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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 2000
REGISTRATION NO. 333-90903
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BROADCOM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 33-0480482
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NUMBER)
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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:
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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
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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
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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
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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
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(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. Registration fee was paid on November 12, 1999.
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.
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PROSPECTUS
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 requires the
affirmative vote of the holders of a majority of the outstanding shares of Class
B common stock, voting separately as a class, unless such issuance has been
approved by at least two-thirds of the members of our board of directors then in
office. 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 January 10, 2000, the last reported sale price for the Class A
common stock was $295.56 per share. Our Class B common stock is not publicly
traded.
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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.
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The date of this prospectus is January 10, 2000.
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TABLE OF CONTENTS
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PAGE
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Broadcom.................................................... 3
Risk Factors................................................ 3
Use of Proceeds............................................. 21
Plan of Distribution........................................ 21
Description of Capital Stock................................ 25
Income Tax Considerations Regarding Our Common Stock and the
Exchange of Exchangeable Shares........................... 26
Where You Can Find More Information......................... 34
Incorporation of Certain Documents by Reference............. 35
Forward-Looking Statements.................................. 36
Legal Matters............................................... 36
Experts..................................................... 36
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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.
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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 INC. EXCHANGEABLE SHARES IS GENERALLY A
TAXABLE EVENT AND YOUR TAX CONSEQUENCES WILL VARY DEPENDING ON A NUMBER OF
FACTORS.
The exchange of HH Acquisition Inc. exchangeable shares for shares of
Broadcom Class B common stock is generally a taxable event in Canada and the
United States. A summary of the material Canadian and United States federal
income tax considerations generally applicable under the Income Tax Act (Canada)
or the Internal Revenue Code of 1986, as amended, if you exchange your
exchangeable shares for our Class B common stock is included later in this
prospectus under the section entitled "Income Tax Considerations Regarding Our
Common Stock and the Exchange of Exchangeable Shares." 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 shares of
our Class B common stock.
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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 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 effects on sales and pricing of our
products;
- silicon 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 and products 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;
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- the effects of new and emerging technologies;
- the risks and uncertainties associated with our international operations;
- 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 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 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 revenue 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 revenue 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.
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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-
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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
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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.
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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 industrywide.
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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,
Inc., have established relationships with foundries other than TSMC and
Chartered, and we are using these other foundries to produce the initial
products of Maverick and Broadcom HomeNetworking. 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.
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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
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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.
We have recently established a relationship with another third-party
subcontractor, Amkor Technology, to assemble and test some of our products. We
may utilize this subcontractor for other products in the future. In using this
subcontractor, we will be subject to all of the same risks described in the
foregoing paragraph with respect to ASAT and STATS.
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 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.
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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
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
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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 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 six 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.
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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 recently prevailed in litigation with Sarnoff Corporation and
NxtWave Communications, Inc., formerly Sarnoff Digital Communications, Inc., who
alleged 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.
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
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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.
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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, certain
issuances 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
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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 $304.88 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 need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, these systems and
applications had to be upgraded to comply with the Year 2000 requirements or
risk system failure, miscalculations or other disruptions to normal business
activities.
We have evaluated 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 believe that our products and internal information systems are
Year 2000 compliant. However, we cannot yet assess the extent of the Year 2000
impact and cannot assure you that we will not experience unanticipated residual
consequences of the change in centuries due to the interaction between our own
systems and products and the systems and products of third
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parties. We believe our greatest exposure to residual 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 our suppliers and customers.
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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 in connection with
certain acquisitions, upon exercise of certain stock options and for other
purposes. 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, 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.
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USE OF PROCEEDS
Because the shares of our Class B common stock offered under this
prospectus will be issued in exchange for exchangeable shares of HH Acquisition
Inc., 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 cash proceeds from holders of exchangeable shares for the issuance of
shares of our Class B common stock or upon conversion of such shares of Class B
common stock into Class A common stock.
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, and may redeem the exchangeable
shares at 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 sell or otherwise 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.
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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 no later than 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.
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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 an 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
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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 an 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.
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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
No fractional shares of our Class B common stock will be issued upon
exchange of exchangeable shares. Instead, you will be paid 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
400,000,000 shares of Class A common stock, par value $0.0001 per share,
200,000,000 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 September
30, 1999, 48,076,690 shares of Class A common stock were outstanding, 55,109,916
shares of Class B common stock were outstanding and no shares of preferred stock
were outstanding. On September 30, 1999, assuming the exercise of all
outstanding options, approximately 64,325,118 shares of Class A common stock and
67,230,779 shares of Class B common stock would be outstanding on a fully
diluted basis.
The shares of our Class B common stock are substantially identical to the
shares of our 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 requires the affirmative vote of the holders of a majority
of the outstanding shares of Class B common stock, voting separately as a class,
unless such issuance has been approved by at least two-thirds of the members of
our board of directors then in office. 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.
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INCOME TAX CONSIDERATIONS REGARDING OUR COMMON STOCK
AND THE EXCHANGE OF EXCHANGEABLE SHARES
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following description sets forth the material Canadian federal income
tax considerations generally applicable under the Income Tax Act (Canada),
commonly known as the Canadian Tax Act, to holders of exchangeable shares who
acquire our Class B common stock upon the exchange of exchangeable shares and
who convert their shares of Class B common stock into our Class A common stock.
This summary is based on the current provisions of the Canadian Tax Act,
the regulations promulgated under the Canadian Tax Act and counsel's
understanding of the current administrative practices of the Canada Customs and
Revenue Agency. This summary also takes into account the proposed amendments to
the Canadian Tax Act and corresponding regulations publicly announced by the
Minister of Finance prior to the date of this prospectus and assumes that all
the proposed amendments will be enacted in their present form. However, we
cannot assure you that the proposed amendments will be enacted in the form
proposed, or at all. Except for the proposed amendments discussed above, this
summary does not take into account or anticipate any changes in law, whether by
legislative, administrative or judicial decision or action, nor does it take
into account provincial, territorial or foreign tax legislation or
considerations, which may differ from the Canadian federal income tax
considerations described in this prospectus. No assurances can be given that
subsequent changes in law or administrative policy will not affect or modify the
opinions expressed in this prospectus.
