As filed with the Securities and Exchange Commission on August 4, 1999
Registration No. 333-79407
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________
WESTELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
______________________________
DELAWARE 3661 36-3154957
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or classification Code Number) Identification No.)
organization)
______________________________
750 NORTH COMMONS DRIVE
AURORA, ILLINOIS 60504
(630) 898-2500
(Address, including zip code, and telephone number, including area code, of
registrant's executive offices)
ROBERT H. GAYNOR
CHIEF EXECUTIVE OFFICER
WESTELL TECHNOLOGIES, INC.
750 NORTH COMMONS DRIVE
AURORA, ILLINOIS 60504
(630) 898-2500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
______________________________
Copies To:
NEAL J. WHITE, P.C.
McDermott, Will & Emery
227 West Monroe Street, Suite 3100
Chicago, Illinois 60606-5096
(312) 372-2000
______________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box./X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained in this prospectus is not complete and may be
changed. The selling stockholders may not sell these securities under this
prospectus until the registration statement filed with the SEC is effective.
This prospectus is not an offer to buy these securities in any state where the
offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 4, 1999
PROSPECTUS
8,500,000 SHARES
WESTELL TECHNOLOGIES, INC.
CLASS A COMMON STOCK
We have prepared this prospectus to allow the selling stockholders
identified in this prospectus to sell up to 8,500,000 shares of our class A
common stock.
Our class A common stock is quoted on the Nasdaq National Market under
the symbol "WSTL." On August _____, 1999, the closing sale price of the class A
common stock on the Nasdaq National Market was $_______ per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE MAKING A DECISION TO PURCHASE OUR CLASS A COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. THE CLASS A COMMON
STOCK IS NOT BEING OFFERED IN ANY STATE OR JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF SUCH
DOCUMENTS. YOU SHOULD READ CAREFULLY THE ENTIRE PROSPECTUS, AS WELL AS THE
DOCUMENTS INCORPORATED BY REFERENCE IN THE PROSPECTUS, BEFORE MAKING AN
INVESTMENT DECISION.
______________________________
The date of this Prospectus is August __, 1999
<PAGE>
TABLE OF CONTENTS
The Company..................................................................2
Risk Factors.................................................................2
Use of Proceeds.............................................................14
The Selling Stockholders....................................................14
Plan of Distribution........................................................17
About This Prospectus.......................................................19
Where You Can Find More Information.........................................19
Experts.....................................................................19
THE COMPANY
Because this is a summary, it does not contain all the information
about us that may be important to you. You should read the more detailed
information and the financial statements and related notes which are
incorporated by reference in this prospectus.
Since 1980, Westell has developed telecommunications products that
address the needs of telephone companies to upgrade their existing network
infrastructures in order to deliver advanced data and voice services to their
customers. We design, manufacture, market and service a broad range of digital
and analog products used by telephone companies to deliver services primarily
over existing copper telephone wires that connect end users to a telephone
company's central office. The copper wires that connect users to these central
offices are part of the telephone companies' networks and are commonly referred
to as the local loop or the local access network. We also market our products
and services to other telecommunications and information service providers
seeking direct access to end-user customers. We offer a broad range of products
that facilitate the transmission of high speed digital and analog data between a
telephone company's central office and end-user customers. These products can be
categorized into three groups:
o DSL products: products based on digital subscriber line or DSL
technologies. The DSL technology permits even greater digital
transmission capacity over copper wire than is possible with
other products. DSL technology allows the simultaneous
transmission of data at speeds up to 8.0 Mega bits per second in
one direction and up to 1 Mega bits per second 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. With DSL technology, a
user can talk and have high speed data transmissions at the same
time over a regular phone line. thus offering a more
cost-effective and faster deployment alternative to fiber optic
cable. DSL systems support advanced data applications such as
high speed Internet access, local area network extension,
telecommuting, and virtual libraries;
o T-1 products: products used by telephone companies to enable high
speed digital T-1 transmission at approximately 1.5 megabits per
second and E-1 transmission at approximately 2.0 megabits per
second, which is approximately 24 times faster than standard
telephone service; and o Traditional products: products used by
telephone companies to deliver digital services at speeds ranging
from approximately 2.4 to 64 kilobits per second and traditional
analog services with 4 kilohertz bandwidth which are relatively
slower speeds than T-1 and DSL products.
Conference Plus, Inc., our 88% owned subsidiary, provides audio, video,
and data conferencing services. Businesses and individuals use these services to
hold voice, video or data conferences with many people at the same time.
Conference Plus sells its services directly to large customers, including
Fortune 100 companies and serves customers indirectly through its private
reseller program. Conference Plus is one of the largest providers of
conferencing services that is not directly affiliated with or owned by telephone
carriers such as AT&T.
RISK FACTORS
You should carefully consider the following risk factors in addition to
the other information contained and incorporated by reference into this
prospectus before purchasing our stock.
WE MAY FACE OTHER RISKS NOT DESCRIBED IN THE FOREGOING RISK FACTORS WHICH MAY
IMPAIR OUR BUSINESS OPERATIONS.
The risks and uncertainties described in the foregoing risk factors may
not be the only ones facing us. Additional risks and uncertainties not presently
known to us may also impair our business operations. If any of the following
risks actually occur, our business, financial condition and results of
operations could be materially adversely affected. In this case, the trading
price of our common stock could decline, and you may lose all or part of your
investment.
WE HAVE INCURRED AND CONTINUE TO EXPECT LOSSES.
Due to our significant ongoing investment in DSL technology, which can
be used by telephone companies and other service providers to increase the
transmission speed and capacity of copper telephone wires, we have incurred and
anticipate that our losses may extend at least through each of our fiscal 2000
quarters. To date, we have incurred operating losses, net losses and negative
cash flow on both an annual and quarterly basis. For the year ended March 31,
1999, we had net losses of $35.0 million.
We believe that our future revenue growth and profitability will depend
on:
o creating sustainable DSL sales opportunities;
o developing new and enhanced T-1 products;
o developing other niche products for both DSL and T-1 markets; and
o growing our teleconference service revenues.
In addition, we expect to continue to evaluate new product opportunities and
engage in extensive research and development activities. As a result, we will
continue to invest heavily in research and development and sales and marketing,
which will adversely affect our short-term operating results. We can offer no
assurances that we will achieve profitability in the future.
WE DEPEND ON DSL MARKET ACCEPTANCE AND GROWTH FOR FUTURE SUCCESS.
We expect to continue to invest significant resources in the
development of DSL products. Because the DSL market is in its early stages, our
DSL revenues have been difficult to forecast. If the DSL market fails to grow or
grow more slowly than anticipated, then our business, revenues and operating
results would be materially adversely affected.
Our analog-based and T-1 based products such as our Network Interface
Units, which provide maintenance capabilities for telephone lines providing T-1
transmission, are not expected to generate sufficient revenues or profits to
offset any losses that we may experience due to a lack of sales of DSL systems.
If we fail to generate significant revenues from DSL sales, then we would not be
able to implement our business goals and our business and operating results
would suffer significantly.
Customers have only recently begun to consider implementing DSL
products in their networks. We have shipped most of our DSL products for trials
and early deployment. Most of our customers are in initial service deployments
and are not contractually bound to purchase our DSL systems in the future. We
are unable to predict whether these initial service deployments or other
technical or marketing trials will be successful and when significant commercial
deployment of our DSL products will begin, if at all. The timing of DSL orders
and shipments can significantly impact our revenues and operating results.
Even if our customers adopt policies favoring full-scale implementation
of DSL technology, our DSL-based sales may not become significant. There is no
guaranty that our customers will select our DSL products instead of competitive
products. If we fail to significantly increase our DSL sales, then our business,
operating results and financial condition will suffer.
PRICING PRESSURES ON OUR PRODUCTS MAY AFFECT OUR ABILITY TO BECOME PROFITABLE.
Due to competition in the DSL market, bids for recent field trials of
DSL products reflect:
o the forward pricing of DSL products below production costs to
take into account the expectation of large future volumes and
corresponding reductions in manufacturing costs; or
o suppliers providing DSL products at a lower price as part of a
sale of a package of products and/or services.
We are offering DSL products based upon forward pricing. For example,
in the September and December 1998 quarters, we shipped ADSL products to
customers that were priced below our current production costs. As a result, we
recognized forward pricing losses of approximately $1.7 million and $800,000,
respectively, for DSL orders received during those quarters. Such pricing will
cause us to incur losses on a substantial portion of our DSL product sales
unless and until we can reduce manufacturing costs. We believe that
manufacturing costs may decrease when:
o more cost-effective transceiver technologies are available;
o product design efficiencies are obtained; and
o economies of scale are obtained related to increased volume.
There is no guaranty that we will be able to secure significant
additional orders and reduce per unit manufacturing costs that we have factored
into our forward pricing of DSL products. We could continue to incur losses in
connection with sales of DSL products even if our DSL unit volume increases.
Losses from our sales of DSL products would materially and adversely affect our
ability to achieve profitability and implement our business goals.
Moreover, the International Telecommunication Union is expected to
announce a standard in late 1999 for a DSL product called G.Lite, which will
allow consumers to install DSL technology on their computers themselves. We
believe this announcement will increase competition in the DSL market and result
in greater pricing pressures with respect to all DSL products.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY, CAUSING
OUR STOCK PRICE TO BE VOLATILE OR DECLINE.
