As filed with the Securities and Exchange Commission on January 27, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM S-4
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 Classification Code Number) Identification No.)
or organization)
750 NORTH COMMONS DRIVE
AURORA, ILLINOIS 60504
(630) 898-2500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
__________________________________
MARC ZIONTS
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:
Helen R. Friedli, P.C. Jodi A. Simala
McDermott, Will & Emery Jenner & Block
227 West Monroe Street, Suite 3100 One IBM Plaza, 40th Floor
Chicago, Illinois 60606-5096 Chicago, Illinois 60611
312-372-2000 312-222-9350
__________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement and the effective time of the merger described in this registration
statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|______
If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. |_| __________
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
<CAPTION>
==================================================================================================================================
Title of each class of securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered (1) offering price per aggregate offering registration fee
share(2) price(2)
- ----------------------------------- --------------------- ------------------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Class A Common Stock (par value 19,267,337 shares $13.33 $256,897,828 $67,821
$0.01 per share)
- ----------------------------------- --------------------- ------------------------- ------------------------- --------------------
(1) Based upon the number of shares of common stock, par value $.01 per
share, of Teltrend Inc. outstanding on January 25, 2000, which shares
will be exchanged for shares of Class A Common Stock, par value $0.01
per share, of Westell Technologies, Inc. pursuant to the proposed
merger described herein at an exchange ratio of 3.3 shares of Westell
Class A Common Stock for each share of Teltrend common stock.
(2) Calculated in accordance with Rule 457(f)(1) under the Securities Act
of 1933, and estimated solely for purposes of calculating the
registration fee. The proposed maximum aggregate offering price was
calculated by taking the average high and low prices of Teltrend common
stock as reported on the Nasdaq National Market on January 21, 2000,
and multiplying such number by the number of shares of Teltrend common
stock to be exchanged pursuant to the merger. The proposed maximum
offering price per share was calculated by dividing the proposed
maximum aggregate offering price by the number of shares of Westell
Class A Common Stock to be registered hereunder.
</TABLE>
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>
[WESTELL LOGO] [TELTREND LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
TO THE STOCKHOLDERS OF WESTELL TECHNOLOGIES, INC. AND TELTREND INC.
The boards of directors of Westell Technologies, Inc. and Teltrend Inc.
have unanimously approved a merger of Teltrend with a wholly-owned subsidiary of
Westell, pursuant to which Teltrend would become a wholly-owned subsidiary of
Westell.
Upon completion of the merger, Teltrend stockholders will receive 3.3
shares of Westell Class A Common Stock in exchange for each share of Teltrend
common stock they own, subject to provisions regarding payment of cash in lieu
of fractional shares. The exchange ratio is fixed and will not change based on
any changes in the value of Westell's Class A Common Stock or Teltrend's common
stock. Westell's stockholders will continue to own their existing shares of
Westell Class A Common Stock and Class B Common Stock. After the merger, the
Teltrend stockholders will hold approximately 34% of Westell's outstanding Class
A Common Stock and Class B Common Stock, considered together, or approximately
17% of the total voting power of Westell. Assuming the exercise of all
outstanding options and warrants to purchase Class A Common Stock and the
conversion of Westell's outstanding convertible debentures at their current
conversion price, these percentages would be approximately 29% and 16%,
respectively.
The merger requires the stockholders of Teltrend to adopt the merger
agreement and the stockholders of Westell to approve the stock issuance in the
merger and a related amendment to Westell's Amended and Restated Certificate of
Incorporation to increase the number of shares of authorized Westell Class A
Common Stock. We have scheduled meetings for our stockholders to vote on these
matters.
Regardless of the number of shares you own or whether you plan to
attend a meeting, it is important that your shares be represented and voted. We
ask that you take the time to vote by completing and mailing the enclosed proxy
card promptly. Voting instructions are inside.
The dates, times and places of the meetings are as follows:
FOR WESTELL STOCKHOLDERS: FOR TELTREND STOCKHOLDERS:
March __, 2000 March __, 2000
10:00 a.m., local time 10:00 a.m., local time
Westell's Corporate Headquarters Teltrend's Corporate Headquarters
750 North Commons Drive 620 Stetson Avenue
Aurora, Illinois 60504 St. Charles, Illinois 60174
This document provides detailed information about the merger. In
addition, you can find more information about Westell and Teltrend in the
documents each company has filed with the Securities and Exchange Commission.
Instructions on how to obtain these documents are included in this joint proxy
statement/prospectus. Westell's Class A Common Stock is listed on the Nasdaq
National Market under the symbol "WSTL".
Thank you.
Marc Zionts Howard L. Kirby, Jr.
Chief Executive Officer Chairman, President and Chief Executive Officer
Westell Technologies, Inc. Teltrend Inc.
FOR A DISCUSSION OF RISKS YOU SHOULD CONSIDER IN EVALUATING THE MERGER, SEE RISK
FACTORS BEGINNING ON PAGE I-13.
- --------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THE MERGER DESCRIBED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR THE WESTELL
CLASS A COMMON STOCK TO BE ISSUED IN THE MERGER, NOR HAVE THEY DETERMINED IF
THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
This joint proxy statement/prospectus is dated February ____, 2000 and is first
being mailed to stockholders on or about February __, 2000.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates by reference important business and
financial information about our companies from documents that we have filed with
the SEC but have not included or delivered with this document. If you write or
call us, we will send you these documents, excluding exhibits unless they are
specifically incorporated by reference into these documents, without charge. You
may contact us:
Westell Technologies, Inc. Teltrend Inc.
Attention: Investor Attention: [Investor
Relations Department Relations Department]
750 North Commons Drive 620 Stetson Avenue
Aurora, Illinois 60504 St. Charles, Illinois
Tel.: 800-323-6883 (toll free) Tel.: 630-377-1700
PLEASE REQUEST DOCUMENTS FROM EITHER COMPANY NO LATER THAN __________,
2000 TO ENSURE TIMELY DELIVERY. See "Where You Can Find More Information" on
page VI-1 for more information about the documents incorporated by reference
into this document.
<PAGE>
WESTELL TECHNOLOGIES, INC.
750 N. COMMONS DRIVE
AURORA, ILLINOIS 60504
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF
WESTELL TECHNOLOGIES, INC.:
Westell Technologies, Inc. will hold a special meeting of its
stockholders on March __, 2000, at 10:00 a.m., local time, at Westell's
corporate headquarters, 750 North Commons Drive, Aurora, Illinois 60504, for the
following purposes:
(1) To consider and act upon a proposal to approve the issuance of
shares of Westell's Class A Common Stock, in accordance with the agreement and
plan of merger dated December 13, 1999 among Westell, Theta Acquisition Corp., a
wholly owned subsidiary of Westell, and Teltrend Inc. as we describe in the
attached joint proxy statement/prospectus;
(2) To consider and act upon a proposal to amend Westell's Amended and
Restated Certificate of Incorporation to increase to 85 million from 65.5
million the total number of shares of Westell Class A Common Stock that Westell
is authorized to issue, effective as of the effective time of the proposed
merger; and
(3) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The close of business on ____________, 2000 is the record date for the
Westell special meeting. Holders of Westell's Class A Common Stock and Class B
Common Stock on the record date will be entitled to vote at the meeting. On the
record date, there were _____ shares of Westell Class A Common Stock and ____
shares of Westell Class B Common Stock outstanding. Each share of Westell Class
A Common Stock entitles its holder to one vote and each share of Westell Class B
Common Stock entitles its holder to four votes.
Each proposal will be voted upon separately by Westell's stockholders,
with the holders of shares of Class A Common Stock and Class B Common Stock
voting together as a single class with respect to each proposal. The merger will
not be completed unless each proposal is approved by the required vote. The
affirmative vote of a majority of the total votes cast is required to approve
the issuance of shares of Westell's Class A Common Stock in the merger and the
affirmative vote of a majority of the total votes outstanding on the record date
is required to approve the amendment to Westell's Amended and Restated
Certificate of Incorporation. The co-trustees of the Westell Technologies, Inc.
Voting Trust, who beneficially own approximately 80% of the voting power of
Westell, have agreed to vote in favor of these proposals if a majority of
Westell's non-affiliated, public stockholders so vote. In addition, the
co-trustees may also vote in favor of the proposals even if a majority of the
non-affiliated, public stockholders reject the proposals. The co-trustees have
indicated their current intention to vote as the majority of Westell's
non-affiliated, public stockholders vote with respect to the proposals. The
voting agreement is described in more detail in the attached joint proxy
statement/prospectus.
Westell's Board of Directors believes that the merger will provide
significant benefits to Westell's stockholders, customers and employees.
Westell's Board of Directors has unanimously approved the merger and the
proposals to be presented at the meeting and recommends that Westell
stockholders vote in favor of the proposals.
PLEASE SIGN AND PROMPTLY RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE WESTELL SPECIAL MEETING. A
PROMPT RESPONSE IS HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED. A
stockholder who executes a proxy may revoke it any time before it is exercised
by giving written notice of revocation to the corporate secretary of Westell, by
subsequently filing another later-dated proxy or by attending the Westell
special meeting and voting in person.
By Order of the Board of Directors,
/s/ Nicholas C. Hindman, Sr.
Nicholas C. Hindman, Sr.
Acting Vice President, Secretary, Treasurer and
Chief Financial Officer
<PAGE>
TELTREND CORPORATION
620 STETSON AVENUE
ST. CHARLES, ILLINOIS 60174
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS
OF TELTREND INC.:
Teltrend Inc. will hold a special meeting of its stockholders on
___________ ___, 2000 at 10:00 a.m., local time, at Teltrend's corporate
headquarters, 620 Stetson Avenue, St. Charles, Illinois 60174, for the following
purposes:
(1) To consider and vote upon a proposal to adopt the agreement and
plan of merger dated December 13, 1999 among Teltrend, Westell Technologies,
Inc., and Theta Acquisition Corp., a wholly owned subsidiary of Westell, as we
describe in the attached joint proxy statement/prospectus. If the merger is
consummated:
o Teltrend stockholders will receive 3.3 shares of Westell Class A
Common Stock for each share of Teltrend common stock that they own,
subject to provisions regarding payment of cash in lieu of fractional
shares; and
o Teltrend will become a wholly-owned subsidiary of Westell.
(2) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The close of business on _______________, 2000 is the record date for
the Teltrend special meeting. Holders of Teltrend's common stock on the record
date will be entitled to vote at the meeting. On the record date, there were
______ shares of Teltrend common stock outstanding (excluding treasury shares),
each of which is entitled to one vote.
The affirmative vote of a majority of the shares of Teltrend common
stock outstanding on the record date is required to adopt the merger agreement.
Detailed information concerning the merger agreement and the merger is contained
in the attached joint proxy statement/prospectus, which you are urged to read
carefully.
Teltrend's Board of Directors has unanimously determined that the
merger is fair to, and in the best interests of, the Teltrend stockholders, has
approved the merger agreement and the merger, and recommends that the Teltrend
stockholders vote to adopt the merger agreement at the Teltrend special meeting.
PLEASE SIGN AND PROMPTLY RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE TELTREND SPECIAL MEETING. A
PROMPT RESPONSE IS HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED. A
stockholder who executes a proxy may revoke it any time before it is exercised
by giving written notice of revocation to the corporate secretary of Teltrend,
by subsequently filing another later-dated proxy or by attending the Teltrend
special meeting and voting in person.
STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES WHEN RETURNING
THEIR PROXIES. If the merger agreement is adopted and the merger is consummated,
stockholders will be notified and furnished instructions on how and when to
surrender their stock certificates.
By Order of the Board of Directors,
/s/ Douglas P. Hoffmeyer
Douglas P. Hoffmeyer
Sr. Vice President, Finance; Chief Financial
Officer; Secretary and Treasurer
<PAGE>
TABLE OF CONTENTS
CHAPTER ONE: OVERVIEW
Questions and Answers About the Merger.....I-1
Summary....................................I-3
The Companies..........................I-3
Reasons for the Merger.................I-3
Recommendations to Stockholders........I-3
The Merger.............................I-4
Comparative Per Share Market
Price Information......................I-4
Ownership of Westell After the Merger..I-4
Stockholders Meetings..................I-4
Stockholder Vote Required..............I-4
Opinions of Financial Advisors.........I-5
Interests of Officers and Directors
in the Merger..........................I-5
Comparison of Rights of Teltrend
and Westell Stockholders ..............I-6
Accounting Treatment...................I-6
Material Federal Income Tax
Consequences ..........................I-6
No Appraisal Rights....................I-6
Regulatory Approval....................I-6
Termination of the Merger Agreement;
Termination Fees.......................I-6
Summary Selected Historical Consolidated
And Pro Forma Financial Data.............I-8
How We Prepared the Financial
Statements ............................I-8
Accounting Treatment of the Merger.....I-8
Merger-Related Expenses................I-8
Selected Historical Consolidated
Financial Data of Westell..............I-9
Selected Historical Consolidated
Financial Data of Teltrend............I-10
Selected Unaudited Pro Forma
Consolidated Financial Information....I-11
Unaudited Comparative Per Share Data..I-12
Risk Factors..............................I-13
Since the market price of the Westell
Class A Common Stock fluctuates,
Teltrend stockholders cannot be
sure of the market price of the Westell
Class A Common Stock they will receive
in the merger.........................I-13
We may not be able to successfully
integrate our operations..............I-13
Westell has incurred and continues
to expect losses......................I-14
Westell is controlled by a limited
number of stockholders, whose actions
from time to time could limit
the rights of Teltrend stockholders
as holders of Westell Class A
Common Stock..........................I-14
<PAGE>
Following the merger, Teltrend
stockholders may be adversely affected
by future issuances and sales of
Westell's Class A Common Stock........I-14
The combined company will depend on
digital subscriber line market
acceptance and growth for future
success...............................I-16
Pricing pressures on products may
adversely affect the combined company's
profitability.........................I-16
Evolving industry standards may
adversely affect the combined company's
DSL sales.............................I-17
The combined company's products will
face competition from other existing
products, products under
development and changing technology,
and the combined company must develop
new commercially successful
products to achieve its business
goals and generate revenue............I-17
The combined company may experience
delays in the deployment of new
products..............................I-18
Industry consolidation could make
competing more difficult..............I-18
The failure to maintain and further
develop partners and alliances would
adversely affect the combined
company's business....................I-19
Westell's and Teltrend's lack of
backlog may affect the combined
company's ability to adjust to an
unexpected shortfall in orders........I-19
The combined company will depend on
a limited number of customers who
are able to exert a high degree
of influence over it..................I-19
Westell's and Teltrend's customers
have lengthy purchase cycles which
affect their ability to sell
products..............................I-20
Westell and Teltrend are dependent
on, and would not be able to compete
without, third party technologyI-20
Westell and Teltrend are dependent
on sole or limited source suppliers
and could not sell their
products without these suppliers......I-21
<PAGE>
Westell's and Teltrend's services
are affected by uncertain government
regulations and changes in
current or future laws or regulations
could restrict the way the combined
company operates its business.........I-21
Westell's failure to manage the
combined company's growth effectively
could impair its ability to
supply and support the manufacture
of large volumes of DSL products......I-22
The combined company's failure to
retain key personnel and hire
additional key personnel could
adversely affect its ability to
successfully compete, develop and
sell new products.....................I-22
Westell's stock price is volatile.....I-22
The combined company's quarterly
operating results are likely to
fluctuate significantly and should not
be relied upon as an indication of
future performance....................I-23
Conference Plus's large competitors
could adversely affect Conference
Plus's ability to maintain or
increase its market share.............I-23
Cautionary Note Concerning Forward-Looking
Statements............................I-24
CHAPTER TWO -- THE TRANSACTION
The Companies.............................II-1
Westell Technologies, Inc. ...........II-1
Teltrend Inc. ........................II-2
Theta Acquisition Corp. ..............II-2
The Merger................................II-3
General...............................II-3
Background of the Merger..............II-3
Westell's Reasons for the Merger;
Recommendation of the Westell Board...II-4
Teltrend's Reasons For the Merger;
Recommendation of the Teltrend Board..II-6
Opinion and Advice of Westell's
Financial Advisors....................II-7
Opinion of Teltrend's Financial
Advisor..............................II-14
Voting Agreement With Westell
Controlling Stockholders.............II-18
Material Federal Income Tax
Consequences.........................II-18
Accounting Treatment.................II-19
Regulatory Approvals.................II-19
No Appraisal Rights..................II-20
Restrictions on Resales by
Affiliates...........................II-20
Market Prices and Dividends..............II-21
<PAGE>
Westell and Teltrend Unaudited Pro
Forma Condensed Consolidated
Financial Data........................II-24
Interests of Teltrend's Directors
and Officers in the Merger............II-30
Teltrend Severance Plan..............II-30
Teltrend Stock Option Plans..........II-31
Indemnification and Insurance........II-31
Directors and Executive Officers
of Westell Following the Merger......II-32
CHAPTER THREE -- THE MEETINGS AND VOTING
The Westell Special Meeting..............III-1
Purpose of the Meeting...............III-1
Date, Place and Time.................III-1
Record Date; Stock Outstanding.......III-1
Votes Required for Approval..........III-2
Quorum Requirement...................III-2
Stock Ownership of Management;
Voting Agreement....................III-2
Voting and Revocation of Proxies.....III-2
Solicitation of Proxies..............III-3
The Teltrend Special Meeting.............III-3
General..............................III-3
Purpose of the Meeting...............III-3
Date, Place and Time.................III-3
Record Date; Stock Outstanding.......III-3
Votes Required for Approval..........III-3
Quorum Requirement...................III-4
Stock Ownership of Management........III-4
Voting and Revocation of Proxies.....III-4
Solicitation of Proxies..............III-4
CHAPTER FOUR -- THE MERGER AGREEMENT
Terms of the Merger.......................IV-1
Exchange of Shares........................IV-1
Treatment of Teltrend Stock Options.......IV-2
Conditions to the Merger..................IV-2
Representations and Warranties............IV-3
Principal Covenants.......................IV-4
Termination of the Merger Agreement;
Termination Fees..........................IV-7
Other Expenses............................IV-9
Amendment; Waiver........................IV-10
CHAPTER FIVE -- CERTAIN LEGAL INFORMATION
Material Differences in Rights of
Teltrend and Westell Stockholders......V-1
Authorized Capital Stock...............V-1
Dividends..............................V-1
Voting Rights..........................V-2
Convertibility.........................V-2
Liquidation Rights.....................V-3
Other Provisions.......................V-3
<PAGE>
Preferred Stock........................V-3
RightsPlan.............................V-3
Directors..............................V-4
Special Meetings.......................V-4
Amendment to Certificate of
Incorporation and Bylaws...............V-4
Stockholder Proposals..................V-5
Business Combinations..................V-5
Limitation on Liability and
Indemnification of Directors
and Officers...........................V-5
Experts....................................V-6
Legal Matters..............................V-7
CHAPTER SIX -- ADDITIONAL
INFORMATION FOR STOCKHOLDERS
Submission of Future
Stockholder Proposals.....................VI-1
Where You Can Find More Information.......VI-1
Appendix A: Agreement and Plan of Merger, dated
as of December 13, 1999, by and among Westel
Technologies, Inc., Theta Acquisition Corp.
and Teltrend Inc.
Appendix B: Opinion of Goldman, Sachs & Co.
Appendix C: Opinion of SoundView Technology Group, Inc.
<PAGE>
CHAPTER ONE
OVERVIEW
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHEN AND WHERE ARE THE STOCKHOLDER MEETINGS?
A: The Westell meeting will take place on March __, 2000 at Westell's
corporate headquarters, 750 North Commons Drive, Aurora, Illinois 60504.
The Teltrend meeting will take place on March __, 2000 at Teltrend's
corporate headquarters, 620 Stetson Avenue, St. Charles, Illinois 60174.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
document, please fill out, sign and mail your signed proxy card in the
enclosed return envelope as soon as possible, so that we may vote your
shares at the appropriate meeting.
In order to assure that we obtain your vote, please give your proxy as
instructed on your proxy card even if you currently plan to attend the
meeting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker cannot vote them. You should therefore
be sure to provide your broker with instructions on how to vote your
shares.
If you do not give voting instructions to your broker, you will, in
effect, be voting against the merger unless you appear in person at the
appropriate meeting with a proxy from your broker authorizing you to vote
your "street name" shares, and vote in favor of the applicable
proposal(s).
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at
the applicable stockholder meeting. You can do this in one of three ways:
(1) you can send a written notice stating that you would like to revoke
your proxy, (2) you can complete and submit a new proxy card which bears a
later date (if you choose either (1) or (2), you must submit your notice
of revocation or your new proxy card to the appropriate corporate
secretary), or (3) you can attend your meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions
received from your broker to change those instructions.
Q: WHAT WILL TELTREND STOCKHOLDERS RECEIVE FOR THEIR TELTREND SHARES?
A: In the merger, Teltrend stockholders will receive 3.3 shares of Westell
Class A Common Stock in exchange for each share of Teltrend common stock
they hold. This exchange ratio will not change, even if the market price
of Westell or Teltrend shares increases or decreases between now and the
date the merger is completed. Because the market price of Westell Class A
Common Stock may fluctuate from day to day, Teltrend stockholders cannot
be sure of the market value of the Westell Class A Common Stock they will
receive in the merger at the time they vote their shares.
Westell will not issue fractional shares in the merger. The Teltrend
stockholders will receive cash in lieu of fractional shares based on the
average closing price of the Westell Class A Common Stock during the 10
trading days immediately preceding the merger.
Q. WILL THE MERGER BE TAXABLE TO ME?
A. We expect that the merger generally will not be taxable to either Westell
or Teltrend or Teltrend's stockholders for U.S. federal income tax
purposes, except for cash received in lieu of any fractional shares.
Q. WHAT RISKS SHOULD I CONSIDER?
A. You should review "Risk Factors" beginning on page I-13. You should also
review the countervailing factors considered by each company's Board of
Directors. See "Westell's Reasons for the Merger; Recommendation of the
Westell Board" beginning on page II-4 and "Teltrend's Reasons for the
Merger; Recommendation of the Teltrend Board" beginning on page II-6.
<PAGE>
Q. HOW MANY CLASSES OF COMMON STOCK DOES WESTELL HAVE?
A. Westell has two classes of common stock: Class A Common Stock and Class B
Common Stock. Generally, both classes vote together as a single class with
each share of Class A Common Stock having one vote and each share of Class
B Common Stock having four votes. Economically, Westell's Class A Common
Stock and Class B Common Stock are equivalent.
Q: WILL WESTELL STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A: No. Westell stockholders will continue to hold the Westell shares they
currently own. After the merger, these shares will represent an ownership
interest in the combined businesses of Westell and Teltrend.
Q: SHOULD TELTREND STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. After we complete the merger, we will send to the T eltrend
stockholders written instructions to exchange the Teltrend common stock
for Westell Class A Common Stock.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We expect to complete the merger as soon as possible after the stockholder
meetings, assuming the stockholders of both companies approve the
transaction. However, because the merger is subject to certain regulatory
approvals and other conditions, we cannot predict the exact timing.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If you have more questions about the merger you should contact:
If you are a Westell stockholder:
Westell Technologies, Inc.
800-323-6883 (toll free)
630-375-4940 (fax)
Attn: Investor Relations Department
If you are a Teltrend stockholder:
Teltrend Inc.
630-377-1700
630-377-0128 (fax)
Attn: ______________________
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger more fully and for a more complete
description of the legal terms of the merger, you should read this entire
document and the documents we have referred you to. The merger agreement is
attached as Appendix A. We encourage you to read the merger agreement. It is the
legal document that governs the merger.
THE COMPANIES
WESTELL TECHNOLOGIES, INC.
750 N. Commons Drive
Aurora, Illinois 60504
800-323-6883
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. Westell designs, manufactures, markets and services 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. This existing infrastructure is commonly
referred to as the local loop or the local access network. Westell also markets
its products and services to other telecommunications and information service
providers seeking direct access to end user customers. In addition, Conference
Plus, Inc., Westell's 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.
Westell is currently considering a proposal to spin-off Conference Plus in the
next 12 to 24 months.
TELTREND INC.
620 Stetson Avenue
St. Charles, Illinois 60174
630-377-1700
Teltrend designs, manufactures and markets a broad range of
transmission products used by telephone companies to provide voice and data
service over the telephone network. Historically, substantially all of
Teltrend's products have been sold directly to the regional bell operating
companies and their local affiliates (RBOCs) for use with the copper wireline
that is generally used to carry voice and data across the local loop. Teltrend's
strong reliance on the RBOCs continues, but its purchase of Teltrend Limited in
September 1997 expanded its markets and product lines. With the addition of
Teltrend Limited, Teltrend has entered the telecommunication signaling
interworking market, providing products that interpret and translate
transmission signals to allow for interoperability between older-generation and
next-generation telecommunications networks. Teltrend Limited sales are
primarily targeted in Europe.
REASONS FOR THE MERGER
Both the Westell Board and the Teltrend Board believe that the combined
company will have the potential to realize long-term synergies and improved
financial and operating results. We believe that the combined company will be
positioned to provide leading network and telecommunication service providers
world-wide with digital subscriber line system and technology solutions that
meet the standards for network level interoperability.
RECOMMENDATIONS TO STOCKHOLDERS
Both the Westell Board and the Teltrend Board believe that the merger
is in the best interests of their respective companies' stockholders and that
the strong management teams from both companies will work to achieve potential
long-term synergies and realize growth opportunities.
TELTREND: The Teltrend Board has unanimously approved the merger and
the merger agreement. The Teltrend Board recommends that Teltrend stockholders
vote FOR the proposal to adopt the merger agreement, under which a wholly owned
subsidiary of Westell will be merged with Teltrend.
WESTELL: The Westell Board has unanimously approved the merger and the
merger agreement. The Westell Board unanimously recommends that Westell
stockholders vote FOR the proposals submitted for Westell stockholder approval
in connection with the merger.
<PAGE>
THE MERGER
The agreement and plan of merger dated December 13, 1999 among
Teltrend, Westell and Theta Acquisition Corp. is the legal document that governs
the merger. The merger agreement is attached as Appendix A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement carefully.
In the merger, Teltrend will become a wholly-owned subsidiary of
Westell, and each share of Teltrend common stock will be converted into the
right to receive 3.3 shares of Westell Class A Common Stock. Cash will be paid
in lieu of any fractional shares, based on the average closing price of the
Westell Class A Common Stock during the 10 trading days immediately preceding
the merger.
Each option to purchase shares of Teltrend common stock which is
unexpired and unexercised as of the effective time will be automatically
converted into an option to purchase a number of shares of Westell Class A
Common Stock equal to the number of shares of Teltrend common stock subject to
such option multiplied by the exchange ratio at an exercise price per share
equal to the exercise price in effect under such option immediately prior to the
effective time divided by the exchange ratio. See "Treatment of Teltrend Stock
Options" on page IV-2.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Both the Westell Class A Common Stock and the Teltrend common stock are
quoted on the Nasdaq National Market. An application will be made to quote the
Westell Class A Common Stock to be issued in the merger on the Nasdaq National
Market. After the merger, shares of Westell Class A Common Stock will continue
to be traded on the Nasdaq National Market under the symbol "WSTL."
On December 10, 1999, the last trading date prior to the public
announcement of the proposed merger, the last reported closing price on the
Nasdaq National Market for the Westell Class A Common Stock was $10 3/4 and for
the Teltrend common stock was $23 1/8. On ____________, 2000, the most recent
available date prior to printing this joint proxy statement/prospectus, the last
reported closing price on the Nasdaq National Market for the Westell Class A
Common Stock was $__________ and for the Teltrend common stock was $__________.
OWNERSHIP OF WESTELL AFTER THE MERGER
Westell will issue approximately 19 million shares of its Class A
Common Stock to Teltrend stockholders in the merger. Upon completion of the
merger, this will represent approximately:
o 52% of Westell's outstanding Class A Common Stock;
o 34% of Westell's outstanding Class A Common Stock and Class B Common Stock,
considered together; and o 17% of Westell's outstanding voting power.
This information is based on the number of shares of Westell Class A
Common Stock and Class B Common Stock and shares of Teltrend common stock
outstanding on ______ __, 2000, and does not take into account stock options,
Westell's warrants or Westell's convertible debentures. Assuming the exercise of
all outstanding options (including options issued upon conversion of the
outstanding Teltrend options) and warrants to purchase Class A Common Stock and
the conversion of Westell's outstanding convertible debentures at the current
conversion price, upon completion of the merger, the Class A Common Stock to be
received by the Teltrend stockholders will represent approximately 40% of the
outstanding Class A Common Stock, 29% of the outstanding Class A Common Stock
and Class B Common Stock, considered together, and 16% of Westell's outstanding
voting power.
STOCKHOLDERS MEETINGS
Both Teltrend and Westell are holding special meetings at which their
stockholders will vote on proposals related to the merger. If you were a record
holder of Teltrend common stock at the close of business on __________, 2000,
you will be entitled to vote at the Teltrend meeting. If you were a record
holder of Westell Class A Common Stock or Westell Class B Common Stock on
__________, 2000, you will be entitled to vote at the Westell meeting.
STOCKHOLDER VOTE REQUIRED
The affirmative vote of a majority of the shares of Teltrend common
stock outstanding on the record date is required to adopt the merger agreement.
As a result, a Teltrend stockholder that abstains or does not vote on the merger
is effectively voting against the merger. Each share of Teltrend common stock is
entitled to one vote. On the record date, directors and executive officers of
<PAGE>
Teltrend and their affiliates owned and were entitled to vote ____ shares of
Teltrend common stock, or approximately ___% of the outstanding shares of
Teltrend common stock. These individuals and their affiliates have indicated
that they will vote in favor of adoption of the merger agreement.
The affirmative vote of a majority of the total votes cast is required
to approve the issuance of shares of Westell's Class A Common Stock in the
merger and the affirmative vote of a majority of the total votes outstanding on
the record date is required to approve the amendment to Westell's Amended and
Restated Certificate of Incorporation. As a result, a Westell stockholder that
abstains or does not vote on the amendment to Westell's Certificate of
Incorporation is effectively voting against such amendment. Because Westell does
not presently have enough un-reserved shares of Class A Common Stock available
to issue in the merger, such a vote is accordingly a vote against the merger.
Each share of Westell Class A Common Stock entitles its holder to one
vote and each share of Westell Class B Common Stock entitles its holder to four
votes. On the record date, directors and executive officers of Westell and their
affiliates owned and were entitled to vote ___ shares of Westell Class A Common
Stock and all outstanding shares of Class B Common Stock, or approximately __%
of Westell's outstanding votes. Two of Westell's directors, who are the
co-trustees of the Westell Technologies, Inc. Voting Trust, and beneficially own
approximately 80% of the voting power of Westell, have agreed to vote in favor
of the merger proposals if a majority of Westell's non-affiliated public
stockholders so vote. In addition, the co-trustees may also vote in favor of the
merger proposals even if a majority of the non-affiliated, public stockholders
reject the proposals. The co-trustees have indicated their current intention to
vote as the majority of Westell's non-affiliated, public stockholders vote with
respect to the proposals. The voting agreement is described in more detail in
this joint proxy statement/prospectus. See "Voting Agreement with Westell
Controlling Stockholders" on page II-18.
OPINIONS OF FINANCIAL ADVISORS
In deciding to approve the merger, among the factors that the Westell
Board considered was the opinion of its financial advisor, Goldman, Sachs & Co.,
that, as of December 13, 1999, the exchange ratio of 3.3 shares of Westell Class
A Common Stock for each share of Teltrend common stock pursuant to the merger
agreement was fair, from a financial point of view, to Westell. The full text of
the written opinion of Goldman Sachs, which sets forth assumptions made,
procedures followed, matters considered and limitations on the review undertaken
in connection with the opinion, is attached as Appendix B. Goldman Sachs'
opinion does not constitute a recommendation as to how any holder of Westell
Class A Common Stock should vote with respect to the merger proposals. We
encourage Westell stockholders to read the Goldman Sachs opinion. In deciding to
approve the merger, the Westell Board also considered the advice of Hambrecht &
Quist, an additional financial advisor retained by the Westell Board to provide
general advisory services with respect to the merger.
In deciding to approve the merger, among the factors that the Teltrend
Board considered was the opinion of its financial advisor, SoundView Technology
Group, Inc., that, as of December 13, 1999, the exchange ratio pursuant to the
merger agreement was fair, from a financial point of view, to the holders of
Teltrend common stock. The full text of the written opinion of SoundView, which
sets forth the assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
hereto as Appendix C. We encourage Teltrend stockholders to read the SoundView
opinion.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
When you consider the Teltrend Board's recommendation that the Teltrend
stockholders vote in favor of adoption of the merger agreement, you should be
aware that the officers and directors of Teltrend may have interests in the
merger that may be different from yours.
