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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 2
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XYLAN CORPORATION
(Name of Subject Company)
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XYLAN CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Including the associated Preferred Share Purchase Rights)
(Title of Class of Securities)
984151 10 0
(CUSIP Number of Class of Securities)
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STEVE Y. KIM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
XYLAN CORPORATION
26707 WEST AGOURA ROAD
CALABASAS, CALIFORNIA 91302
(818) 880-3500
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person filing statement)
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WITH A COPY TO:
TAE HEA NAHM, ESQ.
STEVEN J. TONSFELDT, ESQ.
VENTURE LAW GROUP
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488
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This Amendment No. 2 to Schedule 14D-9 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Statement") of
Xylan Corporation (the "Company") filed with the Securities and Exchange
Commission (the "Commission") on March 8, 1999, as amended by that Amendment No.
1 ("Amendment No. 1") to Schedule 14D-9 filed by the Company with the Commission
on March 12, 1999.
Capitalized terms used but not otherwise defined herein have the
meanings ascribed to such terms in the Statement.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is hereby amended and restated in its entirety to read as
follows:
"Litigation. On March 2, 1999, an action entitled Daniel W. Krasner v.
Xylan Corporation et. al. was filed, on March 5, 1999, an action entitled Jay
Gentile v. Xylan Corporation et. al. was filed, and on March 9, 1999, an action
entitled Marilyn Mandel v. Xylan Corporation et. al. was filed, each in the
Superior Court of the State of California for the County of Los Angeles, in
which the respective plaintiffs named as defendants the Company, the directors
of the Company and Alcatel. The complaints purport to assert claims on behalf of
all public shareholders of the Company. The complaints allege that Alcatel and
the members of the Company Board have breached their fiduciary duties to the
Company and that Alcatel used its relationship with the Company and the Company
Board to force the Company Board to accept an inadequate proposal.
The complaints seek class certification and other equitable and monetary
relief, including enjoining the Offer and the Merger or awarding damages.
Alcatel and the Company believe that the allegations are without merit and
intend to vigorously contest these actions. There can be no assurance that the
defendants will be successful.
Other. In addition, reference is hereby made to the Offer to Purchase
(including without limitation Item 15 thereof) and the related Letter of
Transmittal, which are attached as Exhibits 1 and 2 hereto, respectively, and
are incorporated by reference herein in their entirety."
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 is hereby amended and restated in its entirety to read as
follows:
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"Exhibit 1 Form of Offer to Purchase, dated March 8, 1999 (incorporated
by reference to Exhibit (a)(1) to Parent and Purchaser's
Tender Offer Statement on Schedule 14D-1 dated March 8, 1999,
as amended (the "Schedule 14D-1")).
Exhibit 2 Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(2) to the Schedule 14D-1).
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Exhibit 3 Agreement and Plan of Merger, dated as of March 1, 1999, among
Xylan Corporation, Zeus Acquisition Corp., and Alcatel
(incorporated by reference to Exhibit (c)(1) to the Schedule
14D-1).
Exhibit 4 Stock Option Agreement, dated as of March 1, 1999, among Xylan
Corporation, Zeus Acquisition Corp., and Alcatel (incorporated
by reference to Exhibit (c)(5) to the Schedule 14D-1).
Exhibit 5 1995 Shareholders Agreement, dated March 13, 1995, between
Alcatel Data Networks S.A., Brentwood Associates VI, L.P.,
Crosspoint Venture Partners 93, Crosspoint 1993 Entrepreneurs
Fund, Norwest Equity Partners IV, U.S. Venture Partners IV,
L.P., Second Ventures II, L.P., USVP Entrepreneur Partners II,
L.P., Steve Y. Kim, and Yuri Pikover (incorporated by
reference to Exhibit (c)(6) to the Schedule 14D-1).
Exhibit 6 Letter to Shareholders of Xylan Corporation dated March 8,
1999.*+
Exhibit 7 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
Yuri Pikover, Pikover 1995 Irrevocable Trust, Pikover Trust,
and Pikover Irrevocable Children's Trust dated as of March 1,
1999 (incorporated by reference to Exhibit (c)(3) to the
Schedule 14D-1).