We expect to continue to experience significant fluctuations in
quarterly operating results. Factors that have had and may continue to influence
our quarterly operating results include:
o the size and timing of customer orders and subsequent shipments,
including customer order deferrals in anticipation of new
products or anticipated sale or merger of the customer's business
or other reasons;
o the impact of changes in the customer mix or product mix sold;
o long and unpredictable sales cycles and customer purchasing
programs;
o the absence of unconditional minimum purchase commitments from
any customer;
o timing of product introductions or enhancements by us or our
competitors;
o acceptance of new products by our customers;
o technological changes in the telecommunications industry;
o competitive pricing pressures;
o accuracy of customer forecasts of end-user demand;
o write-offs for obsolete inventory;
o changes in our operating expenses which can occur because of
product development costs, pricing pressures and other factors;
o personnel changes;
o quality control of products sold;
o disruption in supplies of key components of our products;
o regulatory changes; and
o delays of payments by customers.
Sales to our largest customers have fluctuated and are expected to
fluctuate significantly between financial periods. Sales to our customers
typically involve long approval and procurement cycles and can involve large
purchase commitments. Customers purchasing DSL products may generally reschedule
orders without penalty to the customer. Cancellation or deferral of one or a
small number of orders could cause significant fluctuations in our quarterly
operating results. Due to our fluctuations in quarterly results, we believe that
period-to-period comparisons of our quarterly operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance.
In addition, these quarterly fluctuations make it more difficult to
forecast our revenues. It is likely that in some future quarters our operating
results will be below the expectations of securities analysts and investors,
which may adversely affect our stock price. This occurred in fiscal 1999. We
attempt to address this possible divergence through our public announcements and
reports. The degree of specificity we can offer in such announcements, however,
and the likelihood that any forward-looking statements we make will prove
correct, can and will vary. As long as we continue to depend on DSL and new
products, there is substantial risk of widely varying quarterly results,
including the so-called "missed quarter" relative to investor expectations.
EVOLVING INDUSTRY STANDARDS MAY ADVERSELY AFFECT OUR DSL SALES
Industry wide standardization organizations such as the American
National Standards Institute and the European Telecommunications Standards
Institute are responsible for setting transceiver technology standards for DSL
products. Because we have not internally developed a transceiver technology for
our products, we are dependent on transceiver technologies from third parties.
Absent the proper relationships with key transceiver technology vendors, our
products may not comply with the developing standards for DSL. If customers
require standards-based products that require transceiver technologies not
available to us under reasonable terms, then our DSL revenues would
significantly decrease and our business and operating results would materially
suffer.
We will continue to rely on third party suppliers for access to
transceiver technologies for new DSL products such as the DSL product under
development called G.Lite, which will allow consumers to install DSL technology
on their computers themselves. Since standards have not been established for
G.Lite products, there can be no assurance that standards-compliant transceiver
technologies will be available to us in a timely manner for the purpose of
product development.
In addition, the introduction of competing standards or implementation
specifications could result in confusion in the market and delay any decisions
regarding deployment of DSL systems. For example, the anticipated announcement
of G.Lite standard could also delay our customer's deployment of other DSL
products. Delay in the announcement of standards would materially and adversely
impact sales of our DSL product offerings and could have a material adverse
effect on our business and operating results.
OUR PRODUCTS FACE COMPETITION FROM OTHER EXISTING PRODUCTS, PRODUCTS UNDER
DEVELOPMENT AND CHANGING TECHNOLOGY, AND WE MUST DEVELOP NEW COMMERCIALLY
SUCCESSFUL PRODUCTS TO ACHIEVE OUR BUSINESS GOALS AND GENERAL REVENUE.
The markets for our products are characterized by:
o intense competition,
o rapid technological advances,
o evolving industry standards,
o changes in end-user requirements,
o frequent new product introductions and enhancements, and
o evolving telephone company service offerings.
New products introductions or changes in telephone company services
could render our existing products and products under development obsolete and
unmarketable. For example, HDSL, product that enhances the signal quality of the
transmission over copper wire, may reduce the demand for the types of products
that we currently manufacture such as our Network Interface Units product, which
provide performance monitoring of copper telephone wires. Our Network Interface
Units accounted for at least 50% of our revenues in each of the last three
fiscal years. Further, we believe that the domestic market for many of our
traditional analog products is decreasing, and will likely continue to decrease,
as high capacity digital transmission becomes less expensive and more widely
deployed. Our future success will largely depend upon our ability to continue to
enhance our existing products and to successfully develop and market new
products on a cost-effective and timely basis.
Our current product offerings apply primarily to the delivery of
digital communications over copper wire in the local access network. We expect
that the increasing deployment of fiber and wireless broadband transmission in
the local access network will reduce the demand for our existing products.
Telephone companies also 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. If telephone companies decide not to
aggressively respond to this competition and fail to offer high speed digital
transmission, then the overall demand for DSL products will decline.
Consequently, to remain competitive we must develop new products to meet the
demands of these emerging transmission media and new local access network
providers.
If our products become obsolete or fail to gain widespread commercial
acceptance due to competing products and technologies, then our product revenues
would significantly decrease and business and operating results will be
materially adversely affected.
WE MAY EXPERIENCE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS.
Our past sales have resulted from our ability to anticipate changes in
technology, industry standards and telephone company service offerings, and to
develop and introduce new and enhanced products and services. Our continued
ability to adapt to such changes will be a significant factor in maintaining or
improving our competitive position and our prospects for growth. Factors
resulting in delays in product development include:
o rapid technological changes in the telecommunications industry;
o the Regional Bell Operating Companies' lengthy product approval
and purchase processes; and
o our reliance on third-party technology for the development of
new products.
There can be no assurance that we 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 we will have the financial and manufacturing resources
necessary to continue to successfully develop new products or to otherwise
successfully respond to changing technology standards and telephone company
service offerings. If we fail to deploy new products on a timely basis, then our
product sales will decrease and our competitive position and financial condition
would be materially and adversely affected.
THE HIGHLY COMPETITIVE MARKET IN WHICH WE OPERATE MAY RESULT IN OPERATING
LOSSES, A DECREASE IN OUR MARKET SHARE, AND FLUCTUATIONS IN OUR REVENUE.
We expect competition to increase in the future especially in the emerging
DSL market. Because we are significantly smaller than most of our competitors,
we may lack the financial resources needed to increase our market share. Our
principal competitors are as follows: o DSL products: Alcatel Network Systems,
AGCS, Cabletron, ECI Telecom, Ltd., Nokia, Copper Mountain, Cabletron, Ltd.,
Ericsson, Cisco Systems, Lucent Technologies, Inc., Nortel, Orckit
Communications, Ltd. PairGain Technologies, Inc., Paradyne, 3Com, and Siemens; o
T-1 products: ADC Telecommunications Inc., Applied Digital Access Inc., PairGain
Technologies, Inc. and Teltrend, Inc.; and o Traditional products: Adtran, Inc.,
Pulsecom, Tellabs, Inc. and Teltrend, Inc.
In addition, under the Telecommunications Act , the Regional Bell Operating
Companies may engage in manufacturing activities. So our largest customers may
potentially become our competitors as well.
We expect continued aggressive tactics from many of our competitors
such as:
o Forward pricing of products;
o Early announcements of competing products;
o Bids that bundle DSL products with other product offerings;
o Customer financing assistance; and o Intellectual property
disputes.
These tactics can be particularly effective in a highly concentrated customer
base such as ours.
Many of our competitors are much larger than us and can a wide array of
different products and services that are required for all of the telephone
companies' business. Conversely, our products are used in the local access
network which is just one element of a telephone companies' network. Instead of
directly competing with these large suppliers, we have entered into strategic
alliances with companies such as Lucent and Fujitsu Telecom Europe, Ltd. to
offer our products within a package of products sold by these companies. Our
ability to sell our DSL products will depend on the success of our alliances
with large suppliers and our system solutions. Our inability to form successful
alliances and develop systems that meet customer requirements will affect our
ability to sell our DSL Products which would materially adversely affect our
business and operating results.
In addition, the development of the G.Lite DSL product could enable
other companies with less technological expertise than us to more readily enter
the DSL market and could place additional pricing pressures on our other DSL
products.
Conference Plus participates in the highly competitive industry of
voice, video, and multimedia conferencing services. Competitors include
stand-alone conferencing companies and major telecommunications providers. In
addition, internet service providers may attempt to expand their revenue base by
providing conferencing services. Conference Plus's ability to sustain growth and
performance is dependent on its:
o maintenance of high quality standards and low cost position;
o continued operational excellence;
o strong alliances and partnerships;
o international expansion; and
o evolving technological capability.
Any increase in competition could reduce our gross margin, require
increased spending on research and development and sales and marketing, and
otherwise materially adversely affect our business and operating results.
OUR LACK OF BACKLOG MAY AFFECT OUR ABILITY TO ADJUST TO AN UNEXPECTED SHORTFALL
IN ORDERS.
Because we generally ship products within a short period after receipt
of an order, we typically do not have a material backlog of unfilled orders, and
our revenues in any quarter are substantially dependent on orders booked in that
quarter. Our expense levels are based in large part on anticipated future
revenues and are relatively fixed in the short-term. Therefore, we 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 our
expectations or any material delay of customer orders would have immediate
adverse impact on our business and operating results.
INDUSTRY CONSOLIDATION COULD MAKE COMPETING MORE DIFFICULT.
Consolidation of companies offering high speed telecommunications
products is occurring through acquisitions, joint ventures and licensing
arrangements involving our competitors, our customers and our customers'
competitors. We cannot provide any assurances that we will be able to compete
successfully in an increasingly consolidated telecommunications industry. Any
heightened competitive pressures that we may face may have a material adverse
effect on our business, prospects, financial condition and result of operations.
