APPLIED MICRO CIRCUITS CORP, S-4/A, 2000-09-27

APPLIED MICRO CIRCUITS CORP
S-4/A, 2000-09-27
SEMICONDUCTORS & RELATED DEVICES

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As filed with the Securities and Exchange Commission on September 27, 2000

Registration No. 333-45660
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 1

TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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APPLIED MICRO CIRCUITS CORPORATION
(Exact name of registrant as specified in its charter)

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<TABLE>
<S> <C> <C>
Delaware 3674 94-2586591
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

APPLIED MICRO CIRCUITS CORPORATION
6290 Sequence Drive
San Diego, California 92121
Telephone: (858) 450-9333
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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WILLIAM E. BENDUSH
Vice President, Finance and Administration, and
Chief Financial Officer

APPLIED MICRO CIRCUITS CORPORATION
6290 Sequence Drive
San Diego, California 92121
Telephone: (858) 450-9333
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
<TABLE>
<S> <C>
D. BRADLEY PECK, ESQ. AARON J. ALTER, ESQ.
COOLEY GODWARD llp JOHN L. DONAHUE, ESQ.
4365 Executive Drive, Suite 1100 ADAM R. DOLINKO, ESQ.
San Diego, California 92121 WILSON SONSINI GOODRICH & ROSATI,
Telephone: (858) 550-6000 PROFESSIONAL CORPORATION
650 Page Mill Road
Palo Alto, California 94304
Telephone: (650) 493-9300
</TABLE>
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Approximate date of commencement of proposed sale to the public: As
promptly as practicable after this Registration Statement becomes effective
and prior to the effective time of the proposed merger described in this
Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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(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. [_]

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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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

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MMC NETWORKS, INC.
1144 E. Arques Avenue
Sunnyvale, California 94085

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

October 25, 2000

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of MMC
Networks, Inc., a Delaware corporation, will be held at 10:00 a.m. Pacific time
on October 25, 2000, at the principal executive offices of MMC Networks at 1144
E. Arques Avenue, Sunnyvale, California 94085 for the following purposes:

The special meeting is called for the purpose of considering and voting
upon:

1. A proposal to adopt the Agreement and Plan of Merger and
Reorganization dated as of August 28, 2000, among Applied Micro Circuits
Corporation ("AMCC"), Mercury Acquisition Corp., a newly formed wholly
owned subsidiary of AMCC ("Merger Sub"), and MMC Networks, Inc., pursuant
to which Merger Sub will merge with and into MMC Networks, and Merger Sub
will cease to exist and MMC Networks will become a wholly owned subsidiary
of AMCC (the "Merger"), and approve the Merger; and

2. Such other business as may properly come before the special meeting
or any adjournments or postponements thereof.

The proposed merger and other related matters are more fully described in
the attached prospectus/proxy statement and the appendices thereto.

The Board of Directors has fixed the close of business on September 21, 2000
as the record date for the determination of the stockholders entitled to notice
of and to vote at the special meeting and any adjournments or postponements
thereof. Only holders of record of common stock on the record date are entitled
to vote at the special meeting.

If you would like to attend the special meeting and your shares are held by
a broker, bank or other nominee, you must bring to the meeting a recent
brokerage statement or a letter from the nominee confirming your beneficial
ownership of the shares. You also must bring a form of personal identification.
In order to vote your shares at the special meeting, you must obtain from the
nominee a proxy issued in your name.

You can ensure that your shares are voted at the special meeting by signing
and dating the enclosed proxy and returning it in the envelope provided.
Sending in a signed proxy will not affect your right to attend the meeting and
vote in person. You may revoke your proxy at any time before it is voted by
giving written notice to the Secretary of MMC Networks at its principal
executive offices, 1144 E. Arques Avenue, Sunnyvale, California 94085, by
signing and returning a later dated proxy or by voting in person at the special
meeting.

WHETHER OR NOT YOU EXPECT TO ATTEND, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.

By Order of the Board of Directors,

Richard C. Yonker
Vice President, Finance,
Chief Financial Officer and
Secretary

Sunnyvale, California

September 29, 2000
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[LOGO OF MMC NETWORKS, INC.]

Merger Proposed--Your Vote Is Important

The boards of directors of Applied Micro Circuits Corporation (AMCC) and MMC
Networks, Inc. have agreed on a merger. If the merger is approved by the MMC
Networks stockholders and completed, the common stockholders of MMC Networks
would become stockholders of AMCC.

AMCC common stock is listed on The Nasdaq National Market under the symbol
"AMCC." MMC Networks common stock is listed on The Nasdaq National Market under
the symbol "MMCN."

If the merger is completed, each outstanding share of MMC Networks common
stock would become 0.619 of a share of AMCC common stock, and each share of MMC
Networks common stock subject to an outstanding stock option would become 0.619
of a share of AMCC common stock. As a result, based on the number of shares of
MMC Networks common stock and options to purchase MMC Networks common stock
outstanding on September 21, 2000, holders of MMC Networks common stock and
options exercisable for MMC Networks common stock will have the right to
receive an aggregate of approximately 24,696,123 shares of AMCC common stock.
However, the maximum number of shares of AMCC common stock which AMCC is
obligated to issue will be no more than 20% of the number of shares of AMCC
common stock outstanding as of the effective time of the merger. This means
that if MMC Networks issues shares of MMC common stock other than for the
exercise of options currently outstanding, or grants additional options, which
in the aggregate increases the number of total shares of AMCC common stock to
be issued in the merger above the 20% threshold, the number of shares of AMCC
common stock you will receive will be adjusted downward. The AMCC common stock
to be issued in exchange for the MMC Networks stock options will only be issued
when such options are exercised.

This prospectus/proxy statement provides you with detailed information about
the proposed merger. In addition, you may obtain information about AMCC and MMC
Networks from documents that have been filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.

Please see "Risk Factors" beginning on page 24 of this prospectus/proxy
statement for a description of certain risks associated with the merger and the
businesses of AMCC and MMC Networks.

Whether or not you plan to attend the special meeting, please take the time
to vote by completing the enclosed proxy card and mailing it as soon as
possible. If you sign, date and mail your proxy card without indicating how you
want to vote, your proxy will be voted by the proxy agents as recommended by
your board of directors.

This prospectus/proxy statement is being mailed on or about September 29,
2000 to the stockholders of record of MMC Networks as of September 21, 2000.

Neither the SEC nor any state securities regulators have approved the
securities to be issued in the merger or determined if this
prospectus/proxy statement is accurate or adequate. Any representation to
the contrary is a criminal offense.

Prospectus/proxy statement dated September 27, 2000.
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TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS................................................ 1
WHERE YOU CAN FIND MORE INFORMATION....................................... 1
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 2
SUMMARY................................................................... 4
PRICE RANGE OF COMMON STOCK............................................... 8
AMCC SUMMARY FINANCIAL INFORMATION........................................ 10
AMCC QUARTERLY FINANCIAL INFORMATION (UNAUDITED) ......................... 12
MMC NETWORKS SUMMARY FINANCIAL INFORMATION................................ 13
MMC NETWORKS QUARTERLY FINANCIAL INFORMATION (UNAUDITED).................. 14
COMPARATIVE PER SHARE DATA (UNAUDITED).................................... 16
AMCC AND MMC NETWORKS UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS............................................................... 17
AMCC AND MMC NETWORKS UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE
SHEET.................................................................... 18
AMCC AND MMC NETWORKS UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS............................................................... 19
AMCC AND MMC NETWORKS NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS..................................................... 21
RISK FACTORS.............................................................. 24
Risks Relating to the Merger............................................ 24
Risks Relating to AMCC's and MMC Networks' Businesses................... 25
THE MMC NETWORKS SPECIAL MEETING.......................................... 39
Date, Time and Place.................................................... 39
Matters to be Considered at the Special Meeting......................... 39
Board of Directors Recommendation....................................... 39
Record Date............................................................. 39
Quorum.................................................................. 39
Stockholders Entitled to Vote........................................... 39
Vote Required........................................................... 40
Voting Agreement........................................................ 40
Proxies................................................................. 40
Revocability of Proxies................................................. 40
Solicitation of Proxies and Expenses.................................... 41
THE MERGER................................................................ 42
Background of the Merger................................................ 42
AMCC's Reasons for the Merger........................................... 44
MMC Networks' Reasons for the Merger.................................... 45
Consideration to be Received in the Merger.............................. 46
Procedures for Exchange of MMC Networks Stock Certificates.............. 46
Treatment of Options to Purchase MMC Networks Common Stock.............. 47
Stock Ownership Following the Merger.................................... 47
CERTAIN TERMS OF THE MERGER AGREEMENT..................................... 48
General................................................................. 48
Representations and Warranties.......................................... 48
Certain Covenants of the Parties........................................ 49
Conditions to the Merger................................................ 51
Termination............................................................. 52
Termination Fee......................................................... 53
Expenses Relating to the Merger......................................... 53
Opinion of MMC Networks' Financial Advisor.............................. 53
</TABLE>

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TABLE OF CONTENTS--(Continued)

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INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED AGREEMENTS......... 60
Interests of Certain Persons in the Merger.............................. 60
Voting Agreement........................................................ 61
OTHER MATTERS RELATED TO THE MERGER....................................... 62
Material Federal Income Tax Consequences................................ 62
Restrictions on Resales of AMCC Common Stock by Affiliates of MMC
Networks............................................................... 63
Accounting Treatment.................................................... 63
Appraisal Rights........................................................ 63
AMCC BUSINESS............................................................. 64
Industry Background..................................................... 64
AMCC Strategy........................................................... 66
Product and Customers................................................... 66
Technology.............................................................. 69
Research and Development................................................ 70
Manufacturing........................................................... 70
Sales and Marketing..................................................... 71
Backlog................................................................. 72
Competition............................................................. 72
Proprietary Rights...................................................... 73
Environmental Matters................................................... 73
Employees............................................................... 74
Properties.............................................................. 74
Legal Proceedings....................................................... 74
AMCC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 75
Results of Operations................................................... 75
Liquidity and Capital Resources......................................... 79
Quantitative and Qualitative Disclosure About Market Risk............... 80
AMCC MANAGEMENT AFTER THE MERGER.......................................... 81
Executive Officers and Directors........................................ 81
Director Compensation................................................... 84
Executive Compensation.................................................. 85
Employment, Severance and Change of Control Agreements.................. 86
Transactions with Management............................................ 88
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
AMCC..................................................................... 90
MMC NETWORKS BUSINESS .................................................... 92
Industry Background..................................................... 92
Market Opportunity for Network Processors............................... 93
MMC Networks' Strategy.................................................. 93
Technology.............................................................. 94
Target Markets and Products............................................. 96
Network Processors (Np Family).......................................... 96
Switch Fabric Products (NPX, ATMS, and PS Families)..................... 96
Products Under Development ............................................. 97
Customers............................................................... 97
Sales, Marketing and Technical Support.................................. 98
Research and Development................................................ 98
Manufacturing........................................................... 99
Competition............................................................. 99
</TABLE>

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TABLE OF CONTENTS--(Continued)

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<S> <C>
Intellectual Property................................................... 100
Employees............................................................... 100
MMC NETWORKS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................ 101
Results of Operations..................................................... 101
Liquidity and Capital Resources........................................... 105
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MMC
NETWORKS................................................................. 106
DESCRIPTION OF AMCC CAPITAL STOCK......................................... 108
Voting Rights........................................................... 108
Dividends............................................................... 108
Notice of Stockholders' Meetings........................................ 108
Transfer Agent and Registrar............................................ 108
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 108
General................................................................. 108
Size of the Board of Directors.......................................... 109
Classification of the Board of Directors................................ 109
Cumulative Voting....................................................... 109
Removal of Directors.................................................... 109
Filling Vacancies on the Board of Directors............................. 109
Right to Call Special Meetings of Stockholders.......................... 110
Indemnification......................................................... 110
EXPERTS................................................................... 111
LEGAL MATTERS............................................................. 111
</TABLE>

The following appendices also constitute part of this prospectus/proxy
statement:

Appendix A--Agreement and Plan of Merger and Reorganization

Appendix B--Form of Voting Agreement

Appendix C--Opinion of Credit Suisse First Boston Corporation

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FORWARD-LOOKING STATEMENTS

AMCC and MMC Networks have each made forward-looking statements in this
document that are subject to risks and uncertainties. Forward-looking
statements include the information concerning possible or assumed future
results of operations of AMCC, MMC Networks or the combined company. When used
in this prospectus/proxy statement, the words "may", "intend", "will",
"should", "could", "potential", "expect", "anticipate", "believe", "estimate",
"plan", "predict", or "continue" and similar expressions, are intended to
identify forward-looking statements, although not all forward-looking
statements contain these identifying words. You should note that the merger and
an investment in AMCC common stock involve risks and uncertainties that could
affect the future financial results of AMCC. Some of these risks include:

. risks associated with integrating the businesses and technologies of AMCC
and MMC Networks;

. risks relating to the respective businesses of AMCC and MMC Networks; and

. other risks and uncertainties discussed under "Risk Factors" and
elsewhere in this prospectus/proxy statement.

WHERE YOU CAN FIND MORE INFORMATION

AMCC is a Delaware corporation. AMCC's principal executive offices are
located at 6290 Sequence Drive, San Diego, California 92121, and its telephone
number is (858) 450-9333.

MMC Networks is a Delaware corporation. MMC Networks' principal executive
offices are located at 1144 E. Arques Avenue, Sunnyvale, California 94085, and
its telephone number is (408) 731-1600.

AMCC has filed a registration statement on Form S-4 with the SEC, of which
this prospectus/proxy statement is a part. AMCC and MMC Networks each file
proxy statements and annual, quarterly and other reports and information with
the SEC. You can inspect and copy the registration statement as well as the
proxy statements, reports and other information AMCC and MMC Networks have
filed with the SEC at the public reference room maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C., and at the SEC Regional Offices located
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. You
can call the SEC at 1-800-732-0330 for further information about the public
reference rooms. AMCC and MMC Networks also are required to file electronic
versions of these documents with the SEC, which may be accessed from the SEC's
World Wide Web site at http://www.sec.gov.

AMCC and MMC Networks are not incorporating any documents by reference in
this prospectus/proxy statement.

You should rely only on the information provided in this prospectus/proxy
statement (including the appendices) in considering how to vote your shares on
the proposal discussed herein. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus/proxy statement is accurate as of any date other than the date on
the front of this document.

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This prospectus/proxy statement contains trademarks and registered
trademarks of AMCC, MMC Networks and other companies.

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QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: As an MMC Networks stockholder, what will I receive in the merger?

A: You will receive 0.619 of a share of AMCC common stock in exchange for
each share of common stock of MMC Networks that you hold. No fractional shares
will be issued. You will receive cash for any fractional share you would
otherwise receive. For example, if you own 100 shares of common stock of
MMC Networks, you will receive 61 shares of AMCC common stock and cash equal to
0.9 times the closing sales price of a share of AMCC common stock on the date
the merger becomes effective in exchange for your shares of common stock of MMC
Networks. However, the maximum number of shares of AMCC common stock which AMCC
is obligated to issue (including shares issuable upon exercise of assumed
options) will be no more than 20% of the number of shares of AMCC common stock
outstanding as of the effective time of the merger. This means that if MMC
Networks issues shares of MMC common stock other than for the exercise of
options currently outstanding, or grants additional options, which in the
aggregate increases the number of total shares of AMCC common stock to be
issued in the merger above the 20% threshold, the number of shares of AMCC
common stock you will receive will be decreased.

Q: What will happen to the outstanding options to purchase shares of MMC
Networks common stock as a result of the merger?

A: Each outstanding option to purchase shares of MMC Networks common stock
will be assumed by AMCC. The number of shares of AMCC common stock issuable
upon the exercise of an assumed option will be equal to the number of shares of
MMC Networks common stock subject to the option multiplied by 0.619. The per
share exercise price of an assumed option will be determined by dividing the
exercise price of the option in effect immediately prior to the merger by
0.619. The resulting exercise price will then be rounded up to the nearest
whole cent. For example, an option to purchase 100 shares of MMC Networks
common stock at an exercise price of $50.00 per share will become after the
merger an option to purchase 61 shares of AMCC common stock at an exercise
price of $80.78 per share.

Q: What are the tax consequences to me of the merger?

A: AMCC and MMC Networks have structured the merger so that for federal
income tax purposes, the MMC Networks stockholders will generally not recognize
a gain or a loss upon the receipt of the AMCC common stock in the merger,
except with respect to cash received in lieu of fractional shares. Please read
carefully the discussion in "Other Matters Related to the Merger--Material
Federal Income Tax Consequences" beginning on page 62 below. AMCC and MMC
Networks have conditioned the completion of the merger on receipt of legal
opinions regarding the tax consequences of the merger.

Q: What do I need to do now?

A: After carefully reading and considering the information contained in this
document, please fill out, date and sign your proxy card. Then mail your signed
proxy card in the enclosed postage-prepaid return envelope as soon as possible
so that your shares may be represented at the special meeting.

Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?

A: Your broker will vote your shares only if you instruct your broker on how
to vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.

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Q: Can I change my vote after I have mailed my signed proxy card?

A: You can change your vote at any time before your proxy is voted at the
special meeting in one of three ways. First, you can send a written notice
stating that you would like to revoke your proxy. Second, you can complete and
submit a new proxy card. If you choose either of these two methods, you must
submit your notice of revocation or your new proxy card to the attention of the
secretary of MMC Networks at 1144 East Arques Avenue, Sunnyvale, California
94085. Third, you can attend the special meeting and vote in person. Simply
attending the special meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change your vote.

Q: Should I send in my stock certificates now?

A: No. AMCC will send you written instructions on how to exchange your stock
certificates after the merger is completed.

Q: If I hold MMC Networks stock options, do I have to do anything with my
options?

A: No. Options will be assumed as noted above and in accordance with the
terms of MMC Networks' equity incentive plans.

Q: When do you expect the merger to be completed?

A: Assuming that AMCC and MMC Networks satisfy or waive all of the other
conditions to closing contained in the merger agreement, the merger will occur
as soon as practicable after receiving the required vote of the stockholders of
MMC Networks to approve the merger.

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SUMMARY

This summary highlights selected information found in greater detail
elsewhere in this prospectus/proxy statement. This summary does not contain all
of the information that is important to you. We urge you to read the entire
document (including the appendices) before you decide whether to vote in favor
of the merger. The merger agreement is attached as Appendix A to this document.
We encourage you to read the merger agreement which is the legal document
governing the terms of the merger. We have included page references
parenthetically to direct you to a more complete description in this
prospectus/proxy statement of the topics presented in this summary.

The Companies (pages 64 and 92)

Applied Micro Circuits Corporation
6290 Sequence Drive
San Diego, California 92121
(858) 450-9333

AMCC designs, develops, manufactures and markets high-performance, high-
bandwidth silicon solutions for the world's optical networks. AMCC offers
integrated circuit, or IC, products that enable the transport of voice and data
over fiber optic networks by utilizing a combination of high-frequency analog,
mixed-signal and digital design expertise coupled with system-level knowledge
and multiple silicon process technologies. AMCC's customers include leading
communications equipment manufacturers such as Alcatel, Ciena, Cisco, Lucent,
Marconi Communications and Nortel as well as emerging communications systems
providers such as Juniper Networks and Sycamore Networks.

MMC Networks, Inc.
1144 E. Arques Avenue
Sunnyvale, California 94085
(408) 731-1600

MMC Networks designs, develops and markets network processing platforms that
enable network and communications equipment vendors to rapidly develop
scalable, high-performance, feature-rich, cost-effective products. MMC
Networks' platforms include fully programmable, policy-enabled network
processors, an open, extensible software architecture, high-capacity switching
fabrics, and integrated traffic management capabilities, complemented by system
design and consulting services. MMC Networks platforms form the silicon
"engines" of many Layer 2 through Layer 7 WAN and LAN switches and routers,
broadband, optical, web switching, subscriber management, and other
communications platforms.

Reasons for the Merger (page 44)

AMCC. AMCC's board of directors approved the merger based upon a number of
factors, including the following:

. the ability of MMC Networks to develop and sell high-end network
processors and traffic management products and low-end network processor
products with advanced technology, and the current and projected demand
for these network processor products upon the standardization of these
products;

. the combination of the complementary products and technologies that will
allow AMCC to provide more complete solutions than AMCC can provide now
and that may provide AMCC's customers an opportunity to reduce the time
to market for their products;

. MMC Networks' strong technical employee and consultant force, which
includes over 220 design engineers, quality and test engineers and sales
and marketing personnel;

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. the maturity, scalability, wire-speed performance and market acceptance
of MMC Networks' current network processor products over network
processor products currently on the market as well as the likelihood of
market acceptance of MMC Networks' future products;

. MMC Networks' focus on designing products compatible with the wide area
network, or WAN, market segment; and

. MMC Networks' significant design wins with leading communications
equipment manufacturers.

MMC Networks. MMC Networks' board of directors approved the merger based
upon a number of factors, including the following:

. the merger will offer the stockholders of the combined company the
potential benefits described above under the heading "AMCC's Reasons for
the Merger;"

. the merger will result in a combined company with greater financial,
technological and human resources to develop or acquire new products and
new technologies, and greater sales and marketing resources to help
promote and sell MMC Networks' products;

. MMC Networks will have access to the customer base of AMCC and may
benefit from increased distribution of MMC Networks' products;

. the broad expertise of the AMCC management team and the significant
marketing resources of AMCC will contribute to stronger product planning
and operational execution;

. the value of the shares of AMCC common stock that the MMC Networks
stockholders will receive in the merger represents a significant premium
to market for the MMC Networks stockholders; and

. the opinion of Credit Suisse First Boston regarding the fairness, from a
financial point of view, of the exchange ratio, as more fully described
below under "Opinion of MMC Networks' Financial Advisor."

Recommendation of the Board of MMC Networks (page 39)

The board of directors of MMC Networks believes that the merger is fair to,
and in the best interests of, MMC Networks and its stockholders, and
unanimously recommends that the stockholders of MMC Networks vote "FOR" the
merger agreement and merger.

Opinion of MMC Networks' Financial Advisor (page 53)

In connection with the merger, Credit Suisse First Boston Corporation, MMC
Networks' financial advisor, delivered a written opinion to the MMC Networks
board of directors as to the fairness, from a financial point of view, of the
exchange ratio provided for in the merger to the holders of MMC Networks common
stock. The full text of Credit Suisse First Boston's written opinion, dated
August 28, 2000, is attached to this document as Appendix C. We encourage you
to read this opinion carefully in its entirety for a description of the
procedures followed, assumptions made, matters considered and limitations on
the review undertaken. Credit Suisse First Boston's opinion is addressed to the
MMC Networks board of directors and does not constitute a recommendation to any
stockholder as to any matters relating to the merger.

What You Will Receive in the Merger (page 46)

In connection with the merger, as a holder of MMC Networks common stock, you
will receive 0.619 of a share of AMCC common stock for each share of common
stock of MMC Networks that you hold. No fractional shares will be issued.
Instead you will be paid in cash the dollar amount, without interest,
determined by multiplying any fractional share by the closing sales price of
AMCC common stock as quoted on The Nasdaq National Market on the date the
merger becomes effective. Thus, if you hold 100 shares of common stock of MMC
Networks, you will receive 61 shares of AMCC common stock and cash equal to 0.9
times the closing sales price of AMCC common stock on the date the merger
becomes effective.

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Ownership of AMCC Following the Merger (page 47)

Assuming that no additional shares of MMC Networks common stock are issued
and none of the currently outstanding options to purchase MMC Networks common
stock are exercised prior to the merger, AMCC will issue approximately
20,563,356 shares of AMCC common stock for the outstanding shares of MMC
Networks stock and will assume options to purchase approximately 4,132,767
shares of AMCC common stock. Based upon 126,168,858 shares of AMCC common stock
issued and outstanding as of September 21, 2000, and assuming no exercise of
outstanding options, warrants or other rights to purchase AMCC common stock,
the former holders of MMC Networks common stock would hold and have voting
power with respect to approximately 14%, and the stockholders of AMCC prior to
the closing of the merger would hold and have voting power with respect to
approximately 86%, of AMCC's total issued and outstanding shares of common
stock after completion of the merger.

Date, Time and Place of Meeting of Stockholders (page 39)

The MMC Networks special meeting will be held on October 25, 2000 at 10:00
a.m., Pacific time, at MMC Networks' principal executive offices located at
1144 E. Arques Avenue, Sunnyvale, California 94085.

Purpose of the Meeting (page 39)

At the MMC Networks special meeting, the stockholders of MMC Networks will
be asked to vote upon and approve the proposed merger and adopt the related
agreement and plan of merger and reorganization.

Record Date; Shares Entitled to Vote (page 39)

Only holders of record of MMC Networks common stock at the close of business
on September 21, 2000 are entitled to notice of and to vote at the MMC Networks
special meeting. At the close of business on September 21, 2000, there were
outstanding and entitled to vote 33,220,285 shares of MMC Networks common
stock, each of which will be entitled to one vote on each matter to be acted
upon at the MMC Networks special meeting.

Required Vote (page 40)

The affirmative vote of a majority of the outstanding shares of MMC Networks
common stock is required to adopt the merger agreement and approve the merger.
Failure to vote, broker non-votes and abstentions will have the same affect as
a vote "AGAINST" the adoption of the merger agreement and approval of the
merger.

Voting Agreement (page 40)

Stockholders of MMC Networks, who beneficially own approximately 15% of the
total MMC Networks common stock outstanding as of the record date, have agreed
to vote their shares "FOR" adoption of the merger agreement and approval of the
merger.

Conditions to the Merger (page 51)

AMCC and MMC Networks will complete the merger only if a number of
conditions either are satisfied or waived, some of which include:

. AMCC's registration statement allowing AMCC to issue shares of its common
stock in the merger being declared effective by the SEC;

. there being no restraining orders, injunctions or other orders preventing
the completion of the merger or other legal requirements that make the
completion of the merger illegal; and

. the holders of a majority of shares of MMC Networks common stock adopting
the merger agreement and approving the merger.

6
<PAGE>

Termination Fee (page 53)

If the merger agreement is terminated under certain circumstances, MMC
Networks will have to pay AMCC a termination fee of $135,000,000.

Tax Matters (page 62)

It is expected that the merger will constitute a tax-free reorganization for
federal income tax purposes and, accordingly, that no gain or loss will be
recognized for federal income tax purposes by the MMC Networks stockholders
upon exchange of their MMC Networks common stock in the merger (except with
respect to any cash received in the merger in lieu of any fractional share).
The obligations of AMCC and MMC Networks to complete the merger are conditioned
on the receipt by AMCC of an opinion from Cooley Godward llp, and the receipt
by MMC Networks of an opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, that the merger constitutes a reorganization under Section 368 of
the Internal Revenue Code of 1986.

Tax matters can be complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your own
tax advisors to fully understand the tax consequences of the merger to you.

Government Approvals

The completion of the merger is subject to the expiration or termination of
the relevant waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976. AMCC and MMC Networks have filed the notification and report forms
required under the Hart-Scott-Rodino Act.

Accounting Treatment (page 63)

The merger will be accounted for as a "purchase" for financial reporting
purposes.

7
<PAGE>

PRICE RANGE OF COMMON STOCK

AMCC common stock is listed on The Nasdaq National Market under the symbol
"AMCC." The following table shows, for the periods indicated, the high and low
reported sales prices per share of AMCC common stock on The Nasdaq National
Market. Share prices have been restated to reflect two-for-one stock splits
effected on each of September 9, 1999 and March 23, 2000.

<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ended March 31, 1999
First Quarter.............................................. $ 7.50 $ 4.41
Second Quarter............................................. $ 7.50 $ 3.22
Third Quarter.............................................. $ 10.16 $ 3.06
Fourth Quarter............................................. $ 11.69 $ 8.22

<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ended March 31, 2000
First Quarter.............................................. $ 21.25 $10.28
Second Quarter............................................. $ 33.50 $19.06
Third Quarter.............................................. $ 64.19 $27.19
Fourth Quarter............................................. $158.87 $50.53

<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ending March 31, 2001
First Quarter.............................................. $149.25 $65.50
Second Quarter (through September 22, 2000)................ $210.19 $95.50
</TABLE>

At September 21, 2000, there were approximately 720 holders of record of
AMCC common stock.

MMC Networks common stock is listed on The Nasdaq National Market under the
symbol "MMCN." The following table shows, for the periods indicated, the high
and low reported sales prices per share of MMC Networks common stock on The
Nasdaq National Market.

<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ended December 31, 1998
First Quarter.............................................. $ 23.38 $14.00
Second Quarter............................................. $ 34.25 $19.38
Third Quarter.............................................. $ 33.88 $10.00
Fourth Quarter............................................. $ 16.38 $ 7.75

<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ended December 31, 1999
First Quarter.............................................. $ 22.13 $11.75
Second Quarter............................................. $ 45.25 $16.00
Third Quarter.............................................. $ 57.00 $21.25
Fourth Quarter............................................. $ 35.00 $16.38

<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal year ending December 31, 2000
First Quarter.............................................. $ 60.75 $27.50
Second Quarter............................................. $ 55.00 $21.25
Third Quarter (through September 22, 2000)................. $126.57 $41.25
</TABLE>

8
<PAGE>

At September 21, 2000, there were approximately 115 holders of record of MMC
Networks common stock.

On August 25, 2000, the last full trading day prior to the execution and
delivery of the merger agreement, the closing sales price reported on The
Nasdaq National Market was $188.56 per share for AMCC's common stock and $78.25
per share for MMC Networks common stock. Holders of MMC Networks common stock
are encouraged to obtain a current market quotation for AMCC common stock.

Neither AMCC nor MMC Networks has paid any cash dividends in the past, and
each currently intends to retain future earnings, if any, to fund the
development and growth of its business and not to pay any cash dividends in the
foreseeable future.

9
<PAGE>

AMCC SUMMARY FINANCIAL INFORMATION

The following consolidated financial information is derived from the AMCC
consolidated financial statements included elsewhere in this prospectus/proxy
statement and should be read together with "AMCC Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
Three Months
Year Ended March 31, Ended June 30,
------------------------------------------- ---------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- -------- -------- ------- -------
(Unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net revenues............ $50,264 $57,468 $76,618 $105,000 $172,354 $31,643 $74,188
Cost of revenues........ 34,169 30,057 34,321 37,937 50,218 10,283 19,314
------- ------- ------- -------- -------- ------- -------
Gross profit............ 16,095 27,411 42,297 67,063 122,134 21,360 54,874
Operating expenses:
Research and
development.......... 8,283 7,870 13,268 22,472 32,815 6,354 14,837
Selling, general and
administrative....... 11,232 12,537 14,278 18,325 28,199 5,569 10,611
Amortization of
goodwill and
purchased
intangibles.......... -- -- -- -- -- -- 2,284
Acquired in process
research and
development.......... -- -- -- -- -- -- 21,800
Merger-related costs.. -- -- -- 2,350 -- -- --
------- ------- ------- -------- -------- ------- -------
Total operating
expenses........... 19,515 20,407 27,546 43,147 61,014 11,923 49,532
------- ------- ------- -------- -------- ------- -------
Operating income
(loss)................. (3,420) 7,004 14,751 23,916 61,120 9,437 5,342
Interest income
(expense), net......... (242) (29) 871 3,450 12,872 884 12,277
------- ------- ------- -------- -------- ------- -------
Income (loss) before
income taxes........... (3,662) 6,975 15,622 27,366 73,992 10,321 17,619
Provision for income
taxes.................. 32 659 406 10,233 25,367 3,535 14,224
------- ------- ------- -------- -------- ------- -------
Net income (loss)....... $(3,694) $ 6,316 $15,216 $ 17,133 $ 48,625 $ 6,786 $ 3,395
------- ------- ------- -------- -------- ------- -------
Basic earnings (loss)
per share(1):
Earnings (loss) per
share................ $ (0.20) $ 0.32 $ 0.36 $ 0.17 $ 0.45 $ 0.07 $ 0.03
======= ======= ======= ======== ======== ======= =======
Shares used in
calculating basic
earnings (loss) per
share................ 18,264 20,024 42,376 98,056 107,820 102,860 121,352
======= ======= ======= ======== ======== ======= =======
Diluted earnings (loss)
per share(1):
Earnings (loss) per
share................ $ (0.05) $ 0.09 $ 0.19 $ 0.16 $ 0.41 $ 0.06 $ 0.03
======= ======= ======= ======== ======== ======= =======
Shares used in
calculating diluted
earnings (loss) per
share................ 69,576 71,628 81,176 109,720 119,152 114,112 132,581
======= ======= ======= ======== ======== ======= =======
</TABLE>
--------
(1) All share and per share information has been restated to reflect two-for-
one stock splits effected on each of September 9, 1999 and March 23, 2000.

10
<PAGE>

AMCC SUMMARY FINANCIAL INFORMATION (Cont.)

<TABLE>
<CAPTION>
March 31, June 30,
-------------------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
------- ------- -------- -------- ---------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance (in thousands)
Sheet Data:
Working capital......... $13,977 $19,364 $ 77,417 $103,617 $ 977,621 $109,343 $ 998,220
Total assets............ 37,836 41,814 112,834 150,655 1,046,882 157,772 1,282,107
Long-term debt and
capital lease
obligations, less
current portion........ 4,447 3,192 4,091 7,558 5,294 7,030 4,768
Total stockholders'
equity................. 21,512 27,743 91,634 121,694 1,013,805 130,693 1,235,592
</TABLE>

11
<PAGE>

AMCC QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands, except per share data)

<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------
Dec. Dec.
June 30, Sept. 30, 31, March 31, June 30, Sept. 30, 31, March 31, June 30,
1998 1998 1998 1999 1999 1999 1999 2000 2000
-------- --------- ------- --------- -------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $23,814 $25,472 $26,972 $28,742 $31,643 $37,898 $45,762 $57,094 $74,188
Cost of revenues........ 9,399 9,347 9,669 9,522 10,283 11,326 13,209 15,400 19,314
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 14,415 16,125 17,303 19,220 21,360 26,572 32,553 41,649 54,874
Operating expenses:
Research and
development.......... 4,893 5,454 5,847 6,278 6,354 7,194 8,281 10,986 14,837
Selling, general and
administrative....... 4,164 4,296 4,573 5,292 5,569 6,548 7,061 9,021 10,611
Amortization of
goodwill and
purchased
intangibles.......... -- -- -- -- -- -- -- -- 2,284
Acquired in process
research and
development.......... -- -- -- -- -- -- -- -- 21,800
Merger-related costs.. -- -- -- 2,350 -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 9,057 9,750 10,420 13,920 11,923 13,742 15,342 20,007 49,532
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 5,358 6,375 6,883 5,300 9,437 12,830 17,211 21,642 5,342
Interest income, net.... 853 877 883 837 884 1,005 1,225 9,758 12,277
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 6,211 7,252 7,766 6,137 10,321 13,835 18,436 31,400 17,619
Provision for income
taxes.................. 2,227 2,584 2,646 2,776 3,535 4,738 6,324 10,770 14,224
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 3,984 $ 4,668 $ 5,120 $ 3,361 $ 6,786 $ 9,097 $12,112 $20,630 $ 3,395
======= ======= ======= ======= ======= ======= ======= ======= =======
Earnings per share
(diluted)(1)........... $ 0.04 $ 0.04 $ 0.05 $ 0.03 $ 0.06 $ 0.08 $ 0.10 $ 0.16 $ 0.03
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used in
calculating diluted
earnings per share(1).. 106,660 109,184 110,476 112,560 114,112 115,864 117,608 129,024 132,581
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
-------
(1) All share and per share information has been restated to reflect two-for-
one stock splits effected on each of September 9, 1999 and March 23, 2000.

12
<PAGE>

MMC NETWORKS SUMMARY FINANCIAL INFORMATION

The following summary financial data are derived from MMC Networks'
consolidated financial statements included elsewhere in this prospectus/proxy
statement and should be read in conjunction with "MMC Networks Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
---------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- ------- -------- --------
(in thousands, except per share data) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues................ $ 577 $10,515 $21,930 $49,279 $70,149 $ 35,433 $ 29,669
Cost of revenues........ 304 3,576 6,542 14,353 21,524 10,468 8,860
------- ------- ------- ------- ------- -------- --------
Gross profit............ 273 6,939 15,388 34,926 48,625 24,965 20,809
Operating expenses:
Research and
development, net..... 1,802 3,312 8,318 14,552 22,645 9,710 15,082
Selling, general and
administrative....... 1,151 3,225 6,240 9,162 11,182 5,075 6,949
Litigation
settlement........... -- -- -- 1,250 -- -- --
------- ------- ------- ------- ------- -------- --------
Total operating
expenses........... 2,953 6,537 14,558 24,964 33,827 14,785 22,031
------- ------- ------- ------- ------- -------- --------
Operating income
(loss)................. (2,680) 402 830 9,962 14,798 10,180 (1,222)
Other income, net....... 104 317 504 2,179 3,138 1,345 2,050
------- ------- ------- ------- ------- -------- --------
Income (loss) before
income taxes........... (2,576) 719 1,334 12,141 17,936 11,525 828
Provision for income
taxes.................. -- 17 138 3,730 6,099 4,145 264
------- ------- ------- ------- ------- -------- --------
Net income (loss)....... $(2,576) $ 702 $ 1,196 $ 8,411 $11,837 $ 7,380 $ 564
======= ======= ======= ======= ======= ======== ========
Basic earnings (loss)
per share:
Earnings (loss) per
share................ $ (0.38) $ 0.07 $ 0.08 $ 0.28 $ 0.38 $ 0.24 $ 0.02
======= ======= ======= ======= ======= ======== ========
Shares used in
calculating basic
earnings (loss) per
share................ 6,808 10,652 14,432 29,693 31,065 30,523 32,472
======= ======= ======= ======= ======= ======== ========
Diluted earnings (loss)
per share:
Earnings (loss) per
share................ $ (0.38) $ 0.03 $ 0.04 $ 0.25 $ 0.35 $ 0.22 $ 0.02
======= ======= ======= ======= ======= ======== ========
Shares used in
calculating diluted
earnings (loss) per
share................ 6,808 25,745 29,113 33,611 33,791 34,043 35,386
======= ======= ======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------ ------- ------- ------- ------- ------- --------
(in thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Working capital......... $7,177 $ 7,113 $46,159 $57,323 $79,508 $66,413 $ 82,538
Total assets............ 9,527 10,676 54,723 73,384 96,395 83,318 105,275
Long-term obligations... 301 636 286 -- -- -- --
Total stockholders'
equity................. 7,446 8,177 49,717 62,945 87,960 72,500 94,159
</TABLE>

13
<PAGE>

MMC NETWORKS QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands, except per share data)

<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------
June Sept. Dec. June Sept. Dec.
March 31, 30, 30, 31, March 31, 30, 30, 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- ------- ------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $9,623 $12,017 $14,015 $13,624 $16,110 $19,323 $23,149 $11,567
Cost of revenues........ 2,936 3,490 4,036 3,891 4,801 5,667 6,868 4,188
------ ------- ------- ------- ------- ------- ------- -------
Gross profit............ 6,687 8,527 9,979 9,733 11,309 13,656 16,281 7,379
Operating expenses:
Research and
development, net..... 3,144 3,654 3,872 3,882 4,454 5,256 6,360 6,575
Selling, general and
administrative....... 2,097 2,255 2,406 2,404 2,392 2,683 3,136 2,971
Litigation
settlement........... -- 1,250 -- -- -- -- -- --
------ ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 5,241 7,159 6,278 6,286 6,846 7,939 9,496 9,546
------ ------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................. 1,446 1,368 3,701 3,447 4,463 5,717 6,785 (2,167)
Interest income, net.... 510 479 556 634 654 691 844 949
------ ------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 1,956 1,847 4,257 4,081 5,117 6,408 7,629 (1,218)
Provision for (benefit
from) income taxes..... 700 555 1,275 1,200 1,840 2,305 2,745 (791)
------ ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $1,256 $ 1,292 $ 2,982 $ 2,881 $ 3,277 $ 4,103 $ 4,884 $ (427)
====== ======= ======= ======= ======= ======= ======= =======
Earnings (loss) per
share (diluted)........ $ 0.04 $ 0.04 $ 0.09 $ 0.09 $ 0.10 $ 0.12 $ 0.14 $ (0.01)
====== ======= ======= ======= ======= ======= ======= =======
Shares used in
calculating diluted
earnings (loss) per
share.................. 33,717 33,794 33,723 33,611 33,499 34,587 35,283 33,791
====== ======= ======= ======= ======= ======= ======= =======
</TABLE>

14
<PAGE>

MMC NETWORKS QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Cont.)
(in thousands, except per share data)

<TABLE>
<CAPTION>
Quarters Ended
-----------------
June
March 31, 30,
2000 2000
--------- -------
<S> <C> <C>
Net revenues................................................ $12,639 $17,030
Cost of revenues............................................ 3,847 5,013
------- -------
Gross profit................................................ 8,792 12,017
Operating expenses:
Research and development, net............................. 7,169 7,913
Selling, general and administrative....................... 3,212 3,737
------- -------
Total operating expenses................................ 10,381 11,650
------- -------
Operating income (loss)..................................... (1,589) 367
Other income, net........................................... 1,000 1,050
------- -------
Income (loss) before income taxes........................... (589) 1,417
Provision for (benefit from) income taxes................... (189) 453
------- -------
Net income (loss)........................................... $ (400) $ 964
======= =======
Earnings (loss) per share (diluted)......................... $ (0.01) $ 0.03
======= =======
Shares used in calculating diluted earnings (loss) per
share...................................................... 32,207 35,310
======= =======
</TABLE>

15
<PAGE>

COMPARATIVE PER SHARE DATA (UNAUDITED)

The following table sets forth certain audited and unaudited historical per
share data of AMCC and MMC Networks and unaudited pro forma combined per share
data. You should read the information below with the selected historical
financial information and the unaudited pro forma combined condensed financial
statements included elsewhere in this prospectus/proxy statement. The pro forma
combined condensed financial information is not necessarily indicative of the
operating results of future operations or the actual results that would have
occurred at the beginning of the period presented.

<TABLE>
<CAPTION>
Three months
ended June 30, Year
2000 ended(1)
-------------- -------
<S> <C> <C>
AMCC--Historical
Net income per share (diluted)....................... $ 0.03 $ 0.41
Book value per share(2).............................. $ 9.91 --
AMCC--Pro forma(3)
Net income (loss) per share.......................... $(0.04) $ 0.26
Book value per share................................. $ 9.91 --
MMC Networks--Historical
Net income per share (diluted)....................... $ 0.03 $ 0.35
Book value per share(4).............................. $ 2.87 --
Pro forma combined net loss per share (diluted)
Pro forma net loss per share(5)...................... $(1.44) $(6.01)
Equivalent pro forma net loss per MMC Networks
share(6)............................................ $(0.89) $(3.72)
Pro forma combined net book value per share
Pro forma net book value per share(7)................ $35.68 --
Equivalent pro forma net book value per MMC Networks
share(6)............................................ $22.09 --
</TABLE>
--------
(1) The periods for which the net income per share data has been presented are
the year ended March 31, 2000 for AMCC, and the year ended December 31,
1999 for MMC Networks.

(2) The AMCC historical book value per share is calculated by dividing its
stockholders' equity at June 30, 2000, by the total number of outstanding
shares of common stock at June 30, 2000.

(3) The AMCC pro forma net income per share and book value per share data is
derived from the historical combined financial statements of AMCC and
YuniNetworks, Inc. after giving effect to the merger completed on June 8,
2000 under the purchase method of accounting and the assumption and
adjustments related to the YuniNetworks acquisition described in the
accompanying notes to the unaudited pro forma combined condensed financial
statements.

(4) The MMC Networks historical book value per share is calculated by dividing
its stockholders' equity at June 30, 2000 by the total number of
outstanding shares of its common stock at June 30, 2000.

(5) The pro forma combined net loss per share is calculated by dividing the pro
forma net loss by the pro forma number of diluted shares outstanding.

(6) The equivalent pro forma combined amounts are calculated by multiplying the
pro forma combined per share amounts by the exchange ratio of 0.619 per
share of AMCC common stock for each share of MMC Networks common stock
equivalent share.

(7) The pro forma combined net book value per share is calculated by dividing
the pro forma stockholders' equity by the pro forma number of shares
outstanding.

16
<PAGE>

AMCC AND MMC NETWORKS

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed financial information
gives effect to the merger of AMCC and MMC Networks using the purchase method
of accounting. Effective June 8, 2000 AMCC acquired YuniNetworks in a
transaction accounted for as a purchase. Accordingly, the historical balance
sheet of AMCC as of June 30, 2000 includes the accounts of YuniNetworks as of
that date, but the historical income statements of AMCC for the year ended
March 31, 2000 and the three months ended June 30, 2000 do not include the
results of operations of YuniNetworks prior to June 8, 2000.

The unaudited pro forma combined condensed balance sheet is based on the
individual historical balance sheets of AMCC and MMC Networks and has been
prepared to reflect the acquisition by AMCC of MMC Networks as if the
acquisition had occurred as of June 30, 2000.

The unaudited pro forma combined condensed statement of operations for the
year ended March 31, 2000 is based on the individual historical statements of
operations of AMCC, YuniNetworks and MMC Networks and combines the results of
operations of AMCC for the year ended March 31, 2000 with the results of
operations for YuniNetworks for the period from October 8, 1999 (inception)
through March 31, 2000 and the results of operations for MMC Networks for the
year ended December 31, 1999 as if the YuniNetworks acquisition had occurred as
of October 8, 1999 (the date of inception) and the acquisition of MMC Networks
had occurred as of April 1, 1999. The unaudited pro forma combined condensed
statement of operations for the three months ended June 30, 2000 is based on
the individual historical statements of operations of AMCC, YuniNetworks and
MMC Networks and combines the results of operations for AMCC for the three
months ended June 30, 2000 with the results of operations for YuniNetworks for
the period from April 1, 2000 through June 8, 2000 (the acquisition date) and
the results of operations for MMC Networks for the three months ended June 30,
2000, as if both acquisitions had occurred as of the beginning of the period.
The fiscal year ends of AMCC and YuniNetworks are March 31, and MMC Networks is
December 31. The results of operations of MMC Networks for the three months
ended March 31, 2000 are not reflected in the above pro forma results of
operations.

The pro forma combined condensed financial information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or operating results that would have been achieved if the acquisitions
had been completed as of the beginning of the periods presented, nor are they
necessarily indicative of the future financial position or operating results of
AMCC. The pro forma combined condensed financial information does not give
effect to any cost savings or restructuring and integration costs that may
result from the integration of AMCC's, YuniNetworks' and MMC Networks'
operations. The costs related to restructuring and integration have not yet
been determined, and AMCC expects to charge these costs to operations during
the quarter incurred.

The unaudited pro forma combined condensed financial information should be
read in conjunction with the audited and unaudited financial statements and
accompanying notes of AMCC, YuniNetworks and MMC Networks included elsewhere in
this prospectus/proxy statement.

17
<PAGE>

AMCC AND MMC NETWORKS

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

At June 30, 2000
(in thousands)

<TABLE>
<CAPTION>
MMC Pro Forma Pro Forma
AMCC Networks Adjustments Notes Combined
---------- -------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
------

Current assets:
Cash and cash
equivalents.......... $ 189,812 $ 40,744 $ -- $ 230,556
Short-term
investments--
available-for-sale... 784,255 33,412 -- 817,667
Accounts receivable,
net of allowance..... 38,271 10,189 -- 48,460
Inventories........... 11,092 4,722 -- 15,814
Deferred income
taxes................ 4,462 -- -- 4,462
Notes receivable from
officers and
employees............ 82 -- -- 82
Other current assets.. 11,993 4,587 -- 16,580
---------- -------- ---------- ----------
Total current
assets............. 1,039,967 93,654 -- 1,133,621
Property and equipment,
net.................... 44,913 10,100 -- 55,013
Intangible assets....... 193,601 -- 3,949,278 (A) 4,142,879
Other assets............ 3,626 1,521 -- 5,147
---------- -------- ---------- ----------
Total assets........ $1,282,107 $105,275 $3,949,278 $5,336,660
========== ======== ========== ==========

LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------

Current liabilities:
Accounts payable...... $ 12,291 $ 6,591 $ 47,000 (B) $ 65,882
Accrued payroll and
related expenses..... 7,934 -- -- 7,934
Other accrued
liabilities.......... 15,848 4,525 -- 20,373
Deferred tax
liability............ -- -- 60,000 (M) 60,000
Deferred revenue...... 3,552 -- -- 3,552
Current portion of
long-term debt....... 1,418 -- -- 1,418
Current portion of
capital lease
obligations.......... 704 -- -- 704
---------- -------- ---------- ----------
Total current
liabilities........ 41,747 11,116 107,000 159,863
Long-term debt, less
current portion........ 3,235 -- 3,235
Long-term capital lease
obligations, less
current portion........ 1,533 -- 1,533
Stockholders' equity:
Preferred stock....... -- -- -- --
Common stock.......... 1,246 29 176 (D)(C) 1,451
Additional paid-in
capital.............. 1,164,878 74,372 4,428,407 (D)(C) 5,667,657
Deferred compensation,
net.................. (3,762) -- (466,500) (E) (470,262)
Accumulated other
comprehensive loss... (304) (102) 102 (C) (304)
Retained earnings
(deficit)............ 73,534 19,907 (119,907) (C)(F) (26,466)
Notes receivable from
stockholders......... -- (47) -- (47)
---------- -------- ---------- ----------
Total stockholders'
equity............. 1,235,592 94,159 3,842,278 5,172,029
---------- -------- ---------- ----------
Total liabilities
and stockholders'
equity............. $1,282,107 $105,275 $3,949,278 $5,336,660
========== ======== ========== ==========
</TABLE>

See accompanying notes to the unaudited pro forma combined condensed financial
information.

18
<PAGE>

AMCC AND MMC NETWORKS

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

Year Ended March 31, 2000
(in thousands, except per share data)

<TABLE>
<CAPTION>
AMCC YuniNetworks, MMC Networks
12 months Inc. 12 months
ended Inception to ended
March 31, March 31, December 31, Pro Forma Pro Forma
2000 2000 1999 Adjustments Notes Combined
--------- ------------- ------------ ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $172,352 $ -- $70,149 $ -- $ 242,501
Cost of revenues........ 50,218 -- 21,524 53,050 (I)(L) 124,792
-------- ------- ------- --------- ---------
Gross profit............ 122,134 -- 48,625 (53,050) 117,709
Operating expenses:
Research and
development.......... 32,815 758 22,645 69,975 (L) 126,193
Selling, general and
administrative....... 28,199 252 11,182 69,975 (L) 109,608
Amortization of
intangible assets.... -- -- -- 649,343 (G)(H) 649,343
-------- ------- ------- --------- ---------
Total operating
expenses........... 61,014 1,010 33,827 789,293 885,144
-------- ------- ------- --------- ---------
Operating income
(loss)................. 61,120 (1,010) 14,798 (842,343) (767,435)
Interest income, net.... 12,872 71 3,138 (3,087) (J) 12,994
-------- ------- ------- --------- ---------
Income before income
taxes.................. 73,992 (939) 17,936 (845,430) (754,441)
Provision for income
taxes.................. 25,367 -- 6,099 (16,381) (K) 15,085
-------- ------- ------- --------- ---------
Net income (loss)....... $ 48,625 $ (939) $11,837 $(829,049) $(769,526)
======== ======= ======= ========= =========
Basic earnings (loss)
per share:
Earnings (loss) per
share................ $ 0.45 $ (0.10) $ 0.38 $ (6.01)
======== ======= ======= =========
Shares used in
calculating basic
earnings (loss) per
share................ 107,820 9,526 31,065 128,061
======== ======= ======= =========
Diluted earnings (loss)
per share:
Earnings (loss) per
share................ $ 0.41 $ (0.10) $ 0.35 $ (6.01)
======== ======= ======= =========
Shares used in
calculating diluted
earnings (loss) per
share................ 119,152 9,526 33,791 128,061
======== ======= ======= =========
</TABLE>

The above pro forma combined condensed statement of operations does not
include an estimated $100 million in-process research and development charge to
be recorded by AMCC in conjunction with the acquisition of MMC Networks for the
estimated fair value of the in-process research and development of MMC Networks
or $21.8 million of acquired in-process research and development which was
recorded by AMCC at the closing of the YuniNetworks acquisition.

See accompanying notes to the unaudited pro forma combined condensed financial
information.

19
<PAGE>

AMCC AND MMC NETWORKS

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

Three Months Ended June 30, 2000
(in thousands, except per share data)

<TABLE>
<CAPTION>
AMCC YuniNetworks MMC Networks
3 months ended April 1, 2000- 3 months ended Pro Forma Pro Forma
June 30, 2000 June 8, 2000 June 30, 2000 Adjustments Notes Combined
-------------- -------------- -------------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues...................... $74,188 $ -- $17,030 $ -- $ 91,218
Cost of revenues.................. 19,314 -- 5,013 13,262 (I)(L) 37,589
------- ------- ------- --------- ---------
Gross profit...................... 54,874 -- 12,017 (13,262) 53,629
Operating expenses:
Research and development........ 14,837 1,880 7,913 17,494 (L) 42,124
Selling, general and
administrative................. 10,611 627 3,737 17,494 (L) 32,469
Amortization of intangible
assets......................... 2,284 -- -- 164,397 (G)(H) 166,681
Acquired in-process research and
development.................... 21,800 -- -- -- 21,800
------- ------- ------- --------- ---------
Total operating expenses...... 49,532 2,507 11,650 199,385 263,074
------- ------- ------- --------- ---------
Operating income (loss)........... 5,342 (2,507) 367 (212,647) (209,445)
Interest income, net.............. 12,277 35 1,050 (806) (J) 12,556
------- ------- ------- --------- ---------
Income before income taxes........ 17,619 (2,472) 1,417 (213,453) (196,889)
Provision for income taxes........ 14,224 -- 453 (4,906) (K) 9,771
------- ------- ------- --------- ---------
Net income (loss)................. $ 3,395 $(2,472) $ 964 $(208,547) $(206,660)
======= ======= ======= ========= =========
Basic earnings (loss) per share:
Earnings (loss) per share....... $ 0.03 * $ 0.03 $ (1.44)
======= ======= ======= =========
Shares used in calculating basic
earnings (loss) per share...... 121,352 * 32,738 143,129
======= ======= ======= =========
Diluted earnings (loss) per share:
Earnings (loss) per share....... $ 0.03 * $ 0.03 $ (1.44)
======= ======= ======= =========
Shares used in calculating
diluted earnings (loss)
per share...................... 132,581 * 35,310 143,129
======= ======= ======= =========
</TABLE>
--------
* Not meaningful

See accompanying notes to the unaudited pro forma combined condensed financial
information.

20
<PAGE>

AMCC AND MMC NETWORKS

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS

1. Pro Forma Basis of Presentation and Adjustments

The unaudited pro forma combined condensed financial information assumes the
acquisition by AMCC of MMC Networks in a transaction to be accounted for as a
purchase. The unaudited pro forma combined condensed balance sheet is based on
the individual balance sheets of AMCC and MMC Networks and has been prepared to
reflect the acquisition by AMCC of MMC Networks as if the acquisition had
occurred as of June 30, 2000. Effective June 8, 2000 AMCC acquired YuniNetworks
in a transaction accounted for as a purchase. Accordingly, the historical
balance sheet of AMCC as of June 30, 2000 includes the accounts of YuniNetworks
as of that date, but the historical income statements of AMCC for the year
ended March 31, 2000 and the three months ended June 30, 2000 do not include
the results of operations for YuniNetworks for the period prior to June 8,
2000.

The unaudited pro forma combined condensed statement of operations for the
year ended March 31, 2000 is based on the individual historical statements of
operations of AMCC, YuniNetworks and MMC Networks and combines the results of
operations of AMCC for the year ended March 31, 2000 with the results of
operations for YuniNetworks for the period from October 8, 1999 (inception)
through March 31, 2000 and the results of operations for MMC Networks for the
year ended December 31, 1999 as if the YuniNetworks acquisition had occurred as
of October 8, 1999 (the date of inception) and the acquisition of MMC Networks
had occurred as of April 1, 1999. The unaudited pro forma combined condensed
statements of operations for the three months ended June 30, 2000 is based on
the individual historical statements of operations of AMCC, YuniNetworks and
MMC Networks and combines the results of operations for AMCC for the three
months ended June 30, 2000 with the results of operations for YuniNetworks for
the period from April 1, 2000 through June 8, 2000 (the acquisition date) and
the results of operations for MMC Networks for the three months ended June 30,
2000, as if both acquisitions had occurred as of the beginning of the period.

Under the terms of the merger agreement, AMCC will issue 0.619 shares of
AMCC common stock for each outstanding common share of MMC Networks common
stock. Based on the number of shares of MMC Networks common stock and options
to purchase shares of MMC Networks common stock outstanding as of August 24,
2000, and the exchange ratio of 0.619, AMCC would issue approximately
20,494,997 shares of AMCC common stock and assume options to purchase
approximately 4,136,754 shares of AMCC common stock.

AMCC estimates the purchase price to be approximately $4.5 billion. For
purposes of determining this estimated purchase price, AMCC assumed that the
value of the AMCC common stock issued in the merger is $189.36 per share based
on the average closing price of AMCC common stock for the three days before and
two days after the terms of the acquisition had been agreed to and announced.
The value of the options to be assumed is based on their estimated intrinsic
value.

21
<PAGE>

AMCC AND MMC NETWORKS

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS--(Cont.)

AMCC is in the process of conducting an evaluation of the intangible assets
to be acquired in order to allocate the purchase price in accordance with
Accounting Principle Bulletin Opinion No. 16. Subject to adjustments when the
evaluation is updated, the purchase price was allocated as follows based upon
management's best estimate of the tangible and intangible assets, including
acquired technology and in-process research and development (in thousands):

<TABLE>
<S> <C>
Current assets acquired.......................................... $ 93,654
Property and equipment........................................... 10,100
Other assets..................................................... 1,521
In-process research and development.............................. 100,000
Developed core technology........................................ 150,000
Goodwill......................................................... 3,799,278
Liabilities assumed.............................................. (11,116)
Deferred tax liability........................................... (60,000)
Liabilities for merger-related costs............................. (47,000)
Deferred compensation............................................ 466,500
----------
$4,502,937
==========
</TABLE>

Adjustments will include changes in the value of the assets, liabilities and
deferred compensation between July 1, 2000 and the date the merger is completed
and changes in the number of outstanding shares of MMC Networks common stock
and options to purchase shares of MMC Networks common stock between August 24,
2000 and the date the merger is completed.

2. Pro Forma Adjustments to Pro Forma Combined Condensed Financial Information

(A) The residual amount of the purchase price over the net book value of the
assets and liabilities assumed and in-process research and development
charges has been allocated to intangible assets. The intangible assets are
expected to consist of developed core technology, intellectual property,
assembled workforce and goodwill.

(B) To increase the accrued expenses by $47 million for acquisition-related
expenses such as investment banking, legal, accounting, registration and
miscellaneous fees.

(D) To reflect the value of the shares of AMCC common stock to be issued in
connection with the merger.

(E) To record deferred compensation related to the unvested stock options of
MMC Networks employees that will be assumed by AMCC in accordance with
recently issued FASB Interpretation No. 44 (FIN No. 44) of APB Opinion No.
25. Prior to the issuance of FIN No. 44 this would have been accounted for
as additional purchase price and amortized over the life of the goodwill.

(F) To reflect the charge for the MMC Networks in-process research and
development of approximately $100 million.

(G) To record amortization expense of the acquired intangibles related to the
purchase of YuniNetworks based on a useful life of six years.

(H) To record amortization expense of the acquired intangibles related to the
purchase of MMC Networks based on a useful life of six years.

22
<PAGE>

AMCC AND MMC NETWORKS

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS--(Cont.)

(I) To record amortization expense of developed core technology acquired in the
purchase of MMC Networks based on a useful life of four years.

(J) To eliminate interest income which would not have been earned on the cash
expended for the transactions.

(K) To record tax benefits for the YuniNetworks' net loss which would have been
absorbed by AMCC's taxable income, the reduction of interest income related
to the cash paid in the transaction and to amortize a portion of the
deferred tax liability set up in connection with the non-goodwill
intangibles.

(L) To record the amortization of deferred compensation for the unvested MMC
employee stock options assumed by AMCC.

(M) To record the estimated deferred tax liability on the non-goodwill
intangible assets.

23
<PAGE>

RISK FACTORS

You should carefully read the following risk factors and other information
contained in this prospectus/proxy statement prior to deciding whether to vote
to adopt the merger agreement and approve the merger. Keep in mind that the
risks described below are not the only risks facing AMCC, MMC Networks or the
combined company.

Risks Relating to the Merger

The 0.619 exchange ratio does not protect you from fluctuations in the market
price of AMCC common stock.

Upon completion of the merger, each share of MMC Networks common stock will
be exchanged for 0.619 of a share of AMCC common stock. There will be no
adjustment for changes in the market price of AMCC common stock. AMCC and MMC
Networks are not permitted to abandon the merger and MMC Networks is not
permitted to resolicit the vote of its stockholders solely because of changes
in the market price of AMCC common stock. The specific dollar value of AMCC
common stock to be received by you upon completion of the merger will depend on
the market value of AMCC common stock at that time. The share price of AMCC
common stock is by nature subject to the general price fluctuations in the
market for publicly traded equity securities and has experienced significant
volatility. No prediction can be made as to the market price of AMCC common
stock after completion of the merger.

The total number of shares of AMCC common stock issuable in connection with the
merger is subject to a predefined limit.

The maximum number of shares of AMCC common stock which AMCC will be
obligated to issue in connection with the merger is no more than 20% of the
number of shares of AMCC common stock outstanding as of the effective time of
the merger. This means that if MMC Networks issues shares of MMC common stock
other than for the exercise of options currently outstanding, or grants
additional options, which in the aggregate increases the number of total shares
of AMCC common stock to be issued in the merger above the 20% threshold, the
number of shares of AMCC common stock you will receive will be reduced.

The anticipated benefits of the merger to the combined company may not be
realized.

AMCC and MMC Networks entered into the merger agreement with the expectation
that the merger will result in benefits, including:

. combining complementary technologies permitting AMCC and MMC Networks to
provide products with more complete solutions than either company can now
provide;

. a combined company with greater financial, technology and human resources
for developing new products and providing greater sales and marketing
resources to help promote and sell the products of AMCC and MMC Networks;
and

. providing each company with access to the other company's customer base
and thus increasing distribution of AMCC's and MMC Networks' products.

However, achieving the benefits of the merger will depend in part on the
integration of the technology, operations and personnel of the two companies in
a timely and efficient manner so as to minimize the risk that the merger will
result in the loss of key employees or the continued diversion of the attention
of management.

In addition, synergies from the merger may not materialize. Integrating
sales of MMC Networks' products into AMCC's business model will involve risks
that may jeopardize the success of the combined company. MMC Networks'
technology and products address a new market for AMCC, namely the network
processor market, and MMC Networks' network processor products will be new
products for AMCC.

24
<PAGE>

The costs associated with the integration may be substantial. These costs
will negatively affect the combined company's operating results and may result
in a decrease in the market price of AMCC common stock.

AMCC cannot assure you that AMCC and MMC Networks will be successfully
integrated or that any of the anticipated benefits will be realized, and
failure to do so could have a material adverse effect on AMCC's business,
financial condition and operating results. Nor can AMCC assure you that the
stockholders of the combined company will achieve greater value through share
ownership of the combined entity than they would have achieved as stockholders
of MMC Networks as a separate entity.

Certain officers and a director of MMC Networks have conflicts of interest that
may have influenced them to support or approve the merger.

Douglas Spreng, a director and President and Chief Executive Officer of MMC
Networks, has entered into an employment and non-competition agreement with
AMCC that will become effective upon completion of the merger. In addition,
after the merger, Mr. Spreng will serve as a member of the AMCC board of
directors. You should consider whether these interests and benefits may have
influenced Mr. Spreng to support or approve the merger as a director or
recommend that the merger be approved by the MMC Networks stockholders. In
addition, other executive officers of MMC Networks have entered into employment
and non-competition agreements with AMCC that will become effective upon
completion of the merger. You should consider whether these interests and
benefits may have influenced these officers' presentations to the MMC Networks
board of directors regarding the merger.

Risks Relating to AMCC's and MMC Networks' Businesses

The combined company's operating results may fluctuate because of a number of
factors, many of which will be beyond its control.

If the combined company's operating results are below the expectations of
public market analysts or investors, then the market price of the AMCC common
stock could decline. MMC Networks' revenues and expenses have fluctuated
significantly in the past and may continue to do so in the future. In the
fourth quarter of 1999 MMC Networks' revenues fell to $11.6 million from $23.1
million in the previous quarter, primarily as a result of two events. IBM,
which accounted for 19% of MMC Network's revenues in 1999, ceased the
manufacture and sale of its network equipment products that use MMC Networks'
products. In addition, Cisco, which accounted for 52% of MMC Networks' revenues
in 1999, terminated one program and reduced production of two other programs,
all three of which used MMC Networks' products.

Some of the factors that have historically affected AMCC's and MMC Networks'
quarterly and annual results, but which are difficult to control or predict
are:

. the reduction, rescheduling or cancellation of orders by customers,
whether as a result of stockpiling of AMCC's or MMC Networks' products or
otherwise;

. fluctuations in the timing and amount of customer requests for product
shipments;

. the availability of external foundry capacity, purchased parts and raw
materials;

. fluctuations in manufacturing output, yields and inventory levels or
other potential problems or delays in the fabrication, assembly, testing
or delivery of AMCC's and MMC Networks' products;

. increases in the costs of products from suppliers;

. discontinuance of products by suppliers;

. fluctuations in product life cycles;

. changes in the mix of products that AMCC's and MMC Networks' customers
buy;

. ability to introduce new products and technologies on a timely basis;

25
<PAGE>

. the announcement or introduction of products and technologies by
competitors;

. competitive pressures on selling prices;

. market acceptance of AMCC's and MMC Networks' products and of their
customers' products;

. the amount and timing of costs associated with warranty and product
returns;

. the amount and timing of investments in research and development;

. the amount and timing of the costs associated with payroll taxes related
to stock option exercises;

. the timing of depreciation and other expenses that AMCC expects to incur
in connection with any expansion of its manufacturing capacity;

. costs associated with acquisitions and the integration of acquired
operations;

. costs associated with compliance with applicable environmental
regulations or remediation;

. costs associated with litigation, including without limitation,
litigation or settlements relating to the use or ownership of
intellectual property;

. the ability of AMCC's and MMC Networks' customers to obtain components
from their other suppliers;

. general communications systems industry and semiconductor industry
conditions; and

. general economic conditions.

AMCC's and MMC Networks' expense levels are based, in part, on their
expectations of future revenues. AMCC and MMC Networks are continuing to
increase their operating expenses for additional manufacturing capacity,
personnel and new product development. However, AMCC and MMC Networks have
limited ability to reduce expenses quickly in response to any revenue
shortfalls. Consequently, the combined company's business, financial condition
and operating results would be harmed if it does not achieve anticipated
revenues. AMCC and MMC Networks can have revenue shortfalls for a variety of
reasons, including:

. significant pricing pressures that occur because of declines in average
selling prices over the life of a product;

. sudden shortages of raw materials or production capacity constraints that
lead AMCC's and MMC Networks' suppliers to allocate available supplies or
capacity to customers with resources greater than AMCC and MMC Networks
and, in turn, interrupt AMCC's and MMC Networks' ability to meet their
production obligations;

. fabrication, test or assembly capacity constraints for internally
manufactured devices which interrupt AMCC's and MMC Networks' ability to
meet production obligations; and

. the reduction, rescheduling or cancellation of customer orders.

In addition, AMCC's and MMC Networks' businesses are characterized by short-
term orders and shipment schedules, and customer orders typically can be
canceled or rescheduled without significant penalty to the customer. Because
AMCC and MMC Networks do not have substantial noncancellable backlog, AMCC and
MMC Networks typically plan their production and inventory levels based on
internal forecasts of customer demand which are highly unpredictable and can
fluctuate substantially. From time to time, in response to anticipated long
lead times to obtain inventory and materials from AMCC's and MMC Networks'
outside suppliers and foundries, AMCC and MMC Networks may order materials in
advance of anticipated customer demand. This advance ordering might result in
excess inventory levels or unanticipated inventory write-downs if expected
orders fail to materialize, or other factors render the customers' products
less marketable. Further, AMCC currently anticipates that an increasing portion
of its revenues in future periods will be derived from sales of application-
specific standard products, or ASSPs, instead of application-specific
integrated circuits, or ASICs. Customer orders for ASSPs typically have shorter
lead times than orders for ASICs, which may make it increasingly difficult for
AMCC to predict revenues and inventory levels and adjust production
appropriately. If

26
<PAGE>

the combined company is unable to plan inventory and production levels
effectively, its business, financial condition and operating results could be
materially harmed.

A disruption in the manufacturing capabilities of the combined company's
outside foundries would negatively impact the production of certain of its
products.

AMCC and MMC Networks rely on outside foundries for the manufacture of
products, including all of MMC Networks' products and all of AMCC's products
designed on CMOS processes and silicon germanium processes. MMC Networks does
not have long-term wafer supply agreements with outside foundries that
guarantee wafer or product quantities, prices or delivery lead times. The
outside foundries manufacture AMCC's and MMC Networks' products on a purchase
order basis. AMCC expects that, for the foreseeable future, a single foundry
will manufacture certain of its products. None of MMC Networks' products are
currently manufactured by more than one supplier. Since AMCC and MMC Networks
place orders on a purchase order basis, these suppliers can allocate, and in
the past have allocated, capacity to the production of other companies'
products while reducing deliveries to AMCC and MMC Networks on short notice.
Because establishing relationships and ramping production with new outside
foundries takes several months to over a year, there is no readily available
alternative source of supply for these products. A manufacturing disruption
experienced by one or more of the combined company's outside foundries or a
disruption of the relationship between the combined company and an outside
foundry would negatively impact the production of some of the combined
company's products for a substantial period of time. Furthermore, the
transition to the next generation of manufacturing technologies at one or more
of the outside foundries could be unsuccessful or delayed.

