<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BROADCOM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-0480482
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NUMBER)
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92618
(949) 450-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HENRY T. NICHOLAS III, PH.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CO-CHAIRMAN
BROADCOM CORPORATION
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92618
(949) 450-8700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
BRUCE R. HALLETT, ESQ. DAVID A. DULL, ESQ.
SUE L. COLLINS, ESQ. BROADCOM CORPORATION
BROBECK, PHLEGER & HARRISON LLP 16215 ALTON PARKWAY
38 TECHNOLOGY DRIVE IRVINE, CALIFORNIA 92618
IRVINE, CALIFORNIA 92618 (949) 450-8700
(949) 790-6300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
===========================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------------------
Class A common stock, $.0001 par
value................................. 653,159 $151.125 $ 98,708,653.88 $27,441.01
Class B common stock, $.0001 par
value................................ 653,159 $151.125 $ 98,708,653.88 $27,441.01
Total......................... $197,417,307.76 $54,882.02
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457 of the Securities Act of 1933, as amended (the
"Securities Act"). Based upon the average of the high and low sales prices
per share of Broadcom's Class A common stock on November 5, 1999 as reported
on the Nasdaq National Market, pursuant to Rule 457(c) of the Securities
Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
(Subject to completion, dated November 12, 1999)
653,159 SHARES
[BROADCOM LOGO]
CLASS A COMMON STOCK
AND CLASS B COMMON STOCK
This prospectus relates to 653,159 shares of our Class B common stock that
we may issue from time to time in exchange for exchangeable shares issued by one
of our Canadian subsidiaries, HH Acquisition Inc. The exchangeable shares were
issued by HH Acquisition Inc. in August 1999 to shareholders of HotHaus
Technologies Inc. in connection with our acquisition of HotHaus Technologies. As
a holder of exchangeable shares, you may exchange your exchangeable shares for
shares of our Class B common stock at any time. Upon an exchange of exchangeable
shares, you will receive one share of our Class B common stock for each
exchangeable share. You also will receive a cash amount equal to any declared
and unpaid dividend on the exchangeable shares if the record date for the
dividend is prior to the date of exchange. The automatic redemption date for the
exchangeable shares is August 31, 2009. On that date, HH Acquisition Inc. will
redeem, or HH Acquisition ULC, another of our Canadian subsidiaries, will
acquire, all of the then outstanding exchangeable shares by delivering, for each
exchangeable share, one share of our Class B common stock plus a cash amount
equal to any declared and unpaid dividends. HH Acquisition Inc. may redeem or HH
Acquisition ULC may acquire all exchangeable shares before August 31, 2009 if
there are fewer than 100,000 exchangeable shares then outstanding that are not
owned by us or our affiliates.
This prospectus also relates to 653,159 shares of our Class A common stock
into which the shares of Class B common stock offered by this prospectus are
convertible. We have two classes of common stock outstanding, Class A common
stock and Class B common stock. The rights, preferences and privileges of each
class of common stock are identical in all respects except for voting rights.
The holders of the Class A common stock are entitled to one vote per share and
the holders of Class B common stock are entitled to ten votes per share on
matters submitted to a vote of the shareholders. Holders of shares of Class A
common stock and holders of shares of Class B common stock vote together as a
single class on all matters submitted to a shareholder vote, except (1) as
otherwise required by law or (2) with respect to a proposed issuance of
additional shares of Class B common stock, which issuance currently requires the
affirmative vote of the holders of a majority of the outstanding shares of Class
B common stock, voting separately as a class. Each share of our Class B common
stock is convertible at the option of the holder into one share of Class A
common stock, and generally will automatically convert into one share of Class A
common stock upon sale or other transfer.
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "BRCM." On November 11, 1999, the last reported sale price for the Class
A common stock was $180.00 per share. Our Class B common stock is not publicly
traded.
-------------------------
SEE THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS
PROSPECTUS FOR A DISCUSSION OF THE RISKS ASSOCIATED WITH AN INVESTMENT IN OUR
COMMON STOCK AS A RESULT OF THE EXCHANGE OF YOUR EXCHANGEABLE SHARES.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
The date of this prospectus is November , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Broadcom.................................................... 3
Risk Factors................................................ 3
Use of Proceeds............................................. 21
Plan of Distribution........................................ 21
Description of Capital Stock................................ 25
Where You Can Find More Information......................... 26
Incorporation of Certain Documents by Reference............. 26
Forward-Looking Statements.................................. 27
Legal Matters............................................... 27
Experts..................................................... 28
</TABLE>
-------------------------
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANY PERSON TO PROVIDE YOU WITH
INFORMATION THAT DIFFERS FROM WHAT IS CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. IF ANY PERSON DOES PROVIDE YOU WITH INFORMATION THAT DIFFERS
FROM WHAT IS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES, OR AN OFFER OF SOLICITATION IN ANY JURISDICTION WHERE OFFERS
OR SALES ARE NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, EVEN THOUGH THIS PROSPECTUS MAY
BE DELIVERED OR SHARES MAY BE SOLD UNDER THIS PROSPECTUS ON A LATER DATE.
2
<PAGE> 4
BROADCOM
In this prospectus, the terms "Broadcom," "company," "we," "us" and "our'
refer to Broadcom Corporation and its subsidiaries.
We are a leading provider of highly integrated silicon solutions that
enable broadband digital transmission of voice, data and video content to and
throughout the home and within the business enterprise. Our products enable the
high-speed transmission of data over existing communications infrastructures,
most of which were not originally intended for digital data transmission. Using
proprietary technologies and advanced design methodologies, we design, develop
and supply integrated circuits for a number of the most significant broadband
communications markets, including the markets for cable set-top boxes, cable
modems, high-speed office networks, home networking, direct broadcast satellite
and terrestrial digital broadcast, and digital subscriber lines.
Our principal executive offices are located at 16215 Alton Parkway, Irvine,
California 92618. Our telephone number is (949) 450-8700.
RISK FACTORS
Before deciding to invest in our company or to maintain or increase your
investment, you should carefully consider the risks described below, in addition
to the other information in this report and in our other filings with the SEC,
including our Annual Report on Form 10-K for the year ended December 31, 1998
and subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties
described below are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also affect our business operations. If any of these risks actually occur, that
could seriously harm our business, financial condition or results of operations.
In that event, the market price for our Class A common stock could decline and
you may lose all or part of your investment.
THE EXCHANGE OF YOUR HH ACQUISITION EXCHANGEABLE SHARES MAY BE A TAXABLE EVENT
AND YOUR TAX CONSEQUENCES WILL VARY DEPENDING ON A NUMBER OF FACTORS.
The exchange of your exchangeable shares for shares of our common stock is
generally a taxable event in Canada and the United States. Your tax consequences
can vary depending on a number of factors, including:
- your residency;
- the method of exchange; and
- the length of time that the exchangeable shares were held prior to
exchange.
Canadian and United States federal income tax considerations will vary according
to your particular circumstances. You should consult with your own tax advisor
as to the tax consequences of exchanging your exchangeable shares for our Class
B common stock.
OUR COMMON STOCK WILL BE FOREIGN PROPERTY IN CANADA AND MAY SUBJECT SOME TRUSTS
HOLDING OUR COMMON STOCK TO TAX.
Our Class A common stock and Class B common stock will be foreign property
in Canada for trusts governed by registered pension plans, registered retirement
savings plans, registered retirement income funds and deferred profit sharing
plans and for some other tax-exempt persons. Under the
3
<PAGE> 5
Income Tax Act (Canada) Part XI, tax is generally imposed on these trusts where
the cost amount of foreign property held by the trust at the end of the month
exceeds 20% of the cost amount of all property held by the trust at the end of
the month. Part XI tax is imposed at the rate of one percent per month of the
cost amount of any excess foreign property.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. AS A RESULT, WE MAY
FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS,
WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.
Our quarterly revenues and operating results have fluctuated significantly
in the past and may continue to vary from quarter to quarter due to a number of
factors, many of which are not within our control. If our operating results do
not meet the expectations of securities analysts or investors, our stock price
may decline. Fluctuations in our operating results may be due to a number of
factors, including the following:
- the volume of our product sales and pricing concessions on volume sales;
- the timing, rescheduling or cancellation of significant customer orders;
- the gain or loss of a key customer;
- the qualification, availability and pricing of competing products and
technologies and the resulting effect on sales and pricing of our
products;
- wafer pricing and the availability of foundry and assembly capacity and
raw materials;
- our ability to specify, develop, complete, introduce, market and
transition to volume production new products and technologies in a timely
manner;
- the timing of customer qualification and industry interoperability
certification of new products and the risks of non-qualification or
non-certification;
- the rate at which our present and future customers and end users adopt
Broadcom's technologies in our target markets;
- the rate of adoption and acceptance of new industry standards in our
target markets;
- intellectual property disputes and customer indemnification claims;
- the risks inherent in our acquisitions of technologies and businesses,
including the timing and successful completion of technology and product
development through volume production, integration issues, costs and
unanticipated expenditures, changing relationships with customers,
suppliers and strategic partners, potential contractual, intellectual
property or employment issues, accounting charges, and the risks that the
acquisition cannot be completed successfully or that anticipated benefits
are not realized;
- the effectiveness of our product cost reduction efforts;
- fluctuations in our manufacturing yields and other problems or delays in
the fabrication, assembly, testing or delivery of our products;
- the effects of new and emerging technologies;
- risks and uncertainties associated with our international operations;
4
<PAGE> 6
- our ability to retain and hire key executives, technical personnel and
other employees in the numbers, with the capabilities and at the
compensation levels that we need to implement our business and product
plans;
- problems or delays that we may face in shifting our products to smaller
geometry process technologies and in achieving higher levels of design
integration;
- changes in our product or customer mix;
- the quality of our products and any remediation costs;
- the effects of natural disasters and other events beyond our control;
- the level of orders received that we can ship in a fiscal quarter;
- economic and market conditions in the semiconductor industry and the
broadband communications markets;
- potential business disruptions, claims, expenses and other difficulties
resulting from "Year 2000" problems in computer-based systems used by us,
our suppliers or our customers; and
- general economic and market conditions.
We intend to continue to increase our operating expenses in 1999 and 2000.
A large portion of our operating expenses, including rent, salaries and capital
lease expenditures, is fixed and difficult to reduce or change. Accordingly, if
our total revenue does not meet our expectations, we probably would not be able
to adjust our expenses quickly enough to compensate for the shortfall in
revenue. In that event, our business, financial condition and results of
operations would be materially and adversely affected.
Due to all of the foregoing factors, and the other risks discussed in this
report, you should not rely on quarter-to-quarter comparisons of our operating
results as an indication of future performance.
BECAUSE WE DEPEND ON A FEW SIGNIFICANT CUSTOMERS FOR A SUBSTANTIAL PORTION OF
OUR REVENUES, THE LOSS OF A KEY CUSTOMER COULD SERIOUSLY HARM OUR BUSINESS. IN
ADDITION, IF WE ARE UNABLE TO CONTINUE TO SELL EXISTING AND NEW PRODUCTS TO OUR
KEY CUSTOMERS IN SIGNIFICANT QUANTITIES OR TO ATTRACT NEW SIGNIFICANT CUSTOMERS,
OUR FUTURE OPERATING RESULTS COULD BE ADVERSELY AFFECTED.
We have derived a substantial portion of our revenues in the past from
sales to a relatively small number of customers. As a result, the loss of any
significant customer could materially and adversely affect our financial
condition and results of operations. Sales to General Instrument, 3Com and
Cisco, including sales to their respective manufacturing subcontractors,
accounted for approximately 29.7%, 17.6% and 11.8%, respectively, of our revenue
in the nine months ended September 30, 1999. Sales to our five largest
customers, including sales to their respective manufacturing subcontractors,
decreased to 63.4% of our total revenue in the three months ended September 30,
1999 compared to 69.3% in the three months ended September 30, 1998. In the nine
months ended September 30, 1999 sales to our five largest customers decreased to
69.1% of our total revenues compared to 71.6% in the respective prior year
period. We expect that our key customers will continue to account for a
substantial portion of our revenues for 1999 and in the future. Accordingly, our
future operating results will continue to depend on the success of our largest
customers and on our ability to sell existing and new products to these
customers in significant quantities.
5
<PAGE> 7
We may not be able to maintain or increase sales to certain of our key
customers for a variety of reasons, including the following:
- Most of our customers can stop incorporating our products into their own
products with limited notice to us and suffer little or no penalty.
- Our agreements with our customers typically do not require them to
purchase a minimum amount of our products.
- Many of our customers have pre-existing relationships with our current or
potential competitors that may affect their decision to purchase our
products.
- Our customers face intense competition from other manufacturers that do
not use our products.
- Some of our customers offer or may offer products that compete with our
products.
- Our longstanding relationships with some of our larger customers may also
deter other potential customers who compete with these customers from
buying our products.
In addition, in order to attract new customers or retain existing
customers, we may offer certain customers favorable prices on our products. If
these prices are lower than the prices paid by our existing customers, we would
have to offer the same lower prices to certain of our customers who have
contractual "most favored nation" pricing arrangements. In that event, our
average selling prices and gross margins would decline. The loss of a key
customer, a reduction in our sales to any key customer or our inability to
attract new significant customers could materially and adversely affect our
business, financial condition or results of operations.
WE FACE INTENSE COMPETITION IN THE BROADBAND COMMUNICATIONS MARKETS AND
SEMICONDUCTOR INDUSTRY, WHICH COULD REDUCE OUR MARKET SHARE IN EXISTING MARKETS
AND AFFECT OUR ENTRY INTO NEW MARKETS.
The broadband communications markets and semiconductor industry are
intensely competitive. We expect competition to continue to increase in the
future as industry standards become well known and as other competitors enter
our target markets. We currently compete with a number of major domestic and
international suppliers of integrated circuits in the markets for cable set-top
boxes, cable modems, high-speed office networks, home networking, direct
broadcast satellite and terrestrial digital satellite, and digital subscriber
lines. This competition has resulted and may continue to result in declining
average selling prices for our products. We currently compete in the cable
set-top box market with Conexant, Fujitsu, LSI Logic, Motorola, Philips
Electronics, STMicroelectronics, Texas Instruments and VLSI Technology, a
subsidiary of Philips Electronics, for communication devices, and with ATI
Technologies, C-Cube, LSI Logic, Motorola, STMicroelectronics and Texas
Instruments in the MPEG/graphics segment. We expect that other major
semiconductor manufacturers will enter the market as digital broadcast
television and other digital cable television markets become more established. A
number of companies, including Conexant, Libit Signal Processing, a subsidiary
of Texas Instruments, and others have announced MCNS/DOCSIS compliant products,
which could result in significant competition in the cable modem market. In the
high-speed office networking market, we principally compete with established
suppliers including Galileo, Level One Communications, a subsidiary of Intel
Corporation, Lucent Technologies, National Semiconductor and Texas Instruments.
A number of smaller companies have announced products in our target markets,
such as Altima, Seeq, a subsidiary of LSI Logic, and Allayer. We also compete
for customer specific ASICs against traditional ASIC suppliers such as Lucent,
LSI Logic, NEC and Toshiba. Our principal competitors in the DBS and terrestrial
broadcast market include Conexant, Fujitsu, Hyundai, LG Semiconductors, Libit,
LSI Logic, Lucent, Motorola, Nxtwave Communica-
6
<PAGE> 8
tions, Oren, Philips Electronics, Sony, STMicroelectronics and VLSI Technology.
Our principal competitors in the xDSL market include Alcatel, Analog Devices,
Conexant, Globespan, Lucent, Motorola, Siemens and Texas Instruments. As the
home networking market develops, we expect to encounter competition from various
competitors, including Advanced Micro Devices, Conexant, Intel, Lucent and Texas
Instruments. In all of the foregoing markets, we also may face competition from
newly established competitors and suppliers of products based on new or emerging
technologies. We also believe we will encounter further consolidation in the
markets in which we compete.
Many of our competitors operate their own fabrication facilities and have
longer operating histories and presence in key markets, greater name
recognition, larger customer bases and significantly greater financial, sales
and marketing, manufacturing, distribution and technical resources than we do.
As a result, these competitors may be able to adapt more quickly than we can to
new or emerging technologies and changes in customer requirements. They may also
be able to devote greater resources than we can to the promotion and sale of
their products. In addition, current and potential competitors have established
or may establish financial or strategic relationships among themselves or with
existing or potential customers, resellers or other third parties. Accordingly,
it is possible that new competitors or alliances among competitors could emerge
and rapidly acquire significant market share. Existing or new competitors may
also develop technologies in the future that more effectively address the
transmission of digital information through existing analog infrastructures at
lower costs than our technologies. Increased competition has in the past and is
likely to continue to result in price reductions, reduced gross margins and loss
of market share. We cannot assure you that we will be able to continue to
compete successfully or that competitive pressures will not materially and
adversely affect our business, financial condition and results of operations.
OUR ACQUISITION STRATEGY MAY REQUIRE US TO MAKE SIGNIFICANT CAPITAL INFUSIONS,
BE DILUTIVE TO OUR EXISTING SHAREHOLDERS, AND RESULT IN DIFFICULTIES IN
ASSIMILATING AND INTEGRATING THE OPERATIONS, PERSONNEL, TECHNOLOGIES, PRODUCTS
AND INFORMATION SYSTEMS OF ACQUIRED COMPANIES.
A key element of our business strategy involves expansion through the
acquisition of businesses, products or technologies that would allow us to
complement our existing product offerings, expand our market coverage or enhance
our technological capabilities. Since January 1999, we have acquired Maverick
Networks, Epigram, Inc., Armedia, Inc., HotHaus Technologies Inc. and AltoCom,
Inc. We plan to continue to pursue acquisition opportunities in the future.
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 the
acquired company. We may also encounter delays in the timing and successful
completion of the acquired company's technology and product development to
production readiness, unanticipated expenditures, changing relationships with
customers, suppliers and strategic partners, or contractual, intellectual
property or employment issues. In addition, the key personnel of the 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 and
increase our expenses. In addition, acquisitions may materially and adversely
affect our results of operations because they may require large one-time
write-offs, increased debt and contingent liabilities, substantial depreciation
or deferred compensation charges or the amortization of expenses related to
goodwill and other intangible assets. We may seek to account for acquisitions
under the pooling-of-interests accounting method, but that method may not be
available. Any of these events could cause the price of our Class A common stock
to decline. Furthermore, if we issue equity or convertible debt securities to
pay for an acquisition, as in the case of our recent acquisitions, the issuance
may be dilutive to our existing shareholders. In addition, the equity or debt
securities
7
<PAGE> 9
that we may issue could have rights, preferences or privileges senior to those
of the holders of our Common Stock.
We cannot assure you that we will be able to consummate any of our
acquisitions or that we will realize the benefits anticipated from these
acquisitions. In the future, we may not be able to find other suitable
acquisition opportunities. Even if we do find suitable acquisition
opportunities, we may not be able to consummate the acquisitions on commercially
acceptable terms. Moreover, due to our limited acquisition experience, it may be
difficult for us to successfully integrate any acquired businesses, products,
technologies or personnel, which could materially and adversely affect our
business, financial condition and results of operations.
WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES IN THE SEMICONDUCTOR INDUSTRY
AND BROADBAND COMMUNICATIONS MARKETS IN ORDER TO REMAIN COMPETITIVE.
Our future success will depend on our ability to anticipate and adapt to
changes in technology and industry standards. We will also need to continue to
develop and introduce new and enhanced products to meet our customers' changing
demands. Substantially all of our current product revenue is derived from sales
of products for the high-speed networking, cable set-top box and cable modem
markets. These markets are characterized by rapidly changing technology,
evolving industry standards, frequent new product introductions and short
product life cycles. In addition, these markets continue to undergo rapid growth
and consolidation. A significant slowdown in any of these markets or other
broadband communications markets could materially and adversely affect our
business, financial condition and results of operations. Our success will also
depend on the ability of our customers to develop new products and enhance
existing products for the broadband communications markets and to successfully
introduce and promote those products. The broadband communications markets may
not continue to develop to the extent or in the timeframes that we anticipate.
If new markets do not develop as we anticipate or if our products do not gain
widespread acceptance in these markets, our business, financial condition and
results of operations could be materially and adversely affected.
IF WE DO NOT ANTICIPATE AND ADAPT TO EVOLVING INDUSTRY STANDARDS IN THE
SEMICONDUCTOR INDUSTRY AND BROADBAND COMMUNICATIONS MARKETS, OUR PRODUCTS COULD
BECOME OBSOLETE AND WE COULD LOSE MARKET SHARE.
Products for broadband communications applications generally are based on
industry standards that are continually evolving. If new industry standards
emerge, our products or our customers' products could become unmarketable or
obsolete. We may also have to incur substantial unanticipated costs to comply
with these new standards. Our past sales and profitability have resulted, to a
large extent, from our ability to anticipate changes in technology and industry
standards and to develop and introduce new and enhanced products. Our ability to
adapt to these changes and to anticipate future standards, and the rate of
adoption and acceptance of those standards, will be a significant factor in
maintaining or improving our competitive position and prospects for growth. We
have in the past invested substantial resources in emerging technologies, such
as 100Base-T4 for high-speed networking, which did not achieve the market
acceptance that we had expected. Our inability to anticipate the evolving
standards in the semiconductor industry and, in particular the broadband
communications markets, or to develop and introduce new products successfully
into these markets could materially and adversely affect our business, financial
condition and results of operations.
8
<PAGE> 10
IF WE ARE UNABLE TO DEVELOP AND INTRODUCE NEW SILICON SOLUTIONS SUCCESSFULLY AND
IN A COST-EFFECTIVE AND TIMELY MANNER OR TO ACHIEVE MARKET ACCEPTANCE OF OUR NEW
PRODUCTS, OUR OPERATING RESULTS WOULD BE ADVERSELY AFFECTED.
Our future success will depend on our ability to develop new silicon
solutions for existing and new markets, introduce these products in a
cost-effective and timely manner and convince leading equipment manufacturers to
select these products for design into their own new products. Our quarterly
results in the past have been, and are expected in the future to continue to be,
dependent on the introduction of a relatively small number of new products and
the timely completion and delivery of those products to customers. The
development of new silicon devices is highly complex, and from time to time we
have experienced delays in completing the development and introduction of new
products. Our ability to successfully develop and deliver new products will
depend on various factors, including our ability to:
- accurately predict market requirements and evolving industry standards;
- accurately define new products;
- timely complete and introduce new product designs;
- timely qualify and obtain industry interoperability certification of our
products and our customers' products into which our products will be
incorporated;
- obtain sufficient foundry capacity;
- achieve high manufacturing yields; and
- gain market acceptance of our products and our customers' products.
If we are not able to develop and introduce new products successfully and
in a cost-effective and timely manner, our business, financial condition and
results of operations would be materially and adversely affected.
Our new products generally are incorporated into our customers' products at
the design stage. We have often incurred significant expenditures on the
development of a new product without any assurance that an equipment
manufacturer will select our product for design into its own product. The value
of our products largely depends on the commercial success of our customers'
products and on the extent to which those products accommodate components
manufactured by our competitors. We cannot assure you that we will continue to
achieve design wins. In addition, the equipment that incorporates our products
may never become commercially successful.
WE DEPEND ON TWO INDEPENDENT FOUNDRIES TO MANUFACTURE SUBSTANTIALLY ALL OF OUR
CURRENT PRODUCTS, AND ANY FAILURE TO OBTAIN SUFFICIENT FOUNDRY CAPACITY COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.
We do not own or operate a fabrication facility. Two outside foundries,
Taiwan Semiconductor Manufacturing Corporation, or TSMC, in Taiwan and Chartered
Semiconductor Manufacturing, or Chartered, in Singapore, currently manufacture
substantially all of our semiconductor devices in current production. In
September 1999, TSMC's principal facility was affected by a significant
earthquake in Taiwan. As a consequence of this earthquake, TSMC suffered power
outages and equipment damage that have impaired TSMC's wafer deliveries and,
together with strong demand, could result in wafer shortages and higher wafer
pricing industry wide.
9
<PAGE> 11
Because we rely on outside foundries with limited capacity, we face several
significant risks, including:
- a lack of ensured wafer supply;
- limited control over delivery schedules, quality assurance and control,
manufacturing yields and production costs; and
- the unavailability of or potential delays in obtaining access to key
process technologies.
In addition, the manufacture of integrated circuits is a highly complex and
technologically demanding process. Although we work closely with our foundries
to minimize the likelihood of reduced manufacturing yields, our foundries have
from time to time experienced lower than anticipated manufacturing yields. This
often occurs during the production of new products or the installation and
start-up of new process technologies.
The ability of each foundry to provide us with semiconductor devices is
limited by its available capacity. Although we have entered into contractual
commitments to supply specified levels of products to certain of our customers,
we do not have a long-term volume purchase agreement or a guaranteed level of
production capacity with either TSMC or Chartered. Excess foundry capacity may
not always be available when we need it or at reasonable prices. Availability of
excess foundry capacity has recently been reduced due to strong demand. We place
our orders on the basis of our customers' purchase orders, and TSMC and
Chartered can allocate capacity to the production of other companies' products
and reduce deliveries to us on short notice. It is possible that foundry
customers that are larger and better financed than we are or that have long-term
agreements with TSMC or Chartered, may induce our foundries to reallocate
capacity to them. Such a reallocation could impair our ability to secure the
supply of components that we need. Although we primarily use two independent
foundries, most of our components are not manufactured at both foundries at any
given time and some of our products may be designed to be manufactured at only
one. Accordingly, if one of our foundries is unable to provide us with
components as needed, we could experience significant delays in securing
sufficient supplies of those components. Any of these delays would likely
materially and adversely affect our business, financial condition and results of
operations. In addition, if either TSMC or Chartered experiences financial
difficulties, whether as a result of the recent Asian economic crisis or
otherwise, if either foundry suffers any damage to its facilities or in the
event of any other disruption of foundry capacity, we may not be able to qualify
an alternative foundry in a timely manner. Even our current foundries would need
to have new manufacturing processes qualified if there is a disruption in an
existing process. If we choose to use a new foundry or process, it would
typically take us several months to qualify the new foundry or process before we
can begin shipping products from it. If we cannot accomplish this qualification
in a timely manner, we may still experience a significant interruption in supply
of the affected products. We cannot assure you that any of our existing or new
foundries would be able to produce integrated circuits with acceptable
manufacturing yields. Furthermore, our foundries may not be able to deliver
enough semiconductor devices to us on a timely basis, or at reasonable prices.
Maverick and Broadcom HomeNetworking, Inc., formerly known as Epigram, have
established relationships with foundries other than TSMC and Chartered, and we
currently expect to use these other foundries to produce the initial products of
Maverick and Broadcom HomeNetworking, subject to satisfactory qualification. We
may utilize such foundries for other products in the future. In using these new
foundries, we will be subject to all of the same risks described in the
foregoing paragraphs with respect to TSMC and Chartered.
10
<PAGE> 12
WE MAY BE UNABLE TO RETAIN KEY TECHNICAL AND SENIOR MANAGEMENT PERSONNEL AND
ATTRACT ADDITIONAL KEY EMPLOYEES, WHICH COULD SERIOUSLY HARM OUR BUSINESS.
Our future success depends to a significant extent upon the continued
service of our key technical and senior management personnel, in particular, our
co-founder, President and Chief Executive Officer, Dr. Henry T. Nicholas III,
and our co-founder, Vice President of Research & Development, and Chief
Technical Officer, Dr. Henry Samueli. We do not have employment agreements with
these executives or any other key employees that govern the length of their
service. The loss of the services of Dr. Nicholas or Dr. Samueli, or certain
other key employees, would likely materially and adversely affect our business,
financial condition and results of operations. Our future success also depends
on our ability to continue to attract, retain and motivate qualified personnel,
particularly digital circuit designers, mixed-signal circuit designers and
systems applications engineers. Competition for these employees is intense. We
may not be able to attract as many qualified new personnel as we were able to
employ prior to our initial public offering. Our inability to attract and retain
additional key employees could have an adverse effect on our business, financial
condition and results of operations.
OUR INABILITY TO MANAGE OUR SIGNIFICANT RECENT AND ANTICIPATED FUTURE GROWTH
COULD STRAIN OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES, AND COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.
During the past year, we have significantly increased the scope of our
operations and expanded our workforce, growing from 546 employees in September
1998 to 849 employees in September 1999, including contract and temporary
employees. This growth has placed, and our anticipated future growth of
operations is expected to continue to place, a significant strain on our
management personnel, systems and resources. We anticipate that we will need to
implement a variety of new and upgraded operational and financial systems,
procedures and controls, including the ongoing improvement of our accounting and
other internal management systems. We also expect we will need to continue to
expand, train, manage and motivate our workforce. All of these endeavors will
require substantial management effort. In order to support our growth, we
recently relocated our headquarters and Irvine operations into larger
facilities, which allowed us to centralize all of our Irvine employees and
operations on one campus. In the future, we may engage in other relocations of
our employees or operations from time to time. These relocations could result in
temporary disruptions of our operations or a diversion of our management's
attention and resources. If we are unable to effectively manage our expanding
operations, our business, financial condition and results of operations could be
materially and adversely affected.
THE LOSS OF EITHER OF THE TWO THIRD-PARTY SUBCONTRACTORS THAT ASSEMBLE AND TEST
SUBSTANTIALLY ALL OF OUR CURRENT PRODUCTS COULD DISRUPT OUR SHIPMENTS, HARM OUR
CUSTOMER RELATIONSHIPS AND ADVERSELY AFFECT OUR NET SALES.
Two third-party subcontractors, ASAT Ltd. in Hong Kong and ST Assembly Test
Services, or STATS, in Singapore, assemble and test almost all of our current
products. Because we rely on third-party subcontractors to assemble and test our
products, we cannot directly control our product delivery schedules and quality
assurance and control. This lack of control has in the past, and could in the
future, result in product shortages or quality assurance problems that could
increase our manufacturing, assembly or testing costs. We do not have long-term
agreements with either ASAT or STATS. We typically procure services from these
suppliers on a per order basis. If either ASAT or STATS experiences capacity
constraints or financial difficulties, whether as a result of the recent Asian
economic crisis or otherwise, if either subcontractor suffers any damage to its
facilities or in the event of any other disruption of assembly and testing
capacity, we may not be able to obtain
11
<PAGE> 13
alternative assembly and testing services in a timely manner. Due to the amount
of time that it usually takes us to qualify assemblers and testers, we could
experience significant delays in product shipments if we are required to find
alternative assemblers or testers for our components. Any problems that we may
encounter with the delivery, quality or cost of our products could materially
and adversely affect our business, financial condition or results of operations.
AS OUR INTERNATIONAL BUSINESS EXPANDS, OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS COULD BE ADVERSELY AFFECTED AS A RESULT OF LEGAL, BUSINESS AND
ECONOMIC RISKS SPECIFIC TO INTERNATIONAL OPERATIONS.
We currently obtain substantially all of our manufacturing, assembly and
testing services from suppliers located outside of the United States. In
addition, approximately 16.5% of our total revenue in the nine months ended
September 30, 1999 was derived from sales to independent customers outside the
United States. We also frequently ship products to our domestic customers'
international manufacturing divisions and subcontractors. We recently
established an international distribution center in Singapore and a design
center in The Netherlands. As a result of our acquisition of HotHaus in August
1999, we now undertake software design, development and marketing activities in
Canada. Furthermore, as a result of our acquisition of Armedia in May 1999, we
also undertake design and development activities in India. In the future, we
intend to continue to expand these international business activities and also to
open other design and operational centers abroad. International operations are
subject to many inherent risks, including:
- political, social and economic instability;
- trade restrictions;
- the imposition of governmental controls;
- exposure to different legal standards, particularly with respect to
intellectual property;
- burdens of complying with a variety of foreign laws;
- import and export license requirements and restrictions of the United
States and each other country in which we operate;
- unexpected changes in regulatory requirements;
- foreign technical standards;
- changes in tariffs;
- difficulties in staffing and managing international operations;
- fluctuations in currency exchange rates;
- difficulties in collecting receivables from foreign entities; and
- potentially adverse tax consequences.
Because we rely on Asian foundries and assemblers and have expanded our
international operations in Asia, our business may be materially and adversely
affected by the recent Asian economic crisis.
Certain Asian countries have recently experienced significant economic
difficulties. These difficulties include currency devaluation and instability,
business failures and a generally depressed business climate, particularly in
the semiconductor industry. Because we rely on Asian foundries and assemblers
and have expanded our international operations in that region, the Asian
12
<PAGE> 14
economic crisis may materially and adversely affect our business, financial
condition and results of operations.