The Canadian federal income tax considerations applicable to each HH
Acquisition Inc. shareholder will vary according to each HH Acquisition Inc.
shareholder's particular circumstances. This summary is not intended to be, and
should not be construed to be, legal or tax advice to any particular HH
Acquisition Inc. shareholder. Accordingly, HH Acquisition Inc. shareholders
should consult with their own tax advisors as to the tax consequences to them of
exchanging their exchangeable shares for our common stock in their particular
circumstances. No advance income tax ruling has been obtained from the Canada
Customs and Revenue Agency to confirm the tax consequences of any of the
transactions described herein.
For the purposes of the Canadian Tax Act, all amounts relating to the
acquisition, holding or disposition of our Class B common stock, including
dividends, adjusted cost base and proceeds of disposition, must be converted
into Canadian dollars based on the prevailing United States dollar exchange rate
at the time that the amounts arise.
HH ACQUISITION INC. SHAREHOLDERS RESIDENT IN CANADA. The following portion
of the summary is applicable only to HH Acquisition Inc. shareholders who:
- for purposes of the Canadian Tax Act and any relevant bilateral tax
treaty, and at all relevant times, are resident or deemed to be resident
in Canada;
- hold their exchangeable shares and will hold their shares of our Class B
common stock as capital property; and
- deal at arm's length with HH Acquisition Inc. and Broadcom.
This summary does not apply to a shareholder with respect to whom we are or will
be a foreign affiliate within the meaning of the Canadian Tax Act or who holds
more than 10% of the exchangeable shares.
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The exchangeable shares and our Class B common stock will generally be
considered to be capital property to a holder of these shares provided that the
holder does not hold any of the shares in the course of carrying on a business
of buying and selling shares and has not acquired the shares in a transaction
considered to be an adventure in the nature of trade. Some holders who might not
otherwise be considered to hold their exchangeable shares as capital property
may be entitled, in some circumstances, to have them treated as capital property
by making the election provided by subsection 39(4) of the Canadian Tax Act.
This election will not, however, be available where an HH Acquisition Inc.
shareholder has made an election under subsection 85(1) or subsection 85(2) of
the Canadian Tax Act in connection with the acquisition of the exchangeable
shares. In addition, the mark-to-market rules contained in the Canadian Tax Act
relating to financial institutions, including some financial institutions,
registered securities dealers and corporations controlled by one or more
financial institutions or registered dealers, will deem these financial
institutions not to hold their exchangeable shares or our Class B common stock
as capital property for the purposes of the Canadian Tax Act. HH Acquisition
Inc. shareholders that are financial institutions should consult their own tax
advisors to determine the tax consequences to them of the application of the
mark-to-market rules.
Redemption or exchange of exchangeable shares. An HH Acquisition Inc.
shareholder will be considered under the Canadian Tax Act to have disposed of
exchangeable shares on:
- a redemption, including pursuant to a request for redemption by a holder
of exchangeable shares, of the holder's exchangeable shares by HH
Acquisition Inc.;
- HH Acquisition ULC's acquisition of a holder's exchangeable shares
pursuant to its overriding purchase rights;
- the exercise by the trustee under the Voting and Exchange Trust Agreement
of an exchange right upon your instructions if there is an HH Acquisition
Inc. insolvency event; or
- an automatic exchange if there is a Broadcom insolvency event.
The Canadian federal income tax consequences of such a disposition are
significantly different for the holder depending on whether the event giving
rise to the disposition is a redemption by HH Acquisition Inc. or an acquisition
by HH Acquisition ULC. An HH Acquisition Inc. shareholder who exercises the
right to require redemption of an exchangeable share by giving a request for
redemption cannot control whether the exchangeable share will be acquired by HH
Acquisition ULC under its overriding purchase right or redeemed by HH
Acquisition Inc. The holder will, however, be notified if the overriding
purchase right will not be exercised in which case the holder may cancel the
notice of retraction and retain the exchangeable share.
On the redemption, including pursuant to a request for redemption by a
shareholder of HH Acquisition Inc., of an exchangeable share by HH Acquisition
Inc., the holder of an exchangeable share will be deemed to have received a
taxable dividend. The amount of the dividend will be equal to the amount, if
any, by which the redemption proceeds exceed the paid-up capital, for purposes
of the Canadian Tax Act, at that time, of the exchangeable share so redeemed.
The redemption proceeds for each exchangeable share will be equal to the fair
market value of one of our shares of Class B common stock at the time that share
of Class B common stock is received by the holder from HH Acquisition Inc. on
the redemption plus the amount of any accrued but unpaid dividends on the
exchangeable share.
A shareholder who is an individual will be required to include in income
dividends deemed to be received on the exchangeable shares, subject to the
gross-up and dividend tax credit rules normally applicable to taxable dividends
received from taxable Canadian corporations.
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In the case of a shareholder that is a corporation, other than a "specified
financial institution" as defined in the Canadian Tax Act, dividends deemed to
be received on the exchangeable shares will be included in computing the
corporation's income and will generally be deductible in computing its taxable
income unless there is any denial of the dividend deduction as discussed below.
A corporation is a specified financial institution for purposes of the Canadian
Tax Act if it is a bank, a trust company, a credit union, an insurance
corporation or a corporation whose principal business is the lending of money to
persons with whom the corporation is dealing at arm's length or the purchasing
of debt obligations issued by the persons listed above or a combination thereof,
and corporations controlled by or related to these entities.
