WESTELL TECHNOLOGIES INC, S-1/A, 1996-06-20

WESTELL TECHNOLOGIES INC
S-1/A, 1996-06-20
TELEPHONE & TELEGRAPH APPARATUS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996

REGISTRATION NO. 333-04973
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER

THE SECURITIES ACT OF 1933
------------------------------

WESTELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
------------------------------

<TABLE>
<S> <C> <C>
DELAWARE 3661 36-3154957
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

------------------------------

101 KENDALL POINT DRIVE
OSWEGO, ILLINOIS 60543
(708) 820-1919
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------

GARY F. SEAMANS
WESTELL TECHNOLOGIES, INC.
101 KENDALL POINT DRIVE
OSWEGO, ILLINOIS 60543
(708) 820-1919
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

Copies to:

<TABLE>
<S> <C>
William J. Quinlan, Jr. Barry E. Taylor
Heidi J. Steele Mark Bonham
McDermott, Will & Emery J. Robert Suffoletta
227 West Monroe Street Craig D. Norris
Chicago, Illinois 60606-5096 Wilson Sonsini Goodrich & Rosati, P.C.
(312) 372-2000 650 Page Mill Road
Palo Alto, California 94304-1050
(415) 493-9300
</TABLE>

------------------------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2

WESTELL TECHNOLOGIES, INC.

CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K ITEM 501(B)

<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
----------------------------------------- ---------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Not applicable
6. Dilution................................. Not applicable
7. Selling Security Holders................. Principal and Selling Stockholders
8. Plan of Distribution..................... Outside Front Cover Page; Underwriting
9. Description of Securities to Be
Registered............................... Prospectus Summary; Price Range of Class A
Common Stock Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel... Legal Matters; Experts
11. Information with Respect to the
Registrant............................... Outside Front Cover Page; Prospectus Summary;
Risk Factors; The Company; Dividend Policy;
Price Range of Class A Common Stock
Capitalization; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Management;
Principal and Selling Stockholders; Certain
Transactions; Description of Capital Stock;
Shares Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not applicable
</TABLE>
<PAGE> 3

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities
may not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, DATED JUNE 20, 1996

2,540,000 SHARES
WESTELL LOGO

CLASS A COMMON STOCK

Of the 2,540,000 shares of Class A Common Stock offered hereby, 1,665,000
shares are being sold by Westell Technologies, Inc. ("Westell" or the "Company")
and 875,000 shares are being sold by the Selling Stockholders. The Company will
not receive any proceeds from the sale of shares by the Selling Stockholders.
See "Principal and Selling Stockholders."

The Company's Common Stock consists of Class A Common Stock and Class B
Common Stock. The economic rights of each class of Common Stock are identical
but the voting rights differ. Each share of Class A Common Stock entitles its
holder to one vote and each share of Class B Common Stock entitles its holder to
four votes. Class A Common Stock is freely transferable and Class B Common Stock
is transferable only to certain transferees but is convertible into Class A
Common Stock on a share-for-share basis. See "Principal and Selling
Stockholders" and "Description of Capital Stock."

The Class A Common Stock is quoted on the Nasdaq National Market under the
symbol "WSTL." On June 18, 1996, the last reported sale price of the Class A
Common Stock on the Nasdaq National Market was $48 1/4 per share. See "Price
Range of Class A Common Stock."

SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.

------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount (1) Company (2) Stockholders
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<S> <C> <C> <C> <C>
Per Share................................... $ $ $ $
Total (3)................................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company, estimated at $450,000.

(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an aggregate of 381,000 additional shares of
Class A Common Stock solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the Price to Public will total
$ , the Underwriting Discount will total $ , the Proceeds
to Company will total $ and the Proceeds to Selling Stockholders
will total $ . See "Underwriting."

The shares of Class A Common Stock are offered by the several Underwriters
named herein subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the certificates representing such shares will be made against payment therefor
at the office of Montgomery Securities on or about , 1996.
------------------------
MONTGOMERY SECURITIES
COWEN & COMPANY
PUNK, ZIEGEL & KNOELL

, 1996
<PAGE> 4
[Inside Front Cover]

Besides the text set forth below on this page, the inside cover of this
Prospectus consists of a diagram showing the connection of copper wires and
fiber cable between a telephone company's central office and a home and a
skyscraper where businesses are located. At the telephone company's central
office, there are boxes representing the use of Westell's Network Management
products and other Westell products.

The connection between the telephone company's central office and the
home is a line representing copper wire. At the home there are boxes
representing the use of Westell's ADSL products. Four pictures near the home
(as indicated on the diagram below) show telephone company services that are
supported by Westell ADSL products. The pictures are as follows: (i) a boy
using a computer for Internet access, (ii) a man working at his home with a
computer representing "work at home," (iii) a boy using a television to select
a video through video-on-demand, and (iv) a woman and child using a computer
screen for distance learning.

The connections between the telephone company's central office and the
skyscraper are three lines, two representing copper wires using Westell's ADSL
and T-1 products and a fiber cable using Westell's fiber products.

Near the skyscraper there are boxes representing the use of Westell's ADSL,
T-1 and fiber products.

Three pictures near the skyscraper (as indicated on the diagram below) show
telephone company applications of Westell's products. The pictures are as
follows: (i) a man using a computer to obtain data, (ii) a group using a
television for video conferencing and (iii) a woman using a telephone.

[WESTELL LOGO]

Westell Technologies delivers a broad range of analog, digital and fiber
telecommunications products used in the "last mile" of the local access
network. Westell is a leading provider of products based upon Asymmetric
Digital Subscriber Line ("ADSL") technology which enables interactive
multimedia services over existing copper wire.

TELCO CENTRAL OFFICE

NETWORK [PHOTO] [PHOTO]
MANAGEMENT
DATA
[PHOTO]

ACCESSVISSION(TM)

VIDEO SERVER

VIDEO
CONFERENCING

[PHOTO] [PHOTO] BUSINESS

[PHOTO]

INTERNET ACCESS

[PHOTO] [PHOTO]

WORK AT HOME VOICE

[PHOTO]

VIDEO-ON-DEMAND [PHOTO]

HOME

[PHOTO] WESTELL LOGO = Westell product
Fiber = QuadJack
DISTANCE LEARNING ADSL = FlexCAP,
FlexVision,
EnVision
T-1 = Network
Interface Unit/
Performance
Monitoring
PHOTO = Copper wire
PHOTO = Fiber optic
cable

<PAGE> 5

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE
"UNDERWRITING."

2
<PAGE> 6

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including "Risk Factors" and
the Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Prospectus. As used in this Prospectus, the terms "Westell" and "Company"
include Westell Technologies, Inc. and its subsidiaries, unless the context
otherwise indicates. The discussion in this Prospectus contains forward-looking
statements which include risks and uncertainties. The Company's actual results
could differ materially from those discussed in this Prospectus. Factors that
could cause or contribute to such differences include those discussed in the
sections entitled "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as those
discussed elsewhere in this Prospectus.

THE COMPANY

Since 1980, Westell Technologies, Inc. ("Westell" or the "Company") has
developed telecommunications products that address the needs of telephone
companies ("telcos") to upgrade their existing network infrastructures
continually in order to deliver advanced data and voice services to their
customers. The Company designs, manufactures, markets and services a broad range
of digital and analog products used by telcos to deliver services primarily over
existing copper telephone wires that connect end users to a telco's central
office (the "local access network"). The Company also markets its products and
services to other telecommunications and information service providers seeking
direct access to end-user customers. The Company's principal customers include
all seven Regional Bell Operating Companies (the "RBOCs") as well as GTE,
British Telecom and Telecom Italia. In addition, Westell sells products to
several other entities, including public telephone administrations located
outside the U.S., independent domestic local exchange carriers, competitive
access providers, interexchange carriers and the U.S. federal government.

Westell is a leading developer and provider of broadband telecommunications
access systems using an emerging technology known as Asymmetric Digital
Subscriber Line ("ADSL"). ADSL systems will allow telcos to provide interactive
multimedia services over existing copper wire, thus offering a more
cost-effective and faster deployment alternative to fiber optic cable in the
"last mile" of the local access network. ADSL systems enable interactive
multimedia services such as advanced data dialtone applications, including high
speed Internet access, local area network ("LAN") extension, telecommuting and
medical imaging, as well as emerging video dialtone applications, including
video-on-demand, distance learning, video conferencing and work at home.
Currently, over 30 domestic and international telcos, including Bell Atlantic,
GTE, US West !nterprise, British Telecom and Telecom Italia, are conducting
technical or marketing trials for new interactive multimedia services that rely
on the Company's ADSL systems.

The Company's objective is to be a global leader in providing low cost and
high quality local access network products that enable telcos to meet the
growing demand for service offerings based on digital technology. Westell's
strategy is to leverage its leadership position in the ADSL market to capture
emerging opportunities as telcos expand their interactive multimedia offerings.
With over 15 years of experience in developing products for the local access
network, particularly T-1 Network Interface Units ("NIUs"), the Company also
intends to capitalize upon its existing customer relationships to continue to
develop cost-effective and implementable intelligent network products and access
systems. The Company believes that its pursuit of strategic relationships with
technology leaders enables it to obtain the emerging technologies required in
its product development efforts and to focus on specific product applications
for its telco customers.

3
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by the Company.............. 1,665,000 shares
Class A Common Stock offered by the Selling
Stockholders........................................... 875,000 shares
Common Stock to be outstanding after the offering:
Class A Common Stock................................... 15,051,962 shares (1)
Class B Common Stock................................... 21,253,020 shares
Total............................................... 36,304,982 shares
Use of proceeds.......................................... To purchase capital equipment and
for general corporate purposes,
including working capital and
potential acquisitions.
Voting rights............................................ The Class A Common Stock and the
Class B Common Stock vote as a
single class with respect to all
matters submitted to a vote of
stockholders, with each share of
Class A Common Stock entitled to
one vote and each share of Class B
Common Stock entitled to four
votes, except with respect to
certain future issuances of Class B
Common Stock and as provided by
law.
Nasdaq National Market symbol............................ WSTL
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $33,621 $43,221 $51,051 $74,029 $83,236
Gross margin................................... 14,647 17,863 20,801 29,535 32,457
Operating income (loss) from continuing
operations................................... 4,907 2,799 (464) (178) (2,254)
Net income (loss).............................. 3,029 1,698 213 (508) (2,075)
Net income (loss) per share (2)................ $ 0.11 $ 0.06 $ 0.01 $ (0.02) $ (0.07)
Average number of common shares outstanding
(2).......................................... 26,560 27,620 28,486 28,952 30,846
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED (3)
------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $28,741 $ 88,913
Total assets......................................................... 64,448 124,620
Long-term debt, including current portion............................ 4,427 4,427
Total stockholders' equity........................................... 38,985 99,157
</TABLE>

- ------------------------------

(1) Excludes (i) 2,663,426 shares of Class A Common Stock reserved for issuance
pursuant to the Company's 1995 Stock Incentive Plan (the "Stock Incentive
Plan"), 754,250 of which are subject to outstanding options granted at a
weighted average exercise price of $33.92 per share, and (ii) 213,532 shares
reserved for issuance under the Company's Employee Stock Purchase Plan (the
"Stock Purchase Plan"). See "Management -- Stock Plans."

(2) Adjusted to reflect the Stock Split (as defined below). See Notes 1 and 11
of Notes to Consolidated Financial Statements.

(3) Adjusted to give effect to the sale of 1,665,000 shares of Class A Common
Stock offered by the Company hereby, based upon an assumed public offering
price of $38 1/8 per share, and the receipt and application of the net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
------------------------------

Unless otherwise indicated, the information presented in this Prospectus
(i) has been adjusted to reflect the two-for-one stock split in the form of a
100 percent stock dividend of both classes of outstanding Common Stock paid on
June 7, 1996 to holders of record on May 20, 1996 (the "Stock Split"), and (ii)
assumes that the Underwriters' over-allotment option is not exercised.

4
<PAGE> 8

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," such as those concerning future
product sales and gross margins, certain statements contained under "Business,"
such as statements concerning the development and introduction of new products
and the development of alternative Digital Subscriber Line ("DSL") technology,
and other statements contained in this Prospectus regarding matters that are not
historical facts are forward-looking statements (as such term is defined in the
rules promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act")). Because such forward-looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
herein under "Risk Factors." The Company undertakes no obligation to release
publicly the result of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business before
purchasing shares of the Class A Common Stock offered hereby.

RELIANCE ON EMERGING MARKET FOR ADSL TECHNOLOGY; ANTICIPATED LOSSES

The Company's future growth is substantially dependent upon whether DSL
technology, particularly as it relates to ADSL systems, gains widespread
commercial acceptance by telcos. Since 1992, the Company has invested, and
expects to continue to invest, significant resources in the development of ADSL
technology. However, the market for products using ADSL technology is only now
emerging as telcos have recently begun to consider implementing ADSL technology
in their networks. As a result, revenues from ADSL systems have been difficult
for the Company to forecast, and the Company's overall results of operations
have experienced substantial fluctuations in recent periods. The timing of
orders and shipments of ADSL systems can have a significant impact on the
Company's revenues and results of operations. For example, the Company's
revenues increased by $9.8 million in the fourth quarter of fiscal 1995 compared
to the third quarter of fiscal 1995 due to a large shipment of ADSL systems to
one customer. The Company has continued to ship ADSL systems but at a reduced
level from that of the fourth quarter of fiscal 1995, which has resulted in a
reduction in quarterly revenues when compared to the preceding quarter in three
of the four quarters in fiscal 1996. Due to the Company's significant ongoing
investment in ADSL technology, the Company anticipates losses in at least the
first and second quarters of fiscal 1997. The Company's ability to achieve
profitability or revenue growth in the future will depend upon market acceptance
of the Company's ADSL systems and the development and market acceptance of other
DSL products introduced by the Company. To date, telcos have deployed the
Company's ADSL systems solely for laboratory, technical and marketing trials and
have not yet begun commercial deployment. The Company is unable to predict
whether such laboratory, technical and marketing trials will be successful and
when commercial deployment will begin, if at all. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

5
<PAGE> 9

Integrated Service Digital Network ("ISDN"), cable modems and optical fiber, and
telco policies that favor the use of such alternative technologies over ADSL
technology. As a result of these factors, there can be no assurance that telcos
will pursue the deployment of products using ADSL technology. Even if telcos
adopt policies favoring full-scale implementation of ADSL technology, there is
no assurance that sales of the Company's ADSL systems will become significant or
that the Company will be able to successfully introduce on a timely basis or
achieve sales of ADSL systems and other products based upon DSL technology
planned for future introduction. Due to increased competition, low barriers to
entry, product pricing pressures and new product introductions in the Company's
core Digital Signal Hierarchy Level 0 ("DS0") and Digital Signal Hierarchy Level
1 ("DS1") markets, these DS0 and DS1 product groups are not expected to generate
sufficient revenues or profits to offset any losses that the Company may
experience due to a lack of sales of ADSL systems and other DSL products
currently under development. As a result, if telcos fail to deploy the Company's
ADSL systems, and the Company therefore does not receive significant revenues
from ADSL sales, then the Company's business and results of operations will be
materially adversely affected and there can be no assurance that the Company
will achieve profitability in the future. See "Business -- Industry Overview"
and "Business -- Products."

FLUCTUATIONS IN QUARTERLY RESULTS; LACK OF BACKLOG

The Company has experienced, and expects to continue to experience,
significant fluctuations in its quarterly results of operations. Factors which
have had an influence on and may continue to influence the Company's results of
operations in a particular quarter include the size and timing of customer
orders and subsequent shipments, customer order deferrals in anticipation of new
products, timing of product introductions or enhancements by the Company or its
competitors, market acceptance of new products, technological changes in the
telecommunications industry, competitive pricing pressures, accuracy of customer
forecasts of end-user demand, changes in the Company's operating expenses,
personnel changes, foreign currency fluctuations, changes in the mix of products
sold, quality control of products sold, disruption in sources of supply,
regulatory changes, capital spending, delays of payments by customers and
general economic conditions. The timing and volume of customer orders are
difficult to forecast because telcos typically require prompt delivery of
products and a substantial majority of the Company's sales are booked and
shipped in the same quarter pursuant to nonbinding purchase agreements. As a
result, the Company has a limited backlog of orders for its products and must
maintain sufficient raw and finished goods inventory levels to satisfy
anticipated customer demand on a timely basis. Maintaining sufficient inventory
levels to assure prompt delivery of the Company's products increases the risk of
inventory obsolescence and associated write-offs, which could have an adverse
effect on the Company's business and results of operations.

Westell intends to continue to make significant ongoing development
expenditures for new products and technologies which may adversely affect
quarter to quarter results of operations. The Company's expense levels are based
in part on expectations of future revenues and are relatively fixed in the short
term. The Company has significantly increased, and intends to continue to
increase, operating expenditures and inventory, particularly as the Company
expands its operations to develop and market products based upon ADSL
technology. Consequently, a shortfall in quarterly revenues due to a lack of
sales of ADSL systems or otherwise would adversely affect the Company's business
and results of operations in a given quarter due to the Company's inability to
adjust expenses or inventory to match revenues for that quarter. In addition,
while warranty returns to date have been relatively insignificant, there can be
no assurance that warranty returns will not increase as the Company increases
its sales of products based upon emerging technology such as its ADSL systems.
Increases in warranty returns in excess of those experienced by the Company to
date may have an adverse effect on the Company's quarterly results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Manufacturing."

RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS

The markets for the Company's products are characterized by intense
competition, rapid technological advances, evolving industry standards, changes
in end-user requirements, frequent new product introductions and enhancements,
and evolving telco service offerings. If technologies or standards applicable to
the

6
<PAGE> 10

Company's products (or telco service offerings based on the Company's products)
become obsolete or fail to gain widespread commercial acceptance, then the
Company's business and results of operations will be materially adversely
affected. Moreover, the introduction of products embodying new technology, the
emergence of new industry standards or changes in telco services could render
the Company's existing products, as well as products under development, obsolete
and unmarketable. The Company believes that the continued deployment of new
technologies in the U.S., such as High bit-rate Digital Subscriber Line
("HDSL"), in the local access network will adversely affect demand for certain
of its existing products such as NIUs, which accounted for 45.5% of the
Company's revenues in fiscal 1996, and that its future success will largely
depend upon its ability to continue to enhance its existing products and to
successfully develop and market new products on a cost-effective and timely
basis. In this regard, most of the Company's current product offerings apply
primarily to the delivery of digital communications over copper wire in the
local access network. While the Company has competed successfully to date by
developing high performance products for transmission over copper wire, it
expects that the increasing deployment of fiber and wireless broadband
transmission in the local access network (each of which uses a significantly
different process of delivery) will require the Company to develop new products
to meet the demands of these emerging transmission media.

The Company's past sales and profitability have resulted, to a significant
extent, from its ability to anticipate changes in technology, industry standards
and telco service offerings, and to develop and introduce new and enhanced
products. The Company's continued ability to adapt to such changes will be a
significant factor in maintaining or improving its competitive position and its
prospects for growth. Due to rapid technological changes in the
telecommunications industry, the RBOCs' lengthy product approval and purchase
processes and the Company's reliance on third-party technology for the
development of new products, however, there can be no assurance that the Company
will successfully introduce new products on a timely basis or achieve sales of
new products in the future. In addition, there can be no assurance that the
Company will have the financial and manufacturing resources necessary to
continue to successfully develop new products based on emerging technology or to
otherwise successfully respond to changing technology, industry standards and
telco service offerings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business -- Industry Overview," "Business
- -- Products," "Business -- Research and Product Development" and "Business --
Competition."

COMPETITION

The markets for the Company's products are intensely competitive and the
Company expects competition to increase in the future, especially in the
emerging ADSL market. Westell's principal competitors in the DS0 market are
Adtran, Inc., Tellabs, Inc. and Teltrend, Inc. Westell's principal competitors
in the DS1 market are ADC Telecommunications Inc., PairGain Technologies, Inc.
and Teltrend, Inc. The Company's current competitors in the ADSL market include
Alcatel Network Systems, Amati Communications Corp., AT&T Paradyne Corporation
("AT&T Paradyne"), ECI Telecom, Inc., Ericsson, LG Information and
Communications, Ltd., Lucent Technologies, PairGain Technologies, Inc., Orckit
Communications, Ltd. and Performance Telecom Corp. The Company expects
competition in the ADSL market in the near future from numerous other companies.
In addition, the Telecommunications Act of 1996 (the "Telecommunications Act")
which was signed into law on February 8, 1996, permits the RBOCs to engage in
manufacturing activities after the Federal Communications Commission (the "FCC")
authorizes an RBOC to provide long distance services within its service
territory. An RBOC must first meet specific statutory and regulatory tests
demonstrating that its monopoly market for local exchange services is open to
competition before it will be permitted to enter the long distance market. When
these tests are met, an RBOC will be permitted to engage in manufacturing
activities. Therefore, RBOCs, which are the Company's largest customers, may
potentially become the Company's competitors as well. Many of the Company's
competitors and potential competitors have greater financial, technological,
manufacturing, marketing and human resources than the Company. Any increase in
competition could reduce the Company's gross margin, require increased spending
by the Company on research and development and sales and marketing, and
otherwise materially adversely affect the Company's business and results of
operations. See "-- Dependence on Third-Party Technology; Relationship with AT&T
Paradyne."

7
<PAGE> 11

adopted policies that favor the deployment of fiber. To the extent that telcos
choose to install fiber and other transmission media between the central office
and the end user, the Company expects that demand for its copper wire-based
products will decline. Telcos face competition from cable operators, new local
access providers and wireless service providers that are capable of providing
high speed digital transmission to end users. To the extent telcos are not
successful in responding to this competition by offering high speed digital
transmission, demand for ADSL systems may not develop. In addition, the
deployment of certain products and technologies for copper wire may also reduce
the demand for the types of products currently manufactured by the Company.
Specifically, the deployment of HDSL in the U.S., which reduces telcos' need for
T-1 repeaters and NIUs, may result in a decrease in demand for Westell's
DS1-based products. Further, the Company believes that the domestic market for
many of its DS0-based products is decreasing, and will likely continue to
decrease, as high capacity digital transmission becomes less expensive and more
widely deployed. See "Business -- Competition," "Business -- Marketing, Sales
and Distribution" and "Business -- Government Regulation."

DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS; LENGTHY SALES CYCLES

The Company depends, and will continue to depend, on the RBOCs and other
independent local exchange carriers for substantially all of its revenues. Sales
to the RBOCs accounted for 72.6%, 74.3% and 53.8% of the Company's revenues in
fiscal 1994, 1995 and 1996, respectively. Consequently, the Company's future
success will depend significantly upon the timeliness and size of future
purchase orders from the RBOCs, the product requirements of the RBOCs, the
financial and operating success of the RBOCs, and the success of the RBOCs'
services that use the Company's products. Any attempt by an RBOC or other telco
to seek out additional or alternative suppliers or to undertake, as permitted
under applicable regulations, the internal production of products would have a
material adverse effect on the Company's business and results of operations. In
addition, the Company's sales to its largest customers have in the past
fluctuated and in the future are expected to fluctuate significantly from
quarter to quarter and year to year. The loss of such customers or the
occurrence of such sales fluctuations would materially adversely affect the
Company's business and results of operations. Bell Atlantic and NYNEX and
Pacific Telesis and SBC Communications, respectively, have recently announced
their intent to merge. The Company is unable to predict what effect either of
these mergers, if completed, would have on the demand for the Company's ADSL
systems or other products. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Customers" and
"Business -- Government Regulation."

The RBOCs and the Company's other customers are significantly larger than,
and are able to exert a high degree of influence over, the Company. Prior to
selling its products to telcos, the Company must undergo lengthy approval and
purchase processes. Evaluation can take as little as a few months for products
that vary slightly from existing products or up to a year or more for products
based on new technologies such as ADSL. Accordingly, the Company is continually
submitting successive generations of its current products as well as new
products to its customers for approval. The length of the approval process can
vary and is affected by a number of factors, including the complexity of the
product involved, priorities of telcos, telcos' budgets and regulatory issues
affecting telcos. The requirement that telcos obtain FCC approval for certain
new telco services prior to their implementation has in the past delayed the
approval process. There can be no assurance that such delays, if experienced in
the future, will not have a material adverse affect on the Company's business
and results of operations. While the Company has been successful in the past in
obtaining product approvals from its customers, there can be no assurance that
such approvals or that ensuing sales of such products will continue to occur.
Even if demand for the Company's products is high, the RBOCs have sufficient
bargaining power to demand low prices and other terms and conditions that may
materially adversely affect the Company's business and results of operations.
See "Business -- Marketing, Sales and Distribution."

DEPENDENCE ON THIRD-PARTY TECHNOLOGY; RELATIONSHIP WITH AT&T PARADYNE

8
<PAGE> 12

technology would force the Company to find other developers on a timely basis or
develop its own technology. There can be no assurance that the Company will be
able to obtain the third-party technology necessary to continue to develop and
introduce new and enhanced products, that the Company will obtain third-party
technology on commercially reasonable terms or that the Company will be able to
replace third-party technology in the event such technology becomes unavailable,
obsolete or incompatible with future versions of the Company's products. The
absence, or any significant delay in the replacement, of third-party technology
would have a material adverse effect on the Company's business and results of
operations.

The Company's ADSL products are dependent upon a carrierless
amplitude/phase modulation ("CAP") DSL technology known as GlobeSpan(TM) that
the Company licenses from AT&T Paradyne. AT&T Paradyne is currently the sole
provider of this CAP DSL technology and the Company currently would not be able
to produce any of its ADSL systems without using this technology. The license
between AT&T Paradyne and the Company (the "AT&T License"), which expires in
December 2002, is nonexclusive and this technology has been licensed to numerous
manufacturers. The Company has entered into cooperation and development
agreements with other technology suppliers who are developing alternative DSL
technologies, such as discrete multi-tone ("DMT") DSL technology. Under one such
arrangement, the Company is currently testing prototypes of an alternative DSL
technology. Consequently, in the event AT&T Paradyne fails to renew the AT&T
License, the Company believes that it will have sufficient access to alternative
sources of DSL technology prior to December 2002 so that it will be able to
continue to produce ADSL systems. However, the cancellation or failure of AT&T
Paradyne to renew the AT&T License would materially adversely affect the
Company's business and results of operations if other sources of DSL technology
do not become readily available on similar terms or telcos elect not to deploy
ADSL systems utilizing alternative DSL technologies, such as DMT DSL technology.

In addition, AT&T Paradyne has formed a business unit that develops and
markets products competitive with the Company's products, such as ADSL. Although
this newly-formed business unit does not affect the Company's AT&T License and
is an independent unit from the business unit licensing CAP DSL technology,
there can be no assurance that the formation of this business unit will not
affect the Company's ability to license CAP DSL technology from AT&T Paradyne
after the AT&T License expires. In addition, AT&T Corporation announced that it
intends to sell AT&T Paradyne. The Company is unable to predict what effect, if
any, such a sale would have on the Company's relationship with AT&T Paradyne or
on AT&T Paradyne's licensing of its CAP DSL technology or future technology to
the Company or others. In the event that AT&T Paradyne is sold to a competitor
of the Company, the Company's ability to continue to license CAP DSL technology
after December 2002 may be adversely affected. See "Business -- Proprietary
Rights."

DEPENDENCE ON SOLE OR LIMITED SOURCE SUPPLIERS

Certain key components, such as integrated circuits and other electronic
components, used in the Company's products are currently available from only one
source or a limited number of suppliers. For instance, the Company currently
depends on a division of Lucent Technologies (formerly known as AT&T
Microelectronics) to provide critical integrated circuits used in the Company's
ADSL products. The Company purchases integrated circuits from Lucent
Technologies on a purchase order basis and does not have any formal supply
arrangements with Lucent Technologies. In addition, certain electronic
components are currently in short supply and are provided on an allocation basis
to the Company and other users based upon past usage. There can be no assurance
that the Company will be able to continue to obtain sufficient quantities of
integrated circuits or other electronic components as required, or that such
components, if obtained, will be available to the Company on commercially
reasonable terms. In addition, the Company anticipates that integrated circuit
production capacity and availability of certain electronic components from its
suppliers may be insufficient to meet demand in the future. Integrated circuits
and other electronic components are key components in most of the Company's
products and are fundamental to the Company's business strategy of developing
new and succeeding generations of products at reduced unit costs without
compromising functionality or serviceability. In the past, however, the Company
has experienced delays in the receipt of certain of its key components, such as
integrated circuits, which have resulted in delays in related product
deliveries. There can be no assurance that delays in key components or product
deliveries will not occur in the future due to shortages

9
<PAGE> 13

resulting from the limited number of suppliers, the financial or other
difficulties of such suppliers, or the possible limitations in integrated
circuit production capacity or electronic component availability because of
significant worldwide demand for these components. The inability to obtain
sufficient key components or to develop alternative sources for such components,
if and as required in the future, could result in delays or reductions in
product shipments, which in turn could have a material adverse effect on the
Company's customer relationships and its business and results of operations. See
"Business -- Manufacturing."

GOVERNMENT REGULATION

Federal and state regulatory agencies, including the FCC and various state
public utility and service commissions, regulate most of the Company's domestic
customers. While such regulation does not affect the Company directly, the
effects of such regulation on the Company's customers may, in turn, adversely
impact the Company's business and results of operations. For example, FCC
regulatory policies affecting the availability of telco services, and other
terms on which telcos conduct their business, may impede the Company's
penetration of certain markets. The Telecommunications Act lifted certain
restrictions on telcos' ability to provide interactive multimedia services
including video-on-demand. The Telecommunications Act establishes new
regulations whereby telcos may provide various types of video services. Rules to
implement these new statutory provisions are now being considered by the FCC.
While the statutory and regulatory framework for telcos providing video products
has become more favorable, it is uncertain at this time how this will affect
telcos demand for products based upon ADSL technology. In addition, the
Company's business and results of operations may also be adversely affected by
the imposition of certain tariffs, duties and other import restrictions on
components which the Company obtains from non-domestic suppliers, or by the
imposition of export restrictions on products which the Company sells
internationally. Changes in current or future laws or regulations, in the U.S.
or elsewhere, could materially adversely affect the Company's business and
results of operations.

In addition, the Telecommunications Act permits the RBOCs to engage in
manufacturing activities after the FCC authorizes an RBOC to provide long
distance services within its service territory. An RBOC must first meet specific
statutory and regulatory tests demonstrating that its monopoly market for local
exchange services is open to competition before it will be permitted to enter
the long distance market. When these tests are met, an RBOC will be permitted to
engage in manufacturing activities and the RBOCs, which are the Company's
largest customers, may become the Company's competitors as well. See "Business
- -- Government Regulation."

POTENTIAL PRODUCT RECALLS; WARRANTY EXPENSES

The Company's products are required to meet rigorous standards imposed by
its customers. Most of the Company's products carry a limited warranty ranging
from two to seven years, which generally covers defects in materials or
workmanship and failure to meet published specifications, but excludes damages
caused by improper use and all other express or implied warranties. In the event
there are material deficiencies or defects in the design or manufacture of the
Company's products, the affected products could be subject to recall. For the
past five fiscal years, the Company's warranty expenses have been relatively
insignificant. Although the Company maintains a comprehensive quality control
program, there can be no assurance that the Company's products will not suffer
from defects or other deficiencies or that the Company will not experience a
material product recall in the future. Complex products such as those offered by
the Company may contain undetected errors or failures when first introduced or
as new versions are released. Any product recall as a result of such errors or
failures, and the associated negative publicity, could result in the loss of or
delay in market acceptance of the Company's products and have a material adverse
effect on the Company's business and results of operations. The Company's
standard limited warranty for its ADSL products ranges from two to five years.
Since the Company's ADSL products are new, with limited time in service, the
Company cannot predict the level of warranty claims that it will experience for
these products. Despite testing by the Company and its customers, there can be
no assurance that existing or future products based on ADSL or other technology
will not contain undetected errors or failures when first introduced or as new
versions are released. Such errors or failures could result in warranty returns
in excess of those historically experienced by the Company and have a material
adverse effect on the Company's business and results of operations. See
"Business -- Customer Service and Support."

10
<PAGE> 14

RISKS DUE TO EXPANDING INTERNATIONAL OPERATIONS

International revenues represented 5.0% and 23.8% of the Company's revenues
in fiscal 1995 and 1996, respectively. The Company believes that international
revenues will represent a significant percentage of revenues in the future. Due
to its export sales, the Company is subject to the risks of conducting business
internationally, including unexpected changes in regulatory requirements,
foreign currency fluctuations which could result in reduced revenues or
increased operating expenses, tariffs and trade barriers, potentially longer
payment cycles, difficulty in accounts receivable collection, foreign taxes, and
the burdens of complying with a variety of foreign laws and telecommunications
standards. The Company's contracts with its international customers are
typically denominated in foreign currency and any decline in the value of such
currency could have a significant impact on the Company's business and results
of operations. For example, in fiscal 1996, the Company incurred a $270,000
transaction loss on receivables due to foreign currency fluctuations. To date,
the Company has not engaged in hedging with respect to its foreign currency
exposure but may do so in the future. The Company also is subject to general
geopolitical risks, such as political and economic instability and changes in
diplomatic and trade relationships, in connection with its international
operations. In addition, the laws of certain foreign countries may not protect
the Company's proprietary technology to the same extent as do the laws of the
U.S. There can be no assurance that the risks associated with the Company's
international operations will not materially adversely affect the Company's
business and results of operations in the future or require the Company to
modify significantly its current business practices. See "Business --
Customers."