Various export licensing requirements, the seasonality of international sales
or an increase in the value of the U.S. dollar relative to foreign currencies
could materially and adversely affect our business or require us to modify our
current business practices significantly.
Various government export regulations apply to the encryption or other
features contained in some of our products. We have applied for and received
several export licenses under these regulations, but we cannot assure you that
we will obtain any licenses for which we have currently applied or any licenses
that we may apply for in the future. If we do not receive the required licenses,
we may be unable to manufacture the affected products at our foreign foundries
or to ship these products to certain customers located outside the United
States. Moreover, the seasonality of international sales and economic conditions
in our primary overseas markets may negatively impact the demand for our
products abroad. All of our international sales to date have been denominated in
U.S. dollars. Accordingly, an increase in the value of the U.S. dollar relative
to foreign currencies could make our products less competitive in international
markets. Any one or more of the foregoing factors could materially and adversely
affect our business, financial condition or results of operations or require us
to modify our current business practices significantly. We anticipate that these
factors will impact our business to a greater degree as we further expand our
international business activities.
OUR FUTURE SUCCESS DEPENDS IN SIGNIFICANT PART ON STRATEGIC RELATIONSHIPS WITH
CERTAIN OF OUR CUSTOMERS. IF WE CANNOT MAINTAIN THESE RELATIONSHIPS OR IF THESE
CUSTOMERS DEVELOP THEIR OWN SOLUTIONS OR ADOPT A COMPETITOR'S SOLUTIONS INSTEAD
OF BUYING OUR PRODUCTS, OUR OPERATING RESULTS WOULD BE ADVERSELY AFFECTED.
In the past, we have relied on our strategic relationships with certain
customers who are technology leaders in our target markets. We intend to pursue
and continue to form these strategic relationships in the future. These
relationships often require us to develop new products that typically involve
significant technological challenges. Our partners frequently place considerable
pressure on us to meet their tight development schedules. Accordingly, we may
have to devote a substantial amount of our limited resources to our strategic
relationships, which could detract from or delay our completion of other
important development projects. Delays in development could impair our
relationships with our strategic partners and negatively impact sales of the
products under development. Moreover, it is possible that our customers may
develop their own solutions or adopt a competitor's solution for products that
they currently buy from us. If that happens, our business, financial condition
and results of operations would be materially and adversely affected.
WE MAY EXPERIENCE DIFFICULTIES IN TRANSITIONING TO SMALLER GEOMETRY PROCESS
TECHNOLOGIES OR IN ACHIEVING HIGHER LEVELS OF DESIGN INTEGRATION THAT MAY RESULT
IN REDUCED MANUFACTURING YIELDS, DELAYS IN PRODUCT DELIVERIES AND INCREASED
EXPENSES.
In order to remain competitive, we believe that we will have to transition
our products to increasingly smaller geometries. This transition will require us
to redesign certain of our products and modify the manufacturing process for our
products. We continually evaluate the benefits, on a product-by-product basis,
of migrating to smaller geometry process technologies in order to reduce our
costs, and we have begun shifting some of our products from .50 micron to .35
micron and smaller geometry processes. In the past, we have experienced some
difficulties in shifting to smaller geometry process technologies or new
manufacturing processes. These difficulties resulted in reduced manufacturing
yields, delays in product deliveries and increased expenses. We may face similar
13
<PAGE> 15
difficulties, delays and expenses as we continue to transition our products to
smaller geometry processes. We are dependent on our relationships with our
foundries to transition to smaller geometry processes successfully. We cannot
assure you that our foundries will be able to effectively manage the transition
or that we will be able to maintain our relationships with our foundries. If our
foundries or we experience significant delays in this transition or fail to
efficiently implement this transition, our business, financial condition and
results of operations could be materially and adversely affected. As smaller
geometry processes become more prevalent, we expect to integrate greater levels
of functionality, as well as customer and third party intellectual property,
into our products. However, we may not be able to achieve higher levels of
design integration or deliver new integrated products on a timely basis, or at
all.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS, WHICH COULD HARM OUR COMPETITIVE POSITION.
Our success and future revenue growth will depend, in part, on our ability
to protect our intellectual property. We primarily rely on patent, copyright,
trademark and trade secret laws, as well as nondisclosure agreements and other
methods, to protect our proprietary technologies and processes. Despite our
efforts to protect our proprietary technologies and processes, it is possible
that certain of our competitors or other parties may obtain, use or disclose our
technologies and processes. We currently hold five issued United States patents
and have filed over 180 United States patent applications. We cannot assure you
that any additional patents will be issued. Even if a new patent is issued, the
claims allowed may not be sufficiently broad to protect our technology. In
addition, any of our existing or future patents may be challenged, invalidated
or circumvented. Moreover, any rights granted under these patents may not
provide us with meaningful protection. If our patents do not adequately protect
our technology, then our competitors may be able to offer products similar to
ours. Our competitors may also be able to develop similar technology
independently or design around our patents. Moreover, because we have
participated in developing various industry standards, we may be required to
license some of our technology and patents to others, including competitors, who
develop products based on the adopted standards.
We generally enter into confidentiality agreements with our employees and
strategic partners. We also try to control access to and distribution of our
technologies, documentation and other proprietary information. Despite these
efforts, parties may attempt to copy, disclose, obtain or use our products,
services or technology without our authorization. As a result, our technologies
and processes may be misappropriated, particularly in foreign countries where
laws may not protect our proprietary rights as fully as in the United States.
In addition, some of our customers have entered into agreements with us
that grant them the right to use our proprietary technology if we ever fail to
fulfill our obligations under those agreements, including product supply
obligations, and do not correct this failure within a specified time period.
Moreover, we often incorporate the intellectual property of our strategic
customers into our own designs, and have certain obligations not to use or
disclose their intellectual property without their authorization. We cannot
assure you that our efforts to prevent the misappropriation or infringement of
our intellectual property or the intellectual property of our customers will
succeed. In the future, we may have to engage in litigation to enforce our
intellectual property rights, protect our trade secrets or determine the
validity and scope of the proprietary rights of others, including our customers.
This litigation may be very expensive, divert management's attention and
materially and adversely affect our business, financial condition and results of
operations.
14
<PAGE> 16
Infringement or other claims against us could adversely affect our ability to
market our products, require us to redesign our products or seek licenses from
third parties and seriously harm our operating results.
Companies in the semiconductor industry often aggressively protect and
pursue their intellectual property rights. From time to time, we have received,
and may continue to receive in the future, notices that claim we have infringed
upon, misappropriated or misused other parties' proprietary rights. We recently
settled litigation with Stanford Telecommunications, Inc. that related to the
alleged infringement of one of Stanford's patents by several of our modem
products. We are also currently involved in litigation with Sarnoff Corporation
and NxtWave Communications, Inc., formerly Sarnoff Digital Communications, Inc.,
who allege that we misappropriated and misused certain of their trade secrets.
Our subsidiary, AltoCom, is the defendant in patent litigation brought by
Motorola, Inc. It is possible that we will not prevail in these matters. In
addition, we may be sued in the future by other parties who claim that we have
infringed their patents or misappropriated or misused their trade secrets, or
who may seek to invalidate one of our patents. Any of these claims may
materially and adversely affect our business, financial condition and results of
operations. For example, in a patent or trade secret action, a court could issue
an injunction against us that would require us to withdraw or recall certain
products from the market or redesign certain products offered for sale or under
development. In addition, we may be liable for damages for past infringement and
royalties for future use of the technology. We may also have to indemnify
certain customers and strategic partners under our agreements with these parties
if a third party alleges or if a court finds that we have infringed upon,
misappropriated or misused these party's proprietary rights. Even if claims
against us are not valid or successfully asserted, these claims could result in
significant costs and a diversion of management and personnel resources to
defend. In that event, our business, financial condition and results of
operations would likely be materially and adversely affected. If any claims or
actions are asserted against us, we may seek to obtain a license under a third
party's intellectual property rights. However, we may not be able to obtain a
license on commercially reasonable terms, if at all.
OUR PRODUCTS TYPICALLY HAVE LENGTHY SALES CYCLES THAT INCREASE OUR RISK THAT A
CUSTOMER WILL DECIDE TO CANCEL OR CHANGE ITS PRODUCT PLANS, WHICH COULD CAUSE US
TO LOSE ANTICIPATED SALES. IN ADDITION, OUR AVERAGE PRODUCT CYCLES TEND TO BE
SHORT AND, AS A RESULT, WE MAY HOLD EXCESS OR OBSOLETE INVENTORY WHICH COULD
ADVERSELY AFFECT OUR OPERATING RESULTS.
After we have developed and delivered a product to a customer, our customer
will often test and evaluate our product prior to designing its own equipment to
incorporate our product. Our customer may need three to six months or longer to
test and evaluate our product and an additional three to six months or more to
begin volume production of equipment that incorporates our product. Due to this
lengthy sales cycle, we may experience delays from the time we increase our
operating expenses and our investments in inventory, until the time that we
generate revenues for these products. It is possible that we may never generate
any revenues from these products after incurring these expenditures. Even if a
customer selects our product to incorporate into its equipment, we have no
assurances that this customer will ultimately market and sell their equipment or
that these efforts by our customer will be successful. The delays inherent in
our lengthy sales cycle increase the risk that a customer will decide to cancel
or change its product plans. Such a cancellation or change in plans by a
customer could cause us to lose sales that we had anticipated. In addition, our
business, financial condition and results of operations could be materially and
adversely affected if a significant customer curtails, reduces or delays orders
during our sales cycle or chooses not to release equipment that contains our
products.
15
<PAGE> 17
While our sales cycles are typically long, our average product life cycles
tend to be short as a result of the rapidly changing technology environment in
which we operate. As a result, the resources devoted to product sales and
marketing may not generate material revenues for us, and from time to time, we
may need to write off excess and obsolete inventory. If we incur significant
marketing and inventory expenses in the future that we are not able to recover,
and we are not able to compensate for these expenses, our operating results
could be adversely affected. In addition, if we sell our products at reduced
prices in anticipation of cost reductions, and we still have higher cost
products in inventory, our operating results would be harmed.
BECAUSE WE ARE SUBJECT TO ORDER AND SHIPMENT UNCERTAINTIES, ANY SIGNIFICANT
CANCELLATIONS OR DEFERRALS COULD SERIOUSLY HARM OUR OPERATING RESULTS.
We typically sell products pursuant to purchase orders that customers can
generally cancel or defer on short notice without incurring a significant
penalty. Any significant cancellations or deferrals could materially and
adversely affect our business, financial condition and results of operations. In
addition, cancellations or deferrals could cause us to hold excess inventory,
which could reduce our profit margins and restrict our ability to fund our
operations. We recognize revenue upon shipment of products to a customer. If a
customer refuses to accept shipped products or does not timely pay for these
products, we could incur significant charges against our income. These charges
could materially and adversely affect our operating results.
THE COMPLEXITY OF OUR PRODUCTS COULD RESULT IN UNFORESEEN DELAYS OR EXPENSES AND
IN UNDETECTED DEFECTS OR BUGS, WHICH COULD ADVERSELY AFFECT THE MARKET
ACCEPTANCE OF NEW PRODUCTS AND DAMAGE OUR REPUTATION WITH OUR CURRENT OR
PROSPECTIVE CUSTOMERS.
Highly complex products such as the products that we offer frequently
contain defects and bugs when they are first introduced or as new versions are
released. We have in the past experienced, and may in the future continue to
experience, these errors, defects and bugs. 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 or attract new customers. In addition, these defects or problems could
interrupt or delay sales to our customers. In order to alleviate these problems,
we may have to invest significant capital and other resources. Although our
suppliers, our customers and we test our products, we cannot assure you that our
new products will not contain defects or bugs. 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 development costs and product repair or
replacement costs. These problems may also result in claims against us by our
customers or others. In addition, these problems may divert our technical and
other resources from other development efforts. Moreover, we would likely lose,
or experience a delay in, market acceptance of the affected product or products
and lose credibility with our current and prospective customers.
OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO THE CYCLICALITY OF THE
SEMICONDUCTOR INDUSTRY. ANY SUCH VARIATIONS COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK.
We operate in the semiconductor industry, which is highly cyclical and
subject to rapid technological change. From time to time, the semiconductor
industry has experienced significant economic downturns, characterized by
diminished product demand, accelerated erosion of prices and excess production
capacity. This industry also periodically experiences increased demand and
production capacity constraints. Accordingly, our quarterly results may vary
significantly as a result of the general conditions in the semiconductor
industry.
16
<PAGE> 18
OUR CALIFORNIA FACILITIES AND THE FACILITIES OF ONE OF THE TWO INDEPENDENT
FOUNDRIES UPON WHICH WE RELY TO MANUFACTURE SUBSTANTIALLY ALL OF OUR CURRENT
PRODUCTS ARE LOCATED IN REGIONS THAT ARE SUBJECT TO EARTHQUAKES AND OTHER
NATURAL DISASTERS.
Our California facilities, including our principal executive offices, are
located near major earthquake fault lines. If there is a major earthquake or any
other natural disaster in a region where one of our facilities is located, our
business could be materially and adversely affected. In addition, TSMC, one of
the two outside foundries upon which we rely to manufacture substantially all of
our semiconductor devices, is located in Taiwan, a country that is also subject
to earthquakes. Any earthquake or other natural disaster in Taiwan could
materially disrupt TSMC's production capabilities and could result in our
experiencing a significant delay in delivery, or substantial shortage, of wafers
and possibly in higher fabrication fees.
CHANGES IN CURRENT OR FUTURE LAWS OR REGULATIONS OR THE IMPOSITION OF NEW LAWS
OR REGULATIONS BY THE FCC, OTHER FEDERAL OR STATE AGENCIES OR FOREIGN
GOVERNMENTS COULD IMPEDE THE SALE OF OUR PRODUCTS OR OTHERWISE HARM OUR
BUSINESS.
The Federal Communications Commission has broad jurisdiction over each of
our target markets. Although current FCC regulations and the laws and
regulations of other federal or state agencies are not directly applicable to
our products, they do apply to much of the equipment into which our products are
incorporated. As a result, the effects of regulation on our customers or the
industries in which they operate may, in turn, materially and adversely impact
our business, financial condition and results of operations. FCC regulatory
policies that affect the ability of cable operators or telephone companies to
offer certain services or other aspects of their business may impede the sale of
our products. For example, in the past we have experienced delays when products
incorporating our chips failed to comply with FCC emissions specifications. We
may also be subject to regulation by countries other than the United States.
Foreign governments may impose tariffs, duties and other import restrictions on
components that we obtain from non-domestic suppliers and may impose export
restrictions on products that we sell internationally. These tariffs, duties or
restrictions could materially and adversely affect our business, financial
condition and results of operations. Changes in current laws or regulations or
the imposition of new laws and regulations in the United States or elsewhere
could also materially and adversely affect our business.
CERTAIN OF OUR DIRECTORS, EXECUTIVE OFFICERS AND THEIR AFFILIATES CAN CONTROL
THE OUTCOME OF MATTERS THAT REQUIRE THE APPROVAL OF OUR SHAREHOLDERS AND
ACCORDINGLY, WE WILL NOT BE ABLE TO ENGAGE IN CERTAIN TRANSACTIONS WITHOUT THEIR
APPROVAL.
As of September 30, 1999, our directors and executive officers beneficially
owned approximately 39.4% of our outstanding Common Stock and 66.9% of the total
voting control held by our shareholders. In particular, as of September 30,
1999, our two founders, Dr. Henry T. Nicholas III and Dr. Henry Samueli,
beneficially owned a total of approximately 37.2% of our outstanding Common
Stock and 63.6% of the total voting control held by our shareholders.
Accordingly, these shareholders currently have enough voting power to control
the outcome of matters that require the approval of our shareholders. These
matters include the election of a majority of our Board of Directors, the
issuance of additional shares of Class B common stock and the approval of any
significant corporate transaction, including a merger, consolidation or sale of
substantially all of our assets. In addition, these insiders currently also
control the management of our business. Because of their significant stock
ownership, we will not be able to engage in certain transactions without the
approval of these shareholders. These transactions include proxy contests,
mergers, tender offers, open market purchase programs or other purchases of our
Class A common stock that could give our
17
<PAGE> 19
shareholders the opportunity to receive a higher price for their shares than the
prevailing market price at the time of these purchases.
OUR STOCK PRICE IS HIGHLY VOLATILE. ACCORDINGLY, YOU MAY NOT BE ABLE TO RESELL
YOUR SHARES OF COMMON STOCK AT OR ABOVE THE PRICE YOU PAID FOR THEM.
The market price of our Class A common stock has fluctuated substantially
in the past and is likely to continue to be highly volatile and subject to wide
fluctuations. Since our initial public offering in April 1998, our Class A
common stock has traded at prices as low as $23.50 and as high as $180.63 per
share. These fluctuations have occurred and may continue to occur in response to
various factors, many of which we cannot control, including:
- quarter-to-quarter variations in our operating results;
- announcements of technological innovations or new products by our
competitors, customers or us;
- general conditions in the semiconductor industry and telecommunications
and data communications equipment markets;
- changes in earnings estimates or investment recommendations by analysts;
- changes in investor perceptions; or
- changes in expectations relating to our products, plans and strategic
position or those of our competitors or customers.
In addition, the market prices of securities of Internet-related and other
high technology companies have been especially volatile. This volatility has
significantly affected the market prices of securities of many technology
companies for reasons frequently unrelated to the operating performance of the
specific companies. Accordingly, you may not be able to resell your shares of
common stock at or above the price you paid. In the past, companies that have
experienced volatility in the market price of their securities have been the
subject of securities class action litigation. If we were the object of a
securities class action litigation, it could result in substantial losses and
divert management's attention and resources from other matters.
OUR PRODUCTS AND INTERNAL INFORMATION SYSTEMS AND THE PRODUCTS AND SYSTEMS OF
OUR CUSTOMERS AND THE THIRD PARTY SUPPLIERS WHO FABRICATE, TEST AND ASSEMBLE OUR
PRODUCTS MAY BE NEGATIVELY IMPACTED BY YEAR 2000 COMPLIANCE PROBLEMS.
Many existing computer systems and applications and other control devices
use only two digits to identify a year in the date field. These systems and
software applications will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, these systems and
applications will need to be upgraded to comply with the Year 2000 requirements
or risk system failure, miscalculations or other disruptions to normal business
activities.
We are currently evaluating our Year 2000 readiness, both in terms of the
compliance of our products and the compliance of our information systems and
applications which monitor all aspects of our business, including financial
systems, customer services, marketing information, infrastructure and
telecommunications equipment. We are presently updating our products and
internal information systems, but we may not be able to complete these upgrades
in a timely manner or at reasonable costs. We also may not be able to anticipate
the extent of the Year 2000 impact until the Year 2000 arrives due to the
interaction between our own systems and products and the systems and products of
18
<PAGE> 20
third parties. We believe our greatest exposure to Year 2000 risks relates to
the readiness of the third party suppliers who fabricate, assemble and test our
products and of our customers, who incorporate our products into their own
products. Any failure of these third parties to resolve their own Year 2000
issues in a timely manner could cause a material disruption in our business and
affect the marketability of our products.
We also rely on the external systems of other third parties such as
creditors, financial organizations, governmental entities and other suppliers,
both domestic and international, to provide us with accurate data. Our business
could be materially and adversely affected if any of these third parties
experience disruptions in their operations or if an economic crisis or general
widespread problems result from systems that are not Year 2000 compliant.
Although we are working on contingency plans to address these issues, any
contingency plans that we implement may not be adequate to meet our needs
without disrupting our business or without causing delays and inefficiencies
inherent in conducting operations in an alternative manner. If we fail to
address any of the foregoing Year 2000 risks, our business, financial condition
and results of operations may be materially and adversely affected.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE THROUGH THE ISSUANCE OF
ADDITIONAL EQUITY OR CONVERTIBLE DEBT SECURITIES OR BY BORROWING MONEY, AND
ADDITIONAL FUNDS MAY NOT BE AVAILABLE ON TERMS ACCEPTABLE TO US.
We believe that the cash, cash equivalents and investments on hand and the
cash we expect to generate from operations will be sufficient to meet our
capital needs for at least the next twelve months. However, it is possible that
we may need to raise additional funds to fund our activities beyond the next
year. We could raise these funds by selling more stock to the public or to
selected investors, or by borrowing money. In addition, even though we may not
need additional funds, we may still elect to sell additional equity securities
or obtain credit facilities for other reasons. We may not be able to obtain
additional funds on favorable terms, or at all. If adequate funds are not
available, we may be required to curtail our operations significantly or to
obtain funds through arrangements with strategic partners or others that may
require us to relinquish rights to certain technologies or potential markets. If
we raise additional funds by issuing additional equity or convertible debt
securities, the ownership percentages of existing shareholders would be reduced.
In addition, the equity or debt securities that we issue may have rights,
preferences or privileges senior to those of the holders of our common stock.
It is possible that our future capital requirements may vary materially
from those now planned. The amount of capital that we will need in the future
will depend on many factors, including:
- the market acceptance of our products;
- the levels of promotion and advertising that will be required to launch
our products and achieve and maintain a competitive position in the
marketplace;
- volume price discounts;
- our business, product, capital expenditure and research and development
plans and technology roadmap;
- the levels of inventory and accounts receivable that we maintain;
- capital improvements to new and existing facilities;
- technological advances;
- our competitors' response to our products; and
- our relationships with suppliers and customers.
19
<PAGE> 21
In addition, we may require additional capital to accommodate planned
growth, hiring, infrastructure and facility needs or to consummate acquisitions
of other businesses, products or technologies.
OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN ANTI-TAKEOVER PROVISIONS THAT
COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
Our articles of incorporation and bylaws contain provisions that may
prevent or discourage a third party from acquiring us, even if the acquisition
would be beneficial to our shareholders. In addition, we have in the past issued
and will in the future issue shares of Class B common stock to certain holders.
Those shares have superior voting rights entitling the holder to ten votes for
each share held on matters that we submit to a shareholder vote (as compared
with one vote per share in the case of our publicly-held Class A common stock).
Our Board of Directors also has the authority to fix the rights and preferences
of shares of our preferred stock and to issue these shares without a shareholder
vote. It is possible that the provisions in our charter documents, the existence
of supervoting rights by holders of our Class B common stock, and our officers'
ownership of a majority of the Class B common stock and the ability of our Board
of Directors to issue preferred stock may prevent parties from acquiring us. In
addition, these factors may discourage third parties from bidding for our Class
A common stock at a premium over the market price for this stock. Finally, these
factors may also materially and adversely affect the market price of our Class A
common stock, and the voting and other rights of the holders of our Class A
common stock.
20
<PAGE> 22
USE OF PROCEEDS
Because the shares of our Class B common stock offered under this
prospectus will be issued in exchange for exchangeable shares and the shares of
Class A common stock offered under this prospectus will be issued upon
conversion of those shares of Class B common stock, we will receive no proceeds
from the issuance of such shares.
PLAN OF DISTRIBUTION
GENERAL
You may receive shares of our Class B common stock in exchange for your
exchangeable shares as follows:
- you may elect to exchange your exchangeable shares for shares of our
Class B common stock at any time;
- HH Acquisition Inc. will automatically redeem all exchangeable shares
that are outstanding on August 31, 2009 or an earlier date if there are
less than 100,000 exchangeable shares outstanding that are not owned by
us or our affiliates on the earlier date, by delivering shares of our
Class B common stock to you; or
- upon a liquidation of HH Acquisition Inc. or Broadcom your exchangeable
shares will be exchanged for shares of our Class B common stock.
Upon exchange of your exchangeable shares, you will receive, for each
exchangeable share you hold, one share of our Class B common stock and a cash
amount equal to any declared and unpaid dividends on the exchangeable share.
Each share of our Class B common stock that you receive upon exchange of
your exchangeable shares is convertible at any time at your option into one
share of our Class A common stock. Each share of your Class B common stock
generally will automatically convert into one share of our Class A common stock
when you transfer it.
We have not engaged any broker, dealer or underwriter in connection with
this offering of our Class A and Class B common stock.
The following is a summary of the material rights, privileges, restrictions
and conditions relating to the issuance of our Class B common stock in exchange
for your exchangeable shares. The specific provisions governing the exchangeable
shares are set forth in the Plan of Arrangement and the Voting and Exchange
Trust Agreement, which are included as exhibits to the registration statement of
which this prospectus is a part. You should read the Plan of Arrangement and the
Voting and Exchange Trust Agreement for a more complete understanding of the
exchangeable shares.
21
<PAGE> 23
ELECTION BY HOLDERS OF EXCHANGEABLE SHARES TO EXCHANGE THEIR SHARES
As a holder of exchangeable shares, you have the right at any time to
require HH Acquisition Inc. to redeem any or all of the exchangeable shares you
hold. In order to request a redemption of your shares, you must present to HH
Acquisition Inc.'s transfer agent, CIBC Mellon Trust Company, the following
documents:
- a certificate or certificates representing the number of exchangeable
shares to be redeemed;
- a written redemption request, the form of which you may obtain from HH
Acquisition Inc. or its transfer agent, that specifies the number of
exchangeable shares you wish to have redeemed and acknowledges the
overriding purchase right, which is described below, of HH Acquisition
ULC, one of our Canadian subsidiaries; and
- any other documents that HH Acquisition Inc., its transfer agent or the
Company Act (British Columbia) may require to effect the redemption of
your exchangeable shares.
Upon receipt of a redemption request, the transfer agent must promptly
notify HH Acquisition ULC and us of the request. HH Acquisition ULC has an
overriding right to purchase the exchangeable shares specified in the redemption
request. If HH Acquisition ULC elects to exercise this right, then HH
Acquisition Inc. will not redeem your exchangeable shares, but, instead, HH
Acquisition ULC will purchase your exchangeable shares. In that event, HH
Acquisition ULC will deliver to the transfer agent for payment to you, one share
of our Class B common stock for each exchangeable share purchased plus a cash
amount equal to any declared and unpaid dividends on each exchangeable share
provided that the record date of the dividend is prior to the date of purchase.
The purchase by HH Acquisition ULC of your exchangeable shares will occur on the
sixth business day after your redemption request is received by the transfer
agent. HH Acquisition ULC will notify the transfer agent within three business
days of the transfer agent's receipt of your redemption request if it elects to
exercise its overriding purchase right. The transfer agent will notify you if HH
Acquisition ULC has decided not to exercise this right.
If HH Acquisition ULC does not elect to exercise its overriding purchase
right, then HH Acquisition Inc. will redeem your shares on the sixth business
day after your redemption request is received by the transfer agent. In that
event, HH Acquisition Inc. will deliver to the transfer agent for payment to you
one share of our Class B common stock for each exchangeable share redeemed plus
a cash amount equal to any declared and unpaid dividends on each exchangeable
share provided that the record date of the dividend is prior to the date of
exchange.
If, as a result of solvency requirements or applicable law, HH Acquisition
Inc. is not able to redeem all of the exchangeable shares you requested, then HH
Acquisition Inc. will redeem only those exchangeable shares permitted by law. HH
Acquisition ULC will purchase the remaining exchangeable shares not redeemed by
HH Acquisition Inc. In that event, you will receive one share of our Class B
common stock for each share purchased by HH Acquisition ULC plus a cash amount
equal to any declared and unpaid dividends on each exchangeable share provided
that the record date of the dividend is prior to the date of our purchase.
You may revoke your redemption request at any time prior to the close of
business on the business day immediately preceding the purchase or redemption
date. If you revoke your redemption request, your exchangeable shares will not
be purchased by HH Acquisition ULC or redeemed by HH Acquisition Inc.
22
<PAGE> 24
REDEMPTION OF EXCHANGEABLE SHARES BY HH ACQUISITION INC.
The automatic redemption date for the exchangeable shares is August 31,
2009. On that date, HH Acquisition Inc. will redeem all of the then outstanding
exchangeable shares by delivering to the transfer agent for payment to you one
share of our Class B common stock for each exchangeable share you hold and a
cash amount equal to any declared but unpaid dividends on each exchangeable
share up to the redemption date. HH Acquisition Inc. has the right to redeem the
exchangeable shares prior to August 31, 2009 if there are fewer than 100,000
exchangeable shares outstanding that are not owned by us or our affiliates. HH
Acquisition Inc. will, at least 75 days prior to a redemption date, provide all
holders of exchangeable shares with written notice of the proposed redemption of
the exchangeable shares. The redemption of the exchangeable shares by HH
Acquisition Inc. is subject to applicable law and to the overriding purchase
right of HH Acquisition ULC described below.
HH Acquisition ULC has an overriding right to purchase all but not less
than all of the outstanding exchangeable shares on the proposed redemption date.
If HH Acquisition ULC elects to exercise this right, it must notify the transfer
agent and HH Acquisition Inc. of its intention to exercise this right at least
75 days prior to the proposed redemption date. The transfer agent will notify
you whether or not HH Acquisition ULC has decided to exercise its overriding
purchase right. If HH Acquisition ULC does exercise this right, it will deliver
to the transfer agent for payment to you on the redemption date one share of our
Class B common stock for each exchangeable share you hold and a cash amount
equal to all declared but unpaid dividends on each exchangeable share up to the
redemption date.
RIGHTS ON THE LIQUIDATION OF HH ACQUISITION INC. OR BROADCOM
LIQUIDATION OR INSOLVENCY OF HH ACQUISITION INC.
If HH Acquisition Inc. liquidates, dissolves, or winds up its affairs or
otherwise distributes its assets among its shareholders for the purposes of
winding up its affairs, you will receive from HH Acquisition Inc. a liquidation
payment equal to one share of our Class B common stock for each exchangeable
share you hold plus a cash amount equal to all declared but unpaid dividends on
each exchangeable share up to the effective date of the liquidation. HH
Acquisition Inc. will make this liquidation payment to you, as a holder of
exchangeable shares, before it makes any payments to any holder of a class of
stock ranking junior to the exchangeable shares. The payment of this liquidation
payment to you is subject to applicable law and the overriding liquidation call
right of HH Acquisition ULC described below.
In the event of a liquidation, dissolution or winding up of HH Acquisition
Inc., HH Acquisition ULC will have the overriding right to purchase all but not
less than all of the outstanding exchangeable shares. If HH Acquisition ULC
elects to exercise this right, it must notify the transfer agent and HH
Acquisition Inc. of its intention to exercise the right at least 30 days prior
to the proposed liquidation date in the case of a voluntary liquidation,
dissolution or winding up of HH Acquisition Inc. In the case of an involuntary
liquidation, dissolution or winding up of HH Acquisition Inc., HH Acquisition
ULC must notify the transfer agent and HH Acquisition Inc. of its intention to
exercise this right at least five business days prior to the proposed
liquidation date. The transfer agent will notify you whether or not HH
Acquisition ULC has decided to exercise its overriding purchase right. If HH
Acquisition ULC does exercise this right, it will deliver to the transfer agent
for payment to you one share of our Class B common stock for each exchangeable
share you hold plus a cash amount equal to all declared but unpaid dividends on
each exchangeable share up to the effective date of the liquidation.
If a HH Acquisition Inc. insolvency event or default event occurs, as a
holder of exchangeable shares, you may instruct US Trust Company, National
Association, as trustee under the Voting and
23
<PAGE> 25
Exchange Trust Agreement, to exercise its exchange right on your behalf. This
exchange right enables the trustee to require HH Acquisition ULC to purchase any
or all of your exchangeable shares. The purchase price payable by HH Acquisition
ULC to you upon exercise of the trustee's exchange right is one share of our
Class B common stock for each exchangeable share purchased plus a cash amount
equal to all declared but unpaid dividends on each exchangeable share. The
occurrence of any of the following will constitute a HH Acquisition Inc.
insolvency event:
- the institution by HH Acquisition Inc. of any proceeding to be
adjudicated a bankrupt or insolvent or to be dissolved or wound up, or
the consent of HH Acquisition Inc. to the institution of bankruptcy,
insolvency, dissolution or winding up proceedings against it;
- the filing of a petition, answer or consent seeking the dissolution or
winding up under any bankruptcy, insolvency or analogous laws, and the
failure by HH Acquisition Inc. to contest in good faith the commencement
of any of these proceedings within 15 days of becoming aware of it;
- HH Acquisition Inc.'s consent to the filing of any petition referenced
above or to the appointment of a receiver;
- the making by HH Acquisition Inc. of a general assignment for the benefit
of creditors;
- the admission in writing by HH Acquisition Inc. of its inability to pay
its debts generally as they become due; or
- HH Acquisition Inc.'s not being permitted, pursuant to solvency
requirements of applicable law, to redeem any exchangeable shares
presented for redemption by a holder of exchangeable shares.