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS WHO ARE ABLE TO EXERT A HIGH DEGREE
OF INFLUENCE OVER US.
We have and will continue to depend on the large Regional Bell
Operating Companies, those companies emerging from the break-up of AT&T, as well
as and other telephone carriers including smaller local telephone carriers and
new alternative telephone carriers such as Qwest, for substantially all of our
revenues. Sales to the Regional Bell Operating Companies accounted for 61.9%,
51.1% and 46.6% of our revenues in fiscal 1997, 1998 and 1999, respectively.
Consequently, our future success will depend significantly upon:
o the timeliness and size of future purchase orders from the
Regional Bell Operating Companies;
o the product requirements of the Regional Bell Operating
Companies;
o the financial and operating success of the Regional Bell
Operating Companies; and
o the success of the Regional Bell Operating Companies' services
that use our products.
The Regional Bell Operating Companies and our other customers are significantly
larger than we are and are able to exert a high degree of influence over us.
Customers purchasing our products may generally reschedule orders without
penalty to the customer. Even if demand for our products is high, the Regional
Bell Operating Companies have sufficient bargaining power to demand low prices
and other terms and conditions that may materially adversely affect our business
and operating results.
Any attempt by a Regional Bell Operating Company or our other customers
to seek out additional or alternative suppliers or to undertake the internal
production of products would have a material adverse effect on our business and
operating results. The loss of any or our customer could result in an immediate
decrease in product sales and materially and adversely affect our business.
Conference Plus's customer base is very concentrated as its top ten
customers represent a large portion of revenue. Customers of Conference Plus
have expanded their requirements for our services, but there can be no assurance
that such expansion will increase in the future. Additionally, Conference Plus's
customers continually undergo review and evaluation of their conferencing
services to evaluate the merits of bringing those services in-house rather than
outsourcing those services. There can be no assurance in the future that
Conference Plus's customers will bring some portion or all of their conferencing
services in-house. Conference Plus must continually provide higher quality,
lower cost services to provide maintain and grow their customer base. Any loss
of a major account, would have a material adverse effect on Conference Plus. In
addition, any merger or acquisition of a major customer could have a material
adverse effect on Conference Plus.
OUR CUSTOMERS HAVE LENGTHY PURCHASE CYCLES WHICH AFFECT OUR ABILITY TO SELL OUR
PRODUCTS.
Prior to selling products to telephone companies, we 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 DSL products. Accordingly,
we are continually submitting successive generations of our current products as
well as new products to our customers for approval. The length of the approval
process can vary and is affected by a number of factors, including:
o the complexity of the product involved,
o priorities of telephone companies,
o telephone companies' budgets, and o regulatory issues affecting
telephone companies.
The requirement that telephone companies obtain FCC approval for most new
telephone company services prior to their implementation has in the past delayed
the approval process. Such delays in the future could have a material adverse
affect on our business and operating results. While we have been successful in
the past in obtaining product approvals from our customers, there is no guaranty
that such approvals or that ensuing sales of such products will continue to
occur.
THE FAILURE TO MAINTAIN AND FURTHER DEVELOP PARTNERS AND ALLIANCES WOULD
ADVERSELY AFFECT OUR BUSINESS.
We have developed and maintain partnerships and alliances with other
companies in order to secure complementary technologies, to lower costs, and to
better market and sell our products. These partnerships and alliances provide
important resources and channels for us to compete successfully. For example,
our partnership with Lucent Technologies for the development of an ADSL product
that may be integrated in a product sold by Lucent enables us to access to a
significant number of potential customers. We cannot provide any assurances that
these partnerships will continue in the future. ADSL is a DSL technology that
allows for bi-directional high speed digital transmission as well as analog
telephone service along a copper telephone wire. As competition increases in the
DSL market, our alliances will become even more important to us. A loss of one
or more partnerships and alliances could affect our ability to sell our products
and therefore could materially adversely affect our business and operating
results.
WE ARE DEPENDENT ON THIRD PARTY TECHNOLOGY AND WE WOULD NOT BE ABLE TO COMPETE
WITHOUT THIRD PARTY TECHNOLOGY.
Many of our products incorporate technology developed and owned by
third parties. Consequently, we must rely upon third parties to develop and
introduce technologies which enhance our current products and to develop new
products. Any impairment or termination of our relationship with any licensors
of technology would force us to find other developers on a timely basis or
develop our own technology. There is no guaranty that we will be able to obtain
the third-party technology necessary to continue to develop and introduce new
and enhanced products, that we will obtain third-party technology on
commercially reasonable terms or that we will be able to replace third-party
technology in the event such technology becomes unavailable, obsolete or
incompatible with future versions of our products. We would have severe
difficulty competing if we cannot obtain or replace the third-party technology
used in our products. Any absence or delay would materially adversely affect our
business and operating results.
For example, our ability to produce DSL products is dependent upon
third party transceiver technologies. Our licenses for DSL transceiver
technology are nonexclusive and the transceiver technologies either have been
licensed to numerous other manufacturers or do not require a license to acquire.
If our DSL transceiver licensors fail to deliver implementable or standards
compliant transceiver solutions to us and other alternative sources of DSL
transceiver technologies are not available to us at commercially acceptable
terms, then our business and operating results would be materially and adversely
affected.
WE ARE DEPENDENT ON SOLE OR LIMITED SOURCE SUPPLIERS AND COULD NOT SELL OUR
PRODUCTS WITHOUT THESE SUPPLIERS.
Integrated circuits and other electronic components used in our
products are currently available from only one source or a limited number of
suppliers. For example, we currently depend on GlobeSpan Technologies, Alcatel
and Analog Devices, Inc. to provide critical integrated transceiver circuits
used in the Company's DSL products. In addition, some of the electronic
components used in our products are currently in short supply and are provided
on an allocation basis to us and other users based upon past usage. There is no
guaranty that we 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 us on commercially reasonable
terms. Integrated transceiver circuits and electronic components are key
components in all of our products and are fundamental to our business strategy
of developing new and succeeding generations of products at reduced unit costs
without compromising functionality or serviceability. In the past we have
experienced delays in the receipt of key components which have resulted in
delays in related product deliveries. We anticipate that integrated circuit
production capacity and availability of some electronic components may be
insufficient to meet the demand for such components in the future. The inability
to obtain sufficient key components or to develop alternative sources for such
components as required, could result in delays or reductions in product
shipments, and consequently have a material adverse effect on our customer
relationships and our business and operating results.
OUR SERVICES ARE AFFECTED BY UNCERTAIN GOVERNMENT REGULATION AND CHANGES IN
CURRENT OR FUTURE LAWS OR REGULATIONS COULD RESTRICT THE WAY WE OPERATE OUR
BUSINESS.
Many of our customers are 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 us directly, the effects of
such regulations on our customers may adversely impact our business and
operating results. For example, FCC regulatory policies affecting the
availability of telephone company services and other terms on which telephone
companies conduct their business may impede our penetration of local access
markets. The Telecommunications Act lifted certain restrictions on telephone
companies' ability to provide interactive multimedia services including video on
demand. The Telecommunications Act establishes new regulations whereby telephone
companies 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 telephone companies providing video
products has become more favorable, it is uncertain at this time how this will
affect telephone companies' demand for products based upon DSL technology. In
addition, our business and operating results may also be adversely affected by
the imposition of tariffs, duties and other import restrictions on components
that we obtain from non-domestic suppliers or by the imposition of export
restrictions on products that we sell 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 our business and operating
results.
In addition, the Telecommunications Act permits the Regional Bell
Operating Companies to engage in manufacturing activities after the FCC
authorizes a Regional Bell Operating Company to provide long distance services
within its service territory. A Regional Bell Operating Company must first meet
specific statutory and regulatory tests demonstrating that its monopoly market
for local telephone services is open to competition before it will be permitted
to enter the long distance market. When these tests are met, a Regional Bell
Operating Company will be permitted to engage in manufacturing activities and
the Regional Bell Operating Companies, which are our largest customers, may
become our competitors as well.
POTENTIAL PRODUCT RECALLS AND WARRANTY EXPENSES COULD ADVERSELY AFFECT OUR
ABILITY TO BECOME PROFITABLE.
Our products are required to meet rigorous standards imposed by our
customers. Most of our products carry a limited warranty ranging from one to
seven years. In addition, our supply contracts with our major customers
typically require us to accept returns of products or indemnify such customers
against certain liabilities arising out of the use of our products. Complex
products such as those offered by us may contain undetected errors or failures
when first introduced or as new versions are released. Because we rely on new
product development to remain competitive, we cannot predict the level of these
type of claims that we will experience in the future. Despite our testing of
products and our comprehensive quality control program, there is no guaranty
that our products will not suffer from defects or other deficiencies or that we
will not experience material product recalls, product returns, warranty claims
or indemnification claims in the future. Such recalls, returns or claims and the
associated negative publicity could result in the loss of or delay in market
acceptance of our products, affect our product sales, our relationships with
customers, and our ability to generate a profit
OUR INTERNATIONAL OPERATIONS EXPOSE US TO THE RISKS OF CONDUCTING BUSINESS
OUTSIDE THE UNITED STATES.
International revenues represented 5.5%, 9.9% and 9.1% of our revenues
in fiscal 1997, 1998 and 1999, respectively. The Company also has a relationship
with Fujitsu Telecom Europe, Ltd. for the supply of ADSL equipment to British
Telecom. Our international revenues are subject to the risks of conducting
business internationally, which include:
o unexpected changes in regulatory requirements,
o foreign currency fluctuations
o tariffs and trade barriers,
o potentially longer payment cycles,
o difficulty in accounts receivable collection,
o foreign taxes,
o burdens of complying with a variety of foreign laws and
telecommunications standards, and
o the failure of the laws of foreign countries to protect our
proprietary technology.
