Securities Law & Instruments

Headnote

MRRS - Prospectus and registration relief in connection with an acquisition of aprivate issuer using an exchangeable share structure. First trade relief forunderlying securities if trade is executed through the facilities of a stockexchange located outside of Canada.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., s. 25, 53, 74(1).

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am.,

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO

AND

IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
PMC-SIERRA, INC. , 600444 B.C. LTD. AND EXTREME PACKET DEVICES INC.

MRRS DECISION DOCUMENT


WHEREAS the local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia and Ontario (the "Jurisdictions") hasreceived an application from PMC-Sierra, Inc. ("PMC"), 600444 B.C. Ltd. ("Newco")and Extreme Packet Devices Inc. ("Extreme") (collectively, the "Filer") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation") that theregistration requirement and the prospectus requirement, as defined in NationalInstrument 14-101 - Definitions, of the Legislation (the "Registration and ProspectusRequirements") shall not apply to certain trades of securities in connection with theacquisition (the "Acquisition") of Extreme under the terms of an acquisitionagreement (the "Acquisition Agreement") between PMC, Newco and Extreme datedMarch 2, 2000;

AND WHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the British Columbia Securities Commission isthe principal regulator for this application;

AND WHEREAS the Filer has represented to the Decision Makers that:

1. PMC was incorporated under the laws of Delaware on May 2, 1997, is nota reporting issuer under the Legislation or under any other Canadiansecurities legislation, but is subject to the reporting requirements of theUnited States Securities Exchange Act of 1934, as amended;

2. the authorized capital of PMC consists of 200,000,000 shares of PMCCommon Stock (the "PMC Shares"), of which 136,750,448 PMC Shares wereoutstanding as of December 31, 1999;

3. the PMC Shares are quoted on NASDAQ National Market ("NASDAQ");

4. as of March 7, 2000, PMC had a total of 77 shareholders of record residentin British Columbia holding approximately 0.02% of the issued andoutstanding PMC Shares, and a total of 8 shareholders of record resident inOntario holding less than 0.001% of the issued and outstanding PMCShares;

5. Newco was incorporated under the laws of British Columbia solely to effectthe Acquisition and is a wholly-owned subsidiary of PMC;

6. Extreme was incorporated under the laws of Ontario on March 26, 1999, isa private issuer or private company as defined in the Legislation, and is nota reporting issuer under the securities legislation of any other jurisdiction;

7. the authorized capital of Extreme consists of an unlimited number ofcommon shares, of which 7,374,867 common shares are issued andoutstanding; Extreme also has certain warrants (the "Extreme Warrants")and options to purchase common shares of Extreme (the "Extreme Options")outstanding;

8. all of the issued and outstanding Extreme common shares are owned by 85shareholders, 76 of whom reside in Ontario and the remaining 9 of whomreside in the United States; all of the issued and outstanding ExtremeOptions are owned by 65 holders, 60 of whom reside in Ontario and theremaining 5 of whom are resident in the United States; the sole holder ofExtreme Warrants resides in the United States;

9. under the Acquisition Agreement, immediately prior to the closing of theAcquisition, Extreme will amend its share capital structure so that it consistsof an unlimited number of voting Ordinary Shares and an unlimited numberof non-voting Special Shares, all of the outstanding common shares ofExtreme will be converted into Special Shares at an exchange ratio set outin the Acquisition Agreement, and Extreme will continue out of Ontario andinto British Columbia;

10. at the time of closing of the Acquisition, Newco will deliver one PMC Shareto Extreme in exchange for one Ordinary Share of Extreme; as a result,PMC will own all of the Ordinary Shares of Extreme through Newco and theformer holders of common shares of Extreme will own all of the SpecialShares;

11. in addition, under the Acquisition Agreement, PMC will assume the ExtremeWarrants and Extreme Options such that upon exercise, their holders willreceive PMC Shares at an exchange ratio set out in the AcquisitionAgreement;

12. Extreme will obtain shareholder approval of the reorganization of its capital,the continuance into British Columbia and the Acquisition in the form ofunanimous written resolutions in accordance with the Ontario BusinessCorporations Act; Extreme will provide its shareholders with a memorandumthat contains a detailed description of the continuance, the reorganizationand the Acquisition and their Canadian securities and tax implications,together with PMC's most recent Form 10-K, annual report, all stub periodquarterly financial statements since PMC's most recent year end and allpress releases relating to financial matters;

13. the Special Shares will provide the former holders of common shares ofExtreme with a security of a Canadian issuer having economic attributes,including voting and dividend rights and liquidation entitlements, which are,as nearly as practicable, equivalent to those of PMC Shares; the SpecialShares will provide the Canadian resident shareholders of Extreme with theopportunity to defer the capital gains tax that they would otherwise have topay if they received PMC Shares in exchange for their common shares ofExtreme at the time of the closing of the Acquisition;