A default event will occur if HH Acquisition Inc. fails to perform any of
its obligations under the special rights and restrictions attached to the
exchangeable shares for any reason other than because of the occurrence of an
insolvency event.
LIQUIDATION OF BROADCOM
If a Broadcom liquidation event occurs, HH Acquisition ULC will purchase
all of your outstanding exchangeable shares on the fifth business day prior to
the Broadcom liquidation event. The purchase price that HH Acquisition ULC will
pay for your exchangeable shares will be one share of our Class B common stock
for each exchangeable share you hold plus a cash amount equal to all declared
but unpaid dividends on each exchangeable share up to the effective date of the
liquidation. This purchase of your exchangeable shares by HH Acquisition ULC
will enable you to participate on an equal basis with the holders of our Class B
common stock if a Broadcom liquidation event occurs. The occurrence of any of
the following will constitute a Broadcom liquidation event:
- a determination by our board of directors to institute voluntary
liquidation, dissolution or winding up proceedings or to effect any other
distribution of our assets among our shareholders for the purpose of
winding up our affairs; or
- the receipt by us of notice of, or our otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other proceedings with
respect to our involuntary liquidation, dissolution or winding up or to
effect any other distribution of our assets among our shareholders for
the purpose of winding up our affairs.
24
<PAGE> 26
ADJUSTMENTS IN THE NUMBER OF SHARES OF OUR CLASS B COMMON STOCK YOU WILL RECEIVE
IN EXCHANGE FOR YOUR EXCHANGEABLE SHARES
The number of shares of our Class B common stock into which each of your
exchangeable shares is exchangeable will be adjusted to reflect any:
- stock split of our Class B common stock;
- reverse stock split of our Class B common stock;
- stock dividend on our Class B common stock;
- consolidation, merger, arrangement or amalgamation of Broadcom with or
into another entity;
- recapitalization or reclassification of our outstanding Class B common
stock; or
- other similar change regarding our Class B common stock.
FRACTIONAL SHARES
We will not issue you fractional shares of our Class B common stock upon
exchange of exchangeable shares. Instead, we will pay you cash for any
fractional portion of a share that you are entitled to based on the current
market price of our Class A common stock.
DESCRIPTION OF CAPITAL STOCK
Under Broadcom's present capital structure, Broadcom is authorized to issue
200,000,000 shares of Class A common stock, par value $0.0001 per share,
100,000,000 shares of Class B common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $0.0001 per share. On October
31, 1999, 56,794,221 shares of Class A common stock were outstanding, 46,871,074
shares of Class B common stock were outstanding and no shares of preferred stock
were outstanding.
The shares of our Class B common stock are substantially identical to the
shares of Class A common stock, except that the holders of Class A common stock
are entitled to one (1) vote per share and the holders of the Class B common
stock are entitled to ten (10) votes per share on all matters submitted to
shareholder vote. Holders of shares of Class A common stock and holders of
shares of Class B common stock vote together as a single class on all matters
submitted to a shareholder vote, except (1) as otherwise required by law or (2)
with respect to a proposed issuance of additional shares of Class B common
stock, which issuance currently requires the affirmative vote of the holders of
a majority of the outstanding shares of Class B common stock, voting separately
as a class. Each share of Class B common stock is convertible at the option of
the holder into one (1) share of Class A common stock and will, in general,
automatically convert into one (1) share of Class A common stock upon sale or
other transfer. The preferred stock may be issued from time to time in one or
more series with such rights, preferences and privileges, including dividend
rates, conversion and redemption prices, and voting rights, as may be determined
by our Board of Directors.
In September 1999 our Board unanimously approved the amendment of Article
III of our articles of incorporation to increase the number of shares of Class A
common stock authorized for issuance by 200,000,000 shares to an aggregate of
400,000,000 shares authorized for issuance, and to increase the number of shares
of Class B common stock authorized for issuance by an additional
25
<PAGE> 27
100,000,000 shares, to an aggregate of 200,000,000 shares authorized. The Board
believes it needs to have the ability to issue such additional shares of common
stock for any proper corporate purpose, such as stock splits and stock
dividends, future acquisitions, stock and option grants, and convertible debt
and equity financings. In addition, our Board unanimously approved an amendment
to Article III, Section 2 of our articles of incorporation to permit us to issue
additional shares of Class B common stock without the approval of the holders of
the outstanding shares of Class B common stock when such issuance has been
approved by two-thirds of the members of our Board then in office. If our
shareholders approve and adopt these proposed amendments at our 1999 Special
Meeting of Shareholders to be held on November 22, 1999, then we will amend our
articles of incorporation accordingly.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the SEC at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public at the SEC's web site at
http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC under the
Securities Act of 1933, as amended. This prospectus is a part of that
registration statement. This prospectus does not contain all of the information
in the registration statement or the exhibits to the registration statement, as
permitted by SEC rules.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is an important part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended.
The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999;
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1999;
4. Our definitive proxy statement filed with the SEC on April 9, 1999 in
connection with our annual meeting of shareholders;
5. Our definitive proxy statement filed with the SEC on October 20, 1999
in connection with a special meeting of shareholders;
6. Our Current Report on Form 8-K filed with the SEC on January 27, 1999;
7. Our Current Report on Form 8-K filed with the SEC on April 28, 1999;
8. Our Current Report on Form 8-K filed with the SEC on June 1, 1999;
9. Our Current Report on Form 8-K filed with the SEC on June 23, 1999;
26
<PAGE> 28
10. Our Current Report on Form 8-K filed with the SEC on July 21, 1999;
11. Our Current Report on Form 8-K filed with the SEC on August 12, 1999;
12. Our Current Report on Form 8-K filed with the SEC on September 1, 1999;
13. Our Current Report on Form 8-K/A filed with the SEC on September 17,
1999;
14. Our Current Report on Form 8-K filed with the SEC on September 28,
1999; and
15. The description of our Class A common stock contained in our
registration statement on Form 8-A filed with the SEC on April 6, 1998,
under Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such.
All reports and other documents we subsequently file under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
prior to the termination of this offering will be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such reports
and documents. Any statement incorporated herein shall be deemed to be modified
or superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference. We will not provide
copies of exhibits to such documents unless such exhibits are specifically
incorporated by reference into such document. Requests for documents should be
submitted in writing to Investor Relations, Broadcom Corporation, P.O. Box
57013, Irvine, California 92619-7103 or by telephone at (949) 585-5660.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements. These forward-looking statements
are based on our current expectations, estimates and projections about our
industry, management's beliefs and certain assumptions made by us. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
"may," "will" and variations of these words or similar expressions are intended
to identify forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, our actual results could
differ materially and adversely from those expressed or forecasted in any
forward-looking statements as a result of a variety of factors, including those
set forth in "Risk Factors" above and elsewhere in, or incorporated by reference
into, this prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
LEGAL MATTERS
The validity of the issuance of the shares offered pursuant to this
prospectus will be passed upon for us by Brobeck, Phleger & Harrison LLP,
Irvine, California.
27
<PAGE> 29
EXPERTS
The consolidated financial statements of Broadcom Corporation included in
Broadcom Corporation's Current Report on Form 8-K dated September 17, 1999, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
28
<PAGE> 30
Broadcom Logo
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses to be paid by
us in connection with the offering of the securities being registered. All of
the amounts shown are estimates except for the Securities and Exchange
Commission registration fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $
Nasdaq National Market additional listing fee...............
Printing Expenses...........................................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Miscellaneous...............................................
----------
Total............................................. $
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation limit the personal liability of our directors
for monetary damages to the fullest extent permitted by the California General
Corporation Law. Under the California General Corporation Law, a director's
liability to a company or its shareholders may not be limited with respect to
the following items: (1) acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law, (2) acts or omissions that a
director believes to be contrary to the best interests of the company or its
shareholders or that involve the absence of good faith on the part of the
director, (3) any transaction from which a director derived an improper personal
benefit, (4) acts or omissions that show a reckless disregard for the director's
duty to the company or its shareholders in circumstances in which the director
was aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of a serious injury to the company or its
shareholders, (5) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the company
or its shareholders, (6) contracts or transactions between the company and a
director within the scope of Section 310 of the California General Corporation
Law or (7) improper dividends, loans and guarantees under Section 316 of the
California General Corporation Law. The limitation of liability does not affect
the availability of injunctions and other equitable remedies available to our
shareholders for any violation by a director of the director's fiduciary duty to
us or our shareholders.
Our articles of incorporation also include an authorization for Broadcom to
indemnify its "agents," as defined in Section 317 of the California General
Corporation Law, through bylaw provisions, by agreement or otherwise, to the
fullest extent permitted by law. Pursuant to this provision, our bylaws provide
for indemnification of our directors, officers and employees. In addition, we
may, at our discretion, provide indemnification to persons whom we are not
obligated to indemnify. The bylaws also allow us to enter into indemnity
agreements with individual directors, officers, employees and other agents. We
have entered into these indemnity agreements with all of our directors and
executive officers. These agreements provide the maximum indemnification
permitted by law. These agreements, together with our bylaws and articles of
incorporation, may require us, among other things, to (1) indemnify our
directors or executive officers, other than for liability resulting from willful
misconduct of a culpable nature, (2) advance expenses to them as they are
incurred, provided that they undertake to repay the amount advanced if it is
ultimately determined by a court that they are not entitled to indemnification,
and (3) obtain directors' and
II-1
<PAGE> 32
officers' insurance if available on reasonable terms. Section 317 of the
California General Corporation Law and our bylaws make provision for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities, including reimbursement of expenses incurred, arising under the
Securities Act of 1933, as amended.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of Broadcom
Corporation.
3.2* Bylaws of Broadcom Corporation.
5.1** Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2** Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (reference is made to page II-4 of this
Registration Statement).
99.1 Plan of Arrangement under Section 252 of the Company Act
(British Columbia), including Provisions Attaching to the
Exchangeable Shares.
99.2 Voting and Exchange Trust Agreement, dated as of August 31,
1999, among Broadcom Corporation, HH Acquisition Inc., HH
Acquisition ULC, Broadcom (BVI) Limited and CBIC Mellon
Trust Company, as Trustee.
99.3 Parent Support Agreement, dated as of August 31, 1999, among
Broadcom Corporation, HH Acquisition Inc., HH Acquisition
ULC and Broadcom (BVI) Limited.
</TABLE>
- -------------------------
* Incorporated by reference to the similarly numbered exhibit to the
Registration Statement on Form S-1 filed by Broadcom Corporation,
Registration No. 333-45619.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering price may be reflected in the form of prospectus filed
with the Commission under Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-2
<PAGE> 33
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by us pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
registrant's Annual Report under Section 13(a) or Section 15(d) of the Exchange
Act of 1934 that is incorporated by reference into this registration statement
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
question has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on the 12th day of
November, 1999.
BROADCOM CORPORATION
By: /s/ HENRY T. NICHOLAS
------------------------------------
Henry T. Nicholas III, Ph.D.
President, Chief Executive Officer
and Co-Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officers and
directors of Broadcom Corporation, a California corporation, do hereby
constitute and appoint Henry T. Nicholas III and Henry Samueli and each of them,
their lawful attorneys-in-fact and agents with full power and authority to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, and any one of them, determine may be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulations or requirements of the
Securities and Exchange Commission in connection with this registration
statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to this
registration statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this registration statement, and to any and
all instruments or documents filed as part of or in conjunction with this
registration statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms that all said attorneys and agents, or
any one of them, shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated. Pursuant to the requirements of the
Securities Act of 1933, as amended, this registration statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HENRY T. NICHOLAS President, Chief Executive November 12, 1999
- ----------------------------------------------------- Officer and Co-Chairman
Henry T. Nicholas III, Ph.D. (Principal Executive
Officer)
/s/ HENRY SAMUELI Vice President of Research November 12, 1999
- ----------------------------------------------------- & Development, Chief
Henry Samueli, Ph.D. Technical Officer and
Co-Chairman
</TABLE>
II-4
<PAGE> 35
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM J. RUEHLE Vice President and Chief November 12, 1999
- ----------------------------------------------------- Financial Officer
William J. Ruehle (Principal Financial and
Accounting Officer)
/s/ ALAN E. ROSS Director November 12, 1999
- -----------------------------------------------------
Alan E. Ross
/s/ MYRON S. EICHEN Director November 12, 1999
- -----------------------------------------------------
Myron S. Eichen
/s/ WERNER F. WOLFEN Director November 12, 1999
- -----------------------------------------------------
Werner F. Wolfen
</TABLE>
II-5
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1* Amended and Restated Articles of Incorporation of Broadcom
Corporation.
3.2* Bylaws of Broadcom Corporation.
5.1** Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2** Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (reference is made to page II-4 of this
Registration Statement).
99.1 Plan of Arrangement under Section 252 of the Company Act
(British Columbia), including Provisions Attaching to the
Exchangeable Shares.
99.2 Voting and Exchange Trust Agreement, dated as of August 31,
1999, among Broadcom Corporation, HH Acquisition Inc., HH
Acquisition ULC, Broadcom (BVI) Limited and CBIC Mellon
Trust Company, as Trustee.
99.3 Parent Support Agreement, dated as of August 31, 1999, among
Broadcom Corporation, HH Acquisition Inc., HH Acquisition
ULC and Broadcom (BVI) Limited.
</TABLE>
- -------------------------
* Incorporated by reference to the similarly numbered exhibit to the
Registration Statement on Form S-1 filed by Broadcom Corporation,
Registration No. 333-45619.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-3 and related Prospectus of Broadcom Corporation
for the registration of 653,159 shares of its Class A common stock and 653,159
shares of its Class B common stock and to the incorporation by reference therein
of our report dated January 26, 1999 (except for Note 2 as to which the date is
May 31, 1999, and Notes 9 and 13 as to which the date is August 31, 1999), with
respect to the consolidated financial statements of Broadcom Corporation
included in its Current Report on Form 8-K dated September 17, 1999, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Orange County, California
November 12, 1999
<PAGE> 1
EXHIBIT 99.1
PLAN OF ARRANGEMENT
UNDER SECTION 252
OF THE COMPANY ACT (BRITISH COLUMBIA)
ARTICLE 1
INTERPRETATION
--------------
1.1 DEFINITIONS
In this Plan of Arrangement unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
(a) "ACQUISITION AGREEMENT" means the agreement by and among Parent,
BVI, the Company, CDN2 and Target, dated as of July 15, 1999, as
the same may be amended and restated, providing for, among other
things, the Arrangement;
(b) "AFFILIATE" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or
under common control with, that Person, (b) any other Person
that owns or controls 10% or more of any class of equity
securities (including any equity securities issuable upon the
exercise of any option or convertible security) of that Person
or any of its Affiliates, or (c) any director, partner or
officer of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with")
as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise;
(c) "ARRANGEMENT" means the arrangement under section 252 of the BC
Company Act on the terms and subject to the conditions set out
in this Plan of Arrangement, subject to any amendments thereto
made in accordance with section 6.1 or made at the direction of
the Court in the Final Order;
(d) "AUTOMATIC REDEMPTION DATE" means August 31, 2009 unless such
date shall be accelerated at any time to a specified earlier
date by the Board of Directors upon at least 75 days prior
written notice to the registered holders of Exchangeable Shares,
in which case the Automatic Redemption Date shall be such
earlier date; provided, however, that the Board of Directors may
so accelerate the Automatic Redemption Date only at such time as
there are outstanding fewer than 100,000 Exchangeable Shares
held by holders other than Parent and its Affiliates;
A-1
<PAGE> 2
(e) "AVERAGE CLOSING PRICE" means the average closing sales price of
Class A Shares for the 30 trading days ending on the date three
trading days prior to the Effective Date, as traded on the
NASDAQ and reported by the Wall Street Journal or, if the Class
A shares are not then quoted on NASDAQ, on such other stock
exchange or automated quotation system on which the Class A
Shares are listed or quoted, as the case may be, as may be
selected by the Board of Directors for such purpose, provided,
however, that if in the opinion of the Board of Directors:
(i) the public distribution or trading activity of Class A
Shares during such period does not create a market that
reflects the fair market value of a Parent Common Share;
or
(ii) the number of Class A Shares that a holder of Parent
Common Shares is entitled to receive on conversion of
such Parent Common Shares is such that one Parent Common
share is not equal in value to one Class A Share;
then the Average Closing Price of a Parent Common Share shall be
determined by the Board of Directors in good faith based upon
the advice of such qualified independent financial advisors as
the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding;
(f) "BC COMPANY ACT" means the Company Act (British Columbia), as
amended from time to time;
(g) "BOARD OF DIRECTORS" means the board of directors of the
Company;
(h) "BUSINESS DAY" means any day other than a Saturday, a Sunday or
a day when banks are not open for business in either or both of
Irvine, California and Vancouver, British Columbia;
(i) "BVI" means Broadcom (BVI) Limited, a company existing pursuant
to the laws of the British Virgin Islands.
(j) "CANADIAN DOLLAR EQUIVALENT" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount")
at any date the product obtained by multiplying (a) the Foreign
Currency Amount by (b) the noon spot exchange rate on such date
for such foreign currency expressed in Canadian dollars as
reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date
for such foreign currency expressed in Canadian dollars as may
be deemed by the Board of Directors to be appropriate for such
purpose;
(k) "CAPITAL REORGANIZATION" has the meaning ascribed thereto in
section 5.7;
A-2
<PAGE> 3
(l) "CDN2" means HH Acquisition ULC, a company existing under the
Companies Act (Nova Scotia) or a Permitted Assign (as that term
is defined in section 7.1).
(m) "CDN2 CALL NOTICE" has the meaning ascribed thereto in
subsection 5. 1 (b);
(n) "CLASS A SHARES" means the Class A common stock of Parent;
(o) "COMPANY" means HH Acquisition Inc. a company existing under the
BC Company Act;
(p) "COURT" means the Supreme Court of British Columbia;
(q) "CURRENT MARKET PRICE" means, in respect of Parent Common Shares
on any date, the Canadian Dollar Equivalent of the closing sale
price of Class A Shares on such day (or, if no trades of Class A
Shares occurred on such day, on the last trading day prior
thereto on which such trades occurred) as traded on NASDAQ and
reported by the Wall Street Journal, or, if the Class A Shares
are not then quoted on NASDAQ, on such other stock exchange or
automated quotation system on which the Class A Shares are
listed or quoted, as the case may be, as may be selected by the
Board of Directors for such purpose, provided, however, that if
in the opinion of the Board of Directors:
(i) the public distribution or trading activity of Class A
Shares during such period does not create a market that
reflects the fair market value of a Parent Common Share;
or
(ii) the number of Class A Shares that a holder of Parent
Common Shares is entitled to receive on conversion of
such Parent Common Shares is such that one Parent Common
share is not equal in value to one Class A Share,
then the Current Market Price of a Parent Common Share shall be
determined by the Board of Directors in good faith based upon
the advice of such qualified independent financial advisors as
the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding;
(r) "CURRENT PARENT COMMON SHARE EQUIVALENT" means, on any date, the
equivalent as at such date of one Parent Common Share as at the
Effective Date, expressed to four decimal places, determined by
applying on a cumulative basis the following adjustments, to the
extent applicable by reason of any transactions occurring in
respect of Parent Common Shares between the Effective Date and
such date, the Current Parent Common Share Equivalent as at the
Effective Date being 1.0000:
(i) if Parent shall (A) subdivide, redivide or change its
then outstanding Parent Common Shares into a greater
number of Parent Common Shares, unless the
A-3
<PAGE> 4
Company is permitted under applicable law without a vote
of its shareholders to make, and shall simultaneously
make, the same or an economically equivalent change to
the rights of the holders of Exchangeable Shares, (B)
reduce, combine, consolidate or change its then
outstanding Parent Common Shares into a lesser number of
Parent Common Shares, unless the Company is permitted
under applicable law without a vote of its shareholders
to make, and shall simultaneously make, the same or an
economically equivalent change to the rights of the
holders of Exchangeable Shares, or (C) issue Parent
Common Shares (or securities exchangeable or convertible
into Parent Common Shares) to the holders of all or
substantially all of its then outstanding Parent Common
Shares by way of stock dividend or other distribution
(other than to holders of Parent Common Shares who
exercise an option to receive stock dividends in lieu of
receiving cash dividends), unless the Company is
permitted under applicable law without a vote of its
shareholders to issue or distribute, and shall
simultaneously issue and distribute, equivalent numbers
of Parent Common Shares or other securities (adjusted if
necessary in accordance with the Current Parent Common
Share Equivalent), or the economic equivalent on a per
share basis, to the holders of the Exchangeable Shares
(any of such events being herein called a "Parent Common
Share Reorganization"), the Current Parent Common Share
Equivalent shall be adjusted effective immediately after
the record date at which the holders of Parent Common
Shares are determined for the purpose of the Parent
Common Share Reorganization by multiplying the Current
Parent Common Share Equivalent in effect on such record
date by the quotient obtained when:
(I) the number of Parent Common Shares
outstanding after the completion of such
Parent Common Share Reorganization (but
before giving effect to the issue of any
Parent Common Shares issued after such
record date otherwise than as part of
such Parent Common Share Reorganization)
including, in the case where securities
exchangeable or convertible into Parent
Common Shares are distributed, the
number of Parent Common Shares that
would have been outstanding had such
securities been exchanged for or
converted into Parent Common Shares on
such record date,
is divided by
(II) the number of Parent Common Shares
outstanding on such record date before
giving effect to the Parent Common Share
Reorganization;
(s) "DEPOSITARY AGENT" means U.S. Stock Transfer Corporation at its
principal offices in Glendale, California;
A-4
<PAGE> 5
(t) "EFFECTIVE DATE" means the date the certified copy of the Final
Order is accepted for filing by the Registrar to give effect to
the Arrangement;
(u) "EFFECTIVE TIME" means 12:01 a.m. on the Effective Date;
(v) "EXCHANGE RATIO" is 2,000,000 divided by the aggregate number of
Target Common Shares outstanding immediately prior to the
Effective Time (including (i) all Target Common Shares issued or
issuable upon exercise, conversion or exchange of all unvested
and vested Target Options which are not exercised, converted,
exchanged or expired as of the Effective Time; and (ii) all
options which Target has committed to grant but under which the
conditions of grant are not fulfilled as of the Effective Date);
(w) "EXCHANGEABLE SHARE PROVISIONS" means the special rights and
restrictions attaching to the Exchangeable Shares, which are set
forth in Appendix A hereto;
(x) "EXCHANGEABLE SHARES" means the Exchangeable Non-Voting Shares
of the Company having the special rights and restrictions set
forth in the Exchangeable Share Provisions;
(y) "FINAL ORDER" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any
time prior to the Effective Time;
(z) "LETTER OF TRANSMITTAL" means collectively a letter of
Transmittal and Election Form in the form accompanying the
materials to be sent to the shareholders of Target in connection
with the Meeting;
(aa) "LIEN" means any lien, pledge, adverse claim, security interest,
mortgage, claim, charge or encumbrance;
(bb) "LIQUIDATION CALL PURCHASE PRICE" has the meaning ascribed
thereto in subsection 5.2(a);
(cc) "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in
subsection 5.2(a);
(dd) "LIQUIDATION DATE" has the meaning ascribed thereto in section
4.1 of the Exchangeable Share Provisions;
(ee) "MEETING" means the Special Meeting of the shareholders of
Target (including holders of Target Options who shall vote
together with shareholders of Target as a single class) to be
held to consider the Arrangement;
(ff) "NASDAQ" means the distinct tier of the Nasdaq Stock Market
referred to as the National Market;
A-5
<PAGE> 6
(gg) "PARENT" means Broadcom Corporation, a corporation existing
under the laws of the State of California;
(hh) "PARENT COMMON SHARE REORGANIZATION" has the meaning ascribed
thereto in subsection 1.1(r);
(ii) "PARENT COMMON SHARES" means the Class B common stock, par value
US$0.0001 per share, of Parent;
(jj) "PERSON" means any natural person, corporation, general
partnership, limited partnership, limited liability company or
partnership, proprietorship, other business organization, trust,
union, association or Governmental or Regulatory Authority;
(kk) "REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed
thereto in subsection 5.3(a);
(ll) "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in
subsection 5.3(a);
(mm) "REGISTRAR" means the Registrar appointed under the BC Company
Act;
(nn) "RETRACTED SHARES" has the meaning ascribed thereto in section
5.1 of the Exchangeable Share Provisions;
(oo) "RETRACTION CALL PURCHASE PRICE" has the meaning ascribed
thereto in subsection 5.1(a);
(pp) "RETRACTION CALL RIGHT" has the meaning ascribed thereto in
subsection 5.1(a);
(qq) "RETRACTION DATE" has the meaning ascribed thereto in section
5.2 of the Exchangeable Share Provisions;
(rr) "RETRACTION REQUEST" has the meaning ascribed thereto in section
5.1 of the Exchangeable Share Provisions;
(ss) "REVISED EXERCISE PRICE" of a Target Option means the exercise
price of such Target Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio;
(tt) "TARGET" means HotHaus Technologies Inc., a corporation existing
under the BC Company Act;
(uu) "TARGET COMMON SHARES" means the common shares in the capital of
Target, including all rights associated therewith;
(vv) "TARGET OPTIONS" means options, whether vested or unvested,
granted by Target
A-6
<PAGE> 7
prior to the Effective Date to purchase Target Common Shares
including the Target Warrants;
(ww) "TARGET WARRANTS" means all of the unexpired warrants granted by
Target to purchase Target Common Shares;
(xx) "TAX ACT" means the Income Tax Act (Canada), as amended from
time to time;
(yy) "TRANSFER AGENT" means CIBC Mellon Trust Company or such other
person as may from time to time be the Registrar and Transfer
Agent for the Exchangeable Shares; and
(zz) "VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and
Exchange Trust Agreement between the Company, Parent, BVI, CDN2
and US Trust Corporation, made as of the Effective Date.
1.2 SECTIONS AND HEADINGS
The division of this Plan of Arrangement into sections and the insertion
of headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless otherwise indicated, any
reference in this Plan of Arrangement to a section or an Appendix refers to the
specified section of or Appendix to this Plan of Arrangement.
1.3 NUMBER, GENDER AND PERSONS
In this Plan of Arrangement, unless the context otherwise requires,
words importing the singular number include the plural and vice versa, words
importing any gender include all genders and words importing persons include
individuals, corporations, partnerships, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entities of any
kind.
1.4 WITHHOLDING TAX
All amounts required to be paid, deposited or delivered under this Plan
of Arrangement shall be paid, deposited or delivered after deduction of any
amount required by applicable law to be deducted or withheld on account of tax
and the deduction of such amounts and remittance to the applicable tax
authorities shall, to the extent thereof, satisfy such requirement to pay,
deposit or deliver hereunder.
A-7
<PAGE> 8
ARTICLE 2
ARRANGEMENT
2.1 ARRANGEMENT
At the Effective Time on the Effective Date, the following shall occur
and shall be deemed to occur in the following order without any further act or
formality:
(a) The authorized share capital of the Company shall be amended to
authorize up to 2,000,000 Exchangeable Shares; as a result of
such amendment the Company shall have three classes of
authorized share capital, namely, 10,000,000 Common Shares,
10,000,000 preferred shares and up to 2,000,000 Exchangeable
Shares; the special rights and restrictions attaching to the
Exchangeable Shares shall be as set out in Appendix A.
(b) All of the outstanding Target Common Shares, except Target
Common Shares held by holders who have exercised their rights of
dissent in accordance with section 3.1 hereof and who are
ultimately entitled to be paid fair value for such shares
(hereinafter, "Dissenters") shall, without any action on the
part of such holders be deemed to be transferred to the Company
in exchange for that number of Exchangeable Shares (to be
delivered to the affected holder pursuant to section 4.1
hereof), or Parent Common Shares (to be delivered to the
affected holder of Target Common Shares pursuant to section 4.2
hereof), or a combination of the two, equal to the product of
such number of Target Common Shares (other than shares held by
Dissenters) being exchanged and the Exchange Ratio. Each such
former holder of Target Common Shares shall receive the whole
number of Exchangeable Shares or Parent Common Shares, or a
combination of the two, resulting from the exchange of such
holder's Target Common Shares for the consideration set out in
the foregoing sentence. In lieu of fractional Exchangeable
Shares or Parent Common Shares, or a combination of the two,
each holder of a Target Common Share who otherwise would be
entitled to receive a fraction of an Exchangeable Share or
Parent Common Shares, or a combination of the two, on the
exchange shall be paid an amount determined as set forth in
section 4.4 hereof.
(c) Upon the exchange referred to in subsection 2.1(b) above, each
holder of exchanged Target Common Shares shall cease to be such
a holder, shall have their name removed from the register of
holders of Target Common Shares and shall become a holder of the
number of fully paid Exchangeable Shares or Parent Common
Shares, or a combination of the two, to which they are entitled
as a result of such exchange and such holder's name shall be
added to the register of holders of Exchangeable Shares or
Parent Common Shares, or a combination of the two, accordingly.
(d) The Company shall add to its stated capital account in respect
of Exchangeable
A-8
<PAGE> 9
Shares issued pursuant to subsection 2.1(b) an amount equal to
the aggregate fair market value of the Target Common Shares
exchanged for Exchangeable Shares pursuant to subsection 2.1(b)
and immediately thereafter such paid-up capital shall be reduced
to an amount equal to the paid-up capital, for purposes of the
Income Tax Act (Canada), of the such Target Common Shares so
exchanged all as determined by the Board of Directors of the
Company.
(e) Except for Target Options granted to holders who have exercised
their rights of dissent in accordance with section 3.1 hereof
and who are ultimately entitled to be paid fair value for the
Target Common Shares subject to such Target Options, each
outstanding Target Option shall be assumed by Parent, together
with the Target Incentive Stock Option Plan, and converted into
an option to purchase a number of Parent Common Shares equal to
the product (rounded down to the nearest whole number) of the
Exchange Ratio times the number of Target Common Shares subject
to such Target Option and having an exercise price equal to the
Revised Exercise Price (rounded up to the nearest cent) and
having the same vesting, expiration and other terms as in effect
immediately prior to the Effective Time.
(f) For the purposes of indemnifying Parent, and its officers,
directors, employees, agents, Affiliates and Associates with
respect to any inaccuracies in Target's representations,
warranties and covenants in the Acquisition Agreement, 10% of
the Exchangeable Shares and Parent Common Shares issued pursuant
to the Plan of Arrangement (the "Escrow Amount") will be
deposited, without any act of any shareholder, with Depositary
Agent for the Escrow Period as defined in the Acquisition
Agreement. The portion of the Escrow Amount contributed on
behalf of each shareholder of Exchangeable Shares or Parent
Common Shares, or a combination of the two shall be in
proportion to the aggregate number of Exchangeable Shares or
Parent Common Shares, or the combination of the two, to which
said holder would otherwise be entitled under the Plan of
Arrangement. The provisions of section 7.2 of the Acquisition
Agreement shall apply to the Escrow Amount.
2.2 ELECTIONS
Each Person who, at or prior to 5:00 p.m. (Vancouver Time) on the
Business Day immediately preceding the Meeting, is a holder of record of Target
Common Shares, will be entitled, with respect to all or a portion of such
shares, to make an election at or prior to 5:00 p.m. on the Business Day
immediately preceding the Meeting to receive Exchangeable Shares or Parent
Common Shares, or a combination thereof, in exchange for such holder's Target
Common Shares, on the basis set forth herein and in accordance with such
arrangements and procedures as will be agreed upon in good faith by Parent,
Acquisition Sub and Target, including the form of the Letter of Transmittal
containing the elections and the procedures governing transmittal. Any Target
Common Shares for which an effective election has not been made (other than
Dissenters) will be deemed to be transferred to the Company pursuant to Section
2.1(b) in exchange for Exchangeable Shares.
A-9
<PAGE> 10
2.3 SECTION 85 ELECTION
If so requested by any holder of Target Common Shares who exchanges any
of his Target Common Shares for Exchangeable Shares, the Company will jointly
with that holder elect, in prescribed form and in accordance with subsection
85(6) of the Tax Act, pursuant to subsection 85(1) of the Tax Act at such amount
as is stipulated by that holder.