These interests exist because of the rights some of the executive
officers have under a severance plan maintained by Teltrend that Westell has
agreed to assume upon completion of the merger. This severance plan will provide
these officers with severance benefits if their employment is terminated either
by Westell or, in certain situations, by the executive, after the merger. If
severance benefits were to be paid under this plan at the time of the merger,
the executive officers subject to the plan would receive an aggregate of
approximately $3.2 million.
In addition, Westell's board of directors has agreed to appoint Howard
L. Kirby, Jr. and Bernard F. Sergesketter, currently the chairman of the board
<PAGE>
and chief executive officer and a director, respectively, of Teltrend to the
Westell board upon completion of the merger.
In addition, under the terms of Teltrend's existing option agreements,
all unvested options to purchase Teltrend common stock, including those held by
directors and executive officers, will become fully vested and exercisable in
connection with the merger. Those options which are not exercised or expired
before the merger will be converted into options to purchase Westell's Class A
Common Stock.
Please review the section entitled "Interests of Teltrend's Directors
and Officers in the Merger" beginning on page II-29.
COMPARISON OF RIGHTS OF TELTREND AND WESTELL STOCKHOLDERS
After the merger, Teltrend stockholders will become holders of Westell
Class A Common Stock and their rights as stockholders will be governed by the
Amended and Restated Certificate of Incorporation and bylaws of Westell. There
are some differences between the certificates of incorporation and bylaws of
Teltrend and Westell. For example, Westell has two classes of common stock:
Class A Common Stock and Class B Common Stock. Generally, both classes vote
together as a single class, with each share of Class B Common Stock having four
votes and each share of Class A Common Stock having one vote. In addition, the
Class B Common Stock is effectively controlled by two Westell directors as
co-trustees of a voting trust. This control gives these individuals
approximately 80% of Westell's current voting power and is expected to give them
approximately 68% of Westell's voting power upon consummation of the merger.
Accordingly, the rights of Teltrend stockholders as stockholders of Westell may
be limited from time to time by actions taken by the holders of the Class B
Common Stock. For a more complete discussion, see "Material Differences in
Rights of Teltrend and Westell Stockholders" beginning on page V-1.
ACCOUNTING TREATMENT
Westell and Teltrend anticipate that the merger will be accounted for
as a purchase. Merger related costs of approximately $5 million will be included
in the determination of the purchase price. Please see the section entitled
"Westell and Teltrend Unaudited Pro Forma Condensed Consolidated Financial Data"
beginning on page II-24.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The merger is expected to be tax-free to Westell and Teltrend for U.S.
federal income tax purposes. The merger is also expected to be tax-free for U.S.
federal income tax purposes to Teltrend stockholders, except with respect to
cash these stockholders receive in lieu of fractional shares. Stockholders are
urged to consult their own tax advisors.
NO APPRAISAL RIGHTS
Neither the Teltrend stockholders nor the Westell stockholders are
entitled to appraisal rights under Delaware law in connection with the merger.
REGULATORY APPROVAL
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we
cannot complete the merger until Westell and Teltrend give information and
materials to the U.S. Department of Justice and Federal Trade Commission and
wait for a required waiting period to expire or terminate. Westell and Teltrend
submitted pre-merger notification and report forms effective January 3, 2000.
Unless Westell or Teltrend receives a request for additional information or
documentary materials, the waiting period under the HSR Act will expire on
February 2, 2000, unless terminated earlier.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES
Each of Westell and Teltrend can terminate the merger agreement under
certain circumstances. You should review the section entitled "The Merger
Agreement - Termination of the Merger Agreement; Termination Fees" beginning on
page IV-7 for details in that regard.
Teltrend has agreed to pay to Westell a break-up fee of approximately
$7.2 million under the following circumstances:
o Teltrend terminates the merger agreement as a result of a superior
proposal, in accordance with the termination rights described on page
IV-8;
o Westell terminates the merger agreement because the Teltrend Board has
resolved to accept a superior proposal or has recommended to the
Teltrend stockholders that they tender their shares in a tender offer
commenced by a third party; or
<PAGE>
o either Westell or Teltrend terminates the merger agreement because the
Teltrend stockholders have not adopted the merger agreement at a duly
held meeting, but only if Teltrend enters into a definitive agreement
with respect to an acquisition transaction within three months
following such termination.
Westell has agreed to pay to Teltrend a break-up fee of approximately
$7.2 million under the following circumstances:
o either Westell or Teltrend terminates the merger agreement because the
Westell Board resolves to accept a superior proposal which requires
the merger agreement to be terminated, but only if Westell enters into
a definitive agreement with respect to an acquisition transaction
within nine months following such termination; or
o Westell, in the limited circumstances permitted by the merger
agreement, does not recommend to its stockholders approval of the
proposals described in this joint proxy statement/ prospectus and
Teltrend terminates the merger agreement because the Westell
stockholders have failed to approve such matters at a duly held
meeting called for that purpose, but only if Westell enters into a
definitive agreement with respect to an acquisition transaction within
three months following such termination.
<PAGE>
SUMMARY SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA FINANCIAL DATA
HOW WE PREPARED THE FINANCIAL STATEMENTS
We are providing the following information to aid you in your analysis
of the financial aspects of the merger. We derived this information from the
consolidated financial statements of Westell and of Teltrend. The information is
only a summary and you should read it together with Westell's and Teltrend's
historical financial statements and related notes contained in the underlying
reports and other information that Westell and Teltrend have filed with the SEC
and incorporated into this joint proxy statement/prospectus by reference. See
"Where You Can Find More Information" on page VI-1.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for by Westell as a purchase of a
business. This means that, for accounting and financial reporting purposes, the
assets and liabilities of Teltrend will be recorded at their fair value, and any
excess of Westell's purchase price over the fair value of Teltrend's net assets
will be recorded as intangible assets, including goodwill.
We have presented unaudited pro forma condensed consolidated financial
information that reflects the purchase method of accounting to give you a better
understanding of what our businesses might have looked like had they been
combined since April 1, 1998. The companies may have performed differently had
they always been combined. You should not rely on the unaudited pro forma
condensed consolidated financial information as being indicative of the
historical results that the combined company would have had or the future
results that it will experience after the merger.
MERGER-RELATED EXPENSES
We estimate that merger-related fees and expenses, consisting primarily
of fees and expenses of investment bankers, attorneys and accountants, SEC
filing fees, fees and expenses of financial printing, and other related charges,
will be approximately $ 5.0 million. After the merger, Westell may also incur
charges and expenses relating to integrating the operations of Teltrend.
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF WESTELL
In the table below, we provide you with selected historical
consolidated financial data of Westell. Westell prepared this information using
its consolidated financial statements as of the dates indicated and for each of
the fiscal years in the five-year period ended March 31, 1999 and for the
six-month periods ended September 30, 1999 and 1998. Westell derived the data
below for each of the fiscal years presented from consolidated financial
statements audited by Arthur Andersen LLP, independent auditors. Westell derived
the data for the six-month periods presented from unaudited consolidated
financial statements. In the opinion of Westell's management, the unaudited
consolidated interim financial data contain all adjustments, consisting only of
normal, recurring accruals unless otherwise indicated, necessary for a fair
statement of these interim periods. The information provided below is only a
summary and you should read it together with the financial information
incorporated by reference in this document. See "Where You Can Find More
Information" on page VI-1.
<TABLE>
WESTELL SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Total revenues......... $ 74,029 $ 83,236 $ 79,385 $ 86,351 $ 93,180 $ 45,673 $ 49,163
Gross margin........... 29,535 32,457 21,553 (1) 27,492 24,864 11,512 13,131
Loss from operations... (178) (2,254) (26,412) (32,896) (35,100) (17,499) (5,814)
Net loss............... (508) (2,075) (14,706) (13,971) (34,992) (16,872) (6,491)
PER SHARE DATA:
Net loss per basic and
diluted common share.. (0.02) (0.07) (0.41) (0.38) (0.96) (0.46) (0.18)
Cash dividends ........ - - - - - - -
Book value per basic
and diluted common 0.26 1.26 2.40 2.01 1.07 1.54 0.96
share.................
Weighted average basic
and diluted common
shares outstanding (2) 28,952 30,846 35,940 36,348 36,427 36,417 36,519
AS OF MARCH 31, AS OF
------------------------------------------------------------------- SEPT. 30,
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- ---- ----
SELECTED BALANCE SHEET
DATA:
<S> <C> <C> <C> <C> <C> <C>
Working capital........ $ 1,280 $28,741(3) $ 65,105 (3) $ 47,481 $ 12,213 $ 26,883
Total assets........... 40,276 64,448 108,049 98,405 64,407 75,355
Long-term debt,
including current 4,129 4,427 6,487 4,420 4,814 22,585
portion...............
Stockholders' equity... 7,558 38,985(3) 86,188 (3) 73,141 39,124 34,865
------------------------------------------------------------------------------------------------------------
(1) Includes a charge for establishment of ADSL piece part inventory reserve in
the amount of $5.0 million.
(2) Adjusted to reflect a two-for-one stock split in the form of a 100% stock
dividend paid on June 7, 1996 to holders of record on May 20, 1996.
(3) During fiscal years 1996 and 1997, Westell issued approximately 5.7 million
and 1.7 million shares of Westell Class A Common Stock, respectively. The
number of shares issued during fiscal 1996 has been as adjusted to reflect
to the two-for-one stock split described in note 2 above; the issuance in
fiscal 1997 occurred after the stock-split. The net proceeds of the
offerings ($34.4 million in 1996 and $62.1 million in 1997) were used to
reduce debt and for working capital purposes.
</TABLE>
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TELTREND
In the table below, we provide you with selected historical
consolidated financial data of Teltrend. Teltrend prepared this information
using its consolidated financial statements as of the dates indicated and for
each of the fiscal years in the five-year period ended July 31, 1999 and for the
three-month periods ended October 30, 1999 and October 31, 1998. Teltrend
derived the data below for each of the fiscal years presented from financial
statements audited by Ernst & Young, LLP, independent auditors. Teltrend derived
the data for the three-month periods presented from unaudited consolidated
financial statements. In the opinion of Teltrend's management, the unaudited
consolidated interim financial data contain all adjustments, consisting only of
normal, recurring accruals unless otherwise indicated, necessary for a fair
statement of these interim periods. The information provided is only a summary
and you should read it together with the financial information incorporated by
reference in this document. See "Where You Can Find More Information" on page
VI-1.
<TABLE>
TELTREND SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JULY, (1) OCTOBER, (1)
-------------------
------------------------------------------------------------------
1995(2) 1996 1997 1998(4) 1999(5) 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Total revenues......... $ 62,052 $ 85,913 $ 81,243 $ 96,762 $107,031 $ 30,198 $ 25,989
Gross margin........... 26,061 39,269 35,947 44,637 48,694 13,927 12,060
Income from operations. 11,391 19,852 14,433 5,916 10,648 3,700 3,491
Net income............. 4,330 12,164 9,628 2,239 7,162 2,531 2,467
PER SHARE DATA:
Net income per basic - 1.94 1.50 0.35 1.20 0.41 0.43
share.................
Net income per diluted - 1.86 1.45 0.34 1.18 0.41 0.42
share.................
Cash dividends per share - - - - - - -
Book value per share... 2.60 6.51 7.88 8.20 8.44 $8.25 $ 9.03
Weighted average basic
common shares - 6,261 6,430 6,434 5,965 6,162 5,786
outstanding ..........
Weighted average diluted
common shares - 6,552 6,654 6,503 6,071 6,205 5,930
outstanding ..........
Pro forma earnings per
share (unaudited) (3) 1.19
Pro forma average
common shares
outstanding
(unaudited) (3) 5,941
AS OF JULY, (1)
------------------------------------------------------------------ AS OF OCTOBER,
1995 1996 1997 1998 1999 1999 (1)
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital........ $ 10,188 $ 35,901 $ 44,088 $ 38,209 $ 38,963 $ 41,537
Total assets........... 28,699 57,284 62,831 69,916 66,983 69,303
Long-term debt,
including current - - - - - -
portion...............
Stockholders' equity... 15,417 42,645 52,435 53,304 51,239 53,523
------------------------------------------------------------------------------------------------------------
(1) Teltrend's fiscal year normally consists of four 13-week quarters, with
each of the first three quarters ending on the last Saturday of such
quarter and the fourth quarter ending on the last Saturday in July. In
fiscal 1999, the first quarter consisted of 14 weeks. The three months
ended October 30 refer to Teltrend's first fiscal quarter. First quarter
1998 consisted of 14 weeks compared to 13 weeks in first quarter 1999.
(2) Substantially all of Teltrend's long-term indebtedness was repaid in full
upon consummation of its initial public offering which occurred in fiscal
1995 in conjunction with a recapitalization of Teltrend. In addition,
Teltrend eliminated its valuation allowance for net deferred tax assets of
approximately $3.4 million.
(3) Pro forma earnings per share and average number of shares for fiscal 1995
give effect to Teltrend's initial public offering and the other components
of its recapitalization, as if they occurred as of July 31, 1994.
(4) On September 18, 1997, Teltrend purchased the outstanding shares of
Securicor 3net Limited (since renamed Teltrend Limited). The transaction
was accounted for as a purchase and therefore the results of Teltrend
Limited are included with the operations of Teltrend since that date. As
required by generally accepted accounting principles, Teltrend recorded a
$4.0 million charge immediately after the acquisition to write off the
portion of the purchase price allocated to in-process research and
development costs.
(5) On May 28, 1999 Teltrend sold substantially all of the assets of its packet
switched product line to Contrecom Systems Limited of England for
approximately $3.1 million. The sale resulted in a $1.3 million loss,
composed largely of the write-off of intangible assets associated with the
packet switched product line.
</TABLE>
<PAGE>
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
For pro forma purposes, Westell's consolidated statements of operations
for the fiscal year ended March 31, 1999 and the unaudited six months ended
September 30, 1999, have been combined with the unaudited consolidated
statements of operations of Teltrend for the twelve months ended May 1, 1999,
and for the six months ended October 30, 1999, respectively, both of which end
within 90 days of the Westell fiscal year end and interim reporting period,
respectively. In addition, Westell's unaudited consolidated balance sheet as of
September 30, 1999 has been combined with Teltrend's unaudited consolidated
balance sheet as of October 30, 1999. This selected unaudited pro forma
consolidated financial information should be read in conjunction with the
separate historical financial statements and accompanying notes of Westell and
Teltrend, which are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page VI-1.
The unaudited pro forma consolidated financial data do not reflect any cost
savings anticipated as a result of the merger. You should not rely on the
selected unaudited pro forma consolidated financial information as an indication
of the results of operations or financial position that would have been achieved
if the merger had taken place earlier or of the results of operations or
financial position of Westell after the completion of the merger.
We have included detailed unaudited pro forma condensed consolidated
financial data beginning on page II-24.
<TABLE>
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Six months ended
Year ended September 30, 1999
March 31, 1999 (1) (1)
------------------ ---------------------
<S> <C> <C>
PRO FORMA CONSOLIDATED OPERATIONS DATA:
Total revenues....................................... $ 201,214 $ 101,146
Operating loss....................................... (34,190) (3,393)
Net loss............................................. (33,259) (3,496)
PRO FORMA PER SHARE DATA:
Net loss............................................. (0.57) (0.06)
Book value........................................... 4.60 4.58
EQUIVALENT PER SHARE DATA: (2)
Net loss............................................. (1.88) (.20)
Book value.......................................... 15.18 15.11
September 30, 1999 (1)
--------------------------
<S> <C>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................................... $ 61,220
Total assets.............................................................. 329,190
Long term debt, including current portion................................. 22,585
Total stockholders' equity................................................ 268,720
- ----------------------------------------------------------------------------------- -------------------------- -----
(1) The unaudited pro forma consolidated statements of operations data give
effect to the merger as if it occurred on April 1, 1998, and the unaudited
pro forma consolidated balance sheet data give effect to the merger as if
it occurred on September 30, 1999. The merger will be accounted for as a
purchase. See Note 1 of the Notes to Pro Forma Condensed Consolidated
Financial Data on page II-28 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the Westell and
Teltrend annual and quarterly reports incorporated by reference herein.
(2) Equivalent pro forma amounts are calculated by multiplying the pro forma
net loss per share before non-recurring charges directly attributable to
the transaction and pro forma book value per share by an exchange ratio of
3.3 so that the per share amounts are equated to be respective values for
one share of Teltrend common stock.
</TABLE>
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
In the table below, we provide you with historical and pro forma per
share information for Westell and historical and pro forma equivalent per share
information for Teltrend as of and for the six months ended September 30, 1999
and the fiscal year ended March 31, 1999. We have assumed for purposes of the
Westell pro forma financial information that the merger had been completed on
April 1, 1998 for income statement purposes, and that the merger had been
completed on September 30, 1999 for balance sheet purposes. The Teltrend pro
forma equivalent information presents Westell pro forma per share data
multiplied by the exchange ratio of 3.3.
The table also sets forth:
o for December 10, 1999 (the last trading day before the
announcement of the merger agreement) and __________________,
2000 (the last practicable trading day before the printing of
this joint proxy statement/prospectus), the closing sales prices
of a share of Westell Class A Common Stock and Teltrend common
stock, as reported on the Nasdaq National Market; and
o the equivalent pro forma market price per share of Teltrend
common stock as of those dates, assuming that the merger had been
consummated on those dates. This equivalent pro forma market
price was determined by multiplying the exchange ratio of 3.3:1
by the applicable price of Westell Class A Common Stock.
It is important that when you read this information, you read along
with it the separate historical financial statements and accompanying notes of
Westell and Teltrend, which are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page VI-1.
You should not rely on the unaudited selected pro forma per share information as
an indication of the results of operations or financial position that would have
been achieved if the merger had taken place earlier or of the results of
operations or financial position of Westell after the completion of the merger.
In addition, no assurances can be given as to the market prices of Westell Class
A Common Stock or Teltrend common stock at, or, in the case of Westell Class A
Common Stock, after, the effective time of the merger. STOCKHOLDERS ARE ADVISED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR WESTELL CLASS A COMMON STOCK AND
TELTREND COMMON STOCK.
<TABLE>
Teltrend
Teltrend Westell Westell Pro Pro Forma
Historical Historical Forma Equivalent
---------- ---------- ----- ----------
<S> <C> <C> <C> <C>
Book value per common share:
September 30, 1999.............................. $ 8.91 $ 0.96 $ 4.58 $ 15.16
March 31, 1999.................................. 8.13 1.07 4.60 15.18
Income from continuing operations:
Earnings (loss) per common share -- basic:
For the six months ended September 30, 1999..... 0.85 (0.18) (0.06) (0.20)
For the fiscal year ended March 31, 1999........ 1.11 (0.96) (0.57) (1.88)
Earnings (loss) per common share -- diluted:
For the six months ended September 30, 1999..... 0.83 (0.18) (0.06) (0.20)
For the fiscal year ended March 31, 1999........ 1.10 (0.96) (0.57) (1.88)
Closing sales price per share, December 10, 1999..... 23.13 10.75 N/A 35.48
Closing sales price per share, February _, 2000...... N/A
</TABLE>
<PAGE>
RISK FACTORS
Both Teltrend stockholders and Westell stockholders should carefully
consider the following important factors, in addition to those discussed
elsewhere in this document, and in the documents that Westell and Teltrend have
filed with the SEC which are incorporated by reference, to determine whether to
vote for the proposals relating to the merger.
SINCE THE MARKET PRICE OF THE WESTELL CLASS A COMMON STOCK FLUCTUATES, TELTREND
STOCKHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE WESTELL CLASS A COMMON
STOCK THEY WILL RECEIVE IN THE MERGER.
At the time the merger is completed, each share of Teltrend common
stock will be converted into the right to receive 3.3 shares of Westell Class A
Common Stock. This exchange ratio of shares of Teltrend common stock for shares
of Westell Class A Common Stock is fixed and will not be adjusted in the event
of any increase or decrease in the market price of either the Teltrend common
stock or the Westell Class A Common Stock. The price of either the Teltrend
common stock or the Westell Class A Common Stock on the date of the merger may
vary from its price on the date of this joint proxy statement/prospectus and on
the dates of the stockholder meetings. The variations may be the result of
changes in the business, operations or prospects of Teltrend or Westell, market
assessments of the likelihood that the merger will be completed and its timing,
regulatory considerations, general market and economic conditions and other
factors. As a result, the value of the Westell Class A Common Stock received by
Teltrend stockholders in the merger may be higher or lower than the market value
of the Westell Class A Common Stock at the time you vote or at the date of this
joint proxy statement/prospectus.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS.
In determining that the issuance of shares of Westell Class A Common
Stock to the Teltrend stockholders and the merger is fair to and in the best
interests of their stockholders, both Boards considered, among other things, the
financial benefits, operating efficiencies and synergies expected to result from
the completion of the merger.
A successful combination of the two companies will require, among other
things, integration of the two companies' respective:
o technological expertise and licensed technologies;
o strategic alliances;
o products and product development efforts;
o sales and distribution channels;
o manufacturing and sourcing;
o key personnel; and
o management information systems.
Neither company has been involved in a strategic merger of this size,
in which effective integration of corporate cultures may be especially important
over the long term to achieve the benefits of the merger. This integration may
not be successfully accomplished. Moreover, the integration of the operations
following the merger will require the dedication of management and other
personnel which may distract their attention from the day-to-day business of the
combined companies, the development or acquisition of new products and the
pursuit of other business acquisition activities. Failure to successfully
accomplish the integration of the two companies' operations and technologies, or
a prolonged delay in accomplishing a reasonable measure of integration, may have
a material adverse effect on the combined company.
In addition, as a consequence of the merger, both the Westell
stockholders and the Teltrend stockholders will lose the opportunity to invest
in the development and exploitation of their company's products on a stand-alone
basis. Further, with respect to Teltrend, the combined company will have
different management than Teltrend's current management, and consequently the
management of the combined company may make strategic and operational decisions
that differ from those of Teltrend's current management. It is possible that
<PAGE>
either Westell or Teltrend, if it were to remain independent, could achieve
economic performance superior to that of the combined company.
WESTELL HAS INCURRED AND CONTINUES TO EXPECT LOSSES.
Due to Westell's significant ongoing investment in digital subscriber
line technology, which can be used by telephone companies and other service
providers to increase the transmission speed and capacity of copper telephone
wires, it has incurred and anticipates that its losses may extend through March
31, 2000. To date, Westell has incurred operating losses, net losses and
negative cash flow on both an annual and quarterly basis. For the fiscal year
ended March 31, 1999, Westell had net losses of approximately $35.0 million. For
the six months ended September 30, 1999, Westell had net losses of approximately
$6.5 million.
In addition, Westell expects the combined company to continue to
evaluate new product opportunities and engage in extensive research and
development activities. As a result, the combined company will continue to
invest heavily in research and development and sales and marketing, which will
adversely affect its short-term operating results. Westell can offer no
assurances that it will achieve profitability in the future.
WESTELL IS CONTROLLED BY A LIMITED NUMBER OF STOCKHOLDERS, WHOSE ACTIONS FROM
TIME TO TIME COULD LIMIT THE RIGHTS OF TELTREND STOCKHOLDERS AS HOLDERS OF
WESTELL CLASS A COMMON STOCK.
At _________, 2000, Robert C. Penny III and Melvin J. Simon, as trustees
of a voting trust containing Westell Class B Common Stock held for the benefit
of the Penny family and the Simon family, had the exclusive power to vote over
80% of the votes entitled to be cast by the holders of Westell 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 them from transferring any Class B Common Stock or their beneficial
interests in the voting trust without first offering such 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 Westell stockholders for approval. This
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 Westell Class A Common Stock might otherwise receive a premium for
their shares over the then-current market price.
Upon completion of the merger, we expect that Messrs. Penny and Simon,
as trustees, will continue to have effective control over Westell as described
above. This is because, even after Westell issues approximately 19 million
shares of Class A Common Stock to Teltrend stockholders in the merger, Messrs.
Penny and Simon will continue to have the exclusive power to vote over 68% of
the votes entitled to be cast by the holders of Westell common stock.
Concurrently with the execution of the merger agreement, Messrs. Penny
and Simon, individually and as co-trustees of the voting trust, entered into an
agreement with Teltrend under which each of them has agreed to vote all of the
capital stock of Westell for which he has the power to vote in favor of the
merger proposals if Westell's public stockholders vote in favor. For purposes of
the voting agreement, Westell's public stockholders include all holders of
Westell Class A Common Stock, other than Messrs. Penny and Simon and members of
their families and any officers or directors of Westell. In addition, the
co-trustees may also vote in favor of the merger proposals even if a majority of
the public stockholders reject the proposals. The co-trustees have indicated
their current intention to vote as the majority of Westell's non-affiliated,
public stockholders vote with respect to the proposals. For a description of the
voting agreement, you should see "Voting Agreement with Westell Controlling
Stockholders" on page II-18.
FOLLOWING THE MERGER, TELTREND STOCKHOLDERS MAY BE ADVERSELY AFFECTED BY FUTURE
ISSUANCES AND SALES OF WESTELL'S CLASS A COMMON STOCK.
<PAGE>
Sales of substantial amounts of Westell Class A Common Stock in the
public market following the merger could adversely affect the market price of
the Westell Class A Common Stock. Westell has outstanding the following
obligations which require it to issue additional shares of Class A Common Stock:
o Westell has outstanding options to purchase approximately 3.8
million shares of Westell Class A Common Stock which were granted
to employees from time to time as part of Westell's compensation
programs. Upon the merger, outstanding options to purchase
Teltrend commons stock will be converted into options to purchase
Westell Class A Common Stock, resulting in additional options to
purchase approximately 3.1 million shares of Westell Class A
Common Stock becoming outstanding.
o Westell has reserved 131,825 shares of Class A Common Stock for
issuance under its employee stock purchase plan.
o The 19,124,869 shares of Westell Class B Common Stock outstanding
are convertible into an equal number of shares of Class A Common
Stock under circumstances which are under the control of the
holders thereof. Messrs. Penny and Simon, as co-trustees of the
Westell Technologies, Inc. Voting Trust, are entitled to require
Westell to register for sale with the SEC the shares of Class A
Common Stock issuable upon conversion of the Class B Common
Stock.
o In April 1999, Westell issued $20 million of debentures that are
convertible into shares of Class A Common Stock. Currently, these
debentures are convertible into 3,138,731 shares, which upon
issuance would represent approximately 18% of Westell's currently
outstanding Class A Common Stock and 3% of Westell's current
voting power. In addition, in connection with the issuance of the
debentures Westell issued warrants to purchase 909,091 shares of
Class A Common Stock which currently have an exercise price of
$5.92.
Westell's convertible debentures are convertible into a number of
shares of Class A Common Stock 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 the Class A Common Stock at the time
of conversion, except that the market price can be imposed only
under specific conditions.
The number of shares of Class A Common Stock that may ultimately be issued upon
conversion is presently indeterminable and could fluctuate significantly. To
illustrate the potential dilution that may occur upon conversion of the
convertible debentures, the following table sets forth the number of shares of
Class A Common Stock that are convertible from the convertible debentures if the
conversion price is $6.372, which is the initial conversion price, $4 and $2 per
share.
<TABLE>
SHARES ISSUABLE FROM PRE-MERGER PRE-MERGER
CONVERTIBLE DEBENTURES PERCENTAGE OWNERSHIP OF PERCENTAGE OWNERSHIP OF
CONVERSION PRICE AND WARRANTS CLASS A COMMON STOCK TOTAL VOTING POWER
- ---------------- ------------ -------------------- ------------------
<S> <C> <C> <C>
$6.372 (the initial 4,047,822 18.8% 4.1%
conversion price)
$4.00 5,909,091 25.3% 5.9%
$2.00 10,909,091 38.5% 10.4%
</TABLE>
The variable conversion price formula could affect the Class A Common Stock as
follows:
o If Westell's Class A Common Stock trades at a price less than the
variable conversion price, which is initially $6.372 per share,
then the convertible debentures will be convertible into shares
of 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. The number of shares of Class A Common Stock issuable
upon conversion of
<PAGE>
the convertible debentures will be inversely proportional to the
market price of the Class A Common Stock at the time of
conversion.
o To the extent that the holders of the convertible debentures
convert and then sell their Class A Common Stock, the Class A
Common Stock price may decrease due to the additional shares in
the market, allowing holders to convert the convertible
debentures into greater amounts of Class A Common Stock, further
depressing the stock price.
o The interest payable on the convertible debentures may be paid in
cash, additional convertible debentures or Class A Common Stock
at Westell's option. In this regard, the lower the Class A Common
Stock price, the more shares of Class A Common Stock the holders
of the convertible debentures will receive in payment of
dividends.
o The significant downward pressure on the price of the Class A
Common Stock as the debenture holders convert and sell material
amounts of Class A Common Stock could encourage short sales by
the holders or others, placing further downward pressure on the
price of the Class A Common Stock.
The warrants are also subject to anti-dilution protection, which may
result in the issuance of more shares than originally anticipated if Westell
issues securities at less than market value or the applicable exercise price.
These factors may result in substantial future dilution to the holders of
Westell's Class A Common Stock, including, following the merger, the former
Teltrend stockholders. Westell has filed a registration statement with the SEC
to register the resale of the shares issuable upon conversion of the debentures
and exercise of the warrants.
As a result of these obligations, Teltrend stockholders may be subject
to substantial dilution after the merger as holders of Westell Class A Common
Stock. This dilution could adversely impact Teltrend stockholders by disrupting
the market for, and causing a decline in the trading price of, the Westell Class
A Common Stock.
THE COMBINED COMPANY WILL DEPEND ON DIGITAL SUBSCRIBER LINE MARKET ACCEPTANCE
AND GROWTH FOR FUTURE SUCCESS.
Westell expects to continue to invest significant resources in the
development of digital subscriber line ("DSL") products. Because the DSL market
is in its early stages, Westell's DSL revenues have been difficult to forecast.
If the DSL market fails to grow or grows more slowly than anticipated, then the
combined company's business, revenues and operating results would be materially
adversely affected.
Customers have only recently begun to consider implementing DSL
products in their networks. Westell has shipped most of its DSL products for
trials and early deployment. Most of Westell's customers are in initial service
deployments and are not contractually bound to purchase Westell's DSL systems in
the future. Westell is unable to predict whether these initial service
deployments or other technical or marketing trials will be successful and when
significant commercial deployment of Westell's DSL products will begin, if at
all. The timing of DSL orders and shipments can significantly impact the
combined company's revenues and operating results.
Even if the combined company's customers adopt policies favoring
full-scale implementation of DSL technology, the combined company's DSL-based
sales may not become significant. There is no guaranty that customers will
select the combined company's DSL products instead of competitive products. If
the combined company fails to significantly increase its DSL sales, then its
business, operating results and financial condition will suffer.
PRICING PRESSURES ON PRODUCTS MAY ADVERSELY AFFECT THE COMBINED COMPANY'S
PROFITABILITY.
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
<PAGE>
o suppliers providing DSL products at a lower price as part of a
sale of a package of products and/or services that include but
are not limited to DSL products.
Westell is offering DSL products with a gross profit substantially
lower than its other products. Such pricing will have a negative impact on the
gross margins of the combined company on a substantial portion of its product
sales unless and until it can reduce the costs associated with its DSL products.
Westell believes that the DSL product costs may decrease when:
o more cost-effective transceiver and microprocessor technologies
are available;
o product design efficiencies are obtained; and
o additional economies of scale are obtained related to increased
volume.
There is no guaranty that the combined company will be able to secure
significant additional orders and reduce per unit product costs of DSL products.
The combined company could continue to experience low gross margins in
connection with sales of DSL products even if its DSL unit volume increases. Low
gross margins from DSL products could result in fluctuations in quarterly
operating results and would materially and adversely affect the combined
company's profitability and ability to implement its business goals.
EVOLVING INDUSTRY STANDARDS MAY ADVERSELY AFFECT THE COMBINED COMPANY'S 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 Westell has not internally developed a transceiver technology
for its products, it is dependent on transceiver technologies from third
parties. Absent the proper relationships with key transceiver technology
vendors, the combined company's products may not comply with the developing
standards for DSL. If customers require standards-based products that require
transceiver technologies not available to the combined company under reasonable
terms, then its DSL revenues would significantly decrease and its business and
operating results would materially suffer.
The combined company will continue to rely on third party suppliers for
access to transceiver technologies for new DSL products. Since standards have
not been established such products, there can be no assurance that
standards-compliant transceiver technologies will be available to the combined
company 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. Delay in the announcement of standards
would materially and adversely impact sales of the combined company's DSL
product offerings and could have a material adverse effect on its business and
operating results.
THE COMBINED COMPANY'S PRODUCTS WILL FACE COMPETITION FROM OTHER EXISTING
PRODUCTS, PRODUCTS UNDER DEVELOPMENT AND CHANGING TECHNOLOGY, AND THE COMBINED
COMPANY MUST DEVELOP NEW COMMERCIALLY SUCCESSFUL PRODUCTS TO ACHIEVE ITS
BUSINESS GOALS AND GENERATE REVENUE.
