which Buyer is, or is to be, a party or the consummation by Buyer of the Contemplated Transactions, other than Governmental Consents set forth in Section 11.4 of the Buyer Disclosure Schedule or required in connection with Restricted IPR, and except for those for which the failure (in part or in whole) to

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obtain such Governmental Consents would not have, or be reasonably expected to have, a Buyer Material Adverse Effect. All representations, warranties, statements or other communications, whether express or implied, made by Buyer to any Governmental Authority in connection with any Governmental Consents shall be true and correct.

     11.5 Capitalization of Buyer. Section 11.5 of the Buyer Disclosure Schedule includes a true and correct copy of the Buyer’s capitalization table as of the date hereof (“Buyer Capitalization Table”), showing the authorized share capital of Buyer (the “Buyer Capital Stock”) and the beneficial and legal owners of the Buyer Capital Stock (“Buyer Investors”). Other than as set forth on the Buyer Capitalization Table, there are no other shares or other equity securities of Buyer in issue and there will be no options, warrants, calls, conversion rights, commitments or agreements of any character to which Buyer is a party or by which Buyer is bound that do or may obligate Buyer to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares in Buyer’s share capital (the “Buyer Shares”) or securities convertible into or exchangeable for Buyer Shares or that do or may obligate Buyer to grant, extend, accelerate the vesting or waive any repurchase rights of, or change the price of the Buyer Shares or otherwise amend or enter into any such rights, commitments, subscriptions, options or agreements. All shares as set forth in the Buyer Capitalization Table were validly issued in compliance with all applicable French Laws and duly authorized and are fully paid and non-assessable.

     11.6 Litigation. Except as set forth in Section 11.6 of the Buyer Disclosure Schedule, as of the date hereof, there is no Litigation pending or, to the Knowledge of Buyer, threatened against or involving Buyer which questions the validity of this Agreement or any of the Ancillary Agreements to which it is a party or seeks to prohibit, enjoin or otherwise challenge Buyer’s ability to consummate the Contemplated Transactions.

     11.7 Financial Capacity. Buyer has access to, and will have available on the Closing Date, capital in an amount that is sufficient to pay the Purchase Price and fund the working capital of the Business in accordance with this Agreement. At the time of any required payment of any Earnout Payment, Buyer will have access to, and will have available financial resources in an amount sufficient to pay such Earnout Payment in accordance with this Agreement. Buyer (i) has the resources and capabilities (financial or otherwise) to perform and satisfy its obligations hereunder and under each of the Ancillary Agreements and to operate the Business (including the business of the Transferred Entities) at least until the date that is the twenty-four (24) month anniversary of the Closing and (ii) has the resources and capabilities (financial or otherwise) to meet all of the obligations of Vault-IC and sustain Vault-IC as a solvent entity for at least until the date that is the twenty-four (24) month anniversary of the Closing.

     11.8 Solvency.

          (a) Buyer is now solvent and will not be rendered insolvent by any of the Contemplated Transactions. As used in this section, “insolvent” means that the Buyer is in cessation of payments, that is, that the Buyer is unable to pay its debts which have come due (passif exigible), irrespective of whether payment has in fact been demanded, with its available assets (actif

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disponible). The Buyer’s available assets consist in: cash, cash equivalents, rights to draw down under contractualized credit lines and rights to drawdown under contractualized discount facilities.

          (b) Immediately following the consummation of the Contemplated Transactions: (i) Buyer will be able to pay its liabilities as they become due in the usual course of its business; (ii) Buyer will not have insufficient capital with which to conduct its present or proposed business (including the operation of the Business) or in violation of capital preservation or shareholders’ equity requirements under applicable Law where Buyer is registered or organized; and (iii) taking into account all other liabilities and obligations of Buyer and its Subsidiaries (taking into account the maximum probable amount of such other liabilities and obligations and the earliest reasonable time at which such liabilities and obligations may become payable) Buyer will be able to pay and satisfy all such other liabilities when due.

     11.9 No Brokers. Neither Buyer nor any of its Affiliates has employed or incurred any liability to any broker, finder or agent for any brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Agreements or the Contemplated Transactions.

     11.10 Investment Intent. At the date hereof and at the Closing, Buyer’s intent is and will be, as the case may be, to acquire the UK Ordinary Shares and the Vault-IC Shares for its own account for investment, without a view to resale or distribution thereof in violation of US federal or state or non-US securities Laws and with no present intention of distributing or reselling any part thereof. Buyer will not so distribute or resell any of the UK Ordinary Shares or the Vault-IC Shares in violation of any such Laws.

     11.11 Investigation. Buyer is knowledgeable about the industry in which the Business operates and the Laws and regulations applicable to the Business, and is experienced in the acquisition and management of businesses and companies, including the Business and the Transferred Entities. Buyer has sufficient knowledge and experience in business, financial and investment matters that it is capable of evaluating the merits and risks of the Contemplated Transactions and making an informed decision with respect to such transactions. Buyer has been afforded reasonable access to the books and records, information, facilities and personnel of the Business for purposes of conducting a due diligence investigation of the Business, Atmel France, Atmel UK, the Assets and Assumed Liabilities. Buyer has conducted a reasonable due diligence investigation of the Business, Atmel France, Atmel UK, the Assets and the Assumed Liabilities and has received answers to all material inquiries it has made with respect to the Business and Atmel UK that are satisfactory to Buyer. As of the date hereof, Buyer does not have any knowledge of any inaccuracy or failure to be true of any of the representations or warranties of Atmel in ARTICLES IV through X or in any of the Ancillary Agreements. The foregoing shall not affect the rights of Buyer or the obligations of Seller under Section 16.2 (Special Indemnity).

     11.12 Investment Agreement. Buyer on the Closing Date will have available to it sufficient funds to permit Buyer to satisfy all of its obligations under this Agreement, including the payments required by Article II and consummation of the Contemplated Transactions, and the

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Ancillary Agreements and the payment of all related fees and expenses. A true and complete fully executed copy of the Investment Agreement, including all exhibits, schedules, annexes and attachments thereto, is attached hereto as Exhibit O, pursuant to which the Buyer Investors have agreed and committed to make or cause to be made an aggregate equity investment in Buyer to provide the full amount of funds required for Buyer to consummate the Contemplated Transactions (including the Earnout Payments) and to pay related fees and expenses (the “Equity Investment”). There are no amendments, restatements or modifications to the Investment Agreement as of the date of this Agreement and the respective obligations of the parties to the Investment Agreement contained therein have not been withdrawn, modified or rescinded in any respect prior to the date of this Agreement. As of the date of this Agreement, the Investment Agreement is in full force and effect and constitutes the legal, valid and binding obligation of each of Buyer and, to the Knowledge of Buyer, the Buyer Investors, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, liquidation, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law). There are no conditions precedent to the funding of the full amount of the Equity Investment, other than the satisfaction or waiver of the conditions set forth in Section 1.1.3 of the Investment Agreement. Subject to the terms and conditions of the Investment Agreement, the net proceeds contemplated from the Equity Investment will be sufficient for the satisfaction of all of Buyer’s obligations under this Agreement, including the payment of any amounts required to be paid pursuant to Article II, and under each of the Ancillary Agreements. As of (a) the date of this Agreement, no event has occurred which would constitute a breach or default (or an event which with notice or lapse of time or both would constitute a default), in each case, on the part of Buyer under the Investment Agreement or, to the Knowledge of Buyer, any other party to the Investment Agreement and (b) the date of this Agreement and the Closing Date, subject to the satisfaction of the conditions contained in Sections 13.1 and 13.3 hereof, to the Knowledge of Buyer, there exists, or will exist, no reason or circumstances that the conditions to the Equity Investment will not be satisfied or that the proceeds of the Equity Investment will not be available to Buyer on or before the Closing Date.

     11.13 No Inducement or Reliance; Independent Assessment. With respect to Buyer’s investigation of the Business, the Assets and the Transferred Entities and the execution of this Agreement and the Ancillary Agreements, Buyer has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made available or provided by Atmel, the Selling Subsidiaries, Atmel UK, any Affiliate of the foregoing, or any director, officer, employee, consultant, shareholder, advisor, broker or other agent or representative of Atmel, the Selling Subsidiaries, Atmel UK or any of their respective Affiliates or by any other Person representing or purporting to represent Atmel, the Selling Subsidiaries, Atmel UK or any of their respective Affiliates that are not expressly set forth in this Agreement or in the Ancillary Agreements, whether or not any such representations, warranties or statements were made in writing or orally, and none of Atmel, the Selling Subsidiaries, Atmel UK, any of their respective Affiliates, or any director, officer, employee, consultant, shareholder, advisor, broker or other agent or representative of Atmel, the Selling Subsidiaries, Atmel UK or any of their respective Affiliates, or any other Person shall have or be subject to any liability or indemnification or other obligation to Buyer, its Affiliates, the Buyer Indemnitees or any other Person resulting from the distribution to or

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access by Buyer, or Buyer’s use of, any information, documents or materials, including those made available in any “data rooms,” management presentations or meetings, works council information documents or presentations, offering memoranda, term sheets, proposals, letters of intent, pro forma and other financial statements or projections, responses to questions submitted by a Buyer or its advisors or representatives, on-site visits, or in any other form in expectation of or to consummate the transactions contemplated hereby or in any of the Ancillary Agreements. Buyer acknowledges that (i) it has made its own independent assessment of the present condition and the future prospects of the Business and is sufficiently experienced to make an informed judgment with respect thereto and (ii) that it and all of its respective directors, officers, employees, agents, attorneys, accountants, other advisors, consultants and representatives have been provided adequate access to the personnel, assets, properties, premises, information and records of the Business to enable Buyer to make its own assessment of the Business.

ARTICLE XII
COVENANTS

     12.1 Conduct of the Business.

          (a) Except (i) to the extent compelled or required by applicable Law, (ii) as otherwise permitted or contemplated by this Agreement, (iii) as set forth in Section 12.1(a) of the Atmel Disclosure Schedule or (iv) with the prior written consent of Buyer (which consent shall not be unreasonably withheld or delayed), during the period from the date hereof to the Closing Date, Atmel shall, and shall cause the Selling Subsidiaries and Atmel UK to, and Atmel shall, after the Incorporation Date, cause Vault-IC to, conduct the Business in the ordinary course of business, and to the extent consistent therewith (x) use commercially reasonable efforts to maintain its assets and properties and to preserve its current relationships with customers, employees, suppliers and others doing business with it, (y) maintain its books and records in the ordinary course of business, and (z) use commercially reasonable efforts to preserve the goodwill and ongoing operations of their business.

          (b) Without limiting the generality of the foregoing, except (i) to the extent compelled or required by applicable Law, (ii) as otherwise permitted or contemplated by this Agreement, (iii) as set forth in Section 12.1(b) of the Atmel Disclosure Schedule or (iv) as consented to in writing by Buyer (which consent shall not be unreasonably withheld or delayed), during the period from the date hereof to the Closing Date, Atmel shall not, and shall cause the Selling Subsidiaries, Atmel UK, Atmel France and, after the Incorporation Date, Vault-IC not to:

               (i) divest, sell or otherwise dispose of, or encumber any Asset or any asset of the Transferred Entities, other than the sales of products or services in the ordinary course of business;

               (ii) enter into or adopt any Benefit Plan or employment or severance agreement (including GPEC Agreements) with respect to Employees, or amend or terminate any Benefit Plan, except to the extent required by applicable Law or Contract;

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               (iii) make any change in the rate of compensation, commission, bonus, or other direct or indirect remuneration payable, or agree to pay, conditionally or otherwise, any bonus, incentive, retention, change in control payment or other compensation, retirement, welfare, fringe or severance benefit or vacation pay, to or in respect of any Employee, except in the ordinary course of business or to the extent required by any applicable Law;

               (iv) file or cause to be filed any material amended Tax Return with respect to the Business or the Transferred Entities or agree to extend the statute of limitations in respect of any material amount of Taxes;

               (v) increase the amount reserved for, or reserve any new amounts for, payment of any contingent Tax liability with respect to the Business except in the ordinary course of business;

               (vi) change material accounting policies or procedures of the Business except to the extent required to conform with UK GAAP or applicable Law;

               (vii) change the Business’ fiscal year or the accounting reference date of the Transferred Entity Employees;

               (viii) amend the memorandum or articles of association of Atmel UK or, after the Incorporation Date, the Vault-IC Articles of Association;

               (ix) create or permit the creation of any Lien (except any Permitted Lien) over, encumber, transfer or sell any UK Ordinary Shares to a third party or, after the Incorporation Date, create or permit the creation of any Lien (except any Permitted Lien) over, encumber, transfer or sell any of the Vault-IC Shares to a third party;

               (x) create or permit the creation of any material Lien (except any Permitted Lien) over, transfer or sell to any Affiliate of Atmel or a third party the Transferred IPR, the Transferred Equipment or the ACP Equipment outside of the Ordinary Course;

               (xi) incur, assume or guarantee any indebtedness for borrowed money from a third party other than trade indebtedness incurred in the Ordinary Course, current liabilities incurred in the Ordinary Course, liabilities under Contracts entered into in the Ordinary Course, and borrowings under lines of credit existing as of the date hereof; or

               (xii) authorize, agree, resolve or consent to any of the foregoing.