ARTICLE 3
RIGHTS OF DISSENT
3.1 RIGHTS OF DISSENT
Holders of Target Common Shares or of Target Options may exercise rights
of dissent with respect to such Target Common Shares or the Target Common Shares
subject to such Target Options, as the case may be ("Dissenters' Shares"). In
order to dissent with respect to Target Options, such Target Options shall be
deemed to have been exercised for the purpose of exercising such dissent rights
and the exercise price under each such Target Option shall be deemed to be
satisfied by set-off against the fair value paid for the Dissenters' Shares
subject thereto, provided that if the holder of any such Target Option is
ultimately not entitled to be paid fair value for the Dissenters' Shares subject
thereto, such Target Option shall be deemed not to have been exercised and shall
become an option to purchase Parent Common Shares in accordance with subsection
2.1(e). All such rights of dissent shall be exercised pursuant to and in the
manner set forth in section 207 of the BC Company Act as modified by the Interim
Order (as defined in the Acquisition Agreement) and this section 3.1 (the
"Dissent Procedures") in connection with the Arrangement and holders who duly
exercise such rights of dissent and who:
(a) are ultimately entitled to be paid fair value for their
Dissenters' Shares shall be deemed to have transferred such
Dissenters' Shares to Target for cancellation on the Effective
Date but shall not be entitled to any other payment or
consideration (including Exchangeable Shares and Parent Common
Shares) that would be payable under this Arrangement had such
holder not exercised such right of dissent, or
(b) are ultimately not entitled, for any reason, to be paid fair
value for their Dissenters' Shares shall be deemed to have
participated in the Arrangement on the same basis as any
non-dissenting holder of Target Common Shares or Target Options,
as the case may be, and shall receive Exchangeable Shares on the
basis determined in accordance with subsection 2.1(b) or options
on the basis provided in subsection 2.1(e), as the case may be.
In no case shall Target be required to recognize such holders as holders of
Target Common Shares or Target Options, as the case may be, on and after the
Effective Date, and the names of such holders of Target Common Shares or Target
Options, as the case may be, shall be deleted from the
A-10
<PAGE> 11
register of holders of Target Common Shares and all records of Target Options
maintained by the Company, respectively, on the Effective Date.
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES
At or promptly after the Effective Time, the Company shall deposit with
the Depositary, for the benefit of the holders of Target Common Shares who will
receive Exchangeable Shares in connection with the Arrangement, certificates
representing the Exchangeable Shares issued pursuant to subsection 2.1(c) in
exchange for outstanding Target Common Shares. Upon surrender to the Depositary
for cancellation of a certificate which immediately prior to the Effective Time
represented outstanding Target Common Shares that were exchanged for
Exchangeable Shares under the Arrangement, together with such other documents
and instruments as would have been required to effect the transfer of the shares
formerly represented by such certificate under the BC Company Act and the
articles of Target and such additional documents and instruments as the
Depositary may reasonably require, the holder of such surrendered certificate
shall be entitled to receive in exchange therefor, and the Depositary shall
deliver to such holder, a certificate representing that number (rounded down to
the nearest whole number) of Exchangeable Shares, which such holder has the
right to receive (together with any dividends or distributions with respect
thereto pursuant to section 4.3 and any cash in lieu of fractional Exchangeable
Shares, pursuant to section 4.4), and the certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Target Common
Shares which is not registered in the transfer records of Target, a certificate
representing the proper number of Exchangeable Shares may be issued to a
transferee if the certificate representing such Target Common Shares is
presented to the Depositary, accompanied by all documents required to evidence
and effect such transfer. Until surrendered as contemplated by this section 4.1,
each certificate which immediately prior to the Effective Time represented one
or more outstanding Target Common Shares that were exchanged for one or more
Exchangeable Shares shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender (i) a certificate
representing Exchangeable Shares, as contemplated by this section 4.1, (ii) a
cash payment in lieu of any fractional Exchangeable Shares, as contemplated by
section 4.4, and (iii) any dividends or distributions with a record date after
the Effective Time theretofore paid or payable with respect to Exchangeable
Shares, as contemplated by section 4.3.
4.2 EXCHANGE OF CERTIFICATES FOR PARENT COMMON SHARES
At or promptly after the Effective Time, CDN2 shall deposit with the
Depositary, for the benefit of the holders of Target Common Shares who will
receive Parent Common Shares in connection with the Arrangement, certificates
representing the Parent Common Shares, issued pursuant to subsection 2.1(c) in
exchange for outstanding Target Common Shares. Upon surrender to the Depositary
for cancellation of a certificate which immediately prior to the Effective Time
A-11
<PAGE> 12
represented outstanding Target Common Shares that were exchanged for Parent
Common Shares together with such other documents and instruments as would have
been required to effect the transfer of the shares formerly represented by such
certificate under the BC Company Act and the articles of Target and such
additional documents and instruments as the Depositary may reasonably require,
the holder of such surrendered certificate shall be entitled to receive in
exchange therefor, and the Depositary shall deliver to such holder, a
certificate representing that number (rounded down to the nearest whole number)
of Parent Common Shares, which such holder has the right to receive (together
with any dividends or distributions with respect thereto pursuant to section 4.3
and any cash in lieu of fractional Parent Common Shares, pursuant to section
4.4), and the certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of Target Common Shares which is not registered
in the transfer records of Target, a certificate representing the proper number
of Parent Common Shares may be issued to a transferee if the certificate
representing such Target Common Shares is presented to the Depositary,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this section 4.2, each certificate which
immediately prior to the Effective Time represented one or more outstanding
Target Common Shares that were exchanged for one or more Parent Common Shares
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender (i) a certificate representing Parent Common
Shares, as contemplated by this section 4.2, (ii) a cash payment in lieu of any
fractional Parent Common Shares, as contemplated by section 4.4, and (iii) any
dividends or distributions with a record date after the Effective Time
theretofore paid or payable with respect to Parent Common Shares, as
contemplated by section 4.3.
4.3 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES
No dividends or other distributions declared or made after the Effective
Time with respect to Exchangeable Shares or Parent Common Shares with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
certificate which, immediately prior to the Effective Time, represented
outstanding Target Common Shares that were exchanged pursuant to section 2.1(b),
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to section 4.4, unless and until such certificate shall be
surrendered in accordance with section 4.1 or section 4.2. Subject to applicable
law and to section 4.6, at the time of such surrender of any such certificate
(or, in the case of clause (iii) below, at the appropriate payment date), there
shall be paid to the record holder of the certificate representing whole
Exchangeable Shares or Parent Common Shares, as the case may be, into which the
shares represented by the surrendered certificate were exchanged, without
interest, (i) the amount of any cash payable in lieu of a fractional
Exchangeable Share or Parent Common Share to which such holder is entitled
pursuant to section 4.4, (ii) the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole Exchangeable Shares or Parent Common Shares, as the case may be, and
(iii) the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Exchangeable Shares or Parent
Common Shares, as the case may be.
A-12
<PAGE> 13
4.4 NO FRACTIONAL SHARES
No certificates or scrip representing fractional Exchangeable Shares or
Parent Common Shares shall be issued upon the surrender for exchange of
certificates pursuant to section 4.1 or section 4.2 and no dividend, stock split
or other change in the capital structure of the Company shall relate to any such
fractional security and such fractional interests shall not entitle the owner
thereof to vote or to exercise any rights as a security holder of the Company.
In lieu of any such fractional securities, each person entitled to a fractional
interest in an Exchangeable Share or Parent Common Share will receive an amount
of cash (rounded to the nearest whole cent), without interest, equal to the
Canadian Dollar Equivalent as of the Effective Date of the product of (i) such
fraction, multiplied by (ii) the Average Closing Price.
4.5 LOST CERTIFICATES
If any certificate that immediately prior to the Effective Time
represented outstanding Target Common Shares that were exchanged pursuant to
section 2.1(b) has been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed, the Depositary will issue in exchange for such lost, stolen
or destroyed certificate, certificates representing Exchangeable Shares or
Parent Common Shares (and any dividends or distributions with respect thereto
and any cash pursuant to section 4.4) deliverable in respect thereof as
determined in accordance with section 2.1(b). When authorizing such payment in
exchange for any lost, stolen or destroyed certificate, the person to whom
certificates representing Exchangeable Shares or Parent Common Shares are to be
issued shall, as a condition precedent to the issuance thereof, give a bond
satisfactory to Target or the Company, as the case may be, in such sum as Target
or the Company may direct or otherwise indemnify Target or the Company in a
manner satisfactory to the Company and Target against any claim that may be made
against Target or the Company with respect to the certificate alleged to have
been lost, stolen or destroyed.
4.6 EXTINGUISHMENT OF RIGHTS
Any certificate that immediately prior to the Effective Time represented
outstanding Target Common Shares that were exchanged pursuant to section 2.1(b)
and not deposited, with all other instruments required by section 4.1 or section
4.2, on or prior to the sixth anniversary of the Effective Date shall cease to
represent a claim or interest of any kind or nature as a shareholder of Target.
On such date, the Exchangeable Shares or Parent Common Shares to which the
former registered holder of the certificate referred to in the preceding
sentence was ultimately entitled shall be deemed to have been surrendered to the
Company together with all entitlements to dividends, distributions and interests
thereon held for such former registered holder for no consideration.
A-13
<PAGE> 14
ARTICLE 5
CERTAIN RIGHTS OF CDN2 TO ACQUIRE EXCHANGEABLE SHARES
5.1 CDN2 RETRACTION CALL RIGHT
(a) CDN2 shall have the overriding right (the "Retraction Call
Right"), notwithstanding the proposed redemption of Retracted
Shares by the Company on a Retraction Date, to purchase from the
holder of the Retracted Shares on the Retraction Date the
Retracted Shares upon payment by CDN2 to the holder of an amount
per share equal to (a) the Current Market Price multiplied by
the Current Parent Common Share Equivalent, in each case
determined on the Retraction Date, which shall be satisfied in
full in respect of the Retracted Shares by causing to be
delivered to such holder such whole number of Parent Common
Shares as is equal to the product obtained by multiplying the
number of Retracted Shares by the Current Parent Common Share
Equivalent (together with an amount in lieu of any fractional
Parent Common Share resulting from such calculation payable in
accordance with section 5.5), plus (b) the aggregate of all
dividends declared and unpaid on such Retracted Share
(collectively the "Retraction Call Purchase Price"). In the
event of the exercise of the Retraction Call Right by CDN2, the
holder of the Retracted Shares shall be obligated to sell to
CDN2, and CDN2 shall be obligated to purchase, the Retracted
Shares on the Retraction Date upon payment by CDN2 to such
holder of the Retraction Call Purchase Price for each Retracted
Share.
(b) In order to exercise the Retraction Call Right, CDN2 must notify
the Transfer Agent in writing of its determination to do so (the
"CDN2 Call Notice") prior to the expiry of the third Business
Day after the receipt by the Transfer Agent of the Retraction
Request. If CDN2 does not so notify the Transfer Agent, the
Transfer Agent will notify the holder as soon as possible
thereafter that CDN2 will not exercise the Retraction Call
Right, in which case the holder may revoke his Retraction
Request in accordance with the Exchangeable Share Provisions. If
CDN2 delivers the CDN2 Call Notice before the end of such three
Business Day period, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the
Retracted Shares to CDN2 in accordance with the Retraction Call
Right. In such event, the Company shall not redeem the Retracted
Shares and CDN2 shall purchase from such holder and such holder
shall sell to CDN2 on the Retraction Date the Retracted Shares
for the Retraction Call Purchase Price for each Retracted Share.
(c) For the purposes of completing a purchase of the Retracted
Shares pursuant to the Retraction Call Right, CDN2 shall deposit
with the Transfer Agent, on or before the Retraction Date,
certificates representing the Parent Common Shares to be
delivered to the holder of the Retracted Shares in payment of
the total Retraction Call Purchase Price for the Retracted
Shares (or the portion thereof payable in Parent Common Shares,
as the case may be) and a cheque in the amount of the remaining
A-14
<PAGE> 15
portion, if any, of the total Retraction Call Purchase Price
(or, if any part of the Retraction Call Purchase Price consists
of dividends payable in property, such property or property that
is the same as or economically equivalent to such property).
Provided that such total Retraction Call Purchase Price has been
so deposited with the Transfer Agent, the closing of the
purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as of the
close of business on the Retraction Date and, for greater
certainty, no redemption by the Company of such Retracted Shares
shall take place on the Retraction Date. CDN2 shall cause the
Transfer Agent to deliver to the holder of the Retracted Shares,
at the address of such holder recorded in the securities
register of the Company for the Exchangeable Shares or at the
address specified in the holder's Retraction Request or by
holding for pick-up by the holder at the office of the Transfer
Agent to which the Retraction Request was delivered, in payment
of such total Retraction Call Purchase Price, certificates
representing the Parent Common Shares to be delivered in respect
of such payment (which shares shall be duly issued as fully paid
and non-assessable and shall be free and clear of any Liens)
registered in the name of the holder or in such other name as
the holder may request in payment of such and, if applicable, a
cheque of CDN2 payable at par and in Canadian dollars at any
branch of the bankers of CDN2 or the Company in Canada (or, if
any part of the Retraction Call Purchase Price consists of
dividends payable in property, such property or property that is
the same as or economically equivalent to such property), and
such delivery of such certificates and cheque (and property, if
any) to the holder on behalf of CDN2 by the Transfer Agent shall
be deemed to be payment of and shall satisfy and discharge all
liability for the total Retraction Call Purchase Price to the
extent that the same is represented by such share certificates
and cheque (and property, if any), unless such cheque is not
paid on due presentation. On and after the close of business on
the Retraction Date, the holder of the Retracted Shares shall
cease to be a holder of such Retracted Shares and shall not be
entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive the Retraction Call
Purchase Price, unless upon presentation and surrender of
certificates in accordance with the foregoing provisions,
payment of the total Retraction Call Purchase Price shall not be
made, in which case the rights of such holder shall remain
unaffected until the total Retraction Call Purchase Price has
been paid in the manner hereinbefore provided. On and after the
close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the
total Retraction Call Purchase Price has been made in accordance
with the foregoing provisions, the holder of the Retracted
Shares so purchased by CDN2 shall thereafter be considered and
deemed for all purposes to be a holder of the Parent Common
Shares delivered to such holder.
A-15
<PAGE> 16
5.2 CDN2 LIQUIDATION CALL RIGHT
(a) CDN2 shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of the Company, to
purchase from all but not less than all of the holders (other
than CDN2 and its Affiliates) of Exchangeable Shares on the
Liquidation Date all but not less than all of the Exchangeable
Shares held by each such holder on payment by CDN2 of an amount
per share equal to (a) the Current Market Price multiplied by
the Current Parent Common Share Equivalent, in each case
determined on the last business day prior to the Liquidation
Date, which shall be satisfied in full in respect of all of the
Exchangeable Shares held by such holder by CDN2 causing to be
delivered to such holder such whole number of Parent Common
Shares as is equal to the product obtained by multiplying the
number of such Exchangeable Shares by the Current Parent Common
Share Equivalent (together with an amount in lieu of any
fractional Parent Common Share resulting from such calculation
payable in accordance with section 5.5), plus (b) the aggregate
of all dividends declared and unpaid on such Exchangeable Share
up to the Liquidation Date (collectively the "Liquidation Call
Purchase Price"). In the event of the exercise of the
Liquidation Call Right by CDN2, each holder shall be obligated
to sell all the Exchangeable Shares held by the holder to CDN2
on the Liquidation Date on payment by CDN2 to the holder of the
Liquidation Call Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, CDN2 must notify the
Transfer Agent and the Company of CDN2's intention to exercise
such right at least 30 days before the Liquidation Date in the
case of a voluntary liquidation, dissolution or winding up of
the Company and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or winding up of the Company. The Transfer Agent
will notify the holders of Exchangeable Shares as to whether or
not CDN2 has exercised the Liquidation Call Right forthwith
after the expiry of the date by which the same may be exercised
by CDN2. If CDN2 exercises the Liquidation Call Right, on the
Liquidation Date, CDN2 will purchase and the holders will sell
all of the Exchangeable Shares then outstanding for a price per
share equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, CDN2 shall
deposit with the Transfer Agent, on or before the Liquidation
Date, certificates representing the aggregate number of Parent
Common Shares deliverable by CDN2 (which shares shall be duly
issued as fully paid and non-assessable and shall be free and
clear of any Liens) in payment of the total Liquidation Call
Purchase Price (or the portion thereof payable in Parent Common
Shares, as the case may be) and a cheque or cheques in the
amount of the remaining portion, if any, of the total
Liquidation Call Purchase Price (or, if any part of the
Liquidation Call Purchase Price consists of dividends payable in
property, such property or property that is the same as or
economically equivalent to such
A-16
<PAGE> 17
property). Provided that such total Liquidation Call Purchase
Price has been so deposited with the Transfer Agent, on and
after the Liquidation Date the rights of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase Price
payable by CDN2 upon presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such
holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the
Parent Common Shares delivered to it. Upon surrender to the
Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the BC Company Act and the articles of
the Company and such additional documents and instruments as the
Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf
of CDN2 shall deliver to such holder, certificates representing
the Parent Common Shares to which the holder is entitled and a
cheque or cheques of CDN2 payable at par and in Canadian dollars
at any branch of the bankers of CDN2 or of the Company in Canada
in payment of the remaining portion, if any, of the total
Liquidation Call Purchase Price (or, if any part of the
Liquidation Call Purchase Price consists of dividends payable in
property, such property or property that is the same as or
economically equivalent to such property). If CDN2 does not
exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date the holders of the Exchangeable
Shares will be entitled to receive in exchange therefor the
Liquidation Amount otherwise payable by the Company in
connection with the liquidation, dissolution or winding-up of
the Company pursuant to sections 4.1 to 4.3 of the Exchangeable
Share Provisions.
5.3 CDN2 REDEMPTION CALL RIGHT
(a) CDN2 shall have the overriding right (the "Redemption Call
Right"), notwithstanding the proposed redemption of the
Exchangeable Shares by the Company on the Automatic Redemption
Date, to purchase from all but not less than all of the holders
(other than Parent or its Affiliates) of Exchangeable Shares on
the Automatic Redemption Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by CDN2
to the holder of an amount per share equal to (a) the Current
Market Price multiplied by the Current Parent Common Share
Equivalent, in each case determined on the Automatic Redemption
Date, which shall be satisfied in full in respect of all of the
Exchangeable Shares held by such holder by causing to be
delivered to such holder such number of Parent Common Shares as
is equal to the product obtained by multiplying the number of
such Exchangeable Shares by the Current Parent Common Share
Equivalent (together with an amount in lieu of any fractional
Parent Common Share resulting from such calculation payable in
accordance with section 5.5), plus (b) the aggregate of all
dividends declared and unpaid on such Exchangeable Shares
(collectively the "Redemption Call Purchase Price"). In the
event of the exercise of
A-17
<PAGE> 18
the Redemption Call Right by CDN2, each holder shall be
obligated to sell to CDN2, and CDN2 shall be obligated to
purchase, all the Exchangeable Shares held by the holder on the
Automatic Redemption Date on payment by CDN2 to the holder of
the Redemption Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, CDN2 must notify the
Transfer Agent, as agent for the holders of the Exchangeable
Shares, and the Company of CDN2's intention to exercise such
right at least 75 days before the Automatic Redemption Date. The
Transfer Agent will notify the holders of the Exchangeable
Shares as to whether or not Parent has exercised the Redemption
Call Right forthwith after the date by which the same may be
exercised by CDN2. If CDN2 exercises the Redemption Call Right,
on the Automatic Redemption Date CDN2 will purchase and the
holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Redemption Call
Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, CDN2 shall deposit
with the Transfer Agent, on or before the Automatic Redemption
Date, certificates representing the aggregate number of Parent
Common Shares deliverable by CDN2 (which shares shall be duly
issued as fully paid and non-assessable and shall be free and
clear of any Liens) in payment of the total Redemption Call
Purchase Price (or the portion thereof payable in Parent Common
Shares, as the case may be) and a cheque or cheques in the
amount of the remaining portion, if any, of the total Redemption
Call Purchase Price (or, if any of the Redemption Call Purchase
Price consists of dividends payable in property, such property
or property the same as or economically equivalent to such
property). Provided that such total Redemption Call Purchase
Price has been so deposited with the Transfer Agent, on and
after the Automatic Redemption Date the rights of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Redemption Call Purchase Price
payable by CDN2 upon presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such
holder and the holder shall on and after the Automatic
Redemption Date be considered and deemed for all purposes to be
the holder of the Parent Common Shares delivered to such holder.
Upon surrender to the Transfer Agent of a certificate or
certificates representing Exchangeable Shares, together with
such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the BC Company
Act and the articles of the Company and such additional
documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and the Transfer Agent on behalf of CDN2 shall deliver to such
holder, certificates representing the Parent Common Shares to
which the holder is entitled and a cheque or cheques of CDN2
payable at par and in Canadian dollars at any branch of the
bankers of CDN2 or of the Company in Canada in payment of the
remaining portion, if any, of the total Redemption Call Purchase
Price (or, if part of the Redemption Call Purchase Price
consists of dividends payable in property, such property or
property the same as or
A-18
<PAGE> 19
economically equivalent to such property). If CDN2 does not
exercise the Redemption Call Right in the manner described
above, on the Automatic Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange
therefor the redemption price otherwise payable by the Company
in connection with the redemption of the Exchangeable Shares
pursuant to Article 6 of the Exchangeable Share Provisions.
5.4 FRACTIONAL PARENT COMMON SHARES
No certificates or scrip representing fractional Parent Common Shares
shall be delivered to holders of Exchangeable Shares pursuant to the provisions
hereof. In lieu of any such fractional security, each person entitled to a
fractional interest in a Parent Common Share will receive an amount of cash
(rounded to the nearest whole cent), without interest, equal to the Canadian
Dollar Equivalent as of the third Business Day prior to the relevant date of
delivery of certificates representing Parent Common Shares (the "Fractional
Share Calculation Date") of the product of (i) such fraction, multiplied by (ii)
the closing sale price of Class A Shares as traded on NASDAQ and reported by the
The Wall Street Journal on the Fractional Share Calculation Date, or, if the
Class A Shares are not then quoted on NASDAQ, on such other stock exchange or
automated quotation system on which the Class A Shares are listed or quoted, as
the case may be, as may be selected by the Board of Directors for such purpose,
provided, however, that if in the opinion of the Board of Directors:
(a) the public distribution or trading activity of Class A Shares
during such period does not create a market that reflects the
fair market value of a Parent Common Share; or
(b) the number of Class A Shares that a holder of Parent Common
Shares is entitled to receive on conversion of such Parent
Common Shares is such that one Parent Common Share is not equal
in value to one Class A Share,
then the Current Market Price of a Parent Common Share shall be determined by
the Board of Directors in good faith based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem to be
appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
5.5 ECONOMIC EQUIVALENCE
The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the Board of Directors may require)
economic equivalence for the purposes of any provision herein that requires such
a determination and each such determination shall be conclusive and binding on
Parent and the holders of Exchangeable Shares, where applicable.
5.6 CAPITAL REORGANIZATION OF PARENT
If at any time there is a capital reorganization of Parent that is not
provided for in
A-19
<PAGE> 20
subsection 1.1(r) or a consolidation, merger, arrangement or amalgamation
(statutory or otherwise) of Parent with or into another entity (any such event
being called a "Capital Reorganization"), any holder of Exchangeable Shares
whose Exchangeable Shares have not been exchanged for Parent Common Shares in
accordance with the provisions hereof prior to the record date for such Capital
Reorganization shall be entitled to receive and shall accept, upon any such
exchange occurring pursuant to the provisions hereof at any time after the
record date for such Capital Reorganization, in lieu of the Parent Common Shares
that he would otherwise have been entitled to receive pursuant to the provisions
hereof, the number of shares or other securities of Parent or of the body
corporate resulting, surviving or continuing from the Capital Reorganization, or
other property, that such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the record date, he had been the
registered holder of the number of Parent Common Shares to which he was then
entitled upon any exchange of his Exchangeable Shares into Parent Common Shares
in accordance with the provisions hereof, subject to adjustment thereafter in
the same manner, as nearly as may be possible, as is provided for in subsection
1.1(r); provided that no such Capital Reorganization shall be carried into
effect unless all necessary steps shall have been taken so that each holder of
Exchangeable Shares shall thereafter be entitled to receive, upon any exchange
of his Exchangeable Shares pursuant to the provisions hereof, such number of
shares or other securities of Parent or of the body corporate resulting,
surviving or continuing from the Capital Reorganization, or other property.
5.7 OTHER CHANGE IN PARENT COMMON SHARES
In the case of any reclassification of, or other change in, the
outstanding Parent Common Shares other than a Parent Common Share Reorganization
or a Capital Reorganization, such changes shall be made in the rights attaching
to the Exchangeable Shares, without any action on the part of the Company or the
holders of the Exchangeable Shares to the extent permitted by applicable law,
effective immediately following the record date for such reclassification or
other change, to the extent necessary to ensure that holders of Exchangeable
Shares shall be entitled to receive, upon the occurrence at any time after such
record date of any event whereby they would receive Parent Common Shares
pursuant to the provisions hereof, such shares, securities or rights as they
would have received if their Exchangeable Shares had been exchanged for Parent
Common Shares pursuant to the provisions hereof immediately prior to such record
date, subject to adjustment thereafter in the same manner, as nearly as may be
possible, as is provided for in subsection 1.1(r).
A-20
<PAGE> 21
ARTICLE 6
AMENDMENT
6.1 PLAN OF ARRANGEMENT AMENDMENT
(a) By instrument in writing the Company and Target may amend,
modify and/or supplement this Plan of Arrangement at any time
and from time to time provided that any such amendment,
modification, or supplement must be (i) agreed to by Parent,
(ii) filed with the Court and, if made following the Meeting,
approved by the Court and (iii) communicated to holders of
Target Common Shares and Target Options in the manner required
by the Court (if so required).
(b) Any amendment, modification or supplement to this Plan of
Arrangement that is approved by the Court following the Meeting
shall be effective only if (i) it is consented to by each of the
Company, Target and Parent and (ii) it is consented to by the
holders of the Target Common Shares and the holders of the
Target Options in each case to the extent so required by the
Court.
ARTICLE 7
GUARANTY
7.1 GUARANTY AND ASSIGNMENT
BVI, or Parent in the event BVI fails to perform, shall unconditionally
and irrevocably guarantee the full and punctual performance of all of the
obligations of the Company and CDN2 under this Plan of Arrangement. CDN2 may
assign all or a portion of its rights and obligations (including, without
limitation, CDN2's obligations pursuant to section 4.2, the Retraction Call
Right, the Liquidation Call Right and the Redemption Call Right) under this Plan
of Arrangement to Parent or to BVI (collectively, the "Permitted Assigns" and
either individually a "Permitted Assign") without the consent of the holders of
Exchangeable Shares, provided that CDN2 shall not thereby be released from such
obligations.
A-21
<PAGE> 22
APPENDIX A TO PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Company shall have the
following special rights and restrictions.
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
(a) "AFFILIATE" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or
under common control with, that Person, (b) any other Person
that owns or controls 10% or more of any class of equity
securities (including any equity securities issuable upon the
exercise of any option or convertible security) of that Person
or any of its Affiliates, or (c) any director, partner or
officer of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with")
as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
(b) "AUTOMATIC REDEMPTION DATE" means August 31, 2009, unless such
date shall be accelerated at any time to a specified earlier
date by the Board of Directors upon at least 75 days prior
written notice to the registered holders of Exchangeable Shares,
in which case the Automatic Redemption Date shall be such
earlier date; provided, however, that the Board of Directors may
so accelerate the Automatic Redemption Date only at such time as
there are outstanding fewer than 100,000 Exchangeable Shares
held by holders other than Parent and its Affiliates.
(c) "BOARD OF DIRECTORS" means the board of directors of the
Company.
(d) "BUSINESS DAY" means any day other than a Saturday, a Sunday or
a day when banks are not open for business in one or both of
Irvine, California and Vancouver, British Columbia.
(e) "BVI" means Broadcom (BVI) Limited, a company existing pursuant
to the laws of the British Virgin Islands.
(f) "CANADIAN DOLLAR EQUIVALENT" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount")
at any date the product obtained by multiplying (a) the Foreign
Currency Amount by (b) the noon spot exchange rate
A-A-1
<PAGE> 23
on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such
spot exchange rate is not available, such exchange rate on such
date for such foreign currency expressed in Canadian dollars as
may be deemed by the Board of Directors to be appropriate for
such purpose.
(g) "CAPITAL REORGANIZATION" has the meaning ascribed thereto in
section 9.2 of these share provisions.
(h) "BC COMPANY ACT" means the Company Act (British Columbia) as
amended from time to time.
(i) "CDN2" means HH Acquisition ULC, a company existing under the
Companies Act (Nova Scotia) or a Permitted Assign (as that term
is defined in section 7.1 of the Plan of Arrangement).
(j) "CDN2 CALL NOTICE" has the meaning ascribed thereto in
subsection 5.1(b) of the Plan of Arrangement.
(k) "CLASS A SHARES" means the Class A shares of common stock of
Parent.
(l) "COMPANY" means HH Acquisition Inc., a company incorporated
under the BC Company Act.
(m) "CURRENT MARKET PRICE" means, in respect of Parent Common Shares
on any date, the Canadian Dollar Equivalent of the closing sale
price of Class A Shares on such day (or, if no trades of Class A
Shares occurred on such day, on the last trading day prior
thereto on which such trades occurred) as traded on NASDAQ and
reported by The Wall Street Journal, or, if the Class A Shares
are not then quoted on NASDAQ, on such other stock exchange or
automated quotation system on which the Class A Shares are
listed or quoted, as the case may be, as may be selected by the
Board of Directors for such purpose, provided, however, that if
in the opinion of the Board of Directors:
(i) the public distribution or trading activity of Class A
Shares during such period does not create a market that
reflects the fair market value of a Parent Common Share;
or
(ii) the number of Class A Shares that a holder of Parent
Common Shares is entitled to receive on conversion of
such Parent Common Shares is such that one Parent Common
share is not equal in value to one Class A Share.
then the Current Market Price of a Parent Common Share shall be
determined by the Board of Directors in good faith based upon
the advice of such qualified independent financial advisors as
the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding.
A-A-2
<PAGE> 24
(n) "CURRENT PARENT COMMON SHARE EQUIVALENT" means, on any date, the
equivalent as at such date of one Parent Common Share as at the
Effective Date, expressed to four decimal places, determined by
applying on a cumulative basis the following adjustments, to the
extent applicable by reason of any transactions occurring in
respect of Parent Common Shares between the Effective Date and
such date, the Current Parent Common Share Equivalent as at the
Effective Date being 1.0000:
(i) if Parent shall (A) subdivide, redivide or change its
then outstanding Parent Common Shares into a greater
number of Parent Common Shares, unless the Company is
permitted under applicable law without a vote of its
shareholders to make, and shall simultaneously make, the
same or an economically equivalent change to the rights
of the holders of Exchangeable Shares, (B) reduce,
combine, consolidate or change its then outstanding
Parent Common Shares into a lesser number of Parent
Common Shares, unless the Company is permitted under
applicable law without a vote of its shareholders to
make, and shall simultaneously make, the same or an
economically equivalent change to the rights of the
holders of Exchangeable Shares, or (C) issue Parent
Common Shares (or securities exchangeable or convertible
into Parent Common Shares) to the holders of all or
substantially all of its then outstanding Parent Common
Shares by way of stock dividend or other distribution
(other than to holders of Parent Common Shares who
exercise an option to receive stock dividends in lieu of
receiving cash dividends), unless the Company is
permitted under applicable law without a vote of its
shareholders to issue or distribute, and shall
simultaneously issue and distribute, equivalent numbers
of Parent Common Shares or other securities (adjusted if
necessary in accordance with the Current Parent Common
Share Equivalent), or the economic equivalent on a per
share basis, to the holders of the Exchangeable Shares
(any of such events being herein called a "Parent Common
Share Reorganization"), the Current Parent Common Share
Equivalent shall be adjusted effective immediately after
the record date at which the holders of Parent Common
Shares are determined for the purpose of the Parent
Common Share Reorganization by multiplying the Current
Parent Common Share Equivalent in effect on such record
date by the quotient obtained when:
(I) the number of Parent Common Shares outstanding
after the completion of such Parent Common Share
Reorganization (but before giving effect to the
issue of any Parent Common Shares issued after
such record date otherwise than as part of such
Parent Common Share Reorganization) including,
in the case where securities exchangeable or
convertible into Parent Common Shares are
distributed, the number of Parent Common Shares
that would have been outstanding had such
securities been exchanged for or
A-A-3
<PAGE> 25
converted into Parent Common Shares on such
record date, is divided by
(II) the number of Parent Common Shares outstanding
on such record date before giving effect to the
Parent Common Share Reorganization;
(o) "EFFECTIVE DATE" has the meaning ascribed thereto in the Plan of
Arrangement.