14. the provisions of the Special Shares (the "Special Share Provisions") providethat:

(a) except as required by applicable law, holders of Special Shares shallnot be entitled to receive notice of or vote at meetings of theshareholders of Extreme;

(b) the Special Shares shall rank prior to the Ordinary Shares withrespect to the distribution of assets in the event of a liquidation,dissolution or winding-up of Extreme;

(c) each Special Share shall entitle the holder thereof to receivedividends from Extreme at the same time as, and in an amountequivalent to, dividends paid by PMC on each PMC Share on thedeclaration date;

(d) a Special Share shall entitle the holder thereof to retract such SpecialShare and to receive an amount equal to the market price of onePMC Share on the retraction date, which shall be satisfied byExtreme delivering one PMC Share, together with an additionalamount equal to the full amount of all declared and unpaid dividendson each retracted Special Share (collectively, the "Retraction Price");notwithstanding the foregoing, upon being notified by Extreme of aproposed retraction by a holder of Special Shares, PMC will have anoverriding call right to purchase from such holder of Special Shareseach Special Share proposed to be retracted at the Retraction Priceby distributing to the shareholders of Special Shares one PMC Sharetogether with all declared and unpaid dividends for each SpecialShare;

(e) Extreme may redeem the outstanding Special Shares on the fourthanniversary of the closing of the Acquisition (the "AutomaticRedemption Date"); upon a redemption by Extreme on the AutomaticRedemption Date, each Special Share shall entitle the holder thereofto receive from Extreme for each Special Share redeemed an amountequal to the market price of one PMC Share on the AutomaticRedemption Date, which amount will be satisfied by Extremedelivering to such holder of Special Shares one PMC Share, togetherwith an additional amount equal to the full amount of all declared andunpaid dividends on each PMC Share up to the AutomaticRedemption Date (collectively, the "Redemption Price");notwithstanding the foregoing, PMC will have an overriding call rightto purchase the Special Shares on the Automatic Redemption Datefor the Redemption Price by distributing to the holders of SpecialShares one PMC Share together with all declared dividends for eachSpecial Share; and

(f) upon the liquidation, dissolution or winding-up of Extreme, eachSpecial Share shall entitle the holder thereof to receive an amountequal to the market price of one PMC Share on the liquidation date,which will be satisfied by PMC distributing to such holder of SpecialShares one PMC Share, together with an additional amount equal tothe full amount of all declared and unpaid dividends on each SpecialShare (collectively, the "Liquidation Price"); notwithstanding theforegoing, upon any proposed liquidation, dissolution or winding-upof Extreme, PMC or, if PMC assigns the right to Newco, Newco willhave an overriding call right to purchase for the Liquidation Priceeach Special Share to be redeemed from the holders of SpecialShares;

(g) in the event of any capital reorganization, or any reclassification ofthe PMC Shares, a distribution of PMC Shares to holders by way ofa stock dividend payable in PMC Shares or by a subdivision or splitup of PMC Shares, the consolidation or merger of PMC with or intoanother person (other than a consolidation or merger in which PMCis the continuing entity and which does not result in any change in thePMC Shares), the sale or other disposition of all or substantially allof the properties and assets of PMC as an entirety to any otherperson or a tender offer, share exchange offer, issuer bid, take-overbid or similar transaction with respect to the PMC Shares, then, aftersuch reorganization, reclassification and consolidation, merger, saleor other disposition or tender offer, share exchange offer, issuer bid,take-over bid or similar transaction with respect to the PMC Shares,including a distribution of PMC Shares by way of stock dividend or bya subdivision or split up of PMC Shares, in circumstances where thesame or an economically equivalent change is not made to, or benefitconferred upon the holders of, the Special Shares, then on theoccurrence of any such event, the number of PMC Sharesexchangeable for each Special Share will be adjusted accordinglyand from such date the dividend entitlement of the Special Sharesshall be adjusted accordingly;

15. at the closing of the Acquisition, PMC, Newco and Extreme will enter into asupport agreement (the "Support Agreement") under which, among otherthings, PMC will ensure that:

(a) Extreme has sufficient assets available to pay simultaneous andequivalent dividends on the Special Shares as are paid by PMC onthe PMC Shares, and simultaneously declares and pays suchsimultaneous and equivalent dividends on the Special Shares; and

(b) Newco and Extreme are able to fulfil their obligations in respect of theput, redemption and retraction rights and the dissolution entitlementsupon liquidation that are attributes of the Special Shares and theexchange rights provided under the Trust Agreement (as definedbelow);