If the combined company does not successfully expand its manufacturing capacity
on time, it may face serious capacity constraints.

AMCC currently manufactures a significant portion of its IC products at its
wafer fabrication facility located in San Diego, California, and it is
currently expanding this facility. AMCC believes that when the expansion is
completed, the combined company will be able to satisfy its production needs of
the products built in the San Diego facility through the end of fiscal 2001,
although this date may vary depending on, among other things, the combined
company's rate of growth. The combined company will be required to hire, train
and manage additional production personnel in order to increase production
capacity as scheduled. In addition, to further expand AMCC's capacity to
fabricate wafers using a bipolar process, AMCC entered into a foundry agreement
with a third party wafer fabrication facility. The combined company will have
to install its fabrication processes at this foundry, qualify its processes at
this foundry and then ramp production volumes at this foundry. If the combined
company cannot expand its internal capacity on a timely basis, it could
experience significant capacity constraints that could render the combined
company unable to meet customer demand or force it to spend more to meet
demand. In addition, the depreciation and other expenses that the combined
company will incur in connection with the expansion of its manufacturing
capacity may harm the combined company's gross margin in any future fiscal
period.

AMCC and MMC Networks are exploring alternatives for the further expansion
of their manufacturing capacity including:

. entering into strategic relationships to obtain additional capacity;

. building a new wafer fabrication facility; or

. purchasing a wafer fabrication facility.

Any of these alternatives could require a significant investment by the
combined company. There can be no assurance that any of the alternatives for
expansion of AMCC's or MMC Networks' manufacturing capacity will be available
on a timely basis or that the combined company will be able to manage its
growth and effectively integrate its expansion into its current operations.

27
<PAGE>

The cost of any investment the combined company may have to make to expand
its manufacturing capacity is expected to be funded through a combination of
available cash, cash equivalents and short-term investments, cash from
operations and additional debt, lease or equity financing. The combined company
may not be able to obtain the additional financing necessary to fund the
construction and completion of the expanded manufacturing facility.

Expanding current wafer fabrication facilities, building new wafer
fabrication facilities or purchasing wafer fabrication facilities entails
significant risks, including:

. shortages of materials and skilled labor;

. unforeseen environmental or engineering problems;

. work stoppages;

. weather interference; and

. unanticipated cost increases.

Any one of these risks could have a material adverse effect on the building,
equipping and production start-up of new facilities or the expansion of
existing facilities. In addition, unexpected changes or concessions required by
local, state or federal regulatory agencies with respect to necessary licenses,
land use permits, site approvals and building permits could involve significant
additional costs and delay the scheduled opening of the expansion or new
facility and could reduce the combined company's anticipated revenues. Also,
the timing of commencement of operation of an expanded or new facility will
depend upon the availability, timely delivery, successful installation and
testing of the necessary process equipment. As a result of the foregoing and
other factors, the combined company's expanded or new facility may not be
completed and in volume production within the current budget or within the
period currently scheduled. The combined company may be unable to achieve
adequate manufacturing yields in an expanded or new facility in a timely
manner, and the combined company's revenues may not increase commensurate with
the anticipated increase in manufacturing capacity associated with an expanded
or new facility. In addition, in the future, the combined company may be
required for competitive reasons to make additional capital investments in its
existing wafer fabrication facilities or to accelerate the timing of the
construction of a new wafer fabrication facility in order to expedite the
manufacture of products based on more advanced manufacturing processes.

The combined company's operating results will substantially depend on
manufacturing output and yields, which may not meet expectations.

AMCC and MMC Networks manufacture their products at external foundries such
as IBM, Taiwan Semiconductor Manufacturing Corporation, United Microelectronics
Corporation, Kawasaki Steel LSI Japan, AMI Semiconductor, Oki Electronics
Corporation and Matsushita Electronics (Panasonic) Corporation. In addition,
AMCC manufactures a significant portion of its semiconductors at its San Diego
fabrication facility. Manufacturing semiconductors requires manufacturing tools
which are unique to each product being produced. If one of these unique
manufacturing tools was damaged or destroyed, then the combined company's
ability to manufacture the related product would be impaired and the combined
company's business would suffer until the tool was repaired or replaced.

Product yields decline whenever a substantial percentage of wafers must be
rejected or a significant number of die on each wafer are nonfunctional. Such
declines can be caused by many factors, including minute levels of contaminants
in the manufacturing environment, design issues, defects in masks used to print
circuits on a wafer and difficulties in the fabrication process. The ongoing
expansion of the manufacturing capacity of AMCC's existing wafer fabrication
facility could increase the risk of contaminants in the facility. In addition,
design iterations and process changes by AMCC's or MMC Networks' suppliers can
cause a risk of contamination. Many of these problems also are difficult to
diagnose, and are time consuming and expensive to remedy and can result in
shipment delays.

28
<PAGE>

AMCC and MMC Networks estimate yields per wafer in order to estimate the
value of inventory. If yields are materially different than projected, work-in-
process inventory may need to be revalued. AMCC and MMC Networks have in the
past, and the combined company may in the future from time to time, take
inventory write-downs as a result of decreases in manufacturing yields. The
combined company may suffer periodic yield problems in connection with new or
existing products or in connection with the commencement of production in a new
or expanded manufacturing facility.

In addition, the combined company's manufacturing output or yields may
decline as a result of power outages, accidents, natural disasters or other
disruptions to the manufacturing process.

Because of the nature of manufacturing semiconductor products, the majority
of the combined company's costs of manufacturing are relatively fixed, yield
decreases can result in substantially higher unit costs and may result in
reduced gross profit and net income. In addition, yield decreases could force
the combined company to allocate available product supply among customers,
which could potentially harm customer relationships.

The combined company's dependence on third-party manufacturing and supply
relationships increases the risk that it will not have an adequate supply of
products to meet demand or that its cost of materials will be higher than
expected.

The risks associated with the combined company's dependence upon third
parties which manufacture, assemble or package certain of its products,
include:

. the potential lack of adequate capacity during periods of excess demand;

. reduced control over delivery schedules and quality;

. risks of inadequate manufacturing yields and excessive costs;

. difficulties selecting and integrating new subcontractors;

. limited warranties on wafers or products supplied to the combined
company;

. potential increases in prices; and

. potential misappropriation of the combined company's intellectual
property.

Difficulties associated with adapting the combined company's technology and
product design to the proprietary process technology and design rules of
outside foundries also can lead to reduced yields. The process technology of an
outside foundry is typically proprietary to the manufacturer. Since low yields
may result from either design or process technology failures, yield problems
may not be effectively determined or resolved until an actual product exists
that can be analyzed and tested to identify process sensitivities relating to
the design rules that are used. As a result, yield problems may not be
identified until well into the production process, and resolution of yield
problems may require cooperation between the combined company and its
manufacturers. In some cases this risk could be compounded by the offshore
location of certain of the combined company's manufacturers, increasing the
effort and time required to identify, communicate and resolve manufacturing
yield problems. In addition, manufacturing defects which are not discovered by
the combined company during the manufacturing or testing process may lead to
costly product recalls. These risks may lead to increased costs or delay
product delivery, which would harm the combined company's profitability and
customer relationships.

If the outside foundries which the combined company will use to manufacture
wafers or products discontinue the manufacturing processes needed to meet its
demands or fail to upgrade their technologies needed to manufacture its
products, the combined company may face production delays.

AMCC's and MMC Networks' wafer and product requirements typically represent
a very small portion of the total production of the third-party foundries. As a
result, the combined company will be subject to the risk

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that a producer will cease production on an older or lower-volume process that
it uses to produce the combined company's products. Additionally, the combined
company will not be certain its external foundries will continue to devote
resources to the production of its products or continue to advance the process
design technologies on which the manufacturing of its products are based. Each
of these events could increase the combined company's costs and harm its
ability to deliver products on time.

Due to an industry transition to six-inch, eight-inch and twelve-inch wafer
fabrication facilities, there is a limited number of suppliers of the four-inch
wafers that AMCC uses to build products in its existing manufacturing facility,
and AMCC relies on a single supplier for these wafers. Although AMCC believes
that it will have sufficient access to four-inch wafers to support production
in the existing fabrication facility for the foreseeable future, AMCC cannot be
certain that its current supplier will continue to supply it with four-inch
wafers on a long-term basis. Additionally, the availability of manufacturing
equipment needed for a four-inch process is limited, and certain new equipment
required for more advanced processes may not be available for a four-inch
process.

The combined company must develop or otherwise gain access to improved process
technologies.

The combined company's future success will depend, in large part, upon its
ability to improve existing process technologies, to develop or acquire new
process technologies, including silicon germanium processes, and to adapt its
process technologies to emerging industry standards. In the future, the
combined company may be required to transition one or more of its products to
process technologies with smaller geometries, other materials or higher speeds
in order to reduce costs and/or improve product performance. The combined
company may not be able to improve its process technologies and develop or
otherwise gain access to new process technologies, including, but not limited
to silicon germanium process technologies, in a timely or affordable manner. In
addition, products based on these technologies may not achieve market
acceptance.

The combined company's customers will be concentrated, so the loss of one or
more key customers could significantly reduce its revenues and profits.

Historically, a relatively small number of customers has accounted for a
significant portion of AMCC's and MMC Networks' revenues in any particular
period. For example, AMCC's five largest customers accounted for approximately
71% and 69% of AMCC's revenues for the fiscal year ended March 31, 2000 and the
quarter ended June 30, 2000, respectively. Sales to Nortel and its contract
manufacturers accounted for approximately 38% and 37% of AMCC's revenues for
the fiscal year ended March 31, 2000 and the quarter ended June 30, 2000,
respectively. Sales to Cisco and IBM accounted for 52% and 19%, respectively,
of MMC Networks' revenues for the fiscal year ended December 31, 1999. Sales to
Cisco, Arrowpoint Communications (recently acquired by Cisco) and Nortel
accounted for 25%, 20% and 23%, respectively, of MMC Networks' revenues for the
quarter ended June 30, 2000. However, AMCC and MMC Networks have no long-term
volume purchase commitments from any of their major customers. AMCC anticipates
that sales of products to relatively few customers will continue to account for
a significant portion of the combined company's revenues. If Nortel, Cisco or
another significant customer overstocked the combined company's products,
additional orders for its products could be harmed. A reduction, delay or
cancellation of orders from one or more significant customers or the loss of
one or more key customers could significantly reduce the combined company's
revenues and profits. AMCC cannot assure you that AMCC's and MMC Networks'
current customers will continue to place orders with the combined company, that
orders by existing customers will continue at current or historical levels or
that the combined company will be able to obtain orders from new customers. The
combined company's ability to maintain or increase sales to key customers
and/or attract new significant customers is subject to a variety of factors,
including:

. customers may stop incorporating the combined company's products into
their own products with limited notice to the combined company and suffer
little or no penalty;

. design wins with customers may not result in significant sales to such
customers;

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. the introduction of a customer's significant new products may be late or
less successful in the market than planned;

. a significant customer's product line using the combined company's
products may rapidly decline or be phased out;

. significant customers may not incorporate the combined company's products
in their future product designs;

. agreements with customers typically do not require them to purchase a
minimum amount of AMCC's or MMC Networks' products;

. many of AMCC's and MMC Networks' customers have pre-existing
relationships with current or potential competitors that may cause them
to switch from the combined company's products to competing products;

. the combined company may not be able to successfully develop
relationships with additional significant network equipment vendors; and

. AMCC's and MMC Networks' relationship with some of their larger customers
may deter other potential customers (who compete with these customers)
from buying the combined company's products.

Any one of the factors above could have a material adverse effect on the
combined company's business, financial condition and results of operations.

The combined company's future success depends in part on the continued service
of its key design engineering, sales, marketing and executive personnel and its
ability to identify, hire and retain additional personnel.

The combined company's success depends in part upon its ability to attract
and retain highly qualified technical and management personnel. There is
intense competition for qualified personnel in the semiconductor industry, in
particular, design engineers, and the combined company may not be able to
attract and train engineers or other qualified personnel necessary for the
development of its businesses or to replace engineers or other qualified
personnel who may leave its employ in the future. The combined company's
anticipated growth is expected to place increased demands on its resources and
will likely require the addition of new management personnel and the
development of additional expertise by existing management personnel. Loss of
the services of, or failure to recruit, key design engineers or other technical
and management personnel could be significantly detrimental to the combined
company's products and process development programs.

Periods of rapid growth and expansion could continue to place a significant
strain on the combined company's limited personnel and other resources.

To manage expanded operations effectively, the combined company will be
required to continue to improve its operational, financial and management
systems and to successfully hire, train, motivate and manage its employees. In
addition, the integration of past and future potential acquisitions and the
expansion of AMCC's manufacturing capacity will require significant additional
management, technical and administrative resources. AMCC cannot be certain that
the combined company will be able to manage its growth, and AMCC cannot be
certain that the combined company will be able to effectively integrate a new
or expanded wafer fabrication facility into current operations.

An important part of the combined company's strategy will be to focus on the
market for high-speed communications ICs. If the combined company is unable to
expand its share of this market further, the combined company's revenues could
stop growing and may decline.

AMCC's and MMC Networks' markets frequently undergo transitions in which
products rapidly incorporate new features and performance standards on an
industry-wide basis. If the combined company's products are unable to support
the new features or performance levels required by OEMs in these markets, the

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combined company would be likely to lose business from an existing or potential
customer and, moreover, would not have the opportunity to compete for new
design wins until the next product transition occurs. The combined company's
revenues could be significantly reduced for a substantial period if the
combined company:

. fails to develop products with required features or performance
standards;

. experiences a delay as short as a few months in bringing a new product to
market; or

. customers fail to achieve market acceptance of its products.

A significant portion of the combined company's revenues is expected to be
derived from sales of products based on SONET, SDH and ATM transmission
standards. If the communications market evolves to new standards, the combined
company may not be able to successfully design and manufacture new products
that address the needs of the combined company's customers or gain substantial
market acceptance. Although AMCC has developed products for the Gigabit
Ethernet and Fibre Channel communications standards, volume sales of these
products are modest, and the combined company may not be successful in
addressing the market opportunities for products based on these standards.

The success of the combined company's business depends in part upon development
of the market for network processors.

Many of MMC Networks' current and potential customers have substantial
technological capabilities and financial resources. They traditionally use
these resources to internally develop the ASIC components and develop programs
for the general-purpose processors utilized in MMC Networks' products.

The combined company's future prospects are dependent upon its customers'
acceptance of network processors as an alternative to ASIC components and
general-purpose processors. Future prospects also are dependent upon acceptance
of third-party sourcing for network processors as an alternative to in-house
development. Network equipment vendors may in the future continue to use
internally-developed ASIC components and general-purpose processors. They also
may decide to develop or acquire components, technologies or network processors
that are similar to, or that may be substituted for, the combined company's
products.

The combined company must anticipate market trends and the price,
performance and functionality requirements of its customers. It also must
successfully develop and manufacture products that meet these requirements. The
products must be available to customers on a timely basis and at competitive
prices.

If the combined company's network equipment vendor customers fail to accept
network processors as an alternative, if they develop or acquire the technology
to develop such components internally rather than purchase the combined
company's products, or if the combined company is otherwise unable to develop
strong relationships with network equipment vendors, the combined company's
business, financial condition and results of operations would be materially and
adversely affected.

The markets of the combined company will be subject to rapid technological
change, so its success will depend heavily on its ability to develop and
introduce new products.

The markets for AMCC's and MMC Networks' products are characterized by:

. rapidly changing technologies;

. evolving and competing industry standards;

. short product life cycles;

. changing customer needs;

. emerging competition;

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. frequent new product introductions and enhancements;

. increased integration with other functions; and

. rapid product obsolescence.

To develop new products for the communications markets, the combined company
must develop, gain access to and use leading technologies in a cost-effective
and timely manner and continue to develop technical and design expertise. In
addition, the combined company must have its products designed into its
customers' future products and maintain close working relationships with key
customers in order to develop new products that meet customers' changing needs.
The combined company also must respond to changing industry standards, trends
towards increased integration and other technological changes on a timely and
cost-effective basis. Further, if the combined company fails to achieve design
wins with key customers, its business will significantly suffer because once a
customer has designed a supplier's product into its system, the customer
typically is extremely reluctant to change its supply source due to significant
costs associated with qualifying a new supplier.

Products for communications applications as well as for high-speed computing
applications are based on industry standards that are continually evolving. The
combined company's ability to compete in the future will depend on its ability
to identify and ensure compliance with these evolving industry standards. The
emergence of new industry standards could render the combined company's
products incompatible with products developed by major systems manufacturers.
As a result, the combined company could be required to invest significant time
and effort and incur significant expense to redesign its products to ensure
compliance with relevant standards. If the combined company's products are not
in compliance with prevailing industry standards for a significant period of
time, the combined company could miss opportunities to achieve crucial design
wins. In addition, the combined company may not be successful in developing or
using new technologies or in developing new products or product enhancements
that achieve market acceptance. The combined company's pursuit of necessary
technological advances may require substantial time and expense.

The markets in which the combined company will compete are highly competitive
and subject to price erosion and heightened international competition.

The markets in which AMCC and MMC Networks operate are highly competitive,
and AMCC expects that competition will increase in these markets. The ability
of the combined company to compete successfully in its markets depends on a
number of factors, including:

. success in designing and subcontracting the manufacture of new products
that implement new technologies;

. product quality, reliability and performance;

. customer support;

. time-to-market;

. price;

. the efficiency of production;

. design wins;

. expansion of production of the combined company's products for particular
systems manufacturers;

. end-user acceptance of the systems manufacturers' products;

. market acceptance of competitors' products; and

. general economic conditions.

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In addition, the combined company's competitors or customers may offer
enhancements to their existing products or offer new products based on new
technologies, industry standards or customer requirements and which are
available to customers on a more timely basis than comparable products from the
combined company or that have the potential to replace or provide lower-cost or
higher performance alternatives to the combined company's products. The
introduction of enhancements or new products by competitors could render
existing and future products of the combined company obsolete or unmarketable.
In addition, AMCC expects that certain of the combined company's competitors
and other semiconductor companies may seek to develop and introduce products
that integrate the functions performed by the combined company's IC products on
a single chip, thus eliminating the need for its products.

In the communications markets, the combined company will compete primarily
against Agilent, Conexant, Lucent and PMC-Sierra. The combined company's
products also will compete with those of Broadcom, Galileo Technology, Giga,
Infineon, Intel, Maxim, Motorola, Philips, SiTera, TriQuint and Vitesse. Some
of these companies have significantly greater financial and other resources
than the combined company, and some of these companies use other process
technology such as gallium arsenide which may have certain advantages over
technology AMCC or MMC Networks currently uses. In addition, in certain
circumstances, most notably with respect to ASICs supplied to Nortel, the
combined company's customers or potential customers have or may develop
internal IC manufacturing capabilities with which the combined company may
compete.

AMCC expects revenues that are currently derived from non-communications
markets to decline in future periods.

AMCC historically has derived significant revenues from product sales to
customers in the automated test equipment, or ATE, high-speed computing and
military markets and currently anticipates that it will continue to derive
revenues from sales to customers in these markets in the near term. However,
AMCC is not currently funding product development efforts in these markets and
as a result AMCC expects that revenues for the combined company from products
in these markets will decline in future periods. In addition, the market for
ATE and high-speed computing IC products is subject to extreme price
competition, and the combined company may not be able to reduce the costs of
manufacturing high-speed computing IC products in response to declining average
selling prices.

Further, AMCC expects that certain competitors will seek to develop and
introduce products that integrate the functions performed by the combined
company's ATE and high-speed computing IC products on single chips. In
addition, one or more of the combined company's customers may choose to utilize
discrete components to perform the functions served by its high-speed computing
IC products or may use their own design and fabrication facilities to create a
similar product. In either case, the need for ATE and high-speed computing
customers to purchase the combined company's IC products could be eliminated.

The combined company may in the future make acquisitions which will involve
numerous risks. There is no assurance that the combined company will be able to
address these risks successfully without substantial expense, delay or other
operational or financial problems.

The risks involved with acquisitions include:

. diversion of management's attention;

. failure to retain key personnel;

. amortization of acquired intangible assets;

. client dissatisfaction or performance problems with an acquired firm;

. the cost associated with acquisitions and the integration of acquired
operations; and

. assumption of unknown liabilities, or other unanticipated events or
circumstances.

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A future acquisition could adversely affect operating results. In
particular, if the combined company were to acquire a company or assets and
record the acquisition as a purchase, the combined company may capitalize a
significant goodwill asset. This asset would be amortized over its expected
period of benefit. The resulting amortization expense could seriously impact
operating results for many years.

In addition, acquisitions accounted for using the pooling of interest
methods of accounting are subject to rules established by the Financial
Accounting Standards Board and the Securities and Exchange Commission. These
rules are complex and the interpretation of them is subject to change.
Additionally, the availability of pooling of interests accounting treatment for
a business combination depends in part upon circumstances and events occurring
after the effective time. The failure of a past business combination or a
future potential business combination that has been accounted for under the
pooling of interests accounting method to qualify for this accounting treatment
would materially harm the combined company's reported and future earnings and
likely, the price of the AMCC common stock.

Any of these risks could materially harm the combined company's business,
financial condition and results of operations. There can be no assurance that
any business that the combined company acquires will achieve anticipated
revenues and operating results.

The complexity of MMC Networks' products frequently leads to errors, defects
and bugs when they are first introduced, which could negatively impact the
combined company's reputation with its customers.

Products as complex as those offered by MMC Networks frequently contain
errors, defects and bugs when first introduced or as new versions are released.
MMC Networks has in the past experienced such errors, defects and bugs.
Delivery of products with production defects or reliability, quality or
compatibility problems could significantly delay or hinder market acceptance of
the combined company's products. This, in turn, could damage the combined
company's reputation and adversely affect the combined company's ability to
retain its existing customers and to attract new customers. Errors, defects or
bugs could cause problems, interruptions, delays or a cessation of sales to the
combined company's customers.

Resolving such problems may require significant expenditures of capital and
resources by the combined company. There can be no assurance that problems will
not be found in new products after commencement of commercial production,
despite testing by the combined company, its suppliers or its customers. This
could result in:

. additional development costs;

. loss of, or delays in, market acceptance;

. diversion of technical and other resources from the combined company's
other development efforts;

. claims by the combined company's customers or others against it; and

. loss of credibility with the combined company's current and prospective
customers.

Any such event could have a material adverse effect on the combined
company's business, financial condition and results of operations.

The combined company may not be able to protect its intellectual property
adequately.

AMCC and MMC Networks rely in part on patents to protect their intellectual
property. There can be no assurance that the pending patent applications or any
future applications by the combined company will be approved, or that any
issued patents will provide the combined company with competitive advantages or
will not be challenged by third parties, or that if challenged, will be found
to be valid or enforceable, or that the patents of others will not have an
adverse effect on the combined company's ability to do business. Furthermore,
others may independently develop similar products or processes, duplicate the
products or processes or design around any patents that may be issued to the
combined company.

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To protect their intellectual property, AMCC and MMC Networks also rely on
the combination of mask work protection under the Federal Semiconductor Chip
Protection Act of 1984, trademarks, copyrights, trade secret laws, employee and
third-party nondisclosure agreements and licensing arrangements. Despite these
efforts, the combined company cannot be certain that others will not
independently develop substantially equivalent intellectual property or
otherwise gain access to the combined company's trade secrets or intellectual
property, or disclose such intellectual property or trade secrets, or that the
combined company can meaningfully protect its intellectual property.

The combined company could be harmed by litigation involving patents and
proprietary rights.

Litigation may be necessary to enforce the combined company's intellectual
property rights, to determine the validity and scope of the proprietary rights
of others or to defend against claims of infringement or misappropriation. As a
general matter, the semiconductor industry is characterized by substantial
litigation regarding patent and other intellectual property rights. Such
litigation could result in substantial costs and diversion of resources,
including the attention of the combined company's management and technical
personnel and could have a material adverse effect on the combined company's
business, financial condition and results of operations. The combined company
may be accused of infringing the intellectual property rights of third parties.
The combined company will have certain indemnification obligations to customers
with respect to the infringement of third-party intellectual property rights by
its products. AMCC cannot be certain that infringement claims by third parties
or claims for indemnification by customers or end users resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to be true, will not harm the combined company's business.

Any litigation relating to the intellectual property rights of third
parties, whether or not determined in the combined company's favor or settled
by the combined company, would at a minimum be costly and could divert the
efforts and attention of its management and technical personnel. In the event
of any adverse ruling in any such litigation, the combined company could be
required to pay substantial damages, cease the manufacturing, use and sale of
infringing products, discontinue the use of certain processes or obtain a
license under the intellectual property rights of the third party claiming
infringement. A license might not be available on reasonable terms.

The combined company's operating results will be subject to fluctuations
because of international sales.

International sales (including sales to Canada) accounted for approximately
49% and 37% of AMCC's revenues for the fiscal year ended March 31, 2000 and
quarter ended June 30, 2000, respectively. International sales may increase in
future periods and may account for an increasing portion of the combined
company's revenues. As a result, an increasing portion of the combined
company's revenues may be subject to certain risks, including:

. changes in regulatory requirements;

. tariffs and other barriers;

. timing and availability of export licenses;

. political and economic instability;

. difficulties in accounts receivable collections;

. natural disasters;

. difficulties in staffing and managing foreign subsidiary and branch
operations;

. difficulties in managing distributors;

. difficulties in obtaining governmental approvals for communications and
other products;

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. foreign currency exchange fluctuations;

. the burden of complying with a wide variety of complex foreign laws and
treaties; and

. potentially adverse tax consequences.

The combined company will be subject to the risks associated with the
imposition of legislation and regulations relating to the import or export of
high technology products. AMCC cannot predict whether quotas, duties, taxes or
other charges or restrictions upon the importation or exportation of the
combined company's products will be implemented by the United States or other
countries. Because sales of AMCC's and MMC Networks' products have been
denominated to date primarily in United States dollars, increases in the value
of the United States dollar could increase the price of the combined company's
products so that they become relatively more expensive to customers in the
local currency of a particular country, leading to a reduction in sales and
profitability in that country. Future international activity may result in
increased foreign currency denominated sales. Gains and losses on the
conversion to United States dollars of accounts receivable, accounts payable
and other monetary assets and liabilities arising from international operations
may contribute to fluctuations in the combined company's results of operations.
Some of AMCC's and MMC Networks' customer purchase orders and agreements are
governed by foreign laws, which may differ significantly from United States
laws. Therefore, the combined company may be limited in its ability to enforce
its rights under such agreements and to collect damages, if awarded.

The combined company could incur substantial fines or litigation costs
associated with its storage, use and disposal of hazardous materials.

AMCC is subject to a variety of federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in AMCC's manufacturing process.
Any failure to comply with present or future regulations could result in the
imposition of fines, the suspension of production or a cessation of operations.
In addition, these regulations could restrict the combined company's ability to
expand its facilities at the present location or construct or operate a new
wafer fabrication facility or could require the combined company to acquire
costly equipment or incur other significant expenses to comply with
environmental regulations or clean up prior discharges. Since 1993, AMCC has
been named as a potentially responsible party, along with a large number of
other companies that used Omega Chemical Corporation in Whittier, California to
handle and dispose of certain hazardous waste material. AMCC is a member of a
large group of potentially responsible parties that has agreed to fund certain
remediation efforts at the Omega site, which efforts are ongoing. To date,
AMCC's payment obligations with respect to these funding efforts have not been
material, and AMCC believes that the combined company's future obligations to
fund these efforts will not have a material adverse effect on its business,
financial condition or operating results. Although AMCC believes that it is
currently in material compliance with applicable environmental laws and
regulations, AMCC cannot assure you that the combined company will be in
material compliance with these laws or regulations or that its future
obligations to fund any remediation efforts, including those at the Omega site,
will not have a material adverse effect on its business.

The combined company's ability to manufacture sufficient wafers to meet demand
could be severely hampered by a shortage of water or natural disasters.

AMCC uses significant amounts of water throughout its manufacturing
processes. Previous droughts in California have resulted in restrictions being
placed on water use by manufacturers and residents in California. In the event
of future drought, reductions in water use may be mandated generally, and it is
unclear how such reductions will be allocated among California's different
users. AMCC cannot be certain that near term reductions in water allocations to
manufacturers will not occur. AMCC's existing wafer fabrication facility is,
and a potential new wafer fabrication facility may be, located in Southern
California and these facilities may be subject to natural disasters such as
earthquakes or floods. AMCC does not have earthquake insurance for these
facilities, because adequate coverage is not offered at economically
justifiable rates. A significant natural

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disaster, such as an earthquake or flood, could have a material adverse impact
on the combined company's business, financial condition or operating results.

The AMCC common stock price is volatile.

The market price of AMCC common stock has fluctuated significantly to date.
In the future, the market price of AMCC common stock could be subject to
significant fluctuations due to general market conditions and in response to
quarter-to-quarter variations in:

. the combined company's anticipated or actual operating results;

. announcements or introductions of new products;

. technological innovations or setbacks by the combined company or its
competitors;

. conditions in the semiconductor, telecommunications, data communications,
or high-speed computing markets;

. the commencement of litigation;

. changes in estimates of the combined company's performance by securities
analysts;

. announcements of merger or acquisition transactions;

. other events or factors; and

. general economic and market conditions.

In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have affected the market prices of many high
technology companies, particularly semiconductor companies, and that have often
been unrelated or disproportionate to the operating performance of companies.
These fluctuations, as well as general economic and market conditions, may harm
the market price of AMCC common stock.

The anti-takeover provisions of AMCC's certificate of incorporation may delay,
defer or prevent a change of control.

AMCC's board of directors has the authority to issue up to 2,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges and restrictions, including voting rights, of those shares without
any further vote or action by AMCC's stockholders. The rights of the holders of
AMCC common stock will be subject to, and may harmed by, the rights of the
holders of any shares of preferred stock that may be issued in the future. The
issuance of preferred stock may delay, defer or prevent a change in control, as
the terms of the preferred stock that might be issued could potentially
prohibit AMCC's consummation of any merger, reorganization, sale of
substantially all of its assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of
preferred stock. In addition, the issuance of preferred stock could have a
dilutive effect on AMCC's stockholders.

If AMCC issues additional shares of stock in the future, it may have a dilutive
effect on existing AMCC stockholders.

AMCC's board of directors and stockholders have recently approved an
amendment to AMCC's certificate of incorporation that increases the number of
authorized shares of AMCC common stock by 450,000,000, to a total of
630,000,000 shares. This increase in authorized shares will provide AMCC with
the flexibility to issue AMCC common stock for proper corporate purposes, which
may include making acquisitions through the use of stock, adopting additional
equity incentive plans and raising equity capital. Any subsequent issuance of
AMCC common stock may result in immediate dilution of then current AMCC
stockholders.

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THE MMC NETWORKS SPECIAL MEETING

AMCC is furnishing this prospectus/proxy statement to MMC Networks
stockholders in connection with the solicitation of proxies from MMC Networks
stockholders for use at the MMC Networks special meeting to be held on October
25, 2000. AMCC also is furnishing this prospectus/proxy statement to MMC
Networks stockholders as a prospectus in connection with the issuance by AMCC
of shares of AMCC common stock in the merger.

Date, Time and Place

The special meeting will be held on October 25, 2000, at 10:00 a.m. Pacific
time, at the offices of MMC Networks located at 1144 East Arques Avenue,
Sunnyvale, California 94085.

Matters to be Considered at the Special Meeting

At the special meeting, and any adjournment of the special meeting, MMC
Networks stockholders will be asked:

. to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger and Reorganization by and among AMCC, Mercury Acquisition Corp.
and MMC Networks, dated as of August 28, 2000, and approve the merger
under which MMC Networks will become a wholly owned subsidiary of AMCC;
and

. to consider and transact such other matters which may properly come
before the Special Meeting.

Board of Directors Recommendation

The MMC Networks board of directors has unanimously approved the merger
agreement and the merger and recommends a vote "FOR" adoption of the merger
agreement and approval of the merger.

Record Date

The MMC Networks board of directors fixed September 21, 2000 as the record
date for the special meeting. Accordingly, only stockholders of record of MMC
Networks common stock at the close of business on September 21, 2000 are
entitled to notice of and to vote at the special meeting.

Quorum

The presence at the special meeting, either in person or by proxy, of a
majority of the issued and outstanding shares of MMC Networks common stock on
the record date is necessary to constitute a quorum to transact business at the
meeting. If a quorum is not present, it is expected that the special meeting
will be adjourned or postponed in order to solicit additional proxies. Shares
of MMC Networks common stock represented at the special meeting but not voting,
including shares of MMC Networks common stock for which proxy cards have been
received but for which the holders have abstained and broker non-votes, will be
treated as present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business.

Stockholders Entitled to Vote

At the close of business on the record date, September 21, 2000, there were
33,220,285 shares of MMC Networks common stock outstanding and entitled to vote
held by approximately 115 stockholders of record.

The holders of MMC Networks common stock are entitled to cast one vote for
each share they hold on each matter submitted to the MMC Networks stockholders
for a vote at the special meeting.

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Vote Required

Adoption of the merger agreement and approval of the merger requires the
affirmative vote of the holders of a majority of the shares of MMC Networks
common stock outstanding on the record date.

Failure to vote, broker non-votes and abstentions will not be deemed to be
cast either "FOR" or "AGAINST" the merger agreement and the merger. However,
because adoption of the merger agreement and approval of the merger requires
the affirmative vote of the holders of a majority of the outstanding shares of
MMC Networks common stock, the failure to vote, broker non-votes and
abstentions will have the same effect as a vote "AGAINST" the merger agreement
and the merger.

Voting Agreements

As of August 28, 2000, certain MMC Networks stockholders, including certain
officers and directors of MMC Networks, entered into voting agreements,
pursuant to which, among other things, they agreed to vote their shares of MMC
Networks stock "FOR" adoption of the merger agreement and the approval of the
merger. A copy of the voting agreement is attached as Appendix B to this
prospectus/proxy statement. Each of these MMC Networks stockholders has also
granted an irrevocable proxy and a power of attorney to AMCC representatives to
vote his, her or its shares of MMC Networks common stock "FOR" adoption of the
merger agreement and the approval of the merger. On the record date, the MMC
Networks stockholders that are parties to the voting agreements collectively
owned and were entitled to vote approximately 15% of the outstanding shares of
MMC Networks common stock.

Proxies

All shares represented by properly executed proxy cards received in time for
the special meeting will be voted at the special meeting in the manner
specified by the holders. Properly executed proxy cards that do not contain
voting instructions with respect to approval of the merger agreement and the
merger will be voted "FOR" adoption of the merger agreement and the approval of
the merger.

Only shares affirmatively voted for adoption of the merger agreement and
approval of the merger, including properly executed proxy cards that do not
contain voting instructions, will be counted as votes in favor of the merger
agreement and the merger proposal.

The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement and approve the merger will be voted in favor of any
adjournment or postponement.

Revocability of Proxies

You may revoke your proxy at any time prior to its use:

. by delivering to the secretary of MMC Networks at the address set forth
below a signed notice of revocation or a later-dated, signed proxy card;
or

. by attending the special meeting and voting in person.

Attendance at the special meeting is not in itself sufficient to revoke a
proxy.

All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to MMC Networks, Inc., 1144 East
Arques Avenue, Sunnyvale, California 94085, Attention: Secretary. A proxy
appointment will not be revoked by death or incapacity of the MMC Networks

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stockholder executing the proxy card unless, before the shares are voted,
notice of such death or incapacity is filed with MMC Networks' secretary or
other person responsible for tabulating votes on MMC Networks' behalf.

Solicitation of Proxies and Expenses

MMC Networks and AMCC will share equally the fees and costs, except
attorneys' and accountants' fees, of filing and printing this prospectus/proxy
statement. MMC Networks will bear all attorneys' and accountants' fees incurred
by it in connection with filing and printing this prospectus/proxy statement
and will pay the cost of soliciting proxies from its stockholders. MMC Networks
has retained Corporate Investor Communications as proxy solicitor, and expects
to pay approximately $10,000 for such services. In addition to solicitation by
mail, MMC Networks' directors, officers and employees may solicit proxies by
telephone, fax, e-mail, telegram or in person.

Please do not send stock certificates with your proxy card. A transmittal
form with instructions concerning the surrender of MMC Networks stock
certificates will be mailed to you by AMCC's exchange agent promptly after
completion of the merger.

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THE MERGER

This section of the prospectus/proxy statement describes material aspects of
the proposed merger. While we believe that the description covers the material
terms of the merger, this summary may not contain all of the information that
is important to you. You should read this entire document including the
appendices for a more complete understanding of the merger.

Background of the Merger

Commencing in October 1999, AMCC's executive management held numerous
discussions regarding strategic acquisitions which would enable AMCC to
continue increasing its revenues and presence in the networking market. During
these discussions, AMCC's executive management reviewed presentations and
analyses regarding potential high-growth sectors in the networking market. As a
result of these discussions, AMCC's executive management decided to enter into
discussions with companies that design high-speed network processor products,
which are devices that process data before it is routed through a
telecommunications network to its destination.

On October 15, 1999, at a regularly scheduled meeting, the MMC Networks
board of directors discussed industry consolidation. As part of this
discussion, the MMC Networks board considered which companies in the
telecommunications integrated circuit industry might be candidates for a
potential strategic relationship. AMCC was one of the companies that the MMC
Networks board discussed.

On October 21, 1999, David Rickey, President and Chief Executive Officer of
AMCC, met with Doug Spreng, President and Chief Executive Officer of MMC
Networks and other key management employees of MMC Networks to discuss a
potential strategic relationship between the two companies. At this meeting,
each of the companies exchanged certain information about their respective
technologies, business operations, financial condition and other related
matters.

During the period from the end of October 1999 through February 2000, AMCC
held discussions with several other companies that produce network processor
products.

On February 9, 2000, at a regularly scheduled meeting of the board of
directors of MMC Networks, the board again discussed potential strategic
relationships in light of then current industry consolidation. After extensive
discussion, the MMC Networks board of directors directed management to explore
potential strategic transactions with several companies, one of which was AMCC.

On or about February 29, 2000, Stephen Smith, AMCC's Vice President,
Business Development, contacted Mr. Spreng to continue discussions regarding
AMCC's interest in a potential strategic transaction between AMCC and MMC
Networks.

Between February 29, 2000 and March 13, 2000, Mr. Smith and Mr. Spreng had
several conversations regarding a potential strategic transaction between the
two companies, and both agreed that further discussions between representatives
of MMC Networks and AMCC should ensue.

On March 16, 2000, Alexander Joffe, Chief Technology Officer of MMC
Networks, Andrew Gottlieb, Vice President of Marketing of MMC Networks, and Mr.
Spreng met with AMCC executives and managers. At the meeting, the parties
entered into an agreement that each party would not disclose or misuse
confidential information provided by the other party during discussions
regarding the merger. The parties then discussed the strategic direction and
current results of AMCC and the features and development schedule of MMC
Networks' network processor products and switch fabric product design. The
parties also discussed in general terms possible synergies between MMC
Networks' network processors, traffic management chips and switch fabrics and
AMCC's IC products.

During the period from March 16, 2000 through May 15, 2000, Mr. Smith, Mr.
Rickey and Mr. Spreng continued to have telephone discussions to explore the
benefits and challenges of combining the two companies.

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On May 11, 2000, a meeting was held among Mr. Spreng, Mr. Gottlieb, Mr.
Rickey, Mr. Smith and Candace Kilburn, Vice President, Human Resources of AMCC,
to review the status of discussions between the companies regarding a potential
strategic transaction.

After reviewing the results of these meetings, and similar meetings with
other companies that design network processor products, AMCC's executive
management concluded that the potential strategic transaction with MMC Networks
presented certain compelling benefits including MMC Networks' proven
technology, significant revenue potential and customer base.

On May 31, 2000, Mr. Spreng received a telephone call from Mr. Smith. During
the call, Mr. Smith suggested a valuation of MMC Networks at which AMCC would
be interested in pursuing an acquisition. Mr. Spreng advised Mr. Smith on the
call that he believed that the valuation was insufficient, but that he would
poll the other members of the MMC Networks' board of directors on the proposal.

On June 1, 2000, Mr. Spreng contacted each member of the MMC Networks board
of directors to discuss the valuation that had been communicated by Mr. Smith.

On June 2, 2000, Mr. Spreng met with representatives of MMC Networks'
financial advisor, Credit Suisse First Boston Corporation, to discuss the
valuation proposed by Mr. Smith and the reaction to the valuation by the MMC
Networks board of directors. Mr. Spreng then contacted Mr. Smith by telephone
and told him that while he believed that a transaction between the two
companies would be considered seriously by the MMC board of directors, the
previously suggested valuation was inadequate. However, Mr. Spreng indicated
that he would like to continue discussions on the terms of the proposed
transaction.

By June 15, 2000, the negotiations between AMCC and MMC Networks reached a
temporary impasse due to, among other reasons, the parties' failure to agree on
valuation.

On August 4, 2000, Mr. Spreng received a telephone call from Brent Little,
Vice President, Marketing for AMCC, and Mr. Smith, at which time Mr. Little and
Mr. Smith indicated that AMCC wished to discuss a revised valuation proposal,
and that a letter to that effect would be forthcoming. Mr. Spreng received the
letter on August 7, 2000.

On August 11, 2000, Mr. Spreng, Mr. Gottlieb, Richard C. Yonker, Vice
President and Chief Financial Officer of MMC Networks, and MMC Networks' legal
advisor, Wilson Sonsini Goodrich & Rosati, Professional Corporation, and its
financial advisor met to discuss the proposal contained in AMCC's August 7,
2000 letter. After a lengthy discussion of the terms of the proposal, Mr.
Spreng, with the advice of MMC Networks' advisors, concluded that an MMC
Networks board of directors meeting should be convened to discuss the proposal.

On August 14, 2000, the AMCC board of directors held a telephonic meeting
and discussed fully the terms of the proposed transaction and the status of
negotiations.

On August 16, 2000, a special meeting of the MMC Networks' board of
directors was held to discuss the AMCC proposal with representatives of MMC
Networks' legal and financial advisors. After a lengthy discussion of the
likely material terms of an acquisition transaction, the MMC Networks board of
directors authorized management of MMC Networks to proceed with negotiations
with AMCC, subject to board review and approval of the terms of the definitive
agreements relating to a merger transaction.

Between August 14, 2000 and August 18, 2000, AMCC and MMC Networks
negotiated the terms of an exclusivity agreement, which AMCC made a condition
to entering into negotiations of the definitive merger agreement.

On August 18, 2000, the MMC Networks board of directors held a telephonic
meeting at which the status of due diligence and negotiations were discussed
with MMC Networks' legal and financial advisors. At this

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meeting, the MMC Networks board of directors authorized management to enter
into an exclusivity agreement with AMCC for a period of no more than ten days
to allow the parties to complete their negotiations of definitive merger
agreements.

On August 18, 2000, the parties entered into the exclusivity agreement
whereby MMC Networks agreed to give AMCC a nine-day period during which MMC
Networks would negotiate exclusively with AMCC. During the period from August
18, 2000, through August 24, 2000, representatives of each of AMCC and
MMC Networks, including AMCC's legal advisor, Cooley Godward LLP, and financial
advisor, Salomon Smith Barney, and MMC Networks' legal and financial advisors,
conducted numerous telephone conferences to negotiate the terms and conditions
of the merger agreement and various other legal, financial and regulatory
matters related to the merger. During this period and continuing through August
27, 2000, AMCC's and MMC Networks' management and legal and financial advisors
conducted due diligence investigations.

On August 24, 2000, the MMC Networks board of directors held a telephonic
meeting and received a full report on the status of negotiations from MMC
Networks' management and legal and financial advisors, and discussed the
significant open issues separating the parties before the merger agreement
could be finalized.

On August 25, 2000, the AMCC board of directors held a telephonic neeting,
at which the management of AMCC presented to the board a summary of terms of
the proposed merger with MMC Networks. Frederick Muto of Cooley Godward llp,
AMCC's legal advisor, reviewed with the board the terms of the merger agreement
and various other legal matters regarding the proposed transaction. Chris
Varelas of Salomon Smith Barney, AMCC's financial advisor, gave a presentation
to the board regarding the fairness of the merger to AMCC. After discussion,
the AMCC board of directors approved the merger and authorized the management
of AMCC to enter into the merger agreement and execute all documents relating
to the transaction.

On August 27, 2000, the MMC Networks board of directors held a meeting,
together with MMC Networks' management and legal and financial advisors, to
review the principal terms of the proposed merger, including the status and
timing of the transaction. At the meeting, MMC Networks' financial advisor
reviewed with the MMC Networks board of directors its financial analysis of the
exchange ratio and delivered to the MMC Networks board of directors an oral
opinion, confirmed by delivery of a written opinion dated August 28, 2000, the
effective date of the merger agreement, to the effect that, as of the date of
the opinion and based on and subject to the matters described in the opinion,
the exchange ratio was fair, from a financial viewpoint, to the holders of
MMC Networks common stock. Management of MMC Networks made a detailed
presentation on the product and technology synergies that were presented by
combining the two companies. Representatives of MMC Networks' legal advisor
then advised the members of the board of their fiduciary duties in considering
whether to approve the transaction. After full discussion, the MMC Networks
board of directors unanimously concluded that the merger was in the best
interests of the MMC Networks stockholders, declared the merger advisable, and
unanimously approved the terms of the merger and the merger agreement and
resolved to recommend that the MMC Networks stockholders vote to adopt the
merger agreement and approve the merger.

On August 28, 2000, AMCC and MMC Networks executed the merger agreement and
related agreements and issued a joint press release announcing the merger.

AMCC's Reasons for the Merger

In the course of reaching its decision to approve the merger, the AMCC board
of directors consulted with AMCC's legal and financial advisors as well as with
AMCC's senior management. The board considered a number of strategic factors
associated with MMC Networks' business and opportunities presented by combining
the two companies, including:

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. MMC Networks' strong technical employee and consultant force, which
includes over 220 design engineers, quality and test engineers and sales
and marketing personnel;

. MMC Networks' focus on designing products compatible with the WAN market
segment; and

. MMC Networks' significant design wins with leading communications
equipment manufacturers.

The AMCC board of directors also considered a number of risks and
potentially negative factors in its deliberation concerning the merger,
including the risk factors described elsewhere in this prospectus/proxy
statement, and in particular:

. the challenge of integrating the businesses and operations of the two
companies;

. the goodwill charges that would be incurred and the adverse effect the
amortization of this goodwill would have on future operating results; and

. the risk of diverting management resources from other strategic
opportunities and operational matters for an extended period of time.

In analyzing the proposed merger, none of the factors listed above was
viewed by the AMCC board of directors as determinative, and the board did not
quantify or weight any of the factors. Rather, the board made its determination
based upon the total mix of information available to it. Moreover, individual
members of the board may have assigned different values to different factors.

After considering the foregoing factors, the AMCC board of directors
unanimously determined that the potential benefits of the merger outweighed any
benefits of seeking an alternative acquisition or trying to develop its own
network processor and traffic management products.

MMC Networks' Reasons for the Merger

The decision of the MMC Networks board of directors to enter into the merger
agreement with AMCC and to recommend that the MMC Networks stockholders adopt
the merger agreement, approve the merger and the transactions associated with
it was the result of careful consideration by the MMC Networks board of
directors of a range of strategic alternatives, including potential business
combinations with companies other than AMCC, and the pursuit of a long-term
independent business strategy for MMC Networks. The MMC Networks board of
directors also consulted with MMC Networks' management and legal and financial
advisors throughout the period it was considering the merger.

During the course of its deliberations, the MMC Networks board of directors
considered a number of factors that the board believes make the merger
attractive to the MMC Networks stockholders and could contribute to the success
of the combined company, including the following:

. the merger will offer the stockholders of the combined company the
potential benefits described above under the heading "AMCC's Reasons for
the Merger;"

. MMC Networks will have access to the customer base of AMCC and may
benefit from increased distribution of MMC Networks' products;

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. the broad expertise of the AMCC management team and the significant
marketing resources of AMCC will contribute to stronger product planning
and operational execution;

. the value of the shares of AMCC common stock that the MMC Networks
stockholders will receive in the merger represents a significant premium
to market for the MMC Networks stockholders; and

In addition, the MMC Networks board of directors considered a number of
potentially negative factors relating to the merger, including the following:

. the risk that AMCC's stock price will fall, thereby diminishing the value
of the consideration being paid to the MMC Networks stockholders;

. the risk that expected benefits of the merger may not be realized;

. the risk that MMC Networks may find it more difficult to attract and hire
skilled employees as part of a much larger enterprise; and

. the other risks described in this prospectus/proxy statement under "Risk
Factors."

After considering the potential advantages and disadvantages of the merger,
the MMC Networks board of directors unanimously determined that the potential
benefits of the merger outweighed the potentially negative effects of the
merger.

In analyzing the proposed merger, the MMC Networks board of directors did
not view any single factor as determinative and did not quantify or weight any
of the factors. Rather, the board made its determination based upon the total
mix of information available to it. In addition, individual members of the
board may have assigned different values to different factors.

Based on the above, the MMC Networks board of directors concluded that the
merger is fair to, and in the best interests of, MMC Networks and its
stockholders and unanimously recommends that the MMC Networks stockholders vote
for the merger. The affirmative vote of the stockholders holding a majority of
the MMC Networks common stock outstanding on the record date is required to
adopt the merger agreement and approve the merger.

Consideration to be Received in the Merger

AMCC Common Stock. Upon completion of the merger, each share of MMC Networks
common stock then outstanding will be converted into the right to receive 0.619
of a share of AMCC common stock (the exchange ratio). The number of shares of
AMCC common stock issuable in the merger will be proportionately adjusted for
any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or similar transaction undertaken by AMCC prior to the
effective time of the merger. In addition, the total number of shares AMCC
would be required to issue will be no more than 20% of the AMCC common stock
outstanding as of the effective time of the merger.

No fractional shares. No fractional shares of AMCC common stock will be
issued in connection with the merger. Instead of a fraction of a share, a
holder of MMC Networks common stock will receive payment in cash, without
interest, determined by multiplying the fraction that would have been received
by the closing sales price per share of AMCC common stock, as quoted on The
Nasdaq National Market, on the date the merger becomes effective.

Procedures for Exchange of MMC Networks Stock Certificates

After the merger is completed, AMCC will mail you a letter of transmittal
and instructions for surrendering MMC Networks stock certificates in exchange
for AMCC stock certificates. When you deliver

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your MMC Networks stock certificates to AMCC, along with a properly executed
letter of transmittal and any other required documents, your MMC Networks stock
certificates will be canceled and you will receive AMCC stock certificates
representing the number of whole shares of AMCC common stock to which you are
entitled under the merger agreement. You will receive cash for any fractional
share of AMCC common stock to which you would have otherwise been entitled.

If your MMC Networks stock certificate has been lost, stolen or destroyed,
AMCC may require you to provide an appropriate affidavit and deliver a bond as
indemnity against any claim that may be made against AMCC or MMC Networks with
respect to your lost, stolen or destroyed stock certificate.

You should not surrender your MMC Networks stock certificates for exchange
until you receive a letter of transmittal from AMCC.

Treatment of Options to Purchase MMC Networks Common Stock

When the merger is completed, all outstanding options to purchase MMC
Networks common stock will be assumed by AMCC in accordance with the merger
agreement. Upon the merger:

. each option to purchase shares of MMC Networks common stock automatically
will become an option to purchase that number of shares of AMCC common
stock equal to the number of shares of MMC Networks common stock subject
to the MMC Networks option immediately prior to the effective time of the
merger multiplied by 0.619, rounding down to the nearest whole share of
AMCC common stock; and

. the exercise price for each share of AMCC common stock issuable upon the
exercise of the assumed MMC Networks option will be determined by
dividing the per share exercise price in effect immediately prior to the
effective time of the merger by 0.619, rounding up to the nearest whole
cent.

Any restriction on the exercise of an MMC Networks option will continue in
full force and effect, and no additional restrictions on such options will be
imposed by AMCC.

Stock Ownership Following the Merger

Assuming that no additional shares of MMC Networks common stock are issued
and none of the currently outstanding options to purchase MMC Networks common
stock are exercised prior to the merger, AMCC will issue approximately
20,563,356 shares of AMCC common stock for the outstanding shares of MMC
Networks stock and will assume options to purchase approximately 4,132,767
shares of AMCC common stock. Based upon 126,168,858 shares of AMCC common stock
issued and outstanding as of September 21, 2000 and assuming no exercise of
options, warrants or other rights to purchase AMCC common stock, the former
holders of MMC Networks common stock would hold and have voting power with
respect to approximately 14%, and the stockholders of AMCC prior to the closing
of the merger would hold and have voting power with respect to approximately
86%, of AMCC's total issued and outstanding shares of common stock after
consummation of the merger.

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CERTAIN TERMS OF THE MERGER AGREEMENT

The following is a summary of the material provisions of the merger
agreement. However, the following is not a complete statement of all provisions
of the merger agreement. AMCC and MMC Networks urge you to read the entire
merger agreement, which is attached as Appendix A to this prospectus/proxy
statement. This summary is qualified in its entirety by reference to the full
text of the merger agreement.

General

The merger agreement provides for the merger of MMC Networks with Mercury
Acquisition Corp., a wholly owned subsidiary of AMCC. As a result of the
merger, MMC Networks will be the surviving entity in the merger and will become
a wholly owned subsidiary of AMCC. The former stockholders of MMC Networks will
become stockholders of AMCC. The merger will be completed upon the filing of a
certificate of merger with the Secretary of State of the State of Delaware.

Representations and Warranties

The merger agreement contains customary representations and warranties of
MMC Networks, AMCC and Mercury Acquisition Corp. relating to the respective
businesses of the parties. The representations and warranties of MMC Networks,
AMCC and Mercury Acquisition Corp. expire upon the completion of the merger.
The representations made by MMC Networks include, among others, representations
relating to:

. its due organization, good standing and subsidiaries;

. its authority to own its assets and carry on its business;

. its capital structure;

. the accuracy of all its filings with the SEC since December 31, 1999;

. the completeness, preparation and compliance of its financial statements
in accordance with generally accepted accounting principles;

. the absence of changes in its business since June 30, 2000 that would
materially adversely affect it;

. its intellectual property and other assets;

. tax, insurance, employee and environmental matters;

. the enforceability of its material contracts;

. the receipt of an opinion from MMC Networks' financial advisor;

. absence of material litigation; and

. the authority to enter into the merger agreement and to consummate the
merger.

The representations made by AMCC include, among others, representations
relating to:

. its due organization, good standing and subsidiaries;

. its authority to own its assets and carry on its business;

. its capital structure;

. the accuracy of all its filings with the SEC since December 31, 1999;

. the completeness, preparation and compliance of its financial statements
in accordance with generally accepted accounting principles;

. the absence of changes in its business since December 31, 1999 that would
materially adversely affect it;

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. the valid issuance of the shares of AMCC common stock to be issued as
consideration for the merger; and

. the authority to enter into the merger agreement and to consummate the
merger.

Certain Covenants of the Parties

Conduct of the Parties Prior to the Closing of the Merger

The merger agreement obligates MMC Networks to conduct its business in the
ordinary course before the merger becomes effective and imposes some
limitations on the operations of MMC Networks during that time. These
limitations include agreements by MMC Networks not to take any of the following
actions without the prior written consent of AMCC:

. declare or pay dividends or make any other distribution in respect of any
shares of capital stock or other securities;

. repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities;

. sell, issue or authorize the issuance of, with certain exceptions related
to MMC Network's equity incentive plans, any equity or other securities;

. amend or waive any of its rights under, or permit the acceleration of
vesting of, outstanding options;

. amend its organizational documents;

. become a party to an acquisition transaction, recapitalization or
reclassification of shares of capital stock or other securities or
ownership interests in MMC Networks;

. conduct a stock split, reverse stock split or similar transaction with
respect to the shares of its capital stock;

. form a subsidiary or acquire an interest in any other entity;

. make any significant capital expenditure prior to completion of the
merger;

. amend, prematurely terminate or waive any material right or remedy under,
any material contract;

. enter into or become bound by a material contract;

. with certain exceptions, acquire, sell, lease or license any right or
other material asset from or to any other entity;

. lend money to any entity, or incur or guarantee any indebtedness for
borrowed money;

. establish or adopt any employee benefit plan, pay bonuses, or increase
salaries payable to any directors or officers;

. change any of its methods of accounting or accounting practices in any
material respect;

. make a material tax election;

. hire any new employee having an annual salary in excess of certain
limits; or

. commence or settle any material legal proceeding.

In addition, AMCC has agreed not to take any of the following actions
without the prior written consent of MMC Networks:

. declare, pay or make any extraordinary dividends on or distributions in
respect of any shares of capital stock or other securities;

. amend its certificate of incorporation in a manner adverse to the MMC
Networks stockholders, other than an amendment to increase the number of
authorized shares of AMCC common stock; and

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. commence or complete any acquisition transaction which would result in
the issuance of more than 25,000,000 shares of AMCC common stock or which
would reasonably be expected to delay the consummation of the merger.

Limitations on Discussing and Encouraging Other Transaction Proposals

MMC Networks has agreed to terminate all inquiries, contacts, discussions
or negotiations with any third party with respect to any disposition of a
material portion of its assets, certain issuances or disposition of its
securities, or any merger, consolidation or similar transaction. In addition,
MMC Networks has agreed not to solicit, encourage or otherwise facilitate any
discussions or negotiations that may lead to an acquisition proposal;
provided, however that, prior to receiving the required vote in favor of the
merger of the MMC Networks stockholders, MMC Networks may enter into
discussion with any third party in response to a written offer that satisfies
all of the following conditions:

. the offer is an unsolicited, bona fide, written offer to purchase at
least a majority of the outstanding MMC Networks common stock;

. the MMC Networks board of directors determines in good faith and after
consultation with MMC Networks' financial advisors that such offer is
more favorable to the MMC Networks stockholders than the terms of the
proposed merger;

. the MMC Networks board of directors determines in good faith, after
consulting MMC Networks' legal counsel, that such discussions are
necessary for the board to comply with its fiduciary obligations to the
MMC Networks stockholders;

. MMC Networks notifies AMCC in writing at least 48 hours prior to entering
into discussions with such third party of the identity of such third
party and of MMC Networks' intent to enter into discussions with such
third party; and

. no financing required to consummate the transaction contemplated by such
offer is not committed or is not reasonably capable of being obtained by
the offering party on a timely basis.

MMC Networks' Right to Terminate the Merger Agreement or Withdraw its
Recommendation in Favor of the Proposed Merger

Under the merger agreement, MMC Networks may terminate the merger agreement
or may withdraw or adversely modify its board recommendation in favor of the
proposed merger if all of the following conditions are met:

. the MMC Networks stockholders have not yet adopted the merger agreement;

. MMC Networks receives an unsolicited, bona fide, written offer to
purchase all of the outstanding shares of MMC Networks common stock
(which offer is not withdrawn);

. MMC Networks provides AMCC with at least two business days prior notice
of any meeting of the MMC Networks board of directors at which the board
will determine whether to support such an offer;

. the MMC Networks board of directors determines in good faith, after
consulting MMC Networks' financial advisors, that such offer is more
favorable to the MMC Networks stockholders than the proposed merger;

. the MMC Networks board of directors determines in good faith, after
consulting MMC Networks' legal counsel, that the withdrawal or
modification of its board recommendation to adopt the merger agreement or
the termination of the merger agreement is necessary for the board to
comply with its fiduciary obligations to the MMC Networks stockholders;

. MMC Networks has not terminated the merger agreement or withdrawn or
adversely modified its recommendation to adopt the merger agreement at
any time within one business day after AMCC has

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<PAGE>

received a written notice from MMC Networks confirming that the MMC
Networks board of directors has determined that the other offer is more
favorable to the MMC Networks stockholders than the proposed merger;

. MMC Networks has released AMCC from any standstill or similar agreement
restricting AMCC from acquiring the securities of MMC Networks; and

. MMC Networks has not violated its covenant not to solicit or initiate or
otherwise knowingly induce or encourage any discussions or negotiations
that may lead to an acquisition proposal.

MMC Networks' right to terminate the merger agreement or withdraw or adversely
modify its recommendation in favor of the merger agreement is referred to in
this prospectus as "MMC Networks' right of withdrawal."

Director and Officer Indemnification

After the merger is completed, AMCC is required to indemnify and hold
harmless the directors and officers of MMC Networks with respect to matters
existing or occurring at or prior to the time the merger was completed,
whether asserted or claimed prior to, at, or after the merger was completed,
as provided in its certificate of incorporation, bylaws and indemnification
agreements, and as permitted by applicable law. AMCC is required to provide
liability insurance for each individual who served as a director or officer of
MMC Networks at any time prior to the completion of the merger for a period of
six years after the completion of the merger no less favorable in coverage and
amount than any applicable insurance in effect immediately prior to the
completion of the merger. However, AMCC will only be obligated to obtain and
provide such coverage which is available at a cost of up to 175% of the cost
of such coverage immediately prior to completion of the merger.

Conditions to the Merger

The obligations of MMC Networks and AMCC to complete the merger are subject
to certain conditions, including the following:

. no law, regulation, injunction or other order may be enacted or issued
which has the effect of making the merger illegal or otherwise
prohibiting completion of the merger substantially on the terms contained
in the merger agreement;

. AMCC's registration statement must have become effective, and no stop
order issued by the SEC shall be pending;

. the holders of a majority of shares of MMC Networks common stock shall
have approved the merger;

. the representations and warranties made by either AMCC or MMC Networks in
the merger agreement must be accurate in all material respects, and an
officer of each company will have delivered a certificate to the other
company certifying that such condition has been satisfied;

. all of the covenants and obligations of each of AMCC or MMC Networks will
have been complied with in all material respects;

. the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 shall have expired or been terminated;

. each of Cooley Godward llp and Wilson Sonsini Goodrich & Rosati,
Professional Corporation will have delivered the legal opinions required
to be delivered by them under the terms of the merger agreement; and

. no lawsuit, action or proceeding shall be pending by any governmental
entity, other entity or person challenging the merger.

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<PAGE>

Termination

The merger agreement provides MMC Networks and AMCC with rights to terminate
the agreement in certain circumstances prior to the closing of the merger. AMCC
and MMC Networks may mutually agree in writing to terminate the merger
agreement. In addition, either party may terminate the merger agreement if the
merger agreement shall not have been approved by the MMC Networks stockholders
or a governmental body shall have issued a final order having the effect of
permanently enjoining or restraining the merger.

AMCC may terminate the merger agreement prior to closing for the following
reasons:

. if any of MMC Networks' representations or warranties were materially
inaccurate or have become materially inaccurate, or MMC Networks has
breached any covenant contained in the merger agreement, provided that
AMCC may not terminate the merger agreement if MMC Networks cures such
inaccuracy or breach;

. if the closing has not taken place prior to February 28, 2001 (other than
due to AMCC's failure to perform any covenant under the merger
agreement); or

. if prior to the approval of the merger agreement by the MMC Networks
stockholders if any of the following events occurs:

- the MMC Networks board of directors shall have failed to recommend, or
shall have withdrawn its recommendation in favor of adopting the merger
agreement;

- the MMC Networks board of directors shall have failed to include in
this prospectus/proxy statement the recommendation of the board in
favor of adopting the merger agreement;

- MMC Networks shall have approved, endorsed or recommended any proposal
relating to the acquisition of MMC Networks by an entity other than
AMCC;

- MMC Networks shall have entered into a letter of intent or contract
relating to the acquisition of MMC Networks by an entity other than
AMCC;

- a tender or exchange offer relating to securities of MMC Networks shall
have been commenced and MMC Networks shall not have sent to its
securityholders, a statement disclosing that MMC Networks does not
recommend acceptance of such tender or exchange offer;

- a proposal relating to the acquisition of MMC Networks by an entity
other than AMCC is publicly announced, and MMC Networks fails to issue
a press release announcing its opposition to such proposal or fails to
reaffirm the MMC Networks board of directors' recommendation in favor
of the acquisition by AMCC; or

- MMC Networks shall have breached its covenant not to solicit proposals
related to the acquisition of MMC Networks by an entity other than AMCC
and such breach results in the making of such a proposal by a third
party.

These events are referred to in this prospectus/proxy statement as
"triggering events."

MMC Networks may terminate the merger agreement prior to closing for the
following reasons:

. if any of AMCC's representations or warranties were materially inaccurate
or have become materially inaccurate, or AMCC has breached any covenant
contained in the merger agreement, provided that MMC Networks may not
terminate the merger agreement if AMCC cures such inaccuracy or breach
within 30 days after the date of such inaccuracy or breach; or

. if the closing has not taken place prior to February 28, 2001 (other than
due to MMC Networks' failure to perform any covenant under the merger
agreement); or

. if MMC Networks is entitled to exercise the MMC Networks' right of
withdrawal discussed under the section entitled "MMC Networks' Right to
Terminate the Merger Agreement or Withdraw its Recommendation in Favor of
the Proposed Merger."

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<PAGE>

All of these rights will expire upon the closing of the merger.

Termination Fee

AMCC is entitled to a cash termination fee if the merger agreement is
terminated under the following scenarios:

. by AMCC or MMC Networks because the MMC special meeting of stockholders
was properly held and the requisite number of MMC stockholders did not
approve the merger and (i) at or prior to the time the merger agreement
was terminated, a proposal to acquire more than 50% of the common stock
or assets of MMC Networks was publicly disclosed or commenced, (ii) such
proposal was not unconditionally and publicly withdrawn five business
days prior to the MMC Networks special meeting of stockholders and (iii)
within nine months after the termination of the merger agreement, MMC
Networks consummates a transaction involving the acquisition of more than
50% of the common stock or assets of MMC Networks;

. by AMCC or MMC Networks because the merger was not consummated prior to
February 28, 2001 and (i) at or prior to the time the merger agreement
was terminated, a proposal to acquire more than 50% of the common stock
or assets of MMC Networks was disclosed or commenced, (ii) such proposal
was not unconditionally and publicly withdrawn five business days prior
to February 28, 2001, (iii) within nine months after the termination of
the merger agreement, MMC Networks consummates a transaction involving
the acquisition of more than 50% of the common stock or assets of MMC
Networks, (iv) AMCC Networks shall not have, and MMC Networks shall have,
taken any action or omission which constitutes a breach of the covenants
of the merger agreement that can be shown to be a significant
contributing factor to the merger not being consummated by February 28,
2001;

. by AMCC because a triggering event has occurred; or

. by MMC Networks under MMC Networks' right of withdrawal.

Under all of the foregoing circumstances, AMCC is entitled to a cash
termination fee of $135,000,000.

Expenses Relating to the Merger

Generally, all fees and expenses incurred in connection with the merger,
the merger agreement and the transactions contemplated by the merger agreement
will be paid by the party incurring those expenses, whether or not the merger
is consummated. However, AMCC and MMC Networks shall share equally the fees
and expense, other than attorneys' and accountants' fees, related to the
filing, printing and mailing of the registration statement and the
prospectus/proxy statement and the filing of notices and applications under
the relevant antitrust laws.

Opinion of MMC Networks' Financial Advisor

Credit Suisse First Boston has acted as MMC Networks' exclusive financial
advisor in connection with the merger. MMC Networks selected Credit Suisse
First Boston based on Credit Suisse First Boston's experience, expertise and
reputation. Credit Suisse First Boston is an internationally recognized
investment banking firm and is regularly engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.

In connection with Credit Suisse First Boston's engagement, MMC Networks
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to the holders of MMC Networks common stock of the
exchange ratio provided for in the merger. On August 27, 2000, at a meeting of
the MMC Networks board of directors held to evaluate the merger, Credit Suisse
First Boston rendered to the MMC Networks board of directors an oral opinion,
which opinion was confirmed by delivery of a written

53
<PAGE>

opinion dated August 28, 2000, the date of the merger agreement, to the effect
that, as of the date of the opinion and based on and subject to the matters
described in the opinion, the exchange ratio was fair, from a financial point
of view, to the holders of MMC Networks common stock.

The full text of Credit Suisse First Boston's written opinion dated August
28, 2000 to the MMC Networks board of directors, which sets forth the
procedures followed, assumptions made, matters considered and limitations on
the review undertaken, is attached as Appendix C and is incorporated into this
document by reference. Holders of MMC Networks common stock are urged to read
this opinion carefully in its entirety. Credit Suisse First Boston's opinion is
addressed to the MMC Networks board of directors and relates only to the
fairness of the exchange ratio from a financial point of view, does not address
any other aspect of the proposed merger or any related transaction and does not
constitute a recommendation to any stockholder as to any matters relating to
the merger. The summary of Credit Suisse First Boston's opinion in this
document is qualified in its entirety by reference to the full text of the
opinion.

In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and related documents, as well as publicly available business and
financial information relating to MMC Networks and AMCC. Credit Suisse First
Boston also reviewed other information relating to MMC Networks and AMCC,
including publicly available financial forecasts, which MMC Networks and AMCC
provided to or discussed with Credit Suisse First Boston, and discussed with
MMC Networks' and AMCC's managements the businesses and prospects of MMC
Networks and AMCC.

Credit Suisse First Boston also considered financial and stock market data
of MMC Networks and AMCC and compared those data with similar data for other
publicly held companies in businesses similar to MMC Networks and AMCC and
considered, to the extent publicly available, the financial terms of other
business combinations and transactions recently effected. Credit Suisse First
Boston also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.