In the case of a shareholder that is a specified financial institution,
this dividend will be deductible in computing its taxable income only if either:
- the specified financial institution did not acquire the exchangeable
shares in the ordinary course of the business carried on by the
institution; or
- at the time of the deemed receipt of the dividend by the specified
financial institution, the exchangeable shares are listed on a prescribed
stock exchange in Canada, and the specified financial institution, either
alone or together with persons with whom it does not deal at arm's
length, is not deemed to receive dividends in respect of more than 10% of
the issued and outstanding exchangeable shares.
We do not expect to list the exchangeable shares on a prescribed stock exchange
in Canada.
A shareholder that is a "private corporation," as defined in the Canadian
Tax Act, or any other corporation resident in Canada and controlled or deemed to
be controlled by or for the benefit of an individual or related group of
individuals may be liable under Part IV of the Canadian Tax Act to pay a
refundable tax of 33 1/3% on dividends deemed to be received on the exchangeable
shares to the extent that these dividends are deductible in computing the
shareholder's taxable income.
If we or any other person with whom we do not deal at arm's length is a
specified financial institution at a point in time that a dividend is deemed to
be paid on an exchangeable share, then, unless the exemption described below
applies, dividends deemed to be received by a shareholder that is a corporation
will not be deductible in computing taxable income but will be fully includable
in taxable income under Part I of the Canadian Tax Act. A shareholder that is a
"Canadian-controlled private corporation," as defined in the Canadian Tax Act,
may be liable to pay an additional refundable tax of 6 2/3% on deemed dividends
that are not deductible in computing taxable income. This denial of the dividend
deduction for a corporate shareholder will not apply in any event if:
- at the time a dividend is deemed to be received, the exchangeable shares
are listed on a prescribed stock exchange;
- we are "related" to HH Acquisition Inc. for the purpose of the Canadian
Tax Act; and
- the recipient, together with persons with whom the recipient does not
deal at arm's length or any partnership or trust of which the recipient
or person is a member or beneficiary, respectively, is not deemed to
receive dividends on more than 10% of the issued and outstanding
exchangeable shares.
The special rights and restrictions attached to the exchangeable shares provide
that, while any exchangeable share is outstanding, HH Acquisition Inc. will at
no time be a specified financial institution or a specified person in relation
to a specified financial institution.
The exchangeable shares will be "taxable preferred shares" and "short-term
preferred shares" for purposes of the Canadian Tax Act. Accordingly, HH
Acquisition Inc. will be subject to a 66 2/3% tax
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under Part VI.1 of the Canadian Tax Act on dividends deemed to be paid on the
exchangeable shares and will be entitled to deduct 9/4 of the tax payable in
computing its taxable income under Part I of the Canadian Tax Act.
On the redemption, the holder of an exchangeable share will also be
considered to have disposed of the exchangeable share for proceeds of
disposition equal to the redemption proceeds less the amount of the deemed
dividend. A holder will in general realize a capital loss or a capital gain
equal to the amount by which the adjusted cost base to the holder of the
exchangeable share exceeds or is less than the proceeds of disposition. The
general tax treatment of capital gains and capital losses is discussed below
under the heading "Capital gains and capital losses." In the case of a
shareholder that is a corporation, in some circumstances the amount of any
deemed dividend may be treated as proceeds of disposition and not as a dividend.
On the exchange of an exchangeable share by the holder thereof with HH
Acquisition ULC for our Class B common stock the holder will be considered to
have disposed of the exchangeable share for proceeds of disposition equal to the
fair market value at that time our Class B common stock is received on the
exchange plus any declared and unpaid dividends in respect of the exchangeable
share. The holder will in general realize a capital gain or a capital loss equal
to the amount by which the proceeds of disposition of the exchangeable share,
net of any reasonable costs of disposition, exceed or are less than the adjusted
cost base to the holder of the exchangeable share. The general tax treatment of
capital gains and capital losses is discussed below under the heading "Capital
gains and losses."
The cost of our Class B common stock received on the redemption of an
exchangeable share by HH Acquisition Inc. will be equal to the fair market value
of our Class B common stock received on the redemption. The cost of our Class B
common stock received on the exchange of an exchangeable share with HH
Acquisition ULC will be equal to the fair market value of our Class B common
stock received on the exchange. The cost of any of this Class B common stock
will be averaged with the adjusted cost base of any of our other Class B common
stock held by the HH Acquisition Inc. shareholder immediately before that time
for the purposes of determining the holder's adjusted cost base of our Class B
common stock.
Dividends on our Class A or Class B common stock. Dividends on our Class A
or Class B common stock must be included in the recipient's income for the
purposes of the Canadian Tax Act. These dividends received by a holder who is an
individual will not be subject to the gross-up and dividend tax credit rules in
the Canadian Tax Act. A holder that is a corporation will include these
dividends in computing its taxable income. A holder that is a Canadian
controlled private corporation may be liable to pay an additional refundable tax
of 6 2/3% on these dividends. United States non-resident withholding tax paid in
respect of these dividends, as discussed under the heading "United States
Federal Tax Considerations" below, will be eligible for foreign tax credit or
deduction treatment where applicable under the Canadian Tax Act. We have no
current plans to pay cash dividends on our Class A or Class B common stock. The
Canadian Tax Act consequences of a stock dividend may be different from those of
a cash dividend.
Disposition of our Class A or Class B common stock. A disposition or
deemed disposition of our Class A or Class B common stock by a holder, other
than a conversion of our Class B common stock into Class A common stock, will
generally result in a capital gain or capital loss equal to the amount by which
the proceeds of disposition, net of any reasonable costs of disposition, exceed
or are less than the adjusted cost base to the holder of our Class A or Class B
common stock. The general tax treatment of capital gains and capital losses is
discussed below under the heading "Capital gains and losses."
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A holder who converts Class B common stock into Class A common stock will
be deemed not to have made a taxable disposition of the Class B common stock and
the cost to the holder of the Class A common stock so obtained will be the
adjusted cost base to the holder of the converted Class B common stock
immediately before the conversion.