There can be no assurance that the risks associated with our international
operations will not materially adversely affect our business and operating
results in the future or require us to modify significantly our current business
practices.
OUR FAILURE TO MANAGE OUR GROWTH EFFECTIVELY COULD IMPAIR OUR ABILITY TO SUPPLY
AND SUPPORT THE MANUFACTURE OF LARGE VOLUMES OF DSL PRODUCTS.
We are in the process of planning for the manufacturing capabilities
necessary to supply and support large volumes of DSL products and in the future
may become increasingly dependent on subcontractors. 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 we believe 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
our business and operating results. If we are not successful in increasing our
manufacturing capacity in a timely and cost-effective manner, then the possible
transition to subcontracting will materially adversely affect our business and
operating results. Our failure to effectively manage our growth would have a
material adverse effect on our business and operating results.
THE CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OF OUR CONVERTIBLE DEBENTURES
MAY SIGNIFICANTLY INCREASE THE SUPPLY OF OUR CLASS A COMMON STOCK IN THE PUBLIC
MARKET, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
On April 16, 1999, we issued $20,000,000 aggregate principal amount of
convertible debentures. The convertible debentures are convertible into a number
of shares of class A common stock as is determined by dividing the principal
amount of the convertible debentures by the lesser of:
o a variable conversion price which is initially $6.372 per share, but will
be increased under the terms of the convertible debentures; and
o the floating market price of our class A common stock at the time of
conversion, except that the market price can be imposed only under specific
conditions.
Assuming a conversion price of $6.372 per share, the convertible debentures will
be convertible into approximately 3,138,731 shares of class A common stock. If
our class A common stock trades at a price less than the variable conversion
price, then the convertible debentures will be convertible into shares of our
class A common stock at variable rates based on future trading prices of the
class A common stock and events that may occur in the future. Therefore, if the
conversion price is less than $6.372 per share, then the number of shares of
class A common stock issuable upon conversion of the convertible debentures will
be inversely proportional to the market price of the class A common stock at the
time of conversion. The number of shares of class A common stock that may
ultimately be issued upon conversion is therefore presently indeterminable and
could fluctuate significantly. Depending on market conditions at the time of
conversion, however, the number of shares issuable could prove to be
significantly greater if our stock's trading price declines. Purchasers of class
A common stock could therefore experience substantial dilution upon conversion
of the convertible debentures.
Also, the warrants are subject to anti-dilution protection, which may
result in the issuance of more shares than originally anticipated if we issue
securities at less than market value or the applicable exercise price. These
factors may result in substantial future dilution to the holders of our class A
common stock.
WE WILL NOT BE ABLE TO SUCCESSFULLY COMPETE, DEVELOP AND SELL NEW PRODUCTS IF WE
FAIL TO RETAIN KEY PERSONNEL AND HIRE ADDITIONAL KEY PERSONNEL.
Because of our need to continually evolve our business with new product
developments and strategies, our success is dependent, in part, on our ability
to attract and retain qualified technical, marketing, sales and management
personnel. To remain competitive in the telecommunications industry, we must
maintain top management talent, employees who are involved in the development
and testing of new products, and employees who have developed important
relationships with key customers. Because of the high demand to these types of
key employees, especially in the DSL market, it is difficult to retain existing
key employees and attract new key employees. While most of our executive
officers, have severance agreements in which the officers agreed not to compete
with us and not to solicit any of our employees for a period of one year after
termination of the officer's employment in most circumstances, we do not have
similar noncompetition and nonsolicitation agreements for other employees who
are important in our product development and sales. Our inability to attract and
retain additional key employees or the loss of one or more of our current key
employees could materially adversely affect our ability to successfully develop
new products and implement our strategy.
WE RELY ON OUR INTELLECTUAL PROPERTY WHICH WE MAY BE UNABLE TO PROTECT, OR WE
MAY BE FOUND TO INFRINGE THE RIGHTS OF OTHERS.
Our success will depend, in part, on our ability to protect trade
secrets, obtain or license patents and operate without infringing on the rights
of others. Although we regard our technology as proprietary, we have only one
patent on such technology related to Network Interface Units. We expect to seek
additional patents from time to time related to our research and development
activities. We rely on a combination of technical leadership, trade secrets,
copyright and trademark law and nondisclosure agreements to protect our
unpatented proprietary know-how. These measures, however, may not provide
meaningful protection for our trade secrets or other proprietary information.
Moreover, our business and operating results may be materially adversely
affected by competitors who independently develop substantially equivalent
technology. In addition, the laws of some foreign countries do not protect our
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 we receive communications
from third parties alleging infringement of exclusive patent, copyright and
other intellectual property rights to technologies that are important to us.
There is no guaranty that third parties will not assert infringement claims
against us in the future, that assertions by such parties will not result in
costly litigation, or that we 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 our efforts. Any infringement
claim or other litigation against or by us could have a material adverse effect
on our business and operating results.
OUR STOCK PRICE IS VOLATILE WHICH MAY AFFECT YOUR ABILITY TO REALIZE A PROFIT
WHEN PURCHASING OUR STOCK.
Our class A common stock price has experienced substantial volatility
in the past and is likely to remain volatile in the future due to factors such
as:
o Our historical and anticipated quarterly and annual operating
results;
o Variations between our actual results and analyst and investor
expectations;
o Announcements by us or others and developments affecting our
business;
o Investor perceptions of our company and comparable public
companies; and
o Conditions and trends in the data communications and
Internet-related industries.
In particular, the stock market has from time to time experienced significant
price and volume fluctuations affecting the common stocks of technology
companies, which may include telecommunications manufacturers like Westell.
Volatility can also arise as a result of the activities of short sellers and
risk arbitrageurs regardless of our performance. This volatility may result in a
material decline in the market price of our class A common stock, and may have
little relationship to our financial results or prospects.
WE WILL NEED ADDITIONAL FINANCING IF WE DO NOT MEET OUR BUSINESS PLAN OR WE WILL
NOT BE ABLE TO FUND OUR OPERATIONS.
We must continue to enhance and expand our product and service
offerings in order to maintain our competitive position and increase our market
share. As a result and due to our net losses, the continuing operations of our
business may require substantial capital infusions. Whether or when we can
achieve cash flow levels sufficient to support our operations cannot be
accurately predicted. Unless such cash flow levels are achieved, we may require
additional borrowings or the sale of debt or equity securities, or some
combination thereof, to provide finding for our operations. In April 1999, we
completed a private placement of convertible debentures and warrants for $20
million to fund our operations. If we cannot generate sufficient cash flow from
our operations, or are unable to borrow or otherwise obtain additional funds to
finance our operations when needed, then our financial condition and operating
results would be materially adversely affected and we would not be able to
operate our business. Under the terms of the sale of the convertible debentures
and warrants, in most circumstances, we are not permitted to issue any equity
securities or any equity-like securities until October 11, 1999.
OUR PRINCIPAL STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE WHICH COULD
DISCOURAGE TRANSACTIONS INVOLVING A CHANGE OF CONTROL OF WESTELL AND MAY AFFECT
YOUR ABILITY TO RECEIVE A PREMIUM FOR CLASS A COMMON STOCK THAT YOU PURCHASE.
At March 31, 1999, as trustees of a voting trust containing common
stock held for the benefit of the Penny family and the Simon family, Robert C.
Penny III and Melvin J. Simon have the exclusive power to vote over 75% of the
votes entitled to be cast by the holders of our common stock. In addition, all
members of the Penny family who are beneficiaries under this voting trust are
parties to a stock transfer restriction agreement which prohibits the
beneficiaries from transferring any class B common stock or their beneficial
interests in the voting trust without first offering such class B common stock
to the other Penny family members. Consequently, Westell is effectively under
the control of Messrs. Penny and Simon, as trustees, who have sufficient voting
power to elect all of the directors and to determine the outcome of most
corporate transactions or other matters submitted to the stockholders for
approval. Such control may have the effect of discouraging transactions
involving an actual or potential change of control of Westell, including
transactions in which the holders of class B common stock might otherwise
receive a premium for their shares over the then-current market price.
IF WE DO NOT ADEQUATELY ADDRESS YEAR 2000 ISSUES, WE MAY INCUR SIGNIFICANT COSTS
AND OUR BUSINESS COULD SUFFER.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a result,
our computer programs that have date-sensitive software and software of
companies into which our network is interconnected may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. If the system of other companies
on whose services we depend or with whom our systems interconnect are not year
2000 compliant, it could have a material adverse effect on our business,
prospects, financial condition and operating results. The year 2000 issue is
discussed at greater length in the SEC documents that are incorporated by
reference into this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the class A common
stock by the selling stockholders.
THE SELLING STOCKHOLDERS
The class A common stock covered by this prospectus consists of shares
issued or issuable upon conversion of our $20,000,000 aggregate principal amount
of 6% Subordinated Secured Convertible Debentures due April 15, 2004 and
Warrants to purchase 909,091 shares of our class A common stock.
The number of shares that may be actually sold by each selling
stockholder will be determined by such selling stockholder. Because each selling
stockholder may sell all, some or none of the shares of class A common stock
which each holds, and because the offering contemplated by this prospectus is
not currently being underwritten, no estimate can be given as to the number of
shares of class A common stock that will be held by the selling stockholders
upon termination of the offering.
Under Rule 416 of the Securities Act of 1933, the selling stockholders
may also offer and sell additional shares of class A common stock issued or
issuable upon conversion or exercise of the Warrants or the convertible
debentures as a result of stock splits, stock dividends and anti-dilution
provisions.