In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information that was
provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to publicly
available financial forecasts relating to MMC Networks and AMCC which Credit
Suisse First Boston reviewed and discussed with MMC Networks' and AMCC's
managements, Credit Suisse First Boston assumed, at the direction of
MMC Networks' and AMCC's managements, that the forecasts represented reasonable
estimates and judgments as to the future financial performance of MMC Networks
and AMCC. In addition, Credit Suisse First Boston relied, without independent
verification, on the assessments of MMC Networks' and AMCC's managements as to
MMC Networks' and AMCC's existing and future technology and products and the
risks associated with their technology and products, their ability to integrate
MMC Networks' and AMCC's businesses and their ability to retain key employees
of MMC Networks and AMCC. Credit Suisse First Boston also assumed, with
MMC Networks' consent, that the merger will be treated as a tax-free
reorganization for federal income tax purposes.

Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of MMC Networks' or AMCC's assets or
liabilities, contingent or otherwise, and was not furnished with any
evaluations or appraisals. Credit Suisse First Boston's opinion was necessarily
based on information available to, and financial, economic, market and other
conditions as they existed and could be evaluated by, Credit Suisse First
Boston on the date of its opinion. Credit Suisse First Boston did not express
any opinion as to what the value of AMCC common stock actually would be when
issued in the merger or the prices at which AMCC common stock would trade after
the merger.

In connection with its engagement, Credit Suisse First Boston was not
requested to, and did not, solicit third party indications of interest in the
possible acquisition of all or any part of MMC Networks. Although

54
<PAGE>

Credit Suisse First Boston evaluated the exchange ratio from a financial point
of view, Credit Suisse First Boston was not requested to, and did not,
recommend the specific consideration payable in the merger, which consideration
was determined between MMC Networks and AMCC. MMC Networks imposed no other
limitations on Credit Suisse First Boston with respect to the investigations
made or procedures followed in rendering its opinion.

In preparing its opinion to the MMC Networks board of directors, Credit
Suisse First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. In arriving
at its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.

In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of MMC Networks and AMCC.
No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to MMC Networks or AMCC or the proposed
merger, and an evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions analyzed.

The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by the
analyses. In addition, analyses relating to the value of businesses or
securities do not necessarily purport to be appraisals or to reflect the prices
at which businesses or securities actually may be sold. Accordingly, Credit
Suisse First Boston's analyses and estimates are inherently subject to
substantial uncertainty.

Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the MMC Networks board of directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of the MMC Networks board of directors or management with respect to
the merger or the exchange ratio.

The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's opinion dated August 28, 2000 delivered to the MMC
Networks board of directors in connection with the merger. The financial
analyses summarized below include information presented in tabular format. In
order to fully understand Credit Suisse First Boston's financial analyses, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Considering
the data in the tables below without considering the full narrative description
of the financial analyses, including the methodologies and assumptions
underlying the analyses, could create a misleading or incomplete view of Credit
Suisse First Boston's financial analyses.

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<PAGE>

Peer Group Comparison. Credit Suisse First Boston compared financial,
operating and stock market data of MMC Networks, AMCC and the following
publicly traded companies in the WAN/LAN access, diversified and wireless
business categories of the semiconductor industry:

<TABLE>
<S> <C> <C>
WAN/LAN Access Diversified Wireless
Semiconductor Companies Semiconductor Companies Semiconductor Companies
----------------------- ----------------------- -----------------------
. Broadcom Corporation . Intel Corporation . QUALCOMM Incorporated
. PMC-Sierra, Inc. . Texas Instruments Incorporated . RF Micro Devices, Inc.
. AMCC . LSI Logic Corporation . TriQuint Semiconductor, Inc.
. Vitesse Semiconductor Corporation . Conexant Systems, Inc. . Sawtek Inc.
. MMC Networks . Alpha Industries, Inc.
. GlobeSpan, Inc. . ANADIGICS, Inc.
. Virata Corporation
. TranSwitch Corporation
. Centillium Communications, Inc.
. Galileo Technology Ltd.
</TABLE>

Credit Suisse First Boston compared stock prices as a multiple of latest 12
months and estimated calendar years 2000 and 2001 earnings per share and fully
diluted aggregate values, calculated as fully diluted equity market value plus
net debt, as a multiple of latest 12 months and estimated calendar years 2000
and 2001 revenues. All multiples were based on closing stock prices on August
25, 2000. Estimated financial data for the selected companies, MMC Networks and
AMCC were based on research analysts' estimates. This analysis indicated the
following median implied multiples for the selected groups of companies, as
compared to the implied multiples for MMC Networks and AMCC:

<TABLE>
<CAPTION>
Aggregate Value/Revenue
Multiples Price/Earnings Multiples
----------------------------- -----------------------------
Latest Estimated Estimated Latest Estimated Estimated
12 months 2000 2001 12 months 2000 2001
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WAN/LAN Access Semiconductor Companies.. 74.6x 35.6x 21.7x 334.8x 235.2x 110.9x
Diversified Semiconductor Companies..... 8.1x 7.1x 5.6x 53.7x 41.9x 35.4x
Wireless Semiconductor Companies........ 12.8x 11.5x 8.5x 52.1x 51.4x 39.3x
AMCC.................................... 118.4x 78.9x 47.4x 334.8x 221.6x 151.8x
MMC Networks............................ 44.7x 37.3x 20.4x 531.8x 440.9x 110.9x
</TABLE>

Exchange Ratio Analysis. Credit Suisse First Boston reviewed the ratio of
the closing price of MMC Networks common stock divided by the closing price of
AMCC common stock on August 25, 2000, referred to as the current market, and
the average of this ratio computed over various periods ended August 25, 2000.
Credit Suisse First Boston then computed the fully diluted ownership of MMC
Networks' stockholders in the combined company implied by the current market
and by the average of the ratios over these various periods. This analysis
indicated the following:

<TABLE>
<CAPTION>
Implied
MMC Networks'
Stockholders
Average Fully Diluted
Exchange Ratio Ownership
Period Prior to August 25, 2000 Over Period Percentage
------------------------------- -------------- -------------
<S> <C> <C>
Current market................................ 0.4150x 10.0%
10 trading days average....................... 0.4367x 10.5%
30 trading days average....................... 0.3773x 9.2%
60 trading days average....................... 0.4231x 10.2%
90 trading days average....................... 0.3730x 9.1%
180 trading days average...................... 0.3751x 9.1%
Average since November 1, 1999................ 0.3938x 9.6%
</TABLE>

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<PAGE>

Credit Suisse First Boston noted that the pro forma fully diluted ownership
of MMC Networks' stockholders in the combined company implied by the exchange
ratio in the merger was 14.5%.

Premiums Paid Analysis. Credit Suisse First Boston analyzed the purchase
prices and implied premiums paid in the following five publicly announced
transactions involving companies in the semiconductor industry:

<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
. PMC-Sierra, Inc. . Quantum Effect Devices, Inc.
. Conexant Systems, Inc. . Maker Communications, Inc.
. Texas Instruments Incorporated . Burr-Brown Corporation
. Texas Instruments Incorporated . Unitrode Corporation
. Intel Corporation . Level One Communications, Inc.
</TABLE>

Credit Suisse First Boston focused in particular on the transaction
involving PMC-Sierra, Inc. and Quantum Effect Devices, Inc., or QED, and on the
transaction involving Conexant Systems, Inc. and Maker Communications, Inc.
Credit Suisse First Boston also reviewed the purchase prices and implied
premiums paid in 199 stock-for-stock transactions effected since April 30, 1987
and 88 stock-for-stock transactions with a transaction value in excess of $500
million effected since July 5, 1994. Credit Suisse First Boston then compared
the median implied premiums paid in the selected transactions with the premium
implied in the merger based on the exchange ratio.

For each transaction or group of transactions, the following table presents
the premium implied by the exchange ratio provided for in each transaction to
the ratio of the stock prices for the acquirors and targets in the transactions
one trading day prior to public announcement of the transaction and the average
ratio of the stock prices for the acquirors and targets in the transactions
over various periods prior to public announcement of the transaction:

<TABLE>
<CAPTION>
Premium
Represented by
Exchange Ratio Premium Exchange Ratio
----------------------------------------------------------------- in the Merger
199 Over Average
Precedent 88 Precedent Ratio of
Other Stock-for- Stock-for- MMC Networks
Period Prior to Selected Stock Stock Common Stock
Public Announcement PMC-Sierra/ Transactions Transactions Transactions to AMCC Common
of Transaction QED Conexant/Maker - Mean - Median - Median Stock
------------------- ----------- -------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
1 trading day prior..... 25.0% 84.2% 60.0% 27.7% 28.4% 49.2%
10 trading days
average................ 14.1% 76.5% 53.9% 32.7% 35.5% 41.7%
30 trading days
average................ 30.1% 59.3% 50.7% 34.6% 38.7% 64.1%
60 trading days
average................ 17.6% 31.9% 51.6% 33.2% 37.8% 46.3%
90 trading days
average................ 8.8% 11.1% 59.4% 28.3% 31.1% 66.0%
Average of periods...... 15.5% 52.6% 55.1% 26.1% 34.3% 52.8%
</TABLE>

Contribution Analysis. Credit Suisse First Boston computed the relative
contributions of MMC Networks and AMCC to the estimated revenue, gross profit,
operating income and net income of the combined company for calendar years 2000
and 2001, excluding goodwill, potential synergies and potential one-time
charges, based on research analysts' estimates. Credit Suisse First Boston then
computed the fully diluted ownership of

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<PAGE>

MMC Networks' stockholders in the combined company implied by MMC Networks'
relative contribution as well as the resulting implied exchange ratio. This
analysis indicated the following:

<TABLE>
<CAPTION>
Implied
MMC Networks'
Stockholders
Fully Diluted Implied
Ownership Exchange
Operational Metric Percentage Ratio
------------------ ------------- --------
<S> <C> <C>
Revenue
Estimated Calendar Year 2000........................ 18.9% 0.8432x
Estimated Calendar Year 2001........................ 20.3% 0.9231x

Gross Profit
Estimated Calendar Year 2000........................ 18.1% 0.8052x
Estimated Calendar Year 2001........................ 19.3% 0.8671x

Operating Income
Estimated Calendar Year 2000........................ 4.4% 0.1807x
Estimated Calendar Year 2001........................ 13.5% 0.5740x

Net Income
Estimated Calendar Year 2000........................ 5.6% 0.2286x
Estimated Calendar Year 2001........................ 13.5% 0.5712x
</TABLE>

Credit Suisse First Boston noted that the pro forma fully diluted ownership
of MMC Networks' stockholders in the combined company implied by the exchange
ratio in the merger was 14.5%.

Precedent Transactions Analysis. Credit Suisse First Boston analyzed the
purchase prices and implied transaction multiples in the following 13 publicly
announced transactions involving companies in the communications semiconductor
industry:

<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
. PMC Sierra, Inc. .Quantum Effect Devices, Inc.
. Conexant Systems, Inc. .Maker Communications, Inc.
. Texas Instruments Incorporated .Burr-Brown Corporation
. Intel Corporation .DSP Communications, Inc.
. Texas Instruments Incorporated .Unitrode Corporation
. Koninklijke Phillips Electronics NV .VLSI Technology, Inc.
. Intel Corporation .Level One Communications, Inc.
. LSI Logic Corporation .SEEQ Technology Incorporated
. Bain Capital Inc. .Integrated Circuit Systems, Inc.
. Texas Instruments Incorporated .Amati Communications Corporation
. National Semiconductor Corporation .Cyrix Corporation
. Intel Corporation .Chips and Technologies, Inc.
. TPG Partners II, L.P. .Zilog, Inc.
</TABLE>

Credit Suisse First Boston focused in particular on the transaction involving
PMC-Sierra, Inc. and Quantum Effect Devices, Inc., or QED, and on the
transaction involving Conexant Systems, Inc. and Maker Communications, Inc.
Credit Suisse First Boston reviewed fully diluted aggregate values in the
selected transactions as a multiple of next 12 months revenue and fully diluted
equity values in the selected transactions as a multiple of next 12 months net
income. All multiples were based on financial information available at the time
of the relevant transaction. Estimated financial data for MMC Networks, AMCC
and the selected transactions were based on research analysts' estimates.
Credit Suisse First Boston then compared the results of

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<PAGE>

this analysis to corresponding data for MMC Networks based on the exchange
ratio in the merger and the closing price of AMCC common stock on August 25,
2000. This analysis indicated the following:

<TABLE>
<CAPTION>
Aggregate Value as Equity Value as
Multiple of Next Multiple of Next
12 Months Revenue 12 Months Net Income
------------------ --------------------
<S> <C> <C>
MMC Networks--Merger................ 39.8x 257.1x
PMC-Sierra/QED...................... 25.4x 294.8x
Conexant/Maker ..................... 43.2x 261.7x
Other Selected Transactions--Mean... 5.9x 36.2x
</TABLE>

Illustrative Share Price Impact. Credit Suisse First Boston computed the
implied value per share of MMC Networks common stock on both a stand-alone
basis and pro forma for the merger. In this analysis, Credit Suisse First
Boston utilized estimated calendar year 2001 earnings per share for MMC
Networks on a stand-alone basis and for the combined company on a pro forma
basis and applied a range of estimated calendar year 2001 earnings multiples,
with particular focus on the earnings multiples implied by the closing price
per share of MMC Networks common stock and AMCC common stock on August 25,
2000. This analysis was performed based on research analysts' estimates. This
analysis indicated the following:

<TABLE>
<CAPTION>
Implied Value Per Share
of MMC Networks
Common Stock
-----------------------
<S> <C>
MMC Networks--Stand-Alone........................ $78.25-$107.16
MMC Networks--Pro Forma.......................... $84.22-$115.33
</TABLE>

Pro Forma Earnings Impact Analysis. Credit Suisse First Boston analyzed the
potential pro forma effect of the merger on AMCC's estimated earnings per share
for calendar year 2001, excluding goodwill, potential synergies and potential
one-time charges, based on research analysts' estimates. This analysis
indicated that the merger could be $0.01 per share dilutive to, or result in a
1.2% decrease in, AMCC's estimated earnings per share in calendar year 2001.
The actual results achieved by the combined company may vary from projected
results and the variations may be material.

Other Factors. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:

. the historical stock prices and trading characteristics of MMC Networks
common stock and AMCC common stock; and

. the percentage increases in the market prices of MMC Networks common
stock and AMCC common stock, the common stock of two selected companies
in the communications semiconductor industry and the Philadelphia Stock
Exchange Semiconductor Index and NASDAQ Composite Index over various
periods.

Miscellaneous. MMC Networks has agreed to pay Credit Suisse First Boston
upon completion of the merger a fee based on the value of the merger. MMC
Networks also has agreed to reimburse Credit Suisse First Boston for its
reasonable out-of-pocket expenses, including reasonable fees and expenses of
legal counsel and any other advisor retained by Credit Suisse First Boston, and
to indemnify Credit Suisse First Boston and related parties against
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.

Credit Suisse First Boston and its affiliates have in the past provided, and
are currently providing, financial services to AMCC unrelated to the proposed
merger, for which services Credit Suisse First Boston and its affiliates have
received and will receive compensation. In the ordinary course of business,
Credit Suisse First Boston and its affiliates may actively trade the debt and
equity securities of MMC Networks and AMCC for their own accounts and for the
accounts of customers and, accordingly, may at any time hold long or short
positions in those securities.

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INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED AGREEMENTS

Interests of Certain Persons in the Merger

In consideration of the recommendation of the MMC Networks board of
directors with respect to the merger, you should be aware that certain members
of the MMC Networks board of directors and certain MMC Networks executive
officers have interests in the merger that may be deemed to be in addition to
those of the MMC Networks stockholders generally.

Effective upon the consummation of the merger, Douglas C. Spreng, the
current President and Chief Executive Officer of MMC Networks, will become
President and Chief Executive Officer of the surviving MMC Networks. Under the
terms of his employment agreement, Mr. Spreng will receive an annual base
salary of $350,000 and will be eligible to receive annual cash bonuses of up to
$122,500, with the actual amount of such bonus being determined based upon the
surviving MMC Networks' performance and Mr. Spreng's performance, as assessed
and approved by the Compensation Committee of the AMCC board of directors. In
addition to his annual salary and bonus, Mr. Spreng will receive options to
purchase up to 500,000 shares of AMCC common stock, of which options to
purchase 125,000 shares will vest on the one-year anniversary of Mr. Spreng's
employment with the surviving MMC Networks and the remaining options to
purchase 375,000 shares will vest ratably on a monthly basis over the following
36 months. Mr. Spreng's employment with the surviving MMC Networks will
initially be for a one-year term. If Mr. Spreng's employment is terminated
without cause or constructively terminated, depending on the date of
termination, he will be entitled to receive his then current base salary for up
to two years.

Effective upon the consummation of the merger, Alexander Joffe, the current
Vice President and Chief Technology Officer of MMC Networks, will become Senior
Vice President and Chief Technology Officer of the surviving MMC Networks.
Under the terms of this employment agreement, Mr. Joffe will receive an annual
base salary of $200,000 and will be eligible to receive annual cash bonuses of
up to $60,000, with the actual amount of such bonus being determined based upon
the surviving MMC Networks' performance and Mr. Joffe's performance, as
assessed and approved by the Compensation Committee of the AMCC board of
directors. In addition to his annual salary, Mr. Joffe will receive options to
purchase up to 200,000 shares of AMCC common stock, of which options to
purchase 50,000 shares will vest on the one-year anniversary of Mr. Joffe's
employment with the surviving MMC Networks and the remaining options to
purchase 150,000 shares will vest ratably on a monthly basis over the following
36 months. Mr. Joffe's employment with the surviving MMC Networks will
initially be for a one-year term. If Mr. Joffe's employment is terminated
without cause or constructively terminated, depending on the date of
termination, he will be entitled to receive his then current base salary for up
to one year.

Effective upon the consummation of the merger, Frederick J. Berkowitz, the
current Vice President, Engineering of MMC Networks, will become Senior Vice
President, Engineering of the surviving MMC Networks. Under the terms of this
employment agreement, Mr. Berkowitz will receive an annual base salary of
$200,000 and will be eligible to receive annual cash bonuses of up to $60,000,
with the actual amount of such bonus being determined based upon the surviving
MMC Networks' performance and Mr. Berkowitz's performance, as assessed and
approved by the Compensation Committee of the AMCC board of directors. In
addition to his annual salary, Mr. Berkowitz will receive options to purchase
up to 50,000 shares of AMCC common stock, of which options to purchase 12,500
shares will vest on the one-year anniversary of Mr. Berkowitz's employment with
the surviving MMC Networks and the remaining options to purchase 37,500 shares
will vest ratably on a monthly basis over the following 36 months. Mr.
Berkowitz's employment with the surviving MMC Networks will initially be for a
one-year term. If Mr. Berkowitz's employment is terminated without cause or
constructively terminated, depending on the date of termination, he will be
entitled to receive his then current base salary for up to one year.

In addition, as a result of the merger, the vesting of the options held by
the members of the MMC Networks board of directors and Richard C. Yonker, Vice
President, Finance and Chief Executive Officer of MMC Networks, will be
accelerated by 12 months.

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The MMC Networks board of directors was aware of these interests and
considered them in approving the merger agreement, the merger and the related
transactions.

Voting Agreement

Amos Wilnai, Alexander Joffe, Douglas C. Spreng, John G. Adler, Irwin
Federman, Andrew S. Rappaport, Geoffrey Y. Yang, Richard C. Yonker and
Institutional Venture Partners VI, L.P., each an MMC Networks
stockholder, beneficially own in the aggregate shares of MMC Networks common
stock representing approximately 15% of the outstanding MMC Networks common
stock as of the date of this prospectus/proxy statement, and in connection with
the merger each has entered into a voting agreement with AMCC. Under the terms
of the voting agreement, each of these MMC Networks stockholders has agreed to
vote all of his or its shares of MMC Networks common stock to adopt the merger
agreement and in favor of the merger. The voting agreement terminates upon the
earlier to occur of the consummation of the merger or the termination of the
merger agreement.

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OTHER MATTERS RELATED TO THE MERGER

Material Federal Income Tax Consequences

The following discussion summarizes the material U.S. federal income tax
consequences of the merger that are expected to apply generally to MMC Networks
stockholders upon an exchange of their MMC Networks common stock for AMCC
common stock in the merger. This summary is based upon current provisions of
the Internal Revenue Code, existing Treasury regulations and current
administrative rulings and court decisions, all of which are subject to change.
Any change, which may or may not be retroactive, could alter the tax
consequences to AMCC, MMC Networks or the MMC Networks stockholders as
described in this summary. No attempt has been made to comment on all federal
income tax consequences of the merger that may be relevant to particular
holders, including holders:

. who do not hold their shares as capital assets;

. who are subject to special tax rules such as financial institutions,
dealers in securities, foreign persons, mutual funds, insurance companies
or tax-exempt entities;

. who are subject to the alternative minimum tax provisions of the Internal
Revenue Code;

. who acquired their shares in connection with stock option or stock
purchase plans or in other compensatory transactions;

. who hold their shares as a hedge or as part of a hedging, straddle or
other risk reduction strategy; or

. whose shares are qualified small business stock for purposes of Sections
1202 and 1045 of the Internal Revenue Code.

In addition, the following discussion does not address the tax consequences
of the merger under state, local or foreign tax laws. Furthermore, the
following discussion does not address (i) the tax consequences of transactions
effectuated before, after or at the same time as the merger, whether or not
they are in connection with the merger, including, without limitation,
transactions in which shares of MMC Networks common stock are acquired or
shares of AMCC common stock are disposed of, (ii) the tax consequences to
holders of options issued by MMC Networks which are assumed, exercised or
converted, as the case may be, in connection with the merger or (iii) the tax
consequences of the receipt of shares of AMCC common stock other than in
exchange for shares of MMC Networks common stock.

Accordingly, holders of MMC Networks common stock are urged to consult their
own tax advisers regarding the U.S. federal income tax consequences of the
merger in light of their personal circumstances and the consequences under
state, local and foreign tax laws.

As a condition to the consummation of the merger, Cooley Godward llp and
Wilson Sonsini Goodrich & Rosati, Professional Corporation must render tax
opinions that the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code (a "Reorganization"). The tax
opinions are subject to certain assumptions and qualifications and are based in
part on the truth and accuracy of certain representations of AMCC, Mercury
Acquisition Corp. and MMC Networks. No ruling from the Internal Revenue Service
has been or will be requested in connection with the merger, and MMC Networks
stockholders should be aware that the tax opinions discussed in this section
are not binding on the IRS, the IRS could adopt a contrary position, and a
contrary position could be sustained by a court.

Subject to the assumptions and limitations discussed above, it is the
opinion of Cooley Godward llp, tax counsel to AMCC, and Wilson Sonsini Goodrich
& Rosati, Professional Corporation, tax counsel to MMC Networks, that:

. the merger will be treated for federal income tax purposes as a
Reorganization;

. AMCC, Mercury Acquisition Corp. and MMC Networks will not recognize any
gain or loss solely as a result of the merger;

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<PAGE>

. MMC Networks stockholders will not recognize any gain or loss upon the
receipt of solely AMCC common stock for their MMC Networks common stock,
other than with respect to cash received in lieu of fractional shares of
AMCC common stock;

. the aggregate basis of the shares of AMCC common stock received by an MMC
Networks stockholder in the merger (including any fractional share deemed
received) will be the same as the aggregate basis of the shares of MMC
Networks common stock surrendered in exchange therefor;

. the holding period of the shares of AMCC common stock received by an MMC
Networks stockholder in the merger will include the holding period of the
shares of MMC Networks common stock surrendered in exchange therefor; and

. an MMC Networks stockholder who receives cash in lieu of a fractional
share will recognize gain or loss equal to the difference, if any,
between such stockholder's basis in the fractional share and the amount
of cash received. Such gain or loss will be a capital gain or loss.

Backup Withholding. With respect to a cash payment received by an MMC
Networks stockholder in lieu of a fractional share of AMCC common stock, a
noncorporate MMC Networks stockholder may be subject to backup withholding at a
rate of 31%. However, backup withholding will not apply to a stockholder who
either (i) furnishes a correct taxpayer identification number and certifies
that he or she is not subject to backup withholding by completing the
substitute Form W-9 that will be included as part of the letter of transmittal,
or (ii) otherwise proves to AMCC and its exchange agent that the stockholder is
exempt from backup withholding.

Reporting Requirements. Each MMC Networks stockholder that receives AMCC
common stock in the merger will be required to file a statement with his, her
or its federal income tax return setting forth his, her or its basis in the MMC
Networks common stock surrendered and the fair market value of the AMCC common
stock and cash, if any, received in the merger, and to retain permanent records
of these facts relating to the merger.

Consequences of IRS Challenge. A successful challenge by the IRS to the
Reorganization status of the merger would result in the MMC Networks
stockholders recognizing taxable gain or loss with respect to each share of MMC
Networks common stock surrendered equal to the difference between each
stockholder's basis in such share and the fair market value, as of the
effective time of the merger, of the AMCC common stock received in exchange
therefor. In such event, an MMC Networks stockholder's aggregate basis in the
AMCC common stock so received would equal its fair market value, and the
holding period of such stock would begin the day after the date the merger
becomes effective.

Restrictions on Resales of AMCC Common Stock by Affiliates of MMC Networks

The shares of AMCC common stock to be received by the MMC Networks
stockholders in connection with the merger have been registered under the
Securities Act and, except as set forth in this paragraph, may be traded
without restriction. The shares of AMCC common stock to be issued in connection
with the merger and received by persons who may be deemed to be "affiliates"
(as that term is defined in Rule 144 under the Securities Act) of MMC Networks
prior to the merger may be resold by them only in transactions permitted by the
resale provisions of Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act or pursuant to existing registration rights.

Accounting Treatment

AMCC will account for the merger using the purchase method of accounting,
which means that the assets and liabilities of MMC Networks, including
intangible assets, will be recorded at their fair value and the results of
operations of MMC Networks, will be included in AMCC's results from the date of
acquisition.

Appraisal Rights

The holders of MMC Networks common stock will not be entitled to appraisal
rights in the merger under Delaware law.

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<PAGE>

AMCC BUSINESS

AMCC designs, develops, manufactures and markets high-performance, high-
bandwidth silicon solutions for the world's optical networks. AMCC offers
integrated circuit ("IC") products that enable the transport of voice and data
over fiber optic networks by utilizing a combination of high-frequency analog,
mixed-signal and digital design expertise coupled with system-level knowledge
and multiple silicon process technologies. AMCC's customers include leading
communications equipment manufacturers such as Alcatel, Ciena, Cisco, JDS
Uniphase, Lucent, Marconi Communications and Nortel as well as emerging
communications systems providers such as Juniper Networks and Sycamore
Networks.

AMCC's objective is to be the premier supplier of high-bandwidth silicon ICs
for the world's optical networks. AMCC's strategies for achieving this
objective include:

. Focusing on high-growth, fiber optic-based network markets;

. Providing complete IC solutions to its customers and aggressively
integrating product functionality; and

. Leveraging its expertise in multiple silicon-process technologies to
provide cost-effective, optimized solutions.

AMCC's products target the Synchronous Optical Network ("SONET")/Synchronous
Digital Hierarchy ("SDH"), Asynchronous Transfer Mode ("ATM"), Gigabit Ethernet
and Fibre Channel semiconductor markets. In addition, AMCC recently introduced
silicon ICs targeted for Dense Wave Division Mutliplexing ("DWDM") systems.
AMCC provides its customers with complete silicon IC solutions ranging from
physical media dependent devices such as laser drivers and physical layer
products such as transceivers to overhead processor products such as framers
and mappers. AMCC's products span data rates from OC-3, or 155 megabits per
second, to OC-192, or 10 gigabits per second. AMCC also supplies silicon ICs
for the automated test equipment ("ATE") high-speed computing and military
markets.

AMCC manufactures a significant portion of its products at its silicon wafer
fabrication facility in San Diego, California. AMCC also uses outside
semiconductor wafer fabrication facilities for the production of products
designed on CMOS and silicon germanium ("SiGe") BiCMOS processes.

Industry Background

The Communications Industry

Communications technology has evolved from simple analog voice signals
transmitted over networks of copper telephone lines to complex analog and
digital voice and data transmitted over hybrid networks of media such as
copper, coaxial and fiber optic cables, as well as wireless. This evolution has
been driven by enormous increases in the number of users and the complexity of
the data types transmitted over networks. In addition, the substantial growth
in the Internet, the World Wide Web, cellular and facsimile communications; the
emergence of new applications such as video conferencing; and the increase in
demand for remote network access and higher speed, higher bandwidth
communication between local area networks and local and wide area networks have
increased network bandwidth requirements. This increase has made many systems
architectures inadequate.

In the wide area network ("WAN") market, service providers and equipment
suppliers in particular were impacted by the inadequacy of systems
architectures caused by the legacy public network infrastructure. This
infrastructure was designed to optimize voice communications and is not well
suited for the high-throughput requirements of data transmission that is
transmitted in "packet bursts." The volume and complexity of this data led to
the increasing deployment of fiber optic technology for use in WANs. This
technology provides substantially greater transmission capacity and is less
error prone and easier to maintain than copper networks. The SONET standard in
North America and Japan, and the SDH standard in the rest of the world, became
the standards for the transmission of signals over optical fiber. The SONET/SDH
standards facilitate high data

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integrity and improved network reliability, while reducing maintenance and
other operation costs by standardizing interoperability among equipment from
different vendors. With data and video traffic being added in abundance to
voice traffic, a transmission protocol complementary to SONET/SDH, ATM, emerged
to optimize bandwidth utilization. Today's carriers and service providers are
seeing exponential increases in data traffic and only very modest increases in
voice traffic making data the dominant traffic over fiber optic networks today.
The explosive bandwidth growth in today's data centric networks has demanded
the adoption of more advanced optical networking technologies such as DWDM.
DWDM is the optical multiplexing of different wavelengths of light down a
single fiber. Each wavelength is the equivalent of an independent optical
channel. DWDM greatly increases the capacity of installed fiber. Complementing
DWDM transmission capabilities are emerging optical add drop multiplexers and
cross connects which can more efficiently switch large optical datapaths
through the network. In addition, new protocols such as multi-protocol level
switching ("MPLS") have emerged which are better suited for data centric
traffic while providing for the low latency and quality of service needs of
voice and video traffic. SONET/SDH has also evolved to handle these new
protocols with packet over SONET ("POS") capabilities.

In the local area network ("LAN") market, similar bandwidth issues have
arisen as the greater computational power of PCs have enabled powerful network
applications such as video conferencing and Web communications. However, these
new applications and the increasing number of computers on networks have
significantly increased the volume of data traffic and, as a result, the
network has now become the bottleneck in the delivery of integrated video,
audio and data. Ethernet is currently the most widespread LAN standard,
operating at 10 to 100 megabits per second. However, LAN backbones are rapidly
being upgraded to Gigabit Ethernet and ATM standards in order to increase
available bandwidth. These network protocols, which enable expanded bandwidth
in excess of one gigabit per second, are emerging as the new standards for LAN
backbones. Future LAN backbones will have yet more bandwidth capability as 10
Gigabit Ethernet is deployed. In addition, the Fibre Channel standard, which
also facilitates data transmission at rates exceeding one gigabit per second,
has emerged as a practical, cost-effective and highly reliable method for
achieving high-speed, high-volume data transfer among workstations, mainframes,
data storage devices and other peripherals. Fibre Channel and Gigabit Ethernet
are complementary and compatible transmission standards, and the emergence of
Gigabit Ethernet has accelerated the growth of the Fibre Channel standard.

The Communications IC Opportunity

In order to address the growing requirements of communications networks,
equipment suppliers are developing and introducing increasingly sophisticated
systems at a rapid rate. To achieve the performance and functionality required
by such systems, these OEMs must utilize increasingly complex ICs, which now
account for a larger portion of the value-added proprietary content of such
systems. As a result of the rapid pace of new product introductions, the
proliferation of standards to be accommodated and the difficulty of designing
and producing requisite ICs, equipment suppliers increasingly outsource these
ICs to semiconductor firms with specialized expertise. These trends have
created a significant opportunity for IC suppliers that can design cost-
effective solutions for the transmission of high-frequency data. IC suppliers
must utilize a variety of skills and technologies to satisfy the requirements
of communications equipment OEMs. These OEMs require IC suppliers that possess
system-level expertise and can quickly bring to market high-performance, highly
reliable, power-efficient ICs. Additionally, these OEMs seek suppliers with
both analog and digital expertise to provide a more complete solution that
enables faster integration into the system design and higher performance. In
particular, WAN OEMs require IC suppliers to provide solutions that minimize
jitter (a measure of the stability and noisiness of a signal), which degrades
transmission quality over distance. LAN products typically have substantially
shorter life cycles than WAN products, increased cost pressures, and higher
volumes.

In the high-performance communication IC market, a number of process
technologies are used to produce ICs. Traditionally, designers have relied on
silicon-based manufacturing process technologies for the development of high-
speed, mixed-signal analog and digital circuits with precision timing. In some
cases, OEMs utilize discrete components or IC solutions based on non-silicon
processes such as gallium arsenide

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("GaAs") to meet the high-frequency requirements of certain communications
products. However, non-silicon processes tend to be more expensive and less
predictable with respect to yields and are less able to ramp to high-volume
production than silicon processes.

AMCC Strategy

AMCC's objective is to be the leading supplier of high-performance, high-
bandwidth silicon IC solutions for the world's optical communications
infrastructure. To achieve this objective, AMCC employs the following
strategies:

Focus on High-Growth Wide Area Network Markets

AMCC targets key high-growth WAN markets, including those for SONET/SDH,
ATM, POS, DWDM and optical modules. AMCC has built substantial competencies
focused on the specific requirements of these markets in the areas of process
technology and mixed-signal design and substantial expertise in systems
architecture and applications support. AMCC believes that the integration of
these capabilities enables it to optimize solutions addressing the high-
bandwidth connectivity requirements of WAN systems OEMs.

Provide Complete System Level IC Solutions to the Customer and Aggressively
Integrate Products Functionality

AMCC's strategy in the WAN market is two-fold; 1) provide fiber-through-
switch silicon solutions; and 2) continue to optimize these solutions through
integration. To this end, in June 2000, AMCC acquired YuniNetworks, Inc.
providing it with expertise in the development of terabit switching solutions.
AMCC believes the YuniNetworks acquisition, together with its established
competence in the high-speed mixed-signal and high-integration digital
development, will allow it to offer comprehensive solutions for communications
equipment OEMs from the fiber through the switch. These integrated solutions
provide AMCC's customers with guaranteed interoperability, pre-designed
subsystems, better-cost economics, and system-level expertise. The result is
faster time-to-market, better performance and lower cost. To continue these
customer benefits in future generations of products, AMCC is pursuing an
aggressive integration strategy to provide greater functionality in fewer ICs.

Leverage AMCC's Expertise in Multiple Silicon Process Technologies to Provide
Cost Effective Optimized Solutions

AMCC is dedicated to utilizing the best silicon process technology available
to offer solutions optimized for specific applications and customer
requirements. AMCC believes its current bipolar and BiCMOS processes,
complemented by advanced CMOS and SiGe BiCMOS processes from external
foundries, provide it with the flexibility to design and manufacture products
that are tailored to an application's individual needs. Through this flexible
approach, AMCC is better able to transition products over time to new
manufacturing processes as product performance requirements and process
technologies evolve.

Products and Customers

AMCC's current IC products primarily address the needs of the fiber optic
based WAN and LAN markets. AMCC's products for these markets are designed to
respond to the growing demand for high-speed networking applications for
established and emerging WAN standards such as SONET/SDH, POS, ATM, and MPLS,
and LAN standards, such as Gigabit Ethernet, ATM and Fibre Channel. AMCC also
markets and sell IC products that address the needs of the ATE, broadcast HDTV,
high-speed computing and military markets. AMCC utilizes its high-performance,
high-density design expertise and systems knowledge, together with its internal
bipolar and BiCMOS processes and CMOS and SiGe processes from outside
foundries, to design and manufacture products that are tailored to its
customers' needs.

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Transition from ASICs to ASSPs

Application specific integrated circuits ("ASICs") are custom products that
are designed by or for only one customer, and can be sold only to that one
customer. Application specific standard products ("ASSPs"), on the other hand,
are standardized products, that are designed for, and can be used by, several
customers. ASSPs generally can be designed and brought to market in less time.
Accordingly, companies that manufacture networking systems have been using
fewer ASICs and more ASSPs. Most of AMCC's products are ASSPs, and management
believes that the trend towards greater usage of ASSPs in communication
network systems will continue.

AMCC has several types of communications IC products categorized by the type
of signals they utilize. These categories are:

Analog Layer: AMCC's analog layer ICs typically work in conjunction with
the lasers or photo diodes that provide the electrical-to-optical and optical-
to-electrical signal conversions. These ICs include various amplifiers that
take very weak electrical signals (e.g. a few millivolts) and increase them
for use at the higher digital signal level (e.g. hundreds of millivolts).
AMCC's analog layer products transmit signals at rates ranging from 1 to 10
Gbps.

Mixed Signal Layer: AMCC's mixed signal ICs transmit and receive data to
and from the analog layer in a very high-speed serial format (up to 10 Gbps)
and reduce overall system "noise." This low noise capability permits the
transmission of data over greater distances with fewer errors. AMCC's mixed
signal ICs also convert data from the analog layer to the digital layer and
vice versa.

Digital Layer: AMCC's digital layer ICs transmit and receive data to and
from the mixed signal layer in a parallel format and are used predominately in
systems such as very high-speed transmission equipment, add-drop multiplexers,
digital and optical cross-connects, edge and core routers and DWDM. After
transmitting and receiving the data, these ICs then perform a number of
additional functions, including framing, terminating the overhead, performance
monitoring, forward error correction and mapping the data payload to/from the
transmission format. These ICs then send the data either directly to a switch
fabric product which routes the data to its destination, or to a network
processor, which further processes the data prior to forwarding it to a switch
fabric product.

AMCC uses its design methodologies to develop a platform product and
leverage that product into multiple derivative products that are highly
optimized for specific applications. For example, AMCC recently developed the
S3057, a SONET/SDH OC-48 transceiver, as a platform for three products in its
S3000 family. By reusing significant portions of the platform design, AMCC can
reduce development time, risk and costs. This is especially important in
analog intensive circuitry such as very low jitter phase locked loops
("PLLs").

The following table summarizes the product categories that AMCC offers in
the communication markets:

<TABLE>
<CAPTION>
Product Category
---------------------
Mixed
Digital Signal Analog
------- ------ ------
<S> <C> <C> <C>
Market:
WAN-SONET/SDH/ATM:
OC-3 (155 megabits per second)..................... X X
OC-12 (622 megabits per second).................... X X
OC-48 (2.5 gigabits per second).................... X X X
OC-192 (10 gigabits per second).................... X X X
LAN:
Fibre Channel...................................... X X
Gigabit Ethernet................................... X X
</TABLE>
--------
X = AMCC currently produces or has sampled products in this market.

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WAN Products

WAN Analog Products: During fiscal year 2000, AMCC introduced its first
generation of analog PMD products for the OC-192 market. The S3090
transimpedence amplifier and S3096 post amplifier were developed in a SiGe
process.

WAN Mixed Signal Products: AMCC introduced its first generation of SONET OC-
12 products in 1993. AMCC has since developed four additional generations of
these products, each integrating greater functionality on each chip while
improving jitter performance. During fiscal year 2000, AMCC has introduced
several OC-48 integrated physical layer transceiver devices and OC-192
transmitter and receiver chipsets. The S3067 operating off a single +3.3V
supply offered the industry's first multi-rate forward error correction capable
device with Clock Synthesis Unit, mux and demux functions. Additionally, AMCC
introduced the Yukon device, the first OC-48 framer/mapper chip with a fully
integrated physical layer including clock and data recovery.

WAN Digital Layer Products: During fiscal year 2000, AMCC introduced many
digital layer products for the OC-12, OC-48, and OC-192 markets. The Missouri
device is the first commercially available OC-48 pointer processor. The Rhine
device supports 16 physical OC-3 channels, 4 OC-12 channels or a single OC-48
channel. The Indus device performs SONET framing and muxing at OC-192. All of
these devices can be utilized with AMCC's mixed signal and analog layer
products to provide a comprehensive solution set.

Current customers for AMCC's WAN products include Alcatel, Cisco, Ciena,
ECI, Hitachi, JDS Uniphase, Juniper, Lucent, Marconi, Nortel, Sycamore and
Tellabs.

LAN Products

LAN Analog Products: Over the past fiscal year, AMCC has focused on
producing 2.5Gbps laser drivers and amplifiers for Verticle Cavity Surface
Emitting Lasar based modules. These modules will be deployed in very short
reach applications (less than 300 meters) which include optical backplanes for
next-generation core switches, routers and DWDM systems.

LAN Mixed Signal Products: AMCC introduced its first physical layer products
in the gigabit ethernet and fibre channel markets in 1995. Today the S2060 is
AMCC's most popular low-cost, low-power, gigabit ethernet transceiver.

Current customers for AMCC's products in the LAN market include 3Com,
Agilent, Bay Networks (acquired by Nortel), Cabletron Systems, Cisco, Compaq,
FORE Systems (acquired by Marconi), Lucent, Newbridge Networks (acquired by
Alcatel) and Sun Microsystems.

ATE

AMCC is not currently developing new products for the ATE market. AMCC
continues to manufacture and sell ASIC products to customers such as Hewlett-
Packard, LTX, Schlumberger, Teradyne and Texas Instruments.

High-Speed Computing Products

AMCC offers a PCI product line that addresses the high-speed computing
market. However, AMCC is not currently developing new products for this market.
The S5933 is a standard master/slave PCI controller chip. The S5920 is a
standard target-only PCI controller chip. These devices are supported with
comprehensive development kits and third-party driver software. AMCC sells
these products to a very large and diverse customer base. Current customers of
AMCC's PCI products include Cisco Systems, Ericsson, IBM, Nortel, Sagem.

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Military

AMCC is not currently developing new products for military applications.
AMCC continues to manufacture and sell ASIC products for military applications
to customers such as Northrop Grumman and Raytheon Systems.

Technology

AMCC utilizes its technological and design expertise to solve the problems
of high-speed analog, digital and mixed-signal circuit designs for the world's
optical networks. AMCC's competencies include the design and manufacture of
high-performance analog, digital and mixed signal ICs, in-depth knowledge of
the architecture and functioning of high-bandwidth fiber optic communications
systems, proven ASIC design methodologies and libraries, and high-performance
semiconductor manufacturing and packaging expertise.

Design of High-Performance Analog, Digital and Mixed-Signal ICs

AMCC has developed multiple generations of products that integrate both
analog and digital elements on the same chip, while balancing the difficult
trade-offs of speed, power and timing inherent in high-speed applications. AMCC
was one of the first companies to embed analog PLLs in bipolar chips with
digital logic for high-speed data transmission and receiver applications. Since
the introduction of its first on-chip clock recovery and clock synthesis
products in 1993 (the S3005/S3006 chip set), AMCC has refined these key
circuits and have successfully integrated multiple analog functions and
multiple channels on the same chip. The mixing of digital and analog signals
poses difficult challenges for IC designers, particularly at high frequencies.
AMCC has acquired significant expertise in mixed-signal IC designs through the
development of multiple generations of products. Through the acquisition of
Cimaron Communications, AMCC added VLSI digital design and systems expertise.
AMCC will continue to apply these competencies in the development of
increasingly complex digital layer products.

Systems and Architecture Expertise

AMCC believes that its systems architects, design engineers and technical
marketing and applications engineers have a thorough understanding of the fiber
optic communications systems for which AMCC designs and builds ASSPs. AMCC
substantially expanded this expertise into higher layers of the communication
system with the acquisition of Cimaron. Using this systems expertise, AMCC
developed semiconductor devices to meet OEMs' high-bandwidth systems
requirements. By understanding the systems into which its products are
designed, AMCC believes that it is better able to anticipate and develop
optimal solutions for the various cost, power and performance trade-offs faced
by its customers. AMCC believes that its systems knowledge also enables it to
develop more comprehensive, interoperable solutions. This allows AMCC to
develop boards with multiple products that are a more substantial part of the
customers' system, enabling faster integration into their products.

Process Technology

AMCC utilizes its own internal wafer fabrication facility and have developed
and produced multiple generations of cost-effective, high-performance bipolar
and BiCMOS processes. The proven internal silicon-based process technologies
AMCC uses has not required the highly capital-intensive facilities needed by
certain advanced microprocessor, memory or CMOS ASIC suppliers. In addition,
AMCC has obtained access to advanced CMOS and SiGe BiCMOS processes through
foundry relationships. AMCC believes that through the use of its internal and
external process technologies AMCC is able to provide an optimal mix of cost
and performance for the targeted application.

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Packaging

AMCC has substantial experience in the development and use of plastic and
ceramic packages for high-performance applications. The selection of the
optimal package solution is a vital element of the delivery of high-performance
products and involves balancing cost, size, thermal management and technical
performance. AMCC's products are designed to reduce power dissipation and die
size to enable the use of industry standard packages. AMCC employs a wide
variety of package types and is currently designing products using ball grid
arrays, tape ball grid arrays and multi-chip modules. AMCC's experience with a
variety of packages is one of the factors that enables it to provide optimal
high-performance IC solutions to its customers.

Research and Development

AMCC's research and development expertise and efforts are focused on the
development of high-performance analog, digital and mixed-signal ASSPs for
fiber optic communications applications. AMCC also develops high-performance
libraries and design methodologies that are optimized for these applications.

Product Development

AMCC's product development is focused on building high-performance high-
gate-count digital design expertise and analog-intensive design expertise that
is incorporated into well-documented blocks that can be reused for multiple
products. AMCC has made, and will continue to make significant investments in
advanced CAD tools to leverage its design engineering staff, reduce design
cycle time and increase first-time design correctness. AMCC's product
development is driven by the imperatives of reducing design cycle time,
increasing first-time design correctness, adhering to disciplined, well
documented design processes and continuing to be responsive to customer needs.
AMCC is also developing high-performance packages for its products in
collaboration with its packaging suppliers and its customers.

Process Development

AMCC's process development is focused on enhancing its current bipolar
processes and acquiring or developing new processes optimized for high-
performance digital and mixed-signal communications applications. AMCC's
process engineers are also involved with the selection and management of its
relationships with outside foundries to provide the advanced CMOS and SiGe
BiCMOS processes required for certain of its products. If AMCC fails to improve
its existing process technologies or to obtain access to new process
technologies from external foundries in a timely or affordable manner its
business, financial condition and operating results could be adversely
affected.

AMCC's research and development expenses in fiscal years 1998, 1999 and 2000
were $13.3 million, $22.5 million and $32.8 million, respectively, which were
17.3%, 21.4% and 19.0%, respectively, of revenues for such periods. For the
quarter ended June 30, 2000 research and development expenses were $14.8
million or 20.0% of revenue.

Manufacturing

Wafer Fabrication

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AMCC is exploring alternatives for the further expansion of its
manufacturing capacity that would likely occur after fiscal year 2001,
including:

. entering into strategic relationships to obtain additional capacity;

. building a new wafer fabrication facility; or

. purchasing a wafer fabrication facility.

In addition, AMCC currently utilizes seven outside foundries, AMI
Semiconductor, IBM, Kawasaki Steel LSI Japan, Taiwan Semiconductor
Manufacturing Corporation, United Microelectronics Corporation, Oki Electronics
Corporation and Matsushita Electronics (Panasonic) Corporation for the
production of products designed on CMOS processes, and AMCC is utilizing IBM
for SiGe BiCMOS processes. AMCC does not plan to fabricate its own CMOS wafers.
There are certain risks associated with AMCC's dependence on external foundries
for certain of its products, including reduced control over delivery schedules,
quality assurance, manufacturing yields and costs, the potential lack of
adequate capacity during periods of excess demand, limited warranties on wafers
or products supplied to it, increases in prices and potential misappropriation
of AMCC's intellectual property.

Components and Raw Materials

AMCC purchases all of its "raw" silicon wafers from Wacker Siltronic
Corporation. While most silicon wafers now being supplied to the semiconductor
industry are larger than four inches, AMCC believes that Wacker Siltronic will
continue to supply its needs for the foreseeable future. AMCC also carries a
significant inventory of raw wafers to cushion any interruption in supply. AMCC
purchases its ceramic packages from Kyocera America and NTK Ceramics and its
plastic packaging from Amkor and ASAT.

Assembly and Test

AMCC assembles prototypes and modest production volumes of specific products
in its internal assembly facility in San Diego, California. Most of its
production assembly, however, is performed by multiple assembly subcontractors
located in the Far East, Europe and the United States. Following assembly, the
packaged units are returned to AMCC for burn-in (in some cases), final testing
and marking prior to shipment to customers. From time to time, some testing is
performed by subcontractors.

Sales and Marketing

AMCC sells its products principally through a network of independent
manufacturers' representatives and distributors in specified territories, under
the direction of its direct sales force.

The direct sales force is technically trained and is supported by
applications engineers in the field as well as applications and design
engineers at AMCC's design centers. AMCC believes that this "engineering-
intensive" relationship with its customers results in strong, long-term
customer relationships beneficial to both AMCC and its customers. AMCC augments
this strategic account sales approach with domestic and foreign distributors
that service primarily smaller accounts purchasing ASSPs.

In North America, AMCC's direct sales effort is supported by 18 independent
manufacturers' representatives and one distributor. Internationally, AMCC sells
its products through 11 distributors in Europe and 8 distributors throughout
the rest of the world. During fiscal years 1998, 1999 and 2000, 21%, 20% and
38%, respectively, of net revenues were from Nortel and its contract
manufacturers. During the quarter ended June 30, 2000, 37% of net revenues were
from Nortel and its contract manufacturers. In fiscal years 1998, 1999 and
2000, purchases through Insight Electronics, AMCC's domestic distributor,
accounted for 11%, 13% and 17% of net revenues, respectively. During the
quarter ended June 30, 2000 19% of net revenue were from Insight Electronics.
Additionally, in fiscal year 1999, Raytheon Systems accounted for 16% of net
revenues. No other customer accounted for more than 10% of revenues in any
period. In fiscal years 1998, 1999 and 2000,

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approximately 23%, 24% and 23% of AMCC's revenues were derived from sales to
customers located outside of North America. In the quarter ended June 30, 2000
19% of net revenue were derived from sales to customers located outside North
America.

AMCC's sales headquarters is located in San Diego, California. AMCC
maintains sales offices in Andover, Massachusetts; Raleigh, North Carolina;
Plano, Texas; San Jose, California; Signal Hill, California; Naperville,
Illinois; Manchester, United Kingdom; Munich, Germany; Milan, Italy; Paris,
France; and Tokyo, Japan.

Backlog

AMCC's sales are made primarily pursuant to standard purchase orders for the
delivery of products. Quantities of AMCC's products to be delivered and
delivery schedules are frequently revised to reflect changes in customers'
needs, and customer orders generally can be canceled or rescheduled without
significant penalty to the customer. For these reasons, AMCC's backlog as of
any particular date is not representative of actual sales for any succeeding
period, and it therefore believes that backlog is not a good indicator of
future revenue. AMCC's backlog for products requested to be shipped and non-
recurring engineering services to be completed in the next six months was
$100.0 million on June 30, 2000, compared to $42.0 million on June 30, 1999.

Competition

The semiconductor market, particularly the high-performance semiconductor
market, is highly competitive and subject to rapid technological change, price
erosion and heightened international competition. The communications industry
is becoming intensely competitive due in part to deregulation and heightened
international competition. AMCC's ability to successfully compete in these
markets depends on a number of factors, including: product performance, success
in designing and subcontracting the manufacture of new products that implement
new technologies, product quality, reliability, price, the efficiency of
production, design wins for its IC products, ramp up of production of its
products for particular system manufacturers, end-user acceptance of the system
manufacturers' products, market acceptance of competitors' products and general
economic conditions. In addition, AMCC's competitors may offer enhancements to
existing products, or offer new products based on new technologies, industry
standards or customer requirements, that are available to customers on a more
timely basis than comparable products from AMCC or that have the potential to
replace or provide lower cost alternatives to its products. The introduction of
such enhancements or new products by AMCC's competitors could render its
existing and future products obsolete or unmarketable. Furthermore, once a
customer has designed a supplier's product into its system, the customer is
extremely reluctant to change its supply source due to the significant costs
associated with qualifying a new supplier. Finally, AMCC expects that certain
of its competitors and other semiconductor companies may seek to develop and
introduce products that integrate the functions performed by AMCC's IC products
on a single chip, thus eliminating the need for its products. Each of these
factors could have a material adverse effect on AMCC's business, financial
condition and results of operations.

In the communications markets, AMCC competes primarily against companies
such as Agilent, Conexant, Giga (acquired by Intel), Infineon, Lucent, Maxim,
Newport, Philips, PMC-Sierra, TriQuint and Vitesse. In certain circumstances,
most notably with respect to ASICs supplied to Nortel, AMCC's customers or
potential customers have internal IC manufacturing capability, and this
internal source is an alternative available to the customer. In the ATE market,
AMCC competes primarily against Vitesse and Silicon ECL and BiCMOS products
offered principally by semiconductor manufacturers such as Analog Devices,
Lucent and Maxim. Many of these companies and potential new competitors have
greater financial, technical, manufacturing and marketing resources than AMCC.
In addition, in lower-frequency applications, AMCC faces increasing competition
from other CMOS-based products, particularly as the performance of such
products continues to improve. There can be no assurance that AMCC will be able
to develop new products to compete with new technologies on a timely basis or
in a cost-effective manner. Any failure by AMCC to compete

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successfully in these target markets, particularly in the communications
markets, would have a material adverse effect on AMCC's business, financial
condition and results of operations.

Proprietary Rights

AMCC relies in part on patents to protect its intellectual property. AMCC
has been issued 24 patents in the United States and one patent in Canada, which
patents principally cover certain aspects of the design and architecture of
AMCC's IC products. In addition, AMCC had 42 patent applications pending in the
U.S. Patent and Trademark Office. There can be no assurance that AMCC's pending
patent applications or any future applications will be approved, or that any
issued patents will provide it with competitive advantages or will not be
challenged by third parties or that if challenged, will be found to be valid or
enforceable, or that the patents of others will not have an adverse effect on
AMCC's ability to do business. There can be no assurance that others will not
independently develop similar products or processes, duplicate AMCC's products
or processes or design around any patents that may be issued to AMCC.

To protect AMCC's intellectual property, AMCC also relies on a combination
of mask work protection under the Federal Semiconductor Chip Protection Act of
1984, trademarks, copyrights, trade secret laws, employee and third-party
nondisclosure agreements and licensing arrangements. A mask work refers to the
intangible information content of the set of masks or mask databases used to
make a semiconductor product. Despite these efforts, there can be no assurance
that others will not independently develop substantially equivalent
intellectual property or otherwise gain access to AMCC's trade secrets or
intellectual property, or disclose such intellectual property or trade secrets,
or that AMCC can meaningfully protect its intellectual property. A failure by
AMCC to meaningfully protect its intellectual property could have a material
adverse effect on its business, financial condition and operating results.

As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property rights.
In the past AMCC has been, and in the future may be, notified that it may be
infringing the intellectual property rights of third parties. AMCC has certain
indemnification obligations to customers with respect to the infringement of
third party intellectual property rights by its products. There can be no
assurance that infringement claims by third parties or claims for
indemnification by customers or end users of AMCC's products resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to be true, will not materially adversely affect its business,
financial condition or operating results. In the event of any adverse ruling in
any such matter, AMCC could be required to pay substantial damages, which could
include treble damages, cease the manufacturing, use and sale of infringing
products, discontinue the use of certain processes or obtain a license under
the intellectual property rights of the third-party claiming infringement.
There can be no assurance that a license would be available on reasonable terms
or at all. Any limitations on AMCC's ability to market its products, any delays
and costs associated with redesigning its products or payments of license fees
to third parties or any failure by it to develop or license a substitute
technology on commercially reasonable terms could have a material adverse
effect on AMCC's business, financial condition and operating results.

Environmental Matters

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efforts at the Omega site, which efforts are ongoing. To date, AMCC's payment
obligations with respect to such funding efforts have not been material, and
AMCC believes that its future obligations to fund such efforts will not have a
material adverse effect on its business, financial condition or operating
results. Although AMCC believes that it is currently in material compliance
with applicable environmental laws and regulations, there can be no assurance
that AMCC is or will be in material compliance with such laws or regulations or
that AMCC's future obligations to fund any remediation efforts, including those
at the Omega site, will not have a material adverse effect on its business,
financial condition or operating results.

Employees

As of August 31, 2000, AMCC had 600 full-time employees: 51 in
administration, 230 in engineering and product development, 211 in operations
and 108 in marketing and sales. AMCC's ability to attract and retain qualified
personnel is essential to its continued success. None of AMCC's employees is
represented by a collective bargaining agreement, nor has AMCC ever experienced
any work stoppage. AMCC believes its employee relations are good. Loss of the
services of, or failure to recruit, key design engineers or other technical and
management personnel could be significantly detrimental to its product and
process development programs or otherwise have a material adverse effect on its
business, financial condition, and operating results.

Properties

AMCC's executive offices, marketing and sales headquarters are located in
San Diego, California in a 90,000 square foot building that is leased under a
lease that expires in 2007. AMCC's principal engineering facilities are located
in a 60,000 square foot building in San Diego, California that is leased
through August 2010. AMCC's manufacturing facilities are located in a 21,000
square foot building in San Diego. AMCC leases the facility under a lease that
expires in 2003, but provides it with an option to extend the lease for one
additional five year period. In May 1999, AMCC acquired a parcel of land as a
site for a potential new wafer fabrication facility. This parcel of land is
located approximately one-quarter mile from AMCC's headquarters in San Diego,
California. The land currently does not have any improvements, and there are no
current plans to commence building on the land.

AMCC leased additional space for sales offices and design centers in
Andover, Massachusetts; Bedford, New Hampshire; Fort Collins, Colorado; Irvine,
California; Raleigh, North Carolina; Plano, Texas; San Jose, California; Edina,
Minnesota; Kanata, Canada; Munich, Germany; Milan, Italy; Tokyo, Japan and
Paris, France.

Legal Proceedings

From time to time, AMCC may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this prospectus/proxy statement, AMCC is not engaged in any legal
proceedings that are expected, individually or in the aggregate, to have a
material adverse effect on AMCC's business, financial condition or operating
results.

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AMCC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with AMCC's
consolidated financial statements and related notes and the other financial
information included elsewhere in this prospectus/consent solicitation
statement. This discussion contains forward-looking statements that involve
risks and uncertainties. AMCC's actual results could differ materially from the
results contemplated by these forward-looking statements as a result of certain
factors, including those discussed below and elsewhere in this
prospectus/consent solicitation statement, particularly under the heading "Risk
Factors."

Results of Operations

Comparison of the Three Months Ended June 30, 2000 to the Three Months Ended
June 30, 1999.

On September 9, 1999 and again on March 23, 2000, AMCC effected a two-for-
one stock split (in the form of a 100% stock dividend); accordingly, all share
and per share amounts in this discussion of the results of operations have been
restated to reflect the stock splits.

Net Revenues. Net revenues for the three months ended June 30, 2000 were
$74.2 million, an increase of 134% over net revenues of $31.6 million for the
three months ended June 30, 1999. Revenues from sales of communications
products increased to 83% of net revenues for the three months ended June 30,
2000 from 70% of net revenues for the three months ended June 30, 1999,
reflecting unit growth in shipments of existing products, as well as the
introduction of new products. Sales to Nortel, and their contract
manufacturers, accounted for 37% of net revenues for the three months ended
June 30, 2000 compared to 31% for the three months ended June 30, 1999. Sales
to Insight Electronics, Inc., AMCC's domestic distributor, accounted for 19% of
net revenues in the three months ended June 30, 2000, compared to 14% for the
three months ended June 30, 1999. Sales outside of North America accounted for
19% of net revenues for the three months ended June 30, 2000, compared to 25%
for the three months ended June 30, 1999.

Gross Margin. Gross margin was 74% for the three months ended June 30, 2000,
compared to 68% for the three months ended June 30, 1999. The increase in gross
margin resulted from increased utilization of AMCC's wafer fabrication
facility. AMCC's gross margin is primarily impacted by factory utilization,
wafer yields, product mix and the timing of depreciation expense and other
costs associated with expanding manufacturing capacity. AMCC's strategy is to
maximize factory utilization whenever possible, maintain or improve its
manufacturing yields, and focus on the development and sales of high-
performance products that allow for higher gross margins. There can be no
assurance, however, that it will be successful in achieving these objectives.
In addition, these factors can vary significantly from quarter to quarter,
which would likely result in fluctuations in quarterly gross margin and net
income.

Research and Development. Research and development ("R&D") expenses
increased 134% to approximately $14.8 million, or 20% of net revenues, for the
three months ended June 30, 2000, from approximately $6.4 million, or 20% of
net revenues, for the three months ended June 30, 1999. The increase in R&D
expenses in absolute dollars is a reflection of AMCC's aggressive product
development efforts. Factors contributing to the increase in R&D expenses are a
$1.9 million increase in compensation related costs, as a result of both
increased headcount and increased average compensation costs, a $666,000
increase in the cost of design tools and software and a $3.5 million increase
in prototyping and outside contractor costs. AMCC believes that a continued
commitment to R&D is vital to maintain a leadership position with innovative
communications products. Accordingly, AMCC expects R&D expenses to increase in
absolute dollars and as a percentage of net revenues in the future. Currently,
R&D expenses are focused on the development of products and processes for the
communications markets, and AMCC expects to continue this focus.

Selling, General and Administrative. Selling, general and administrative
(SG&A) expenses were approximately $10.6 million, or 14% of net revenues, for
the three months ended June 30, 2000, as compared

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to approximately $5.6 million, or 18% of net revenues, for the three months
ended June 30, 1999. The increase in SG&A expenses for the three months ended
June 30, 2000 was primarily due to a $2.3 million increase in personnel and
travel costs, and a $1.0 million increase in commissions earned by sales
representatives, as well as increases in professional fees for legal and
accounting services.

Amortization of Purchased Intangibles. For the three months ended June 30,
2000, amortization of purchased intangibles ("API") expense was $2.3 million or
3% of net revenues. The API expense is due to the amortization of intangible
assets recorded in connection with AMCC's acquisitions, which were accounted
for as purchases. At June 30, 2000, AMCC expects amortization expense to be
$27.5 million, $33.1 million, $33.0 million, $32.6 million and $31.9 million
for the years ended March 31, 2001, 2002, 2003, 2004 and 2005, respectively.

Acquired In-process Research and Development. For the three months ended
June 30, 2000, the Company recorded $21.8 million of acquired in-process
research and development resulting from the acquisition of YuniNetworks. This
amount was expensed on the acquisition date because the acquired technology had
not yet reached technological feasibility and had no future alternative uses.
There can be no assurance that acquisitions of businesses, products or
technologies by AMCC in the future will not result in substantial charges for
acquired in-process research and development that may cause fluctuations in
AMCC's quarterly or annual operating results.

Net Interest Income. Net interest income increased to $12.3 million for the
three months ended June 30, 2000 from $884,000 for the three months ended June
30, 1999. This increase was due principally to higher interest income from
larger cash and short-term investment balances as a result of AMCC's public
stock offering in January 2000.

Provision for Income Taxes. The effective tax rate for the three months
ended June 30, 2000 was 81%. This amount differed from statutory rates
primarily due to the nondeductibility of purchased in-process R&D and the
amortization of purchased intangibles.

Deferred Compensation. During the three months ended June 30, 2000, deferred
compensation of $2.5 million was recorded related to restricted stock and
options granted to founders and employees of acquired companies. AMCC currently
expects to record amortization of deferred compensation with respect to these
option grants of approximately $1.1 million, $1.1 million, $1.0 million, and
$0.8 million during the fiscal years ended March 31, 2001, 2002, 2003, and
2004, respectively.

Backlog. AMCC's sales are made primarily pursuant to standard purchase
orders for delivery of products. Quantities of AMCC's products to be delivered
and delivery schedules are frequently revised to reflect changes in customer
needs, and in some cases customer orders can be canceled or rescheduled without
significant penalty to the customer. For these reasons, AMCC's backlog as of
any particular date is not representative of actual sales for any succeeding
period, and AMCC therefore believes that backlog is not a good indicator of
future revenue. AMCC's backlog for products requested to be shipped and
nonrecurring engineering services to be completed in the next six months was
$100.0 million on June 30, 2000, compared to $42.0 million on June 30, 1999.

Comparison of the Year Ended March 31, 2000 to the Year Ended March 31, 1999

Net Revenues. Net revenues for the year ended March 31, 2000 were
approximately $172.4 million, representing an increase of 64% over net revenues
of approximately $105.0 million for the year ended March 31, 1999. Revenues
from sales of communications products increased 141% to $138.1 million or 80%
of net revenues for the year ended March 31, 2000 from $57.3 million or 55% of
net revenues for the year ended March 31, 1999. This increase reflects both
unit growth in shipments of existing products, as well as the introduction of
new products for these markets. Revenues from sales of non-communications
products, consisting of the ATE, high-speed computing and military markets,
decreased from 45% of net revenues for the

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year ended March 31, 1999, to 20% of net revenues for the year ended March 31,
2000. Sales to Nortel, including their contract manufacturers, accounted for
38% and 20% of net revenues for the years ended March 31, 2000 and 1999,
respectively. In the years ended March 31, 2000 and 1999, Insight Electronics,
Inc., AMCC's domestic distributor, accounted for 17% and 13% of net revenues,
respectively. Sales outside of North America accounted for 23% and 24% of net
revenues for the years ended March 31, 2000 and 1999, respectively.

Gross Margin. Gross margin was 70.9% for the year ended March 31, 2000, as
compared to 63.9% for the year ended March 31, 1999. The increase in gross
margin resulted primarily from increased utilization of AMCC's wafer
fabrication facility. AMCC's gross margin is primarily impacted by factory
utilization, manufacturing yields, product mix and the timing of depreciation
expense and other costs associated with expanding AMCC's manufacturing
capacity.

Research and Development. Research and development ("R&D") expenses
increased 46% to approximately $32.8 million, or 19% of revenues, for the year
ended March 31, 2000, from approximately $22.5 million, or 21.4% of net
revenues, for the year ended March 31, 1999. The increase in R&D expenses in
absolute dollars is a reflection of AMCC's aggressive product development
efforts. Factors contributing to the increase in R&D expenses are a $4.2
million increase in compensation related costs, as a result of both increased
headcount and increased average compensation costs, a $2.8 million increase in
the cost of design tools and software, and a $3.0 million increase in
prototyping and outside contractor costs.

Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses were approximately $28.2 million, or 16.4% of revenues, for
the year ended March 31, 2000, as compared to approximately $18.3 million, or
17.5% of net revenues, for the year ended March 31, 1999. The increase in SG&A
expenses for the year ended March 31, 2000 was primarily due to a $4.4 million
increase in personnel and travel costs, a $1.0 million increase in commissions
earned by sales representatives, a $500,000 increase in product promotion
expenses, and a $1.1 million increase in professional fees related to legal,
accounting and strategic developments.

Operating Margin. AMCC's operating margin increased to 35.5% of net revenues
for the year ended March 31, 2000, compared to 22.8% for the year ended March
31, 1999, principally as a result of the increase in gross margin and the
decrease in R&D and SG&A expenses as a percentage of net revenues.

Net Interest Income. Net interest income increased to $12.9 million for the
year ended March 31, 2000 compared to $3.5 million for the year ended March 31,
1999. This increase was due principally to higher interest income from larger
cash and short-term investment balances generated from operations and the net
proceeds of approximately $815 million from AMCC's public offering completed in
January 2000.

Income Taxes. AMCC's annual effective tax rate for the year ended March 31,
2000 was 34.3%, compared to an effective tax rate of 37.4% for the year ended
March 31, 1999. The effective tax rate for the year ended March 31, 2000 was
decreased from statutory rates due to the utilization of certain federal and
state tax credits. The rate for fiscal 2000 was lower than the prior year due
to the non-deductibility of certain merger-related costs incurred in fiscal
1999.

Diluted Earnings per share. Diluted earnings per share increased 156% to
$0.41 in the year ended March 31, 2000, compared to $0.16 for the year ended
March 31, 1999.

Deferred Compensation. In connection with the grant of certain stock options
to employees during the six months ended September 30, 1997, AMCC recorded
aggregate deferred compensation of $599,000, representing the difference
between the deemed fair value of the common stock at the date of grant for
accounting purposes and the option exercise price of such options.
Additionally, during the year ended March 31, 1999, AMCC recorded deferred
compensation of $2.5 million related to restricted stock and options granted to
founders and employees of Cimaron Communications Corporation ("Cimaron"). Such
amounts are

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presented as a reduction of stockholders' equity and amortized ratably over the
vesting period of the applicable options. Amortization of deferred compensation
recorded for the years ended March 31, 2000 and 1999 was $611,000 and $860,000,
respectively.

Backlog. AMCC's sales are made primarily pursuant to standard purchase
orders for delivery of products. Quantities of AMCC's products to be delivered
and delivery schedules are frequently revised to reflect changes in customer
needs, and customer orders can be canceled or rescheduled without significant
penalty to the customer. For these reasons, AMCC's backlog as of any particular
date is not representative of actual sales for any succeeding period, and
therefore it believes that backlog is not a good indicator of future revenue.
AMCC's backlog for products requested to be shipped in the next six months was
$86.1 million on March 31, 2000 compared to $38.2 million on March 31, 1999.