The markets for Westell's and Teltrend's products are characterized by:
o intense competition,
o rapid technological advances,
o evolving industry standards,
o changing demographics such as shifts to home offices,
o modifications in end-user requirements,
o frequent new product introductions and enhancements, and
o evolving telephone company service offerings.
<PAGE>
New product introductions or changes in telephone company services
could render Westell's existing products and products under development obsolete
and unmarketable. For example, High Bit-Rate DSL, a product that enhances the
signal quality of the transmission over copper wire, may reduce the demand for
Westell's traditional T-1 products. These products accounted for at least 50% of
its revenues in each of the last three fiscal years. Further, the demand for
many of Westell's traditional analog products is decreasing, and will likely
continue to decrease, as high capacity digital transmission becomes less
expensive and more widely deployed. Many of Teltrend's products face similar
trends. There can be no assurance that the combined company 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. The combined company's future
success will largely depend upon its ability to continue to enhance Westell's
and Teltrend's existing products and to successfully develop and market new
products on a cost-effective and timely basis.
Westell's and Teltrend's current product offerings apply primarily to
the delivery and monitoring of digital communications over copper wire in the
local access network. The combined company expects that the increasing
deployment of fiber and wireless broadband transmission in the local access
network will reduce the demand for these 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 the combined company must develop new products to meet the demands
of these emerging transmission media and new local access network providers.
If the combined company's products become obsolete or fail to gain
widespread commercial acceptance due to competing products and technologies,
then its product revenues would significantly decrease and its business and
operating results will be materially adversely affected.
THE COMBINED COMPANY MAY EXPERIENCE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS.
Westell's and Teltrend's past sales have resulted from their ability to
anticipate changes in technology, industry standards and telephone company
service offerings, and to develop and introduce new and enhanced products and
services. The combined company's continued ability to adapt to such changes will
be a significant factor in maintaining or improving its competitive position and
its prospects for growth. 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;
o reliance on third-party technology for the development of new
products; and
o consolidation among the customer base resulting in operational
disruptions.
There can be no assurance that the combined company will successfully introduce
new products on a timely basis or achieve sales of new products in the future.
If the combined company fails to deploy new products on a timely basis, then its
product sales will decrease, its quarterly operating results could fluctuate,
and its competitive position and financial condition would be materially and
adversely affected.
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 Westell's and Teltrend's competitors and customers.
Westell cannot provide any assurances that the combined company will be able to
compete successfully in an increasingly consolidated telecommunications
industry. Any heightened competitive pressures that the combined company may
<PAGE>
face may have a material adverse effect on its business, prospects, financial
condition and result of operations.
THE FAILURE TO MAINTAIN AND FURTHER DEVELOP PARTNERS AND ALLIANCES WOULD
ADVERSELY AFFECT THE COMBINED COMPANY'S BUSINESS.
Instead of directly competing with large telecommunications equipment
suppliers, Westell has begun to develop and maintain partnerships and alliances
with other companies in order to secure complementary technologies, to lower
costs, and to better market and sell products. These partnerships and alliances
provide important resources and channels for the combined company to compete
successfully. Some of Westell's partnerships provide it with third party
technology that it relies on to manufacture its products. In addition, instead
of directly competing with large suppliers such as Lucent Technologies and
Fujitsu in the DSL market, Westell has entered into alliances with these
companies to offer products within a package of products sold by these companies
to telephone companies. Westell cannot provide any assurances that these
partnerships will continue in the future. As competition increases in the DSL
market, these alliances will become even more important to the combined company.
A loss of one or more partnerships and alliances could affect the combined
company's ability to sell its products and therefore could materially adversely
affect its business and operating results.
WESTELL'S AND TELTREND'S LACK OF BACKLOG MAY AFFECT THE COMBINED COMPANY'S
ABILITY TO ADJUST TO AN UNEXPECTED SHORTFALL IN ORDERS.
Because Westell and Teltrend each generally ship products within a
short period after receipt of an order, neither company typically has a material
backlog of unfilled orders, and revenues in any quarter are substantially
dependent on orders booked in that quarter. Westell's and Teltrend's expense
levels are based in large part on anticipated future revenues and are relatively
fixed in the short-term. Therefore, the combined company may be unable to adjust
spending in a timely manner to compensate for any unexpected shortfall of
orders. Accordingly, any significant shortfall of demand in relation to
expectations or any material delay of customer orders would adversely affect
quarterly operating results and have an immediate adverse impact on the combined
company's business and operating results.
THE COMBINED COMPANY WILL DEPEND ON A LIMITED NUMBER OF CUSTOMERS WHO ARE ABLE
TO EXERT A HIGH DEGREE OF INFLUENCE OVER IT.
Westell and Teltrend each have depended, and the combined company will
continue to depend on a small number of customers for substantially all of its
revenues. these customers consist primarily of the large regional bell operating
companies, which are the telephone companies that emerged from the break-up of
AT&T. Sales to the regional bell operating companies accounted for 61.9%, 51.1%
and 46.6% of Westell's revenues in fiscal 1997, 1998 and 1999, respectively and
95.8%, 81.7% and 75.5% of Teltrend's revenues in fiscal 1997, 1998 and 1999,
respectively. Consequently, the combined company's 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 its products.
The regional bell operating companies and Westell's and Teltrend's
other customers are significantly larger and are expected to be able to exert a
high degree of influence over the combined company. Customers purchasing
Westell's or Teltrend's products may generally reschedule orders without penalty
to the customer. Even if demand for the combined company's 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 the
combined company's business and operating results.
<PAGE>
Any attempt by a regional bell operating company or other customers to
seek out additional or alternative suppliers or to undertake the internal
production of products would have a material adverse effect on the combined
company's business and operating results. The loss of any customer could result
in an immediate decrease in product sales and materially and adversely affect
the combined company's business.
Conference Plus, Westell's 88% owned subsidiary, has a customer base
that is very concentrated as well, with its ten customers representing a large
portion of revenue. Customers of Conference Plus have expanded their
requirements for its 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.
WESTELL'S AND TELTREND'S CUSTOMERS HAVE LENGTHY PURCHASE CYCLES WHICH AFFECT
THEIR ABILITY TO SELL PRODUCTS.
Prior to selling products to telephone companies, Westell and Teltrend
each 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, each company is continually submitting successive
generations of its current products as well as new products to its customers for
approval. The length of the approval process can vary and is affected by a
number of factors, including the:
o 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 the combined company's business and operating results. While
Westell and Teltrend have each been successful in the past in obtaining product
approvals from their customers, there is no guaranty that such approvals or that
ensuing sales of such products will continue to occur.
WESTELL AND TELTREND ARE DEPENDENT ON, AND WOULD NOT BE ABLE TO COMPETE WITHOUT,
THIRD PARTY TECHNOLOGY.
Many of Westell's and Teltrend's products incorporate technology
developed and owned by third parties. Consequently, each company must rely upon
third parties to develop and introduce technologies which enhance its current
products and to develop new products. Any impairment or termination of Westell's
or Teltrend's relationship with any licensors of technology would force the
combined company to find other developers on a timely basis or develop its own
technology. There is no guaranty that the combined company will be able to
obtain the third-party technology necessary to continue to develop and introduce
new and enhanced products, that it will obtain third-party technology on
commercially reasonable terms or that it will be able to replace third-party
technology in the event such technology becomes unavailable, obsolete or
incompatible with future versions of the combined company's products. The
combined company would have severe difficulty competing if it cannot obtain or
replace the third-party technology used in its products. Any absence or delay
would materially adversely affect the combined company's business and operating
results.
For example, Westell's ability to produce DSL products is dependent
upon third party transceiver technologies. Westell's 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
<PAGE>
to acquire. If Westell's DSL transceiver licensors fail to deliver implementable
or standards compliant transceiver solutions to it and other alternative sources
of DSL transceiver technologies are not available to it at commercially
acceptable terms, then the combined company's business and operating results
would be materially and adversely affected.
WESTELL AND TELTREND ARE DEPENDENT ON SOLE OR LIMITED SOURCE SUPPLIERS AND COULD
NOT SELL THEIR PRODUCTS WITHOUT THESE SUPPLIERS.
Integrated circuits and other electronic components used in Westell's
and Teltrend's products are currently available from only one source or a
limited number of suppliers. For example, Westell currently depends on GlobeSpan
Technologies, Alcatel Microelectronics and Analog Devices, Inc. to provide
critical integrated transceiver circuits used in its DSL products. In addition,
some of the electronic components used in Westell's and Teltrend's products are
currently in short supply and are provided on an allocation basis to Westell and
other users based upon past usage. There is no guaranty that the combined
company will be able to continue to obtain sufficient quantities of integrated
circuits or other electronic components as required, or that such components, if
obtained, will be available to the combined company on commercially reasonable
terms. Integrated transceiver circuits and electronic components are key
components in all of Westell's and Teltrend's products and are fundamental to
the combined company's business strategy of developing new and succeeding
generations of products at reduced unit costs without compromising functionality
or serviceability. In the past Westell has experienced delays in the receipt of
key components which have resulted in delays in related product deliveries.
Westell anticipates 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 the combined company's customer relationships and its business
and operating results.
WESTELL'S AND TELTREND'S SERVICES ARE AFFECTED BY UNCERTAIN GOVERNMENT
REGULATION AND CHANGES IN CURRENT OR FUTURE LAWS OR REGULATIONS COULD RESTRICT
THE WAY THE COMBINED COMPANY OPERATES ITS BUSINESS.
Many of Westell's and Teltrend's customers are subject to regulation
from federal and state agencies, including the FCC and various state public
utility and service commissions. While such regulations do not affect Westell
and Teltrend directly, the effects of such regulations on their customers may
adversely impact the combined company's 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 the combined company's penetration of local access markets. The
Telecommunications Act lifted certain restrictions on telephone companies'
ability to provide interactive multimedia 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 multimedia services
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,
the combined company's business and operating results may also be adversely
affected by the imposition of tariffs, duties and other import restrictions on
components that it obtains from non-domestic suppliers or by the imposition of
export restrictions on products that it sells internationally. Internationally,
governments of the United Kingdom, Canada, Australia and numerous other
countries actively promote and create competition in the telecommunications
industry. Changes in current or future laws or regulations, in the U.S. or
elsewhere, could materially and adversely affect the combined company's 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 Westell's and Teltrend's
largest customers, may become the combined company's competitors as well.
<PAGE>
WESTELL'S FAILURE TO MANAGE THE COMBINED COMPANY'S GROWTH EFFECTIVELY COULD
IMPAIR ITS ABILITY TO SUPPLY AND SUPPORT THE MANUFACTURE OF LARGE VOLUMES OF DSL
PRODUCTS.
Westell is in the process of planning for the manufacturing
capabilities necessary to supply and support large volumes of DSL products and
in the future the combined company 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
Westell believes that alternative subcontractors or sources could be developed
if necessary, the use of subcontractors could result in material delays or
interruption of supply as a consequence of required re-tooling, retraining and
other activities related to establishing and developing a new subcontractor or
supplier relationship. Any material delays or difficulties in connection with
increased manufacturing production or the use of subcontractors could have a
material adverse effect on the combined company's business and operating
results. The combined company's failure to effectively manage its growth would
have a material adverse effect on its business and operating results.
THE COMBINED COMPANY'S FAILURE TO RETAIN KEY PERSONNEL AND HIRE ADDITIONAL KEY
PERSONNEL COULD ADVERSELY AFFECT ITS ABILITY TO SUCCESSFULLY COMPETE, DEVELOP
AND SELL NEW PRODUCTS.
Because of Westell's and Teltrend's need to continually evolve their
businesses with new product developments and strategies, the combined company's
success will be dependent, in part, on its ability to attract and retain
qualified technical, marketing, sales and management personnel. To remain
competitive in the telecommunications industry, the combined company 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 Westell's executive
officers have severance agreements in which the officers have agreed not to
compete with it and not to solicit any of its employees for a period of one year
after termination of the officer's employment in most circumstances, Teltrend
generally does not have similar noncompetition and nonsolicitation agreements
for its employees and Westell does not have similar agreements for other
employees who are important in its product development and sales. The combined
company's inability to attract and retain additional key employees or the loss
of one or more of Westell's or Teltrend's current key employees could materially
adversely affect the combined company's ability to successfully develop new
products and implement its strategy.
WESTELL'S STOCK PRICE IS VOLATILE.
Westell's 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 Westell's historical and anticipated quarterly and annual
operating results;
o Variations between Westell's actual results and analyst and
investor expectations;
o Announcements by Westell or others and developments affecting our
business;
o Investor perceptions of Westell 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 the combined company's performance.
This volatility may result in a material decline in the market price of the
Westell Class A Common Stock, and may have little relationship to the combined
company's financial results or prospects.
<PAGE>
THE COMBINED COMPANY'S QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE
SIGNIFICANTLY AND SHOULD NOT BE RELIED UPON AS INDICATIONS OF FUTURE
PERFORMANCE.
Westell expects to continue to experience significant fluctuations in
quarterly operating results. Due to the factors set forth below and elsewhere
contained in these "Risk Factors," sales to Westell's and Teltrend's largest
customers have fluctuated and are expected to fluctuate significantly between
quarters. Sales to customers typically involve large purchase commitments, and
customers purchasing Westell's or Teltrend's products may generally reschedule
or cancel orders without penalty. As a result, Westell's quarterly operating
results have fluctuated significantly in the past three fiscal years. Other
factors that have had and may continue to influence Westell's quarterly
operating results include:
o the impact of changes in the DSL customer mix or product mix
sold;
o timing of product introductions or enhancements by the combined
company or its competitors;
o changes in operating expenses which can occur because of product
development costs, timing of customer reimbursements for research
and development, pricing pressures and other reasons;
o write-offs for obsolete inventory; and
o the other risks that are contained in this "Risk Factors"
section.
Due to Westell's fluctuations in quarterly results, it believes that
period-to-period comparisons of its quarterly operating results are not
necessarily meaningful. Quarterly fluctuations make it more difficult to
forecast the combined company's revenues. It is likely that in some future
quarters Westell's operating results will be below the expectations of
securities analysts and investors, which may adversely affect its stock price.
This occurred in fiscal 1999. Westell attempt to address this possible
divergence through its public announcements and reports. The degree of
specificity Westell can offer in such announcements, however, and the likelihood
that any forward-looking statements it makes will prove correct, can and will
vary. As long as the combined company continues 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.
CONFERENCE PLUS'S LARGE COMPETITORS COULD ADVERSELY AFFECT CONFERENCE PLUS'S
ABILITY TO MAINTAIN OR INCREASE ITS MARKET SHARE.
Conference Plus, Westell's 88% owned subsidiary, 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 and other
entrants 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 international expansion;
o retention and addition of key personnel; and
o evolving technological capability.
Any increase in competition could reduce Westell's gross margin, require
increased spending on research and development and sales and marketing, and
otherwise materially adversely affect the combined company's business and
operating results. Westell is currently considering a proposal to spin-off
Conference Plus in the next 12 to 24 months.
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements and other information contained in this joint proxy
statement/prospectus or any document incorporated by reference herein relating
to the financial condition, results of operations, cash flows, business
strategies, operating efficiencies or synergies, growth opportunities, plans and
objectives of management and other matters that are not historical facts are
hereby identified as forward-looking statements under the Private Securities
Litigation Reform Act of 1995. The words will, should, could, anticipate,
believe, plan, estimate, expect, intend, project, forecast, and other similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this joint
proxy statement/prospectus and the documents incorporated herein by reference.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause results and conditions to differ materially.
Important factors that could cause actual results to differ materially
from the expectations reflected in the forward-looking statements include those
described in the "Risk Factors" section beginning on page I-13. In addition, the
forward-looking statements are subject to uncertainties relating to the
synergies, charges and expenses associated with the merger. Westell and Teltrend
expressly disclaim any duty to update any forward-looking statements to reflect
events or circumstance after the date of this joint proxy statement/prospectus
or to reflect the occurrence of unanticipated events.
<PAGE>
CHAPTER TWO
THE TRANSACTION
THE COMPANIES
WESTELL TECHNOLOGIES, INC.
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. Westell designs, manufactures, markets and services 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. This is commonly referred to as the local
loop or the local access network. Westell also markets its products and services
to other telecommunications and information service providers seeking direct
access to end user customers.
Traditionally, telephone companies have provided services using analog
transmission, which involves the transmission of wave signals that correspond to
the information being transmitted. Analog transmission, however, is unable to
provide the requisite volume, speed and reliability to support the growing
demands for services over telephone wires. In contrast, digital transmission
makes it possible to reduce all forms of images, sounds and data to simple
digital signals of ones and zeros and consequently permits high-speed,
high-volume and highly reliable data transmission. In the U. S., the digital
conversion of the analog network has been built on the format known as T-1. T-1
transmission utilizes a data rate that is 24 times faster than standard analog
transmission, or a rate equal to 1.54 megabits per second. Further, T-1
transmission can be aggregated or subdivided into channels that can deliver data
transmission tailored to specific end user requirements.
Westell's products can be categorized into three groups:
o HiCAP products: products that maintain, repair and monitor
special circuits in the local loop that have higher capacity than
normal telephone circuits. Special circuits are those that enable
high-speed digital transmission at rates that are called T-1 or
DS-3 rates in the U.S. and E-1 rates outside the U.S.
o CPE (Customer Premise Equipment) products: modems that reside at
end-user locations based on digital subscriber line (DSL)
technologies. DSL technology allows the simultaneous transmission
of data at speeds up to 140 times faster than traditional analog
telephone service in one direction, or 8 megabits per second, and
up to 17 times faster than traditional analog telephone service
in the reverse direction, or 1 megabit per second, while also
providing traditional analog telephone service over a single pair
of copper wires at distances of up to 18,000 feet, depending on
the transmission rates.
o Transport systems products: products that include both DSL
equipment that is used in telephone companies' and service
providers' equipment offices, commonly referred to as central
offices, as well as products that monitor, maintain, and
safeguard wireless networks and the demarcation points between
wireless networks and traditional phone networks that are used in
central offices, in outdoor locations and on customers' premises.
Conference Plus, Inc., Westell's 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. Westell is currently considering a proposal to spin-off
Conference Plus in the next 12 to 24 months.
Westell was incorporated in 1980 under the laws of the State of
Delaware and has its principal executive offices at 750 North Commons Drive,
Aurora, Illinois 60504 (telephone number: 630-898-2500). Internet users can
obtain information about Westell and its services at http://www.westell.com.
<PAGE>
TELTREND INC.
Like Westell, Teltrend designs, manufactures and markets a broad range
of transmission products that are used by telephone companies to provide data
and voice services over the existing telephone network, primarily in the local
loop. Teltrend also manufactures a wide range of products that convert, change
and amplify transmission protocols and are used worldwide in public and private
communications networks. Teltrend's products provide transmission of data and
voice over the copper-wire network and permit the telephone companies to
maximize use of the existing infrastructure of copper wireline.
Teltrend manufactures a broad range of products necessary to provision
the local loop which are designed for installation either at the end-user's
premises, along the copper wires of the local loop or at the telephone
companies' central offices. Teltrend's principal products are as follows:
o High capacity products: Teltrend's high capacity products include
traditional T-1 line and office repeaters, which are installed to
restore and amplify T-1 signals that degrade as they are
transmitted, and T-1 network interface units and associated
mountings. Its products also include , CellPak(TM) units for
cellular and wireless base station sites, and high bit-rate
digital subscriber line ("HDSL") systems, which are an alternate
method of delivering T-1 services in the local loop that do not
require line conditioning or the installation of mid-span
repeaters for distances up to 12,000 feet.
o Channelized products: Teltrend's channelized products include
digital loop carrier and voice frequency products, including a
small digital loop carrier system, plug-in units for existing
digital loop carrier systems and traditional voice frequency
products. Digital loop carriers are deployed within the local
loop to interface fiber-optic or some other transmission medium
to the copper wire line that runs to an end-user's premises.
Teltrend's products also include integrated services digital
network ("ISDN")/digital data system ("DDS") products, including
ISDN and DDS line repeaters, and ISDN and DDS D-4 circuit
assemblies commonly referred to as channel units. ISDN and DDS
are alternate technologies used to provide digital services in
the local loop at rates from 64 to 128 kbit/sec.
o Conversion products: These products include network interfacing
and protocol conversion products.
During the first nine months of Teltrend's fiscal year ended July 31,
1999, Teltrend also offered a line of connections for local area computer
networks, remote network access solutions and secure networking products which
it referred to as its packet switched products business. On May 28, 1999,
Teltrend sold substantially all of the assets of its packet switched products
business.
Teltrend was incorporated in 1987 under the laws of the State of
Delaware and has its principal executive offices at 620 Stetson Avenue, St.
Charles, Illinois 60174 (telephone number: 630-377-1700). Internet users can
obtain information about Teltrend and its services at http://www.teltrend.com.
THETA ACQUISITION CORP.
Theta Acquisition Corp. is a Delaware corporation formed by Westell in
December 1999 under the laws of the State of Delaware solely for the purpose of
merging into Teltrend. Theta Acquisition Corp. is wholly owned by Westell. The
mailing address of Theta Acquisition Corp.'s principal executive offices is c/o
Westell Technologies, Inc., 750 North Commons Drive, Aurora, Illinois 60504
(telephone number: 630-898-2500).
<PAGE>
THE MERGER
GENERAL
Each of the Westell Board and the Teltrend Board is using this joint
proxy statement/prospectus to solicit proxies from the holders of its common
stock for use at the Westell special meeting or the Teltrend special meeting, as
the case may be. See Chapter III - "The Meetings and Voting."
The merger agreement provides for the merger of a subsidiary of Westell
with and into Teltrend. As a result of the proposed merger, Teltrend will become
a wholly owned subsidiary of Westell. Based on the closing price of Westell
Class A Common Stock on December 10, 1999, the last trading day before we
publicly announced the signing of the merger agreement, had the merger taken
place each share of Teltrend common stock would have been converted into the
right to receive 3.3 shares of Westell Class A Common Stock with a value of
$10.75 per share. This represented a 53% premium over the closing price of
Teltrend common stock on that date. Had the merger taken place on __________,
2000, the last available trading date before the printing of this joint proxy
statement/prospectus, each share of Teltrend common stock would have been
converted into the right to receive 3.3 shares of Westell Class A Common Stock
with a value of $________ per share, based on that day's closing price for
Westell. When we complete the merger, the market value of consideration into
which each share of Teltrend common stock is converted in the merger may be more
or less than either of these amounts, depending on the market value of Westell
Class A Common Stock at that time.
BACKGROUND OF THE MERGER
In early October 1998, a representative of Teltrend's investment
banking firm, SoundView, contacted Marc Zionts, Westell's chief executive
officer, and expressed Teltrend's interest in exploring the acquisition of
Westell's HiCAP business (as described in the section entitled "Westell
Technologies, Inc." on page II-1). At this time, Westell was exploring its
options for improving its operating efficiencies, and expansion was selected as
one option to consider. In this regard, Westell had reviewed numerous companies
in the Chicago area, including Teltrend, and had concluded that Teltrend's
complementary technology, customer base and close proximity provided the best
option for expansion. As a result of the Teltrend inquiry, discussions were held
between Westell and Teltrend to explore possibilities of a strategic business
transaction.
Throughout November and December 1998, J. Nelson, Westell's president,
and Howard Kirby, Teltrend's chief executive officer, met and discussed mutual
business opportunities. Throughout these discussions, Mr. Kirby conveyed
Teltrend's desire to purchase Westell's HiCAP and non-DSL transport businesses,
but expressed a growing interest in a potential merger.
In December 1998, Teltrend signed an agreement with SoundView to pursue
merger and acquisition opportunities.
Discussions between Westell and Teltrend ceased until March 1999, when
Messrs. Nelson and Kirby again agreed that there were compelling synergies that
could be achieved in a merger.
In late May, Westell contacted its investment bankers, Goldman Sachs,
to assist Westell in determining whether it should pursue continued merger
discussions with Teltrend. Westell determined that such a merger still made
sense to pursue. As a result, Westell management continued developing models
using publicly available data to ascertain the validity of such a business
combination. Westell also retained Hambrecht & Quist, investment bankers, to
review the analysis prepared by Westell's management. Based upon the findings of
management and both investment banking firms, the Westell board requested that
Westell management re-engage in discussions with Teltrend management.
On June 1, 1999, Mr. Zionts, Mr. Nelson and Melvin J. Simon, a director
of Westell, met with Mr. Kirby and Douglas Hoffmeyer, Teltrend's chief financial
officer to discuss possible valuations in a merger transaction. On August 11,
1999, Mr. Nelson and Mr. Kirby met again to discuss a possible transaction.
Discussions continued between Teltrend and Westell throughout August.
<PAGE>
On September 9, 1999, Westell and Teltrend executed a confidentiality
agreement. Also on that date, a meeting was held with executives from Westell
(Messrs. Zionts and Nelson, together with Marc Hafner, an executive vice
president of Westell and Bill Noll, a senior vice president of Westell) and
Teltrend (Messrs. Kirby and Hoffmeyer, together with Jack Parker, a senior vice
president of Teltrend), with investment bankers from both companies present. At
this meeting, Westell presented a general overview of its company and business
units and products, a summary of its manufacturing capability and facility
capacity and a financial summary and perspective on the benefits of the proposed
merger. Teltrend presented its strategic directions for fiscal years 2000-2002,
including an overview of Teltrend's base products and growth targets by business
unit. Teltrend also presented a financial update and its perspective on the
synergy that could be achieved in a merger.
On September 17, 1999, Westell presented Teltrend with a non-binding
proposal outlining the terms under which Westell was prepared to enter into
merger discussions. From September 21 through November 2, representatives of the
parties and their financial advisors negotiated the terms of the non-binding
term sheet, including the exchange ratio, board representation and treatment of
options. In the course of these negotiations, on October 22, 1999, Messrs.
Zionts and Nelson, together with Robert Gaynor, Westell's Chairman of the Board
and then chief executive officer, made a presentation to the Teltrend Board with
respect to the potential merger. On November 2, 1999, the parties executed the
non-binding term sheet.
Throughout November 1999, representatives of the companies met to
discuss due diligence issues as well as corporate communication and synergies.
The parties' formal due diligence investigations began the week of November 8,
1999 and continued until the merger agreement was signed.
On November 11, 1999, Westell presented Teltrend with a draft merger
agreement and on November 23, 1999, representatives of both Westell and
Teltrend, together with their legal counsel and financial advisors, met to
negotiate the terms of the merger agreement and related documents. From November
24, 1999 through December 13, 1999, representatives of Westell and Teltrend and
their respective financial advisors and legal counsel held a series of
telephonic meetings, at which the parties negotiated the final terms of the
merger, the merger agreement and related documents. During November and early
December, the Teltrend Board and the Westell Board each, separately, held
several meetings to discuss the progress of due diligence, the negotiations and
the transaction generally.
On December 13, 1999, the Board of Directors of Westell held a special
meeting, at which the Westell Board members unanimously approved the merger
agreement and recommended that the stockholders of Westell vote in favor of the
merger proposals.
Also on December 13, 1999, the Board of Directors of Teltrend held a
special meeting, at which the Teltrend Board members unanimously approved the
merger agreement and recommended that the stockholders of Teltrend vote in favor
of the adoption of the merger agreement.
WESTELL'S REASONS FOR THE MERGER; RECOMMENDATION OF THE WESTELL BOARD
Westell is pursuing the merger for the following reasons:
o Combining the Teltrend business into Westell's facility is
expected to result in operating efficiencies at the gross margin
and operating income levels. Larger volume material purchases,
facility overhead allocable to more revenue, operating expenses
synergies and other cost reductions should account for these
efficiencies.
o The positive impact on cash flow generated from the combined
businesses, Teltrend's significant cash balances and the
opportunity to turn redundant assets into additional cash, will
help provide additional resources to grow the combined companies'
DSL businesses.
o Westell's income tax loss carryover will be available to offset
future taxable income of the combined companies, providing
another positive effect on cash flow and earnings.
o The addition of Teltrend products such as HDSL, channelized
products and conversion products will broaden Westell's product
portfolio.
<PAGE>
o In the areas where Westell and Teltrend have similar products,
the opportunity will exist for the selection of a "best of breed"
product platform which should provide the combined entities with
additional flexibility and efficiencies.
o With the current consolidation in their customer base, the
combined companies should be in a stronger position to gain
mindshare of these larger companies and to meet their expanding
needs with the additional operating scale provided by a combined
Westell and Teltrend.
On December 13, 1999, the Westell Board unanimously approved the merger
agreement and the transactions contemplated thereby. In making its decision, the
Westell Board consulted with Westell's management and its financial and legal
advisors and considered various factors, including those listed below:
o information concerning the financial performance and condition,
business operations, capital levels, asset quality and prospects
of each company, and the projected future financial performance
of each company as a separate entity and on a combined basis;
o current industry, economic and market conditions and trends;
o the importance of significant scale and scope and financial
resources to a company's ability to compete effectively globally;
o the possibility that achieving cost savings, operating
efficiencies and synergies as a result of consummating the merger
at this time might not be available to the same degree to either
company on its own;
o the risk that the combined company may not realize the
anticipated cost savings, operating efficiencies and synergies;
o the judgment, advice and analysis of Westell's management,
including the results of Westell's due diligence investigations;
o the terms of the merger agreement;
o the current and historical market prices of the common stock of
each company;
o the risks associated with a fixed exchange ratio, including the
risk that, because the exchange ratio will not be adjusted for
changes in the market price of either Westell Class A Common
Stock or Teltrend common stock, the per share value of the
consideration to be received by Teltrend stockholders might be
significantly more than the price per share implied by the
exchange ratio immediately prior to the announcement of the
merger;
o the quantitative analysis of the financial terms of the merger
performed by Goldman Sachs, its financial advisor;
o the opinion of Goldman Sachs described below as to the fairness,
from a financial point of view, of the exchange ratio, which was
determined through arms-length negotiations between the
companies;
o the assurance of Hambrecht & Quist, Westell's additional
financial advisor, that, based on Hambrecht & Quist's limited
review of the transaction and certain related documents, it had
identified no significant risks not also identified by Goldman
Sachs or Westell's management with respect to the merger;
o Teltrend's and Westell's respective businesses, assets, product
mixes, manufacturing facilities, liabilities, managements,
strategic objectives, and prospects;
o the challenges of combining the businesses of two corporations
the size of Westell and Teltrend and the attendant risk of
diverting management resources from other strategic opportunities
and from operational matters for an extended period of time; and
o the anticipated impact of the merger on the customers and
employees of each company.
The foregoing discussion of the information and factors considered and
given weight by the Westell Board is not intended to be exhaustive but
summarizes the material factors considered. The Westell Board did not assign any
relative or specific weights to the various factors considered. Instead, the
Westell Board conducted an overall analysis of the factors described above,
including through discussions with and asking questions of Westell's management
and legal and financial advisors. In considering the factors described above,
the individual directors may have given different weight to different factors.
<PAGE>
ACCORDINGLY, THE WESTELL BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF WESTELL CLASS A COMMON
STOCK AND CLASS B COMMON STOCK VOTE FOR APPROVAL OF THE ISSUANCE OF THE WESTELL
CLASS A COMMON STOCK IN THE MERGER AND THE AMENDMENT TO WESTELL'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE TO 85 MILLION FROM 65.5
MILLION THE TOTAL NUMBER OF SHARES OF CLASS A COMMON STOCK THAT WESTELL IS
AUTHORIZED TO ISSUE.
TELTREND'S REASONS FOR THE MERGER; RECOMMENDATION OF THE TELTREND BOARD
On December 13, 1999, the Teltrend Board unanimously determined that
the merger agreement and the transactions contemplated thereby, including,
without limitation, the merger, are advisable and in the best interests of
Teltrend and the Teltrend stockholders and decided to recommend adoption of the
merger agreement to the Teltrend stockholders.