(p) "EXCHANGEABLE SHARES" mean the Exchangeable Non-Voting Shares of
the Company having the special rights and restrictions set forth
herein.
(q) "LIEN" has the meaning ascribed thereto in the Plan of
Arrangement.
(r) "LIQUIDATION AMOUNT" has the meaning ascribed thereto in section
4.1 of these share provisions.
(s) "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in
section 5.2 of the Plan of Arrangement.
(t) "LIQUIDATION DATE" has the meaning ascribed thereto in section
4.1 of these share provisions.
(u) "NASDAQ" means the distinct tier of The Nasdaq Stock Market
referred to as the Nasdaq National Market.
(v) "PARENT" means Broadcom Corporation a corporation organised and
existing under the laws of the State of California, and any
successor corporation.
(w) "PARENT COMMON SHARE REORGANISATION" has the meaning ascribed
thereto in subsection 1.1(n) of these share provisions.
(x) "PARENT COMMON SHARES" mean the Class B shares of common stock
of Parent, with a par value of U.S.$0.001 per share and having
ten votes per share, and any other securities into which such
shares may be changed.
(y) "PARENT DIVIDEND DECLARATION DATE" means the date on which the
Board of Directors of Parent declares any dividend on the Parent
Common Shares.
(z) "PARENT SUPPORT AGREEMENT" means the Parent Support Agreement
among Parent BVI, CDN2 and the Company, made as of the Effective
Date.
(aa) "PERSON" means any natural person, corporation, general
partnership, limited partnership, limited liability company or
partnership, proprietorship, other
A-A-4
<PAGE> 26
business organization, trust, union, association or Governmental
or Regulatory Authority;
(bb) "PLAN OF ARRANGEMENT" means the plan of arrangement relating to
the arrangement of the Company under section 252 of the BC
Company Act, to which plan these share provisions are attached.
(cc) "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in
section 5.3 of the Plan of Arrangement.
(dd) "REDEMPTION PRICE" has the meaning ascribed thereto in section
6.1 of these share provisions.
(ee) "RETRACTED SHARES" has the meaning ascribed thereto in section
5.1 of these share provisions.
(ff) "RETRACTION CALL RIGHT" has the meaning ascribed thereto in
section 5.1 of the Plan of Arrangement.
(gg) "RETRACTION DATE" has the meaning ascribed thereto in section
5.2 of these share provisions.
(hh) "RETRACTION PRICE" has the meaning ascribed thereto in section
5.1 of these share provisions.
(ii) "RETRACTION REQUEST" has the meaning ascribed thereto in section
5.1 of these share provisions.
(jj) "TAX ACT" means the Income Tax Act (Canada) as amended from time
to time.
(kk) "TRANSFER AGENT" means CIBC Mellon Trust Company or such other
person as may from time to time be the registrar and transfer
agent for the Exchangeable Shares.
(ll) "TRUSTEE" means US Trust Corporation, and any successor trustee
appointed under the Voting and Exchange Trust Agreement.
(mm) "VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and
Exchange Trust Agreement between the Company, Parent, BVI, CDN2
and the Trustee, made as of the Effective Date.
1.2 All amounts required to be paid, deposited or delivered hereunder shall be
paid, deposited or delivered after deduction of any amount required by
applicable law to be deducted or withheld on account of tax and the deduction of
such amounts and remittance to the applicable
A-A-5
<PAGE> 27
tax authorities shall, to the extent thereof, satisfy such requirement to pay,
deposit or deliver hereunder.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank senior to the Common Shares and any other
shares ranking junior to the Exchangeable Shares, with respect to the payment of
dividends and the distribution of assets in the event of the liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, or
any other distribution of the assets of the Company among its shareholders for
the purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the Board
of Directors shall, subject to applicable law, declare a dividend on each
Exchangeable Share (a) in the case of a cash dividend declared on the Parent
Common Shares, in an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Parent Dividend Declaration Date of the cash
dividend declared on such number of Parent Common Shares as is equal to the
Current Parent Common Share Equivalent on the Parent Dividend Declaration Date
or (b) in the case of a stock dividend declared on the Parent Common Shares to
be paid in Parent Common Shares, in such whole number of Exchangeable Shares for
the Exchangeable Shares held by each holder as is equal to the number of Parent
Common Shares to be paid as a dividend per Parent Common Share (if such
calculation results in a fraction of an Exchangeable Share, the holder shall
receive in lieu of such fraction an amount in cash equal to the product obtained
by multiplying the amount that would be payable in respect of an equal fraction
of a Parent Common Share as at the Parent Dividend Declaration Date, calculated
in accordance with section 9.4, by the Current Parent Common Share Equivalent as
at such date) or (c) in the case of a dividend declared on the Parent Common
Shares to be paid in property other than cash or Parent Common Shares (including
without limitation other securities of Parent), in such type and amount of
property for each Exchangeable Share as is the same as or economically
equivalent (as determined by the Board of Directors in accordance with section
9.1) to the type and amount of property to be paid as a dividend on such number
of Parent Common Shares as is equal to the Current Parent Common Share
Equivalent on the Parent Dividend Declaration Date. Such dividends shall be paid
out of money, assets or property of the Company properly applicable to the
payment of dividends, or out of authorized but unissued Exchangeable Shares.
3.2 Cheques of the Company payable at par at any branch of the bankers of the
Company shall be issued in respect of any cash dividends contemplated by
subsection 3.1(a) hereof or in respect of any cash amount payable in lieu of a
fractional Exchangeable Share in connection with any stock dividends
contemplated by subsection 3.1(b) hereof and the sending of such a cheque to
each holder of an Exchangeable Share shall satisfy the cash dividend represented
thereby
A-A-6
<PAGE> 28
unless the cheque is not paid on presentation. Certificates registered in the
name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by subsection 3. 1
(b) hereof and the sending of such a certificate to each holder of an
Exchangeable Share shall satisfy the stock dividend represented thereby. Such
other type and amount of property in respect of any dividends contemplated by
subsection 3.1(c) hereof shall be issued, distributed or transferred by the
Company in such manner as it shall determine and the issuance, distribution or
transfer thereof by the Company to each holder of an Exchangeable Share shall
satisfy the dividend represented thereby. No holder of an Exchangeable Share
shall be entitled to recover by action or other legal process against the
Company any dividend that is represented by a cheque that has not been duly
presented to the Company's bankers for payment or that otherwise remains
unclaimed for a period of six years from the date on which such dividend was
payable.
3.3 The record date for the determination of the holders of Exchangeable Shares
entitled to receive payment of, and the payment date for, any dividend declared
on the Exchangeable Shares under section 3.1 hereof shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the Parent Common Shares.
3.4 If on any payment date for any dividends declared on the Exchangeable Shares
under section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Company shall have sufficient moneys, assets or property properly
applicable to the payment of such dividends.
3.5 So long as any of the Exchangeable Shares are outstanding, the Company shall
not at any time without, but may at any time with, the approval of the holders
of the Exchangeable Shares given as specified in section 8.2 of these share
provisions:
(a) pay any dividends on the Common Shares, or any other shares
ranking junior to the Exchangeable Shares, other than stock
dividends payable in Common Shares or any such other shares
ranking junior to the Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect
of Common Shares or any other shares ranking junior to the
Exchangeable Shares;
(c) redeem or purchase any other shares of the Company ranking
equally with the Exchangeable Shares with respect to the payment
of dividends or on any liquidation distribution;
(d) issue any Exchangeable Shares other than (i) by way of stock
dividends to the holders of such Exchangeable Shares, (ii)
otherwise pro rata to holders of Exchangeable Shares, (iii) as
contemplated by the Parent Support Agreement or (iv) pursuant to
any agreements or rights in existence at the Effective Date; or
(e) issue any other shares of the Company ranking equally with or
senior to the Exchangeable Shares;
A-A-7
<PAGE> 29
provided that the restrictions in subsections 3.5(a), 3.5(b) and 3.5(c) shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared to date on the Parent Common Shares shall have been
declared on the Exchangeable Shares and paid in full.
ARTICLE 4
DISTRIBUTION ON LIQUIDATION
4.1 In the event of the liquidation, dissolution or winding-up of the Company or
any other distribution of the assets of the Company among its shareholders for
the purpose of winding up its affairs, a holder of Exchangeable Shares shall be
entitled, subject to applicable law, to receive from the assets of the Company
in respect of each Exchangeable Share held by such holder on the effective date
(the "Liquidation Date") of such liquidation, dissolution or winding-up, before
any distribution of any part of the assets of the Company among the holders of
the Common Shares or any other shares ranking junior to the Exchangeable Shares,
an amount per share equal to (a) the Current Market Price multiplied by the
Current Parent Common Share Equivalent, in each case determined on the last
Business Day prior to the Liquidation Date, which shall be satisfied in full in
respect of all of the Exchangeable Shares held by such holder by the Company
causing to be delivered to such holder such whole number of Parent Common Shares
as is equal to the product obtained by multiplying the number of such
Exchangeable Shares by the Current Parent Common Share Equivalent (together with
an amount in lieu of any fractional Parent Common Share resulting from such
calculation payable in accordance with section 9.4), plus (b) the aggregate of
all declared and unpaid dividends on each such Exchangeable Share up to the
Liquidation Date (collectively the "Liquidation Amount").
4.2 On or promptly after the Liquidation Date, and subject to the exercise by
CDN2 of the Liquidation Call Right, the Company shall cause to be delivered to
the holders of the Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the BC Company Act and the articles of the Company and such additional documents
and instruments as the Transfer Agent may reasonably require, at the registered
office of the Company or at any office of the Transfer Agent as may be specified
by the Company by notice to the holders of the Exchangeable Shares. Payment of
the total Liquidation Amount for such Exchangeable Shares shall be made by
delivery to each holder, at the address of the holder recorded in the securities
register of the Company for the Exchangeable Shares or by holding for pick-up by
the holder at the registered office of the Company or at any office of the
Transfer Agent as may be specified by the Company by notice to the holders of
Exchangeable Shares, on behalf of the Company of certificates representing the
Parent Common Shares to be delivered in payment thereof (which shares shall be
duly issued as fully paid and non-assessable and shall be free and clear of any
Liens) and a cheque of the Company payable at par at any branch of the bankers
of the Company in respect of any fractional Parent Common Share and all declared
and unpaid dividends comprising part of the total Liquidation Amount (or, if any
of such dividends were payable in property, such property or property that is
the same as or economically equivalent to such property).
A-A-8
<PAGE> 30
On and after the Liquidation Date, the holders of the Exchangeable Shares shall
cease to be holders of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof, other than the right
to receive the total Liquidation Amount in respect of their Exchangeable Shares,
unless payment of the total Liquidation Amount for such Exchangeable Shares
shall not be made upon presentation and surrender of share certificates in
accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Liquidation Amount has been paid
in the manner hereinbefore provided. The Company shall have the right at any
time on or after the Liquidation Date to deposit or cause to be deposited the
total Liquidation Amount in respect of the Exchangeable Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account with any chartered bank or trust company
in Canada. Upon such deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be limited to receiving the total
Liquidation Amount (without interest) for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon such payment or
deposit of the total Liquidation Amount, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be the holders of
the Parent Common Shares delivered to them.
4.3 After the Company has satisfied its obligations to pay the holders of the
Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant to
section 4.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of the Company.
ARTICLE 5
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
5.1 A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by CDN2 of the Retraction Call Right and otherwise upon compliance
with the provisions of this Article 5, to require the Company to redeem any or
all of the Exchangeable Shares registered in the name of such holder (the
"Retracted Shares") for an amount for each Retracted Share equal to (a) the
Current Market Price multiplied by the Current Parent Common Share Equivalent,
in each case determined on the last Business Day prior to the Retraction Date,
which shall be satisfied in full in respect of the Retracted Shares by the
Company causing to be delivered to such holder such whole number of Parent
Common Shares as is equal to the product obtained by multiplying the number of
Retracted Shares by the Current Parent Common Share Equivalent (together with an
amount in lieu of any fractional Parent Common Share resulting from such
calculation payable in accordance with section 9.4), plus (b) the aggregate of
all dividends declared and unpaid on each Retracted Share up to the Retraction
Date (collectively the "Retraction Price", provided that if the record date for
any such declared and unpaid dividend occurs on or after the Retraction Date the
Retraction Price shall not include such declared and unpaid dividends). To
effect such redemption, the holder shall present and surrender at any office of
the Transfer Agent listed on Schedule A hereto the certificate or certificates
representing the Exchangeable Shares which the holder desires to have the
Company redeem, together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the BC Company Act
and the articles of the Company and such additional documents and instruments as
the Transfer Agent may reasonably require, and together
A-A-9
<PAGE> 31
with a duly executed statement (the "Retraction Request") in the form of
Schedule A hereto or in such other form as may be acceptable to the Transfer
Agent:
(a) specifying that the holder desires to have the Retracted Shares
represented by such certificate or certificates redeemed by the
Company; and
(b) acknowledging the Retraction Call Right of CDN2 to purchase all
but not less than all the Retracted Shares directly from the
holder and that the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted Shares to
CDN2 in accordance with the Retraction Call Right.
5.2 Subject to the exercise by CDN2 of the Retraction Call Right, upon receipt
by the Transfer Agent in the manner specified in section 5.1 hereof of a
certificate or certificates representing the number of Exchangeable Shares which
the holder desires to have the Company redeem, together with such other
documents and instruments as may be required pursuant to section 5.1 and a
Retraction Request, and provided that the Retraction Request is not revoked by
the holders in the manner specified in Section 5.7, the Company shall redeem the
Retracted Shares effective at the close of business on the sixth Business Day
after the Retraction Request is received (the "Retraction Date") and shall cause
to be delivered to such holder the total Retraction Price with respect to such
shares. If only a part of the Exchangeable Shares represented by any certificate
are redeemed (or purchased by Parent pursuant to the Retraction Call Right), a
new certificate for the balance of such Exchangeable Shares shall be issued to
the holder at the expense of the Company.
5.3 Upon receipt by the Transfer Agent of a Retraction Request, the Transfer
Agent shall forthwith notify Parent and CDN2 thereof. In order to exercise the
Retraction Call Right, CDN2 must deliver a CDN2 Call Notice to the Transfer
Agent prior to the expiry of the third Business Day after the receipt by the
Transfer Agent of the Retraction Request. If CDN2 does not so notify the
Transfer Agent, the Transfer Agent will notify the holder as soon as possible
thereafter that CDN2 will not exercise the Retraction Call Right. If CDN2
delivers the CDN2 Call Notice before the end of such three Business Day period,
and provided that the Retraction Request is not revoked by the holder in the
manner specified in section 5.7, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the Retracted Shares to
CDN2 in accordance with the Retraction Call Right. In such event, the Company
shall not redeem the Retracted Shares and CDN2 shall purchase from such holder
and such holder shall sell to CDN2 on the Retraction Date the Retracted Shares
pursuant to the Retraction Call Right.
5.4 If a Retraction Request is received by the Transfer Agent pursuant to
section 5.1 and CDN2 has not exercised the Retraction Call Right, and provided
the Retraction Request is not revoked by the holder in the manner specified in
section 5.7, the Company shall cause the Transfer Agent to deliver to the holder
of the Retracted Shares, at the address of the holder recorded in the securities
register of the Company for the Exchangeable Shares or at the address specified
in the holder's Retraction Request or by holding for pick-up by the holder at
the office of the Transfer Agent to which the Retraction Request was delivered,
certificates representing the Parent Common
A-A-10
<PAGE> 32
Shares to be delivered to the holder in payment of the total Retraction Price
for the Retracted Shares (or the portion thereof payable in Parent Common
Shares, as the case may be) (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any Liens) registered in the name
of the holder or in such other name as the holder may request and a cheque of
the Company payable at par at any branch of the bankers of the Company in
payment of the remaining portion, if any, of the total Retraction Price (or, if
any part of the Retraction Price consists of dividends payable in property, such
property or property that is the same as or economically equivalent to such
property), and such delivery of such certificates and cheque (and property, if
any) on behalf of the Company, by the Transfer Agent shall be deemed to be
payment of and shall satisfy and discharge all liability for the total
Retraction Price, to the extent that the same is represented by such share
certificates and cheque (and property, if any), unless such cheque is not paid
on due presentation.
5.5 On and after the close of business on the Retraction Date, the holder of the
Retracted Shares shall cease to be a holder of such Retracted Shares and shall
not be entitled to exercise any of the rights of a holder in respect thereof,
other than the right to receive his proportionate part of the total Retraction
Price, unless upon presentation and surrender of certificates in accordance with
the foregoing provisions, payment of the total Retraction Price shall not be
made, in which case the rights of such holder shall remain unaffected until the
total Retraction Price has been paid in the manner hereinbefore provided. On and
after the close of business on the Retraction Date, provided that presentation
and surrender of certificates and payment of the total Retraction Price has been
made in accordance with the foregoing provisions, the holder of the Retracted
Shares so redeemed by the Company shall thereafter be considered and deemed for
all purposes to be a holder of the Parent Common Shares delivered to it.
5.6 Notwithstanding any other provision of this Article 5, the Company shall not
be obligated to redeem Retracted Shares specified by a holder in a Retraction
Request to the extent that such redemption of Retracted Shares would be contrary
to solvency requirements or other provisions of applicable law. If the Company
believes that on any Retraction Date it would not be permitted by any of such
provisions to redeem the Retracted Shares tendered for redemption on such date,
and provided that CDN2 shall not have exercised the Retraction Call Right with
respect to the Retracted Shares, the Company shall be obligated to redeem
Retracted Shares specified by a holder in a Retraction Request only to the
extent of the maximum number that may be so redeemed (rounded down to a whole
number of shares) as would not be contrary to such provisions on a pro rata
basis and shall notify the holder at least two Business Days prior to the
Retraction Date as to the number of Retracted Shares which will not be redeemed
by the Company and the Company shall issue to each holder of Retracted Shares a
new certificate, at the expense of the Company, representing the Retracted
Shares not redeemed by the Company pursuant to section 5.2 hereof. The holder of
any such Retracted Shares not redeemed by the Company pursuant to section 5.2 of
these share provisions as a result of solvency requirements of applicable law
shall be deemed by giving the Retraction Request to require Parent to purchase
such Retracted Shares from such holder pursuant to the Exchange Right (as
defined in the Voting and Exchange Trust Agreement).
5.7 A holder of Retracted Shares may, by notice in writing given by the holder
to the Company and to the Transfer Agent before the close of business on the
Business Day immediately
A-A-11
<PAGE> 33
preceding the Retraction Date, withdraw its Retraction Request, in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to Parent shall be deemed to have been revoked.
ARTICLE 6
REDEMPTION OF EXCHANGEABLE SHARES
6.1 Subject to applicable law, and if CDN2 does not exercise the Redemption Call
Right, the Company shall on the Automatic Redemption Date redeem the whole of
the then outstanding Exchangeable Shares for an amount per share equal to (a)
the Current Market Price multiplied by the Current Parent Common Share
Equivalent, in each case determined on the last business day prior to the
Automatic Redemption Date, which shall be satisfied in full in respect of all of
the Exchangeable Shares held by each holder of Exchangeable Shares by the
Company causing to be delivered to such holder such whole number of Parent
Common Shares as is equal to the product obtained by multiplying the number of
such Exchangeable Shares by the Current Parent Common Share Equivalent (together
with an amount in lieu of any fractional Parent Common Share resulting from such
calculation payable in accordance with section 9.4), plus (b) the aggregate of
all declared and unpaid dividends thereon up to the Automatic Redemption Date
(collectively the "Redemption Price").
6.2 In any case of a redemption of Exchangeable Shares under this Article 6, the
Company shall, at least 75 days before the Automatic Redemption Date, send or
cause to be sent to each holder of Exchangeable Shares a notice in writing of
the redemption by the Company or the purchase by CDN2 under the Redemption Call
Right, as the case may be, of the Exchangeable Shares held by such holder. Such
notice shall set out the formula for determining the Redemption Price or the
Redemption Call Purchase Price, as the case may be, the Automatic Redemption
Date and, if applicable, particulars of the Redemption Call Right.
6.3 On or after the Automatic Redemption Date and subject to the exercise by
CDN2 of the Redemption Call Right, the Company shall cause to be delivered to
the holders of the Exchangeable Shares the Redemption Price for each such
Exchangeable Share upon presentation and surrender at any office of the Transfer
Agent of the certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the BC Company Act and the articles of the Company and
such additional documents and instruments as the Transfer Agent may reasonably
require. Payment of the total Redemption Price for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Company or by holding for pick up by the
holder at the registered office of the Company or at any office of the Transfer
Agent as may be specified by the Company in such notice, on behalf of the
Company of certificates representing the Parent Common Shares to be delivered to
the holder in payment of the Redemption Price (or the portion thereof payable in
Parent Common Shares, as the case may be) (which shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any Liens) and a
cheque of the Company payable at par at any branch of the bankers of the Company
in respect of any fractional Parent Common Share and all declared and unpaid
dividends comprising part of the total Redemption Price (or, if any of such
dividends are payable in property, such property or property of the economic
equivalent thereof). On and after the Automatic
A-A-12
<PAGE> 34
Redemption Date, the holders of the Exchangeable Shares called for redemption
shall cease to be holders of such Exchangeable Shares and shall not be entitled
to exercise any of the rights of holders in respect thereof, other than the
right to receive the total Redemption Price for their Exchangeable Shares,
unless payment of the total Redemption Price for such Exchangeable Shares shall
not be made upon presentation and surrender of certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. The Company shall have the right at any time to deposit
or cause to be deposited the total Redemption Price of the Exchangeable Shares
so called for redemption, or of such of the said Exchangeable Shares represented
by certificates that have not at the date of such deposit been surrendered by
the holders thereof in connection with such redemption, in a custodial account
with any chartered bank or trust company in Canada named in such notice. Upon
the later of such deposit being made and the Automatic Redemption Date, the
Exchangeable Shares in respect whereof such deposit shall have been made shall
be redeemed and the rights of the holders thereof after such deposit or
Automatic Redemption Date, as the case may be, shall be limited to receiving the
total Redemption Price for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of the
total Redemption Price, the holders of the Exchangeable Shares shall thereafter
be considered and deemed for all purposes to be holders of the Parent Common
Shares delivered to them.
ARTICLE 7
VOTING RIGHTS
7.1 Except as required by applicable law and the provisions of sections 3.5, 8.1
and 10.2, the holders of the Exchangeable Shares shall not be entitled as such
to receive notice of or to attend any meeting of the members of the Company or
to vote at any such meeting.
ARTICLE 8
AMENDMENT AND APPROVAL
8.1 The special rights and restrictions attaching to the Exchangeable Shares may
be added to, changed or removed but only with the approval of the holders of the
Exchangeable Shares given as hereinafter specified.
8.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which the holders of at
least 50% of the outstanding Exchangeable Shares at that time are present or
represented by proxy. If at any such meeting the holders of at least 50% of the
outstanding Exchangeable Shares at that time are not present or represented by
proxy within one-half hour after the time appointed for such meeting then the
meeting shall be adjourned to such date not less than 10 days thereafter and to
such time and place as may be designated by the Chairman of such meeting. At
such adjourned meeting the holders of Exchangeable Shares present
A-A-13
<PAGE> 35
or represented by proxy thereat may transact the business for which the meeting
was originally called and a resolution passed thereat by the affirmative vote of
not less than two-thirds of the votes cast on such resolution at such meeting
shall constitute the approval or consent of the holders of the Exchangeable
Shares.
ARTICLE 9
ECONOMIC EQUIVALENCE, CHANGES RELATING TO PARENT
9.1 The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the Board of Directors may require)
economic equivalence for the purposes of any provision herein that requires such
a determination and each such determination shall be conclusive and binding on
Parent, where applicable.
9.2 If at any time there is a capital reorganization of Parent that is not
provided for in subsection 1.1(n) or a consolidation, merger, arrangement or
amalgamation (statutory or otherwise) of Parent with or into another entity (any
such event being called a "Capital Reorganization"), any holder of Exchangeable
Shares whose Exchangeable Shares have not been exchanged for Parent Common
Shares in accordance with the provisions hereof prior to the record date for
such Capital Reorganization shall be entitled to receive and shall accept, upon
any such exchange occurring pursuant to the provisions hereof at any time after
the record date for such Capital Reorganization, in lieu of the Parent Common
Shares that he would otherwise have been entitled to receive pursuant to the
provisions hereof, the number of shares or other securities of Parent or of the
body corporate resulting, surviving or continuing from the Capital
Reorganization, or other property, that such holder would have been entitled to
receive as a result of such Capital Reorganization if, on the record date, he
had been the registered holder of the number of Parent Common Shares to which he
was then entitled upon any exchange of his Exchangeable Shares into Parent
Common Shares in accordance with the provisions hereof, subject to adjustment
thereafter in the same manner, as nearly as may be possible, as is provided for
in subsection 1.1(n); provided that no such Capital Reorganization shall be
carried into effect unless all necessary steps shall have been taken so that
each holder of Exchangeable Shares shall thereafter be entitled to receive, upon
any exchange of his Exchangeable Shares pursuant to the provisions hereof, such
number of shares or other securities of Parent or of the body corporate
resulting, surviving or continuing from the Capital Reorganization, or other
property.
9.3 In the case of any reclassification of, or other change in, the outstanding
Parent Common Shares other than a Parent Common Share Reorganization or a
Capital Reorganization, such changes shall be made in the rights attaching to
the Exchangeable Shares, without any action on the part of the Company or the
holders of the Exchangeable Shares to the extent permitted by applicable law,
effective immediately following the record date for such reclassification or
other change, to the extent necessary to ensure that holders of Exchangeable
Shares shall be entitled to receive, upon the occurrence at any time after such
record date of any event whereby they would receive Parent Common Shares
pursuant to the provisions hereof, such shares, securities or rights as they
would have received if their Exchangeable Shares had been exchanged for Parent
Common Shares pursuant to the provisions hereof immediately prior to such record
date, subject to
A-A-14
<PAGE> 36
adjustment thereafter in the same manner, as nearly as may be possible, as is
provided for in subsection 1.1(n).
9.4 If and whenever at any time up to and including the Liquidation Date:
(a) shares or securities of Parent of any class other than Parent
Common Shares (other than shares convertible into or
exchangeable for or carrying rights to acquire Parent Common
Shares);
(b) rights, options or warrants, other than those referred to in
subsection 1.1(n);
(c) evidences of indebtedness of Parent; or
(d) assets of Parent;
are issued or distributed to the holders of all or substantially all of the then
outstanding Parent Common Shares, the economic equivalent on a per share basis
of such rights, options, securities, shares, evidences of indebtedness or other
assets shall be issued or distributed simultaneously to holders of the
Exchangeable Shares whose Exchangeable shares have not been exchanged for Parent
Common Shares in accordance with the provisions hereof prior to the record date
for such issuance or distribution.
9.5 No certificates or scrip representing fractional Parent Common Shares shall
be delivered to holders of Exchangeable Shares pursuant to the provisions
hereof. In lieu of any such fractional security, each person entitled to a
fractional interest in a Parent Common Share will receive an amount of cash
(rounded to the nearest whole cent), without interest, equal to the Canadian
Dollar Equivalent as of the fourth Business Day prior to the relevant date of
delivery of certificates representing Parent Common Shares (the "Fractional
Share Calculation Date") of the product of (i) such fraction, multiplied by (ii)
the closing sale price of Parent Common Shares as reported on NASDAQ on the
Fractional Share Calculation Date.
ARTICLE 10
ACTIONS BY THE COMPANY UNDER PARENT SUPPORT AGREEMENT
10.1 The Company will take all such actions and do all such things as shall be
necessary or advisable to perform and comply with and to ensure performance and
compliance by Parent with all provisions of the Parent Support Agreement and the
Voting and Exchange Trust Agreement applicable to the Company and Parent,
respectively, in accordance with the terms thereof including, without
limitation, taking all such actions and doing all such things as shall be
necessary or advisable to enforce to the fullest extent possible for the direct
benefit of the Company and the holders of Exchangeable Shares all rights and
benefits in favour of the Company under or pursuant to such agreements.
10.2 The Company shall not propose, agree to or otherwise give effect to any
amendment to, or waiver or forgiveness of its rights or obligations under, the
Parent Support Agreement and the Voting and Exchange Trust Agreement without the
approval of the holders of the Exchangeable
A-A-15
<PAGE> 37
Shares given in accordance with section 8.2 of these share provisions other than
such amendments, waivers and/or forgiveness as may be necessary or advisable for
the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Company or the holders of
Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with
such agreements as may be necessary or desirable with respect to
matters or questions arising thereunder which, in the opinion of
the Board of Directors, it may be expedient to make, provided
that the Board of Directors shall be of the opinion, after
consultation with counsel, that such provisions and
modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreements which,
on the advice of counsel to the Company, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error contained therein, provided that the Board of
Directors shall be of the opinion, after consultation with
counsel, that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable
Shares.
ARTICLE 11
LEGEND
11.1 The certificates evidencing the Exchangeable Shares shall contain or have
affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Parent Support Agreement, the provisions of the
Plan of Arrangement relating to the Retraction Call Right, the Liquidation Call
Right and the Redemption Call Right, and the Voting and Exchange Trust Agreement
(including the provisions with respect to the voting rights, exchange right and
automatic exchange thereunder).
ARTICLE 12
NOTICES
12.1 Any notice, request or other communication to be given to the Company by a
holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of the Company and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Company.
12.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Company or the Transfer Agent of certificates representing Exchangeable Shares
in connection with the liquidation, dissolution or winding up of the Company or
the retraction or redemption of Exchangeable Shares shall be made by registered
mail (postage prepaid) or by delivery to the registered office of the Company or
to such office of the Transfer Agent as may be specified by the Company, in each
case addressed to the attention of the President of the Company. Any such
A-A-16
<PAGE> 38
presentation and surrender of certificates shall only be deemed to have been
made and to be effective upon actual receipt thereof by the Company or the
Transfer Agent, as the case may be. Any such presentation and surrender of
certificates made by registered mail shall be at the sole risk of the holder
mailing the same.
12.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Company shall be in writing and shall
be valid and effective if given by mail (postage prepaid) or by delivery to the
address of the holder recorded in the securities register of the Company or, in
the event of the address of any such holder not being so recorded, then at the
last known address of such holder. Any such notice, request or other
communication, if given by mail, shall be deemed to have been given and received
on the fifth Business Day following the date of mailing and, if given by
delivery, shall be deemed to have been given and received on the date of
delivery. Accidental failure or omission to give any notice, request or other
communication to one or more holders of Exchangeable Shares shall not invalidate
or otherwise alter or affect any action or proceeding to be taken by the Company
pursuant thereto.
ARTICLE 13
TAX MATTERS
13.1 While any Exchangeable Share is outstanding, the Company will at no time be
a specified financial institution (as that term is defined in subsection 248(1)
of the Tax Act) or a specified person (as that term is defined in paragraph
112(2.2)(g) of the Tax Act) in relation to any such institution.
A-A-17
<PAGE> 39
SCHEDULE A
NOTICE OF RETRACTION
To: HH Acquisition Inc. (the "Company") and HH Acquisition ULC ("CDN2") and
Broadcom Corporation ("Parent")
This notice is given pursuant to Article 5 of the provisions (the "Share
Provisions") attaching to the share(s) represented by this certificate and all
capitalized words and expressions used in this notice that are defined in the
Share Provisions have the meanings ascribed to such words and expressions in
such Share Provisions.
The undersigned hereby notifies the Company that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Company redeem in accordance with Article 5 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] _____________________________ share(s) only.
The undersigned acknowledges the Retraction Call Right of CDN2 (or a
Permitted Assign) to purchase all but not less than all the Retracted Shares
from the undersigned and that this notice shall be deemed to be a revocable
offer (subject as hereinafter provided) by the undersigned to sell the Retracted
Shares to CDN2 (or a Permitted Assign) in accordance with the Retraction Call
Right on the Retraction Date for the Retraction Call Purchase Price and on the
other terms and conditions set out in section 5.1 of the Plan of Arrangement. If
CDN2 (or a Permitted Assign) determines not to exercise the Retraction Call
Right, the Transfer Agent will notify the undersigned of such fact as soon as
possible. This notice of retraction, and the offer to sell the Retracted Shares
to CDN2 (or a Permitted Assign), may be withdrawn and revoked by the undersigned
only by notice in writing given to CDN2 (or a Permitted Assign), the Company and
to the Transfer Agent at any time before the close of business on the business
day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions
of applicable law or otherwise, the Company fails to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust Agreement) so as to require Parent to
purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Company, CDN2 (and
the Permitted Assigns):
(i) that the undersigned has good title to, and owns, the share(s)
represented by this certificate to be acquired by the Company or
CDN2 (or a Permitted Assign), as the case may be, free and clear
of all Liens; AND
A-A-18
<PAGE> 40
(ii) either
[ ] the undersigned is a resident of Canada for purposes
of the Income Tax Act (Canada); OR
[ ] the undersigned is not a resident of Canada for purposes
of the Income Tax Act (Canada).