          (c) Nothing contained in this Agreement shall give to Buyer, directly or indirectly, rights to control or direct the operations of the Business or Transferred Entities prior to the Closing Date. Notwithstanding anything to the contrary in this Agreement, no consent of Buyer shall be required with respect to any matter set forth in this Section 12.1 or elsewhere in this Agreement to the extent that the requirement of such consent would violate or conflict with applicable Law.

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     12.2 Access to Information Prior to the Closing. During the period from the date hereof through the Closing Date, Atmel shall give Buyer and its authorized representatives reasonable access during regular business hours to all books and records of the Business and the premises of Atmel France, Atmel UK, ACP, Atmel Paris and Atmel Taiwan as Buyer may reasonably request; provided, that (a) Buyer and its representatives shall take such action as is deemed necessary in the reasonable judgment of Atmel to schedule such access and visits through a designated officer or representative of Atmel or its Affiliates and in such a way as to avoid disrupting the normal operations of Atmel, the Selling Subsidiaries, Atmel UK, Atmel France, the Business and, after the Incorporation Date, Vault-IC, (b) Atmel, the Selling Subsidiaries, Atmel UK, Atmel France and, after the Incorporation Date, Vault-IC shall not be required to take any action which would constitute a waiver of the attorney-client or other privilege or would compromise Atmel’s, Atmel UK’s, the Selling Subsidiaries’ or, after the Incorporation Date, Vault-IC’s confidential information not related to the Business, (c) Atmel, the Selling Subsidiaries and Atmel UK need not supply Buyer with any information which, in the reasonable judgment of Atmel, Atmel, the Selling Subsidiaries, Atmel UK or, after the Incorporation Date, Vault-IC are under a contractual or legal obligation not to supply, and (d) in no event shall Buyer be permitted, without prior written consent of Atmel, to contact the Employees, their representatives on works councils or unions, the press, any Governmental Authority, consortium partner, customer, distributor, sales representative or other third party or conduct any sampling of soil, sediment, groundwater, surface water or building material.

     12.3 Regulatory Filings; Efforts.

          (a) As soon as reasonably practicable following the date hereof and pursuant to the applicable requirements of Law, the Parties shall use their commercially reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done all things necessary, proper or advisable under applicable Law to obtain all necessary waivers, consents, approvals, permits, authorizations or Orders (including the expirations of any waiting periods) from the Governmental Authorities required to consummate the Contemplated Transactions. Buyer and Atmel each shall (i) promptly supply the other Party with any information and documents which may be required in order to effectuate any filings with the Governmental Authorities listed in Section 12.3(a) of the Atmel or Buyer Disclosure Schedule, as the case may be, concerning the Contemplated Transactions and (ii) respond as promptly as practicable to any inquiries received from such Governmental Authorities for additional information or documentation. Each of Buyer and Atmel shall (x) promptly notify the other Party of any material communication between that Party and any Governmental Authority concerning the Contemplated Transactions; (y) consult with the other Party, to the extent practicable, in advance of participating in any substantive meeting or discussion with the Governmental Authorities and its representatives, attorney and advisors with respect to any filings, investigation or inquiry concerning the Contemplated Transactions and, to the extent permitted by such Governmental Authority, give the other Party the opportunity to attend and participate thereat; and (z) to the extent practicable and subject to applicable Law, furnish the other Party with copies of all filings, reports, written correspondence and communications between them and their Affiliates and their respective representatives on the one hand, and any Governmental Authority or members of their respective staffs on the other hand, with respect to the Contemplated

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Transactions. Subject to Section 12.3(b) and upon the terms and conditions set forth herein, each of the Parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things, necessary, proper or advisable to make effective as promptly as practicable, but in no event later than the End Date, the Contemplated Transactions, including obtaining approvals, if any, from the Governmental Authorities set forth in Section 12.3(a) of the Atmel Disclosure Schedule; provided, that none of the Atmel, the Selling Subsidiaries nor their respective Affiliates shall have any obligation to make payments, incur penalties or other obligations, or any concessions to any third party in connections with obtaining any consents or approvals.

          (b) In furtherance and not in limitation of the foregoing, Buyer shall take any and all steps necessary to avoid or eliminate impediments or objections, if any, that may be asserted with respect to the transactions contemplated by this Agreement or the Ancillary Agreements under any customs or international trade regulatory requirement of Law so as to enable the Parties hereto to close the Contemplated Transactions as promptly as practicable. In addition, Atmel and Buyer shall use their respective commercially reasonable best efforts to prevent anything that would restrain, prevent, or delay the Closing on or before the consummation of the Contemplated Transactions.

     12.4 Certain Tax Matters.

Certain French Tax Matters

          (a) French Tax Return Preparation. Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, on a timely basis all Tax Returns of the Business or, after the Incorporation Date, Vault-IC that are due after the Closing Date and that reflect any liability for Taxes or, after the Incorporation Date, Vault-IC, that relate to any taxable period beginning before the Closing Date. All such Tax Returns (other than those with respect to Straddle Periods) shall be prepared in a manner consistent with past practice of Selling Subsidiaries in relation to the Business, or, after the Incorporation Date, Vault-IC; except to the extent that Buyer determines, with the advice of tax counsel that there is not at least substantial authority for a particular position for French Tax purposes. Buyer shall provide Atmel with a draft copy of each such Tax Return at least thirty (30) Business Days prior to the filing of such return for its review and comment and, with respect to each such Tax Return, shall make such changes that are reasonably requested by Atmel, its tax counsel or tax advisor, except to the extent that Buyer determines, with the advice of tax counsel that there is not at least substantial authority for a requested change or that such changes are inconsistent with prior practice of Selling Subsidiaries in relation to the Business, or, after the Incorporation Date, Vault-IC (as the case may be). Buyer shall timely pay all Taxes shown due with respect to Tax Returns filed pursuant to this Section 12.4(a).

          (b) Cooperation on French Tax Matters. Buyer and Atmel shall cooperate fully, as and to the extent reasonably requested by any Party, in connection with the filing of Tax Returns pursuant to this Section 12.4 and any Tax Contest. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any such Tax Contest and making Employees available on a mutually

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convenient basis to provide additional information and explanation of any material provided hereunder. Buyer and Atmel agree (x) to retain or cause the retention of all books and records with respect to Tax matters pertinent to the Business or Vault-IC relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Atmel, as the case may be, any extensions thereof) of the respective taxable periods, and to abide by (or in the case of Buyer, to cause Vault-IC to abide by) all record retention agreements entered into with any Taxing Authority, and (y) to give (and in the case of Buyer, to cause Vault-IC to give to Atmel) the other reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other so requests, Buyer and Atmel, as the case may be, shall allow the other to take possession of such books and records.

          (c) Certain French Taxes. Atmel shall pay any Transfer Taxes due on the Vault-IC Shares until the aggregate amount of all such Transfer Taxes exceeds One Hundred Thousand Euros (€100,000), in which event Atmel and Buyer shall each pay one-half of such excess Transfer Taxes. The Party required by Law to do so will file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes.

          (d) French VAT on Transfer of Assets. If any French VAT credit (if any) is available by Vault-IC after the effective date of the Contemplated Transaction related to Assets of Atmel France transferred to Vault-IC, Buyer shall reimburse Atmel for such VAT credit.

          (e) French Refunds, Carrybacks and Amended Returns. Except for refunds of Taxes of the Business attributable to carrybacks from periods (or portions of periods) ending after the Closing Date, all refunds of Atmel’s Taxes and any refunds of Taxes paid by Vault-IC not reflected in the Financial Statements shall be for the account of Atmel and the Selling Subsidiaries under the following conditions. Any such amount shall be offset against any amount owing by Atmel to Buyer pursuant to this Section 12.4 and set against existing claims under Tax indemnities due from Atmel, with the balance first being used to refund prior such claims paid out by Atmel and then carried forward against future such claims. The provisions of this Section 12.4(e) shall cease to have any effect after the date on which the representations and warranties given in Section 5.13 (French Taxes and French Tax Matters — Atmel France) cease to be of any force or effect pursuant to Section 16.1 hereof. Any such refunds not either (a) received from or (b) agreed as final with the relevant tax authority, in each case, before that date shall be kept by the Transferred Entities.

Certain UK Tax Matters

          (f) UK Tax Return Preparation.

     Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, on a timely basis all Tax Returns of Atmel UK that are due after the Closing Date and that reflect any liability for Atmel’s Taxes or that relate to any taxable period beginning on or before the Closing Date. All such Tax Returns (other than those with respect to Straddle Periods) shall be prepared in a manner consistent with past practice of Atmel UK except to the extent that Buyer determines, with the advice of tax counsel that a particular position does not constitute a proper filing position for UK

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Tax purposes. Buyer shall provide Atmel with a draft copy of each such Tax Return at least thirty (30) Business Days prior to the filing of such return for its review and comment and, with respect to each such Tax Return, shall make such changes that are reasonably requested by Atmel, its tax counsel or tax advisor, except to the extent that Buyer determines, with the advice of tax counsel that there is no reasonable basis, for a requested change or that such changes are inconsistent with prior practice of Atmel UK. Buyer shall timely pay all Taxes shown due with respect to Tax Returns filed pursuant to this Section 12.4(f).

          (g) Cooperation on UK Tax Matters.

               (i) Buyer agrees upon request to cause Atmel UK to surrender, to Atmel or an Affiliate of Atmel such amount by way of group relief (as defined in Section 402 of the Income and Corporation Taxes Act 1988) (“group relief”) as Atmel may require (to the extent permitted by law), for no consideration (except to the extent that the relief has been included in the Final Working Capital Statement, in which case an amount shall be payable by the relevant claimant company to Atmel UK equal to the amount of the relief surrendered multiplied by 28% or the standard rate of UK corporation tax, if different, for the accounting period in which the group relief will be utilized);

               (ii) Buyer also agrees to cause Atmel UK to accept the surrender, at the request of Atmel, of any group relief from Atmel or an Affiliate of Atmel to the extent permitted by law, in consideration (subject to clause (iii) below) for the payment by Atmel UK to the relevant surrendering company equal to the amount of the relief surrendered multiplied by 28% or the standard rate of UK corporation tax, if different, for the accounting period in which the group relief will be utilized;

               (iii) Atmel or any of its Subsidiaries or Affiliates shall be entitled to surrender any amount of group relief to Atmel UK, and Buyer shall cause Atmel UK to accept such surrender, for no consideration in full or part satisfaction of any successful claim by the Buyer against Atmel under any indemnity or warranty given under this Agreement.

               (iv) If any amount of group relief surrendered under this Section 12.4(g) is not allowed by way of relief by the claimant company against corporation tax, a refund of any consideration paid in respect of that disallowed group relief shall be made by the surrendering company.

          (h) Certain UK Taxes. Any Transfer Taxes relating to the transfer of the UK Ordinary Shares shall be paid by Buyer. The Party required by Law to do so will file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes.

          (i) UK Refunds, Carrybacks and Amended Returns. Except for refunds of Taxes of the Business attributable to carrybacks from periods (or portions of periods) ending after the Closing Date all refunds of Atmel’s Taxes and any refunds of Taxes paid by Atmel UK not reflected in the Financial Statements shall be for the account of Atmel and the Selling Subsidiaries

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under the following conditions. Any such amount shall be offset against any amount owing by Atmel to Buyer pursuant to this Section 12.4 and set against existing claims under Tax indemnities due from Atmel, with the balance first being used to refund prior such claims paid out by Atmel and then carried forward against future such claims. The provisions of this Section 12.4(i) shall cease to have any effect after the date on which the representations and warranties given in Section 4.14 (UK Taxes and UK Tax Matters) cease to be of any force or effect pursuant to Section 16.1 hereof. Any such refunds not either (a) received from or (b) agreed as final with the relevant tax authority, in each case, before that date shall be kept by the Transferred Entities.