Comparison of the Year Ended March 31, 1999 to the Year Ended March 31, 1998

Net Revenues. Net revenues for the year ended March 31, 1999 were
approximately $105.0 million, representing an increase of 37% over net revenues
of approximately $76.6 million for the year ended March 31, 1998. Revenues from
sales of communications products increased 56% to $57.3 million or 55% of net
revenues for the year ended March 31, 1999 from $36.6 million or 48% of net
revenues for the year ended March 31, 1998. This increase reflects both unit
growth in shipments of existing products, as well as the introduction of new
products for these markets. Revenues from sales of products to other markets,
consisting of the ATE, high-speed computing and military markets, decreased
from 52% of net revenues for the year ended March 31, 1998, to 45% of net
revenues for the year ended March 31, 1999, although revenues from sales to
these other markets increased in absolute dollars. The increase in absolute
dollars in revenues attributed to these other markets was primarily due to
$10.0 million of shipments in the year ended March 31, 1999, relating to the
partial fulfillment of an end-of-life order from Raytheon Systems Co. Total
sales to Raytheon Systems Co. accounted for 16% of net revenues in the year
ended March 31, 1999 and were less than 10% of net revenues in the year ended
March 31, 1998. Sales to Nortel accounted for 20% and 21% of net revenues for
the years ended March 31, 1999 and 1998, respectively. In the years ended March
31, 1999 and 1998, Insight Electronics, Inc. accounted for 13% and 11% of net
revenues, respectively. Sales outside of North America accounted for 24% and
23% of net revenues for the years ended March 31, 1999 and 1998, respectively.

Gross Margin. Gross margin was 63.9% for the year ended March 31, 1999, as
compared to 55.2% for the year ended March 31, 1998. The increase in gross
margin resulted from increased utilization of AMCC's wafer fabrication
facility.

Research and Development. R&D expenses increased 69% to approximately $22.5
million, or 21.4% of revenues, for the year ended March 31, 1999, from
approximately $13.3 million, or 17.3% of net revenues, for the year ended March
31, 1998. The substantial increase in R&D expenses was due to AMCC's
acquisition of Cimaron, which incurred approximately $2.5 million of R&D
expenses during its fiscal year, and accelerated new product and process
development efforts, including a $3.2 million increase in compensation costs,
and a $3.9 million increase in prototyping and outside contractor costs.

Selling, General and Administrative. SG&A expenses were approximately $18.3
million, or 17.5% of revenues, for the year ended March 31, 1999, as compared
to approximately $14.3 million, or 18.6% of net revenues, for the year ended
March 31, 1998. The increase in SG&A expenses for the year ended March 31, 1999
was primarily due to a $2.1 million increase in personnel costs, a $500,000
increase in commissions earned by third-party sales representatives, a $500,000
increase in product promotion expenses and a $400,000 increase in legal and
accounting costs. A portion of such increases was also due to AMCC's
acquisition of Cimaron. The decrease in SG&A expenses as a percentage of net
revenues for the year ended March 31, 1999 was a result of net revenues
increasing more rapidly than SG&A expenses.

Merger-related Costs. In March 1999, AMCC acquired all of the outstanding
common stock and common stock equivalents of Cimaron in exchange for
approximately 12 million shares of AMCC's common

78
<PAGE>

stock. The acquisition has been accounted for using the pooling-of-interests
method of accounting. Costs associated with this merger of $2.3 million, or
$0.02 per diluted share, were expensed in the quarter ended March 31, 1999.

Operating Margin. AMCC's operating margin increased to 22.8% of net revenues
for the year ended March 31, 1999, compared to 19.3% for the year ended March
31, 1998, principally as a result of the increase in gross margin and decrease
in SG&A expenses as a percentage of net revenues, partially offset by the
increase in R&D expenses as a percentage of net revenues.

Net Interest Income. Net interest income increased to $3.5 million for the
year ended March 31, 1999 compared to $871,000 for the year ended March 31,
1998. This increase was due principally to higher interest income from larger
cash and short-term investment balances generated from operations and the
proceeds from AMCC's public offerings completed during the second half of the
year ended March 31, 1998.

Income Taxes. AMCC's annual effective tax rate for the year ended March 31,
1999, which approximated statutory rates, was 37.4%, compared to an effective
tax rate of 2.6% for the year ended March 31, 1998. The effective tax rate for
the year ended March 31, 1998 was decreased from statutory rates due to the
reduction of a valuation allowance recorded against deferred tax assets for net
operating loss carryforwards and credits.

Diluted Earnings per share. Diluted earnings per share decreased 16% to
$0.16 in the year ended March 31, 1999, compared to $0.19 for the year ended
March 31, 1998. The decrease reflects the merger related costs of $2.3 million,
the increase in the effective tax rate, and the greater number of shares
outstanding due in part to the Cimaron acquisition, offset in part by the
increase in operating income in fiscal 1999.

Deferred Compensation. Amortization of deferred compensation recorded for
the years ended March 31, 1998 and 1999 was $127,000 and $860,000,
respectively.

Backlog. AMCC's backlog for products requested to be shipped and
nonrecurring engineering services to be completed in the next six months at
March 31, 1999 was $38.2 million, compared to $30.1 million on March 31, 1998.
Included in backlog at March 31, 1999 was the $9.3 million balance of an order
received from Raytheon Systems Co. related to an end-of-life buy for integrated
circuits used in its high speed radar systems.

Liquidity and Capital Resources

AMCC's principal source of liquidity as of June 30, 2000 consists of $974.1
million in cash, cash equivalents and short-term investments. Working capital
as of June 30, 2000 was $998.2 million, compared to $977.6 million as of March
31, 2000. This increase in working capital was primarily due to net cash
provided by operating activities, offset by payments for acquired businesses
and the purchase of property and equipment.

For the three months ended June 30, 2000 and 1999, net cash provided by
operating activities was $33.3 million and $7.1 million, respectively. Net cash
provided by operating activities for the three months ended June 30, 2000 and
1999 primarily reflected net income before depreciation, amortization and other
non-cash charges plus increased accounts payable and accrued liabilities offset
by increases in accounts receivable.

Capital expenditures totaled $8.9 million for the three months ended June
30, 2000 which included approximately $3.7 million for engineering hardware and
design software and $4.7 million for test and manufacturing equipment, compared
to capital expenditures of $5.1 million for the three months ended June 30,
1999. AMCC intends to increase capital expenditures for manufacturing
equipment, test equipment and computer hardware and software.

AMCC is exploring alternatives for the expansion of its manufacturing
capacity, which would likely occur after fiscal year 2001, including further
expansion of its current wafer fabrication facility, building a new wafer
fabrication facility, purchasing a wafer fabrication facility, and/or entering
into strategic relationships to obtain

79
<PAGE>

additional capacity. Any of these alternatives could require a significant
investment by AMCC, and there can be no assurance that any of the alternatives
for expansion of its manufacturing capacity will be available on a timely
basis.

In January 2000, AMCC completed the public offering of approximately 12
million shares of common stock raising net proceeds of approximately $815
million. AMCC intends to use the proceeds of the offering for working capital
and general corporate purposes. In addition, AMCC may use a portion of the net
proceeds to acquire businesses or technologies.

AMCC believes that its available cash, cash equivalents and short-term
investments, and cash generated from operations will be sufficient to meet its
capital requirements for the next 12 months, although AMCC could elect or could
be required to raise additional capital during such period. There can be no
assurance that such additional debt or equity financing will be available on
commercially reasonable terms or at all.

Quantitative and Qualitative Disclosure About Market Risk

At June 30, 2000, AMCC's investment portfolio included fixed-income
securities of $784.3 million. These securities are subject to interest rate
risk and will decline in value if interest rates increase. Because the average
maturity date of the investment portfolio is relatively short, an immediate 100
basis point increase in interest rates would have no material impact on AMCC's
financial condition or results of operations.

AMCC generally conducts business, including sales to foreign customers, in
U.S. dollars and as a result, have limited foreign currency exchange rate risk.
The effect of an immediate 10 percent change in foreign exchange rates would
not have a material impact on AMCC's financial condition or results of
operations.

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<PAGE>

AMCC MANAGEMENT AFTER THE MERGER

Executive Officers and Directors

The following table sets forth the names of the members of the board of
directors and executive officers of AMCC, their ages and the positions held by
them with AMCC as of August 29, 2000. Upon the completion of the merger, Mr.
Douglas Spreng will be added to AMCC's board of directors.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David M. Rickey.............. 44 Chairman of the Board of Directors,
President, and Chief Executive Officer

William E. Bendush........... 51 Vice President, Finance and
Administration, and Chief Financial
Officer and Secretary

Kenneth L. Clark............. 52 Vice President, Operations

Candace H. Kilburn........... 46 Vice President, Human Resources

Brent E. Little.............. 37 Vice President, Marketing

Gary D. Martin............... 48 Chief Technical Officer, Digital Products

Stephen M. Smith............. 42 Vice President, Business Development

Ramakrishna R. Sudireddy..... 33 Vice President, Digital Products

Thomas L. Tullie............. 35 Vice President, Sales

Gregory A. Winner............ 44 Vice President, Engineering

Roger A. Smullen, Sr......... 64 Vice-Chairman of the Board of Directors

William K. Bowes, Jr.(1)..... 74 Director

R. Clive Ghest(1)............ 63 Director

Franklin P. Johnson, Jr.(1).. 72 Director

S. Atiq Raza(2).............. 51 Director

Douglas C. Spreng............ 56 Director

Arthur B. Stabenow(2)........ 62 Director

Harvey P. White(2)........... 66 Director
</TABLE>
--------
(1) Member of the Audit Committee

(2) Member of the Compensation Committee

There are no family relationships among any of the directors or executive
officers of AMCC.

David M. Rickey has served as President, Chief Executive Officer and a
director since February 1996 and as Chairman since August 2000. From August
1993 to May 1995, Mr. Rickey served as AMCC's Vice President of Operations.
From May 1995 to February 1996, Mr. Rickey served as Vice President of
Operations at NexGen, a semiconductor company. Previously, Mr. Rickey spent
more than eight years with Nortel, a telecommunications manufacturer, where he
led the wafer fabrication engineering and manufacturing operations in both
Ottawa, Canada and San Diego, California. Mr. Rickey has earned B.S. degrees
from both Marietta College (summa cum laude) and Columbia University. In
addition, Mr. Rickey received an M.S. in Materials Science and Engineering from
Stanford University.

William E. Bendush has served as the Vice President, Finance and
Administration, Chief Financial Officer and Secretary of AMCC since April 1999,
and upon completion of the merger, Mr. Bendush will become the Director, Chief
Executive Officer, Chief Financial Officer and Secretary of MMC Networks. Mr.
Bendush came to AMCC from Silicon Systems Inc., where he served as Senior Vice
President and Chief Financial Officer

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<PAGE>

from September 1986 to April 1999. Prior to joining Silicon Systems Inc., Mr.
Bendush held various financial management positions at AM International, Gulf +
Western Industries and Gould Inc. Mr. Bendush received a B.A. from Northern
Illinois University.

Kenneth L. Clark joined AMCC in November 1997 as Vice President, Operations.
Prior to joining AMCC, Mr. Clark worked at Integrated Device Technology, Inc.,
a semiconductor company, from February 1995 to October 1997, where he served as
Director, Fab Operations. From 1990 to 1995, Mr. Clark served in various senior
management positions including Director, Fab Operations at Silicon Systems,
Inc., a semiconductor company. From 1987 to 1990, Mr. Clark served as Director,
Fab Operations at National Semiconductor Corp. Mr. Clark has also held
manufacturing and engineering management positions at Cypress Semiconductor
Corp., Zymos, Inc., Micron Technology and American Microsystems, Inc. Mr. Clark
holds a B.S. in Physics from the University of Washington.

Candace H. Kilburn joined AMCC in 1996 with over 19 years human resources
management experience. Prior to joining AMCC, Ms. Kilburn served as Director of
Human Resources with Buck Knives Inc. from 1990 to 1996 where she was
responsible for international human resources. She has also held positions at
Handyman Corporation and Rohr Industries. Ms. Kilburn earned a B.S. in Business
Administration from the United States International University, and an M.B.A.
from Chapman University. She is designated as a Senior Professional in Human
Resources, a Certified Employee Benefits Specialist, and has two certificates
in Human Resources Management.

Brent E. Little joined AMCC in 1991. Prior to his current position as Vice
President of Marketing, he held several marketing management positions with
AMCC as the Director of Strategic Marketing, and Director of Marketing for ASIC
products. Prior to joining AMCC, he worked as the Business Development Manager
for Analysis and Technology, Inc., and worked with the U.S. Navy as a Project
Engineer. Mr. Little earned a B.S. in Electrical Engineering from the
University of California, Santa Barbara.

Gary D. Martin joined AMCC in March 1999 when AMCC acquired Cimaron
Communications. Before co-founding Cimaron in January 1998, Dr. Martin was a
design consultant, performing ASIC design services for Lucent Technologies, ATI
and Siltek. From 1995 to 1997, he was Vice President of Engineering and Chief
Technical Officer at ATI. Dr. Martin was employed by AT&T Bell Laboratories
from 1978 to 1995. During that time, he contributed to more than 20 ASIC
designs in SONET, ATM, PDH and error correction. Between 1987 and 1995, he was
Technical Manager for the SONET/ATM ASIC design group, and for the high-speed
modem design group. Dr. Martin contributed to the architecture and design of
AT&T's original SONET chip set, which was eventually used successfully in a
number of AT&T SONET products. From 1978 to 1987, as a Member of Technical
Staff, Dr. Martin was a system engineer and a digital design engineer. Dr.
Martin holds a master's degree and a doctorate in Electrical Engineering from
Stanford University, and bachelor's and master's degrees in Mechanical
Engineering from Oklahoma State University.

Stephen M. Smith joined AMCC as Vice President, Business Development in
October 1999. From May 1998 to October 1999 Mr. Smith worked at ST
Microelectronics, a semiconductor company, as the Director of the Micro-
Fluidics Business Unit located in San Diego, California. Additionally, Mr.
Smith worked for STM from January 1993 until May 1997 as the Director of
Finance, Region Americas located in Carrollton, Texas. From May 1997 to May
1998 Mr. Smith served as Vice President Finance for Vixel Corporation, a Fibre
Channel company. Previously, Mr. Smith spent 8 years with Nortel where he led
the finance teams in both Ottawa, Canada and San Diego, California. Mr. Smith
also worked in various finance positions with Motorola from 1982 to 1985. Mr.
Smith holds a B.S. degree from Arizona State University.

Ramakrishna R. Sudireddy joined AMCC in March 1999 when AMCC acquired
Cimaron Communications. Before co-founding Cimaron in January 1998, Mr.
Sudireddy founded Siltek Corporation in 1996, and served as its Vice President
of Research and Development until 1997. Siltek provided ATM and SONET design
services for such companies as Lucent Technologies, SGS Thomson, and Sun
Microsystems. From 1991 to 1996, Mr. Sudireddy was a Member of Technical Staff
at AT&T Bell Laboratories. While at Bell

82
<PAGE>

Labs, he was the chief architect and lead designer for a number of highly
complex ASICs. These ASICs generally had hundreds of thousands of gates, and
operated at speeds as high as 622 MHz. Mr. Sudireddy gained prominence for
developing these ASICs more efficiently (with as many as 30% fewer gates) and
more quickly than conventional methods within Bell Labs. Mr. Sudireddy has a
master's degree in Computer Engineering from the University of Massachusetts at
Lowell, and a bachelor's degree in Electrical Engineering from Nagarjuna
University in Guntur, India.

Thomas L. Tullie joined AMCC as Vice President, Sales in August 1996. Prior
to joining AMCC, from 1989 to 1996 Mr. Tullie held several strategic sales
management positions, most recently as Director of East Coast Sales, at S-MOS
Systems, a semiconductor company. Prior to joining S-MOS Systems, Mr. Tullie
was a designer in the workstations group of Digital Equipment Corporation. Mr.
Tullie earned a B.S. from the University of Massachusetts and an M.B.A. from
Clark University.

Gregory A. Winner joined AMCC in November 1999. Mr. Winner came to AMCC from
Silicon Systems, Inc., where he was responsible for the advanced development of
integrated circuit products as their vice president of Product Development from
September 1982 to November 1999. Prior to that, he held various engineering
positions at Memorex, IBM and General Dynamics. Mr. Winner holds an M.S.E.E.
from Stanford University and a B.S.E.E degree from the University of
California, Los Angeles.

Roger A. Smullen, Sr. has served as the Vice-Chairman of AMCC's Board of
Directors since August 2000 and served as Chairman from October 1982 until
August 2000. Mr. Smullen has served as Acting Vice President, Operations of the
Company from August 1997 through October 1997. From April 1983 until April
1987, Mr. Smullen served as the Company's Chief Executive Officer. Previously,
he was senior vice president of operations of Intersil, Inc.'s semiconductor
division. In 1967, Mr. Smullen co-founded National Semiconductor. Prior to
that, he was director of integrated circuits at Fairchild Semiconductor. Mr.
Smullen is currently a director of Micro Linear Corporation, a manufacturer of
integrated circuits. He holds a B.S. in Mechanical Engineering from the
University of Minnesota.

William K. Bowes, Jr. has served as a director of AMCC since April 1980. He
has been a general partner of U.S. Venture Partners, a venture capital
investment entity, since July 1981. Mr. Bowes serves as a director of Amgen,
Inc., XOMA Corporation, Lynx Therapeutics, Inc. and one privately-held U.S.
Venture Partners portfolio company. Mr. Bowes holds a B.A. from Stanford
University and an M.B.A. from Harvard Business School.

R. Clive Ghest has served as a director of AMCC since July 1997. Since
January 1997, Mr. Ghest has been a principal of Ghest Associates Consulting.
Mr. Ghest was the Vice President of Business Development at Advanced Micro
Devices Inc. from February 1986 to December 1996. He has more than 35 years of
experience in various capacities in the computer, communications and
semiconductor industries. Mr. Ghest holds an M.S.E.E. from the University of
Santa Clara and an Hons. B.Sc. from the University of London.

Franklin P. Johnson, Jr. has served as a director of AMCC since April 1980.
He is the general partner of Asset Management Partners, a venture capital
limited partnership. Mr. Johnson has been a private venture capital investor
for more than five years. Mr. Johnson is a director of Amgen, Inc. and IDEC
Pharmaceuticals Corporation. Mr. Johnson holds a B.S. from Stanford University
and an M.B.A. from Harvard Business School.

S. Atiq Raza has served as a director of AMCC since September 1999. Mr. Raza
is President and CEO of Raza Foundries, Inc., a company that builds and
operates broadband networking and communications companies which he founded in
October 1999. Mr. Raza was the President and Chief Operating Officer of
Advanced Micro Devices from January 1996 to March 1999. From October 1988 to
January 1996 he was with NexGen, Inc. where he held the positions of Chairman,
Chief Executive Officer and President. Prior to joining NexGen, Mr. Raza spent
15 years in various engineering and management positions including Vice
President Technology Centers at VLSI Technology Inc. Mr. Raza holds a
bachelor's degree from the University of

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<PAGE>

London, and a master's degree from Stanford University. He also serves on the
board of directors of Procket Networks, Inc., Nishan Systems and Mellanox
Technologies, Ltd.

Douglas C. Spreng will, after completion of the merger, serve as a director
of AMCC. Douglas C. Spreng has served as MMC Network's President and Chief
Executive Officer since April 1999. From 1992 to 1999, Mr. Spreng served as the
Executive Vice President of the Client Access Business Unit of 3Com
Corporation, a networking company. Mr. Spreng holds a B.S.E.E. from the
Massachusetts Institute of Technology and an M.B.A. from Harvard Business
School.

Arthur B. Stabenow has served as a director of AMCC since July 1988. Mr.
Stabenow was Chairman, President and Chief Executive Officer of Micro Linear
Corporation, a manufacturer of integrated circuits, from April 1986 until his
retirement in January 1999. Mr. Stabenow has over 35 years of experience in the
semiconductor industry. From January 1979 to March 1986, he was employed as a
vice president and general manager at National Semiconductor Corporation. Mr.
Stabenow is currently a director of Zoran, Inc. and Micro Linear Corporation.
Mr. Stabenow holds an M.B.A. from the University of New Haven.

Harvey P. White has served as a director of AMCC since April 1999. Since
January 1999, Mr. White has been the President and CEO of Leap Wireless
International. Mr. White was one of the founders of Qualcomm and served as
President from May 1992 through June 1998. Prior to May 1992, he served as
Executive Vice President and Chief Operating Officer and was a Director of
Qualcomm since it began operations in July 1985 until September 1998. Mr. White
holds a bachelor's degree in economics from Marshall University.

Director Compensation

Nonemployee directors of AMCC receive a $12,000 annual fee and fees of $500
per meeting attended. Directors are also reimbursed for customary and usual
travel expenses incurred in connection with attendance at meetings of AMCC's
Board of Directors.

AMCC's 1997 Directors' Stock Option Plan (Directors Plan) provides that each
person who becomes a nonemployee director of AMCC will be granted (on the date
on which the optionee first becomes a nonemployee director of AMCC) a
nonstatutory stock option to purchase 50,000 shares of AMCC common stock.
Thereafter, on April 1 of each year (starting in 2000) for nonemployee
directors who were serving as of the date of the closing of the initial public
offering, which was declared effective on November 24, 1997, each nonemployee
director will be granted an option to purchase 50,000 shares of AMCC common
stock if on such date, he or she has served on the AMCC's Board of Directors
for at least six months.

In fiscal 2000, without taking into account the stock splits effected in
September 1999 and March 2000, Mr. White received an automatic grant of 12,500
shares at an exercise price of $49.1252 upon his appointment as a director in
April 1999. As adjusted for the stock split in September 1999, Mr. Raza
received an automatic grant of 25,000 shares at an exercise price of $54.375
upon his appointment as a Director in September 1999. These options vest over a
twelve-month period.

AMCC has agreed to indemnify each director and officer against certain
claims and expenses for which the director might be held liable in connection
with past or future services to AMCC and its subsidiaries. In addition, AMCC
maintains an insurance policy insuring it officers and directors against such
liabilities.

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<PAGE>

Executive Compensation

Summary Compensation Table

The following table shows the compensation earned by (a) the individual who
served as AMCC's Chief Executive Officer during the fiscal year ended March 31,
2000, (b) the four other most highly compensated individuals who served as an
executive officer of AMCC during the fiscal year ended March 31, 2000; and
(c) the compensation received by each such individual for AMCC's two preceding
fiscal years (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>
Securities
Other Annual Underlying All Other
Name and Principal Fiscal Salary Bonus Compensation Options Compensation
Position Year ($)(1) ($) ($)(2) (#)(3) ($)
------------------ ------ ------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David M. Rickey......... 2000 348,550 350,000(4) -- 2,640,000 3,120(5)
President and Chief 1999 315,453 110,000(6) -- -- 3,120(5)
Executive Officer 1998 300,014 212,900(7) -- 586,664 3,120(5)

Thomas L. Tullie........ 2000 268,473(8) 35,000(4) -- 270,000 --
Vice President, Sales 1999 249,199(9) 25,000(6) -- -- --
1998 219,556(10) 52,000(7) -- 293,332 --

William E. Bendush...... 2000 199,288(11) 100,000(4) -- 650,000 --
Vice President and 1999 -- -- -- -- --
Chief Financial Officer 1998 -- -- -- -- --

Kenneth L. Clark........ 2000 188,070 100,000(4) -- 270,000 --
Vice President,
Operations 1999 181,770 35,000(6) 31,385(12) -- --
1998 64,211(13) 26,000(7) -- 520,000 --

Brent E. Little......... 2000 163,231 100,000(4) -- 400,000 --
Vice President,
Marketing 1999 126,933 30,000(6) -- 300,000 --
1998 125,465 37,000(7) -- 89,328 --
</TABLE>
--------
(1) Includes pre-tax contributions to the AMCC 401(k) Plan.

(2) Excludes annual compensation which, for any named executive officer, did
not in aggregate exceed the lesser of $50,000 or ten percent of such
named executive officer's total annual salary and bonus for that year.

(3) Options granted in a given fiscal year may include grants based on the
officer's performance in the prior fiscal year and have been adjusted to
reflect the September 1999 and March 2000 two-for-one stock splits.

(4) Includes fiscal 2000 bonus paid in May 2000 (fiscal 2001).

(5) Includes annual premiums in the amount of $3,120 paid by AMCC on a term
life insurance policy.

(6) Includes fiscal 1999 bonus paid in April 1999 (fiscal 2000).

(7) Includes fiscal 1998 bonus paid in April 1998 (fiscal 1999).

(8) Includes commissions earned by Mr. Tullie in the amount of $107,521.

(9) Includes commissions earned by Mr. Tullie in the amount of $91,714, of
which $66,630 was paid to Mr. Tullie in fiscal 1999 and $25,084 was paid
to Mr. Tullie in fiscal 2000.

(10) Includes commissions earned by Mr. Tullie in the amount of $71,639, of
which $63,914 was paid to Mr. Tullie in fiscal 1998 and $7,725 was paid
to Mr. Tullie is fiscal 1999. Also includes a referral bonus in the
amount of $2,000.

(11) Includes a sign-on bonus in the amount of $25,000.

(12) Includes $27,985 paid to Mr. Clark in the form of relocation expenses and
a matching contribution in the amount of $3,390 that AMCC made on Mr.
Clark's behalf to the AMCC 401(k) Plan.

(13) Mr. Clark joined AMCC in November 1997, and his annualized base salary
for the fiscal year ended March 31, 1998 was $175,000.

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<PAGE>

Employment, Severance and Change of Control Agreements

AMCC has entered an employment agreement with Douglas C. Spreng, which is
effective upon completion of the merger. See "Interest of Certain Persons in
the Merger and Related Agreements."

In January 1996, AMCC entered into a letter agreement with David M. Rickey,
AMCC's President and Chief Executive Officer, in connection with the
commencement of his employment. This agreement entitles Mr. Rickey to a salary
of $275,000 per year and term life insurance purchased by AMCC for the benefit
of Mr. Rickey's estate. Pursuant to the terms of the agreement, if AMCC enters
into certain change-of-control transactions, the vesting of the options to
purchase shares of AMCC's common stock granted in connection with the
commencement of Mr. Rickey's employment will accelerate and become exercisable
in full. In addition, the agreement provides that if AMCC is acquired and the
per share value of AMCC's common stock is less than $.75 per share, AMCC will
compensate Mr. Rickey for the difference between $.75 per share and the per
share merger or sale price determined by AMCC's Board of Directors. The letter
agreement provides that Mr. Rickey's employment is at will and terminable by
AMCC or Mr. Rickey for any reason, with or without cause, and with or without
notice.

In August 1996, AMCC entered into a letter agreement with Thomas L. Tullie,
AMCC's Vice President, Sales, in connection with the commencement of his
employment. Pursuant to the terms of the agreement, if AMCC enters into certain
change-of-control transactions, the vesting of the options to purchase shares
of AMCC's common stock granted in connection with the commencement of Mr.
Tullie's employment will accelerate and become exercisable in full.

In accordance with the terms of its 1992 Stock Option Plan (1992 Plan),
unless otherwise provided for a particular optionee pursuant to a separate
agreement, if AMCC enters into certain change-of-control transactions, any
option granted under its 1992 Plan to purchase shares of AMCC's common stock
shall vest and become immediately exercisable for the number of shares that
would otherwise be vested and exercisable under the terms of the option one
year after the date of the change-of-control transaction. This would apply to
options granted under the Plan to any of the Named Executive Officers.

Option Grants In Last Fiscal Year

<TABLE>
<CAPTION>
Individual Grants(1)
--------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees in Exercise or Option Term(2)
Options Fiscal Year Base Price Expiration ----------------------
Name Granted (#) (%)(3) ($/sh)(4) Date 5% ($) 10% ($)
---- ----------- ------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
David M. Rickey......... 640,000(5) 4.67 12.969 04/23/09 5,219,846 13,228,113
2,000,000 14.60 71.969 01/19/10 90,521,835 229,400,102

Thomas L. Tullie........ 120,000(5) 0.88 12.969 04/23/09 978,721 2,480,271
150,000 1.10 140.875 03/08/10 13,289,330 33,677,770

William E. Bendush...... 33,148 0.24 12.063 04/20/09 251,462 637,254
466,852 3.41 12.063 04/20/09 3,541,559 8,975,005
150,000 1.10 140.875 03/08/10 13,289,330 33,677,770

Kenneth L. Clark........ 120,000(5) 0.88 12.969 04/23/09 978,721 2,480,271
150,000 1.10 140.875 03/08/10 13,289,330 33,677,770

Brent E. Little......... 40,000(5) 0.29 12.969 04/23/09 326,240 826,757
160,000 1.17 20.375 08/06/09 2,048,067 5,188,979
200,000 1.46 140.875 03/08/10 17,719,106 44,903,694
</TABLE>
--------
(1) Consists of options granted pursuant to AMCC's 1992 Plan. Options granted
under the 1992 Plan to new hires generally become exercisable over four
years from the date of grant with one-fourth of the shares

86
<PAGE>

becoming exercisable one year from the date of grant and the remaining
shares becoming exercisable on a monthly basis thereafter for the remaining
36 months. Options granted under the 1992 Plan to current employees
generally become exercisable on a monthly basis over a period of forty-
eight months from the date of grant. All figures have been adjusted to
reflect AMCC's September 1999 and March 2000 two-for-one stock splits.

(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the SEC. There can be no assurance that the
actual stock price appreciation over the ten-year option term will be at
the assumed 5% and 10% levels or at any other defined level. Unless the
market price of the common stock appreciates over the option term, no
value will be realized from the option grants made to the Named Executive
Officers.

(3) An aggregate of 13,797,938 options to purchase shares of AMCC common
stock were granted during fiscal year ended March 31, 2000, of which
13,697,938 shares were granted to employees.

(4) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of shares that are already owned or by offset of the
underlying shares, subject to certain conditions.

(5) Options granted in April 1999 in connection with the Named Executive
Officer's performance in fiscal year ended March 31, 1999.

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<PAGE>

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values

The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the fiscal year ended
March 31, 2000. In addition, the table sets forth the number of shares covered
by stock options as of the fiscal year ended March 31, 2000, and the value of
"in-the-money" stock options, which represents the positive spread between the
exercise price of a stock option and the market price of the shares subject to
such option at the end of the fiscal year ended March 31, 2000.

<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised Options In-the-Money Options at
Acquired on Value at Fiscal year End (#) Fiscal Year End ($)
Exercise Realized ------------------------------- ----------------------------
Name (#) ($)(1) Exercisable/Unexercisable(2)(3) Exercisable/Unexercisable(4)
---- ----------- ---------- ------------------------------- ----------------------------
<S> <C> <C> <C> <C>
David M. Rickey......... 130,000 12,897,742 315,000/2,515,000 36,939,648/235,296,538
Thomas L. Tullie........ 23,978 541,752 86,022/320,000 12,188,773/ 25,249,214
William E. Bendush...... -- 0 125,004/524,996 17,250,615/ 53,127,836
Kenneth L. Clark........ 165,834 5,290,176 26,666/450,000 3,873,872/ 44,575,530
Brent E. Little......... 37,000 834,163 204,362/613,970 28,960,363/ 58,454,369
</TABLE>
--------
(1) This value has been calculated based on the fair market value of AMCC's
common stock as of the date of exercise as determined by the closing price
of AMCC's stock on The Nasdaq National Market as of the date of exercise
minus the applicable per share exercise price or, in the case of a same-
day-sale of the option, by the actual sale price of the stock minus the
applicable per share exercise price.

(2) No stock appreciation rights (SARs) were outstanding during fiscal 2000.

(3) Options granted prior to March 27, 1998 under the 1992 Stock Option Plan
are generally exercisable, but subject to a right of repurchase pursuant to
the vesting schedule of each grant. Options granted on or after March 27,
1998 are exercisable only as to those shares that are vested. Accordingly,
the table reflects those options that are exercisable, not those options
that are vested.

(4) Based on the $150.063 per share closing price of AMCC's common stock on The
Nasdaq National Market on March 31, 2000, less the exercise price of the
options.

Transactions with Management

In January 1996, AMCC entered into a letter agreement with David M. Rickey,
AMCC's President and Chief Executive Officer, relating to Mr. Rickey's
employment and benefits in connection with certain change-of-control
transactions. See "Employment, Severance and Change of Control Agreements."

In August 1996, AMCC entered into a letter agreement with Thomas L. Tullie,
Vice President, Sales, relating to Mr. Tullie's employment and benefits in
connection with certain change-of-control transactions. See "Employment,
Severance and Change of Control Agreements."

In February 1996, AMCC entered into a loan arrangement with Mr. Rickey,
pursuant to which AMCC loaned to Mr. Rickey $150,000 (Note No. 1) and $53,000
(Note No. 2) at an annual interest rate of 5.32%. Note No. 1 was a full
recourse, unsecured real estate bridge loan with accrued interest and principal
payable upon the earlier of February 12, 1999 or the sale of the house in which
Mr. Rickey lived prior to relocating to San Diego to accept employment as
AMCC's President and Chief Executive Officer. Note No. 2 was the reinstatement
of a loan which had been made previously to Mr. Rickey in connection with the
exercise of incentive stock options while serving as Vice President,
Manufacturing for AMCC. Note No. 2 was a full recourse, unsecured promissory
note with accrued interest and principal payable no later than February 12,
1999. Note No. 1 and Note No. 2 may be declared payable in full by AMCC in the
event that Mr. Rickey ceases to be employed by AMCC. In May 1996, AMCC entered
into a loan agreement with Mr. Rickey pursuant to which AMCC loaned $750,000
(Note No. 3) to Mr. Rickey at an interest rate of 5.76% per annum compounded
annually. The proceeds of the loan were used to exercise options granted by Mr.
Rickey's former

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<PAGE>

employer, which were expiring as a result of Mr. Rickey's termination of
employment with the former employer in order to join AMCC. The loan is
evidenced by a non-recourse promissory note, which is secured by 46,500 shares
of common stock of Advanced Micro Devices, Inc. The principal and accrued
interest on Note No. 3 were due and payable in full on May 1, 1999, unless
accelerated in whole or in part in the event of (i) a default under the loan
agreement or pledge agreement for Note No. 3, (ii) a default in payment under
Note No. 3 or any other promissory note issued to AMCC by Mr. Rickey, (iii) the
voluntary or involuntary termination of Mr. Rickey's employment with AMCC or
(iv) the sale of any portion of the common stock securing Note No. 3. Each of
Note No. 1, Note No. 2 and Note No. 3 were approved by the Board of Directors
of AMCC pursuant to the approval of Mr. Rickey's offer of employment with AMCC.
In September 1996, Mr. Rickey repaid approximately $142,000 of the principal on
Note No. 1, and in April 1997, Mr. Rickey delivered a full recourse, unsecured
promissory note with a principal amount of $12,392 and an interest rate of
5.91% per annum in payment of the balance of the amount owing under Note No. 1.
In January 1999 and April 2000, the Board of Directors extended the due dates
on the notes by one year, as these notes became due. In August 1999, Mr. Rickey
repaid the $750,000 principal balance of Note No. 3 plus accrued interest of
approximately $150,000 in full. The current aggregate principal balance
outstanding under each note is as follows:

<TABLE>
<CAPTION>
Principal Date of Extended Current
Amount Original Note Maturity Date Interest Rate
--------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Note No. 1............... $12,392 4/1/1997 3/31/2002 6.42%
Note No. 2............... $53,000 2/12/1996 2/12/2002 6.42%
</TABLE>

In July 1997, Mr. Rickey exercised stock options granted under the 1992
Plan. In payment of the purchase price for the exercised shares, Mr. Rickey
delivered full recourse promissory notes in principal amounts of approximately
$400,000, $20,000 and $35,000 bearing interest at rates of 5.98%, 5.98% and
6.54%, respectively. The notes and accrued interest thereon were payable in
full in February 2000, February 2000 and April 2001, respectively. In January
2000 the Board of Directors extended the maturity dates of the first two notes
to February 2002 and the maturity date of the third note to April 2003. In May
2000, Mr. Rickey repaid the $400,000, $20,000 and $35,000 balances of each of
these notes, respectively, plus aggregate accrued interest of approximately
$85,000.

AMCC has entered into indemnification agreements with its officers and
directors containing provisions that may require AMCC, among other things, to
indemnify its officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors (other than
liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.

AMCC believes that all of the transactions set forth above were made on
terms no less favorable to AMCC than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between AMCC and its
officers, directors, principal stockholders and affiliates will be approved by
a majority of the Board of Directors, including a majority of the independent
and disinterested outside directors on the Board of Directors, and will be on
terms no less favorable to AMCC than could be obtained from unaffiliated third
parties.

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<PAGE>

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF AMCC

Except as otherwise noted, the following table sets forth information that
has been provided to AMCC with respect to the beneficial ownership of shares of
AMCC's common stock as of August 29, 2000 for (i) each person who is known by
AMCC to own beneficially more than five percent of the outstanding shares of
common stock, (ii) each director of AMCC, (iii) each of the executive officers
named in the Summary Compensation Table of this proxy/consent solicitation
(Named Executive Officers), and (iv) all directors and executive officers of
AMCC as a group.

<TABLE>
<CAPTION>
Percentage of
Shares
Number of Outstanding(3)
Shares ------------------
Beneficially Before After
Name and Address (1) (2) Owned Merger Merger
------------------------ ------------ ------- -------
<S> <C> <C> <C>
Putnam Investment Management................ 6,640,901 5.4% 4.6%
One Post Office Square
Boston, MA 02110
Roger A. Smullen, Sr.(4).................... 1,320,605 * *
David M. Rickey(5).......................... 508,833 * *
Franklin P. Johnson, Jr.(6)................. 873,992 * *
Thomas L. Tullie(7)......................... 392,213 * *
Brent E. Little(8).......................... 325,166 * *
William K. Bowes, Jr.(9).................... 128,368 * *
William E. Bendush(10)...................... 86,253 * *
Arthur B. Stabenow(11)...................... 151,652 * *
R. Clive Ghest(12).......................... 59,000 * *
Kenneth L. Clark(13)........................ 52,993 * *
Harvey P. White(14)......................... 83,000 * *
S. Atiq Raza(15)............................ 34,270 * *
All directors and executive officers as a
group (7 persons)(16)...................... 5,076,487 4.1% 3.6%
</TABLE>
--------
* Less than 1%.

(1) The address for AMCC's executive officers and directors is: c/o AMCC, 6290
Sequence Drive, San Diego, California 92121.

(2) The persons named in this table have sole voting and investment power with
respect to all shares of AMCC common stock shown as beneficially owned by
them, subject to community property laws where applicable and except as
indicated in the other footnotes to this table.

(3) In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of AMCC common stock subject
to options or warrants held by that person that are exercisable within 60
days after August 29, 2000 are deemed outstanding. Such shares, however,
are not deemed outstanding for the purpose of computing the percentage
ownership of any other person. Applicable percentages are based on
121,844,760 shares of AMCC common stock outstanding on August 29, 2000
together with applicable options for such stockholders.

(4) Includes 16,666 shares of AMCC common stock that are subject to repurchase
by AMCC and 5,835 shares issuable upon the exercise of vested options that
are exercisable within 60 days of August 29, 2000. Also includes 1,298,104
shares of AMCC common stock held in trust for the benefit of Mr. Smullen's
family.

(5) Includes 38,888 shares of AMCC common stock that are subject to repurchase
by AMCC and 376,113 shares issuable upon the exercise of vested options
that are exercisable within 60 days of August 29, 2000. Also includes
17,429 shares of AMCC common stock held in trust for the benefit of Mr.
Rickey's family.

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<PAGE>

(6) Includes 278,328 shares of AMCC common stock issuable upon the exercise of
vested options that are exercisable within 60 days of August 29, 2000.
Also includes 285,664 shares held by Mr. Johnson's wife. Mr. Johnson
disclaims beneficial ownership with respect to the shares held by his
wife.

(7) Includes 19,444 shares of AMCC common stock that are subject to repurchase
by AMCC and 120,329 shares issuable upon the exercise of vested options
that are exercisable within 60 days of August 29, 2000.

(8) Includes 307,582 shares of AMCC common stock issuable upon the exercise of
options that are exercisable within 60 days of August 29, 2000, of which
10,554 are subject to repurchase rights in favor of AMCC. Also includes
7,286 shares of AMCC common stock held in trust for the benefit of
Mr. Little's family.

(9) Includes 22,800 shares of AMCC common stock owned by the William K. Bowes,
Jr. Foundation. Includes 78,328 shares of common stock issuable upon the
exercise of vested options that are exercisable within 60 days of August
29, 2000.

(10) Includes 86,253 shares of AMCC common stock issuable upon the exercise of
options that are exercisable within 60 days of August 29, 2000.

(11) Includes 25,000 shares of AMCC common stock issuable upon the exercise of
options that are exercisable within 60 days of August 29, 2000.

(12) Includes 47,888 shares of AMCC common stock issuable upon the exercise of
options that are exercisable within 60 days of August 29, 2000, of which
11,111 are subject to repurchase rights in favor of the Company.

(13) Includes 45,417 shares of AMCC common stock issuable upon the exercise of
vested options that are exercisable within 60 days of August 29, 2000.

(14) Includes 75,000 shares of AMCC common stock issuable upon the exercise of
vested options that are exercisable within 60 days of August 29, 2000.

(15) Includes 29,167 shares of AMCC common stock issuable upon the exercise of
vested options that are exercisable within 60 days of August 29, 2000.

(16) Includes 74,988 shares of AMCC common stock that are subject to repurchase
by AMCC. Includes 1,805,657 shares issuable upon the exercise of options
that are exercisable within 60 days of August 29, 2000, of which 10,554
are subject to repurchase rights in favor of AMCC.

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<PAGE>

MMC NETWORKS BUSINESS

MMC Networks, Inc. is a leading developer and supplier of Network Processing
Platforms, including both Network Processors and Switch Fabrics, that allow
network equipment vendors to more rapidly develop high-performance, feature-
rich, cost-effective products supporting a broad range of networking functions.

Network Processors are high-performance, software-programmable processors
optimized for networking and communications applications, while Switch Fabrics
are high-capacity, software-configurable devices that provide central, high-
speed interconnections amongst multiple processors or other devices. MMC
Networks Network Processors and Switch Fabrics form the core silicon "engines"
of LAN and WAN products for both Service Provider and Enterprise networks.

MMC Networks' AnyFlow(TM) family of products includes the MMC nP(TM) family
of Network Processors, the nPX(TM) family of Switch Fabrics, and the nPC family
of Coprocessors and Connectivity Components. MMC Networks also offers and
markets nP Design Services(TM), which include hardware and software design
consulting in addition to training and traditional support services. MMC
Networks believes that network equipment vendors are able to reduce design and
development costs and accelerate product development cycles for high-
performance routers and switches by using the MMC Networks' products and
services.

MMC Networks' products employ its proprietary nPcore(TM)network-optimized
RISC processor core and its ViX(TM) interconnect architecture. These enable
network equipment vendors to implement high-performance, value-added features
in their switch and router products. MMC Networks' customers use its Network
Processor Platforms to develop and market multi-gigabit, wire-speed, policy-
enabled, Layer 2-7 WAN and LAN switches and routers; wireless, cable, and dial-
up access and aggregation platforms; Web switching; optical switching; security
and firewall devices; Virtual Private Network (VPN) systems; Voice Over IP
(VoIP) switching; ATM switches; and other communications platforms.

MMC Networks was incorporated in California in September 1992 and
reincorporated in Delaware in October 1997. MMC Networks' principal executive
offices are located at 1144 East Arques Avenue, Sunnyvale, California 94085,
and its telephone number is (408) 731-1600.

Industry Background

The volume of traffic sent over data networks has increased dramatically
over the past decade, and nearly all observers of the networking industry agree
that the next several years will see continued substantial growth. The
proliferation of high-performance personal computers, workstations and servers,
a growing reliance on increasingly data-intensive networked applications, and a
dramatic increase in the number of users connected to both corporate networks
and the Internet have all contributed to this growth. In addition, as
organizations increasingly rely on corporate intranets, the Internet,
eCommerce, and business-to-business electronic commerce, networks have been
extended to connect branch offices, home offices, mobile users and, more
recently, customers and suppliers. These trends continue to drive demand for
high-performance networking equipment that supports internetworking among a
variety of types of LANs and WANs, supporting a wide variety of network
protocols.

As the size and performance requirements of networks have grown, network
equipment vendors have increasingly focused on advanced switching and routing
devices to meet the increasing demand for both performance and features. In
addition to improved performance and multiprotocol connectivity, both network
service providers and enterprises are more frequently demanding networking
equipment that supports a broad variety of advanced features, without
compromising performance. For example, as the reach of enterprise data networks
has spread to WANs, the Internet, and business-to-business extranets, network
administrators need security at multiple points in the network. As businesses
become more dependent on intranets and the Internet, they are increasingly
demanding the ability to give different levels of priority, or quality of
service (QoS), to their multiple applications and users to make more efficient
use of networking resources. Similarly, new

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<PAGE>

applications such as video conferencing, multimedia training and Internet
telephony (Voice Over IP) require end-to-end quality of service guaranteed
across entire networks. Finally, in order to implement such advanced features
across complex, high-speed networks, network administrators also need better
network management capabilities to help them analyze the traffic flowing
through the network, to anticipate traffic growth and to quickly isolate and
solve network problems.

While attempting to respond to customer demands for more performance, new
capabilities, greater security and better management, network equipment vendors
face growing competition, evolving networking standards and increasing market
segmentation. Rapid growth in the data networking industry has attracted a
multitude of new entrants who are competing with or, in many instances, are
being acquired by major network equipment vendors. To compete effectively,
network equipment vendors must improve their time-to-market and lower their
costs while continuing to increase performance and add advanced features and
differentiated functionality.

To stay competitive in this environment, network equipment vendors must
address the needs of their increasingly diverse customer base and provide
support for a broad array of networking protocols and features without
degrading performance. To accomplish these purposes, these vendors have
employed increasingly capable semiconductor devices in their networking
equipment, the most important being those used as the switching or routing
"engines." Network equipment vendors have traditionally relied on one of two
approaches for these semiconductor engines: general-purpose processors or
custom-developed Application-Specific Integrated Circuits (ASICs). Each of
these approaches has both advantages and disadvantages. Switches and routers
utilizing off-the-shelf, general-purpose processors can be brought to market
relatively quickly and can be programmed in software to add new features or
adapt to changes in industry protocols and standards, but these processors
cannot generally offer sufficient performance for today's high-speed networks
and usually bring unacceptably high unit costs. Alternatively, switches and
routers based on ASICs can be designed to achieve high performance and produced
at relatively low unit cost, but the ASIC development cycle is usually too time
consuming to permit the development of high-performance ASICs with advanced
feature sets while meeting network equipment vendors' time-to-market
constraints. In addition, ASICs involve the risk of additional delays
associated with multiple iterations that may be required in the ASIC
development cycle, provide little flexibility to conform to rapidly evolving
standards and protocols and lack the full feature support that would allow them
to address multiple segments of the networking market. Consequently, neither
approach achieves network equipment vendors' requirements for high performance
and advanced features without imposing an unacceptable time-to-market and/or
cost burden.

Market Opportunity for Network Processors

These market trends have created a significant opportunity for Network
Processors and Switch Fabrics. Combining the lower costs of ASICs with the
flexibility and adaptability offered by general-purpose processors, Network
Processors are software-programmable processors optimized for networking and
communications applications. In combination with high-capacity interconnections
provided by Switch Fabrics, off-the-shelf Network Processors enable the rapid
design and development of switching and routing solutions that incorporate
advanced features, operate without significant performance degradation, and
address evolving standards and multiple market segments through software
programmability. They further allow vendors to develop systems that can be
produced in a cost-efficient manner and within the time-to-market constraints
of the competitive networking equipment market. Network Processors and Switch
Fabrics offer network equipment vendors the ability to reduce the time and
expense involved in developing customized chip sets for individual network
switching products, while allowing vendors to focus on developing networking
systems which are powerful, cost-effective, differentiated and feature-rich to
satisfy the needs of their increasingly diverse customer bases.

MMC Networks' Strategy

MMC Networks' strategy is to enable network equipment vendors to rapidly
develop and introduce differentiated products by leveraging MMC Networks' high-
performance, feature-rich, software-programmable,

93
<PAGE>

cost-effective Network Processors and high-capacity, software-configurable
Switching Fabrics. Key elements of the MMC Networks' strategy include the
following:

Provide a Complete Solution. Most high-performance WAN and LAN switches and
routers require both switching and packet processing components and may require
additional traffic management components. By offering a complete Network
Processing Platform, including both Switching Fabric and Network Processor
chipsets, and by further embedding rich traffic management functionality in its
fabrics and processors, MMC Networks seeks to accelerate network equipment
vendors' time to market by reducing the need to source, integrate, and test
multiple chipsets from multiple vendors.

Target High-Growth Markets. MMC Networks' Network Processors and Switching
Fabrics target the rapidly growing enterprise and service provider markets.
These markets also experience rapid growth in performance needs and rapid
changes in features required, all of which make the MMC Networks' adaptable,
software-programmable products ideal for equipment targeted at these sectors.
MMC Networks focuses on the design and development of Network Processing
Platforms that enable network equipment vendors to rapidly design and bring to
market a broad variety of differentiated networking solutions meeting the
performance and feature requirements of this evolving market.

Facilitate Customer Success. Increasing competition and evolving networking
standards will continue to exert pressure on network equipment vendors to
introduce new products rapidly and cost-effectively. MMC Networks works closely
with its customers to design products that enable rapid time-to-market, provide
performance and functionality compatible with such customers' current and
future needs, and complement network equipment vendors' own product development
efforts.

Extend Technology Leadership. MMC Networks has made substantial investments
in the technologies that underlie its Network Processors, with the goal of
setting new price/performance benchmarks and enabling the widespread use of
sophisticated networking functionality. For example, MMC Networks' ViX
architecture, which forms the basis of all of its products, is designed to
enable network equipment vendors to implement value-added features without
significant performance degradation. MMC Networks is continually developing new
technologies for its Network Processors, such as the Policy Engine, introduced
in 1999 and embedded in the MMC Networks' nP7120 Gigabit Network Processor
(formerly known as the GPIF-207), which is designed to allow more features at
wire-speed.

Leverage Fabless Semiconductor Model. MMC Networks seeks to leverage the
flexibility of its fabless semiconductor business model to lower technology and
production risks, increase profitability and reduce time-to-market. MMC
Networks' fabless model allows it to focus on its core Network Processing
Platform design competencies, while minimizing the capital and operating
infrastructure requirements.

Technology

MMC Networks' Network Processing Platforms include high-capacity, flexible
switching fabrics and multi-gigabit, open-architecture, software-programmable
processors with instruction sets that have been optimized for processing and
switching networking data, voice and video packets and cells. MMC Networks
believes that the key underlying technologies employed in its Network
Processors and Switching Fabrics give it a substantial competitive advantage.
The core technologies employed in current products include the MMC Networks'
nPcore network-optimized RISC processor core, Policy Engine, ViX architecture,
Per-Flow and Per-Stream Queuing technology, Direct Replication Engine
technology, and Virtual SAR technology.

nPcore: Programmable BitStream Processor Technology. MMC Networks' nPcore is
a network-optimized instruction set processor core embedded in each of the MMC
Networks' Network Processors. Employing MMC Network's Programmable BitStream
Processor technology, the nPcore performs the processing of packet and cell
headers, including such functions as real-time parsing, matching and table
look-up, as well as bit stream manipulations such as adding, deleting,
substituting, appending and pre-pending. This

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<PAGE>

functionality enables network equipment vendors to build high-performance
switches and routers with additional services that address network security,
class of service and quality of service and improve management throughout the
network.

Policy Engine. MMC Networks' latest Network Processors include embedded,
programmable Policy Engines that provide intelligent packet classification for
enabling Policy-based network services. Since they are programmable, they can
support both the fluid service requirements of network providers and evolving
policy-based network management standards.

ViX Architecture. The ViX architecture is a switch fabric architecture that
uses a patented point-to-point connection matrix that permits the use of a
wide, centralized, shared-memory structure, while separating control
information from user data. The ViX architecture's use of "point-to-point
connections" is designed to enable network equipment vendors to easily scale
the number of ports in their switches and routers, unlike shared-bus
architectures that run into clock frequency, bus capacitance and pin count
limitations. The use of a "wide, centralized shared-memory structure" enables
network equipment vendors to scale the bandwidth and amount of buffer memory,
unlike crossbar architectures which become increasingly expensive as bandwidth
and buffer requirements increase. The "separation of control information from
user data" enables network equipment vendors to more easily implement high-
performance processing, queuing, replication and switching functions for
networking applications, unlike shared-bus and crossbar architectures, which
may require complex processors to coordinate multiple functions across multiple
ports and the replication of user data within their buffers. In addition, the
ViX architecture is designed as an open architecture, providing external access
to the appropriate timing and control signals, which enables network equipment
vendors to more easily implement differentiated features and functionality.

Per-Flow and Per-Stream Queuing (PFQ and PSQ) Technology. All networking
switches and routers must buffer data when networks become congested. Networks
that use conventional switches and routers usually buffer data on a linear,
first-in-first-out ("FIFO") basis. As data accumulates in the buffer, new data
sits "behind" all of the information that previously arrived at the
switch/router. High-priority information sent to that switch or router is not
distinguished from other data and is therefore "stuck" in the back of the
buffer until such other data is sent. MMC Networks' PFQ and PSQ technology is
designed to alleviate the limitations of FIFO queuing by assigning each piece
of data to its own unique queue and then scheduling the sending of the data
according to software-programmable algorithms developed by the network
equipment vendor, thus allowing the switch or router to implement class of
service or quality of service functionality. Switches and routers incorporating
PFQ technology can be designed to support up to 500,000 queues, providing
enough queues for large-scale networks.

Direct Replication Engine Technology. When data must be broadcast to all
ports on a switch or router or "multicast" to select ports, routers and
switches must replicate data packets for each port connection. This process may
significantly degrade performance. MMC Networks' Direct Replication Engine
technology is designed to provide wire-speed multicast and broadcast capability
by leveraging the separation of control information from user data enabled by
the ViX architecture. This capability allows the switch or router to store a
single copy of the data to be transmitted and replicate it to multiple ports in
a single instruction cycle.

Virtual SAR Technology. Conventional switches and routers use expensive
segmentation and reassembly ("SAR") chips to convert frames to cells and vice
versa, thus enabling the internetworking of ATM with Ethernet, frame relay and
other packet-based protocols. MMC Networks' Virtual SAR technology provides the
ability to convert frames to cells and vice versa, thus eliminating the need
for expensive external SAR chips.

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<PAGE>

Target Markets and Products

MMC Networks' products serve two primary markets: enterprise networks and
service providers. MMC Networks' products are designed into networking
equipment intended for both of these markets. The following table summarizes
selected product and service applications within each of these markets:

<TABLE>
<CAPTION>
Enterprise Network Service Provider Services
------------------ -------------------------
<S> <C> <C> <C>
Layer 2/3/4/7 Switching Wiring Closet ATM Voice
10/100 Ethernet Power Workgroup Packet Over Sonet (POS) Cable
Gigabit Ethernet Campus Backbone Optical (MAN) Edge Dial
ATM Remote Access xDSL Wireless
Firewalls Internet Routers Web Switch VPN
VPN Frame Relay
</TABLE>

MMC Networks' nP Network Processors and nPX Switching Fabrics provide the
core functionality for a wide array of switches and routers developed by
network equipment vendors targeting both the enterprise network and service
provider markets. MMC Networks' also offers development hardware kits, which
assist customers in their technical evaluation of MMC Networks' products.

Network Processors (Np Family)

nP7120 Gigabit Network Processor. Also known as the GPIF-207 Gigabit Packet
Processor, the nP7120 Gigabit Network Processor is MMC Networks' first multi-
gigabit packet processor. nP7120 offers two gigabit-rate ports for Gigabit
Ethernet or OC-12 rate Packet Over Sonet (POS)/HDLC connections, and these can
be further bonded together to support up to an OC-48 rate connection. With two
software-programmable, network-optimized nPcore processor cores, it enables
wire-speed Layer 2-7 packet processing, and the embedded Policy Engine allows
wire-speed intelligent packet classification for Policy-based network services
without degrading packet processing performance. With support for MMC Network's
ViX interconnect architecture, nP7120 can be connected to nPX5400 or nPX5500
switches, other fabrics, or custom logic so that it can function as a
standalone packet processor. MMC Networks announced the nP7120 in 1999 and
expects to bring it into production in 2000. The development and introduction
of new product classes like the nP7120 is subject to numerous risks and
uncertainties including delays in the design and engineering process, uncertain
manufacturing and assembly lead times, yield uncertainties and product defects.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Future Results--New Product Development and
Technological Change", "--Dependence on Independent Manufacturers" and "--
Product Complexity."

nP7110 Gigabit Network Processor. Also known as the XPIF Gigabit Packet
Processor, the nP7110 Gigabit Network Processor was MMC Networks' first
gigabit-rate packet processor. nP7110 includes a software-programmable,
network-optimized nPcore processor core for wire-speed packet processing of a
Gigabit Ethernet or Packet Over Sonet (POS)/HDLC connection. nP7110 can be
connected to MMC Networks nPX5400 or nPX5500 switches or other fabrics. nP7110
began shipping in volume in 1999.

nP7000 Ethernet Network Processor Family. Also known as the EPIF Ethernet
Packet Processor family, the members of the nP7000 family each support multiple
10/100 Ethernet interfaces, including embedded, on-chip 10/100 Ethernet Media
Access Control (MAC) functions. nP7100 family Network Processors all support
Layer 2-7 packet processing, enabling a wide variety of feature-rich enterprise
and service provider products.

Switch Fabric Products (NPX, ATMS, and PS FAMILIES)

nPX5400 Switch Fabric. Also known as the AnyFlow 5400, the single-chip
nPX5400 can be cascaded to provide up to 22 Gbps full-duplex (44 Gbps
aggregate) high-throughput switching capacity, while simultaneously providing
wire-speed IP multicast operations and Per-Stream Queuing (PSQ). The nPX5400

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first sampled in 1998 and began shipping in volume in 1999 for 10/100/1000
Ethernet, PoS, and other packet-network applications.

nPX5500 Switch Fabric. Also known as the AnyFlow 5500, MMC Networks' nPX5500
Switch Fabric chip set was the first member of the nPX (AnyFlow) family and
implements MMC Networks' Virtual SAR and Per Flow Queuing (PFQ) technologies.
The nPX5500 employs a modular design which enables deployment in a wide range
of networking equipment, including ATM, 10/100/1000 Ethernet, HDLC, Packet Over
Sonet (PoS), and various WAN and MAN switches, routers, and other
communications platforms. The nPX5500 provides wire-speed switching and routing
with quality of service and packet/cell internetworking at a bandwidth of 20
Gbps full-duplex (40 Gbps aggregate), with throughput of up to 20 million
packets-per-second (pps). The nPX5500 sampled in 1997 and began volume
shipments in 1998.

ATMS2000 Family. The ATMS2000 ATM Switch chip set provides the core
functionality of a high-performance ATM switch, providing a cost-effective
solution for 2.5- or 5-Gbps switches and routers with port densities of up to
32 OC-3 ports or eight OC-12 ports.

PS1000 Family. The PS1000 Ethernet Switch chip set implements the core
functionality of a high-performance Fast Ethernet switch, enabling low-cost
solutions supporting scalable port densities from eight to 128 10-Mbps Ethernet
ports and up to 32 100-Mbps Fast Ethernet ports with the option of one or two
ATM uplinks.

Products Under Development

MMC Networks expects to continue to enhance and refine its Network
Processors and Switch Fabrics, while adding additional operational features
designed to make the MMC Networks' products more attractive to a wide range of
network equipment vendors.

Customers

MMC Networks sells its products to a variety of network equipment vendors.
As of June 30, 2000, MMC Networks had achieved 72 design wins among more than
40 network equipment vendors for its newer nP Network Processor and nPX Switch
Fabric families, all formerly known as AnyFlow products. This total does not
include working designs employing MMC Networks' older ATMS2000 and PS1000
product families. Each design win is a customer platform, usually containing
multiple units of MMC Networks' chips. To qualify as a design win, a network
equipment vendor must have (i) purchased network processor prototypes, a
reference design kit or software drivers from MMC Networks and (ii) commenced
development of a product incorporating MMC Networks' network processors. During
the design-in process, MMC Networks works closely with each customer to assist
in resolving technical questions and to help the customer achieve volume
production of its products. Achieving a design win with a network equipment
vendor provides no assurance that such network equipment vendor will ultimately
ship products incorporating MMC Networks' network processors.

None of MMC Networks' customer purchase agreements contain a minimum
purchase requirement. Customers typically purchase MMC Networks' products
pursuant to short-term purchase orders that may be canceled without charge if
notice is given within an agreed-upon period.

MMC Networks' major customers for the last three years, from whom revenues
exceeded 10% of total revenues, are listed below.
<TABLE>
<CAPTION>
Year Ended
December 31
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cisco Systems, Inc......................................... 52% 50% 28%
International Business Machines Corporation ("IBM")........ 19% * *
</TABLE>

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<TABLE>
<CAPTION>
Year Ended
December 31
---------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Mitsui Comtek Corp., a non-stocking sales representative
for Japan............................................... * 12% 28%
Hitachi.................................................. * * 12%
</TABLE>
--------
* Less than 10% during year

In the third quarter of 1999, IBM accounted for 22% of total revenues.
During that quarter, IBM announced it was closing down most of its network
equipment business. IBM informed MMC that it will cease the manufacture and
sale of its network equipment products that use MMC products, and it will cease
future purchases of those MMC products. Revenues from IBM decreased to 6%
during the fourth quarter of 1999, and MMC Networks does not expect to realize
any revenue from IBM in 2000.

Sales, Marketing and Technical Support

MMC Networks targets customers based on industry leadership, technology
leadership and target applications. MMC Networks works with large and small,
public and privately held network and communications equipment vendors. MMC
Networks maintains close working relationships with its customers in order to
design and develop solutions which specifically address their needs. MMC
Networks markets its products through a direct sales and marketing
organization, headquartered in Sunnyvale, California, direct sales offices in
Massachusetts and North Carolina, and through sales representatives in the
United States, the United Kingdom and several Pacific Rim countries. Sales
representatives are selected for their understanding of the networking
marketplace and their ability to provide effective field sales support for MMC
Networks' products.

MMC Networks has a number of marketing programs designed to inform network
equipment vendors about the capabilities and benefits of MMC Networks'
products. MMC Networks' marketing efforts include participation in industry
trade shows, technical conferences and technology seminars, preparation of
competitive analyses, sales training, publication of technical and educational
articles in industry journals, maintenance of MMC Networks' World Wide Web
site, advertising and direct mail distribution of MMC Networks literature.

MMC Networks provides both technical support and design consulting to
customers via its nP Design Services programs, delivered through factory system
engineers and, if necessary, product designers and architects. Local field
support is provided in person or by telephone. MMC Networks plans to hire
additional support and design consulting staff for remote offices, as the need
arises. MMC Networks believes that providing network equipment vendors with
comprehensive product service and support is critical to maintaining a
competitive position in the networking market and is critical to shortening
customers' design-in cycles. MMC Networks works closely with its customers to
monitor the performance of its product designs and to provide support at each
stage of customer product development.

Research and Development

MMC Networks' success will depend to a substantial degree upon its ability
to develop and introduce in a timely fashion new products and enhancements to
its existing products that meet changing customer requirements and emerging
industry standards. MMC Networks has made and plans to continue to make
substantial investments in research and development and to participate in the
development of industry standards.

MMC Networks focuses its development efforts on network processor product
development. Before a new product is developed, the MMC Networks' research and
development engineers work with marketing managers and customers to develop a
comprehensive requirements specification. After the product is designed and
commercially released, MMC Networks' engineers continue to work with customers
on early design-in efforts to understand requirements for future generations
and upgrades. MMC Networks employs engineers working

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on many stages of chip architecture, design, verification and test. In
addition, MMC Networks also employs hardware and software engineers to develop
its reference design kits and related software.

MMC Networks' research and development expenditures, net of non-recurring
engineering funding received from customers, totaled $22.6 million, $14.6
million and $8.3 million in the years ended December 31, 1999, 1998 and 1997,
respectively, representing 32%, 30% and 38% of revenues for such periods,
respectively. Research and development expenses primarily consist of salaries
and related costs of employees engaged in ongoing research, design and
development activities and subcontracting costs. Non-recurring engineering fees
paid by MMC Networks' customers to facilitate product development projects
reduce these expenses.

Manufacturing

Currently, MMC Networks outsources all of its semiconductor manufacturing,
including wafer fabrication, unit assembly and test. This "fabless"
semiconductor-manufacturing model allows MMC Networks to focus substantially
all of its resources on the design, development and marketing of products.
"Fabless" manufacturing also significantly reduces the capital requirements of
MMC Networks.

MMC Networks purchases certain of its products fully assembled and tested,
on a "turnkey" basis. MMC Networks obtains other products by purchasing
processed wafers and then subcontracting the assembly and test of finished
units.

During 1999, MMC Networks purchased turnkey products from Oki Semiconductor
and NEC in Japan, and it purchased wafers from Taiwan Semiconductor
Manufacturing Corporation (TSMC), United Microelectronics Corporation (UMC) in
Taiwan, and Panasonic in Japan. MMC Networks anticipates that the portion of
its production purchased as wafers rather than turnkey units will increase in
future periods. MMC Networks chose these three manufacturers in large part due
to their conformance with international standards of technology, their
capacity, their quality and their support for the state-of-the-art design tools
used by MMC Networks.

MMC Networks uses mainstream Complementary Metal Oxide Silicon (CMOS)
processes for the manufacturing of its products. MMC Networks' main products
currently are fabricated in .25, .35, .5 and .8 micron CMOS. MMC Networks plans
to build certain new products on .18 micron CMOS. MMC Networks continuously
evaluates the benefits, on a product-by-product basis, of migrating to a
smaller geometry process in order to reduce costs and has commenced migration
of certain products to smaller geometries. MMC Networks believes that
transitioning its products to increasingly smaller geometries will be important
for it to remain competitive. No assurance can be given that future process
migration will be achieved without difficulty.

MMC Networks must place orders approximately 10 to 13 weeks in advance of
expected delivery. As a result, it has only a limited ability to react to
fluctuations in demand for its products, which could cause MMC Networks to have
an excess or a shortage of inventory of a particular product. If capacity
becomes less available in the future, MMC Networks may be required to place
orders earlier than 10 to 13 weeks in advance of expected delivery.

Competition

The data networking and semiconductor industries are intensely competitive
and are characterized by constant technological change, rapid rates of product
obsolescence and price erosion. MMC Networks' Network Processors and Switch
Fabrics compete now or are expected to compete in the future with current or
future products from companies such as Broadcom, Conexant, Galileo Technology,
IBM, Intel, Lucent Technologies, Motorola, PMC-Sierra, SiTera, and Texas
Instruments, as well as additional and potential future smaller start-up
companies. Additional existing domestic and international semiconductor
suppliers could also

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enter the market in the future. MMC Networks could also face competition from
suppliers of products based on new or emerging technologies. In addition, many
of MMC Networks' existing and potential customers, including Cisco, internally
develop ASICs, general purpose processors, Network Processors, or other devices
which attempt to perform some or all of the functions performed by MMC
Networks' products.

Intellectual Property

MMC Networks' future success and ability to compete are dependent, in part,
upon its proprietary technology. MMC Networks has been granted ten patents and
has filed nine other patent applications in the United States. Internationally
MMC Networks has been granted four patents and has filed 21 other patent
applications. None of MMC Networks' patent applications relate to specific
products of MMC Networks, as it believes that it may be more effective to seek
patent protection with respect to its key underlying technologies, such as
aspects of its ViX Architecture.

In addition, MMC Networks claims copyright protection for certain
proprietary software and documentation. MMC Networks also attempts to protect
its trade secrets and other proprietary information through agreements with its
customers, suppliers, employees and consultants, and through other security
measures. Although MMC Networks intends to protect its rights vigorously, there
can be no assurance that these measures will be successful. In addition, the
laws of certain countries in which MMC Networks' products are or may be
manufactured or sold, including Japan and Taiwan, may not protect MMC Networks'
products and intellectual property rights to the same extent as the laws of the
United States.

MMC Networks believes that, because of the rapid pace of technological
change in the networking industry, its technical expertise and ability to
introduce new products on a timely basis will be more important in maintaining
its competitive position than protection of its intellectual property. MMC
Networks believes that patent, trade secret and copyright protection are
important but must be supported by expanding the knowledge, ability and
experience of MMC Networks' personnel and introducing and enhancing products.
Although MMC Networks continues to implement protective measures and intends to
defend vigorously its intellectual property rights, there can be no assurance
that these measures will be successful.

Employees

As of June 30, 2000, MMC Networks had a total of 214 full-time employees and
19 contractors. Of the full-time employees, 113 were in research and
development, 33 in marketing and technical support, 14 in sales and 54 in
operations and administration. MMC Networks' employees are not represented by
any collective bargaining agreement, and MMC Networks has never experienced a
work stoppage. MMC Networks believes its employee relations are good.

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MMC NETWORKS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with MMC Networks'
financial statements and related notes and the other financial information
included elsewhere in this prospectus/proxy solicitation statement. This
discussion contains forward-looking statements that involve risks and
uncertainties. MMC Networks' actual results could differ materially from the
results contemplated by these forward-looking statements as a result of certain
factors, including those discussed below and elsewhere in this prospectus/proxy
solicitation statement, particularly under the heading "Risk Factors."

Results of Operations

Comparison of the Six Months Ended June 30, 2000 to the Six Months Ended June
30, 1999.

Revenues. Revenues increased during the second quarter of 2000 by $4.4
million in comparison to revenues for the first quarter of 2000 of $12.6
million. Revenues decreased to $17.0 million for the three months ended June
30, 2000 from $19.3 million for the three months ended June 30, 1999. Revenues
decreased to $29.7 million for the six months ended June 30, 2000 from $35.4
million for the same period in 1999.