Capital gains and losses. An HH Acquisition Inc. shareholder's taxable
capital gain or allowable capital loss from the disposition of exchangeable
shares or our Class A or Class B common stock, other than a conversion of our
Class B common stock into Class A common stock, will be equal to three-quarters
of the amount of the shareholder's capital gain or capital loss in respect of
the disposition. An HH Acquisition Inc. shareholder must include any of this
taxable capital gain in income for the taxation year of disposition, and may,
subject to the detailed provisions of the Canadian Tax Act, deduct any allowable
capital loss from taxable capital gains in the year in which the allowable
capital loss is realized. Under the detailed rules contained in the Canadian Tax
Act, any remaining allowable capital loss may generally be applied to reduce net
taxable capital gains realized by the holder in the three preceding taxation
years or in any subsequent taxation year.
If the holder of an exchangeable share is a corporation, the amount of any
capital loss arising from a disposition or deemed disposition of an exchangeable
share may be reduced by the amount of dividends received or deemed to have been
received by it on the exchangeable share to the extent and under circumstances
prescribed by the Canadian Tax Act. Similar rules may apply where a corporation
is a member of a partnership or a beneficiary of a trust that owns exchangeable
shares or where a trust or partnership of which a corporation is a beneficiary
or a member is a member of a partnership or a beneficiary of a trust that owns
exchangeable shares.
Capital gains realized by an individual may be subject to alternative
minimum tax under the Canadian Tax Act depending on the individual's
circumstances.
HH Acquisition Inc. shareholders that are "Canadian controlled private
corporations," as defined in the Canadian Tax Act, may be liable to pay an
additional 6 2/3% refundable tax in respect of taxable capital gains realized.
Eligibility for investment. We have indicated to counsel that we will
maintain the listing of our Class A common stock on the Nasdaq National Market
or another prescribed exchange.
Qualified investments. Provided our Class A common stock is listed on a
prescribed stock exchange, which includes the Nasdaq National Market, on which
our Class A common stock but not our Class B common stock is currently listed,
our Class A common stock will be a qualified investment under the Canadian Tax
Act for trusts governed by registered retirement savings plans, registered
retirement income funds, deferred profit sharing plans and registered education
savings plans. Exchangeable shares and our Class B common stock are not
qualified investments.
Foreign property. Exchangeable shares and our Class A or Class B common
stock will be foreign property under the Canadian Tax Act. A penalty tax is
imposed by Part XI of the Canadian Tax Act if the cost amount of certain
taxpayers' investment in foreign property exceeds the statutory limit.
Foreign Property information Reporting. A holder of exchangeable shares or
our Class A or Class B common stock who is a "specified Canadian entity," as
defined in the Canadian Tax Act, and whose cost amount for these shares at any
time in a year or fiscal period exceeds Canadian $100,000 will be required to
file an information return in respect of these shares disclosing the holder's
cost amount, any dividends received in the year and any gains or losses realized
in the year in respect of these shares. A specified Canadian entity means a
taxpayer resident in Canada in the year, other than a corporation or a trust
exempt from tax under Part I of the Canadian Tax Act, a
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non-resident-owned investment corporation, a mutual fund corporation, a mutual
fund trust and certain other trusts and partnerships.
HH ACQUISITION INC. SHAREHOLDERS NOT RESIDENT IN CANADA. The following
portion of the summary is applicable only to HH Acquisition Inc. shareholders
who:
- for purposes of the Canadian Tax Act and any relevant bilateral treaty,
and at all relevant times, are not resident and are not deemed to be
resident in Canada;
- hold their exchangeable shares and will hold shares of our Class B common
stock as capital property; and
- deal at arm's length with HH Acquisition Inc. and Broadcom.
Generally, the exchangeable shares will be taxable Canadian property, and a
holder whose exchangeable shares are redeemed either under HH Acquisition Inc.'s
redemption right or pursuant to a request for redemption by the holder will be
deemed to have received a dividend and be considered to have disposed of the
exchangeable shares for proceeds as described above for shareholders resident in
Canada under the heading "Redemption or exchange of exchangeable shares." The
amount of such dividend will be subject to the tax treatment of dividends
described below, and if the holder of exchangeable shares has not submitted a
qualifying certificate issued by the Canada Customs and Revenue Agency under
section 116 of the Canadian Tax Act, HH Acquisition Inc. will reduce the amount
of any Class B common stock or cash proceeds resulting from the redemption by
the amount of withholdings required by section 116 of the Canadian Tax Act. On
the exchange of an exchangeable share by the non-resident holder thereof with HH
Acquisition ULC for a share of Class B common stock, the non-resident holder
will be considered to have disposed of the exchangeable share for proceeds of
disposition in an amount as described above for shareholders resident in Canada,
and if the holder of exchangeable shares has not submitted a qualifying
certificate issued by the Canada Customs and Revenue Agency under section 116 of
the Canadian Tax Act, HH Acquisition ULC will reduce the amount of any Class B
common stock or cash proceeds resulting from the exchange by the amount of
withholdings required under section 116 of the Canadian Tax Act.
Dividends deemed to be paid on the exchangeable shares are subject to
non-resident withholding tax under the Canadian Tax Act at the rate of 25%
although this rate may be reduced under the provisions of an applicable income
tax treaty. Under the Income Tax Treaty between Canada and the United States
effective August 16, 1984, as amended, the rate is generally reduced to 15% in
respect of dividends paid to a person who is the beneficial owner of the shares
and who is resident in the United States for purposes of the Income Tax Treaty.
Generally, our Class B common stock will not be taxable Canadian property
if;
- the holder does not use or hold, and is not deemed to use or hold, these
shares in connection with carrying on business in Canada; and
- no more than 50% of the fair market value of the Class B common stock is
derived directly or indirectly from one or a combination of real property
situated in Canada, Canadian resource properties and timber resource
properties.