Certain Swiss Tax Matters

          (j) Certain Swiss Taxes. If any VAT Taxes relating to the Swiss transfer of the Business is due, such VAT shall be paid by Buyer. The Party required by Law to do so will file all necessary Tax Returns and other documentation with respect to all such VAT.

          (k) Swiss Refunds, Carrybacks and Amended Returns. Except for refunds of Taxes of the Business attributable to carrybacks from periods (or portions of periods) ending after the Closing Date, all refunds of Atmel’s Taxes and any refunds of Taxes paid by Atmel Switzerland not reflected in the Financial Statements shall be for the account of Atmel and the Selling Subsidiaries under the following conditions. Any such amount shall be offset against any amount owing by Atmel to Buyer pursuant to this Section 12.4 and set against existing claims under Tax indemnities due from Atmel, with the balance first being used to refund prior such claims paid out by Atmel and then carried forward against future such claims. The provisions of this Section 12.4(k) shall cease to have any effect after the date on which the representations and warranties given in Section 8.1(d) (Swiss Taxes and Swiss Tax matters) cease to be of any force or effect pursuant to Section 16.1 hereof. Any such refunds not either (a) received from or (b) agreed as final with the relevant tax authority, in each case, before that date shall be kept by the Transferred Entities.

     12.5 Certain Employee Matters.

          (a) Following the Closing, Buyer shall not, and shall cause its Affiliates not to, terminate (including any constructive termination or any change to employment agreements or other terms and conditions of employment, but excluding terminations for misconduct or under any social plan for which the relevant works council has issued an opinion as required by French Law) any of the France Employees for six (6) months following the Closing Date.

          (b) Buyer agrees and acknowledge that all rights, powers, duties and liabilities of the Employees immediately prior the Closing in relation to such Employees and their terms and conditions of employment in force immediately prior the Closing will be assumed by Buyer or Vault-IC in accordance with applicable Law and the terms of this Agreement, and Buyer hereby agrees to accept, and after the Closing shall cause Vault-IC to accept, all such rights, powers, duties and liabilities.

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          (c) Upon the Closing and until March 30, 2011 (inclusive), Buyer shall honor and comply with, and as necessary shall cause its Affiliates to honor and comply with, in accordance with their terms, and shall not terminate or attempt to terminate, amend or attempt to amend, the GPEC Agreement (Accord sur la Gestion Previsionnelle des Emplois et des Competences) and all amendments thereto (including Avenant No. 1 au Protocole d’Accord GPEC and Avenant No. 2 au Protocole d’Accord GPEC) (collectively, the “GPEC Agreements”). Similarly, except as permitted by applicable Law and in accordance with Sections 12.5(a) and (c), Buyer shall honor and comply with, and shall cause its Affiliates to honor and comply with, in accordance with their terms, and shall not terminate or attempt to terminate, amend or attempt to amend, all individual employment, severance, retention, compensation and other related agreements, including, without limitation, all agreements, commitments and obligations under the Benefit Plans and collective bargaining agreements (including the GPEC Agreements).

          (d) Buyer shall take, and shall cause its Affiliates to take, all steps necessary to be in a position (including having adequate financial resources) for Buyer and/or its Affiliates (including Vault-IC), effective as of the Closing Date, to employ the Employees and assume all liabilities and obligations with respect to such Employees in compliance with all applicable Laws, Contracts and Benefit Plans.

          (e) The Parties acknowledge and agree that all provisions contained in this Section 12.5 with respect to the Employees will not create any right in any other Person, except as set forth herein. Without limiting Buyer’s other obligations hereunder, prior to the date hereof, the Parties and their respective Affiliates have complied in all material respects with all obligations under applicable Laws, to inform and/or consult with the relevant works councils, if any, and will continue to provide such information and extent such cooperation to the other Parties as is required by that Party to comply with its works council information and consultation obligations

          (f) Atmel shall be solely responsible for the settlement of all options, restricted stock units or other right to purchase shares of common stock of Atmel which were granted to any Employee by Atmel, Atmel UK, Atmel France or Atmel Taiwan and which are exercised, in accordance with the terms of the plan, program or arrangement under which such options, restricted stock units or rights were granted, after the Closing Date. From and after the Closing, Buyer shall assist Atmel, Atmel France, Atmel UK or Atmel Taiwan, as applicable, in processing the exercises by former Employees of any such options, restricted stock units or rights.

          (g) Buyer shall cooperate with Atmel France and Atmel UK to prepare all documents and materials, including, among other things, an information package to the works council of Atmel France and Atmel UK summarizing this Agreement and the Contemplated Transactions and other presentation materials used in the information and consultation process in order for the works council of Atmel France to issue an Opinion. In addition, Buyer shall prepare and submit to Atmel France and the works council of Atmel France a summary presentation of a 3-year business plan and related summary financial projections of Buyer for the Business, present the summary business plan and summary financial projections to the works council of Atmel France,

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participate in any “town hall” meetings held at Atmel UK, and promptly and accurately respond to all questions and requests from the works council of Atmel France and the employees of Atmel UK.

          (h) Prior to the Closing, Atmel shall cause any and all Atmel Taiwan Employees and Atmel Paris Employees, as identified on Schedule 12.5(h) in an anonymized list, to transfer to or accept employment with Buyer, Atmel UK or Vault-IC as appropriate in accordance with applicable Laws, including, without limitation, entering into tripartite agreements with each such Business Employee, and Buyer shall execute such tripartite agreement with such Business Employee and Atmel for the purpose of effecting such transfers of the Business Employees.

          (i) Following the Closing, Buyer shall promptly notify Atmel in the event that any Employee who has options, restricted stock units or other right to purchase shares of common stock of Atmel exercises such options, restricted stock units or rights after the Closing, and Atmel shall be liable for, and shall reimburse, Buyer for any and all payments, taxes or other withholdings that Buyer may be required to pay with respect to such post-Closing exercises by any Employee.

     12.6 Preservation of Books and Records.

          (a) For a period of six (6) years from the Closing Date or such longer time as may be required by Law:

               (i) Buyer shall not and shall cause its Affiliates not to dispose of or destroy any of the books and records of the Business or either of the Transferred Entities relating to periods prior to the Closing (the “Books and Records”) without first offering to turn over possession thereof to Atmel by written notice to Atmel at least sixty (60) days prior to the proposed date of such disposition or destruction.

               (ii) Buyer shall and shall cause its Affiliates to allow Atmel and their representatives, agents, attorneys, auditors and advisors access to all Books and Records on reasonable notice and at reasonable times at Buyer’s principal place of business or at any location where any Books and Records are stored, and Atmel shall have the right, at their own expense, to make copies of any Books and Records; provided, that any such access or copying shall be had or done in such a manner so as not to unduly interfere with the normal conduct of Buyer’s business.

               (iii) Buyer shall and shall cause its Affiliates to make available to Atmel, at Atmel’s expense, upon reasonable notice to Buyer and at reasonable times and upon written request (i) Buyer’s personnel to assist Atmel in locating and obtaining any Books and Records, and (ii) any of Buyer’s personnel whose assistance or participation is reasonably required by Atmel or any of their Affiliates in anticipation of, or preparation for, existing or future Litigation or other matters in which Atmel or any of their Affiliates or their respective businesses are involved as long as in any such Litigation, Buyer is not in an adverse position against Atmel or its Affiliates involved in such Litigation.

          (b) For a period of three (3) years from the Closing Date and in accordance with Atmel’s Document Retention Policy, Atmel shall not and shall cause its Affiliates not to

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dispose of or destroy electronic copies of the Books and Records and allow Buyer and its representatives, agents, attorneys, auditors and advisors access to all such Books and Records on reasonable notice and at reasonable times at Atmel’s principal place of business or at any location where any Books and Records are stored, and Buyer shall have the right, at its own expense, to make copies of any Books and Records, but all in compliance with applicable Laws (including those that relate to data privacy and discovery rules) that govern the preservation and transfer of such Books and Records.

     12.7 Non-Competition and Business Restrictions.

          (a) In further consideration of the amounts to be paid hereunder for the Assets, the Vault-IC Shares, the Atmel UK Ordinary Shares and the goodwill of the Business sold in connection therewith, Atmel agrees that for a period of five (5) years following the Closing Date (the “Non-Compete Term”) neither Atmel nor any of its Affiliates shall conduct a Competing Business, except as permitted in this Section 12.7. In no event shall this Section 12.7 preclude Atmel and any of its Affiliates from continuing to engage in any business or continuing to develop, make or sell any product or technology, other than in the Competing Business, or preclude Atmel or any of its Affiliates from selling, licensing, providing, marketing or offering any product or technology to any Person; provided, however that during the Non-Compete Term Atmel or any of its Affiliates does not: (i) engage in the Competing Business in connection with any of the foregoing; (ii) grant a third party a license to any of the Transferred Patents or License-Back Patents to practice such patents in the field of (A) Smart Cards or Secure Microcontrollers specifically designed for incorporation into Smart Cards, except for pay TV application specific integrated circuits (“ASICs”) for NDS, or (B) the Secure AVR Core, devices incorporating the Secure AVR Core or Secure Microcontrollers that are fully binary code compatible with the Secure AVR Core, or (C) Stand-alone devices that serve solely as readers of Smart Cards using the ISO 7816 standard; or (iii) expressly grant a license to a third party to use the Standard AVR Core in a Smart Card.

          (b) Notwithstanding anything to the contrary in Section 12.7(a), nothing contained in Section 12.7(a) shall restrict or prohibit Atmel and/or its Affiliates from (i) having an investment representing 30% or less of the voting power in an election of directors or similar managers of any Person that is engaged in a Competing Business, or (ii) engaging in a transaction, whereby, directly or indirectly, Atmel and/or its Affiliates consummate (by merger, consolidation, stock purchase, asset acquisition or otherwise) an acquisition of or merger with any Person or business the primary business of which is not a Competing Business, and in such event, Atmel and its Affiliates shall not in any way be restricted from operating the acquired Competing Business and shall not otherwise be subject to the restrictions set forth in Section 12.7(a), except as provided in Section 12.7(c). Further, (i) in the event Atmel or a Selling Subsidiary undergoes a change of control by means of a stock sale, asset sale, merger or otherwise, except as provided in Section 12.7(c), Section 12.7(a) shall terminate and be of no force or effect; and (ii) Section 12.7(a) shall not apply to any Person that is or was an Affiliate of Atmel, or to any Person that acquires a business of Atmel or its Affiliates other than any business involving the Secure AVR Core, in which Person Atmel or its Affiliate owns less than 30% of the voting power in an election of directors or similar managers of such Person.

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          (c) Notwithstanding Section 12.7(b), in the event of either the acquisition by Atmel of a third party or the acquisition by a third party of Atmel, as described above, Atmel or such acquirer of Atmel, as the case may be, shall not, prior to the end of the Non-Compete Term sell or license the Secure AVR Core, devices incorporating the Secure AVR Core, or Secure Microcontrollers that are fully binary code compatible with the Secure AVR Core.

          (d) Notwithstanding anything to the contrary set forth herein or any of the Ancillary Agreements, Buyer on behalf of itself and its current and future Affiliates and successors agrees, except as expressly permitted with respect to the sale of a Smart Card Reader, for a period of seven (7) years following the Closing Date, (“Restriction Period”) to neither (i) use any of the Assets or any of the material Technology licensed to Buyer hereunder or under any Ancillary Agreement, for the purposes of designing, manufacturing, selling, or supporting, or otherwise engaging in any business for, general purpose microcontroller devices, nor (ii) market or promote any Licensed Product as suitable for use as, or capable of being used as, a general purpose microcontroller. For the absence of doubt, it is understood that this Section 12.7(d) is intended to impose only restrictions of the conduct of Buyer and its successor during the Restriction Period and is not intend to grant, or imply, any license, permission, or grant of rights (including Intellectual Property Rights) by Atmel to Buyer or its successors to engage in any business, act or conduct (whether or not prohibited during such Restriction Period) during or after the Restriction Period.