The undersigned hereby acknowledges that, if the undersigned is not a resident
of Canada, and has not submitted with this notice a certificate issued by
Revenue Canada under section 116 of the Income Tax Act (Canada) in respect of
the Retracted Shares, the amount of any securities or cash resulting from the
retraction or the purchase of the Retracted Shares will be reduced by the amount
of withholdings required under the Income Tax Act (Canada).
- --------------- ----------------------------- -----------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for
pick-up by the shareholder at the principal transfer office of CIBC
Mellon Trust Company (the "Transfer Agent") at 1177 West Hastings
Street, Vancouver, B.C. V6E 2K3 failing which the securities and any
cheque(s) will be mailed to the last address of the shareholder as it
appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent at its principal transfer office in
Vancouver. The securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name of the
shareholder as it appears on the register of the Company and the
securities and cheque(s) resulting from such retraction or purchase will
be delivered to such shareholder as indicated above, unless the form
appearing immediately below is duly completed.
A-A-19
<PAGE> 41
- -------------------------------------- ---------------------------------------
Name of Person in Whose Name Date
Securities or Cheque(s) Are To
Be Registered, Issued or
Delivered (please print)
- -------------------------------------- ---------------------------------------
Street Address or P.O. Box Signature of Shareholder
- -------------------------------------- ---------------------------------------
City-Province Signature of Shareholder
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the
remaining shares of the Company will be issued and registered in the
name of the shareholder as it appears on the register of the Company,
unless the Share Transfer Power on the share certificate is duly
completed in respect of such shares.
A-A-20
<PAGE> 1
EXHIBIT 99.2
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 31st day of August, 1999.
B E T W E E N:
BROADCOM CORPORATION, a company incorporated pursuant to the laws of
California and having its office at 16215 Alton Parkway, P.O. Box 57013,
Irvine, California, 92619-7013
(hereinafter referred to as "Parent"),
- and -
HH ACQUISITION INC., a company incorporated pursuant to the laws of
British Columbia and having its registered office at 2600 - 700 West
Georgia Street, Vancouver, British Columbia, V7Y 1B3
(hereinafter referred to as "Acquisition Sub"),
- and -
HH ACQUISITION ULC, a company incorporated pursuant to the laws of Nova
Scotia and having its registered office at 800 - 1959 Upper Water
Street, Halifax, Nova Scotia, B3J 2X2
(hereinafter referred to as "CDN2"),
- and -
BROADCOM (BVI) LIMITED, a company incorporated pursuant to the laws of
the British Virgin Islands and having its registered office at Citco
Building, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin
Islands
(hereinafter referred to as "BVI"),
- and -
US TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association
organized pursuant to the laws of the United States of America and
having its office at 515 South Flower Street, Suite 2700, Los Angeles,
California 90071
(hereinafter referred to as "Trustee").
<PAGE> 2
-2-
WHEREAS pursuant to an acquisition agreement dated as of July 15, 1999
(the "Acquisition Agreement"), by and between Parent, BVI, CDN2, Acquisition Sub
and HotHaus Technologies Inc. ("Target"), the parties agreed that inter alia on
the Effective Time (as defined in the Acquisition Agreement), Parent, BVI, CDN2
and Acquisition Sub would execute and deliver a Voting and Exchange Trust
Agreement containing the terms and conditions set forth in Exhibit C to the
Acquisition Agreement;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
plan of arrangement filed pursuant to the B.C. Company Act, each issued and
outstanding common share of Target (a "Target Common Share") was exchanged, at
the option of the Holder, for an Exchangeable Non-Voting Share of the
Acquisition Sub (the "Exchangeable Shares") or for a share of the Class B common
stock, par value of U.S. $0.0001 per share, of Parent (the "Parent Common
Shares");
AND WHEREAS the plan of arrangement sets forth the special rights and
restrictions (collectively the "Exchangeable Share Provisions") attaching to the
Exchangeable Shares;
AND WHEREAS Parent is to deposit the number of Parent Common Shares
equal to the number of Exchangeable Shares to secure the voting rights granted
for the benefit of the holders of the Exchangeable Shares, such voting rights
per Exchangeable Share to be equivalent to the voting rights per Parent Common
Share;
AND WHEREAS CDN2 is to grant to and in favour of the holders (other than
Parent and its Affiliates) from time to time of Exchangeable Shares the right,
in the circumstances set forth herein, to require CDN2 to purchase from each
such holder all or any part of the Exchangeable Shares held by the holder;
AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in Parent shall be exercisable by
holders (other than Parent and its Affiliates) from time to time of Exchangeable
Shares by and through the Trustee, which will hold legal title to such number of
Parent Common Shares (the "Deposited Shares") as is from time to time equal to
the number of Exchangeable Shares from time to time issued and outstanding,
multiplied by the Current Parent Common Share Equivalent for the benefit of such
holders and whereby the rights to require CDN2 to purchase Exchangeable Shares
from the holders thereof shall be exercisable by such holders from time to time
of Exchangeable Shares by and through the Trustee, which will hold legal title
to such rights for the benefit of such holders;
AND WHEREAS these recitals and any statements of fact in this Agreement
are made by Parent, BVI, CDN2 and Acquisition Sub and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
<PAGE> 3
-3-
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS.
In this Agreement, the following terms shall have the following
meanings:
"ACQUISITION SUB" means HH Acquisition Inc., a company existing under
the BC Company Act.
"AFFILIATE" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other person that owns or controls 10% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any option or convertible security) of that Person or any of its Affiliates,
or (c) any director, partner, or officer of such Person. For the purposes of
this definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"ARRANGEMENT" has the meaning ascribed thereto in the recitals hereto.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of
Parent to effect the automatic exchange of shares of Parent Common Shares for
Exchangeable Shares pursuant to subsection 5.11(c) hereof.
"BC COMPANY ACT" means the Company Act (British Columbia), and all
amendments and additions thereto.
"BOARD OF DIRECTORS" means the board of directors of the Acquisition
Sub.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks located in the State of California or the Province of British
Columbia are authorized or obligated to close.
"BVI" means Broadcom (BVI) Limited a company existing pursuant to the
laws of the British Virgin Islands.
"CALL RIGHTS" means collectively the Liquidation Call Right, the
Redemption Call Right and the Retraction Call Right.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in
a foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not-available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
<PAGE> 4
-4-
"CDN2" means HH Acquisition ULC a company existing under the Companies
Act (Nova Scotia) or a Permitted Assign as that term is defined in section 14
hereof.
"CURRENT MARKET PRICE" means, in respect of Parent Common Shares on any
date, the Canadian Dollar Equivalent of the closing sale price of Class A Common
Shares on such date (or, if no trades of Class A Common Shares occurred on such
day, on the last trading day prior thereto on which such trades occurred) as
traded on NASDAQ and reported by the Wall Street Journal, or, if the Class A
Shares are not the quoted on NASDAQ, on such other stock exchange or automated
quotation system on which the Class A Shares are listed or quoted, as the case
may be, as may be selected by the Board of Directors for such purpose, provided,
however, that if in the opinion of the Board of Directors:
(i) the public distribution or trading activity of Class A Shares
during such period does not create a market that reflects the
fair market value of Parent Common Share; or
(ii) the number of Class A Shares that a holder of Parent Common
Shares is entitled to receive on conversion of such Parent
Common Shares is such that one Parent Common Share is not equal
in value to one Class A Share,
the then current Market Price of a Parent Common Share shall be determined by
the Board of Directors in good faith based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem to be
appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
"CURRENT PARENT COMMON SHARE EQUIVALENT" has the meaning ascribed
thereto in the Exchangeable Share Provisions.
"DEFAULT EVENT" means any failure, other than by reason of an Insolvency
Event, of the Acquisition Sub to perform any of its obligations pursuant to the
Exchangeable Share Provisions, including without limitation its obligation to
redeem any Retracted Shares.
"DEPOSITED SHARES" has the meaning provided in the recitals hereto and
any shares delivered in addition or in substitution therefor pursuant to section
3.4 hereof.
"EXCHANGE RIGHT" has the meaning ascribed thereto in section 5.1 hereof.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning ascribed thereto in the
recitals hereto.
"EXCHANGEABLE SHARES" has the meaning ascribed thereto in the recitals
hereto.
"HOLDER VOTES" has the meaning ascribed thereto in section 4.2 hereof.
"HOLDERS" means the registered holders from time to time of Exchangeable
Shares, other than Parent and its Affiliates.
"INSOLVENCY EVENT" means the institution by the Acquisition Sub of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or wound
up, or the consent of the Acquisition Sub to the institution of bankruptcy,
insolvency, dissolution or winding up proceedings
<PAGE> 5
-5-
against it, or the filing of a petition, answer or consent seeking dissolution
or winding up under any bankruptcy, insolvency or analogous laws, including
without limitation the Companies Creditors' Arrangement Act (Canada) and the
Bankruptcy and Insolvency Act (Canada), and the failure by the Acquisition Sub
to contest in good faith any such proceedings commenced in respect of the
Acquisition Sub within 15 days of becoming aware thereof, or the consent by the
Acquisition Sub to the filing of any such petition or to the appointment of a
receiver, or the making by the Acquisition Sub of a general assignment for the
benefit of creditors, or the admission in writing by the Acquisition Sub of its
inability to pay its debts generally as they become due, or the Acquisition Sub
not being permitted, pursuant to solvency requirements of applicable law, to
redeem any Retracted Shares pursuant to section 5.6 of the Exchangeable Share
Provisions.
"LIEN" has the meaning ascribed thereto in the Plan of Arrangement.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"LIQUIDATION EVENT" has the meaning ascribed thereto in subsection
5.11(a) hereof.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
subsection 5.11(c) hereof.
"LIST" has the meaning ascribed thereto in section 4.6 hereof.
"NASDAQ" means the distinct tier of the Nasdaq Stock Market referred as
the National Market.
"OFFICER'S CERTIFICATE" means, with respect to Parent, BVI, CDN2, or
Acquisition Sub, as the case may be, a certificate signed by any one of the
Chairman of the Board, the President, any Vice-President or any other senior
officer of Parent, BVI, CDN2 or Acquisition Sub, as the case may be.
"PARENT COMMON SHARES" has the meaning ascribed thereto in the recitals
hereto.
"PARENT CONSENT" has the meaning ascribed thereto in section 4.2 hereof.
"PARENT MEETING" has the meaning ascribed thereto in section 4.2 hereof.
"PARENT SUCCESSOR" has the meaning ascribed thereto in subsection
10.1(a) hereof.
"PARENT SUPPORT AGREEMENT" means that certain support agreement made as
of even date herewith between BVI, Acquisition Sub, CDN2 and Parent.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"PLAN OF ARRANGEMENT" means the plan of arrangement of the Acquisition
Sub providing for the Arrangement.
A-A-22
<PAGE> 6
-6-
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"REPLACEMENT OPTION" has the meaning ascribed thereto in the Acquisition
Agreement.
"RETRACTED SHARES" has the meaning ascribed thereto in section 5.7
hereof.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"TRANSFER AGENT" means CIBC Mellon Trust Company or such other persons
as may from time to time be the registrar and transfer agent for the
Exchangeable Shares.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Deposited Shares, any other securities, the
Exchange Right, the Automatic Exchange Rights and any money or other property
that may be held by the Trustee from time to time pursuant to this Agreement.
"VOTING RIGHTS" means the voting rights attached to the Deposited
Shares.
1.2 SECTIONS AND HEADINGS.
The division of this Agreement into articles, sections and paragraphs
and the insertion of headings are for reference purposes only and shall not
affect the interpretation of this Agreement. Unless otherwise indicated, any
reference in this Agreement to an article, section and paragraph refers to the
specified article, section and paragraph of this Agreement.
1.3 NUMBER AND GENDER.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
1.4 DATE FOR ANY ACTION.
If any date on which any action is required to be taken under this
Agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
1.5 WITHHOLDING TAX.
All amounts required to be paid, deposited or delivered under this
Agreement hereunder shall be paid, deposited or delivered after deduction of any
amount required by applicable law to be deducted or withheld on account of tax
and the deduction of such amounts and remittance to the applicable tax
authorities shall, to the extent thereof, satisfy such requirement to pay,
deposit or deliver hereunder.
A-A-23
<PAGE> 7
-7-
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST.
The purpose of this Agreement is to create the Trust for the benefit of
the Holders, as herein provided. The Trustee will hold the Deposited Shares in
order to enable the Trustee to exercise the Voting Rights and will hold the
Exchange Right and the Automatic Exchange Rights in order to enable the Trustee
to exercise such rights, in each case as trustee for and on behalf of the
Holders as provided in this Agreement.
ARTICLE 3
DEPOSITED SHARES
3.1 ISSUE AND OWNERSHIP OF THE DEPOSITED SHARES.
Parent hereby issues to and deposits with the Trustee the Deposited
Shares to be hereafter held of record by the Trustee as trustee for and on
behalf of, and for the use and benefit of, the Holders and in accordance with
the provisions of this Agreement. Parent hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the issuance of the Deposited
Shares by Parent to the Trustee. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall possess and be vested
with full legal ownership of the Deposited Shares and shall be entitled to
exercise all of the rights and powers of an owner with respect to the Deposited
Shares, provided that the Trustee shall:
(a) hold the Deposited Shares and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance with
the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal in
or with the Deposited Shares and the Deposited Shares shall not
be used or disposed of by the Trustee for any purpose other than
the purposes for which this Trust is created pursuant to this
Agreement.
3.2 LEGENDED SHARE CERTIFICATES.
The Acquisition Sub shall cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of their
right to instruct the Trustee with respect to the exercise of the Voting Rights
with respect to the Exchangeable Shares held by Holders.
3.3 SAFE KEEPING OF CERTIFICATE.
The certificates representing the Deposited Shares shall at all times be
held in safe keeping by the Trustee.
<PAGE> 8
-8-
3.4 DISTRIBUTIONS AND RELEASE OF TRUST PROPERTY.
The Trustee shall hold the Trust Estate and shall at the request of
Parent release and deliver the Trust Estate to Parent provided that the Trustee
shall refuse to release and deliver to Parent the Trust Estate if, as a result
of such release and delivery, the Trustee would no longer hold sufficient
Deposited Shares to permit the Trustee to exercise Voting Rights on behalf of
all Holders. Parent may direct that the Trust Estate released be returned to
Parent or delivered to a third party.
3.5 SUBSTITUTION OF TRUST PROPERTY.
The Parent shall have the right at any time to deliver to the Trustee
any additional Parent Common Shares or any other class of shares of Parent in
substitution for the Deposited Shares provided that the Trustee at all times
holds sufficient Deposited Shares to permit the Trustee to exercise Voting
Rights on behalf of all Holders. Upon receipt and delivery to Parent by Trustee
of any shares delivered by Parent in substitution for Deposited Shares, the
Trustee shall deliver to Parent the appropriate number of Deposited Shares.
ARTICLE 4
VOTING RIGHTS
4.1 VOTING RIGHTS.
The Trustee, as the holder of record of the Deposited Shares, shall be
entitled to all of the Voting Rights, including the right to consent to or to
vote in person or by proxy the Deposited Shares, on any matter, question or
proposition whatsoever that may properly come before the stockholders of Parent
for their vote at a Parent Meeting or in connection with a Parent Consent. The
Voting Rights shall be and remain vested in and exercised by the Trustee.
Subject to section 6.15 hereof, the Trustee shall exercise the Voting Rights
only on the basis of instructions received pursuant to this Article 4 from
Holders entitled to instruct the Trustee as to the voting thereof at the time at
which a Parent Consent is sought or a Parent Meeting is held. To the extent that
no instructions are received from a Holder with respect to the Voting Rights to
which such Holder is entitled, the Trustee shall not exercise or permit the
exercise of such Holder's Voting Rights.
4.2 NUMBER OF VOTES.
With respect to all meetings of stockholders of Parent at which holders
of Parent Common Shares are entitled to vote (a "Parent Meeting") and with
respect to all written consents sought from the holders of Parent Common Shares
(a "Parent Consent"), each Holder shall be entitled to instruct the Trustee to
cast and exercise, in the manner instructed, such number of votes comprised in
the Voting Rights as is equal to the Current Parent Common Share Equivalent on
the record date established by Parent or by applicable law for such Parent
Meeting or Parent Consent, as the case may be, for each Exchangeable Share owned
of record by such Holder on such record date (the "Holder Votes") in respect of
each matter, question or proposition to be voted on at such Parent Meeting or to
be consented to in connection with such Parent Consent. Parent shall notify
Trustee of any change to the Current Parent Common Share Equivalent.
<PAGE> 9
-9-
4.3 MAILINGS TO SHAREHOLDERS.
With respect to each Parent Meeting and Parent Consent, the Trustee
shall mail or cause to be mailed (or otherwise communicate in the same manner as
Parent utilizes in communications to holders of Parent Common Shares) to each of
the Holders named in the List on the same day as the initial mailing of notice
(or other communication) with respect thereto is given by Parent or any third
party to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders
of Parent,
(b) a statement that such Holder is entitled to instruct the Trustee
as to the exercise of the Holder Votes with respect to such
Parent Meeting or Parent Consent, as the case may be, or,
pursuant to section 4.7 hereof, to attend such Parent Meeting
and to exercise personally the Holder Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise
personally the Holder Votes; or
(ii) a proxy to a designated agent or other representative of
the management of Parent to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the
Holder, the Holder Votes to which such Holder is entitled will
not be exercised;
(e) a form of direction whereby the Holder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such instructions
must be received by the Trustee in order to be binding upon it,
which in the case of a Parent Meeting shall not be earlier than
the close of business on the second Business Day prior to such
meeting, and (ii) the method for revoking or amending such
instructions.
For the purpose of determining Holder Votes to which a Holder is entitled in
respect of any such Parent Meeting or Parent Consent, the number of Exchangeable
Shares owned of record by the Holder shall be determined at the close of
business on the record date established by Parent or by applicable law for
purposes of determining stockholders entitled to vote at such Parent Meeting or
to give written consent in connection with such Parent Consent. Parent shall
notify the Trustee of any decision of the board of directors of Parent with
respect to the calling of any such Parent Meeting or the seeking by Parent of
any such Parent Consent and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event in sufficient
time to enable the Trustee to perform its obligations contemplated by this
section 4.3.
4.4 COPIES OF STOCKHOLDER INFORMATION.
Parent shall deliver to the Trustee copies of all proxy materials,
(including notices of Parent Meetings), information statements, reports
(including without limitation all interim and
<PAGE> 10
-10-
annual financial statements) and other written communications that are to be
distributed by Parent from time to time to holders of Parent Common Shares in
sufficient quantities and in sufficient time so as to enable the Trustee to send
those materials to each Holder at the same time as such materials are first sent
to holders of Parent Common Shares. The Trustee shall mail or otherwise send to
each Holder, at the expense of Parent, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by Parent) received by the Trustee from Parent at the same time
as such materials are first sent to holders of Parent Common Shares. The Trustee
shall make copies of all such materials available for inspection by any Holder
at the Trustee's principal office.
4.5 OTHER MATERIALS.
Immediately after receipt by Parent or any stockholder of Parent of any
material sent or given generally to the holders of Parent Common Shares by or on
behalf of a third party, including without limitation dissident proxy and
information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), Parent shall
use all commercially reasonable efforts to obtain and deliver to the Trustee
copies thereof in sufficient quantities so as to enable the Trustee to forward
such material (unless the same has been provided directly to Holders by such
third party) to each Holder as soon as possible thereafter. As soon as
practicable after receipt thereof, the Trustee shall mail or otherwise send to
each Holder, at the expense of Parent, copies of all such materials received by
the Trustee from Parent. The Trustee shall also make copies of all such
materials available for inspection by any Holder at the Trustee's principal
office.
4.6 LIST OF PERSONS ENTITLED TO VOTE. The Acquisition Sub shall, (a) prior to
each annual, general and special Parent Meeting or the seeking of any Parent
Consent and (b) forthwith upon each request made at any time by the Trustee in
writing, prepare or cause to be prepared a list (a "List") of the names and
addresses of the Holders arranged in alphabetical order and showing the number
of Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Parent Meeting or a Parent
Consent, at the close of business on the record date established by Parent or
pursuant to applicable law for determining the holders of Parent Common Shares
entitled to receive notice of and/or to vote at such Parent Meeting or to give
consent in connection with such Parent Consent. Each such List shall be
delivered to the Trustee promptly after receipt by the Acquisition Sub of such
request or the record date for such meeting or seeking of consent, as the case
may be, and in any event within sufficient time as to enable the Trustee to
perform its obligations under this Agreement. Parent agrees to give the
Acquisition Sub notice (with a copy to the Trustee) of the calling of any Parent
Meeting or the seeking of any Parent Consent, together with the record dates
therefor, sufficiently prior to the date of the calling of such meeting or
seeking of such consent so as to enable the Acquisition Sub to perform its
obligations under this section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES. Any Holder named in a List prepared in
connection with any Parent Meeting or any Parent Consent shall be entitled (a)
to instruct the Trustee in the manner described in section 4.3 hereof with
respect to the exercise of the Holder Votes to which such Holder is entitled or
(b) to attend such meeting and personally to exercise thereat (or to exercise
with respect to any written consent), as the proxy of the Trustee, the Holder
Votes to which such Holder is entitled.
<PAGE> 11
-11-
4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT MEETING.
(a) In connection with each Parent Meeting and Parent Consent, the
Trustee shall exercise, either in person or by proxy, in
accordance with the instructions received from a Holder pursuant
to section 4.3 hereof, the Holder Votes as to which such Holder
is entitled to direct the vote (or any lesser number thereof as
may be set forth in the instructions); provided, however, that
such written instructions are received by the Trustee from the
Holder prior to the time and date fixed by it for receipt of
such instructions in the notice given by the Trustee to the
Holder pursuant to section 4.3 hereof.
(b) The Trustee shall cause such representatives as are empowered by
it to sign and deliver, on behalf of the Trustee, proxies for
Voting Rights to attend each Parent Meeting. Upon submission by
a Holder (or its designee) of identification satisfactory to the
Trustee's representatives, and at the Holder's request, such
representatives shall sign and deliver to such Holder (or its
designee) a proxy to exercise personally the Holder Votes as to
which such Holder is otherwise entitled hereunder to direct the
vote, if such Holder either (i) has not previously given the
Trustee instructions pursuant to section 4.3 hereof in respect
of such meeting, or (ii) submits to the Trustee's
representatives written revocation of any such previous
instructions. At such meeting, the Holder exercising such Holder
Votes shall have the same rights as the Trustee to speak at the
meeting in respect of any matter, question or proposition, to
vote by way of ballot at the meeting in respect of any matter,
question or proposition and to vote at such meeting by way of a
show of hands in respect of any matter, question or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be distributed
by the Trustee to the Holders pursuant to this Agreement shall be delivered or
sent by mail (or otherwise communicated in the same manner as Parent utilizes in
communications to holders of Parent Common Shares) to each Holder at its address
as shown on the books of the Acquisition Sub. The Acquisition Sub shall provide
or cause to be provided to the Trustee for this purpose, on a timely basis and
without charge or other expense:
(a) the most current List; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this Agreement.
4.10 TERMINATION OF VOTING RIGHTS. Except with respect to a Parent Meeting or
Parent Consent for which the record date has occurred, all of the rights of a
Holder with respect to the Holder Votes exercisable in respect of the
Exchangeable Shares held by such Holder, including the right to instruct the
Trustee as to the voting of or to vote personally such Holder Votes, shall be
deemed to be surrendered by the Holder to Parent and such Holder Votes and the
Voting Rights represented thereby shall cease immediately upon the delivery by
such Holder to the Trustee of the certificates representing such Exchangeable
Shares in connection with the exercise by the Holder of the Exchange Right or
the occurrence of the automatic exchange pursuant to the Automatic Exchange
Rights (unless in either case CDN2 shall not have delivered the requisite Parent
Common Shares issuable in exchange therefor to the Trustee for delivery to the
Holders), or upon the redemption of Exchangeable Shares pursuant to Article 5 or
Article 6 of the Exchangeable Share
<PAGE> 12
-12-
Provisions, or upon the effective date of the liquidation, dissolution or
winding-up of the Acquisition Sub pursuant to Article 4 of the Exchangeable
Share Provisions, or upon the purchase of Exchangeable Shares from the holder
thereof by CDN2 pursuant to the exercise by CDN2 of the Retraction Call Right,
the Redemption Call Right or the Liquidation Call Right. Acquisition Sub shall
cause the Transfer Agent to notify the Trustee of a redemption of Exchangeable
Shares pursuant to Articles 5 and 6 of the Exchangeable Share Provisions or upon
the liquidation, dissolution or winding-up of Acquisition Sub pursuant to
Article 4 of the Exchangeable Share Provisions or upon the exercise by CDN2 of
the Retraction Call Right, Liquidation Call Right or Redemption Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT.
CDN2 hereby grants to the Trustee as trustee for and on behalf of, and
for the use and benefit of, the Holders (a) the right (the "Exchange Right"),
upon the occurrence and during the continuance of an Insolvency Event or Default
Event, to require CDN2 to purchase from each Holder all or any part of the
Exchangeable Shares held by such Holder and (b) the Automatic Exchange Rights,
all in accordance with the provisions of this agreement. CDN2 hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Holders of good and valuable consideration (and the adequacy thereof) for the
grant of the Exchange Right and the Automatic Exchange Rights by CDN2 to the
Trustee. During the term of the Trust and subject to the terms and conditions of
this Agreement, the Trustee shall possess and be vested with full legal
ownership of the Exchange Right and the Automatic Exchange Rights and shall be
entitled to exercise all of the rights and powers of an owner with respect to
the Exchange Right and the Automatic Exchange Rights, provided that the Trustee
shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and
the legal title thereto as trustee solely for the use and
benefit of the Holders in accordance with the provisions of this
Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to exercise or otherwise deal in or with the
Exchange Right or the Automatic Exchange Rights, and the Trustee
shall not exercise any such rights for any purpose other than
the purposes for which this Trust is created pursuant to this
Agreement.
5.2 LEGENDED SHARE CERTIFICATES.
The Acquisition Sub shall cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with respect to the exercise
of the Exchange Right in respect of the Exchangeable Shares held
by a Holder; and
(b) the Automatic Exchange Rights.
<PAGE> 13
-13-
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT.
The Exchange Right shall be and remain vested in and exercisable by the
Trustee. Subject to section 6.15 hereof, the Trustee shall exercise the Exchange
Right only on the basis of instructions received pursuant to this Article 5 from
Holders entitled to instruct the Trustee as to the exercise thereof. To the
extent that no instructions are received from a Holder with respect to the
Exchange Right, the Trustee shall not exercise or permit the exercise of the
Exchange Right.
5.4 PURCHASE PRICE.
The purchase price payable by CDN2 for each Exchangeable Share to be
purchased by CDN2 under the Exchange Right shall be an amount per share equal to
(a) the Current Market Price multiplied by the Current Parent Common Share
Equivalent, in each case determined on the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right, which shall be
satisfied in full in respect of the Exchangeable Shares in regard to which a
Holder has exercised the Exchange Right by causing to be delivered to such
Holder such whole number of Parent Common Shares as is equal to the product
obtained by multiplying the number of such Exchangeable Shares by the Current
Parent Common Share Equivalent (together with an amount in lieu of any
fractional Parent Common Share resulting from such calculation payable in
accordance with section 9.5 of the Exchangeable Share Provisions), plus (b) the
aggregate of all dividends declared and unpaid on each such Exchangeable Share
(provided that if the record date for any such declared and unpaid dividends
occurs on or after the day of closing of such purchase and sale the purchase
price shall not include such declared and unpaid dividends).
5.5 EXERCISE INSTRUCTIONS.
Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of an Insolvency Event,
to instruct the Trustee to exercise the Exchange Right with respect to all or
any part of the Exchangeable Shares registered in the name of such Holder on the
books of the Acquisition Sub. To cause the exercise of the Exchange Right by the
Trustee, the Holder shall deliver to the Trustee, in person or by certified or
registered mail, at its principal office or at such other place as the Trustee
may from time to time designate by written notice to the Holders, the
certificates representing the Exchangeable Shares that such Holder desires CDN2
to purchase, duly endorsed in blank, and accompanied by such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the BC Company Act and the articles of the Acquisition Sub and such additional
documents and instruments as the Trustee may reasonably require together with
(a) a duly completed form of notice of exercise of the Exchange Right, contained
on the reverse of or attached to the Exchangeable Share certificates, stating
(i) that the Holder thereby instructs the Trustee to exercise the Exchange Right
so as to require CDN2 to purchase from the Holder the number of Exchangeable
Shares specified therein, (ii) that such Holder has good title to and owns all
such Exchangeable Shares to be acquired by CDN2 free and clear of all Liens,
(iii) the names in which the certificates representing Parent Common Shares
issuable in connection with the exercise of the Exchange Right are to be issued
and (iv) the names and addresses of the persons to whom such new certificates
should be delivered and (b) payment (or evidence satisfactory to the Trustee,
Acquisition Sub and CDN2 of payment) of the taxes (if any) payable as
contemplated by section 5.8 of this Agreement. If only a part of the
Exchangeable Shares represented by any certificate or certificates delivered to
the Trustee are to be purchased by CDN2 under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
holder at the expense
<PAGE> 14
-14-
of Acquisition Sub. Upon written request from the Trustee, Acquisition Sub shall
provide the Trustee notice of the documents and instruments required to effect a
transfer of Exchangeable Shares under the BC Company Act.
5.6 DELIVERY OF PARENT COMMON SHARES: EFFECT OF EXERCISE.
Promptly after receipt of the certificates representing the Exchangeable
Shares that the Holder desires CDN2 to purchase under the Exchange Right
(together with such documents and instruments of transfer and a duly completed
form of notice of exercise of the Exchange Right (and payment of taxes, if any,
or evidence thereof in accordance with section 5.8), duly endorsed for transfer
to CDN2, the Trustee shall notify Parent, BVI, CDN2 and Acquisition Sub of its
receipt of the same, which notice to Parent, BVI, CDN2 and Acquisition Sub shall
constitute exercise of the Exchange Right by the Trustee on behalf of the holder
of such Exchangeable Shares, and CDN2 shall immediately thereafter deliver or
cause to be delivered to the Trustee, for delivery to the Holder of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Holder), the certificates for the number of Parent Common Shares issuable
in connection with the exercise of the Exchange Right, which shares shall be
duly issued as fully paid and non-assessable and shall be free and clear of any
Liens, and cheques for the balance, if any, of the total purchase price therefor
(or, if part of the purchase price consists of dividends payable in property,
such property or property the same as or economically equivalent to such
property). Immediately upon the giving of notice by the Trustee to Parent, BVI,
CDN2 and Acquisition Sub of the exercise of the Exchange Right, as provided in
this section 5.6, the closing of the transaction of purchase and sale
contemplated by the Exchange Right shall be deemed to have occurred, and the
Holder of such Exchangeable Shares shall be deemed to have transferred to CDN2
all of its right, title and interest in and to such Exchangeable Shares and in
the related interest in the Trust Estate and shall cease to be a holder of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive the purchase price
therefor, unless the requisite number of Parent Common Shares (together with a
cheque for the balance, if any, of the purchase price therefor or, if part of
the purchase price consists of dividends payable in property, such property or
property the same as or economically equivalent to such property) is not
allotted, issued and delivered by CDN2 to the Trustee for delivery to such
Holder (or to other persons, if any, properly designated by such Holder) within
five Business Days of the date of the giving of such notice by the Trustee, in
which case the rights of the Holder shall remain unaffected until such Parent
Common Shares are so allotted, issued and delivered by CDN2 and any such cheque
is so delivered and paid. Concurrently with such Holder ceasing to be a holder
of Exchangeable Shares, the Holder shall be considered and deemed for all
purposes to be the holder of the Parent Common Shares delivered to it pursuant
to the Exchange Right.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION.