A non-resident HH Acquisition Inc. shareholder will not be subject to tax
under the Canadian Tax Act on the sale or other disposition of our Class B
common stock that is not taxable Canadian property to such holder.
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UNITED STATES FEDERAL TAX CONSIDERATIONS
The following description sets forth the material United States federal
income and estate tax considerations for Non-United States holders relating to
the exchange of exchangeable shares for our Class B common stock and the
acquisition, ownership and disposition of our Class A common stock and Class B
common stock, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based on the
provisions of the Internal Revenue Code of 1986, as amended, which we refer to
herein as the Code, the applicable Treasury Regulations promulgated or proposed
thereunder, judicial authority and current administrative rulings and practice,
all of which are subject to change, possibly on a retroactive basis. This
discussion deals only with holders that hold exchangeable shares, or will hold
our Class A common stock and Class B common stock, as "capital assets" within
the meaning of Section 1221 of the Code. This discussion does not address tax
considerations applicable to investors that may be subject to special tax rules
or persons that will hold exchangeable shares, our Class A common stock or our
Class B common stock as a position in a hedging transaction, "straddle" or
"conversion transaction" for tax purposes. We have not sought any ruling from
the Internal Revenue Service with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the Internal Revenue Service will agree with such statements and conclusions.
Investors considering the exchange of exchangeable shares for our Class B
common stock should consult their tax advisors with respect to the application
of United States federal income and estate tax laws to their particular
circumstances, as well as any tax consequences arising under the laws of any
state, local or foreign taxing jurisdiction or under any applicable tax treaty.
As used herein, the term "Non-United States holder" means a holder of
exchangeable shares, Class A Common Stock or Class B Common Stock that is not a
"United States person" for United States federal income tax purposes. A "United
States person" is:
- a citizen or resident of the United States, including an alien individual
who is a lawful permanent resident of the United States or who meets the
"substantial presence" test under Section 7701(b) of the Code;
- a corporation or partnership, including entities treated as corporations
or partnerships for federal income tax purposes, created or organized in
the United States or under the laws of the United States, any state, or
the District of Columbia;
- an estate the income of which is subject to Unites States federal income
taxation regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
DIVIDENDS ON OUR CLASS A COMMON STOCK OR CLASS B COMMON STOCK. Dividends
paid to a Non-United States holder of our Class A common stock or Class B common
stock, excluding any dividends that are effectively connected with the holder's
conduct of a trade or business in the United States, will be subject to United
States federal withholding tax at a 30% rate or lower rate provided under an
applicable income tax treaty. Non-United States holders wishing to claim the
benefit of an applicable treaty rate may be required to satisfy certification
requirements. A Non-United States holder that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by making an appropriate claim for refund
with the Internal Revenue Service.
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Except to the extent that an applicable tax treaty otherwise provides, a
Non-United States holder will be taxed in the same manner as a United States
holder on dividends paid that are effectively connected with the conduct of a
trade or business in the United States by the Non-United States holder. If such
Non-United States holder is a foreign corporation, it may also be subject to a
United States branch profits tax on such effectively connected income at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Even though such effectively connected dividends are subject to United States
federal income tax, and may be subject to the branch profits tax, they will not
be subject to United States withholding tax if the holder delivers an applicable
form to us or our paying agent.
We have no current plans to pay cash dividends on our Class A or Class B
common stock. The United States federal income tax consequences of a stock
dividend may be different from those of a cash dividend.
DISPOSITION OF CLASS A COMMON STOCK OR CLASS B COMMON STOCK; EXCHANGE OF
EXCHANGEABLE SHARES. A Non-United States holder generally will be subject to
United States federal income tax or withholding tax on any gain recognized on
the sale, exchange or other disposition of our Class A common stock or Class B
common stock, or upon the exchange of exchangeable shares for Class B common
stock, only if:
(1) such gain is effectively connected with the conduct of a United States
trade or business by the Non-United States holder and, if a tax treaty
applies, attributable to a United States permanent establishment
maintained by the Non-United States holder;
(2) in the case of a Non-United States holder who is an individual, such
holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition
and certain other conditions are satisfied; or
(3) the holder is subject to tax pursuant to the provisions of the Code
applicable to some United States expatriates.
Our discussion of the United States federal income tax consequences of a
sale or other disposition of our Class A common stock or Class B common stock by
a Non-United States holder assumes that we are not, have not been and will not
be at any time a "United States real property holding corporation," which we
refer to in this Prospectus as a "USRPHC." We have determined that we are not a
USRPHC and do not expect to become one in the future. However, if we were to
become a USRPHC, Non-United States holders could be subject to a tax on a
disposition of the holder's Class A common stock or Class B common stock
notwithstanding the foregoing generally applicable rules.
FEDERAL ESTATE TAX CONSEQUENCES TO A NON-UNITED STATES HOLDER. Shares of
our Class A common stock and Class B common stock actually or beneficially held,
other than through a foreign corporation, by an individual Non-United States
holder at the time of his or her death, or previously transferred subject to
some retained rights or powers, will be included in the value of such holder's
gross estate for United States federal estate tax purposes unless otherwise
provided by an applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Backup withholding at a rate
of 31% may apply to dividends paid to Non-United States holders that are not
"exempt recipients" and that fail to provide any information that may be
required regarding their foreign status in the manner required by the Code and
applicable Treasury Regulations. We must annually report to the Internal Revenue
Service and to each holder the amount of dividends paid to such holder and the
amount of tax withheld on such amounts. Copies of the information returns
reporting any dividends paid and backup
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<PAGE> 35
withholding tax collected may be made available to the tax authorities in the
country in which a Non-United States holder resides under an applicable income
tax treaty.
Information reporting requirements and backup withholding will not apply to
any payment of the proceeds of the sale of our Class A common stock or Class B
common stock by a Non-United States holder effected outside the United States by
a foreign office of a "broker", as defined in applicable Treasury Regulations,
unless, under current law, such broker:
- is a United States person;
- is a foreign person that derives 50% or more of its gross income for some
periods from the conduct of a trade or business in the United States; or
- is a controlled foreign corporation for United States federal income tax
purposes.