The decreases in second quarter revenues and first half revenues in 2000
compared to the same periods in 1999 are primarily due to two events. First,
IBM, which accounted for 23% of revenues in the second quarter of 1999,
announced during the third quarter of 1999 that it was closing down most of its
network equipment business and informed MMC Networks that it was ceasing the
manufacture and sale of its network equipment products, which use MMC Networks'
products. Revenues to IBM were zero in the first and second quarters of 2000.

Second, Cisco Systems, MMC Networks' largest customer in the six months
ended June 30, 1999 at 52% of revenues, decreased its purchases from MMC
Networks during the fourth quarter of 1999 and the first half of 2000, as it
terminated a large program and decreased purchases while it consumed inventory
already purchased. Revenues from Cisco were 45% of total revenues in the fourth
quarter of 1999, 35% in the first quarter of 2000 and 25% in the second quarter
of 2000. These revenues from Cisco exclude revenues from ArrowPoint
Communications, which Cisco acquired on June 23, 2000.

Decreases in revenues from IBM and Cisco were partially offset by increases
in revenues from other customers. Revenues from ArrowPoint Communications
increased to 8% of revenues in the first quarter of 2000 and 20% in the second
quarter of 2000, up from under 5% in the fourth quarter of 1999. Revenues from
Nortel Networks increased to 24% of revenues in the first quarter of 2000 and
23% of revenues in the second quarter of 2000, up from 18% in the fourth
quarter of 1999. Revenues from Fujitsu increased to 11% of revenues in the
first quarter of 2000 and 13% in the second quarter of 2000, up from under 5%
in the fourth quarter of 1999. In 2000, MMC Networks expects that revenues from
the AnyFlow product line will constitute most of its revenue, as the ATM and PS
lines near the end of their life cycles.

MMC Networks may experience substantial period-to-period fluctuations in
future operating results due to changes in demand for its products or due to
the continued average sales price erosion that characterizes the data
networking and semiconductor industries.

Cost of Revenues; Gross Profit. Cost of revenues decreased to $5.0 million
for the three months ended June 30, 2000 from $5.7 million for the three months
ended June 30, 1999. Cost of revenues also decreased to $8.9 million for the
first half of 2000 from $10.5 million for the same period in 1999. Decreased
cost of revenues in both periods resulted from decreased unit shipments.

Gross margin was 70.6% for the three months ended June 30, 2000, compared to
70.7% for the three months ended June 30, 1999. Gross margin for the six months
ended June 30, 2000 was 70.1%, compared to

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70.4% for the same period in 1999. MMC Networks anticipates that gross margins
will remain in the same range during the remainder of 2000.

Research and Development Expense. Research and development expenses
increased to $7.9 million for the three months ended June 30, 2000 from $5.3
million for the three months ended June 30, 1999. These expenses also increased
to $15.1 million for the six months ended June 30, 2000 from $9.7 million
during the same period in 1999. The increases in both 2000 periods are due
primarily to increased new product development activity. As a percentage of
total revenues, research and development expenses increased to 46.5% during the
second quarter of 2000 from 27.2% during the same period in 1999, increased to
50.8% during the first half of 2000 from 27.4% in the same period in 1999 due
to the continued increase in research and development activity and the decrease
in revenue from period to period.

In 2000, MMC Networks expects research and development expenses to continue
to increase in absolute dollars, but to increase at a lower percentage rate
than the expected rate of increase in revenues.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $3.7 million for the three months ended
June 30, 2000 from $2.7 million for the three months ended June 30, 1999. These
expenses also increased to $6.9 million for the six months ended June 30, 2000
from $5.1 million during the same period in 1999. The increases in both 2000
periods are due to increased headcount in selling, general and administrative
functions and increased sales support functions.

As a percentage of total revenues, selling, general and administrative
expenses increased to 21.9% for the three months ended June 30, 2000 from 13.9%
for the three months ended June 30, 1999. They also increased to 23.4% during
the first half of 2000 from 14.3% in the same period in 1999. The increases in
both 2000 periods are due to increased headcount in selling, general and
administrative functions and increased sales support functions, and the
decrease in revenue from period to period.

In 2000, MMC Networks expects selling, general and administrative expenses
to continue to increase in absolute dollars, but to increase at a lower
percentage rate than the expected rate of increase in revenues.

Interest income, net. Interest income, net increased to $1.1 million for the
three months ended June 30, 2000 from $691,000 for the three months ended June
30, 1999. Interest income, net increased to $2.1 million for the six months
ended June 30, 2000 from $1.3 million during the same period in 1999. Interest
income, net consists of interest income, which is interest earned on average
cash, cash equivalents and short-term investments, offset by interest expense.
Interest income, net consisted primarily of interest income for the periods
presented. The increases in interest income, net are due to increased cash and
investment balances provided by cash flow from operations and the exercise of
stock options.

Provision for Income Taxes. The provision for income taxes decreased to
$453,000 for the three months ended June 30, 2000 from $2.3 million for the
three months ended June 30, 1999, reflecting effective tax rates of 32% and
36%, respectively. The provision for income taxes decreased to $264,000 for the
first half of 2000 from $4.1 million during the same period in 1999. The
decrease in the provision for income taxes during both periods is due to the
decrease in income before taxes and the decrease in the effective tax rate. The
decrease in the effective tax rate is due to increased research and development
tax credits and an anticipated increase in operations in Israel, where MMC
Networks has qualified for certain low rates of taxation. MMC Networks expects
its effective tax rate to remain at about 32% during 2000.

Comparison of the Year Ended December 31, 1999 to the Year Ended December 31,
1998.

Revenues. Revenues increased to $70.1 million for the year ended December
31, 1999 from $49.3 million for the year ended December 31, 1998. Despite the
decline in average sales prices experienced in the data networking and
semiconductor industries during 1999, increased unit shipments in 1999 compared
to 1998 resulted in increased revenues. The increase in unit shipments was due
to both an increase in the number

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of customer designs in production and an increase in the volume of shipments of
existing and new designs. MMC Networks may experience substantial period-to-
period fluctuations in future operating results due to changes in demand for
its product or continued average sales price erosion.

The increase year to year was mainly due to an increase in sales of the
AnyFlow product line. Sales of the ATM and PS product lines were approximately
flat year to year. In 2000, MMC Networks expects that revenues from the AnyFlow
product line will constitute most of its revenue, as the ATM and PS lines near
the end of their life cycles.

Cost of Revenues; Gross Profit. Cost of revenues increased to $21.5 million
for the year ended December 31, 1999 from $14.4 million for the year ended
December 31, 1998 as a result of increased unit shipments. Gross margins
declined slightly to 69.3% from 70.9% for the years ended December 31, 1999 and
1998, respectively, due to the decline in average sales prices.

Research and Development Expenses, Net. Net research and development
expenses increased to $22.6 million for the year ended December 31, 1999 from
$14.6 million for the year ended December 31, 1998. The increase is due
primarily to increased new product development activity. Research and
development expenses, net, include expenses incurred under a number of
contracts with customers whereby MMC Networks receives partial or complete
reimbursement for expenses incurred. These reimbursements are recorded as an
offset against research and development expenses. For further discussion of
funding received under MMC Networks' research and development contracts, see
Note 9 of MMC Networks, Inc. Notes to the Consolidated Financial Statements--
Research and Development Contracts.

As a percentage of total revenues, research and development expenses net,
increased to 32.3% during 1999 from 29.5% during 1998.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $11.2 million for the year ended December
31, 1999 from $9.2 million for the year ended December 31, 1998 due to several
factors: increased sales commissions resulting from higher revenues, increased
selling and marketing costs associated with new products, additional personnel,
and additional costs incurred to provide customer support for new designs. As a
percentage of total revenues, selling, general and administrative expenses
decreased to 15.9% for the year ended December 31, 1999 from 18.6% for the year
ended December 31, 1998 as revenue growth outpaced the increase in selling,
general and administrative expenses required to support that growth.

Interest income, net. Interest income, net consists of interest income
offset by interest expense. Interest income reflects interest earned on average
cash, cash equivalents and short-term investment balances. Interest income
increased to $3.2 million for the year ended December 31, 1999 from $2.2
million for the year ended December 31, 1998. This increase is due to increased
cash and investment balances provided by cash flow from operations. Interest
expense reflects interest on borrowings against lease lines to finance the
acquisition of capital equipment. Interest expense was $34,000 and $55,000 for
the years ended December 31, 1999 and 1998, respectively.

Provision for Income Taxes. The provision for income taxes increased to $6.1
million for the year ended December 31, 1999 from $3.7 million for the year
ended December 31, 1998, reflecting effective rates of 34% and 30.7%,
respectively. The increase in the provision and the increase in the effective
tax rate are due to the increase in pretax income from period to period and the
reduction of valuation allowances and resulting realizability of deferred tax
benefits during 1998.

Comparison of the Year Ended December 31, 1998 to the Year Ended December 31,
1997

Revenues. Revenues increased to $49.3 million for the year ended December
31, 1998 from $21.9 million for the year ended December 31, 1997. Despite a
decline in average sales prices during 1998,

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increased unit shipments in 1998 as compared to 1997 resulted in increased
revenues across all MMC Networks's products. The increase in unit shipments was
primarily due to the shift of the AF5500 into volume production and the
continued success of the ATMS2000. Although PS1000 revenue grew year over year,
PS1000 revenue as a percent of total revenue decreased year over year. This
decline was due to the economic downturn in Japan and Asia and poor acceptance
in the marketplace of the end products of equipment vendors using the PS1000.

Cost of Revenues; Gross Profit. Cost of revenues increased to $14.4 million
for the year ended December 31, 1998 from $6.5 million for the year ended
December 31, 1997 as a result of increased unit shipments associated with
increased sales of MMC Networks's network processors to new and existing
customers. Gross margins remained relatively constant at 70.9% and 70.2% for
the years ended December 31, 1998 and 1997, respectively. Higher margins from
newer products offset declining margins from older products.

Research and Development Expenses, Net. Net research and development
expenses increased to $14.6 million for the year ended December 31, 1998 from
$8.3 million for the year ended December 31, 1997. The increase is due
primarily to increased new product development activity. As part of a plan to
increase the number of new products under development, during the second
quarter of 1998 MMC Networks established a wholly owned subsidiary in Israel,
MMC Networks Israel Ltd., which functions as a design center. Research and
development expenses net, include expenses incurred under a number of contracts
with customers whereby MMC Networks receives partial or complete reimbursement
for expenses incurred. These reimbursements are recorded as an offset against
research and development expenses. For further discussion of funding received
under MMC Networks's research and development contracts see Note 9 of MMC
Networks, Inc. Notes to the Consolidated Financial Statements -- Research and
Development Contracts.

As a percentage of total revenues, research and development expenses, net
decreased to 29.5% for the year ended December 31, 1998 from 37.9% for the year
ended December 31, 1997. This percentage decrease resulted from revenues
growing faster than research and development expenses, net.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $9.2 million for the year ended December
31, 1998 from $6.2 million for the year ended December 31, 1997 due to several
factors: increased sales commissions resulting from higher revenues, increased
selling and marketing costs associated with new products, additional personnel,
additional costs incurred to provide customer support for new designs and
additional costs associated with being a public company. As a percentage of
total revenues, selling, general and administrative expenses decreased to 18.6%
for the year ended December 31, 1998 from 28.5% for the year ended December 31,
1997 as revenue growth outpaced the increase in selling, general and
administrative expenses required to support that growth.

Litigation settlement. During the fourth quarter of 1997, FORE filed
complaints alleging patent infringement and trade secret misappropriation
against MMC Networks. MMC Networks entered into a settlement agreement with
FORE in June 1998. In accordance with the settlement, MMC Networks agreed to
pay a settlement fee and entered into a patent cross-licensing agreement
pursuant to which MMC Networks and FORE granted each other perpetual, with
certain exceptions, and fully-paid licenses to certain patents held by them.
The settlement fee and related legal expenses totaling approximately $1.3
million were charged to operating income in the quarter ended June 30, 1998.

Interest Income, net. Interest income, net consists of the difference
between interest income and interest expense. Interest income reflects interest
earned on average cash, cash equivalents and short-term investment balances.
Interest income increased to $2.2 million for the year ended December 31, 1998
from $630,000 for the year ended December 31, 1997. This increase is due to
increased cash and investment balances from period to period due to the receipt
of net proceeds from MMC Networks's initial public offering in October 1997 and
cash flow from operations. Interest expense reflects interest on borrowings
against lease lines to finance the

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acquisition of capital equipment. Interest expense was $55,000 and $126,000 for
the years ended December 31, 1998 and 1997, respectively.

Provision for Income Taxes. The provision for income taxes increased to $3.7
million for the year ended December 31, 1998 from $138,000 for the year ended
December 31, 1997 reflecting effective tax rates of 30.7% and 10.3%,
respectively. The increase in the provision is due to a significant increase in
operating income from period to period coupled with an increase in MMC
Networks' effective tax rate as compared to the prior year. The effective tax
rate for 1998 is considerably higher than the effective tax rate for 1997
because MMC Networks utilized all of its net operating loss carryforwards
during 1997 and all of its research and development credit carryforwards in
1998.

Liquidity and Capital Resources

As of June 30, 2000, MMC Networks had cash, cash equivalents and short-term
investments of $74.2 million compared to $72.0 million at December 31, 1999, an
increase of $2.2 million. As of June 30, 2000, MMC Networks had cash and cash
equivalents of $40.7 million, up from $13.5 million at December 31, 1999. This
$27.3 million increase in cash and cash equivalents was due to cash flows from
operating activities of $2.1 million, $19.6 million in investing activities
primarily from the sale of short-term investments and $5.6 million in financing
activities from the exercise of stock options. Cash was used to acquire
property and equipment of $4.2 million during the first half of 2000. During
April 2000, MMC Networks invested $1.0 million in a software development
company in exchange for a debenture, convertible into common stock of that
company.

MMC Networks maintains a $10.0 million credit facility with a bank, which
expires in May 2001. Borrowings bear interest at the bank's prime rate. MMC
Networks' agreement with the bank requires compliance with certain financial
covenants. In the event of default, all outstanding borrowings will accrue
interest at a rate of five percentage points above the rate effective
immediately prior to the default. The credit facility has not been used since
its inception in 1998.

MMC Networks anticipates that a significant portion of future capital
expenditures will be devoted to investment in design tool software and computer
equipment on which the design software tools run.

MMC Networks believes that its existing cash balances together with the
borrowing capacity under its credit facility and cash flow from future
operations will be sufficient to meet its capital requirements through the next
twelve months. It is possible that MMC Networks could be required, or could
elect, to seek to raise additional capital before such time. This is a forward-
looking statement, and the actual period of time for which MMC Networks'
resources will be sufficient will depend on many factors, including:

. the rate of revenue growth, if any

. the timing and extent of spending to support product development efforts

. the expansion of sales and marketing efforts

. the timing and size of business or technology acquisitions

. the timing of introductions of new products and enhancements to existing
products

. market acceptance of MMC Network's products

There can be no assurance that additional equity or debt financing, if
required, will be available on acceptable terms or at all.

105
<PAGE>

COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MMC NETWORKS

Except as otherwise noted, the following table sets forth information that
has been provided to AMCC with respect to the beneficial ownership of shares of
MMC Networks' common stock as of August 31, 2000 for (i) each person who is
known by MMC Networks to own beneficially more than five percent of the
outstanding shares of common stock, (ii) each director of MMC Networks, (iii)
MMC Networks' CEO and four most highly compensated executive officers, and (iv)
all directors and executive officers of MMC Networks as a group.

<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name and Address(1) Beneficially Owned Outstanding(2)
------------------- ------------------ --------------------
<S> <C> <C>
Massachusetts Financial Services Co... 2,213,280 6.7%
500 Boylston Street
Boston, MA 02116
Alexander Joffe(4).................... 1,541,582 4.6%
Amos Wilnai(5)........................ 1,305,176 3.9%
Douglas C. Spreng(6).................. 356,573 1.1%
Ari Birger............................ 122,671 *
John A. Teegan........................ 73,219 *
Andrew J. Gottlieb.................... 73,198 *
Frederick J. Berkowitz................ 60,016 *
Timothy M. Heenan..................... 18,831 *
Yehuda Shaik.......................... 4,208 *
Jeffrey L. Cashen..................... -- *
Richard C. Yonker..................... -- *
Geoffrey Y. Yang(7)................... 161,084 *
Andrew S. Rappaport................... 100,150 *
Irwin Federman........................ 79,207 *
John G. Adler......................... 56,250 *
All directors and executive officers
as a group (15 persons) (9) (10)..... 4,619,803 13.4%
</TABLE>
--------
* Less than 1%.

(1) The address for MMC Networks' executive officers and directors is: c/o MMC
Networks, 1144 East Arques Avenue, Sunnyvale, California 94085.

(2) The persons named in this table have sole voting and investment power with
respect to all shares of MMC Networks common stock shown as beneficially
owned by them, subject to community property laws where applicable and
except as indicated in the other footnotes to this table.

(3) In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of MMC Networks common stock
subject to options or warrants held by that person that are exercisable
within 60 days after August 31, 2000 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Applicable percentages are based
on 33,165,772 shares of MMC Networks common stock outstanding on August
31, 2000 together with applicable options for such stockholders.

(4) Includes 9,000 shares held by Mr. Joffe's minor children, as to which Mr.
Joffe disclaims beneficial ownership.

(5) Represents shares held by Amos Wilnai and Ruth Wilnai, Trustees of the
Wilnai Family Trust U/D/T dated June 10, 1997. Does not include 1,039,456
shares held by each of Nitzan Wilnai, Sigal Wilnai and Yael Wilnai, Mr.
Wilnai's adult children. Also does not include 113,205 shares held by
Miriam Wilnai, Mr. Wilnai's mother. Mr. Wilnai disclaims beneficial
ownership of all these shares.

106
<PAGE>

(6) Includes 300 shares held by Mr. Spreng's son, as to which Mr. Spreng
disclaims beneficial ownership.

(7) Does not include 1,261,322 shares beneficially owned by Institutional
Venture Partners VI, L.P., 18,114 shares held by Institutional Venture
Management VI, L.P., and 36,226 shares held by IVP Founders Fund I, L.P.
As a General Partner of Institutional Venture Management VI, L.P., which
is the General Partner of each of such limited partnerships, Mr. Yang may
be deemed to share voting and investment power with respect to these
shares. However, Mr. Yang disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest in these partnerships.

(8) Includes shares held by Institutional Venture Partners VI, L.P.,
Institutional Venture Management VI, L.P., IVP Founders Fund I, L.P.

(9) Includes shares which certain executive officers and directors of the MMC
Networks have the right to acquire within 60 days after the date of this
table pursuant to outstanding options, as follows:

Alexander Joffe, 477,082 shares;

Amos Wilnai, 7,500 shares;

Douglas C. Spreng, 354,999 shares;

Timothy M. Heenan, 4,936 shares;

Ari Birger, 24,687 shares;

John A. Teegen, 68,124 shares;

Frederick J. Berkowitz, 59,624 shares;

Geoffrey Y. Yang, 27,500 shares;

Andrew S. Rappaport, 27,500 shares;

Irwin Federman, 27,500 shares;

Yehuda Shaik, 4,208 shares;

Andrew J. Gottlieb, 70,832 shares;

John G. Adler, 56,250 shares; and

All executive officers and directors as a group, 1,210,742 shares.

107
<PAGE>

DESCRIPTION OF AMCC CAPITAL STOCK

AMCC is authorized to issue 632,000,000 shares of its capital stock, which
are divided into two classes known as common stock and preferred stock,
respectively. The authorized number of shares of AMCC common stock consists of
630,000,000 shares, par value $0.01 per share, of which 126,168,858 shares were
issued and outstanding on September 21, 2000. The authorized number of shares
of AMCC preferred stock consists of 2,000,000 shares, par value $0.01 per
share, of which none were issued and outstanding on September 21, 2000. AMCC
common stock is listed on The Nasdaq National Market under the symbol "AMCC."

AMCC's Board of Directors has the power to (i) provide for the issuance of
preferred stock in one or more series; (ii) establish from time to time the
number of shares to be included in each such series; (iii) fix the voting
powers, designations, powers, preferences and relative, participating, optional
or other rights of the shares of each such series and the qualifications,
limitations or restrictions thereof; and (iv) increase or decrease the number
of shares of any series subsequent to the issuance of shares of that series,
but not below the number of shares of such series then outstanding.

Voting Rights

Each AMCC stockholder is entitled to one vote for each share of capital
stock held by such holder.

Dividends

The directors of AMCC may declare and pay dividends upon the shares of its
capital stock out of funds of AMCC legally available for the declaration of
dividends.

Notice of Stockholders' Meetings

Except as otherwise required by law, the holder of each share of AMCC
capital stock is entitled to notice of any stockholders' meeting. Such notice
shall be sent to each stockholder entitled to vote not less than ten (10) nor
more than sixty (60) days before the date of the meeting.

Transfer Agent and Registrar

The stock transfer agent and registrar for AMCC's common stock is
Computershare Investor Services, L.L.C.

COMPARISON OF STOCKHOLDER RIGHTS

General

The rights of AMCC stockholders are governed by the AMCC Certificate of
Incorporation, as amended (AMCC Certificate), its Bylaws, as amended (AMCC
Bylaws) and the Delaware General Corporation Law. The rights of MMC Networks
stockholders are governed by the MMC Networks Certificate of Incorporation, as
amended (MMC Networks Certificate), its Bylaws (MMC Networks Bylaws) and the
Delaware General Corporation Law.

Upon consummation of the merger, the stockholders of MMC Networks will
become stockholders of AMCC. The rights of the MMC Networks stockholders differ
from the rights of the AMCC stockholders because the MMC Networks charter
documents differ in certain material respects from the AMCC charter documents.

The following is a summary of the principal differences between the rights
of the MMC Networks stockholders and the rights of the AMCC stockholders. Such
differences can be examined in full by reference to the respective charter
documents of MMC Networks and AMCC.

108
<PAGE>

Size of the Board of Directors

Under the AMCC Bylaws, the number of directors constituting the entire board
of directors may be changed by a resolution of the board of directors or a
resolution of the stockholders. No reduction of the authorized number of
directors shall have the effect of removing any director before such director's
term of office expires. The number of directors of AMCC is currently fixed at
eight.

Under the MMC Networks Bylaws, the number of directors constituting the
entire board of directors may be changed only by a resolution of the board of
directors. The number of directors of MMC Networks is currently fixed at six.

Classification of the Board of Directors

The Delaware General Corporation Law permits, but does not require, a
classified board of directors, divided into as many as three classes with
staggered terms under which one-half or one-third of the directors are elected
for terms of two or three years, respectively.

MMC Networks' certificate of incorporation provides for a classified board
of directors while AMCC's does not.

Cumulative Voting

The MMC Networks Bylaws provide that a person entitled to vote at an
election for directors may cumulate votes to which such person is entitled and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which such stockholder's shares
are otherwise entitled, or distribute the stockholder's votes on the same
principle among as many candidates as such stockholder desires. Under
cumulative voting, the candidates receiving the highest number of votes, up to
the number of directors to be elected, are elected.

The AMCC Certificate and Bylaws are silent as to cumulative voting. However,
stockholders will be entitled to cumulative voting as described above if the
corporation is subject to Section 2115(b) of the California General Corporation
Law.

Removal of Directors

Under the AMCC Bylaws, unless otherwise restricted by statute, any director
or the entire board of directors may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote at an election of
directors; provided, however, that if the stockholders of AMCC are entitled to
cumulative voting, if less than the entire board of directors is to be removed,
no director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire board of directors.

Under the MMC Networks Bylaws, the board of directors or any individual
director may be removed from office at any time without cause by the
affirmative vote of the holders of at least a majority of the outstanding
shares entitled to vote on such removal.

Filling Vacancies on the Board of Directors

Under the Delaware General Corporation Law, vacancies may be filled by a
majority of the directors then in office (even though less than a quorum)
unless otherwise provided in the certificate of incorporation or bylaws. The
Delaware General Corporation Law further provides that if, at the time of
filling any vacancy, the directors then in office constitute less than a
majority of the board (as constituted immediately prior of any such increase),
the Delaware Court of Chancery may, upon application of any holder or holders
of at least ten percent of the total number of the outstanding stock having the
right to vote for directors, summarily order a

109
<PAGE>

special election be held to fill any such vacancy or to replace directors
chosen by the board of directors to fill such vacancy.

The AMCC Bylaws provide that when one or more directors resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have resigned, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective. Unless otherwise provided in the AMCC
Bylaws or the AMCC Certificate, vacancies and newly created directorships
resulting from an increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum, or by
a sole remaining director. Whenever the holders of any class or classes of
stock or series thereof are entitled to elect one or more directors, vacancies
and newly created directorships of such class or classes or series may be
filled by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so elected. If
at any time AMCC should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee, fiduciary or guardian of a
stockholder, may call a special meeting of stockholders, or may apply to the
Court of Chancery for a decree summarily ordering an election as provided in
Section 211 of the Delaware General Corporation Law.

The MMC Certificate provides that any vacancies on the board of directors
for any reason may be filled only by the affirmative vote of a majority of the
directors then in office, even though less than a quorum of the board of
directors. Any director elected in accordance with the preceding sentence shall
hold office until the next succeeding annual meeting of stockholders and until
such director's successor shall have been elected and qualified.

Right to Call Special Meetings of Stockholders

Under the AMCC Bylaws, special meetings of the stockholders of AMCC may be
called at any time by (i) the board of directors, (ii) the chairman of the
board of directors or (iii) the president.

Under the MMC Networks Bylaws, special meetings of the stockholders of MMC
Networks may be called by (i) the chairman of the board of directors, or (ii) a
committee of the board of directors whose express powers include the ability to
call such a special meeting.

Indemnification

The MMC Networks Certificate provides that the liability of directors for
monetary damages for breach of fiduciary duty as a director shall be eliminated
to the fullest extent under applicable law.

The AMCC Certificate provides that the liability of directors for monetary
damages for breach of fiduciary duty as a director shall be eliminated to the
fullest extent under applicable law. The AMCC Certificate also provides that
AMCC may indemnify to the fullest extent permitted by law any person made or
threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he or she,
his or her testator or intestate is or was a director, officer or employee of
AMCC or any predecessor of AMCC or serves or served at any other enterprise as
a director, officer or employee at the request of AMCC or any predecessor to
AMCC.

110
<PAGE>

EXPERTS

Ernst & Young LLP, independent auditors, have audited AMCC's consolidated
financial statements and schedule at March 31, 2000 and 1999, and for each of
the three years in the period ended March 31, 2000, as set forth in their
report. AMCC's consolidated financial statements and schedule are included in
the prospectus/proxy statement and elsewhere in this Registration Statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.

MMC Networks' financial statements as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 and schedule are
included in the prospectus/proxy statement and elsewhere in this Registration
Statement in reliance on the report of PricewaterhouseCoopers llp, independent
accountants, given on their authority as experts in auditing and accounting.

Ernst & Young LLP, independent auditors, have audited YuniNetworks, Inc.'s
financial statements at March 31, 2000 and for the period from October 8, 1999
(inception) through March 31, 2000 as set forth in their report. YuniNetworks,
Inc.'s financial statements are included in the prospectus/proxy statement and
elsewhere in this Registration Statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

LEGAL MATTERS

The validity of the shares of AMCC common stock offered hereby and certain
tax matters will be passed upon for AMCC by Cooley Godward LLP, San Diego and
San Francisco, California. Certain tax matters will be passed upon by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California,
counsel to MMC Networks.

111
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Applied Micro Circuits Corporation
</TABLE>

<TABLE>
<S> <C>
Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors....................... F-2
Consolidated Balance Sheets as of March 31, 1999 and 2000............... F-3
Consolidated Statement of Income for the fiscal years ended March 31,
1998, 1999 and 2000.................................................... F-4
Consolidated Statements of Stockholders' Equity for the fiscal years
ended March 31, 1998, 1999 and 2000.................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended March
31, 1998, 1999 and 2000................................................ F-6
Notes to Consolidated Financial Statements.............................. F-7
Schedule II - Valuation and Qualifying Accounts......................... F-19

Interim Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and
March 31, 2000......................................................... F-20
Condensed Consolidated Statements of Income (unaudited) for the three
months ended June 30, 2000 and 1999.................................... F-21
Condensed Consolidated Statements of Cash Flows (unaudited) for the
three months ended June 30, 2000 and 1999.............................. F-22
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-23

MMC Networks, Inc.
</TABLE>

<TABLE>
<S> <C>
Consolidated Financial Statements
Report of PricewaterhouseCoopers LLP, Independent Accountants........... F-27
Consolidated Balance Sheets as of December 31, 1998 and 1999............ F-28
Consolidated Statements of Operations for the fiscal years ended
December 31, 1997, 1998 and 1999....................................... F-29
Consolidated Statements of Stockholders' Equity for the fiscal years
ended December 31, 1997, 1998 and 1999................................. F-30
Consolidated Statements of Cash Flows for the fiscal years ended
December 31, 1997, 1998 and 1999....................................... F-31
Notes to the Consolidated Financial Statements.......................... F-32
Schedule II - Valuation and Qualifying Accounts......................... F-43

Interim Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and
December 31, 1999...................................................... F-44
Condensed Consolidated Statements of Operations (unaudited) for the
three months ended June 30, 2000 and 1999 and the six months ended June
30, 2000 and 1999...................................................... F-45
Condensed Consolidated Statements of Cash Flow (unaudited) for the six
months ended June 30, 2000 and 1999.................................... F-46
Notes to the Condensed Consolidated Financial Statements (unaudited).... F-47

YuniNetworks, Inc.
</TABLE>

<TABLE>
<S> <C>
Financial Statements
Report of Ernst & Young LLP, Independent Auditors....................... F-49
Balance Sheet as of March 31, 2000...................................... F-50
Statement of Operations for the period from October 8, 1999 (inception)
through March 31, 2000................................................. F-51
Statement of Stockholders' Equity for the period ended March 31, 2000... F-52
Statement of Cash Flows for the period from October 8, 1999 (inception)
through March 31, 2000................................................. F-53
Notes to the Consolidated Financial Statements.......................... F-54
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Applied Micro Circuits Corporation

We have audited the accompanying consolidated balance sheets of Applied
Micro Circuits Corporation as of March 31, 1999 and 2000, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 2000. Our audits also
included the financial statement schedule listed in the index at F-1. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Applied Micro Circuits Corporation at March 31, 1999 and 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended March 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

/s/ Ernst & Young LLP

San Diego, California
April 19, 2000

F-2
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)

<TABLE>
<CAPTION>
March 31,
--------------------
1999 2000
-------- ----------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 13,530 $ 170,102
Short-term investments--available-for-sale............. 73,010 784,449
Accounts receivable, net of allowance for doubtful
accounts of $177 and $314 at March 31, 1999 and 2000,
respectively ......................................... 19,275 25,459
Inventories............................................ 9,813 10,925
Deferred income taxes.................................. 4,573 4,148
Current portion of notes receivable from officer and
employees............................................. 815 81
Other current assets................................... 4,004 10,240
-------- ----------
Total current assets................................. 125,020 1,005,404
Property and equipment, net............................ 23,128 37,842
Notes receivable from officers and employees, less
current portion....................................... 100 48
Other assets........................................... 2,407 3,588
-------- ----------
Total assets......................................... $150,655 $1,046,882
======== ==========

<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

<S> <C> <C>
Current liabilities:
Accounts payable....................................... $ 5,131 $ 8,818
Accrued payroll and related expenses................... 4,689 7,618
Other accrued liabilities.............................. 7,207 6,448
Deferred revenue....................................... 1,439 2,776
Current portion of long-term debt...................... 1,862 1,394
Current portion of capital lease obligations........... 1,075 729
-------- ----------
Total current liabilities............................ 21,403 27,783
Long-term debt, less current portion..................... 4,995 3,599
Long-term capital lease obligations, less current
portion................................................. 2,563 1,695
Commitments and contingencies (Notes 7 and 10)
Stockholders' equity:
Preferred Stock, $0.01 par value:
Authorized shares--2,000, none issued and
outstanding.......................................... -- --
Common Stock, $0.01 par value:
Authorized shares--180,000 at March 31, 2000
Issued and outstanding shares--106,448 and 121,842 at
March 31, 1999 and 2000, respectively................ 1,064 1,218
Additional paid-in capital............................... 101,727 944,512
Deferred compensation, net............................... (2,123) (1,443)
Accumulated other comprehensive income (loss)............ (33) (166)
Retained earnings........................................ 21,514 70,139
Notes receivable from stockholders....................... (455) (455)
-------- ----------
Total stockholders' equity........................... 121,694 1,013,805
-------- ----------
Total liabilities and stockholders' equity........... $150,655 $1,046,882
======== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
-------------------------
1998 1999 2000
------- -------- --------
<S> <C> <C> <C>
Net revenues......................................... $76,618 $105,000 $172,352
Cost of revenues..................................... 34,321 37,937 50,218
------- -------- --------
Gross profit......................................... 42,297 67,063 122,134
Operating expenses:
Research and development........................... 13,268 22,472 32,815
Selling, general and administrative................ 14,278 18,325 28,199
Merger-related costs............................... -- 2,350 --
------- -------- --------
Total operating expenses......................... 27,546 43,147 61,014
------- -------- --------
Operating income..................................... 14,751 23,916 61,120
Interest income, net................................. 871 3,450 12,872
------- -------- --------
Interest income, net................................. 15,622 27,366 73,992
Provision for income taxes........................... 406 10,233 25,367
------- -------- --------
Net income........................................... $15,216 $ 17,133 $ 48,625
======= ======== ========
Basic earnings per share:
Earnings per share................................. $ 0.36 $ 0.17 $ 0.45
======= ======== ========
Share used in calculating basic earnings per
share............................................. 42,376 98,056 107,820
======= ======== ========
Diluted earnings per share:
Earnings per share................................. $ 0.19 $ 0.16 $ 0.41
======= ======== ========
Shares used in calculating diluted earnings per
share............................................. 81,176 109,720 119,152
======= ======== ========
</TABLE>

See accompanying notes.

F-4
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

<TABLE>
<CAPTION>
Convertible
Preferred Accumulated Notes
Stock Common Stock Additional Other Retained Receivable Total
-------------- --------------- Paid-In Deferred Comprehensive Earnings From Stockholders'
Shares Amount Shares Amount Capital Compensation (Loss) (Deficit) Stockholders Equity
------ ------ ------- ------ ---------- ------------ ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March
31, 1997......... 1,223 $ 12 20,100 $ 201 $ 36,823 $ -- $ -- $(9,235) $ (58) $ 27,743
Issuance of
common stock, net
of issuance
costs............ -- -- 20,156 202 51,791 -- -- -- -- 51,993
Conversion of
convertible
preferred stock
to common Stock.. (1,051) (11) 42,868 429 (418) -- -- -- -- --
Issuance of stock
pursuant to
exercise of stock
options.......... -- -- 6,808 69 806 -- -- -- (455) 420
Net exercise of
warrants......... -- -- 212 -- -- -- -- -- -- --
Payments on
notes............ -- -- -- -- -- -- -- -- 12 12
Repurchase of
convertible
preferred stock.. (172) (1) -- -- (3,617) -- -- (259) -- (3,877)
Deferred
compensation
related to stock
options.......... -- -- -- -- 599 (599) -- -- -- --
Amortization of
deferred
compensation..... -- -- -- -- -- 127 -- -- -- 127
Net income....... -- -- -- -- -- -- -- 15,216 -- 15,216
------ ---- ------- ------ -------- ------- ----- ------- ----- ----------
Balance, March
31, 1998......... -- -- 90,144 901 85,984 (472) -- 5,722 (501) 91,634
Issuance of stock
upon formation of
Cimaron.......... -- -- 9,376 93 4,571 (230) -- -- 4,434
Issuance of
common stock
under employee
stock Purchase
plans............ -- -- 1,668 17 3,162 -- -- -- -- 3,179
Issuance of stock
pursuant to
exercise of stock
Options.......... -- -- 5,260 53 2,484 (964) -- -- -- 1,573
Tax benefit of
disqualifying
dispositions..... -- -- -- -- 4,209 -- -- -- -- 4,209
Payment on
notes............ -- -- -- -- -- -- -- -- 46 46
Deferred
compensation
related to stock
options and
restricted
stock............ -- -- -- -- 1,317 (1,317) -- -- -- --
Amortization of
deferred
compensation..... -- -- -- -- -- 860 -- -- -- 860
Adjustment for
change in
Cimaron's year
end.............. -- -- -- -- -- -- -- (1,341) -- (1,341)
Comprehensive
income:
Net income...... -- -- -- -- -- -- -- 17,133 -- 17,133
Unrealized loss
on short-term
investments, net
of tax benefit.. -- -- -- -- -- -- (33) -- -- (33)
Total
comprehensive
income........... -- -- -- -- -- -- -- -- -- 17,100
------ ---- ------- ------ -------- ------- ----- ------- ----- ----------
Balance, March
31, 1999......... -- -- 106,448 1,064 101,727 (2,123) (33) 21,514 (455) 121,694
Issuance of
stock, net of
issuance costs... -- -- 12,005 120 814,860 -- -- -- -- 814,980
Issuance of
common stock
under employee
stock purchase
plans............ -- -- 262 3 2,501 -- -- -- -- 2,504
Issuance of stock
pursuant to
exercise of stock
options.......... -- -- 3,183 31 10,345 -- -- -- -- 10,376
Repurchase of
restricted
stock............ -- -- (56) -- (11) -- -- -- -- (11)
Amortization of
deferred
compensation..... -- -- -- -- -- 611 -- -- -- 611
Elimination of
deferred
compensation
related to stock
options
forfeited........ -- -- -- -- (69) 69 -- -- -- --
Tax benefit of
disqualifying
dispositions..... -- -- -- -- 15,159 -- -- -- -- 15,159
Comprehensive
income:
Net income...... -- -- -- -- -- -- -- 48,625 -- 48,625
Unrealized loss
on short-term
investments, net
of tax benefit.. -- -- -- -- -- -- (133) -- -- (133)
------ ---- ------- ------ -------- ------- ----- ------- ----- ----------
Total
comprehensive
income........... -- -- -- -- -- -- -- -- -- 48,492
------ ---- ------- ------ -------- ------- ----- ------- ----- ----------
Balance, March
31, 2000......... -- $ -- 121,842 $1,218 $944,512 $(1,443) $(166) $70,139 $(455) $1,013,805
====== ==== ======= ====== ======== ======= ===== ======= ===== ==========
</TABLE>

See accompanying notes.

F-5
<PAGE>

APPLIED MICO CIRCUITS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------------
1998 1999 2000
--------- --------- -----------
<S> <C> <C> <C>
Operating Activities
Net income................................ $ 15,216 $ 17,133 $ 48,625
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 5,174 7,045 8,039
Write-offs of inventories................ 600 180 701
Amortization of deferred compensation.... 127 860 611
Tax benefit of disqualifying
dispositions............................ -- 4,209 15,159
Loss on disposals of property............ -- 221 --
Adjustment for change in Cimaron year
end..................................... -- (1,341) --
Changes in operating assets and
liabilities:
Accounts receivables................... (3,761) (7,096) (6,184)
Inventories............................ (1,255) (1,808) (1,813)
Other assets........................... (1,607) (678) (7,417)
Accounts payable....................... 2,787 (84) 3,687
Accrued payroll and other accrued
liabilities........................... 2,418 4,495 2,170
Deferred income taxes.................. (3,882) (691) 425
Deferred revenue....................... 1,067 (434) 1,337
--------- --------- -----------
Net cash provided by operating
activities.......................... 16,884 22,011 65,340
Investing Activities
Proceeds from sales and maturities of
short-term investments................... 66,547 187,787 1,847,446
Purchase of short-term investments........ (119,874) (199,394) (2,559,018)
Repayments and (advances) on notes
receivable from officers and employees... (366) 262 786
Purchase of property, equipment and other
assets................................... (11,342) (16,490) (22,753)
--------- --------- -----------
Net cash used for investing
activities.......................... (65,035) (27,835) (733,539)
Financing Activities
Proceeds from issuance of common stock,
net...................................... 52,413 9,062 827,860
Repurchase of common stock................ -- -- (11)
Repurchase of convertible preferred
stock.................................... (3,877) -- --
Payments on notes receivable from
stockholders............................. 12 46 --
Payments on capital lease obligations..... (2,691) (2,110) (1,214)
Payments on long-term debt................ (37) (792) (1,864)
Proceeds from equipment financed under
capital leases........................... -- 2,342 --
Issuance of long-term debt................ 3,303 4,346 --
--------- --------- -----------
Net cash provided by financing
activities.......................... 49,123 12,894 824,771
--------- --------- -----------
Net increase in cash and cash
equivalents......................... 972 7,070 156,572
Cash and cash equivalents at beginning of
year....................................... 5,488 6,460 13,530
--------- --------- -----------
Cash and cash equivalents at end of year.... $ 6,460 $ 13,530 $ 170,102
--------- --------- -----------
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest.................................. $ 380 $ 542 $ 634
========= ========= ===========
Income taxes.............................. $ 3,251 $ 4,274 $ 12,273
========= ========= ===========
</TABLE>

Supplemental schedule of non-cash investing and financing activities.
Capital lease obligations of approximately $282,000 were incurred and notes
were received for the exercise of stock options totaling $455,000 during fiscal
year 1998.

See accompanying notes.

F-6
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business

The Company designs, develops, manufactures and markets high-performance,
high-bandwidth silicon solutions for the world's optical networks.

Basis of Presentation

On September 9, 1999 and again on March 23, 2000, the Company effected a
two-for-one stock split (in the form of a 100% stock dividend); accordingly,
all prior share, per share, common stock, and stock option amounts in these
financial statements have been restated to reflect the stock splits.

The consolidated financial statements include all the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

Cash, Cash Equivalents and Short-Term Investments

Cash and cash equivalents consist of money market type funds and highly
liquid debt instruments with original maturities of three months or less at the
date of acquisition. Short-term investments consist of United States Treasury
notes, obligations of U.S. government agencies, state, municipal and county
governments notes and bonds and corporate bonds. The Company maintains its
excess cash in financial institutions with strong credit ratings and has not
experienced any significant losses on its investments.

The Company classifies its short-term investments as "Available-for-Sale"
and records such assets at the estimated fair value with unrealized gains and
losses excluded from earnings and reported, net of tax, in comprehensive income
(loss). The basis for computing realized gains or losses is by specific
identification.

The following is a summary of available-for-sale securities (in thousands):

<TABLE>
<CAPTION>
Gross Unrealized
--------------------------------
Estimated
Amortized Fair
Cost Gains Losses Value
--------- ----- ------ ---------
<S> <C> <C> <C> <C>
At March 31, 2000:
U.S. treasury securities and obligations
of U.S. government agencies............ $ 25,942 $-- $118 $ 25,824
State, Municipal and County government
notes and bonds........................ 397,645 30 14 397,661
U.S. corporate debt securities.......... 361,132 26 194 360,964
-------- --- ---- --------
$784,719 $56 $326 $784,449
======== === ==== ========
At March 31, 1999:
U.S. treasury securities and obligations
of U.S. government agencies............ $ 21,740 $22 $ 72 $ 21,690
U.S. corporate debt securities.......... 51,321 16 17 51,320
-------- --- ---- --------
$ 73,061 $38 $ 89 $ 73,010
======== === ==== ========
</TABLE>

F-7
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Available-for-sale securities by contractual maturity are as follows (in
thousands):

<TABLE>
<CAPTION>
March
31,
2000
--------
<S> <C>
Due in one year or less.......................................... $700,939
Due after one year through two years............................. 35,582
Greater than two years........................................... 47,928
--------
$784,449
========
</TABLE>

Fair Value of Financial Instruments

The carrying value of cash equivalents, short-term investments, accounts
receivable, accounts payable, accrued liabilities and long-term debt
approximates fair value.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of available-for-sale
securities and trade receivables. The Company believes that the credit risk in
its trade receivables is mitigated by the Company's credit evaluation process,
relatively short collection terms and dispersion of its customer base. The
Company generally does not require collateral and has not experienced
significant losses on trade receivables from any particular customer or
geographic region for any period presented.

The Company invests its excess cash in debt instruments of the U.S.
Treasury, governmental agencies and corporations with strong credit ratings.
The Company has established guidelines relative to diversification and
maturities that attempt to maintain safety and liquidity. These guidelines are
periodically reviewed and modified to take advantage of trends in yields and
interest rates. The Company has not experienced any significant losses on its
cash equivalents or short-term investments.

Use of Estimates

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the financial statements. These
estimates include assessing the collectability of accounts receivable, the use
and recoverability of inventory, estimates to complete engineering contracts,
costs of future product returns under warranty and provisions for contingencies
expected to be incurred. Actual results could differ from those estimates.

Inventories

Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market. The Company's inventory valuation process is done
on a part-by-part basis. Lower of cost or market adjustments, specifically
identified on a part-by-part basis, reduce the carrying value of the related
inventory and take into consideration reductions in sales prices, excess
inventory levels and obsolete inventory. Once established, these adjustments
are considered permanent and are not reversed until the related inventory is
sold or disposed.

Property and Equipment

Property and equipment are stated at cost and depreciated over the estimated
useful lives of the assets (3 to 7 years) using the straight line method.
Leasehold improvements are stated at cost and amortized over the

F-8
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

useful life of the asset. Property and equipment under capital leases are
recorded at the net present value of the minimum lease payments and are
amortized over the useful life of the assets.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of", the Company records impairment losses on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amounts. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. Through March 31, 2000,
the Company has not experienced any such impairments.

Advertising Cost

Advertising costs are expensed as incurred.

Revenues

Revenues related to product sales are generally recognized when the products
are shipped to the customer. Recognition of revenues and the related cost of
revenues on shipments to distributors that are subject to terms of sale
allowing for price protection and right of return on products unsold by the
distributor are deferred until the distributor's ability to return the products
or its rights to price protection lapse or have been limited. Revenues on
engineering design contracts are recognized using the percentage-of-completion
method based on actual cost incurred to date compared to total estimated costs
of the project. Deferred revenue represents both the margin on shipments of
products to distributors that will be recognized when the distributors ship the
products to their customers or the right of return has lapsed and billings in
excess and estimated earnings on uncompleted engineering design contracts.

Warranty Reserves

Estimated expenses for warranty obligations are accrued as revenue is
recognized. Reserve estimates are adjusted periodically to reflect actual
experience.

Research and Development

Research and development costs are expensed as incurred. Substantially all
research and development expenses are related to new product development,
designing significant improvements to existing products and new process
development.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25") and related
interpretations in accounting for its employee and director stock options
because the alternative fair value accounting provided for under SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), requires the use of
option valuation models that were not developed for use in valuing employee and
director stock options. Under SFAS 123 compensation cost is determined using
the fair value of stock-based compensation determined as of the grant date, and
is recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current
implicit value accounting method specified in APB 25 to account for stock-based
compensation and

F-9
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

disclose in the footnotes to the financial statements the pro forma effect of
using the fair value method for its stock based compensation.

Recent Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Management does not believe this will have a material effect on
the Company's operations. Implementation of this standard has recently been
delayed by the FASB for a 12-month period. The Company will now adopt SFAS 133
as required for its first quarterly filing of fiscal year 2002.

Reclassification

Certain prior period amounts have been reclassified to conform to the
current period presentation.

Earnings Per Share

Shares used in basic earnings per share are computed using the weighted
average number of common shares outstanding during each period. Shares used in
diluted earnings per share include the dilutive effect of common shares
potentially issuable upon the exercise of stock options. The reconciliation of
shares used to calculate basic and diluted earnings per share consists of the
following (in thousands):

<TABLE>
<CAPTION>
Fiscal years ended
March 31,
----------------------
1998 1999 2000
------ ------- -------
<S> <C> <C> <C>
Shares used in basic earnings per share
computations-weighted average common shares
outstanding....................................... 42,376 98,056 107,820
Effect of assumed conversion of preferred stock
from date of issuance............................. 29,736 -- --
Net effect of dilutive common share equivalents
based on treasury stock method.................... 9,064 11,664 11,332
------ ------- -------
Shares used in diluted earnings per share
computations...................................... 81,176 109,720 119,152
====== ======= =======
</TABLE>

2. Acquisitions

In March 1999, the Company acquired all of the outstanding common stock and
common stock equivalents of Cimaron Communications Corporation ("Cimaron") in
exchange for approximately 12 million shares of the Company's common stock.
Cimaron also designs and develops high-bandwidth silicon solutions for the
world's communications equipment manufacturers. The acquisition has been
accounted for using the pooling-of-interests method of accounting. Prior to the
combination, Cimaron had a fiscal year end of December 31. In recording the
business combination, Cimaron's results of operations for the fiscal year ended
December 31, 1998 were combined with AMCC's for the fiscal year ended March 31,
1999. Cimaron's net sales and net loss for the three month period ended March
31, 1999 were $110,000 and $(1,341,000), respectively. Cimaron's results of
operations and cash flows for the three month period ended March 31, 1999 have
been added directly to the retained earnings and cash flows of AMCC and
excluded from reported fiscal 1999 results of operations.

F-10
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In April 1998, the Company acquired Ten Mountains Design which designs and
develops high bandwidth analog devices for communications equipment suppliers
and optical module manufacturers. The purchase price was approximately $330,000
and resulted in recording intangible assets of approximately $280,000 which
will be amortized over three years. The financial statements include the
results of operation for Ten Mountains Design from the date of acquisition.

3. Certain Financial Statement Information

<TABLE>
<CAPTION>
March 31,
------------------
1999 2000
-------- --------
<S> <C> <C>
Inventories (in thousands):
Finished goods......................................... $ 975 $ 2,666
Work in process........................................ 7,688 6,966
Raw materials.......................................... 1,150 1,293
-------- --------
$ 9,813 $ 10,925
======== ========
Property and equipment (in thousands):
Machinery and equipment................................ $ 33,280 $ 46,375
Leasehold improvements................................. 7,641 8,352
Computers, office furniture and equipment.............. 16,654 20,743
Land................................................... 1,133 4,808
-------- --------
58,708 80,278
Less accumulated depreciation and amortization......... (35,580) (42,436)
-------- --------
$ 23,128 $ 37,842
======== ========
Other accrued liabilities (in thousands):
Income taxes payable................................... $ 3,329 $ 839
Accrued merger-related costs........................... 1,893 --
Other.................................................. 1,985 5,609
-------- --------
$ 7,207 $ 6,448
======== ========
</TABLE>

The cost and accumulated amortization of machinery and equipment under
capital leases at March 31, 2000 were approximately $10.5 million and $8.7
million, respectively ($10.5 million and $8.5 million, at March 31, 1999,
respectively). Amortization of assets held under capital leases is included
with depreciation expense.

During the years ended March 31, 1998, 1999 and 2000, the Company earned
interest income of $1,252,000, $3,992,000 and $13,506,000, respectively, and
incurred interest expense of $381,000, $542,000 and $634,000, respectively.

4. Long-Term Debt

During Fiscal 1999, the Company had an equipment line of credit with a bank
which expired on March 31, 1999. Borrowings of $7.1 million under the line of
credit were converted into term notes, with monthly payments totaling $141,000
including interest, payable over 53 to 60 months, at interest rates between
6.44% and 7.42%. At March 31, 2000, approximately $5.0 million was outstanding
on the notes.

F-11
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Principal maturities of the notes payable at March 31, 2000 are as follows
(in thousands):

<TABLE>
<CAPTION>
Year ending March 31,
---------------------
<S> <C>
2001............................................................. $1,394
2002............................................................. 1,495
2003............................................................. 1,603
2004............................................................. 501
------
$4,993
======
</TABLE>

5. Stockholders' Equity

Authorized shares

On September 1, 1999, the Company's stockholders approved an increase in the
number of authorized shares of common stock to 180 million.

Stock Offerings

In December 1997, the Company completed its initial public offering of its
common stock. The offering raised net proceeds to the Company of approximately
$25.1 million. In March 1998, the Company completed a secondary public offering
of common stock in which the Company raised net proceeds of approximately
$26.9 million. In January 2000, the Company raised an additional $815 million
of net proceeds from the issuance of approximately 12 million shares of its
common stock.

Convertible Preferred Stock

On April 24, 1997 the Board authorized the Company to repurchase up to $4.0
million of convertible preferred stock, with priority given to the holders of
convertible preferred stock that submitted bids for the sale of their shares of
convertible preferred stock at the lowest price per share. On June 20, 1997,
the Company repurchased an aggregate of 172,300 shares of convertible preferred
stock for approximately $3.9 million at prices between $1.20 and $2.61 per
share on an as converted to common stock basis. In connection with the initial
public offering, all then outstanding shares of convertible preferred stock
immediately converted into 42.9 million shares of common stock.

Preferred Stock

In November 1997, the Certificate of Incorporation was amended to allow the
issuance of up to 2.0 million shares of preferred stock in one or more series
and to fix the rights, preferences, privileges and restriction thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series of the designation of such series, without
further vote or action by the stockholders.

Stock Options and Other Stock Awards

In March 2000, the Company adopted the 2000 Equity Incentive Plan ("the 2000
Plan") under which 4.0 million shares were reserved for future granting of
nonqualified stock options to employees, directors and consultants of the
Company and its affiliates. At March 31, 2000, 2.6 million non-qualified stock
options were outstanding and 1.4 million shares were available for future
grant.

F-12
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's 1992 Stock Option Plan ("1992 Plan") provides for the granting
of incentive and nonqualified stock options to employees. During Fiscal 2000,
the Board of Directors adopted, and the stockholders subsequently approved, an
amendment to the 1992 Plan to increase the number of shares available for
future grant by 15.2 million. At March 31, 2000, 17.3 million stock options
were outstanding and 9.8 million shares were available for future grant. The
Company's 1982 Employee Incentive Stock Option Plan expired in 1992.

In connection with the Company's acquisition of Cimaron, the Company assumed
options and other stock awards granted under Cimaron's 1998 Stock Incentive
Plan ("The Incentive Plan") covering approximately 2.6 million shares of Common
Stock at a weighted average exercise price of $.06 per share. The terms of the
plan provides for the granting of options, restricted stock, or other stock
based awards ("stock awards") to employees, officers, directors, consultants
and advisors. Generally, the stock awards are granted at prices at least equal
to the fair value of the Company's Common Stock on the date of grant. At March
31, 2000, approximately 250,000 stock options were outstanding and 1.6 million
shares were available for future grant under the Incentive Plan.

The Company's 1997 Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors on October 6, 1997, and was subsequently
approved by the stockholders. A total of 800,000 shares of Common Stock are
reserved for issuance under the Directors' Plan. The Directors' Plan provides
for the grant of non-statutory options to nonemployee directors of the Company.
At March 31, 2000, 100,000 stock options had been issued under the Directors'
Plan and 700,000 were available for future grant.

Options and other stock awards under the plans expire not more than ten
years from the date of grant and are either, exercisable immediately after the
date of grant and subject to certain repurchase rights by the Company until
such ownership rights have vested, or exercisable upon vesting. Vesting
generally occurs over four to five years. At March 31, 1999 and 2000, 3.5
million and 1.1 million shares of common stock were subject to repurchase,
respectively. Options are granted at prices at least equal to fair value of the
Company's common stock on the date of grant.

Pursuant to an employment agreement entered into during January 1996,
between the Company and an executive, the Company granted an option to purchase
3.2 million shares of the Company's common stock at $0.13 per share under the
1992 Stock Option Plan. The option vests ratably over four years. In the event
the Company is acquired, the agreement stipulates that under certain
circumstances the executive is eligible for certain additional compensation.
These options as well as 266,668 additional options issued in April 1997 were
exercised in July 1997. The exercise was paid for with various full-recourse
notes, which aggregated $455,000 and bear interest at rates between 5.98% and
6.54%, and were due at the earlier of February 12, 2000 ($420,000) and April 9,
2001 ($35,000) or the termination of employment. In January 2000, the notes due
on February 2000 were extended by the Board of Directors to become due in
February 2002.

Pro forma information regarding net income and net income per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value of the options was estimated at the date of grant
using the minimum value method for grants prior to the initial public offering
and the Black Scholes method for grants after the initial public offering.

F-13
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of options granted in 1998, 1999 and 2000 reported below has
been estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions.

<TABLE>
<CAPTION>
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Expected life (in years)................................... 4.0 4.5 4.0
Risk-free interest rate.................................... 6.0% 6.0% 6.0%
Volatility................................................. .92 .89 .82
Dividend yield............................................. 0% 0% 0%
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in the opinion of
management, the existing models do not necessarily provide a reliable single
measure of the fair value of its options. The weighted average estimated fair
value of employee stock options granted during 1998, 1999 and 2000, including
options assumed through acquired companies, was $1.71, $5.27 and $40.28 per
share, respectively. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting periods.
The Company's pro forma information is as follows:

<TABLE>
<CAPTION>
1998 1999 2000
------- ------- -------
(In thousands, except
per share amounts)
<S> <C> <C> <C>
Pro forma net income................................ $14,856 $13,202 $19,385
Pro forma basic earnings per share.................. $ 0.35 $ 0.13 $ 0.18
Pro forma diluted earnings per share................ $ 0.18 $ 0.12 $ 0.16
</TABLE>

A summary of the Company's stock option activity, including those issued
outside of the plans, and related information are as follows:

<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------
1998 1999 2000
----------------- ----------------- -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
(shares in thousands)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 11,369 $0.13 10,730 $1.72 10,694 $ 4.03
Granted............... 7,196 2.50 6,081 4.62 13,798 63.51
Exercised............. (6,806) 0.13 (5,258) 0.30 (3,183) 3.26
Forfeited............. (1,029) 0.16 (859) 2.08 (1,026) 9.65
------ ------ ------
Outstanding at end of
year................... 10,730 $1.72 10,694 $4.03 20,283 $44.31
====== ===== ====== ===== ====== ======
Vested at end of year... 2,540 $0.15 2,714 $1.81 3,899 $ 8.39
====== ===== ====== ===== ====== ======
</TABLE>

F-14
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following is a further breakdown of the options outstanding at March
31, 2000 (shares in thousands):

<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.09-$ 2.00......... 2,304 6.86 $ 0.38 1,288 $ 0.24
$ 2.00-$ 6.75......... 3,024 8.02 $ 5.64 1,125 $ 5.60
$ 6.75-$ 23.00......... 7,014 9.05 $ 12.96 1,329 $12.05
$ 23.00-$ 42.25......... 1,451 9.55 $ 35.07 31 $27.93
$ 42.25-$ 71.97......... 2,086 9.80 $ 71.00 126 $71.83
$ 71.97-$140.53......... 691 9.87 $ 97.62 -- $ --
$140.53-$154.81......... 3,713 9.94 $140.95 -- $ --
------ ---- ------- ----- ------
$ 0.09-$154.81......... 20,283 8.95 $ 44.31 3,899 $ 8.39
====== ==== ======= ===== ======
</TABLE>

From April 1, 1997 through September 30, 1997, the Company recorded
deferred compensation expense for the difference between the exercise price
and the fair value for financial statement presentation purposes of the
Company's common stock, as determined by the Board of Directors, for all
options granted in the period. This deferred compensation aggregates to
$599,000, which is being amortized ratably over the four year vesting period
of the related options. Additionally, during the year ended March 31, 1999,
the Company recorded deferred compensation related to restricted stock and
stock options granted to founders and employees of Cimaron of $2.5 million.
Such amount is being amortized over the related vesting period, generally five
years. Amortization of deferred compensation during fiscal years 1998, 1999
and 2000 was $127,000, $860,000 and $611,000, respectively.

Employee Stock Purchase Plans

The Company's 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
was adopted by the Board of Directors on October 6, 1997, and was subsequently
approved by the stockholders. A total of 1.6 million shares of common stock
are reserved for issuance under the 1997 Purchase Plan. At March 31, 2000,
approximately 1.58 million shares had been issued under the 1997 Purchase Plan
and approximately 20,000 shares were available for future grant.

The Company's 1998 Employee Stock Purchase Plan (the "1998 Purchase Plan")
was approved by the stockholders on August 4, 1998. A total of 1.6 million
shares are authorized for issuance under the 1998 Purchase Plan. At March 31,
2000, 355,144 shares had been issued under the 1998 Purchase Plan and
approximately 1.2 million shares were available for future grant.

Under the terms of the plans, purchases are made semiannually on January 31
and July 31 and the purchase price of the Common Stock is equal to 85% of the
fair market value of the common stock on the first or last day of the offering
period, whichever is lower.

F-15
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Common Shares Reserved for Future Issuance

At March 31, 2000, the Company has the following shares of common stock
reserved for issuance upon the exercise of equity instruments: (in thousands)

<TABLE>
<S> <C>
Stock Options:
Issued and outstanding.............................................. 20,283
Authorized for future grants........................................ 13,500
Stock purchase plans.................................................. 1,269
------
35,052
======
</TABLE>

6. Income Taxes

The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
-------------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C> <C>
Current:
Federal...................................... $ 3,606 $ 9,860 $21,966
State........................................ 682 1,064 2,976
------- ------- -------
Total current.............................. 4,288 10,924 24,942
Deferred:
Federal...................................... (3,558) (362) 65
State........................................ (324) (329) 360
------- ------- -------
Total deferred............................. (3,882) (691) 425
------- ------- ------- ---
$ 406 $10,233 $25,367
======= ======= =======
</TABLE>

The provision for income taxes reconciles to the amount computed by applying
the federal statutory rate (35%) to income before income taxes as follows (in
thousands):

<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------------
1998 1999 2000
------------ ------------ ------------
$ % $ % $ %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Tax at federal statutory rate......... $ 5,468 35% $ 9,578 35% $25,897 35%
Increase (decrease) in valuation
allowance of deferred tax assets..... (5,094) (32) -- -- -- --
Foreign sales corporation............. (309) (2) (387) (1) (873) (1)
Tax exempt interest................... -- -- -- -- (312) --
State taxes, net of federal benefit... 233 1 478 1 2,294 3
Federal tax credits................... (281) (2) (1,216) (5) (2,122) (3)
State tax credits..................... -- -- -- -- (1,097) (2)
Merger costs and deferred
compensation......................... -- -- 763 3 213 --
Other................................. 389 3 1,017 4 1,367 2
------- --- ------- --- ------- ---
$ 406 3% $10,233 37% $25,367 34%
======= === ======= === ======= ===
</TABLE>

F-16
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant components of the Company's deferred tax assets and liabilities
for federal and state income taxes as of March 31, 1999 and 2000 are as shown
below. At March 31, 1998, the effective tax rate is computed based on a full
reduction of the valuation allowance and realization of the deferred tax asset.

<TABLE>
<CAPTION>
March 31,
-------------
1999 2000
------ ------
<S> <C> <C>
Deferred tax assets (in thousands):
Inventory write-downs and other reserves................... $1,850 $2,433
Net operating loss carryforwards........................... 1,719 --
Capitalization of inventory and research and development
costs..................................................... 313 405
Research and development credit carryforwards.............. 298 1,364
State income taxes......................................... 47 140
Other credit carryforwards................................. 447 --
------ ------
Total deferred tax assets.................................. 4,674 4,342
Deferred tax liabilities:
Depreciation and amortization.............................. 101 194
------ ------
Net deferred tax assets.................................... $4,573 $4,148
====== ======
</TABLE>

At March 31, 2000, the Company has federal research and development tax
credit carryforwards of approximately $1.4 million, which will begin to expire
in 2020 unless previously utilized.

7. Commitments

The Company leases certain of its facilities under long-term operating
leases, which expire at various dates through 2011. In addition, the Company
has committed to a long-term lease for a building beginning in October 2000,
which also expires in 2011. The lease agreements frequently include renewal
provisions, which require the Company to pay taxes, insurance and maintenance
costs and contain escalation clauses based upon increases in the Consumer Price
Index or defined rent increases. The Company also leases certain software under
non-cancellable operating leases expiring through 2002.

Annual future minimum lease payments, including machinery and equipment
under capital leases as of March 31, 2000 are as follows:

<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Ending March 31, Lease Leases
---------------------------- --------- -------
<S> <C> <C>
2001....................................................... $ 4,591 $ 879
2002....................................................... 5,076 736
2003....................................................... 4,485 449
2004....................................................... 2,379 678
2005....................................................... 2,261 --
Thereafter................................................. 8,292 --
------- ------
Total minimum lease payments............................. $27,084 2,742
=======
Less amount representing interest.......................... 318
------
Present value of remaining minimum capital lease payments
(including current portion of $729)....................... $2,424
======
</TABLE>

Rent expense (including short-term leases and net of sublease income) for
the years ended March 31, 1998, 1999, and 2000 was $1.2 million, $1.4 million
and $1.6 million, respectively.

F-17
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Employee Retirement Plan

Effective January 1, 1986, the Company established a 401(k) defined
contribution retirement plan (the "Retirement Plan") covering all full-time
employees with greater than three months of service. The Retirement Plan
provides for voluntary employee contributions from 1% to 20% of annual
compensation, subject to a maximum limit allowed by Internal Revenue Service
guidelines. The Company may contribute such amounts as determined by the Board
of Directors. Employer contributions vest to participants at a rate of 20% per
year of service, provided that after five years of service all past and
subsequent employer contributions are 100% vested. The contributions charged to
operations totaled $412,000, $573,000 and $677,000 for the years ended March
31, 1998, 1999 and 2000, respectively.

9. Significant Customer and Geographic Information

During the years ended March 31, 1998, 1999, and 2000, 21%, 20% and 38%,
respectively, of net revenues were from Nortel and their subcontract
manufacturers. In 1998, 1999 and 2000, Insight Electronics, the Company's
domestic distributor, accounted for 11%, 13% and 17% of net revenues,
respectively. Additionally, in 1999, Raytheon Systems Co. accounted for 16% of
net revenues. No other customer accounted for more than 10% of revenues in any
period.

Net revenues by geographic region were as follows (in thousands):

<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
-------------------------
1998 1999 2000
------- -------- --------
<S> <C> <C> <C>
Net revenues:
United States.................................... $44,448 $ 61,760 $ 88,349
Canada........................................... 14,204 18,011 43,770
Europe and Israel................................ 13,773 18,136 28,980
Asia............................................. 4,193 7,093 11,253
------- -------- --------
$76,618 $105,000 $172,352
======= ======== ========
</TABLE>

10. Contingencies

The Company is party to various claims and legal actions arising in the
normal course of business, including notification of possible infringement on
the intellectual property rights of third parties. In addition, since 1993 the
Company has been named as a potentially responsible party ("PRP") along with a
large number of other companies that used Omega Chemical Corporation ("Omega")
in Whittier, California to handle and dispose of certain hazardous waste
material. The Company is a member of a large group of PRPs that has agreed to
fund certain remediation efforts at the Omega site for which the Company has
accrued approximately $50,000. Although the ultimate outcome of these matters
is not presently determinable, management believes that the resolution of all
such pending matters, net of amounts accrued, will not have a material adverse
affect on the Company's financial position or liquidity; however, there can be
no assurance that the ultimate resolution of these matters will not have a
material impact on the Company's results of operations in any period.

11. Subsequent Event

On April 19, 2000, the Company signed a definitive agreement to acquire
YuniNetworks, Inc., a developer of scalable switch fabric silicon solutions for
communication equipment. Under the terms of the agreement, AMCC will issue up
to 2,250,000 shares of its common stock and options in exchange for all
outstanding shares of YuniNetworks' preferred and common stock, including
shares issuable upon exercise of employee stock options and other rights. The
transaction will be accounted for as a purchase and is expected to close in
June 2000.

F-18
<PAGE>

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ---------- ------------------------- ------------ ---------
Additions
-------------------------
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions-- at End
Description of Period Expenses Describe Describe of Period
----------- ---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended March 31,
2000: Allowance for
doubtful Accounts..... $177 $150 $ -- $ 13 $314
Year ended March 31,
1999: Allowance for
doubtful Accounts..... $350 $ 50 $ -- $223 $177
Year ended March 31,
1998: Allowance for
doubtful Accounts..... $200 $157 $ -- $ 7 $350
</TABLE>

F-19
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)

<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
----------- ----------
(unaudited)
<S> <C> <C>
ASSETS
------

Current assets:
Cash and cash equivalents............................ $ 189,812 $ 170,102
Short-term investments--available-for-Sale........... 784,255 784,449
Accounts receivable, net of allowance for doubtful
accounts of $689 and $314 at June 30, 2000
(unaudited) and March 31, 2000, respectively........ 38,271 25,459
Inventories.......................................... 11,092 10,925
Deferred income taxes................................ 4,462 4,148
Current portion of notes receivable from officer and
employees........................................... 82 81
Other current assets................................. 11,993 10,240
---------- ----------
Total current assets............................. 1,039,967 1,005,404
Property and equipment, net............................ 44,913 37,842
Purchased intangibles, net of $2,284 of accumulated
amortization at June 30, 2000......................... 193,601 --
Other assets........................................... 3,626 3,636
---------- ----------
Total assets..................................... $1,282,107 $1,046,882
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable..................................... $ 12,291 $ 8,818
Accrued payroll and related expenses................. 7,934 7,618
Other accrued liabilities............................ 15,848 6,448
Deferred revenue..................................... 3,552 2,776
Current portion of long-term debt.................... 1,418 1,394
Current portion of capital lease obligations......... 704 729
---------- ----------
Total current liabilities........................ 41,747 27,783
Long-term debt, less current portion................... 3,235 3,599
Long-term capital lease obligations, less current
portion............................................... 1,533 1,695
Stockholders' equity:
Preferred Stock, $0.01 par value:
2,000 shares authorized, none issued and
outstanding....................................... -- --
Common Stock, $0.01 par value:
Authorized shares--180,000 Issued and outstanding
shares--124,624 at June 30, 2000 (unaudited) and
121,842 at March 31, 2000......................... 1,246 1,218
Additional paid-in capital......................... 1,164,878 944,512
Deferred compensation, net......................... (3,762) (1,443)
Accumulated other comprehensive loss............... (304) (166)
Retained earnings.................................. 73,534 70,139
Notes receivable from stockholders................. -- (455)
---------- ----------
Total stockholders' equity....................... 1,235,592 1,013,805
---------- ----------
Total liabilities and stockholders' equity....... $1,282,107 $1,046,882
========== ==========
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.