FACTORS AFFECTING ABILITY TO MANAGE AND SUSTAIN GROWTH

Since fiscal 1992, the Company has experienced a period of rapid growth
which has placed, and is expected to continue to place, a significant strain on
the Company's management, operational and financial resources. The Company's
growth is expected to require the addition of new management personnel and the
development of additional expertise by existing management personnel. The
Company's ability to manage growth effectively, particularly given the
increasingly international scope of its operations, will require it to continue
to implement and improve its operational, financial and management information
systems, to develop the management skills of its managers and supervisors and to
train, motivate and manage its employees. In addition, the Company currently
manufactures most of its products internally and is in the process of developing
the manufacturing capabilities necessary to supply and support large volumes of
ADSL systems. As part of its strategic plan to meet the potential worldwide
demand for its ADSL systems, the Company has entered into discussions to
establish subcontracting relationships for the assembly of its ADSL systems and
in the future may become increasingly dependent on subcontractors. There can be
no assurance that the Company will be successful in increasing its manufacturing
capacity in a timely and cost-effective manner or that the possible transition
to subcontracting will not materially adversely affect the Company's business
and results of operations. The Company's failure to effectively manage its
growth would have a material adverse effect on the Company's business and
results of operations.

PROPRIETARY TECHNOLOGY; RISK OF THIRD-PARTY CLAIMS OF INFRINGEMENT

11
<PAGE> 15

parties will not result in costly litigation, or that the Company would prevail
in any such litigation or be able to license any valid and infringed patents
from third parties on commercially reasonable terms. Further, such litigation,
regardless of its outcome, could result in substantial costs to and diversion of
effort by the Company. Any infringement claim or other litigation against or by
the Company could have a material adverse effect on the Company's business and
results of operations. See "Business -- Proprietary Rights."

DEPENDENCE ON KEY PERSONNEL

The success of the Company is dependent, in part, on its ability to attract
and retain qualified technical, marketing, sales and management personnel.
Competition for such personnel is intense and the Company's inability to attract
and retain additional key employees or the loss of one or more of its current
key employees could materially adversely affect the Company's business and
results of operations. The Company does not have employment contracts or
noncompete agreements with any of its executive officers except Richard Riviere,
the Vice President of Transaction Services and President of Conference Plus,
Inc., a subsidiary of the Company. Mr. Riviere has agreed not to compete with
the Company for two years after the termination of his employment with the
Company. There can be no assurance that the Company will be successful in hiring
or retaining key personnel. See "Management."

EXPECTED VOLATILITY OF STOCK PRICE

The market price of the Company's Class A Common Stock has risen
substantially since the Company's initial public offering in November 1995. The
Class A Common Stock is quoted on the Nasdaq National Market, which market has
experienced and is likely to experience in the future significant price and
volume fluctuations. The trading prices of many technology stocks are at or near
their historical highs and reflect price/earnings ratios substantially above
historical norms. There can be no assurance that these trading prices and
price/earnings ratios will be sustained. Market fluctuations may adversely
affect the market price of the Company's Class A Common Stock without regard to
the operating performance of the Company. In addition, the Company believes that
factors such as announcements of developments related to the Company's business,
fluctuations in the Company's results of operations, sales of substantial
amounts of securities of the Company into the marketplace, general conditions in
the telecommunications industry or the worldwide economy, an outbreak of
hostilities, a shortfall in revenues or earnings compared to analysts'
expectations, changes in analysts' recommendations or projections, announcements
of new products by the Company or its competitors or developments in the
Company's relationships with its suppliers or customers could cause the price of
the Class A Common Stock to fluctuate in the future, perhaps substantially.
There can be no assurance that the market price of the Company's Class A Common
Stock will not experience significant fluctuations in the future, including
fluctuations that are unrelated to the Company's performance. General market
price declines or market volatility in the future could adversely affect the
market price of the Class A Common Stock, and the current market price of the
Class A Common Stock may not be indicative of future market prices.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of substantial amounts of Class A Common Stock (including shares
issuable upon conversion of outstanding Class B Common Stock) in the public
market following this offering could adversely affect the market price of the
Class A Common Stock. Upon the completion of this offering, all outstanding
shares of Common Stock will be either freely tradeable in the public market or
will be eligible for immediate public sale subject (i) to certain rights of
first refusal held by members of the Robert C. Penny III family with respect to
19,552,938 shares held pursuant to a Voting Trust Agreement dated February 23,
1994, as amended (the "Voting Trust"), among Robert C. Penny III and Melvin J.
Simon, as trustees (the "Trustees"), and members of the Penny family (as defined
in the Voting Trust) and Simon family (as defined in the Voting Trust) and (ii)
in the case of certain shares, to the volume and manner of sale limitations
imposed by Rule 144 under the Securities Act. Holders of 24,937,806 shares have,
subject to certain limited exceptions, agreed not to sell or offer to sell or
otherwise dispose of the shares of Common Stock currently held by them, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into or exchangeable for any shares of Common Stock for a period of
90 days after the date of this Prospectus without

12
<PAGE> 16

the prior written consent of Montgomery Securities. In addition, as Trustees
under the Voting Trust, beginning 90 days after the date of this Prospectus,
Robert C. Penny III and Melvin J. Simon, as Trustees of the Voting Trust, are
entitled to certain registration rights with respect to the 19,552,938 shares of
Class A Common Stock issuable upon conversion of the Class B Common Stock held
in the Voting Trust. In addition, the Company has registered an aggregate of
2,876,958 shares of Class A Common Stock reserved for issuance under the Stock
Purchase Plan and the Stock Incentive Plan. The issuance of shares under the
Stock Purchase Plan and the Stock Incentive Plan will result in the dilution of
the voting power of the shares of Class A Common Stock purchased in this
offering and could have a dilutive effect on the Company's earnings per share.
See "Management -- Stock Plans," "Description of Capital Stock," "Shares
Eligible for Future Sale" and "Underwriting."

CONTROL BY PRINCIPAL STOCKHOLDERS

The Company's capital stock consists of Class A Common Stock and Class B
Common Stock. Holders of Class A Common Stock are entitled to one vote per share
and holders of the Class B Common Stock are entitled to four votes per share. As
Trustees of the Voting Trust, immediately following this offering, Robert C.
Penny III and Melvin J. Simon will have the exclusive power to vote 53.9% of the
outstanding shares of Common Stock, which constitute 78.2% of the votes entitled
to be cast by the holders of the Company's Common Stock, according to the mutual
determination by Messrs. Penny and Simon as to the best interests of the
beneficiaries of the Voting Trust, consisting of the Penny family and the Simon
family. In addition, all members of the Penny family who are beneficiaries under
the Voting Trust are parties to a Stock Transfer Restriction Agreement which
prohibits such beneficiaries from transferring any Common Stock or their
beneficial interests in the Voting Trust acquired prior to the date of this
Prospectus without first offering such Common Stock to the other members of the
Penny family. Consequently, Messrs. Penny and Simon, as Trustees, will
effectively control the Company and generally have sufficient voting power to
elect all of the directors and to determine the outcome of any corporate
transaction or other matter submitted to the stockholders for approval. Such
control may have the effect of discouraging certain types of transactions
involving an actual or potential change of control of the Company, including
transactions in which the holders of Class A Common Stock might otherwise
receive a premium for their shares over the then-current market price. See
"Principal and Selling Stockholders" and "Description of Capital Stock."

ANTI-TAKEOVER PROVISIONS

The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to determine the relative preferences, limitations
and relative rights of those shares with respect to dividends, redemption,
payments on liquidation, sinking fund provisions, conversion privileges and
voting rights without any further vote or action by the stockholders. The rights
of the holders of Class A Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. While the Company has no present intention to issue shares of
Preferred Stock, any such issuance could have the effect of making it more
difficult for a third party to acquire control of the Company. In addition, the
Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which could have the effect of delaying or
preventing a change of control of the Company. Furthermore, certain provisions
of the Company's Amended and Restated Certificate of Incorporation (the "Amended
Certificate of Incorporation") and By-laws may individually or collectively have
the effect of delaying or preventing changes in control or management of the
Company and could have a depressive effect on the market price of the Company's
Class A Common Stock. For example, the Company's Amended Certificate of
Incorporation and By-laws contain provisions that limit the right of
stockholders to call special stockholders meetings and require that stockholders
follow an advance notification procedure for certain stockholder nominations of
candidates to the Board of Directors and for new business to be conducted at
stockholders meetings. See "Description of Capital Stock."

NO DIVIDENDS

The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future.

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<PAGE> 17

THE COMPANY

Westell Technologies, Inc. was incorporated in Delaware on October 29, 1980
under the name "R-Com, Inc." In November 1992, the Company changed its name to
"Electronic Information Technologies, Inc.," and in October 1995 the Company
changed its name to "Westell Technologies, Inc." Westell is a holding company
and operates through its subsidiaries. Westell, Inc., a wholly owned subsidiary
of the Company (the "Operating Company"), designs, manufactures and distributes
telecommunications equipment. Westell International, Inc., a wholly owned
subsidiary of the Company ("Westell International"), and Westell Europe, Ltd., a
wholly owned subsidiary of Westell International, market and distribute the
Company's telecommunications products in international markets. Conference Plus,
Inc., an 89.2%-owned subsidiary of the Company ("Conference Plus"), provides
teleconferencing services. Video Conference Plus, Inc., a wholly owned
subsidiary of Conference Plus, markets video teleconferencing equipment and
services. The Company has a majority interest in Westell-Meridian LLC, which was
established in fiscal 1996 for the purpose of developing a new corporate
facility site. Key Prestige Information Network Systems, Inc., an 88%-owned
subsidiary of the Company ("KPINS"), utilizes electronic networks to process
business transactions for various customers. In August 1995, the Company
approved a plan for the disposition of KPINS. As used in this Prospectus, the
terms "Westell" and the "Company" include Westell Technologies, Inc. and its
subsidiaries, unless the context otherwise indicates. The Company's principal
executive offices are located at 101 Kendall Point Drive, Oswego, Illinois 60543
and its telephone number is (708) 820-1919.

FlexCAP(R) is a registered trademark of the Company. This Prospectus also
includes other tradenames and trademarks of the Company (including Information
CopperHighway(TM), FlexVision(TM), InterAccess(TM), InterVision(TM),
WorldVision(TM), SuperVision(TM) and EnVision(TM)) and tradenames and trademarks
of other companies.

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<PAGE> 18

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,665,000 shares of
Class A Common Stock offered by the Company hereby, based upon an assumed public
offering price of $38 1/8 per share, after deducting the underwriting discount
and estimated offering expenses, are estimated to be approximately $60.2 million
($65.8 million if the Underwriters' over-allotment option is exercised in full).
The Company will not receive any proceeds from the sale of the shares by the
Selling Stockholders.

The Company estimates that it will use approximately $6.0 million of the
net proceeds to purchase capital equipment. The Company expects to use the
remaining proceeds for general corporate purposes, including working capital and
possible acquisitions of businesses, technologies or products complementary to
the Company's business. Although the Company may pursue acquisition
opportunities in the future, there are no present understandings, commitments or
agreements with respect to any such acquisitions. Pending such uses, the Company
intends to invest the proceeds in short-term interest-bearing securities.

PRICE RANGE OF CLASS A COMMON STOCK

The Company effected its initial public offering on November 30, 1995 at a
price to the public of $6.50 per share. The Company's Class A Common Stock is
quoted on the Nasdaq National Market under the symbol "WSTL." The following
table sets forth for the periods indicated the high and low closing sale prices
for the Class A Common Stock as reported on the Nasdaq National Market, which
prices reflect the Stock Split.

<TABLE>
<CAPTION>
HIGH LOW
--------------- -------
<S> <C> <C>
FISCAL YEAR 1996
Third Quarter (from December 1, 1995)................................... $13 13/16 $ 9 3/4
Fourth Quarter.......................................................... 20 9 5/8
FISCAL YEAR 1997
First Quarter (through May 30, 1996).................................... 42 1/2 18 5/8
</TABLE>

On May 30, 1996, the last reported sale price of the Class A Common Stock
on the Nasdaq National Market was $38 1/8 per share. As of May 30, 1996, there
were approximately 218 holders of record of the outstanding shares of Class A
Common Stock.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain any future earnings to finance
the growth and development of its business.

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<PAGE> 19

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996, as adjusted to reflect the sale by the Company of the 1,665,000 shares
of Class A Common Stock offered hereby and the receipt and application by the
Company of the estimated net proceeds therefrom, based upon an assumed public
offering price of $38 1/8 per share, and after deducting the underwriting
discount and estimated offering expenses. The capitalization information set
forth in the table below is qualified by the more detailed Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus
and should be read in conjunction with such Consolidated Financial Statements
and Notes.

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt..................................... $ 1,591 $ 1,591
======= =========
Long-term debt, excluding current portion............................. $ 2,836 $ 2,836
------- ---------
Stockholders' equity:
Class A Common Stock, $0.01 par value per share, 43,500,000 shares
authorized; 12,801,606 shares issued and outstanding, actual; and
15,051,962 shares issued and outstanding, as adjusted (1)........ 128 151
Class B Common Stock, $0.01 par value per share, 25,000,000 shares
authorized; 21,838,376 shares issued and outstanding, actual; and
21,253,020 shares issued and outstanding, as adjusted............ 218 212
Preferred Stock, $0.01 par value per share, 1,000,000 shares
authorized; no shares issued and outstanding, actual; and no
shares issued and outstanding, as adjusted....................... -- --
Additional paid-in capital.......................................... 34,285 94,440
Cumulative translation adjustment................................... (59) (59)
Retained earnings..................................................... 4,413 4,413
------- ---------
Total stockholder's equity..................................... 38,985 99,157
------- ---------
Total capitalization........................................ $41,821 $ 101,993
======= =========
</TABLE>

- ------------------------------

(1) Excludes (i) 2,663,426 shares of Class A Common Stock reserved for issuance
pursuant to the Stock Incentive Plan, 754,250 of which are subject to
outstanding options granted at a weighted average exercise price of $33.92
per share, and (ii) 213,532 shares reserved for issuance under the Stock
Purchase Plan. See "Management -- Stock Plans."

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<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of March 31, 1992,
1993, 1994, 1995 and 1996 and for each of the five fiscal years in the period
ended March 31, 1996 have been derived from the Company's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants. The data set forth below is qualified by reference to, and should
be read in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
the related Notes thereto and other financial information appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $33,621 $43,221 $51,051 $74,029 $83,236
Cost of goods sold............................. 18,974 25,358 30,250 44,494 50,779
------- ------- ------- ------- -------
Gross margin................................. 14,647 17,863 20,801 29,535 32,457
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.......................... 3,839 5,688 8,068 12,169 13,744
Research and development..................... 2,778 5,284 7,695 10,843 12,603
General and administrative................... 3,123 4,092 5,502 6,701 8,364
------- ------- ------- ------- -------
Total operating expenses.................. 9,740 15,064 21,265 29,713 34,711
------- ------- ------- ------- -------
Operating income (loss) from continuing
operations................................... 4,907 2,799 (464) (178) (2,254)
Other income (expense), net.................... (5) (14) (36) 34 (226)
Interest expense............................... 144 137 176 769 859
------- ------- ------- ------- -------
Income (loss) from continuing operations before
income taxes................................. 4,758 2,648 (676) (913) (3,339)
Provision (benefit) for income taxes........... 1,729 913 (989) (788) (1,886)
------- ------- ------- ------- -------
Income (loss) from continuing operations....... 3,029 1,735 313 (125) (1,453)
Discontinued operations (loss)................. -- (37) (100) (383) (622)
------- ------- ------- ------- -------
Net income (loss).............................. $ 3,029 $ 1,698 $ 213 $ (508) $(2,075)
======= ======= ======= ======= =======
Net income (loss) per share: (1)
Continuing operations........................ $ 0.11 $ 0.06 $ 0.01 $ (0.01) $ (0.05)
Discontinued operations...................... -- -- (0.00) (0.01) (0.02)
------- ------- ------- ------- -------
Net income (loss) per share.................... $ 0.11 $ 0.06 $ 0.01 $ (0.02) $ (0.07)
======= ======= ======= ======= =======
Dividends declared per share................... $ -- $ -- $ -- $ -- $ --
Average number of common shares outstanding
(1).......................................... 26,560 27,620 28,486 28,952 30,846
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 3,971 $ 5,137 $ 3,053 $ 1,280 $28,741
Total assets................................... 11,662 15,777 29,327 40,276 64,448
Revolving promissory notes..................... 1,500 1,700 1,700 11,089 --
Long-term debt, including current portion...... 936 704 3,339 4,129 4,427
Total stockholders' equity..................... 5,586 7,719 8,002 7,558 38,985
</TABLE>

- ------------------------------
(1) Adjusted to reflect the Stock Split. See Notes 1 and 11 of Notes to
Consolidated Financial Statements.

17
<PAGE> 21

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

This Prospectus contains, in addition to historical information,
forward-looking statements that include risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include
those discussed below, as well as those discussed elsewhere in this Prospectus.
The Company undertakes no obligation to release publicly the result of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

OVERVIEW

The Company commenced operations in 1980 as a provider of
telecommunications network transmission products that enable advanced
telecommunications services over copper telephone wires. Until fiscal 1994, the
Company derived substantially all of its revenues from its DS0 and DS1 product
lines, particularly the sale of NIUs and related products, which accounted for
at least 45% of revenues in each of the last three fiscal years. The Company
introduced its first DSL products in fiscal 1993 and these products represented
3.9%, 20.6% and 24.4% of revenues in fiscal 1994, 1995 and 1996, respectively.
The Company has also provided audio teleconferencing services since fiscal 1989
and consumer products claims processing services since fiscal 1994. Revenues
from audio teleconferencing services constituted 9.2% of the Company's revenues
in both fiscal 1995 and 1996. In August 1995, the Company approved a plan for
the disposition of KPINS, its consumer products claims processing subsidiary,
which is presented in the results of operations as a discontinued operation.

The Company's customer base is comprised primarily of the RBOCs,
independent domestic local exchange carriers and public telephone
administrations located outside the U.S. Due to the stringent quality
specifications of its customers and the regulated environment in which its
customers operate, the Company must undergo lengthy approval and procurement
processes prior to selling its products. Accordingly, the Company must make
significant upfront investments in product and market development prior to
actual commencement of sales of new products. In late fiscal 1992, the Company
significantly increased its investment in new product development based on
emerging technologies, particularly ADSL, and began expanding its sales and
marketing efforts to cover new product lines and planned expansion into
international markets. International operations accounted for 5.0% and 23.8% of
the Company's revenues in fiscal 1995 and 1996, respectively. As a result of the
significant increases in research and development and sales and marketing
expenses related to new product and market development, the Company's results of
operations were adversely impacted in fiscal 1994, 1995 and 1996.

The Company expects to continue to evaluate new product opportunities and
engage in extensive research and development activities. This will require the
Company to continue to invest heavily in research and development and sales and
marketing, which is expected to adversely affect short-term results of
operations. Due to the Company's significant ongoing investment in ADSL
technology, the Company anticipates losses in at least the first and second
quarters of fiscal 1997. The Company believes that its future revenue growth and
profitability will principally depend on its success in increasing sales of ADSL
products and developing new and enhanced DS1 and other DSL products. In view of
the Company's reliance on the emerging ADSL market for growth and the
unpredictability of orders and subsequent revenues, the Company believes that
period to period comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Revenues from DS0 products have declined in recent years as telcos continue to
move from analog to digital transmission services. The Company also expects that
revenues from NIU products in its DS1 product group may decline as telcos
increase the use of alternative technologies such as HDSL. Failure to increase
revenues from new products, whether due to lack of market acceptance,
competition, technological change or otherwise, would have a material adverse
effect on the Company's business and results of operations.

18
<PAGE> 22

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenues represented by
certain items in the Company's statements of operations for the periods
indicated:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Revenues........................................................ 100.0% 100.0% 100.0%
Cost of goods sold.............................................. 59.3 60.1 61.0
----- ----- -----
Gross margin.................................................. 40.7 39.9 39.0
----- ----- -----
Operating expenses:
Sales and marketing........................................... 15.8 16.4 16.5
Research and development...................................... 15.1 14.6 15.1
General and administrative.................................... 10.8 9.1 10.0
----- ----- -----
Total operating expenses................................... 41.7 40.1 41.7
----- ----- -----
Operating income (loss) from continuing operations.............. (1.0) (0.2) (2.7)
Other income (expense), net..................................... 0.0 0.0 (0.3)
Interest expense................................................ 0.3 1.0 1.0
----- ----- -----
Income (loss) from continuing operations before income taxes.... (1.3) (1.2) (4.0)
Provision (benefit) for income taxes............................ (1.9) (1.0) (2.3)
----- ----- -----
Income (loss) from continuing operations........................ 0.6 (0.2) (1.7)
Discontinued operations (loss).................................. (0.2) (0.5) (0.8)
----- ----- -----
Net income (loss)............................................... 0.4% (0.7)% (2.5)%
===== ===== =====
</TABLE>

FISCAL YEARS ENDED MARCH 31, 1994, 1995 AND 1996

Revenues. Revenues were $51.1 million, $74.0 million and $83.2 million in
fiscal 1994, 1995 and 1996, respectively. Revenues increased 45.0% from fiscal
1994 to 1995 and 12.4% from fiscal 1995 to 1996. The fiscal 1995 increase was
primarily a result of a $13.5 million increase in sales of DSL products, a $7.5
million increase in sales of DS1 products and a $1.4 million increase in
teleconferencing revenues, which was offset in part by a $1.3 million decline in
revenues from DS0 products. The fiscal 1996 increase was primarily due to a $5.1
million increase in DSL products reflecting shipments to two international
customers and a $3.3 million increase in DS1 product revenues.

Gross Margin. Gross margin decreased as a percentage of revenues from 40.7%
in fiscal 1994 to 39.9% in fiscal 1995 and to 39.0% in fiscal 1996. These
decreases were due to product pricing pressures and changes in product mix
within the Company's DS1 and DS0 product lines. These decreases were offset in
part by sales of higher margin ADSL products and an increase in teleconferencing
revenues in fiscal 1995 and 1996.

Sales and Marketing. Sales and marketing expenses were $8.1 million, $12.2
million and $13.7 million in fiscal 1994, 1995 and 1996, respectively,
constituting 15.8%, 16.4% and 16.5% of revenues, respectively. These increases
in sales and marketing expenses were primarily due to staff additions, in both
domestic and international markets, to support and promote the Company's product
lines, particularly ADSL products. The Company believes that continued
investment in sales and marketing will be required to expand its product lines,
bring new products to market and service customers. The Company anticipates that
sales and marketing expenses will continue to increase in absolute dollars.

Research and Development. Research and development expenses were $7.7
million, $10.8 million and $12.6 million in fiscal 1994, 1995 and 1996,
respectively, constituting 15.1%. 14.6% and 15.1% of revenues, respectively.
These increases in research and development expenses were due primarily to new
and existing product development for ADSL and other emerging technology products
and were offset in part by customer nonrecurring engineering funding of $800,000
and $2.6 million in fiscal 1995 and 1996, respectively. The Company believes
that a continued commitment to research and development will be required for the

19
<PAGE> 23

Company to remain competitive and anticipates that research and development
costs will increase in absolute dollars.

General and Administrative. General and administrative expenses were $5.5
million, $6.7 million and $8.4 million in fiscal 1994, 1995, and 1996
respectively, constituting 10.8%, 9.1% and 10.0% of revenues, respectively. The
fiscal 1995 and fiscal 1996 increases were due primarily to continued expansion
of operations in domestic and international markets. The Company anticipates
that general and administrative costs will continue to increase in absolute
dollars as the Company hires additional personnel.

Interest Expense. Interest expense was $176,000, $769,000 and $859,000 for
fiscal 1994, 1995 and 1996, respectively. Interest expense increased,
particularly in fiscal 1995 and 1996, as a result of interest expense incurred
by the Company in connection with borrowings under its revolving promissory
notes to fund expanded working capital requirements and, to a lesser extent,
interest incurred under capital lease obligations.

Benefit for Income Taxes. Benefit for income taxes were $989,000, $788,000
and $1.9 million in fiscal 1994, 1995, and 1996, respectively. In each of these
fiscal years, in addition to the tax benefit generated by the loss before income
taxes, the Company was able to utilize $724,000, $632,000 and $790,000,
respectively, in tax credits primarily generated by increasing research and
development activities. The Company has approximately $1.8 million in income tax
credit carryforwards and a $1.9 million net operating loss carryforward that are
available to offset future taxable income. The tax credit carryforwards begin to
expire in 2009 and the net operating loss carryforward expires in 2011.

20
<PAGE> 24

QUARTERLY RESULTS OF OPERATIONS

The following tables present the Company's results of operations for each
of the last eight fiscal quarters and the percentage relationship of certain
items to revenues for the respective periods. The Company believes that the
information regarding each of these quarters is prepared on the same basis as
the audited Consolidated Financial Statements of the Company appearing elsewhere
in this Prospectus. In the opinion of management, all necessary adjustments
(consisting only of normal recurring adjustments) have been included to present
fairly the unaudited quarterly results when read in conjunction with the audited
Consolidated Financial Statements of the Company and the Notes thereto appearing
elsewhere in this Prospectus. These quarterly results of operations are not
necessarily indicative of the results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
------------------------------------------------ ------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1995 1995 1995 1995 1996
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $15,721 $15,837 $16,059 $26,412 $22,487 $20,460 $21,346 $18,943
Cost of goods sold....... 8,951 9,391 9,994 16,159 12,822 12,611 13,225 12,121
------- ------- ------- ------- ------- ------- ------- -------
Gross margin........... 6,770 6,446 6,065 10,253 9,665 7,849 8,121 6,822
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.... 2,525 2,866 3,169 3,609 3,685 3,428 3,671 2,960
Research and
development.......... 2,437 2,621 2,768 3,018 3,024 3,358 3,252 2,969
General and
administrative....... 1,407 1,574 1,707 2,015 2,021 2,065 2,236 2,042
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 6,369 7,061 7,644 8,642 8,730 8,851 9,159 7,971
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)
from continuing
operations............. 401 (615) (1,579) 1,611 935 (1,002) (1,038) (1,149)
------- ------- ------- ------- ------- ------- ------- -------
Other income (expense),
net.................... 9 9 9 9 (258) 55 82 (105)
Interest expense......... 105 152 227 285 260 261 290 48
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
continuing operations
before income taxes.... 305 (758) (1,797) 1,335 417 (1,208) (1,246) (1,302)
Provision (benefit) for
income taxes........... 10 (403) (805) 408 28 (586) (617) (711)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
continuing
operations............. 295 (355) (992) 927 389 (622) (629) (591)
Discontinued operations
(loss)................. (82) (151) (84) (65) (65) (529) (24) (4)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)........ $ 213 $ (506) $(1,076) $ 862 $ 324 $(1,151) $ (653) $ (595)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
------------------------------------------------ ------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1995 1995 1995 1995 1996
-------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....... 56.9 59.3 62.2 61.2 57.0 61.6 62.0 64.0
-------- --------- -------- -------- -------- --------- -------- --------
Gross margin........... 43.1 40.7 37.8 38.8 43.0 38.4 38.0 36.0
-------- --------- -------- -------- -------- --------- -------- --------
Operating expenses:
Sales and marketing.... 16.1 18.1 19.7 13.7 16.4 16.8 17.2 15.6
Research and
development.......... 15.5 16.5 17.2 11.4 13.4 16.4 15.2 15.7
General and
administrative....... 8.9 9.9 10.6 7.6 9.0 10.1 10.5 10.8
-------- --------- -------- -------- -------- --------- -------- --------
Total operating
expenses........... 40.5 44.6 47.6 32.7 38.8 43.3 42.9 42.1
-------- --------- -------- -------- -------- --------- -------- --------
Operating income (loss)
from continuing
operations............. 2.6 (3.9) (9.8) 6.1 4.2 (4.9) (4.9) (6.1)
-------- --------- -------- -------- -------- --------- -------- --------
Other income (expense),
net.................... 0.1 0.1 0.1 0.0 (1.2) 0.3 0.4 (0.6)
Interest expense......... 0.7 1.0 1.4 1.1 1.2 1.3 1.3 0.2
-------- --------- -------- -------- -------- --------- -------- --------
Income (loss) from
continuing operations
before income taxes.... 2.0 (4.8) (11.2) 5.1 1.8 (5.9) (5.8) (6.9)
Provision (benefit) for
income taxes........... 0.1 (2.5) (5.0) 1.5 0.1 (2.9) (2.9) (3.8)
-------- --------- -------- -------- -------- --------- -------- --------
Income (loss) from
continuing
operations............. 1.9 (2.2) (6.2) 3.5 1.7 (3.0) (2.9) (3.1)
Discontinued operations
(loss)................. (0.5) (1.0) (0.5) (0.2) (0.3) (2.6) (0.1) 0.0
-------- --------- -------- -------- -------- --------- -------- --------
Net income (loss)........ 1.4 % (3.2)% (6.7)% 3.3% 1.4% (5.6)% (3.0)% (3.1)%
======= ======== ======= ======== ======= ======== ======= ========
</TABLE>

21
<PAGE> 25

The Company's revenues increased by $9.8 million in the fourth quarter of
fiscal 1995 compared to the third quarter of fiscal 1995 due to a large shipment
of ADSL systems to one customer when this customer received regulatory approval
for market trial deployment of ADSL systems. The Company has continued to ship
ADSL systems but at a reduced level from that of the fourth quarter of fiscal
1995, which has resulted in a reduction in quarterly revenues compared to the
preceding quarter in three of the four quarters in fiscal 1996. Gross margin as
a percentage of revenues increased from 38.8% in the fourth quarter of fiscal
1995 to 43.0% in the first quarter of fiscal 1996 due to higher margins received
on ADSL products. Gross margin as a percentage of revenues declined to 38.4%,
38.0% and 36.0% in the second, third and fourth quarters of fiscal 1996,
respectively, as a result of product pricing pressures in the DS1 and DS0
product lines as well as investments in manufacturing infrastructure for
anticipated ADSL production. The Company believes that its gross margin in
future periods will depend on a number of factors, including market demand for
the Company's ADSL products, pricing pressures, competitive technologies and
manufacturing expenses. There can be no assurance that the Company will be able
to increase gross margins in future periods even if its ADSL products achieve
market acceptance.

Operating expenses increased during each quarter of fiscal 1995 and the
first three quarters of fiscal 1996 as the Company continued to make significant
investments to support anticipated revenue growth. Operating expenses decreased
in the fourth quarter of fiscal 1996 primarily as a result of nonrecurring
engineering funding from third parties in the amount of $1.1 million which
offset research and development expenses. The Company expects to continue to
increase operating expenses to support the development, introduction and
promotion of ADSL systems and other new products. As a result of fluctuations in
the timing of revenues of ADSL products and increased research and development
and sales and marketing expenses, the Company currently anticipates net losses
in at least the first and second quarters of fiscal 1997. In addition, the
Company recorded approximately $237,000 of compensation expense in the third
quarter of fiscal 1996 as a result of the issuance of 24,624 shares of Class A
Common Stock to employees of the Company. The Company also recorded a charge of
approximately $520,000, net of tax, in the second quarter of fiscal 1996 in
connection with the planned disposition of KPINS.

The Company expects to continue to experience significant fluctuations in
quarterly results of operations. The Company believes that fluctuations in
quarterly results may cause the market price of the Class A Common Stock to
fluctuate, perhaps substantially. Factors which have had an influence on and may
continue to influence the Company's results of operations in a particular
quarter include the size and timing of customer orders and subsequent shipments,
customer order deferrals in anticipation of new products, timing of product
introductions or enhancements by the Company or its competitors, market
acceptance of new products, technological changes in the telecommunications
industry, competitive pricing pressures, accuracy of customer forecasts of
end-user demand, changes in the Company's operating expenses, personnel changes,
foreign currency fluctuations, changes in the mix of products sold, quality
control of products sold, disruption in sources of supply, regulatory changes,
capital spending, delays of payments by customers and general economic
conditions. Sales to the Company's customers typically involve long approval and
procurement cycles and can involve large purchase commitments. Accordingly,
cancellation or deferral of one or a small number of orders could cause
significant fluctuations in the Company's quarterly results of operations. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance.

Because the Company generally ships products within a short period after
receipt of an order, the Company typically does not have a material backlog of
unfilled orders, and revenues in any quarter are substantially dependent on
orders booked in that quarter. The Company's expense levels are based in large
part on anticipated future revenues and are relatively fixed in the short-term.
Therefore, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall of orders. Accordingly, any significant
shortfall of demand in relation to the Company's expectations or any material
delay of customer orders would have an almost immediate adverse impact on the
Company's business and results of operations and on its ability to achieve
profitability.