The following table sets forth certain information regarding the
selling stockholders, including:
o the name of each selling stockholder,
o the beneficial ownership of class A common stock of each selling
stockholder as of April 30, 1999, and
o the maximum number of shares of class A common stock offered by
each selling stockholder.
The information presented is based on data furnished to the Company by the
selling stockholders. The actual number of shares of class A common stock
issuable upon conversion of the convertible debentures is indeterminate, and is
subject to adjustment and could be materially less or more than the amounts set
forth in the table below depending on factors which we cannot predict at this
time, including, among other factors, the future market price of the class A
common stock. The shares of class A common stock included in the table below
represent a good faith estimate of the number of shares of class A common stock
that are issuable upon conversion of the convertible debentures, including
shares issuable as a result of payment of premiums in class A common stock or as
a result of conversion default or other default payments.
Pursuant to their terms, the convertible debentures and warrants are
convertible by any holder only to the extent that the number of shares thereby
issuable, together with the number of shares of class A common stock owned by
such holder, but not including unconverted shares of convertible debentures or
warrants, would not exceed 4.99% of the then outstanding class A common stock as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, unless such conversion is approved by the majority of the holders of class
A common stock. Accordingly, the number of shares of class A common stock set
forth in the third and fourth columns of the table for each selling stockholder
exceeds the number of shares of class A common stock that the selling
stockholder beneficially owns as of July 31, 1999. This 4.99% limit may not
prevent any holder from converting all of its convertible debentures or
exercising its warrants, because the holder can convert or exercise into 4.99%
of the outstanding class A common stock, then sell all of that stock to permit
it to engage in further conversions or exercises. As a result, the 4.99% limit
does not prevent any selling stockholder from selling more than 4.99% of our
class A common stock.
<TABLE>
SHARES OF CLASS A COMMON STOCK
BENEFICIALLY OWNED PRIOR TO
SHARES OF CLASS A COMMON OFFERING ASSUMING THE 4.99%
STOCK BENEFICIALLY OWNED OWNERSHIP LIMITATION IS NOT IN SHARES BEING
PRIOR TO OFFERING EFFECT OFFERED
% OF CLASS PERCENT OF
A COMMON TOTAL VOTING
NUMBER STOCK NUMBER POWER
<S> <C> <C> <C> <C> <C>
Castle Creek Technology Partners LLC (1)............844,037... 4.99% 1,821,519 1.9% 3,825,000
Marshall Capital Management, Inc....................844,037... 4.99% 1,214,346 1.3% 2,550,000
Capital Ventures International......................844,037... 4.99% 1,011,954 1.1% 2,125,000
- ---------------------
*Less than 1%
(1) Castle Creek Technology Partners, LLC beneficially owns 844,037 shares,
determined in accordance with Rule 13d-3, and disclaims beneficially
ownership of any shares other than respect to these 844,037 shares. As
investment manager, pursuant to a management agreement with Castle
Creek Technology Partners LLC, Castle Creek Partners, LLC may be deemed
to beneficially own the securities held by Castle Creek Technology
Partners LLC. Castle Creek Partners, LLC disclaims such beneficial
ownership. John Ziegelman and Daniel Asher, as managing members of
Castle Creek Partners, LLC, may be deemed to be beneficial owners of
such securities. Messrs. Asher and Ziegelman disclaim such beneficial
ownership.
</TABLE>
The percentages set forth in the table above are based upon 16,947,030
shares of class A common stock and 19,527,569 shares of Class B Common Stock
outstanding. The percentages in the second column in the above table do not
include the voting power of our class B common stock. Each share of class A
common stock has one vote per share and each share of class B Common Stock has
four votes per share.
The numbers included in the column "Shares Being Offered" include
additional shares that may be issuable to the selling stockholders if the
conversion price of the convertible debentures falls below $6.372 per share or
because additional shares are issuable due to anti-dilution price protection
provisions and/or we enter into certain major transactions such as the sale of
substantially all of our assets, a merger or a change in actual voting control.
At our election, but subject to specific conditions, the convertible debentures
are not convertible into shares of class A common stock if shares to be received
upon such conversion would exceed 20% of the outstanding class A common stock.
DESCRIPTION OF CONVERTIBLE DEBENTURES AND WARRANTS
As of April 14, 1999, we issued and sold $20 million aggregate principal
amount of the convertible debentures and warrants to purchase 909,091 shares,
subject to adjustment, of our class A common stock. The convertible debentures
are convertible into our class A common stock.
Conversion Price. The conversion price is generally the lower of:
o the "variable conversion price" as described below, and
o the floating market price of our class A common stock at time of
conversion based upon lowest average bid price of the Class A
Common Stock in a five consecutive day trading period in the ten
trading days immediately prior to the recalculation of the
conversion price.
The variable conversion price initially is $6.372 per share. On April 16, 2000
and April 16, 2001, the variable conversion price will be adjusted to be the
greater of:
o $4.4604, and
o the weighted average sales price of the class A common stock over
the ten day trading period prior to the adjustment.
The variable conversion price cannot fall below $4.4604 or be greater than
$6.372 per share.
Interest. The convertible debentures accrue interest at the rate of 6% or
$1,200,000 per year. This interest is payable, at our option, in cash,
additional convertible debentures or class A common stock at the conversion
price then in effect. The number of shares issued as payment of the annual
accrued interest would be 188,323 shares of class A common stock per year
assuming the conversion price equals $6.372 per share. The interest rate on the
convertible debentures can increase to 8% if the conversion price of the
convertible debentures falls below $4.4604 per share.
20% Conversion Limitation. At our election, but subject to specific conditions,
the convertible debentures are not convertible if shares to be received upon
such conversion of all of the convertible debentures would equal or exceed 20%
of our outstanding common stock. Once we notify the selling stockholders that
the conversion of all of the convertible debentures would equal or exceed 20% of
our common stock, we may exchange that portion of the convertible debenture
submitted for conversion that represents the amount of convertible debentures
held by that selling stockholders that would exceed 20% of our common stock if
converted into a one year note bearing interest at 12% per year.
Potential Dilution Due to Conversion. The following table sets forth the number
of shares of class A common stock issuable upon conversion of the convertible
debentures and the percentage ownership of the class A common stock that each
represents assuming:
o the conversion price is 25%, 50%, 75% and 100% of the initial
variable conversion price ($6.372);
o the conversion price is the minimum variable conversion price
($4.4604);
o 16,914,573 shares of class A common stock and 19,527,569 shares
of class B common stock are outstanding.
<TABLE>
PERCENTAGE OWNERSHIP
SHARES UNDERLYING OF CLASS A PERCENTAGE OWNERSHIP
PERCENT OF $6.372 CONVERTIBLE DEBENTURES COMMON STOCK(1) OF TOTAL VOTING POWER
----------------- ---------------------- --------------- ---------------------
<S> <C> <C> <C>
100%.............. 3,138,731 18.6% 3.4%
75%............... 4184,956 24.7% 4.4%
50%............... 6,277,464 37.1% 6.6%
25%............... 12,554,928 74.2% 13.2%
Minimum Variable
Conversion Price
($4.4604)......... 4,483,903 26.5% 4.7%
</TABLE>
Limitations in the securities purchase agreement under which the
convertible debentures were issued may preclude the levels of beneficial
ownership set forth above from being achieved. In addition, additional shares
are issuable under the convertible debentures due to anti-dilution price
protection provisions and/or we enter into major transactions such as the sale
of substantially all of our assets, a merger or a change in actual voting
control. The exercise price and the number of shares of class A common stock
issuable upon exercise of the warrants or conversion of the convertible
debentures will be adjusted if we issue additional shares of class A common
stock, other than pursuant to Board approved employee/director option plans, at
prices less than the then market or conversion price.
The additional shares issued upon conversion of the convertible
debentures would dilute the percentage interest of each of our existing class A
common stockholders, and this dilution would increase as more shares of class A
common stock are issued due to the impact of the variable conversion price. Each
additional issuance of shares upon conversion or exercise of the warrants would
increase the supply of shares in the market and, as a result, may cause the
market price of our common stock to decline.
The effect of this increased supply of class A common stock leading to
a lower market price may be magnified if there are sequential conversions of
convertible debentures. Specifically, the selling stockholders could convert a
portion of their convertible debentures and then sell the class A common stock
issued upon conversion, which likely would result in a drop in our stock price.
Then selling stockholders could convert another portion of their convertible
debentures at a lower conversion price because of the decreased stock price, and
be issued a greater number of shares of class A common stock due to the lower
conversion price. If they then sold shares of class A common stock, our stock
price would likely decrease again, permitting the selling stockholders to do
more conversions at a conversion price even more favorable to them. However, an
ever falling market price for our common stock may not benefit the holders of
the convertible debentures. If the price keeps falling, the holders will receive
more and more shares with a decreasing aggregate value. Eventually, if the
dilution becomes extreme, the market for our class A common stock will tend to
become illiquid, which will limit the ability of the converting selling
stockholders to sell shares of our class A common stock even at a very low
price.
A pattern of such partial conversions and sales could increase the
aggregate number of shares of class A common stock issued upon conversion of the
convertible debentures above that it would otherwise be, and could place
significant downward pressure on our stock price. This downward pressure on our
stock price might encourage market participants to sell our stock short, which
would put further downward pressure on our stock price, and further decrease the
conversion price and increase the dilution of our existing common stockholders
upon conversion of the convertible debentures.