In evaluating the merger, the Teltrend Board consulted with its
management, financial advisors and legal counsel and gave careful consideration
to a number of factors which supported the board's determinations, including the
following:
o the various alternatives to the merger, including remaining
independent, and the risks associated with those alternatives;
o the relative risks to Teltrend's business if the merger is not
completed;
o the results of due diligence reviews conducted by Teltrend's
management, legal advisors and financial advisors examining
Westell's business, operations, technology and competitive
position;
o the fact that Teltrend's stockholders would have the opportunity
to participate in the potential for growth of the combined
company after the merger, as the merger is expected to result in
a combined company with greater financial, technological and
human resources to develop new generations of products, and
greater marketing resources to develop and promote each company's
existing products;
o the price per share implied by the exchange ratio in the merger,
as of the last trading day prior to the announcement of the
merger, represented a premium of 53% to the closing price of
Teltrend's common stock on the last trading day prior to the
announcement of the merger, and a premium of 72% to the average
closing price of Teltrend's common stock over the twenty trading
days prior to the announcement of the merger;
o the shares of Westell Class A Common Stock issuable to Teltrend's
stockholders in the merger will have a significantly larger
market float and average trading volume upon the merger, and may
provide greater liquidity, than the Teltrend common stock
currently has;
o the fact that the merger would be a tax-free reorganization for
federal income tax purposes;
o Teltrend's ability to terminate the merger agreement if the
Teltrend board were presented with a superior offer, upon the
payment of a fee of $7,177,632 to Westell, as well as other
scenarios under which termination is possible, with or without
termination fees;
o the Teltrend board of directors' review with its legal advisors
of the terms and conditions of the merger agreement and voting
agreement. In particular, the board considered the events
triggering payment of the termination fee and the limitations on
Teltrend's ability to negotiate an alternative transaction with
other companies, and the potential effect these provisions would
have on Teltrend receiving alternative proposals which could be
superior to the merger;
o the opinion of SoundView Technology Group, Inc. delivered orally
on December 13, 1999, and confirmed in writing, that as of such
date and subject to assumptions made and matters considered and
limitations on the review set forth in its opinion, the
consideration to be received by Teltrend stockholders in the
merger was fair to Teltrend stockholders from a financial point
of view; and
o the willingness of Robert C. Penny III and Melvin J. Simon,
individually and as trustees of the Westell Technologies, Inc.
Voting Trust, to vote in accordance with the voting by Westell's
other, non-affiliated stockholders with respect to the
transactions contemplated by the merger, according to the terms
and conditions of the voting agreement.
<PAGE>
The Teltrend Board of Directors also considered a variety of risks and
other potentially negative factors in its consideration of the merger agreement
and the merger, including the following:
o the risk that the benefits sought to be achieved by the merger
will not be realized;
o the fact that Teltrend's obligation to pay a termination fee to
Westell in specified circumstances might deter other parties from
proposing an alternative transaction that might be more
advantageous to Teltrend stockholders;
o the risks associated with a fixed exchange ratio, including the
risk that, because the exchange ratio will not be adjusted for
changes in the market price of either Westell Class A Common
Stock or Teltrend common stock, the per share value of the
consideration to be received by Teltrend stockholders might be
significantly less than the price per share implied by the
exchange ratio immediately prior to the announcement of the
merger;
o the possibility of management disruption associated with the
merger, the challenges and costs of integrating the operations of
the companies and the risk that key management and technical
personnel might leave Teltrend before or after the merger is
completed;
o the expectation that current Westell stockholders would own
approximately 83% in voting power and 66% in value of the
combined company immediately following the merger, based upon the
outstanding shares of both companies as of December 10, 1999;
o the fact that Robert C. Penny III and Melvin J. Simon, as
stockholders and as trustees of the Westell Technologies, Inc.
Voting Trust, are expected to control approximately 68% of the
voting power of Westell upon the merger;
o the potential loss of revenues and business opportunities for
Teltrend as a result of confusion in the marketplace after
announcement of the merger, or possible adverse reactions by
existing or prospective Teltrend customers who compete with
Westell or its affiliates, and the possible exploitation of such
issues by Teltrend's and Westell's competitors; and
o other applicable risks described in this joint proxy
statement/prospectus under "Risk Factors," starting on page I-13.
The foregoing discussion of the information and factors considered and
given weight by the Teltrend Board is not intended to be exhaustive but
summarizes the material factors considered. The Teltrend Board relied on the
experience and expertise of SoundView Technology Group, Inc., its financial
advisor, for quantitative analysis of the financial terms of the merger. See
"Opinion of Teltrend's Financial Advisor" beginning on page II-14. The Teltrend
Board did not assign any relative or specific weights to the various factors
considered. Instead, the Teltrend Board conducted an overall analysis of the
factors described above, including through discussions with and asking questions
of Teltrend's management and legal and financial advisors. In considering the
factors described above, the individual directors may have given different
weight to different factors.
FOR THE REASONS DISCUSSED ABOVE, THE TELTREND BOARD HAS UNANIMOUSLY
APPROVED AND DEEMED ADVISABLE AND IN THE BEST INTERESTS OF THE TELTREND
STOCKHOLDERS THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY RECOMMENDS
THAT THE TELTREND STOCKHOLDERS VOTE FOR APPROVAL OF THE ADOPTION OF THE MERGER
AGREEMENT.
OPINION AND ADVICE OF WESTELL'S FINANCIAL ADVISORS
OPINION OF GOLDMAN SACHS
On December 13, 1999, Goldman Sachs delivered its oral opinion to the
Board of Directors of Westell that, as of such date, the exchange ratio was fair
from a financial point of view to Westell. Goldman Sachs subsequently confirmed
its oral opinion by delivery of its written opinion dated December 13, 1999.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED DECEMBER
13, 1999, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX
<PAGE>
B AND IS INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. YOU
SHOULD READ THE OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other
things:
o the merger agreement;
o annual reports to stockholders and annual reports on Form 10-K of
Teltrend and Westell for the five fiscal years ended July 31,
1999 and the four fiscal years ended March 31, 1999,
respectively;
o interim reports to stockholders and quarterly reports on Form
10-Q of Teltrend and Westell;
o other communications from Teltrend and Westell to their
respective stockholders; and
o internal financial analyses and forecasts for Teltrend and
Westell prepared by their respective managements, including costs
savings and operating synergies projected by the management of
Westell to result from the merger.
Goldman Sachs also held discussions with members of the senior
management of Teltrend and Westell regarding the strategic rationale for, and
the potential benefits of, the merger and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, Goldman Sachs:
o reviewed the reported price and trading activity for the Teltrend
common stock and Westell Class A Common Stock;
o compared financial and stock market information for Teltrend and
Westell with similar information for other publicly-traded
companies;
o reviewed the financial terms of recent business combinations in
the telecommunications equipment, data communications and
networking industries specifically and in other industries
generally; and
o performed other studies and analyses Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed, with the consent of the Westell Board, that the internal
financial forecasts prepared by the managements of Teltrend and Westell,
including any synergies, have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of Teltrend and Westell and
that such forecasts and synergies will be realized in the amounts and the time
periods contemplated thereby. Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of Teltrend or Westell or
any of their subsidiaries and was not furnished with any such evaluation or
appraisal. Goldman Sachs also assumed that all material governmental, regulatory
or other consents and approvals necessary for the consummation of the merger
will be obtained without any adverse effect on Teltrend or Westell or on the
benefits of the merger. The advisory services and opinion of Goldman Sachs were
provided for the information and assistance of the Westell Board in connection
with its consideration of the merger, and the opinion does not constitute a
recommendation as to how any holder of Westell Class A Common Stock or Class B
Common Stock should vote with respect to the merger proposals.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Westell Board on
December 13, 1999.
THE FOLLOWING SUMMARIES OF FINANCIAL ANALYSES INCLUDE INFORMATION
PRESENTED IN TABULAR FORMAT. YOU SHOULD READ THESE TABLES TOGETHER WITH THE TEXT
OF EACH SUMMARY.
(1) Exchange Ratio History. Goldman Sachs calculated the ratio of the
average market price of Teltrend common stock to the average market price of
Westell Class A Common Stock during selected weekly periods ending the week of
December 6, 1999. The results are shown in the following table:
<PAGE>
Period Average Share Exchange Ratio
------ ----------------------------
3 months ending December 9, 1999 2.33x
1 year ending December 9, 1999 2.95x
3 years ending December 9, 1999 2.03x
(2) Public Market Comparison. Goldman Sachs compiled and reviewed
selected financial information and calculated certain ratios and public market
multiples for two groups of publicly traded companies in the communications
equipment industry.
Group A consisted of: Group B consisted of:
o ADC Telecommunications, Inc.; o Allen Telecom Inc.;
o ADTRAN, Inc.; o Andrew Corporation; and
o Aware, Inc.; o Tollgrade Communications, Inc.
o Copper Mountain Networks, Inc.;
o Orckit Communications Ltd.;
o Pairgain Technologies, Inc.;
o Paradyne Networks Inc.;
o Redback Networks Inc.; and
o Westell Technologies, Inc.
The selected companies were chosen because they are publicly-traded
communications equipment companies with operations that for purposes of analysis
may be considered similar to Westell or Teltrend. The selected companies were
placed into Group A or Group B based on relative valuation metrics. Companies
trading at a multiple of levered market capitalization (equity market
capitalization plus net debt) to 1999 estimated revenue of 4.0x or greater were
put in Group A. Other relevant comparable companies were put in Group B. The
multiples and ratios were calculated using the closing price for the common
stock of each of the selected companies on December 10, 1999 and, except as
otherwise indicated below, were based on Institutional Brokers Estimate System,
or IBES, estimates, and published equity research reports and the most recent
publicly available information.
Goldman Sachs calculated low, high and median values for each of the
three ratios or multiples set forth below:
o The ratio of price to estimated earnings per share, or EPS, for
calendar years 1999 and 2000, respectively;
o Levered market capitalization as a multiple of revenues for the
last twelve months ("LTM"), estimated revenues for calendar year
1999 and estimated revenues for calendar year 2000, respectively;
o Levered market capitalization as a multiple of LTM earnings
before interest, taxes, depreciation and amortization, or EBITDA,
for the last 12 months.
The high, low and median multiples for the two groups of comparable
companies were applied to the corresponding operating metric for Teltrend, using
Westell management's estimates of Teltrend's 1999 and 2000 EPS and revenues. On
this basis, Goldman Sachs calculated a range of implied prices per share for
Teltrend shares and a range of implied exchange ratios, using a $10.75 per share
price for Westell shares. The results of such analyses are set forth in the
following table:
<PAGE>
<TABLE>
--------------------------------------------------------------------------------------------------
Comparable Multiples Implied Exchange Ratio
--------------------------------------------------------------------------------------------------
Low High Median Low High Median
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GROUP A
P/E Ratio
Calendar Year 1999 39.3x 245.8x 105.6x 5.2x 32.6x 14.0x
Calendar Year 2000 31.1x 641.4x 96.7x 4.7x 96.2x 14.5x
--------------------------------------------------------------------------------------------------
Levered revenue multiple
LTM 3.6x 298.2x 6.3x 5.8x 455.6x 10.0x
Calendar Year 1999 4.1x 121.0x 5.7x 7.1x 199.3x 9.7x
Calendar Year 2000 3.2x 57.4x 4.6x 6.1x 102.8x 8.6x
--------------------------------------------------------------------------------------------------
Levered EBITDA multiple
LTM 23.0x 430.1x 70.9x 5.6x 608.2x 16.4x
--------------------------------------------------------------------------------------------------
GROUP B
P/E Ratio
Calendar Year 1999 22.3x 223.4x 25.0x 3.0x 29.6x 3.3x
Calendar Year 2000 16.5x 22.3x 21.9x 2.5x 3.4x 3.3x
--------------------------------------------------------------------------------------------------
Levered revenue multiple
LTM 1.1x 3.9x 1.4x 2.0x 6.3x 2.5x
Calendar Year 1999 1.1x 3.7x 1.4x 2.2x 6.4x 2.7x
Calendar Year 2000 0.9x 3.2x 1.3x 2.1x 6.1x 2.7x
--------------------------------------------------------------------------------------------------
Levered EBITDA multiple
LTM 8.0x 16.2x 13.4x 2.2x 4.0x 3.4x
--------------------------------------------------------------------------------------------------
</TABLE>
(3) Selected Transaction Analysis. Goldman Sachs compiled and reviewed
selected financial information for 282 selected transactions in the
communications equipment industry from 1988 to the present. Goldman Sachs
calculated high, low and median values for the selected transactions for each of
the three ratios or multiples set forth below.
o The ratio of equity consideration paid in each such transaction
to the acquired company's LTM and forward calendar year earnings
for calendar year 1999, respectively;
o Levered consideration as a multiple of the acquired company's LTM
sales; and
o The percentage premium paid to equity holders calculated using
the price paid per share by the acquirer relative to the target's
price five days prior to announcement.
The high, low and median multiples for the selected transactions were
applied to the corresponding value for Teltrend, using Westell management's
estimates of Teltrend's 1999 earnings. On this basis, Goldman Sachs calculated a
range of implied prices per share for Teltrend shares and a range of implied
exchange ratios, using a $10.75 per share price for Westell shares. The results
of such analyses are set forth below:
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Comparable Multiples/Percent Implied Exchange Ratio
- -----------------------------------------------------------------------------------------------------------
Low High Median Low High Median
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
P/E Ratio
LTM 4.1x 189.1x 35.1x 0.5x NM 4.1x
Calendar Year 1999 2.5x 171.3x 32.5x 0.3x NM 4.3x
- -----------------------------------------------------------------------------------------------------------
Levered revenue multiple
LTM 0.3x 677.3x 2.8x 0.8x NM 4.6x
- -----------------------------------------------------------------------------------------------------------
Premium to market value (25.8%) 141.6% 36.5% 1.6x 5.2x 2.9x
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(4) Contribution Analysis. Goldman Sachs calculated the respective
percentage contribution by Teltrend and Westell to the combined company assuming
Westell's fiscal years 1999, 2000 and 2001 estimated revenue and 2001 estimated
operating income on a pro forma basis. The analysis did not take into account
any synergies that may result from the merger. In addition, Goldman Sachs
calculated the pro forma share ownership of the combined company immediately
following the merger, assuming a 3.30:1 exchange ratio, in order to determine
the percentages of the combined company that will be owned immediately following
consummation of the merger by stockholders of Westell and Teltrend,
respectively. The results of such analyses are summarized below.
-----------------------------------------------------------------------
Pro Forma Ownership of the Combined Company
(in percent)
-----------------------------------------------------------------------
Westell stockholders 66.2
Teltrend stockholders 33.8
-----------------------------------------------------------------------
Revenue Contribution
(in percent)
------------------------- ----------------------- ---------------------
Westell Teltrend
------------------------- ----------------------- ---------------------
1999 47.8 52.2
2000 50.2 49.8
2001 60.1 39.9
-----------------------------------------------------------------------
Operating Income Contribution
(in percent)
-----------------------------------------------------------------------
Westell Teltrend
------------------------- ----------------------- ---------------------
2001 44.3 55.7
-----------------------------------------------------------------------
(5) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the merger for fiscal years ended March
1999, 2000, 2001 and 2002 using estimates of earnings for those fiscal years
that were provided by Westell management for both Westell and Teltrend. Goldman
Sachs compared the EPS of Westell on a stand-alone basis to the estimated
unadjusted and cash EPS (which excludes the effects of goodwill amortization) of
the combined company on a pro forma basis, both including and not including the
synergies estimated by Westell management to result from the merger. The results
of such analyses indicate that for the fiscal year ended March 30, 1999 the
merger would be dilutive on an EPS basis, not including synergies, and accretive
on an EPS basis, including synergies, and on a cash EPS basis, both including
and not including synergies. For the fiscal years ended March 30, 2001 and 2002,
the merger would be dilutive on an EPS basis, both including and excluding
synergies, but accretive on a cash EPS basis, both including and excluding
synergies.
(6) Discounted Cash Flow Analysis - Teltrend. Goldman Sachs performed a
discounted cash flow analysis of the expected cash flows of Teltrend using
projections from Westell's management under the following two scenarios: (a) not
including the synergies estimated by Westell management to result from the
merger (the "Base Case") and (b) including the synergies estimated by Westell
management to result from the merger (the "Synergies Case"). Goldman Sachs
calculated a net present value of Teltrend's free cash flows for the fiscal
years 2000 through 2004 using discount rates ranging from 8% to 12%. Goldman
Sachs also calculated Teltrend's terminal values in the year 2004 based on
multiples ranging from 7x EBITDA to 12x EBITDA. The terminal values were then
discounted to present value using discount rates from 8% to 12%. The implied
values per Teltrend share derived from such analysis ranged from $25.03 to
$44.45 in the Base Case and from $43.36 to $75.71 in the Synergies Case.
(7) Discounted Cash Flow Analysis - Westell. Goldman Sachs also
performed a discounted cash flow analysis of the expected cash flows of Westell
using projections from Westell's management. Goldman Sachs calculated a net
present value of Westell's free cash flows for the fiscal years 2001 through
2005 using discount rates ranging from 13% to 21%. Goldman Sachs also calculated
Westell's terminal values in the year 2005 based on multiples ranging from 8x
EBITDA to 18x EBITDA. The terminal values were then discounted to present value
<PAGE>
using discount rates from 13% to 21%. The implied values per Westell share
derived from such analysis ranged from $5.99 to $17.94.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Westell or Teltrend or the contemplated merger.
The analyses were prepared solely for purposes of providing an opinion
to the Westell Board as to the fairness from a financial point of view to
Westell of the share exchange ratio. The analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, none of Westell,
Teltrend, Goldman Sachs or any other person assumes responsibility if future
results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Westell Board was one
of many factors taken into consideration by the Westell Board in making its
determination to approve the merger. The foregoing summary does not purport to
be a complete description of the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Goldman
Sachs is familiar with Westell, having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the merger agreement. Goldman Sachs provides a full range of financial
advisory and securities services and, in the course of its normal trading
activities, may from time to time effect transactions and hold securities,
including derivative securities, of Westell or Teltrend for its own account and
for the accounts of customers.
In addition, Goldman Sachs has been informed that SoundView Technology
Group, Inc. has acted as financial advisor to Teltrend in connection with the
merger. SoundView and Wit Capital Group, Inc. have entered into an agreement
pursuant to which Wit will acquire SoundView. Goldman Sachs currently owns
approximately 16.5% of the outstanding shares of common stock of Wit and
warrants to acquire additional shares of common stock of Wit which, if
exercised, would result in Goldman Sachs owning approximately 24.7% of the
outstanding shares of common stock of Wit.
Pursuant to a letter agreement dated September 8, 1999, Westell engaged
Goldman Sachs to act as its financial advisor in connection with the possible
acquisition by Westell or any of its affiliates of all or a portion of the stock
or assets of Teltrend. Pursuant to the terms of this letter agreement, Westell
has agreed to pay Goldman Sachs a transaction fee based on the outcome of the
merger as follows:
o if the merger is consummated, Goldman Sachs will receive a fee of
$2.3 million; or
o if the merger is not consummated and pursuant to the merger
agreement Westell receives a payment in connection with the
termination of the merger agreement or the failure to consummate
the merger, Goldman Sachs will receive a fee of $1.0 million.
Westell also has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
<PAGE>
ADVICE OF HAMBRECHT & QUIST
In addition engaging Goldman Sachs, the Westell Board also engaged the
services of Hambrecht & Quist LLC to provide general advisory services with
respect to the merger. Hambrecht & Quist reviewed the merger agreement, all the
material presented to the Westell Board by Goldman Sachs, as well as certain due
diligence materials prepared by Westell's management. In addition, Hambrecht &
Quist had several conversations with the Westell Board and Westell's management
regarding the transaction, the negotiation process and general financial market
conditions. As a result of this limited review, on December 13, 1999, Hambrecht
& Quist orally advised the Westell Board that it had identified no significant
risks not also identified by Goldman Sachs or Westell's management with respect
to the merger. The Westell Board did not retain Hambrecht & Quist to deliver an
opinion with regard to its general advice or the fairness, from a financial
point of view, of the exchange ratio, and Hambrecht & Quist did not prepare any
such opinion.
The advisory services of Hambrecht & Quist were provided for the
information and assistance of the Westell Board in connection with its
consideration of the merger, and such does not constitute a recommendation as to
how any holder of Westell Class A Common Stock or Class B Common Stock should
vote with respect to the merger proposals. As described above, Hambrecht &
Quist's advice to the Westell Board was one of many factors taken into
consideration by the Westell Board in making its determination to approve the
merger.
Hambrecht & Quist, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Hambrecht &
Quist is familiar with Westell, having acted as its general financial advisor in
connection with the merger agreement. Hambrecht & Quist provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Westell or Teltrend for its own
account and for the accounts of customers.
Pursuant to a letter agreement dated August 15, 1999, Westell engaged
Hambrecht & Quist to act as its secondary financial advisor in connection with
the possible acquisition by Westell or any of its affiliates of all or a portion
of the stock or assets of Teltrend, providing general guidance and advice to the
Westell Board, but not rendering an opinion regarding the fairness of the
ultimate consideration to be paid by Westell in such a transaction. Pursuant to
the terms of this letter agreement, Westell has agreed to pay to Hambrecht &
Quist a fee of $225,000 upon the effectiveness of the merger. Westell also has
agreed to reimburse Hambrecht & Quist for its reasonable out-of-pocket expenses,
including attorneys' fees, and to indemnify Hambrecht & Quist against certain
liabilities, including certain liabilities under the federal securities laws.
OPINION OF TELTREND'S FINANCIAL ADVISOR
SoundView Technology Group, Inc. was retained by the Teltrend Board to
render an opinion as to whether the exchange ratio to be offered in the merger
is fair, from a financial point of view, to the Teltrend stockholders.
On December 13, 1999, SoundView delivered its opinion to the Teltrend
Board that, as of such date, based upon the facts and circumstances as they
existed at that time, and subject to certain assumptions made, matters
considered and limits of review set forth therein, the exchange ratio to be
offered in the merger is fair, from a financial point of view to the Teltrend
stockholders.
The full text of the written opinion of SoundView, dated December 13,
1999, which sets forth, among other things, the assumptions made, matters
considered, and the scope and limitations of the review undertaken and
procedures followed by SoundView in rendering its opinion, is included in
Appendix C to this joint proxy statement/prospectus. SoundView's opinion is
directed only to the fairness, from a financial point of view, to the Teltrend
stockholders of the exchange ratio to be offered in the merger. SoundView's
opinion was delivered for the use and benefit of the Teltrend Board in its
consideration of the merger and is not intended to be and does not constitute a
recommendation to any Teltrend stockholder as to how such stockholder should
vote with respect to the proposed merger. The summary of the opinion of
SoundView set forth below is qualified by reference to the full text of the
opinion. Teltrend stockholders are urged to read this opinion in its entirety.
<PAGE>
In connection with rendering its opinion, SoundView, among other
things:
o reviewed the draft agreement and plan of merger dated December
13, 1999 and the specific terms of the merger set forth therein;
o reviewed the draft voting agreement dated December 13, 1999;
o reviewed Teltrend's financial and operating information for the
two-year period ended July 31, 1999 and the three-month period
ended October 30, 1999;
o reviewed Westell's financial and operating information for the
two year period ended March 31, 1999 and the six-month period
ended September 30, 1999;
o reviewed certain information regarding the private placement by
Westell of 6% subordinated convertible debentures and stock
purchase warrants to Capital Ventures International, Castle Creek
Technology Partners LLC, and Marshall Capital Management, Inc.;
o reviewed certain financial and operating information regarding
the business, operations and prospects of Teltrend and Westell,
including forecasts and projections, provided to it by the
managements of Teltrend and Westell, respectively;
o reviewed certain publicly available information concerning
certain other companies which it deemed to be reasonably similar
to Teltrend and Westell and the trading markets for certain of
such companies' securities;
o reviewed the financial terms of certain recent mergers and
acquisitions which it deemed relevant;
o conducted discussions with certain members of senior management
of Teltrend and Westell concerning their respective businesses
and operations, assets, present conditions and future prospects;
and
o performed such other analyses, examinations and procedures,
reviewed such other agreements and documents, and considered such
other factors as it deemed, in its sole judgment, to be
necessary, appropriate or relevant to render its opinion.
In arriving at its opinion, SoundView did not make, obtain or assume
any responsibility for any independent evaluation or appraisal of the properties
and facilities or of the assets and liabilities (contingent or otherwise) of
either Teltrend or Westell. SoundView assumed and relied upon the accuracy and
completeness of the financial and other information supplied to or otherwise
used by it in arriving at its opinion, and did not attempt independently to
verify, or undertake any obligation to verify, such information. SoundView
further relied upon the assurances of the managements of Teltrend and Westell
that they were not aware of any facts that would make such information
inaccurate or misleading. In addition, SoundView assumed that the forecasts and
projections provided to it by Westell and Teltrend represented the best
currently available estimates and judgments of Westell's and Teltrend's
managements as to the future financial condition and results of operations of
Westell and Teltrend, respectively, and assumed that such forecasts and
projections were reasonably prepared based on such currently available estimates
and judgments. SoundView assumed no responsibility for and expressed no view as
to such forecasts and projections or the assumptions on which they were based.
SoundView also took into account its assessment of general economic,
market and financial conditions and its experience in similar transactions, as
well as its experience in securities valuation in general. Its opinion is
necessarily based upon conditions as they existed and could be evaluated as of
December 13, 1999.
SoundView did not express any view as to the price at which Teltrend's
stock will trade prior to the closing of the merger, or the price at which
Westell's stock will trade prior to or subsequent to the closing of the merger.
Its opinion did not constitute a recommendation of the merger over any other
alternative transactions which may have been available to Teltrend and did not
address the underlying business decision of the Teltrend Board to proceed with
or effect the merger.
The following is a brief summary of the material aspects of the
analyses performed by SoundView in connection with rendering its opinion.
ANALYSES RELATING TO TELTREND
<PAGE>
Analysis of Selected Comparable Publicly Traded Companies. Using
publicly available information, SoundView compared certain financial, market and
operating information of selected publicly traded telecommunications equipment
manufacturers that were, in SoundView's judgment, similar to Teltrend. For each
of the selected companies, SoundView calculated a multiple of enterprise value
to calendar 1998 and projected calendar 1999 and 2000 revenues. Enterprise value
was calculated by adding net debt to the company's market capitalization. Net
debt was calculated by subtracting cash and cash equivalents from total debt.
Companies analyzed by SoundView in connection with this analysis included ADC
Telecommunications, Inc., ADTRAN, Inc., Larscom Incorporated, PairGain
Technologies, Inc. and Tollgrade Communications, Inc. The table below shows the
results of such analysis.
- --------------------------------------------------------------------------------
Comparable Companies
- --------------------------------------------------------------------------------
Teltrend* Low Mean Median High
Enterprise Value/1998 Revenue (Actual) 1.8x 0.7x 4.1x 3.9x 6.6x
- --------------------------------------------------------------------------------
Enterprise Value/1999 Revenue (Projected) 1.9x 0.5x 3.4x 3.7x 5.3x
- --------------------------------------------------------------------------------
Enterprise Value/2000 Revenue (Projected) 1.5x 0.4x 2.8x 3.3x 4.3x
- --------------------------------------------------------------------------------
* Enterprise value computed based on closing price of Westell Class A Common
Stock on December 10, 1999.
Comparable Transaction Analysis. Using publicly available information,
SoundView analyzed the purchase prices and multiples paid in selected
acquisitions of telecommunications equipment manufacturers that, in SoundView's
judgment, were comparable to the business of Teltrend. However, SoundView noted
that none of such acquisitions took place under market conditions or competitive
conditions or circumstances that are directly comparable to a merger as of the
date of SoundView's opinion and that, accordingly, qualitative judgments must be
made concerning the difference between the characteristics of these transactions
and other factors and issues which would affect the price an acquiror is willing
to pay in an acquisition. For each of the selected targets, SoundView calculated
a multiple of enterprise value to LTM revenue. Enterprise value was calculated
by adding net debt to the company's market capitalization. Net debt was
calculated by subtracting cash and cash equivalents from total debt. SoundView
analyzed 19 transactions that were completed between November 21, 1994 and
November 21, 1999, and the table below shows the results of such analysis.
- --------------------------------------------------------------------------------
Comparable Transactions
- --------------------------------------------------------------------------------
Teltrend* Low Mean Median High
- --------------------------------------------------------------------------------
Enterprise Value/LTM Revenue 1.9x 0.2x 1.9x 1.6x 5.4x
- --------------------------------------------------------------------------------
* Enterprise value computed based on closing price of Westell Class A Common
Stock on December 10, 1999.
Premiums Paid Analysis. SoundView reviewed publicly available
information for selected completed stock-for-stock merger and acquisition
transactions, which were announced between November 21, 1996 and November 21,
1999, with a value of $50 million to $500 million and in which the acquiring
company purchased greater than 50% of a public target.
SoundView performed its analysis on 424 transactions that satisfied the
criteria, and the table below shows a comparison of those premiums paid to the
premium that would be paid to Teltrend stockholders based upon the implied value
payable in the transaction. The premium calculations for Teltrend stock are
based upon the value of Westell Class A Common Stock on December 10, 1999.
- --------------------------------------------------------------------------------
Comparable Transactions
- --------------------------------------------------------------------------------
Teltrend Low Mean Median High
- --------------------------------------------------------------------------------
One day before announcement 53.4% -48.5% 27.6% 22.9% 234.7%
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis. SoundView conducted an unleveraged
discounted cash flow analysis based upon financial information for Teltrend
provided by its management. SoundView calculated a range of net present values
of the projected unleveraged free cash flows in the forecast using various
discount rates reflecting weighted average costs of capital in the range of 15%
to 20%. SoundView then combined such values with the terminal values calculated
by multiplying projected revenue for the year 2004 by a range of exit multiples
from 0.5 to 1.5 times and using the same discount rates as those utilized for
unleveraged free cash flows to obtain ranges of implied total enterprise value
for Teltrend. The net present value of free cash flow, when combined with the
<PAGE>
terminal values, yielded an implied total enterprise value in the range of $96.1
million to $249.3 million. In order to derive implied equity value per share
ranges for Teltrend, SoundView subtracted the estimated net debt of Teltrend as
of October 31, 1999 from the implied total enterprise values and divided the
result by the fully diluted shares outstanding for Teltrend. Net debt was
calculated by subtracting cash and cash equivalents from total debt. The implied
equity value per share for Teltrend was in the range of $18.45 to $41.25 per
share.
ANALYSES RELATING TO WESTELL
Analysis of Selected Comparable Publicly Traded Companies. Using
publicly available information, SoundView analyzed certain financial, market and
operating information of selected publicly traded companies in the two market
segments where Westell operates. These segments are asymmetric digital
subscriber line (ADSL) products and telecommunications equipment. Companies
analyzed by SoundView in the ADSL industry included Aware, Inc., Orckit
Communications Ltd. and Paradyne Networks, Inc. For each of the selected
companies, SoundView calculated enterprise value as a multiple of calendar 1998
and projected calendar 1999 and 2000 revenues. Enterprise value was calculated
by adding net debt to the company's market capitalization. Net debt was
calculated by subtracting cash and cash equivalents from total debt. The table
below shows the results of such analysis.
Comparable Companies
- --------------------------------------------------------------------------------
Westell* Low Mean Median High
- --------------------------------------------------------------------------------
Enterprise Value/1998 Revenue (Actual) 4.7x 4.5x 33.0x 14.3x 80.3x
- --------------------------------------------------------------------------------
Enterprise Value/1999 Revenue (Projected) 4.1x 4.1x 19.1x 7.4x 45.9x
- --------------------------------------------------------------------------------
Enterprise Value/2000 Revenue (Projected) 2.9x 3.8x 12.7x 3.8x 30.5x
- --------------------------------------------------------------------------------
* Revenues are for the fiscal years ended March 31, 1999 (shown as 1998
revenue), 2000 (shown as projected 1999 revenue) and 2001 (shown as projected
2000 revenue).
Companies analyzed by SoundView in the telecommunications equipment
market analysis included ADC Telecommunications, Inc., ADTRAN, Inc., Larscom
Incorporated, PairGain Technologies, Inc. and Tollgrade Communications, Inc. For
each of the selected companies, SoundView calculated enterprise value as a
multiple of 1998 and projected 1999 and 2000 revenues. Enterprise value was
calculated by adding net debt to the company's market capitalization. Net debt
was calculated by subtracting cash and cash equivalents from total debt. The
following table shows the results of such analysis.
<PAGE>
- --------------------------------------------------------------------------------
Comparable Companies
- --------------------------------------------------------------------------------
Westell* Low Mean Median High
- --------------------------------------------------------------------------------
Enterprise Value/1998 Revenue (Actual) 4.7x 0.7x 4.1x 3.9x 6.6x
- --------------------------------------------------------------------------------
Enterprise Value/1999 Revenue (Projected) 4.1x 0.5x 3.4x 3.7x 5.3x
- --------------------------------------------------------------------------------
Enterprise Value/2000 Revenue (Projected) 2.9x 0.4x 2.8x 3.3x 4.3x
- --------------------------------------------------------------------------------
* Revenues are for the fiscal years ended March 31, 1999 (shown as 1998
revenue), 2000 (shown as projected 1999 revenue) and 2001 (shown as projected
2000 revenue).
Discounted Cash Flow Analysis. SoundView conducted an unleveraged
discounted cash flow analysis based upon financial information for Westell
provided by its management. SoundView calculated a range of net present values
of the projected unleveraged free cash flows in the forecast using various
discount rates reflecting weighted average costs of capital in the range of 15%
to 25%. SoundView then combined such values with the terminal values calculated
by multiplying projected revenue for the year 2004 by a range of exit multiples
from 2.0 to 4.0 times and using the same discount rates as those utilized for
unleveraged free cash flows to obtain ranges of implied total enterprise value
for Westell. The net present value of free cash flow, when combined with the
terminal value, yielded an implied total enterprise value in the range of $300.8
million to $778.1 million. In order to derive implied equity value per share
ranges for Westell, SoundView subtracted the estimated net debt of Westell as of
September 30, 1999 from the implied total enterprise values and divided the
result by the fully diluted shares outstanding for Westell. The implied equity
value per share for Westell was in the range of $6.98 to $17.70 per share.