     12.8 Non-Solicitation. Between the date hereof and the date which is the two (2) year anniversary of the (x) Closing Date or (y) the termination of this Agreement, neither Buyer nor Atmel shall or allow their respective Affiliates to, directly or indirectly, solicit any employees of the other Party or its Affiliates, or, between the date hereof and the Closing Date, the Transferred Entities:

          (a) employed in the executive, senior managerial, engineering, technical, R&D, marketing or sales capacity or whose departure from the employment of Atmel, Selling Subsidiaries, the Transferred Entities, or any of their Affiliates would or would be likely to cause material loss to or other negative impact on its or their business; and

          (b) in connection with the Contemplated Transactions, with whom Buyer or any of its Affiliates have had contact or about whom Atmel, the Selling Subsidiaries, Atmel UK or any of their Affiliates have made information available to Buyer or any of its Affiliates, with a view to inducing such person to leave the employ of Atmel, the Selling Subsidiaries, Atmel UK or any of their Affiliates, as applicable, or violate the terms of his or her Contract, or other employment arrangements, with Atmel, the Selling Subsidiaries, Atmel UK or any of their Affiliates, as applicable; provided, that nothing in this Section 12.8 shall prohibit any Party or any of its Affiliates from employing any such employee as a result of a general solicitation to the public or general advertising, or, by written consent of the Parties, the solicitation of any individual whose employment with any Party, the Selling Subsidiaries or their respective Affiliates has been terminated for at least twelve (12) months or by written consent of the Parties. Each of the restrictions set forth in this Section 12.8 is separate and the provisions of Section 18.5 shall apply in the event of any partial unenforceability.

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     12.9 Contacts with Third Parties. From the date hereof until the Closing, without the prior written consent of Atmel, such consent not to be unreasonably withheld, Buyer shall not contact any suppliers, vendors, partners (including consortium partners or joint development partners), licensors or other service providers to, or customers or works councils of, Atmel, Atmel France, the Selling Subsidiaries, the Transferred Entities, or their respective Affiliates in connection with or pertaining to the Business or any subject matter of this Agreement or the Ancillary Agreements. In contemplation of the Closing, Buyer shall cooperate (and shall procure that its Affiliates also cooperate) and Atmel shall cooperate (and shall procure that its Affiliates also cooperate) in contacting, including for the purpose of obtaining any necessary consents, approval or waivers from, any suppliers, vendors, partners (including consortium partners or joint development partners), licensors or other service providers to, or customers or works councils of, Atmel, Atmel France, the Selling Subsidiaries, the Transferred Entities, or their respective Affiliates in connection with or pertaining to any subject matter of this Agreement (including requesting such consents and approvals necessary to transfer the Transferred Contracts, Restricted IPR, Open Purchase Orders and other assets) or the Ancillary Agreements, as and to the extent requested by Buyer or Atmel. Pursuant to such prior written consent of Atmel and in furtherance of the foregoing cooperation between Atmel and Buyer, Atmel shall assist Buyer in corresponding with parties, including making customer visits, and extending cooperation to Buyer in negotiating with suppliers, vendors, licensors and service providers for the transfer of Transferred Contracts or entering into a new Contract.

     12.10 Mail; Payments.

          (a) Atmel shall authorize and empower Buyer on and after the Closing Date to receive and open all mail and other communications received by Buyer or Affiliates relating to the Business and to deal with the contents of such communications in good faith, in a proper manner and in compliance with all applicable Laws. Atmel shall promptly deliver to Buyer any mail or other communication received by Atmel or the Selling Subsidiaries after the Closing Date pertaining to the Business. Buyer shall promptly deliver to Atmel any mail or other communication received by Buyer after the Closing Date pertaining to the business of Atmel, Atmel France, the Selling Subsidiaries and their respective Affiliates other than the Business.

          (b) Atmel agrees that Buyer has the right and authority to endorse, without recourse, any check or other evidence of indebtedness received by Buyer in respect of any note or account receivable transferred to Buyer pursuant to this Agreement and Atmel shall furnish Buyer such evidence of this authority as Buyer may request.

     12.11 Public Announcements. Before Atmel France begins to inform and consult with its works council regarding this Agreement and the Contemplated Transactions, Atmel and Buyer shall prepare a mutually agreeable press release announcing this Agreement and the Contemplated Transactions and issue the press release at the time of the first meeting of the works council where the Contemplated Transactions are presented. Prior to the Closing, Buyer and Atmel shall keep each other informed regarding form and timing of public disclosures of this Agreement and the Contemplated

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Transactions neither Buyer nor Atmel will issue or make any subsequent press release or public statement with respect to this Agreement, the Ancillary Agreements or the Contemplated Transactions and without the prior consent of the other Party, except as may be required by Law; provided, further, that the Party proposing to issue any press release or similar public announcement or communication in compliance with any such disclosure obligations under any Law shall use commercially reasonable efforts to consult in good faith with the other Parties before doing so.

     12.12 Commercially Reasonable Efforts. Except as otherwise set forth in Section 12.3, subject to the terms and conditions set forth herein and to applicable Law, each of the Parties shall cooperate and use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, and assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Contemplated Transactions, including the satisfaction of the respective conditions set forth in ARTICLE XIII.

     12.13 Board Meetings.

          (a) Atmel UK. On or prior to the Closing Date, Atmel shall procure:

               (i) the approval of the board of directors of Atmel UK, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Atmel UK, of the performance by Atmel UK of the Contemplated Transactions that are required to be performed by Atmel UK; and

               (ii) the nomination by the board of directors of Atmel UK, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Atmel UK, of the Persons which shall be appointed as directors of the Atmel UK, which appointments shall take effect at the end of such board meeting.

          (b) ACP. On or prior to the Closing Date, Atmel shall procure the approval of the board of directors of ACP, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of ACP, of the performance by ACP of the Contemplated Transactions that are required to be performed by ACP.

          (c) Atmel Switzerland. On or prior to the Closing Date, Atmel shall procure the approval of the board of managers of Atmel Switzerland, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Atmel Switzerland, of the performance by Atmel Switzerland of the Contemplated Transactions that are required to be performed by Atmel Switzerland.

          (d) Atmel Sarl. On or prior to the Closing Date, Atmel shall procure the approval of the board of managers of Atmel Sarl, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Atmel Sarl, of the performance by Atmel Sarl of the Contemplated Transactions that are required to be performed by Atmel Sarl.

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          (e) Atmel. Prior to the date hereof, the board of directors of Atmel has duly authorized, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Atmel, the execution and delivery of this Agreement and the Ancillary Agreements to which Atmel is a party and the performance by Atmel of the Contemplated Transactions that are required to be performed by Atmel.

     12.14 Delivery of Financial Statements. As soon as reasonably practicable after the end of each quarterly accounting period between the date hereof and the Closing, Atmel shall provide to Buyer an unaudited consolidated pro forma statement of direct revenues and costs associated with the Business as of the last day of such quarterly accounting period. Such financial information will be prepared on a good faith basis to generally reflect the performance of the Business during the applicable quarterly accounting period and will be true and correct, subject to absence of footnote disclosure and to normal, recurring end-of-period adjustments and except where the failure to be true and correct would not have, or be reasonably expected to have, a Business Material Adverse Effect.

     12.15 Further Post-Closing Agreements. For twenty-four (24) months after the Closing, Buyer shall ensure, and shall take all steps reasonably necessary to ensure, that the Business has sufficient working capital at all times during such period such that the Business will be able to comply in all respects with all obligations of the Business, including, but not limited, to all obligations related to Employees, financial or otherwise.

     12.16 Intercompany Payments. Effective at the Closing, all intercompany loans and receivables and payables to which Atmel UK is a party or to which Atmel UK is subject will be settled or transferred and extinguished in their entirety such that there shall be no intercompany loans, receivables and payables outstanding at Atmel UK as of the Closing.

     12.17 Incorporation of Vault-IC. Prior to the Closing, Atmel France shall file the Vault-IC Articles of Association (statuts), substantially in the form attached hereto as Exhibit L (the “Vault-IC Articles of Association”), with the registry of commerce and companies of Paris, France and such filed Vault-IC Articles of Association shall have been declared effective by the registry of commerce and companies of Paris, France (the date on which the Vault-IC Articles of Association is declared effective shall be the “Incorporation Date”). Promptly following the Incorporation Date, Atmel France shall provide Buyer with a copy of the filed Vault-IC Articles of Association and the appointment of the Commissaire aux apports as well as his report without reserve (sans réserve).

     12.18 Registered Office of Vault-IC. For twenty-four (24) months after the Closing, Buyer shall not, and shall cause Vault-IC not to, move or change the registered office of Vault-IC from Paris, France to another location outside of Paris, France.

     12.19 Merger. Buyer hereby agrees that it shall not, in any manner whatsoever, merge Vault-IC or cause it to be merged with another entity (including in a dissolution without liquidation under Article 1844-5 of the French Civil Code) within two (2) calendar years from the Closing Date.

     12.20 Other Transaction Matters.

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          (a) As of the date hereof, LFoundry GmbH shall have signed the Preliminary, Non-Binding Term Sheet between LFoundry and Buyer attached hereto as Exhibit D (the “Signed LFoundry Term Sheet”).

          (b) As of the date hereof, Atmel and Buyer have entered into the Foundry Agreement substantially in the form attached hereto as Exhibit E and the Probe and Test Services Agreement substantially in the form attached hereto as Exhibit F.

          (c) As of the date hereof, Buyer and Atmel shall have completed negotiation in good faith the terms and conditions of the a lease agreement in the form attached hereto as Exhibit J pursuant to which Atmel France shall lease the Property to Vault-IC (the “Lease Agreement”) on terms that are commercially reasonable and are in compliance with applicable Laws, including French Laws governing commercial lease transactions.

          (d) As of the date hereof, Buyer and Atmel shall have agreed to the form of the Vault-IC Articles of Association as attached hereto as Exhibit L.

          (e) Prior to the Closing, Atmel and Buyer agree to negotiate in good faith the terms and conditions of the Escrow Agreement substantially in the form attached hereto as Exhibit A.

          (f) Prior to the Closing, Atmel and Buyer agree to negotiate in good faith the terms and conditions of the Transition Services Agreement substantially in the form attached hereto as Exhibit G and shall cooperate to produce a mutually acceptable transition plan, which shall be attached to and incorporated by reference in the Transition Services Agreement.

          (g) Prior to the Closing and upon receipt of any and all necessary consents, approvals or authorizations from all applicable Governmental Authority, unless otherwise mutually agreed by Buyer and Atmel, Atmel agrees to enter into, and shall cause the Vault-IC to enter into, the IT Apps License Agreement substantially in the form attached hereto as Exhibit H pursuant to which Atmel or its Affiliates shall grant a license to Vault-IC with respect to certain IT applications originally developed by Atmel or its Affiliates on terms that are commercially reasonable.

          (h) Prior to the Closing, Atmel and Buyer agree to negotiate in good faith the terms and conditions of the Standard Cell Library License Agreement substantially in the form attached hereto as Exhibit I.

     12.21 Exclusivity. During the Exclusivity Period (as defined below), Atmel shall not, and shall procure that none of the Selling Subsidiaries shall, directly or indirectly, (a) solicit, initiate, facilitate or seek any inquiry, proposal or offer from any third party in respect of any transaction involving the possible sale, disposition or acquisition of the Vault-IC Shares, the UK Ordinary Shares, the Assets or the Assumed Liabilities (each, a “Potential Transaction”); (b) participate in any discussions or negotiations or enter into any agreement with, any third party in respect of a Potential Transaction; or (c) accept any proposal or offer from any third party in respect of a Potential Transaction. As of the date hereof, Atmel shall cease and cause to be terminated any existing

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discussions with any third party regarding a Potential Transaction. During the Exclusivity Period, Atmel shall promptly notify Buyer of any receipt by Atmel or any of its Affiliates, or any officer, director, employee, financial advisor, representative or agent of Atmel or any of their Affiliates of a proposal or offer concerning a Potential Transaction. For purposes hereof, “Exclusivity Period” means the period from the date hereof until the earlier of (i) the Closing Date and (ii) the date of the termination of this Agreement pursuant to ARTICLE XVII.

     12.22 Atmel Philippines Authorizations. Prior to the Closing, Atmel shall use commercially reasonable efforts to obtain and deliver to Buyer, copies of the authorization documents set forth on Schedule 12.22.

     12.23 Buyer Philippines Authorizations. Prior to the Closing, Buyer shall use commercially reasonable efforts to obtain and deliver to Atmel (a) copies of documentation establishing, to the reasonable satisfaction of Atmel, that Buyer is registered by the PEZA as an Ecozone Enterprise, and (b) copies of the authorization documents set forth on Schedule 12.23.