22
<PAGE> 26

LIQUIDITY AND CAPITAL RESOURCES

In November 1995, the Company effected the initial public offering of its
Class A Common Stock which generated approximately $33.3 million in corporate
funding. The Company used the proceeds from the offering to repay revolving
promissory bank notes of approximately $11.1 million which primarily financed
working capital. The remainder of the proceeds were invested in short term
investments comprised principally of the highest grade commercial paper and
government backed securities with 90-day or less maturity. As of March 31, 1996,
the Company had no amounts outstanding under its secured revolving promissory
notes and $3.8 million outstanding under its equipment financing facility. As of
March 31, 1996, the Company had approximately $15.4 million available under
these facilities. The revolving promissory notes and the equipment financing
facility require the maintenance of a minimum cash to current maturities ratio,
a current ratio and a maximum debt to net worth ratio. The Company is currently
in compliance with all such covenants.

The Company's operating activities generated cash of $3.6 million and $6.5
million in fiscal 1994 and 1996, respectively, and used cash of $5.3 million in
fiscal 1995. Cash generated from operating activities in fiscal 1994 resulted
principally from increases in customer deposits and accounts payable offset in
part by increases in accounts receivable, inventory and prepaid expenses. Cash
used by operations in fiscal 1995 resulted primarily from decreases in customer
deposits and increases in receivables and inventory, offset in part by increases
in accounts payable. Cash generated from operating activities in fiscal 1996 was
a result of decreases in receivables and inventory and an increase in customer
deposits offset in part by a decrease in accounts payable.

Capital expenditures in fiscal 1994, 1995 and 1996 were $6.1 million, $5.2
million, and $6.3 million, respectively. These expenditures were principally for
machinery, computer and research equipment purchases. The Company expects to
spend approximately $6.0 million in fiscal 1997 for capital equipment.

In September 1995, the Company formed a limited liability company ("LLC")
with a real estate developer for the purpose of developing a 16.4 acre site in
Aurora, Illinois into a 173,000 square foot corporate facility to house
manufacturing, engineering, sales, marketing and administration. In connection
therewith, the Company currently has a 98% ownership interest in the LLC, which
will gradually decrease to a 60% ownership interest as the other LLC member
increases its capital contribution to the LLC by contributing its development
fee for the new facility, as earned. In addition, the Company has a
reimbursement obligation with respect to an irrevocable letter of credit issued
for the Company's account in the amount of $952,000, due on or before September
30, 1996, which represents the Company's capital contribution to the LLC. On
September 25, 1995, the Company advanced the LLC $1.4 million for the purchase
of land. The advance is in the form of a short-term note which bears interest at
the prime rate (8.25% at March 31, 1996). The note and accrued interest become
due from the proceeds of the construction financing. During fiscal 1996, the LLC
began construction of the new facility and as of March 31, 1996, $3.0 million of
construction costs were incurred. In September 1995, the Company also entered
into a 15-year lease for the facility being developed by the LLC. Pursuant to
the terms of the LLC, the Company will have the option to buy out the other
investor in the LLC and thereby purchase the facility being developed by the LLC
or sell its interest in the LLC.

At March 31, 1996, the Company's principal sources of liquidity were $21.8
million of cash and cash equivalents, and $12.8 million and $2.6 million
available under its secured revolving promissory notes and equipment borrowing
facility, respectively. Borrowings under the secured revolving promissory notes
and equipment borrowing facility currently bear interest at the bank's prime
rate (8.25% at March 31, 1996). These revolving promissory notes are due on, and
the equipment borrowing facility expires in, September 1996 and the Company
anticipates that such revolving promissory notes and equipment borrowing
facility will be renewed on no less favorable terms.

The Company had a deferred tax asset of approximately $4.4 million at March
31, 1996. This deferred tax asset relates to (i) tax credit carryforwards of
approximately $1.8 million, (ii) a net operating loss carryforward of
approximately $740,000 and (iii) temporary differences between the amount of
assets and liabilities for financial reporting purposes and such amounts
measured by tax laws. Of such tax credit carryforwards, the first $500,000 of
credits expire in 2009 and $321,000 of credits may be carried forward
indefinitely. The net operating loss carryforward expires in 2011. The remainder
of the deferred tax asset

23
<PAGE> 27

relates to items deductible for financial income reporting purposes which were
taxable in accordance with tax regulations. Management has not recorded a
valuation allowance and believes that the deferred tax asset will be fully
realized based on current estimates of future taxable income, future reversals
of existing taxable temporary differences or available tax planning strategies.

The Company believes that the net proceeds from this offering, its bank
lines of credit and funds generated from operations, if any, will provide
adequate liquidity to meet the Company's capital and operating requirements
during the twelve-month period following this offering.

RECENTLY ISSUED ACCOUNTING STANDARDS

During March 1995 and October 1995, respectively, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and SFAS No. 123, "Accounting for Stock-Based
Compensation." The Company is required to adopt these standards in fiscal 1997.
The Company does not anticipate that adoption of SFAS No. 121 will have a
material effect on its financial statements. The Company anticipates that it
will provide expanded disclosure in the footnotes to its financial statements,
as prescribed by SFAS No. 123, for activity related to its stock plans.

24
<PAGE> 28

BUSINESS

Since 1980, Westell has developed telecommunications products that address
the needs of telephone companies ("telcos") to upgrade their existing network
infrastructures continually in order to deliver advanced data and voice services
to their customers. The Company designs, manufactures, markets and services a
broad range of digital and analog products used by telcos to deliver services
primarily over existing copper telephone wires that connect end users to a
telco's central office (the "local access network"). The Company also markets
its products and services to other telecommunications and information service
providers seeking direct access to end-user customers. The Company's principal
customers include all seven Regional Bell Operating Companies (the "RBOCs") as
well as GTE, British Telecom and Telecom Italia. In addition, Westell sells
products to several other entities, including public telephone administrations
located outside the U.S., independent domestic local exchange carriers,
competitive access providers, interexchange carriers and the U.S. federal
government.

INDUSTRY OVERVIEW

Since the early 1980s, the telecommunications industry has experienced an
increased demand for and growth in the number of services provided to end users.
Not only has traditional telephone voice traffic increased, but the growth of
personal computers and modems has created significant data traffic from a wide
variety of services such as fax, e-mail and online access. For example,
businesses with multiple locations increasingly require geographically dispersed
LANs to be linked in sophisticated wide area networks ("WANs") that must handle
large volumes of telecommunications traffic. In addition, the Internet has
expanded beyond its traditional data transmission and file-sharing functions to
offer e-mail, new data sources, commercial services, transaction processing,
independent bulletin boards, the World Wide Web and voice transmission. Business
and residential based end-user demand for telecommunications services is
expected to continue to grow as telcos and information service providers
increase their offerings of new interactive multimedia services, including data
dialtone applications such as high speed Internet access, LAN extension, medical
imaging and telecommuting, and video dialtone applications such as
video-on-demand, distance learning, video conferencing and work at home. To
handle the growing volume of data communications traffic and to provide faster
and higher quality transmission, telcos and information service providers have
continually upgraded the capacity and speed of their networks.

Deregulation. Deregulation of the telecommunications industry has increased
the number of competitors in the local access network and has further
accelerated telcos' needs to upgrade their networks and increase their
telecommunications service offerings. For example, alternative access providers
have deployed fiber and wireless systems for high volume data transmission to
business centers and other high density metropolitan areas. As alternative
access providers' costs decline and deregulation continues, alternative access
providers are likely to create additional competition for telcos by developing
new products and services for end users. Recent deregulation also allows
interexchange carriers, information service providers and cable operators to
deploy competitive services in the local access network. Currently available
high speed cable modems will enable cable operators to provide data transmission
services to customers in addition to standard television services. Cable
operators are seeking to compete with telcos in the delivery of high speed
digital transmission

25
<PAGE> 29

as well as traditional local telephone service. In addition, this trend toward
continued deregulation of the telecommunications industry may further decrease
the current restrictions and regulations affecting telcos' ability to provide
nontraditional telco services such as video-on-demand.

Existing Telco Infrastructure. Traditionally, telcos have provided local
access services using analog technology, which does not have the bandwidth or
functionality to support the growing demand for new services over telephone
wires. In contrast, digital technology permits high speed, high volume and
reliable data transmission by reducing all forms of images, sounds and data to
digital signals, thereby increasing the variety and bandwidth of services that
can be provided in the local access network. To handle the growing demand for
digital traffic, telcos have deployed broadband optical fiber in their network
"backbone" interconnecting their geographically dispersed central offices.
Telcos have also used fiber to interconnect their central offices to high
density telecommunications traffic areas. Deployment of fiber in the local
access network connecting end users to a telco's central office, however, has
proven labor intensive, complicated, time consuming and expensive. Consequently,
this "last mile" of the telco's network still predominantly consists of low
speed analog transmission over copper wire.

Given the challenges of widespread replacement of copper wire in the local
access network, telcos have turned to systems suppliers for cost-effective
technology that can expand the ability of the existing copper wire
infrastructure to accommodate high speed digital transmission. Digital
conversion of the analog network has been built on the multiplexing format known
as T-1 (E-1 in most countries outside of the U.S.). T-1/E-1 transmission
utilizes a data rate of 1.544 (2.048 outside the U.S.) Megabits per second
("Mbps"), which can be aggregated or subdivided into channels to deliver data
communication services tailored to specific end-user requirements.

Existing and Emerging Technologies. Systems suppliers have developed, and
are currently developing, numerous products that have increased the quality,
speed and cost-effectiveness of digital transmission over copper wire. These
products include:

ISDN. In the early 1980s, telcos introduced basic rate Integrated
Service Digital Network ("ISDN") technology, which provides digital
transmission at rates up to 144 Kilobits per second ("Kbps") as well as a
means to aggregate multiple channels into a single higher speed link over
copper wire. Telcos have only recently begun to widely deploy basic rate
ISDN technology with the emergence of nationwide standards and a decline in
costs for basic rate ISDN service. The market penetration of existing basic
rate ISDN technology, however, may be constrained due to its limited
bandwidth, which does not allow telcos to offer advanced data and video
dialtone services, its inability to provide existing telephone service over
the same wire and its relatively high installation costs.

HDSL. In 1992, telcos introduced High bit-rate Digital Subscriber Line
("HDSL") technology, which reduces the costs of installing and upgrading
T-1/E-1 service. Traditional T-1/E-1 service requires the installation of
one or more mid-span repeaters for line lengths greater than 3,000 feet and
the expensive and time consuming "conditioning" of copper wire. HDSL
increases the non-repeatered distance of T-1/E-1 transmission (1.544/2.048
Mbps) over two pairs of copper wires to approximately 12,000 feet, which
reduces the need for repeaters and conditioning. As a result, telcos are
deploying HDSL technology in their local access networks where the end user
requires only one digital communication stream and does not require a
telephone channel to run on the same wire.

ADSL. An emerging technology known as ADSL permits even greater
digital transmission capacity over copper wire than is possible with
existing HDSL and ISDN products. ADSL technology allows the simultaneous
transmission of data at speeds from 1.5 to 8.0 Mbps in one direction and
from 64 to 640 Kbps in the reverse direction, while also providing standard
analog telephone service over a single pair of copper wires at distances of
up to 18,000 feet, depending on the transmission rate. ADSL products enable
telcos to provide interactive multimedia services over copper wire, such as
high speed Internet access, video-on-demand, medical imaging, video
conferencing and telecommuting, while simultaneously carrying traditional
telephone services. A new ADSL technology called Very High Speed Digital
Subscriber Line ("VDSL") is currently being developed that will increase
both the downstream and upstream data transmission capacity to up to 52.0
Mbps and 2.0 Mbps, respectively.

26
<PAGE> 30

RADSL and SDSL. Products and technologies continue to be developed to
expand the local access network's capability to transmit high speed digital
data as well as reduce telcos' costs in providing traditional analog
services. To increase utilization of broadband copper wire transmission,
manufacturers are currently developing Rate Adaptive ADSL ("RADSL") systems
that will automatically adjust the digital transmission rate based upon the
quality of the copper telephone wire and the distance transmitted in order
to maximize the digital capacity of the wire and to facilitate the
installation of ADSL systems. Symmetric Digital Subscriber Line ("SDSL")
technology is being designed and developed which, in contrast to current
HDSL and ISDN systems, can provide both a digital and an analog channel
over a single pair of copper wires.

THE WESTELL SOLUTION

Westell designs, manufactures and markets a broad range of
telecommunications products that provide its telco customers with dependable,
high quality transmission systems in the local access network. The Company
believes that its extensive experience in the local access network strategically
positions it to identify product applications that will enhance existing telco
services as well as expand telco service offerings to end users. Westell is a
leading provider of ADSL systems, which allow telcos to provide high speed
interactive multimedia services over existing copper wire, thus offering a
cost-effective alternative to the deployment of fiber optic cable in the "last
mile" of the local access network. Westell's ADSL systems also enable telcos to
use their existing infrastructures to respond to competition from cable
operators that may offer these services using cable modems. The Company
continues to aggressively develop products based upon new technologies, such as
ADSL and SDSL, as well as enhance its existing product offerings in the analog,
digital and digital subscriber line ("DSL") markets. In the last decade, Westell
has introduced a number of intelligent products that enable telcos to increase
productivity and transmission quality over their local access networks through
self-diagnostic and performance monitoring applications. For example, in 1986,
Westell introduced NIUs, which provide maintenance and performance monitoring
capabilities to aid telcos in the provisioning and maintenance of T-1 lines.
Westell also continues to focus on the relationships that it has built with its
customers during its 16-year history. Rapid technological evolution has provided
the Company with an opportunity to forge strategic alliances with customers and
technology suppliers in order to accelerate the time to market for new products.
In addition, the Company continues to redefine its products to increase their
functionality and interface capacity with other products while decreasing
product costs in order to achieve mass deployment of ADSL systems and to
facilitate the numerous applications of high speed digital transmission required
by telcos' consumers.

STRATEGY

Westell's objective is to be a global leader in providing low cost and high
quality local access network products that enable telcos to meet the growing
demand for digital service offerings. Key elements of the Company's strategy
include:

Leverage Global Leadership in ADSL Market. The Company seeks to
leverage its leadership position in the ADSL market to capture emerging
global market opportunities as telcos expand their interactive multimedia,
data and video dialtone services. Currently over 30 domestic and
international telcos, including Bell Atlantic, GTE, US West !nterprise,
British Telecom and Telecom Italia, are conducting technical or marketing
trials for new services that rely on the Company's ADSL systems. The
Company is currently defining broadband access systems based on RADSL and
SDSL technology, which are expected to complement the Company's ADSL
systems and the Company believes will have performance advantages over
alternative ISDN and HDSL systems.

Deliver Mass Market Solutions for High Speed Online and Internet
Access Services. Due to the rapid emergence and end-user interest in online
information services, the Internet and the World Wide Web, the Company
intends to work with telcos and information service providers to deliver
advanced, high speed data dialtone solutions for these applications as well
as additional services, such as video

27
<PAGE> 31

dialtone applications, as they become available. To facilitate mass market
deployment of its ADSL systems, the Company is undertaking a program to
increase the level of integration among its products and improve economies
of scale. The Company seeks to expand the development of ADSL systems in
the consumer market by creating ADSL software and hardware interfaces that
support multiple consumer applications.

Continue to Create Strategic Relationships and Alliances. The Company
intends to continue to forge strategic relationships and alliances with key
customers and suppliers. The Company has established strategic
relationships to facilitate the Company's ability to develop products that
anticipate customers' product needs. For example, Westell has entered into
an alliance with Microsoft Corporation whereby Westell's FlexCAP ADSL
modems will be compatible with Microsoft Corporation's Windows NT(R) Server
Network. In addition, Westell's relationships with technology leaders such
as AT&T Paradyne and Analog Devices, Inc. enable the Company to obtain
emerging technologies required in its product development. These
relationships allow the Company to focus on product applications and to
develop products using multiple emerging technologies.

Maintain Core Business Strength and Develop New Products. The Company
has extensive experience in developing and marketing products for the local
access network and has achieved a leading position in T-1 network interface
and performance monitoring units. The Company intends to continue to
capitalize upon its DS0 and DS1 product development experience and customer
relationships to develop cost-effective and implementable intelligent
products for the local access network. The Company is committed to
developing products that are compatible with existing equipment and
technologies, thereby enabling open architecture network infrastructures.
Westell intends to continue to develop products in its core business, such
as SmartLink, which enhance the efficiency of high speed transmission over
copper wire, and QuadJack, which is one of the Company's first fiber optic
products.

Expand International Presence. The Company devotes significant
resources to expanding its international business. Many of Westell's
products, including its ADSL and HDSL systems, support E-1 standards, the
predominant standard for digital transmission outside of North America.
Westell has offices in Canada, England and Hong Kong and a distribution and
service network that supports customers in more than 40 countries. The
Company intends to continue to expand its international distribution
arrangements and strategic relationships in an effort to increase its
international presence.

Commitment to Product Quality, Customer Service and Low-Cost
Manufacturing. The Company benefits from a strong reputation for providing
quality products and responsive service. Westell works closely with
customers to provide technical consulting, maintenance and research
assistance. Westell's continuous quality improvement is demonstrated by the
achievement of the British Approval Board for Telecommunications production
quality assurance approval, Bellcore's Customer Supplier Quality Program
("CSQP") registration and the ISO 9001 registration of its domestic
operations. The Company believes that its commitment to product quality and
customer service will enhance its efforts to reduce production cycle times
and product costs.

PRODUCTS

The Company offers a broad range of products that facilitate the
transmission of high speed digital and analog data between a telco's central
office and end-user customers. These products can be categorized into three
groups: (i) products based on DSL technologies, including ADSL and HDSL systems
("DSL products"), (ii) Digital Signal Hierarchy Level 1 based products, which
are used by telcos to enable high speed digital T-1 transmission at
approximately 1.5 Mbps and E-1 transmission at approximately 2.0 Mbps ("DS1
products"), and (iii) Digital Signal Hierarchy Level 0 based products, which are
used by telcos to deliver digital services at speeds ranging from approximately
2.4 to 64 Kbps and analog services over a 4 Kilohertz bandwidth ("DS0
products").

The prices for the products within each of the product groups of the
Company vary based upon volume, customer specifications and other criteria and
are subject to change due to competition among telecommunications manufacturers.
The Company's DSL products command higher average sales prices than its DS0 and

28
<PAGE> 32

DS1 products but represent fewer of the units sold by the Company. The following
table sets forth the revenues from Westell's three product groups for the
periods indicated:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
DSL products..................................................... $ 1,706 $15,235 $20,299
DS1 products..................................................... 31,980 40,754 44,027
DS0 products..................................................... 10,251 8,979 9,332
</TABLE>

DSL Products. The Company is a leading developer and provider of DSL
products and transmission systems that utilize emerging ADSL technology. DSL
technology is also used for HDSL and SDSL products. Products based upon ADSL
technology can be used by telcos to provide interactive multimedia services,
including data and video dialtone applications, while simultaneously providing
traditional telephone services over existing copper wire. Products based upon
ADSL technology enable telcos to deliver these interactive multimedia services
more quickly and cost-effectively than deploying broadband fiber networks in the
"last mile" of the local access network. The Company's revenues from HDSL
products to date have not been significant.

The following table sets forth a representative list of the Company's
current DSL products and their applications:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION APPLICATIONS YEAR INTRODUCED
- -------------------------- ---------------------------------- ---------------------------------- ---------------
<S> <C> <C> <C>
FlexCAP ADSL.............. ADSL transport system that Interactive multimedia, video-on- 1993
delivers 1.5 or 2.0 Mbps of demand, live broadcast, high speed
digital bandwidth to end users. Internet access and LAN
Uses carrierless amplitude/phase interconnect, while providing
modulation ("CAP") technology. simultaneous standard telephone
service.
InterAccess HDSL.......... HDSL system that supports 1.5 or T-1 or E-1 service provisioning. 1994
2.0 Mbps bi-directional services Increases repeaterless distance to
over two pairs of copper wires. up to 12,000 feet over two pairs
of copper wires.
AccessVision.............. Network management system for DSL Management and control of DSL 1995
transport systems. transport systems.
</TABLE>

ADSL technology permits the transmission of three communication streams of
varying speeds over existing copper wire. The non-repeatered transmission
distances of current ADSL systems vary based upon the data rate, with a maximum
distance of 18,000 feet. The first communication stream provides a one way high
speed digital data transmission from a server, such as may be found on the
Internet or in a stored video program network, to an end user. The second
communication stream provides medium speed bi-directional digital data
transmission to and from the end user which enables the end user to respond and
interact with the incoming high speed data stream. The third communication
stream provides traditional analog voice transmission capabilities permitting
simultaneous telephone service.

Westell's FlexCAP ADSL system currently consists of (i) a high speed
uni-directional digital data communication stream at rates up to 1.5 or 2.0
Mbps, (ii) a bi-directional control and digital data communication stream at
rates up to 64 Kbps and (iii) a traditional analog telephone service line. This
ADSL system can support high speed data applications, such as high speed
Internet access and remote LAN access, and video-on-demand services over
existing telephone lines. In late calendar year 1996, Westell plans to introduce
rate adaptive FlexCAP ADSL systems using RADSL technology which will increase
the bi-directional capacity to up to 384 Kbps.

The Company also markets other products that facilitate telcos'
incorporation of ADSL technology into their network infrastructures. Westell has
worldwide distribution rights to market AccessVision, an open systems
standards-based software management system that monitors and controls ADSL
equipment and the

29
<PAGE> 33

interactive services transmitted through ADSL technology, which was developed by
Atlantech Technologies, Ltd. Westell's distribution rights to AccessVision
expire in December 2001.

Currently over 30 telcos have purchased the Company's ADSL systems to
conduct technical and marketing trials for new interactive multimedia
applications. Bell Atlantic and British Telecom are in the process of connecting
over 2,000 customers to Westell's FlexCAP ADSL systems. Telecom Italia has
connected a total of 1,000 customers to Westell's FlexCAP ADSL systems in Rome
and Milan. ADSL applications in these trials include interactive
video-on-demand, music-on-demand, catalog shopping, financial services,
games-on-demand, television-on-demand and long distance learning services.
Internationally, Westell's ADSL systems have been purchased by telephone
administrations in Australia, Belgium, Canada, Hong Kong, Italy, Norway,
Singapore, South Korea, Spain, Switzerland and the United Kingdom.

The Company's HDSL systems eliminate the need for telcos to condition the
copper wire and to install line repeaters for distances of up to 12,000 feet.
Westell's HDSL systems also contain performance and monitoring functions with
remote accessibility that may supplant the need for repeaters and NIUs. Westell
currently sells its HDSL systems to the federal government and markets its
InterAccess HDSL systems outside the U.S.

DS1 Products. Westell's DS1 products provide telcos with cost-effective
solutions to transport, maintain and improve the reliability of T-1 services
over copper and fiber lines in the local access network.

The following table sets forth a representative list of the Company's DS1
products and their applications:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION APPLICATION YEAR INTRODUCED
- ----------------------------- ---------------------------------- ---------------------------------- ---------------
<S> <C> <C> <C>
NIU.......................... Network Interface Unit providing Facilitates the maintenance of T-1 1986
for maintenance of T-1 facilities. facilities to access services such
as frame relay and primary rate
ISDN.
NIU-PM....................... Network Interface Unit with Facilitates the maintenance and 1992
Performance Monitoring that stores provides performance monitoring of
information for seven days. T-1 facilities to access services
such as frame relay and primary
rate ISDN.
QuadJack..................... Transport system that provides Provides transport and facilitates 1994
transmission medium for one to maintenance for high speed digital
four DS1 signals over fiber. circuits over fiber optic
facilities.
SmartLink.................... Automatic Protection System for up Increases the reliability of T-1 1995
to 8 T-1 customer lines. and other high speed digital
facilities. Used for critical
circuits such as those used to
provide service to cellular
telephone sites.
</TABLE>

Many of the Company's DS1 products, such as its NIUs, smart line repeaters,
office repeaters and T-1 maintenance service switches, function to monitor and
control the quality of digital transmission over copper wire. The Company's NIU
products allow telcos to monitor transmission conditions and to detect
performance problems in circuits from remote locations. All of the RBOCs and GTE
have purchased the Company's NIUs. Westell also developed and co-patented with
Ameritech a second generation NIU known as NIU-PM which monitors and stores
information for seven days so that telcos can study and detect any irregular
operations and performance of a line over time. The Company customizes its NIU
products to meet customers' particular needs. Sales of NIU products represented
45.5% of the Company's revenues in fiscal 1996.

The Company's SmartLink Automatic Protection Switch system ("APS") monitors
up to eight customer T-1 channels and allows telcos to provide uninterrupted
service in the event of a fault of any channel. Once the APS detects a fault in
one channel, it automatically places that signal on a protection channel and
generates a notification alarm at the telco's central office, thereby
significantly reducing network downtime and costly data interruption. APS is
currently being deployed by two RBOCs and is in field trials with an additional
RBOC.

30
<PAGE> 34

Westell's QuadJack product is specifically designed to provide transmission
for one to four customer T-1 signals over fiber lines, which results in a
cost-effective means of providing T-1 services to small business customers who
typically do not require the standard 28 or more T-1 lines that fiber-based
transmission delivers to an end user.

DS0 Products. Westell's DS0 products are used by telcos to deliver digital
and analog service across copper wire in the local access network at speeds
ranging from approximately 2.4 to 64 Kbps for digital transmission or 4
Kilohertz for analog transmission.

The following table sets forth a representative list of the Company's DS0
products and their applications:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION APPLICATION YEAR INTRODUCED
- ---------------------------- ---------------------------------- ---------------------------------- ---------------
<S> <C> <C> <C>
DST......................... Data Station Termination unit Point of sale, lottery and other 1983
providing maintenance and analog data.
equalization of data transmission.
Tandem...................... Provides DS0 and analog channel Special services inter-office 1987
cross connections in tandem D4 cross connections.
environment.
TwinLine.................... Allows second channel to be added Business and second lines. 1994
to a single pair of copper wires.
SSTP........................ Special Services Transport Pipe Analog data, video conferencing 1994
employs ISDN technology to deliver and digital data service.
multiple special services over a
single pair of copper wires.
Campus Loopback Unit........ Maintenance loopback for analog Private data networks. 1995
data.
</TABLE>

In some circumstances, analog data lines are the only practical way to add
a terminal to an existing analog data network. Consequently, analog transmission
is often the most economical, most easily installed or the only service
available in certain locations. Westell's DST unit provides the interface
between analog transmission and an end user's modem. The Company's other DS0
products include voice frequency channel units and mountings, which are used to
provide dedicated analog data lines, smart repeaters, which boost analog
signals, and other products which incorporate performance testing and monitoring
functions designed to improve the quality of analog transmission over copper
wire.

RESEARCH AND PRODUCT DEVELOPMENT

The Company believes that its future success depends on its ability to
maintain its technological leadership through enhancements of its existing
products and development of new products that meet customer needs. Westell works
closely with its current and potential customers as part of the product
development process. The Company regularly customizes products to address
particular customer product needs. For the fiscal years ended March 31, 1995 and
1996, the Company recognized income of $800,000 and $2.6 million, respectively,
for customer sponsored research and development. Research and development
expenses for fiscal 1994, 1995 and 1996 were $7.7 million, $10.8 million and
$12.6 million, respectively. To date, all research and development costs have
been charged to operating expense as incurred. From time to time, development
programs are conducted by other firms under contract with the Company, and
related costs are also charged to operations as incurred.

31
<PAGE> 35

The following table sets forth some of the products under development by
the Company:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION APPLICATIONS
- ------------------------------ ---------------------------------------- ----------------------------------------
<S> <C> <C>
SuperVision................... Broadband access and routing platform Aggregates many DSL facilities providing
for DSL services with ATM multiplexing. efficient network backbone transport.
FlexVision ADSL............... An ADSL transport system that delivers Interactive multimedia, video-on-demand,
1.5, 2.0 or 6.0 Mbps of digital live broadcast, high speed Internet
bandwidth downstream to end users and up access and LAN interconnect, while
to 640 Kbps of bi-directional digital providing simultaneous standard
bandwidth. Uses CAP technology. Used in telephone service.
connection with SuperVision
multiplexers.
EnVision ADSL................. An ADSL transport system that delivers Interactive multimedia, video-on-demand,
1.5, 2.0, 6.0 or 8.0 Mbps of digital live broadcast, high speed Internet
bandwidth downstream to end users and up access and LAN interconnect, while
to 640 Kbps of bi-directional digital providing simultaneous standard
bandwidth. Uses discrete multi-tone telephone service.
("DMT") technology. Used in connection
with SuperVision multiplexers.
RADSL......................... Rate Adaptive ADSL system that delivers Data dialtone services. Adapts
1.0 to 6.0 Mbps downstream to end users transmission speed to quality of copper
and up to 1.0 Mbps of bi-directional wire and the transmission distance.
digital bandwidth. Uses CAP technology.
Used in connection with SuperVision
multiplexers or FlexCAP platforms.
SDSL.......................... Symmetric Digital Subscriber Line. Used Data dialtone services over a single
in connection with SuperVision pair of copper wires.
multiplexers or FlexCAP platforms.
FlexCAP PC Modem Card......... ADSL PC modem card which can be High speed Internet access and data
installed by an end user in a compatible dialtone services while providing
PC. Delivers 1.5 Mbps of digital simultaneous standard telephone service.
bandwidth to end users and up to 64 Kbps Complies with the Intel and Microsoft
of bi-directional digital bandwidth. "Plug and Play" standard, so that the
Requires compatible ADSL systems at FlexCAP PC modem card will be
telco or Internet service provider. automatically configured on compatible
PCs.
</TABLE>

To provide a more efficient transport of individual DSL facilities over
telephone networks, Westell is developing its SuperVision access multiplexer.
This SuperVision system will aggregate many DSL systems into a single high speed
optical link thereby facilitating the connection between copper wire digital
transmission used in the local access network and the optical fiber transmission
in the network "backbone." In addition, the Company announced the development of
its FlexVision ADSL system that is expected to provide up to 6.0 Mbps of
uni-directional bandwidth supporting multiple simultaneous video-on-demand
channels of information. Westell's current ADSL systems and its FlexVision
system under development are based on CAP technology. Westell is also developing
its EnVision system, which will utilize DMT technology instead of CAP technology
and is expected to provide up to 8.0 Mbps of downstream data and 640 Kbps of
bi-directional data transmission as well as traditional telephone service.

Westell is also focusing on defining products using next generation DSL
technologies such as RADSL and SDSL. RADSL will allow telcos to automatically
adjust the digital transmission rate based upon the quality of the copper
telephone wire and the transmission distance. This rate adaptability allows
telcos to maximize the digital capacity of copper wire and facilitates
installation of ADSL systems, thereby increasing the utilization of poor quality
copper telephone wires which traditionally have required extensive installation
and monitoring. Unlike HDSL, SDSL will enable the transmission of both a high
speed bi-directional digital data communication stream as well as analog
telephone service over a single pair of copper wires. SDSL is expected to reduce
telcos' costs and allow high speed bi-directional services to be introduced to
end users.

The Company currently anticipates that it will introduce the products
listed in the above table in late calendar year 1996 and calendar year 1997.
However, there can be no assurance that the Company will be able to introduce
such products as planned, and the failure of the Company to do so would have a
material adverse effect on the Company's business and results of operations. In
addition, there can be no assurance that the Company's future development
efforts will result in commercially successful products or that the Company's

32
<PAGE> 36

products will not be rendered obsolete by changing technology, new industry
standards or new product announcements by competitors.

The Company's product development programs are carried out by engineers and
engineering support personnel based in Aurora, Illinois and Cambridge, England.
The Company's domestic engineering is conducted in accordance with ISO 9001,
which is the international standard for quality management systems for design,
manufacturing and service. The Company's research and development personnel are
organized into product development teams. Each product development team is
generally responsible for sustaining technical support of existing products,
decreasing manufacturing costs, conceiving new products in cooperation with
other groups within the Company and adapting standard products or technology to
meet new customer needs. In particular, each product development team is charged
with implementing the Company's engineering strategy of reducing product costs
for each succeeding generation of the Company's products in an effort to be a
low cost, high quality provider, without compromising functionality or
serviceability. The Company believes that the key to this strategy is choosing
an initial architecture for each product that enables engineering innovations to
result in future cost reductions. Successful execution of this strategy also
requires that the Company continue to attract and recruit highly qualified
engineers.

CUSTOMERS

The Company's principal customers historically have been U.S. telcos. Since
fiscal 1993, the Company has also marketed its products internationally. The
Company's customers include all seven RBOCs, GTE, British Telecom and Telecom
Italia. In addition, Westell sells products to several other entities, including
public telephone administrations located outside the U.S., independent domestic
local exchange carriers, competitive access providers, interexchange carriers
and the U.S. federal government. International revenues represented
approximately $226,000, $3.7 million and $19.8 million of the Company's revenues
in fiscal 1994, 1995 and 1996, respectively, accounting for 0.4%, 5.0% and 23.8%
of the Company's revenues in such periods.