In arriving at its opinion and in discussing its opinion with the
Teltrend Board, SoundView performed various financial analyses. While the
foregoing summary describes all material analyses and factors considered by
SoundView in rendering its opinion, such summary does not purport to be a
complete description of SoundView's analyses. SoundView believes that its
analyses and summaries should be considered as a whole, and that selecting
portions of its analyses or the factors considered by it, without considering
all factors and analyses, could create a misleading view of the process
underlying its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analyses and summary
description. In performing its analyses, SoundView considered general economic,
market and financial conditions and other matters, many of which are beyond the
control of Teltrend and Westell. The analyses performed by SoundView are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty.
SoundView is a nationally recognized investment banking firm. As part
of its investment banking services, SoundView is frequently engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, secondary distributions of securities, private
placements and valuations for estate, corporate and other purposes. SoundView
was retained by the Teltrend Board to act as its financial advisor in connection
with the merger based upon SoundView's experience as a financial advisor in
mergers and acquisitions as well as SoundView's familiarity with the
telecommunications equipment manufacturing industry.
Except as described above, SoundView has not rendered material
financial advisory or investment banking services to Teltrend or to Westell
during the last three years. In the ordinary course of its business, SoundView
may actively trade in the equity securities of Teltrend and Westell for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
Pursuant to the terms of its engagement letter with SoundView, Teltrend
has agreed to pay SoundView a cash fee at the closing of the merger equal to:
(1) 1.50% of the first $40 million of consideration paid by Westell at closing
(defined as gross value of cash and the fair market value of all other property
paid by Westell in connection with the merger); plus (2) 1.00% of the next $40
million of consideration; plus (3) 0.05% of any consideration over $80 million.
<PAGE>
In addition, Teltrend has agreed to reimburse SoundView for all
reasonable expenses incurred by it in connection with the merger, including
reasonable professional fees and disbursements. Teltrend has also agreed to
indemnify SoundView against certain liabilities in connection with its
engagement.
VOTING AGREEMENT WITH WESTELL CONTROLLING STOCKHOLDERS
Concurrently with the execution of the merger agreement, Robert C.
Penny III and Melvin J. Simon, individually and as co-trustees of the Westell
Technologies, Inc. Voting Trust, entered into an agreement with Teltrend under
which each of them has agreed to vote all of the capital stock of Westell for
which he has the power to vote in favor of the merger proposals if a majority of
the votes held by Westell's public stockholders are voted in favor of these
proposals. For purposes of the voting agreement, Westell's public stockholders
include all holders of Westell Class A Common Stock, other than Messrs. Penny
and Simon and members of their families and any officers or directors of
Westell.
While the co-trustees are obligated to vote in favor of the merger
proposals if a majority of Westell's public stockholders so vote, the voting
agreement does not prevent or prohibit the co-trustees from also voting in favor
of the proposals even if a majority of Westell's public stockholders reject the
proposals. The co-trustees have indicated their current intention to vote as the
majority of Westell's non-affiliated, public stockholders vote with respect to
the proposals.
Messrs. Penny and Simon, as co-trustees of the Westell Technologies,
Inc. Voting Trust, beneficially own approximately 80% of the voting power
entitled to vote at the Westell special meeting. The affirmative vote of a
majority of the total votes cast is required to approve the issuance of shares
of Westell's Class A Common Stock in the merger and the affirmative vote of a
majority of the total votes outstanding is required to approve the amendment to
Westell's Certificate of Incorporation.
Until the merger is completed or the merger agreement is terminated,
the voting agreement only allows the co-trustees to transfer shares of Westell's
Class B Common Stock in transactions where:
o the Class B Common Stock is converted into Class A Common Stock
which is then sold to unaffiliated third parties; or
o the recipient of the Class B Common Stock agrees to be bound by
the terms of the voting agreement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following outlines the material United States federal income tax
consequences of the merger and is not a complete analysis of all tax effects of
the merger. The discussion does not address the effect of state, local or
non-U.S. tax laws, or the effect of any U.S. federal tax laws other than those
pertaining to United States federal income tax.
Westell and Teltrend intend that the merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986. As a reorganization under Section 368(a) of the Code, the
following are the material United States federal income tax consequences of the
merger:
o no gain or loss will be recognized by Teltrend, Westell or Theta
Acquisition Corp. as a result of the merger;
o no gain or loss will be recognized by Teltrend stockholders upon
the conversion of Teltrend common stock into shares of Westell
Class A Common Stock pursuant to the merger, except with respect
to cash, if any, received in lieu of fractional shares of Westell
Class A Common Stock;
o the aggregate tax basis of the shares of Westell Class A Common
Stock received in exchange for shares of Teltrend common stock
pursuant to the merger, including a fractional share of Westell
Class A Common Stock for which cash is received, will be the same
as the aggregate tax basis of the shares of Teltrend common stock
exchanged therefor;
<PAGE>
o the holding period of the shares of Westell Class A Common Stock
received in the merger will include the holding period of the
shares of Teltrend common stock exchanged therefor; and
o a Teltrend stockholder who receives cash in lieu of a fractional
share of Westell Class A Common Stock will recognize gain or loss
equal to the difference, if any, between the stockholder's tax
basis in the fractional share and the amount of cash received.
THE CONCLUSIONS EXPRESSED ABOVE ARE BASED ON CURRENT LAW. FUTURE
LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN
APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THOSE CONCLUSIONS. NO RULINGS
HAVE OR WILL BE SOUGHT FROM THE INTERNAL REVENUE SERVICE CONCERNING THE TAX
CONSEQUENCES OF THE MERGER.
THE DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES THAT MAY BE
RELEVANT TO PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES OR TO
TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE. SUCH TAXPAYERS INCLUDE
NON-U.S. PERSONS, INSURANCE COMPANIES, TAX-EXEMPT ENTITIES, RETIREMENT PLANS,
DEALERS IN SECURITIES, BANKS AND PERSONS WHO ACQUIRED TELTREND STOCK PURSUANT TO
THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION.
BECAUSE OF THE COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX
CONSEQUENCES TO ANY PARTICULAR TELTREND STOCKHOLDER MAY BE AFFECTED BY MATTERS
NOT DISCUSSED ABOVE, EACH TELTREND STOCKHOLDER IS URGED TO CONSULT A PERSONAL
TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM
OR HER TAKING INTO ACCOUNT HIS OR HER OWN PARTICULAR CIRCUMSTANCES, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS
OF THE FEDERAL TAX LAWS.
ACCOUNTING TREATMENT
Westell and Teltrend anticipate that the merger will be accounted for
as a purchase. Merger related costs of approximately $5 million will be included
in the determination of the purchase price. See "Westell and Teltrend Unaudited
Condensed Consolidated Pro Forma Financial Data" beginning on page II-24.
The unaudited pro forma financial information contained in this joint
proxy statement/prospectus has been prepared by accounting for the merger as a
purchase.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations promulgated thereunder,
specified transactions, including the merger, may not be consummated unless
certain waiting period requirements have expired or been terminated. Westell and
Teltrend filed their Premerger Notification and Report Forms pursuant to the HSR
Act with the United States Department of Justice (the "DOJ") and the United
States Federal Trade Commission (the "FTC") on January 3, 2000 and are waiting
for the expiration of the required waiting period. Under the HSR Act, the merger
may not be consummated until thirty days (unless early termination of this
waiting period is granted) after the initial filing or, if the FTC or DOJ issues
a request for additional information and other documentary material (a "second
request"), twenty days after Westell and Teltrend have substantially complied
with such a second request. If no second request is made, the waiting period
will expire on February 2, 2000.
The FTC and DOJ frequently scrutinize the legality under the antitrust
laws of transactions such as the merger. At any time before or after the
effective time of the merger, the FTC, the DOJ or others could take action under
the antitrust laws with respect to the merger, including seeking to enjoin the
consummation of the merger, to rescind the merger or to require the divestiture
of substantial assets of Westell or Teltrend. While the companies believe that
the merger is legal under the antitrust laws, there can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
Under the merger agreement, Westell and Teltrend have agreed to use
their reasonable efforts to comply as expeditiously as possible with all lawful
requests of the FTC or the DOJ for additional information and documents and have
agreed not to extend the waiting period under the HSR Act or enter into any
agreement with the FTC or the DOJ not to consummate the transactions
contemplated by the merger agreement without the each other's prior written
<PAGE>
consent. In addition, Westell has agreed to reasonably consider taking such
actions as may be useful in resolving any antitrust objections that may be
asserted with respect to the merger by the FTC, the DOJ or any other federal or
state agency.
NO APPRAISAL RIGHTS
Neither the Teltrend stockholders nor the Westell stockholders are
entitled to appraisal rights under Delaware law in connection with the merger.
RESTRICTIONS ON RESALES BY AFFILIATES
All shares of Westell Class A Common Stock to be issued in connection
with the merger have been registered under the Securities Act of 1933, as
amended. As a result, these shares may be traded freely and without restriction
by those stockholders not deemed to be "affiliates" of Teltrend prior to the
date of the Teltrend special meeting, as that term is defined under the
Securities Act, or of Westell following the effective time of the merger.
Affiliates are generally defined as persons who control, are controlled by or
are under common control with Teltrend at the time of the Teltrend special
meeting, or Westell following the effective time, and include directors and
executive officers of Teltrend or Westell.
This joint proxy statement/prospectus does not cover any resales of
Westell Class A Common Stock to be received by these affiliates and no person is
authorized to make any use of this joint proxy statement/prospectus in
connection with any such resale. As a result, any subsequent transfer by an
affiliate of Teltrend must be one permitted by the resale provisions of Rule 145
under the Securities Act, or Rule 144 under the Securities Act in the case of
such persons who become affiliates of Westell, or as otherwise permitted under
the Securities Act. These restrictions are expected to apply to the directors,
executive officers and holders of 10% or more of the Teltrend common stock, as
well as to certain other related individuals or entities. The merger agreement
requires Teltrend to obtain from its executive officers and directors, and to
use its reasonable best efforts to obtain from its other affiliates, a written
agreement to the effect that such persons will not offer, sell or otherwise
dispose of any shares of Westell Class A Common Stock issued to them in the
merger, except as permitted by the Securities Act or the rules promulgated
thereunder.
<PAGE>
MARKET PRICES AND DIVIDENDS
The Westell Class A Common Stock is quoted on the Nasdaq National
Market under the symbol "WSTL." The Teltrend common stock is quoted on the
Nasdaq National Market under the symbol "TLTN." An application will be made to
quote the shares of Westell Class A Common Stock to be issued in the merger on
the Nasdaq National Market. There is no established public trading market for
either the Westell Class B Common Stock or Teltrend's class A common stock (no
shares of which are outstanding).
On ____________________, 2000, there were approximately ___ holders of
record of Westell Class A Common Stock and Westell Class B Common Stock and
_____ shares of Westell Class A Common Stock and _____ shares of Westell Class B
Common Stock were outstanding. On ____________, 2000, there were approximately
_____ holders of record of Teltrend common stock and _____________ shares of
Teltrend common stock were outstanding.
The following tables set forth the range of high and low closing sales
prices of Westell Class A Common Stock and Teltrend common stock, each as
reported on the Nasdaq National Market, for the quarterly periods indicated.
Westell's fiscal year ends on March 31 each year and its interim fiscal quarters
end on June 30, September 30 and December 31 of each year. Teltrend's fiscal
year ends on the last Saturday of July each year, and its interim fiscal
quarters generally end on the last Saturday of October, January and April each
year.
WESTELL CLASS A COMMON STOCK
----------------------------
HIGH LOW
---- ---
FISCAL YEAR ENDED MARCH 31, 1998
First Quarter.................................. 25 7/8 10 3/4
Second Quarter................................. 27 5/8 17 1/4
Third Quarter.................................. 24 7/8 10 1/2
Fourth Quarter................................. 15 1/4 10 3/4
FISCAL YEAR ENDED MARCH 31, 1999
First Quarter.................................. 13 7/8 8 7/8
Second Quarter................................. 10 3 3/4
Third Quarter.................................. 8 1/4 2 3/4
Fourth Quarter................................. 9 3 3/16
FISCAL YEAR TO END MARCH 31, 2000
First Quarter.................................. 10 3/16 3 7/8
Second Quarter................................. 9 1/2 6 7/8
Third Quarter.................................. 13 6 7/16
Fourth Quarter (through January 26, 2000)...... 19 5/16 9 11/16
<PAGE>
TELTREND COMMON STOCK
---------------------
HIGH LOW
---- ---
FISCAL YEAR ENDED JULY 25, 1998
First Quarter.................................. 21 1/4 14 7/8
Second Quarter................................. 18 13/16 14 1/8
Third Quarter.................................. 16 7/8 12 1/4
Fourth Quarter................................. 18 5/8 14 3/4
FISCAL YEAR ENDED JULY 31, 1999
First Quarter.................................. 15 1/2 11 7/8
Second Quarter................................. 25 1/16 13 1/8
Third Quarter.................................. 26 1/4 14 5/8
Fourth Quarter................................. 22 3/8 17 1/2
FISCAL YEAR TO END JULY 30, 2000
First Quarter.................................. 23 13/16 17
Second Quarter (through January 26, 2000)...... 52 1/4 17 7/8
On December 10, 1999, the last trading date prior to the public
announcement of the proposed merger, the last reported closing price on the
Nasdaq National Market for the Westell Class A Common Stock was $10 3/4 and for
the Teltrend common stock was $23 1/8. On ____________, 2000, the most recent
available date prior to printing this joint proxy statement/prospectus, the last
reported closing price on the Nasdaq National Market for the Westell Class A
Common Stock was $__________ and for the Teltrend common stock was $__________.
No assurances can be given as to the market prices of Westell Class A
Common Stock or Teltrend common stock at, or, in the case of Westell Class A
Common Stock, after, the effective time of the merger. STOCKHOLDERS ARE ADVISED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR WESTELL CLASS A COMMON STOCK AND
TELTREND COMMON STOCK.
Neither Westell nor Teltrend have declared or paid any cash dividends
on their common stock since 1998 and neither company anticipates paying any cash
dividends in the foreseeable future. Westell currently intends to retain any
future earnings to finance the growth and development of its business.
<PAGE>
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
statements give effect to the proposed acquisition of Teltrend by Westell under
the purchase method of accounting as defined in APB Opinion No. 16.
When reviewing the following pro forma information, you should note
that:
o the pro forma condensed consolidated balance sheet as of
September 30, 1999 assumes that the merger took place on
September 30, 1999 and combines Westell's September 30, 1999
unaudited consolidated balance sheet with Teltrend's October 30,
1999 unaudited consolidated balance sheet;
o the pro forma condensed consolidated statement of operations for
the fiscal year ended March 31, 1999 assumes the merger took
place as of April 1, 1998, and combines Westell's consolidated
statement of operations for its fiscal year ended March 31, 1999
with Teltrend's unaudited consolidated statement of operations
for the comparable twelve month period ending May 1, 1999; and
o the pro forma condensed consolidated statement of operations for
the six month period ended September 30, 1999 assumes that the
merger took place as of April 1, 1999, and combines the unaudited
consolidated statement of operations of Westell for the six month
period ending September 30, 1999 with Teltrend's unaudited
consolidated statement of operations for the comparable six month
period ending October 30, 1999.
The unaudited pro forma condensed consolidated financial data have been
included for illustrative purposes only, and do not reflect any cost savings and
other synergies anticipated by Westell's management as a result of the merger or
any nonrecurring charges directly attributable to the merger. The unaudited pro
forma condensed consolidated financial data are not necessarily indicative of
the results of operations or financial position that would have occurred had the
merger been completed on the dates indicated, nor are they necessarily
indicative of future results of operations or financial position of the
consolidated company.
The purchase price reflected in the accompanying pro forma condensed
consolidated financial data has been calculated based upon an estimated fair
market value of Westell's Class A Common Stock of $ 11.16 per share which was
the average high/low on January 14, 2000. The effects resulting from any
differences in the final purchase price may differ significantly from the
estimate used herein, and changes in the fair market value of the Westell Class
A Common Stock through the date of consummation of the merger will affect the
purchase price to be allocated. For example, every $1 increase in the market
price of Westell's Class A Common Stock would result in a purchase price
increase of approximately $22.2 million and a goodwill increase of approximately
$22.2 million, and would decrease annual earnings per share by approximately
$.02 per share after the merger.
The acquired assets and liabilities of Teltrend are stated in the
accompanying pro forma condensed consolidated financial statements at values
representing a preliminary allocation of the purchase price. Westell is
currently in the process of obtaining valuations for the tangible and intangible
assets of Teltrend. The effects resulting from any differences in the final
allocation of the purchase price may differ significantly from the estimates
used herein.
The accompanying pro forma information should be read in conjunction
with the historical financial statements and related notes for both Westell and
Teltrend, which are included in their annual and quarterly reports on file with
the SEC and are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page VI-1.
<PAGE>
<TABLE>
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<CAPTION>
Historical
-----------------------------------
ASSETS: Westell Teltrend Pro Forma Pro Forma
9/30/99 10/30/99 Adjustments
(Note 2)
==================== ============== ======================= ===============
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents...... $13,605 $19,067 $(5,000)(a) $ 27,672
Short term investments......... - 8,768 - 8,768
Accounts receivable (net of
allowances).................... 17,952 15,568 - 33,520
Inventories.................... 11,453 10,132 2,000(c) 23,585
Prepaid expenses and other
current assets................. 1,696 3,782 5,478
Total current assets........... 44,706 57,317 (3,000) 99,023
Property and equipment, net of
accumulated depreciation and 11,654 9,611 816(c) 22,081
amortization ..................
Intangible assets, net............... - 1,431 186,716(d) 188,147
Deferred tax asset and other long term
assets......................... 18,995 944 19,939
Total assets $75,355 $69,303 $184,532 $ 329,190
==================== ============== ======================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities.................. $17,823 $15,780 $4,200(e) $37,803
Other long term liabilities.......... 3,667 - - 3,667
Convertible debt (net of debt discount
of $1,000)..................... 19,000 - - 19,000
--------------------------------------------------------------------------
Total liabilities......... 40,490 15,780 4,200 60,470
--------------------------------------------------------------------------
Stockholders equity
Class A common stock,
par $0.01...................... 175 65 157(b) 397
Class B common stock,
par $0.01...................... 191 - - 191
Preferred stock, par $0.01..... - - - -
Additional paid in capital..... 99,543 100,135 133,498(b) 333,176
Treasury stock................. (11,728) 11,728(b)
Cumulative translation
adjustment..................... 703 140 (140)(b) 703
Accumulated deficit............ (65,747) (35,089) 35,089(b) (65,747)
Total stockholders' equity 34,865 53,523 180,332 268,720
--------------------------------------------------------------------------
Total liabilities and
stockholders' equity $75,355 $69,303 $184,532 $329,190
==================== ============== ======================= ===============
</TABLE>
<PAGE>
<TABLE>
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Historical
----------------------------------- Pro Forma
Westell Teltrend Adjustments Pro Forma
3/31/99 5/01/99 (Note 2)
===================== ============== ================= ====================
<S> <C> <C> <C> <C>
Equipment Sales...................... $71,863 $108,034 $ - $179,897
Service Revenue...................... 21,317 - - 21,317
--------------------- -------------- ----------------- --------------------
Total Revenue.................. 93,180 108,034 - 201,214
Cost of equipment sales.............. 55,439 58,284 - 113,723
Cost of services..................... 12,877 - - 12,877
--------------------- -------------- ----------------- --------------------
Total cost of goods sold....... 68,316 58,284 - 126,600
--------------------- -------------- ----------------- --------------------
Gross profit.............. 24,864 49,750 - 74,614
Operating expenses:
Sales and marketing............ 19,442 14,359 - 33,801
Research and development....... 26,605 15,475 - 42,080
General and administrative 13,117 8,265 105 21,487
(f)
Restructuring and loss on
sale or disposal............... 800 1,300 - 2,100
Intangible amortization........ - - 9,336(g) 9,336
--------------------- -------------- ----------------- --------------------
Total operating expenses.. 59,964 39,399 9,441 108,804
Operating income (loss).............. (35,100) 10,351 (9,441) (34,190)
Other income, net.................... 404 823 - 1,227
Interest expense..................... 296 - - 296
--------------------- -------------- ----------------- --------------------
Income (loss) before income taxes.... (34,992) 11,174 (9,441) (33,259)
Provision (benefit) for income taxes. 4,383 (4,383)(h) -
Net income (loss).................... $(34,992) $ 6,791 $ (5,058) $(33,259)
--------------------- -------------- ----------------- --------------------
Net income (loss) per
basic common share............... $(0.96) $1.11 $ - $ (0.57)
===================== ============== ================= ====================
Net income (loss) per
diluted common share............. $(0.96) $1.10 $ - $ (0.57)
===================== ============== ================= ====================
Weighted basic average of common
shares and common share equivalents 36,427 6,116 16,095(i) 58,638
===================== ============== ================= ====================
Weighted diluted average of common
shares and common share equivalents 36,427 6,200 16,011(i) 58,638
===================== ============== ================= ====================
</TABLE>
<PAGE>
<TABLE>
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Historical
----------------------------------- Pro Forma
Westell Teltrend Adjustments Pro Forma
9/30/99 10/30/99 (Note 2)
=================================== ================= =====================
<S> <C> <C> <C> <C>
Equipment sales...................... $34,514 $51,983 $ - $86,497
Service revenue...................... 14,649 - - 14649
--------------------- -------------- ----------------- --------------------
Total revenue.................. 49,163 51,983 - 101,146
Cost of equipment sales.............. 26,246 27,957 - 54,203
Cost of services..................... 9,786 - - 9,786
--------------------- -------------- ----------------- --------------------
Total cost of goods sold....... 36,032 27,957 - 63,989
--------------------- -------------- ----------------- --------------------
Gross profit.............. 13,131 24,026 - 37,157
Operating expenses
Sales and marketing............ 7,112 5,371 - 12,483
Research and development....... 5,216 7,706 - 12,922
General and administrative 6,617 3,807 53(f) 10,477
Intangible amortization........ - - 4,668(g) 4,668
--------------------- -------------- ----------------- --------------------
Total operating expenses.. 18,945 16,884 (4,721) 40,550
Operating income (loss).............. (5,814) 7,142 (4,721) (3,393)
Other income, net.................... 51 574 - 625
Interest expense..................... 728 - - 728
----------------------------------- ----------------- ---------------------
Income (loss) before income taxes.... (6,491) 7,716 (4,721) (3,496)
Provision (benefit) for income taxes. 2,727 (2,727)(h) -
--------------------- -------------- ----------------- --------------------
Net income (loss) ................... $ (6,491) $ 4,989 $(1,994) $ (3,496)
Net income (loss) per
basic common share............... $ (0.18) $ 0.85 $ - $ (0.06)
===================== ============== ================= ====================
Net income (loss) per
diluted common share............. $ (0.18) $ 0.83 $ - $ (0.06)
===================== ============== ================= ====================
Weighted basic average of common shares
and common share equivalents..... 36,519 5,898 16,313(i) 58,730
===================== ============== ================= ====================
Weighted diluted average of common
shares and common share equivalents
36,519 6,008 16,203(i) 58,730
===================== ============== ================= ====================
</TABLE>
<PAGE>
WESTELL AND TELTREND
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
NOTE 1 -- PURCHASE PRICE ALLOCATION
Westell estimates that the purchase price for the acquisition will be
approximately $243.0 million, based upon an estimated fair market value of
Westell's Class A Common Stock of $11.16 per share which was the average
high/low on January 14, 2000, and the issuance of 19.159 million shares of
Westell Class A Common Stock in exchange for all shares of Teltrend common
stock, plus the fair market value of the 3.1 million Westell stock options
issued in exchange for the outstanding Teltrend stock options. The effects
resulting from any differences in the final purchase price may differ
significantly from the estimate used herein, and changes in the fair market
value of the Westell Class A Common Stock through the date of consummation of
the merger will affect the purchase price to be allocated. For example, every $1
increase in the market price of Westell's Class A Common Stock would result in a
purchase price increase of approximately $22.2 million and a goodwill increase
of approximately $22.2 million, and would decrease annual earnings per share by
approximately $.02 per share after the merger.
The acquired assets and liabilities of Teltrend are stated in the
accompanying pro forma condensed consolidated financial statements at values
representing a preliminary allocation of the purchase price. Westell is
currently in the process of obtaining valuations for the tangible and intangible
assets of Teltrend. The effects resulting from any differences in the final
allocation of the purchase price may differ significantly from the estimates
used herein.
Total purchase consideration and allocation of increase in basis used in
the preparation of these statements was computed as follows:
<TABLE>
Purchase price:
<S> <C>
Acquisition of outstanding shares of common stock, including stock options....................... $213,738
Conversion of Teltrend options for Westell options................................................ 20,117
Acquisition expenses.............................................................................. 5,000
Severance costs................................................................................... 4,200
----------------
Total purchase price............................................................ $243,055
Allocation of purchase price:
Book value of assets acquired..................................................................... $53,523
Increase in inventory to fair market value less selling costs..................................... 2,000
Increase in basis of property and equipment to estimated fair market value........................ 816
Goodwill.......................................................................................... 186,716
----------------
Total purchase price............................................................ $243,055
</TABLE>
NOTE 2 -- PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the historical amounts
in the unaudited pro forma condensed consolidated financial data:
a) Total costs associated with the merger are estimated to be approximately
$5.0 million. Costs to be incurred by Westell and Teltrend in connection
with the merger include investment banking, legal, accounting and other
related fees, and have been reflected in the accompanying unaudited pro
forma condensed consolidated balance sheet as a reduction to cash.
b) Reflects (i) the issuance of 19.159 million shares of Westell Class A
Common Stock in exchange for all shares of Teltrend common stock based
upon an exchange ratio of 3.3 shares of Westell Class A Common Stock for
<PAGE>
each share of Teltrend common stock at an estimated fair market value of $
11.16 per share of Westell Class A Common Stock and (ii) the fair market
value of 3.1 million Westell stock options issued in exchange for the
outstanding Teltrend stock options. Also reflects the elimination of
Teltrend equity accounts.
c) Adjustment to record inventory and property and equipment to estimated fair
market value, less selling costs.
d) Excess of purchase price consideration over fair market value of
identifiable tangible and intangible assets.
e) Estimated severance costs that will be accrued at the acquisition date and
paid over the following year.
f) Additional depreciation as a result of the increase of property and
equipment to fair market value.
g) Amortization of goodwill on a straight-line basis over a 20 year life.
h) Elimination of tax provision recorded due to the combined entity operating
at a pro forma loss. All tax benefit is offset by a valuation allowance in
pro forma analysis.
i) The calculation of weighted average common and common equivalent shares
assumes an exchange ratio of 3.3 shares of Westell Class A Common Stock for
each share of Teltrend common stock. Common equivalent shares consist of
dilutive shares issuable upon the exercise of stock options and have been
excluded from the calculation, as their effect would be anti-dilutive.
<PAGE>
INTERESTS OF TELTREND'S DIRECTORS AND OFFICERS IN THE MERGER
In considering the recommendation of the Teltrend Board with respect to
the merger agreement, Teltrend stockholders should be aware that certain members
of Teltrend's management and the Teltrend Board may have interests in the merger
that are different from, or in addition to, the interests of Teltrend
stockholders generally, and which may create potential conflicts of interest.
The Teltrend Board was aware of, and considered, the interests of its directors
and officers when it approved the merger agreement and the merger.
TELTREND SEVERANCE PLAN
The merger agreement provides that Westell will assume, and (subject to
Westell's right to thereafter amend, modify or terminate the policy) Westell
will thereafter pay, perform and discharge when due, all of Teltrend's
obligations under Teltrend's Executive Officer Severance Plan with respect to
the individuals who participate therein. The following executive officers of
Teltrend currently participate in the severance policy:
o Howard L, Kirby, Jr. o Michael S. Grzeskowiak
o Douglas P. Hoffmeyer o Theodor A. Maxeiner
o Laurence L. Sheets o Micahael A. Samocki
o Jack C. Parker o Janice Lollini
o Steven R. Snow o Michael Burgess
o Gilbert H. Hosie
The severance policy provides for the payment of certain severance
amounts to the participants if they are involuntarily terminated from Teltrend.
Involuntary termination includes the participant's resignation or retirement as
a result of a change of control of Teltrend if such resignation or retirement:
o is requested or required by the acquiring entity as a condition
to the change of control; or
o occurs within one year of the completion of the change of
control.
Notwithstanding those provisions, however, no severance will be paid to
participants who accept employment, or refuse comparable employment, with
Teltrend or the acquiring company in a change in control.
Severance amounts to be paid to the participants will be based on the
participant's annual base salary in effect on the date of termination of
employment and will vary depending upon his or her position with Teltrend at the
time of the termination and whether or not the termination follows a change of
control, as follows. Ten years' service is the maximum period available.
<TABLE>
Executive Standard Termination Change-in-Control
--------- -------------------- -----------------
<S> <C> <C>
CEO 2.4 months base pay for each year of service 4.8 months base pay for each year of service
Senior Vice President 1.8 months base pay for each year of service 3.6 months base pay for each year of service
Vice President 1.2 months base pay for each year of service 2.4 months base pay for each year of service
Assistant Vice President 0.6 months base pay for each year of service 1.2 months base pay for each year of service
</TABLE>
In addition to the base salary amounts, the participants will receive
the same life, health and disability plan participation to which they were
entitled as an employee immediately before the termination.
Participants who are eligible to receive severance payments under the
policy may also request that Teltrend amend their stock options to extend the
period during which the option will vest and be exercisable during the severance
period. Pursuant to Teltrend's stock option plans, the vesting of all stock
options held by the participants in the severance policy will accelerate upon
the merger. Teltrend and Westell have agreed that, prior to the consummation of
the merger, Teltrend will amend the stock options held by the participants to
permit an extension of the time during which the options may be exercised if the
participant becomes so entitled pursuant to the severance policy.
<PAGE>
The severance policy provides that, while it may be terminated or
amended at any time, no such termination or amendment may reduce or adversely
affect the severance of any participant whose employment terminates within two
years of the policy's termination or amendment.
Neither Westell nor Teltrend has determined whether any of the
above-named executives who participate in the severance policy will be offered
comparable employment following the effective time of the merger. Assuming that
all such executives are terminated or are not offered comparable employment and
resign, Westell will pay to such executive officers an aggregate severance
payment estimated to be approximately $3.2 million.
TELTREND STOCK OPTION PLANS
In the merger agreement, Westell and Teltrend have each agreed to take
all actions necessary to cause each option to purchase shares of Teltrend common
stock which is unexpired and unexercised as of the merger effective time to be
automatically converted at the effective time into an option (1) to purchase a
number of shares of Westell Class A Common Stock equal to the number of shares
of Teltrend common stock subject to the option multiplied by the exchange ratio
of 3.3, which is (2) at an exercise price per share equal to the exercise price
in effect under the option immediately prior to the effective time divided by
the exchange ratio. The date of grant of each converted option will be the date
on which the corresponding Teltrend option was granted. Each option, as
converted, will otherwise be subject to the same terms and conditions as the
corresponding Teltrend option, except that:
o if the applicable Teltrend option provides for acceleration of
vesting upon the merger, the converted option will be so vested
following the merger; and
o the terms of Teltrend options outstanding under Teltrend's 1997
Non-Employee Director Stock Option Plan will be amended so that
the options may be exercised for longer periods than previously
provided, as follows:
o with respect to those Teltrend directors who do not become
directors of Westell following the merger, until six months
following the effective time of the merger, or the date on
which the options expire (whichever is earlier), and
o with respect to Howard L. Kirby, Jr. and Bernard F.
Sergesketter, Teltrend directors who will become directors
of Westell following the merger, until 90 days following the
date on which such person ceases to be a director of
Westell, or the date on which the options expire (whichever
is earlier).
Substantially all of Teltrend's stock options will vest upon the
consummation of the merger. With respect to the following executive officers of
Teltrend: Howard L. Kirby, Jr., Steven R. Snow, Douglas P. Hoffmeyer, Jack C.
Parker, Michael S. Grzeskowiak, Gilbert H. Hosie, Laurence L. Sheets, Janice
Lollini, Theodor A. Maxeiner, Michael A. Samocki and Michael Burgess, options to
acquire an aggregate of approximately 167,575 shares of Teltrend common stock
will vest upon the merger. With respect to the following non-employee directors
of Teltrend: Frank T. Cary, Harry Crutcher, III, William R. Delk, Donald R.