F-20
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)

<TABLE>
<CAPTION>
Three Months
Ended June 30,
---------------
2000 1999
------- -------
<S> <C> <C>
Net revenues................................................... $74,188 $31,643
Cost of revenues............................................... 19,314 10,283
------- -------
Gross profit................................................... 54,874 21,360
Operating expenses:
Research and development..................................... 14,837 6,354
Selling, general and administrative.......................... 10,611 5,569
Amortization of goodwill and purchased intangibles........... 2,284 --
Acquired in-process research and development................. 21,800 --
------- -------
Total operating expenses................................... 49,532 11,923
------- -------
Operating income............................................... 5,342 9,437
Interest income, net......................................... 12,277 884
------- -------
Income before income taxes................................... 17,619 10,321
Provision for income taxes................................... 14,224 3,535
------- -------
Net income................................................... $ 3,395 $ 6,786
======= =======
Basic earnings per share:
Earnings per share........................................... $ 0.03 $ 0.07
------- -------
Shares used in calculating basic earnings per share.......... 121,352 102,860
------- -------
Diluted earnings per share:
Earnings per share........................................... $ 0.03 $ 0.06
======= =======
Shares used in calculating diluted earnings per share........ 132,581 114,112
======= =======
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.

F-21
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------
2000 1999
--------- --------
<S> <C> <C>
Operating Activities
Net income.............................................. $ 3,395 $ 6,786
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 2,418 1,916
Amortization of purchased intangibles................. 2,284 --
Acquired in-process research and development.......... 21,800 --
Amortization of deferred compensation................. 169 154
Tax benefit of disqualifying dispositions............. 5,238 894
Changes in assets and liabilities:
Accounts receivable................................. (12,723) (1,975)
Inventories......................................... (167) (596)
Other current assets................................ (910) 342
Accounts payable.................................... 3,429 938
Accrued payroll and other accrued Liabilities....... 7,591 (1,575)
Deferred income taxes............................... -- 300
Deferred revenue.................................... 776 (64)
--------- --------
Net cash provided by operating activities......... 33,300 7,120
Investing Activities
Proceeds from sales and maturities of short-term
investments............................................ 831,059 38,020
Purchase of short-term investments...................... (830,993) (40,025)
Notes receivable from officers and employees............ 9 90
Payments for acquired businesses, less cash acquired.... (8,433) --
Purchase of property and equipment...................... (8,949) (5,059)
--------- --------
Net cash used for investing activities financing
activities....................................... (17,307) (6,974)
Financing Activities
Proceeds from issuance of common stock, net............. 3,799 1,347
Proceeds on notes receivable from stockholders.......... 455 --
Repurchase of restricted stock.......................... -- (8)
Payments on capital lease obligations................... (188) (301)
Payments on long-term debt.............................. (339) (880)
Other................................................... (10) --
--------- --------
Net cash provided by financing activities......... 3,717 158
--------- --------
Net increase in cash and cash equivalents......... 19,710 304
Cash and cash equivalents at beginning of period.......... 170,102 13,530
--------- --------
Cash and cash equivalents at end of period................ $ 189,812 $ 13,834
========= ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest.............................................. $ 128 $ 224
========= ========
Income taxes.......................................... $ 138 $ 1,842
========= ========
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.

F-22
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. BASIS OF PRESENTATION--INTERIM FINANCIAL INFORMATION (unaudited)

The accompanying unaudited interim condensed financial statements of Applied
Micro Circuits Corporation ("AMCC" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, considered necessary for a fair presentation of the results for
the interim periods presented. Interim results are not necessarily indicative
of results for a full year. The Company has experienced significant quarterly
fluctuations in net revenues and operating results, and expects that these
fluctuations in sales, expenses and net income or losses will continue.

The financial statements and related disclosures have been prepared with the
presumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto contained in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended March 31, 2000.

2. EARNINGS PER SHARE

The reconciliation of shares used to calculate basic and diluted earnings
per share consists of the following (in thousands):

<TABLE>
<CAPTION>
Three Months
Ended June 30,
---------------
2000 1999
------- -------
<S> <C> <C>
Shares used in basic earnings per share computations--
weighted average common shares outstanding............... 121,352 102,860
Net effect of dilutive common share equivalents........... 11,229 11,252
------- -------
Shares used in diluted earnings per share computations.... 132,581 114,112
======= =======
</TABLE>

3. CERTAIN FINANCIAL STATEMENT INFORMATION

<TABLE>
<CAPTION>
June
30, March 31,
2000 2000
------- ---------
<S> <C> <C>
Inventories (in thousands):
Finished goods........................................... $ 2,494 $ 2,666
Work in process.......................................... 7,301 6,966
Raw materials............................................ 1,297 1,293
------- -------
$11,092 $10,925
======= =======
</TABLE>

F-23
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
-------- ---------
<S> <C> <C>
Property and equipment (in thousands):
Machinery and equipment............................... $ 51,515 $ 46,375
Leasehold improvements................................ 8,440 8,352
Computers, office furniture and equipment............. 24,960 20,743
Land.................................................. 4,808 4,808
-------- --------
89,723 80,278
Less accumulated depreciation and amortization.......... (44,810) (42,436)
-------- --------
$ 44,913 $ 37,842
======== ========
</TABLE>

4. COMPREHENSIVE INCOME

The components of comprehensive income, net of tax, are as follows (in
thousands):

<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Net income............................................... $3,395 $6,786
Change in net unrealized loss on available-for-sale
investments............................................. (128) (174)
Foreign currency translation adjustment.................. (10) --
------ ------
Comprehensive income................................... $3,257 $6,612
====== ======
</TABLE>

Accumulated other comprehensive loss presented in the accompanying
consolidated condensed balance sheets consists of the accumulated net
unrealized loss on available-for-sale investments and foreign currency
translation adjustments.

5. BUSINESS COMBINATIONS

On June 8, 2000, the Company completed the acquisition of YuniNetworks,
Inc., a developer of scalable switch fabric silicon solutions for communication
equipment. The transaction was accounted for as a purchase. Under the terms of
the merger agreement, in exchange for all YuniNetworks' shares of common and
preferred stock, AMCC issued 2,024,323 shares of its common stock; the Company
also assumed options to purchase 133,722 shares of its common stock. Pursuant
to a separate agreement, AMCC purchased 10% of the YuniNetworks' shares held by
the majority stockholder of YuniNetworks for $8.9 million cash. The
accompanying financial statements include the results of operations of
YuniNetworks from the date of acquisition.

F-24
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Based on the consideration issued in the transaction, transaction costs and
the liabilities assumed, the total purchase price was approximately $220
million. The Company conducted an independent valuation of the tangible and
intangible assets acquired in order to allocate the purchase price in
accordance with Accounting Principles Board Opinion No. 16. The purchase price
was allocated as follows based upon management's best estimate of the tangible
and intangible assets, including acquired technology and in-process research
and development (in thousands):

<TABLE>
<S> <C>
Current assets acquired............................................ $ 2,177
Property and equipment............................................. 482
Assembled workforce................................................ 1,200
In-process research and development................................ 21,800
Goodwill........................................................... 191,165
Liabilities assumed................................................ (542)
Liabilities for merger-related costs............................... (850)
Deferred compensation.............................................. 2,488
--------
Total consideration.............................................. $217,920
========
</TABLE>

A portion of the purchase price has been allocated to acquired in-process
research and development ("IPR&D"). IPR&D was identified and valued through
extensive interviews, analysis of data provided by YuniNetworks concerning
products under development, their stage of development, the time and resources
needed to complete them, their expected income generating ability, target
markets and associated risks. The income approach, which includes an analysis
of the markets, cash flows, and risks associated with achieving such cash
flows, was the primary technique utilized in valuing the IPR&D.

At the date of acquisition, YuniNetworks had no developed products. The
product under development consists of a unique switching chipset that consists
of six individual integrated circuits, reference designs, and a simulation
tool. Because the development project had not reached technological feasibility
and had no future alternative use, it was classified as IPR&D and charged to
expense upon closing of the merger. The Company estimates that a total
investment of $3.1 million in research and development over the next seven
months will be required to complete the IPR&D. The nature of the efforts
required to develop the purchased IPR&D into commercially viable products
principally relate to the completion of all planning, designing, prototyping,
verification and testing activities necessary to establish that the products
can be produced to meet their design specifications, including functions,
features and technical performance requirements.

In valuing the IPR&D, the Company considered, among other factors, projected
incremental cash flows from the projects when completed and any associated
risks with achieving these cash flows. The projected incremental cash flows
were discounted back to their present value using a 21% discount rate. The
discount rate was determined after consideration of the Company's weighted
average cost of capital and the weighted average return on assets. Associated
risks include the inherent difficulties and uncertainties in completing the
project and thereby achieving technological feasibility, anticipated levels of
market acceptance and penetration, market growth rates and risks related to the
impact of potential changes in future target markets.

The acquired assembled workforce is comprised of 22 skilled employees across
YuniNetworks' executive, research and development, and general and
administrative groups. The Company is amortizing the value assigned to the
assembled workforce of approximately $1.2 million on a straight-line basis over
an estimated remaining useful life of four years.

Goodwill, which represents the excess of the purchase price of an investment
in an acquired business over the fair value of the underlying net identifiable
assets, is being amortized on a straight-line basis over its estimated
remaining useful life of six years.

F-25
<PAGE>

APPLIED MICRO CIRCUITS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following unaudited pro forma summary presents the consolidated results
of operations of the Company, excluding the charge for acquired in-process
research and development, as if the acquisition of YuniNetworks had occurred at
the beginning of the earliest period presented and does not purport to be
indicative of what would have occurred had the acquisition been made as of that
date or of the results which may occur in the future. The pro forma results of
operations combines the consolidated results of operations of the Company,
excluding the charge for acquired in-process research and development
attributable to YuniNetworks for the three months ended June 30, 2000 with the
historical results of operations of YuniNetworks for the three months ended
June 30, 2000.

The pro forma combined results for the three months ended June 30, 1999 are
the same as the reported results for that period because YuniNetworks did not
commence its operations until October 8, 1999.

<TABLE>
<CAPTION>
Three Months
Ended June 30,
---------------
2000 1999
------- -------
<S> <C> <C>
Net sales................................................... $74,188 $31,643
======= =======
Net income.................................................. 17,531 6,786
======= =======
Diluted earnings per share.................................. 0.13 0.06
======= =======
</TABLE>

During the three months ended June 30, 2000, the Company also completed the
acquisitions of pBaud Logic, Inc. and Chameleon Technologies, which were also
accounted for as purchases.

6. NEW ACCOUNTING PRONOUNCEMENTS

In September 1999, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force Topic No. D-83 ("EITF D-83"), "Accounting for
Payroll Taxes Associated with Stock Option Exercises." EITF D-83 requires that
payroll taxes paid on the difference between the exercise price and the fair
value of acquired stock in association with an employee's exercise of stock
options be treated as operating expenses. Payroll taxes on stock option
exercises were $388,000 for the quarter ended June 30, 2000.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Management does not
believe this will have a material effect on the Company's operations.
Implementation of this standard has recently been delayed by the FASB for a
12-month period. The Company will now adopt SFAS 133 as required for its first
quarterly filing of fiscal year 2002.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements", which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. The Company
is required to adopt SAB 101 in the quarter ending March 31, 2001. The Company
is in the process of assessing the impact of adopting SAB 101 on our financial
position and results of operations, however, we do not expect the effect, if
any, to be material.

F-26
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of MMC Networks, Inc.

In our opinion, the consolidated financial statements of MMC Networks, Inc.
and financial statement schedule listed in the index at F-1 present fairly, in
all material respects, the financial position of MMC Networks, Inc. and its
subsidiary at December 31, 1999 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

San Jose, California
January 19, 2000

F-27
<PAGE>

MMC NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
------- -------
<S> <C> <C>
ASSETS
------

Current assets:
Cash and cash equivalents.................................. $13,484 $31,452
Short-term investments..................................... 58,511 21,726
Accounts receivable, net of allowances of $422 and $172.... 6,358 10,582
Inventories................................................ 3,216 630
Prepaid expenses and other current assets.................. 6,374 3,372
------- -------
Total current assets..................................... 87,943 67,762
Property and equipment, net.................................. 8,222 5,487
Other assets................................................. 230 135
------- -------
$96,395 $73,384
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable........................................... $ 4,725 $ 4,400
Accrued expenses........................................... 3,710 5,753
Capital lease obligations.................................. -- 286
------- -------
Total current liabilities................................ 8,435 10,439
------- -------
Commitments and contingencies (Note 10)

Stockholders' equity:
Preferred Stock: $0.001 par value; 10,000 shares
authorized; no shares issued or outstanding............... -- --
Common Stock: $0.001 par value; 100,000 shares authorized;
31,871 and 30,135 shares issued and outstanding........... 28 26
Additional paid-in capital................................. 68,771 55,520
Notes receivable from stockholders......................... (47) (107)
Retained earnings.......................................... 19,343 7,506
Accumulated other comprehensive loss....................... (135) --
------- -------
Total stockholders' equity............................... 87,960 62,945
------- -------
$96,395 $73,384
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-28
<PAGE>

MMC NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues............................................ $70,149 $49,279 $21,930
Cost of revenues.................................... 21,524 14,353 6,542
------- ------- -------
Gross profit...................................... 48,625 34,926 15,388
------- ------- -------
Operating expenses:
Research and development, net...................... 22,645 14,552 8,318
Selling, general and administrative................ 11,182 9,162 6,240
Litigation settlement.............................. -- 1,250 --
------- ------- -------
Total operating expenses.......................... 33,827 24,964 14,558
------- ------- -------
Operating income.................................... 14,798 9,962 830
------- ------- -------
Other income (expense):
Interest income.................................... 3,172 2,234 630
Interest expense................................... (34) (55) (126)
------- ------- -------
Total other income................................ 3,138 2,179 504
------- ------- -------
Income before income taxes.......................... 17,936 12,141 1,334
Provision for income taxes.......................... 6,099 3,730 138
------- ------- -------
Net income.......................................... $11,837 $ 8,411 $ 1,196
======= ======= =======
Basic income per share.............................. $ 0.38 $ 0.28 $ 0.08
======= ======= =======
Shares used to compute basic income per share....... 31,065 29,693 14,432
======= ======= =======
Diluted income per share............................ $ 0.35 $ 0.25 $ 0.04
======= ======= =======
Shares used to compute diluted income per share..... 33,791 33,611 29,113
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-29
<PAGE>

MMC NETWORKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

<TABLE>
<CAPTION>
Convertible Notes Accumulated
Preferred Stock Common Stock Additional Receivable Other
----------------- -------------- Paid-In from Retained Comprehensive
Shares Amount Shares Amount Capital Stockholders Earnings Loss Total
-------- ------- ------ ------ ---------- ------------ -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 13,342 $10,247 11,121 $ 7 $ 249 $(225) $(2,101) $ -- $ 8,177
Conversion of Preferred
Stock upon the
completion of the
initial public
offering............... (13,342) (10,247) 13,342 13 10,234 -- -- -- --
Issuance of Common
Stock, net of issue
costs of $1,104........ -- -- 4,025 4 40,068 -- -- -- 40,072
Repurchase of Common
Stock and reduction of
loan receivable from
stockholder............ -- -- (170) -- (114) 114 -- -- --
Exercise of warrant..... -- -- 121 -- -- -- -- -- --
Exercise of stock
options and other...... -- -- 744 1 311 (70) -- -- 242
Issuance of Common Stock
in exchange for
services............... -- -- 15 -- 30 -- -- -- 30
Net income.............. -- -- -- -- -- -- 1,196 -- 1,196
-------- ------- ------ --- ------- ----- ------- ----- -------
Balance at December 31,
1997................... -- -- 29,198 25 50,778 (181) (905) -- 49,717
Exercise of stock
options and other...... -- -- 859 1 1,218 -- -- -- 1,219
Shares issued under the
Employee Stock Purchase
Plan................... -- -- 78 -- 716 -- -- -- 716
Repayment of notes
receivable from
stockholders........... -- -- -- -- -- 74 -- -- 74
Tax benefit from the
exercise of stock
options................ -- -- -- -- 2,808 -- -- -- 2,808
Net income.............. -- -- -- -- -- -- 8,411 -- 8,411
-------- ------- ------ --- ------- ----- ------- ----- -------
Balance at December 31,
1998................... -- -- 30,135 26 55,520 (107) 7,506 -- 62,945
Exercise of stock
options and other...... -- -- 1,639 2 5,218 -- -- -- 5,220
Shares issued under the
Employee Stock Purchase
Plan................... -- -- 97 -- 1,003 -- -- -- 1,003
Repayment of notes
receivable from
stockholders........... -- -- -- -- -- 60 -- -- 60
Tax benefit from the
exercise of stock
options................ -- -- -- -- 7,030 -- -- -- 7,030
Net income.............. -- -- -- -- -- -- 11,837 -- 11,837
Unrealized loss on
short-term
investments............ -- -- -- -- -- -- -- (135) (135)
-------- ------- ------ --- ------- ----- ------- ----- -------
Balance at December 31,
1999................... -- $ -- 31,871 $28 $68,771 $ (47) $19,343 $(135) $87,960
======== ======= ====== === ======= ===== ======= ===== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-30
<PAGE>

MMC NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 11,837 $ 8,411 $ 1,196
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 3,309 2,224 1,186
Issuance of Common Stock in exchange for
services..................................... -- -- 30
Tax benefit from the exercise of stock
options...................................... 7,030 2,808 --
Changes in assets and liabilities:
Accounts receivable.......................... 4,224 (6,056) (2,501)
Inventories.................................. (2,586) (60) (59)
Prepaid expenses and other assets............ (3,097) (2,912) (389)
Accounts payable............................. 325 1,774 2,040
Accrued expenses............................. (2,043) 4,009 955
Deferred revenue and customer deposits....... -- -- (100)
-------- -------- -------
Net cash provided by operating activities... 18,999 10,198 2,358
-------- -------- -------
Cash flows from investing activities:
Sale (purchase) of short-term investments....... (36,920) (21,726) 1,509
Acquisition of property and equipment........... (6,044) (4,080) (3,201)
-------- -------- -------
Net cash used in investing activities....... (42,964) (25,806) (1,692)
-------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of Common Stock, net..... 6,223 1,935 40,314
Proceeds from the repayment of notes receivable
from stockholders.............................. 60 74 --
Principal payments on capital lease
obligations.................................... (286) (350) (388)
-------- -------- -------
Net cash provided by financing activities... 5,997 1,659 39,926
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents...................................... (17,968) (13,949) 40,592
Cash and cash equivalents at beginning of year.... 31,452 45,401 4,809
-------- -------- -------
Cash and cash equivalents at end of year.......... $ 13,484 $ 31,452 $45,401
======== ======== =======
Supplemental disclosure:
Cash paid for interest.......................... $ 34 $ 55 $ 126
Cash paid for income taxes...................... $ 4,664 $ 1,517 $ 13
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-31
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--THE COMPANY

MMC Networks is a leading developer and supplier of Network Processors,
which are high-performance, open-architecture, software-programmable processors
optimized for network applications. MMC was incorporated in California in
September 1992 as a Subchapter S corporation and became a Subchapter
C corporation effective July 1994. MMC was reincorporated in Delaware in
October 1997. In May 1998, the Company established a wholly owned subsidiary in
Israel, MMC Networks Israel, LTD, ("MMCIL"), which functions as an engineering
design center. MMC sells its products primarily in the United States.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The consolidated financial statements include the
accounts of MMC and its wholly owned subsidiary. All material intercompany
accounts and transactions have been eliminated.

Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. Those estimates and assumptions affect the reported amounts of
assets and liabilities, and revenues and expenses during the reporting period.
They also affect disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.

Cash, cash equivalents and short-term investments. All highly liquid
investments with a maturity of three months or less when purchased are
considered to be cash equivalents. Short-term investments have maturities of
more than three months when purchased and consist primarily of commercial paper
and securities issued or guaranteed by the U.S. government. Short-term
investments have been categorized as available-for-sale. At December 31, 1999,
the fair market value of the Company's short-term investments was less than
cost by $135,000 and the Company recorded the unrealized loss in Other
Accumulated Comprehensive Loss in Stockholders' Equity. At December 31, 1998,
the fair market value of the Company's short-term investments approximated
cost.

Inventories. Inventories are stated at the lower of cost, determined using
the first-in, first-out method, or market.

Property and equipment. Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets, generally three years.

Long-lived assets. The Company evaluates the recoverability of long-lived
assets based on a gross cash flow basis whenever events or changes in
circumstances indicate the carrying amount of the assets may not be fully
recoverable. If the net book value of our long-lived assets exceeds the future
undiscounted cash flows of those assets, then impairment of those assets is
recognized. No such impairments have been identified to date.

Revenue recognition. Revenues are recognized upon shipment of product to
customers. Funds received in advance of product shipment are deferred and
recognized upon shipment of the product. The Company's normal policy is to not
accept returns except for defective products. Anticipated costs related to
product warranties are charged to operations as revenues are recognized. The
Company has not experienced significant warranty claims to date.

Research and development. Research and development expenses are charged to
operations as incurred. Occasionally the Company receives non-recurring
engineering funding for development projects to apply or enhance the Company's
technology to a particular customer's needs. This funding is recognized over
the term of the respective contract using the percentage-of-completion method.
At the time of recognition, amounts

F-32
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

received under research and development contracts are offset against research
and development expenses. (See Note 9.)

Software development expenses. Software development expenses are included in
research and development. The Company's policy is to capitalize certain
software development expenses once technological feasibility is established,
which the Company defines as the completion of a working model. The capitalized
expense is then amortized on a straight-line basis over the estimated product
life, or on the ratio of current sales to total projected product sales,
whichever is greater. To date, the period between achieving technological
feasibility and the general availability of such software has been short.

Income taxes. The Company accounts for income taxes using an asset and
liability approach. It requires the recognition of taxes payable or refundable
for the current year. It also requires the recognition of deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. The
measurement of current and deferred tax liabilities and assets are based on the
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced,
if necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realized.

Stock-based compensation. Our policy is to account for stock based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. The Company provides additional pro
forma disclosures as required under Statement of Financial Accounting Standards
No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation." (See Note 6.)

Concentrations of credit risk. Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash, cash equivalents, short-term investments and accounts
receivable. The Company places its cash, cash equivalents and short-term
investments primarily in market rate accounts, commercial paper, state and
municipal securities and securities issued by or guaranteed by the U.S.
government. The Company performs ongoing credit evaluations of our customers'
financial condition and generally does not require collateral from our
customers. The Company provides an allowance for doubtful accounts receivable
based upon the expected collectibility of the receivables and to date has not
experienced any material losses.

Net income per share. Basic EPS is computed by dividing net income available
to common stockholders (numerator) by the weighted average shares of common
stock outstanding (denominator) during the period. Basic EPS excludes the
dilutive effect of potential common stock. Diluted EPS gives effect to all
dilutive potential common stock outstanding during the period. In computing
diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of potential common
stock.

F-33
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table reconciles the numerators and denominators of the basic
and diluted EPS computations for the years ended December 31, 1997 and 1998 and
1999.

<TABLE>
<CAPTION>
Per Share
Net Income Shares Amount
---------- ------ ---------
(in thousands,
except per share data)
<S> <C> <C> <C>
For the Year Ended December 31, 1997:
Earning per share of Common Stock--basic........ $ 1,196 14,432 $0.08
=====
Effect of dilutive securities:
Convertible Preferred Stock................... -- 11,118
Warrants...................................... -- 114
Stock options................................. -- 3,449
------- ------
Earnings per share of Common Stock--diluted..... $ 1,196 29,113 $0.04
======= ====== =====

For the Year Ended December 31, 1998:
Earning per share of Common Stock--basic........ $ 8,411 29,693 $0.28
=====
Effect of dilutive securities:
Warrants...................................... -- 30
Stock options................................. -- 3,888
------- ------
Earnings per share of Common Stock--diluted..... $ 8,411 33,611 $0.25
======= ====== =====

For the Year Ended December 31, 1999:
Earning per share of Common Stock--basic........ $11,837 31,065 $0.38
=====
Effect of dilutive securities:
Stock options................................. -- 2,726
------- ------
Earnings per share of Common Stock--diluted..... $11,837 33,791 $0.35
======= ====== =====
</TABLE>

Options to purchase Common Stock are considered anti-dilutive if the
options' exercise price is greater than the average fair market value of the
Company's Common Stock. Anti-dilutive options are excluded from the calculation
of diluted net income per share. The anti-dilutive options excluded from
diluted net income per share were as follows:

<TABLE>
<CAPTION>
Options Price
------- ------
<S> <C> <C>
December 31, 1997........................................... 29,500 $15.94
December 31, 1998........................................... 354,500 $24.52
December 31, 1999........................................... 663,850 $35.21
</TABLE>

Comprehensive Income. Comprehensive income is recorded in accordance with
the standards of Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). Comprehensive gains or losses
are reflected in Stockholders' Equity. During 1999, the Company recorded a
comprehensive loss of $135,000 related to unrecognized losses on Short Term
Investments. Items of comprehensive income were not recorded during 1998 and
1997 because they were immaterial. If the comprehensive loss of $135,000 had
been recorded in the Consolidated Statements of Operations during 1999, net
income would have been $11,702,000.

Segment Information. The Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131") in 1998. This

F-34
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

statement establishes standards for the way companies report information about
operating segments in financial statements. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers.

Operating Segments. While the Company has more than one product family, it
operates in one segment. All of the products are sold to network equipment
vendors for inclusion in their enterprise and service provider products.

Geographic Areas. The Company reports its sales in geographic areas
according to the location the product is shipped. In the case that a customer
regularly directs product to be shipped to a manufacturing subcontractor
located in a different geographic area, sales are reported in the geographic
area of the customer and not the subcontractor. Revenues by geographic area
were:

<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
North America............................................. 92% 84% 69%
Asia (including Japan).................................... 5% 13% 29%
Europe.................................................... 3% 3% 2%
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

Major Customers. Significant customers are those customers accounting for
more than 10% of the Company's total revenues. Revenues as a percentage of
total revenues for significant customers are as follows:

<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cisco Systems, Inc. ........................................ 52% 50% 28%
International Business Machines Corporation................. 19% * *
Mitsui Comtek Corp., a non-stocking sales representative for
Japan...................................................... * 12% 28%
Hitachi..................................................... * * 12%
</TABLE>
--------
*Less than 10% during year

Cisco Systems Inc. and Nortel Networks Corp. represented 41% and 19% of
trade receivables at December 31, 1999, and Cisco Systems Inc. and Mitsui
Comtek Corp. represented 55% and 18% of trade receivables at December 31, 1998.

F-35
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 3--COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Inventories:
Work in process.......................................... $ 1,541 $ 244
Finished goods........................................... 1,675 386
------- -------
$ 3,216 $ 630
======= =======
Property and equipment:
Computers and equipment.................................. $ 5,732 $ 2,964
Purchased software....................................... 8,556 6,010
Furniture and fixtures................................... 934 430
------- -------
15,222 9,404
Less accumulated depreciation and amortization........... (7,000) (3,917)
------- -------
$ 8,222 $ 5,487
======= =======
Accrued liabilities:
Accrued compensation and benefits........................ $ 1,639 $ 1,844
Income taxes payable..................................... -- 1,802
Accrued warranty......................................... 1,894 1,899
Other accrued liabilities................................ 177 208
------- -------
$ 3,710 $ 5,753
======= =======
</TABLE>

NOTE 4--FINANCING AGREEMENTS

During the first half of 1998, the Company established two credit facilities
with a bank: 1) a loan agreement and 2) a non-recourse receivables purchase
agreement. The loan agreement allows borrowings up to $8.0 million. Borrowings
bear interest at the bank's prime interest rate, which was 8.5% at December 31,
1999. The agreement requires that we comply with certain financial covenants.
In the event of default, all outstanding borrowings will accrue interest at a
rate of five percentage points above the rate effective immediately prior to a
default. The loan agreement expired in May 1999 and was renewed for one year on
the same terms. The non-recourse receivables purchase agreement expired in
February 1999 and was not renewed. The loan agreement has not been utilized
since its inception and the receivables purchase agreement was also not
utilized prior to its expiration.

F-36
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 5--INCOME TAXES

The Company's income before taxes is primarily composed of domestic income.
The provision for income taxes for the years ended December 31, 1999 and 1998
consists of the following:

<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1999 1998
------ ------
(in
thousands)
<S> <C> <C>
Current tax expense
United States............................................... $6,259 $5,212
State....................................................... 513 760
Foreign..................................................... -- 29
------ ------
Total current tax expense.................................. 6,772 6,001
Deferred income tax......................................... (673) (2,271)
------ ------
Total provision for income taxes........................... $6,099 $3,730
====== ======
</TABLE>

Deferred tax assets consist of the following:

<TABLE>
<CAPTION>
Year Ended
December 31,
-------------
1999 1998
------ ------
(in
thousands)
<S> <C> <C>
Reserve and basis differences................................ $ 840 $ 758
Accrued expenses............................................. 1,863 1,312
Other........................................................ 241 201
------ ------
Total deferred tax assets................................... $2,944 $2,271
====== ======
</TABLE>

The tax benefit of $7.0 million associated with the exercise of employee
stock options was recorded in Stockholders' Equity in 1999.

The effective tax rate for the years ended December 31, 1999 and 1998
reconciles to the statutory tax rates as follows:

<TABLE>
<CAPTION>
December
31,
----------
1999 1998
---- ----
<S> <C> <C>
Federal statutory rate............................................. 35% 35%
State taxes, net of federal benefit................................ 3 2
Foreign income taxes............................................... (1) 2
Permanent differences.............................................. -- 2
Research and development credit carryforwards...................... (8) (3)
Release of valuation allowance..................................... -- (9)
Other.............................................................. 5 2
--- ---
Effective tax rate............................................... 34% 31%
=== ===
</TABLE>

F-37
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 6--CAPITAL STOCK

Common Stock. The Company is authorized to issue 100,000,000 shares of
Common Stock with a par value of $0.001 per share and 10,000,00 shares of
undesignated Preferred Stock with a par value of $0.001 per share. Holders of
Common Stock are entitled to one vote per share on all matters voted on by the
Company's stockholders. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series. It may also fix the rights,
preferences, privileges and restrictions of any undesignated Preferred Stock
that is issued.

In October 1997, the Company completed its initial public offering (the
"IPO") of 4,025,000 shares of Common Stock at a price of $11.00 per share. The
Company received proceeds of approximately $40.1 million of cash, net of issue
costs. In conjunction with the IPO, all outstanding shares of Convertible
Preferred Stock were converted into shares of Common Stock on a one-for-one
basis. The Company converted 9,255,000 shares of Series A Convertible Preferred
Stock and 4,086,780 shares of Series B Convertible Preferred Stock.

Stock Option Repricing. On September 18, 1998, the Board of Directors
extended an offer to employees holding certain outstanding stock options the
opportunity to receive repriced options. The offer was made for options with
grant dates after October 28, 1997. The exercise price for repriced options was
$16.38, the closing sales price of the Company's Common Stock on the effective
date, which was September 25, 1998. No other terms or conditions of the
original option agreements were changed except that the repriced option was not
exercisable for a period of six months from the effective date of the
repricing. A total of 424,000 options with original exercise prices ranging
from $16.75 to $32.13 were repriced. Members of the Board of Directors and the
Company's officers were excluded from the repricing.

1997 Stock Plan. In August 1997, the Company's Board of Directors adopted,
and the stockholders subsequently approved, the 1997 Stock Plan (the "1997
Plan"), which replaced the 1993 Plan. The following shares have been reserved
for issuance under the 1997 Plan:

(a) 1,500,000 shares of Common Stock plus any shares which were reserved
but unissued under the 1993 Plan

(b) any shares returned to the 1993 Plan as a result of termination of the
options

(c) shares added to the 1997 Plan for automatic annual increases on the
date of each annual meeting of the stockholders beginning with the 1999
annual meeting

The automatic annual increases are limited to the lesser of:

(a) 1,000,000 shares,

(b) 5% of all outstanding shares of Common Stock

Unless terminated sooner, the 1997 Plan will terminate automatically in
August 2007.

The 1997 Plan provides for the grant of incentive stock options ("ISOs") to
employees, officers and employee directors. It also provides for the grant of
nonstatutory stock options ("NSOs") and stock purchase rights ("SPRs") to
employees, directors and consultants. ISOs granted to participants owning stock
possessing more than 10% of the voting power of all classes of stock must have
an exercise price at least equal to 110% of the fair market value on the date
of grant and are for periods not to exceed five years. All other options
granted under the plan must have an exercise price at least equal to the fair
market value on the date of grant and are for periods not to exceed ten years.
Options granted under the 1997 Plan generally vest at a rate of 25% on the
first anniversary of the date of grant and 1/48 of the underlying shares per
month after the first anniversary.

F-38
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock purchase rights ("SPRs") are for periods and prices determined by the
Board. Shares purchased through the exercise of SPRs are subject to repurchase
by the Company at the original price paid by the purchaser in the event that
the purchaser's employment with the Company terminates. The repurchase right
lapses at a rate determined by the Board. No stock purchase rights have been
granted to date under either the 1997 Plan or the Predecessor Plan.

1997 Director Option Plan. In August 1997, the Company's Board of Directors
adopted, and the stockholders subsequently approved, the 1997 Director Option
Plan (the "Director Plan"). The Director Plan provides for the grant of NSOs to
non-employee directors. Options granted under the Director Plan are for periods
not to exceed ten years and are granted at exercise prices not less than the
fair market value on the date of grant. The Director Plan provides that each
non-employee director will automatically be granted an NSO to purchase 40,000
shares of Common Stock (the "First Option") on the date that the Director first
becomes a non-employee director, unless immediately prior to becoming a non-
employee director, they were an employee director of the Company. In addition
to the First Option, each non-employee director will automatically be granted
an option to purchase 10,000 shares (a "Subsequent Option") two days after the
announcement of the Company's fiscal year-end earnings of each year, if on that
date they will have served on the Board of Directors for at least the preceding
six months.

Each First Option and each Subsequent Option will have a term of 10 years.
The First Options generally vest at a rate of 25% on the first anniversary of
the date of grant and 1/48 of the underlying shares per month after the first
anniversary, as long as the person continues to serve as a Director. Each
Subsequent Option will vest at a rate of 1/12 of the underlying shares per
month. At December 31, 1999, a total of 190,000 shares of Common Stock have
been reserved for issuance since inception of the Director Plan.

A total of 19,415,000 shares have been reserved for issuance under all stock
option plans since inception of the plans as of December 31, 1999. Activity
under the stock option plans is as follows:

<TABLE>
<CAPTION>
Weighted
Shares Average
Available Options Exercise
For Grant Outstanding Price
---------- ----------- --------
<S> <C> <C> <C>
Balance at December 31, 1996............... 2,521,311 3,193,905 $ 0.71
Authorized................................. 7,650,000 -- --
Granted.................................... (3,213,500) 3,213,500 3.53
Exercised.................................. -- (743,830) 0.36
Canceled................................... 431,688 (431,688) 0.97
---------- ----------
Balance at December 31, 1997............... 7,389,499 5,231,887 2.47
Granted.................................... (1,638,000) 1,638,000 17.15
Exercised.................................. -- (859,445) 1.47
Canceled................................... 782,783 (782,783) 15.95
---------- ----------
Balance at December 31, 1998............... 6,534,282 5,227,659 5.22
Authorized................................. 1,040,000 -- --
Granted.................................... (3,189,467) 3,189,467 21.64
Exercised.................................. -- (1,608,777) 3.15
Canceled................................... 673,914 (673,914) 8.89
---------- ----------
Balance at December 31, 1999............... 5,058,729 6,134,435 $13.88
========== ==========
</TABLE>

F-39
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company adopted the disclosure-only provisions of SFAS 123, "Accounting
for Stock Based Compensation". The fair value of stock options granted prior to
the filing of the Company's initial registration statement on August 19, 1997
were calculated using the minimum value model. Options granted after that date
were calculated based on the Black-Scholes model utilizing the following
weighted average assumptions:

<TABLE>
<CAPTION>
Year Ended October 28 January 1
December 31, to to
-------------- December 31, October 27,
1999 1998 1997 1997
------ ------ ------------ -----------
<S> <C> <C> <C> <C>
Stock Option Plans:
Expected dividend yield......... 0% 0% 0% 0%
Expected stock price
volatility..................... .90 .80 .70 0
Risk free interest rate......... 6.66% 4.85% 6.03% 6.33%
Expected life of the options
(years)........................ 5.18 4.53 4.00 4.00
Weighted-average fair value..... $16.08 $11.10 $1.16 $1.16
</TABLE>

Summary information concerning outstanding and exercisable options as of
December 31, 1999 is as follows (Remaining Contractual Life is expressed in
years):

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- -------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Outstanding Price
------------------------ ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 0.03- 2.00............ 1,231,146 6.58 $ 1.24 820,608 $ 1.05
2.17-12.63............ 1,606,038 8.09 7.81 457,334 5.20
12.75-16.75............ 1,797,388 8.92 16.33 248,660 16.20
16.94-54.25............ 1,499,863 9.55 27.82 40,000 17.16
--------- ---------
$ 0.03-54.25............ 6,134,435 8.39 $13.88 1,566,602 $ 5.08
========= =========
</TABLE>

1997 Employee Stock Purchase Plan. In August 1997, MMC's Board of Directors
adopted the 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan"). The
1997 Purchase Plan is intended to qualify under Section 423 of the Internal
Revenue Code. It contains 24-month offering periods, with four six-month
purchase periods included in each offering period. The 1997 Purchase Plan
permits employees to purchase MMC Common Stock through payroll deductions of up
to 10% of the participant's compensation. The price of stock purchased under
the 1997 Purchase Plan is 85% of the lower of the fair market value of the
Common Stock at the beginning of the offering period or at the end of the
purchase period. At December 31, 1999 a total of 545,102 shares of Common Stock
have been reserved for issuance since inception under the 1997 Purchase Plan.
Shares reserved for issuance under the 1997 Purchase Plan are subject to
automatic annual increases equal to the lesser of (i) 400,000 shares, (ii) 0.8%
of all then outstanding shares of Common Stock of the Company or (iii) a lesser
amount determined by the Board.

F-40
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of shares granted under the 1997 Purchase Plan was calculated
utilizing the Black-Scholes model and the following weighted-average
assumptions:

<TABLE>
<CAPTION>
Year Ended
December October 28
31, to
------------ December 31,
1999 1998 1997
----- ----- ------------
<S> <C> <C> <C>
Stock Purchase Plan:
Expected dividend yield......................... 0% 0% 0%
Expected stock price volatility................. .81 .77 .70
Risk free interest rate......................... 4.94% 4.92% 5.58%
Expected life of the options (years)............ 1.22 1.16 1.3
Weighted-average fair values.................... $6.32 $5.50 $4.63
</TABLE>

The following table summarizes SFAS 123 pro forma information.

<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1999 1998 1997
------- ------ ------
(in thousands,
except per share
data)
<S> <C> <C> <C>
Net income as reported................................ $11,837 $8,411 $1,196
Pro forma net income.................................. 4,103 5,741 619
Basic income per share as reported.................... $ 0.38 $ 0.28 $ 0.08
Pro forma basic income per share...................... 0.13 0.19 0.04
Diluted income per share as reported.................. $ 0.35 $ 0.25 $ 0.04
Pro forma diluted income per share.................... 0.12 0.17 0.02
</TABLE>

The pro forma amounts reflect compensation expense related to 1999, 1998 and
1997 stock option grants and shares issued under the 1997 Purchase Plan.
Because the pro forma compensation cost for the stock options is recognized
over the stock option vesting period, the pro forma reductions in net income
shown above are not representative of the pro forma reduction in net income in
future periods.

NOTE 7--OTHER EMPLOYEE BENEFITS

Effective January 1994, the Company adopted a 401(k) plan for its employees
whereby eligible employees may contribute up to 20% of their earnings, on a
pre-tax basis, subject to the maximum amount permitted by the Internal Revenue
Code. At the discretion of the Board of Directors, the Company may make
contributions under the 401(k) plan. To date, the Company has not made any such
contributions.

NOTE 8--NOTES RECEIVABLE FROM STOCKHOLDERS

In October and November 1995, the Company made full recourse loans with
principal amounts totaling $125,000 to certain employees pursuant to the
Company's 1993 Plan. The loans are non-interest bearing and are due in October
and November 2000 or earlier in the event of the borrower's termination of
employment with the Company. At December 31, 1999 the outstanding balance under
these loans of $47,400 is secured by 85,500 shares of the Company's Common
Stock.

NOTE 9--RESEARCH AND DEVELOPMENT CONTRACTS

During the years ended December 31, 1999, 1998 and 1997 the Company
performed research and development, which was funded under a number of
contracts with certain customers. The Company recognized $200,000, $811,000,
and $716,000, respectively, as offsets against research and development
expenses.

F-41
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Additionally during 1999, $625,000 of 1998 funding was repaid in exchange for
certain rights to use the technology in the Company's products. One customer
represented 100% of the 1999 funding, and one customer represented 77% of the
1998 funding as well as the repayment in 1999. Funding received under any of
the research and development contracts was not individually significant during
1997.

The contracts vary in term and provide for the development of technologies
that will enhance products to meet the customer's specific needs. The funding
is generally non-refundable, except under conditions specific to each
contract.

NOTE 10--COMMITMENTS AND CONTINGENCIES

Leases. The Company leases its facilities under noncancelable lease
agreements, which expire from May 2000 through May 2005. Rent expense under
noncancelable operating leases was $1.2 million, $687,000 and $612,000 during
the years ended December 31, 1999, 1998 and 1997, respectively.

Future minimum lease payments under all non-cancelable operating leases are
as follows (in thousands):

<TABLE>
<S> <C>
For the Year Ended December 31,
2000.............................................................. $ 1,450
2001.............................................................. 1,698
2002.............................................................. 2,444
2003.............................................................. 2,722
2004.............................................................. 2,722
2005.............................................................. 1,009
-------
Total minimum payments.......................................... $12,045
=======
</TABLE>

Through 1996, the Company leased property and equipment of $1.4 million
under master lease agreements with leasing companies. These capital leases
terminated during 1999.

During 1999, the Company entered into an agreement with a software vendor.
Under this agreement, the Company committed to pay $2.9 million over 3 years
beginning April 1999 in exchange for the use of certain design software.
During the year the commitment increased to $3.8 million in exchange for the
use of additional design software. As of December 31, 1999, $3.1 million
remains outstanding under this commitment.

Other. From time to time, third parties, including competitors of the
Company, may assert patent, copyright and other intellectual property rights
to technologies that are important to the Company. Management is not aware of
any such matters that are currently pending.

F-42
<PAGE>

MMC NETWORKS, INC.

VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1998 and 1999
(in thousands)

<TABLE>
<CAPTION>
Additions Deduction
Balance at Charged to from Balance
Beginning Statement of Allowance/ at End
of Period Operations Reserve of Period
---------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year ended December 31, 1997..... $133 $ 48 $ -- $181
==== ===== ==== ====
Year ended December 31, 1998..... $181 $ -- $ 9 $172
==== ===== ==== ====
Year ended December 31, 1999..... $172 $ 250 $ -- $422
==== ===== ==== ====
</TABLE>

F-43
<PAGE>

MMC NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
------

Current assets:
Cash and cash equivalents............................. $ 40,744 $13,484
Short-term investments................................ 33,412 58,511
Accounts receivable, net of allowances of $422, at
June and December.................................... 10,189 6,358
Inventories........................................... 4,722 3,216
Prepaid expenses and other current assets............. 4,587 6,374
-------- -------
Total current assets................................ 93,654 87,943
Property and equipment, net............................. 10,100 8,222
Other assets............................................ 1,521 230
-------- -------
$105,275 $96,395
======== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable...................................... $ 6,591 $ 4,725
Accrued expenses...................................... 4,525 3,710
-------- -------
Total current liabilities........................... 11,116 8,435
-------- -------
Stockholder's equity:
Preferred Stock: $0.001 par value; 10,000 shares
authorized; no shares issued or outstanding.......... -- --
Common Stock: $0.001 par value; 100,000 shares
authorized; 32,848 and 31,871 shares issued and
outstanding.......................................... 29 28
Additional paid-in capital............................ 74,372 68,771
Notes receivable from stockholders.................... (47) (47)
Retained earnings..................................... 19,907 19,343
Accumulated other comprehensive loss.................. (102) (135)
-------- -------
Total stockholders' equity.......................... 94,159 87,960
-------- -------
$105,275 $96,395
======== =======
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-44
<PAGE>

MMC NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)

<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues..................................... $17,030 $19,323 $29,669 $35,433
Cost of revenues............................. 5,013 5,667 8,860 10,468
------- ------- ------- -------
Gross profit............................. 12,017 13,656 20,809 24,965
------- ------- ------- -------
Operating expenses:
Research and development................... $ 7,913 5,256 15,082 9,710
Selling, general and administrative........ 3,737 2,683 6,949 5,075
------- ------- ------- -------
Total operating expenses................. 11,650 7,939 22,031 14,785
Operating income (loss)...................... 367 5,717 (1,222) 10,180
Interest income, net......................... 1,050 691 2,050 1,345
------- ------- ------- -------
Income before income taxes................... 1,417 6,408 828 11,525
Provision for income taxes................... 453 2,305 264 4,145
------- ------- ------- -------
Net income................................... $ 964 $ 4,103 $ 564 $ 7,380
======= ======= ======= =======
Basic income per share....................... $ 0.03 $ 0.13 $ 0.02 $ 0.24
======= ======= ======= =======
Shares used to compute basic income per
share....................................... 32,738 30,716 32,472 30,523
======= ======= ======= =======
Diluted income per share..................... $ 0.03 $ 0.12 $ 0.02 $ 0.22
======= ======= ======= =======
Shares used to compute diluted income per
share....................................... 35,310 34,587 35,386 34,043
======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-45
<PAGE>

MMC NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)

<TABLE>
<CAPTION>
Six Months Ended June
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 564 $ 7,380
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 2,358 1,448
Changes in assets and liabilities:
Accounts receivable.............................. (3,831) 9
Inventories...................................... (1,506) (856)
Prepaid expenses and other current assets........ 1,787 308
Accounts payable................................. 1,866 1,094
Accrued expenses................................. 815 (559)
---------- ----------
Net cash provided by operating activities...... 2,053 8,824
---------- ----------
Cash flows from investing activities:
Sale of short-term investments....................... 25,132 3,196
Acquisition of property and equipment................ (4,236) (1,814)
Investment in convertible debenture.................. (1,000) --
Other assets......................................... (291) (99)
---------- ----------
Net cash provided by investing activities...... 19,605 1,283
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of Common Stock, net.......... 5,602 2,175
Principal payments on capital lease obligations...... -- (156)
---------- ----------
Net cash provided by financing activities...... 5,602 2,019
---------- ----------
Net increase in cash and cash equivalents.............. 27,260 12,126
Cash and cash equivalents at beginning of period....... 13,484 31,452
---------- ----------
Cash and cash equivalents at end of period............. $ 40,744 $ 43,578
========== ==========
Supplemental disclosure:
Cash paid for interest................................. $ -- $ 21
Cash paid for income taxes............................. $ 50 $ 4,664
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-46
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements and notes to
the condensed consolidated financial statements of MMC Networks, Inc. ("MMC")
are unaudited. In the opinion of management, these statements and notes have
been prepared on the same basis as the audited consolidated financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial position,
results of operations and cash flows for MMC for the periods presented. Results
for the interim periods presented are not necessarily indicative of results for
the entire year. The words "we", "us" and "our" used in this report refer to
MMC Networks, Inc.

The accompanying condensed consolidated financial statements and notes do
not include certain information and footnote disclosures normally required
under generally accepted accounting principles. Therefore, these condensed
consolidated financial statements and notes should be read in conjunction with
the audited consolidated financial statements and notes included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1999.

NOTE 2--EARNINGS PER SHARE

The computations of basic and diluted earnings per share for the periods
presented are as follows:

<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
----------------- -----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Net income available to common
stockholders.......................... $ 964 $4,103 $ 564 $7,380
====== ====== ====== ======
Shares used to compute basic income per
share................................. 32,738 30,716 32,472 30,523
Effect of dilutive securities:
Stock options........................ 2,572 3,871 2,914 3,520
------ ------ ------ ------
Shares used to compute basic income per
share................................. 35,310 34,587 35,386 34,043
====== ====== ====== ======
Basic income per share................. $ 0.03 $ 0.13 $ 0.02 $ 0.24
====== ====== ====== ======
Diluted income per share............... $ 0.03 $ 0.12 $ 0.02 $ 0.22
====== ====== ====== ======
</TABLE>

NOTE 3--COMPOSITION OF INVENTORIES

<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
(in thousands)
<S> <C> <C>
Inventories:
Work in process...................................... $2,951 $1,541
Finished goods....................................... 1,771 1,675
------ ------
$4,722 $3,216
====== ======
</TABLE>

F-47
<PAGE>

MMC NETWORKS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 4--FINANCING AGREEMENTS AND OTHER COMMITMENTS

The Company maintains a loan agreement with a bank that allows the Company
to borrow up to $10.0 million. Borrowings bear interest at the bank's prime
interest rate, which was 9.5% at June 30, 2000. The agreement requires that we
comply with certain financial covenants. In the event of default, all
outstanding borrowings will accrue interest at a rate of five percentage points
above the rate effective immediately prior to a default. There have been no
borrowings against the loan agreement since its inception in 1998. The loan
agreement expires in May 2001.

During 1999, the Company entered into an agreement with a software vendor.
Under this agreement, the Company committed to pay $3.8 million over 3 years
beginning April 1999 in exchange for the use of certain design software. As of
June 30, 2000, $2.4 million remains outstanding under this commitment.

NOTE 5--RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133,"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes new standards of accounting and reporting for derivative
instruments and hedging activities. It requires that all derivatives be
recognized at fair value in the statement of financial position, and that the
corresponding gains and losses be reported either in the statement of
operations or as a component of comprehensive income (loss), depending on the
type of hedging relationship that exists. In July 1999, the FASB issued SFAS
137 "Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133." SFAS 137 deferred the effective
date of SFAS 133 until fiscal years beginning after June 15, 2000. Management
does not believe that the adoption of SFAS 133 will have a material impact on
its reported operations or financial position.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB) No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. On June 26,
2000, the SEC issued SAB 101B to provide registrants with additional time to
implement guidance contained in SAB 101. SAB 101B delays the implementation
date of SAB 101 until no later than the Company's fourth fiscal quarter of
fiscal 2000. In various areas, including revenue recognition, accounting
standards and practices continue to evolve. Additionally, the SEC is preparing
to issue interpretative guidance relating to SAB 101, and the FASB's Emerging
Issues Task Force continues to address revenue related accounting issues. The
management of the Company believes it is in compliance with all of the rules
and related guidance as they currently exist. However, any changes to generally
accepted accounting principles in these areas could impact the Company's future
accounting for its operations.

In March 2000, the Financial Accounting Standard Board issued Interpretation
No. 44 ("FIN 44") "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of APB Opinion No. 25 ("APB 25"). FIN 44
clarifies the application of APB 25 for:

a) the definition of "employee" for the purposes of applying APB 25,

b) the criteria for determining whether a plan qualifies as a non-
compensatory plan,

c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and

d) the accounting for an exchange of stock compensation awards in a
business combination. FIN 44 is effective July 1, 2000, but certain
conclusions cover specific events that occur after either December 15,
1998 or January 12, 2000. We believe that the impact of FIN 44 will not
have a material effect on our financial position or results of operations
of the Company.

F-48
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
YuniNetworks, Inc.

We have audited the accompanying balance sheet of YuniNetworks, Inc. (a
development stage company) as of March 31, 2000 and the related statements of
operations, stockholders' equity, and cash flows for the period from October 8,
1999 (inception) to March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of YuniNetworks, Inc. (a
development stage company) at March 31, 2000, and the results of its operations
and its cash flows for the period from October 8, 1999 (inception) to March 31,
2000, in conformity with accounting principles generally accepted in the United
States.

/s/ Ernst & Young LLP

San Diego, California
April 19, 2000

F-49
<PAGE>

YUNINETWORKS, INC.
(a development stage company)

BALANCE SHEET

March 31, 2000

<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current assets:
Cash and cash equivalents............................................. $ 4,482,172
Prepaid expenses...................................................... 5,367
-----------
Total current assets.............................................. 4,487,539
Property and equipment, net............................................. 739,015
Other assets............................................................ 130,254
-----------
Total assets...................................................... $ 5,356,808
===========

<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

<S> <C>
Current liabilities:
Accounts payable...................................................... $ 536,729
Other accrued liabilities............................................. 47,466
-----------
Total current liabilities......................................... 584,195

Commitments (Note 3)

Stockholders' equity:
Preferred stock, $.001 par value: 15,000,000 shares authorized;
Series A preferred stock:
Issued and outstanding--11,000,000 at March 31, 2000;
Liquidation preference--$5,500,000.................................. 11,000
Common stock, $0.001 par value: 35,000,000 shares authorized;
Issued and outstanding--11,503,333 shares at March 31, 2000......... 11,504
Additional paid in capital............................................ 8,826,807
Deferred compensation................................................. (3,137,681)
Deficit accumulated during development stage.......................... (939,017)
-----------
Total stockholders' equity........................................ 4,772,613
-----------
Total liabilities and stockholders' equity........................ $ 5,356,808
===========
</TABLE>

See accompanying notes.

F-50
<PAGE>

YUNINETWORKS, INC.
(a development stage company)

STATEMENT OF OPERATIONS

For the period from October 8, 1999 (inception) through March 31, 2000

<TABLE>
<S> <C>
Operating expenses:
Research and development....................................... $ 757,751
General and administrative..................................... 252,583
-----------
Loss from operations............................................. (1,010,334)
Interest income.................................................. 71,317
-----------
Net loss......................................................... $ (939,017)
===========
Basic and diluted and net loss per share......................... $ (.10)
===========
Weighted average shares used in computations of basic and diluted
net loss per share.............................................. 9,526,487
===========
</TABLE>

See accompanying notes.

F-51
<PAGE>

YUNINETWORKS, INC.
(a development stage company)

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Deficit
accumulated
Preferred stock Common stock Additional during Total
------------------ ------------------ paid-in Deferred development stockholders'
Shares Amount Shares Amount capital compensation stage equity
---------- ------- ---------- ------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders
common stock at $0.001
per share for cash on
October 8, 1999........ -- $ -- 10,612,500 $10,613 $ -- $ -- $ -- $ 10,613
Issuance of Series A
preferred stock at
$0.50 per share for
cash, net of issuance
costs of $19,311 on
December 21, 1999...... 11,000,000 11,000 -- -- 5,469,689 -- -- 5,480,689
Issuance of common stock
at $0.05 per share for
cash on February 15,
2000................... -- -- 125,000 125 6,125 -- -- 6,250
Issuance of common stock
at $0.05 per share for
cash on March 31,
2000................... -- -- 50,000 50 2,450 -- -- 2,500
Exercise of stock
options................ 715,833 716 35,076 -- -- 35,792
Deferred compensation
related to stock
options................ -- -- -- -- 3,313,467 (3,313,467) -- --
Amortization of deferred
compensation........... -- -- -- -- -- 175,786 -- 175,786
Net loss................ (939,017) (939,017)
---------- ------- ---------- ------- ---------- ----------- --------- ----------
Balance at March 31,
2000................... 11,000,000 $11,000 11,503,333 $11,504 $8,826,807 $(3,137,681) $(939,017) $4,772,613
========== ======= ========== ======= ========== =========== ========= ==========
</TABLE>

See accompanying notes.

F-52
<PAGE>

YUNINETWORKS, INC.
(a development stage company)

STATEMENT OF CASH FLOWS

For the period from October 8, 1999 (inception) through March 31, 2000

<TABLE>
<S> <C>
Operating activities
Net loss........................................................... $ (939,017)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................. 120,824
Amortization of deferred compensation.......................... 175,786
Changes in operating assets and liabilities:
Prepaid expenses and other current assets........................ (5,367)
Other assets..................................................... (130,254)
Accounts payable................................................. 536,729
Other accrued liabilities........................................ 47,466
----------
Net cash used in operating activities...................... (193,833)

Investing activities
Purchases of property and equipment................................ (859,839)
----------
Net cash used in investing activities.............................. (859,839)

Financing activities
Issuance of common stock for exercise of stock options............. 35,792
Issuance of preferred stock........................................ 5,480,689
Issuance of common stock........................................... 19,363
----------
Net cash provided by financing activities.......................... 5,535,844
----------
Net increase in cash and cash equivalents.......................... 4,482,172
Cash and cash equivalents at beginning of period................... --
----------
Cash and cash equivalents at end of period......................... $4,482,172
==========
</TABLE>

See accompanying notes.

F-53
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business

YuniNetworks, Inc. (the "Company") was organized under the laws of the state
of Delaware. The Company specializes in providing scalable terabit switching
fabric technology.

As of March 31, 2000, the Company has not initiated its commercial
operations, accordingly, the Company is considered to be in the development
stage.

Basis of Presentation

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. Since inception, the Company has been engaged in
organizational activities, including recruiting personnel, establishing office
facilities, research and development and obtaining financing. Through March 31,
2000, the Company has incurred accumulated losses of $939,017. Successful
completion of the Company's development program and its transition to attaining
profitable operations is dependent upon obtaining financing adequate to
complete its product development and the successful market introduction of its
products and services. In December 1999, the Company raised proceeds of
$5,500,000 from the sale of shares of Series A preferred stock. Management
believes that these funds will be adequate to meet the Company's working
capital requirements through March 31, 2001.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market funds, and other
highly liquid investments with maturities of three months or less from the date
of purchase. As of March 31, 2000, the Company has not experienced any losses
on its cash and cash equivalents.

Fair Value of Financial Instruments

The carrying value of cash, cash equivalents, accounts payable and accrued
liabilities approximates fair value.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets (one to five
years).

Long-Lived Assets

The Company investigates potential impairments of its long-lived assets when
there is evidence that events or changes in circumstances may have made
recovery of an asset's carrying value unlikely. An impairment loss

F-54
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

is recognized when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the asset. The Company has not identified any
such losses.

Research and Development

Research and development costs are expensed as incurred.

Stock Options

SFAS No. 123, Accounting for Stock-Based Compensation, and EITF 96-18,
Accounting for Equity Instruments that are Issued to Other than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services, establishes the
use of the fair value based method of accounting for stock-based compensation
arrangements, under which compensation cost is determined using the fair value
of the stock determined as of the grant date, and is recognized over the
periods in which the related services are rendered. Deferred compensation for
options granted to non-employees has been determined in accordance with SFAS
No. 123 and EITF 96-18 as the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measured. Deferred charges for options granted to non-employees are
periodically remeasured as the underlying options vest. SFAS No. 123 also
permits companies to elect to continue using the intrinsic value accounting
method specified in Accounting Principles Board (APB) Opinion No. 25 to account
for stock-based compensation. The Company has decided to retain the intrinsic
value based method, and has disclosed the pro forma effect of using the fair
value based method to account for its stock-based compensation.

Deferred compensation for options and warrants granted to non-employees has
been determined at the grant date in accordance with SFAS No. 123 and EITF No.
96-18, Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services, and
has been recorded at the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measured.
Such deferred compensation is recognized over the period the related services
are rendered.

Comprehensive Income

The Company has adopted SFAS No. 130, Reporting Comprehensive Income, which
requires that all components of comprehensive income, including net income, be
reported in the financial statements in the period in which they are
recognized. Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from non-owner
sources. Net income (loss) and other comprehensive income, including foreign
currency translation adjustments, and unrealized gains and losses on
investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income (loss). Comprehensive loss for the period ended March 31,
2000 did not differ from reported net loss.

Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128,
Earnings Per Share, and SEC Staff Accounting Bulletin (or SAB) No. 98. Under
the provisions of SFAS No. 128, basic net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common shares outstanding during the period. Diluted net income (loss) per
share is computed by dividing the net income (loss) for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. For purpose of this calculation, common stock subject to
repurchase by the Company and options are considered common stock equivalents.
As the Company reported a loss for the

F-55
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

period ended March 31, 2000, all common stock equivalents have been excluded
from the computation since the effect would be antidilutive.

Under the provision of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No common shares have been
issued for nominal consideration.

Income Taxes

Current income tax expense or benefit is the amount of income taxes expected
to be payable or refundable for the current year. A deferred income tax asset
or liability is computed for the expected future impact of differences between
the financial reporting and tax basis of assets and liabilities and for the
expected future tax benefit to be derived from tax credits and loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.

Recently Issued Accounting Standards

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. The Statement will
require the recognition of all derivatives on the Company's balance sheet at
fair value. The Financing Accounting Standards Board has subsequently delayed
implementation of the standard for the financial years beginning after June 15,
2000. The Company expects to adopt the new Statement effective April 1, 2001.
The impact on the Company's financial statements is not expected to be
material.

2. Property and Equipment

Property and equipment is summarized as follows at March 31, 2000:

<TABLE>
<S> <C>
Purchased software................................................ $ 669,447
Furniture and fixtures............................................ 46,854
Computer equipment................................................ 143,538
---------
859,839
Less accumulated depreciation and amortization.................... (120,824)
---------
$ 739,015
=========
</TABLE>

3. Commitments

The Company leases its facilities under operating leases that expire in
December 2002. Rent expense was $48,856 for the period from October 8, 1999
(inception) through March 31, 2000. At March 31, 2000 annual minimum future
payments under the operating leases are as follows:

<TABLE>
<CAPTION>
Operating
Lease
---------
<S> <C>
2000............................................................... $176,893
2001............................................................... 200,481
2002............................................................... 154,543
--------
Total future lease payments...................................... $531,917
========
</TABLE>

F-56
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company licensed certain patent rights from the University of
California. Under the terms of the agreement, the Company paid an initial
license fee of $75,000 and to maintain the rights must make annual payments of
$10,000 on each March 14, 2001 and 2002 and $40,000 on each March 14 thereafter
for the life of the patents. Additionally, the Company must pay to the
University of California a stated portion of any sublicense revenues or
royalties earned by the Company from the patented technology.

4. Stockholders' Equity

Common Stock

Founders and employees have purchased 11,090,833 shares (including 590,833
from option exercises of common stock at prices ranging from $.001 and $.05 per
share, 9,997,083 of which are subject to repurchase as of March 31, 2000). The
Company has the option to repurchase, at the original price, unvested shares in
the event of termination of employment. Shares issued under these agreements
generally vest over four years. In March 2000, the Company entered into new
employment agreements with two of its founders whereby 10,500,000 shares of
common stock purchased by such founders upon the formation of the Company
became subject to vesting restrictions. The Company has entered into an
employment agreement with one of the founders whereby a portion of the unvested
founder's stock will automatically become vested upon a change in control, as
defined. A total of 2,750,000 shares are subject to the acceleration
provisions. The actual percent that is accelerated is dependent upon the sales
price of the Company and the date of sale and can range from a minimum of 50%
to a maximum of 100%.

Stock Options

The Company adopted the 1999 Equity Incentive Plan (the "Plan") and reserved
3,387,500 shares of common stock for grants under the Plan. The Plan provides
for the grant of incentive and nonstatutory stock options, stock bonuses and
rights to purchase restricted stock to employees, directors, or consultants of
the Company. The Plan provides that incentive stock options will be granted
only to employees at no less than the fair value of the Company's common stock
(no less than 85% of the fair value for nonstatutory stock options), as
determined by the Board of Directors at the date of the grant. Options
generally vest 25% one year from date of grant and ratably each month
thereafter for a period of 36 months and expire up to ten years from date of
grant.

Certain option grants under the Plan are subject to an early exercise
provision. Common shares obtained on early exercise of unvested options are
subject to repurchase by the Company at the original issue price and will vest
according to the respective option agreement. At March 31, 2000 there were
590,833 exercised shares outstanding due to early exercise of the options that
are subject to repurchase by the Company.

A summary of the Company's stock option activity, and related information
for the period ended March 31, 2000 follows:

<TABLE>
<CAPTION>
Weighted-
Average
Options Exercise Price
---------- --------------
<S> <C> <C>
Outstanding at October 8, 1999.................... $ -- $ --
Granted........................................... 2,437,300 $0.05
Exercised......................................... (715,833) $0.05
Cancelled......................................... -- --
---------- -----
Outstanding at March 31, 2000..................... $1,721,467 $0.05
========== =====
</TABLE>

F-57
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The weighted-average fair value of options granted during the period ended
March 31, 2000 was $0.05 and the weighted-average remaining contractual life of
these options is 9.5 years.

Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of SFAS 123. The fair value for these
options was estimated at the dates of grant using the minimum value option
pricing model with the following weighted-average assumptions: (a) weighted
average risk-free interest rate of 6.25%, (b) expected dividend yield of 0%,
and (c) five year estimated life of the options.

The effect of applying the minimum value of SFAS 123 to the stock options
for the period ended March 31, 2000, was not materially different from the
reported amount. Therefore, such pro forma information is not presented herein.
The effects of applying Statement 123 for pro forma disclosure is not likely to
be representative of the pro forma effect on net income in future years.

Deferred Compensation

Through March 31, 2000, the Company recorded deferred compensation for the
difference between the price per share of restricted stock issued or the
exercise price of stock options granted and the deemed fair value for financial
statement presentation purposes of the Company's common stock at the date of
issuance or grant. The deferred compensation will be amortized over the vesting
period of the related restricted stock or options, which is generally four
years.

Convertible Preferred Stock

In December 1999, the Company issued an aggregate of 11,000,000 shares of
Series A preferred stock with net proceeds of $5,480,689. The holders of the
Series A preferred stock are entitled to receive cash dividends at a rate of
seven percent of the original purchase price per annum. The dividends on
preferred stock are noncumulative and payable when and if declared by the Board
of Directors.

The holders of the Series A preferred stock may at any time elect to convert
any or all shares into common shares of the Company at the then applicable
conversion rate, subject to certain antidilutive adjustments. Each share is
automatically converted into common stock, at the then applicable conversion
rate, upon the closing of a firmly underwritten public offering of shares of
common stock of the Company at a total offering not less than $20,000,000. As
of March 31, 2000 each share of preferred stock is convertible into one share
of common stock. Each holder of Series A preferred stock is entitled to one
vote for each share of common stock into which such convertible preferred share
would convert.

The holders of Series A preferred stock are entitled to receive liquidation
preferences in an amount equal to such shares original purchase price plus all
declared and unpaid dividends, prior and in preference to any distribution of
assets to the holders of common stock.

F-58
<PAGE>

YUNINETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Shares Reserved for Future Issuance

The following common stock is reserved for future issuance as of March 31:

<TABLE>
<CAPTION>
2000
----------
<S> <C>
Conversion of preferred stock..................................... 11,000,000
Stock options issued and outstanding.............................. 1,721,467
Authorized for future grants...................................... 950,200
Common stock authorized for sale, not issued...................... 240,000
----------
13,911,667
==========
</TABLE>

5. Income Taxes

At March 31, 2000, the Company has federal and state tax net operating loss
carryforwards of approximately $686,000 and $343,000, respectively. The federal
and state tax loss carryforwards will begin expiring in 2019 and 2007,
respectively, unless previously utilized.

Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of
the Company's net operating loss and credit carryforwards may be limited in the
event of a cumulative change in ownership of more than 50% within a three year
period; however, the Company does not believe that this will significantly
impact the utilization of the tax carryforwards.

Significant components of the Company's deferred tax assets as of March 31,
2000 are shown below. A valuation allowance has been recognized to offset the
deferred tax assets, as realization of such assets is uncertain.

<TABLE>
<CAPTION>
March 31,
2000
---------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.................................. $ 260,000
---------
Total deferred tax assets......................................... 260,000
Valuation allowance for deferred tax assets....................... (260,000)
---------
Net deferred taxes................................................ $ --
=========
</TABLE>

6. Subsequent Events

On April 18, 2000, the Company entered into a definitive agreement to be
acquired by Applied Micro Circuits Corporation (AMCC). Under the terms of the
agreement, AMCC will issue up to 2,250,000 shares of its common stock for all
outstanding shares of the Company's preferred stock and common stock, including
shares issuable upon exercise of outstanding options.