The following table lists certain customers of the Company and end users of
the Company's products:

<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
- ------------------- -------------------------
<S> <C>
Ameritech Belgacom
Bell Atlantic Bell Telephone of Canada
Bell South British Telecom
GTE Entel Chile
NYNEX Hong Kong Telecom
Pacific Telesis Korea Telecom
SBC Communications Singapore Telecom
Sprint Swiss Telecom
US West Telecom Italia
Telecom Malaysia
Telefonica Spain
Telenor
Telestra Australia
</TABLE>

Sales to the RBOCs and British Telecom accounted for 72.6%, 74.3% and 64.9%
of the Company's revenues in fiscal 1994, 1995 and 1996, respectively. The
Company's future success will depend significantly upon the timeliness and size
of future purchase orders from the RBOCs, the product requirements of the RBOCs,
the success of the RBOCs' services that use the Company's products and the
financial and operating success of these providers. Sales to Ameritech, British
Telecom and U.S. West accounted for 12.0%, 11.1% and 10.4% of the Company's
revenues in fiscal 1996, respectively.

MARKETING, SALES AND DISTRIBUTION

The Company sells its products in the U.S. principally through its domestic
field sales organization. The Company markets its products internationally in
over 40 countries under various distribution arrangements that include OEM
agreements, technology licenses and distributors supported by partners and
internationally based sales personnel. The Company's field sales organizations
and distributors receive support from internal

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<PAGE> 37

marketing, sales and customer support groups. As of March 31, 1996, the
Company's marketing, sales and distribution programs were conducted by 141
employees.

The Company's international operations are based in Tampa, Florida and are
also conducted through business operations in Ottawa, Canada, Cambridge,
England, Hong Kong and Singapore, and a distribution and service network that
supports customers in more than 40 countries. The Company expects to continue to
pursue international market opportunities by focusing primarily on sales of DSL
products in international markets. The Company believes that there is a greater
demand for DSL products in international markets compared to DS0 and DS1
products due to a growing demand in foreign countries for services such as data
dialtone that require high speed digital transmission.

Although the telco approval processes may vary to some extent depending on
the customer and the product being evaluated, they generally are conducted as
follows:

Laboratory Evaluation. The product's function and performance are tested
against all relevant industry standards, including those established by
Bellcore.

Technical Trial. A number of telephone lines are equipped with the product
for simulated operation in a field trial. The field trial is used to
evaluate performance, assess ease of installation and establish
troubleshooting procedures.

Marketing Trial. Emerging products such as ADSL are tested for market
acceptance of new services. Marketing trials usually involve a greater
number of systems than technical trials because systems are deployed at
several locations in the telco's network. This stage gives telcos an
opportunity to establish procedures, train employees to install and
maintain the new product and to obtain more feedback on the product from a
wider range of operations personnel.

Commercial Deployment. Commercial deployment usually involves substantially
greater numbers of systems and locations than the marketing trial stage. In
the first phase of commercial deployment, a telco initially installs the
equipment in select locations for select applications. This phase is
followed by general deployment involving greater numbers of systems and
locations. General deployment does not usually mean that one supplier's
product is purchased for all of the telcos' needs throughout the system as
telcos often rely upon multiple suppliers to ensure that their needs can be
met. Subsequent orders, if any, are generally placed under single or
multi-year supply agreements that are generally not subject to minimum
volume commitments.

In most international markets, there is one major telco per country with
limited or few alternate carriers or independent telcos. Typically, these telcos
are highly regulated, government-owned agencies that have approval and purchase
processes similar to those followed by the RBOCs.

CUSTOMER SERVICE AND SUPPORT

Westell maintains 24-hour, 7-day-a-week telephone support and provides
on-site support. The Company also provides technical consulting, research
assistance and training to its customers with respect to the installation,
operation and maintenance of its products.

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<PAGE> 38

in materials or workmanship and failure to meet published specifications, but
excludes damages caused by improper use and all other express or implied
warranties. In the event there are material deficiencies or defects in the
design or manufacture of the Company's products, the affected products could be
subject to recall. For the past five fiscal years, the Company's warranty
expenses have been relatively insignificant.

The Company has supply contracts with most of its major customers. These
contracts typically do not establish minimum purchase commitments, and they may
require the Company to accept returns of products or indemnify such customers
against certain liabilities arising out of the use of the Company's products.
Although, to date, the Company has not experienced any significant product
returns or indemnification claims under these contracts, any such claims or
returns could have a material adverse effect on the Company's business and
results of operations. While the Company maintains a comprehensive quality
control program, there can be no assurance that the Company's products will not
suffer from defects or other deficiencies or that the Company will not
experience a material product recall in the future. Complex products such as
those offered by the Company may contain undetected errors or failures when
first introduced or as new versions are released. Any product recall as a result
of such errors or failures, and the associated negative publicity, could result
in the loss of or delay in market acceptance of the Company's products and have
a material adverse effect on the Company's business and results of operations.
The Company's standard limited warranty for ADSL products ranges from two to
five years. Since the Company's ADSL products are new, with limited time in
service, the Company cannot predict the level of warranty claims that it will
experience for these products. Despite testing by the Company and its customers,
there can be no assurance that existing or future products based on ADSL or
other technologies will not contain undetected errors or failures when first
introduced or as new versions are released. Such errors or failures could result
in warranty returns in excess of those historically experienced by the Company
and have a material adverse effect on the Company's business and results of
operations.

MANUFACTURING

The Company purchases parts and components for its products from a number
of suppliers through a worldwide sourcing program. Certain key components, such
as integrated circuits and other electronic components, used in the Company's
products are currently available from only one source or a limited number of
suppliers. For instance, the Company currently depends on a division of Lucent
Technologies (formerly known as AT&T Microelectronics) to provide critical
integrated circuits used in the Company's ADSL products. In addition, certain
electronic components are currently in short supply and are provided on an
allocation basis to the Company and other users, based upon past usage. There
can be no assurance that the Company will be able to continue to obtain
sufficient quantities of integrated circuits or other electronic components as
required, or that such components, if obtained, will be available to the Company
on commercially reasonable terms. The Company purchases integrated circuits from
Lucent Technologies on a purchase order basis and does not have any formal
supply arrangements with Lucent Technologies. The Company anticipates that
integrated circuit production capacity and availability of certain electronic
components of its suppliers may be insufficient to meet demand for such
components in the future. Integrated circuits and electronic components are key
components in all of the Company's products and are fundamental to the Company's
business strategy of developing new and succeeding generations of products at
reduced unit costs without compromising functionality or serviceability. In the
past, however, the Company has experienced delays in the receipt of certain of
its key components, such as integrated circuits, which have resulted in delays
in related product deliveries. There can be no assurance that delays in key
components or product deliveries will not occur in the future due to shortages
resulting from the limited number of suppliers, the financial or other
difficulties of such suppliers or the possible limitations in integrated circuit
production capacity or electronic component availability because of significant
worldwide demand for these components. The inability to obtain sufficient key
components or to develop alternative sources for such components, if and as
required in the future, could result in delays or reductions in product
shipments, which in turn could have a material adverse effect on the Company's
customer relationships and its business and results of operations.

The Company currently manufactures most of its products internally while
relying on a few subcontractors in the U.S. and the United Kingdom for various
assemblies. As part of its strategic plan to meet the

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<PAGE> 39

potential worldwide demand for its ADSL systems, however, the Company currently
is in the process of developing the manufacturing capabilities necessary to
supply and support large volumes of ADSL systems and in the future may become
increasingly dependent on subcontractors. The Company has entered into
discussions to establish subcontracting relationships for the assembly of its
ADSL systems. A reliance on third-party subcontractors involves several risks,
including the potential absence of adequate capacity and reduced control over
product quality, delivery schedules, manufacturing yields and costs. Although
the Company believes that alternative subcontractors or sources could be
developed if necessary, the use of subcontractors could result in material
delays or interruption of supply as a consequence of required re-tooling,
retraining and other activities related to establishing and developing a new
subcontractor or supplier relationship. Any material delays or difficulties in
connection with increased manufacturing production or the use of subcontractors
could have a material adverse effect on the Company's business and results of
operations. There can be no assurance that the Company will be successful in
increasing its manufacturing capacity in a timely and cost-effective manner or
that the possible transition to subcontracting will not materially adversely
affect the Company's business and results of operations.

A substantial portion of the Company's shipments in any fiscal period
relate to orders for certain products received in that period. Further, a
significant percentage of orders, such as NIUs, require delivery within 48
hours. To meet this demand, the Company maintains raw materials inventory and
limited finished goods inventory at its manufacturing facility. In addition, the
Company maintains some finished goods inventory at the customer's site pursuant
to an agreement that the customer will eventually purchase such inventory. Final
testing and shipment of products to customers occurs in the Company's Oswego,
Illinois facilities. The Company's domestic facilities are certified pursuant to
ISO 9001.

The Company's backlog for its DS1 and DS0 products at March 31, 1996 was
$2.0 million. The Company believes that because a substantial portion of
customer orders for DS1 and DS0 products are filled within the quarter of
receipt, the Company's backlog is not a meaningful indicator of actual revenues
for these products for any succeeding period. In general, customers purchasing
DSL products may reschedule orders without penalty to the customer. As a result,
the quantities of the Company's products to be delivered and their delivery
schedules may be revised by customers to reflect changes in their DSL product
needs. Since backlog of DSL products can be rescheduled without penalty, the
Company does not believe that its backlog of DSL products is a meaningful
indicator of future revenues from DSL products.

COMPETITION

The markets for the Company's products are intensely competitive and the
Company expects competition to increase in the future, especially in the
emerging ADSL market. Westell's principal competitors in the DS0 market are
Adtran, Inc., Tellabs, Inc. and Teltrend, Inc. Westell's principal competitors
in the DS1 market are ADC Telecommunications Inc., PairGain Technologies, Inc.
and Teltrend, Inc. The Company's current competitors in the ADSL market include
Alcatel Network Systems, Amati Communications Corp., AT&T Paradyne, ECI Telecom,
Inc., Ericsson, LG Information and Communications, Ltd., Lucent Technologies,
PairGain Technologies, Inc., Orckit Communications, Ltd. and Performance Telecom
Corp. The Company expects competition in the ADSL market in the near future from
numerous other companies. In addition, the Telecommunications Act which was
signed into law on February 8, 1996, permits the RBOCs to engage in
manufacturing activities after the FCC authorizes an RBOC to provide long
distance services within its service territory. An RBOC must first meet specific
statutory and regulatory tests demonstrating that its monopoly market for local
exchange services is open to competition before it will be permitted to enter
the long distance market. When these tests are met, an RBOC will be permitted to
engage in manufacturing activities. Therefore, RBOCs, which are the Company's
largest customers, may potentially become the Company's competitors as well.
Many of the Company's competitors and potential competitors have greater
financial, technological, manufacturing, marketing and human resources than the
Company. Any increase in competition could reduce the Company's gross margin,
require increased spending by the Company on research and development and sales
and marketing, and otherwise materially adversely affect the Company's business
and results of operations.

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<PAGE> 40

Products that increase the efficiency of digital transmission over copper
wire face competition from fiber, wireless, cable modems and other products
delivering broadband digital transmission. Many telcos have adopted policies
that favor the deployment of fiber. To the extent that telcos choose to install
fiber and other transmission media between the central office and the end user,
the Company expects that demand for its copper wire-based products will decline.
Telcos face competition from cable operators, new local access providers and
wireless service providers that are capable of providing high speed digital
transmission to end users. To the extent telcos decide not to aggressively
respond to this competition and fail to offer high speed digital transmission,
the overall demand for ADSL products could decline. In addition, the deployment
of certain products and technologies for copper wire may also reduce the demand
for the types of products currently manufactured by the Company. Specifically,
the deployment of HDSL in the U.S., which reduces telcos' need for T-1 repeaters
and NIUs, may result in a decrease in demand for Westell's DS1-based products.
Further, the Company believes that the domestic market for many of its DS0-based
products is decreasing, and will likely continue to decrease, as high capacity
digital transmission becomes less expensive and more widely deployed.

TELECONFERENCE SERVICES

Conference Plus provides operator-assisted and automatic teleconferencing
services to customers throughout the U.S. The Company manages its
teleconferencing services through its operations center located in Schaumburg,
Illinois. Teleconferencing services allow organizations and individuals to
collect and disseminate information faster, more accurately and without the
associated costs of face-to-face meetings. The Company's strategy in this market
is to apply its expertise as a telecommunications products manufacturer to
provide cost-effective and quality teleconferencing services to satisfy the
growing customer demand for these services. Conference Plus was started by the
Company in October 1988, and generated $5.4 million, $6.8 million and $7.7
million in revenues in fiscal 1994, 1995 and 1996, respectively.

Competition in the teleconferencing business is intense and the Company
expects that competition will increase due to low barriers to entry and recent
entrants into the audio teleconferencing service market. Many of Conference
Plus' competitors, including AT&T, MCI Communications and Sprint Communications,
have much greater name recognition, more extensive customer service and
marketing capabilities and substantially greater financial, technological and
personnel resources than the Company. There can be no assurance that the Company
will be able to successfully compete in this market in the future or that
competitive pressures will not result in price reductions that would materially
adversely affect the Company's business and results of operations.

GOVERNMENT REGULATION

The telecommunications industry, including most of the Company's customers,
is subject to regulation from federal and state agencies, including the FCC and
various state public utility and service commissions. While such regulation does
not affect the Company directly, the effects of such regulations on the
Company's customers may, in turn, adversely impact the Company's business and
results of operations. For example, FCC regulatory policies affecting the
availability of telco services and other terms on which telcos conduct their
business may impede the Company's penetration of certain markets. The
Telecommunications Act lifted certain restrictions on telcos' ability to provide
interactive multimedia services including video on demand. The
Telecommunications Act establishes new regulations whereby telcos may provide
various types of video services. Rules to implement these new statutory
provisions are now being considered by the FCC. While the statutory and
regulatory framework for telcos providing video products has become more
favorable, it is uncertain at this time how this will affect telcos' demand for
products based upon ADSL technology.

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<PAGE> 41

The Company's business and operating results may also be adversely affected
by the imposition of certain tariffs, duties and other import restrictions on
components that the Company obtains from non-domestic suppliers or by the
imposition of export restrictions on products that the Company sells
internationally. Internationally, governments of the United Kingdom, Canada,
Australia and numerous other countries actively promote and create competition
in the telecommunications industry. Changes in current or future laws or
regulations, in the U.S. or elsewhere, could materially and adversely affect the
Company's business and results of operations.

PROPRIETARY RIGHTS

The Company's success and future revenue growth will depend, in part, on
its ability to protect trade secrets, obtain or license patents and operate
without infringing on the rights of others. Although the Company regards its
technology as proprietary, it has only one patent on such technology. The
Company expects to seek additional patents from time to time related to its
research and development activities. The Company relies on a combination of
technical leadership, trade secrets, copyright and trademark law and
nondisclosure agreements to protect its unpatented proprietary know-how. There
can be no assurance, however, that these measures will provide meaningful
protection for the Company's trade secrets or other proprietary information.
Moreover, the Company's business and results of operations may be materially
adversely affected by competitors who independently develop substantially
equivalent technology. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as U.S. law. The
telecommunications industry is also characterized by the existence of an
increasing number of patents and frequent litigation based on allegations of
patent and other intellectual property infringement. From time to time, the
Company receives communications from third parties alleging infringement of
exclusive patent, copyright and other intellectual property rights to
technologies that are important to the Company. There can be no assurance that
third parties will not assert infringement claims against the Company in the
future, that assertions by such parties will not result in costly litigation, or
that the Company would prevail in any such litigation or be able to license any
valid and infringed patents from third parties on commercially reasonable terms.
Further, such litigation, regardless of its outcome, could result in substantial
costs to and diversion of effort by the Company. Any infringement claim or other
litigation against or by the Company could have a material adverse effect on the
Company's business and results of operations.

Many of the Company's products incorporate technology developed and owned
by third parties. Consequently, the Company must rely upon third parties to
develop and introduce technologies which enhance the Company's current products
and enable the Company, in turn, to develop its own products on a timely and
cost-effective basis to meet changing customer needs and technological trends in
the telecommunications industry. Any impairment or termination of the Company's
relationship with any licensors of third-party technology would force the
Company to find other developers on a timely basis or develop its own
technology. There can be no assurance that the Company will be able to obtain
the third-party technology necessary to continue to develop and introduce new
and enhanced products, that the Company will obtain third-party technology on
commercially reasonable terms or that the Company will be able to replace third-
party technology in the event such technology becomes unavailable, obsolete or
incompatible with future versions of the Company's products. The absence of or
any significant delay in the replacement of third-party technology would have a
material adverse effect on the Company's business and results of operations.

The Company's ADSL products are dependent upon a CAP DSL technology known
as GlobeSpan(TM) that the Company licenses from AT&T Paradyne. AT&T Paradyne is
currently the sole provider of this CAP DSL technology and the Company currently
would not be able to produce any of its ADSL systems without using this
technology. The AT&T License, which expires in December 2002, is nonexclusive
and this technology has been licensed to numerous manufacturers. The Company has
entered into cooperation and development agreements with other technology
suppliers who are developing alternative DSL technologies, such as DMT DSL
technology. Under one such arrangement, the Company is currently testing
prototypes of an alternative DSL technology. Consequently, in the event AT&T
Paradyne fails to renew the AT&T License, the Company believes that it will have
sufficient access to alternative sources of DSL technology prior to December
2002 so that it will be able to continue to produce ADSL systems. However, the
cancellation or failure of AT&T

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<PAGE> 42

Paradyne to renew the AT&T License would materially adversely affect the
Company's business and results of operations if other sources of DSL technology
do not become readily available on similar terms or telcos elect not to deploy
ADSL systems utilizing alternative DSL technologies, such as DMT DSL technology.

Rapid technological evolution has resulted in the need to implement
strategic alliances with customers and technology suppliers in order to
accelerate the time to market for new products. Without such relationships and
due to the lengthy telco product approval and purchase cycles, the technology
may be obsolete by the time it is implemented. Relationships in place with
companies such as AT&T Paradyne, Analog Devices, Inc., Motorola and certain
customers enable the Company to develop products at the same time that the
Company undergoes the product approval and purchase processes for products in
development. This can result in much quicker introduction of new products while
the technology is still in demand. Westell has cooperation and development
relationships with Atlantech Technologies Ltd., a software development company
based in Scotland, Scientific Generics, an innovative technology development
company based in Cambridge, England, and Sungmi Electronics, an industry leader
in the supply of high speed switching, transmission and local access systems
based in Seoul, Korea.

EMPLOYEES

As of March 31, 1996, the Company had 737 full-time employees in continuing
operations and 62 full-time employees in KPINS which the Company plans to
discontinue. Westell's telecommunications business had a total of 652 full-time
employees, consisting of 141 in sales, marketing, distribution and service, 138
in research and development, 343 in manufacturing and 30 in administration.
Conference Plus had a total of 85 full-time employees. None of the Company's
employees are represented by a collective bargaining agreement nor has the
Company ever experienced any work stoppage. The Company believes its
relationship with its employees is good.

PROPERTIES

The Company leases approximately 108,000 square feet of office, development
and manufacturing space in facilities in Oswego, Illinois (75,000 square feet)
and Aurora, Illinois (33,000 square feet), both suburbs of Chicago. The current
lease for the Oswego facility expires in August 2002 but may be terminated by
the Company at any time after August 1997 upon 12 months notice. The current
lease for the Aurora facility expires in February 1998 but may be extended by
the Company for up to two additional two-year periods. The Company also leases
facilities in Schaumburg, Illinois for Conference Plus, and in Tampa, Florida
and Cambridge, England for its international operations.

While the Company believes its current facilities are adequate to support
its present level of operations, it believes that it will require additional
space in the next two years to accommodate additional expansion of its business
operations. The Company estimates that its manufacturing facilities are
operating at a utilization rate of approximately 50%. In September 1995, the
Company entered into an agreement with a real estate developer forming a LLC
that is constructing a 173,000 square foot facility in Aurora, Illinois. The
Company has entered into a 15-year lease of this facility with the LLC, which
term will commence upon the substantial completion of this facility. The Company
expects to move a portion of its operations to this new facility by the

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<PAGE> 43

third quarter of fiscal 1997. The Company will have the option to purchase the
facility being developed by the LLC or sell its interest in the LLC. It is the
Company's current intent to sell this property when construction is completed,
repay any financing and lease the facility from a third party.

LEGAL PROCEEDINGS

The Company has been involved from time to time in litigation in the normal
course of its business. In January 1995, a former officer of a Westell
subsidiary filed suit against the Company in the Superior Court of the State of
California alleging monetary damages suffered as a result of wrongful
termination and breach of contract. The Company believes the suit is without
merit and intends to contest the suit vigorously. While the outcome of this
lawsuit cannot be determined with certainty, the Company does not believe that
the resolution of this lawsuit will have a material adverse effect on the
Company or its business and results of operations. However, a judgment against
the Company of a significant amount could have a material adverse effect on the
Company's liquidity and results of operations. The Company is not a party to any
other litigation that would have a material adverse effect on the Company or its
business and results of operations.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Gary F. Seamans (1).............. 47 Chairman of the Board of Directors, President and
Chief Executive Officer
Robert H. Gaynor (1)(2).......... 72 Vice Chairman of the Board of Directors
Curtis L. Benton................. 56 Executive Vice President and Chief Administration
Officer
J. William Nelson................ 43 President of U.S. Operations
Michael F. Lathrope.............. 49 Senior Vice President of Product Development and
Chief Technology Officer
Stephen J. Hawrysz............... 37 Vice President, Secretary, Treasurer and Chief
Financial Officer
Melvin J. Simon (1)(2)........... 51 Assistant Secretary, Assistant Treasurer and Director
Robert D. Faw.................... 42 President of Global Operations
Marcus H. Hafner, Sr. ........... 38 Vice President of Business Development
Richard P. Riviere............... 41 Vice President of Transaction Services and President
of Conference Plus
Neil J. Kreitman................. 39 Senior Vice President of Global Manufacturing and
Sourcing
Stefan D. Abrams (3)............. 57 Director
Michael A. Brunner (3)........... 62 Director
Paul A. Dwyer (3)................ 62 Director
Ormand J. Wade (2)............... 57 Director
</TABLE>

- ------------------------------
(1) Member of Executive Committee.

(2) Member of Compensation Committee and Stock Incentive Committee.

(3) Member of Audit Committee.

Gary F. Seamans has served as Chairman of the Board of Directors of the
Company since February 1991, as a director of the Company since February 1988
and as President and Chief Executive Officer of the Company since January 1988.
Prior to joining the Company, Mr. Seamans served as Vice President of Sales and
Marketing -- Midwest Division at MCI Communications, Inc. from 1984 to 1987.
From 1971 to 1984, Mr. Seamans held a variety of management positions in the
operations, engineering, sales, marketing, strategic planning, finance and
personnel departments of AT&T.

Robert H. Gaynor has served as Vice Chairman of the Board of Directors of
the Company since December 1991 and as a director of the Company since October
1990. Mr. Gaynor presently serves as Chairman of the Rockhill Workshop, an
executive conference at the University of Missouri, Kansas City. From 1958 to
1986, Mr. Gaynor held a variety of executive officer positions at AT&T.

Curtis L. Benton has served as Executive Vice President since July 1993 and
as Chief Administration Officer since April 1996. Mr. Benton has also served as
Executive Vice President of the Operating Company since August 1992 and as Chief
Operating Officer of the Company from January 1990 to April 1996.

J. William Nelson has served as President of U.S. Operations since April
1996 and as Executive Vice President and Chief Customer Satisfaction Officer of
the Operating Company since July 1993. Mr. Nelson served as Senior Vice
President and Chief Customer Satisfaction Officer of the Company from May 1991
to June 1993. Prior to joining the Company, Mr. Nelson held a variety of
management positions, including Director of Large Account Sales and Director of
Customer Service, at MCI Communications, Inc. from April 1986 to May 1991.

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<PAGE> 45

Michael F. Lathrope has served as Senior Vice President of Product
Development and Chief Technology Officer of the Company since April 1996, Mr.
Lathrope served as Vice President of Engineering and Chief Technology Officer of
the Company from June 1993 to April 1996 and as Vice President of Engineering of
the Company from April 1989 to June 1993.

Stephen J. Hawrysz has served as Vice President and Chief Financial Officer
of the Company since July 1993, as Secretary and Treasurer of the Company since
July 1995 and as Vice President and Chief Financial Officer of the Operating
Company since August 1990. A Certified Public Accountant, Mr. Hawrysz served in
the Audit Division of Arthur Andersen LLP, a public accounting firm, from June
1980 to November 1989, and as Assistant Controller for Wisconsin Central
Transportation Corporation, a regional railroad company, from November 1989 to
August 1990.

Melvin J. Simon has served as Assistant Secretary and Assistant Treasurer
of the Company since July 1995 and as a Director of the Company since August
1992. From August 1992 to July 1995, Mr. Simon served as Secretary and Treasurer
of the Company. A Certified Public Accountant, Mr. Simon founded and has served
as President of Melvin J. Simon & Associates, Ltd., a public accounting firm,
since May 1980.

Robert D. Faw has served as President of Global Operations since April
1996, as President of Westell International since February 1993 and as Chief
Executive Officer of Westell International since August 1993. Mr. Faw served as
Executive Vice President, International Operations of the Company from July 1995
to April 1996. Prior to joining the Company, Mr. Faw was Director of
International Operations and Business Development Director of Advanced
Technologies at AT&T Paradyne from October 1981 to January 1993.

Marcus H. Hafner, Sr. has served as Vice President of Business Development
since April 1996. Mr. Hafner served as Business Development Vice President of
the Company from May 1995 to March 1996. Prior to joining the Company, Mr.
Hafner was President and Chief Operating Officer of On-Demand Technologies,
Inc., a broadband network systems provider, from April 1992 to April 1995, and a
Senior Program Manager at E-Systems, Inc., an electronics company, from November
1990 to April 1992.

Richard P. Riviere has served as Vice President of Transaction Services for
the Company since July 1995 and as President and Chief Executive Officer of
Conference Plus since October 1988.

Neil J. Kreitman has served as Senior Vice President of Global
Manufacturing and Sourcing of the Company since November 1995, and as Vice
President of Operations Science of the Company since January 1995. Prior to
joining the Company, Mr. Kreitman was Director of Material Management at AT&T
Paradyne from May 1984 to January 1995.

Stefan D. Abrams has served as a director of the Company since February
1994. Mr. Abrams has been a Managing Director of The TCW Group, Inc., an
investment management firm, since October 1992. From September 1989 to September
1992, Mr. Abrams was a Managing Director of Kidder, Peabody & Company, an
investment banking firm.

Michael A. Brunner has served as a director of the Company since December
1994. From May 1985 to February 1992, Mr. Brunner served as President of AT&T
Federal Systems, a division of AT&T. Mr. Brunner currently serves as a director
of Concurrent Computer Corporation, a computer manufacturer, and as a director
and past Chairman of the Leonard Center for Excellence in Engineering of Penn
State University.

Paul A. Dwyer has served as a director of the Company since January 1996
and as a director of the Operating Company since November 1995. Mr. Dwyer has
served as Vice President -- Finance of Henry Crown and Company, a private
investment firm, since February 1981.

Ormand J. Wade has served as a director of the Company since December 1994.
From February 1987 to December 1992, Mr. Wade served as Vice Chairman of
Ameritech Corp. and from January 1982 to February 1987, as President and Chief
Executive Officer of Illinois Bell Telephone Company. Mr. Wade currently serves
as a director of ITW Corporation, a manufacturer of precision engineered
products, Andrew Corporation, a manufacturer of microwave and peripheral
equipment, and Northwestern Memorial Hospital, and as a trustee of the
University of Chicago.

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<PAGE> 46

DIRECTOR COMPENSATION

Directors who are not employees of the Company each receive $20,000 per
year for services rendered as directors, except Mr. Gaynor who receives $30,000
per year as Vice Chairman. In addition, all directors may be reimbursed for
certain expenses incurred in connection with attendance at Board and committee
meetings. Other than with respect to reimbursement of expenses, directors who
are employees of the Company do not receive additional compensation for service
as a director. In connection with his election as a director of the Operating
Company in November 1995, Mr. Dwyer was granted an option to purchase 89,900
shares of Class A Common Stock at an exercise price of $6.50 per share. Mr.
Dwyer's options vest at a rate of 1,872 shares per month commencing January 1,
1996.

BOARD COMMITTEES

The Board of Directors has established three standing committees: the Audit
Committee, the Compensation Committee and the Executive Committee. The Audit
Committee recommends the appointment of auditors and oversees the accounting and
audit functions of the Company. The Compensation Committee determines executive
officers' salaries and bonuses. The Stock Incentive Committee administers the
Stock Purchase Plan and the Stock Incentive Plan. The Executive Committee has
the authority to take all actions that the Board of Directors as a whole would
be able to take, except as limited by applicable law.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS

The Compensation Committee is currently composed of Messrs. Gaynor, Wade
and Simon, the Assistant Secretary and Assistant Treasurer of the Company. No
interlocking relationship exists between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.

Since 1984, Melvin J. Simon & Associates, Ltd. has provided accounting and
other financial services to the Company. Mr. Simon, a director and the Assistant
Secretary and Assistant Treasurer of the Company and a Co-Trustee of the Voting
Trust, is the sole owner of Melvin J. Simon & Associates, Ltd. The Company paid
Melvin J. Simon & Associates, Ltd. approximately $88,000, $88,000 and $64,000 in
fiscal 1994, 1995 and 1996, respectively, for its services. The Company believes
that these services are provided on terms no less favorable to the Company than
could be obtained from unaffiliated parties.

Pursuant to a contract that expired on January 31, 1996, Florence R. Penny,
the mother of Robert C. Penny III, a Co-Trustee of the Voting Trust, and the
beneficial owner of shares of Class B Common Stock held in the Voting Trust
received $63,000 per year for her services as a consultant to the Company.

The Company has granted Robert C. Penny III and Melvin J. Simon, as
Trustees of the Voting Trust, certain registration rights with respect to the
shares of Common Stock held in the Voting Trust. See "Shares Eligible for Future
Sale."

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<PAGE> 47

EXECUTIVE COMPENSATION

The following table sets forth information for the fiscal years ended March
31, 1995 and 1996, with respect to all compensation paid or earned for services
rendered to the Company by the Company's Chief Executive Officer and the
Company's four other most highly compensated executive officers who were serving
as executive officers as of March 31, 1996 (together, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FISCAL -------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)(2)
----------------------------------------- ------ -------- -------- -------------------
<S> <C> <C> <C> <C>
Gary F. Seamans
Chairman of the Board, President and
Chief Executive Officer................. 1996 $275,000 $212,800 $ 5,136
1995 253,000 231,000 3,205
Curtis L. Benton
Executive Vice President and Chief
Administration Officer.................. 1996 153,000 69,600 6,454
1995 139,000 124,382 3,162
J. William Nelson
President of U.S. Operations............ 1996 152,000 69,600 4,435
1995 138,000 124,790 2,707
Michael F. Lathrope
Senior Vice President of Product
Development and Chief Technology
Officer................................. 1996 140,000 42,400 4,366
1995 130,000 71,896 2,395
Robert D. Faw
President of Global Operations.......... 1996 120,000 42,000 1,845
1995 105,000 67,500 988
</TABLE>

- ------------------------------
(1) All Other Compensation for fiscal 1996 consists of matching contributions
under the Company's 401(k) Profit Sharing Plan and life insurance premiums,
as follows: Mr. Seamans: $3,570 and $1,566, respectively; Mr. Benton: $4,177
and $2,277, respectively; Mr. Nelson: $3,937 and $498, respectively; Mr.
Lathrope: $3,910 and $456, respectively; and, Mr. Faw: $1,625 and $220,
respectively.

(2) The Company did not issue restricted stock or grant stock options or SARs to
any of the Named Executive Officers in fiscal year 1996. At March 31, 1996,
restricted stock, with a fair market value equal to $18.50 per share, was
held by Mr. Seamans (199,636 shares of Class B Common Stock valued at
$3,693,266); Mr. Benton (66,468 shares of Class A Common Stock valued at
$1,229,658); and, Mr. Faw (72,500 shares of Class A Common Stock valued at
$1,341,250). Holders of restricted stock are entitled to vote and receive
all dividends, if any, paid on such shares.