Company Redemption. We may redeem the convertible debentures after April 16,
2000, if the price of our class A common stock is at least 200% of the variable
conversion price then in effect. The redemption price would equal 115% of the
face amount of the convertible debentures, plus accrued and unpaid interest. The
selling stockholders have a right to convert their convertible debentures prior
to a Company redemption.
Security Interest. The convertible debentures are collaterally secured with a
second lien on all of our assets, except for the common stock of our subsidiary,
Conference Plus, Inc. We are subject to penalties, under a variety of
circumstances, including failure to list the underlying class A common stock on
The Nasdaq Stock Market and failure to register the resale of the underlying
class A common stock under the Securities Act of 1933.
Registration Rights. Pursuant to the securities purchase agreement under which
the convertible debentures were issued, we filed with the SEC a Registration
Statement on Form S-3, of which this prospectus forms a part, with respect to
the resale of the shares and agreed to use our best efforts to keep such
Registration Statement effective until such date as all of the shares have been
resold, or such time as all of the shares held by the selling stockholders can
be sold immediately without compliance with the registration requirement of the
Securities Act of 1933, pursuant to Rule 144 or otherwise.
Warrants. The warrants are exercisable at any time until April 15, 2004. The
exercise price for the class A common stock underlying the warrants is $8.9208
per share.
PLAN OF DISTRIBUTION
Sales of the shares being sold by the selling stockholders are for the
selling stockholders' own accounts. We will not receive any proceeds from the
sale of the shares offered hereby.
The selling stockholders have advised us that:
o the shares may be sold by the selling stockholders or their
respective pledgees, donees, transferees or successors in
interest, on The Nasdaq Stock Market, in sales occurring in the
public market other than such market quotation system, in
privately negotiated transactions, through the writing of options
on shares, short sales or in a combination of such transactions;
o each sale may be made either at market prices prevailing at the
time of such sale, at negotiated prices, at fixed prices which
may be changed, or at prices related to prevailing market prices;
o some or all of the shares may be sold through brokers acting on
behalf of the selling stockholders or to dealers for resale by
such dealers including block trades in which brokers or dealers
will attempt to sell the shares but may position and resell the
block or principal; and
o in connection with such sales, such brokers and dealers may
receive compensation in the form of discounts and commissions
from the selling stockholders and may receive commissions from
the purchasers of shares for whom they act as broker or agent
which discounts and commissions may be less than or exceed those
customary in the types of transactions involved. Any broker or
dealer participating in any such sale may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933
and will be required to deliver a copy of this prospectus to any
person who purchases any class A common stock from or through
such broker or dealer. We have been advised that, as of the date
hereof, none of the selling stockholders have made any
arrangements with any broker for the sale of their class A common
stock.
In offering the class A common stock covered hereby, the selling
stockholders and any broker-dealers and any other participating broker-dealers
who execute sales for the selling stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales, and any profits realized by the selling stockholders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions. In addition, any class A common stock covered by this
prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this prospectus.
If necessary, the specific shares of our class A common stock to be
sold, the names of the selling stockholders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part. We entered into a registration rights agreement in connection with
the private placement of the convertible debentures and the warrants which
required us to register the underlying shares of our class A common stock under
applicable federal and state securities laws under certain circumstances and at
certain times. The registration rights agreement provides for
cross-indemnification of the selling stockholders and us and their respective
directors, officers and controlling persons against certain liabilities in
connection with the offer and sale of the class A common stock, including
liabilities under the Securities Act of 1933 and to contribute to payments the
parties may be required to make in respect thereof. We have agreed to indemnify
and hold harmless the selling stockholders from certain liabilities under the
Securities Act of 1933.
Under applicable rules and regulations under Regulation M under the
Securities Exchange Act of 1934, any person engaged in the distribution of the
class A common stock may not simultaneously engage in market making activities,
subject to certain exceptions, with respect to the class A common stock of the
Company for a specified period set forth in Regulation M prior to the
commencement of such distribution and until its completion. In addition and
without limiting the foregoing, each selling stockholder will be subject to the
applicable provisions of the Securities Act of 1933 and Securities Exchange Act
of 1934 and the rules and regulations thereunder, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of the class A common stock by the selling stockholders. The foregoing
may affect the marketability of the class A common stock.
We will bear all expenses of the offering of the class A common stock,
except that the selling stockholders will pay any applicable underwriting
commissions and expenses, brokerage fees and transfer taxes, as well as the fees
and disbursements of counsel to and experts for the selling stockholders.
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement that we have
filed with the SEC using a "shelf registration" process. You should read both
this prospectus and any supplement together with additional information
described under "Where You Can Find More Information."
You should rely only on the information provided or incorporated by
reference in this Prospectus or any supplement. We have not authorized anyone
else to provide you with additional or different information. The class A common
stock is not being offered in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of such documents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at The Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and at Seven World Trade Center, Suite 1300, New
York, New York 10048. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our filings with the SEC are also
available to the public on the SEC's Internet web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file with the
SEC later will automatically update and supersede this information. The
following documents filed by us and any future filings made by us with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
until the Selling Stockholders sell all of the class A common stock offered
hereby, are incorporated by reference in this Prospectus:
o the Company's Annual Report on Form 10-K for the year ended March
31, 1999, as amended;
o the Company's Registration Statement on Form 8-A;
o the Company's Current Reports on Form 8-K dated April 20, 1999
and June 14, 1999; and
o the Company's Schedule 14A filed with the Commission on July 14,
1999.
You may request a copy of these filings, at no cost, by writing or telephoning
us at:
Westell Technologies, Inc.
750 North Commons
Aurora, Illinois 60504
(630) 898-2500
Attention: Nicholas Hindman
EXPERTS
The consolidated financial statements and schedule of the Company
incorporated by reference in this Registration Statement on Form S-3 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
its reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses (other than the SEC registration fee)
of the issuance and distribution of the securities being registered, all of
which will be paid by the Company.
SEC registration fee.................................... $15,212
Fees and expenses of counsel............................ 15,000
Fees and expenses of accountants........................ 5,000
*Nasdaq listing fees and expenses.........................
Miscellaneous........................................... ,788
---------
Total..................................... $ 40,000
========
The Company has agreed to bear all expenses (other than underwriting
discounts and selling commissions, brokerage fees and transfer taxes, if any,
and the fees and expenses of counsel and other advisors to the Selling
Stockholders) in connection with the registration and sale of the Shares being
offered by the Selling Stockholders.
ITEM 15. 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
shareholders. 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.
The Company's Restated Certificate and 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.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated Certificate of Incorporation of the
Company as amended.
+3.2 Second Amended and Restated By-Laws of the Company,
incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (No. 33-98024).
+5.1 Opinion of McDermott, Will & Emery regarding legality
+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 with the signature page to the
Registration Statement)
+ Previously filed.
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement 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.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officer 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 Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Aurora, Illinois on August 3, 1999.
WESTELL TECHNOLOGIES, INC.
By: /s/ Robert H. Gaynor
Robert H. Gaynor,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed by the following persons or their attorneys-in-fact in
the capacities indicated on August 3, 1999.
SIGNATURE TITLE
- --------- -----
/s/ Robert H. Gaynor Chief Executive Officer and Chairman of the
Robert H. Gaynor Board of Directors (Principal Executive
Officer)
* Interim Chief Financial Officer (Principal
Nicholas C. Hindman Financial and Accounting Officer)
* Director
Paul A. Dwyer
* Director
Robert C. Penny III
* Director
John W. Seaholtz
* Director
Melvin J. Simon
* Director
Ormand J. Wade
*Pursuant to Power of Attorney
/s/ Robert H. Gaynor
Robert H. Gaynor
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WESTELL TECHNOLOGIES, INC.
The Amended and Restated Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of Delaware on
November 28, 1995. This First Amendment to the Amended and Restated Certificate
of Incorporation increases the number of authorized shares of the Class A Common
Stock of Corporation as approved by written consent of the shareholders in
accordance with Sections 228 and 242 of the General Corporation Law of Delaware.
The first paragraph of Article FIFTH of the Amended and Restated
Certificate of Incorporation is hereby amended and restated as follows:
"FIFTH: The total number of shares of all classes of capital stock
which the corporation shall have the authority to issue is Ninety One
Million Five Hundred Thousand (91,500,000) of which Sixty Five Million
Five Hundred Thousand (65,500,000) shares shall be shares of Class A
Common Stock (the "Class A Common Stock") with a par value of $0.01 per
share; Twenty Five Million (25,000,000) shares shall be shares of Class
B Common Stock (the "Class B Common Stock") with a par value of $0.01
per share; and One Million (1,000,000) shares shall be shares of
Preferred Stock (the "Preferred Stock") with a par value of $0.01 per
share."
The numbered paragraphs (1) through (17) of Article FIFTH shall remain
unchanged.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
the Amended and Restated Certificate of Incorporation to be signed by its duly
authorized officers this ____ day of March, 1999.
WESTELL TECHNOLOGIES, INC.
------------------------------
Stephen J. Hawrysz
Vice President
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WESTELL TECHNOLOGIES, INC.
The original Certificate of Incorporation was filed with the
Secretary of State of Delaware on October 29, 1980 under the name R-COM, INC. An
amendment was filed on November 17, 1992 changing its name to Electronic
Information Technologies, Inc., and an amendment was filed October 30, 1995
changing its name to Westell Technologies, Inc. This Amended and Restated
Certificate of Incorporation restates and integrates the original Certificate of
Incorporation and all amendments thereto, and includes amendments adopted by the
board of directors and stockholders of Westell Technologies, Inc. as part of
this Amendment and Restatement on August 9, 1995 and October 27, 1995
respectively. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the applicable provisions of Sections 242 and 245 of
the General Corporation Law of Delaware and shall become effective upon filing
with the Secretary of State of the State of Delaware.