Payment of the proceeds of any such sale effected outside the United States
by a foreign office of any broker that is described above will not be subject to
backup withholding, but will be subject to information reporting requirements
unless such broker has documentary evidence in its records that the beneficial
owner is a Non-United States holder and other conditions are met, or the
beneficial owner otherwise establishes an exemption.
Payment of the proceeds of any such sale to or through the United States
office of a broker is subject to information reporting and backup withholding,
unless the owner of Class A common stock or Class B common stock:
- provides an applicable form signed under penalties of perjury that
includes its name and address and certifies as to its Non-United States
holder status; or
- is a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business and provides a statement to us or its agent under
penalties of perjury in which it certifies that an applicable form has
been received by it from the Non-United States holder or qualifying
intermediary and furnishes us or its agent with a copy thereof.
Backup withholding is not an additional tax. Any amounts withheld from a
payment to a holder of our Class A common stock or Class B common stock under
the backup withholding rules will be allowed as a credit against such holder's
United States federal income tax and may entitle the holder to a refund,
provided that the holder furnishes required information to the Internal Revenue
Service.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the United States 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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it as well as information filed previously or in the
future with the SEC, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999;
5. Our definitive proxy statement filed with the SEC on April 9, 1999 in
connection with our annual meeting of shareholders;
6. Our definitive proxy statement filed with the SEC on October 20, 1999
in connection with a special meeting of shareholders;
7. Our Current Report on Form 8-K filed with the SEC on January 27, 1999;
8. Our Current Report on Form 8-K filed with the SEC on April 28, 1999;
9. Our Current Report on Form 8-K filed with the SEC on June 1, 1999;
10. Our Current Report on Form 8-K filed with the SEC on June 23, 1999;
11. Our Current Report on Form 8-K filed with the SEC on July 21, 1999;
12. Our Current Report on Form 8-K filed with the SEC on August 12, 1999;
13. Our Current Report on Form 8-K filed with the SEC on September 1, 1999;
14. Our Current Report on Form 8-K/A filed with the SEC on September 17,
1999;
15. Our Current Report on Form 8-K filed with the SEC on September 28,
1999;
16. Our Current Report on Form 8-K/A filed with the SEC on November 24,
1999; and
17. 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.
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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 as well as material federal U.S. tax consequences will be passed upon
for us by Brobeck, Phleger & Harrison LLP, Irvine, California. Material Canadian
federal income tax consequences will be passed upon for us by Farris, Vaughan,
Wills & Murphy, Vancouver, British Columbia.
EXPERTS
The consolidated financial statements and schedule of Broadcom Corporation
included in Broadcom Corporation's Current Report on Form 8-K/A dated November
24, 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 and schedule are incorporated
herein by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
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Broadcom Logo
<PAGE> 39
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........................................ $ 54,882
Nasdaq National Market additional listing fee............... 5,715
Printing Expenses........................................... 25,000
Legal Fees and Expenses..................................... 10,727
Accounting Fees and Expenses................................ 15,000
Miscellaneous............................................... --
--------
Total............................................. $111,324
========
</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
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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.
3.1.1 Certificate of Amendment of Amended and Restated Articles of
Incorporation of Broadcom Corporation, as filed with the
California Secretary of State on December 31, 1999.
3.2* Bylaws of Broadcom Corporation.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
8.1 Opinion of Farris, Vaughan, Wills & Murphy as to tax
matters.
8.2 Opinion of Brobeck, Phleger & Harrison LLP as to tax
matters.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.2).
23.3 Consent of Farris, Vaughan, Wills & Murphy (included in
Exhibit 8.1).
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.
** Previously filed.
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
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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
(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> 42
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 Amendment No. 1 to
this Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 10th day of January, 2000.
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.
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 January 10, 2000
- ----------------------------------------------------- Officer and Co-Chairman
Henry T. Nicholas III, Ph.D. (Principal Executive
Officer)
* Vice President of Research January 10, 2000
- ----------------------------------------------------- & Development, Chief
Henry Samueli, Ph.D. Technical Officer and
Co-Chairman
</TABLE>
II-4
<PAGE> 43
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Vice President and Chief January 10, 2000
- ----------------------------------------------------- Financial Officer
William J. Ruehle (Principal Financial and
Accounting Officer)
* Director January 10, 2000
- -----------------------------------------------------
Alan E. Ross
* Director January 10, 2000
- -----------------------------------------------------
Myron S. Eichen
* Director January 10, 2000
- -----------------------------------------------------
Werner F. Wolfen
</TABLE>
*By: /s/ HENRY T. NICHOLAS
-----------------------------------
Henry T. Nicholas III,
Ph.D.
(attorney-in-fact)
II-5
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1* Amended and Restated Articles of Incorporation of Broadcom
Corporation.
3.1.1 Certificate of Amendment of Amended and Restated Articles of
Incorporation of Broadcom Corporation, as filed with the
California Secretary of State on December 31, 1999.
3.2* Bylaws of Broadcom Corporation.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
8.1 Opinion of Farris, Vaughan, Wills & Murphy as to tax
matters.
8.2 Opinion of Brobeck, Phleger & Harrison LLP as to tax
matters.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.2).
23.3 Consent of Farris, Vaughan, Wills & Murphy (included in
Exhibit 8.1).
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.
** Previously filed.
<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
Henry T. Nicholas III and David A. Dull hereby certify that:
1. They are the President and Secretary, respectively, of Broadcom
Corporation, a California corporation.
