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Technology Stocks : Xylan
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To: mark j. marvier who wrote (4091)3/3/1999 1:54:00 PM
From: E_K_S  Read Replies (3) of 4135
 
To Thread: I called Xylan Investor relations (1-800-999-9526) and talked to the Controller.

I asked if XYLAN provided an option for shareholders to place their stock in an escrow account which would hold these shares for a period of time so that gains could be treated as capital gains (taxed at 20%) rather than ordinary income. He stated that ALA and Xylan discussed this but determined that it was easier to tender all shares with the specified cut off date.

Using an escrow account, shareholders could tender their shares at the specific price subject to a specific date so as to receive a preferred capital gains tax treatment. This option should be positive for ALA as this procedure is like an interest free loan (it could be set up where proceeds sitting in escrow earn interest that is credited to the shareholder too).

In my case, I am short a few months to reflect a long term capital gain and the tax impact is significant. With state and Federal taxes, it accounts for as much as 50% of the potential profit!

ALA needs 90% of XYLAN shares to proceed with their current plan. I suggest that ALL SHAREHOLDERS call IR and refuse to tender your shares unless such an escrow account is set up!

We only need 4.1 million shares to refuse to tender....and perhaps they will provide the shareholder such an escrow option. This is the least they can do for the loyal shareholders. I would of preferred ALA stock but this is an acceptable alternative.

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Xylan's controller did not think this was a concern (they receive all their stock options in ALA stock now) and we the shareholders should be happy with the tender offer and terms. However, if you analyze the tax treatment, the winners in this deal are both the Feds and the State.

I really do not think it is asking too much of ALA and XYLAN to provide this escrow account option.

Any comments?

EKS
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