     12.24 Equity Investment.

     Buyer shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the Equity Investment on the terms and conditions described in the Investment Agreement, including using best efforts to (i) maintain in effect the Investment Agreement, (ii) satisfy on a timely basis all conditions applicable to the Equity Investment in the Investment Agreement that are within the control of Buyer and comply with its obligations thereunder, and (iii) consummate the Equity Investment at or prior to the Closing. In the event that all conditions to the Investment Agreement have been satisfied or, upon funding, will be satisfied, Buyer shall use its best efforts to cause, on or prior to the Closing Date, the Buyer Investors to fund the Equity Investment. Buyer shall not agree to amend, replace, supplement or otherwise modify, or waive any of its rights under, the Investment Agreement.

     12.25 Breach of Representation, Warranty or Covenant. Upon the occurrence of any event that would constitute a breach of a representation, warranty or covenant made by either Party in this Agreement, the breaching Party shall promptly notify the other Party of the occurrence of such event.

     12.26 Confidential Information.

     (a) The terms and conditions of this Agreement, the Ancillary Agreements, and any presentations or summaries of the terms of such agreements prepared in connection with the transactions contemplated hereby (the “Transaction Confidential Information”) shall be considered confidential information subject to the confidentiality obligations of Buyer and Atmel, as set forth in the Confidentiality Agreement and the terms of this Section 12.26. Without limiting the foregoing, except with the other party’s prior written consent, or expressly permitted in Section 12.26(b), neither Buyer nor Atmel shall publicly disclose Transaction Confidential Information.

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     (b) Notwithstanding the foregoing, a Party may disclose Transaction Confidential Information:

               (i) to such Party’s employees, directors, counsel or advisors with a need to know such information;

               (ii) each Party’s works council to the extent necessary for the purposes of engaging in such consultations and obtaining such approvals as are required by Law;

               (iii) as required under Law to a Governmental Authority or any applicable stock exchange, as determined with the advice of a Party’s legal counsel; or

               (iv) that has already been publicly disclosed without breach of this Agreement or the Confidentiality Agreement.

          (c) In addition, Buyer recognizes that by reason of its diligence and investigation related to negotiations and transactions related to this Agreement and the Ancillary Agreements, Atmel has disclosed to Buyer and its Affiliates, investors and advisors (“Recipients”), and Recipients acquired and will acquire Confidential Information (as defined below), the use or disclosure of which could cause Atmel substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Buyer covenants and agrees that Recipients shall not at any time, except in performance of their obligations to Atmel, directly or indirectly, use, disclose or publish, or permit other persons (including Affiliates) to disclose or publish, any Confidential Information, or use any such information in a manner detrimental to the interests of Atmel or any of its Affiliates, unless (i) such information becomes generally known to the public through no fault of Recipients, (ii) disclosure is permitted pursuant to Section 12.26(b), or (iii) in connection with the enforcement of this Agreement or any of the Ancillary Agreements.

          (d) The term “Confidential Information” means information that that is either marked or identified as confidential information at the time of disclosure or which, if not so marked, is disclosed under circumstances that would lead a reasonable person to conclude that the disclosing party intended such information to be confidential. “Confidential Information” also includes Transaction Confidential Information and information defined as “Proprietary Information” under the Confidentiality Agreement.

          (e) Following the Closing, this Section 12.26 shall not apply to any Confidential Information that is Licensed Other IPR or Transferred Other IPR.

ARTICLE XIII
CONDITIONS TO CLOSING

     13.1 Conditions to All Parties’ Obligations. The obligations of the Parties to consummate the Contemplated Transactions are subject to the fulfillment prior to or at the Closing of each of the following conditions (any or all of which may be waived by the Parties):

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          (a) No Injunction. No Governmental Authority or court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, Order or other notice (whether temporary, preliminary or permanent) (collectively, the “Restraints”), in any case which is in effect and which prevents or prohibits consummation of the Contemplated Transactions; provided, that each of the Parties shall use its commercially reasonable efforts to cause any such Restraint to be vacated or lifted.

          (b) Regulatory Laws.

               (i) Any applicable waiting periods set forth in Section 13.1(b)(i) of the Atmel Disclosure Schedule that are required to be terminated or expired prior to the Closing shall have terminated or expired;

               (ii) All approvals set forth in Section 13.1(b)(ii) of the Atmel Disclosure Schedule have been obtained; and

               (iii) All notices and filings set forth in Section 13.1(b)(iii) of the Atmel Disclosure Schedule have been duly delivered.

          (c) The Dropdown. The Dropdown shall have been completed to the reasonable satisfaction of each Party it being understood that neither Party shall be entitled to prevail itself of its failure to act reasonably. On or prior to the Closing Date, the Président of Vault-IC shall duly authorize, in accordance with applicable Laws and the certificate of incorporation, bylaws or other similar organizational documents of Vault-IC, the execution and delivery of this Agreement and the Ancillary Agreements to which Vault-IC is a party and the performance by Vault-IC of the Contemplated Transactions that are required to be performed by Vault-IC.

     13.2 Conditions to Atmel’s Obligations. The obligations of Atmel to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Atmel):

          (a) Representations and Warranties. The representations and warranties of Buyer contained in ARTICLE XI hereof shall be true and correct as of the Closing Date as though made as of the Closing Date (except for representations and warranties which address matters only as of a specific date, which representations and warranties shall continue as of the Closing Date to be true and correct as of such specific date), except to the extent that the failure to be so true and correct would not have a Buyer Material Adverse Effect.

          (b) Performance. Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Buyer at or prior to the Closing.

          (c) Deliveries. Atmel shall have received the deliveries contemplated by ARTICLE XV.

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     13.3 Conditions to Buyer’s Obligations. The obligations of Buyer to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Buyer):

          (a) Representations and Warranties. The representations and warranties of Atmel contained in ARTICLES IV through X hereof which are qualified by Business Material Adverse Effect or other materiality qualification shall be true and correct as of the Closing Date as though made as of the Closing Date (except for representations and warranties which address matters only as of a specific date, which representations and warranties shall continue as of the Closing Date to be true and correct as of such specific date). The representations and warranties of Atmel contained in ARTICLES IV through X hereof which are not qualified by Business Material Adverse Effect or other materiality qualification shall be true and correct as of the Closing Date as though made as of the Closing Date (except for representations and warranties which address matters only as of a specific date, which representations and warranties shall continue as of the Closing Date to be true and correct as of such specific date), except to the extent that the failure to be so true and correct would not have a Business Material Adverse Effect.

          (b) Performance. Atmel shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Atmel at or prior to the Closing.

          (c) Deliveries. Buyer shall have received the deliveries contemplated by ARTICLE XIV.

ARTICLE XIV
DELIVERIES BY ATMEL AT CLOSING

On the Closing Date, Atmel shall deliver or cause to be delivered:

     14.1 Atmel UK.

          (a) Atmel UK Stock Transfer Form. To Buyer, a duly stamped transfer of the UK Ordinary Shares duly executed by Atmel in favor of Buyer together with definitive share certificates for the UK Ordinary Shares showing Atmel as the registered holder or an indemnity for lost certificates and such other waivers, consents and other documents as may be necessary to enable Buyer to be registered as the holder of the UK Ordinary Shares.

          (b) Certain Atmel UK Documents. To Buyer, (a) the check books, certificates of incorporation, common seals and all statutory and minute books (which shall be written up to, but not including, the Closing Date) of Atmel UK together with all unused share certificate forms, (b) such title deeds, leases, licenses and other documents as may be in the possession of Atmel, the Selling Subsidiaries or Atmel UK relating to each of the properties owned, leased or licensed by Atmel UK or the title of Atmel UK to each of such properties, (c) the written resignations of the Atmel UK directors and (d) a notice of resignation of the existing auditors of Atmel UK.

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          (c) Audited Financial Statements. To Buyer, the audited balance sheet of Atmel UK as of December 31, 2009 prepared in accordance with UK GAAP (the “Audited Balance Sheet”).

          (d) Certain Employee Documents. All documents, policies, filings and other materials related to the Atmel UK Employees, such as employee handbooks and workplace policies, and other documents with respect to the Employees as may be reasonably requested by Buyer prior to the Closing.

     14.2 Atmel France.

          (a) Contribution Documents. To Buyer, duly signed Contribution Agreement, together with a copy of the decision of the shareholder meeting of Vault-IC approving the contribution and the related capital increase on the basis of the report of the Commisaire aux apports.

          (b) Vault-IC Share Transfer Form. To Buyer, a duly completed and signed share transfer form (ordres de mouvement) and any other instruments of assignment, in form and substance reasonably acceptable to Buyer, evidencing the valid transfer to Buyer of the Vault-IC Shares, free and clear of all Liens (except for Permitted Liens and any Liens created by Buyer).

          (c) Vault-IC Documents. To Buyer, (a) the check books, certificates of incorporation, common seals and all statutory and minute books (which shall be written up to, but not including, the Closing Date) of Vault-IC together with all unused share certificate forms, (b) such title deeds, leases, licenses and other documents as may be in the possession of Atmel, the Selling Subsidiaries or Atmel France relating to each of the properties owned, leased or licensed by Vault-IC or the title of Vault-IC to each of such properties, (c) duly completed and signed related tax forms (Cerfa 2759), and (d) a written resignation of the President (Président) of Vault-IC.

          (d) Certain Employee Documents. All documents, policies, filings and other materials related to the Atmel France Employees, such as employee handbooks and workplace policies, and other documents with respect to the Employees as may be reasonably requested by Buyer prior to the Closing.

     14.3 Certain Atmel Paris Employee Documents. Any documents evidencing the transfer of the Atmel Paris Employees to Buyer.

     14.4 Atmel.

          (a) Officer’s Certificate. To Buyer, an officer’s certificate signed by an officer of Atmel to the effect set forth in Sections 13.3(a) and 13.3(b).

          (b) Instruments of Assignment. To Buyer, duly executed instruments of assignment for the Transferred Patents and any Transferred Other IPR that is the subject of a public registration or filing, and instruments of assignment for each Real Property Lease as well as any

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other instrument which would be necessary to assign an Asset pertaining to the Business and which may not be otherwise provided for in this Agreement.

          (c) Receipt. To Buyer, a receipt for the Closing Date Consideration Amount.

          (d) Certain Documents. To Buyer, (i) a duly executed counterpart of the Escrow Agreement, the Wafer Purchase Agreement, the Foundry Agreement, the Core License Agreement, the Lease Agreement, the Transition Services Agreement, the Probe and Test Services Agreement and the Contribution Agreement, and (ii) the final Atmel Disclosure Schedule to the extent that such Atmel Disclosure Schedules have been modified, amended or supplemented between the date of this Agreement and the Closing Date.

          14.5 Further Instruments. Such documents of further assurance reasonably necessary and typical for transactions similar to the Contemplated Transactions in order to complete the Contemplated Transactions. Notwithstanding anything to the contrary herein, Buyer shall be solely responsible for filing or recording, as the case may, be any instruments of assignment or transfer delivered to it by Atmel hereunder, including such instruments for the transfer of the Transferred IPR and Transferred Trademarks.

          14.6 Atmel Switzerland Sale Agreement. To Buyer, to the extent required to evidence such sale, a duly executed sale agreement for all of the Inventory related to Existing Products in Switzerland other than the Excluded Assets or Assets which are owned by the Transferred Entities (except however in as much as such sale agreement would be required to register or evidence the transfer of such Asset).

          14.7 Atmel Sarl Assignment Agreement. To Buyer, to the extent required to evidence such sale, a duly executed assignment agreement for all of the Atmel Sarl Transferred Contracts other than the Excluded Assets or Transferred Contracts to which the Transferred Entities are a party (except however in as much as such assignment agreement would be required to register or evidence the transfer of such Atmel Sarl Transferred Contracts).

          14.8 ACP Bill of Sale. To Buyer, to the extent required to evidence such sale, a duly executed bill of sale for all of the ACP Equipment.

          14.9 Certain Atmel Taiwan Employee Documents.

          (a) All documents, policies, filings and other materials related to the Atmel Taiwan Employees, such as employee handbooks and workplace policies, and other documents with respect to the Employees as may be reasonably requested by Buyer prior to the Closing.

          (b) Any documents evidencing that Atmel Taiwan Employees shall become employed by Buyer as of the Closing.

          14.10 Non-Assignable Assets, Transferred Contracts and Restricted IPR. To the extent that Atmel and the Selling Subsidiaries have been able to receive the written consents and approvals

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necessary to transfer the Assets, Transferred Contracts and Restricted IPR pursuant to Sections 2.4(a) (Non-Assignable Assets), 2.4(b) (Non-Assignable Contracts) and 2.4(c) (Restricted IPR) before Closing, Atmel shall deliver to Buyer such consents and approvals received with respect thereto.