Hollis, Susan B. Major and Bernard F. Sergesketter, options to acquire an
aggregate of approximately 27,000 shares of Teltrend common stock will vest upon
the merger.
INDEMNIFICATION AND INSURANCE
Westell has agreed that, from and after the effective time of the
merger, Teltrend, as a wholly-owned subsidiary of Westell, will indemnify and
hold harmless all of Teltrend's past and present officers and directors to the
same extent and in the same manner and subject to the same limits as these
persons were indemnified on the date the merger agreement was signed.
Further, for six years following the merger, Westell has agreed to
cause Teltrend to use its reasonable best efforts to provide one or more
policies of directors' and officers' liability insurance that provide(s)
coverage for events occurring prior to the effective time of the merger. This
insurance must be substantially similar to Teltrend's existing policy or, if
substantially equivalent insurance coverage is unavailable, the most similar
available coverage; provided, however, that in no event will Teltrend be
required to pay an annual premium for the insurance in excess of 150% of the
<PAGE>
last annual premium paid prior to the date the merger agreement was signed. If
the insurance expires, is terminated or canceled during the six-year period or
exceeds the maximum premium, Westell will cause Teltrend to obtain as much
directors' and officers' liability insurance as can be obtained for the
remainder of the period for an annualized premium not in excess of the maximum
premium, on terms and conditions no less advantageous than Teltrend's existing
directors' and officers' liability insurance.
In addition, in the event that
o the indemnification or advancement of expenses to be provided by
Teltrend following the merger, together with the insurance to be
maintained by Teltrend, after each is fully exhausted, is not
adequate to fully indemnify or provide advancement of expenses to
any covered party to the same extent and in the same manner that
such indemnification or advancement of expenses would have been
required to be provided by Teltrend prior to the effective time
of the merger, and
o there has been a diminution in Teltrend's net book value from its
net book value as reflected on its October 30, 1999 balance
sheet,
then Westell has agreed to indemnify the covered party to the extent of the
diminution.
DIRECTORS AND EXECUTIVE OFFICERS OF WESTELL FOLLOWING THE MERGER
Westell has agreed to take such actions as are necessary so that the
Westell Board immediately following the merger includes Howard L. Kirby, Jr. and
Bernard F. Sergesketter, each of whom is currently a director of Teltrend. It is
expected that all of the directors currently serving on the Westell Board will
continue to serve as members of the Westell Board immediately following the
merger. In January 2000, Westell's Board increased its size from six members to
eight and elected Marc Zionts, Westell's chief executive officer, and J. William
Nelson, Westell's president, as directors to fill the newly created
directorships. In addition, in January 2000, Ormand Wade resigned as a director
and was replaced, by the vote of the remaining directors, by Thomas A. Reynolds,
III. Mr. Reynolds is a partner with Winston & Strawn, an international law firm
headquartered in Chicago which he joined in 1983. Mr. Reynolds is also a member
of the board of directors of Smurfit Stone Container Corporation, an integrated
producer of paperboard and paper-based packaging products.
Mr. Kirby has served as the president, the chief executive officer and
a director of Teltrend since January 1990. Mr. Kirby was named chairman of the
Teltrend Board in February 1997. Mr. Kirby began his career in the
telecommunications industry in 1962 with Collins Radio Company (which
subsequently became a part of Rockwell International Corporation), where he
spent 20 years in various management positions in engineering, marketing and
sales. From 1982 to 1984, Mr. Kirby was the director of planning and business
development for U.S. Telephone, now part of Sprint Corporation. In 1984, Mr.
Kirby became the vice president and general manager at Pulse Communications,
Inc., a subsidiary of Hubbell Incorporated, and held that position until he
joined Teltrend in 1990. Mr. Kirby is 63 years old.
Mr. Sergesketter has been a director of Teltrend since January 1996.
Since August 1994, Mr. Sergesketter has been the president and chief executive
officer of Sergesketter & Associates Inc., a firm which provides consulting
services in the areas of marketing, telecommunications and quality management.
Prior to that, Mr. Sergesketter held various positions (including positions in
engineering, finance, sales and marketing) during his 36-year career with AT&T,
including, from January 1983 to August 1994, vice president -- central region.
As vice president -- central region of AT&T, Mr. Sergesketter's principal
responsibilities were for AT&T's sales and marketing operations in the midwest.
Mr. Sergesketter is a director of the Illinois Institute of Technology, The
Cradle, The Sigma Chi Foundation, and Mather Foundation. Mr. Sergesketter is 63
years old.
Upon consummation of the merger, Teltrend will be a wholly-owned
subsidiary of Westell. The current directors of Teltrend will resign at the
effective time, and Westell will name a new board of directors for Teltrend.
Westell has not yet determined whether the current executive officers
of Teltrend will continue to serve in executive positions at Westell or in their
current positions with Teltrend, which will become a subsidiary of Westell,
after the effective time of the merger. Such decisions are expected to be made
promptly following the effective time.
<PAGE>
CHAPTER THREE
THE MEETINGS AND VOTING
THE WESTELL SPECIAL MEETING
PURPOSE OF THE MEETING
At the Westell special meeting, Westell stockholders will be asked to
consider and vote upon the proposals described below. Each proposal will be
voted upon separately by Westell stockholders; however, the merger will not be
completed and the actions contemplated in the merger proposals will not be
effected unless each of the proposals are approved by the required vote of
Westell stockholders.
(1) Westell stockholders are being asked to approve the issuance of
shares of Westell Class A Common Stock in accordance with the merger agreement.
(2) Westell stockholders are being asked to approve and adopt an
amendment to Westell's Amended and Restated Certificate of Incorporation to
increase the number of shares of Class A Common Stock that Westell is authorized
to issue to 85 million from 65.5 million.
Westell does not currently have enough authorized shares of Westell
Class A Common Stock to consummate the merger. As a result, and given the
reservation of the shares to be issued upon conversion of Westell's Class B
Common Stock and convertible debentures and upon the exercise of outstanding
options and warrants, the authorized shares must be increased to at least
approximately 71 million shares in order to effect the merger. In addition,
since the number of shares of Class A Common Stock into which Westell's
convertible debentures and warrants is variable, and therefore may increase in
certain circumstances, Westell must have the ability to reserve additional
shares for issuance with respect thereto. The Westell Board believes that
increasing the authorized shares to 85 million is advisable since it will allow
Westell to reserve such additional shares, if necessary, and will provide
Westell with some additional flexibility to issue shares of Class A Common Stock
in connection with employee benefit plans, possible future financing
transactions, acquisitions of other companies or business properties, stock
splits, and other corporate purposes. While the issuance of additional shares of
Class A Common Stock may dilute the ownership interests of a person seeking to
obtain control of Westell, and thus discourage a change in control of Westell by
making it more difficult or costly, Westell is not aware of anyone seeking to
accumulate Class A Common Stock for such purpose and has no present intention of
using any additional Class A Common Stock to deter a change in control. Except
as otherwise required by applicable law or the rules of the National Association
of Securities Dealers, Inc., authorized but unissued shares of Class A Common
Stock may be issued at such time, for such purposes, and for such consideration
as the Westell Board may determine to be appropriate, without further
authorization by the Westell stockholders.
It is not expected that any matters other than the proposals described
above will be brought before the Westell special meeting. If, however, other
matters are properly presented, the persons named in the proxy will have
authority to vote in accordance with their judgment on any such matters, except
that no proxy that directs a vote against or abstention with respect to the
merger proposals will be voted to adjourn or postpone the Westell special
meeting.
DATE, PLACE AND TIME
The Westell special meeting will be held at 10:00 a.m., local time, on
_________________, 2000, at Westell's corporate headquarters, 750 North Commons
Drive, Aurora, Illinois 60504.
RECORD DATE; STOCK OUTSTANDING
The Westell Board has fixed the close of business on __________, 2000
as the record date for determining the holders of Westell common stock that are
entitled to receive notice of and to vote at the Westell special meeting. On the
record date, there were _____ shares of Westell Class A Common Stock and ____
<PAGE>
shares of Westell Class B Common Stock outstanding. Each share of Westell Class
A Common Stock entitles its holder to one vote and each share of Westell Class B
Common Stock entitles its holder to four votes.
VOTES REQUIRED FOR APPROVAL
Each proposal will be voted upon separately by Westell's stockholders,
with the holders of shares of Class A Common Stock and Class B Common Stock
voting together as a single class with respect to each proposal. The affirmative
vote of a majority of the total votes cast is required to approve the issuance
of shares of Westell's Class A Common Stock in the merger and the affirmative
vote of a majority of the total votes outstanding as of the record date is
required to approve the amendment to Westell's Amended and Restated Certificate
of Incorporation.
Because the amendment to Westell's Amended and Restated Certificate of
Incorporation requires the approval of a majority of the total votes
outstanding, abstentions or the failure to vote and broker non-votes will have
the same effect as a negative vote. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
QUORUM REQUIREMENT
A quorum of Westell stockholders is necessary to hold a valid meeting.
The presence in person or by proxy of holders of shares representing a majority
of Westell's outstanding votes on the record date is a quorum. Abstentions and
broker non-votes count as present for establishing a quorum. Shares held by
Westell in its treasury are not counted as outstanding for quorum or voting
purposes.
STOCK OWNERSHIP OF MANAGEMENT; VOTING AGREEMENT
On _____, 2000, directors and executive officers of Westell and their
affiliates owned and were entitled to vote ___ shares of Westell Class A Common
Stock and all outstanding shares of Class B Common Stock, or approximately __%
of Westell's outstanding votes.
Messrs. Penny and Simon, two of Westell's directors, who are the
co-trustees of the Westell Technologies, Inc. Voting Trust, and beneficially own
approximately 80% of the voting power of Westell, have agreed to vote in favor
of the merger proposals if a majority of Westell's public stockholders so vote.
For purposes of the voting agreement, Westell's public stockholders include all
holders of Westell Class A Common Stock, other than Messrs. Penny and Simon and
members of their families and any officers or directors of Westell.
While the co-trustees are obligated to vote in favor of the merger
proposals if a majority of Westell's public stockholders so vote, the voting
agreement does not prevent or prohibit the co-trustees from also voting in favor
of the proposals even if a majority of Westell's public stockholders reject the
proposals. The co-trustees have indicated their current intention to vote as the
majority of Westell's non-affiliated, public stockholders vote with respect to
the proposals. The voting agreement is described in more detail in "Voting
Agreement with Westell Controlling Stockholders" on page II-18.
VOTING AND REVOCATION OF PROXIES
Westell Class A Common Stock represented by a proxy properly signed and
received at or prior to the Westell special meeting, unless subsequently
revoked, will be voted in accordance with the instructions thereon. IF A PROXY
IS SIGNED AND RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, SHARES
REPRESENTED BY THE PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS. If you vote
in favor of either of the proposals, the proxy holders may, in their discretion,
vote your shares to adjourn the Westell special meeting to solicit additional
proxies in favor of the proposals.
A Westell stockholder who executes a proxy may revoke it any time
before it is exercised by giving written notice of revocation to the corporate
secretary of Westell, by subsequently filing another, later-dated proxy or by
<PAGE>
attending the Westell special meeting and voting in person. Attendance at the
Westell special meeting will not in and of itself constitute revocation of a
proxy.
SOLICITATION OF PROXIES
The Westell Board is soliciting proxies on behalf of Westell. In
addition to solicitation by mail, directors, officers and employees of Westell,
none of whom will be specifically compensated for such services, may solicit
proxies from the stockholders of Westell, personally or by telephone or other
forms of communication. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
proxy materials to beneficial owners.
THE TELTREND SPECIAL MEETING
GENERAL
This joint proxy statement/prospectus is furnished to the holders of
Teltrend common stock in connection with the solicitation of proxies by the
Teltrend Board for use at the Teltrend special meeting to be held for the
purposes described in this document.
This joint proxy statement/prospectus is also furnished to Teltrend
stockholders as a prospectus in connection with the issuance by Westell of
shares of Westell Class A Common Stock pursuant to the merger.
PURPOSE OF THE MEETING
At the Teltrend special meeting, Teltrend stockholders will be asked to
consider and vote upon a proposal to adopt the merger agreement. The merger
agreement is attached as Appendix A to this joint proxy statement/prospectus and
described under "The Merger Agreement" beginning on page IV-1.
It is not expected that any matters other than the proposal described
above will be brought before the Teltrend special meeting. If, however, other
matters are properly presented, the persons named in the proxy will have
authority to vote in accordance with their judgment on any such matters, except
that no proxy that directs a vote against or abstention with respect to the
adoption of the merger agreement will be voted to adjourn or postpone the
Teltrend special meeting.
DATE, PLACE AND TIME
The Teltrend special meeting will be held at 10:00 a.m., local time, on
________, __________, 2000, at Teltrend's corporate headquarters, 620 Stetson
Avenue, St. Charles, Illinois 60174.
RECORD DATE; STOCK OUTSTANDING
The Teltrend Board has fixed the close of business on __________, 2000
as the record date for determining the holders of Teltrend common stock that are
entitled to receive notice of and to vote at the Teltrend special meeting. On
the record date, there were _____ shares of Teltrend common stock outstanding.
Each share of Teltrend common stock entitles its holder to one vote.
VOTES REQUIRED FOR APPROVAL
The affirmative vote of a majority of the total votes outstanding as of
the record date is required to approve the adoption of the merger agreement.
Because the adoption of the merger agreement requires the approval of a
majority of the total votes outstanding, abstentions or the failure to vote and
broker non-votes will have the same effect as a negative vote. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does not vote on a
<PAGE>
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner.
QUORUM REQUIREMENT
A quorum of Teltrend stockholders is necessary to hold a valid meeting.
The presence in person or by proxy of holders of shares representing a majority
of the Teltrend's outstanding common stock on the record date is a quorum.
Abstentions and broker non-votes count as present for establishing a quorum.
Shares held by Teltrend in its treasury are not counted as outstanding for
quorum or voting purposes.
STOCK OWNERSHIP OF MANAGEMENT
On _____, 2000, directors and executive officers of Teltrend and their
affiliates owned and were entitled to vote ___ shares of Teltrend common stock,
or approximately ___% of the outstanding shares of Teltrend common stock. These
individuals and their affiliates have indicated that they will vote in favor of
approval and adoption of the merger agreement.
VOTING AND REVOCATION OF PROXIES
Teltrend common stock represented by a proxy properly signed and
received at or prior to the Teltrend special meeting, unless subsequently
revoked, will be voted in accordance with the instructions thereon. IF A PROXY
IS SIGNED AND RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, SHARES
REPRESENTED BY THE PROXY WILL BE VOTED "FOR" THE ADOPTION OF THE MERGER
AGREEMENT. If you vote in favor of adoption of the merger agreement, the proxy
holders may, in their discretion, vote your shares to adjourn the Teltrend
special meeting to solicit additional proxies in favor of adoption of the merger
agreement.
A Teltrend stockholder who executes a proxy may revoke it any time
before it is exercised by giving written notice of revocation to the corporate
secretary of Teltrend, by subsequently filing another, later-dated proxy or by
attending the Teltrend special meeting and voting in person. Attendance at the
Teltrend special meeting will not in and of itself constitute revocation of a
proxy.
SOLICITATION OF PROXIES
The Teltrend Board is soliciting proxies on behalf of Teltrend. In
addition to solicitation by mail, directors, officers and employees of Teltrend,
none of whom will be specifically compensated for such services, may solicit
proxies from the stockholders of Teltrend, personally or by telephone or other
forms of communication. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
proxy materials to beneficial owners.
<PAGE>
CHAPTER FOUR
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT. ALL WESTELL
STOCKHOLDERS AND TELTREND STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT
CAREFULLY FOR A COMPLETE DESCRIPTION OF THE MERGER.
TERMS OF THE MERGER
After the conditions precedent to the merger have been fulfilled or
waived, a certificate of merger will be filed with the Delaware Secretary of
State. The merger will become effective upon the filing of the certificate of
merger, and Teltrend will become a wholly-owned subsidiary of Westell.
At the effective time of the merger:
o each share of Teltrend common stock outstanding will be converted
into the right to receive 3.3 shares of Westell Class A Common
Stock, subject to the provisions below regarding fractional
shares;
o each option or warrant exercisable for Teltrend common stock will
be converted into an option or warrant exercisable for Westell
Class A Common Stock, for a number of shares and at an exercise
price adjusted to reflect the exchange ratio; and
o all shares of Teltrend common stock, when converted, will no
longer be outstanding and will automatically be canceled.
No fractional shares of Westell Class A Common Stock will be issued in
the merger. Instead, each Teltrend stockholder who would otherwise be entitled
to receive a fraction of a share of Westell Class A Common Stock, after
aggregating all shares of Westell Class A Common Stock which the holder is
entitled to receive, will be paid an amount in cash, determined by multiplying
the fraction by the average closing price per share of Westell Class A Common
Stock on the Nasdaq National Market during the 10 trading days immediately
preceding the effective time.
Because the exchange ratio is fixed, the number of shares of Westell
Class A Common Stock to be received by Teltrend stockholders upon consummation
of the merger will depend only on the number of shares of Teltrend common stock
outstanding at the effective time and will not be adjusted due to any increase
or decrease in the market price of the Teltrend common stock or the Westell
Class A Common Stock. This includes any such increase or decrease after the date
of this joint proxy statement/prospectus and after the dates of the Westell
special meeting and the Teltrend special meeting.
EXCHANGE OF SHARES
Westell will appoint an exchange agent to handle the exchange of
Teltrend stock certificates in the merger for Westell Class A Common Stock
certificates and the payment of cash in lieu of fractional shares of Westell
Class A Common Stock.
Soon after the effective time, the exchange agent will mail a letter of
transmittal which will contain instructions for delivery of Teltrend stock in
exchange for Westell Class A Common Stock (and cash in lieu of fractional
shares) to each Teltrend stockholder. Upon delivery of Teltrend common stock to
the exchange agent and the signed letter of transmittal, the Teltrend
stockholder will receive certificates representing the number of whole shares of
Westell Class A Common Stock to which the holder of the certificate is entitled
under the merger agreement, and cash in lieu of any fractional shares, and the
Teltrend certificates surrendered will be canceled. TELTREND STOCKHOLDERS SHOULD
NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE THE LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
<PAGE>
TREATMENT OF TELTREND STOCK OPTIONS
Westell and Teltrend have each agreed to take all actions necessary to
cause each option to purchase shares of Teltrend common stock which is unexpired
and unexercised as of the effective time to be automatically converted at the
effective time into an option (1) to purchase a number of shares of Westell
Class A Common Stock equal to the number of shares of Teltrend common stock
subject to such option multiplied by the exchange ratio of 3.3, which is (2) at
an exercise price per share equal to the exercise price in effect under such
option immediately prior to the effective time divided by the exchange ratio.
The date of grant of each converted option will be the date on which the
corresponding Teltrend option was granted. Each option, as converted, will
otherwise be subject to the same terms and conditions as the corresponding
Teltrend option, except that:
o if the applicable Teltrend option provides for acceleration of
vesting upon the merger, the converted option will be so vested
following the merger; and
o the terms of Teltrend options outstanding under Teltrend's 1997
Non-Employee Director Stock Option Plan will be amended so that
the options may be exercised for longer periods than previously
provided, as follows:
o with respect to those Teltrend directors who do not become
directors of Westell following the merger, until six months
following the effective time, or the date on which the
options expire (whichever is earlier), and
o with respect to Howard L. Kirby and Bernard F. Sergesketter,
Teltrend directors who will become directors of Westell
following the merger, until 90 days following the date on
which such person ceases to be a director of Westell, or the
date on which the options expire (whichever is earlier).
Westell will file with the SEC a registration statement on Form S-8 with
respect to the issuance of shares of Westell Class A Common Stock upon exercise
of the converted options.
CONDITIONS TO THE MERGER
Mutual Closing Conditions. The obligations of Westell and Teltrend to
effect the merger are subject to the satisfaction, or to the extent legally
permissible, the waiver, of the following conditions:
o approval by the Westell stockholders of the issuance of Westell
Class A Common Stock in the merger and the amendment to Westell's
Amended and Restated Certificate of Incorporation;
o adoption by the Teltrend stockholders of the merger agreement;
o approval for listing on the Nasdaq National Market of the shares
of Westell Class A Common Stock to be issued in the merger and
those to be reserved for issuance upon exercise of converted
Teltrend stock options;
o expiration or termination of the waiting period applicable to the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of
1976;
o Westell's registration statement on Form S-4, which includes this
joint proxy statement/prospectus, being effective and not subject
to any stop order by the SEC;
o absence of legal prohibition on completion of the merger; and
o the receipt of all governmental waivers, consents, orders and
approvals legally required for the consummation of the merger,
unless the failure to obtain the same would not be reasonably
likely to have a material adverse effect on Teltrend.
Additional Closing Conditions for Teltrend's Benefit. Teltrend's
obligation to complete the merger is
subject to the following additional conditions:
o Westell's and Theta Acquisition Corp.'s performance in all
material respects of the obligations required to be performed by
them under the merger agreement on or prior to the closing date;
<PAGE>
o the accuracy, in all material respects, of the representations
and warranties of Westell and Theta Acquisition Corp. to the
extent specified in the merger agreement;
o the absence of any changes or events that have a material adverse
effect on Westell or Theta Acquisition Corp.; and
o the receipt of certain closing certificates from officers of
Westell and Theta Acquisition Corp.
Additional Closing Conditions for Westell's Benefit. Westell's
obligation to complete the merger are subject to the following additional
conditions:
o Teltrend's performance in all material respects of the
obligations required to be performed by it under the merger
agreement on or prior to the closing date;
o the accuracy, in all material respects, of the representations
and warranties of Teltrend, to the extent specified in the merger
agreement;
o the delivery of agreements from certain of Teltrend's affiliates
regarding restrictions on the resale of the Westell Class A
Common Stock received by those persons in the merger, to the
extent required by the merger agreement;
o the amendment of certain Teltrend options, to the extent required
by the merger agreement;
o the absence of any changes or events that have a material adverse
effect on Teltrend; and
o the receipt of certain closing certificates from officers of
Teltrend.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations
and warranties made by Westell and Theta Acquisition Corp., on the one hand, and
Teltrend, on the other hand. The most significant of these relate to:
o corporate existence;
o capitalization;
o ownership of subsidiaries;
o authorization to enter into the merger; government or other
approvals required in connection with the merger; and absence of
any breaches of organizational documents, laws or material
agreements as a result of the merger;
o filings with the SEC and financial statements;
o the absence of material undisclosed liabilities;
o litigation;
o information provided for inclusion in this joint proxy
statement/prospectus;
o compliance with laws and material agreements;
o tax matters;
o employee benefits matters;
o labor matters;
o environmental matters;
o title to assets;
o the stockholder vote required to approve the matters to be
submitted to the applicable stockholders;
o broker's or advisor's fees; and
o opinions of financial advisors.
Teltrend also represented that it had taken all action necessary to
exempt the merger from the provisions of the Delaware anti-takeover statute and
to render the Teltrend rights plan inapplicable to the merger.
<PAGE>
The representations and warranties in the merger agreement will not
survive the closing of the merger or termination of the merger agreement.
PRINCIPAL COVENANTS
Each of Westell and Teltrend has undertaken covenants in the merger
agreement. The following summarizes the more significant of these covenants.
Interim Operations. Each of Westell and Teltrend has undertaken a
separate covenant that places restrictions on it and its subsidiaries until the
effective time of the merger. The following summarizes the more significant
restrictions undertaken by each of Westell and Teltrend, each of which is
subject to exception in the event of the prior consent of the other.
Restrictions on Interim Operations of Teltrend. Teltrend has agreed
that it and each of its subsidiaries will:
o conduct its business in the ordinary and usual course of
business, consistent with past practice;
o not amend or propose to amend its certificate of incorporation,
by-laws or other similar governing documents,
o not split, combine or reclassify its outstanding capital stock or
declare any dividend, other than dividends by wholly-owned
subsidiaries of Teltrend;
o not issue, dispose of, or redeem or purchase any shares of its
capital stock, or any options or securities exercisable for or
convertible into its capital stock, subject to the exceptions set
forth in the merger agreement;
o not incur any indebtedness, subject to certain ordinary course
exceptions;
o not take or fail to take any action which would cause Teltrend or
its stockholders to recognize gain or loss for federal income tax
purposes as a result of the consummation of the merger, except to
the extent that any stockholders receive cash in lieu of
fractional shares;
o not make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of
business and expenditures for fixed or capital assets in the
ordinary course of business and consistent with Teltrend's
capital budget;
o not sell, pledge, dispose of or encumber any material assets or
businesses other than sales in the ordinary course of business;
o except as otherwise permitted pursuant to the merger agreement,
not take any action which would be reasonably likely to prevent
Teltrend from (1) obtaining any necessary governmental approvals,
(2) performing its covenants and agreements under the merger
agreement, or (3) consummating the transactions contemplated by
the merger agreement;
o use all reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of its
present officers and key employees, and preserve the goodwill and
business relationships with customers and others having business
relationships with it and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by the merger agreement;
o not enter into or amend in any material respect any employment,
severance, special pay arrangement with respect to termination of
employment or other similar arrangements or agreements with any
directors, officers or key employees, except in the ordinary
course and consistent with past practice, and not, in any event,
enter into any written employment agreements, subject to
specified exceptions with respect to employees of Teltrend's
subsidiary in the United Kingdom;
o not adopt, enter into or amend in any material respect any
employee benefit plan or arrangement, except as required to
comply with changes in applicable law or as otherwise
contemplated by the merger agreement;
o use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets
and its businesses in such amounts and against such risks and
losses as are consistent with past practice;
<PAGE>
o not implement any change in accounting principles, practices or
methods, other than as may be required by United States generally
accepted accounting principles, the financial accounting
standards board, the SEC or any other government authority or
oversight agency; and
o not make, change or revoke any material tax election or make any
material agreement or settlement regarding taxes with any taxing
authority.
Restrictions on the Interim Operations of Westell. Westell has agreed
that it and each of its subsidiaries will:
o conduct its business in the ordinary and usual course of
business, consistent with past practice;
o not amend or propose to amend its certificate of incorporation,
other than as contemplated by this joint proxy
statement/prospectus, by-laws or other similar governing
documents,
o not split, combine or reclassify its outstanding capital stock or
declare any dividend, other than dividends by wholly-owned
subsidiaries of Westell;
o not issue, dispose of, or redeem or purchase any shares of its
capital stock, or any options or securities exercisable for or
convertible into its capital stock, subject to the exceptions set
forth in the merger agreement;
o not incur any indebtedness, subject to certain ordinary course
exceptions;
o not take or fail to take any action which would cause Westell or
Teltrend's stockholders to recognize gain or loss for federal
income tax purposes as a result of the consummation of the
merger, except to the extent that any stockholders receive cash
in lieu of fractional shares;
o not make any acquisition of any assets or businesses other than
in the ordinary course of business;
o not sell, pledge, dispose of or encumber any material assets or
businesses other than sales in the ordinary course of business;
o except as otherwise permitted pursuant to the merger agreement,
not take any action which would be reasonably likely to prevent
Westell from (1) obtaining any necessary governmental approvals,
(2) performing its covenants and agreements under the merger
agreement, or (3) consummating the transactions contemplated by
the merger agreement;
o use all reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of its
present officers and key employees, and preserve the goodwill and
business relationships with customers and others having business
relationships with it and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by the merger agreement;
o not implement any change in accounting principles, practices or
methods, other than as may be required by United States generally
accepted accounting principles, the financial accounting
standards board, the SEC or any other government authority or
oversight agency; and
o use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets
and its businesses in such amounts and against such risks and
losses as are consistent with past practice.
No Solicitation by Teltrend
Teltrend has agreed that it and its subsidiaries and their officers,
directors, employees and advisors will not initiate, solicit, negotiate,
knowingly encourage or provide non-public or confidential information to
facilitate any proposal or offer to acquire all or any substantial part of the
business and properties of Teltrend or any capital stock of Teltrend.
However, notwithstanding the restrictions in the preceding paragraph,
Teltrend may, in response to an unsolicited written proposal or indication of
interest with respect to a potential or proposed acquisition transaction,
o furnish confidential or non-public information to a financially
capable potential acquirer, subject to a confidentiality and
standstill agreement no more favorable than the one between
Teltrend and Westell; and
<PAGE>
o negotiate with such potential acquirer,
but only if the Teltrend Board in good faith, after consultation with its
outside legal counsel, determines that the failure to provide such confidential
or non-public information to or negotiate with such potential acquirer would
constitute a breach of its fiduciary duty to the Teltrend stockholders.
Teltrend must notify Westell as soon as practicable after (1) Teltrend
has received any acquisition proposal, (2) the Teltrend Board or its chief
executive officer or chief financial officer has actual knowledge that anyone
intends to make an acquisition proposal, or (3) Teltrend has received specified
requests for nonpublic information relating to it or its subsidiaries. The
notice must be made orally and in writing and must indicate in reasonable detail
the identity of the offeror and the terms and conditions of the proposal,
inquiry or contact. Teltrend must keep Westell fully informed of the status and
details of any such acquisition proposal or request.
Teltrend Board's Covenant to Recommend
Teltrend has agreed that it will submit the merger agreement for
adoption at a meeting of its stockholders as promptly as practicable and,
subject to the next sentence, will use its reasonable best efforts to obtain
stockholder adoption of the merger agreement. Further, Teltrend's Board has
agreed to recommend adoption of the merger agreement to the Teltrend
stockholders, except as may be required in response to any unsolicited bona fide
written acquisition proposal, in order to comply with its fiduciary duties under
Delaware corporate law as it determines in good faith, after consultation with
Teltrend's outside legal counsel.
Westell Board's Covenant to Recommend
Westell has agreed that it will submit the issues described in this
joint proxy statement/prospectus for approval at a meeting of its stockholders
as promptly as practicable and, subject to the next sentence, will use its
reasonable best efforts to obtain stockholder approval thereof. Further, the
Westell Board has agreed to recommend approval of such issues, except as may be
required, in response to any bona fide acquisition proposal with respect to
Westell, in order to comply with the Westell Board's fiduciary duties under
Delaware corporate law as it determines in good faith, after consultation with
Westell's outside legal counsel.
Westell has also agreed to authorize and cause an officer of Westell to
vote Westell's shares of capital stock of Theta Acquisition Corp. for adoption
of the merger agreement and to take all additional actions as the sole
stockholder of Theta Acquisition Corp. necessary to adopt the merger agreement.
Listing of Westell Class A Common Stock
Westell has agreed to cause the shares of its Class A Common Stock
which will be issued in connection with the merger and reserved for issuance
upon the exercise of the converted Teltrend stock options to be listed on the
Nasdaq National Market.
Covenant to Cooperate
Westell and Teltrend have each agreed to use all reasonable efforts to
do everything necessary or advisable to consummate the merger and the other
transactions contemplated by the merger agreement. In addition, Teltrend has
granted to Westell the right, at Westell's expense, to participate in any
litigation commenced against Teltrend relating to the transactions contemplated
by the merger agreement. Teltrend has also agreed that it will not settle any
such litigation without Westell's prior consent, unless the Teltrend Board
determines in good faith after consultation with Teltrend's outside legal
counsel that the existence or exercise of such right with respect to a
particular settlement would violate the fiduciary duties of the Teltrend Board.
Director's and Officer's Indemnification
Westell has agreed that from and after the effective time of the
merger, Teltrend, as a wholly-owned subsidiary of Westell, will indemnify and
hold harmless all of Teltrend's past and present officers and directors to the
<PAGE>
same extent and in the same manner and subject to the same limits as such
persons were indemnified on December 13, 1999 pursuant to Delaware corporate
law, Teltrend's certificate of incorporation or Teltrend's bylaws for acts or
omissions occurring at or prior to the effective time of the merger.
Further, for six years following the merger, Westell has agreed to
cause Teltrend to use its reasonable best efforts to provide one or more
policies of directors' and officers' liability insurance that provide(s)
coverage for events occurring prior to the effective time of the merger. This
insurance must be substantially similar to Teltrend's existing policy or, if
substantially equivalent insurance coverage is unavailable, the most similar
available coverage; provided, however, that in no event will Teltrend be
required to pay an annual premium for the insurance in excess of 150% of the
last annual premium paid prior to the December 13, 1999. If the insurance
expires, is terminated or canceled during the six-year period or exceeds the
maximum premium, Westell will cause Teltrend to obtain as much directors' and
officers' liability insurance as can be obtained for the remainder of the period
for an annualized premium not in excess of the maximum premium, on terms and
conditions no less advantageous than Teltrend's existing directors' and
officers' liability insurance.
In addition, in the event that
o the indemnification or advancement of expenses to be provided by
the Teltrend following the merger, together with the insurance to
be maintained by Teltrend, after each is fully exhausted, is not
adequate to fully indemnify or provide advancement of expenses to
any covered party to the same extent and in the same manner that
such indemnification or advancement of expenses would have been
required to be provided by Teltrend prior to the effective time
of the merger, and
o there has been a diminution in Teltrend's net book value from its
net book value as reflected on its October 30, 1999 balance sheet,
then Westell has agreed to indemnify the covered party to the extent of the
diminution.