F-59
<PAGE>

APPENDIX A

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

among:

Applied Micro Circuits Corporation
a Delaware corporation;

Mercury Acquisition Corp.,
a Delaware corporation; and

MMC Networks, Inc.,
a Delaware corporation

-------------------------

Dated as of August 28, 2000

-------------------------
<PAGE>

Table Of Contents

<TABLE>
<CAPTION>
Page
----

<C> <S> <C>
SECTION 1. Description of Transaction..................................... A- 1

1.1 Merger of Merger Sub into the Company............................ A- 1

1.2 Effect of the Merger............................................. A- 1

1.3 Closing; Effective Time.......................................... A- 1

1.4 Certificate of Incorporation and Bylaws; Directors............... A- 2

1.5 Conversion of Shares............................................. A- 2

1.6 Closing of the Company's Transfer Books.......................... A- 3

1.7 Exchange of Certificates......................................... A- 3

1.8 No Appraisal Rights.............................................. A- 4

1.9 Tax Consequences................................................. A- 4

1.10 Further Action................................................... A- 4

SECTION 2. Representations and Warranties of the Company.................. A- 4

2.1 Due Organization; Subsidiaries................................... A- 4

2.2 Authority; Binding Nature of Agreement........................... A- 5

2.3 Capitalization, Etc. ............................................ A- 5

2.4 SEC Filings; Financial Statements................................ A- 6

2.5 Absence of Changes............................................... A- 7

2.6 Proprietary Assets............................................... A- 8

2.7 Contracts........................................................ A- 9

2.8 Sale of Products; Performance of Services........................ A-10

2.9 Liabilities...................................................... A-10

2.10 Compliance with Legal Requirements............................... A-10

2.11 Governmental Authorizations...................................... A-10

2.12 Tax Matters...................................................... A-11

2.13 Employee and Labor Matters; Benefit Plans........................ A-11

2.14 Environmental Matters............................................ A-14

2.15 Legal Proceedings; Orders........................................ A-14

2.16 Vote Required.................................................... A-14

2.17 Non-Contravention; Consents...................................... A-14

2.18 Fairness Opinion................................................. A-15

2.19 Financial Advisor................................................ A-15

2.20 Takeover Statutes................................................ A-15

2.21 Full Disclosure.................................................. A-15

SECTION 3. Representations and Warranties of Parent and Merger Sub........ A-16

3.1 Due Organization; Subsidiaries................................... A-16

3.2 Authority; Binding Nature of Agreement........................... A-16
</TABLE>

<PAGE>

Table Of Contents
(continued)

<TABLE>
<CAPTION>
Page
----

<C> <S> <C>
3.3 Capitalization, Etc. ............................................ A-16

3.4 SEC Filings; Financial Statements................................ A-17

3.5 Absence of Changes............................................... A-17

3.6 Non-Contravention; Consents...................................... A-18

3.7 Liabilities...................................................... A-18

3.8 Compliance with Legal Requirements............................... A-18

3.9 Governmental Authorizations...................................... A-18

3.10 Environmental Matters............................................ A-18

3.11 Legal Proceedings; Orders........................................ A-19

3.12 Full Disclosure.................................................. A-19

SECTION 4. Certain Covenants of the Company............................... A-19

4.1 Operation of the Company's Business.............................. A-19

4.2 No Solicitation.................................................. A-21

SECTION 5. Additional Covenants of the Parties............................ A-22

5.1 Registration Statement; Proxy Statement.......................... A-22

5.2 Company Stockholders' Meeting.................................... A-22

5.3 Regulatory Approvals............................................. A-23

5.4 Stock Options.................................................... A-24

5.5 Employee Benefits................................................ A-24

5.6 Indemnification of Officers and Directors........................ A-25

5.7 Additional Agreements............................................ A-25

5.8 Disclosure....................................................... A-27

5.9 Tax Matters...................................................... A-27

5.10 Listing.......................................................... A-27

5.11 Access and Investigation......................................... A-27

5.12 Exemption from Liability Under Section 16(b)..................... A-27

5.13 Board of Directors of Parent..................................... A-28

SECTION 6. Conditions Precedent to Obligations of Parent and Merger Sub... A-28

6.1 Accuracy of Representations...................................... A-28

6.2 Performance of Covenants......................................... A-28

6.3 Effectiveness of Registration Statement.......................... A-29

6.4 Stockholder Approval............................................. A-29

6.5 Agreements and Documents......................................... A-29

6.6 No Material Adverse Effect....................................... A-29

6.7 HSR Act.......................................................... A-29

6.8 No Restraints.................................................... A-29

6.9 No Governmental Litigation....................................... A-29
</TABLE>
<PAGE>

Table Of Contents
(continued)

<TABLE>
<CAPTION>
Page
----

<C> <S> <C>
SECTION 7. Conditions Precedent to Obligation of the Company.............. A-29

7.1 Accuracy of Representations...................................... A-29

7.2 Performance of Covenants......................................... A-30

7.3 Effectiveness of Registration Statement.......................... A-30

7.4 Stockholder Approval............................................. A-30

7.5 Documents........................................................ A-30

7.6 No Material Adverse Effect....................................... A-30

7.7 HSR Act.......................................................... A-30

7.8 Listing.......................................................... A-30

7.9 No Restraints.................................................... A-30

7.10 No Governmental Litigation....................................... A-30

SECTION 8. Termination.................................................... A-31

8.1 Termination...................................................... A-31

8.2 Effect of Termination............................................ A-32

8.3 Expenses; Termination Fees....................................... A-32

SECTION 9. Miscellaneous Provisions....................................... A-33

9.1 Amendment........................................................ A-33

9.2 Waiver........................................................... A-33

9.3 No Survival of Representations and Warranties.................... A-33

9.4 Entire Agreement; Counterparts................................... A-33

9.5 Applicable Law; Jurisdiction..................................... A-33

9.6 Attorneys' Fees.................................................. A-34

9.7 Assignability.................................................... A-34

9.8 Notices.......................................................... A-34

9.9 Construction..................................................... A-35
</TABLE>

<PAGE>

AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION

This Agreement and Plan of Merger and Reorganization ("Agreement") is made
and entered into as of August 28, 2000, by and among Applied Micro Circuits
Corporation, a Delaware corporation ("Parent"); Mercury Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub");
and MMC Networks, Inc., a Delaware corporation (the "Company"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.

Recitals

A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.

B. It is intended that the Merger qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").

C. The respective boards of directors of Parent, Merger Sub and the Company
have approved this Agreement and the Merger.

D. In order to induce Parent to enter into this Agreement and to consummate
the Merger, concurrently with the execution and delivery of this Agreement: (i)
certain stockholders of the Company are executing voting agreements in favor of
Parent (the "Company Stockholder Voting Agreements"); and (ii) certain key
employees of the Company are executing employment and noncompetition agreements
with Parent and Merger Sub.

Agreement

The parties to this Agreement, intending to be legally bound, agree as
follows:

SECTION 1. Description of Transaction

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").

1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").

1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California,
at 10:00 a.m. on a date to be designated by Parent (the "Closing Date"), which
shall be no later than the second business day after the last to be satisfied
or waived of the conditions set forth in Sections 6 and 7 shall have been so
satisfied or waived (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of such
conditions). Subject to the provisions of this Agreement, a certificate of
merger satisfying the applicable requirements of the DGCL (the "Certificate of
Merger") shall be duly executed by the Company and concurrently with or as soon
as practicable following the Closing delivered to the Secretary of State of the
State of Delaware for filing. The Merger shall become effective upon the date
and time of the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware or such other date and time as Parent and the Company
may mutually agree and include in the Certificate of Merger (the "Effective
Time").

A-1
<PAGE>

1.4 Certificate of Incorporation and Bylaws; Directors. Unless otherwise
determined by Parent prior to the Effective Time:

(a) the Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of the Company as in effect immediately prior
to the Effective Time;

(b) the Bylaws of the Surviving Corporation shall be the Bylaws of the
Company as in effect immediately prior to the Effective Time; and

(c) the directors of the Surviving Corporation immediately after the
Effective Time shall be the respective individuals who are directors of Merger
Sub immediately prior to the Effective Time.

1.5 Conversion of Shares.

(a) At the Effective Time, by virtue of the Merger and without any further
action on the part of Parent, Merger Sub, the Company or any stockholder of the
Company:

(i) any shares of Company Common Stock then held by the Company or any
wholly owned Subsidiary of the Company (or held in the treasury of the Company)
shall cease to exist, and no consideration shall be delivered in exchange
therefor;

(ii) any shares of Company Common Stock then held by Parent, Merger Sub
or any other wholly owned Subsidiary of Parent shall cease to exist, and no
consideration shall be delivered in exchange therefor;

(iii) except as provided in clauses "(i)" and "(ii)" above and subject
to Sections 1.5(c), 1.5(d) and 1.5(e), each share of Company Common Stock then
outstanding shall be converted into the right to receive that fraction of a
share of Parent Common Stock equal to the Exchange Ratio (as defined in Section
1.5(b)); and

(iv) each share of the Common Stock, $0.01 par value per share, of
Merger Sub then outstanding shall be converted into one share of Common Stock
of the Surviving Corporation.

(b) For purposes of this Agreement the "Exchange Ratio" (as such Exchange
Ratio may be adjusted in accordance with Section 1.5(c)) shall be .619;
provided however, the maximum number of shares of Common Stock which Parent
shall be obligated to issue in connection with the Merger shall be no more than
20% of the number of shares of Parent Common Stock outstanding as of the
Effective Time.

(c) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Common Stock or Parent Common Stock are changed
into, or there is a record date for a transaction in which the outstanding
shares of Company Common Stock or Parent Common Stock will be changed into, a
different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction, then the Exchange Ratio shall be appropriately adjusted.

(d) If any shares of Company Common Stock outstanding immediately prior to
the Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company or under which the Company has
any rights, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take commercially reasonable efforts to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted
stock purchase agreement or other agreement.

(e) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued. Any holder of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock issuable to
such holder) shall, in lieu of such fraction of a share and

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upon surrender of such holder's Company Stock Certificate(s) (as defined in
Section 1.6), be paid in cash the dollar amount (rounded to the nearest whole
cent), without interest, determined by multiplying such fraction by the closing
price of a share of Parent Common Stock on The Nasdaq National Market on the
date the Merger becomes effective.

1.6 Closing of the Company's Transfer Books. At the Effective Time: (a) all
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
all holders of certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time shall cease to have
any rights as stockholders of the Company; and (b) the stock transfer books of
the Company shall be closed with respect to all shares of Company Common Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Common Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any shares of Company Common Stock (a "Company Stock
Certificate") is presented to the Exchange Agent (as defined in Section 1.7) or
to the Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.

1.7 Exchange of Certificates.

(a) On or prior to the Closing Date, Parent shall select a reputable bank or
trust company reasonably acceptable to the Company to act as exchange agent in
the Merger (the "Exchange Agent"). Promptly after the Effective Time and in any
event within three (3) business days, Parent shall deposit with the Exchange
Agent (i) a sufficient number of certificates to cover the shares of Parent
Common Stock issuable pursuant to this Section 1, and (ii) cash sufficient to
make payments in lieu of fractional shares in accordance with Section 1.5(e).
The shares of Parent Common Stock and cash amounts so deposited with the
Exchange Agent, together with any dividends or distributions received by the
Exchange Agent with respect to such shares, are referred to collectively as the
"Exchange Fund."

(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to the record holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery
of Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, (1) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing
the number of whole shares of Parent Common Stock that such holder has the
right to receive pursuant to the provisions of Section 1.5 (and cash in lieu of
any fractional share of Parent Common Stock), and (2) the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.7, each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive shares of
Parent Common Stock (and cash in lieu of any fractional share of Parent Common
Stock) as contemplated by Section 1. If any Company Stock Certificate shall
have been lost, stolen or destroyed, Parent may, in its discretion and as a
condition precedent to the issuance of any certificate representing Parent
Common Stock, require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit and to deliver a bond (in such
sum as Parent may reasonably direct) as indemnity against any claim that may be
made against the Exchange Agent, Parent or the Surviving Corporation with
respect to such Company Stock Certificate.

(c) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to
the shares of Parent Common Stock that such holder has the right to receive in
the Merger until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.7 (at which time such

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holder shall be entitled, subject to the effect of applicable escheat or
similar laws, to receive all such dividends and distributions, without
interest).

(d) Any portion of the Exchange Fund that remains undistributed to holders
of Company Stock Certificates as of the date 180 days after the date on which
the Merger becomes effective shall be delivered to Parent upon demand, and any
holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 1.7 shall
thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.

(e) Each of the Exchange Agent, Parent and the Surviving Corporation shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of
Company Common Stock such amounts as may be required to be deducted or withheld
therefrom under the Code or any provision of state, local or foreign tax law or
under any other applicable Legal Requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the Person to whom such amounts would
otherwise have been paid.

(f) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Common Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions
with respect thereto), or for any cash amounts, delivered to any public
official pursuant to any applicable abandoned property law, escheat law or
similar Legal Requirement.

1.8 No Appraisal Rights. In accordance with Section 262 of the DGCL, no
appraisal rights shall be available to the holders of shares of Company Common
Stock in connection with the Merger.

1.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.

1.10 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.

SECTION 2. Representations and Warranties of the Company

The Company represents and warrants to Parent and Merger Sub (subject to
such exceptions or qualifications as are disclosed in writing in the disclosure
schedule supplied by the Company to Parent dated as of the date hereof (the
"Company Disclosure Schedule"), which disclosure shall provide an exception to
or otherwise qualify only those representations and warranties of the Company
contained in the section of this Agreement corresponding to the part or section
reference of the Company Disclosure Schedule where such disclosure appears and
such exceptions or qualifications shall not be deemed to be an exception to, or
qualify, any other representation or warranty) as follows:

2.1 Due Organization; Subsidiaries. Each of the Acquired Corporations (as
defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound. Each of the
Acquired Corporations is qualified to do business as a foreign corporation, and
is in good standing, under

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<PAGE>

the laws of all jurisdictions where the nature of its business requires such
qualification and where the failure to be so qualified would have a Material
Adverse Effect on any of the Acquired Corporations. The Company has delivered
to Parent accurate and complete copies of the certificate of incorporation,
bylaws and other charter or organizational documents of each of the Acquired
Corporations, including all amendments thereto. The Company has no
Subsidiaries, except for the corporations identified in Part 2.1 of the Company
Disclosure Schedule. (The Company and each of its Subsidiaries are collectively
referred to herein as the "Acquired Corporations"). None of the Acquired
Corporations has any equity interest or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any Entity, other than (i) the Company's interest in its
Subsidiaries identified in Part 2.1 of the Company Disclosure Schedule, or
(ii) any interest in any publicly traded company held for investment and
comprising less than five percent of the outstanding capital stock of such
company. None of the Acquired Corporations has, at any time, been a general
partner of, or has otherwise been liable for any of the debts or other
obligations of, any general partnership, limited partnership or other Entity.

2.2 Authority; Binding Nature of Agreement. Subject to obtaining the
requisite approval of the Company's stockholders in accordance with the DGCL,
the Company has the absolute and unrestricted right, power and authority to
enter into and to perform its obligations under this Agreement. The Board of
Directors of the Company (at a meeting duly called and held) has (a) determined
that the Merger is advisable and fair and in the best interests of the Company
and its stockholders, (b) authorized and approved the execution, delivery and
performance of this Agreement by the Company and approved the Merger, (c)
recommended the adoption of this Agreement by the holders of Company Common
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's stockholders at the Company Stockholders'
Meeting (as defined in Section 5.2), and (d) adopted a resolution having the
effect of causing the Company not to be subject to any state takeover law or
similar Legal Requirement that might otherwise apply to the Merger or any of
the other transactions contemplated by this Agreement. This Agreement
constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies. Prior to the execution of the Company
Stockholder Voting Agreements, the Board of Directors of the Company approved
the Company Stockholder Voting Agreements and the transactions contemplated
thereby. As a result of the approval of this Agreement and the Merger by the
Board of Directors of the Company, no state takeover statute or similar Legal
Requirement applies or purports to apply to the Merger, this Agreement or any
of the transactions contemplated hereby.

2.3 Capitalization, Etc.

(a) The authorized capital stock of the Company consists of: (i) 100,000,000
shares of Company Common Stock; and (ii) 10,000,000 shares of Preferred Stock,
par value $.001 per share. As of August 24, 2000, 33,109,850 shares of Company
Common Stock have been issued and are outstanding and no shares of the
Company's Preferred Stock have been issued or are outstanding. No shares of
capital stock of the Company are held in the Company's treasury. All of the
outstanding shares of Company Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable. There are no shares of
Company Common Stock held by any of the Company's Subsidiaries. None of the
outstanding shares of Company Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right or subject to any right of first refusal in favor of the Company and
there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging
or otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. None of the Acquired Corporations is
under any obligation, or is bound by any Contract pursuant to which it may
become obligated, to repurchase, redeem or otherwise acquire any outstanding
shares of Company Common Stock.

(b) As of August 24, 2000: (i) 931,137 shares of Company Common Stock are
subject to issuance pursuant to stock options granted and outstanding under the
Company's 1993 Stock Plan; (ii) 5,621,826 shares

A-5
<PAGE>

of Company Common Stock are subject to issuance pursuant to stock options
granted and outstanding under the Company's 1997 Stock Plan; (iii) 130,000
shares of Company Common Stock are subject to issuance pursuant to stock
options granted and outstanding under the Company's Director Option Plan; and
(iv) 577,664 shares of Company Common Stock are reserved for future issuance
pursuant to the Company's 1997 Employee Stock Purchase Plan (the "Company
ESPP"), 52,670 of which are subject to issuance pursuant to stock options
granted and outstanding under the Company ESPP. (Stock options granted by the
Company pursuant to the 1993 Stock Plan, the 1997 Stock Plan and the 1997
Director Stock Plan are referred to collectively herein as "Company Options.")
Part 2.3(b) of the Company Disclosure Schedule sets forth the following
information with respect to each Company Option outstanding as of the date of
this Agreement: (i) the particular plan pursuant to which such Company Option
was granted; (ii) the name of the optionee; (iii) the number of shares of
Company Common Stock subject to such Company Option; (iv) the exercise price of
such Company Option; (v) the date on which such Company Option was granted;
(vi) the extent to which such Company Option is vested and exercisable as of
the date of this Agreement; and (vii) the date on which such Company Option
expires. The Company has delivered to Parent accurate and complete copies of
all stock option plans pursuant to which the Company has granted Company
Options, and the forms of all stock option agreements evidencing such options
to the extent such plans or agreements have not been filed as exhibits to the
Company SEC Documents (as defined in Section 2.4(a)).

(c) Except as set forth in Sections 2.3(a) or 2.3(b), as of the date hereof
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of any of the Acquired Corporations; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of any of
the Acquired Corporations; (iii) rights agreement, stockholder rights plan (or
similar plan commonly referred to as a "poison pill") or Contract under which
any of the Acquired Corporations is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or
(iv) condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled
to acquire or receive any shares of capital stock or other securities of any of
the Acquired Corporations.

(d) All outstanding shares of Company Common Stock, all outstanding Company
Options and all outstanding shares of capital stock of each Subsidiary of the
Company have been issued and granted in compliance with (i) all applicable
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts. All of the outstanding shares
of capital stock of each of the Company's Subsidiaries have been duly
authorized and are validly issued, are fully paid and nonassessable and are
owned beneficially and of record by the Company, free and clear of any
Encumbrances.

2.4 SEC Filings; Financial Statements.

(a) The Company has made available to Parent all registration statements,
proxy statements and other statements, reports, schedules, forms and other
documents filed by the Company with the SEC since December 31, 1999 (the
"Company SEC Documents"). All statements, reports, schedules, forms and other
documents required to have been filed by the Company with the SEC since
December 31, 1999 have been so filed. As of the time it was filed with the SEC
(or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing): (i) each of the Company SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

(b) The financial statements (including any related notes) contained in the
Company SEC Documents (the "Company Financial Statements"): (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes

A-6
<PAGE>

to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end adjustments which will not, individually or in the aggregate, be
material in amount); and (iii) fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its consolidated subsidiaries for
the periods covered thereby. For purposes of this Agreement, "Company Balance
Sheet" means that consolidated balance sheet of the Company and its
consolidated subsidiaries as of June 30, 2000 set forth in the Company's
Quarterly Report on Form 10-Q filed with the SEC and the "Company Balance Sheet
Date" means June 30, 2000.

2.5 Absence of Changes. Since the Company Balance Sheet Date:

(a) each of the Acquired Corporations has operated its respective business
in the ordinary course and consistent with past practices;

(b) there has not been any event that has had a Material Adverse Effect on
the Acquired Corporations, and no fact, event, circumstance or condition exists
or has occurred that could reasonably be expected to have a Material Adverse
Effect on the Acquired Corporations;

(c) none of the Acquired Corporations has (i) declared, accrued, set aside
or paid any dividend or made any other distribution in respect of any shares of
capital stock; (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities; (iii) sold, issued or granted, or authorized
the issuance of, (A) any capital stock or other security (except for Company
Common Stock issued upon the valid exercise of outstanding Company Options),
(B) any option, warrant or right to acquire any capital stock or any other
security (except for Company Options described in Part 2.3(c) of the Company
Disclosure Schedule), or (C) any instrument convertible into or exchangeable
for any capital stock or other security; (iv) received any Acquisition Proposal
from any Person (other than Parent); (v) made any capital expenditure which,
when added to all other capital expenditures made on behalf of the Acquired
Corporations since the Company Balance Sheet Date exceeds $250,000 in the
aggregate; (vi) changed any of its methods of accounting or accounting
practices, except as required by generally accepted accounting principles;
(vii) made any material Tax election; or (viii) commenced or settled any
material Legal Proceeding;

(d) none of the Acquired Corporations has (i) amended or waived any of its
material rights under, or permitted the acceleration of vesting under, any
provision of any of the Company Employee Plans (as defined in Section 2.13(a))
or any material provision of any agreement evidencing any outstanding Company
Option; (ii) established or adopted any Company Employee Plan; (iii) caused or
permitted any Company Employee Plan to be amended in any material respect; or
(iv) paid any bonus or made any profit-sharing or similar payment to, or
materially increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;

(e) there has been no amendment to the certificate of incorporation or
bylaws of any of the Acquired Corporations, and none of the Acquired
Corporations has effected or been a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;

(f) except in the ordinary course of business and consistent with past
practices, none of the Acquired Corporations has (i) entered into or permitted
any of the assets owned or used by it which are material to the Acquired
Corporations to become bound by any Contract, or (ii) amended or terminated, or
waived any right or remedy under, any Material Contract (as defined in Section
2.7); and

(g) none of the Acquired Corporations has (i) sold or otherwise disposed of,
or acquired, leased, licensed, waived or relinquished, any right which is
material to the Acquired Corporations or other asset which is material to the
Acquired Corporations to, from or for the benefit of, any other Person except
for rights or other assets sold, disposed of, acquired, leased, licensed,
waived or relinquished in the ordinary course of business

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<PAGE>

and consistent with past practices; (ii) made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
or (iii) guaranteed any indebtedness for borrowed money.

2.6 Proprietary Assets.

(a) As of the date hereof, Part 2.6(a)(i) of the Company Disclosure Schedule
sets forth all U.S. and foreign patents, patent applications, registered
trademarks, trademark applications, registered copyrights and copyright
applications owned by any of the Acquired Corporations. As of the date hereof,
Part 2.6(a)(ii) of the Company Disclosure Schedule identifies any ongoing
royalty or payment obligations in excess of $100,000 with respect to, each
Proprietary Asset that is licensed or otherwise made available to any of the
Acquired Corporations by any Person and is material to the business of the
Acquired Corporations (except for any Proprietary Asset that is licensed to any
Acquired Corporation under any third party software license generally available
to the public), and identifies the Contract under which such Proprietary Asset
is being licensed or otherwise made available to such Acquired Corporation. The
Acquired Corporations have good and valid title to all of the Acquired
Corporation Proprietary Assets identified or required to be identified in Part
2.6(a)(i) of the Company Disclosure Schedule, free and clear of all
Encumbrances, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially detract
from the value of the Acquired Corporation Proprietary Asset subject thereto or
materially impair the operations of the Acquired Corporations. The Acquired
Corporations have a valid right to use, license and otherwise exploit all
Proprietary Assets identified in Part 2.6(a)(ii) of the Company Disclosure
Schedule. None of the Acquired Corporations has developed jointly with any
other Person any Acquired Corporation Proprietary Asset that is material to the
business of the Acquired Corporations and with respect to which such other
Person has any rights. There is no Acquired Corporation Contract (with the
exception of end user license agreements in the form previously delivered by
the Company to Parent) pursuant to which any Person has any right (whether or
not currently exercisable) to use, license or otherwise exploit any Acquired
Corporation Proprietary Asset that is material to the business of the Acquired
Corporations.

(b) The Acquired Corporations have taken reasonable measures and precautions
to protect and maintain the confidentiality, secrecy and value of all material
Acquired Corporation Proprietary Assets (except Acquired Corporation
Proprietary Assets whose value would be unimpaired by disclosure). Without
limiting the generality of the foregoing, (i) each current or former employee
of any Acquired Corporation who is or was involved in, or who has contributed
to, the creation or development of any Acquired Corporation Proprietary Asset
has executed and delivered to such Acquired Corporation an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Confidential Information and
Invention Assignment Agreement previously delivered by the Company to Parent,
and (ii) each current and former consultant and independent contractor to any
Acquired Corporation who is or was involved in, or who has contributed to, the
creation or development of any Acquired Corporation Proprietary Asset has
executed and delivered to the Company an agreement (containing no exceptions to
or exclusions from the scope of its coverage) that is substantially identical
to the form of Consultant Confidential Information and Invention Assignment
Agreement previously delivered to Parent. No current or former employee,
officer, director, stockholder, consultant or independent contractor has any
right, claim or interest in or with respect to any Acquired Corporation
Proprietary Asset.

(c) To the best of the knowledge of the Company: (i) all patents,
trademarks, service marks and copyrights held by any of the Acquired
Corporations are valid, enforceable and subsisting; (ii) none of the Acquired
Corporation Proprietary Assets and no Proprietary Asset that is currently being
developed by any of the Acquired Corporations (either by itself or with any
other Person) infringes, misappropriates or conflicts with any Proprietary
Asset owned or used by any other Person; (iii) none of the products, systems,
software, computer, source code, models, algorithm, formula, inventions,
designs or technology that has been designed, created, developed, assembled,
manufactured or sold by any of the Acquired Corporations is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned or used by any

A-8
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other Person, or has at any time infringed, misappropriated or made any
unlawful or unauthorized use of any Proprietary Asset owned or used by any
other Person; (iv) none of the Acquired Corporations has received any notice
or other communication (in writing) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of,
any Proprietary Asset owned or used by any other Person; and (v) no other
Person is infringing, misappropriating or making any unlawful or unauthorized
use of, and no Proprietary Asset owned or used by any other Person infringes
or conflicts with, any material Acquired Corporation Proprietary Asset. The
Acquired Corporation Proprietary Assets constitute all the Proprietary Assets
necessary to enable each of the Acquired Corporations to conduct its business
in the manner in which such business has been and is being conducted. None of
the Acquired Corporations has (i) licensed any of the material Acquired
Corporation Proprietary Asset to any Person on an exclusive basis, or (ii)
entered into any covenant not to compete or Contract limiting its ability to
exploit fully any material Acquired Corporation Proprietary Assets or to
transact business in any market or geographical area or with any Person.

2.7 Contracts.

(a) Part 2.7 of the Company Disclosure Schedule identifies each Acquired
Corporation Contract not filed as an exhibit to the Company SEC Documents
that, as of the date hereof, constitutes a "Material Contract". For purposes
of this Agreement, each of the following shall be deemed to constitute a
"Material Contract":

(i) any Contract that is required by the rules and regulations of the
SEC to be described in the Company SEC Documents or to be filed as an exhibit
thereto;

(ii) any Contract relating to the employment of any employee, and any
Contract pursuant to which any of the Acquired Corporations is or may become
obligated to make any severance, termination, bonus or relocation payment or
any other payment (other than payments in respect of salary) in excess of
$50,000, to any current or former employee or director or any Contract which
provides for the acceleration of vesting of any options or acceleration of
other rights to acquire shares of Company Common Stock;

(iii) any Acquired Corporation Contract relating to the acquisition,
transfer, development, sharing or license of any material Proprietary Asset
(except for any Acquired Corporation Contract pursuant to which (A) any
material Proprietary Asset is licensed to the Acquired Corporations under any
third party software license generally available to the public at a cost of no
more than $50,000, or (B) any material Proprietary Asset is licensed by any of
the Acquired Corporations to any Person on a non-exclusive basis);

(iv) any Contract which provides for indemnification of any officer,
director, employee or agent;

(v) any Contract imposing any restriction on the right or ability of any
Acquired Corporation to (A) compete with any other Person, (B) acquire any
material product or other material asset or any services from any other
Person, sell any material product or other material asset to or perform any
services for any other Person or transact business or deal in any other manner
with any other Person, (C) develop or distribute any material technology, (D)
make, have made, use or sell any current products or products under
development, or (E) acquire any capital stock or other security of any Person;

(vi) any contract that contemplates or involves payment or delivery of
cash or other consideration in an amount or having a value in excess of
$100,000 in the aggregate, or contemplates or involves the performance of
services having a value in excess of $100,000 in the aggregate;

(vii) any other Contract, if a breach of such Acquired Corporation
Contract would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations; and

(viii) any Contract requiring that any of the Acquired Corporations give
any notice or provide any information to any Person prior to considering or
accepting any Acquisition Proposal or similar proposal, or prior to entering
into any discussions, agreement, arrangement or understanding relating to any
Acquisition Transaction or similar transaction.

(b) Each Material Contract is valid and in full force and effect, and is
enforceable in accordance with its terms against the Company, and to the
Company's knowledge, against the other party thereto, subject to

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(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. The Company has delivered to
Parent an accurate and complete copy of each Material Contract. The Company is
not a party to any "standstill" or similar agreement prohibiting any Person
from acquiring any equity securities of the Company.

(c) None of the Acquired Corporations has violated or breached, or committed
any default under, any Material Contract, and, to the Company's knowledge, no
other Person has violated or breached, or committed any default under, any
Material Contract.

(d) To the Company's knowledge, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) would
reasonably be expected to (i) give any Person the right to declare a default or
exercise any remedy under any Material Contract; (ii) give any person the right
to receive or require a significant rebate, significant chargeback, significant
penalty or significant change in delivery schedule under any Material Contract;
(iii) give any Person the right to accelerate the maturity or performance of
any Material Contract; or (iv) give any Person the right to cancel, terminate
or modify any Material Contract in each case, in a manner that would reasonably
be expected to have a Material Adverse Effect on the Acquired Corporations.

2.8 Sale of Products; Performance of Services. Each product sold or licensed
by any of the Acquired Corporations to any Person conformed and complied in all
respects with the terms and requirements of any applicable warranty or other
Contract and with all applicable Legal Requirements at the time it was sold
except to the extent that any nonconformance or noncompliance would not
reasonably be expected to result in a Material Adverse Effect on the Acquired
Corporations.

2.9 Liabilities. As of the date of this Agreement, none of the Acquired
Corporations has any accrued, contingent or other liabilities of any nature,
either matured or unmatured (whether or not required to be reflected in
financial statements prepared in accordance with generally accepted accounting
principles, and whether due or to become due), except for: (a) liabilities
identified as such in the "liabilities" column of the Company Balance Sheet;
and (b) normal and recurring liabilities that have been incurred by the
Acquired Corporations since the Company Balance Sheet Date in the ordinary
course of business and consistent with past practices which have not resulted
in any material increase in the Company's liabilities from those disclosed or
provided for in the Company Balance Sheet or in the related notes.

2.10 Compliance with Legal Requirements. Each of the Acquired Corporations
is, and at all times since December 31, 1999 has been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations. Since December 31, 1999,
none of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement, except where
such violation or noncompliance would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.

2.11 Governmental Authorizations. Each of the Acquired Corporations holds
all material Governmental Authorizations necessary to enable such Acquired
Corporation to conduct its business in the manner in which such business is
currently being conducted and as proposed to be conducted. All such
Governmental Authorizations are valid and in full force and effect. Each
Acquired Corporation is, and at all times since December 31, 1999 has been, in
compliance with the terms and requirements of such Governmental Authorizations
except where the failure to comply with such terms and requirements has not had
and would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. Except as would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations, since December 31, 1999,
none of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.

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2.12 Tax Matters. Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Acquired Corporations, all Tax Returns
required to be filed by or on behalf of any of the Acquired Corporations with
any Governmental Body with respect to any taxable period ending on or before
the Closing Date (the "Acquired Corporation Returns") (a) have been or will be
filed on or before the applicable due date (including any extensions of such
due date), and (b) have been, or will be when filed, prepared in all material
respects in compliance with all applicable Legal Requirements. All amounts
shown on the Acquired Corporation Returns to be due on or before the Closing
Date have been or will be paid on or before the Closing Date. The Company
Financial Statements fully accrue all actual and contingent liabilities for
Taxes with respect to all periods through the dates thereof in accordance with
generally accepted accounting principles. There are no unsatisfied liabilities
for material Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by any Acquired Corporation with
respect to any material Tax (other than liabilities for Taxes asserted under
any such notice of deficiency or similar document which are being contested in
good faith by the Acquired Corporations and with respect to which adequate
reserves for payment have been established). There are no liens for material
Taxes upon any of the assets of any of the Acquired Corporations except liens
for current Taxes not yet due and payable. No extension or waiver of the
limitation period applicable to any of the Acquired Corporation Returns has
been granted (by the Company or any other Person), and no such extension or
waiver has been requested from any Acquired Corporation other than an extension
resulting from the filing of a Tax Return after its due date in the ordinary
course of business. No claim or Legal Proceeding is pending or, to the
Company's knowledge, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. None of the Acquired
Corporations has entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code. None of the Acquired Corporations has
been, and none of the Acquired Corporations will be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing. There is no agreement, plan,
arrangement or other Contract covering any employee or independent contractor
or former employee or independent contractor of any of the Acquired
Corporations that, considered individually or considered collectively with any
other such Contracts, will, or could reasonably be expected to, give rise
directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162m of the Code. There is no
agreement, plan, arrangement or Contract whereby the Company would be obligated
to pay any excise taxes due from any employee of the Company. None of the
Acquired Corporations is a party to any Contract to compensate any individual
for excise taxes paid pursuant to Section 4999 of the Code. None of the
Acquired Corporations is, or has ever been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract, including any obligation arising by reason of Treasury Regulations
Section 1.1502-6, and none of the Acquired Corporations has or, by reason of
the consummation of the transactions contemplated under this Agreement, will
have any liability or obligation under any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar Contract. None of the Acquired
Corporations have made any distribution of stock of any "controlled
corporation," as that term is defined by Section 355(a)(1) of the Code.

2.13 Employee and Labor Matters; Benefit Plans.

(a) Part 2.13(a) of the Company Disclosure Schedule lists all employee
pension benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare
benefit plans (as defined in Section 3(1) of ERISA), and all other bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance, perquisites, fringe benefits and other similar benefit
plans, programs or arrangements (including a specific identification of those
which contain change of control provisions or pending change of control
provisions), and any employment, executive compensation or severance agreements
(including a specific identification of those which contain change of control
provisions or pending change of control provisions), written or otherwise, as
amended, modified or supplemented, for the benefit of, or relating to, any
foreign or domestic former or current employee, officer, director, independent
contractor or consultant (or any of their beneficiaries) of any Acquired
Corporation or any other Entity (whether or not incorporated) which is a member
of a controlled group which includes any of the

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<PAGE>

Acquired Corporations or which is under common control with any of the Acquired
Corporations within the meaning of Sections 414(b), (c), (m) or (o) of the Code
or Section 4001(a) (14) or (b) of ERISA, as well as each plan with respect to
which any of the Acquired Corporations could incur liability under Title IV of
ERISA or Section 412 of the Code (collectively, the "Company Employee Plans").
The Company has made available to Parent, in a reasonable time, place and
manner, copies of (i) each such written Company Employee Plan (or a written
description of any Company Employee Plan which is not written) and all related
trust agreements, insurance and other contracts (including policies), summary
plan descriptions, summaries of material modifications, registration statements
(including all attachments), prospectuses and communications distributed to
plan participants, (ii) the three most recent annual reports on Form 5500
series, with accompanying schedules and attachments, filed with respect to each
Company Employee Plan required to make such a filing, (iii) the most recent
actuarial valuation for each Company Employee Plan subject to Title IV of
ERISA, (iv) the latest reports which have been filed with the U.S. Department
of Labor with respect to each Company Employee Plan required to make such
filing, (v) the most recent favorable determination letters issued for each
Company Employee Plan and related trust which is intended to be qualified under
Section 401(a) of the Code (and, if an application for such determination is
pending, a copy of the application for such determination), and (vi) financial
and other information regarding current and projected liabilities with respect
to each Company Employee Plan for which the filings described in (ii), (iii) or
(iv) above are not required under ERISA.

(b) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person (other than
continuation coverage to the extent required by law, whether pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 or otherwise), and none
of the Company Employee Plans is a "multiemployer plan" as such term is defined
in Section 3(37) of ERISA; (ii) no party in interest or disqualified person (as
defined in Section 3(14) of ERISA and Section 4975 of the Code) has at any time
engaged in a transaction with respect to any Company Employee Plan which could
subject any of the Acquired Corporations, directly or indirectly, to a material
tax, penalty or other material liability for prohibited transactions under
ERISA or Section 4975 of the Code; (iii) no fiduciary of any Company Employee
Plan has breached any of the responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA, which breach would reasonably be expected
to have a Material Adverse Effect on any of the Acquired Corporations; (iv) all
Company Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance in all material
respects with all applicable Legal Requirements, and may by their terms be
amended and/or terminated at any time subject to applicable Legal Requirements
and the terms of each Company Employee Plan, and each of the Acquired
Corporations has performed all material obligations required to be performed by
them under, and are not in any material respect in default under or in
violation of, any Company Employee Plan, and none of the Acquired Corporations
has any knowledge of any default or violation by any other Person with respect
to, any of the Company Employee Plans; (v) each Company Employee Plan which is
intended to be qualified under Section 401(a) of the Code is the subject of a
favorable determination letter from the Internal Revenue Service (or comparable
letter, such as an opinion or notification letter as to the form of plan
adopted by one or more Acquired Corporations), and, to the Company's knowledge,
nothing has occurred which may reasonably be expected to impair such
determination; (vi) all contributions required to be made with respect to any
Company Employee Plan pursuant to Section 412 of the Code, or the terms of the
Company Employee Plan or any collective bargaining agreement, have been made on
or before their due dates (including any extensions thereof); (vii) with
respect to each Company Employee Plan, no "reportable event" within the meaning
of Section 4043 of ERISA (excluding any such event for which the 30-day notice
requirement has been waived under the regulations to Section 4043 of ERISA) has
occurred for which there is any material outstanding liability to any Acquired
Corporation nor would the consummation of the transactions contemplated hereby
(including the execution of this Agreement) constitute a reportable event for
which the 30-day notice requirement has not been waived; and (viii) none of the
Acquired Corporations has incurred or reasonably expects to incur any material
liability under Title IV of ERISA including, without limitation, any material
liability arising out of or resulting from an event described in Section 4062,
4063 or 4041 of ERISA (other than liability for premium payments to the Pension
Benefit Guaranty Corporation (the "PBGC") arising in the ordinary course).

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<PAGE>

(c) (i) The PBGC has not instituted proceedings to terminate any Company
Employee Plan that is subject to Title IV of ERISA (each, a "Company Defined
Benefit Plan"); (ii) the Company Defined Benefit Plans have no accumulated or
waived funding deficiencies within the meaning of Section 412 of the Code nor
have any extensions of any amortization period within the meaning of Section
412 of the Code or 302 of ERISA been applied for with respect thereto; (iii) as
of January 1, 1999, the present value of the benefit liabilities (within the
meaning of Section 4041 of ERISA) of the Company Defined Benefit Plans,
determined on an ongoing basis using the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan's most recently completed fiscal year, does not
exceed by more than $1,000,000 the value of the Company Defined Benefit Plans'
assets and to the knowledge of the Company, nothing has occurred since the end
of the most recently completed fiscal year that would adversely affect the
funding status of such plans; (iv) all applicable premiums required to be paid
to the PBGC with respect to the Company Defined Benefit Plans have been paid;
(v) no facts or circumstances exist with respect to any Company Defined Benefit
Plan which would give rise to a lien on the assets of any Acquired Corporation
under Section 4068 of ERISA or otherwise; and (vi) as of the date hereof,
substantially all of the assets of the Company Defined Benefit Plans are
readily marketable securities or insurance contracts.

(d) (i) None of the Acquired Corporations has ever maintained an employee
stock ownership plan (within the meaning of Section 4975(e)(7) of the Code) or
any other Company Employee Plan that invests in Company capital stock; (ii)
since December 31, 1998, none of the Acquired Corporations has proposed or
agreed to any increase in benefits under any Company Employee Plan (or the
creation of new benefits) or change in employee coverage which would materially
increase the expense of maintaining any Company Employee Plan; (iii) the
consummation of the transactions contemplated by this Agreement will not result
in an increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits or compensation payable in respect
of any employee; (iv) no person will be entitled to any severance benefits
under the terms of any Company Employee Plan as a result of the consummation of
the transactions contemplated by this Agreement; and (v) none of the Acquired
Corporations will be denied an income tax deduction pursuant to Section 162(m)
or 280G of the Code.

(e) Each Company Employee Plan covering non-U.S. employees (a "Company
International Plan") has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable Legal
Requirements (including any special provisions relating to registered or
qualified plans where such Company International Plan was intended to so
qualify) and has been maintained in good standing with applicable regulatory
authorities. The fair market value of the assets of each funded Company
International Plan, if any, (or the liability of each funded Company
International Plan funded through insurance) is sufficient to procure or
provide for the benefits accrued thereunder through the Effective Time
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to the Company International Plan.

(f) The fiduciary liability insurance policies in effect covering the
fiduciaries of the Company Employee Plans (including the Acquired Corporations)
are set forth on Part 2.13(f) of the Company Disclosure Schedule.

(g) (i) there are no controversies pending or, to the knowledge of the
Company, threatened, between any of the Acquired Corporations and any of their
respective employees, which controversies have had, or would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
on the Acquired Corporations; (ii) none of the Acquired Corporations is in
breach of any material collective bargaining agreement or other labor union
contract applicable to persons employed by any of the Acquired Corporations
which would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Acquired Corporations, nor does the Company know
of any activities or proceedings of any labor union to organize any significant
number of such employees; and (iii) none of the Acquired Corporations is in
breach of any material collective bargaining agreement or other labor union
contract, nor has any knowledge of any activities or proceedings of any labor
unions to organize employees, or of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees (foreign or
domestic) of any of the

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<PAGE>

Acquired Corporations which would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on the Acquired Corporations.
The Company is not obligated to make any payments or provide any benefits to
any Person under the Worker Adjustment and Retraining Notification Act of 1988,
as amended.

2.14 Environmental Matters. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations
of all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. None
of the Acquired Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is
not in compliance with any Environmental Law, and, to the Company's knowledge,
there are no circumstances that may prevent or interfere with the compliance by
any of the Acquired Corporations with any Environmental Law in the future.
Except as to the Company, to the Company's knowledge, no current or prior owner
of any property leased or controlled by any of the Acquired Corporations has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that such current or prior owner or any of the Acquired Corporations is not in
compliance with any Environmental Law. To the Company's knowledge, all property
that is or has been leased to, controlled by or used by the Acquired
Corporations, and all surface water, groundwater and soil associated with or
adjacent to such property is in clean and healthful condition and is free of
any material environmental contamination of any nature and none of the Acquired
Corporations has any liability for any clean-up or remediation under any
Environmental Law or the exposure of any individual to Materials of
Environmental Concern. All property that is leased to, controlled by or used by
any of the Acquired Corporations is free of any asbestos or asbestos-containing
material.

2.15 Legal Proceedings; Orders. Except as would not reasonably be expected
to have a Material Adverse Effect on the Acquired Corporations or to materially
delay or interfere with the consummation of the Merger: (i) there is no pending
Legal Proceeding and, to the Company's knowledge, no Person has threatened to
commence any Legal Proceeding, that involves any of the Acquired Corporations
or any of the assets owned or used by any of the Acquired Corporations; and
(ii) there is no order, writ, injunction, judgment or decree to which any of
the Acquired Corporations, or any of the material assets owned or used by any
of the Acquired Corporations, is subject.

2.16 Vote Required. The affirmative vote of the holders of a majority of the
shares of Company Common Stock outstanding on the record date for the Company
Stockholders' Meeting (the "Required Company Stockholder Vote") is the only
vote of the holders of any class or series of the Company's capital stock
necessary to adopt this Agreement and otherwise approve the Merger and the
other transactions contemplated by this Agreement.

2.17 Non-Contravention; Consents. Neither the execution, delivery or
performance of this Agreement by the Company nor the consummation of the Merger
by the Company or any of the other transactions contemplated by this Agreement,
will directly or indirectly (with or without notice or lapse of time):

(a) contravene, conflict with or result in a violation of any of the
provisions of the certificate of incorporation or bylaws of any of the Acquired
Corporations or any resolution adopted by the stockholders, the board of
directors or any committee of the board of directors of any of the Acquired
Corporations;

(b) result in a violation of any Legal Requirement or any order, writ,
injunction, judgment or decree to which any of the Acquired Corporations, or
any of the material assets owned or used by any of the Acquired Corporations,
is subject;

(c) contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Acquired Corporations or that otherwise relates to
the business of any

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<PAGE>

of the Acquired Corporations or to any of the assets owned or used by any of
the Acquired Corporations, except where the contravention of, conflict with or
violation of, any such terms or requirements would not, individually or in the
aggregate, have a Material Adverse Effect on the Acquired Corporations; or

(d) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
Material Contract, (ii) a rebate, chargeback, penalty or change in delivery
schedule under any Material Contract, (iii) accelerate the maturity or
performance of any Material Contract, or (iv) cancel, terminate or modify any
term of any Material Contract, except in each case where the contravention of,
conflict with, or violation or breach of any such provision would not,
individually or in the aggregate, have a Material Adverse Effect on the
Acquired Corporations.

Except as may be required by the Exchange Act, the DGCL, the HSR Act and the
NASD Bylaws (as they relate to the Form S-4 Registration Statement and the
Proxy Statement) none of the Acquired Corporations was, is or will be required
to make any filing with or give any notice to, or obtain any Consent from, any
Person in connection with (x) the execution, delivery or performance of this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, except in each case, where the
failure to make any filing, give any notice or obtain any Consent would not,
individually or in the aggregate, have a Material Adverse Effect on the
Acquired Corporations.

2.18 Fairness Opinion. The Company's board of directors has received the
opinion of Credit Suisse First Boston Corporation ("Credit Suisse First
Boston"), financial advisor to the Company, to the effect that, as of the date
of this Agreement, the exchange ratio in the Merger is fair, from a financial
point of view, to the holders of Company Common Stock. The Company will furnish
an accurate and complete copy of the written confirmation of such opinion to
Parent as soon as reasonably practicable after the date hereof.

2.19 Financial Advisor. Except for the amounts payable to Credit Suisse
First Boston ("CSFB") under that certain agreement dated June 6, 2000 by and
between the Company and CSFB, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated by this
Agreement. The Company has furnished to Parent accurate and complete copies of
all agreements under which any such fees, commissions or other amounts have
been paid or may become payable and all indemnification and other agreements
related to the engagement of Credit Suisse First Boston.

2.20 Takeover Statutes. As of the date hereof and at all times on or prior
to the Effective Time, the board of directors of the Company has and will take
all actions so that the restrictions applicable to business combinations
contained in Section 203 of the DGCL are, and will be, inapplicable to the
execution, delivery and performance of this Agreement and to the consummation
of the Merger and the other transactions contemplated by this Agreement.

2.21 Full Disclosure.

(a) None of the information supplied or to be supplied by or on behalf of
the Company for inclusion or incorporation by reference in the Form S-4
Registration Statement will, at the time the Form S-4 Registration Statement is
filed with the SEC or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
Proxy Statement will, at the time the Proxy Statement is mailed to the
stockholders of the Company or at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder.

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SECTION 3. Representations and Warranties of Parent and Merger Sub

Parent and Merger Sub represent and warrant to the Company (subject to such
exceptions or qualifications as are disclosed in writing in the disclosure
schedule supplied by Parent to the Company dated as of the date hereof (the
"Parent Disclosure Schedule"), which disclosure shall provide an exception to
or otherwise qualify only those representations and warranties of Parent and
Merger Sub contained in the section of this Agreement corresponding to the part
or section reference of the Parent Disclosure Schedule where such disclosure
appears, and such exceptions or qualifications shall not be deemed to be an
exception to, or qualify, any other representation or warranty) as follows:

3.1 Due Organization; Subsidiaries. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary power and authority: (i) to
conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Material Contracts by which it is bound. Each of Parent and Merger Sub is
qualified to do business as a foreign corporation, and is in good standing,
under the laws of all jurisdictions where the nature of its business requires
such qualification and where the failure to be so qualified would have a
Material Adverse Effect on Parent and Merger Sub, taken as a whole.

3.2 Authority; Binding Nature of Agreement. Each of Parent and Merger Sub
has the absolute and unrestricted right, power and authority to enter into and
to perform its obligations under this Agreement (except that Parent will need
to amend its certificate of incorporation to increase the authorized member of
shares of Parent Common Stock prior to the Effective Time). The Board of
Directors of Parent (at a meeting duly called and held) has authorized and
approved the execution, delivery and performance of this Agreement by Parent
and approved the Merger. This Agreement constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub, as the case may be, in accordance with their terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.

3.3 Capitalization, Etc.

(a) As of the date of this Agreement, the authorized capital stock of Parent
consists of: (i) 180,000,000 shares of Parent Common Stock; and (ii) 2,000,000
shares of Preferred Stock, $.01 par value per share. As of August 24, 2000,
125,768,295 shares of Parent Common Stock have been issued and are outstanding
and no shares of Parent's Preferred Stock have been issued or are outstanding.
As of the date hereof, no shares of capital stock of Parent are held in
Parent's treasury. All of the outstanding shares of Parent Common Stock have
been duly authorized and validly issued, and are fully paid and nonassessable.

(b) As of August 24, 2000: (i) 15,482,750 shares of Parent Common Stock are
subject to issuance pursuant to stock options granted and outstanding under
Parent's 1992 Stock Option Plan; (ii) 391,666 shares of Parent Common Stock are
subject to issuance pursuant to stock options granted and outstanding under
Parent's 1997 Directors' Stock Option Plan; (iii) 2,664 shares of Parent Common
Stock are subject to issuance pursuant to stock options granted and outstanding
Parent's 1982 Employee Incentive Stock Option Plan; (iv) 225,201 shares of
Parent Common Stock are subject to issuance pursuant to Parent's Cimaron 1998
Stock Incentive Plan; (v) 3,697,029 shares of Parent Common Stock are subject
to issuance pursuant to stock options granted and outstanding Parent's 2000
Equity Incentive Plan; (vi) 133,722 shares of Parent Common Stock are subject
to stock options granted and outstanding under Parent's YuniNetwork's 1999
Equity Incentive Plan; and (vii) 53,328 shares of Parent Common Stock are
subject to issuance under various other outstanding stock option agreements. In
addition as of August 24, 2000, (i) 24,504 shares of Parent Common Stock are
reserved for issuance pursuant to Parent's 1997 Employee Stock Purchase Plan,
and (ii) 1,163,858 shares are reserved for issuance under Parent's 1998
Employee Stock Purchase Plan. (Stock options granted by Parent pursuant to the
1992 Stock Option Plan, 1997 Directors' Stock Option Plan, 1982 Employee
Incentive Stock Option Plan, Parent's Cimaron 1998 Stock Incentive Plan,
Parent's 2000 Equity Incentive Plan and other options outstanding to purchase
Parent Common Stock are referred to collectively herein as "Parent Options").

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<PAGE>

(c) Except as set forth in Sections 3.3(a) or 3.3(b), as of August 24, 2000,
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of Parent; (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of Parent; (iii) rights
agreement, stockholder rights plan (or similar plan commonly referred to as a
"poison pill") or Contract under which Parent is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other
securities; or (iv) condition or circumstance that may give rise to or provide
a basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of Parent.

(d) All outstanding shares of Parent Common Stock, all outstanding Parent
Options and all outstanding shares of capital stock of each Subsidiary of
Parent have been issued and granted in compliance with (i) all applicable
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts. The Parent Common Stock to be
issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.

3.4 SEC Filings; Financial Statements.

(a) Parent has made available to the Company all registration statements,
proxy statements and other statements, reports, schedules, forms and other
documents filed by Parent with the SEC since December 31, 1999 (the "Parent SEC
Documents"). All statements, reports, schedules, forms and other documents
required to have been filed by Parent with the SEC since December 31, 1999 have
been so filed. As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

(b) The financial statements (including any related notes) contained in the
Parent SEC Documents (the "Parent Financial Statements"): (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that the unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end adjustments which
will not, individually or in the aggregate, be material in amount), and
(iii) fairly present in all material respects the consolidated financial
position of Parent and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows of Parent and
its consolidated subsidiaries for the periods covered thereby. For purposes of
this Agreement, "Parent Balance Sheet" means that consolidated balance sheet of
Parent as of December 31, 1999 set forth in Parent's Annual Report on Form 10-K
filed with the SEC and the "Parent Balance Sheet Date" means December 31, 1999.

3.5 Absence of Changes. Since the Parent Balance Sheet Date:

(a) there has not been any event that has had a Material Adverse Effect on
Parent, and no fact, event, circumstance or condition exists or has occurred
that could reasonably be expected to have a Material Adverse Effect on Parent;

(b) Parent has operated its business in the ordinary course and consistent
with past practices; and

(c) there has been no amendment to the certificate of incorporation or
bylaws of Parent (other than an amendment to Parent's certificate of
incorporation increasing the authorized number of shares of Parent Common Stock
to 630,000,000).

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3.6 Non-Contravention; Consents. Neither the execution and delivery of this
Agreement by Parent and Merger Sub by Parent nor the consummation by Parent and
Merger Sub of the Merger will directly or indirectly (with or without notice or
lapse of time) (a) conflict with or result in any breach of any provision of
the certificate of incorporation (assuming such certificate of incorporation is
amended to increase the number of shares of Parent Common Stock reserved
thereunder sufficient to consummate the Merger) or bylaws of Parent or Merger
Sub, (b) result in a default by Parent or Merger Sub under any Contract to
which Parent or Merger Sub is a party, except for any default that has not had
and will not have a Material Adverse Effect on Parent, or (c) result in a
violation by Parent or Merger Sub of any order, writ, injunction, judgment or
decree to which Parent or Merger Sub is subject, except for any violation that
has not had and will not have a Material Adverse Effect on Parent. Except as
may be required by the Securities Act, the Exchange Act, state securities or
"blue sky" laws, the DGCL, the HSR Act, any foreign antitrust law or regulation
and the NASD Bylaws (as they relate to the S-4 Registration Statement and the
Proxy Statement), Parent is not and will not be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution, delivery or performance of this Agreement or the
consummation of the Merger.

3.7 Liabilities. As of the date of this Agreement, Parent has no accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements prepared in
accordance with generally accepted accounting principles, and whether due or to
become due), except for: (a) liabilities identified as such in the
"liabilities" column of the Parent Balance Sheet; and (b) normal and recurring
liabilities that have been incurred by Parent since the Parent Balance Sheet
Date in the ordinary course of business and consistent with past practices
which have not resulted, in the aggregate, in any material increase in Parent's
liabilities from those disclosed or provided for in the Parent Balance Sheet or
in the related notes.

3.8 Compliance with Legal Requirements. Parent is, and at all times since
December 31, 1999 has been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent. Since December 31, 1999, Parent not has received any notice
or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement, except
where such violation or noncompliance would not reasonably be expected to have
a Material Adverse Effect on Parent.

3.9 Governmental Authorizations. Parent holds all material Governmental
Authorizations necessary to enable Parent to conduct its business in the manner
in which such business is currently being conducted and as proposed to be
conducted. All such Governmental Authorizations are valid and in full force and
effect. Parent is, and at all times since December 31, 1999 has been, in
compliance with the terms and requirements of such Governmental Authorizations
except where the failure to comply with such terms and requirements has not had
and would not reasonably be expected to have a Material Adverse Effect on
Parent. Except as would not reasonably be expected to have a Material Adverse
Effect on Parent, since December 31, 1999, Parent has not received any notice
or other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.

3.10 Environmental Matters. Parent is in compliance in all material respects
with all applicable Environmental Laws, which compliance includes the
possession by Parent of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Parent has not received any notice or other communication
(in writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that Parent is not in compliance with any
Environmental Law, and, to Parent's knowledge, there are no circumstances that
may prevent or interfere with the compliance by Parent with any Environmental
Law in the future. To Parent's knowledge, no current or prior owner of any
property leased or controlled by Parent has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or any of Parent is not in compliance with any

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Environmental Law. To Parent's knowledge, all property that is or has been
leased to, controlled by or used by Parent, and all surface water, groundwater
and soil associated with or adjacent to such property is in clean and healthful
condition and is free of any material environmental contamination of any nature
and Parent has no liability for any clean-up or remediation under any
Environmental Law or the exposure of any individual to Materials of
Environmental Concern. All property that is leased to, controlled by or used by
Parent is free of any asbestos or asbestos-containing material.

3.11 Legal Proceedings; Orders. Except as would not reasonably be expected
to have a Material Adverse Effect on Parent or to materially delay or interfere
with the consummation of the Merger: (i) there is no pending Legal Proceeding
and, to Parent's knowledge, no Person has threatened to commence any Legal
Proceeding, that involves Parent or any of the assets owned or used by Parent;
and (ii) there is no order, writ, injunction, judgment or decree to which
Parent, or any of the material assets owned or used by Parent, is subject.

3.12 Full Disclosure. None of the information supplied or to be supplied by
or on behalf of Parent for inclusion or incorporation by reference in the Form
S-4 Registration Statement will, at the time the Form S-4 Registration
Statement is filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. None of the information supplied or to be supplied by
or on behalf of Parent for inclusion or incorporation by reference in the Proxy
Statement will, at the time the Proxy Statement is mailed to the stockholders
of the Company or at the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder.

SECTION 4. Certain Covenants of the Company

4.1 Operation of the Company's Business.

(a) During the Period from the date of this Agreement through the Effective
Time (the "Pre-Closing Period"), the Company shall: (i) ensure that each of the
Acquired Corporations conducts its business and operations (A) in the ordinary
course and in accordance with past practices, and (B) in compliance with all
applicable Legal Requirements and the requirements of all Material Contracts;
(ii) use commercially reasonable efforts to ensure that each of the Acquired
Corporations preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations; (iii) provide all notices,
assurances and support required by any Contract relating to any Proprietary
Asset in order to ensure that no condition under such Contract occurs which
could result in, or could increase the likelihood of any transfer or disclosure
by any Acquired Corporation of any Proprietary Asset; (iv) keep in full force
and effect (with the same scope and limits of coverage) all insurance policies
in effect as of the date of this Agreement covering all material assets of the
Acquired Corporations and (v) to the extent requested by Parent, cause its
officers to report regularly to Parent concerning the status of the Acquired
Corporations' respective businesses.

(b) Except as disclosed in the Company Disclosure Schedule, during the Pre-
Closing Period, the Company shall not (without the prior written consent of
Parent which consent, or refusal to consent, will not be unreasonably delayed),
and shall not permit any of the other Acquired Corporations to:

(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock or repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities, except
repurchases of unvested shares at cost in connection with the termination of
the employment or consulting relationship with any employee or consultant
pursuant to stock option or purchase agreements;

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(ii) sell, issue, grant or authorize the issuance or grant of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that (A) the Company may issue Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement or
pursuant to the Company's 1997 Employee Stock Purchase Plan as in effect on the
date hereof, and (B) the Company may grant options under its 1997 Stock Plan to
purchase no more than 20,000 shares of Company Common Stock to any single
current or prospective employee of the Company, and no more than an aggregate
of 600,000 plus the number of shares of Company Common Stock subject to options
that are cancelled during such period shares of Company Common Stock pursuant
to all such grants);

(iii) amend or waive any of its rights under, or accelerate the vesting
under, any provision of any of the Company's stock option plans, any provision
of any agreement evidencing any outstanding stock option or any restricted
stock purchase agreement, or otherwise modify any of the terms of any
outstanding option or any related Contract;

(iv) amend or permit the adoption of any amendment to its certificate of
incorporation or bylaws, or effect or become a party to any merger,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;

(v) form any subsidiary or acquire any equity interest or other interest
in any other Entity;

(vi) make any capital expenditure outside the ordinary course of
business or make any single capital expenditure in excess of $75,000; provided
however, that the maximum amount of all capital expenditures made on behalf of
the Acquired Corporations during the Pre-Closing Period shall not exceed
$250,000 in the aggregate;

(vii) except in the ordinary course of business and consistent with past
practice, enter into or become bound by, or permit any of the assets owned or
used by it to become bound by, any Material Contract, or amend or terminate, or
waive or exercise any material right or remedy under, any Material Contract;

(viii) acquire, lease or license any right or other asset from any other
Person or sell or otherwise dispose of, or lease or license, any right or other
asset to any other Person (except in each case for assets acquired, leased,
licensed or disposed of by the Company in the ordinary course of business and
not having a value, or not requiring payments to be made or received, in excess
of $50,000 individually, or $250,000 in the aggregate), or waive or relinquish
any material right;

(ix) lend money to any Person, or incur or guarantee any indebtedness
(except that the Company may make routine borrowings in the ordinary course of
business and in accordance with past practices under the Company's credit
facilities outstanding as of the date hereof (without any amendment or
modification thereto));

(x) establish, adopt or amend any Company Employee Plan or collective
bargaining agreement, pay any bonus or make any profit-sharing or similar
payment to, or increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors
or officers; provided, however, that the Company may make regularly scheduled
bonus payments and increase the amount of wages paid to employees in the
ordinary course of business and consistent with past practices;

(xi) hire any new employee having an annual salary in excess of
$150,000;

(xii) change any of its methods of accounting or accounting practices in
any respect except as required by generally accepted accounting principles;

(xiii) make any material Tax election;

(xiv) commence or settle any material Legal Proceeding;

(xv) enter into any material transaction or take any other material
action outside the ordinary course of business and inconsistent with past
practices;

(xvi) take or agree to take any action which would result in the failure
to satisfy the condition provided for in Section 6.1 or 6.2; or

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(xvii) agree or commit to take any of the actions described in clauses
"(i)" through "(xvi)" of this Section 4.1(b).

4.2 No Solicitation.

(a) The Company shall not directly or indirectly, and shall not authorize or
permit any of the other Acquired Corporations or any Representative of any of
the Acquired Corporations directly or indirectly to, (i) solicit, initiate, or
knowingly encourage or induce the making, submission or announcement of any
Acquisition Proposal or knowingly take any action that could reasonably be
expected to lead to an Acquisition Proposal, (ii) furnish any information
regarding any of the Acquired Corporations to any Person in connection with or
in response to an Acquisition Proposal or an inquiry or indication of interest
that could reasonably be expected to lead to an Acquisition Proposal, (iii)
engage in discussions or negotiations with any Person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal, or (v) enter into any letter of intent or similar document or any
Contract having a primary purpose of effectuating, or which would effect, any
Acquisition Transaction; provided, however, that prior to the adoption of this
Agreement by the Required Company Stockholder Vote, this Section 4.2(a) shall
not prohibit the Company from furnishing nonpublic information regarding the
Acquired Corporations to, or entering into discussions with, any Person in
response to a Superior Offer that is submitted to the Company by such Person
(and not withdrawn) if (1) such Superior Offer shall not have been received as
the result of a breach of any of the provisions set forth in this Section 4.2,
(2) the board of directors of the Company concludes in good faith, after
consultation with its outside legal counsel, that such action is required in
order for the board of directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law, (3) at least 48
hours prior to furnishing any such nonpublic information to, or entering into
discussions with, such Person, the Company gives Parent written notice of the
identity of such Person and of the Company's intention to furnish nonpublic
information to, or enter into discussions with, such Person, and the Company
receives from such Person an executed confidentiality agreement containing
provisions no less favorable in the aggregate to the Company than those
contained in the Mutual Nondisclosure Agreement dated March 16, 2000 between
Parent and the Company (the "Nondisclosure Agreement"), and (4)
contemporaneously with furnishing any additional nonpublic information to such
Person, the Company furnishes such additional nonpublic information to Parent
(to the extent such nonpublic information has not been previously furnished by
the Company to Parent) provided, that this Section 4.2(a) shall not prohibit
the Company's board of directors from complying with Rules 14d-9 and 14e-2
under the Exchange Act or making any disclosure to the Company's stockholders
that is required by law. Without limiting the generality of the foregoing, the
Company acknowledges and agrees that any violation of any of the restrictions
set forth in the preceding sentence by any Representative of any of the
Acquired Corporations, whether or not such Representative is purporting to act
on behalf of any of the Acquired Corporations, shall be deemed to constitute a
breach of this Section 4.2 by the Company.

(b) The Company shall promptly (and in no event later than one business day
after receipt by any officer or director of the Company or by any employee of
the Company's financial advisors or outside legal counsel of any Acquisition
Proposal or any request for nonpublic information from a Person that could
reasonably be expected to make an Acquisition Proposal) advise Parent in
writing of any Acquisition Proposal or any request for nonpublic information
relating to any of the Acquired Corporations (including the identity of the
Person making or submitting such Acquisition Proposal or request, and the terms
thereof) that is made or submitted by any Person during the Pre-Closing Period.
The Company shall promptly notify Parent in writing of any material
modification to any such Acquisition Proposal or request.

(c) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal.

(d) The Company will promptly request each Person that has executed, within
12 months prior to the date of this Agreement, a confidentiality, standstill or
similar agreement in connection with its consideration of a possible
Acquisition Transaction to return all confidential information heretofore
furnished to such Person by or on behalf of the Company.

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SECTION 5. Additional Covenants of the Parties

5.1 Registration Statement; Proxy Statement.

(a) As promptly as practicable after the date of this Agreement, Parent and
the Company shall prepare and cause to be filed with the SEC the Proxy
Statement and Parent shall prepare and cause to be filed with the SEC the Form
S-4 Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use all reasonable efforts to
cause the Form S-4 Registration Statement and the Proxy Statement to comply
with the rules and regulations promulgated by the SEC, to respond promptly to
any comments of the SEC or its staff and to have the Form S-4 Registration
Statement declared effective under the Securities Act as promptly as
practicable after it is filed with the SEC. The Company will use all reasonable
efforts to cause, and Parent shall cooperate with the Company in causing, the
Proxy Statement to be mailed to the Company's stockholders, as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act. The Company and Parent shall promptly furnish to the
other party all information concerning such party and, with respect to the
Company, the Company's stockholders that may be required or reasonably
requested in connection with any action contemplated by this Section 5.1. If
any event relating to any of the Acquired Corporations or Parent occurs, or if
the Company or Parent becomes aware of any information, that should be
disclosed in an amendment or supplement to the Form S-4 Registration Statement
or the Proxy Statement, then the Company or Parent, as the case my be, shall
promptly inform the other party thereof and shall cooperate with Parent in
filing such amendment or supplement with the SEC and, if appropriate, in
mailing such amendment or supplement to the stockholders of the Company.

(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be registered or qualified under the securities
law of every jurisdiction of the United States in which any registered holder
of Company Common Stock has an address of record on the record date for
determining the stockholders entitled to notice of and to vote at the Company
Stockholders' Meeting.

5.2 Company Stockholders' Meeting.

(a) The Company shall call, give notice of and hold a meeting of the holders
of Company Common Stock to vote on a proposal to adopt this Agreement (the
"Company Stockholders' Meeting"). The Company Stockholders' Meeting shall be
held (on a date selected by the Company in consultation with Parent) as
promptly as practicable after the Form S-4 Registration Statement is declared
effective under the Securities Act. Each of the Company and Parent shall ensure
that all proxies solicited by or on behalf of the Company or Parent in
connection with the Company Stockholders' Meeting are solicited in compliance
with all applicable Legal Requirements.

(b) Subject to Section 5.2(c): (i) the Proxy Statement shall include a
statement to the effect that the board of directors of the Company recommends
that the Company's stockholders vote to adopt this Agreement at the Company
Stockholders' Meeting (the recommendation of the Company's board of directors
that the Company's stockholders vote to adopt this Agreement being referred to
as the "Company Board Recommendation"); and (ii) the Company Board
Recommendation shall not be withdrawn or modified in a manner adverse to
Parent, and no resolution by the board of directors of the Company or any
committee thereof to withdraw or modify the Company Board Recommendation in a
manner adverse to Parent shall be adopted or proposed.

(c) Notwithstanding anything to the contrary contained in Section 5.2(b), at
any time prior to the adoption of this Agreement by the Required Company
Stockholder Vote, (i) the Company Board Recommendation may be withdrawn or
modified in a manner adverse to Parent and such recommendation may be included
in the Proxy Statement (or the withdrawal of the Company Board Recommendation
may be noted therein), or (ii) the Company may terminate this Agreement
pursuant to Section 8.1(h), if, and only if: (A) an unsolicited, bona fide
written offer to purchase all of the outstanding shares of Company Common Stock
is made to the Company and is not withdrawn; (B) the Company provides Parent
with at least two business days prior notice of any meeting of the Company's
board of directors at which such board of directors will consider and

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determine whether such offer is a Superior Offer; (C) the Company's board of
directors determines in good faith (after consultation with the Company's
financial advisor of nationally recognized reputation) that such offer
constitutes a Superior Offer; (D) the Company's board of directors determines
in good faith, after consultation with the Company's outside legal counsel,
that, in light of such Superior Offer, the withdrawal or modification of the
Company Board Recommendation or the termination of this Agreement is required
in order for the Company's board of directors to comply with its fiduciary
obligations to the Company's stockholders under applicable law; (E) the Company
Board Recommendation is not withdrawn or modified in a manner adverse to Parent
or this Agreement is not terminated pursuant to Section 8.1(h), in each case,
at any time within one business day after Parent receives written notice from
the Company confirming that the Company's board of directors has determined
that such offer is a Superior Offer; (F) the Company shall have released Parent
from the provisions of any standstill or similar agreement restricting Parent
from acquiring securities of the Company; and (G) neither the Company nor any
of its Representatives shall have violated any of the restrictions set forth in
Section 4.2 in connection with the receipt of such Superior Offer.

(d) The Company's obligation to call, give notice of and hold the Company
Stockholders' Meeting in accordance with Section 5.2(a) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
of any Superior Offer or other Acquisition Proposal, or by any withdrawal or
modification of the Company Board Recommendation.