ARTICLE XV
DELIVERIES BY BUYER AT CLOSING

     On the Closing Date, Buyer shall deliver or cause to be delivered:

     15.1 Officer’s Certificate. To Atmel, a certificate signed by an officer of Buyer to the effect set forth in Sections 13.2(a) and 13.2(b).

     15.2 Closing Date Consideration Amount. To Atmel, the Closing Date Consideration Amount, as adjusted pursuant to Section 2.9, by wire transfer of immediately available funds, to an account designated by Atmel and dispatch confirmation of such wire transfer.

     15.3 Assumption Agreement. To Atmel, to the extent required to evidence such assumption, duly executed assumption agreements evidencing the assumption by Buyer of the Assumed Liabilities in each of the United States, France, the United Kingdom, the Philippines, Switzerland and Taiwan in accordance with the terms herein.

     15.4 Certain Documents. To Atmel, (i) a duly executed counterpart of each of the Ancillary Agreements, and (ii) if the Buyer Disclosure Schedules have been modified, amended or supplemented between the date of this Agreement and the Closing Date, the final Buyer Disclosure Schedules.

     15.5 Escrow Amount. To the Escrow Agent, the Escrow Amount, by wire transfer of immediately available funds or delivery of other immediately available funds for deposit into the escrow account.

     15.6 Further Instruments. Such documents of further assurance reasonably necessary and typical for transactions similar to the Contemplated Transactions in order to complete the Contemplated Transactions.

     15.7 IP Transfer Costs. Buyer shall be solely responsible for filing and recording any transfers of Intellectual Property Rights delivered hereunder and for all costs associated therewith.

ARTICLE XVI
INDEMNIFICATION; SURVIVAL

     16.1 Expiration of Representations and Warranties. Except as set forth in Section 16.1(a), all of the representations and warranties of the Parties set forth in this Agreement shall terminate and expire, and shall cease to be of any force or effect, at 5:00 P.M. (New York City time) on the date that is twenty (20) months after the Closing Date, and, notwithstanding any statutes

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of limitations under any Law, all liability and indemnification obligations with respect to such representations and warranties shall thereupon be extinguished (except to the extent a claim for indemnification has been made for any thereof in a written notice received by Indemnitor prior to such twenty (20) month period, which notice shall describe, to the extent possible, such matter in reasonable detail).

          (a) The representations and warranties given in Sections 4.14 (UK Taxes and UK Tax Matters), 5.13 (French Taxes and French Tax Matters — Atmel France), 6.7 (French Taxes and French Tax Matters — Vault-IC, 7.11 (US Tax Election) and 8.1(d) (Swiss Taxes and Swiss Tax Matters) and the representations and warranties related to liabilities arising from or related to French national social security contributions (cotisations de sécurité sociale), French employee social security contributions (cotisations de sécurité sociale part employé) and any other French social contributions (CSG, CRDS) or UK national social security and insurance contributions, shall terminate and expire, and shall cease to be of any force or effect upon the expiration of the applicable statute of limitations, and all liability and indemnification obligations with respect to such representations and warranties shall thereupon be extinguished.

     16.2 Special IP Indemnities.

          (a) Special IP Claim.

               (i) Subject to the provisions hereof including 16.3(d), and without limiting Section 16.3(b), from and after the Closing, Atmel agrees to defend Buyer from and against any Special IP Claim, and pay or reimburse Buyer, as the case may be, for such proportion (determined in accordance with Section 16.2(a)(v) below) of any amounts (“Special IP Losses”) paid or payable by Buyer as damages awarded in, or in reasonable settlement of, any Special IP Claim.

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               (ii) Atmel shall not be required to indemnify Buyer with respect to any Special IP Claim unless and until the aggregate amount of all such claims against Buyer for such matters exceeds [*] US dollars (US$[*]), in which event Buyer will be entitled to recover Special IP Losses arising out of or relating to such matters only to the extent in excess thereof and as provided in Section 16.2(a)(v) below. Atmel’s maximum aggregate, joint and cumulative liability and obligation to Buyer with respect to any Special IP Claim shall not exceed [*] US dollars (US$[*]) in the aggregate (“Special IP Claim Liability Cap”). For the avoidance of doubt, following the Closing Date, the Special IP Claim Liability Cap shall be the sole and exclusive remedy of Buyer with respect to any and all claims arising out of this Section 16.2(a) of this Agreement.

               (iii) A “Special IP Claim” is (i) a claim for patent infringement asserted against Buyer by a third party [*] relating, at least in part, to the Business, (ii) where the infringement claimed is with respect to an Existing Product or the conduct of the Business in the same manner as such Business was conducted by Atmel as of the Closing (excluding those claim directed at other products or businesses of Buyer), (iii) where [*], (iv) not a claim asserted against Buyer in response to, or following, a legal action brought or threatened by Buyer (or any person acting on its behalf or under its direction) after the Effective Date (other than in response to a threat first made by Third Party Licensor) against such Third Party Licensor or its affiliates or customers based on products purchased from such Third Party Licensor, and (v) is initiated against Buyer by the filing of a lawsuit or claim in a court or tribunal of competent jurisdiction prior to the second anniversary of the Closing Date.

               (iv) The foregoing states Buyer’s sole right to indemnification for a Special IP Claim, regardless of whether such Special IP Claim would give rise to any right of indemnification under any other Section of this Agreement (including Section 16.3) or any Ancillary Agreement.

               (v) Atmel shall pay Buyer a portion of Special IP Losses, up to a total of [*] US dollars $[*], in accordance with the following:

Special IP Losses	Responsibility of Atmel as percentage
Up to $[*]	[*]%
$[*] to $[*]	[*]%
$[*] to $[*]	[*]%
More than $[*]	[*]%

[*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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     (b)Designated IP Claim.

               (i) Subject to the provisions hereof including 16.3(d), and without limiting Section 16.3(b), from and after the Closing, Atmel agrees to defend Buyer from and against any Designated IP Claim, and pay or reimburse Buyer, as the case may be, for such proportion (determined in accordance with Section 16.2(a)(v) below) of any amounts (“Designated IP Losses”) paid or payable by Buyer as damages awarded in, or in reasonable settlement of, any Designated IP Claim but only as such losses or amount arise out of the manufacture, use or sale by Buyer of Existing Products or Roadmap Products as acquired from Seller hereunder or the conduct of the Business in the same manner as such Business was conducted by Atmel as of the Closing, and shall not apply to any liability or losses arising Buyer’s own business or from the manufacture, use or sale of Buyer’s own products not acquired hereunder.

               (ii) Atmel shall not be required to indemnify Buyer with respect to any Designated IP Claim unless and until the aggregate amount of all such claims against Buyer for such matters exceeds [*] US dollars (US$[*]), in which event Buyer will be entitled to recover Designated IP Losses arising out of or relating to such matters only to the extent in excess thereof and as provided in Section 16.2(b)(v). Atmel’s maximum aggregate, joint and cumulative liability and obligation to Buyer with respect to any Designated IP Claim shall not exceed [*] US dollars (US$[*]) in the aggregate (“Designated IP Claim Liability Cap”). For the avoidance of doubt, following the Closing Date, the Designated IP Claim Liability Cap shall be the sole and exclusive remedy of Buyer with respect to any and all claims arising out of this Section 16.2(b) of this Agreement.

               (iii) A “Designated IP Claim” has the meaning set forth in Section 7.6(d) of the Atmel Disclosure Schedule.

               (iv) The foregoing states Buyer’s sole right to indemnification for a Designated IP Claim, regardless of whether such Designated IP Claim would give rise to any right of indemnification under any other Section of this Agreement (including Section 16.3) or any Ancillary Agreement.

               (v) Atmel shall pay Buyer a portion of Designated IP Losses, up to a total of [*] US dollars (US$[*]), in accordance with the following:

[*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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Designated IP Losses	Responsibility of Atmel as percentage
Up to $[*]	[*]%
$[*] to $[*]	[*]%
More than $[*]	[*]%

     16.3 Indemnification.

          (a) By Buyer. Subject to the provisions of Section 16.1, from and after the Closing, Buyer agrees to jointly and severally indemnify, defend and hold harmless Atmel, its Affiliates and Subsidiaries (including the Selling Subsidiaries), and their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns (collectively, “Atmel Indemnitees”) from and against all Losses incurred by any of the Atmel Indemnitees arising out of or relating to: (i) any breach of any representation or warranty made by Buyer in this Agreement or any Ancillary Agreement, (ii) any breach of any covenant or agreement of Buyer contained in this Agreement or any Ancillary Agreement, (iii) any breach, or violation or termination of the GPEC Agreements by Buyer, or (iv) the Assets and/or the Assumed Liabilities (including, for the avoidance of doubt, any such Losses incurred by any of the Atmel Indemnitees relating to the failure by Buyer, any Affiliate of Buyer or any Transferred Entity to make any payment of Tax which is not Atmel’s Taxes).

          (b) By Atmel. Subject to the provisions of Section 16.1, from and after the Closing, Atmel agrees to indemnify, defend and hold harmless Buyer, its Affiliates and Subsidiaries, and their respective officers, directors, employees, shareholders, members, partners, agents, representatives, successors and assigns (collectively, “Buyer Indemnitees”) from and against all Losses incurred by any of Buyer Indemnitees arising out of or relating to: (i) any breach of any representation or warranty made by Atmel in this Agreement or any Ancillary Agreement (other than breaches of the representations and warranties related to the Assets set forth in Section 6.5, the sole remedy for which shall be the transfer of the relevant Asset to Buyer or a cash payment from Atmel to Buyer sufficient, in the judgment of Atmel, to compensate Buyer for its out-of-pocket expenses related to the failure of the relevant Asset to be transferred), (ii) any breach of any covenant or agreement of Atmel contained in this Agreement or any Ancillary Agreement or (iii) the Excluded Liabilities. Any successful claim under this Section 16.3(b), to the extent it relates to Atmel UK, shall be satisfied by a payment by Atmel to Buyer and not to Atmel UK.

[*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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          (c) Limitations on Rights of Buyer Indemnitees.

               (i) Subject to Section 16.3(c)(iii), Atmel shall not be required to indemnify Buyer Indemnitees with respect to any claim for indemnification arising out of or relating to matters described in Section 16.3(b)(i), unless and until the aggregate amount of all such claims against Buyer Indemnitees for such matters exceeds One Hundred Thousand US dollars (US$100,000), in which event Buyer Indemnitees will be entitled to recover Losses arising out of or relating to such claims only to the extent in excess thereof (the “Deductible”). Atmel’s maximum aggregate, joint and cumulative liability to Buyer Indemnitees with respect to any claim for indemnification arising out of or relating to matters described in Section 16.3(b)(i) shall not exceed Five Million US dollars (US$5,000,000) in the aggregate (“Liability Cap”). For the avoidance of doubt, following the Closing Date, the Liability Cap shall be the sole and exclusive remedy of Buyer Indemnitees with respect to any and all claims arising out of Section 16.3(b)(i) of this Agreement. Without limiting the generality of the foregoing, any indemnification claim involving a Loss of less than Ten Thousand US dollars (US$10,000) shall not be entitled to indemnification under this Section 16.3 and shall not be counted toward satisfaction of the Deductible.

               (ii) Subject to Section 16.3(c)(iii), Atmel shall not be required to indemnify Buyer Indemnitees with respect to any claim for indemnification arising out of or relating to matters described in Section 16.3(b) made by any Buyer Indemnitee after Closing if (i) the facts and circumstances giving rise to such claim are known to the Buyer Indemnitee as of the date hereof, or (ii) such claim for indemnification would not have arisen but for any act, omission or transaction on or after the date hereof by Buyer or with the consent or knowledge of Buyer.

               (iii) Notwithstanding anything to the contrary contained in this Agreement, the limitations on rights of any Indemnitee contained in this Article XVI shall not apply with respect to any claim for indemnification arising out of fraud or an intentional misrepresentation of a material fact or circumstance by any Party.

               (iv) The amount of any and all Losses for which indemnification is provided pursuant to this Article XVI will be net of and shall not include any Tax benefit to which an Indemnitee is entitled by reason of payment of such obligation or liability (taking into account any tax cost or reduction in such Tax benefits by reason of receipt of the indemnification payment) and any amounts of any insurance proceeds, other indemnification payments, payments pursuant to purchase price adjustments, contribution payments, reimbursements or other payments received or receivable by the Indemnitee with respect to such Losses. For the avoidance of doubt, if Buyer or a Buyer Indemnitee is entitled to claims or payments in respect of the same facts and circumstances under more than one provision of this Agreement, it will only be entitled to recover once and no more than once.