Teltrend Severance Policy
Westell has agreed that, at the effective time of the merger, it will
assume, and, subject to its right to thereafter amend, modify or terminate the
policy in accordance with its terms, Westell will thereafter pay, perform and
discharge when due, all of Teltrend's obligations under Teltrend's Executive
Officer Severance Plan with respect to the individuals who participated in the
policy as of December 13, 1999, the date the merger agreement was signed.
Other Covenants
The merger agreement contains various other covenants, the most
significant of which are as follows:
o Westell and Teltrend have each agreed to provide reasonable
access to the other to its properties and records;
o Westell and Teltrend have each agreed to prepare and file this
joint proxy statement/prospectus and to use all reasonable
efforts to have the registration statement, of which this joint
proxy statement/prospectus is a part, declared effective by the
SEC;
o Westell and Teltrend have each agreed to consult with each other
before issuing any press release or similar written public
statement with respect to the merger agreement or the merger; and
o Westell and Teltrend have each agreed to promptly notify each
other of specified events.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES
Right to Terminate
The merger agreement may be terminated at any time prior to the
effective time of the merger in any of the following ways, even if it was
previously adopted by the Teltrend stockholders or if the issuance of Westell
<PAGE>
Class A Common Stock and amendment to Westell's Amended and Restated Certificate
of Incorporation have been approved by the Westell stockholders:
Teltrend will have the right to terminate the merger agreement:
o if the merger is not completed by June 30, 2000 (unless due to a
delay or default on the part of Teltrend), provided, however,
that such date shall be extended to September 30, 2000 if, as of
June 30, 2000, the parties are engaged in ongoing discussions
with the FTC or Antitrust Division regarding the transactions
contemplated by the merger agreement;
o if the merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Teltrend and if
Teltrend shall have used reasonable efforts to prevent the entry
of such order;
o if:
o Teltrend receives an offer or proposal from any potential
acquirer, excluding any Teltrend director or officer or any
group of which any Teltrend director or officer is a member,
with respect to a merger, sale of substantial assets or
other business combination involving Teltrend;
o the Teltrend Board determines, in good faith and after
consultation with an independent financial advisor, that
such offer or proposal, if consummated pursuant to its
terms, would result in an transaction more favorable to
Teltrend's stockholders than the merger and resolves to
accept this superior proposal;
o Teltrend shall have given Westell two days' prior written
notice of its intention to terminate pursuant to this
provision; and
o such termination shall not be effective until Teltrend pays
to Westell the $7.2 million break-up fee described below;
o if the Westell stockholders fail to approve the issuance of the
Westell Class A Common Stock in the merger and the amendment to
Westell's Amended and Restated Certificate of Incorporation, each
as contemplated by this joint proxy statement/prospectus;
o if the Teltrend stockholders fail to adopt the merger agreement
at a duly held meeting called for such purpose or any adjournment
thereof;
o if Westell's representations and warranties fail to be true and
correct in all material respects in accordance with the merger
agreement;
o if Westell fails to perform in any material respect any of its
material covenants in the merger agreement and does not cure such
default in all material respects within 30 days after notice of
such default is given by Teltrend; or
o if the Board of Directors of Westell shall have resolved to
accept a superior proposal.
Westell will have the right to terminate the merger agreement:
o if Teltrend's representations and warranties fail to be true and
correct in all material respects in accordance with the merger
agreement;
o if the merger is not completed by June 30, 2000 (unless due to a
delay or default on the part of Westell or Theta Acquisition
Corp.), provided, however, that such date shall be extended to
September 30, 2000 if, as of June 30, 2000, the parties are
engaged in ongoing discussions with the FTC or Antitrust Division
regarding the transactions contemplated hereby;
o if the merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Westell or
Theta Acquisition Corp. and if Westell shall have used reasonable
efforts to prevent the entry of such order;
o if the Teltrend Board shall have resolved to accept a superior
proposal or shall have recommended to the Teltrend stockholders
that they tender their shares in a tender or an exchange offer
commenced by a third party, excluding any affiliate of Westell or
any group of which any affiliate of Westell is a member;
<PAGE>
o if Teltrend fails to perform in any material respect any of its
material covenants in the merger agreement and does not cure such
default in all material respects within 30 days after notice of
such default is given by Westell;
o if the Teltrend stockholders fail to adopt the merger at a duly
held meeting of stockholders called for such purpose or any
adjournment thereof; or
o if:
o Parent receives an acquisition proposal, which proposal
expressly states in writing that it is subject to Westell
terminating the merger agreement or to otherwise not
consummating the transactions contemplated thereby,
o as a result, the Westell Board does not recommend to
Westell's stockholders approval of the issuance of the
Westell Class A Common Stock in the merger and the amendment
of Westell's Amended and Restated Certificate of
Incorporation, and
o the Westell Board determines, in good faith and after
consultation with an independent financial advisor, that
such offer or proposal, if consummated pursuant to its
terms, would result in a transaction more favorable to
Westell's stockholders than the merger and resolves to
accept such superior proposal.
Termination Fees
Teltrend has agreed to pay to Westell a break-up fee of approximately
$7.2 million under the following circumstances:
o Teltrend terminates the merger agreement as a result of a
superior proposal, in accordance with the termination right
described above;
o Westell terminates the merger agreement because the Teltrend
Board has resolved to accept a superior proposal or has
recommended to the Teltrend stockholders that they tender their
shares in a tender offer commenced by a third party; or
o either Westell or Teltrend terminates the merger agreement
because the Teltrend stockholders have not adopted the merger
agreement at a duly held meeting, but only if Teltrend enters
into a definitive agreement with respect to an acquisition
transaction within three months following such termination.
Westell has agreed to pay to Teltrend a break-up fee of approximately
$7.2 million under the following circumstances:
o either Westell or Teltrend terminates the merger agreement
because the Westell Board resolves to accept a superior proposal,
which requires the merger agreement to be terminated, but only if
Westell enters into a definitive agreement with respect to an
acquisition transaction within nine months following such
termination; or
o Westell, in accordance with the merger agreement, does not
recommend to its stockholders approval of the issuance of the
Westell Class A Common Stock in the merger or the amendment to
Westell's Amended and Restated Certificate of Incorporation, each
as described in this joint proxy statement/prospectus, and
Teltrend terminates the merger agreement because the Westell
stockholders have failed to approve these matters at a duly held
meeting called for that purpose, but only if Westell enters into
a definitive agreement with respect to an acquisition transaction
within three months following such termination.
OTHER EXPENSES
Except as described above, all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses, except that all expenses
incurred in connection with printing and filing the this joint proxy
statement/prospectus will be shared equally by Teltrend and Westell.
<PAGE>
AMENDMENT; WAIVER
Amendment. The merger agreement may not be amended except by action
taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties and in compliance with applicable law. An amendment may take
place at any time prior to the closing date, whether before or after approval by
the stockholders of Westell or Teltrend; provided, however, that after any such
approval, there shall not be made any amendment that by law requires the further
approval of such stockholders without such further approval.
Waiver. At any time prior to the effective time of the merger, Teltrend
and Westell may:
o extend the time for the performance of any of the obligations or
other acts of the other party;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
pursuant thereto; and
o waive compliance with any of the agreements or conditions
contained in the merger agreement.
Any agreement by Teltrend or Westell to any extension or waiver must be in
writing.
<PAGE>
CHAPTER FIVE
CERTAIN LEGAL INFORMATION
MATERIAL DIFFERENCES IN RIGHTS OF TELTREND AND WESTELL STOCKHOLDERS
The following summary compares certain rights of the holders of
Teltrend common stock to the rights of the holders of Westell Class A Common
Stock. The rights of holders of Teltrend common stock are principally governed
by Delaware law, the Teltrend Restated Certificate of Incorporation and the
Teltrend bylaws. Upon completion of the merger, the Teltrend stockholders will
become holders of Westell Class A Common Stock, and their rights will be
principally governed by Delaware law, the Westell Amended and Restated
Certificate of Incorporation and the Westell bylaws. The rights of holders of
Westell Class A Common Stock are different in certain material respects from
those of holders of Teltrend common stock.
The statements set forth this section with respect to the Delaware
General Corporation Law, Westell's Amended and Restated Certificate of
Incorporation and bylaws, and Teltrend's Restated Certificate of Incorporation
and bylaws are brief summaries. For more information as to how you can obtain
copies of Westell's Amended and Restated Certificate of Incorporation and bylaws
and Teltrend's Restated Certificate of Incorporation and bylaws, see "Where You
Can Find More Information" on page VI-1.
AUTHORIZED CAPITAL STOCK
Westell's authorized capital stock currently consists of 65.5 million
shares of Class A Common Stock, 25 million shares of Class B Common Stock, and 1
million shares of preferred stock, each with a par value of $0.01 per share. If,
at the Westell special meeting, the Westell stockholders approve the amendment
to Westell's Amended and Restated Certificate of Incorporation, the number of
authorized shares of Westell Class A Common Stock will be increased to 85
million. As of ____, 2000, __________ shares of Class A Common Stock and shares
of Class B Common Stock were issued and outstanding. As of the date of this
joint proxy statement/prospectus, no classes or series of preferred stock had
been designated by the Westell Board and therefore no shares of Westell
preferred stock were issued or outstanding.
Teltrend's authorized capital stock consists of 15 million shares of
common stock, 1 million shares of class A common stock, and 750,000 shares of
preferred stock, each with a par value of $.01 per share. As of ____, 2000,
__________ shares of Teltrend common stock were issued and outstanding and ___
shares of Teltrend common stock were held as treasury shares. As of the date of
this joint proxy statement/prospectus, 80,000 shares of preferred stock had been
designated as Series A Junior Participating Preferred Stock in connection with
Teltrend's stockholder rights plan, described below, and no shares of Teltrend
class A common stock or Teltrend preferred stock or Series A Junior
Participating Preferred Stock were issued or outstanding.
DIVIDENDS
The holders of Teltrend common stock are entitled to dividends when and
as they are declared, whether in cash, property or securities of the
corporation. In the event Teltrend issues shares of its class A common stock,
then the holders of Teltrend common stock and Teltrend class A common stock will
be entitled to dividends at the same rate per share, provided that if dividends
are declared which are payable in shares of common stock or class A common
stock, dividends will be declared payable at the same rate on each class of
common stock and the dividends payable to holders of common stock will be paid
in shares of common stock and the dividends payable to holders of class A common
stock will be paid in shares of class A common stock. In the event Teltrend
issues shares of its Series A Junior Participating Preferred Stock, holders of
that series will be entitled to receive quarterly dividends when, as and if
declared by the Teltrend Board out of funds legally available for such purposes.
The holders' right to any dividend is subject to any prior and superior rights
of any holders of Teltrend stock ranking prior and superior to the Series A
Junior Participating Preferred Stock with respect to dividends.
Holders of record of shares of Westell Class A Common Stock are
entitled to receive dividends when, if and as may be declared by the Westell
Board out of funds legally available for such purposes, although no dividends
may be declared or paid with respect to Westell's Class A Common Stock unless a
<PAGE>
dividend, at the same rate per share, is simultaneously declared or paid with
respect to Westell's Class B Common Stock. In the case of a stock dividend or
distribution, holders of Class A Common Stock are entitled to receive the same
percentage dividend or distribution as holders of Class B Common Stock except
that stock dividends and distributions shall be made in shares of Class A Common
Stock to the holders of Class A Common Stock and Class B Common Stock to the
holders of Class B Common Stock.
VOTING RIGHTS
The holders of Teltrend common stock are each entitled to one vote per
share held on all matters voted on by the stockholders. The holders of Westell
Class A Common Stock are each entitled to one vote per share held and the
holders of shares of Westell Class B Common Stock are entitled to four votes per
share on all matters voted on by the stockholders. Holders of shares of both
classes of Westell's common stock will vote as a single class on all matters
submitted to a vote of stockholders except:
o with respect to future issuances of Class B Common Stock (which
must be approved by the affirmative vote of a majority of each
class of Westell's common stock, voting separately as a class,
unless the Class B Common Stock is being issued as payment of
stock dividends on Class B Common Stock or in a stock split,
reclassification or other subdivision of the shares of common
stock); and
o as otherwise required by law.
In the merger, approximately 19 million shares of Class A Common Stock
will be issued to Teltrend's stockholders, which will represent approximately:
o 52% of Westell's then outstanding Class A Common Stock;
o 34% of Westell's then outstanding Class A Common Stock and Class
B Common Stock, considered together; and
o 17% of Westell's then outstanding voting power.
This information is based on the number of shares of Westell Class A
Common Stock and Class B Common Stock and shares of Teltrend common stock
outstanding on ____ __, 2000, and does not take into account stock options,
Westell's warrants or Westell's convertible debentures. Assuming the exercise of
all outstanding options (including the options issued by Westell upon conversion
of the outstanding Teltrend options) and warrants to purchase Class A Common
Stock and the conversion of Westell's outstanding convertible debentures at the
current conversion price, upon completion of the merger, the Class A Common
Stock to be received by the Teltrend stockholders will represent approximately
40% of the outstanding Class A Common Stock, 29% of the outstanding Class A
Common Stock and Class B Common Stock, considered together, and 16% of Westell's
outstanding voting power.
Under Delaware law, the affirmative vote of the holders of a majority
of the outstanding voting power of any class of common stock is required to
approve, among other things, an adverse change in the designations, preferences
or limitations of the shares of such class of common stock.
CONVERTIBILITY
Each share of Westell Class B Common Stock is convertible, at the
option of its holder, into one share of Westell Class A Common Stock at any
time. In addition, each share of Westell Class B Common Stock will automatically
be converted into one share of Class A Common Stock in the event:
o such share is transferred to any person or entity other than a
"permitted transferee" or
o the number of shares of Class B Common Stock outstanding at any
time represents less than 10% of the total number of outstanding
shares of Class B Common Stock and Class A Common Stock.
<PAGE>
A "permitted transferee" includes (i) any other holder of Class B
Common Stock, (ii) any member of Robert C. Penny, III's family or Melvin J.
Simon's family, (iii) Gary F. Seamans, his spouse or any of their descendants,
and (iv) certain other permitted transferees.
The Westell Class A Common Stock is not convertible into Westell Class
B Common Stock.
LIQUIDATION RIGHTS
As the only class of Teltrend capital stock outstanding, the Teltrend
common stock is currently entitled to all assets available for distributions
after payment in full to creditors upon the liquidation, dissolution or
winding-up of Teltrend. Upon liquidation, dissolution or winding-up of Westell,
the holders of Westell Class A Common Stock will share ratably with the holders
of Westell Class B Common Stock in all assets available for distributions after
payment in full to creditors.
OTHER PROVISIONS
Neither the holders of Teltrend common stock nor Westell Class A Common
Stock are entitled to preemptive or subscription rights and neither have any
cumulative voting rights. In any merger, consolidation or business combination
at Westell, the consideration to be received per share by holders of Westell
Class A Common Stock must be identical to that received by holders of Westell
Class B Common Stock. In addition, no class of Westell common stock may be
subdivided, consolidated, reclassified or otherwise changed unless the other
class of common stock concurrently is subdivided, consolidated, reclassified or
otherwise changed in the same proportion and in the same manner.
PREFERRED STOCK
The Westell Board and the Teltrend Board each has the authority to
issue shares of preferred stock in one or more series (up to 1 million shares of
preferred stock may be issued by the Westell Board and up to 750,000 shares of
preferred stock may be issued by the Teltrend Board). Each Board has the
authority to fix the rights, preferences, privileges and restrictions thereof
(including dividend rights, conversion rights, voting rights, terms of
redemption, and liquidation preferences) and the number of shares constituting
any series or the designation of such series, without any further vote or action
by stockholders.
The issuance of preferred stock by Westell could adversely affect the
voting power of holders of both classes of Westell common stock and the
likelihood that such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of Westell.
Westell has no present plan to issue any shares of preferred stock.
RIGHTS PLAN
On January 16, 1997, the Teltrend Board declared a dividend of one
preferred share purchase right for each outstanding share of Teltrend common
stock. The dividend was payable on January 27, 1997 to holders of record of the
common stock as of the close of business on that date. Each right entitles the
registered holder to purchase from Teltrend, under certain circumstances
involving the acquisition or the announcement of the intent to acquire 20% or
more of Teltrend's common stock, one one-hundredth of a share of Teltrend's
Series A Junior Participating Preferred Stock at a price of $160.00 per one
one-hundredth of a share, subject to adjustment. The description and terms of
the rights are detailed in a rights agreement dated January 16, 1997, as amended
on June 1, 1998 and further amended on December 13, 1999, and as the same may be
further amended from time to time, between Teltrend and LaSalle Bank National
Association, as rights agent. The amendment dated as of December 13, 1999
excepted the adoption of the merger agreement and the consummation of the merger
and any related transactions from the events which trigger the purchase rights
under the rights agreement.
Westell does not have a rights plan.
<PAGE>
DIRECTORS
Number and Election
The Teltrend bylaws provide that the number of directors who shall
constitute the whole Board of Directors shall not be less than three nor more
than nine, as fixed from time to time by resolution of the Board of Directors by
a majority vote of the directors then in office. Directors of Teltrend are
elected at the annual meeting of Teltrend stockholders and hold office until
their respective successors are elected and qualified or until their earlier
resignation or removal. The Teltrend Board currently consists of seven
directors.
The Westell bylaws provide that the number of directors which
constitute the whole board will be not less than six nor more than ten. The
Westell Board currently consists of eight directors. Following the merger, the
number of directors serving on the Westell Board will be increased by two and
Messrs. Kirby and Sergesketter, currently members of Teltrend's Board, will be
added.
Removal
Directors of Teltrend may be removed, with or without cause, by the
stockholders at any special meeting as long as the notice for that meeting
states that it is for that purpose. Similarly, directors of Westell may be
removed, with or without cause, at any meeting of the stockholders by a majority
vote of those stockholder entitled to vote in elections of directors.
SPECIAL MEETINGS
The Teltrend bylaws provide that a special meeting of the stockholders
may be called at any time by the Teltrend Board, the chairman of the Teltrend
Board or Teltrend's president and chief executive officer and shall be called be
called by the chairman of the Board, the president and chief executive officer
or the secretary at the request in writing of Teltrend stockholders holding at
least fifty percent of the shares of stock outstanding and entitled to vote at
that meeting. The Teltrend bylaws provide that special meetings of the Teltrend
Board may be called by the chairman of the Board, the president and chief
executive officer or by any two of the directors then in office.
The Westell Amended and Restated Certificate of Incorporation provides
that special meetings of the stockholders may be called by the chairman of the
Westell Board, the president, a majority of the Westell Board 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. The Westell
bylaws provide that a special meeting of the Westell Board may be called by the
chairman of the Board, the president or any two or more directors.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS
Certificate of Incorporation
Under the Delaware General Corporation Law, the certificate of
incorporation of a corporation may be amended by resolution of the board of
directors and the affirmative vote of the holders of the majority of the
outstanding voting power entitled to vote thereon. With respect to any amendment
to the certificate of incorporation of a corporation that would adversely affect
a particular class or series of stock, Delaware law also requires the separate
approval by the holders of the affected class or series of stock, voting
together as a single class.
Bylaws
Under the Delaware General Corporation Law, the power to adopt, amend,
or repeal bylaws is vested exclusively in the stockholders entitled to vote,
unless the corporation's certificate of incorporation confers such power on the
board of directors as well.
The Teltrend Restated Certificate of Incorporation and the Teltrend
bylaws provide for bylaw amendments by the Teltrend Board and by the Teltrend
stockholders.
<PAGE>
The Westell Amended and Restated Certificate of Incorporation and the
Westell bylaws provide for bylaw amendments by either the Westell Board, or by
the Westell stockholders, provided that any bylaw provision adopted by the
stockholders may be amended or repealed only by a majority of the Westell
stockholders, voting as a single class.
STOCKHOLDER PROPOSALS
Each of Teltrend's and Westell's bylaws establish an advance notice
procedure for stockholders to bring business before an annual meeting of
stockholders.
Teltrend's bylaws require that any Teltrend stockholder who wishes to
bring any matter before an annual meeting, including the nomination of any
person for election as a Teltrend director, must provide written notice to
Teltrend at its principal executive offices not less than 60 nor more than 90
days prior to the date of the meeting, except that if less than 70 days' notice
or prior public disclosure of the meeting date is given or made to Teltrend
stockholders, notice of the matter must be received no later than the 10th day
following the date of notice or public disclosure of the meeting date, whichever
occurs first. Such notice must include detailed information about the
stockholder giving the notice and a description of the proposed business or
nominees for director, as applicable.
Westell's bylaws require that any Westell stockholder who wishes to
bring business before a stockholders meeting, including the nomination of any
person for election as a Westell director, must provide written notice to
Westell no later than 60 days prior to the annual meeting date.
The notice requirements in each of Teltrend's and Westell's bylaws are
independent of the notice provisions and deadlines under SEC Rule 14a-8.
BUSINESS COMBINATIONS
Teltrend and Westell are both subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the time that the person became an interested
stockholder, unless:
o prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
o upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock at
the time the transaction commenced, excluding certain shares held
by employee directors and employee stock plans; or
o at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or
special meeting of the stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned
by the interested stockholder.
For purposes of Section 203, a "business combination" includes, among
other things, a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is
generally a person who, together with affiliates and associates, owns (or within
three years, did own) 15% or more of the corporation's voting stock.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitations on Liability Permitted by Delaware Law. The Delaware
General Corporation Law provides that a corporation's certificate of
incorporation may include a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. However, no provision can
eliminate or limit the liability of a director for:
o any breach of the director's duty of loyalty to the corporation
or its stockholders;
<PAGE>
o acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law;
o any improper distribution to stockholders;
o any transaction from which the director derived an improper
personal benefit; or
o any acts or omissions prior to the adoption of such a provision
in the certificate of incorporation.
Indemnification Permitted by Delaware Law. The Delaware General
Corporation Law generally permits a corporation to indemnify its directors,
officers, employees and agents against expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred in connection with a
third-party action, other than a derivative action, and against expenses
actually and reasonably incurred in the defense or settlement of a derivative
action, provided that there is a determination that the individual acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation. Such determination shall be made, in the case of
an individual who is a director or officer at the time of such determination:
o by a majority of the disinterested directors, even though less
than a quorum;
o by a committee of such directors designated by a majority vote of
such directors, even though less than a quorum;
o if there are no independent directors or if the independent
directors so direct, by independent legal counsel in a written
opinion; or
o by the stockholders.
Without court approval, however, no indemnification may be made in
respect of any derivative action in which such individual is adjudged liable to
the corporation. The Delaware General Corporation Law requires indemnification
of directors and officers for expenses relating to a successful defense on the
merits or otherwise of a derivative or third-party action.
Westell and Teltrend Provisions Regarding Limitations of Liability and
Indemnification. Westell's Amended and Restated Certificate of Incorporation and
Teltrend's Restated Certificate of Incorporation each contain provisions:
o eliminating the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the
fullest extent permitted by the Delaware General Corporation Law;
and
o indemnifying its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise
discretionary.
Westell's and Teltrend's bylaws each provide that the applicable
company will indemnify its directors and executive officers, and may indemnify
its other officers, employees and other agents, to the fullest extent permitted
by law. The bylaws also permit each company to secure insurance on behalf of any
person it is required or permitted to indemnify for any liability arising out of
his or her actions in such capacity, regardless of whether the bylaws would
permit indemnification. Westell and Teltrend each maintain liability insurance
for its directors and officers.
EXPERTS
The audited consolidated financial statements of Westell included in
Westell's Annual Report on Form 10-K for the year ended March 31, 1999 have been
audited by Arthur Andersen LLP, independent public accountants, as described in
their report included in the Annual Report on Form 10-K. Arthur Andersen's
report and the consolidated financial statements have been incorporated by
reference in this document in reliance upon such report given upon authority of
that firm as experts in accounting and auditing.
The consolidated financial statements of Teltrend incorporated by
reference in Teltrend's Annual Report on Form 10-K for the year ended July 31,
1999, have been audited by Ernst & Young LLP, independent public auditors, as
set forth in their report thereon incorporated by reference therein. Such report
and the consolidated financial statements are incorporated by reference in this
document in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
<PAGE>
Representatives of Arthur Andersen LLP are expected to be present at
the Westell special meeting and representatives of Ernst & Young LLP are
expected to be present at the Teltrend special meeting. These representatives
will have an opportunity to make statements at these meetings if they so desire
and will be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the shares of Westell Class A Common Stock to be issued
pursuant to the merger will be passed upon for Westell by McDermott, Will &
Emery, Chicago, Illinois.
.
<PAGE>
CHAPTER SIX
ADDITIONAL INFORMATION FOR STOCKHOLDERS
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
A stockholder proposal to be included in Westell's proxy statement and
presented at Westell's 2000 annual meeting must be received at Westell's
executive offices, 750 North Commons Drive Aurora, Illinois 60504 by no later
than May 3, 2000 for evaluation as to inclusion in the proxy statement in
connection with that meeting. Westell stockholders wishing to nominate a
director or bring a proposal before the 2000 annual meeting, but not include the
proposal in Westell's proxy statement, must cause written notice of the proposal
to be received by the secretary of Westell at Westell's principal executive
offices by no later than 60 days prior to the annual meeting date, as well as
comply with specified provisions of Westell's bylaws. In order for a Westell
stockholder to nominate a candidate for director, the related notice must
describe various matters regarding the nominee and the stockholder giving the
notice, including such information as name, address, occupation and shares held.
In order for a Westell stockholder to bring other business before a stockholders
meeting, the notice for the meeting must include various matters regarding the
stockholder giving the notice and a description of the proposed business. These
requirements are separate from and in addition to the requirements a stockholder
must meet to have a proposal included in Westell's proxy statement.
Teltrend will hold an annual meeting in the year 2000 only if the
merger has not already been completed. If a meeting is held, a stockholder
proposal to be included in Teltrend's proxy statement and presented at the
annual meeting must be received at Teltrend's executive offices by no later than
June 24, 2000 for evaluation as to inclusion in the proxy statement in
connection with the meeting. In addition, under certain SEC rules, a proxy may
confer discretionary authority to vote on any matter in the event that, among
other situations, Teltrend does not have notice of the matter at least 45 days
before the date on which Teltrend's proxy materials were mailed for the 1999
annual meeting. For the 2000 annual meeting, this date would be September 7,
2000. This is in addition to the date for submission of business at the annual
meeting under Teltrend's bylaws which require, among other things, that notice
of any matter be received by Teltrend at its principal executive offices not
less than 60 nor more than 90 days prior to the date of the meeting, except that
if less than 70 days' notice or prior public disclosure of the meeting date is
given or made to stockholders, notice of the matter must be received no later
than the 10th day following the date of notice or public disclosure of the
meeting date, whichever occurs first.
The SEC rules set forth standards for the exclusion of some stockholder
proposals from a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Westell and Teltrend file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that either company files at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's public reference rooms in New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. The companies' public filings are also available from
commercial document retrieval services and at the Internet web site maintained
by the SEC at http://www.sec.gov. In addition, reports, proxy statements and
other information concerning either company may be inspected at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.
Westell has filed a registration statement on Form S-4 to register with
the SEC the shares of Westell Class A Common Stock to be issued to Teltrend
stockholders in the merger. This joint proxy statement/prospectus is a part of
that registration statement and constitutes a prospectus of Westell, as well as
a proxy statement of Westell for the Westell special meeting and a proxy
statement of Teltrend for the Teltrend special meeting.
As allowed by SEC rules, this joint proxy statement/prospectus does not
contain all the information that stockholders can find in the registration
statement or the exhibits to the registration statement.
THE SEC ALLOWS WESTELL AND TELTREND TO "INCORPORATE BY REFERENCE"
INFORMATION INTO THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH MEANS THAT THE
COMPANIES CAN DISCLOSE IMPORTANT INFORMATION TO YOU BY REFERRING YOU TO ANOTHER
<PAGE>
DOCUMENT FILED SEPARATELY WITH THE SEC. THE INFORMATION INCORPORATED BY
REFERENCE IS DEEMED TO BE PART OF THIS JOINT PROXY STATEMENT/PROSPECTUS, EXCEPT
FOR ANY INFORMATION SUPERSEDED BY INFORMATION CONTAINED, OR INCORPORATED BY
REFERENCE, IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY
STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE THE DOCUMENTS SET FORTH BELOW
THAT WESTELL AND TELTREND HAVE PREVIOUSLY FILED WITH THE SEC. THESE DOCUMENTS
CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANIES AND THEIR FINANCIAL CONDITION.
WESTELL SEC FILINGS (FILE NO. 0-27266) PERIOD
-------------------------------------- ------
Annual Report on Form 10-K.............. Year ended March 31, 1999 (as amended
by Form 10-K/A on August 4, 1999;
August 19, 1999; and August 31, 1999)
Quarterly Reports on Form 10-Q.......... Fiscal quarter ended June 30, 1999
(as amended by Form 10-Q/A on August
31, 1999) and fiscal quarter ended
September 30, 1999.
Current Reports on Form 8-K............. Dated April 16, 1999, June 11, 1999
and December 17, 1999
Description of the Westell Class A Common Stock contained in Westell's
registration statement on Form 8-A dated November 22, 1995, incorporating by
reference the description included under "Description of Common Stock" in
Westell's registration statement on Form S-1 (Registration No. 33-98024).
TELTREND SEC FILINGS (FILE NO. 0-26114) PERIOD
--------------------------------------- ------
Annual Report on Form 10-K.............. Year ended July 31, 1999
Quarterly Report on Form 10-Q........... Fiscal quarter ended October 30, 1999
Current Report on Form 8-K.............. Dated December 17, 1999
We are also incorporating by reference additional documents that
Westell or Teltrend may file with the SEC pursuant to sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 between the date of this joint
proxy statement/prospectus and the date of the special meetings. These documents
include periodic reports, such as annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
Westell has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to Westell, and
Teltrend has supplied all such information relating to Teltrend.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC
or the SEC's Internet site described above. Documents incorporated by reference
are available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this joint proxy
statement/prospectus. Stockholders may obtain documents incorporated by
reference in this joint proxy statement/prospectus by requesting them in writing
or by telephone from the appropriate company at the following addresses:
- --------------------------------------------------------------------------------
WESTELL TECHNOLOGIES, INC. TELTREND INC.
Attention: Investor Attention: [Investor
Relations Department Relations Department]
750 N. Commons Drive 620 Stetson Avenue
Aurora, IL 60504 St. Charles, IL 60174
Tel.: 800-323-6883 (toll free) Tel.: 630-377-1700
- --------------------------------------------------------------------------------
<PAGE>
If you would like to request documents from either of us, please do so
by March __, 2000 to ensure you will receive them before the special meetings.
You can also get more information by visiting Westell's web site at
http://www.westell.com and Teltrend's web site at http://www.teltrend.com. Web
site materials are not part of this document and are not incorporated by
reference.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE
SPECIAL MEETINGS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS.
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OR THE SOLICITATION OF
A PROXY IN ANY JURISDICTION OR FROM ANY PERSON WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED FEBRUARY __, 2000. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR
THE ISSUANCE OF WESTELL CLASS A COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 13, 1999
BY AND AMONG
WESTELL TECHNOLOGIES, INC.
THETA ACQUISITION CORP.
AND
TELTREND INC.
