PMC Sierra, Inc. - MRRS Decision

Headnote

ApplicableOntario Statutes

ApplicableOntario Rules

INTHE MATTER OF

THESECURITIES LEGISLATION OF

BRITISHCOLUMBIA, ALBERTA, MANITOBA AND ONTARIO

AND

INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM

FOREXEMPTIVE RELIEF APPLICATIONS

AND

INTHE MATTER OF

PMC-SIERRA,INC., PMC-SIERRA LTD.,

PMC-SIERRAULC AND EXTREME PACKET DEVICES INC.

MRRSDECISION DOCUMENT

WHEREASthe local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Manitobaand Ontario (the "Jurisdictions") has received an applicationfrom PMC-Sierra, Inc. ("PMC"), PMC-Sierra Ltd. ("Ltd."), PMC-SierraULC ("Newco") and Extreme Packet Devices Inc. ("Extreme") (collectively,the "Filer") for a decision under the securities legislationof the Jurisdictions (the "Legislation") that the requirementcontained in the Legislation to be registered to trade in asecurity and to file and obtain a receipt for a preliminaryprospectus and a prospectus (the "Registration and ProspectusRequirements") shall not apply to certain trades of securitiesin connection with the combination (the "Combination") of thebusinesses of Ltd. and Extreme;

ANDWHEREAS under the Mutual Reliance Review System forExemptive Relief Applications (the "System"), the British ColumbiaSecurities Commission is the principal regulator for this application;

ANDWHEREAS the Filer has represented to the Decision Makersthat:

1.PMC was incorporated under the laws of Delaware, is not a reportingissuer (or equivalent) under the Legislation, but is subjectto the reporting requirements of the United States SecuritiesExchange Act of 1934, as amended;

2.the authorized capital of PMC is 900,000,000 shares of PMC CommonStock (the "PMC Shares") and 5,000,000 shares of Preferred Stock,of which approximately 165,259,314 PMC Shares were outstandingas of November 19, 2001;

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

4.Ltd. was incorporated by continuation under the laws of BritishColumbia, and is not a reporting issuer (or equivalent) underthe Legislation;

5.Ltd.'s authorized capital is (a) 100,000,000 Ordinary shares(the "Ltd. Ordinary Shares"); (b) 2,557,838 Class 1 Specialshares; (c) 2,100,000 Class 2 Special shares; (d) 342,162 Class3 Special shares; and (e) 5,000,000 Class 4 Special shares (theClass 1, 2, 3 and 4 Special shares are collectively, the "ExistingLtd. Special Shares");

6.as at November 19, 2001, there were approximately 3,968,920Ltd. Ordinary Shares and 4,794,853 Existing Ltd. Special Sharesissued and outstanding, of which PMC holds all of the Ltd. OrdinaryShares;

7.Newco was incorporated as an unlimited liability corporationunder the laws of Nova Scotia to hold certain rights and obligationsrelated to the Combination and is a wholly-owned subsidiaryof PMC;

8.Extreme was incorporated by continuation under the laws of BritishColumbia and is not a reporting issuer (or equivalent) underthe Legislation;

9.Extreme's authorized capital is 2,619,940 common shares, 10,000,000ordinary shares (the "Extreme Ordinary Shares") and 10,000,000special shares (the "Extreme Special Shares");

10.as of November 19, 2001, there was 1 Extreme Ordinary Shareand approximately 1,646,346 Extreme Special Shares issued andoutstanding, of which Ltd. holds the 1 Extreme Ordinary Shareand approximately 1,196,229 Extreme Special Shares;

11.the Extreme Special Shares:

(a) have economic attributes, including voting, dividend rightsand liquidation entitlements which are, as nearly as practicable,equivalent to those of PMC Shares; and

(b) are exchangeable into PMC Shares on a one-for-one basisin certain circumstances;

12.the Combination will be effected by:

(a) Ltd. creating the Ltd. Special shares (the "Ltd. SpecialShares") with substantially the same characteristics as theExtreme Special Shares;

(b) Ltd. offering to acquire (the "Exchange Offer") all ExtremeSpecial Shares in exchange for Ltd. Special Shares (the "Exchange");

(c) Extreme transferring all of its assets and liabilities toLtd.;

(d) Ltd. exercising its existing liquidation call right to acquireall Extreme Special Shares not acquired under the Exchange Offerin exchange for PMC Shares; and

(e) Extreme being voluntarily dissolved;

13.after the Exchange, holders of Extreme Special Shares who acceptthe Exchange Offer will hold securities with terms substantiallyequivalent to those held before the Exchange, except that withrespect to the payment of dividends and amounts in the eventof the liquidation, winding up or dissolution of Ltd. the Ltd.Special Shares will rank behind the Existing Ltd. Special Shares,but holders of Ltd. Special Shares will receive the benefitof covenants given by PMC and Ltd. under the Support Agreementand Trust Agreement (defined below);

14.the Exchange and the Ltd. Special Shares may allow Canadianresident shareholders of Extreme to defer the capital gainstax otherwise payable if they received PMC Shares in exchangefor their Extreme Special Shares as part of the Combination;