STOCK PLANS

Employee Stock Purchase Plan. The Company has reserved an aggregate of
217,950 shares of Class A Common Stock for issuance under the Company's Employee
Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is intended to
qualify under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"), and will permit eligible employees of the Company to purchase Class A
Common Stock through payroll deductions of up to 10% (or such larger percentage
up to 25%, as the Stock Incentive Committee administering the Purchase Plan may
in the future determine) of their compensation, provided that no employee may
purchase more than $10,000 (or such larger amount, up to $25,000, as the Stock
Incentive Committee may, in the future, determine) worth of stock in any
calendar year. The Purchase Plan has four three-month offering periods, each
beginning on January 1, March 1, July 1 and September 1 of each

44
<PAGE> 48

year, with the first offering period commencing on January 1, 1996. The price of
Class A Common Stock purchased under the Purchase Plan will be not less than 85%
of the fair market value of the Class A Common Stock on the date of purchase.
The Purchase Plan will be administered by the Stock Incentive Committee. The
Board will be able to amend or terminate the Purchase Plan at any time. However,
the Board will not be able to, without stockholder approval, materially increase
the number of shares of Class A Common Stock available for issuance or
materially modify the eligibility requirements for participation or the benefits
available to participants.

1995 Stock Incentive Plan. The Company has reserved an aggregate of
2,688,050 shares of Class A Common Stock for issuance under the 1995 Stock
Incentive Plan (the "Stock Incentive Plan"), which may be granted to employees,
officers and non-employee directors of the Company. The maximum number of shares
that may be subject to benefits awarded to any participant in any fiscal year
will be 200,000 shares. The Stock Incentive Plan will be administered by the
Stock Incentive Committee. Members of the Committee will waive the right to
participate in the Stock Incentive Plan while serving on the Committee. The
Stock Incentive Plan will provide for awards, which may consist of Class A
Common Stock, restricted shares of Class A Common Stock ("Restricted Shares"),
nonqualified stock options and incentive stock options ("ISOs") to purchase
shares of Class A Common Stock, performance awards and stock appreciation rights
("SARs").

The exercise price for options will be payable in cash. Alternatively, with
the approval of the Stock Incentive Committee, all or part of the exercise price
may be paid by surrendering shares already owned by the optionee, or by
instructing the Company to withhold shares of Class A Common Stock otherwise
issuable upon exercise of the option. The exercise price per share of Class A
Common Stock for each stock option granted under the Stock Incentive Plan may
not be less than 85% (100% in the case of an ISO) of the closing price for the
Class A Common Stock last reported on the Nasdaq National Market on the date the
stock option is granted. The market value of a share of Class A Common Stock on
the date an SAR is granted will equal the base value of such SAR. Options and
SARs to be granted under the Stock Incentive Plan must be exercised within ten
years from the date of grant and will generally vest in annual installments as
determined by the Stock Incentive Committee. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of any ISOs granted under the Stock Incentive Plan may not be less than
110% of the fair market value of the Class A Common Stock on the date of grant,
and the exercise period may not exceed five years from the date of grant.

The Board of Directors will be able to terminate or amend the Stock
Incentive Plan at any time, except that no such action generally will be able to
adversely affect any rights or obligations regarding any awards previously made
under the Stock Incentive Plan without the consent of the recipient. In
addition, no amendment may be effective without the prior approval of
stockholders, if such approval is required for the Stock Incentive Plan to
continue to comply with applicable regulations of the Securities and Exchange
Commission. In the event of any changes in the capital structure of the Company,
such as a stock dividend or split-up, the Board of Directors must make equitable
adjustments to outstanding unexercised awards and to the provisions of the Stock
Incentive Plan as it deems necessary and appropriate. If the Company becomes a
party to a merger, reorganization, liquidation or similar transaction, the Board
of Directors may make such arrangements it deems advisable regarding outstanding
awards, such as substituting new awards for outstanding awards, assuming
outstanding awards or terminating or paying for outstanding awards.

401(K) PLAN

All employees of the Company who are at least 18 years of age and have been
employed by the Company for at least 12 consecutive months (at least 1,000 hours
of service) are eligible to participate in the Company's 401(k) Profit Sharing
Plan (the "401(k) Plan"). Participants may contribute up to the lesser of 15% of
their current compensation or the statutorily prescribed annual limit to the
401(k) Plan. Participant contributions are held and invested by the 401(k)
Plan's trustees. The 401(k) Plan currently provides that the Company will
contribute an amount not to exceed 6% of the participant's compensation for the
year. In fiscal 1996, the Company made matching contributions of approximately
$229,000. In addition, the 401(k) Plan allows the

45
<PAGE> 49

Company to make discretionary profit-sharing contributions to participants. Each
participant's deferred salary contributions vest immediately, and Company
contributions vest over a period of five years. The 401(k) Plan is intended to
qualify under Section 401 of the Code so that contributions by participants to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
participants until withdrawn from the 401(k) Plan.

CERTAIN TRANSACTIONS

Pursuant to an agreement dated September 13, 1988 between the Company and
Richard Riviere, the Vice President of Transaction Services of the Company and
President of Conference Plus, Mr. Riviere receives an annual base salary of not
less than $75,000 during his employment with the Company. This agreement also
provides Mr. Riviere with a right of first refusal with respect to the Company's
interest in Conference Plus in the event the Company decides to sell such
interest. In addition, after his employment with the Company terminates, Mr.
Riviere has agreed not to compete with the Company for a period of two years.

Pursuant to a contract that expired on January 31, 1996, Florence R. Penny,
the mother of Robert C. Penny III, a Co-Trustee of the Voting Trust, and the
beneficial owner of shares of Class B Common Stock held in the Voting Trust,
received $63,000 per year for her services as a consultant to the Company.

46
<PAGE> 50

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information as of May 30, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent of the outstanding shares of the Company's Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer, (iv) all directors
and executive officers of the Company as a group and (v) each of the Selling
Stockholders. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
provided by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING
--------------------------------------------- SHARES BENEFICIALLY OWNED
PERCENT SHARES OF AFTER OFFERING (1)
PRINCIPAL OF CLASS A -------------------------------------
STOCKHOLDERS, NUMBER OF NUMBER OF TOTAL COMMON NUMBER OF NUMBER OF PERCENT OF
EXECUTIVE OFFICERS CLASS A CLASS B VOTING STOCK CLASS A CLASS B TOTAL VOTING
AND DIRECTORS SHARES SHARES POWER (2) OFFERED (1) SHARES SHARES POWER (2)
- --------------------------------------- ------------------- --------- ---------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Penny III....... -- 19,929,396(3)(4) 79.7% 376,458(4)(5) -- 19,552,938 78.2%
Melvin J. Simon........... -- 20,190,396(3)(4)(6) 80.7% 402,558(4)(5)(7) -- 19,787,838 79.1%
Gary F. Seamans........... 130,500(8) 1,627,980 6.6% 175,848(5)(9) 117,450 1,465,182 6.0%
Robert H. Gaynor.......... 259,608 -- * -- 259,608 -- *
Curtis L. Benton.......... 818,322 -- * 81,832 736,490 -- *
Michael F. Lathrope....... 676,280 -- * 67,628 608,652 -- *
J. William Nelson......... 328,860 -- * 32,886 295,974 -- *
Robert D. Faw............. 130,500 -- * 13,050 117,450 -- *
Stephen J. Hawrysz........ 247,544(10) -- * 22,000 225,544 -- *
Stefan D. Abrams.......... 271,860(11) -- * 25,000(11) 246,860 -- *
Michael A. Brunner........ 121,800 -- * 12,180 109,620 -- *
Paul A. Dwyer............. 11,232(12) -- * -- 11,232 -- *
Ormand J. Wade............ 109,620 -- * 10,962 98,658 -- *
All directors and
executive officers as a
group (15 persons)....... 3,109,002 21,818,376 90.3% 843,944(4)(5) 2,830,414 21,253,020 87.8%
OTHER SELLING
STOCKHOLDERS
- --------------------------
Curtis H. Benton (13)..... 78,300 -- * 7,830 70,470 -- *
Lorinda L. Benton......... 78,300 -- * 7,830 70,470 -- *
Robert H. Gaynor, Jr. .... 54,926(14) -- * 5,492(15) 49,434 -- *
Ronald Koval.............. 125,440(16) -- * 5,400 120,040 -- *
William V. Rodey, Jr. .... 58,000(17) -- * 4,504 53,496 -- *
</TABLE>

- ------------------------------

* Less than 1%

(1) Assumes that the Underwriters' over-allotment option to purchase up to
155,000 additional shares from the Company and 226,000 additional shares
from the Selling Stockholders is not exercised. If the Underwriters'
over-allotment option is exercised in full, Melvin J. Simon will sell an
additional 13,050 shares as trustee of a trust for the benefit of Shawn F.
Seamans, Gary F. Seamans' son; Gary F. Seamans will sell an additional
81,399 shares for his own account and 6,524 shares on behalf of trusts for
the benefit of J. William Nelson's children; Curtis L. Benton will sell an
additional 40,916 shares; Michael F. Lathrope will sell an additional
33,814 shares; J. William Nelson will sell an additional 16,443 shares;
Stephen J. Hawrysz will sell an additional 1,819 shares; Stefan D. Abrams
will sell an additional 10,000 shares as trustee of the Stefan D. Abrams
1996 Charitable Unitrust; Robert D. Faw will sell an additional 6,525
shares; Michael A. Brunner will sell an additional 6,090 shares; Curtis H.
Benton will sell an additional 3,915 shares; and Lorinda L. Benton will
sell an additional 3,915 shares.

(2) Percentage of beneficial ownership is based on 12,821,606 shares of Class A
Common Stock and 21,818,376 shares of Class B Common Stock outstanding as
of May 30, 1996 and 15,051,962 shares of Class A Common Stock and
21,253,020 shares of Class B Common Stock outstanding after completion of
this offering.

(3) Includes 19,929,396 shares of Class B Common Stock held by Messrs. Penny
and Simon as Trustees of the Voting Trust. The Trustees have joint voting
and dispositive power over all shares in the Voting Trust. Messrs. Penny
and Simon each disclaim beneficial ownership with respect to all shares
held in the Voting Trust in which they do not have a pecuniary interest.
The Voting Trust contains 6,243,874 shares held for the benefit of Mr.
Penny's immediate family and 930,626 shares held for the benefit of Mr.
Simon's immediate family. The address for Messrs. Penny and Simon is Melvin
J. Simon & Associates, Ltd., 4343 Commerce Court, Suite 114, Lisle,
Illinois 60532. See "-- Voting Trust and Stock Transfer Restriction
Agreement."

47
<PAGE> 51

(4) Includes the following shares to be sold hereunder: (i) 43,540 shares held
by Mr. Simon as trustee of a trust for the benefit of Mr. Penny, (ii) 5,350
shares held by Florence R. Penny, Barbara J. Pruitt and Marlene D. Foskett
as trustees of a trust for the benefit of Mr. Penny, (iii) 65,372 shares
for Mr. Simon's own account, (iv) 26,100 shares held by Natalie Simon,
Melvin J. Simon's wife, as trustee of trusts for the benefit of their
children and (v) 44,768 shares held by Mr. Penny for his own account.
Immediately prior to this offering, these shares are being distributed from
the Voting Trust to these individuals for sale hereunder.

(5) Includes Class A Common Stock issued upon the conversion of shares of Class
B Common Stock in connection with this offering.

(6) Includes 261,000 shares held in trust for the benefit of Shawn F. Seamans,
Gary F. Seaman's son, for which Mr. Simon is trustee and has sole voting
and dispositive power. Mr. Simon disclaims beneficial ownership of these
shares.

(7) Includes 26,100 shares being sold by Mr. Simon on behalf of a trust for the
benefit of Shawn F. Seamans.

(8) Represents shares held in trusts for the benefit of J. William Nelson's
children for which Mr. Seamans is trustee and has sole voting and
dispositive power. Mr. Seamans disclaims beneficial ownership of these
shares.

(9) Includes (i) 162,798 shares being sold by Mr. Seamans for his own account
and (ii) 13,050 shares being sold by Mr. Seamans on behalf of trusts for
the benefit of J. William Nelson's children.

(10) Includes 17,400 shares held by Laura Hawrysz, Mr. Hawrysz's wife, as
trustee of a trust for the benefit of their children.

(11) Includes 35,000 shares held by the Stefan D. Abrams 1996 Charitable
Unitrust, for which Mr. Abrams is trustee, of which 25,000 shares are being
sold in this offering.

(12) Includes options to purchase 11,232 shares that are exercisable within 60
days of May 31, 1996, but does not include options to purchase 78,668
shares which are not presently exercisable.

(13) Mr. Curtis H. Benton is an employee of KPINS.

(14) Includes 15,660 shares held by Robert Gaynor, Jr., as trustee of a trust
for the benefit of his son.

(15) Includes (i) 3,926 shares being sold by Robert H. Gaynor, Jr. for his own
account and (ii) 1,566 shares being sold by Robert H. Gaynor, Jr. on behalf
of a trust for the benefit of his son.

(16) Includes 41,760 shares held by Tamara Koval, Mr. Koval's wife, as trustee
of a trust for the benefit of the Koval family.

(17) Includes 13,920 shares held by Terry Rodey, Mr. Rodey's wife, as trustee of
a trust for the benefit of the Rodey family.

VOTING TRUST AND STOCK TRANSFER RESTRICTION AGREEMENT

All Common Stock held for the benefit of members of the Penny family and
the Simon family, which immediately following this offering represents 53.9% of
the outstanding shares of Common Stock and 78.2% of the voting power of Westell,
is held pursuant to a Voting Trust Agreement dated February 23, 1994, as
amended, and is registered in the names of Robert C. Penny III and Melvin J.
Simon, as Trustees. Under the Voting Trust, the Trustees have all rights of
stockholders, including full voting and investment power. All decisions of the
Trustees require joint approval. The beneficiaries of the Voting Trust (the
"Beneficiaries") receive all cash dividends and distributions paid on the shares
held in the Voting Trust. The Beneficiaries may not withdraw shares held in the
Voting Trust without the consent of the Trustees. In addition, members of the
Penny family may not transfer their beneficial interests in the Voting Trust
without complying with the rights of first refusal described below.
Beneficiaries representing 75% of the voting power of the shares held in the
Voting Trust may amend the Voting Trust or remove the Trustees at any time. The
Voting Trust continues until May 2015 unless earlier terminated or extended.

All members of the Penny family who are Beneficiaries under the Voting
Trust are parties to a Stock Transfer Restriction Agreement with the Company
(the "Stock Transfer Restriction Agreement"). The Stock Transfer Restriction
Agreement prohibits, with limited exceptions, such Beneficiaries from
transferring any Common Stock or their beneficial interests in the Voting Trust
acquired prior to November 30, 1995 without first offering such stock or
beneficial interests to the other members of the Penny family. In addition, the
Company's Amended Certificate of Incorporation provides that shares of Class B
Common Stock are automatically converted into shares of Class A Common Stock if
they are transferred to persons other than "permitted transferees." See
"Description of Capital Stock" and "Shares Eligible for Future Sale."

48
<PAGE> 52

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 43,500,000 shares
of Class A Common Stock, 25,000,000 shares of Class B Common Stock and 1,000,000
shares of Preferred Stock, each with a par value of $0.01 per share. After the
completion of this offering, 15,051,962 shares of Class A Common Stock and
21,253,020 shares of Class B Common Stock will be issued and outstanding.

The following description of the capital stock of the Company and certain
provisions of the Company's Amended Certificate of Incorporation and By-laws is
a summary and is qualified in its entirety by the provisions of the Amended
Certificate of Incorporation and By-laws, which have been filed as exhibits to
the Company's Registration Statement, of which this Prospectus is a part.

COMMON STOCK

Dividends. Holders of record of shares of Common Stock are entitled to
receive such dividends when, if and as may be declared by the Board of Directors
out of funds legally available for such purposes. No dividends may be declared
or paid on any share of any class of Common Stock, unless such dividend, at the
same rate per share, is simultaneously declared or paid on each share of the
other class of Common Stock. In the case of a stock dividend or distribution,
holders of Class A Common Stock are entitled to receive the same percentage
dividend or distribution as holders of Class B Common Stock and vice versa,
except that stock dividends and distributions shall be made in shares of Class A
Common Stock to the holders of Class A Common Stock and in shares of Class B
Common Stock to the holders of Class B Common Stock.

Voting Rights. Holders of Class A Common Stock are entitled to one vote per
share and holders of Class B Common Stock are entitled to four votes per share.
Holders of shares of Common Stock will vote as a single class on all matters
submitted to a vote of stockholders except with respect to future issuances of
Class B Common Stock and as otherwise required by law. The Amended Certificate
of Incorporation provides that all issuances of Class B Common Stock must be
approved by the affirmative vote of a majority of each class of Common Stock,
voting separately as a class, except with respect to (i) payment of stock
dividends on Class B Common Stock and (ii) a stock split, reclassification or
other subdivision of the Class B Common Stock. Under Delaware law, the
affirmative vote of the holders of a majority of the outstanding shares of any
class of Common Stock is required to approve, among other things, a change in
the designations, preferences or limitations of the shares of such class of
Common Stock.

Convertibility. Each share of Class B Common Stock is convertible, at the
option of its holder, into one share of Class A Common Stock at any time. The
Class A Common Stock is not convertible into Class B Common Stock. Each share of
Class B Common Stock shall automatically be converted into one share of Class A
Common Stock in the event (i) such share shall be transferred (including,
without limitation, by way of sale, assignment, exchange, gift, bequest,
appointment or otherwise) to any person or entity other than a "Permitted
Transferee" or (ii) the number of shares of Class B Common Stock outstanding at
any time is equal to or less than 10% of the total number of outstanding shares
of Class B Common Stock and Class A Common Stock. A "Permitted Transferee"
includes (i) any other holder of Class B Common Stock, (ii) any member of the
Penny family or the Simon family, (iii) Gary F. Seamans, his spouse or any of
their descendants and (iv) certain other permitted transferees.

Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A Common Stock are entitled to share ratably with
the holders of Class B Common Stock in all assets available for distributions
after payment in full to creditors.

Other Provisions. The holders of Common Stock are not entitled to
preemptive or subscription rights. In any merger, consolidation or business
combination, the consideration to be received per share by holders of Class A
Common Stock must be identical to that received by holders of Class B Common
Stock. No class of Common Stock may be subdivided, consolidated, reclassified or
otherwise changed unless the other class of Common Stock concurrently is
subdivided, consolidated, reclassified or otherwise changed in the same
proportion and in the same manner. All outstanding shares are, and the shares of
Class A Common Stock offered hereby will be upon issuance, validly issued, fully
paid and nonassessable.

49
<PAGE> 53

PREFERRED STOCK

The Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by stockholders. The issuance
of Preferred Stock could adversely affect the voting power of holders of both
classes of Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any shares of Preferred Stock.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended Certificate of Incorporation contains provisions (i)
eliminating the personal liability of its directors, officers, employees and
other agents for monetary damages resulting from breaches of their fiduciary
duty to the fullest extent permitted by the law and (ii) indemnifying its
directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware. These provisions in the Amended Certificate of
Incorporation do not eliminate the duty of care and, in appropriate
circumstances, equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of a director's duty of
loyalty to the Company or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
any transaction from which the director derived an improper personal benefit and
for improper distributions to stockholders. These provisions also do not affect
a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.

The Company's Amended Certificate of Incorporation and By-laws also permit
it to secure insurance on behalf of any person it is required or permitted to
indemnify for any liability arising out of his or her actions in such capacity,
regardless of whether Delaware Law would permit indemnification. The Company
maintains liability insurance for its directors and officers.

At present, except for the lawsuit described in "Business -- Legal
Proceedings," there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted and the Company is not aware of any other threatened
litigation or proceeding that might result in a claim for such indemnification.

ANTITAKEOVER EFFECTS OF PROVISIONS OF AMENDED CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE LAW

The Company's Amended Certificate of Incorporation or By-laws, as
applicable, among other things, (i) limit the right of stockholders to call
special stockholders meetings, (ii) require stockholders to follow an advance
notification procedure for certain stockholder nominations of candidates to the
Board of Directors and for new business to be conducted at stockholders
meetings, and (iii) provide that the Board of Directors, without action by the
stockholders, may issue and fix the rights and preferences of shares of
Preferred Stock. These provisions may have the effect of delaying, deferring or
preventing a change of control of the Company without further action by the
stockholders, may discourage bids for the Class A Common Stock at a premium over
the market price of the Class A Common Stock, may adversely affect the market
price of, and the voting and other rights of, the holders of the Class A Common
Stock and could have the effect of discouraging certain attempts to acquire the
Company or remove incumbent management or members of the Company's Board of
Directors even if some or a majority of the Company's stockholders deemed such
an attempt to be in their best interests.

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approves either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming

50
<PAGE> 54

an interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock (excluding certain shares held by persons who are both
directors and officers of the corporation and certain employee stock plans), or
(iii) on or after the consummation date, the business combination is approved by
the board of directors and by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder. For
purposes of Section 203, a "business combination" includes, among other things,
a merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder, and an "interested stockholder" is generally a
person who, together with affiliates and associates, owns (or within three
years, owned) 15% or more of the corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is LaSalle National

Trust, N.A.

51
<PAGE> 55

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
15,051,962 shares of Class A Common Stock and 21,253,020 shares of Class B
Common Stock (15,303,001 shares of Class A Common Stock and 21,156,981 shares of
Class B Common Stock if the Underwriters' over-allotment option is exercised in
full). All outstanding shares of Class A and Class B Common Stock will either be
freely tradeable in the public market or eligible for immediate public sale
subject (i) in the case of 19,552,938 shares held pursuant to the Voting Trust,
to certain rights of first refusal held by members of the Penny family, (ii) in
the case of certain shares, to the volume and manner of sale limitations imposed
by Rule 144 under the Securities Act and (iii) in the case of certain shares,
the lock-up agreements described below. The Class B Common Stock is convertible
on a share-for-share basis into Class A Common Stock and must be converted to
effect any public sale of such stock.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who is an affiliate of the Company or who has
beneficially owned restricted securities, which are issued and sold in reliance
upon exemptions from registration under the Securities Act, for at least two
years is entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the then outstanding shares of Common Stock
or the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the filing of a notice of intent to sell. Sales under
Rule 144 are also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company. However, a person who is not deemed to have been an "affiliate" of the
Company at any time during the three months preceding a sale, and who has
beneficially owned restricted securities for at least three years, would be
entitled to sell such shares under Rule 144 without regard to volume
limitations, manner-of-sale provisions, notice requirements or the availability
of current public information about the Company.

The Selling Stockholders and all of the directors and executive officers of
the Company holding in the aggregate 24,937,806 shares of Common Stock upon
completion of this offering have agreed, subject to certain limited exceptions,
not to sell or offer to sell or otherwise dispose of the shares of Common Stock
currently held by them, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for any shares of
Common Stock for a period of 90 days after the date of this Prospectus without
the prior written consent of Montgomery Securities. Montgomery Securities may,
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to these lock-up agreements. In addition, the
Company has agreed that for a period of 90 days after the date of this
Prospectus it will not, without the consent of Montgomery Securities, issue,
offer, sell, grant options to purchase or otherwise dispose of any equity
securities or securities convertible into or exchangeable for equity securities
except for shares of Class A Common Stock offered hereby and shares issued
pursuant to the Purchase Plan and the Stock Incentive Plan.

Robert C. Penny III and Melvin J. Simon, the Trustees under the Voting
Trust, which holds 19,552,938 shares of Class B Common Stock, or 53.9% of the
shares of Common Stock outstanding after this offering, have entered into a
Registration Rights Agreement with the Company under which the Trustees have
certain rights to require the Company to register the Class A Common Stock into
which such shares of Class B Common Stock are convertible for sale under the
Securities Act (the "Registration Rights Agreement"). The Registration Rights
Agreement grants the Trustees the right to require the Company to file three
registration statements on Form S-1 and additional registration statements on
Form S-3 covering sales of such shares. In addition, if the Company proposes to
register any of its securities for sale under the Securities Act, the Trustees
are entitled to notice of such registration and to include their shares in such
registration, subject to the right of the participating underwriters to limit
the number of shares owned by the Trustees included in such registration. All
expenses related to such registration statements, excluding underwriting
discounts, will be paid by the Company, and the Company and the Trustees have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.

52
<PAGE> 56

The Company has filed a registration statement on Form S-8 covering
2,663,426 shares of Class A Common Stock reserved for issuance under the Stock
Incentive Plan and 213,532 shares of Class A Common Stock reserved for issuance
under the Stock Purchase Plan. Shares of Class A Common Stock issued under the
Stock Purchase Plan and the Stock Incentive Plan will be freely tradeable in the
public market, subject in the case of affiliates to the amount, manner of sale,
notice and public information requirements of Rule 144. See "Management -- Stock
Plans."

53
<PAGE> 57

UNDERWRITING

Montgomery Securities, Cowen & Company and Punk, Ziegel & Knoell, L.P. (the
"Underwriters"), have severally agreed, subject to the terms and conditions set
forth in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Class A Common Stock indicated
below opposite their respective names at the initial public offering price less
the underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of such shares, if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities..............................................
Cowen & Company....................................................
Punk, Ziegel & Knoell, L.P. .......................................
---------
Total......................................................... 2,540,000
=========
</TABLE>

The Underwriters have advised the Company that they initially propose to
offer the Class A Common Stock to the public on the terms set forth on the cover
page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may allow, and
such dealers may reallow, a concession of not more than $ per share to certain
other dealers. After the offering, the offering price and other selling terms
may be changed by the Underwriters. The Class A Common Stock is offered subject
to receipt and acceptance by the Underwriters and to certain other conditions,
including the right to reject orders in whole or in part.

The Company and the Selling Stockholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 155,000 and 226,000 additional shares
of Class A Common Stock, respectively, to cover over-allotments, if any, at the
same price per share as the initial 2,540,000 shares to be purchased by the
Underwriters. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the above
table. The Underwriters may purchase such shares only to cover over-allotments
made in connection with this offering.

The Selling Stockholders and all of the directors and executive officers of
the Company have agreed, subject to certain limited exceptions, not to sell or
offer to sell or otherwise dispose of the shares of Common Stock currently held
by them, any options or warrants to purchase any shares of Common Stock or any
securities convertible into or exchangeable for any shares of Common Stock for a
period of 90 days after the date of this Prospectus without the prior written
consent of Montgomery Securities. Montgomery Securities may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to these lock-up agreements. In addition, the Company has
agreed that for a period of 90 days after the date of this Prospectus it will
not, without the consent of Montgomery Securities, issue, offer, sell, grant
options to purchase or otherwise dispose of any equity securities or securities
convertible into or exchangeable for equity securities except for shares of
Class A Common Stock offered hereby and shares issued pursuant to the Purchase
Plan and the Stock Incentive Plan. See "Management -- Stock Plans."

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the Underwriters may be required to make in
respect thereof.

In connection with this offering, the Underwriters and selling group
members, if any, may engage in passive market making transactions in the Class A
Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A under
the Exchange Act. Passive market making consists of displaying bids on the
Nasdaq National Market limited by the prices of independent market makers and
effecting purchases limited by such prices and in response to order flow. Net
purchases by a passive market maker on each day are limited in amount to a
specified percentage of the passive market maker's average daily trading volume
in the

54
<PAGE> 58

Class A Common Stock during a specified prior period and must be discontinued
when such limit is reached. Passive market making may stabilize the market price
of the Class A Common Stock at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company and the Selling Stockholders by McDermott, Will &
Emery, Chicago, Illinois. Irving S. Fishman, a former director of the Company
and of counsel to McDermott, Will & Emery, owns 48,720 shares of Class A Common
Stock and Neal J. White, a partner at McDermott, Will & Emery, owns 1,500 shares
of Class A Common Stock. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. See "Principal and Selling
Stockholders."

EXPERTS

The audited Consolidated Financial Statements and schedule of the Company
included in this Prospectus and appearing in the Registration Statement (as
defined below) have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon the authority of such firm as experts in
giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected at the public
reference facilities maintained by the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 500 West
Madison Street, Chicago, IL 60661, and 7 World Trade Center, New York, NY 10048.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.

The Company has filed with the Commission, a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Class A
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Class A Common Stock offered hereby, reference is
made to the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete; with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.

55
<PAGE> 59

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets -- March 31, 1995 and 1996................................ F-3
Consolidated Statements of Operations for the years ended
March 31, 1994, 1995 and 1996....................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 1994, 1995 and 1996....................................................... F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1994, 1995 and 1996....................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 60

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Westell Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Westell
Technologies, Inc. (a Delaware corporation) and Subsidiaries as of March 31,
1995 and 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1996. 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 in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Westell Technologies, Inc.
and Subsidiaries as of March 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
May 21, 1996

F-2
<PAGE> 61

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 450 $21,789
Accounts receivable (net of allowance of $364,000 and $462,000, respectively)..... 12,613 10,217
Inventories....................................................................... 14,209 10,684
Prepaid expenses and deposits..................................................... 609 745
Refundable income taxes........................................................... 195 444
Deferred income tax asset......................................................... 2,400 1,868
Land and building construction held for sale...................................... -- 4,431
------- -------
Total current assets..................................................... 30,476 50,178
------- -------
Property and equipment:
Machinery and equipment........................................................... 8,762 9,933
Office, computer and research equipment........................................... 7,136 11,520
Leasehold improvements............................................................ 1,287 1,387
------- -------
17,185 22,840
Less accumulated depreciation and amortization.................................... 7,499 11,188
------- -------
Property and equipment, net..................................................... 9,686 11,652
------- -------
Deferred income tax asset and other assets.......................................... 114 2,618
------- -------
Total assets............................................................. $40,276 $64,448
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 9,383 $ 7,643
Accrued expenses.................................................................. 3,341 3,899
Accrued compensation.............................................................. 3,087 2,995
Current portion of long-term debt................................................. 1,332 1,591
Revolving promissory notes........................................................ 11,089 --
Construction Financing............................................................ -- 2,968
Deferred revenue.................................................................. 964 2,341
------- -------
Total current liabilities................................................ 29,196 21,437
------- -------
Long-term debt...................................................................... 2,797 2,836
------- -------
Other long-term liabilities......................................................... 525 1,040
------- -------
Deferred income taxes............................................................... 200 150
------- -------
Commitments and contingencies
Stockholders' equity:
Class A common stock, par $0.01..................................................... 289 128
Authorized -- 43,500,000 shares
Issued and outstanding -- 28,928,196 at March 31, 1995 and 12,801,606 at March 31,
1996
Class B common stock, par $0.01..................................................... -- 218
Authorized -- 25,000,000 shares
Issued and outstanding -- 21,838,376 shares at March 31, 1996
Preferred stock, par $0.01.......................................................... -- --
Authorized -- 1,000,000 shares
Issued and outstanding -- none
Additional paid-in capital.......................................................... 781 34,285
Cumulative translation adjustment................................................... -- (59)
Retained earnings................................................................... 6,488 4,413
------- -------
Total stockholders' equity.................................................... 7,558 38,985
------- -------
Total liabilities and stockholders' equity............................... $40,276 $64,448
======= =======
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-3
<PAGE> 62

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues......................................................... $51,051 $74,029 $83,236
Cost of goods sold............................................... 30,250 44,494 50,779
------- ------- -------
Gross margin................................................... 20,801 29,535 32,457
Operating expenses:
Sales and marketing............................................ 8,068 12,169 13,744
Research and development....................................... 7,695 10,843 12,603
General and administrative..................................... 5,502 6,701 8,364
------- ------- -------
Total operating expenses.................................... 21,265 29,713 34,711
------- ------- -------
Operating loss from continuing operations........................ (464) (178) (2,254)
Other income (expense), net...................................... (36) 34 (226)
Interest expense................................................. 176 769 859
------- ------- -------
Loss from continuing operations before taxes..................... (676) (913) (3,339)
Benefit for income taxes......................................... (989) (788) (1,886)
------- ------- -------
Income (loss) from continuing operations......................... 313 (125) (1,453)
Loss from discontinued operations (net of tax benefits of
$63,000, $243,000 and $394,000, respectively).................. (100) (383) (622)
------- ------- -------
Net income (loss)................................................ $ 213 $ (508) $(2,075)
======= ======= =======
Income (loss) per share:
Continuing operations.......................................... $ 0.01 $ (0.01) $ (0.05)
Discontinued operations........................................ (0.00) (0.01) (0.02)
------- ------- -------
Net income (loss) per share...................................... $ 0.01 $ (0.02) $ (0.07)
======= ======= =======
Average number of common shares outstanding...................... 28,486 28,952 30,846
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-4
<PAGE> 63

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
SHARES ISSUED
AND
OUTSTANDING
---------------- PAR VALUE ADDITIONAL CUMULATIVE TOTAL
CLASS ---------------- PAID-IN TRANSLATION RETAINED STOCKHOLDERS'
CLASS A B CLASS A CLASS B CAPITAL ADJUSTMENT EARNINGS EQUITY
------- ------ ------- ------- ---------- ---------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993
(adjusted for 2 for 1 stock
split effected June 7,
1996)....................... 28,304 -- $ 283 $ -- $ 653 $ -- $ 6,783 $ 7,719
Net income.................. -- -- -- -- -- -- 213 213
Stock awards................ 624 -- 6 -- 64 -- -- 70
------- ------ ----- ---- ------- ---- ------- -------
Balance, March 31, 1994....... 28,928 -- 289 -- 717 -- 6,996 8,002
Net loss.................... -- -- -- -- -- -- (508) (508)
Stock awards................ -- -- -- -- 64 -- -- 64
------- ------ ----- ---- ------- ---- ------- -------
Balance, March 31, 1995....... 28,928 -- 289 -- 781 -- 6,488 7,558
Net loss.................... -- -- -- -- -- -- (2,075) (2,075)
Stock awards................ -- -- -- -- 68 -- -- 68
Translation adjustment...... -- -- -- -- -- (59) -- (59)
Class B Stock Converted to
Class A Stock............ 52 (52) 1 (1) -- -- -- --
Issuance of Class A Common
Stock.................... 5,683 -- 57 -- 33,203 -- -- 33,260
Shares granted under Stock
Incentive Plan........... 25 -- -- -- 164 -- -- 164
Shares sold under Employee
Stock Purchase Plan...... 4 -- -- -- 69 -- -- 69
Recapitalization............ (21,890) 21,890 (219) 219 -- -- -- --
------- ------ ----- ---- ------- ---- ------- -------
Balance, March 31, 1996....... 12,802 21,838 $ 128 $ 218 $ 34,285 $(59) $ 4,413 $ 38,985
======= ====== ===== ==== ======= ==== ======= =======
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-5
<PAGE> 64

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ 213 $ (508) $(2,075)
Reconciliation of net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 1,732 3,355 4,286
Stock awards.............................................. 70 64 232
Deferred taxes............................................ (217) (1,527) (2,080)
Change in assets and liabilities:
(Increase) decrease in accounts receivable.................. (3,677) (5,642) 2,359
(Increase) decrease in inventories.......................... (3,883) (3,285) 3,509
(Increase) decrease in prepaid expenses and deposits........ (395) 26 (136)
(Increase) decrease in refundable income taxes.............. (868) 823 (249)
Increase (decrease) in accounts payable and accrued 3,286 6,066 (667)
expenses..................................................
Increase (decrease) in accrued compensation................. 133 1,496 (92)
Increase (decrease) in deferred revenues.................... 7,179 (6,215) 1,377
------- ------- --------
Net cash provided by (used in) operating activities.... 3,573 (5,347) 6,464
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment............................ (1,535) (4,913) (4,529)
Proceeds from sale of equipment................................ -- 263 --
Long term equipment deposit.................................... (1,396) 1,396 --
(Increase) decrease in other assets............................ (38) (75) 58
Purchase of land held for sale................................. -- -- (1,463)
------- ------- --------
Net cash used in investing activities.................. (2,969) (3,329) (5,934)
------- ------- --------
Cash flows from financing activities:
Net borrowings (repayment) under revolving promissory notes.... -- 9,389 (11,089)
Repayment of long-term debt and leases payable (528) (897) (1,425)
Proceeds from issuance of Common Stock......................... -- -- 33,329
------- ------- --------
Net cash provided by (used in) financing activities.... (528) 8,492 20,815
------- ------- --------
Effect of exchange rate changes on cash.......................... -- -- (6)
Net increase (decrease) in cash and cash equivalents... 76 (184) 21,339
Cash and cash equivalents, beginning of period................... 558 634 450
------- ------- --------
Cash and cash equivalents, end of period......................... $ 634 $ 450 $21,789
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-6
<PAGE> 65

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF ACCOUNTING POLICIES:

Description of Business

Westell Technologies, Inc. (the "Company") is a holding company. Its wholly
owned subsidiary, Westell, Inc., designs, manufactures and distributes
telecommunications equipment which is sold primarily to major telephone
companies. Westell International, Inc., a wholly owned subsidiary of the Company
established in fiscal 1993, and Westell Europe, Ltd., a wholly owned subsidiary
of Westell International, Inc., market and distribute the Westell, Inc. product
line in international markets. Conference Plus, Inc., an 89.2%-owned subsidiary,
provides teleconferencing services to various customers. Video Conference Plus,
Inc., a wholly owned subsidiary of Conference Plus, Inc., markets video
teleconferencing equipment and services to various customers. KeyPrestige
Information Network Systems, Inc., an 88%-owned subsidiary established in fiscal
1993 ("KPINS"), utilizes electronic networks to process business transactions
for various customers. The Company has a majority interest in Westell-Meridian
LLC, established in fiscal 1996 for the purpose of developing a new corporate
facility site (see Note 5).