Exhibit 8 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
Steve Y. Kim, Steve Y. Kim Living Trust and Kim Irrevocable
Children's Trust dated as of March 1, 1999 (incorporated by
reference to Exhibit (c)(2) to the Schedule 14D-1).
Exhibit 9 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
and John Walecka dated as of March 1, 1999 (incorporated by
reference to Exhibit (c)(4) to the Schedule 14D-1).
Exhibit 10 Employment Agreement between Zeus Acquisition Corp., and Steve
Y. Kim dated as of March 1, 1999.+
Exhibit 11 Press Release issued March 2, 1999 (incorporated by reference
to Exhibit (a)(8) to the Schedule 14D-1).
Exhibit 12 International Distributor Agreement between the Company and
Alcatel Data Networks S.A., dated as of March 13, 1995.(A)
Exhibit 13 Product and Technology Agreement between the Company and
Alcatel Data Networks S.A., dated as of March 13, 1995.(A)
Exhibit 14 Form of Change of Control Agreement.(B)
Exhibit 15 Preferred Shares Rights Agreement, dated as of April 17, 1997,
between Xylan Corporation and BankBoston N.A. (f/k/a The First
National Bank of Boston),
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including the Certificate of Determination of Rights,
Preferences and Privileges of Series A Participating Preferred
Stock, the form of Rights Certificate and the Summary of
Rights attached thereto as Exhibits A, B and C, respectively.
(C)
Exhibit 16 Amendment No. 1 to Preferred Shares Rights Agreement, dated as
of March 1, 1999.(D)
Exhibit 17 Complaint filed by Daniel W. Krasner in the Superior Court of
the State of California for the County of Los Angeles on March
2, 1999.+
Exhibit 18 Complaint filed by Jay Gentile in the Superior Court of the
State of California for the County of Los Angeles on March 5,
1999.++
Exhibit 19 Complaint filed by Marilyn Mandel in the Superior Court of the
State of California for the County of Los Angeles on March 9,
1999.
ANNEX A INFORMATION STATEMENT+
ANNEX B OPINION OF MORGAN STANLEY & CO. INCORPORATED+
</TABLE>
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* Included with Schedule 14D-9 mailed to shareholders.
(A) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 333-00574) declared effective on March 11, 1996.
(B) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K filed on March 31, 1998.
(C) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A filed on April 18, 1997.
(D) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on March 8, 1999.
+ Previously filed with the Schedule 14D-9.
++ Previously filed with Amendment No. 1."
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ STEVE Y. KIM
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Steve Y. Kim
President and Chief Executive Officer
Dated: March 16, 1999
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT
NO. DOCUMENT
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Exhibit 1 Form of Offer to Purchase, dated March 8, 1999 (incorporated
by reference to Exhibit (a)(1) to Parent and Purchaser's
Tender Offer Statement on Schedule 14D-1 dated March 8, 1999,
as amended (the "Schedule 14D-1")).
Exhibit 2 Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(2) to the Schedule 14D-1).
Exhibit 3 Agreement and Plan of Merger, dated as of March 1, 1999, among
Xylan Corporation, Zeus Acquisition Corp., and Alcatel
(incorporated by reference to Exhibit (c)(1) to the Schedule
14D-1).
Exhibit 4 Stock Option Agreement, dated as of March 1, 1999, among Xylan
Corporation, Zeus Acquisition Corp., and Alcatel (incorporated
by reference to Exhibit (c)(5) to the Schedule 14D-1).
Exhibit 5 1995 Shareholders Agreement, dated March 13, 1995, between
Alcatel Data Networks S.A., Brentwood Associates VI, L.P.,
Crosspoint Venture Partners 93, Crosspoint 1993 Entrepreneurs
Fund, Norwest Equity Partners IV, U.S. Venture Partners IV,
L.P., Second Ventures II, L.P., USVP Entrepreneur Partners II,
L.P., Steve Y. Kim, and Yuri Pikover (incorporated by
reference to Exhibit (c)(6) to the Schedule 14D-1).