FIRST: The name of the corporation is Westell Technologies,
Inc.
SECOND: The period of existence of the corporation is
perpetual.
THIRD: Its registered office in the State of Delaware is
located at 1209 Orange Street, City of Wilmington, County of New Castle, and The
Corporation Trust Company is the registered agent at such address.
FOURTH: The nature of the business and the objects and
purposes to be transacted, promoted and carried on are to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FIFTH: The total number of shares of all classes of capital
stock which the corporation shall have authority to issue is Sixty Nine Million
Five Hundred Thousand (69,500,000) of which Forty Three Million Five Hundred
Thousand (43,500,000) shares shall be shares of Class A Common Stock (the "Class
A Common Stock") with a par value of $0.01 per share; Twenty Five Million
(25,000,000) shares shall be shares of Class B Common Stock (the "Class B Common
Stock") with a par value of $0.01 per share; and One Million (1,000,000) shares
shall be shares of Preferred Stock (the "Preferred Stock") with a par value of
$0.01 per share.
(1) Common Stock. Class A Common Stock and Class B Common
Stock shall be identical in all respects and shall have equal rights and
privileges, except as otherwise provided in this Article FIFTH.
(2) Dividends on Common Stock. Dividends may be paid on either
or both the Class A Common Stock and Class B Common Stock as and when declared
by the Board of Directors of the corporation out of any funds of the corporation
legally available for the payment of dividends, except that so long as any
shares of Class A Common Stock are outstanding:
(a) No dividend (other than a dividend payable in shares of
the corporation in the manner provided in subparagraph (2)(b) below)
shall be declared or paid upon either class of common stock unless such
dividend, at the same rate per share, is simultaneously declared and
paid upon both classes of common stock.
(b) Stock dividends declared and paid on Class A Common Stock
shall be payable solely in shares of Class A Common Stock and stock
dividends declared and paid on Class B Common Stock shall be payable
solely in shares of Class B Common Stock. No stock dividend may be
declared or paid on the Class A Common Stock unless a stock dividend
payable in shares of Class B Common Stock, proportionately on a
per-share basis, is simultaneously declared and paid on the Class B
Common Stock. No stock dividend may be declared or paid on the Class B
Common Stock unless a stock dividend payable in shares of Class A
Common Stock, proportionately on a per-share basis, is simultaneously
declared and paid on the Class A Common Stock.
(3) Treatment of Common Stock on Liquidation. The holders of
both Class A Common Stock and Class B Common Stock shall be entitled to share
ratably upon any liquidation, dissolution or winding up of the affairs of the
corporation (voluntary or involuntary) in all assets of the corporation. Neither
the consolidation nor the merger of the corporation with or into another
corporation or corporations, nor a reorganization of the corporation alone, nor
the sale or transfer by the corporation of all or any part of its assets, shall
be deemed to be a liquidation, dissolution or winding up of the corporation for
the purposes of this subparagraph (3).
(4) Voting Rights of Common Stock. Except in cases where
pursuant to the Delaware General Corporation Law, the holders of shares of Class
A Common Stock and Class B Common Stock shall be entitled to vote as separate
classes, they shall vote together as a single class, provided that the holders
of shares of Class A Common Stock shall have one (1) vote per share of Class A
Common Stock held and the holders of shares of Class B Common Stock shall have
four (4) votes per share of Class B Common Stock held. Without limiting the
generality of the foregoing, the number of authorized shares of Class A Common
Stock may be increased or decreased (but not below the number of shares of Class
A Common Stock then outstanding) by the affirmative vote of the holders of
shares possessing a majority of the votes represented by the outstanding shares
of Class A Common Stock and Class B Common Stock voting as a single class as
aforesaid. Whenever such holders are entitled pursuant to the Delaware General
Corporation Law to vote as separate classes, holders of Class A Common Stock
voting as a separate class shall be entitled to one (1) vote per share of Class
A Common Stock held and holders of Class B Common Stock voting as a separate
class shall be entitled to four (4) votes per share of Class B Common Stock
held.
(5) Transfer of Class B Common Stock. No person holding shares
of Class B Common Stock (hereinafter called a "Class B Holder") may transfer,
and the corporation shall not register the transfer of, such shares of Class B
Common Stock, whether by sale, assignment, exchange, gift, bequest, appointment
or otherwise, except to a "Permitted Transferee" of such Class B Holder.
(a) The term "Permitted Transferee" shall mean:
i) Florence Penny or any of her descendants or their spouses;
ii) Melvin J. Simon, his spouse, or any of their descendants;
iii) Gary F. Seamans, his spouse, or any of their descendants;
iv) any trust, including a voting trust, established for the
primary benefit of any person (or persons) who is a Permitted
Transferee under (i), (ii) or (iii) above;
v) the guardian of a disabled or adjudicated incompetent Class
B Holder or Permitted Transferee;
vi) the Executor or Administrator of the estate of a deceased
Class B Holder;
vii) any partnership or corporation in which all record and
beneficial owners of all equity interests are Permitted
Transferees; and
viii) any other Class B Holder.
(b) If any shares of Class B Common Stock are acquired by any
person who is not a Permitted Transferee, all shares of Class B Common
Stock then held by such person shall be deemed without further act on
anyone's part to be converted into shares of Class A Common Stock, and
stock certificates formerly representing such shares of Class B Common
Stock shall thereupon and thereafter be deemed to represent the like
number of shares of Class A Common Stock.
(c) Notwithstanding anything to the contrary set forth herein,
any Class B Holder may pledge such Holder's shares of Class B Common
Stock to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee, provided that
such shares shall not be transferred to or registered in the name of
the pledgee, and shall remain subject to the provisions of this
subparagraph (5). In the event of foreclosure or other similar action
by the pledgee, such pledged shares of Class B Common Stock (i) may be
transferred to the pledgee if the pledgee is a Permitted Transferee; or
(ii) converted into shares of Class A Common Stock and transferred to
the pledgee if the pledgee is not a Permitted Transferee.
(d) For purposes of this subparagraph (5):
i) The relationship of any person that is derived by or
through legal adoption shall be considered a natural one.
ii) Each joint owner of shares of Class B Common Stock shall
be considered a "Class B Holder" of such shares.
iii) A minor for whom shares of Class B Common Stock are held
pursuant to a Uniform Gift to Minors Act or similar law shall be
considered a Class B Holder of such shares.
iv) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(e) Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or "nominee"
name. For this purpose, a "beneficial owner" of any shares of Class B
Common Stock shall mean a person who, or an entity which, possesses the
power, either singly or jointly, to direct the voting or disposition of
such shares. The corporation shall note, or cause to be noted on the
certificates for shares of Class B Common Stock, the existence of the
restrictions on transfer and registration of transfer imposed by this
subparagraph (5).
(6) Optional Conversion of Class B Common Stock.
(a) Each share of Class B Common Stock may at any time be
converted, at the option of the holder thereof, into one fully paid and
nonassessable (unless otherwise provided in the Delaware General
Corporation Law, as from time to time in effect) share of Class A
Common Stock. Such right shall be exercised by the surrender of the
certificate representing such shares of Class B Common Stock to be
converted at the office of the corporation or its transfer agent (the
"Transfer Agent") during normal business hours accompanied by a written
notice of the election by the holder thereof to convert and (if so
required by the corporation or the Transfer Agent) an instrument of
transfer, in form satisfactory to the corporation and the Transfer
Agent, duly executed by such holder or his duly authorized attorney,
together with any funds in the amount of any applicable transfer tax
(unless provision satisfactory to the corporation is otherwise made
therefor), if required pursuant to subparagraph (6)(c), below.
(b) As promptly as practical after the surrender for
conversion of a certificate representing shares of Class B Common Stock
in the manner provided in subparagraph (6)(a) above and the payment of
funds in any amount required by the provisions of subparagraphs (6)(a)
and (6)(c), the corporation will deliver or cause to be delivered at
its office or at the office of the Transfer Agent to or upon the
written order of the holder of such certificate, a certificate or
certificates representing the number of fully paid and nonassessable
(except as may be otherwise provided in the Delaware General
Corporation Law, as from time to time in effect) shares of Class A
Common Stock issuable upon such conversion, issued in such name or
names as such holder may direct. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of the surrender of the certificate representing shares of Class B
Common Stock and all rights of the holder of such shares of Class B
Common Stock as such holder shall cease at such time and the person or
persons in whose name or names the certificate or certificates
representing the shares of Class A Common Stock are to be issued shall
be treated for all purposes as having become the record holder or
holders of such shares of Class A Common Stock at such time; provided,
however, that any such surrender and payment on any date when the stock
transfer books of the corporation shall be closed shall constitute a
transfer to the person or persons in whose name or names the
certificate or certificates representing shares of Class A Common Stock
are to be issued as the recordholder or holders thereof for all
purposes effective immediately prior to the close of business on the
next succeeding day on which such stock transfer books are open.
(c) The issuance of certificates for shares of Class A Common
Stock upon conversion of shares of Class B Common Stock shall be made
without charge for any stamp or similar tax in respect to such
issuance. However, if any such certificate is to be issued in a name
other than that of the holder of the share or shares of Class B Common
Stock converted, the person or persons requesting the issuance thereof
shall pay to the corporation the amount of any tax which may be payable
in respect of any transfer involved in such issuance, or shall
establish to the satisfaction of the corporation that any such tax has
been paid.