Principals of Consolidation

The accompanying Consolidated Financial Statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, certificates of
deposit, time deposits, commercial paper, short-term government obligations and
other money market instruments. The Company invests its excess cash in deposits
with major financial institutions, in government securities and the highest
grade commercial paper of companies from a variety of industries. These
securities have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value, and are
considered cash equivalents for purposes of reporting cash flows.

Inventories

Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The components of inventories consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.............................................. $ 8,896 $ 6,784
Work in process............................................ 1,057 845
Finished goods............................................. 5,256 4,205
Reserve for excess and obsolete inventory.................. (1,000) (1,150)
------- -------
$14,209 $10,684
======= =======
</TABLE>

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets which range from 3 to 10 years using
the straight-line method for financial reporting purposes and accelerated
methods for tax purposes. Leasehold improvements are amortized over the lives of
the respective leases.

F-7
<PAGE> 66

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF ACCOUNTING POLICIES: (CONTINUED)
Revenue Recognition

Revenue is generally recognized upon shipment of product. On certain sales
contracts, revenue is not recognized until specific customer product acceptance
terms have been met.

Product Warranties

Most of the Company's products carry a limited warranty ranging from two to
seven years. The Company accrues for estimated warranty costs as products are
shipped.

Deferred Revenue

Deferred revenue represents prepayments for goods or services.

Research and Development Costs

Engineering and product development costs are charged to expense as
incurred.

Supplemental Cash Flow Disclosures

The following represents supplemental disclosures to the consolidated
statements of cash flows:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Schedule of noncash investing and financing
activities:
Property purchased under equipment notes............ $3,165 $1,275 $1,581
Construction held for sale financed with
construction loan................................ -- -- 2,968
Property purchased under capital leases............. -- 412 142
Cash paid for:
Interest............................................ 228 850 1,023
Taxes............................................... 32 49 419
====== ====== ======
</TABLE>

Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument held by the Company:

Cash, trade receivables and trade payables: the carrying amounts
approximate fair value because of the short maturity of these items.

Revolving promissory notes and installment notes payable to a bank:
due to the floating interest rate on these obligations, the carrying
amounts approximate fair value.

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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used when accounting for
allowance for uncollectible accounts receivable, inventory obsolescence, product
warranty, depreciation, employee benefit plans, taxes, and contingencies.

F-8
<PAGE> 67

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF ACCOUNTING POLICIES: (CONTINUED)
Foreign Currency Translation

The financial position and the results of operations of the Company's
foreign subsidiary are measured using local currency as the functional currency.
Assets and liabilities of this subsidiary are translated at the exchange rate in
effect at the end of each period. Income statement accounts are translated at
the average rate of exchange prevailing during the period. Translation
adjustments arising from differences in exchange rates from period to period are
included in the foreign currency translation adjustments account in
stockholders' equity.

The Company recorded a transaction loss of $270,000 in other income
(expense) for fluctuations on foreign currency rates on accounts receivable in
the fiscal year ended March 31, 1996.

Computation of Net Income (Loss) Per Share

Net income (loss) per share is computed using the weighted average number
of common shares outstanding during the period. These shares have been included
in the computation of net income (loss) per share. The computations for net
income (loss) per share reflect the retroactive restatement for the 2-for-1
stock split in the form of a dividend to holders of record on May 20, 1996 and
effected on June 7, 1996.

Geographic Information

The Company's financial information by geographic area was as follows for
the year ended March 31, 1996:

<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL TOTAL
-------- ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue......................................... $ 63,445 $19,791 $83,236
Operating income (loss) from continuing
operations.................................... (6,191) 3,937 (2,254)
Identifiable assets............................. 57,623 6,825 64,448
======= ======= =======
</TABLE>

NOTE 2. REVOLVING PROMISSORY NOTES:

The Company has secured revolving promissory notes with a bank which enable
the Company to borrow up to $14.6 million and $18.5 million as of March 31, 1995
and 1996, respectively, and are due on demand. The notes bear interest at the
bank's prime rate (9.0% and 8.25% at March 31, 1995 and 1996, respectively), and
are secured by substantially all of the assets of the Company. At March 31, 1995
and 1996, the Company had $11.1 million and $0 million borrowed under the
revolving notes, respectively. The Company also had an available equipment line
of $3.0 and $6.4 million with the same bank as of March 31, 1995 and 1996,
respectively. Borrowings under this line totaled $1.8 million and $3.8 million
at March 31, 1995 and 1996, respectively, and are included as installment notes
payable to a bank described in Note 3.

Subsequent to year-end, the above credit facilities were renewed to allow
the Company to borrow up to $25.0 million for working capital and equipment
purchases. Under the renewed credit facilities, the Company is required to
provide a guaranty of up to $3.0 million on the construction financing procured
by Westell-Meridian LLC. See Note 5.

F-9
<PAGE> 68

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
MARCH 31,
----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Note payable to Kendall County, 5%, secured by substantially
all assets of the Company, due through 1998................ $ 131 $ 85
Capitalized lease obligations secured by related equipment... 521 504
Installment notes payable to a bank, interest at prime,
secured by substantially all assets of the Company, due
through November 2000...................................... 3,477 3,838
------ ------
4,129 4,427
Less current portion......................................... 1,332 1,591
------ ------
$2,797 $2,836
====== ======
</TABLE>

Future maturities of long-term debt at March 31, 1996 are as follows (in
thousands):

NOTE 4. INCOME TAXES:

Income taxes are provided based upon income reported for financial
reporting purposes using the provisions of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes, which requires the liability
method. The income tax provisions (benefits) charged to net income are
summarized as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current.......................................... $ (669) $ 300 $ --
Deferred......................................... (173) (1,161) (1,965)
------- ------- -------
(842) (861) (1,965)
------- ------- -------
State:
Current.......................................... (167) -- --
Deferred......................................... (43) (171) (315)
------- ------- -------
(210) (171) (315)
------- ------- -------
Total......................................... $(1,052) $(1,032) $(2,280)
======= ======= =======
</TABLE>

The Company utilizes the flow-through method to account for tax credits. In
fiscal 1994, 1995 and 1996, the Company utilized approximately $724,000,
$632,000 and $790,000, respectively, of tax credits.

F-10
<PAGE> 69

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. INCOME TAXES: (CONTINUED)
The statutory federal income tax rate is reconciled to the Company's
effective income tax rates below:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31,
--------------------------
1994 1995 1996
------ ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate.................... (34.0)% (34.0)% (34.0)%
Meals and entertainment.............................. 2.9 5.3 1.9
State income tax, net of federal tax effect.......... (4.9) (4.9) (4.9)
Income tax credits utilized.......................... (86.3) (41.1) (18.2)
Other................................................ (3.1) 7.7 2.8
------ ----- -----
(125.4)% (67.0)% (52.4)%
====== ===== =====
</TABLE>

Components of the net deferred income tax asset are as follows:

<TABLE>
<CAPTION>
MARCH 31,
-----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts........................... $ 155 $ 189
Alternative minimum tax credit............................ 486 321
Research and development credit carryforward.............. 500 1,501
Compensation accruals..................................... 260 246
Inventory reserves........................................ 486 617
Warranty reserve.......................................... 407 419
Net operating loss carryforward........................... -- 740
Reserve for discontinued operations....................... -- 330
Other..................................................... 306 67
------ ------
2,600 4,430
------ ------
Deferred income tax liabilities:
Property and equipment.................................... 112 --
Other..................................................... 288 150
------ ------
400 150
------ ------
Net deferred income tax asset.......................... $2,200 $4,280
====== ======
</TABLE>

Management has not recorded a valuation allowance because it believes that
the deferred tax asset will be fully realized based on current estimates of
future taxable income, future reversals of existing taxable temporary
differences or available tax planning strategies.

The Company has approximately $1.8 million in income tax credit
carryforwards and a $1.9 million net operating loss carryforward that are
available to offset taxable income in the future. The tax credit carryforwards
begin to expire in 2009 and the net operating loss carryforward expires in 2011.

NOTE 5. LEASE COMMITMENTS:

The Company has agreements to lease a manufacturing facility and several
office facilities through 2000. In addition, the leases require the Company to
pay utilities, insurance and real estate taxes on the facilities. The current
manufacturing facility lease expires in 2002. The Company has the option to
terminate this lease in 1997 and can purchase the facility at any time at fair
market value.

F-11
<PAGE> 70

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5. LEASE COMMITMENTS: (CONTINUED)
Total minimum future rental payments at March 31, 1996 are as follows (in
thousands):

<TABLE>
<S> <C>
1997................................................................. $1,013
1998................................................................. 840
1999................................................................. 337
2000................................................................. 265
2001................................................................. --
Thereafter........................................................... --
------
$2,455
======
</TABLE>

In September 1995, the Company entered into an agreement to form a limited
liability company, Westell-Meridian LLC ("LLC"), for the purpose of developing a
16.4 acre site in Aurora, Illinois into a 173,000 square foot corporate facility
to house manufacturing, engineering, sales, marketing and administration. In
connection therewith, the Company currently has a 98% ownership interest in the
LLC, which will gradually decrease to a 60% ownership interest as the other LLC
member increases its capital contribution to the LLC by contributing its
development fees for the new facility, as earned. In addition, the Company has a
reimbursement obligation with respect to an irrevocable letter of credit issued
for the Company's account in the amount of $952,000, due on or before September
30, 1996, which represents the Company's capital contribution to the LLC.

In September 1995, the Company advanced the LLC $1.4 million for the
purchase of land in the form of a short-term note which bears interest at the
prime rate (8.25% at March 31, 1996). The note and accrued interest become due
and payable from proceeds of construction financing. This note has been
eliminated in consolidation as of March 31, 1996. During fiscal 1996 the LLC
began construction of the facility and as of March 31, 1996 $3.0 million of
construction costs and $1.4 million of land are included in Land and building
construction held for sale in the accompanying balance sheet. It is managements'
current intention to sell its interest in this property when construction is
completed, repay any financing and lease the facility from a third party.

In addition, in September 1995, the Company entered into a 15 year lease
with the LLC for the facility being developed by the LLC. Lease payments will be
based upon construction costs and permanent financing arrangements and will be
determined upon building completion.

NOTE 6. CAPITAL TRANSACTIONS AND STOCK RESTRICTION AGREEMENTS:

The members of the Penny family (major stockholders) have a Stock Transfer
Restriction Agreement which prohibits, with limited exceptions, such members
from transferring their Common Stock acquired prior to November 30, 1995,
without first offering such stock to the other members of the Penny family. A
total of 18,998,770 shares of Common Stock are subject to this Stock Transfer
Restriction Agreement.

During fiscal 1994, common stock awards equal to 312,330 shares were
granted by the Company to certain employees. The number of restricted shares
vested at March 31, 1994, 1995 and 1996 for these stock awards and others
previously granted was 397,565; 674,724 and 740,807 shares, respectively. The
Company valued the stock awards granted during fiscal 1994 at $1.03 per share.
This valuation was based on independent appraisals done at the approximate date
of the grants. Compensation expense of $70,000, $64,000 and $68,000 was
recognized in fiscal 1994, 1995, 1996, respectively, based on the fair market
value of the shares granted. The remaining compensation expense to be recognized
is $117,000 which will be recognized through fiscal 1998 as the stock awards
vest. In addition, the Company granted additional compensation to

F-12
<PAGE> 71

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. CAPITAL TRANSACTIONS AND STOCK RESTRICTION AGREEMENTS: (CONTINUED)
reimburse certain individuals for related income taxes on stock awards granted
during fiscal 1994 in the amount of $244,000.

On May 8, 1996, the Board of Directors authorized a two-for-one stock split
in the form of a dividend to be distributed on June 7, 1996, to stockholders of
record on May 20, 1996. All references in the financial statements to number of
shares and per share amounts of the Company's common stock have been
retroactively restated to reflect the two-for-one stock split.

NOTE 7. BENEFIT PLAN:

The Company sponsors a 401(k) benefit plan (the "Plan") which covers
substantially all of its employees. The Plan is a salary reduction plan which
allows employees to defer up to 15% of wages subject to Internal Revenue Service
allowed limits. The Plan also allows for Company discretionary contributions.
The Company provided for discretionary and matching contributions to the Plan
totaling $260,000, $161,000 and $229,000 for fiscal 1994, 1995 and 1996,
respectively.

NOTE 8. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT:

The Company's primary business relates to the design, manufacture and
distribution of telecommunications equipment which is sold primarily to major
telephone companies. Sales to the Company's largest customers accounted for the
following percentages of revenue:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 13.0% 25.0% 5.8%
Customer B.................................................. 10.8 14.4 12.0
Customer C.................................................. 9.7 10.5 9.9
Customer D.................................................. 15.5 8.9 10.4
Customer E.................................................. 10.7 7.0 6.8
Customer F.................................................. -- -- 11.1
</TABLE>

Major telephone companies comprise a significant portion of the Company's
trade receivables. One customer represented 20.0% of the trade receivables
balance at March 31, 1995 and four customers represented 51.6% of the trade
receivables balance at March 31, 1996.

NOTE 9. COMMITMENTS AND CONTINGENCIES:

In January 1995, a former officer of a subsidiary of the Company filed a
suit against the Company alleging damages suffered as a result of wrongful
termination and breach of contract. Management believes the suit is without
merit and intends to contest the suit vigorously. While the final outcome of
this lawsuit cannot be determined with certainty, management believes the former
officer was released for cause under the terms of an existing agreement and that
the ultimate outcome will not have a material adverse effect on the Company's
business and results of operations or its financial position.

NOTE 10. DISCONTINUED OPERATIONS:

Effective May 1, 1994, the Company acquired the assets of Key Prestige,
Inc. ("KPI") for approximately $200,000 in cash and assumed liabilities of
approximately $190,000. The purchase price was allocated to the assets and
liabilities of KPI based on their relative fair values. Approximately $340,000
was allocated to fixed assets and $50,000 to a non-compete agreement. KPI was
merged with Information Network Systems, Inc. to

F-13
<PAGE> 72

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10. DISCONTINUED OPERATIONS: (CONTINUED)
form KPINS in fiscal 1995. The acquisition, which was accounted for as a
purchase, was funded with proceeds from the revolving promissory notes described
in Note 2.

In August 1995, the Board of Directors approved a plan for the disposition
of KPINS. The net losses of KPINS have been segregated in the consolidated
statements of operations as "discontinued operations." The Company intends to
sell KPINS before August 31, 1996. The components of the loss from discontinued
operations for the year ended March 31, 1996 are as follows:

<TABLE>
<S> <C>
Loss from operations of KPINS for the year ended March 31, 1996
(net of tax benefits of $65,000)................................. $102,000
Estimated loss of disposal of KPINS (net of tax benefits of
$329,000)........................................................ 520,000
--------
Loss from discontinued operations.................................. $622,000
========
</TABLE>

As the Company does not expect KPINS to incur operating losses between
March 31, 1996 and the anticipated date of disposal, no provision for operating
losses during the phase-out period has been made.

Summarized financial information of KPINS is as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31,
--------------------------
1994 1995 1996
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................ $138 $3,765 $3,263
Current assets...................................... 296 992 731
Net property, plant and equipment................... 77 497 301
Total liabilities, excluding intercompany
payables.......................................... 115 664 366
</TABLE>

NOTE 11. STOCK RECAPITALIZATION:

In July 1995, the Company recapitalized its common stock to increase the
number of authorized shares from 14,500,000 shares of common stock to 17,400,000
shares of Class A Common Stock and 11,605,858 shares of Class B Common Stock and
created Class A Common Stock with voting rights of one vote per share and Class
B Common Stock with voting rights of four votes per share. On November 30, 1995,
the Company filed an Amended and Restated Certificate of Incorporation that
increased the amount of authorized capital stock to 43,500,000 shares of Class A
Common Stock, par value $0.01 per share, 25,000,000 shares of Class B Common
Stock, par value $0.01 per share, and 1,000,000 shares of undesignated Preferred
Stock, par value $0.01 per share, and effected a 29-for-1 stock split of the
Class A and Class B Common Stock.

The Board of Directors has the authority to issue the newly authorized
Preferred Stock up to 1,000,000 shares in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series, without any further vote or action by
stockholders.

NOTE 12. STOCK PLANS:

In October 1995, the Company adopted a stock purchase plan that allows
participating employees to purchase, through payroll deductions, shares of the
Company's Class A Common Stock for 85% of the average of the high and low
reported sales prices at specified dates. Under the stock purchase plan, 217,950
shares were authorized and 213,532 shares were available for future issuance at
March 31, 1996.

F-14
<PAGE> 73

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12. STOCK PLANS: (CONTINUED)
In October 1995, the Company adopted a stock incentive plan that permits
the issuance of Class A Common Stock, restricted shares of Class A Common Stock
and stock options to purchase Class A Common Stock, performance awards and stock
appreciation rights to selected employees, officers, consultants and non-
employee directors of the Company. Under the stock incentive plan 2,688,050
shares were authorized and 2,573,526 shares were available for future issuance
at March 31, 1996. During fiscal 1996, the Company granted options for 89,900
shares of Class A Common Stock, of which 5,616 shares were vested at March 31,
1996 at an exercise price of $6.50 per share which represents fair market value
at date of grant. The Company also issued 24,624 shares for stock awards under
this plan in fiscal 1996. Compensation expense of $164,000 and $73,000 was
recognized in fiscal 1996 for the stock awards and the related taxes,
respectively.

On May 21, 1996, the Compensation Committee of the Board of Directors
authorized the future grant of stock options to employees covering 662,850
shares of Class A Common Stock with an exercise price equal to the fair market
value of the Class A Common Stock on the actual date of grant, which is expected
to occur in June 1996.

F-15
<PAGE> 74
[INSIDE BACK COVER]

Besides the text set forth on this page, the back cover of the Prospectus has
three pictures superimposed over a picture of bundled copper wire. One
picture shows a girl using a personal computer for Internet access, another
picture shows a man using a personal computer for work at home and the last
picture shows a black and white movie-still of a man and woman embracing
available by video-on-demand through telephone companies' use of ADSL
technology over existing copper wire.

[INTERNET ACCESS]
[PHOTO]

[PHOTO]
[VIDEO-ON-DEMAND]

[WORK AT HOME]
[PHOTO]

[WESTELL LOGO]

ENABLING VOICE, DATA AND VIDEO APPLICATIONS
FOR THE INFORMATION COPPERHIGHWAY(TM)

<PAGE> 75

- ------------------------------------------------------
- ------------------------------------------------------

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, any Selling Stockholder or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the shares of Class A Common Stock to
which it relates or an offer to, or a solicitation of, any person in any
jurisdiction where such an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company or that information contained herein is correct as of any
time subsequent to the date hereof.
----------------------------
TABLE OF CONTENTS
----------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Cautionary Statement Regarding Forward-
Looking Information................... 5
Risk Factors............................ 5
The Company............................. 14
Use of Proceeds......................... 15
Price Range of Class A Common Stock..... 15
Dividend Policy......................... 15
Capitalization.......................... 16
Selected Consolidated Financial Data.... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 18
Business................................ 25
Management.............................. 41
Certain Transactions.................... 46
Principal and Selling Stockholders...... 47
Description of Capital Stock............ 49
Shares Eligible for Future Sale......... 52
Underwriting............................ 54
Legal Matters........................... 55
Experts................................. 55
Available Information................... 55
Index to Consolidated Financial
Statements............................ F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,540,000 SHARES

WESTELL LOGO

CLASS A COMMON STOCK
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES

COWEN & COMPANY

PUNK, ZIEGEL & KNOELL
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 76

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses of the issuance and distribution
of the securities being registered, all of which will be paid by the Company.
All amounts are estimated except the SEC registration fee and the NASD filing
fee.

<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................................. $ 37,331
NASD filing fee................................................................... 11,326
Nasdaq National Market fee........................................................ 30,500
Printing expenses................................................................. 90,000
Fees and expenses of counsel...................................................... 150,000
Fees and expenses of accountants.................................................. 75,000
Transfer agent and registrar fees................................................. 5,000
Blue sky fees and expenses........................................................ 5,000
Miscellaneous..................................................................... 45,843
--------
Total........................................................................ $450,000
========
</TABLE>

The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriters' discounts and commissions, with respect to
the shares being sold by the Selling Stockholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Delaware law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to an action (other than an action by
or in the right of the corporation) by reason of his service as a director or
officer of the corporation, or his service, at the corporation's request, as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees) that are actually and reasonably
incurred by him ("Expenses"), and judgments, fines and amounts paid in
settlement that are actually and reasonably incurred by him, in connection with
the defense or settlement of such action, provided that he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Although Delaware law permits a corporation to indemnify any person referred to
above against Expenses in connection with the defense or settlement of an action
by or in the right of the corporation, provided that he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the corporation's
best interests, if such person has been judged liable to the corporation,
indemnification is only permitted to the extent that the Court of Chancery (or
the court in which the action was brought) determines that, despite the
adjudication of liability, such person is entitled to indemnity for such
Expenses as the court deems proper. The determination as to whether a person
seeking indemnification has met the required standard of conduct is to be made
(1) by a majority vote of a quorum of disinterested members of the board of
directors, or (2) by independent legal counsel in a written opinion, if such a
quorum does not exist or if the disinterested directors so direct, or (3) by the
stockholders. The General Corporation Law of the State of Delaware also provides
for mandatory indemnification of any director, officer, employee or agent
against Expenses to the extent such person has been successful in any proceeding
covered by the statute. In addition, the General Corporation Law of the State of
Delaware provides the general authorization of advancement of a director's or
officer's litigation expenses in lieu of requiring the authorization of such
advancement by the board of directors in specific cases, and that
indemnification and advancement of expenses provided by the statute shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement or otherwise.

II-1
<PAGE> 77

The Company's Amended and Restated Certificate of Incorporation and the
Company's Amended and Restated By-laws provide for indemnification of the
Company's directors, officers, employees and other agents to the fullest extent
not prohibited by the Delaware law.

The Company maintains liability insurance for the benefit of its directors
and officers.

Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Selling Stockholders, the Company,
its directors, certain of its officers and persons who control the Company
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act") against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Set forth below is information as to securities of the Company issued or
sold by the Company since April 1, 1993 that were not registered under the
Securities Act. All of such shares were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. All sales were to
sophisticated investors. No underwriters were involved, and there were no
underwriting discounts or commissions. The following table reflects a 29-for-1
stock split on all outstanding shares of Common Stock effected in November 1996
and a two-for-one stock split on all outstanding shares of Common Stock to be
paid on June 7, 1996.

<TABLE>
<CAPTION>
DATE NAME SHARES CONSIDERATION
- ------------- ------------------- ------- -----------------------------------------
<S> <C> <C> <C>
12/31/93..... Robert D. Faw 145,000 Past services to the Company as an
employee.
12/31/93..... Kenneth J. Hohhof 34,800 Past services to the Company as an
employee.
12/31/93..... Marianne G. Morgan 34,800 Past services to the Company as an
employee.
12/31/93..... Ormand J. Wade 121,800 Past services to the Company as a
director.
12/31/93..... Stefan D. Abrams 288,260 Past services to the Company as a
director.
</TABLE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation, as amended (incorporated
herein by reference to Exhibit 3.2 to Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
3.2 Amended and Restated By-laws (incorporated herein by reference to Exhibit
3.3 to Westell Technologies, Inc.'s Registration Statement on Form S-1, as
amended, Registration No. 33-98024).
5.1 Opinion of McDermott, Will & Emery regarding legality.
9.1 Voting Trust Agreement dated February 23, 1994, as amended (incorporated
herein by reference to Exhibit 9.1 to Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
10.1 Form of Restricted Stock Award granted by the Company to its officers and
directors other than Gary F. Seamans and Melvin J. Simon (incorporated
herein by reference to Exhibit 10.1 to the Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
10.2 Restricted Stock Award granted December 17, 1991 by the Company to Gary F.
Seamans (incorporated herein by reference to Exhibit 10.2 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
</TABLE>

II-2
<PAGE> 78

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
10.3 Form of Restricted Stock Awards granted by the Company to Gary F. Seamans
and Melvin J. Simon (incorporated herein by reference to Exhibit 10.3 to
Westell Technologies, Inc.'s Registration Statement on Form S-1, as
amended, Registration No. 33-98024).
10.4 Stock Transfer Restriction Agreement entered into by members of the Penny
family, as amended, (incorporated herein by reference to Exhibits 10.4 and
10.16 to Westell Technologies, Inc.'s Registration Statement on Form S-1,
as amended, Registration No. 33-98024).
10.5 Form of Registration Rights Agreement among the Company and Robert C. Penny
III and Melvin J. Simon, as trustees of the Voting Trust dated February 23,
1994 (incorporated herein by reference to Exhibit 10.5 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.6 1995 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.6
to Westell Technologies, Inc.'s Registration Statement on Form S-1, as
amended, Registration No. 33-98024).
10.7 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit
10.7 to Westell Technologies, Inc.'s Registration Statement on Form S-1, as
amended, Registration No. 33-98024).
10.8 Consulting Agreement dated July 28, 1988 between Florence Penny and
Westell, Inc. (incorporated herein by reference to Exhibit 10.8 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.9 Lease Agreement dated July 15, 1986 between Kendall Point Associates, Ltd.
and Westell, Inc., as amended on August 26, 1991 (incorporated herein by
reference to Exhibit 10.9 to Westell Technologies, Inc.'s Registration
Statement on Form S-1, as amended, Registration No. 33-98024).
10.10 Limited Liability Company Operating Agreement dated as of September 23,
1995 by Westell, Inc. and Kingstand Properties, Ltd. (incorporated herein
by reference to Exhibit 10.10 to Westell Technologies, Inc.'s Registration
Statement on Form S-1, as amended, Registration No. 33-98024).
10.11 Lease dated September 25, 1995 between Westell-Meridian L.L.C. and Westell,
Inc. (incorporated herein by reference to Exhibit 10.11 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.12 Credit Agreement dated March 7, 1995 between the Company and Bank One
Chicago, N.A. (incorporated herein by reference to Exhibit 10.12 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
+10.13 Cooperation and Development Agreement between Westell, Inc. and AT&T
Paradyne Corporation, as amended and supplemented (incorporated herein by
reference to Exhibits 10.13 and 10.15 to Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
10.14 Agreement dated September 13, 1988 between Richard Riviere and Westell
Technologies, Inc., as amended (incorporated herein by reference to Exhibit
10.14 to Westell Technologies, Inc.'s Registration Statement on Form S-1,
as amended, Registration No. 33-98024).
*++10.15 Exhibits G and H to Cooperation and Development Agreement dated March 4,
1996 between Westell Technologies, Inc. and AT&T Paradyne Corporation.
*10.16 Credit Agreement dated April 30, 1996 between the Company and Bank One
Chicago, N.A.
</TABLE>

II-3
<PAGE> 79

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
21.1 Subsidiaries of the Registrant (incorporated herein by reference to Exhibit
21.1 to Westell Technologies, Inc.'s Registration Statement on Form S-1, as
amended, Registration No. 33-98024).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of McDermott, Will & Emery (included in Exhibit 5.1).
*24.1 Power of Attorney (included on signature page of the Registration
Statement).
*27 Financial Data Schedule.
</TABLE>

- ------------------------------

* Previously filed.

+ Confidential treatment granted for certain portions of this document. Certain
portions of this document have been filed separately with the Securities and
Exchange Commission.

++ Confidential treatment requested for certain portions of this document.
Certain portions of this document have been filed separately with the
Securities and Exchange Commission.

(b) Financial Statement Schedules:

Independent Auditors' Report

<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- ----------------- ----------------------------------------------
<S> <C>
Schedule II...... Valuation and Qualifying Accounts
</TABLE>

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, 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 Securities Act and will be governed by
the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (ii) each post-effective amendment that contains a form
of prospectus 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-4
<PAGE> 80

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Oswego,
Illinois on June 19, 1996.

WESTELL TECHNOLOGIES, INC.

By /s/ GARY F. SEAMANS

------------------------------------
Gary F. Seamans,
Chairman of the Board of
Directors,
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on June 19, 1996:

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- --------------------------------------------------------
<C> <S>
</TABLE>

<TABLE>
<C> <S>
/s/ GARY F. SEAMANS Chairman of the Board of Directors, President and Chief
- ----------------------------------- Executive Officer (Principal Executive Officer)
Gary F. Seamans
* Vice-Chairman of the Board of Directors
- -----------------------------------
Robert H. Gaynor
* Assistant Secretary and Treasurer and Director
- -----------------------------------
Melvin J. Simon
/s/ STEPHEN J. HAWRYSZ Chief Financial Officer, Vice President, Secretary and
- ----------------------------------- Treasurer (Principal Financial Officer and Principal
Stephen J. Hawrysz Accounting Officer)
* Director
- -----------------------------------
Stefan D. Abrams
* Director
- -----------------------------------
Michael A. Brunner
* Director
- -----------------------------------
Paul A. Dwyer
* Director
- -----------------------------------
Ormand J. Wade
*/s/ GARY F. SEAMANS
- -----------------------------------
Attorney-in-fact
</TABLE>

II-5
<PAGE> 81

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountant............................................... S-2
Schedule II -- Valuation and Qualifying Accounts...................................... S-3
</TABLE>

S-1
<PAGE> 82

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Westell Technologies, Inc.