In the event that a Holder has exercised its right under Article 5 of
the Exchangeable Share Provisions to require the Acquisition Sub to redeem any
or all of the Exchangeable Shares held by the Holder (the "Retracted Shares")
and is notified by Acquisition Sub pursuant to section 5.6 of the Exchangeable
Share Provisions that Acquisition Sub is not permitted as a result of solvency
requirements of applicable law to redeem all of such Retracted Shares, and
provided that CDN2 shall not have exercised the Retraction Call Right with
respect to the Retracted Shares, and that the Holder has not revoked the
retraction request delivered by the Holder to Acquisition Sub pursuant to
Article 5 of the Exchangeable Share Provisions, the retraction request shall
constitute
<PAGE> 15
-15-
and shall be deemed to constitute notice from the Holder to the Trustee
instructing the Trustee to exercise the Exchange Right with respect to those
Retracted Shares that the Acquisition Sub is unable to redeem. In any such
event, Acquisition Sub hereby agrees with the Trustee and in favour of the
Holder immediately to notify the Trustee of such prohibition against Acquisition
Sub redeeming all of the Retracted Shares and immediately to forward or cause to
be forwarded to the Trustee all relevant materials delivered by the Holder to
Acquisition Sub or to the transfer agent of the Exchangeable Shares (including
without limitation a copy of the retraction request delivered pursuant to
section 5.1 of the Exchangeable Share Provisions) in connection with such
proposed redemption of the Retracted Shares and the Trustee shall thereupon
exercise the Exchange Right with respect to the Retracted Shares that
Acquisition Sub is not permitted to redeem and will require CDN2 to purchase
such shares in accordance with the provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES.
Upon any sale of Exchangeable Shares to CDN2 pursuant to the Exchange
Right or the Automatic Exchange Rights, the share certificate or certificates
representing Parent Common Shares to be delivered in connection with the payment
of the purchase price therefor shall be issued in the name of the Holder of the
Exchangeable Shares so sold or in such names as such Holder may otherwise direct
in writing without charge to the holder of the Exchangeable Shares so sold,
provided, however, that such Holder (a) shall pay (and neither Parent, BVI,
CDN2, Acquisition Sub nor the Trustee shall be required to pay) any documentary,
stamp, transfer or other similar taxes that may be payable in respect of any
transfer involved in the issuance or delivery of such shares to a person other
than such Holder or (b) shall establish to the satisfaction of Trustee, Parent,
BVI, CDN2 and Acquisition Sub that such taxes, if any, have been paid.
5.9 NOTICE OR INSOLVENCY EVENT OR DEFAULT EVENT.
Immediately upon the occurrence of an Insolvency Event or Default Event
or any event that with the giving of notice or the passage of time or both would
be an Insolvency Event or Default Event, Acquisition Sub, CDN2 and Parent shall
give written notice thereof to the Trustee. As soon as practicable after
receiving notice from Acquisition Sub, CDN2 and Parent or from any other person
of the occurrence of an Insolvency Event or Default Event, the Trustee shall
mail to each Holder, at the expense of Parent, a notice of such Insolvency Event
or Default Event, which notice shall contain a brief statement of the right of
the Holders with respect to the Exchange Right.
5.10 RESERVATION OF PARENT COMMON SHARES.
Parent hereby represents and warrants that it has irrevocably reserved
for issuance out of its authorized and unissued capital stock such number of
Parent Common Shares as is equal to the number of Exchangeable Shares
outstanding at the date hereof and all vested and unvested Replacement Options
and covenants that it will at all times keep available, free from pre-emptive
and other rights, out of its authorized and unissued capital stock such number
of Parent Common Shares (or other shares or securities into which Parent Common
Shares may be reclassified or changed) as is necessary to enable Parent, BVI,
CDN2 and Acquisition Sub to perform their respective obligations pursuant to
this Agreement, the Exchangeable Share Provisions, the Plan of Arrangement and
the Support Agreement.
<PAGE> 16
-16-
5.11 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT.
(a) Parent shall give the Trustee notice of each of the following events
(a "Liquidation Event") at the time set forth below:
(i) in the event of any determination by the Board of
Directors of Parent to institute voluntary liquidation,
dissolution or winding-up proceedings with respect to
Parent or to effect any other distribution of assets of
Parent among its stockholders for the purpose of winding
up its affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by Parent
of notice of and (B) Parent otherwise becoming aware of
any threatened or instituted claim, suit, petition or
other proceedings with respect to the involuntary
liquidation, dissolution or winding up of Parent or to
effect any other distribution of assets of Parent among
its stockholders for the purpose of winding up its
affairs.
(b) Immediately following receipt by the Trustee from Parent of notice
of any Liquidation Event, the Trustee shall give notice thereof to the Holders.
Such notice shall include a brief description of the automatic exchange of
Exchangeable Shares for Parent Common Shares provided for in subsection 5.11(c)
below.
(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of Parent Common Shares in the distribution of assets of
Parent in connection with a Liquidation Event, on the fifth Business Day prior
to the effective date of a Liquidation Event (the "Liquidation Event Effective
Date") all of the then outstanding Exchangeable Shares shall be automatically
exchanged for Parent Common Shares. To effect such automatic exchange, CDN2
shall purchase each Exchangeable Share outstanding on the fifth Business Day
prior to the Liquidation Event Effective Date and held by Holders, and each
Holder shall sell the Exchangeable Shares held by it at such time, for a
purchase price per share equal to (a) the Current Market Price multiplied by the
Current Parent Common Share Equivalent on such fifth Business Day prior to the
Liquidation Event Effective Date, which shall be satisfied in full in respect of
the Exchangeable Shares held by each Holder by CDN2 issuing to such Holder such
whole number of Parent Common Shares as is equal to the product obtained by
multiplying the number of such Exchangeable Shares by the Current Parent Common
Share Equivalent (together with an amount in lieu of any fractional Parent
Common Share resulting from such calculation payable in accordance with section
9.4 of the Exchangeable Share Provisions), plus (b) an additional amount equal
to the aggregate of all dividends declared and unpaid on each such Exchangeable
Share (provided that if the record date for any such declared and unpaid
dividends occurs on or after the day of closing of such purchase and sale, the
purchase price shall not include such additional amount equal to such declared
and unpaid dividends).
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for Parent Common Shares shall be
deemed to have occurred, and each Holder of Exchangeable Shares shall be deemed
to have transferred to CDN2 all of the Holder's right, title and interest in and
to such Exchangeable Shares and the related interest in the Trust Estate and
shall
<PAGE> 17
-17-
cease to be a Holder of such Exchangeable Shares and CDN2 shall issue to the
Holder the Parent Common Shares issuable upon the automatic exchange of
Exchangeable Shares for Parent Common Shares which shares shall be duly and
validly issued as fully paid and non-assessable and shall be free and clear of
any Liens and shall deliver to the Trustee for delivery to the Holder a cheque
for the balance, if any, of the purchase price for such Exchangeable Shares (or,
if any part of the purchase price consists of dividends payable in property,
such property or property that is the same as or economically equivalent to such
property). Concurrently with such Holder ceasing to be a holder of Exchangeable
Shares, the Holder shall be considered and deemed for all purposes to be the
holder of the Parent Common Shares issued to it pursuant to the automatic
exchange of Exchangeable Shares for Parent Common Shares and the certificates
held by the Holder previously representing the Exchangeable Shares exchanged by
the Holder with CDN2 pursuant to such automatic exchange shall thereafter be
deemed to represent the Parent Common Shares issued to the Holder by CDN2
pursuant to such automatic exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share certificates deemed to represent
Parent Common Shares, duly endorsed in blank and accompanied by such instruments
of transfer as CDN2 may reasonably require, CDN2 shall deliver or cause to be
delivered to the Holder certificates representing the Parent Common Shares of
which the Holder is the holder.
5.12 WITHHOLDING RIGHTS.
Parent, BVI, CDN2, Acquisition Sub and the Trustee shall be entitled to
deduct and withhold from any consideration otherwise payable under this trust
agreement to any Holder of Exchangeable Shares such amounts as Parent, BVI,
CDN2, Acquisition Sub or the Trustee is required or permitted to deduct and
withhold with respect to such payment under the Income Tax Act (Canada), the
United States Internal Revenue Code of 1986 or any provision of provincial,
state, local or foreign tax law, in each case as amended or succeeded. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes as having been paid to the holder of the Exchangeable Shares in
respect of which such deduction and withholding was made, provided that such
withheld amounts are actually remitted to the appropriate taxing authority. To
the extent that the amount so required or permitted to be deducted or withheld
from any payment to a holder exceeds the cash portion, if any, of the
consideration otherwise payable to the holder, Parent, BVI, CDN2, Acquisition
Sub and the Trustee are hereby authorized to sell or otherwise dispose of such
portion of the consideration as is necessary to provide sufficient funds to
Parent, BVI, CDN2, Acquisition Sub or the Trustee, as the case may be, to enable
it to comply with such deduction or withholding requirement and Parent, BVI,
CDN2, Acquisition Sub or the Trustee shall notify the holder thereof and remit
to such holder any unapplied balance of the net proceeds of such sale.
ARTICLE 6
CONCERNING THE TRUSTEE
6.1 POWERS AND DUTIES OF THE TRUSTEE.
The rights, powers and authorities of the Trustee under this Agreement,
in its capacity as trustee of the Trust, shall include:
(a) receipt and deposit of the Deposited Shares from Parent as
trustee for and on behalf of the Holders in accordance with the
provisions of this Agreement;
<PAGE> 18
-18-
(b) granting proxies and distributing materials to Holders as
provided in this Agreement;
(c) voting the Holder Votes in accordance with the provisions of
this Agreement;
(d) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from CDN2 as trustee for and on behalf of the
Holders in accordance with the provisions of this Agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement and in connection therewith
receiving from Holders Exchangeable Shares and other requisite
documents and distributing to such Holders the Parent Common
Shares and cheques, if any, to which such Holders are entitled
upon the exercise of the Exchange Right or pursuant to the
Automatic Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this Agreement;
(h) taking action at the direction of a Holder or Holders to enforce
the obligations of Parent, BVI, CDN2 and Acquisition Sub under
this Agreement and
(i) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights powers and authorities the
Trustee shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of this
Agreement as the Trustee, acting in good faith and in the reasonable exercise of
its duties hereunder, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such rights, powers and authorities by the
Trustee shall be final, conclusive and binding upon all persons. For greater
certainty, the Trustee shall have only those duties as are set out specifically
in this Agreement.
The Trustee in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith with a view to the
best interests of the Holders and shall exercise the care, diligence and skill
that a reasonable person would exercise in comparable circumstances.
<PAGE> 19
-19-
6.2 NO CONFLICT OF INTEREST.
The Trustee represents to Acquisition Sub, BVI, CDN2 and Parent that at
the date of execution and delivery of this Agreement there exists no material
conflict of interest in the role of the Trustee as a fiduciary hereunder and the
role of the Trustee in any other capacity. The Trustee shall, within 30 days
after it becomes aware that such a material conflict of interest exists, either
eliminate such material conflict of interest or resign in the manner and with
the effect specified in Article 9 hereof. If, notwithstanding the foregoing
provisions of this section 6.2, the Trustee has such a material conflict of
interest, the validity and enforceability of this Agreement shall not be
affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this section 6.2, any interested party may apply to the courts of
the State of California for an order that the Trustee be replaced as trustee
hereunder.
6.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
Each of Acquisition Sub, BVI, CDN2 and Parent irrevocably authorize the
Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
Parent Common Shares; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the
records maintained by it which the Trustee may reasonably
require for the discharge of its duties and responsibilities
under this Agreement and (ii) from the transfer agent of Parent
Common Shares, and any subsequent transfer agent of such shares,
the share certificates issuable upon the exercise from time to
time of the Exchange Right and pursuant to the Automatic
Exchange Rights in the manner specified in Article 5 hereof.
Each of Acquisition Sub, CDN2, BVI and Parent irrevocably authorize their
respective registrars and transfer agents to comply with all such requests.
Parent, CDN2 and BVI covenant that they will supply Parent's transfer agent with
duly executed share certificates for the purpose of completing the exercise from
time to time of the Exchange Right and the Automatic Exchange Rights, in each
case pursuant to Article 5 hereof.
6.4 BOOKS AND RECORDS.
The Trustee shall keep available for inspection by Parent, BVI, CDN2 and
Acquisition Sub, at the Trustee's principal office, correct and complete books
and records of account relating to the Trustee's actions under this Agreement,
including without limitation all information relating to mailings and
instructions to and from Holders and all transactions pursuant to the Voting
Rights, the Exchange Right and the Automatic Exchange Rights for the term of
this Agreement. On or before October 1, 1999, and on or before March 1 in every
year thereafter, so long as the Deposited Shares are being held in the name of
the Trustee, the Trustee shall transmit to Parent, BVI, CDN2 and Acquisition Sub
a brief report, dated as of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that
date;
<PAGE> 20
-20-
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee
on behalf of Holders in consideration of the issue and delivery
by CDN2 of Parent Common Shares in connection with the Exchange
Right, during the calendar year ended on such date;
(c) the number of Deposited Shares held by the Trustee at December
31 of such calendar year; and
(d) all other actions taken by the Trustee in the performance of its
duties under this Agreement that it had not previously reported
and which, in the Trustee's opinion, materially affects the
Trust Estate.
6.5 INCOME TAX RETURNS AND REPORTS.
The Trustee shall, to the extent necessary, prepare and file on behalf
of the Trust appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system through
which the Exchangeable Shares are traded and, in connection therewith, may
obtain the advice and assistance of such experts as the Trustee may consider
necessary or advisable.
6.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE.
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this Agreement at the request, order or direction of
any Holder upon such Holder furnishing to the Trustee reasonable funding,
security and indemnity against the costs, expenses and liabilities that may be
incurred by the Trustee therein or thereby, provided that no Holder shall be
obligated to furnish to the Trustee any such funding, security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to (i) the Deposited Shares pursuant to Article 4
hereof, subject to section 6.15 hereof, (ii) the Exchange Right pursuant to
Article 5 hereof, subject to section 6.15 hereof, and (iii) the Automatic
Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities unless
funded and given security and indemnity as aforesaid.
6.7 ACTIONS BY HOLDERS.
No Holder shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this Agreement for the
purpose of enforcing any of its rights or for the execution of any trust or
power hereunder unless the Holder has requested the Trustee to take or institute
such action, suit or proceeding and furnished the Trustee with the funding,
security and indemnity referred to in section 6.6 hereof and the Trustee shall
have failed to so act within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken, it being understood
and intended that no one or more Holders shall have any right in any
<PAGE> 21
-21-
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights,
the Exchange Right or the Automatic Exchange Rights except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Holders.
6.8 RELIANCE UPON DECLARATIONS.
The Trustee shall not be considered to be in contravention of any of its
rights, powers, duties and authorities hereunder if, when required, it acts and
relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
furnished pursuant to the provisions hereof or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder and such lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents comply with the
provisions of section 6.9 hereof, if applicable, and with any other applicable
provisions of this Agreement. The Trustee shall be protected and shall incur no
liability in acting or proceeding in good faith upon any resolution, notice,
telegram request, consent, direction, waiver, certificate, statement, affidavit,
voucher, bond, requisition or other paper or document which it shall in good
faith believe to be genuine and to have been passed or signed by the proper
board or person or to have been prepared and furnished pursuant to any of the
provisions of this Agreement, including the exercise of any rights by any
Holder, and the Trustee shall be under no duty to make any investigation or
inquiry as to any statements contained or matters referred to in any such
instrument, but may, in the absence of bad faith on its part, accept and rely
upon the same as conclusive evidence of the truth and accuracy of such
statements or instruction.
6.9 EVIDENCE AND AUTHORITY TO TRUSTEE.
Acquisition Sub, BVI, CDN2 and/or Parent shall furnish to the Trustee
evidence of compliance with the conditions provided for in this Agreement
relating to any action or step required or permitted to be taken by Acquisition
Sub, BVI, CDN2 and/or Parent or the Trustee under this Agreement or as a result
of any obligation imposed under this Agreement, including, without limitation,
in respect of the Voting Rights, the Exchange Right or the Automatic Exchange
Rights and the taking of any other action to be taken by the Trustee at the
request of or on the application of Acquisition Sub, BVI, CDN2 and/or Parent
forthwith if and when:
(a) such evidence is required by any other section of this Agreement
to be furnished to the Trustee in accordance with the terms of
this section 6.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Acquisition Sub, BVI,
CDN2 and/or Parent written notice requiring it to furnish such
evidence in relation to any particular action or obligation
specified in such notice.
Such evidence shall consist of an Officer's Certificate of
Acquisition Sub, BVI, CDN2 and/or Parent or a statutory declaration or a
certificate made by persons entitled to sign an Officer's Certificate stating
that any such condition has been complied with in accordance with the terms of
this Agreement.
<PAGE> 22
-22-
Whenever such evidence relates to a matter other than the
Voting Rights, the Exchange Right or the Automatic Exchange Rights, and except
as otherwise specifically provided herein, such evidence may consist of a report
or opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give authority to a
statement made by him, provided that if such report or opinion is furnished by a
director, officer or employee of Acquisition Sub, BVI, CDN2 and/or Parent it
shall be in the form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this Agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation as
he believes is necessary to enable him to make the statements or
give the opinions contained or expressed therein.
6.10 EXPERTS, ADVISERS AND AGENTS.
The Trustee may:
(a) in relation to this Agreement act and rely on the opinion or
advice of or information obtained from any solicitor, auditor,
accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Acquisition Sub, BVI, CDN2 and/or
Parent or otherwise, and may employ such assistants as may be
necessary to the proper discharge of its powers and duties and
determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or
assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all services
performed for it in the discharge of the trusts hereof.
6.11 INVESTMENT OF MONEYS HELD BY TRUSTEE.
Unless otherwise provided in this Agreement, any moneys held by or on
behalf of the Trustee that under the terms of this Agreement may or ought to be
invested or which may be on deposit with the Trustee or that may be in the hands
of the Trustee shall be invested in the name or under the control of the Trustee
in Federated Investors U.S. Treasury Cash Reserve. Any income earned in respect
of the Trust Estate which is not used by the Trustee as provided in this
Agreement may be accumulated by the Trustee and added to the capital of the
Trust Estate.
<PAGE> 23
-23-
6.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY.
The Trustee shall not be required to give any bond or security in
respect of the execution of the trusts, rights, duties, powers and authorities
of this Agreement.
6.13 TRUSTEE NOT BOUND TO ACT ON REQUEST.
Except as in this Agreement otherwise specifically provided, the Trustee
shall not be bound to act in accordance with any direction or request of
Acquisition Sub, BVI, CDN2 and/or Parent or of the directors thereof until a
duly authenticated copy of the instrument or resolution containing such
direction or request shall have been delivered to the Trustee, and the Trustee
shall be empowered to act and rely upon any such copy purporting to be
authenticated and believed by the Trustee to be genuine.
6.14 AUTHORITY TO CARRY ON BUSINESS.
The Trustee represents to Acquisition Sub, BVI, CDN2 and Parent that at
the date of execution and delivery by it of this Agreement it is authorized to
perform its obligations pursuant to this Agreement under all applicable laws but
if, notwithstanding the provisions of this section 6.14, it ceases to be so
authorized, the validity and enforceability of this Agreement and the Voting
Rights, the Exchange Right and the Automatic Exchange Rights shall not be
affected in any manner whatsoever by reason only of such event but the Trustee
shall, within 30 days after ceasing to be so authorized, either become so
authorized or resign in the manner and with the effect specified in Article 9
hereof.
6.15 CONFLICTING CLAIMS.
If conflicting claims or demands are made or asserted with respect to
any interest of any Holder in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Holder in any Exchangeable
Shares resulting in conflicting claims or demands being made in connection with
such interest, then the Trustee shall be entitled, at its sole discretion, to
refuse to recognize or to comply with any such claim or demand. In so refusing,
the Trustee may elect not to exercise any Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or demands and, in
so doing, the Trustee shall not be or become liable to any person on account of
such election or its failure or refusal to comply with any such conflicting
claims or demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Right or Automatic Exchange Rights subject to
such conflicting claims or demands have been adjudicated by a
final judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange
Right or Automatic Exchange Rights subject to such conflicting
claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and the
Trustee shall have been furnished with an executed copy of such
agreement.
<PAGE> 24
-24-
If the Trustee elects to recognize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.
6.16 ACCEPTANCE OF TRUST.
The Trustee hereby accepts the Trust created and provided for by and in
this Agreement and agrees to perform the same upon the terms and conditions
herein set forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from time to time
be Holders, subject to all the terms and conditions herein set forth.
ARTICLE 7
COMPENSATION
7.1 FEES AND EXPENSES OF THE TRUSTEE.
Parent, BVI, CDN2 and Acquisition Sub jointly and severally agree to pay
to the Trustee reasonable compensation for all of the services rendered by it
under this Agreement and will reimburse the Trustee for all reasonable expenses
and disbursements, including the cost and expense of any suit or litigation of
any character and any proceedings before any governmental agency reasonably
incurred by the Trustee in connection with its rights and duties under this
Agreement; provided that Parent, BVI, CDN2 and Acquisition Sub shall have no
obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted fraudulently, in bad faith or with
negligence or willful misconduct.
ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1 INDEMNIFICATION OF THE TRUSTEE.
Parent, BVI, CDN2 and Acquisition Sub jointly and severally agree to
indemnify, and hold harmless the Trustee and each of its directors, officers,
employees and agents appointed and acting in accordance with this Agreement
(collectively the "Indemnified Parties") against all claims, losses, damages,
costs, penalties, fines and reasonable expenses (including reasonable expenses
of the Trustee's legal counsel) which, without fraud, negligence, willful
misconduct or bad faith on the part of such Indemnified Party, may be paid,
incurred or suffered by the Indemnified Party by reason of or as a result of the
Trustee's acceptance or administration of the Trust, its compliance with its
duties set forth in this Agreement, or any written or oral instructions
delivered to the Trustee by Parent, BVI, CDN2 or Acquisition Sub pursuant
hereto. In no case shall Parent, BVI, CDN2 or Acquisition Sub be liable under
this indemnity for any claim against any of the Indemnified Parties unless
Parent, BVI, CDN2 and Acquisition Sub shall be notified by the Trustee of the
written assertion of a
<PAGE> 25
-25-
claim or of any action commenced against the Indemnified Parties, promptly after
any of the Indemnified Parties shall have received any such written assertion of
a claim or shall have been served with a summons or other first legal process
giving information as to the nature and basis of the claim. Subject to (ii),
below, Parent, BVI, CDN2 and Acquisition Sub shall be entitled to participate at
their own expense in the defense and, if Parent, BVI, CDN2 or Acquisition Sub so
elect at any time after receipt of such notice, either of them may assume the
defence of any suit brought to enforce any such claim. The Trustee shall have
the right to employ separate counsel in any such suit and participate in the
defence thereof but the fees and expenses of such counsel shall be at the
expense of the Trustee unless: (i) the employment of such counsel has been
authorized by Parent, BVI, CDN2 or Acquisition Sub; or (ii) the named parties to
any such suit include both the Trustee and Parent, BVI, CDN2 or Acquisition Sub
and the Trustee shall have been advised by counsel acceptable to Parent, BVI,
CDN2 or Acquisition Sub that there may be one or more legal defences available
to the Trustee that are different from or in addition to those available to
Parent, BVI, CDN2 or Acquisition Sub and that an actual or potential conflict of
interest exists (in which case Parent, BVI, CDN2 and Acquisition Sub shall not
have the right to assume the defence of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of counsel for the
Trustee).
8.2 LIMITATION OR LIABILITY.
The Trustee shall not be held liable for any loss that may occur by
reason of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this Agreement, except to the
extent that such loss is attributable to the fraud, negligence, willful
misconduct or bad faith on the part of the Trustee.
ARTICLE 9
CHANGE OF TRUSTEE
9.1 RESIGNATION.
The Trustee, or any trustee hereafter appointed, may at any time resign
by giving written notice of such resignation to Parent, BVI, CDN2 and
Acquisition Sub specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless Parent, BVI, CDN2 and Acquisition Sub otherwise agree
and provided further that such resignation shall not take effect until the date
of the appointment of a successor trustee and the acceptance of such appointment
by the successor trustee. Upon receiving such notice of resignation, Parent,
BVI, CDN2 and Acquisition Sub shall promptly appoint a successor trustee by
written instrument in duplicate, one copy of which shall be delivered to the
resigning trustee and one copy to the successor trustee. Failing appointment of
and acceptance by a successor trustee in accordance with the foregoing, a
successor trustee may be appointed by an order of the Supreme Court of British
Columbia upon application of one or more of the parties hereto or any Holder.
9.2 REMOVAL.
The Trustee, or any trustee hereafter appointed may be removed with or
without cause, at any time on 30 days' prior notice by written instrument
executed by Parent, BVI, CDN2 and Acquisition Sub, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to the successor
trustee.
<PAGE> 26
-26-
9.3 SUCCESSOR TRUSTEE.
Any successor trustee appointed as provided under this Agreement shall
execute, acknowledge and deliver to Parent, BVI, CDN2 and Acquisition Sub and to
its predecessor trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if originally named as
trustee in this Agreement and all of the Trust Estate shall automatically rest
in such successor trustee. However, on the written request of Parent, BVI, CDN2
and Acquisition Sub or of the successor trustee, the trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the provisions of
this Agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, Parent, BVI, CDN2, Acquisition Sub and
such predecessor trustee shall execute any and all instruments in writing for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.
9.4 NOTICE OF SUCCESSOR TRUSTEE.
Upon acceptance of appointment by a successor trustee as provided
herein, Parent, BVI, CDN2 and Acquisition Sub shall cause to be mailed notice of
the succession of such trustee hereunder to each Holder specified in the most
current List. If Parent, BVI, CDN2 or Acquisition Sub shall fail to cause such
notice to be mailed within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of Parent, BVI, CDN2 and Acquisition Sub.
ARTICLE 10
PARENT SUCCESSORS
10.1 CERTAIN REQUIREMENTS IN RESPECT OF ACQUISITION, ETC.
Parent shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other person or, in the case of a
merger, of the continuing company resulting therefrom, unless:
(a) such other person or continuing company is a company (herein
called the 'Parent Successor") incorporated under the laws of
any state of the United States or the laws of Canada or any
province thereof, and
(b) Parent Successor, by operation of law, becomes, without more,
bound by the terms and provisions of this Agreement or, if not
so bound, executes, prior to or contemporaneously with the
consummation of such transaction an agreement supplemental
hereto and such other instruments (if any) as are satisfactory
to the Trustee acting reasonably to evidence the assumption by
Parent Successor of liability for all moneys payable and
property deliverable hereunder and the covenant of such Parent
Successor to pay and deliver or cause to be delivered the same
and its
<PAGE> 27
-27-
agreement to observe and perform all the covenants and
obligations of Parent under this Agreement.
10.2 VESTING OF POWERS IN SUCCESSOR.
Whenever the conditions of section 10.1 hereof have been duly observed
and performed, the Trustee, if required, by section 10.1 hereof, Parent
Successor, BVI, CDN2 and Acquisition Sub shall execute and deliver the
supplemental agreement provided for in Article 11 hereof and thereupon Parent
Successor shall possess and from time to time may exercise each and every right
and power of Parent under this Agreement in the name of Parent or otherwise and
any act or proceeding by any provision of this Agreement required to be done or
performed by the board of directors of Parent or any officers of Parent may be
done and performed with like force and effect by the directors or officers of
such Parent Successor.
10.3 WHOLLY-OWNED SUBSIDIARIES.
Nothing herein shall be construed as preventing the amalgamation or
merger of any wholly-owned subsidiary of Parent with or into Parent or the
winding-up, liquidation or dissolution of any wholly-owned subsidiary of Parent
provided that all of the assets of such subsidiary are transferred to Parent or
another wholly-owned direct or indirect subsidiary of Parent and any such
transactions are expressly permitted by this Article 10.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1 AMENDMENTS, MODIFICATIONS, ETC.
This Agreement may not be amended or modified except by an agreement in
writing executed by Acquisition Sub, Parent, BVI, CDN2 and Trustee and approved
by the Holders in accordance with section 8.2 of the Exchangeable Share
Provisions.
11.2 MINISTERIAL AMENDMENTS.
Notwithstanding the provisions of section 11.1 hereof, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the Holders, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto for
the protection of the Holders hereunder;
(b) making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect to
matters or questions that, in the opinion of the board of
directors of each of Parent, BVI, CDN2 and Acquisition Sub and
in the opinion of the Trustee, having in mind the best interests
of the Holders as a whole, it may be expedient to make, provided
that such boards of directors and the Trustee shall be of the
opinion that such amendments and modifications will not be
prejudicial to the interests of the Holders as a whole; or
<PAGE> 28
-28-
(c) making such changes or corrections required for the purpose of
curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error,
provided that the Trustee and the board of directors of each of
Acquisition Sub, CDN2, BVI and Parent shall be of the opinion
that such changes or corrections will not be prejudicial to the
interests of the Holders as a whole.
11.3 MEETING TO CONSIDER AMENDMENTS.
The Acquisition Sub, at the request of Parent, shall call a meeting or
meetings of the Holders for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the articles of the Acquisition Sub,
the Exchangeable Share Provisions and all applicable laws.
11.4 CHANGES IN CAPITAL OF PARENT AND THE ACQUISITION SUB.
Notwithstanding section 11.1, at all times after the occurrence of any
Parent Common Share Reorganization or Capital Reorganization (as such terms are
respectively defined in the Exchangeable Share Provisions) or other change in
either the Parent Common Shares or the Exchangeable Shares or both, this
Agreement shall forthwith be amended and modified as necessary in order that it
shall apply with full force and effect, mutatis mutandis, to all new securities
into which Parent Common Shares or the Exchangeable Shares or both are so
changed and the parties hereto shall execute and deliver a supplemental
agreement giving effect to and evidencing such necessary amendments and
modifications.
11.5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS.
Notwithstanding section 11.1, from time to time Acquisition Sub (when
authorized by a resolution of the board of directors), Parent (when authorized
by a resolution of its board of directors), BVI (when authorized by a resolution
of its board of directors), CDN2 (when authorized by a resolution of its board
of directors) and Trustee may, subject to the provisions hereof, and they shall,
when so directed by these presents, execute and deliver by their proper
officers, Agreements or other instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more of the following purposes:
(a) evidencing the succession of Parent Successors to Parent and the
covenants of and obligations assumed by each such Parent
Successor in accordance with the provisions of Article 10 and
the succession of any successor trustee in accordance with the
provisions of Article 9;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange
Right or the Automatic Exchange Rights that, in the opinion of
the Trustee acting reasonably will not be prejudicial to the
interests of the Holders as a whole or are in the opinion of
counsel to the Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation the
provisions of which apply to Parent, BVI, CDN2, Acquisition Sub,
the Trustee or this Agreement; and
<PAGE> 29
-29-
(c) for any other purposes not inconsistent with the provisions of
this Agreement including, without limitation, to make or
evidence any amendment or modification to this Agreement as
contemplated hereby, provided that, in the opinion of the
Trustee acting reasonably, the rights of the Trustee and the
Holders as a whole will not be prejudiced thereby.
ARTICLE 12
TERMINATION
12.1 TERM.
The Trust created by this Agreement shall continue until the earliest to
occur of the following events:
(a) no outstanding Exchangeable Shares are held by any Holder;
(b) each of Acquisition Sub, BVI, CDN2 and Parent elect in writing
to terminate the Trust and such termination is approved by the
Holders of the Exchangeable Shares in accordance with Section
8.2 of the Exchangeable Share Provisions; and
(c) 21 years after the death of the last survivor of the descendants
of His Majesty King George VI of the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation
of the Trust.
12.2 SURVIVAL.
The provisions of Articles 7 and 8 hereof shall survive any termination
of the Trust pursuant to section 12.1.
ARTICLE 13
GENERAL
13.1 SEVERABILITY.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions; provided, however, that if the provision or
provisions so held to be invalid, in the reasonable judgment of the parties, is
or are so fundamental to the intent of the parties and the operation of this
Agreement that the enforcement of the other provisions hereof, in the absence of
such invalid provision or provisions, would damage irreparably the intent of the
parties in entering into this Agreement, the parties shall agree (i) to
terminate this Agreement, or (ii) to amend or otherwise modify this Agreement so
as to carry out the intent and purposes hereof and the transactions contemplated
hereby.
<PAGE> 30
-30-
13.2 ENUREMENT.
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Holders.