(7) Mandatory Conversion of Class B Common Stock. Should the
number of shares of Class B Common Stock issued and outstanding at any time be
equal to or less than 10% of the total number of shares of Class A and Class B
Common Stock issued and outstanding at such time, then, without further act,
each share of Class B Common Stock shall be converted to one share of Class A
Common Stock, and stock certificates formerly representing outstanding shares of
Class B Common Stock shall thereupon and thereafter be deemed to represent a
like number of shares of Class A Common Stock, and any outstanding right to
receive Class B Common Stock shall automatically become the right to receive a
like number of shares of Class A Common Stock.
(8) Repurchases of Common Stock. Subject to any applicable
provisions of this Article FIFTH, the corporation may at any time or from time
to time purchase or otherwise acquire shares of its common stock of either class
in any manner now or hereafter permitted by law, publicly or privately, or
pursuant to any agreement.
(9) Subdivision or Combination of Common Stock. The shares of
common stock of either class shall not be subdivided by a stock split,
reclassification or otherwise or combined by reverse stock split,
reclassification or otherwise unless, at the same time, the shares of common
stock of both classes are proportionately, on a per share basis, so subdivided
or combined.
(10) Covenant to Reserve Class A Common Stock. The corporation
covenants that it will at all times reserve and keep available, solely for the
purpose of issuance upon conversion of the outstanding shares of Class B Common
Stock, such number of shares of Class A Common Stock as shall be issuable upon
the conversion of all such outstanding shares, provided that nothing contained
herein shall be construed to preclude the corporation from satisfying its
obligations with respect to the conversion of the outstanding shares of Class B
Common Stock by delivery of shares of Class A Common Stock which are held in the
treasury of the corporation. The corporation covenants that if any shares of
Class A Common Stock, required to be reserved for purposes of conversion
hereunder, require registration with or approval of any governmental authority
under any federal or state law before such shares of Class A Common Stock may be
issued upon conversion, the corporation will use reasonable efforts to cause
such shares to be duly registered or approved, as the case may be. The
corporation covenants that all shares of Class A Common Stock which shall be
issued upon conversion of shares of Class B Common Stock, will, upon issue, be
fully paid and nonassessable and not entitled to any preemptive rights.
(11) Treatment of Common Stock on Consolidation or Merger. In
the event of a merger or consolidation of the corporation with or into another
entity (whether or not the corporation is the surviving entity), the holders of
each class of common stock shall be entitled to receive the same per share
consideration as the per share consideration, if any, received by any holder of
each other class of common stock in such merger or consolidation.
(12) Limitation on Issuance of Class B Common Stock. Following
the initial issuance of shares of Class B Common Stock pursuant to the Amended
and Restated Certificate of Incorporation filed on July 10, 1995, such Class B
Common Stock shall be issued by the corporation only (a) in payment of a stock
dividend on then outstanding shares of Class B Common Stock as provided in
subparagraph (2)(b); or (b) in connection with a stock split, reclassification
or other subdivision of then outstanding shares of Class B Common Stock as
provided in subparagraph (9), unless such further issuance shall have been
approved by the holders of a majority of the voting power of the shares of Class
A Common Stock and Class B Common Stock, each voting separately as a class.
(13) Status of Reacquired Class B Common Stock. Shares of
Class B Common Stock converted, exchanged, purchased, retired or surrendered to
the corporation, or which have been issued and reacquired by the corporation in
any manner, shall, upon compliance with any applicable provisions of the
Delaware General Corporation Law, have the status of authorized and unissued
shares of Class B Common Stock and may be reissued subject to the protective
conditions or restrictions of subparagraph (12) above.
(14) Preferred Stock. The Preferred Stock shall be entitled to
such preferences in the distribution of dividends and assets, and shall be
divided into such series, as the Board of Directors of the corporation shall
determine, with full authority in the Board of Directors to determine, prior to
issuance, from time to time, the relative preferences, limitations and relative
rights of the shares of any series of Preferred Stock, with respect to
dividends, redemption, payments on liquidation, sinking fund provisions,
conversion privileges and voting rights.
(15) Issuance of Stock. Except as provided in subparagraph
(12) above, shares of capital stock of the corporation may be issued by the
corporation from time to time in such amounts and proportions and for such
consideration (not less than the par value thereof in the case of capital stock
having par value) as may be fixed and determined from time to time by the Board
of Directors and as shall be permitted by law. No holder of shares of the
capital stock of the corporation shall be entitled to any preemptive right to
subscribe to any new or additional shares of capital stock of the corporation or
securities convertible into shares of capital stock, whether now or hereafter
authorized.
(16) Unclaimed Dividends. Any and all right, title, interest
and claim in or to any dividends declared by the corporation, whether in cash,
stock or otherwise, which are unclaimed by the stockholder entitled thereto for
a period of six years after the close of business on the payment date, shall be
and be deemed to be extinguished and abandoned; and such unclaimed dividends in
the possession of the corporation, its transfer agents or other agents or
depositories, shall at such time become the absolute property of the
corporation, free and clear of any and all claims of any persons whatsoever.
(17) Affidavits. The corporation may, in connection with
preparing a list of stockholders entitled to vote at any meeting of
stockholders, or as a condition to the transfer or the registration of Class B
Common Stock on the corporation's books, require the furnishing of such
affidavits or other proof as it, in its sole discretion, deems necessary to
establish that any person is the beneficial owner of shares of Class B Common
Stock or is a Permitted Transferee.
SIXTH: The number of directors constituting the board of
directors shall be fixed from time to time by or in the manner provided in the
By-laws, and may be increased or decreased as therein provided, provided that no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director.
SEVENTH: A member of the corporation's Board of Directors
shall not be personally liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director, except for
liability of the director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, relating to the
payment of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended after approval by
the stockholders of this Article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of this Article by the stockholders of the corporation
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
<PAGE>
EIGHTH: A. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than such law permitted the corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in paragraph B hereof with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"), provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Article or otherwise.
B. Right of Indemnitee to Bring Suit. If a claim under
paragraph A of this Article is not paid in full by the corporation within sixty
days after a written claim has been received by the corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days, the indemnitee may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking the corporation shall be
entitled to recover such expenses upon final adjudication that, the indemnitee
has not met the applicable standard of conduct set forth in the Delaware General
Corporation Law. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met the applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article or otherwise shall be on the
corporation.
C. Non-Exclusivity of Rights. The rights of indemnification
and to the advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, this Amended and Restated Certificate of Incorporation,
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
D. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
E. Indemnification of Employees and Agents of the Corporation.
The corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the advancement of expenses,
to any employee or agent of the corporation to the fullest extent of the
provisions of this Article with respect to the indemnification and advancement
of expenses of directors and officers of the corporation.
NINTH: A. Stockholder Nomination of a Director Candidate and
Introduction of New Business. Advance notice of stockholder nominations for the
election of directors and of new business to be brought by stockholders before
any meeting of the stockholders of the corporation shall be given in the manner
provided by the By-laws of the corporation.
<PAGE>
B. Special Meetings of Stockholders. Special meetings of the
stockholders, for any purpose or purposes (except to the extent otherwise
provided by law or this Amended and Restated Certificate of Incorporation), may
only be called by the Chairman of the Board, the President, a majority of the
Board of Directors then in office or stockholders owning at least a majority of
the voting power represented by all of the issued and outstanding capital stock
of the corporation.
C. Written Consent by Stockholders Without a Meeting. Except
as otherwise specified in this Amended and Restated Certificate of
Incorporation, any corporate action upon which a vote of stockholders is
required or permitted under the Delaware General Corporation Law, this Amended
and Restated Certificate of Incorporation or the By-laws of the corporation may
be taken without a meeting, without prior notice and without a vote of
stockholders, if stockholders holding stock entitled to vote upon the action,
and having not less than the minimum number of votes that would be necessary to
authorize and take such action at a meeting at which all shares entitled to vote
thereon were present and voted, shall consent in writing to such corporate
action being taken. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous consent shall be given to those stockholders
entitled to vote who have not consented in writing to the action.
<PAGE>
TENTH: A. By-laws. The Board of Directors of the corporation
is authorized to adopt, amend or repeal the By-laws of the corporation, subject
to applicable law and any applicable provisions in any resolution of the Board
of Directors, except that any By-law provision adopted by the stockholders
amending the By-laws after their initial adoption may be amended or repealed
only by the holders of Class A and Class B Common Stock possessing not less than
a majority of the votes represented by the outstanding Class A and Class B
Common Stock of the corporation, voting as a single class.
B. Ballots in the Election of Directors. Elections of
directors need not be by written ballot unless the By-laws of the corporation
shall so provide.
C. Location of Books. The books of the corporation may be kept
at such place within or without the State of Delaware as the By-laws of the
corporation may provide or as may be designated from time to time by the Board
of Directors of the corporation.
ELEVENTH: Whenever a compromise or arrangement is proposed
between the corporation and its creditors or any class of them and/or between
the corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or the voting power of stockholders or class of stockholders of
the corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of the corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the corporation, as the case may be,
and also on the corporation.
TWELFTH: The corporation reserves the right to amend or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon a stockholder herein are granted subject to this
reservation.
<PAGE>
IN WITNESS WHEREOF, the corporation has caused this Amended and
Restated Certificate to be signed by its duly authorized officers this ____ day
of ____________, 1995.
Attest: WESTELL TECHNOLOGIES, INC.
Melvin J. Simon, Gary F. Seamans, Chairman of
Assistant Secretary the Board
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3, as amended on August 4,
1999, of our reports dated May 11, 1999 included in Westell Technologies, Inc.'s
Form 10-K, as amended on August 4, 1999, for the year ended March 31, 1999 and
all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 4, 1999