2. Section A.1 of Article III of the Amended and Restated Articles of
Incorporation of this corporation (the "Articles") is hereby amended in its
entirety to read as follows:
"1. Classes of Stock. This corporation is authorized to issue three
classes of stock to be designated, respectively, "Class A Common
Stock," "Class B Common Stock" and "Preferred Stock." The Class A
Common Stock and Class B Common Stock are hereinafter referred to
collectively as "Common Stock." The total number of shares of stock
which the corporation is authorized to issue is Six Hundred and Ten
Million (610,000,000) shares. Four Hundred Million (400,000,000) shares
shall be Class A Common Stock, par value $.0001 per share, Two Hundred
Million (200,000,000) shares shall be Class B Common Stock, par value
$.0001 per share, and Ten Million (10,000,000) shares shall be
Preferred Stock, par value $.0001 per share."
3. Section B.2.c of Article III of the Articles is hereby amended in
its entirety to read as follows:
"c. The holders of shares of Class A Common Stock and the holders of
shares of Class B Common Stock shall vote together as one class on all
matters submitted to a vote of shareholders of the corporation, except
(i) in the case of a proposed issuance of shares of Class B Common
Stock, which issuance shall require the affirmative vote of the holders
of a majority of the outstanding shares of Class B Common Stock, voting
separately as a class; provided, however, that such approval shall not
be required if the issuance of the Class B Common Stock has been
approved by at least two-thirds of the members of the Board of
Directors, then in office; and (ii) as otherwise required by applicable
law."
4. The foregoing amendment of the Articles has been duly approved by
the Board of Directors.
<PAGE> 2
5. The foregoing amendment of the Articles has been duly approved by
the required vote of the shareholders in accordance with Section 903 of the
California Corporations Code. As of the date of this Certificate, the
corporation had outstanding 55,174,539 shares of Class A Common Stock,
49,396,016 shares of Class B Common Stock, and no shares of Preferred Stock. The
number of shares voting in favor of the foregoing amendments equaled or exceeded
the vote required for approval, such required vote being a majority of the
voting power of the outstanding shares of Class A Common Stock and Class B
Common Stock, voting together as a class, and a majority of the outstanding
shares of the Class B Common Stock, voting as a single class.
2
<PAGE> 3
The undersigned further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this Certificate are
true and correct of our own knowledge.
DATED: December 28, 1999 /s/ HENRY T. NICHOLAS
------------------------------------
Henry T. Nicholas III, President
/s/ DAVID A. DULL
------------------------------------
David A. Dull, Secretary
3
<PAGE> 1
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
January 10, 2000
Broadcom Corporation
16215 Alton Parkway
Irvine, California 92618
Re: Broadcom Corporation Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Broadcom Corporation, a California
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 653,159 shares of the Company's Class A common stock and
up to 653,159 shares of the Company's Class B common stock (the "Shares")
pursuant to the Company's Registration Statement on Form S-3 (the "Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of
Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares. Based on such review, we are of the opinion that the Shares have been
duly authorized, and if, as and when issued in accordance with the Registration
Statement and the related prospectus (as amended and supplemented through the
date of issuance) will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 8.1
[FARRIS, VAUGHAN, WILLS & MURPHY LETTERHEAD]
REPLY ATTENTION OF: R. Hector MacKay-Dunn
DIRECT DIAL NUMBER: 661-9307 OUR FILE NO.: 21520-001
EMAIL ADDRESS: [email protected]
January 10, 2000
Broadcom Corporation
16215 Alton Parkway
Irvine, California 92618
Brobeck Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Dear Sirs/Mesdames:
RE: BROADCOM CORPORATION - FORM S-3 REGISTRATION STATEMENT
RELATING TO 653,159 CLASS A AND 653,159 CLASS B COMMON STOCK
This opinion is being delivered to you in connection with the
preparation and filing with the Securities and Exchange Commission of a Form S-3
Registration Statement (the "Registration Statement") relating to the shares of
Broadcom Class B common stock that may be issued from time to time in exchange
for exchangeable shares of HH Acquisition Inc., a Canadian corporation (the
"Exchangeable Shares"), and shares of Broadcom Class A common stock into which
such shares of Class B common stock are convertible. Except as otherwise
provided, capitalized terms referred to herein have the meanings set forth in
the Registration Statement.
We have acted as Canadian tax counsel to Broadcom Corporation and have
prepared an opinion concerning the material Canadian federal income tax
consequences to holders of Exchangeable Shares who acquire Class B common stock
upon the exchange of Exchangeable Shares and who convert Class B common stock
into Class A common stock as contemplated in the Registration Statement.
We have made such investigations and examined such documents and
records, and have made such examinations of law as we have considered necessary
or relevant to enable us to give and as the basis for the opinion set forth
herein. In particular, we have examined and relied upon:
(a) the Registration Statement;
<PAGE> 2
-2-
(b) the Plan of Arrangement and Appendix A to the Plan of
Arrangement - Provisions Attaching to the Exchangeable Shares;
and
(c) the Voting and Exchange Trust Agreement.
In all such examinations we have assumed the authenticity of all
documents submitted to us as originals and the conformity with authentic
original documents of all original documents submitted to us as certified,
telecopied or photostatic copies, the genuineness of all signatures thereon, and
the legal capacity of natural persons executing such documents. Our opinion set
forth below further assumes (1) the truth accuracy of the statements, covenants,
representations, warranties, and facts set forth in the Registration Statement
and in the other documents examined by us, in connection with formulating our
opinion and (2) the consummation of the exchange of Exchangeable Shares into
Class B common stock and the conversion of Class B common stock into Class A
common stock in the manner contemplated by, and in accordance with the terms set
forth in, the Plan of Arrangement, Appendix A to the Plan of Arrangement -
Provisions Attaching to the Exchangeable Shares, the Voting and Exchange Trust
Agreement, and the Registration Statement.
Unless otherwise stated herein, the terms "Plan of Arrangement",
"Appendix A to the Plan of Arrangement - Provisions Attaching to the
Exchangeable Shares", "Voting and Exchange Trust Agreement" and "Registration
Statement" do not include the documents incorporated by reference therein.