We have audited, in accordance with generally accepted auditing standards,
the financial statements of Westell Technologies, Inc. and its Subsidiaries
included in this Registration Statement and have issued our report thereon dated
May 21, 1996. Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule II, Valuation and
Qualifying Accounts, included herein on page S-3 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
May 21, 1996

S-2
<PAGE> 83

WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE ALLOWANCES
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year............................................ $ 52 $181 $364
Provision for doubtful accounts......................................... 129 201 274
Provision for discounts, allowances and rebates......................... -- -- --
Write-offs of doubtful accounts, net of recoveries...................... -- 18 176
Discounts, allowances and rebates taken................................. -- -- --
---- ---- ----
Balance at end of year.................................................. $181 $364 $462
==== ==== ====
</TABLE>

S-3
<PAGE> 84

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation, as amended (incorporated
herein by reference to Exhibit 3.2 to Westell Technologies, Inc.'s Registration
Statement on Form S-1, as amended, Registration No. 33-98024).
3.2 Amended and Restated By-laws (incorporated herein by reference to Exhibit 3.3 to
Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
5.1 Opinion of McDermott, Will & Emery regarding legality.
9.1 Voting Trust Agreement dated February 23, 1994, as amended (incorporated herein
by reference to Exhibit 9.1 to Westell Technologies, Inc.'s Registration
Statement on Form S-1, as amended, Registration No. 33-98024).
10.1 Form of Restricted Stock Award granted by the Company to its officers and
directors other than Gary F. Seamans and Melvin J. Simon (incorporated herein by
reference to Exhibit 10.1 to the Westell Technologies, Inc.'s Registration
Statement on Form S-1, as amended, Registration No. 33-98024).
10.2 Restricted Stock Award granted December 17, 1991 by the Company to Gary F.
Seamans (incorporated herein by reference to Exhibit 10.2 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended, Registration
No. 33-98024).
10.3 Form of Restricted Stock Awards granted by the Company to Gary F. Seamans and
Melvin J. Simon (incorporated herein by reference to Exhibit 10.3 to Westell
Technologies, Inc.'s Registration Statement on Form S-1, as amended, Registration
No. 33-98024).
10.4 Stock Transfer Restriction Agreement entered into by members of the Penny family,
as amended, (incorporated herein by reference to Exhibits 10.4 and 10.16 to
Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.5 Form of Registration Rights Agreement among the Company and Robert C. Penny III
and Melvin J. Simon, as trustees of the Voting Trust dated February 23, 1994
(incorporated herein by reference to Exhibit 10.5 to Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
10.6 1995 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.6 to
Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.7 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.7 to
Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
10.8 Consulting Agreement dated July 28, 1988 between Florence Penny and Westell, Inc.
(incorporated herein by reference to Exhibit 10.8 to Westell Technologies, Inc.'s
Registration Statement on Form S-1, as amended, Registration No. 33-98024).
10.9 Lease Agreement dated July 15, 1986 between Kendall Point Associates, Ltd. and
Westell, Inc., as amended on August 26, 1991 (incorporated herein by reference to
Exhibit 10.9 to Westell Technologies, Inc.'s Registration Statement on Form S-1,
as amended, Registration No. 33-98024).
10.10 Limited Liability Company Operating Agreement dated as of September 23, 1995 by
Westell, Inc. and Kingstand Properties, Ltd. (incorporated herein by reference to
Exhibit 10.10 to Westell Technologies, Inc.'s Registration Statement on Form S-1,
as amended, Registration No. 33-98024).
</TABLE>

<PAGE> 85

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ---------------------------------------------------------------------------------
<C> <S>
10.11 Lease dated September 25, 1995 between Westell-Meridian L.L.C. and Westell, Inc.
(incorporated herein by reference to Exhibit 10.11 to Westell Technologies,
Inc.'s Registration Statement on Form S-1, as amended, Registration No.
33-98024).
10.12 Credit Agreement dated March 7, 1995 between the Company and Bank One Chicago,
N.A. (incorporated herein by reference to Exhibit 10.12 to Westell Technologies,
Inc.'s Registration Statement on Form S-1, as amended, Registration No.
33-98024).
+10.13 Cooperation and Development Agreement between Westell, Inc. and AT&T Paradyne
Corporation, as amended and supplemented (incorporated herein by reference to
Exhibits 10.13 and 10.15 to Westell Technologies, Inc.'s Registration Statement
on Form S-1, as amended, Registration No. 33-98024).
10.14 Agreement dated September 13, 1988 between Richard Riviere and Westell
Technologies, Inc., as amended (incorporated herein by reference to Exhibit 10.14
to Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
*++10.15 Exhibits G and H to Cooperation and Development Agreement dated March 4, 1996
between Westell Technologies, Inc. and AT&T Paradyne Corporation.
*10.16 Credit Agreement dated April 30, 1996 between the Company and Bank One Chicago,
N.A.
21.1 Subsidiaries of the Registrant (incorporated herein by reference to Exhibit 21.1
to Westell Technologies, Inc.'s Registration Statement on Form S-1, as amended,
Registration No. 33-98024).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of McDermott, Will & Emery (included in Exhibit 5.1).
*24.1 Power of Attorney (included on signature page of the Registration Statement).
*27 Financial Data Schedule.
</TABLE>

- ------------------------------

* Previously filed.

+ Confidential treatment granted for certain portions of this document. Certain
portions of this document have been filed separately with the Securities and
Exchange Commission.

++ Confidential treatment requested for certain portions of this document.
Certain portions of this document have been filed separately with the

Securities and Exchange Commission.

<PAGE> 1
EXHIBIT 1.1
2,540,000 Shares

Westell Technologies, Inc.

Class A Common Stock

UNDERWRITING AGREEMENT

June __, 1996

MONTGOMERY SECURITIES
COWEN & COMPANY
PUNK, ZIEGEL & KNOELL
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111

Ladies & Gentlemen:

SECTION 1

INTRODUCTORY

Westell Technologies, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell 1,665,000 shares of its authorized but unissued
Class A Common Stock (sometimes referred to as the "Common Stock") and certain
stockholders of the Company named in Schedule B annexed hereto (the "Selling
Stockholders") propose to sell severally an aggregate of 875,000 shares of the
Company's issued and outstanding Class A Common Stock to the several
underwriters named in Schedule A annexed hereto (the "Underwriters"). Said
aggregate of 2,540,000 shares are herein called the "Firm Common Shares." In
addition, the Company and the Selling Stockholders propose to grant severally
to the Underwriters options to purchase up to an aggregate of 381,000
additional shares of Common Stock (the "Optional Common Shares"), as provided
in Section 5 hereof. The Firm Common Shares and, to the extent such option is
exercised, the Optional Common Shares are hereinafter collectively referred to
as the "Common Shares." For all purposes hereunder, the term Selling
Stockholders shall include the Insider Selling Stockholders (as defined below).

You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is
advisable.

The Company and each of the Selling Stockholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:

<PAGE> 2

SECTION 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
INSIDER SELLING STOCKHOLDERS

The Company and each of the Selling Stockholders listed on Schedule C
annexed hereto (the "Insider Selling Stockholders") represent and warrant to the
several Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-04973) with
respect to the Common Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you two signed copies of such
registration statement and amendments, together with two copies of each exhibit
filed therewith. Conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested for each of
the Underwriters. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, or (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the Rules and
Regulations. As filed, such amendment and form of final prospectus, or such
final prospectus, shall include all Rule 430A Information and, except to the
extent that you shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the date and time
that this Agreement was executed and delivered by the parties hereto, or, to the
extent not completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the latest
Preliminary prospectus) as the Company shall have previously advised you in
writing would be included or made therein.

The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that such
term shall also include (i) all Rule 430A Information deemed to be included in
such registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations and (ii) a
registration statement, if any, filed pursuant to Rule 462(b) of the Rules and
Regulations relating to the Common Shares. The term "Preliminary Prospectus"
shall mean any preliminary prospectus referred to in the preceding paragraph and
any preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean the prospectus relating to the Common Shares
in the form in which it is first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations or, if no filing pursuant to Rule 424(b) of
the Rules and Regulations is required, shall mean the form of final prospectus
included in the Registration Statement at the time such registration statement
becomes effective. The term "Rule 430A Information" means information with
respect to the Common Shares and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule 430A
of the Rules and Regulations.

(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement becomes
effective, and at all times subsequent thereto up to and including each Closing
Date hereinafter mentioned, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this subsection
2(b) shall be applicable to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, the Prospectus or any such
amendment or supplement in reliance upon and

-2-
<PAGE> 3
in conformity with written information furnished to the Company by or on
behalf of any Underwriter specifically for use in the preparation thereof.

(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 22 to the Registration Statement. The Company and each of its
subsidiaries have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective jurisdictions
of incorporation, with full power and authority (corporate and other) to own and
lease their properties and conduct their respective businesses as described in
the Prospectus; except with respect to the 11% minority interest in Conference
Plus, Inc. (which, in turn, owns 100% of Video Conference Plus, Inc.) and the
15% minority interests in each of Key Prestige Information Network Systems, Inc.
and Schoolhouse Interactive, Inc. described in the Registration Statement and
Prospectus, the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances; the
Company and each of its subsidiaries are in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of their respective businesses, all of which
are valid and in full force and effect; the Company and each of its subsidiaries
are duly qualified to do business and in good standing as foreign corporations
in each jurisdiction in which the ownership or leasing of properties or the
conduct of their respective businesses requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company and its subsidiaries taken as a whole; and, to
the best of the Company's knowledge, no proceeding has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority or qualification.

(d) The Company has an authorized and outstanding capital stock as set
forth under the heading "Capitalization" in the Prospectus; the issued and
outstanding shares of Common Stock and Class B Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are duly listed
for quotation on the Nasdaq National Market, have been issued in compliance with
all federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and conform to the description thereof contained in the Prospectus.
All issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except for rights of first refusal held by certain minority
stockholders of Conference Plus, Inc. and Key Prestige Information Network
Systems, Inc. in connection with certain sales of such subsidiaries by the
Company, and except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company, and the related notes thereto, included in
the Prospectus, neither the Company nor any subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.

(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or purchase
exist with respect to the issuance and sale of the Common Shares by the Company
pursuant to this Agreement. No stockholder of the Company has any right which
has not been waived to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the transfer and sale of
the Common Shares to be sold by the Selling Stockholders or the issuance and
sale of the Common Shares to be sold by the Company as contemplated herein.

(f) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally. The making and performance of this Agreement by
the Company and the consummation of the transactions herein contemplated will
not violate any provisions of the certificate of incorporation or bylaws, or
other organizational documents, of the Company or any of its subsidiaries, and
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries

-3-
<PAGE> 4

or any of its respective properties may be bound or affected, any statute
or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to the Company or any of its subsidiaries or any of their respective
properties. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with the Act,
the Blue Sky laws applicable to the public offering of the Common Shares by the
several Underwriters and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD").

(g) Arthur Andersen, LLP, who have expressed their opinion with respect
to the financial statements and schedules filed with the Commission as a part of
the Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the Act and
the Rules and Regulations.

(h) The consolidated financial statements and schedules of the Company
and its subsidiaries, and the related notes thereto, included in the
Registration Statement and the Prospectus present fairly the financial position
of the Company and its subsidiaries as of the respective dates of such financial
statements and schedules, and the results of operations and changes in financial
position of the Company and its subsidiaries for the respective periods covered
thereby. Such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis as certified by the independent accountants named in subsection 2(g). No
other financial statements or schedules are required to be included in the
Registration Statement. The selected financial data set forth in the Prospectus
under the captions "Capitalization" and "Selected Consolidated Financial Data"
fairly present the information set forth therein on the basis stated in the
Registration Statement.

(i) Except as to defaults which individually or in the aggregate would
not be material to the Company, neither the Company nor any of its subsidiaries
is in violation or default of any provision of its certificate of incorporation
or bylaws, or other organizational documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist any state of facts which constitutes an event of default on
the part of the Company or any such subsidiary as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event of
default.

(j) There are no contracts or other documents required to be described
in the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations which have not been
described or filed as required. The contracts so described in the Prospectus
are in full force and effect on the date hereof; and neither the Company nor any
of its subsidiaries, nor to the best of the Company's knowledge, any other party
is in breach of or default under any of such contracts.

(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or may be a party or of which property owned or leased by the Company or any
of its subsidiaries is or may be the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings might, individually
or in the aggregate, prevent or adversely affect the transactions contemplated
by this Agreement or result in a material adverse change in the condition
(financial or otherwise), properties, business, results of operations or
prospects of the Company and its subsidiaries; and no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent which
might be expected to affect adversely such condition, properties, business,
results of operations or prospects. Neither the Company nor any of its
subsidiaries is a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body.

(l) The Company or the applicable subsidiary has good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such financial statements (or elsewhere in the Prospectus), or
(ii) those which are not material in amount and do not adversely affect the use
made and proposed to be made of such property by the Company and its
subsidiaries. The Company or the applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company.

-4-
<PAGE> 5

Except as disclosed in the Prospectus, the Company owns or leases all
such properties as are necessary to its operations as now conducted or as
proposed to be conducted.

(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus and except as specifically disclosed in
the Registration Statement and Prospectus: (i) the Company and its subsidiaries
have not incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business; (ii) the Company
and its subsidiaries have not sustained any material loss or interference with
their respective businesses or properties from fire, flood, windstorm, accident
or other calamity, whether or not covered by insurance; (iii) the Company has
not paid or declared any dividends or other distributions with respect to its
capital stock and the Company and its subsidiaries are not in default in the
payment of principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale of the
Common Shares hereunder) or indebtedness material to the Company and its
subsidiaries (other than in the ordinary course of business); and (v) there has
not been any material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the Company and its
subsidiaries.

(n) The Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted; and
the Company has no knowledge of any material infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, mask works,
copyrights, licenses, trade secret or other similar rights of others, and there
is no claim being made against the Company or its subsidiaries regarding
trademark, trade name, patent, mask work, copyright, license, trade secret or
other infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company and its subsidiaries.

(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries.

(p) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes shown
as due thereon; and the Company has no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Company or its subsidiaries
which could materially and adversely affect the business, operations or
properties of the Company and its subsidiaries, other than any such taxes as are
being contested in good faith.

(q) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.

(r) The Company has not distributed and will not distribute prior to
the First Closing Date any offering material in connection with the offering and
sale of the Common Shares other than the Prospectus, the Registration Statement
and the other materials permitted by the Act.

(s) Each of the Company and its subsidiaries maintains insurance of the
types and in the amounts generally deemed adequate for its business, including,
but not limited to, insurance covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.

(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States of
any jurisdiction thereof.

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<PAGE> 6

(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.

SECTION 3

REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLING STOCKHOLDERS

(a) Each of the Selling Stockholders represents and warrants, severally
and not jointly, to, and agrees with, the several Underwriters that:

(i) Such Selling Stockholder has, and on the First Closing Date
and the Second Closing Date hereinafter mentioned will have, good and
marketable title to the Common Shares proposed to be sold by such Selling
Stockholder hereunder on such Closing Date and full right, power and authority
to enter into this Agreement and to sell, assign, transfer and deliver such
Common Shares hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, equities, security interests, restrictions and claims
whatsoever; and upon delivery of and payment for such Common Shares hereunder,
the Underwriters will acquire good and marketable title thereto, free and clear
of all liens, encumbrances, equities, claims, restrictions, security interests,
voting trusts or other defects of title whatsoever.

(ii) Such Selling Stockholder has executed and delivered a
Power of Attorney and caused to be executed and delivered on his behalf
a Custody Agreement (hereinafter collectively referred to as the "Stockholders
Agreement") and in connection herewith such Selling Stockholder further
represents, warrants and agrees that such Selling Stockholder has deposited in
custody, under the Stockholders Agreement, with the agent named therein (the
"Agent") as custodian, certificates in negotiable form for the Common Shares
(or shares convertible into the Common Shares) to be sold hereunder by such
Selling Stockholder, for the purpose of further delivery pursuant to this
Agreement. Such Selling Stockholder agrees that the Common Shares to be sold
by such Selling Stockholder on deposit with the Agent are subject to the
interests of the Company and the Underwriters, that the arrangements made for
such custody are to that extent irrevocable, and that the obligations of such
Selling Stockholder hereunder shall not be terminated, except as provided in
this Agreement or in the Stockholders Agreement, by any act of such Selling
Stockholder, by operation of law, by the death or incapacity of such Selling
Stockholder or by the occurrence of any other event. If the Selling
Stockholder should die or become incapacitated, or if any other event should
occur, before the delivery of the Common Shares hereunder, the documents
evidencing Common Shares then on deposit with the Agent shall be delivered by
the Agent in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
or not the Agent shall have received notice thereof. This Agreement and the
Stockholders Agreement have been duly executed and delivered by or on behalf of
such Selling Stockholder and the form of such Stockholders Agreement has been
delivered to you.

(iii) The performance of this Agreement and the Stockholders
Agreement and the consummation of the transactions contemplated hereby
and by the Stockholders Agreement will not result in a breach or violation by
such Selling Stockholder of any of the terms or provisions of, or constitute a
default by such Selling Stockholder under, any indenture, mortgage, deed of
trust, trust (constructive or other), loan agreement, lease, franchise, license
or other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder or any of its properties is bound, any
statute, or any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to such Selling Stockholder or any of
its properties.

(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Common Shares.

(v) Each Preliminary Prospectus and the Prospectus, insofar as
it has included information about such Selling Stockholder, has conformed in all
material respects to the requirements of the Act and the Rules and Regulations
and has not included any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein

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<PAGE> 7

not misleading in light of the circumstances under which they were made;
and neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as it relates to such Selling Stockholder, will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.

(b) Each of the Selling Stockholders agrees with the Company and the
Underwriters not to offer to sell, sell or contract to sell or otherwise dispose
of any shares of Common Stock or securities convertible into or exchangeable for
any shares of Common Stock, for a period of 90 days after the first date that
any of the Common Shares are released by you for sale to the public, without the
prior written consent of Montgomery Securities which consent may be withheld at
the sole discretion of Montgomery Securities.

(c) Each of the Selling Stockholders that is a trust (other than a
revocable trust) hereby covenants and agrees with the Underwriters that such
Selling Stockholder will at all times maintain sufficient assets in the trust to
satisfy the obligations and potential obligations of such Selling Stockholder to
the Underwriters hereunder (including the obligations of such Selling
Stockholder pursuant to Section 11 hereof). In addition, each of the Selling
Stockholders that is a revocable trust hereby covenants and agrees with the
Underwriters that the rights of the Underwriters against such Selling
Stockholder hereunder (including pursuant to Section 11 hereof) may be enforced
against the grantor or grantors of such trust with the same force and effect as
if such rights were enforced against such trust.

SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS

The several Underwriters represent and warrant to the Company and to the
Selling Stockholders that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus was furnished
to the Company by and on behalf of the Underwriters for use in connection with
the preparation of the Registration Statement and the Prospectus and is correct
in all material respects.

SECTION 5

PURCHASE, SALE AND DELIVERY OF COMMON SHARES

On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, (i) the
Company agrees to issue and sell to the Underwriters 1,665,000 of the Firm
Common Shares, and (ii) the Selling Stockholders agree, severally and not
jointly, to sell to the Underwriters in the respective amounts set forth in
Schedule B hereto, an aggregate of 875,000 of the Firm Common Shares. The
Underwriters agree, severally and not jointly, to purchase from the Company and
the Selling Stockholders, respectively, the number of Firm Common Shares
described below. The purchase price per share to be paid by the several
Underwriters to the Company and to the Selling Stockholders, respectively, shall
be $____ per share.

The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable,
as determined by you) bears to 2,540,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares. The obligation of each
Underwriter to the Selling Stockholders shall be to purchase from the Selling
Stockholders that number of full shares which (as nearly as practicable, as
determined by you) bears to 2,540,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.

Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters shall be made as directed by the Underwriters and payment
therefor shall be made at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, IL 60606-5096 (or such other place as may be agreed
upon by the Company and the Underwriters) at such time and date, not later than
the third (or, if the Firm Common Shares are priced as contemplated by Rule
15c6-1(c) of the Exchange Act,

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<PAGE> 8

after 4:30 p.m. Washington, D.C. time, the fourth) full business day
following the first date that any of the Common Shares are released by you for
sale to the public, as you shall designate by at least 48 hours prior notice to
the Company (or at such other time and date, not later than one week after such
third or fourth, as the case may be, full business day as may be agreed upon by
the Company and the Underwriters) (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third or fourth, as the case may be, full business day following the first
date that any of the Common Shares are released by you for sale to the public or
the date that is 48 hours after the date that the Prospectus has been so
recirculated.

Delivery of certificates for the Firm Common Shares shall be made by or
on behalf of the Company and the Selling Stockholders to you, for the respective
accounts of the Underwriters with respect to the Firm Common Shares to be sold
by the Company and by the Selling Stockholders against payment by you, for the
accounts of the several Underwriters, of the purchase price therefor by wire
transfer of federal funds to accounts designated in writing by the Company and
of the Agent in proportion to the number of Firm Common Shares to be sold by the
Company and the Selling Stockholders, respectively. The certificates for the
Firm Common Shares shall be registered in such names and denominations as you
shall have requested at least two full business days prior to the First Closing
Date, and shall be made available for checking and packaging on the business day
preceding the First Closing Date at a location in New York, New York, as may be
designated by you. Time shall be of the essence, and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Underwriters.

In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the (i) Selling Stockholders, severally and not jointly, hereby grant
options to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 226,000 Optional Common Shares in the respective amounts set
forth opposite the name of each such Selling Stockholder in Schedule B hereto
and (ii) the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to 155,000 Optional Common Shares; in
each case at the purchase price per share to be paid for the Firm Common Shares,
for use solely in covering any over-allotments made by you for the account of
the Underwriters in the sale and distribution of the Firm Common Shares. In the
event that the Underwriters elect to purchase less than all of the Optional
Common Shares, the number of Optional Common Shares to be purchased from each
Selling Stockholder and the Company shall be determined by multiplying the
aggregate number of Optional Common Shares to be purchased by a fraction, the
numerator of which is the total number of Optional Common Shares set forth
opposite the name of such Selling Stockholder or the Company in Schedule B
hereto and the denominator of which is 381,000. The option granted hereunder may
be exercised at any time (but not more than once) within 30 days after the first
date that any of the Common Shares are released by you for sale to the public,
upon notice by you to the Company and said Selling Stockholders setting forth
the aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, the names and denominations in which the certificates for
such shares are to be registered and the time and place at which such
certificates will be delivered. Such time of delivery (which may not be earlier
than the First Closing Date), being herein referred to as the "Second Closing
Date," shall be determined by you, but if at any time other than the First
Closing Date shall not be earlier than three full business days after delivery
of such notice of exercise. The number of Optional Common Shares to be
purchased by each Underwriter shall be determined by multiplying the number of
Optional Common Shares to be sold by the Selling Stockholders and the Company
pursuant to such notice of exercise by a fraction, the numerator of which is the
number of Firm Common Shares to be purchased by such Underwriter as set forth
opposite its name in Schedule A and the denominator of which is 2,540,000
(subject to such adjustments to eliminate any fractional share purchases as you
in your discretion may make). Certificates for the Optional Common Shares will
be made available for checking and packaging on the business day preceding the
Second Closing Date at a location in New York, New York, as may be designated by
you. The manner of payment for and delivery of the Optional Common Shares shall
be the same as for the Firm Common Shares purchased from the said Selling
Stockholders and the Company as specified in the two preceding paragraphs. At
any time before lapse of the option, you may cancel such option by giving
written notice of such cancellation to the Company and said Selling
Stockholders. If the option is cancelled or expires unexercised in whole or in
part, the Company will deregister under the Act the number of Optional Common
Shares as to which the option has not been exercised.

You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Common Shares, to make
payment and to receipt therefor. You may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by you by the First Closing

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<PAGE> 9

Date or the Second Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.

Subject to the terms and conditions hereof, the Underwriters propose to
make a public offering of their respective portions of the Common Shares as soon
after the effective date of the Registration Statement as in the judgment of the
Underwriters is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.

SECTION 6

COVENANTS OF THE COMPANY

The Company covenants and agrees that:

(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or after
it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such
stop order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will not
file any amendment or supplement to the Registration Statement (either before or
after it becomes effective), any Preliminary Prospectus or the Prospectus of
which you have not been furnished with a copy a reasonable time prior to such
filing or to which you reasonably object or which is not in compliance with the
Act and the Rules and Regulations.

(b) The Company will prepare and file with the Commission, promptly
upon your request, a registration statement pursuant to Rule 462(b) of the Rules
and Regulations related to the Common Shares and any amendments or supplements
to the Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable the several Underwriters to continue the
distribution of the Common Shares and will use its best efforts to cause the
same to become effective as promptly as possible. The Company will fully and
completely comply with the provisions of Rule 430A of the Rules and Regulations
with respect to information omitted from the Registration Statement in reliance
upon such Rule.

(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would include an untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.

(d) As soon as practicable, but not later than 45 days after the end of
the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings statement (which need not be audited) covering a period

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<PAGE> 10

of 12 consecutive months beginning after the effective date of the Registration
Statement which will satisfy the provisions of the last paragraph of Section
11(a) of the Act.

(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company, at
its expense, but only for the nine-month period referred to in Section 10(a) (3)
of the Act, will furnish to you and the Selling Stockholders or mail to your
order copies of the Registration Statement, the Prospectus, the Preliminary
Prospectus and all amendments and supplements to any such documents in each case
as soon as available and in such quantities as you and the Selling Stockholders
may request, for the purposes contemplated by the Act.

(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.

(g) During the period of five years hereafter, the Company will furnish
to the Underwriters: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.

(h) During the period of 90 days after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of Montgomery Securities (which consent may be withheld at the
sole discretion of Montgomery Securities), the Company will not issue, offer,
sell, grant options to purchase or otherwise dispose of any of the Company's
equity securities or any other securities convertible into or exchangeable with
its Common Stock or other equity security, other than pursuant to (i) stock
options granted pursuant to the Company's 1995 Stock Incentive Plan (as
described in the Registration Statement and Prospectus), and (ii) the Company's
Stock Purchase Plan (as described in the Registration Statement and Prospectus).

(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.

(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the Company's
Common Stock in California), will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.

(k) The Company will use its best efforts to cause the Common Stock to
continue to be listed for quotation as a national market system security on the
NASD Automated Quotation System, and to cause the Common Shares to be issued and
sold by the Company hereunder to be listed for quotation on such system.

You may, in your sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.

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<PAGE> 11

SECTION 7

PAYMENT OF EXPENSES

Whether or not the transactions contemplated hereunder are consummated
or this Agreement becomes effective or is terminated, the Company and, unless
otherwise paid by the Company, the Selling Stockholders agree to pay in such
proportions as they may agree upon among themselves all costs, fees and expenses
incurred in connection with the performance of their obligations hereunder and
in connection with the transactions contemplated hereby, including without
limiting the generality of the foregoing, (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and engraving
costs), (ii) all fees and expenses of the registrar and transfer agent of the
Common Stock, (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Common Shares to the Underwriters,
(iv) all fees and expenses of the Company's counsel and the Company's
independent accountants, (v) all costs and expenses incurred in connection with
the preparation, printing, filing, shipping and distribution of the Registration
Statement, each Preliminary Prospectus and the Prospectus (including all
exhibits and financial statements) and all amendments and supplements provided
for herein, any registration statement filed pursuant to Rule 462(b) of the
Rules and Regulations related to the Common Shares, this Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum,
(vi) all filing fees, reasonable attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Common Shares for offer and sale under the state or Canadian Blue Sky
laws in an amount not to exceed $30,000, (vii) the filing fee of the National
Association of Securities Dealers, Inc., and (viii) all other fees, costs and
expenses referred to in Item 13 of the Registration Statement. The Underwriters
may deem the Company to be the primary obligor with respect to all costs, fees
and expenses to be paid by the Company and by the Selling Stockholders. Except
as provided in this Section 7, Section 9 and Section 11 hereof, the Underwriters
shall pay all of their own expenses, including the fees and disbursements of
their counsel (excluding those relating to qualification, registration or
exemption under the Blue Sky laws and the Blue Sky memorandum referred to
above). This Section 7 shall not affect any agreements relating to the payment
of expenses between the Company and the Selling Stockholders.

The Selling Stockholders will pay (directly or by reimbursement) all
fees and expenses incident to the performance of their obligations under this
Agreement which are not otherwise specifically provided for herein, including
but not limited to (i) any fees and expenses of separate counsel for such
Selling Stockholders; (ii) any fees and expenses of the Agent; and (iii) all
expenses and taxes incident to the sale and delivery of the Common Shares to be
sold by such Selling Stockholders to the Underwriters hereunder.

SECTION 8

CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS

The obligations of the several Underwriters to purchase and pay for the
Firm Common Shares on the First Closing Date and the Optional Common Shares on
the Second Closing Date shall be subject to the accuracy of the representations
and warranties on the part of the Company and the Selling Stockholders herein
set forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholders made pursuant to the provisions hereof, to
the performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:

(a) The Registration Statement shall have become effective not later
than 5:00 p.m.(or, in the case of a registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations relating to the Common Shares, not
later than 8:30 a.m. Washington D.C. time on the date following the date of
this Agreement), Washington, D.C. Time, on the date of this Agreement, or
at such later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company, the Selling

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<PAGE> 12

Stockholders or you, shall be contemplated by the Commission; and any
request of the Commission for inclusion of additional information in the
Registration Statement, or otherwise, shall have been complied with to your
satisfaction.

(b) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock of the Company or any of its
subsidiaries (other than pursuant to the grant of shares of Common Stock to
employees of the Company as described in the Registration Statement and
Prospectus) or any material change in the indebtedness (other than in the
ordinary course of business) of the Company or any of its subsidiaries, (ii)
except as set forth or contemplated by the Registration Statement or the
Prospectus, no material verbal or written agreement or other transaction shall
have been entered into by the Company or any of its subsidiaries, which is not
in the ordinary course of business, (iii) no loss or damage (whether or not
insured) to the property of the Company or any of its subsidiaries shall have
been sustained which materially and adversely affects the condition (financial
or otherwise), business, results of operations or prospects of the Company and
its subsidiaries, (iv) no legal or governmental action, suit or proceeding
affecting the Company or any of its subsidiaries which is material to the
Company and its subsidiaries or which adversely affects or may adversely affect
the transactions contemplated by this Agreement shall have been instituted or
threatened and (v) there shall not have been any material adverse change in the
condition (financial or otherwise), business, management, results of operations
or prospects of the Company and its subsidiaries which makes it impractical or
inadvisable in the judgment of the Underwriters to proceed with the public
offering or purchase the Common Shares as contemplated hereby.

(c) There shall have been furnished to you on each Closing Date, in
form and substance satisfactory to you, except as otherwise expressly provided
below:

(i) An opinion of McDermott, Will & Emery, counsel for the
Company and the Selling Stockholders, addressed to the Underwriters and dated
the First Closing Date, or the Second Closing Date, as the case may be, to the
effect that:

(1) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, is
duly qualified to do business as a foreign corporation and is in
good standing in all other jurisdictions where the ownership or
leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company and
its subsidiaries taken as a whole, and has full corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement;

(2) The authorized, issued and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the
Prospectus; all necessary and proper corporate proceedings have
been taken in order to authorize validly such authorized Common
Stock and Class B Common Stock; all outstanding shares of Common
Stock (including the Firm Common Shares and any Optional Common
Shares) and Class B Common Stock have been duly and validly issued,
are fully paid and nonassessable, were not issued in violation of
or subject to any preemptive rights or, to the best of such
counsel's knowledge, other rights to subscribe for or purchase any
securities, and such shares conform to the description thereof
contained in the Prospectus; without limiting the foregoing, there
are no preemptive or, to the best of such counsel's knowledge,
other rights to subscribe for or purchase any of the Common Shares
to be sold by the Company hereunder;

(3) All of the issued and outstanding shares of the Company's
subsidiaries have been duly and validly authorized and issued, are
fully paid and nonassessable and, except as set forth in the
Registration Statement, are held of record by the Company free and
clear of all liens, encumbrances, equities, claims, security
interests, voting trusts or other defects of title whatsoever;

(4) The certificates evidencing the Common Shares to be
delivered hereunder are in due and proper form under Delaware law,
and when duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment
of the agreed consideration therefor in accordance with the
provisions of this Agreement, the Common Shares represented thereby
will be duly authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation of or subject
to any

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<PAGE> 13
preemptive rights or, to the best of such counsel's
knowledge, other rights to subscribe for or purchase securities,
and such shares will conform in all respects to the description
thereof contained in the Prospectus;

(5) Except as disclosed in or specifically contemplated by the
Prospectus, to the best of such counsel's knowledge, there are no
outstanding options, warrants or other rights calling for the
issuance of, and no commitments, plans or arrangements to issue,
any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the Company;

(6) (a) The Registration Statement has become effective under
the Act, and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated by the Commission; any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been made in the manner and within
the time period required by such Rule 424(b);

(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial
statements and schedules and financial and statistical data
included therein as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of
the Act and the Rules and Regulations.