Exhibit 6 Letter to Shareholders of Xylan Corporation dated March 8,
1999.*+
Exhibit 7 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
Yuri Pikover, Pikover 1995 Irrevocable Trust, Pikover Trust,
and Pikover Irrevocable Children's Trust dated as of March 1,
1999 (incorporated by reference to Exhibit (c)(3) to the
Schedule 14D-1).
Exhibit 8 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
Steve Y. Kim, Steve Y. Kim Living Trust and Kim Irrevocable
Children's Trust dated as of March 1, 1999 (incorporated by
reference to Exhibit (c)(2) to the Schedule 14D-1).
Exhibit 9 Shareholder Agreement between Alcatel, Zeus Acquisition Corp.,
and John Walecka dated as of March 1, 1999 (incorporated by
reference to Exhibit (c)(4) to the Schedule 14D-1).
Exhibit 10 Employment Agreement between Zeus Acquisition Corp., and Steve
Y. Kim dated as of March 1, 1999.+
Exhibit 11 Press Release issued March 2, 1999 (incorporated by reference
to Exhibit (a)(8) to the Schedule 14D-1).
Exhibit 12 International Distributor Agreement between the Company and
Alcatel Data Networks S.A., dated as of March 13, 1995.(A)
Exhibit 13 Product and Technology Agreement between the Company and
Alcatel Data Networks S.A., dated as of March 13, 1995.(A)
Exhibit 14 Form of Change of Control Agreement.(B)
Exhibit 15 Preferred Shares Rights Agreement, dated as of April 17, 1997,
between Xylan Corporation and BankBoston N.A. (f/k/a The First
National Bank of Boston),
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EXHIBIT
NO. DOCUMENT
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including the Certificate of Determination of Rights,
Preferences and Privileges of Series A Participating Preferred
Stock, the form of Rights Certificate and the Summary of
Rights attached thereto as Exhibits A, B and C, respectively.
(C)
Exhibit 16 Amendment No. 1 to Preferred Shares Rights Agreement, dated as
of March 1, 1999.(D)
Exhibit 17 Complaint filed by Daniel W. Krasner in the Superior Court of
the State of California for the County of Los Angeles on March
2, 1999.+
Exhibit 18 Complaint filed by Jay Gentile in the Superior Court of the
State of California for the County of Los Angeles on March 5,
1999.++
Exhibit 19 Complaint filed by Marilyn Mandel in the Superior Court of the
State of California for the County of Los Angeles on March 9,
1999.
ANNEX A INFORMATION STATEMENT+
ANNEX B OPINION OF MORGAN STANLEY & CO. INCORPORATED+
</TABLE>
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* Included with Schedule 14D-9 mailed to shareholders.
(A) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 333-00574) declared effective on March 11, 1996.
(B) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K filed on March 31, 1998.
(C) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A filed on April 18, 1997.
(D) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on March 8, 1999.
+ Previously filed with the Schedule 14D-9.
++ Previously filed with Amendment No. 1.
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EXHIBIT 19
Michael D. Braun (167416)
Steven B. Chroman (183037)
STULL, STULL & BRODY
10940 Wilshire Boulevard
Suite 2300
Los Angeles, CA 90024
(310) 209-2468
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
LOS ANGELES COUNTY
MARILYN MANDEL, On Behalf of Herself and ) Case No.
All Others Similarly Situated, )
) CLASS ACTION
)
Plaintiff, ) COMPLAINT FOR BREACH OF
) FIDUCIARY DUTIES
vs. )
)
XYLAN CORPORATION, STEVE Y. KIM, )
YURI PIKOVER, ROBERT S. CECIL, )
ROBERT C. HAWK, TRUDE C. TAYLOR, )
JOHN L. WALECKA and ALCATEL SA, )
)
Defendants. )
)
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CLASS ACTION COMPLAINT
Plaintiff, by and through her attorneys, alleges the following upon
information and belief:
SUMMARY OF ACTION
1. This action arises out of the proposal by Alcatel SA ("Alcatel"), a
6.5% shareholder of Xylan Corp. ("Xylan" or the "Company"), and one of its most
significant customers, if not its most significant customer, to acquire the
shares of Xylan it does not already own, for grossly inadequate consideration
and in breach of defendants' fiduciary duties. Plaintiff brings this action as a
class action on behalf of herself and all other public stockholders of the
Company who are similarly situated, to void and enjoin defendants' efforts to
deprive the Company's public shareholders of their equity interest in Xylan at a
grossly unfair and inadequate price and to usurp the benefits of the Company's
growth and future prospects for defendants' own benefit.
