SAN JOSE, Calif.—Microchip is reneging on severance benefits Atmel promised its U.S. employees during prolonged merger discussions, according to one disgruntled employee who supplied documents to EE Times. In an interview, Microchip’s chief executive said he and a board member are taking a 50% pay cut for a quarter as a gesture to make up for the failure of Atmel’s board to communicate unprecedented promises.

The disclosures provide a rare look inside the hard realities of a semiconductor industry going through a historic consolidation amid slowing revenues and rising costs.

In a three-and-a-half hour meeting with Atmel employees in Silicon Valley last week, Microchip chief executive Steve Sanghi blamed the Atmel board for failing to communicate details of the severance package to the Microchip board. He offered employees half what Atmel had promised if they signed a letter indemnifying Microchip, the employee said.

“He said you can sign the letter or not, and if not don’t expect anything because I’ll beat you in court. He used the example many times of a house burning and said you can either help me or the house will burn down and get sold — he said that four or five times,” the employee said.

Atmel sent employees an FAQ about the merger stating Microchip agreed to the severance package. “When employees pointed to the FAQ during the all-employee meeting, [Sanghi] dismissed it as something the previous CEO created, something he was not told about, it did not matter,” the employee said. “There was a lot of finger pointing,” he added.

“There was more laughter than I thought would be possible [in the employee meeting with Sanghi] but it was pretty antagonistic,” the employee said, noting a first round of layoffs had already begun including “all vice presidents I know of.”

Another employee contacted by EE Times offered a somewhat different view of the meeting. “It was way too long. I have never sat through a 3.5 hour employee meeting. There were a couple points of contention, but they are doing what they can to work through issues,” he said.

“Microchip got duped as a lot of Atmel employees did and I’m the one fighting for the employees by meeting them half way,” Sanghi told EE Times. “We’ve drafted the letters that will be given to employees in the next 24-48 hours and by the end of the week we will have the whole issue resolved,” he said.

At the San Jose employee meeting, “there was resounding support, near unanimous support for the sacrifice we made—98% of hands went up in the room,” said Sanghi, noting Microchip president Ganesh Moorthy joined him in taking a 50% pay cut for one quarter.