13.3 NOTICES.
All notices, requests and other communications between the parties
hereunder shall be in writing and shall be deemed to have been given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by registered mail, return receipt
requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers (or at such other address for such
party as shall be specified in like notice):
(a) if to Parent, BVI, CDN2 or Acquisition Sub to:
Broadcom Corporation
16215 Alton Parkway
P.O. Box 57013
Irvine, California 92619-7013
Facsimile No.: (949) 450-8715
Attention: President and Chief Executive Officer
and General Counsel
with a copy to:
Brobeck, Phlegert & Harrison LLP
38 Technology Drive
Irvine, California
U.S.A. 92618
Facsimile No.: (949) 790-6300
Attention: Bruce Hallet, ESQ
Farris, Vaughan, Wills & Murphy
2600-700 West Georgia Street
Vancouver, B.C. V7Y 1B3
Facsimile No.: (604) 661-9349
Attention: R. Hector MacKay-Dunn
(b) if to Trustee to:
US Trust Company
515 South Flower Street, Suite 2700
Los Angeles, California 90071
Facsimile No.: (213) 488-1370
Attention: Sandra Leess
All such notices, requests and other communications shall (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon
<PAGE> 31
-31-
facsimile confirmation, (iii) if delivered by mail in the manner described above
to the address as provided for in this Section, be deemed given on the earlier
of the third Business Day following mailing or upon receipt and (iv) if
delivered by overnight courier to the address as provided in this Section, be
deemed given on the earlier of the first Business Day following the date sent by
such overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.
13.4 NOTICE TO HOLDERS.
Any and all notices to be given and any documents to be sent to any
Holders may be given or sent to the address of such Holder shown on the register
of Holders in any manner permitted by the articles of the Acquisition Sub from
time to time in force in respect of notices to shareholders and shall be deemed
to be received (if given or sent in such manner) at the time specified in such
articles, the provisions of which articles shall apply mutatis mutandis to
notices or documents as aforesaid sent to such Holders.
13.5 RISK OF PAYMENTS BY POST.
Whenever payments are to be made or documents are to be sent to any
Holder by the Trustee or by the Acquisition Sub, or by such Holder to the
Trustee or to Parent, CDN2, BVI or Acquisition Sub, the making of such payment
or sending of such document sent through the post shall be at the risk of the
Acquisition Sub, in the case of payments made or documents sent by the Trustee
or the Acquisition Sub, and the Holder, in the case of payments made or
documents sent by the Holder.
13.6 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
13.7 JURISDICTION.
This Agreement shall be construed and enforced in accordance with the
laws of the State of California.
13.8 ATTORNMENT.
Each of Parent, BVI, CDN2, Acquisition Sub and Trustee agree that any
action or proceeding arising out of or relating to this Agreement may be
instituted in the courts of the State of California waives any objection that it
may have now or hereafter to the venue of any such action or proceeding,
irrevocably submit to the jurisdiction of the said courts in any such action or
proceeding, agree to be bound by any judgment of the said courts and agree not
to seek, and hereby waives, any review of the merits of any such judgment by the
courts of any other jurisdiction and hereby appoints the Acquisition Sub at its
registered office as Parent's, CDN's and BVI's attorney for service of process.
<PAGE> 32
-32-
ARTICLE 14
GUARANTY AND ASSIGNMENT
14.1 BVI, or Parent in the event BVI fails to perform, hereby unconditionally
and irrevocably guarantee the prompt and full performance of all CDN2's and
Acquisition Sub's obligations hereunder. CDN2, upon prior notice to the Trustee,
may assign all of its rights and obligations hereunder to Parent or BVI
(collectively the "Permitted Assigns" and either individually a "Permitted
Assign") without the consent of Trustee or Acquisition Sub whereupon Trustee,
Acquisition Sub, Parent or BVI shall enter into a supplemental trust agreement
pursuant to section 11.5(c) reflecting such assignment, provided that CDN2 shall
not thereby be released from such obligations.
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
BROADCOM CORPORATION
by ___________________________________
___________________________________
HH ACQUISITION INC.
by ___________________________________
___________________________________
BROADCOM (BVI) LIMITED
by ___________________________________
___________________________________
HH ACQUISITION ULC
by ___________________________________
___________________________________
US TRUST COMPANY
by ___________________________________
___________________________________
<PAGE> 1
EXHIBIT 99.3
PARENT SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 31st day of August, 1999.
BETWEEN:
BROADCOM (BVI) LIMITED, a company incorporated pursuant to the laws of
the British Virgin Islands, and having its registered office at Citco
Building, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin
Islands.
(hereinafter referred to as "BVI"),
- and -
BROADCOM CORPORATION, a company incorporated pursuant to the laws of
California and having its offices at 16215 Alton Parkway, P.O. Box
57013, Irvine, California, 92619-7013
(hereinafter referred to as "Parent"),
- and -
HH ACQUISITION INC., a company incorporated pursuant to the laws of
British Columbia and having its registered office at 2600 - 700 West
Georgia Street, Vancouver, British Columbia, V7Y 1B3
(hereinafter referred to as "Acquisition Sub"),
- and -
HH ACQUISITION ULC, a company incorporated pursuant to the laws of Nova
Scotia and having its registered office at 800 - 1959 Upper Water
Street, Halifax, Nova Scotia, B3J 2X2
(hereinafter referred to as "CDN2").
WHEREAS pursuant to an acquisition agreement dated as of July 15, 1999
(the "Acquisition Agreement") by and between Parent, BVI, Acquisition Sub, CDN2
and HotHaus Technologies Inc. ("Target") the parties agreed that inter alia on
or before the Closing (as defined in the Acquisition Agreement), Parent, BVI,
CDN2 and Acquisition Sub would execute and deliver
D-1
<PAGE> 2
a Parent Support Agreement in substantially the form set forth in Exhibit D to
the Acquisition Agreement;
AND WHEREAS pursuant to an arrangement (the "Arrangement") to be
effected by plan of arrangement filed pursuant to the BC Company Act on the
Effective Date (as defined in the Acquisition Agreement) each issued and
outstanding common share of Target ("Target Common Shares") will be exchanged
with Acquisition Sub for, at the option of the Holder, Exchangeable Shares of
Acquisition Sub (the "Exchangeable Shares") or Parent Common Shares;
AND WHEREAS the plan of arrangement sets forth the special rights and
restrictions (collectively the "Exchangeable Share Provisions") attaching to the
Exchangeable Shares;
AND WHEREAS the parties hereto desire to make appropriate provision and
to establish a procedure whereby BVI or Parent as applicable, will take certain
actions and make certain payments and deliveries necessary to ensure that
Acquisition Sub will be able to make certain payments and to deliver or cause to
be delivered shares of Parent Common Shares in satisfaction of the obligations
of Acquisition Sub under the Exchangeable Share Provisions with respect to the
payment and satisfaction of dividends, Liquidation Amounts, Retraction Prices
and Redemption Prices all in accordance with the Exchangeable Share Provisions
and BVI or Parent as applicable, will take certain actions such that if CDN2
seeks to exercise its rights under the Plan of Arrangement, it will only do so
if it will be able to make certain payments and cause to be delivered Parent
Common Shares in satisfaction of the obligations of CDN2 under the Plan of
Arrangement;
NOW THEREFORE in consideration of the respective covenants in this
Agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS.
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning ascribed thereto in the Exchangeable Share
Provisions, unless the context requires otherwise.
1.2 SECTIONS AND HEADINGS.
The division of this Agreement into articles, sections and paragraphs
and the insertion of headings are for reference purposes only and shall not
affect the interpretation of this Agreement. Unless otherwise indicated, any
reference in this Agreement to an article, section and paragraph refers to the
specified article, section or paragraph of this Agreement.
D-2
<PAGE> 3
1.3 NUMBER AND GENDER.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
1.4 DATE FOR ANY ACTION.
If any date on which any action is required to be taken under this
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
COVENANTS OF PARENT, BVI AND ACQUISITION SUB
2.1 FUNDING OF THE ACQUISITION SUB.
So long as any Exchangeable Shares are outstanding:
(a) Parent shall not declare or pay any dividend on Parent Common
Shares unless (i) the Acquisition Sub shall have sufficient
assets, funds and other property (including, where applicable,
Parent Common Shares or other securities of Parent) available to
enable the due declaration and the due and punctual payment in
accordance with applicable law, of an equivalent dividend on the
Exchangeable Shares in accordance with the Exchangeable Share
Provisions and (ii) the Acquisition Sub shall simultaneously
declare or pay, as the case may be, an equivalent dividend on
the Exchangeable Shares in accordance with the Exchangeable
Share Provisions;
(b) BVI, or Parent in the event that BVI fails to perform, shall
cause the Acquisition Sub to declare simultaneously with the
declaration of any dividend on Parent Common Shares an
equivalent dividend on the Exchangeable Shares and, when such
dividend is paid on Parent Common Shares, cause the Acquisition
Sub to pay simultaneously therewith such equivalent dividend on
the Exchangeable Shares, in each case in accordance with the
Exchangeable Share Provisions;
(c) Parent shall advise the Acquisition Sub sufficiently in advance
of the declaration by Parent of any dividend on Parent Common
Shares and take all such other actions as are necessary, in
cooperation with the Acquisition Sub, to ensure that the
declaration date, record date and payment date for any dividend
on the Exchangeable Shares shall be the same as the record date,
declaration date and payment date for the corresponding dividend
on Parent Common Shares and such dates in respect of dividends
on the Exchangeable Shares shall be in accordance with any
requirement of the Exchangeable Share Provisions and the stock
exchange on which the Exchangeable Shares are listed;
(d) Parent shall ensure that the record date for any dividend
declared on Parent Common Shares, Parent Common Share
Reorganization or Capital Reorganization is not less than 10
Business Days after the declaration date for such dividend,
Parent Common Share Reorganization or Capital Reorganization;
D-3
<PAGE> 4
(e) BVI, or Parent in the event that BVI fails to perform, shall
take all such actions and do all such things as are necessary or
desirable to enable and permit Acquisition Sub, in accordance
with applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of the Liquidation
Amount in respect of each issued and outstanding Exchangeable
Share upon the liquidation, dissolution or winding-up of the
Acquisition Sub, including without limitation all such actions
and all such things as are necessary or desirable to enable and
permit the Acquisition Sub to cause to be delivered shares of
Parent Common Shares to the holders of Exchangeable Shares in
satisfaction of the Liquidation Amount for each such
Exchangeable Share, in accordance with the provisions of Article
4 of the Exchangeable Share Provisions;
(f) BVI, or Parent in the event that BVI fails to perform, shall
take all such actions and do such things as are necessary or
desirable to enable and permit the Acquisition Sub, in
accordance with applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of the Retraction
Price and the Redemption Price, including without limitation all
such actions and all such things as are necessary or desirable
to enable and permit the Acquisition Sub to cause to be
delivered shares of Parent Common Shares to the holders of
Exchangeable Shares, upon the retraction or redemption of the
Exchangeable Shares in accordance with the provisions of Article
5 or Article 6 of the Exchangeable Share Provisions, as the case
may be;
(g) BVI shall not, and in the event BVI fails to perform Parent
shall cause BVI not to, exercise its vote as a shareholder of
the Acquisition Sub to initiate, consent to or approve the
voluntary liquidation, dissolution or winding-up of the
Acquisition Sub nor take any action or omit to take any action
that is designed to result in the liquidation, dissolution or
winding-up of the Acquisition Sub;
(h) BVI shall not, and in the event BVI fails to perform Parent
shall cause BVI not to, exercise its vote as a shareholder of
the Acquisition Sub to authorize the continuance or other
transfer of the corporate existence of the Acquisition Sub to
any jurisdiction outside Canada; and
(i) Parent and BVI shall take all such actions and do such things as
are necessary or desirable to ensure that Acquisition Sub is
neither a specified financial institution (as that term is
defined in subsection 248(1) of the Income Tax Act (Canada) as
amended from time to time (the "Tax Act") nor a specified person
(as that term is defined in paragraph 112(2.2)(g) of the Tax
Act) in relation to any such institution.
2.2 SEGREGATION OF FUNDS.
BVI or Parent, in the event that BVI fails to perform, will cause the
Acquisition Sub to deposit a sufficient amount of funds in a separate account
and segregate a sufficient amount of such assets and other property as is
necessary to enable the Acquisition Sub to pay or otherwise satisfy the
applicable dividends, Liquidation Amount, Retraction Price or Redemption Price,
in each case for the benefit of holders from time to time of the Exchangeable
Shares, and will cause
D-4
<PAGE> 5
the Acquisition Sub to use such funds, assets and other property so segregated
exclusively for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable, in each case in accordance with the Exchangeable Share Provisions.
2.3 RESERVATION OF PARENT COMMON SHARES.
Parent hereby represents and warrants that it has irrevocably reserved
for issuance out of its authorized and unissued capital stock such number of
Parent Common Shares as is equal to the number of Exchangeable Shares
outstanding immediately following the Effective Date and all vested and unvested
Replacement Options, as that term is defined in the Acquisition Agreement, which
are unexpired and unexercised, and covenants that at all times in the future
while any Exchangeable Shares or Replacement Options are outstanding it will
keep available, free from pre-emptive and other rights, out of its authorized
and unissued capital stock such number of Parent Common Shares (or other shares
or securities into which Parent Common Shares may be reclassified or changed) as
is necessary to enable, BVI, Parent, CDN2 and the Acquisition Sub to perform
their respective obligations pursuant to this agreement, the Exchangeable Share
Provisions and the Voting and Exchange Trust Agreement.
2.4 NOTIFICATION OF CERTAIN EVENTS.
In order to assist Parent, CDN2 and BVI to comply with its obligations
hereunder Acquisition Sub will give, or cause the Transfer Agent to give,
Parent, CDN2 and BVI notice of each of the following events at the time set
forth below:
(a) in the event of any determination by the Board of Directors of
the Acquisition Sub to institute voluntary liquidation,
dissolution or winding up proceedings with respect to the
Acquisition Sub or to effect any other distribution of the
assets of the Acquisition Sub among its shareholders for the
purpose of winding up its affairs, at least 60 days prior to the
proposed effective date of such liquidation, dissolution,
winding up or other distribution;
(b) on the earlier of (i) receipt by the Acquisition Sub of notice
of, and (ii) the Acquisition Sub otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding up of the Acquisition Sub or to effect
any other distribution of the assets of the Acquisition Sub
among its shareholders for the purpose of winding up its
affairs;
(c) immediately, upon receipt by the Transfer Agent of a Retraction
Request; and
(d) as soon as practicable upon the issuance by the Acquisition Sub
of any Exchangeable Shares or rights to acquire Exchangeable
Shares.
D-5
<PAGE> 6
2.5 DELIVERY OF PARENT COMMON SHARES.
In furtherance of the obligations of BVI or Parent as applicable, under
subsections 2.l (e) and (f) hereof, upon notice of any event that requires the
Acquisition Sub to cause to be delivered Parent Common Shares to any holder of
Exchangeable Shares, BVI or Parent, in the event that BVI fails to perform,
shall forthwith deliver the requisite Parent Common Shares to or to the order of
the former holder of the surrendered Exchangeable Shares, as the Acquisition Sub
shall direct. All such Parent Common Shares shall be duly issued as fully paid
and non-assessable and shall be free and clear of any Liens. In consideration of
the delivery of each such Parent Common Share by BVI or Parent as applicable,
the Acquisition Sub shall issue to BVI or Parent as applicable, or as BVI or
Parent as applicable, shall direct, such number of common shares of the
Acquisition Sub as is equal to the fair value of such Parent Common Shares.
2.6 QUALIFICATION OF PARENT COMMON SHARES.
The parties intend that the Exchangeable Shares issued pursuant to the
Plan of Arrangement and the shares of Parent Common Shares issued pursuant to
the Plan of Arrangement and shares of Parent Common Shares issuable in exchange
for the Exchangeable Shares will be issued in transactions (the "Contemplated
Issuances") exempt from registration under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder ("Securities Act")
by reason of Section 3(a)(10) and/or 3(a)(9) thereof and, when issued, such
shares of Parent Common Shares will be immediately convertible into shares of
Parent Class A Common Stock which will be tradable by the holders without
restrictions except for the restrictions set out in the Company Affiliate
Agreements (as defined in the Acquisition Agreement) applicable to Company
Affiliates (as defined in the Acquisition Agreement). In the case of one or more
Contemplated Issuances not being exempt from registration under the Securities
Act, Parent agrees to take all steps reasonably necessary to permit such
Contemplated Issuances to proceed in accordance with the requirements of the
Securities Act and, in the case of shares of Parent Class A Common Stock not
being tradable without restriction, to take all steps reasonably necessary or
appropriate to cause such shares of Parent Class A Common Stock to be freely
tradable without restriction in such manner, including, but not limited to, (x)
within 14 days after the occurrence of a Triggering Event (as defined in the
Acquisition Agreement), filing with the Securities and Exchange Commission or
any successor entity ("SEC"), and using commercially reasonable efforts to cause
the effectiveness of, a registration statement under the Securities Act so as to
register the issuance of such shares of Parent Class A Common Stock, (y) using
commercially reasonable efforts to maintain the effectiveness of such
registration statement (the "Public Registration") until all such shares of
Parent Class A Common Stock have been issued by Parent and (z) taking any action
required to be taken under applicable SEC, state and provincial securities laws
and the regulations of NASDAQ in connection with the issuance of such shares of
Parent Class A Common Stock. Notwithstanding any provision hereof to the
contrary, Parent shall be entitled, without prior notice, to suspend the Public
Registration during customary "blackout periods" relating to material non-public
information regarding Parent that causes the prospectus contained in such
registration statement to not be complete or correct in any material respect.
D-6
<PAGE> 7
2.7 ECONOMIC EQUIVALENCE.
(a) Parent will not without prior approval of Acquisition Sub and
the prior approval of the holders of the Exchangeable Shares
given in accordance with Section 8.2 of the Exchangeable Shares
Provisions:
(i) issue or distribute Parent Common Shares (or securities
exchangeable for or convertible into or carrying rights
to acquire Parent Common Shares) to the holders of all
or substantially all of the then outstanding Parent
Common Shares by way of stock dividend or other
distribution, other than an issue of Parent Common
shares (or securities exchangeable for or convertible
into or carrying rights to acquire Parent Common Shares)
to holders of Parent Common Shares who exercise an
option to receive dividends in Parent Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Parent Common Shares) in lieu
of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to the
holders of all or substantially all of the then
outstanding Parent Common Shares entitling them to
subscribe for or to purchase Parent Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Parent Common Shares); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding Parent Common
Shares (A) shares or securities of Parent of any class
other than Parent Common Shares (other than shares
convertible into or exchangeable for or carrying rights
to acquire Parent Common Shares), (B) rights, options or
warrants other than those referred to in clause (ii),
(C) evidence of indebtedness of Parent or (D) assets of
Parent,
unless the economic equivalent on a per share basis of such
rights, options, securities, shares, evidences of indebtedness
or other assets is issued or distributed simultaneously to
holders of the Exchangeable Shares; provided that, for greater
certainty, the above restrictions shall not apply to any
securities issued or distributed by Parent in order to give
effect to and to consummate the transactions contemplated by,
and in accordance with, the Plan of Arrangement.
(b) Parent will not without the prior approval of Acquisition Sub
and the prior approval of the holders of the Exchangeable Shares
given in accordance with Section 8.2 of the Exchangeable Shares
Provisions;
(i) subdivide, redivide or change the then outstanding
Parent Common Shares into a greater number of Parent
Common Shares; or
(ii) reduce, combine, consolidate or change the then
outstanding Parent Common Shares into a lesser number of
Parent Common Shares; or
(iii) reclassify or otherwise change Parent Common Shares or
effect an amalgamation, merger, reorganization or other
transaction affecting Parent Common Shares,
D-7
<PAGE> 8
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of,
the Exchangeable Shares.
(c) Parent will ensure that the record date for any event referred
to in subsection 2.7(a) or 2.7(b), or (if no record date is
applicable for such event) the effective date for any such
event, is not less than 10 days after the date on which such
event is declared or announced by Parent (with contemporaneous
notification thereof by Parent to Acquisition Sub).
(d) The Board of Directors of Acquisition Sub shall determine, in
good faith and in its sole discretion (with the assistance of
such reputable and qualified independent financial advisors
and/or other experts as the Board of Directors of Acquisition
Sub may require), economic equivalence for the purposes of any
event referred to in subsection 2.7(a) or 2.7(b) and each such
determination shall be conclusive and binding on Parent. In
making each such determination, the following factors shall,
without excluding other factors determined by the Board of
Directors of Acquisition Sub to be relevant, be considered by
the Board of Directors of Acquisition Sub:
(i) in the case of any stock dividend or other distribution
payable in Parent Common Shares, the number of such
shares issued in proportion to the number of Parent
Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or purchase
Parent Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire Parent
Common Shares), the relationship between the exercise
price of each such right, option or warrant and the
current market value (as determined by the Board of
Directors of Acquisition Sub in the manner above
contemplated) of a Parent Common Share;
(iii) in the case of the issuance or distribution of any other
form of property (including without limitation any
shares or securities of Parent of any class other than
Parent Common Shares, any rights, options or warrants
other than those referred to in clause (d)(ii), any
evidence of indebtedness of Parent or any assets of
Parent), the relationship between the fair market value
(as determined by the Board of Directors of Acquisition
Sub in the manner above contemplated) of such property
to be issued or distributed with respect to each
outstanding Parent Common Share and the current market
value (as determined by the Board of Directors of
Acquisition Sub in the manner above contemplated) of a
Parent Common Share;
(iv) in the case of any subdivision, redivision or change of
the then outstanding Parent Common Shares into a greater
number of parent Common Shares or the reduction,
combination, consolidation or change of the then
outstanding Parent Common Shares into a lesser number of
Parent Common Shares or any amalgamation, merger,
reorganization or other transaction affecting
D-8
<PAGE> 9
Parent Common Shares, the effect thereof upon the then
outstanding Parent Common Shares; and
(v) in all such cases, the general taxation consequences of
the relevant event to holders of Exchangeable Shares to
the extent that such consequences may differ from the
taxation consequences to holders of Parent Common Shares
as a result of differences between taxation laws of
Canada and the United States (except for any differing
consequences arising as a result of differing marginal
taxation rates and without regard to the individual
circumstances of holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market
value of any security listed and traded or quoted on a
securities exchange shall be the weighted average of the daily
trading prices of such security during a period of not less than
30 consecutive trading days ending not more than five trading
days before the date of determination on the principal
securities exchange on which such securities are listed and
traded or quoted; provided, however, that if in the opinion of
the Board of Directors of Acquisition Sub the public
distribution or trading activity of such securities during such
period does not create a market which reflects the fair market
value of such securities, then the current market value thereof
shall be determined by the Board of Directors of Acquisition
Sub, in good faith and in its sole discretion (with the
assistance of such reputable and qualified independent financial
advisors and/or other experts as the Board of Directors of
Acquisition Sub may require), and provided further that any such
determination by the Board of Directors of Acquisition Sub shall
be conclusive and binding on Parent.
(e) Acquisition Sub agrees that, to the extent required, upon due
notice from Parent, it will use its best efforts to take or
cause to be taken such steps as may be necessary for the
purposes of ensuring that appropriate dividends are paid or
other distributions are made by Acquisition Sub, or
subdivisions, redivisons or changes are made to the Exchangeable
Shares, in order to implement the required economic equivalent
with respect to the Parent Common Shares and Exchangeable Shares
as provided for in this section 2.6.
2.8 TENDER OFFERS, ETC.
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to Parent Common Shares (an
"Offer") is proposed by Parent or is proposed to Parent or its stockholders and
is recommended by the Board of Directors of Parent, or is otherwise effected or
to be effected with the consent or approval of the Board of Directors of Parent,
Parent will use all commercially reasonable efforts expeditiously and in good
faith to take all such actions and do all such things as are necessary or
desirable to enable and permit holders of Exchangeable Shares to participate in
such Offer to the same extent and on an economically equivalent basis as the
holders of Parent Common Shares, without discrimination. Without limiting the
generality of the foregoing, Parent will use all commercially reasonable efforts
expeditiously and in good faith to ensure that holders of Exchangeable Shares
may participate in all such Offers without being required to retract
Exchangeable Shares as against the Acquisition Sub (or, if so
D-9
<PAGE> 10
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.9 OWNERSHIP OF OUTSTANDING SHARES.
Parent covenants and agrees in favour of the Acquisition Sub that, as
long as any outstanding Exchangeable Shares are owned by any person or entity
other than Parent or any of its Affiliates, Parent will be and remain the direct
or indirect beneficial owner of all issued and outstanding shares in the capital
of the Acquisition Sub (other than Exchangeable Shares) and all outstanding
securities of the Acquisition Sub carrying or otherwise entitled to voting
rights in any circumstances (other than Exchangeable Shares) unless Parent shall
have obtained the prior approval of the Acquisition Sub and the holders of the
Exchangeable Shares given in accordance with section 8.2 of the Exchangeable
Share Provisions.
2.10 PARENT AND AFFILIATES NOT TO VOTE EXCHANGEABLE SHARES.
Each of Parent and CDN2 covenants and agrees that they will appoint and
cause to be appointed proxyholders with respect to all Exchangeable Shares held
by them and their Affiliates for the sole purpose of attending each meeting of
holders of Exchangeable Shares in order to be counted as part of the quorum for
each such meeting. Each of Parent and CDN2 further covenants and agrees that
they will not, and will cause their Affiliates not to, exercise any voting
rights that may be exercisable by holders of Exchangeable Shares from time to
time pursuant to the Exchangeable Share Provisions or pursuant to the provisions
of the BC Company Act with respect to any Exchangeable Shares held by them or by
their Affiliates in respect of any matter considered at any meeting of holders
of Exchangeable Shares, including without limitation any approval to be given by
holders of Exchangeable Shares pursuant to section 8.2 of the Exchangeable Share
Provisions.
2.11 DUE PERFORMANCE.
On and after the Effective Date, Parent and CDN2 shall duly and timely
perform all of their obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of Parent's and
CDN2's rights under the Exchangeable Share Provisions.
2.12 ECONOMIC EQUIVALENCE.
Parent hereby acknowledges that it will be bound by any determination of
economic equivalence made by the Board of Directors pursuant to section 5.5 of
the Plan of Arrangement or section 9.1 of the Exchangeable Share Provisions,
where applicable.
D-10
<PAGE> 11
ARTICLE 3
GENERAL
3.1 TERM.
This agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
there are no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) held by any
party, other than Parent and its Affiliates.
3.2 CHANGES IN CAPITAL OF PARENT AND THE ACQUISITION SUB.
Notwithstanding the provisions of section 3.4 hereof, at all times after
the occurrence of any event effected pursuant to section 2.7 or 2.8 hereof as a
result of which either Parent Common Shares or the Exchangeable Shares or both
are in any way changed, this agreement shall forthwith be amended and modified
as necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which Parent Common Shares or the
Exchangeable Shares or both are so changed and the parties hereto shall execute
and deliver an agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
3.3 SEVERABILITY.
If any provision of this agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
agreement shall not in any way be affected or impaired thereby and this
agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC.
This agreement may not be amended or modified except by an agreement in
writing executed by Acquisition Sub, CDN2, BVI and Parent and approved by the
holders of the Exchangeable Shares in accordance with section 8.2 of the
Exchangeable Share Provisions.
3.5 MINISTERIAL AMENDMENTS.
Notwithstanding the provisions of section 3.4, the parties to this
agreement may without the approval of the holders of the Exchangeable Shares, at
any time and from time to time, amend or modify this agreement in writing for
the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary or desirable with respect to
matters or questions which, in the opinion of the board of
directors of each of Acquisition Sub, BVI, CDN2 and Parent, it
may be expedient to make, provided that each such board of
directors shall be of the opinion that such amendments or
modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of
counsel to Acquisition Sub, BVI, CDN2 and Parent, are required
for the purpose of curing or correcting any ambiguity or defect
or inconsistent provision or clerical omission or mistake or
D-11
<PAGE> 12
manifest error herein, provided that the boards of directors of
each of Acquisition Sub, BVI, CDN2 and Parent shall be of the
opinion that such changes or corrections will not be prejudicial
to the interests of the holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS.
Acquisition Sub, at the request of CDN2, BVI or Parent, shall call a
meeting or meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval pursuant
to section 3.4 hereof. Any such meeting or meetings shall be called and held in
accordance with the articles of the Acquisition Sub and the Exchangeable Share
Provisions.
3.7 WAIVERS ONLY IN WRITING.
No waiver of any of the provisions of this agreement otherwise permitted
hereunder shall be effective unless made in writing and signed by both of the
parties hereto.
3.8 ENUREMENT.
This agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and Permitted Assigns.
3.9 PARENT SUCCESSORS.
Parent shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer. sale, lease or
otherwise) whereby all or substantially all its undertaking, property and assets
would become the property of any other person or, in the case of a merger, of
the continuing company resulting therefrom, unless:
(a) such other person or continuing company is a company (the
"Parent Successor") incorporated under the laws of any state of
the United States or the laws of Canada or any province thereof;
and
(b) the Parent Successor, by operation of law, becomes, without
more, bound by the terms and provisions of this agreement or, if
not so bound, executes, prior to or contemporaneously with the
consummation of such transaction, an agreement to be bound by
the provisions hereof as if it were an original party hereto and
to observe and perform all of the covenants and obligations of
Parent pursuant to this agreement, in form satisfactory to the
Acquisition Sub, acting reasonably.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned subsidiary of Parent with or into Parent, provided that such
transaction complies with this section 3.9.
3.10 NOTICES TO PARTIES.
All notices, requests and other communications between the parties
hereunder shall be in writing and shall be deemed to have been given only if
delivered personally against written
D-12
<PAGE> 13
receipt or by facsimile transmission against facsimile confirmation or mailed by
registered mail, return receipt requested or mailed by overnight courier
prepaid, to the parties at the following addresses or facsimile numbers (or at
such other address for either such party as shall be specified in like notice):
(a) if to Parent, BVI, CDN2 or Acquisition Sub at:
Broadcom Corporation
16215 Alton Parkway
P.O. Box 57013
Irvine, California 92619-7013
Facsimile No.: (949) 450-8715
Attention: President and Chief Executive Officer General Counsel
and General Counsel
with a copy to:
Brobeck, Phlegert & Harrison LLP
38 Technology Drive
Irvine, California
U.S.A. 92618
Facsimile No.: (949) 790-6300
Attention: Bruce Hallet, ESQ
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, B.C.
V7Y 1B3
Facsimile No.: (604) 661-9349
Attention: R. Hector MacKay-Dunn
All such notices, requests and other communications shall (i) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided for in this Section, be deemed given upon facsimile
confirmation, (iii) if delivered by mail in the manner described above to the
address as provided for in this Section, be deemed given on the earlier of the
third Business Day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided in this Section, be deemed given on
the earlier of the first Business Day following the date sent by such overnight
courier or upon receipt (in each case regardless of whether such notice, request
or other communication is received by any other Person to whom a copy of such
notice is to be delivered pursuant to this Section). Any party from time to time
may change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other party
hereto.
D-13
<PAGE> 14
3.11 COUNTERPARTS.
This agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
3.12 JURISDICTION.
This agreement shall be construed and enforced in accordance with the
laws of the State of California.
3.13 ATTORNMENT.
Each of Parent, BVI, Acquisition Sub and CND2 agree that any action or
proceeding arising out of or relating to this agreement may be instituted in the
courts of the State of California waives any objection which it may have now or
hereafter to the venue of any such action or proceeding, irrevocably submits to
the jurisdiction of the said courts in any such action or proceeding, agrees to
be bound by any judgment of the said courts and not to seek, and hereby waives,
any review of the merits of any such judgment by the courts of any other
jurisdiction and hereby appoints the Acquisition Sub at its registered office as
Parent's, BVI's and CDN2's attorney for service of process.
ARTICLE 4
GUARANTY AND ASSIGNMENT
4.1 GUARANTY AND ASSIGNMENT
BVI, or Parent in the event BVI fails to perform, hereby unconditionally
and irrevocably guarantees the full and punctual performance of all CDN2's
obligations hereunder. CDN2 may assign all or a portion of its rights and
obligations hereunder to Parent or to BVI (collectively the "Permitted Assigns"
and either individually a "Permitted Assign") without the consent of Acquisition
Sub whereupon Acquisition Sub, BVI or Parent shall enter into a supplemental
agreement reflecting such assignment, provided that CDN2 shall not thereby be
released from such obligations.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.
BROADCOM CORPORATION
by _____________________________
_____________________________
BROADCOM (BVI) LIMITED
by _____________________________
_____________________________
HH ACQUISITION INC.
by _____________________________
_____________________________
HH ACQUISITION ULC
by _____________________________
_____________________________
D-14