JURISDICTION AND VENUE
1. This Court has jurisdiction over the cause of action asserted herein
pursuant to the California Constitution, Article VI, Section 10, because this
case is a cause not given by statute to other trial courts.
2. This Court has jurisdiction over Xylan because this defendant is a
citizen of California with its principal place of business located at 26707 West
Agoura Road, Calabasas, California.
3. Venue is proper in this Court because the conduct at issue took place
and had an effect in this County.
4. Plaintiff Marilyn Mandel is the owner of shares of the common stock
of Xylan.
5. Defendant Xylan is a California corporation with its principal
executive offices located at 26707 West Agoura Road, Calabasas, California.
Xylan is a provider of high band-width switching systems that enhance the
performance of existing local area networks and facilitate migration to
networking technologies such as Automatic Teller Machines.
6. Defendant Steve Y. Kim is Chairman, CEO and President of Xylan.
7. Defendant Yuri Pikover is Executive Vice President and a director of
Xylan.
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8. Defendant Robert S. Cecil is a director of Xylan.
9. Defendant Robert C. Hawk is a director of Xylan.
10. Defendant Trude C. Taylor is a director of Xylan.
11. Defendant John L. Walecka is a director of Xylan.
12. The foregoing individuals (collectively the "Individual Defendants")
as officers and/or directors of Xylan are in a fiduciary relationship with
plaintiff and other public shareholders and owe plaintiff and the other public
shareholders the highest obligations of good faith, candor, loyalty and fair
dealing.
13. The Individual Defendants suffer from disabling conflicts of
interests and thus cannot adequately protect the interests of the public Xylan
shareholders.
14. Defendant Alcatel is a French-based telecommunications company.
Alcatel owns or controls 6.5 percent of the outstanding shares of Xylan and
dominates and controls Xylan through Xylan's reliance on Alcatel's significant
joint technology and distribution arrangements with the Company and the fact
that Alcatel accounts for 11% of Xylan's revenue.
CLASS ACTION ALLEGATIONS
15. Plaintiff brings this action pursuant to Section 382 of the
California Code of Civil Procedure on her own behalf and as a class action on
behalf of all public stockholders of Xylan (excluding defendants and their
affiliates), or their successors in interest, who are or will be threatened with
injury arising from defendants' actions as more fully described herein (the
"Class").
16. This action is properly maintainable as a class action:
(a) The Class is so numerous that joinder of all members is
impracticable. As of February 27, 1999, there were approximately 42 million
shares of Xylan common stock outstanding, 20 million of which were publicly held
by what plaintiff believes to be thousands of stockholders of record. Members of
the Class are scattered throughout the United States.
(b) There are questions of law and fact which are common to the
Class and which predominate over questions affecting any individual Class
member.
(c) Defendants have acted and will continue to act on grounds
generally
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applicable to the Class, thereby making appropriate final injunctive or
corresponding declaratory relief with respect to the Class as a whole.
(d) A class action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted and no unusual difficulties
are likely to be encountered in the management of this class action. The
likelihood of individual class members prosecuting separate claims is remote.
17. Plaintiff is committed to the prosecution of this action and has
retained competent counsel experienced in litigation of this nature. Plaintiff's
claims are typical of the claims of other members of the Class and plaintiff has
the same interests as the other members of the Class. Accordingly, plaintiff is
an adequate representative of the Class and will fairly and adequately protect
the interests of the Class.
18. Plaintiff does not anticipate any difficulty in the management of
this litigation as a class action.