5.3 Regulatory Approvals. The Company and Parent shall use commercially
reasonable efforts to file, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
HSR Act and any applicable foreign antitrust laws or regulations in connection
with the Merger. The Company and Parent shall respond as promptly as
practicable to (i) any inquiries or requests received from the Federal Trade
Commission or the Department of Justice for additional information or
documentation and (ii) any inquiries or requests received from any state
attorney general, foreign antitrust authority or other Governmental Body in
connection with antitrust or related matters. Each of the Company and Parent
shall (1) give the other party prompt notice of the commencement or threat of
commencement of any Legal Proceeding by or before any Governmental Body with
respect to the Merger or any of the other transactions contemplated by this
Agreement, (2) keep the other party informed as to the status of any such Legal
Proceeding or threat, and (3) promptly inform the other party of any
communication to or from the Federal Trade Commission, the Department of
Justice or any other Governmental Body regarding the Merger. Except as may be
prohibited by any Governmental Body or by any Legal Requirement, the Company
and Parent will consult and cooperate with one another, and will consider in
good faith the views of one another, in connection with any analysis,
appearance, presentation, memorandum, brief, argument, opinion or proposal made
or submitted in connection with any Legal Proceeding under or relating to the
HSR Act or any other foreign, federal or state antitrust or fair trade law. In
addition, except as may be prohibited by any Governmental Body or by any Legal
Requirement, in connection with any Legal Proceeding under or relating to the
HSR Act or any other foreign, federal or state antitrust or fair trade law or
any other similar Legal Proceeding, each of the Company and Parent will permit
authorized Representatives of the other party to be present at each meeting or
conference relating to any such Legal Proceeding and to have access to and be
consulted in connection with any document, opinion or proposal made or
submitted to any Governmental Body in connection with any such Legal
Proceeding. At the request of Parent, the Company shall agree to divest, sell,
dispose of, hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to its or its Subsidiaries' ability
to retain, any of the businesses, product lines or assets of the Company or any
of its Subsidiaries, provided that any such action is conditioned upon the
consummation of the Merger and such action when taken together with any similar
action by Parent would not have a Material Adverse Effect on Parent at and
after the Effective Time.

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5.4 Stock Options.

(a) Subject to Section 5.4(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding
shall be converted into and become rights with respect to Parent Common Stock,
and Parent shall assume each such Company Option in accordance with the terms
(as in effect as of the date of this Agreement) of the stock option plan under
which it was issued and the terms of the stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each Company Option assumed
by Parent may be exercised solely for shares of Parent Common Stock, (ii) the
number of shares of Parent Common Stock subject to each such Company Option
shall be equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounding down to the nearest whole share, (iii) the per share
exercise price under each such Company Option shall be adjusted by dividing the
per share exercise price under such Company Option by the Exchange Ratio and
rounding up to the nearest cent, and (iv) any restriction on the exercise of
any such Company Option shall continue in full force and effect and the term,
exercisability, vesting schedule and other provisions of such Company Option
shall otherwise remain unchanged; provided, however, that each Company Option
assumed by Parent in accordance with this Section 5.4(a) shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction effected subsequent to the
Effective Time. Parent shall file with the SEC, no later than 10 business days
after the date on which the Merger becomes effective, a registration statement
on Form S-8 relating to the shares of Parent Common Stock issuable with respect
to the Company Options and the Company ESPP Options assumed by Parent in
accordance with this Section 5.4(a).

(b) Prior to the Effective Time, the Company shall take all action that may
be necessary (under the plans pursuant to which Company Options are outstanding
and otherwise) to effectuate the provisions of this Section 5.4 and to ensure
that, from and after the Effective Time, holders of Company Options have no
rights with respect thereto other than those specifically provided in this
Section 5.4.

(c) At the Effective Time all outstanding rights to purchase shares of
Company Common Stock under the ESPP ("Purchase Rights") shall be converted (in
accordance with the Exchange Ratio) into rights to purchase shares of Parent
Common Stock (with the number of shares rounded down to the nearest whole share
and the purchase price as of the offering date for each offering period in
effect as of the Effective Time rounded up to the nearest whole cent). All such
converted Purchase Rights shall be assumed by Parent, and each offering period
in effect under the ESPP immediately prior to the Effective Time shall be
continued in accordance with the terms of the ESPP until the end of such
offering period. No additional offering periods will be granted under the ESPP
following the Effective Time, provided that references to the Company in the
ESPP and related documents shall mean Parent (except that the purchase price as
of the enrollment date for a relevant period shall be determined with respect
to the fair market value of the Company Common Stock on such date, as adjusted
hereby). Parent agrees that, from and after the Effective Time, the Company's
employees not participating in an offering which has been continued under the
Company's ESPP may participate in the employee stock purchase plan sponsored by
Parent (the "Parent ESPP"), subject to the terms and conditions of the Parent
ESPP, and that service with the Company shall be treated as service with Parent
for purposes of determining eligibility of the Company's employees under the
Parent ESPP.

5.5 Employee Benefits. Parent agrees that all employees of the Company who
continue employment with Parent or the Surviving Corporation after the
Effective Time ("Continuing Employees") shall be eligible to continue to
participate in the Surviving Corporation's retirement, health, vacation and
other non-equity based employee benefit plans; provided, however, that (a)
nothing in this Section 5.5 or elsewhere in this Agreement shall limit the
right of Parent or the Surviving Corporation to amend or terminate any such
retirement, health, vacation or other employee benefit plan at any time, and
(b) if Parent or the Surviving Corporation terminates any such retirement,
health, vacation or other employee benefit plan, then, the Continuing Employees
shall be eligible to participate in Parent's health, vacation and other non-
equity based employee benefit plans, to substantially the same extent as
employees of Parent in similar positions and at similar grade levels. With
respect to such benefits and to the extent permitted under the applicable
employee benefit plans of Parent,

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credit for service accrued by Continuing Employees (and eligible dependents)
for employment with any Acquired Corporation prior to the Effective Time shall
be recognized (except to the extent necessary to prevent duplication of
benefits), any pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under a similar or
corresponding Company Employee Plan) and eligibility waiting periods applicable
to any Continuing employee of an Acquired Corporation under any group health
plan shall be waived, and employees shall be given credit for amounts paid
under any Company Employee Plan during the same period for purposes of applying
deductibles, co-payments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the applicable Company
Employee Plan. Nothing in this Section 5.5 or elsewhere in this Agreement shall
be construed to create a right in any employee to employment with Parent, the
Surviving Corporation or any other Subsidiary of Parent and, subject to any
other binding written agreement between an employee and Parent or the Surviving
Corporation, the employment of each Continuing Employee shall be "at will"
employment.

5.6 Indemnification of Officers and Directors.

(a) All rights to indemnification existing in favor of those Persons who are
or were directors and officers of the Company (the "Indemnified Persons") for
acts and omissions occurring prior to the Effective Time, as provided in the
Company's Certificate of Incorporation or Bylaws (as in effect as of the date
of this Agreement) and as provided in the indemnification agreements between
the Company and said Indemnified Persons (as in effect as of the date of this
Agreement), shall survive the Merger and shall be observed by the Surviving
Corporation, and Parent shall take all action necessary to cause the Surviving
Corporation to observe such rights, to the fullest extent permitted by Delaware
law.

(b) From the Effective Time until the sixth anniversary of the Effective
Time, Parent shall maintain in effect, for the benefit of the Indemnified
Persons with respect to acts or omissions occurring prior to the Effective
Time, the existing policy of directors' and officers' liability insurance
maintained by the Company as of the date of this Agreement (the "Existing
Policy"); provided, however, that (i) Parent may substitute for the Existing
Policy a policy or policies of no less favorable coverage, and (ii) Parent
shall not be required to pay annual premiums for the Existing Policy (or for
any substitute policies) in excess of 175% of the annual premium payable under
the Existing Policy as of the date hereof (which the Company has represented to
Parent is $217,373 per annum). In the event any future annual premiums for the
Existing Policy (or any substitute policies) exceed 175% of such current annual
premium, Parent shall be entitled to reduce the amount of coverage of the
Existing Policy (or any substitute policies) to the amount of coverage that can
be obtained for a premium equal to 175% of such current annual premium.

5.7 Additional Agreements.

(a) Subject to Section 5.7(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject
to Section 5.7(b), each party to this Agreement (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement; (ii) shall use all reasonable efforts to obtain each Consent (if
any) required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement; and (iii) shall use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by the Company
during the Pre-Closing Period.

(b) Notwithstanding anything to the contrary contained in this Agreement,
Parent shall not have any obligation under this Agreement to: (i) dispose or
transfer or cause any of its Subsidiaries to dispose of or transfer any assets,
or to commit to cause any of the Acquired Corporations to dispose of any
assets; (ii) discontinue or cause any of its Subsidiaries to discontinue
offering any product or service, or to commit to cause any of the Acquired
Corporations to discontinue offering any product or service; (iii) license or
otherwise make available, or

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cause any of its Subsidiaries to license or otherwise make available, to any
Person, any technology, software or other Proprietary Asset, or to commit to
cause any of the Acquired Corporations to license or otherwise make available
to any Person any technology, software or other Proprietary Asset; (iv) hold
separate or cause any of its Subsidiaries to hold separate any assets or
operations (either before or after the Closing Date), or to commit to cause any
of the Acquired Corporations to hold separate any assets or operations; (v)
make or cause any of its Subsidiaries to make any commitment (to any
Governmental Body or otherwise) regarding its future operations or the future
operations of any of the Acquired Corporations; or (vi) contest any Legal
Proceeding relating to the Merger if Parent determines in good faith that
contesting such Legal Proceeding might not be advisable.

(c) During the Pre-Closing Period, the Company shall promptly notify Parent
in writing of (i) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in any representation or warranty made by the
Company in this Agreement if such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; and (ii)
any material breach of any covenant or obligation of the Company that, in each
case of clauses (i) and (ii), would make the timely satisfaction of any
condition set forth in Section 6 or Section 7 impossible or unlikely or that
has had or would reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations. No notification given to Parent pursuant to this
Section 5.7(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of the Company contained in this
Agreement.

(d) During the Pre-Closing Period, Parent shall promptly notify the Company
in writing of (i) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in any representation or warranty made by
Parent in this Agreement if such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; and (ii)
any material breach of any covenant or obligation of Parent that, in each case
of clauses (i) and (ii), would make the timely satisfaction of any condition
set forth in Section 6 or Section 7 impossible or unlikely or that has had or
would reasonably be expected to have a Material Adverse Effect on Parent. No
notification given to the Company pursuant to this Section 5.7(d) shall limit
or otherwise affect any of the representations, warranties, covenants or
obligations of Parent contained in this Agreement.

(e) During the Pre-Closing Period, Parent shall not (without the prior
written consent of the Company, which consent, or refusal to consent, will not
be unreasonably delayed):

(i) declare, accrue, set aside or pay any extraordinary dividends or
make any other extraordinary distribution in respect of any shares of Parent
Common Stock;

(ii) amend or permit the adoption of any amendment to its certificate of
incorporation (other than an amendment to increase the authorized shares of
Parent Common Stock) in a manner adverse to the stockholders of the Company;

(iii) commence or consummate any merger (other than the Merger), share
exchange, exchange offer or other business combination or series of mergers,
share exchanges, exchange offers, which in the aggregate (i) would result in
the issuance of more than 25,000,000 shares of Parent Common Stock, or (ii)
which would reasonably be expected to delay the consummation of the Merger;

(iv) take or agree to take any action which would result in the failure
to satisfy the condition provided for in Section 7.1 or Section 7.2; or

(v) agree or commit to take any of the actions described in clauses
"(i)" through "(iii)" of this Section 5.7(e).

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5.8 Disclosure. Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger or any of the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, neither Parent nor the
Company shall, and neither Parent nor the Company shall permit any of their
respective Representatives to, make any disclosure regarding the Merger or any
of the other transactions contemplated by this Agreement unless (a) the other
party shall have approved such disclosure, or (b) the other party shall have
been advised in writing by its outside legal counsel that such disclosure is
required by applicable law; provided, however, that no such consultation or
agreement shall be required by either party if, prior to the date of such
release or public statement, the Company shall have withheld, withdrawn,
modified or refrained from making its recommendation in favor of adoption of
this Agreement in compliance with Section 5.2(c).

5.9 Tax Matters. At or prior to the filing of the Form S-4 Registration
Statement, the Company and Parent shall execute and deliver to Cooley Godward
LLP and to Wilson Sonsini Goodrich & Rosati, Professional Corporation, tax
representation letters in customary form. Parent, Merger Sub and the Company
shall each confirm to Cooley Godward LLP and to Wilson Sonsini Goodrich &
Rosati, Professional Corporation, the accuracy and completeness as of the
Effective Time of the tax representation letters delivered pursuant to the
immediately preceding sentence. Parent and the Company shall use all reasonable
efforts prior to the Effective Time to cause the Merger to qualify as a
reorganization under Section 368(a) of the Code. Following delivery of the tax
representations letters pursuant to the first sentence of this Section 5.9,
each of Parent and the Company shall use its reasonable efforts to cause Cooley
Godward LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation,
respectively, to deliver to it a tax opinion satisfying the requirements of
Item 601 of Regulation S-K promulgated under the Securities Act which tax
opinion will be included as an exhibit to the Form S-4 Registration Statement.
In rendering such opinions, each of such counsel shall be entitled to rely on
the tax representation letters referred to in this Section 5.9.

5.10 Listing. Parent shall use reasonable efforts to cause the shares of
Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on The Nasdaq National Market.

5.11 Access and Investigation.

(a) During the Pre-Closing Period, subject to applicable antitrust laws and
regulations relating to the exchange of information, the Company shall, and
shall cause the respective Representatives of the Acquired Corporations to: (i)
provide Parent and Parent's Representatives with reasonable access to the
Acquired Corporations' Representatives, personnel, properties and assets and to
all existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations (including the status of
product development efforts); and (ii) provide Parent and Parent's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Corporations, and with such additional financial, operating and other data and
information regarding the Acquired Corporations, as Parent may reasonably
request.

(b) During the Pre-Closing Period, subject to applicable antitrust laws and
regulations relating to the exchange of information, Parent shall, and shall
cause the respective Representatives of Parent to: (i) provide the Company and
the Company's Representatives with reasonable access to Parent's
Representatives, personnel, properties and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent; and (ii) provide the Company and the Company's Representatives with
such copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to Parent, and with such additional
financial, operating and other data and information regarding Parent, as the
Company may reasonably request.

5.12 Exemption from Liability Under Section 16(b). Assuming that the Company
delivers to Parent the Section 16 Information (as defined below) reasonably in
advance of the Effective Time, the Board of Directors of Parent, or a committee
of Non-Employee Directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), shall reasonably promptly thereafter and in
any event prior to the

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Effective Time adopt a resolution providing that the receipt by the Company
Insiders (as defined below) of Parent Common Stock in the Merger, and of
options to purchase Parent Common Stock upon conversion of options to purchase
shares of Company Common Stock, in each case pursuant to the transactions
contemplated hereby and to the extent such securities are listed in the Section
16 Information provided by the Company to Parent prior to the Effective Time,
are intended to be exempt from liability pursuant to Section 16(b) under the
Exchange Act such that any such receipt shall be so exempt. "Section 16
Information" shall mean information accurate in all respects regarding the
Company Insiders, the number of shares of Company Common Stock held by each
such Company Insider and expected to be exchanged for Parent Common Stock in
the Merger, and the number and description of the options to purchase shares of
Company Common Stock held by each such Company Insider and expected to be
converted into options to purchase shares of Parent Common Stock in connection
with the Merger. "Company Insiders" shall mean those officers and directors of
the Company who will be subject to the reporting requirements of Section 16(a)
of the Exchange Act as a result of their service as a director or executive
officer of Parent after the Effective Time and who are listed in the Section 16
Information.

5.13 Board of Directors of Parent. Parent's board of directors shall adopt
resolutions providing that, effective immediately after the Effective Time,
Douglas Spreng shall be appointed as a member of Parent's board of directors to
serve until the next meeting of stockholders of Parent.

SECTION 6. Conditions Precedent to Obligations of Parent and Merger Sub

The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:

6.1 Accuracy of Representations. The representations and warranties of the
Company contained in this Agreement, other than those contained in Section 2.8,
shall have been accurate in all respects as of the date of this Agreement and
shall be accurate in all respects as of the Closing Date as if made on and as
of the Closing Date (except as to such representations and warranties made as
of a specific date, which shall have been accurate in all respects as of such
date), except that, in each case, any inaccuracies in such representations and
warranties will be disregarded if, after aggregating all inaccuracies of such
representations and warranties as of the date of this Agreement and as of the
Closing Date (without duplication), such inaccuracies and the circumstances
giving rise to all such inaccuracies do not constitute a Material Adverse
Effect on the Acquired Corporations determined as of the Closing Date (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect"
qualifications and other materiality qualifications, contained in such
representations and warranties shall be disregarded, and (ii) any update of or
modification to the Company Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded). The
representations and warranties of the Company contained in Section 2.8 shall
have been accurate in all respects as of the date of this Agreement and shall
be accurate in all respects as of the Closing Date as if made on and as of the
Closing Date, except that, in each case, any inaccuracies in such
representations and warranties will be disregarded if, after aggregating all
inaccuracies of such representations and warranties contained in Section 2.8 as
of the date of this Agreement and as of the Closing Date (without duplication),
such inaccuracies and the circumstances giving rise to all such inaccuracies do
not constitute a Material Adverse Effect on the Acquired Corporations
determined as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other materiality qualifications,
contained in such representations and warranties shall be disregarded, and (ii)
any update of or modification to the Company Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded).

6.2 Performance of Covenants. Each covenant or obligation that the Company
is required to comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.

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6.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued and still be pending,
and no proceeding for that purpose shall have been initiated or be threatened,
by the SEC with respect to the Form S-4 Registration Statement.

6.4 Stockholder Approval. This Agreement shall have been duly adopted by the
Required Company Stockholder Vote.

6.5 Agreements and Documents. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:

(a) a legal opinion of Cooley Godward LLP, dated as of the Closing Date and
addressed to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that (i) in rendering such opinion, Cooley Godward LLP may rely upon
the tax representation letters referred to in Section 5.9, and (ii) if Cooley
Godward LLP does not render such opinion or withdraws or modifies such opinion,
this condition shall nonetheless be deemed to be satisfied if Wilson Sonsini
Goodrich & Rosati, Professional Corporation renders such opinion to Parent);
and

(b) a certificate executed on behalf of the Company by its Chief Executive
Officer confirming that the conditions set forth in Sections 6.1, 6.2, 6.4,
6.6, 6.7, 6.8 and 6.9 have been duly satisfied.

6.6 No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect on the Acquired
Corporations.

6.7 HSR Act. The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and any similar waiting
period under any applicable foreign antitrust law or regulation shall have
expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation shall have been obtained.

6.8 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.

6.9 No Governmental Litigation. There shall not be pending any Legal
Proceeding in which a Governmental Body is a party: (a) challenging or seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent or any of its Subsidiaries any damages that may
be material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; (d) which would materially and adversely affect the right of
Parent, the Surviving Corporation or any Subsidiary of Parent to own the assets
or operate the business of the Acquired Corporations; or (e) seeking to compel
Parent or the Company, or any Subsidiary of Parent or the Company, to dispose
of or hold separate any material assets, as a result of the Merger or any of
the other transactions contemplated by this Agreement.

SECTION 7. Conditions Precedent to Obligation of the Company

The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:

7.1 Accuracy of Representations. The representations and warranties of
Parent contained in this Agreement shall have been accurate in all respects as
of the date of this Agreement and shall be accurate in all respects as of the
Closing Date as if made on and as of the Closing Date (except as to such
representations and

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warranties made as of a specific date, which shall have been accurate in all
respects as of such date), except that any inaccuracies in such representations
and warranties will be disregarded if, after aggregating all inaccuracies of
such representations and warranties as of the date of this Agreement and as of
the Closing Date (without duplication), such inaccuracies and the circumstances
giving rise to all such inaccuracies do not constitute a Material Adverse
Effect on Parent determined as of the Closing Date (it being understood that,
for purposes of determining the accuracy of such representations and warranties
as of the Closing Date, (i) all "Material Adverse Effect" qualifications and
other materiality qualifications, and any similar qualifications, contained in
such representations and warranties shall be disregarded, and (ii) any update
of or modification to the Parent Disclosure Schedule made or purported to have
been made after the date of this Agreement shall be disregarded).

7.2 Performance of Covenants. Each covenant and obligation that Parent and
Merger Sub are required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.

7.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued and still be pending,
and no proceeding for that purpose shall have been initiated or be threatened,
by the SEC with respect to the Form S-4 Registration Statement.

7.4 Stockholder Approval. This Agreement shall have been duly adopted by the
Required Company Stockholder Vote.

7.5 Documents. The Company shall have received the following documents:

(a) a legal opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, dated as of the Closing Date, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code (it
being understood that (i) in rendering such opinion, Wilson Sonsini Goodrich &
Rosati, Professional Corporation may rely upon the tax representation letters
referred to in Section 5.9, and (ii) if Wilson Sonsini Goodrich & Rosati,
Professional Corporation does not render such opinion or withdraws or modifies
such opinion, this condition shall nonetheless be deemed to be satisfied if
Cooley Godward llp renders such opinion to the Company); and

(b) a certificate executed on behalf of Parent by an executive officer of
Parent, confirming that conditions set forth in Sections 7.1, 7.2, 7.6, 7.8 and
7.9 have been duly satisfied.

7.6 No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect on Parent.

7.7 HSR Act. The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and any similar waiting
period under any applicable foreign antitrust law or regulation shall have
expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation shall have been obtained.

7.8 Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on The
Nasdaq National Market.

7.9 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger by the
Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or
deemed applicable to the Merger that makes consummation of the Merger by the
Company illegal.

7.10 No Governmental Litigation. There shall not be pending any Legal
Proceeding in which a Governmental Body is a party: (a) challenging or seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking

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to obtain from Parent or any of its Subsidiaries any damages that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; (d) which would materially and adversely affect the right of
Parent, the Surviving Corporation or any Subsidiary of Parent to own the assets
or operate the business of the Acquired Corporations; or (e) seeking to compel
Parent or the Company, or any Subsidiary of Parent or the Company, to dispose
of or hold separate any material assets, as a result of the Merger or any of
the other transactions contemplated by this Agreement.

SECTION 8. Termination

8.1 Termination. This Agreement may be terminated prior to the Effective
Time (whether before or after the adoption of this Agreement by the Required
Company Stockholder Vote):

(a) by mutual written consent of Parent and the Company;

(b) by either Parent or the Company if the Merger shall not have been
consummated by February 28, 2001; provided, however, that a party shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(b) if the
failure to consummate the Merger by February 28, 2001 is primarily attributable
to a failure on the part of such party to perform any covenant in this
Agreement required to be performed by such party at or prior to the Effective
Time;

(c) by either Parent or the Company if a court of competent jurisdiction or
other Governmental Body shall have issued a final and nonappealable order,
decree or ruling, or shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;

(d) by either Parent or the Company if (i) the Company Stockholders' Meeting
(including any adjournments and postponements thereof) shall have been held and
completed and the Company's stockholders shall have taken a final vote on a
proposal to adopt this Agreement, and (ii) this Agreement shall not have been
adopted at the Company Stockholders' Meeting (and shall not have been adopted
at any adjournment or postponement thereof) by the Required Company Stockholder
Vote;

(e) by Parent (at any time prior to the adoption of this Agreement by the
Required Company Stockholder Vote) if a Triggering Event shall have occurred;

(f) by Parent if (i) any of the Company's representations and warranties
contained in this Agreement shall be inaccurate as of the date of this
Agreement, or shall have become inaccurate as of a date subsequent to the date
of this Agreement (as if made on such subsequent date), such that the condition
set forth in Section 6.1 would not be satisfied as of the time such
representation or warranty shall have become inaccurate (assuming the Closing
Date were as of such time), or (ii) any of the Company's covenants contained in
this Agreement shall have been breached such that the condition set forth in
Section 6.2 would not be satisfied as of the time of such breach (assuming the
Closing Date were as of such time); provided, however, that if an inaccuracy in
any of the Company's representations and warranties as of a date subsequent to
the date of this Agreement or a breach of a covenant by the Company is curable
by the Company and the Company is continuing to exercise all reasonable efforts
to cure such inaccuracy or breach, then Parent may not terminate this Agreement
under this Section 8.1(f) on account of such inaccuracy or breach until 30 days
subsequent to the date of such inaccuracy or breach;

(g) by the Company if (i) any of Parent's representations and warranties
contained in this Agreement shall be inaccurate as of the date of this
Agreement, or shall have become inaccurate as of a date subsequent to the date
of this Agreement (as if made on such subsequent date), such that the condition
set forth in Section 7.1 would not be satisfied as of the time such
representation or warranty shall have become inaccurate (assuming the Closing
Date were as of such time), or (ii) if any of Parent's covenants contained in
this Agreement shall have been breached such that the condition set forth in
Section 7.2 would not be satisfied as of the time of such breach (assuming the
Closing Date were was of such time); provided, however, that if an inaccuracy
in any of Parent's

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representations and warranties as of a date subsequent to the date of this
Agreement or a breach of a covenant by Parent is curable by Parent and Parent
is continuing to exercise all reasonable efforts to cure such inaccuracy or
breach, then the Company may not terminate this Agreement under this Section
8.1(g) on account of such inaccuracy or breach until 30 days subsequent to the
date of such inaccuracy or breach; or

(h) by the Company, in accordance with the terms of Section 5.2(c), provided
that Parent has received the termination fee pursuant to Section 8.3(c).

8.2 Effect of Termination. In the event of the termination of this Agreement
as provided in Section 8.1, this Agreement shall be of no further force or
effect; provided, however, that (i) this Section 8.2, Section 8.3 and Section 9
shall survive the termination of this Agreement and shall remain in full force
and effect, and (ii) the termination of this Agreement shall not relieve any
party from any liability for any willful breach of any representation,
warranty, covenant or obligation contained in this Agreement.

8.3 Expenses; Termination Fees.

(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses, whether or not
the Merger is consummated; provided, however, that Parent and the Company shall
share equally all fees and expenses, other than attorneys' and accountants'
fees, incurred in connection with (A) the filing, printing and mailing of the
Form S-4 Registration Statement and the Proxy Statement and any amendments or
supplements thereto and (B) the filing by the parties hereto of the pre-merger
notification and report forms relating to the Merger under the HSR Act and the
filing of any notice or other document under any applicable foreign antitrust
law or regulation.

(b) In the case of termination of this Agreement by Parent or the Company
pursuant to Section 8.1(b) or Section 8.1(d), the Termination Fee (as defined
in Section 8.3(c)) shall be paid by the Company at or prior to the consummation
of any Acquisition Transaction referred to in Section 8.3(c)(i) or 8.3(c)(ii),
as the case may be; in the case of termination of this Agreement by Parent
pursuant to Section 8.1(e), the Termination Fee shall be paid by the Company
within two (2) business days after such termination; and in the case of
termination of this Agreement by the Company pursuant to Section 8.1(h), the
Termination Fee shall be paid by the Company at or prior to such termination.

(c) If (i) (A) this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(d), (B) at or prior to the time of the termination of
this Agreement an Acquisition Proposal shall have been publicly disclosed,
announced, commenced, submitted or made, (C) such Acquisition Proposal shall
not have been unconditionally and publicly withdrawn by the Person making such
Acquisition Proposal at least five (5) business days prior to the date of the
Company Stockholders' Meeting; provided however, that in the event such
Acquisition Proposal is not withdrawn at least five (5) business days prior to
the Company Stockholders' Meeting, the Company shall, at Parent's request,
postpone the Company Stockholders' Meeting for five (5) business days, and (D)
within nine (9) months after such termination the Company consummates any
Acquisition Transaction, (ii) (A) this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(b), (B) at or prior to the time of the
termination of this Agreement an Acquisition Proposal shall have been
disclosed, announced, commenced, submitted or made (C) such Acquisition
Proposal shall not have been unconditionally and publicly withdrawn by the
Person making such Acquisition Proposal at least five (5) business days prior
to February 28, 2001, (D) within nine (9) months after such termination the
Company consummates any Acquisition Transaction, and (E) Parent shall not have
taken or failed to take any action, which action or failure to act constitutes
a material breach of the covenants and agreements set forth in this Agreement,
that can be shown to be a significant contributing factor to the Merger failing
to be consummated by February 28, 2001, and (F) the Company shall have taken or
failed to take any action, which action or failure to act constitutes a breach
of the covenants and agreements set forth in this Agreement, that can be shown
to be a significant contributing factor to the Merger failing to be consummated
by February 28, 2001, (iii) this Agreement is terminated by Parent pursuant to
Section 8.1(e), or (iv) this Agreement is terminated by

A-32
<PAGE>

the Company pursuant to Section 8.1(h), then, in each case of clauses (i)
through (iv) above, the Company shall pay to Parent, in cash at the time
specified in the next sentence, a nonrefundable fee in the amount equal to
$135,000,000. Notwithstanding anything to the contrary contained herein, solely
for purposes of determining whether any fee shall be payable under clauses (i)
or (ii) of this Section 8.3(c), the reference to "15%" in each place it appears
in the definition of "Acquisition Transaction" set forth in Exhibit A hereto
shall be replaced with "50%".

(d) If the Company fails to pay when due any amount payable under this
Section 8.3, then the Company shall pay to Parent interest on such overdue
amount (for the period commencing as of the date such overdue amount was
originally required to be paid and ending on the date such overdue amount is
actually paid to Parent in full) at a rate per annum equal to the "prime rate"
(as announced by Bank of America or any successor thereto) in effect on the
date such overdue amount was originally required to be paid.

SECTION 9. Miscellaneous Provisions

9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after adoption of this Agreement by the stockholders of the Company);
provided, however, that after any such adoption of this Agreement by the
Company's stockholders, no amendment shall be made which by law requires
further approval of the stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

9.2 Waiver.

(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or remedy.

(b) No party shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.

9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Merger.

9.4 Entire Agreement; Counterparts. This Agreement and the other agreements
referred to herein constitute the entire agreement among the parties hereto and
supersedes all other prior agreements and understandings, both written and
oral, among or between any of the parties with respect to the subject matter
hereof and thereof; provided, however, that the Nondisclosure Agreement shall
remain in full force and effect. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.

9.5 Applicable Law; Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. In any action between any of the parties arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement: (a) each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the state and federal courts
located in the State of Delaware; (b) if any such action is commenced in a
state court, then, subject to applicable law, no party shall object to the
removal of such action to any federal court located in the State of Delaware;
(c) each of the parties irrevocably waives the right to trial by jury; and (d)
each of the parties irrevocably consents to service of process by first class
certified mail, return receipt requested, postage prepaid, to the address at
which such party is to receive notice in accordance with Section 9.8.

A-33
<PAGE>

9.6 Attorneys' Fees. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder, the prevailing party
in such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.

9.7 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Except as provided in Section 5.6,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person (other than the parties hereto) any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement.

9.8 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly given on the day of delivery if delivered by hand or facsimile
(with confirmation of delivery), or on the second business day after being sent
by registered overnight mail, return receipt requested, by overnight courier or
overnight express delivery service or by facsimile (in each case, with
confirmation of delivery) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):

if to Parent or Merger Sub:

Applied Micro Circuits Corporation
6290 Sequence Drive
San Diego, CA 92121
Facsimile No. (858) 535-6800
Attn: General Counsel

with a copy to (which copy shall not constitute notice):

Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Facsimile No. (858) 453-3555
Attn: Frederick T. Muto, Esq.

if to the Company:

MMC Networks, Inc.
1144 E. Arques Avenue
Sunnyvale, CA 94085
Facsimile No. (408) 731-1502
Attn: President and Chief Executive Officer

with copies to (which copies shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, Professional Corporation
One Market
Spear Tower, Suite 3300
San Francisco, CA 94105
Facsimile No. (415) 947-2099
Attn: Aaron J. Alter, Esq.
Steve L. Camahort, Esq.

A-34
<PAGE>

9.9 Construction.

(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.

(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.

(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."

(d) Execept as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.

A-35
<PAGE>

In Witness Whereof, the parties have caused this Agreement to be executed as
of the date first above written.

Applied Micro Circuits Corporation

By: /s/ Stephen Smith
----------------------------------

Name: Stephen Smith

Title: Vice President

Mercury Acquisition Corp.

By: /s/ Stephen Smith
----------------------------------

Name: Stephen Smith

Title: Vice President, Business
Development

MMC Networks, Inc.

By: /s/ Douglas Spreng
----------------------------------

Name: Douglas Spreng

Title: President & CEO

[Signature Page to Agreement and Plan of Merger and Reorganization]
<PAGE>

EXHIBITS

<TABLE>
<C> <S>
Exhibit A Certain Definitions
</TABLE>
<PAGE>

EXHIBIT A

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Exhibit A):

Acquired Corporation Contract. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is bound or under which any of the Acquired Corporations has any
obligation; or (c) under which any of the Acquired Corporations has any right
or interest.

Acquired Corporation Proprietary Asset. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to any of the
Acquired Corporations or otherwise used by any of the Acquired Corporations.

Acquisition Proposal. "Acquisition Proposal" shall mean any offer, proposal
or indication of interest (other than an offer, proposal or indication of
interest by Parent) contemplating or otherwise relating to any Acquisition
Transaction.

Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of transactions involving:

(a) any merger, consolidation, share exchange, business combination,
issuance of securities, direct or indirect acquisition of securities,
recapitalization tender offer, exchange offer or other similar transaction in
which (i) any of the Acquired Corporations is a constituent corporation, (ii) a
Person or "group" (as defined in the Exchange Act and the rules promulgated
thereunder) of Persons directly or indirectly acquires beneficial or record
ownership of securities representing more than 15% of the outstanding
securities of any class of voting securities of any of the Acquired
Corporations, or (iii) any of the Acquired Corporations issues securities
representing more than 15% of the outstanding securities of any class of voting
securities of any of the Acquired Corporations;

(b) any direct or indirect sale, lease, exchange, transfer, license,
acquisition or disposition of any business or businesses or of assets or rights
that constitute or account for 15% or more of the consolidated net revenues,
net income or assets of the Acquired Corporations; or

Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.

Company Common Stock. "Company Common Stock" shall mean the Common Stock,
$.001 par value per share, of the Company.

Company Disclosure Schedule. "Company Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by the Company in accordance with
the requirements of Section 9.6 of the Agreement and that has been delivered by
the Company to Parent on the date of the Agreement and signed by the President
of the Company.

Company ESPP Options. "Company ESPP Options" mean all outstanding options
under the Company's 1997 Employee Stock Purchase Plan.

Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).

i
<PAGE>

Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.

Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right or restriction
of any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use
of any asset and any restriction on the possession, exercise or transfer of
any other attribute of ownership of any asset).

Environmental Law. "Environmental Law" means any Legal Requirement relating
to pollution or protection of human health or the environment (including
ambient air, surface water, ground water, land surface or subsurface strata),
including any Legal Requirement relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling of or exposure of any individual to
Materials of Environmental Concern;

Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.

Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

Form S-4 Registration Statement. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with issuance of Parent Common Stock in the Merger, as said
registration statement may be amended.

Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement; or (b) right under any Contract with any
Governmental Body.

Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).

HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.

Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.

Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body
(or under the authority of the NASD).

ii
<PAGE>

Material Adverse Effect. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement but for the
presence of "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, in such representations and warranties) had or
could reasonably be expected to have or give rise to a material adverse effect
on (i) the business, financial condition, capitalization, assets, liabilities,
operations or financial performance of the Acquired Corporations taken as a
whole, (ii) the ability of the Company to consummate the Merger or any of the
other transactions contemplated by the Agreement or to perform any of its
obligations under the Agreement, or (iii) Parent's ability to vote, receive
dividends with respect to or otherwise exercise ownership rights with respect
to the stock of the Surviving Corporation; provided, however, that none of the
following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in
determining whether there has been or will be, a Material Adverse Effect on the
Acquired Corporations: (a) any change in the market price or trading volume of
the Company's stock after the date hereof; (b) any failure by the Company to
meet internal projections or forecasts or published revenue or earnings
predictions for any period ending (or for which revenues or earnings are
released) on or after the date of this Agreement; (c) any adverse change,
effect, occurrence, state of facts or development attributable to conditions
affecting the industries in which the Company participates, the U.S. economy as
a whole or foreign economies in any locations where an Acquired Corporation has
material operations or sales; (d) any adverse change, effect, occurrence, state
of facts or development resulting from compliance with the terms of, or the
taking of any action required by, this Agreement (other than compliance with
the terms of, or any action required by Section 4.1(a)), or (e) any of the
following adverse changes, effects, occurrences, state of facts or developments
to the extent the affected party successfully bears the burden of proving by
clear and convincing evidence they are directly and primarily attributable to
the announcement or pendency of the Merger: (i) cancellations of or delays in
customer orders, (ii) reductions in sales, (iii) disruptions in supplier,
distributor or partner relationships, and (iv) nongovernmental litigation. An
event, violation, inaccuracy, circumstance or other matter will be deemed to
have a "Material Adverse Effect" on Parent if such event, violation,
inaccuracy, circumstance or other matter (considered together with all other
matters that would constitute exceptions to the representations and warranties
set forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, in such
representations and warranties) had or could reasonably be expected to have a
material adverse effect on (i) the business, financial condition,
capitalization, assets, liabilities, operations or financial performance of
Parent and its Subsidiaries taken as a whole, or (ii) the ability of Parent to
consummate the Merger or any of the other transactions contemplated by the
Agreement or to perform any of its obligations under the Agreement; provided,
however, that none of the following shall be deemed in themselves, either alone
or in combination, to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect on Parent: (a) any change in the market price or trading volume of
Parent's stock after the date hereof; (b) any failure by Parent to meet
internal projections or forecasts or published revenue or earnings predictions
for any period ending (or for which revenues or earnings are released) on or
after the date of this Agreement; (c) any adverse change, effect, occurrence,
state of facts or development attributable to conditions affecting the
industries in which Parent participates, the U.S. economy as a whole or foreign
economies in any locations where Parent has material operations or sales; (d)
any adverse change, effect, occurrence, state of facts or development resulting
from compliance with the terms of, or the taking of any action required by,
this Agreement; or (e) any of the following adverse changes, effects,
occurrences, state of facts or developments to the extent the affected party
successfully bears the burden of proving by clear and convincing evidence they
are directly and primarily attributable to the announcement or pendency of the
Merger: (i) cancellations of or delays in customer orders, (ii) reductions in
sales, (iii) disruptions in supplier, distributor or partner relationships, and
(iv) nongovernmental litigation.

Materials of Environmental Concern. "Materials of Environmental Concern"
shall mean all chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health,

iii
<PAGE>

reproduction or the environment.

NASD. "NASD" shall mean the National Association of Securities Dealers, Inc.

Parent Common Stock. "Parent Common Stock" shall mean the Common Stock,
$0.01 par value per share, of Parent.

Parent Contract. "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any asset of Parent is or may become
bound or under which Parent has, or may become subject to, any obligation; or
(c) under which Parent has or may acquire any right or interest.

Person. "Person" shall mean any individual, Entity or Governmental Body.

Proprietary Asset. "Proprietary Asset" shall mean any: (a) registered
patent, patent application, trademark (whether registered or unregistered),
trademark application, trade name, fictitious business name, service mark
(whether registered or unregistered), registered service mark application,
registered copyright, copyright application, registered maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.

Proxy Statement. "Proxy Statement" shall mean the proxy statement/prospectus
to be sent to the Company's stockholders in connection with the Company
Stockholders' Meeting.

Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.

SEC. "SEC" shall mean the United States Securities and Exchange Commission.

Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.

Subsidiary. An entity shall be deemed to be a "Subsidiary" of another Person
if such Person directly or indirectly owns, beneficially or of record, an
amount of voting securities of other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or at least 50% of
the outstanding equity or financial interests of such Entity.

Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase at least a majority of the
outstanding Company Common Stock on terms that the board of directors of the
Company determines, in its good faith judgment, after consultation with its
financial advisor of nationally recognized reputation to be more favorable to
the Company's stockholders than the terms of the Merger; provided, however,
that any such offer shall not be deemed to be a "Superior Offer" if any
financing required to consummate the transaction contemplated by such offer is
not committed or is not reasonably capable of being obtained by such third
party on a timely basis.

Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.

Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.

iv
<PAGE>

Triggering Event. A "Triggering Event" shall be deemed to have occurred if:
(i) the board of directors of the Company shall have failed to recommend that
the Company's stockholders vote to adopt this Agreement, or shall have
withdrawn or modified in a manner adverse to Parent the Company Board
Recommendation; (ii) the Company shall have failed to include in the Proxy
Statement the Company Board Recommendation; (iii) the board of directors of the
Company shall have approved, endorsed or recommended any Acquisition Proposal;
(iv) the Company shall have entered into any letter of intent or similar
document or any Contract relating to any Acquisition Proposal; (v) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its securityholders, within ten business
days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange
offer; (vi) an Acquisition Proposal is publicly announced, and the Company
fails to issue a press release announcing its opposition to such Acquisition
Proposal or fails to reaffirm the Company Board Recommendation at the request
of Parent within ten business days after such Acquisition Proposal is
announced; or (vii) any of the Acquired Corporations or any Representative of
any of the Acquired Corporations shall have violated any of the restrictions
set forth in Sections 4.2(a)(i) or 4.2(a)(ii) and such breach shall have
resulted in the submission, commencement, announcement or the making of an
Acquisition Proposal.

v
<PAGE>

APPENDIX B

VOTING AGREEMENT

This Voting Agreement is entered into as of August 27, 2000, by and between
Applied Micro Circuits Corporation, a Delaware corporation ("Parent"), and
("Stockholder").

Recitals

A. Parent, Mercury Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and MMC Networks, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of Merger
and Reorganization of even date herewith (the "Reorganization Agreement") which
provides (subject to the conditions set forth therein) for the merger of Merger
Sub with and into the Company (the "Merger"). Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Reorganization
Agreement.

B. In order to induce Parent and Merger Sub to enter into the Reorganization
Agreement, Stockholder, in its capacity as a Stockholder of the Company, is
entering into this Voting Agreement.

Agreement

The parties to this Voting Agreement, intending to be legally bound, agree
as follows:

SECTION 1. Certain Definitions

For purposes of this Voting Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $.001 per
share, of the Company.

(b) "Expiration Date" shall mean the earlier of (i) the date upon which the
Reorganization Agreement is validly terminated, or (ii) the Effective Time (as
defined in the Reorganization Agreement).

(c) Stockholder shall be deemed to "Own" or to have acquired "Ownership" of
a security if Stockholder is the: (i) record owner of such security; or (ii)
"beneficial owner" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) of such security; provided, however, that Stockholder
shall not be deemed to Own a security solely because of Stockholder's status as
an executive officer, director, partner or member of a Person that owns such
security.

(d) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental
authority.

(e) "Subject Securities" shall mean: (i) all securities of the Company
(including all shares of Company Common Stock and all options, warrants and
other rights to acquire shares of Company Common Stock) Owned by Stockholder as
of the date of this Agreement; and (ii) all additional securities of the
Company (including all additional shares of Company Common Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock) of which Stockholder acquires Ownership during the period from
the date of this Agreement through the Expiration Date; provided, however, that
securities sold by the Stockholder pursuant to the proviso in the definition of
"Transfer" below shall not be Subject Securities for purposes of this
Agreement.

(f) A Person shall be deemed to have a effected a "Transfer" of a security
if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an
option with respect to, transfers or disposes of such security or any interest
in such security; (ii) enters into an agreement or commitment contemplating the
possible sale of,

B-1
<PAGE>

pledge of, encumbrance of, grant of an option with respect to, transfer of or
disposition of such security or any interest therein; or (iii) reduces such
Person's beneficial ownership of interest in or risk relating to any such
security; provided, however, that, notwithstanding anything in this Agreement
to the contrary, a sale by the Stockholder of up to an aggregate of five
percent (5%) of the Subject Securities Owned by Stockholder as of the date
hereof shall not constitute a Transfer.

SECTION 2. Transfer Of Subject Securities

2.1 Transferee of Subject Securities to be Bound by this
Agreement. Stockholder agrees that, during the period from the date of this
Voting Agreement through the Expiration Date, Stockholder shall not (i) cause
or permit any Transfer of any of the Subject Securities to be effected; or (ii)
create or permit to exist any Encumbrance with respect to any Subject
Securities (other than Encumbrances which do not affect the right to vote such
securities that may exist with respect to such Subject Securities as of the
date of this Voting Agreement and Encumbrances which do not affect, directly or
indirectly, the right of Parent to vote the Subject Securities as provided
herein) unless each Person, in either (i) or (ii) above, to which any of such
Subject Securities, or any interest in any of such Subject Securities, is or
may be transferred shall have: (a) executed a counterpart of this Voting
Agreement and a proxy in the form attached hereto as Exhibit A (with such
modifications as Parent may reasonably request); and (b) agreed to hold such
Subject Securities (or interest in such Subject Securities) subject to all of
the terms and provisions of this Voting Agreement.

2.2 Transfer of Voting Rights. Stockholder agrees that, during the period
from the date of this Voting Agreement through the Expiration Date, Stockholder
shall ensure that: (a) none of the Subject Securities is deposited into a
voting trust; and (b) no proxy is granted, and no voting agreement or similar
agreement is entered into, with respect to any of the Subject Securities (other
than such proxy, voting agreement or similar agreement which does not affect,
impair or impede, directly or indirectly, the right of Parent to vote the
Subject Securities as provided herein).

SECTION 3. Voting Of Shares

3.1 Voting Agreement. Stockholder agrees that, during the period from the
date of this Voting Agreement through the Expiration Date, at any meeting of
stockholders of the Company, however called, and in any action by written
consent of the stockholders of the Company, Stockholder shall, unless otherwise
directed in writing by Parent, vote the Subject Securities or cause the Subject
Securities to be voted (to the extent such securities are entitled to be
voted):

(a) in favor of the adoption of the Reorganization Agreement and in favor of
any other matter proposed to be approved by the holders of the Subject
Securities pursuant to the terms of the Reorganization Agreement;

(b) against any action or agreement that would cause any provision contained
in Sections 6 or 7 of the Reorganization Agreement to not be satisfied; and

(c) against the following actions (other than the Merger and the
transactions contemplated by the Reorganization Agreement): (i) any Acquisition
Proposal; (ii) any change in a majority of the members of the board of
directors of the Company; or (iii) any other action which is intended, or could
reasonably be expected to, impede, interfere with, delay, postpone, discourage
or adversely affect the consummation of the Merger or any of the other
transactions contemplated by the Reorganization Agreement, the Stock Option
Agreement or this Voting Agreement.

3.2 Proxy; Further Assurances.

Contemporaneously with the execution of this Voting Agreement: (i)
Stockholder shall execute and deliver to Parent a proxy in the form attached to
this Voting Agreement as Exhibit A, which shall be irrevocable to the fullest
extent permitted by law, with respect to the shares referred to therein (the
"Proxy"); and (ii) Stockholder

B-2
<PAGE>

shall cause to be delivered to Parent an additional proxy (in the form attached
hereto as Exhibit A) executed on behalf of the record owner of any outstanding
shares of Company Common Stock that are Owned.

SECTION 4. Representations And Warranties Of Stockholder

Stockholder hereby represents and warrants to Parent as follows:

4.1 Authorization, etc. Stockholder has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Voting Agreement and
the Proxy and to perform its obligations hereunder and thereunder. This Voting
Agreement and the Proxy have been duly executed and delivered by Stockholder
and constitute legal, valid and binding obligations of Stockholder, enforceable
against Stockholder in accordance with their terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.

4.2 No Conflicts or Consents

(a) The execution and delivery of this Voting Agreement and the Proxy by
Stockholder do not, and the performance of this Voting Agreement and the Proxy
by Stockholder will not: (i) conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to Stockholder or by which it
or any of its properties is or may be bound or affected; or (ii) result in or
constitute (with or without notice or lapse of time) any breach of or default
under, or give to any other Person (with or without notice or lapse of time)
any right of termination, amendment, acceleration or cancellation of, or result
(with or without notice or lapse of time) in the creation of any Encumbrance or
restriction on any of the Subject Securities pursuant to, any contract to which
Stockholder is a party or by which Stockholder or any of his affiliates or
properties is or may be bound or affected.

(b) The execution and delivery of this Voting Agreement and the Proxy by
Stockholder do not, and the performance of this Voting Agreement and the Proxy
by Stockholder will not, require any consent or approval of any Person.

4.3 Title to Securities. As of the date of this Voting Agreement: (a)
Stockholder holds of record (free and clear of any encumbrances or restrictions
except as specifically disclosed on the signature page hereof) the number of
outstanding shares of Company Common Stock set forth under the heading "Shares
Held of Record" on the signature page hereof; (b) Stockholder holds (free and
clear of any Encumbrances or restrictions except as specifically disclosed on
the signature page hereof) the options, warrants and other rights to acquire
shares of Company Common Stock set forth under the heading "Options, Warrants
and Other Rights" on the signature page hereof; (c) Stockholder Owns the
additional securities of the Company set forth under the heading "Additional
Securities Beneficially Owned" on the signature page hereof; and (d)
Stockholder does not directly or indirectly Own any shares of Company Common
Stock or other securities of the Company, or any option, warrant or other right
to acquire (by purchase, conversion or otherwise) any shares of Company Common
Stock or other securities of the Company, other than the shares and options,
warrants and other rights set forth on the signature page hereof.

SECTION 5. Miscellaneous

5.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made by Stockholder in
this Voting Agreement shall survive until the Expiration Date.

5.2 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid solely by the
party incurring such costs and expenses.

B-3
<PAGE>

5.3 Notices. Any notice or other communication required or permitted to be
delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile, in
each case with confirmation of delivery) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other party):

if to Parent:

David Mersten
Applied Micro Circuits Corporation
6290 Sequence Drive
San Diego, CA 92121
Facsimilie: (858) 535-6800

with a copy to (which copy shall not constitute notice):

Frederick T. Muto, Esq.
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Facsimile No. (858) 453-3555

if to the Stockholder:

at the address set forth below Stockholder's signature on the signature
page hereof

with copies to (which copies shall not constitute notice):

Aaron J. Alter, Esq.
Steve L. Camahort, Esq.
Wilson Sonsini Goodrich & Rosati, Professional Corporation

One Market Spear Tower, Suite 3300
San Francisco, CA 94105
Facsimile No. (415) 947-2099

5.4 Severability. If any provision of this Voting Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Voting Agreement.
Each provision of this Voting Agreement is separable from every other provision
of this Voting Agreement, and each part of each provision of this Voting
Agreement is separable from every other part of such provision.

5.5 Entire Agreement. This Voting Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision
of this Voting Agreement shall be binding upon either party unless made in
writing and signed by both parties.

B-4
<PAGE>

5.6 Assignment; Binding Effect. Except as provided herein, neither this
Voting Agreement nor any of the interests or obligations hereunder may be
assigned or delegated by Stockholder or Parent without the prior written
consent of the non-assigning party, which consent shall not be unreasonably
withheld, and any attempted or purported assignment or delegation of any of
such interests or obligations shall be void. Subject to the preceding sentence,
this Voting Agreement shall be binding upon, and inure to the benefit of,
Stockholder and its heirs, estate, executors, personal representatives,
successors and assigns (as the case may be), and shall be binding upon, and
inure to the benefit of, Parent and its successors and assigns. Without
limiting any of the restrictions set forth in Section 2 or elsewhere in this
Voting Agreement, this Voting Agreement shall be binding upon any Person to
whom any Subject Securities are transferred. Nothing in this Voting Agreement
is intended to confer on any Person (other than Parent and its successors and
assigns) any rights or remedies of any nature.

5.7 Specific Performance. The parties agree that irreparable damage would
occur in the event that any provision of this Voting Agreement or the Proxy
was, or is, not performed in accordance with its specific terms or was, or is,
otherwise breached. Stockholder agrees that, in the event of any breach or
threatened breach by Stockholder of any covenant or obligation contained in
this Voting Agreement or in the Proxy, Parent shall be entitled (in addition to
any other remedy that may be available to it, including monetary damages) to
(a) a decree or order of specific performance to enforce the observance and
performance of such covenant or obligation, and (b) an injunction restraining
such breach or threatened breach. Stockholder further agrees that neither
Parent nor any other Person shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining
any remedy referred to in this Section 5.7, and Stockholder irrevocably waives
any right he may have to require the obtaining, furnishing or posting of any
such bond or similar instrument.

5.8 Non-Exclusivity. The rights and remedies of Parent under this Voting
Agreement are not exclusive of or limited by any other rights or remedies which
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Without limiting the generality of
the foregoing, the rights and remedies of Parent under this Voting Agreement,
and the obligations and liabilities of Stockholder under this Voting Agreement,
are in addition to their respective rights, remedies, obligations and
liabilities under common law requirements and under all applicable statutes,
rules and regulations. Nothing in this Voting Agreement shall limit any of
Stockholder's obligations, or the rights or remedies of Parent, under any
agreement between Parent and Stockholder; and nothing in any such agreement
shall limit any of Stockholder's obligations, or any of the rights or remedies
of Parent, under this Voting Agreement.

5.9 Governing Law; Venue.

(a) This Voting Agreement and the Proxy shall be construed in accordance
with, and governed in all respects by, the laws of the State of Delaware
(without giving effect to principles of conflicts of laws).

(b) Any legal action or other legal proceeding relating to this Voting
Agreement or the Proxy or the enforcement of any provision of this Voting
Agreement or the Proxy may be brought or otherwise commenced in any state or
federal court located in the State of Delaware. Stockholder and Parent each:

(i) expressly and irrevocably consents and submits to the jurisdiction
of each state and federal court located in the State of Delaware (and each
appellate court located in the in the State of Delaware), in connection
with any such legal proceeding;

(ii) agrees that service of any process, summons, notice or document by
U.S. mail addressed to him at the address set forth in Section 5.3 shall
constitute effective service of such process, summons, notice or document
for purposes of any such legal proceeding;

(iii) agrees that each state and federal court located in the State of
Delaware, shall be deemed to be a convenient forum; and

B-5
<PAGE>

(iv) agrees not to assert (by way of motion, as a defense or otherwise),
in any such legal proceeding commenced in any state or federal court
located in the State of Delaware, any claim by either Stockholder or Parent
that it is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the
venue of such proceeding is improper or that this Voting Agreement or the
subject matter of this Voting Agreement may not be enforced in or by such
court.

Nothing contained in this Section 5.9 shall be deemed to limit or otherwise
affect the right of either party to commence any legal proceeding or otherwise
proceed against the other party in any other forum or jurisdiction.

(c) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING AGREEMENT OR THE PROXY OR THE
ENFORCEMENT OF ANY PROVISION OF THIS VOTING AGREEMENT OR THE PROXY.

5.10 Counterparts. This Voting Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.

5.11 Captions. The captions contained in this Voting Agreement are for
convenience of reference only, shall not be deemed to be a part of this Voting
Agreement and shall not be referred to in connection with the construction or
interpretation of this Voting Agreement.

5.12 Waiver. No failure on the part of Parent to exercise any power, right,
privilege or remedy under this Voting Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this Voting
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Voting Agreement, or any power, right,
privilege or remedy of Parent under this Voting Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Parent; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.

5.13 Construction.

(a) For purposes of this Voting Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.

(b) The parties agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Voting Agreement.

(c) As used in this Voting Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."

(d) Except as otherwise indicated, all references in this Voting Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Voting
Agreement and Exhibits to this Voting Agreement.

5.14 Stockholder Capacity. No person executing this Voting Agreement who is
a director or officer of the Company makes any agreement or understanding
herein in his capacity as such director or officer. Without limiting the
generality of the foregoing, Stockholder executes this Voting Agreement solely
in its capacity as Owner of Subject Securities and nothing herein shall limit
or affect any actions taken by Stockholder in its capacity as an officer or
director of the Company in exercising the Company's rights under the
Reorganization

B-6
<PAGE>

Agreement, provided, that no obligation of Stockholder to the Company as an
officer or director of the Company shall affect, impair or impede Stockholder's
obligations under this Voting Agreement including the obligation to vote the
Subject Securities in accordance with Section 3 hereof.

5.15 No Obligation to Exercise Options. Notwithstanding any provisions of
this Voting Agreement to the contrary, nothing in this Voting Agreement shall
obligate Stockholder to exercise any option, warrant or other right to acquire
shares of Company Common stock.

[signature page to follow]

B-7
<PAGE>

In Witness Whereof, Parent and Stockholder have caused this Voting Agreement
to be executed as of the date first written above.

Applied Micro Circuits Corporation

By___________________________________
Name:

[STOCKHOLDER]

_____________________________________
Name:

Address: ____________________________

Facsimile: __________________________

<TABLE>
<CAPTION>
Shares Held of Record Options Warrants and Other Rights Additional Securities Beneficially Owned
--------------------- --------------------------------- ----------------------------------------
<S> <C> <C>
</TABLE>

B-8
<PAGE>

Exhibit A

Form Of Irrevocable Proxy

The undersigned stockholder of MMC Network, Inc., a Delaware corporation
(the "Company"), hereby irrevocably (to the fullest extent permitted by law)
appoints and constitutes David Rickey, David Mersten and Applied Micro Circuits
Corporation, a Delaware corporation ("Parent"), and each of them, the attorneys
and proxies of the undersigned with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
(i) the outstanding shares of Company Common Stock or other securities owned of
record by the undersigned as of the date of this proxy, which shares are
specified on the final page of this proxy, and (ii) any and all other shares of
Company Common Stock or other securities which the undersigned may acquire on
or after the date hereof. (The shares of the Company Common Stock or other
securities referred to in clauses "(i)" and "(ii)" of the immediately preceding
sentence, except for shares which are not Subject Securities (as defined in the
Voting Agreement), are collectively referred to in this proxy as the "Shares").
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and the undersigned agrees
that no subsequent proxies will be given with respect to any of the Shares.

This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, Mercury Acquisition
Corp., a Delaware Corporation and a wholly owned subsidiary of Parent, and the
Company (the "Reorganization Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the
Reorganization Agreement.

The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any time until the earlier to occur of the
valid termination of the Reorganization Agreement or the Effective Time and at
any meeting of the stockholders of the Company, however called, and in any
action by written consent of the Stockholders of the Company:

(i) in favor of the adoption of the Reorganization Agreement and in
favor of any other matter proposed to be approved by the holders of the
Subject Securities pursuant to the terms of the Reorganization Agreement;

(ii) against any action or agreement that would result in a breach of
any representation, warranty, covenant or obligation of the Company in the
Reorganization Agreement; and

(iii) against the following actions (other than the Merger and the
transactions contemplated by the Reorganization Agreement): (A) any
Acquisition Proposal (B) any change in a majority of the members of the
board of directors of the Company; or (C) any other action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the Merger or any of the
other transactions contemplated by the Reorganization Agreement or this
Voting Agreement.

The undersigned may vote the Shares on all other matters.

This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the undersigned (including any
transferee of any of the Shares).

If any provision of this proxy or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder

B-9
<PAGE>

of such provision or the validity or enforceability of any other provision of
this proxy. Each provision of this proxy is separable from every other
provision of this proxy, and each part of each provision of this proxy is
separable from every other part of such provision.

This proxy shall terminate upon the earlier of the valid termination of the
Reorganization Agreement or the effective time of the Merger.

Dated: August 27, 2000.

_____________________________________
Name:

Number of shares of common stock of
the Company owned of record or
beneficially as of the date of this
irrevocable proxy:

_____________________________________

B-10
<PAGE>

APPENDIX C

[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]

August 28, 2000

Board of Directors
MMC Networks, Inc.
1134 East Arques Avenue
Sunnyvale, California 94086

Members of the Board:

You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of common stock, par value $0.001 per
share ("MMC Common Stock"), of MMC Networks, Inc. ("MMC") of the Exchange Ratio
(as defined below) set forth in the Agreement and Plan of Merger and
Reorganization, dated as of August 28, 2000 (the "Agreement"), by and among
Applied Micro Circuits Corporation ("AMCC"), Mercury Acquisition Corp., a
wholly owned subsidiary of AMCC ("Merger Sub"), and MMC. The Agreement provides
for, among other things, the merger of Merger Sub with MMC (the "Merger")
pursuant to which MMC will become a wholly owned subsidiary of AMCC and each
outstanding share of MMC Common Stock will be converted into the right to
receive 0.6190 (the "Exchange Ratio") of a share of common stock, par value
$0.01 per share ("AMCC Common Stock"), of AMCC.

In arriving at our opinion, we have reviewed the Agreement and certain
related documents, as well as certain publicly available business and financial
information relating to MMC and AMCC. We also have reviewed certain other
information relating to MMC and AMCC, including publicly available financial
forecasts, provided to or discussed with us by MMC and AMCC, and have discussed
with the managements of MMC and AMCC the businesses and prospects of MMC and
AMCC. We also have considered certain financial and stock market data of MMC
and AMCC, and we have compared those data with similar data for other publicly
held companies in businesses we deemed similar to those of MMC and AMCC, and we
have considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.

In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to
publicly available financial forecasts relating to MMC and AMCC which we have
reviewed and discussed with the managements of MMC and AMCC, we have assumed,
at the direction of the managements of MMC and AMCC, that such forecasts
represent reasonable estimates and judgments as to the future financial
performance of MMC and AMCC. In addition, we have relied, without independent
verification, upon the assessments of the managements of MMC and AMCC as to (i)
the existing and future technology and products of MMC and AMCC and the risks
associated with such technology and products, (ii) their ability to integrate
the businesses of MMC and AMCC and (iii) their ability to retain key employees
of MMC and AMCC. We also have assumed, with your consent, that the Merger will
be treated as a tax-free reorganization for federal income tax purposes. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of MMC or AMCC, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. We
are not expressing any opinion as to what the value of AMCC Common Stock
actually will be when issued pursuant to the Merger or the prices at which AMCC
Common Stock will trade subsequent to the Merger. In connection with our
engagement, we were not requested to, and did not, solicit third party
indications of interest in the possible acquisition of all or any part of MMC.

C-1
<PAGE>

Board of Directors
MMC Networks, Inc.
August 28, 2000
Page 2

We have acted as financial advisor to MMC in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We also will receive a fee for
rendering this opinion. We and our affiliates in the past have provided, and
currently are providing, financial services to AMCC unrelated to the proposed
Merger, for which services we have received and will receive compensation. In
the ordinary course of business, we and our affiliates may actively trade the
debt and equity securities of MMC and AMCC for our own and such affiliates'
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.

It is understood that this letter is for the information of the Board of
Directors of MMC in connection with its evaluation of the Merger and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to any matter relating to the Merger.

Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
holders of MMC Common Stock.

Very truly yours,

/s/ CREDIT SUISSE FIRST BOSTON
CORPORATION

C-2
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. Indemnification of Directors and Officers

Under Section 145 of the Delaware General Corporation Law, AMCC has broad
powers to indemnify its directors and officers against liabilities they may
incur in such capacities, including liabilities under the Securities Act of
1933, as amended.

The AMCC Bylaws provide that AMCC will indemnify its directors and executive
officers and may indemnify its other officers, employees and other agents to
the fullest extent permitted by Delaware law. AMCC believes that
indemnification under its Bylaws covers at least negligence and gross
negligence by indemnified parties, and may require AMCC to advance litigation
expenses in the case of stockholder derivative actions or other actions,
against and undertaking by the indemnified party to repay such advances if it
is ultimately determined that the indemnified party is not entitled to
indemnification.

In addition, the AMCC Certificate provides that, pursuant to Delaware law,
its directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care to AMCC and its stockholders. This provision
in the AMCC Certificate does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to AMCC for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under any
other law, such as the federal securities laws or state or federal
environmental laws.

AMCC has entered into separate indemnification agreements with its officers
and directors. These agreements may require AMCC, among other things, to
indemnify the directors against certain liabilities that may arise by reason of
their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified
and to obtain directors' insurance if available on reasonable terms. AMCC
maintains director and officer liability insurance.

ITEM 21. Exhibits and Financial Statements Schedule

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
2.1+** Agreement and Plan of Merger and Reorganization by and among the
Registrant, Mercury Acquisition Corp. and MMC Networks, Inc. dated as
of August 28, 2000. Reference is made to Appendix A to the
prospectus/proxy statement which is included in this Registration
Statement.

3.1(1) Registrant's Amended and Restated Certificate of Incorporation, as
currently in effect.

3.2+ Certificate of Amendment of Amended and Restated Certificate of
Incorporation dated September 1, 1999.

3.3+ Certificate of Amendment of Amended and Restated Certificate of
Incorporation dated August 30, 2000.

3.4(2) Registrant's Bylaws, as amended, as currently in effect.

4.1(3) Form of Common Stock Certificate of Registrant.

5.1+ Opinion of Cooley Godward llp.

8.1 Tax opinion of Cooley Godward llp.

8.2 Tax opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.1+ Form of Voting Agreement, dated as of August 28, 2000 by and between
Registrant and certain stockholders of MMC Networks, Inc. Reference
is made to Appendix B of the prospectus/proxy statement which is
included in this Registration Statement.

21.1+ Subsidiaries of Registrant.

23.1 Consent of Ernst & Young llp, Independent Auditors with respect to the
financial statements of Applied Micro Circuits Corporation.

23.2 Consent of Ernst & Young llp, Independent Auditors with respect to the
financial statements of YuniNetworks, Inc.

23.3 Consent of PricewaterhouseCoopers llp, Independent Acountants.

23.4 Consent of Cooley Godward llp. Reference is made to Exhibits 5.1 and
8.1.

23.5 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
Reference is made to Exhibit 8.2.

24.1+ Power of Attorney.

99.1+ Form of proxy card.

99.2+ Consent of Credit Suisse First Boston Corporation.

99.3 Consent of future director.
</TABLE>
--------

(1) Incorporated by reference to Exhibit 3.1 filed with the Company's Annual
Report, Form 10-K for the year ended March 31, 2000.

(2) Incorporated by reference to Exhibit 3.2 filed with the Company's Annual
Report, Form 10-K for the year ended March 31, 2000.

(3) Incorporated by reference to Exhibit 4.1 filed with the Company's
Registration Statement (No. 333-37609) filed October 10, 1997, or with any
Amendment thereto, which registration statement became effective November
24, 1997.

+ Previously filed.

** Schedules omitted pursuant to Regulation S-K, Item 601(b)(2) of the
Securities Act. Registrant undertakes to furnish such schedules to the
Commission supplementally upon request.

ITEM 22. Undertakings

(1) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.

(2) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 ("The
Act") and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the Registration Statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus/Consent
Solicitation pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.

(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.

(5) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to any provision or arrangement, 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 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
matter 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 Act, and will be governed by the
final adjudication of such issue.

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<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on September 26, 2000.

Applied Micro Circuits Corporation

/s/ William E. Bendush
By:__________________________________
William E. Bendush
Vice President, Finance and
Administration,
and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ David M. Rickey Chairman of the Board of September 26, 2000
____________________________________ Directors, President and
David M. Rickey Chief Executive Officer
(principal executive
officer)

/s/ William E. Bendush Vice President, Finance and September 26, 2000
____________________________________ Administration, and Chief
William E. Bendush Financial Officer
(principal financial and
accounting officer)

/s/ Roger A. Smullen, Sr.* Vice-Chairman of the Board September 26, 2000
____________________________________ of Directors
Roger A. Smullen, Sr.

/s/ William K. Bowes, Jr.* Director September 26, 2000
____________________________________
William K. Bowes, Jr.

/s/ R. Clive Ghest* Director September 26, 2000
____________________________________
R. Clive Ghest

/s/ Franklin P. Johnson, Jr.* Director September 26, 2000
____________________________________
Franklin P. Johnson, Jr.

/s/ S. Atiq Raza* Director September 26, 2000
____________________________________
S. Atiq Raza

</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Arthur B. Stabenow* Director September 26, 2000
____________________________________
Arthur B. Stabenow

/s/ Harvey P. White* Director September 26, 2000
____________________________________
Harvey P. White
</TABLE>

/s/ William E. Bendush

*By: _____________________

William E. Bendush

Attorney-in-Fact

II-5
<PAGE>

EXHIBIT INDEX

3.1(1) Registrant's Amended and Restated Certificate of Incorporation, as
currently in effect.

3.2+ Certificate of Amendment of Amended and Restated Certificate of
Incorporation dated September 1, 1999.

3.3+ Certificate of Amendment of Amended and Restated Certificate of
Incorporation dated August 30, 2000.

3.4(2) Registrant's Bylaws, as amended, as currently in effect.

4.1(3) Form of Common Stock Certificate of Registrant.

5.1+ Opinion of Cooley Godward llp.

8.1 Tax opinion of Cooley Godward llp.

8.2 Tax opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.

10.1+ Form of Voting Agreement, dated as of August 28, 2000 by and between
Registrant and certain stockholders of MMC Networks, Inc. Reference
is made to Appendix B of the prospectus/proxy statement which is
included in this Registration Statement.

21.1+ Subsidiaries of Registrant.

23.1 Consent of Ernst & Young llp, Independent Auditors with respect to the
financial statements of Applied Micro Circuits Corporation.

23.2 Consent of Ernst & Young llp, Independent Auditors with respect to the
financial statements of YuniNetworks, Inc.

23.3 Consent of PricewaterhouseCoopers llp, Independent Accountants.

23.4 Consent of Cooley Godward llp. Reference is made to Exhibits 5.1 and
8.1.

23.5 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
Reference is made to Exhibit 8.2.

24.1+ Power of Attorney.

99.1+ Form of proxy card.

99.2+ Consent of Credit Suisse First Boston Corporation.

99.3 Consent of future director.
</TABLE>
--------

(1) Incorporated by reference to Exhibit 3.1 filed with the Company's Annual
Report, Form 10-K for the year ended March 31, 2000.

(2) Incorporated by reference to Exhibit 3.2 filed with the Company's Annual
Report, Form 10-K for the year ended March 31, 2000.

+ Previously filed.

** Schedules omitted pursuant to Regulation S-K, Item 601(b)(2) of the
Securities Act. Registrant undertakes to furnish such schedules to the
Commission supplementally upon request.