          (d) Procedure.

               (i) Direct Claims. If either a Buyer Indemnitee, on the one hand, or a Atmel Indemnitee, on the other hand, shall have a claim for indemnification hereunder (the

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“Indemnitee”) for any claim other than a claim asserted by a third party, a Party shall, and in the case of an Indemnitee that is not a Party, shall cause such Indemnitee to, as promptly as is practicable, give written notice to the Party from whom indemnification is sought (the “Indemnitor”) of the nature and, to the extent practicable, a good faith estimate of the amount, of the claim. The failure to make timely delivery of such written notice by the Indemnitee to the Indemnitor shall not relieve the Indemnitor from any liability under this Section 16.3 with respect to such matter, except to the extent the Indemnitor is actually prejudiced by failure to give such notice or the written notice relates to a breach of a representation and warranty and the notice is not received by Indemnitor prior to the twenty (20) month anniversary referred to in Section 16.1.

               (ii) Third-Party Actions (Other than Tax Contests).

                    (A) If an Indemnitee receives notice or otherwise obtains knowledge of any matter or any threatened matter that may give rise to an indemnification claim against an Indemnitor, then the Indemnitee shall promptly, and in the case of an Indemnitee that is not a Party, shall promptly cause such Indemnitee to, and in any event within twenty (20) Business Days of the receipt of notice or other knowledge of any such claim against the Indemnitor, deliver to the Indemnitor a written notice describing, to the extent possible, such matter in reasonable detail. The failure to make timely delivery of such written notice by the Indemnitee to the Indemnitor shall not relieve the Indemnitor from any liability under this Section 16.3 with respect to such matter, except to the extent the Indemnitor is actually prejudiced by failure to give such notice or the written notice relates to a breach of a representation and warranty and the notice is not received by Indemnitor prior to the twenty (20) month anniversary referred to in Section 16.1. The Indemnitor shall have the right, at its option and at its expense, to assume the defense of any such matter with its own counsel.

                    (B) If the Indemnitor elects to assume the defense of and indemnification for any such matter, then:

                         1. notwithstanding anything to the contrary contained in this Agreement, the Indemnitor shall not be required to pay or otherwise indemnify the Indemnitee against any attorneys’ fees or other expenses incurred on behalf of the Indemnitee in connection with such matter following the Indemnitor’s election to assume the defense of such matter, unless (x) the Indemnitor fails to defend diligently the action or proceeding within five (5) Business Days after receiving written notice of such failure from the Indemnitee, (y) the Indemnitee reasonably shall have concluded (upon advice of its counsel) that there may be one or more legal defenses available to such Indemnitee or other Indemnitees that are not available to the Indemnitor, or (z) the Indemnitee reasonably shall have concluded (upon advice of its counsel) that, with respect to such claims, the Indemnitee and the Indemnitor may have different, conflicting, or adverse legal positions or interests;

                         2. Indemnitee shall, at its own expense, make available to the Indemnitor all books, records and other documents and materials (including oral or written testimony and other evidence) that are under the direct or indirect control of the Indemnitee or any of

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the Indemnitee’s representatives, agents, employees, counsel, accountants or other advisors and that the Indemnitor considers necessary or desirable for the defense of such matter, and cooperate in all reasonable ways with, and make its employees and advisors available or otherwise render reasonable assistance to, the Indemnitor and its employees, advisors, representatives or agents; and

                         3. the Indemnitor shall not, without the written consent of the Indemnitee, which shall not be unreasonably withheld or delayed, settle or compromise any pending or threatened Litigation in respect of which indemnification may be sought hereunder (whether or not the Indemnitee is an actual or potential party to such Litigation) or consent to the entry of any Order which does not, to the extent that the Indemnitee may have any potential or actual liability with respect to such Litigation, include as an unconditional term thereof the delivery by the claimant or plaintiff to the Indemnitee of a written, complete and irrevocable release of the Indemnitee from any and all liability in respect of such Litigation.

                    (C) If the Indemnitor elects not to assume the defense of and indemnification for such matter, then the Indemnitee shall proceed diligently to defend such matter with the assistance of counsel reasonably satisfactory to the Indemnitor at its own cost; provided, that the Indemnitee shall not settle, adjust or compromise such matter, or admit any liability with respect to such matter, without the prior written consent of the Indemnitor.

                    (D) Whether or not the Indemnitor elects not to assume the defense of and indemnification for such matter, both Parties hereto shall cooperate in the defense or control thereof, including entering into any joint defense agreements, and shall furnish such documents, records, information, testimony (oral or written) or any other evidence, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith, and any disputes that may arise between or among the Indemnitor and the Indemnitee with respect to such matter shall be resolved in accordance with this ARTICLE XVI and by binding arbitration in accordance with the terms and provisions of Section 18.12. Buyer acknowledges and agrees that any indemnification of any Buyer Indemnitees pursuant to Section 16.3(b) is expressly conditioned upon Buyer’s full cooperation with Atmel in accordance with this Section 16.3.

                    (E) The procedures in this Section 16.3(d)(ii) shall not apply to matters subject to Section 16.3(d)(iii) (Tax Contests) or to direct claims of Indemnitees under Section 16.3(d)(i).

               (iii) Tax Contests.

                    (A) If, following the Closing Date, Buyer receives from any Taxing Authority written notice of any Tax Contest with respect to which Atmel or the Selling Subsidiaries may have any liability for Atmel’s Taxes or which may give rise to a breach of any of the representations and warranties listed in Section 16.1(a), Buyer shall promptly provide a copy of such notice to Atmel; provided, that Buyer’s failure to promptly provide a copy of such notice to Atmel shall not relieve Atmel from its obligations under Section 16.3(b) except to the extent that Atmel is actually prejudiced by such failure or the written notice relates to a breach of a representation and

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warranty and the notice is not received by Indemnitor prior to the expiration of the applicable statute of limitations.

                    (B) Atmel shall have the right, but not the obligation, at Atmel’s expense, to control, manage and be responsible for, and to contest or settle, any Tax Contest in connection with such notice, to the extent that such notice relates to Atmel’s Taxes or matters which may give rise to a breach of any of the representations and warranties listed in Section 16.1(a). Buyer may participate in such Tax Contest and Atmel shall not settle such Tax Contest without the consent of Buyer, which consent will not be unreasonably withheld or delayed. Atmel shall keep Buyer informed of the progress of all such Tax Contests and shall provide copies of all written communications with any Taxing Authority related to such Tax Contests.

          (e) Subrogation. To the extent that the Indemnitor makes or is required to make any indemnification payment to any Indemnitee, the Indemnitor shall be entitled to exercise, and shall be subrogated to, any rights and remedies (including rights of indemnity, rights of contribution and other rights of recovery) that the Indemnitee or any of the Indemnitee’s Affiliates may have against any other Person with respect to any Losses to which such indemnification payment is directly related, so long as the Indemnitee is not adversely affected thereby.

          (f) Exclusive Remedies Following the Closing Date. Following the Closing Date, the indemnification provisions of this Section 16.3 shall be the sole and exclusive remedy of the Indemnitees, whether in Contract, tort or otherwise, for all matters arising under or in connection with this Agreement and the Contemplated Transactions, including, without limitation, for any inaccuracy or breach of any representation, warranty, covenant or agreement set forth herein.

          (g) Environmental Remedies. Notwithstanding the foregoing or anything to the contrary in this Agreement, Buyer and its successors and assigns understand and agree that the indemnification obligations of Atmel under this Section 16.3 shall constitute the sole and exclusive remedy of Buyer Indemnitees with respect to any matters or claims arising under Environmental Laws, and Buyer hereby waives, and shall cause its Affiliates and its or their respective successors and assigns waive, and unconditionally release or shall cause the unconditional release of Atmel from, any rights and remedies that Buyer, its Affiliates and its or their respective successors and assigns otherwise may have against Atmel or its Affiliates under any Environmental Law, including, without limitation, any claims for contribution under applicable Law.

          (h) Changes in Law. Notwithstanding anything to the contrary contained herein, Atmel shall have no liability or obligation whatsoever with respect to any Loss to the extent that it arises or is increased as a result of the passing of, or a change in, any Law, interpretation of the law or administrative practice of any Governmental Authority after the date of this Agreement.

          (i) Mitigation. Atmel and Buyer agree to, and to cause their Subsidiaries and Affiliates to, make all commercially reasonable efforts to mitigate any Loss for which any Atmel Indemnitee or Buyer Indemnitee may be entitled to indemnification hereunder upon becoming aware of any event which would reasonably be expected to, or does, give rise to any such Loss.

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          (j) Updated Disclosure Schedules. From the date hereof through the Closing Date, the Parties shall have the right to modify, amend and/or supplement their respective Disclosure Schedule by delivering any such modifications, amendments and/or supplements to the other Parties in writing. For purposes of determining whether the conditions to Closing in ARTICLE XIII are satisfied, the Atmel Disclosure Schedule or the Buyer Disclosure Schedule, as applicable, shall only be deemed to include the information contained therein on the date hereof (but shall be deemed accepted for purposes of the conditions to Closing in ARTICLE XIII if Buyer or Atmel, as applicable, do not object within five (5) Business Days of receipt of any modification, amendment and/or supplement in writing). For purposes of determining whether Atmel or Buyer, as applicable, is subject to any claim for indemnification under this Section 16.3 following the Closing Date for a breach of any representation or warranty under this Agreement, the Atmel Disclosure Schedule or the Buyer Disclosure Schedule, as applicable shall be deemed to include the information contained therein on the date hereof and such other information as may be set forth in any modification, amendment and/or supplement to the Atmel Disclosure Schedule or the Buyer Disclosure Schedule, as applicable, delivered by Atmel to Buyer or Buyer to Atmel, as applicable, pursuant to this Section 16.3(j).

          (k) Disclosures before Closing.

               (i) Prior to the Closing, Buyer shall promptly notify Atmel of any event before Closing that is reasonably likely to have a material adverse impact on Buyer’s ability to obtain financing for the Purchase Price, to provide for working capital to operate the Business after Closing or to meet all of its obligations to pay for liabilities and payments related to the Employees.

               (ii) Prior to the Closing, Atmel shall promptly notify Buyer of any event before Closing that is reasonably likely to have a material adverse impact on LFoundry GmbH’s ability to supply products to Buyer after the Closing assuming that LFoundry shall become the owner of the foundry operations located at Zone Industrielle Avenue Olivier Perroy, 13106, Rousset, France before the Closing.

          (l) Assertion of Claims through a Party. No Indemnitee (other than Buyer or any successor or assignee of Buyer in the case of Buyer, and other than Atmel or any successor or assignee of Atmel in the case of Atmel) is entitled to assert any indemnification claim or exercise any other remedy under this Agreement unless either Buyer (in the case of Buyer Indemnitee) or Atmel (in the case of Atmel Indemnitee), as applicable, consents to the assertion of the indemnification claim or the exercise of the other remedy.

ARTICLE XVII
TERMINATION

     17.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned:

          (a) at any time, by mutual written agreement of Atmel and Buyer; or

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          (b) at any time, by Atmel or Buyer if any Restraint having any of the effects set forth in Section 13.1(a) of this Agreement shall be in effect and have become final and nonappealable; or

          (c) by written notice from Buyer, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of Atmel set forth herein shall have occurred, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 13.3(a) or 13.3(b), and (ii) after receipt by Atmel of written notice from Buyer of such breach or failure to perform, cannot be or has not been cured on or prior to December 31, 2010 (the “End Date”); provided, that Buyer is not then in breach with respect to any of its representations, warranties, covenants or other agreements contained in this Agreement; or

          (d) by written notice from Atmel, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of Buyer set forth herein shall have occurred, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 13.2(a) or 13.2(b), and (ii) after receipt by Buyer of written notice from Atmel of such breach or failure to perform, cannot be or has not been cured on or prior to the End Date; provided, that Atmel is not then in breach with respect to any of the representations, warranties, covenants or other agreements contained in this Agreement; or

          (e) by written notice by Atmel or Buyer to the other Party, at any time after the End Date if the Closing shall not have occurred on or prior to such date; provided, that the right to terminate this Agreement under this Section 17.1(e) shall not be available to such Party if the action or inaction of such Party or any of its Affiliates has been a cause of or resulted in the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach with respect to any representation, warranty, covenant or any other agreement contained in this Agreement.