We are opining herein as to the effect on the subject transaction only
of the federal income tax laws of Canada and we express no opinion with respect
to the applicability thereto, or the effect thereon, of any provincial,
territorial or foreign tax legislation or considerations, which may differ from
the material Canadian federal income tax considerations described in the
Registration Statement.
Based on such facts, assumptions, and representations, we are of the
opinion that the information set forth in the Registration Statement under the
caption "Canadian Federal Income Tax Considerations" sets forth, subject to the
limitations and qualifications set forth therein, the material Canadian federal
income tax considerations relevant to the holders of Exchangeable Shares who
acquire Class B common stock upon the exchange of Exchangeable Shares and who
convert Class B common stock into Class A common stock.
This opinion is based on the current provisions of the Canadian Tax
Act, the regulations thereunder and our understanding of the current
administrative practices of the Canada Customs and Revenue Agency. The opinion
also takes into account the proposed amendments to the Canadian Tax Act and
corresponding regulations publicly announced by the Minister of Finance prior to
the date of this opinion and assumes that all such proposed amendments will be
enacted in their present form. However, we cannot assure you that the proposed
amendments will be enacted in the form proposed, or at all. Except for the
foregoing, this opinion does not take into account or anticipate any changes in
law, whether by legislative, administrative or judicial decision or action.
Also, any variation or difference in the facts from
<PAGE> 3
-3-
those set forth in the Registration Statement may affect the conclusions stated
herein. This opinion is rendered to you as of the date of this letter, and we
undertake no obligation to update this opinion after the effectiveness of the
Registration Statement.
We express no opinion as to any matters except as specifically set
forth above or if all of the statements, representations, warranties, and
assumptions upon which we relied are not true and accurate at all relevant
times. In the event any one of the statements, representations, warranties, or
assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
Except as provided below, this opinion is for your use in connection
with the filing of the Registration Statement. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to, or relied upon by
any other person, firm or corporation, for any purpose, without our prior
written consent. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name under the caption
"Canadian Federal Income Tax Considerations" in the Registration Statement. In
giving this consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules or regulations of the Commission promulgated thereunder.
Yours truly,
FARRIS, VAUGHAN, WILLS & MURPHY
Per: "R. Hector MacKay-Dunn"
R. Hector MacKay-Dunn
RHM/ye
<PAGE> 1
EXHIBIT 8.2
TELEPHONE: (415) 442-0900 SPEAR STREET TOWER
FACSIMILE: (415) 442-1010 ONE MARKET
SAN FRANCISCO
CALIFORNIA 94105
www.brobeck.com
January 10, 2000
Broadcom Corporation
16215 Alton Parkway
Irvine, CA 92618
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
preparation and filing with the Securities and Exchange Commission of a Form S-3
Registration Statement (the "Registration Statement") relating to the shares of
Broadcom Class B common stock that may be issued from time to time in exchange
for exchangeable shares of HH Acquisition Inc., a Canadian corporation (the
"Exchangeable Shares"), and shares of Broadcom Class A common stock into which
such shares of Class B common stock are convertible. Except as otherwise
provided, capitalized terms referred to herein have the meanings set forth in
the Registration Statement.
We have acted as legal counsel to Broadcom Corporation in connection
with the filing of the Registration Statement. As such, and for the purpose of
rendering this opinion, we have examined and are relying upon (without any
independent investigation or review thereof) the truth and accuracy, at all
relevant times, of the statements, covenants, representations and warranties
contained in the Registration Statement (including all schedules and exhibits
thereto). We have also examined such other instruments and documents related to
Broadcom Corporation and its subsidiaries, the Exchangeable Shares, the Class A
common stock and the Class B common stock as we have deemed necessary or
appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that original documents submitted to us (including
signatures) are authentic, documents submitted to us as copies conform to the
original documents, and there has been due execution and delivery of all
documents where due execution and delivery are prerequisites to the
effectiveness thereof.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that the statements regarding United States federal income tax
consequences set forth in the Registration Statement under the heading "United
States federal tax considerations," insofar as they constitute statements of law
or legal conclusions, are correct in all material respects. We express no
opinion as to any federal, state or local, foreign or other tax consequences,
other than as set forth in the Registration Statement under the heading "United
States federal income tax considerations."
<PAGE> 2
[BROBECK PHLEGER & HARRISON LOGO]
Broadcom Corporation January 10, 2000
Page 2
In addition to the assumptions and representations described above, this
opinion is subject to the exceptions, limitations and qualifications set forth
below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Internal Revenue
Code of 1986, as amended, existing judicial decisions, administrative
regulations and published rulings and procedures. Our opinion is not binding
upon the Internal Revenue Service or the courts, and there is no assurance that
the Internal Revenue Service will not successfully assert a contrary position.
Furthermore, no assurance can be given that future legislative, judicial or
administrative changes, on either a prospective or retroactive basis, will not
adversely affect the accuracy of the conclusions stated herein. Nevertheless, we
undertake no responsibility to advise you of any new developments in the
application or interpretation of the federal income tax laws.
2. We express no opinion as to any matters except as specifically set
forth above or if all of the statements, representations, warranties and
assumptions upon which we relied are not true and accurate at all relevant
times. In the event any one of the statements, representations, warranties or
assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
This opinion is rendered to you solely in connection with the filing of
the Registration Statement. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also consent to the references to
our firm name wherever appearing in the Registration Statement with respect to
the discussion of the federal income tax consequences of the of the exchange of
exchangeable shares, including any amendments to the Registration Statement.
This opinion may not be relied upon for any other purpose, and may not be made
available to any other person, without our prior written consent.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<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 No. 333-90903) 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 Notes 2 and 9 as to which the date is August 31, 1999), with respect to the
consolidated financial statements and schedule of Broadcom Corporation included
in its Current Report on Form 8-K/A dated November 24, 1999, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Orange County, California
January 7, 2000