16. in addition, at the closing of the Acquisition, PMC, Newco and Extreme, theholders of Special Shares and a trust company, as trustee for the ExtremeShareholders, will enter into a voting trust and exchange agreement (the"Trust Agreement") under which:

(a) PMC will deposit with the Trustee that number of PMC Shares equalto the number of Special Shares outstanding that will enable theholders of Special Shares to vote at meetings of holders of PMCShares;

(b) PMC will grant to the holders of Special Shares an exchange right(the "Exchange Right") which may be exercised by the holders ofSpecial Shares upon the insolvency of Extreme; the Exchange Right,when exercised, will require PMC to purchase from a holder ofSpecial Shares all or any part of the Special Shares held by suchholder of Special Shares; the purchase price for each Special Sharepurchased by PMC under the Exchange Right will be an amountequal to the market price of one PMC Share on the closing date of thepurchase under the Exchange Right, which will be satisfied by PMCdistributing to such holder of Special Shares one PMC Share,together with an additional amount equivalent to the full amount of alldeclared and unpaid dividends on each Special Share;

(c) PMC and Newco will grant to the holders of Special Shares anexchange put right (the "Exchange Put Right") which may beexercised by the holders of Special Shares at any time and from timeto time; the Exchange Put Right, when exercised, will require PMCor Newco to purchase from a holder of Special Shares all or any partof the Special Shares held by such holder of Special Shares; thepurchase price for each Special Share purchased by PMC or Newcounder the Exchange Put Right will be an amount equal to the marketprice of one PMC Share on the closing date of the purchase underthe Exchange Put Right, which will be satisfied by PMC or Newco, asthe case may be, delivering to such holder of Special Shares onePMC Share, together with an additional amount equivalent to the fullamount of all declared and unpaid dividends on each Special Share;

(d) the Special Shares will be automatically exchanged (the "AutomaticExchange Right") by PMC or Newco for PMC Shares in the event ofa voluntary or involuntary liquidation, dissolution or winding-up ofPMC or in the event that PMC enters into any transaction whereby allor substantially all of its assets would become the property of anotherperson or successor company without such person or companybecoming bound by the provisions of the Trust Agreement and theSupport Agreement (each such event being referred to herein as an"Automatic Exchange Event"); prior to the effective date of anAutomatic Exchange Event, each outstanding Special Share (exceptfor those held by PMC or any of its affiliates) will be automaticallyexchanged for PMC Shares; the purchase price for each SpecialShare purchased by PMC or Newco under the Automatic ExchangeRight will be an amount equal to the market price of one PMC Shareon the closing date of the purchase under the Automatic ExchangeRight, which will be satisfied by PMC or Newco delivering to suchholder of Special Shares one PMC Share, together with an additionalamount equal to the full amount of all declared and unpaid dividendson each Special Share;

17. the steps under the Acquisition and the attributes of the Special Sharescontained in the Special Share Provisions, the Support Agreement and theTrust Agreement involve or may involve a number of trades of securities,including trades related to the distribution of the Special Shares pursuant tothe Acquisition or upon the issuance of PMC Share in exchange for SpecialShares; there may be no registration and prospectus exemptions availableunder the Act for certain of the trades and possible trades in securities(collectively, the "Trades") to which the Acquisition gives rise;

18. if all of the Special Shares were exchanged for PMC Shares immediatelyafter the completion of the Acquisition, all persons and companies residentin each of the Jurisdictions would not in aggregate hold of record more than10% of the total number of issued and outstanding PMC Shares or representmore than 10% of the total number of holders of PMC Shares;

19. there is no market for the PMC Shares in the Jurisdictions and none isexpected to develop;

20. upon completion of the Acquisition, none of PMC, Newco or Extreme willbecome reporting issuers under the Legislation;

21. all disclosure material furnished to holders of PMC Shares in the UnitedStates will be provided to holders of Special Shares and PMC Sharesresident in the Jurisdictions; and

22. so long as any outstanding Special Shares are held by any person otherthan PMC or its affiliates, PMC will remain the direct or indirect beneficialowner of all the outstanding voting shares of Newco and Extreme;

AND WHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker collectively the ("Decision");

AND WHEREAS each of the Decision Makers is satisfied that the testcontained in the Legislation that provides the Decision Maker with the Jurisdictionto make the Decision has been met;

The Decision of the Decision Makers under the Legislation is that:

1. the Registration and Prospectus Requirements shall not apply to the Trades;

2. the first trade in Special Shares other than in exchange for PMC Sharesshall be a distribution; and

3. the first trade in any PMC Shares acquired upon exchange of SpecialShares shall be a distribution unless the trade is executed through thefacilities of a stock exchange, including NASDAQ, outside of Canada.

March 28th, 2000.

"Joyce Maykut"