     17.2 Procedure and Effect of Termination. In the event of the termination of this Agreement and the abandonment of the Contemplated Transactions, written notice thereof shall be given by a terminating Party to the other Parties, and this Agreement shall terminate and the Contemplated Transactions shall be abandoned without further action by any of the Parties. If this Agreement is terminated pursuant to Section 17.1:

          (a) Buyer shall immediately return to Atmel or destroy, at Atmel’s request, all documents, information and other materials obtained in connection with this Agreement and the Contemplated Transactions and all documents, information and other materials obtained in connection with Buyer’s investigation of the Business and Atmel UK from Atmel or its Affiliates, their respective employees, advisors, agents or representatives, including any copies of such documents, information or other materials made or supplied to Buyer and any materials derived by Buyer from such documents, information and other materials.

          (b) No Party hereto shall have any obligation or liability to the other Parties hereto, except that the Parties hereto shall remain bound by the provisions of this Section 17.2,

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Section 12.11 and ARTICLE XVIII and by the provisions of the Confidentiality Agreement; provided, that nothing herein shall relieve a defaulting or breaching Party from any liability or damages arising out of its breach of any covenant or agreement in this Agreement.

ARTICLE XVIII
MISCELLANEOUS

     18.1 Expenses. All fees and expenses incurred in connection with the Contemplated Transactions shall be paid by the Party incurring such expenses, whether or not the Contemplated Transactions are consummated.

     18.2 Notices. All notices and other communications given or made pursuant hereto shall be in English and in writing and shall be deemed to have been duly given or made (a) as of the date delivered, if delivered personally, (b) on the date the delivering Party receives confirmation of receipt (including by electronic mail), if delivered by electronic mail, (c) three (3) Business Days after being mailed by registered or certified mail (postage prepaid, return receipt requested) or (d) one (1) Business Day after being sent by overnight courier (providing proof of delivery), to the Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 18.2):

          If to Atmel:

Atmel Corporation
2325 Orchard Parkway
San Jose, California 95131, USA
Attn: Nancy Yamaguchi
E-mail: nancy.yamaguchi@atmel.com

          With copies (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004, USA
Attn: David L. Shaw
E-mail: david.shaw@friedfrank.com

          and

Fried, Frank, Harris, Shriver & Jacobson LLP
65-67, Avenue des Champs Elysées
75008, Paris, France
Attn: David Chijner
E-mail: david.chijner@friedfrank.com

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          and

Wilson Sonsini Goodrich & Rosati
650 Page Mill Rd.
Palo Alto, CA 94304-1050, USA
Attn: Selwyn B. Goldberg
E-mail: sgoldberg@wsgr.com

          If to Buyer:

Inside Contactless S.A.
41 Parc Club du Golf
13856 Aix-en-Provence Cedex 3, France
Attn: Richard Vacher Detourniére
E-mail: rvacherdetourniere@insidefr.com

          With a copy (which shall not constitute notice) to:

Morgan Lewis & Bockius LLP
68, rue du Faubourg Saint-Honore
75008 Paris, France
Attn: Anne Tolila
E-mail: atolila@morganlewis.com

     18.3 Governing Law. This Agreement shall in all respects be governed by and construed in accordance with, and enforced under the Laws (excluding conflict of laws rules and principles) of the State of New York applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.

     18.4 Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto, the Buyer Disclosure Schedule, the Atmel Disclosure Schedule, the Ancillary Agreements and the Confidentiality Agreement, constitute the entire agreement of the Parties relating to the subject matter hereof and supersede all prior Contracts or agreements, whether oral or written.

     18.5 Severability. Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.

     18.6 Amendment. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed

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by Atmel and Buyer; provided, that the observance of any provision of this Agreement may be waived in writing by the Party that will lose the benefit of such provision as a result of such waiver.

     18.7 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. Failure on the part of a Party to complain of any act of any Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitation period has run.

     18.8 Bulk Transfer Laws. Buyer hereby waives compliance by Atmel, the Selling Subsidiaries and their respective Affiliates with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Assets.

     18.9 Parties in Interest; Limitation on Rights of Others. The terms of this Agreement shall be binding upon, and inure to the benefit of, the Parties hereto and their respective legal representatives, successors and assigns. Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the Parties hereto and their respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise.

     18.10 Assignability. This Agreement shall not be assigned by any of the Parties without the prior written consent of the other Parties; provided, however, that solely for tax planning purposes, Buyer may assign this Agreement in whole, but not in part, to one of its wholly-owned Subsidiaries; provided further, however, that in connection with any assignment of this Agreement the assignor shall not be released from its obligations hereunder.

     18.11 Disclosure Schedules. No reference to or disclosure of any item or other matter in the Atmel Disclosure Schedule or the Buyer Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material (nor shall it establish a standard of materiality for any purpose whatsoever) or that such item or other matter is required to be referred to or disclosed in the Atmel Disclosure Schedule or the Buyer Disclosure Schedule. The information set forth in the Atmel Disclosure Schedule and the Buyer Disclosure Schedule is disclosed solely for the purposes of this Agreement, and no information set forth therein shall be deemed to be an admission by any Party hereto to any third party of any matter whatsoever, including any violation of Law or breach of any Contract. The Atmel Disclosure Schedule and the Buyer Disclosure Schedule and the information and disclosures contained therein are intended only to qualify and limit the representations, warranties and covenants of Atmel, Atmel France and Buyer, respectively, contained in this Agreement. Nothing in the Atmel Disclosure Schedule or the Buyer Disclosure Schedule is intended to broaden the scope of any representation or warranty contained in this

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Agreement or create any covenant. Matters reflected in the Atmel Disclosure Schedule and the Buyer Disclosure Schedule are not necessarily limited to matters required by the Agreement to be reflected in the Atmel Disclosure Schedule and the Buyer Disclosure Schedule, respectively. Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature.

     18.12 Dispute Resolution and Venue.

          (a) In the event of any dispute, claim or controversy arising out of or in connection with this Agreement or the Ancillary Agreements, or related to any matter that is the subject of this Agreement or the Ancillary Agreements, or the breach, termination, enforcement, interpretation or validity hereof or thereof, the Party bringing such dispute shall provide a written notice to the other Party or Parties describing such dispute in reasonable detail (the “Dispute Notice”). The Parties hereto agree to use commercially reasonable efforts to resolve the matters described in the Dispute Notice for a period of no less than forty five (45) days following the date of the Dispute Notice. Following such forty five (45) day period, any such dispute, claim or controversy described in the Dispute Notice, including any request for specific performance, claim based on contract, tort, statute or constitution or the determination of the scope or applicability of this agreement to arbitrate, will be determined by arbitration in the Borough of Manhattan, New York, New York before one arbitrator mutually selected by the Parties pursuant to the Comprehensive Arbitration Rules and Procedures (the “JAMS Rules”) of the Judicial Arbitration and Mediation Services (“JAMS”) in effect at the time of such proceeding. The arbitration shall be administered by JAMS pursuant to the JAMS Rules as modified herein and shall be the sole remedy for any dispute, claim or controversy arising out of, in connection with or relating in any way to this Agreement or the Ancillary Agreements.

          (b) The arbitrator shall have the power to order hearings and meetings to be held in such place or places as he or she deems in the interests of reducing the total cost to the Parties of the arbitration. The arbitrator shall be knowledgeable and experienced in the governing law and shall have the right to appoint a technical advisor who is knowledgeable regarding the semiconductor industry. The arbitration proceedings shall be conducted in English.

          (c) The arbitrator shall have the power to grant interim measures of protection, including temporary injunctive relief during the arbitration, and order any remedy, including monetary damages, specific performance and all other forms of legal and equitable relief, except that the arbitrator will not have the power to order consequential damages, special damages, punitive damages or lost profit and other indirect damages; provided, however, that the arbitrator will have the power to order that consequential damages, special damages, punitive damages or lost profit and other indirect damages be awarded to Atmel in connection with any Loss incurred by any of the directors, officers or employees of Atmel as a result of the breach or violation by Buyer of its covenants and agreements contained in Section 12.5(a) and (c) of this Agreement. The arbitrator may hear and rule on dispositive motions as part of the arbitration proceeding (e.g., motions for summary disposition).

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          (d) In accordance with the JAMS Rules, the arbitrator shall have the authority to decide what discovery to require or allow.

          (e) The award rendered by the arbitrator will be final and binding on the Parties. The Parties agree that a judgment based on the award rendered by the arbitrator shall be enforceable in accordance with the New York Convention in any court of competent jurisdiction.

          (f) The award rendered by the arbitrator may be entered into any court having jurisdiction, and application may be made to such court for judicial acceptance of the award and an order of enforcement, as the case may be. Such court proceeding will disclose only the minimum amount of information concerning the arbitration as is required to obtain such acceptance or order.

          (g) Pursuant to JAMS Rules, all communications and filings in the arbitration may be accomplished electronically, with paper copies sent on the same day by courier service, facsimile or post, to the address set forth in Section 18.2 above.

          (h) Except as required by Law, neither Party may disclose the existence, contents or results of an arbitration brought in accordance with this Agreement, or the evidence produced by its opposing Parties, or any analyses or summaries derived from such evidence.

          (i) Each Party hereby agrees that in connection with any such action process may be served in the same manner as notices may be delivered under Section 18.2 and irrevocably waives any defenses it may have to service in such manner.

          (j) Each Party hereby agrees that neither this Agreement nor any of the Ancillary Agreements preclude the Parties from seeking provisional remedies in aid of arbitration from or enforcement of the arbitrator’s decision in (i) the State Courts located in Borough of Manhattan, New York, New York; or (ii) the United States District Court for the Southern District of New York.

     18.13 No Other Duties. The only duties and obligations of the Parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied in fact, Law or equity, or under any principle of fiduciary obligation.

     18.14 Reliance on Counsel and Other Advisors. Each Party has consulted such legal, financial, tax, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each Party represents and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.

     18.15 Remedies. All remedies, either under this Agreement or by Law or otherwise afforded to the Parties hereunder, shall be cumulative and not alternative, and any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of this Agreement and to exercise all other rights granted by Law, equity or otherwise.

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     18.16 Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the Investment Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the Parties agree that, in addition to any other remedies, each Party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. Each Party hereby waives any requirement for the securing or posting of any bond in connection with such remedy. Each Party further agrees that the only permitted objection that it may raise in response to any action for equitable relief is that it contests the existence of a breach or threatened breach of this Agreement.

     18.17 Counterparts. This Agreement may be executed by facsimile signatures and in any number of counterparts with the same effect as if all signatory Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

     18.18 Further Assurance. If at any time after the Closing any further action is necessary or desirable to fully effect the transactions contemplated by this Agreement or any other of the Ancillary Agreements, each of the Parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request.

(signature pages follow)

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     IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be duly executed by its authorized representative and delivered in its name and on its behalf, as of the date of each of the signatures set forth below.

Date: May 2, 2010	INSIDE CONTACTLESS S.A.
	By:	/s/ Remy de Tonnac
		Remy de Tonnac
		Chief Executive Officer and Président du Directoire

(Signature page to Share and Asset Purchase and Sale Agreement)

Date: 25/6/10	ATMEL CORPORATION
	By:	/s/ Walt Lifsey
		Name:	Walt Lifsey
		Title:	Chief Operating Officer
Date: 25/6/10	ATMEL ROUSSET S.A.S. (solely for the purposes of Section 2.2)
	By:	/s/ Walt Lifsey
		Name:	Walt Lifsey
		Title:	Authorized Representative

(Signature page to Share and Asset Purchase and Sale Agreement)

EX-31.1

Exhibit 31.1

CERTIFICATIONS

     I, Steven Laub, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of Atmel Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010

/s/ STEVEN LAUB

Steven Laub

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

     I, Stephen Cumming, certify that:

     1. I have reviewed this Quarterly Report on Form 10-Q of Atmel Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010

/s/ STEPHEN CUMMING

Stephen Cumming

Vice President Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Steven Laub, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Atmel Corporation on Form 10-Q for the fiscal quarter ended June 30, 2010 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Atmel Corporation.

August 9, 2010

By:	/s/ STEVEN LAUB
	Steven Laub
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Stephen Cumming, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Atmel Corporation on Form 10-Q for the fiscal quarter ended June 30, 2010 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Atmel Corporation.

August 9, 2010

By:	/s/ STEPHEN CUMMING
	Stephen Cumming
	Vice President Finance and Chief Financial Officer