15.the Ltd. Special Shares:

(a) do not entitle holders to receive notice of or vote at meetingsof shareholders of Ltd., but under the Trust Agreement (definedbelow), PMC will deposit with the Trustee, PMC Shares equalto the number of Ltd. Special Shares outstanding to enable holdersof Ltd. Special Shares to vote at meetings of holders of PMCShares;

(b) entitle holders to receive dividends from Ltd. at the sametime and in the same amount as dividends paid by PMC on PMCShares;

(c) with respect to the distribution of assets in the eventof a liquidation, dissolution or winding-up of Ltd.:

(i) rank ahead of Ltd. Ordinary Shares to the extent that theholders of Ltd. Special Shares shall receive one PMC Share insuch event;

(ii) rank behind Existing Ltd. Special Shares which have a preferencein an amount equal to the fair market value of the PMC Sharesinto which such Existing Ltd. Special Shares are exchangeable(this should be satisfied by the delivery of PMC Shares);

(d) are exchangeable into PMC Shares on a one-for-one basis,from PMC, Newco or Ltd. on the:

(i) liquidation, dissolution or winding-up of Ltd.;

(ii) retraction or redemption of the Ltd. Special Shares; or;

(iii) compulsory sale of the Ltd. Special Shares under exerciseof call rights by PMC or Newco;

16.the number of PMC Shares exchangeable for each Ltd. SpecialShare will be adjusted, in certain events involving PMC, includingcapital reorganization, stock dividend and disposition of allor substantially all of the property and assets;

17.prior to the closing of the Exchange Offer, PMC, Newco and Ltd.will enter into a support agreement (the "Support Agreement")under which, PMC will ensure that:

(a) Ltd. declares simultaneous and equivalent dividends on theLtd. Special Shares as are paid by PMC on the PMC Shares, andthat Ltd. has sufficient assets to pay such dividends;

(b) Newco and Ltd. are able to fulfil their obligations in respectof the put, redemption and retraction rights and the dissolutionentitlements upon liquidation that are attributes of the Ltd.Special Shares and the exchange rights provided under the TrustAgreement (defined below);

18.at the closing of the Exchange Offer, PMC, Newco and Ltd., theholders of Ltd. Special Shares and a trust company, as trustee(the "Trustee") for the holders of Ltd. Special Shares, willenter into a voting trust and exchange agreement (the "TrustAgreement") under which:

(a) PMC will deposit with the Trustee, PMC Shares equal to thenumber of Ltd. Special Shares outstanding to enable holdersof the Ltd. Special Shares to vote at meetings of holders ofPMC Shares;

(b) holders of Ltd. Special Shares will be entitled to exchangetheir Ltd. Special Shares into PMC Shares from PMC or Newco:

(i) at the election of the holder of Ltd. Special Shares onthe insolvency of Ltd.;

(ii) on the exercise of an exchange put right by holders ofLtd. Special Shares at any time; or

(iii) automatically, in the event of liquidation, winding-upor dissolution of PMC, or if PMC enters into any transactionwhere all or substantially all of its property and assets becomethe property of another person or successor company who is notbound by the Trust Agreement and the Support Agreement;

19.the steps under the Combination and the attributes of the Ltd.Special Shares, the Support Agreement and the Trust Agreementinvolve certain trades and possible trades in securities (collectively,the "Trades") where no registration and prospectus exemptionsmay be available under the Legislation;

20.if all of the Ltd. Special Shares were exchanged for PMC Sharesimmediately after the completion of the Exchange, all personsand companies resident in Canada would not in the aggregateown directly or indirectly more than 10% of the total numberof issued and outstanding PMC Shares or represent more than10% of the total number of holders of PMC Shares;

21.there is no market for the PMC Shares in any province or territoryof Canada and none is expected to develop;

22.on completing the Combination, none of PMC, Newco or Ltd. willbecome reporting issuers (or the equivalent) in any provinceor territory of Canada;

23.all disclosure material furnished to holders of PMC Shares inthe United States will be provided to holders of Ltd. SpecialShares and PMC Shares resident in the Jurisdictions; and

24.so long as any outstanding Ltd. Special Shares are held by anyperson other than PMC or its affiliates, PMC will remain thedirect or indirect beneficial owner of all the outstanding votingshares of Newco and Ltd.;

AND WHEREAS under the System, this MRRS DecisionDocument evidences the decision of each Decision Maker (collectivelythe "Decision");

AND WHEREAS each of the Decision Makers issatisfied that the test contained in the Legislation that providesthe Decision Maker with the Jurisdiction to make the Decisionhas been met;

THE DECISION of the Decision Makers under theLegislation is that the Registration and Prospectus Requirementsshall not apply to the Trades, provided that,

1.the first trade in Ltd. Special Shares, other than in exchangefor PMC Shares, shall be a distribution or primary distributionto the public; and

2.the first trade in any PMC Shares acquired on exchange of Ltd.Special Shares shall be a distribution or primary distributionto the public unless the trade is made through an exchange,or a market, outside of Canada, or to a person or company outsideof Canada. December 14, 2001. "Brenda Leong"