(c) To the best of such counsel's knowledge, there are
no franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement
which are not disclosed or filed, as required; and

(d) To the best of such counsel's knowledge, there are
no legal or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be described
in the Prospectus which are not described as required.

(7) The Company has full corporate right, power and authority
to enter into this Agreement and to sell and deliver the Common
Shares to be sold by it to the several Underwriters; this Agreement
has been duly and validly authorized by all necessary corporate
action by the Company, has been duly and validly executed and
delivered by and on behalf of the Company, and is a valid and
binding agreement of the Company in accordance with its terms,
except as enforceability may be limited by general equitable
principles, bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and except as to
those provisions relating to indemnity or contribution for
liabilities arising under the Act as to which no opinion need be
expressed; and, to the best of such counsel's knowledge, no
approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required for the
execution and delivery of this Agreement by the Company or the
consummation of the transactions contemplated by this Agreement,
except such as have been obtained and are in full force and effect
under the Act and such as may be required under applicable Blue Sky
laws in connection with the purchase and distribution of the Common
Shares by the Underwriters and the clearance of such offering with
the NASD;

(8) The execution and performance of this Agreement and the
consummation of the transactions herein contemplated will not
conflict with, result in the breach of, or constitute, either by
itself or upon notice or the passage of time or both, a default
under, any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument known to such
counsel to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of its or
their property may be bound or affected which is material to the
Company and its subsidiaries, or violate any of the provisions of
the certificate of incorporation or bylaws, or other organizational
documents, of the Company or any of its subsidiaries or, so far as
is known to such counsel, violate any statute, judgment, decree,
order, rule or regulation of any court or governmental body having
jurisdiction over the Company or any of its subsidiaries or any of
its or their property;

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<PAGE> 14

(9) Neither the Company nor any subsidiary is in violation of
its certificate of incorporation or bylaws, or other organizational
documents, or to the best of such counsel's knowledge, in breach of
or default with respect to any provision of any agreement,
mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument known to such counsel to which the
Company or any such subsidiary is a party or by which it or any of
its properties may be bound or affected, except where such default
would not materially adversely affect the Company and its
subsidiaries; and, to the best of such counsel's knowledge, the
Company and its subsidiaries are in compliance with all laws,
rules, regulations, judgments, decrees, orders and statutes of any
court or jurisdiction to which they are subject, except where
noncompliance would not materially adversely affect the Company and
its subsidiaries;

(10) To the best of such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived to
the registration of shares of Common Stock or other securities,
because of the filing of the Registration Statement by the Company
or the offering contemplated hereby;

(11) To the best of such counsel's knowledge, this Agreement and
the Stockholders Agreement have been duly authorized, executed and
delivered by or on behalf of each of the Selling Stockholders; the
Agent has been duly and validly authorized to act as the custodian
of the Common Shares to be sold by each such Selling Stockholder;
and the performance of this Agreement and the Stockholders
Agreement and the consummation of the transactions herein
contemplated by the Selling Stockholders will not result in a
breach of, or constitute a default under, any indenture, mortgage,
deed of trust, trust (constructive or other), loan agreement,
lease, franchise, license or other agreement or instrument to which
any of the Selling Stockholders is a party or by which any of the
Selling Stockholders or any of their properties may be bound, or
violate any statute, judgment, decree, order, rule or regulation
known to such counsel of any court or governmental body having
jurisdiction over any of the Selling Stockholders or any of their
properties; and to the best of such counsel's knowledge, no
approval, authorization, order or consent of any court, regulatory
body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the
Stockholders Agreement or the consummation by the Selling
Stockholders of the transactions contemplated by this Agreement,
except such as have been obtained and are in full force and effect
under the Act and such as may be required under the rules of the
NASD and applicable Blue Sky laws;

(12) To the best of such counsel's knowledge, the Selling
Stockholders have full right, power and authority to enter into
this Agreement and the Stockholders Agreement and to sell, transfer
and deliver the Common Shares to be sold on such Closing Date by
such Selling Stockholders hereunder and upon payment for and
delivery of the Common Shares as contemplated hereunder, the
Underwriters (whom counsel may assume to be bona fide purchasers)
will be the owner of the Common Shares free and clear of all liens,
encumbrances, equities, claims, restrictions, security interests,
voting trusts, or other defects of title whatsoever;

(13) To the best of such counsel's knowledge, this Agreement and
the Stockholders Agreement are valid and binding agreements of each
of the Selling Stockholders in accordance with their terms except
as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except with respect to
those provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed; and

(14) No transfer taxes are required to be paid in connection
with the sale and delivery of the Common Shares to the Underwriters
hereunder.

In rendering such opinion, such counsel may rely, as to matters
of fact, on certificates of the Selling Stockholders and of officers of the
Company and of governmental officials, as to the matters set forth in paragraphs
(12), (13) and (14), on opinions of other counsel retained by the Selling
Stockholders, and, as to matters of local law, on opinions of local counsel in
which case their opinion is to state that they are so doing and that the
Underwriters are justified in relying on such opinions or certificates and
copies of said opinions or certificates are to be attached to the opinion. Such
counsel shall also

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<PAGE> 15
include a statement to the effect that nothing has come to such counsel's
attention that would lead such counsel to believe that either at the effective
date of the Registration Statement or at the applicable Closing Date the
Registration Statement or the Prospectus, or any such amendment or supplement,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading;

(ii) Such opinion or opinions of Wilson, Sonsini, Goodrich & Rosati,
P.C., counsel for the Underwriters, dated the First Closing Date or the
Second Closing Date, as the case may be, with respect to the incorporation
of the Company, the sufficiency of all corporate proceedings and other
legal matters relating to this Agreement, the validity of the Common
Shares, the Registration Statement and the Prospectus and other related
matters as you may reasonably require, and the Company and the Selling
Stockholders shall have furnished to such counsel such documents and shall
have exhibited to them such papers and records as they may reasonably
request for the purpose of enabling them to pass upon such matters. In
connection with such opinions, such counsel may rely on representations or
certificates of officers of the Company and governmental officials.

(iii) A certificate of the Company executed by the Chairman of the
Board and President and the chief financial or accounting officer of the
Company, dated the First Closing Date or the Second Closing Date, as the
case may be, to the effect that:

(1) The representations and warranties of the Company set forth
in Section 2 of this Agreement are true and correct as of the date of
this Agreement and as of the First Closing Date or the Second Closing
Date, as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied on or prior to such Closing Date;

(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best of the
knowledge of the respective signers, no proceedings for that purpose
have been instituted or are pending or contemplated under the Act;

(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus; in
his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements thereto
contain all statements required to be stated therein regarding the
Company and its subsidiaries; and neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading;

(4) Since the initial date on which the Registration Statement
was filed, no agreement, written or oral, transaction or event has
occurred which should have been set forth in an amendment to the
Registration Statement or in a supplement to or amendment of any
prospectus which has not been disclosed in such a supplement or
amendment;

(5) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any material adverse change or a development involving a material
adverse change in the condition (financial or otherwise), business,
properties, results of operations, management or prospects of the
Company and its subsidiaries; and no legal or governmental action,
suit or proceeding is pending or threatened against the Company or any
of its subsidiaries which is material to the Company and its
subsidiaries, whether or not arising from transactions in the ordinary
course of business, or which may adversely affect the transactions
contemplated by this Agreement; since such dates neither the Company
nor any of its subsidiaries has entered into any verbal or written
agreement or other transaction which is not in the ordinary course of
business or incurred any material liability or obligation, direct,
contingent or indirect, made any change in its capital stock, made any
material change in its short-term debt or funded debt or repurchased
or otherwise acquired any of the Company's capital stock; and the
Company

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<PAGE> 16
has not declared or paid any dividend, or made any other distribution,
upon its outstanding capital stock payable to stockholders of record
on a date prior to the First Closing Date or Second Closing Date; and

(6) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, the Company and its
subsidiaries have not sustained a material loss or damage by strike,
fire, flood, windstorm, accident or other calamity (whether or not
insured).

(iv) On the First Closing Date or the Second Closing Date, as the case
may be, a certificate, dated such Closing Date and addressed to you, signed
by or on behalf of each of the Selling Stockholders to the effect that the
representations and warranties of such Selling Stockholder in this
Agreement are true and correct, as if made at and as of the First Closing
Date or the Second Closing Date, as the case may be, and such Selling
Stockholder has complied with all the agreements and satisfied all the
conditions on his part to be performed or satisfied prior to the First
Closing Date or the Second Closing Date, as the case may be.

(v) On the date before this Agreement is executed and also on the First
Closing Date and the Second Closing Date, a letter addressed to you from
Arthur Andersen, LLP, independent accountants, the first one to be dated
the day before the date of this Agreement, the second one to be dated the
First Closing Date and the third one (in the event of a Second Closing) to
be dated the Second Closing Date, in form and substance reasonably
satisfactory to you.

(vi) On or before the First Closing Date, letters from each of the
Selling Stockholders and each director and executive officer of the
Company, in form and substance satisfactory to you, confirming that for a
period of 90 days after the first date that any of the Common Shares are
released by you for sale to the public, such person will not directly or
indirectly sell or offer to sell or otherwise dispose of any shares of
Common Stock or Class B Common Stock or any right to acquire any such
shares without the prior written consent of Montgomery Securities, which
consent may be withheld at the sole discretion of Montgomery Securities.

All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Wilson, Sonsini, Goodrich & Rosati, P.C., counsel for the
Underwriters. The Company shall furnish you with such manually signed or
conformed copies of such opinions, certificates, letters and documents as you
request. Any certificate signed by any officer of the Company and delivered to
the Underwriters or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the
statements made therein.

If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you to the
Company and the Selling Stockholders without liability on the part of any
Underwriter or the Company or the Selling Stockholders except for the expenses
to be paid or reimbursed by the Company and by the Selling Stockholders pursuant
to Sections 7 and 9 hereof and except to the extent provided in Section 11
hereof.

SECTION 9

REIMBURSEMENT OF UNDERWRITERS' EXPENSES

Notwithstanding any other provisions hereof, if this Agreement shall be
terminated by you pursuant to Section 8, or if the sale to the Underwriters of
the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse you and the other Underwriters upon
demand for all out-of-pocket expenses that shall have been reasonably incurred
by you and them in connection with the proposed purchase and the sale of the
Common Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, telegraph charges and telephone
charges relating directly to the offering contemplated by the Prospectus. Any
such termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 7 and Section 11 shall at
all times be effective and shall apply.

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<PAGE> 17

SECTION 10

EFFECTIVENESS OF REGISTRATION STATEMENT

You, the Company and the Selling Stockholders will use your, its and
their best efforts to cause the Registration Statement to become effective, to
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement and, if such stop order be issued, to obtain as soon as
possible the lifting thereof.

SECTION 11

INDEMNIFICATION

(a) The Company and each of the Insider Selling Stockholders, jointly
and severally, agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act
against any losses, claims, damages, liabilities or expenses, joint or several,
to which such Underwriter or such controlling person may become subject, under
the Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations
and warranties of the Company or the Insider Selling Stockholders contained
herein or any failure of the Company or the Insider Selling Stockholders to
perform their respective obligations hereunder or under law; and will
reimburse each Underwriter and each such controlling person for any legal and
other expenses as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that neither the Company nor the Insider Selling
Stockholders will be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof. The Company
and the Insider Selling Stockholders may agree, as among themselves and without
limiting the rights of the Underwriters under this Agreement, as to their
respective amounts of such liability for which they each shall be responsible.
In addition to their other obligations under this Section 11(a), the Company
and the Insider Selling Stockholders agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, or any inaccuracy in the representations and warranties
of the Company or the Insider Selling Stockholders herein or failure to perform
their obligations hereunder, all as described in this Section 11(a), they will
reimburse each Underwriter on a quarterly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's or the Insider Selling Stockholders' obligation to reimburse each
Underwriter for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have been
improper, each Underwriter shall promptly return it to the Company and the
Insider Selling Stockholders together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank
of America NT&SA, San Francisco, California (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within 30
days of a request for reimbursement, shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which the Company or the Insider Selling Stockholders may otherwise
have.

(b) Each of the Selling Stockholders, jointly and severally, agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act against any losses,
claims, damages, liabilities or expenses, joint or several, to which such
Underwriter or such controlling person may become subject, under the Act,

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<PAGE> 18

the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Selling Stockholder), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any
of them not misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Selling Stockholders
contained herein or any failure of the Selling Stockholders to perform their
respective obligations hereunder or under law; and will reimburse each
Underwriter and each such controlling person for any legal and other expenses
as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Selling Stockholders (other than the
Insider Selling Stockholders) will only be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with the information about such Selling Stockholder
furnished to the Company for use therein. In addition to their other
obligations, under this Section 11(b), the Selling Stockholders agree that, as
an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, or any inaccuracy in the
representations and warranties of the Selling Stockholders herein or failure to
perform their obligations hereunder, all as described in this Section 11(b),
they will reimburse each Underwriter on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Selling Stockholders' obligation to reimburse each
Underwriter for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have been
improper, each Underwriter shall promptly return it to the Selling Stockholders
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to an
Underwriter within 30 days of a request for reimbursement, shall bear interest
at the Prime Rate from the date of such request. This indemnity agreement will
be in addition to any liability which the Selling Stockholders may otherwise
have.

(c) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Stockholders and each person, if any, who
controls the Company or any Selling Stockholder within the meaning of the Act,
against any losses, claims, damages, liabilities or expenses to which the
Company, or any such director, officer, Selling Stockholder or controlling
person may become subject, under the Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with the information furnished to the Company pursuant to Section 4
hereof; and will reimburse the Company, or any such director, officer, Selling
Stockholder or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer, Selling Stockholder or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. In addition to its other obligations under this Section 11(c), each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 11(c) which relates to information furnished to the
Company pursuant to Section 4 hereof, it will reimburse the Company (and, to
the extent applicable, each officer, director, controlling person or Selling
Stockholder) on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or Selling Stockholder)
for such expenses and the possibility that such payments might later be held

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<PAGE> 19

to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each officer, director,
controlling person or Selling Stockholder) shall promptly return it to the
Underwriters together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments which are not made
to the Company within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.

(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf
of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel,
approved by the Underwriters in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.

(e) If the indemnification provided for in this Section 11 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b),
(c) or (d) in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Common Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, the Selling Stockholders and the Underwriters in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company, the
Selling Stockholders and the Underwriters shall be deemed to be in the same
proportion, in the case of the Company and the Selling Stockholders as the
total price paid to the Company and to the Selling Stockholders, respectively,
for the Common Shares sold by them to the Underwriters (net of underwriting
commissions but before deducting expenses), and in the case of the Underwriters
as the underwriting commissions received by them bears to the total of such
amounts paid to the Company and to the Selling Stockholders and received by the
Underwriters as underwriting commissions. The relative fault of the Company,
the Selling Stockholders and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact or
the inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in subparagraph (d) of this Section 11, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.

-19-

<PAGE> 20

The provisions set forth in subparagraph (d) of this Section 11 with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this subparagraph (e); provided, however, that
no additional notice shall be required with respect to any action for which
notice has been given under subparagraph (d) for purposes of indemnification.
The Company, the Selling Stockholders and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 11 were
determined solely by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 11, no Underwriter shall be
required to contribute any amount in excess of the amount of the total
underwriting commissions received by such Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 11 are several in proportion to their
respective underwriting commitments and not joint.

(f) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 11(a), 11(b) and
11(c) hereof, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 11(a), 11(b) and
11(c) hereof and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of such
Sections 11(a), 11(b) and 11(c) hereof.

(g) The Company and each of the Underwriters agrees with each of the
Insider Selling Stockholders that any claim of such Underwriter against such
Insider Selling Stockholder for indemnification, reimbursement or advancement
of expenses pursuant to Section 11(a) hereof or breach of any representation or
warranty in Section 2 hereof shall first be sought by such Underwriter to be
satisfied in full by the Company and, subject to the limitation on the
aggregate liability of the Insider Selling Stockholders set forth in Section
11(h), shall be satisfied by the Insider Selling Stockholders only to the
extent that such claim has not been satisfied in full by the Company within the
sixty (60) day period following the date requested for payment in accordance
with the terms of this Agreement.

(h) In no event shall the aggregate liability of any Selling
Stockholder under this Agreement for indemnification, contribution,
reimbursement of expenses and breach of any representation or warranty of such
Selling Stockholder or the Company exceed the proceeds received by such Selling
Stockholder with respect to the Common Shares sold to the Underwriters
hereunder, provided, however, that with respect to the Insider Selling
Stockholder listed on Schedule D hereto, the aggregate liability of such
Insider Selling Stockholder under this Agreement for indemnification,
contribution or reimbursement of expenses pursuant to Section 11(a) hereof and
breach of any representation or warranty of such Insider Selling Stockholder in
Section 2 hereof shall not exceed fifty percent (50%) of the proceeds received
by such Insider Selling Stockholder with respect to the Common Shares sold to
the Underwriters hereunder.

(i) The Company and the Selling Stockholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to their respective amounts of such liability for which they each
shall be responsible.

(j) With respect to the Voting Trust Agreement dated February 24,
1994, as amended (the "Voting Trust"), the Trustees (as defined in the Voting
Trust), on behalf of themselves and each of the Holders (as defined in the
Voting Trust), agree with the Underwriters that in the event the Voting Trust
is amended, terminated or modified in a way that adversely affects the ability
of the Underwriters to enforce their rights against the Voting Trust as an
Insider Selling Stockholder or Selling Stockholder hereunder, then the
Underwriters shall be entitled to proceed against the Holders (as defined in
the Voting Trust) with respect to such rights pro rata based on the relative
interest which each such Holder has in the Voting Trust as of the date hereof.
Notwithstanding the foregoing, the Trustees, the Holders and the Voting Trust
(each as defined in the Voting Trust) may agree, as among themselves and
without limiting the rights of the Underwriters under this Agreement, as to
their respective amounts of such liability through which they shall each be
responsible.

-20-

<PAGE> 21

SECTION 12

DEFAULT OF UNDERWRITERS

It shall be a condition to this Agreement and the obligation of the
Company and the Selling Stockholders to sell and deliver the Common Shares
hereunder, and of each Underwriter to purchase the Common Shares in the manner
as described herein, that, except as hereinafter in this paragraph provided,
each of the Underwriters shall purchase and pay for all the Common Shares
agreed to be purchased by such Underwriter hereunder upon tender to the
Underwriters of all such shares in accordance with the terms hereof. If any
Underwriter or Underwriters default in their obligations to purchase Common
Shares hereunder on either the First or Second Closing Date and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase on such Closing Date does not exceed 10% of the
total number of Common Shares which the Underwriters are obligated to purchase
on such Closing Date, the non-defaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Common Shares which such defaulting Underwriters agreed but failed to
purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Underwriters and the Company for the purchase of such Common Shares by other
persons ore not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company or the Selling Stockholders except for the expenses to be paid by
the Company and the Selling Stockholders pursuant to Section 7 hereof and
except to the extent provided in Section 11 hereof.

In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties,
the Underwriters or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days
in order that the necessary changes in the Registration Statement, Prospectus
and any other documents, as well as any other arrangements, may be effected.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve
a defaulting Underwriter from liability for its default.

SECTION 13

EFFECTIVE DATE

This Agreement shall become effective immediately as to Sections 7, 9,
11, 14 and 16 and, as to all other provisions, (i) if at the time of execution
of this Agreement the Registration Statement has not become effective, at 2:00
P.M., California time, on the first full business day following the
effectiveness of the Registration Statement, or (ii) if at the time of
execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the
Company or by release of any of the Common Shares for sale to the public. For
the purposes of this Section 13, the Common Shares shall be deemed to have been
so released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering,
or (ii) offering the Common Shares for sale to securities dealers, whichever
may occur first.

-21-

<PAGE> 22

SECTION 14

TERMINATION

Without limiting the right to terminate this Agreement pursuant to any
other provision hereof:

(a) This Agreement may be terminated by the Company by notice to you
and the Selling Stockholders or by you by notice to the Company and the Selling
Stockholders at any time prior to the time this Agreement shall become
effective as to all its provisions, and any such termination shall be without
liability on the part of the Company or the Selling Stockholders to any
Underwriter (except for the expenses to be paid or reimbursed by the Company
and the Selling Stockholders pursuant to Sections 7 and 9 hereof and except to
the extent provided in Section 11 hereof) or of any Underwriter to the Company
or the Selling Stockholders (except to the extent provided in Section 11
hereof).

(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
Exchange or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Underwriters, to affect adversely
the marketability of the Common Shares, (iii) if any adverse event shall have
occurred or shall exist which makes untrue or incorrect in any material respect
any statement or information contained in the Registration Statement or
Prospectus or which is not reflected in the Registration Statement or
Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv)
if there shall be any action, suit or proceeding pending or threatened, or
there shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Underwriters, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall be without liability on the part of any Underwriter
to the Company or the Selling Stockholders or on the part of the Company or the
Selling Stockholders to any Underwriter (except for expenses to be paid or
reimbursed by the Company and the Selling Stockholders pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof).

(c) This Agreement shall also terminate at 5:00 P.M., California Time,
on the tenth full business day after the Registration Statement shall have
become effective if the initial public offering price of the Common Shares
shall not then as yet have been determined as provided in Section 5 hereof.
Any termination pursuant to this subsection (c) shall be without liability on
the part of any Underwriter to the Company or the Selling Stockholders or on
the part of the Company or the Selling Stockholders to any Underwriter (except
for expenses to be paid or reimbursed by the Company and the Selling
Stockholders pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof).

SECTION 15

FAILURE OF THE SELLING STOCKHOLDERS TO SELL AND DELIVER

If one or more of the Selling Stockholders shall fail to sell and
deliver to the Underwriters the Common Shares to be sold and delivered by such
Selling Stockholders at the First Closing Date under the terms of this
Agreement, then the Underwriters may at their option, by written notice from
you to the Company and the Selling Stockholders, either (i) terminate this
Agreement without any liability on the part of any Underwriter or, except as
provided in Sections 7, 9 and 11 hereof, the Company or the Selling
Stockholders, or (ii) purchase the shares which the Company and other Selling
Stockholders have agreed to sell and deliver in accordance with the terms
hereof. In the event of a failure by one or more of the Selling Stockholders
to sell and deliver as referred to in this Section, either you or the Company
shall have the right to postpone the Closing Date for a

-22-

<PAGE> 23

period not exceeding seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected.

SECTION 16

REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY

The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers, of the Selling Stockholders
and of the several Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Stockholders,
as the case may be, and will survive delivery of and payment for the Common
Shares sold hereunder and any termination of this Agreement.

SECTION 17

NOTICES

All communications hereunder shall be in writing and, if sent to the
Underwriters shall be mailed, delivered or telegraphed and confirmed to you at
600 Montgomery Street, San Francisco, California 94111, Attention: J. Sanford
Miller, with a copy to Wilson, Sonsini, Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, California 94304, Attention: Barry E. Taylor; and if sent to
the Company or the Selling Stockholders shall be mailed, delivered or
telegraphed and confirmed to the Company at 101 Kendall Point Drive, Oswego,
Illinois, 60543, Attention: Gary F. Seamans, with a copy to McDermott, Will and
Emery, 227 West Monroe Street, Chicago, Illinois, 60606, Attention: William J.
Quinlan, Jr. The Company, the Selling Stockholders or you may change the
address for receipt of communications hereunder by giving notice to the others.

SECTION 18

SUCCESSORS

This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 12
hereof, and to the benefit of the officers and directors and controlling
persons referred to in Section 11, and in each case their respective
successors, personal representatives and assigns, and no other person will have
any right or obligation hereunder. No such assignment shall relieve any party
of its obligations hereunder. The term "successors" shall not include any
purchaser of the Common Shares as such from any of the Underwriters merely by
reason of such purchase.

SECTION 19

PARTIAL UNENFORCEABILITY

The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.

-23-

<PAGE> 24

SECTION 20

APPLICABLE LAW

This Agreement shall be governed by and construed in accordance with the
internal laws (and not the laws pertaining to conflicts of laws) of the State of
California.

SECTION 21

GENERAL

This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in several counterparts, each one of
which shall be an original, and all of which shall constitute one and the same
document.

In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company, the Selling Stockholders and
you.

Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact
to take such action. Without limiting the foregoing, such Attorney-in-fact by
his execution hereof represents that he has been duly appointed as
Attorney-in-fact pursuant to a validly existing and binding Power of Attorney
which authorizes such Attorney-in-fact to act on behalf of the Holders (as
defined in the Voting Trust) as contemplated by Section 11(j) hereof and on
behalf of the grantor or grantors of any Selling Stockholder that is a
revocable trust as contemplated by Section 3(c) hereof. Any action taken under
this Agreement by any of the Attorneys-in-fact will be binding on all the
Selling Stockholders.

-24-

<PAGE> 25

If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon
it will become a binding agreement among the Company, the Selling Stockholders
and the several Underwriters including you, all in accordance with its terms.

Very truly yours,

WESTELL TECHNOLOGIES, INC.

By:
--------------------------------

Title:
-----------------------------

SELLING STOCKHOLDERS

By:
--------------------------------
(Attorney-in-fact)

The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.

MONTGOMERY SECURITIES
COWEN & COMPANY
PUNK, ZIEGEL & KNOELL

By: MONTGOMERY SECURITIES

By:
-----------------------
Partner

-25-

<PAGE> 26

SCHEDULE A

Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------------------------------------------------------- ------------------------------------------------------
<S> <C>

Montgomery Securities. . . . . . . . . . . . . . . . . . . . . . . .

Cowen & Company. . . . . . . . . . . . . . . . . . . . . . . . . . .

Punk, Ziegel & Knoell. . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---------------
2,540,000
===============
</TABLE>

A-1
<PAGE> 27

SCHEDULE B

Number of
Optional
Number of Firm Common Shares
Common Shares to be Sold
to be Sold by Selling by Selling
Name of Selling Stockholder Stockholders Stockholders
- ------------------------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Stefan D. Abrams, as Trustee of the Stefan D. Abrams
1996 Charitable Remainder Trust . . . . . . . . . . . . . . . . . . 25,000 10,000

Stephen J. Hawrysz . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 1,819

Curtis L. Benton, as Trustee of the Curtis L. Benton
1991 Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,832 40,916

Curtis H. Benton, as Trustee of the Curtis H. Benton
Trust U/A Benton Family 1994 Trust. . . . . . . . . . . . . . . . . 7,830 3,915

Lorinda L. Benton, as Trustee of the Lorinda L. Benton
Trust U/A Benton Family 1994 Trust. . . . . . . . . . . . . . . . . 7,830 3,915

Michael A. Brunner . . . . . . . . . . . . . . . . . . . . . . . . . 12,180 6,090

Robert D. Faw. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,050 6,525

Robert H. Gaynor, Jr.. . . . . . . . . . . . . . . . . . . . . . . . 3,926 -0-

Robert Gaynor, Jr., as Trustee of the Steven
Robert Gaynor Trust. . . . . . . . . . . . . . . . . . . . . . . . . 1,566 -0-

Ronald Koval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400 -0-

Michael F. Lathrope. . . . . . . . . . . . . . . . . . . . . . . . . 67,628 33,814

J. William Nelson. . . . . . . . . . . . . . . . . . . . . . . . . . 32,886 16,443

Gary F. Seamans, as Trustee of the James W. Nelson
Trust U/A Nelson Family 1994 Trust. . . . . . . . . . . . . . . . . 6,525 3,262

Gary F. Seamans, as Trustee of the Michael J. Nelson
Trust U/A Nelson Family 1994 Trust. . . . . . . . . . . . . . . . . 6,525 3,262

William V. Rodey, Jr.. . . . . . . . . . . . . . . . . . . . . . . . 4,504 -0-

Gary F. Seamans, as Trustee of the Gary F.
Seamans 1991 Trust . . . . . . . . . . . . . . . . . . . . . . . . . 162,798 81,399

Melvin J. Simon, as Trustee of the Shawn F. Seamans
1993 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,100 13,050

Ormand J. Wade . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,962 -0-

</TABLE>

B-1

<PAGE> 28

<TABLE>
<CAPTION>
Number of
Optional
Number of Firm Common Shares
Common Shares to be Sold
to be Sold by Selling by Selling
Name of Selling Stockholder Stockholders Stockholders
- --------------------------------------------------------------------------------- --------------------- -------------
<S> <C> <C>
Robert C. Penny III and Melvin J. Simon, as Voting Trustees under the 191,328 -0-
Electronic Information Technologies, Inc. Voting Trust Agreement dated
February 23, 1994, as amended . . . . . . . . . . . . . . . . . . . . . . . . . . .

Melvin J. Simon, as Trustee under the Trust Agreement dated October 19, 65,372 1,590
1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Robert C. Penny III, as Trustee under the Trust Agreement dated 44,768 -0-
October 31, 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Florence R. Penny, Barbara J. Pruitt and Marlene D. Foskett as Trustees 5,350 -0-
of the Robert C. Penny Trust No. 2 dated December 30, 1974. . . . . . . . . . . . .

Natalie K. Simon, as Trustee of the Sheri A. Simon Gift Trust Agreement 13,050 -0-
dated December 20, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Natalie K. Simon, as Trustee of the Stacy L. Simon Gift Trust Agreement 13,050 -0-
dated December 20, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Melvin J. Simon, as Trustee of the Trust for Robert C. Penny III under 43,540 -0-
terms of Florence R. Penny Children's Trust . . . . . . . . . . . . . . . . . . . .
-------- -------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . 875,000 226,000
======== =======

</TABLE>

*In addition, the Company will sell up to 155,000 Optional Common Shares.

B-2
<PAGE> 29

SCHEDULE C

INSIDER SELLING STOCKHOLDERS

Curtis L. Benton 1991 Trust
Robert D. Faw
Michael F. Lathrope
J. William Nelson
Robert C. Penny Trust No. 2 dated December 30, 1974
Melvin J. Simon, as Trustee under the Trust Agreement dated October 19, 1984
Robert C. Penny III, as Trustee under the Trust Agreement dated October 31, 1980
Trust for Robert C. Penny III under terms of Florence R. Penny Children's Trust
Electronic Information Technologies, Inc. Voting Trust Agreement dated
February 23, 1994, as amended
Gary F. Seamans 1991 Trust
Stephen J. Hawrysz

C-1
<PAGE> 30

SCHEDULE D

INSIDER SELLING STOCKHOLDER LIMITED PURSUANT TO SECTION 11(h)

Electronic Information Technologies, Inc.
Voting Trust Agreement dated February 23, 1994, as amended

D-1

<PAGE> 1
EXHIBIT 5.1

McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606

June 20, 1996

Westell Technologies, Inc.
101 Kendall Point Drive
Oswego, Illinois 60543

Re: Registration Statement on Form S-1
File No. 333-04973

Ladies and Gentlemen:

You have requested our opinion in connection with the above-referenced
registration statement (the "Registration Statement"), under which (i) Westell
Technologies, Inc. (the "Company") intends to issue and sell in the offering
related thereto 1,665,000 shares (the "Primary Shares") of Class A Common
Stock, par value $.01 per share, of the Company ("Common Stock") and (ii)
certain stockholders of the Company intend to sell in the offering 875,000
shares of Class A Common Stock, plus up to an additional 381,000 shares of
Class A Common Stock granted to the underwriters by the selling stockholders to
cover over-allotments (the "Secondary Shares").

In arriving at the opinion expressed below, we have examined the
Registration Statement and such other documents as we have deemed necessary to
enable us to express the opinion hereinafter set forth. In addition, we have
examined and relied, to the extent we deem proper, on certificates of officers
of the Company as to factual matters, and on the originals or copies certified
or otherwise identified to our satisfaction, of all such corporate records of
the Company and such other instruments and certificates of public officials and
other persons as we have deemed appropriate. In our examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all

<PAGE> 2
Westell Technologies, Inc.
June 20, 1996
Page 2

documents submitted to us as copies, the genuineness of all signatures on
documents reviewed by us and the legal capacity of natural persons.

Based upon and subject to the foregoing, we are of the opinion that (i)
the Primary Shares have been duly authorized and, when issued in accordance
with the terms and conditions set forth in the Registration Statement, will be
validly issued, fully paid and non-assessable, and (ii) the Secondary Shares
have been duly authorized and validly issued and are fully paid and
non-assessable.

We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not
hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

/s/ McDermott, Will & Emery

McDermott, Will & Emery

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated May 21, 1996 and to all references to our Firm included in or made
a part of this registration statement.

ARTHUR ANDERSEN LLP
Chicago, Illinois

June 19, 1996