SUBSTANTIVE ALLEGATIONS
19. On March 2, 1999, Alcatel announced a $37 per share or $2 billion
proposal to acquire the shares of Xylan it does not already own (the
"Transaction"). The Transaction provides that the acquisition will be made by a
cash tender offer commencing on March 8, 1999, and scheduled to expire 20
business days thereafter. Both companies' board of directors approved the
acquisition and the Xylan board has recommended that its shareholders accept the
tender.
20. Xylan has extremely significant joint technology products and
distribution arrangements with Alcatel. Moreover, Alcatel accounted for more
than 11 percent of Xylan's revenue in 1997, i.e., the latest figures available.
Xylan is extremely dependent on Alcatel's business.
21. As such, Alcatel is in a controlling and dominate position over
Xylan and its board of directors and can and has used that dominant position to
force the Xylan Board of Directors to accept their inadequate proposal.
22. While Alcatel's offer amounts to a 37 percent premium over its March
1, 1999
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closing price, Xylan's business has been growing at an extraordinary pace over
the last two years, growing at a rate of 65 percent. Moreover Xylan's recent
fourth quarter profit rose 67 percent on strong sales.
23. Alcatel, through its extensive joint ventures with Xylan, is
intimately aware of the Company's growth prospects. Because Alcatel is in
possession of proprietary information concerning Xylan's future financial
prospects, it is aware of the fact that the Company is worth more than $37 per
share offered under the Transaction. Additionally, the company's stock has
traded as high as $31 as recently as July 20, 1998. Alcatel is therefore taking
advantage of the fact that Xylan's stock does not fully reflect the Company's
financial prospects.
24. The Individual Defendants' are obligated, among other things, to:
(a) undertake an appropriate evaluation of any bona fide offers, and take
appropriate steps to solicit all potential bids for the Company or its assets,
consider strategic alternatives and otherwise obtain the best transaction
reasonably available to maximize shareholder value; (b) take appropriate steps
to have any offer for the company reviewed independently, including appointing a
truly disinterested representative of the public shareholders or requiring a
vote of a majority of the public stockholders so that the interests of Xylan's
public stockholders are protected; and (c) adequately ensure that no conflicts
of interest exist between defendants' own interests and their fiduciary
obligations to the public stockholders of Xylan and that the terms of any
proposal by Alcatel are entirely fair.
25. By virtue of the conduct alleged herein, Alcatel and the Individual
Defendants are not complying with their fiduciary duties or adequately
protecting the interests of the Class, and are enriching Alcatel at the expense
of the Class.
26. As a result of the foregoing, the Individual Defendants and Alcatel
have breached fiduciary duties owed to Xylan and its public stockholders.
27. Unless enjoined by this Court, defendants will continue to breach
fiduciary duties owed to plaintiff and the other members of the class and will
benefit themselves, all to the irreparable harm of the Class, as aforesaid.
28. Plaintiff and the other members of the Class have no adequate remedy
at law.
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PRAYER FOR RELIEF
WHEREFORE, plaintiff demands judgment as follows:
1. declaring this to be a proper class action;
2. enjoining the consummation of the Transaction pending institution of
adequate safeguards to protect the interests of the Class, or, alternatively,
awarding rescissory damages;
3. ordering the Individual Defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class;
4. ordering defendants, jointly and severally, to account to plaintiff
and the other members of the Class for all damages suffered and to be suffered
by them as a result of the acts and transactions alleged herein;
5. declaring that the Individual Defendants and each of them have
violated their fiduciary duties to the Class and/or aided and abetted such
breach;
6. awarding plaintiff the costs and disbursements of the action,
including a reasonable allowance for plaintiff's attorney's fees and experts'
fees; and
7. granting such other and further relief as this Court may deem to be
just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: March 9, 1999 Michael D. Braun
Steven B. Chroman
STULL, STULL & BRODY
By: /s/ STEVEN B. CHROMAN
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Steven B. Chroman
10940 Wilshire Boulevard
Suite 2300
Los Angeles, CA 90024
(310) 209-2468
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