<PAGE>
ARTICLE I THE MERGER............................................1
SECTION 1.1 The Merger............................................1
SECTION 1.2 Effective Time of the Merger..........................1
ARTICLE II THE SURVIVING AND PARENT CORPORATIONS.................1
SECTION 2.1 Certificate of Incorporation of Surviving
Corporation.........................................1
SECTION 2.2 By-Laws of Surviving Corporation......................2
SECTION 2.3 Directors and Officers of Surviving Corporation.......2
SECTION 2.4 Directors of Parent...................................2
ARTICLE III CONVERSION OF SHARES..................................2
SECTION 3.1 Conversion of Company Shares in the Merger............2
SECTION 3.2 Conversion of Subsidiary Shares.......................2
SECTION 3.3 Exchange of Certificates..............................3
SECTION 3.4 No Fractional Securities..............................4
SECTION 3.5 The Closing...........................................4
SECTION 3.6 Closing of the Company's Transfer Books...............5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUBSIDIARY.................................5
SECTION 4.1 Organization and Qualification........................5
SECTION 4.2 Capitalization........................................5
SECTION 4.3 Subsidiaries..........................................6
SECTION 4.4 Authority; Non-Contravention; Approvals...............7
SECTION 4.5 Reports and Financial Statements......................8
SECTION 4.6 Absence of Undisclosed Liabilities....................8
SECTION 4.7 Absence of Certain Changes or Events..................9
SECTION 4.8 Litigation............................................9
SECTION 4.9 Registration Statement and Proxy Statement............9
SECTION 4.10 No Violation of Law...................................9
SECTION 4.11 Compliance with Agreements...........................10
SECTION 4.12 Taxes................................................10
SECTION 4.13 Employee Benefit Plans; ERISA........................11
SECTION 4.14 Labor Controversies..................................12
SECTION 4.15 Environmental Matters................................12
SECTION 4.16 Title to Assets......................................13
SECTION 4.17 Reorganization.......................................13
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 4.18 Parent Stockholders' Approval........................14
SECTION 4.19 Brokers and Finders..................................14
SECTION 4.20 Opinion of Financial Advisor.........................14
SECTION 4.21 Company Stock........................................14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY........14
SECTION 5.1 Organization and Qualification.......................14
SECTION 5.2 Capitalization.......................................15
SECTION 5.3 Subsidiaries.........................................16
SECTION 5.4 Authority; Non-Contravention; Approvals..............16
SECTION 5.5 Reports and Financial Statements.....................17
SECTION 5.6 Absence of Undisclosed Liabilities...................18
SECTION 5.7 Absence of Certain Changes or Events.................18
SECTION 5.8 Litigation...........................................18
SECTION 5.9 Registration Statement and Proxy Statement...........18
SECTION 5.10 No Violation of Law..................................19
SECTION 5.11 Compliance with Agreements...........................19
SECTION 5.12 Taxes................................................19
SECTION 5.13 Employee Benefit Plans; ERISA........................20
SECTION 5.14 Labor Controversies..................................21
SECTION 5.15 Environmental Matter.................................21
SECTION 5.16 Title to Assets......................................21
SECTION 5.17 Reorganization.......................................22
SECTION 5.18 Company Stockholders' Approval.......................22
SECTION 5.19 Brokers and Finders..................................22
SECTION 5.20 Opinion of Financial Advisor.........................22
SECTION 5.21 Section 203..........................................22
SECTION 5.22 Rights Agreement.....................................22
SECTION 5.23 No Recent Negotiations with Affiliates...............22
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER...............24
SECTION 6.1 Conduct of Business by the Company Pending
the Merger.........................................24
SECTION 6.2 Conduct of Business by Parent and Subsidiary
Pending the Merger.................................25
SECTION 6.3 Acquisition Transactions.............................27
ARTICLE VII ADDITIONAL AGREEMENTS................................28
SECTION 7.1 Access to Information................................28
SECTION 7.2 Registration Statement and Proxy Statement...........29
SECTION 7.3 Stockholders' Approvals..............................29
SECTION 7.4 Compliance with the Securities Act and Exchange Act..30
SECTION 7.5 Nasdaq Listing.......................................31
SECTION 7.6 Expenses and Fees....................................31
SECTION 7.7 Agreement to Cooperate...............................31
SECTION 7.9 Option Plans.........................................32
SECTION 7.10 Notification of Certain Matters......................33
SECTION 7.11 Directors' and Officers' Indemnification.............33
SECTION 7.12 Certain Benefits.....................................35
SECTION 7.13 SEC Reports..........................................35
ARTICLE VIII CONDITIONS...........................................35
SECTION 8.1 Conditions to Each Party's Obligation to Effect
the Merger.........................................35
SECTION 8.2 Conditions to Obligation of the Company to Effect
the Merger.........................................36
SECTION 8.3 Conditions to Obligations of Parent and Subsidiary
to Effect the Merger...............................37
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................37
SECTION 9.1 Termination..........................................37
SECTION 9.2 Effect of Termination................................39
SECTION 9.3 Amendment............................................39
SECTION 9.4 Waiver...............................................39
ARTICLE X GENERAL PROVISIONS...................................39
SECTION 10.1 Non-Survival and Scope of Representations and
Warranties and Agreements...........................39
SECTION 10.2 Notices..............................................40
SECTION 10.3 Interpretation.......................................40
SECTION 10.4 Miscellaneous........................................40
SECTION 10.5 Counterparts.........................................40
SECTION 10.6 Parties in Interest..................................41
SECTION 10.7 Severability.........................................41
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 13, 1999 (this
"AGREEMENT"), by and among Westell Technologies, Inc., a Delaware corporation
("PARENT"), Theta Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("SUBSIDIARY"), and Teltrend Inc., a Delaware corporation
(the "COMPANY");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company
have approved the merger of Subsidiary with and into the Company on the terms
set forth in this Agreement (the "MERGER"); and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
thereunder;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"),
Subsidiary shall be merged with and into the Company and the separate existence
of Subsidiary shall thereupon cease. The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes referred to as the
"SURVIVING CORPORATION ."
SECTION 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time a certificate of merger, in a form mutually acceptable to
Parent and the Company, is filed with the Secretary of State of the State of
Delaware in accordance with the DGCL (the "MERGER FILING") or such later time as
may be agreed to by the parties hereto and specified in such certificate of
merger (the "EFFECTIVE TIME"). The Merger Filing shall be made simultaneously
with or as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 3.5. The parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof. Accordingly, the parties shall,
subject to the provisions hereof, use all reasonable efforts to consummate, as
soon as practicable, the transactions contemplated by this Agreement in
accordance with Section 3.5.
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. The
Restated Certificate of Incorporation, as amended, of the Company shall be
amended in the Merger to read in its entirety as set forth as Exhibit 2.1, and,
as so amended, shall be the Certificate of Incorporation of the
<PAGE>
Surviving Corporation from and after the Effective Time, until thereafter
amended in accordance with its terms and as provided in the DGCL.
SECTION 2.2 BY-LAWS OF SURVIVING CORPORATION. The By-laws of Subsidiary
as in effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation from and after the Effective Time, and thereafter may be
amended in accordance with their terms and as provided by the Certificate of
Incorporation of the Surviving Corporation and the DGCL.
SECTION 2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. At the
Effective Time, the directors and officers of the Surviving Corporation shall be
as designated by Parent in writing prior to the Effective Time, and such
directors and officers shall thereafter serve in accordance with the By-laws of
the Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
SECTION 2.4 DIRECTORS OF PARENT. Parent and its Board of Directors
shall take all action as is necessary so that, at the Effective Time, (i) the
size of the board of directors of Parent is increased to include two additional
directors and (ii) two individuals, each of whom (a) currently serves as a
director of the Company, (b) agrees to serve as a director of Parent, and (c) is
identified by Parent, are elected as directors of Parent, each to serve in
accordance with the Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws, as amended, of Parent and until his or her
successor is duly elected and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 CONVERSION OF COMPANY SHARES IN THE MERGER. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any capital stock of Parent or the Company:
(a) each share of the common stock, par value $.01 per share, of
the Company issued and outstanding immediately prior to the Effective
Time (other than shares described in Section 3.1(b)) (the "COMPANY
COMMON STOCK") shall, subject to Sections 3.3 and 3.4, be converted
into the right to receive, without interest, 3.3 (the "EXCHANGE RATIO")
shares of the Class A Common Stock, par value $0.01 per share, of
Parent ("PARENT STOCK");
(b) each share of capital stock of the Company, if any, owned by
Parent or any subsidiary of Parent or held in treasury by the Company
or any subsidiary of the Company immediately prior to the Effective
Time shall be canceled and cease to exist and no consideration shall be
paid in exchange therefor; and
(c) subject to and as more fully provided in Section 7.9, each
unexpired option or warrant to purchase Company Common Stock that is
outstanding at the Effective Time, whether or not exercisable, shall
automatically and without any action on the part of the holder thereof
be converted into an option or warrant to purchase a number of shares
of Parent Stock equal to the number of shares of Company Common Stock
that could be purchased under such option or warrant multiplied by the
Exchange Ratio, at a price per share of Parent Stock equal to the per
share exercise price of such option or warrant divided by the Exchange
Ratio.
SECTION 3.2 CONVERSION OF SUBSIDIARY SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and
<PAGE>
outstanding share of common stock, par value $.01 per share, of Subsidiary
("SUBSIDIARY COMMON STOCK") shall be converted into one share of common stock,
par value $.01 per share, of the Surviving Corporation.
SECTION 3.3 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, each holder of a
certificate which immediately prior to the Effective Time represented
issued and outstanding shares of Company Common Stock (other than
shares described in Section 3.1(b)) shall be entitled to receive in
exchange therefor, upon surrender thereof to an exchange agent
reasonably satisfactory to Parent and the Company (the "EXCHANGE
AGENT"), a certificate or certificates representing the number of whole
shares of Parent Stock to which such holder is entitled pursuant to
Section 3.1(a), any dividends and distributions in respect of such
shares of Parent Stock and any cash in lieu of a fractional share, as
contemplated by Sections 3.3 and 3.4 hereof. Notwithstanding any other
provision of this Agreement, (i) until holders or transferees of
certificates formerly representing shares of Company Common Stock have
surrendered them for exchange as provided herein, no dividends or
distributions on shares of Parent Stock shall be paid with respect to
any shares of Parent Stock to which the holder of any such certificate
would be entitled pursuant to the terms hereof and no payment for
fractional shares shall be made and (ii) without regard to when such
certificates formerly representing shares of Company Common Stock are
surrendered for exchange as provided herein, no interest shall be paid
on any dividends or distributions or any payment for fractional shares.
Upon surrender of a certificate which immediately prior to the
Effective Time represented issued and outstanding shares of Company
Common Stock (other than shares described in Section 3.1(b)), there
shall be paid to the holder of such certificate (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share
of Parent Stock to which such holder is entitled pursuant to Section
3.4 and the amount of any dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to
the whole shares of Parent Stock issuable upon surrender of such
certificate, and (ii) at the appropriate payment date, the amount of
any dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares
of Parent Stock.
(b) If any certificate for shares of Parent Stock is to be issued
in a name other than that in which the certificate formerly
representing shares of Company Common Stock surrendered in exchange
therefor is registered in the Company's transfer records, it shall be a
condition of such exchange that the person requesting such exchange
shall pay any applicable transfer or other taxes required by reason of
such issuance.
(c) As soon as practicable after the Effective Time, Parent shall
make available to the Exchange Agent the certificates representing
shares of Parent Stock required to effect the exchanges referred to in
paragraph (a) above and cash for payment of any fractional shares
referred to in Section 3.4.
(d) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
issued and outstanding shares of Company Common Stock (other than
shares described in Section 3.1(b)) (the "COMPANY CERTIFICATES") (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates shall
pass, only upon actual delivery of the Company Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for certificates
representing shares of Parent Stock. Upon surrender of Company
Certificates for cancellation to the Exchange Agent, together with a
duly executed letter of transmittal and such other documents as the
<PAGE>
Exchange Agent shall reasonably require, the holder of such Company
Certificates shall be entitled to receive in exchange therefor a
certificate or certificates representing that number of whole shares of
Parent Stock into which the shares of Company Common Stock formerly
represented by the Company Certificates so surrendered shall have been
converted into the right to receive pursuant to the provisions of
Section 3.1(a), any cash paid in lieu of a fractional share and any
dividends and distributions contemplated by Section 3.3(a), and the
Company Certificates so surrendered shall be canceled. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be
liable to a holder of a Company Certificate for any shares of Parent
Stock, dividends or distributions thereon or cash payment in lieu of a
fractional share delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(e) Promptly following the date which is nine months after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates (including any Parent Stock) and other documents in its
possession relating to the transactions described in this Agreement,
and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Company Certificate may surrender such Company Certificate
to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the
Parent Stock, any cash paid in lieu of a fractional share and any
dividends and distributions contemplated by Section 3.3(a), without any
interest thereon. Notwithstanding the foregoing, none of the Exchange
Agent, Parent, Subsidiary, the Company or the Surviving Corporation
shall be liable to a holder of a Company Certificate for any shares of
Parent Stock, dividends or distributions thereon or cash payment in
lieu of a fractional share delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Company Certificate to be lost, stolen or
destroyed, the Surviving Corporation shall issue in exchange for such
lost, stolen or destroyed Company Certificate the Parent Stock
deliverable in respect thereof determined in accordance with this
Article III. When authorizing such issuance in exchange therefor, the
Board of Directors of the Surviving Corporation may, in its discretion
and as a condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as
protection against any claim that may be made against the Surviving
Corporation with respect to the Company Certificate alleged to have
been lost, stolen or destroyed.
SECTION 3.4 NO FRACTIONAL SECURITIES. Notwithstanding any other
provision of this Agreement, no fractional shares and no certificates or scrip
for fractional shares of Parent Stock shall be issued in connection with the
Merger. In lieu of any such fractional shares, each holder of shares of Company
Common Stock who would otherwise have been entitled to receive a fraction of a
share of Parent Stock upon surrender of Company Certificates for exchange
pursuant to this Article III (after taking into account all Company Certificates
registered in the name of such holder), shall be entitled to receive from the
Exchange Agent a cash payment equal to such fraction multiplied by the average
closing price per share of Parent Stock on the Nasdaq National Market, as
reported by the Wall Street Journal, during the 10 trading days immediately
preceding the Effective Time.
SECTION 3.5 THE CLOSING. The closing (the "CLOSING") of the
transactions contemplated by this Agreement shall take place at a location
mutually agreeable to Parent and the Company as promptly as practicable
following the date on which the last of the conditions set forth in Article VIII
is fulfilled or waived, or at such other time and place as Parent and the
Company shall agree. The date on which the Closing occurs is referred to in this
Agreement as the "CLOSING DATE."
<PAGE>
SECTION 3.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of Parent
Stock pursuant to Section 3.1 and the right to receive cash for payment of
fractional shares pursuant to Section 3.4. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time shall thereafter be made. If, after the Effective Time, subject to the
terms and conditions of this Agreement, Company Certificates formerly
representing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for shares of Parent Stock in
accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company that,
except as set forth in the Disclosure Schedule dated as of the date hereof and
signed by an authorized officer of Parent (the "PARENT DISCLOSURE SCHEDULE"),
each of which exceptions shall specifically identify the relevant Section hereof
to which it relates:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the requisite
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Each of Parent and
Subsidiary is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing is not
reasonably likely to, when taken together with all other such failures, have a
Parent Material Adverse Effect. For purposes of this Agreement, a "PARENT
MATERIAL ADVERSE EFFECT" is any event, change or effect that (i) is materially
adverse to the business, operations, properties, assets, condition (financial or
other) or results of operations of Parent and its subsidiaries, taken as a
whole, other than any event, change or effect resulting from (a) changes in
general economic conditions (including United States stock market conditions) or
(b) changes in the market price for Parent Stock or Company Common Stock as
reflected on the Nasdaq National Market, or (ii) prevents Parent or Subsidiary
from consummating the transactions contemplated hereby, including the Merger,
prior to the date specified in Section 9.1(b)(i) hereof. True, accurate and
complete copies of each of Parent's and Subsidiary's certificate of
incorporation and by-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been made available to the
Company.
SECTION 4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock
of Parent consists of (a) 65,500,000 shares of Parent Stock, (b)
25,000,000 shares of Class B Common Stock , par value $0.01 per share
("PARENT CLASS B COMMON STOCK"), and (c) 1,000,000 shares of preferred
stock, par value $0.01 per share ("PARENT PREFERRED STOCK"). As of the
close of business on September 30, 1999, (i) 17,489,521 shares of
Parent Stock and 19,124,869 shares of Parent Class B Common Stock were
issued and outstanding, (ii) no shares of Parent Preferred Stock were
issued and outstanding, (iii) no shares of Parent Stock, Parent Class B
Common Stock or Parent Preferred Stock were held in the treasury of
Parent, (iv) 4,768,304 shares of Parent Stock were reserved for
issuance pursuant to the exercise of outstanding options and warrants
to purchase Parent Stock, (v) 131,825 shares of Parent Stock were
reserved for issuance under Parent's Employee Stock Purchase Plan and
(vi) 19,124,869 shares of Parent Stock were reserved for issuance upon
<PAGE>
conversion of Parent's Class B Common Stock. Between September 30, 1999
and the date of this Agreement, Parent has issued no shares of its
capital stock except for 62,836 shares of Parent Stock issued upon the
exercise of options granted pursuant to Parent's 1995 Stock Incentive
Plan. As of the date of this Agreement all outstanding shares of Parent
Stock and Parent Class B Common Stock are, and immediately prior to the
Effective Time all outstanding shares of Parent Stock and Parent Class
B Common Stock will be, validly issued, fully paid and nonassessable
and free of any preemptive (or similar) right.
(b) The authorized capital stock of Subsidiary consists of 1,000
shares of Subsidiary Common Stock, of which 100 shares are issued and
outstanding, which shares are owned beneficially and of record by
Parent.
(c) Except as disclosed in the Parent Disclosure Schedule, as of
the date hereof, there are no outstanding subscriptions, options, puts,
calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement
and also including any rights plan or other anti-takeover agreement,
obligating Parent or any subsidiary of Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
the capital stock of Parent or any subsidiary of Parent or obligating
Parent or any subsidiary of Parent to grant, extend or enter into any
such agreement or commitment. Except as otherwise disclosed in the
Parent Disclosure Schedule, there are no voting trusts, proxies or
other agreements or understandings to which Parent or any subsidiary of
Parent is a party or by which Parent or any subsidiary of Parent is
bound with respect to the voting of any shares of capital stock of
Parent, and there are no registration rights or similar agreements with
respect to any shares of capital stock of Parent or any of its
subsidiaries. The shares of Parent Stock issued to stockholders of the
Company in connection with the Merger will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights.
(d) Except for the Parent Stock and Parent Class B Common Stock or
as otherwise described in the Parent Disclosure Schedule, Parent has
outstanding no bonds, debentures, notes or other obligations or
securities the holders of which have the right to vote (or are
convertible or exchangeable into or exercisable for securities having
the right to vote) with the stockholders of Parent on any matter.
SECTION 4.3 SUBSIDIARIES. Each direct and indirect corporate subsidiary
of Parent is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each subsidiary of Parent is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not, when taken together with all
such other failures, have a Parent Material Adverse Effect. Except as disclosed
in the Parent Disclosure Schedule, all of the outstanding shares of capital
stock of each corporate subsidiary of Parent are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned directly or
indirectly by Parent, free and clear of any liens, claims or encumbrances,
except that such shares are pledged to secure Parent's credit facilities. Except
as disclosed in the Parent Disclosure Schedule, there are no subscriptions,
options, warrants, rights, puts, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to any
shares of capital stock of any corporate subsidiary of Parent, including any
right of conversion or exchange under any outstanding security, instrument or
agreement.
<PAGE>
As used in this Agreement, the term "SUBSIDIARY" shall mean, when used
with reference to any person or entity, any corporation, partnership, limited
liability company, joint venture or other entity of which such person or entity
(either acting alone or together with its other subsidiaries) owns, directly or
indirectly, 50% or more of the stock or other voting interests, the holders of
which are entitled to vote for the election of a majority of the board of
directors or any similar governing body of such corporation, partnership,
limited liability company, joint venture or other entity.
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Subsidiary each have full corporate power and
authority to enter into this Agreement and, subject to the Parent
Stockholders' Approval (as defined in Section 7.3(b)) and the Parent
Required Statutory Approvals (as defined in Section 4.4(c)), to
consummate the transactions contemplated hereby. This Agreement has
been approved by the Boards of Directors of Parent and Subsidiary, and
has been approved by a majority of the non-employee members of the
Board of Directors of Parent, and no other corporate proceedings on the
part of Parent or Subsidiary are necessary to authorize the execution
and delivery of this Agreement or, except for the Parent Stockholders'
Approval, the consummation by Parent and Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent and
Subsidiary enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) The execution and delivery of this Agreement by each of Parent
and Subsidiary do not and will not violate, conflict with or result in
a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination,
acceleration or amendment under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under any of the terms,
conditions or provisions of (i) the respective certificates of
incorporation or by-laws of Parent or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental
authority applicable to Parent or any of its subsidiaries or any of
their respective properties or assets or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which Parent or any of its subsidiaries is now
a party or by which Parent or any of its subsidiaries or any of their
respective properties or assets may be bound. The consummation by
Parent and Subsidiary of the transactions contemplated hereby will not
result in any violation, conflict, breach, default, termination,
acceleration or creation of rights or liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clauses (i) and (ii) above, to obtaining (prior
to the Effective Time) the Parent Required Statutory Approvals and the
Parent Stockholder's Approval and (y) in the case of the terms,
conditions or provisions described in clause (iii) above, to obtaining
(prior to the Effective Time) consents required from commercial
lenders, lessors or other third parties as specified on the Parent
Disclosure Schedule. Excluded from the foregoing sentences of this
paragraph (b), insofar as they apply to the terms, conditions or
provisions described in clauses (ii) and (iii) of the first sentence of
this paragraph (b), are such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Parent
Material Adverse Effect.
<PAGE>
(c) Except for (i) the filings by Parent required by, and the
expiration or termination of any applicable waiting period under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) the filing of the Joint Proxy Statement/Prospectus (as
defined in Section 4.9) with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the declaration of the effectiveness thereof by
the SEC and filings with various state blue sky authorities, (iii) the
making of the Merger Filing with the Secretary of State of the State of
Delaware in connection with the Merger, and (iv) the filings by Parent
required in order for the Parent Stock to be issued in connection with
the Merger to be listed on the Nasdaq National Market (the filings and
approvals referred to in clauses (i) through (iv) are collectively
referred to as the "PARENT REQUIRED STATUTORY Approvals"), no
declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery of this
Agreement by Parent or Subsidiary or the consummation by Parent or
Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents
or approvals which, if not made or obtained, as the case may be, would
not, in the aggregate, have a Parent Material Adverse Effect.
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS. Parent has filed with the
SEC all forms, statements, reports and documents (including all post-effective
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied when filed in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. Parent has made available to the Company
copies (including all exhibits, post-effective amendments and supplements
thereto) of its (a) Annual Reports on Form 10-K for the fiscal year ended March
31, 1999 and for the immediately preceding fiscal year, as filed with the SEC,
(b) proxy and information statements relating to (i) all meetings of its
stockholders (whether annual or special) and (ii) actions by written consent in
lieu of a stockholders' meeting from January 1, 1997, until the date hereof, and
(c) all other reports, including quarterly reports, and registration statements
filed by Parent with the SEC since January 1, 1997 (other than registration
statements filed on Form S-8) (the documents referred to in clauses (a), (b) and
(c) filed prior to the date hereof are collectively referred to as the "PARENT
SEC REPORTS"). The Parent SEC Reports are identified on the Parent Disclosure
Schedule. As of their respective filing dates (and, in the case of any
registration statement, on the date it was declared effective), the Parent SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in the
Parent SEC Reports (collectively, the "PARENT FINANCIAL STATEMENTS") have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present, in all material respects, the
financial position of Parent and its subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
SECTION 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the Parent SEC Reports or as contemplated by this Agreement, neither Parent nor
any of its subsidiaries had at September 30, 1999, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except: (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the Parent Financial Statements or
reflected in the notes thereto or (ii) which were incurred after September 30,
1999, and were incurred in the ordinary course of business and consistent with
past practices; (b) liabilities, obligations or contingencies which (i) would
not, in the aggregate, have a
<PAGE>
Parent Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof; and (c) liabilities and obligations which are of a
nature not required to be reflected in the consolidated financial statements of
Parent and its subsidiaries prepared in accordance with United States generally
accepted accounting principles consistently applied and which were incurred in
the ordinary course of business.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
balance sheet included in the most recently filed Parent SEC Report (the "LAST
PARENT SEC REPORT") that contains consolidated financial statements of Parent,
there has not been any Parent Material Adverse Effect other than changes that
affect the industries in which Parent and its subsidiaries operate generally.
SECTION 4.8 LITIGATION. Except as disclosed in the Last Parent SEC
Report, there are no claims, suits, actions or proceedings pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries,
before any court, governmental department, commission, agency, instrumentality
or authority, or any arbitrator that seek to restrain or enjoin the consummation
of the Merger or which would reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to have a Parent
Material Adverse Effect. Except as set forth in the Last Parent SEC Report,
neither Parent nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator which prohibits or
restricts the consummation of the transactions contemplated hereby or would have
any Parent Material Adverse Effect.
SECTION 4.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its subsidiaries or Affiliates for
inclusion in (a) the Registration Statement on Form S-4 to be filed under the
Securities Act with the SEC by Parent in connection with the Merger for the
purpose of registering the shares of Parent Stock to be issued in connection
with the Merger (the "REGISTRATION STATEMENT") or (b) the proxy statement to be
distributed in connection with the Company's and Parent's meetings of their
respective stockholders to vote upon this Agreement and the transactions
contemplated hereby (the "PROXY STATEMENT" and, together with the prospectus
included in the Registration Statement, the "JOINT PROXY STATEMENT/PROSPECTUS")
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, at any of: (i) the time the Registration Statement (or any
amendment or supplement thereto) is declared effective; (ii) the time the Joint
Proxy Statement/Prospectus (or any amendment or supplement thereto) is first
mailed to the stockholders of Parent and Company; (iii) the time of each of the
meetings of the stockholders of Parent and Company to be held in connection with
the transactions contemplated by this Agreement; and (iv) the Effective Time.
The Joint Proxy Statement/ Prospectus will, as of its mailing date, comply as to
form in all material respects with all applicable laws, including the provisions
of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by Parent or
Subsidiary with respect to information supplied by the Company or the
stockholders of the Company for inclusion therein. For purposes of this
Agreement, the term "Affiliate" means, when used with respect to a specified
person or entity, another person or entity that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the person or entity specified. For the purpose of this definition,
"control" means (i) the ownership or control of more than 50% of the equity
interest in any person or entity, or (ii) the ability to direct or cause the
direction of the management or affairs of a person or entity, whether through
the direct or indirect ownership of voting interests, by contract or otherwise.
SECTION 4.10 NO VIOLATION OF LAW. Except as disclosed in the Last
Parent SEC Report, neither Parent nor any of its subsidiaries is in violation
of, or has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance, or judgment (including, without
limitation,
<PAGE>
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
would not reasonably be expected to have a Parent Material Adverse Effect.
Except as disclosed in the Last Parent SEC Report, as of the date of this
Agreement, to the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened, nor has
any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a Parent Material Adverse Effect.
Parent and its subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted (collectively, the
"PARENT PERMITS"), except for permits, licenses, franchises, variances,
exemptions, orders, authorizations, consents and approvals the absence of which,
alone or in the aggregate, would not have a Parent Material Adverse Effect.
Parent and its subsidiaries are not in violation of the terms of any Parent
Permit, except for delays in filing reports or violations which, alone or in the
aggregate, would not have a Parent Material Adverse Effect.
SECTION 4.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Last Parent SEC Report , each of Parent and its subsidiaries is not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under (a) the respective certificates of
incorporation, by-laws or other similar organizational instruments of Parent or
any of its subsidiaries or (b) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which Parent or any of its subsidiaries is a party or by which any
of them is bound or to which any of their properties or assets are subject,
other than, in the case of clause (b) of this Section 4.11, breaches, violations
and defaults which would not have, in the aggregate, a Parent Material Adverse
Effect.
SECTION 4.12 TAXES.
(a) Parent and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns (as defined in
Section 4.12(c)) required to be filed by them for all periods ending on
or prior to the Effective Time, other than those Tax Returns the
failure of which to file would not have a Parent Material Adverse
Effect, and such Tax Returns were, as of their respective dates of
filing, true, correct and complete in all material respects and (ii)
duly paid in full or made adequate provision for the payment of all
Taxes (as defined in Section 4.12(b)) for all past and current periods.
The liabilities and reserves for Taxes reflected in the Parent balance
sheet included in the Last Parent SEC Report are adequate to cover all
Taxes for all periods ending at or prior to the date of such balance
sheet and there is no liability for Taxes for any period beginning
after such date other than Taxes arising in the ordinary course of
business. There are no material liens for Taxes upon any property or
assets of Parent or any subsidiary thereof, except for liens for Taxes
not yet due. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the
Internal Revenue Service (the "IRS") or any other governmental taxing
authority with respect to Taxes of the Parent or any of its
subsidiaries which, if decided adversely, singly or in the aggregate,
would have a Parent Material Adverse Effect. Except as disclosed on the
Parent Disclosure Schedule, neither Parent nor its subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency other
than waivers and extensions which are no longer in effect. Neither
Parent nor any of its subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes with any entity that
is not, directly or indirectly, a corporate subsidiary of Parent other
than agreements the consequences of which are fully and adequately
reserved for in the Parent Financial Statements. Neither Parent nor any
of its corporate subsidiaries
<PAGE>
has, with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent to the application of Section
341(f) of the Code.
(b) For purposes of this Agreement, the term "TAXES" shall mean
all taxes, including, without limitation, income, gross receipts,
excise, property, sales, withholding, social security, occupation, use,
service, license, payroll, franchise, transfer and recording taxes,
fees and charges, windfall profits, severance, customs, import, export,
employment or similar taxes, charges, fees, levies or other assessments
imposed by the United States, or any state, local or foreign government
or subdivision or agency thereof, whether computed on a separate,
consolidated, unitary, combined or any other basis, and such term shall
include any interest, fines, penalties or additional amounts and any
interest in respect of any additions, fines or penalties attributable
or imposed or with respect to any such taxes, charges, fees, levies or
other assessments.
(c) For purposes of this Agreement, the term "TAX RETURN" shall
mean any return, report or other document or information required to be
supplied to a taxing authority in connection with Taxes.
SECTION 4.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as disclosed in the Parent SEC Reports, at the date
hereof, Parent and its subsidiaries do not maintain or contribute to or
have any obligation or liability to or with respect to any material
employee benefit plans, programs, arrangements or practices (such
plans, programs, arrangements or practices of Parent and its
subsidiaries being referred to as the "PARENT PLANS"), including
employee benefit plans within the meaning set forth in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other similar material arrangements for the provision of
benefits. Neither Parent nor any of its subsidiaries maintains or has
any financial or funding liability with respect to any "Multi-employer
Plan" within the meaning of Section 3(37) of ERISA or a "Multiple
Employer Plan" within the meaning of Section 413(c) of the Code.
Neither Parent nor any of its subsidiaries has any obligation to create
or contribute to any additional such plan, program, arrangement or
practice or to amend any such plan, program, arrangement or practice so
as to increase benefits or contributions thereunder, except as required
under the terms of the Parent Plans, under existing collective
bargaining agreements or to comply with applicable law. Neither Parent
nor any of its subsidiaries has any obligation to contribute to any
plan subject to Title IV of ERISA.
(b) Except as disclosed in the Parent SEC Reports, (i) there have
been no prohibited transactions within the meaning of Section 406 or
407 of ERISA or Section 4975 of the Code with respect to any of the
Parent Plans that could result in penalties, taxes or liabilities
which, singly or in the aggregate, could have a Parent Material Adverse
Effect, (ii) each of the Parent Plans has been operated and
administered in all material respects in accordance with applicable
laws during the period of time covered by the applicable statute of
limitations, (iii) each of the Parent Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and such
determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such
Parent Plans, and the period for making any such necessary retroactive
amendments has not expired, (iv) to the best knowledge of Parent and
its subsidiaries, there are no material pending, threatened or
anticipated claims involving any of the Parent Plans other than claims
for benefits in the ordinary course, and (v) no act, omission or
transaction (individually or in the aggregate) has occurred with
respect to any Parent Plan that has
<PAGE>
resulted or could result in any material liability (direct or indirect)
of Parent or any subsidiary under Sections 409 or 502(c)(i) or (l) of
ERISA or Chapter 43 of Subtitle (A) of the Code. Each Parent Plan can
be unilaterally terminated by Parent or a subsidiary at any time
without material liability, other than for amounts previously reflected
in the financial statements (or notes thereto) included in the Parent
SEC Reports.
(c) The Parent SEC Reports contain a true and complete summary or
list of or otherwise describe all material employment contracts and
other employee benefit arrangements with "change of control" or similar
provisions and all severance agreements with executive officers.
SECTION 4.14 LABOR CONTROVERSIES. Except as disclosed in the Parent SEC
Reports, (a) there are no material controversies pending or, to the knowledge of
Parent, threatened between Parent or its subsidiaries and any representatives of
any of their employees and (b) to the knowledge of Parent, there are no material
organizational efforts presently being made involving any of the presently
unorganized employees of Parent and its subsidiaries except for such
controversies and organizational efforts which, singly or in the aggregate,
could not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.15 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Last Parent SEC Report, (i) Parent
and its subsidiaries have conducted their respective businesses in
compliance with all applicable Environmental Laws (defined in Section
4.15(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of
their respective businesses as presently conducted, (ii) none of the
properties owned by Parent or any of its subsidiaries contain any
Hazardous Substance (defined in Section 4.15(c)) as a result of any
activity of Parent or any of its subsidiaries in amounts exceeding the
levels permitted by applicable Environmental Laws, (iii) neither Parent
nor any of its subsidiaries has received any notices, demand letters or
requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that Parent or any of its
subsidiaries may be in violation of, or liable under, any Environmental
Law in connection with the ownership or operation of their businesses,
(iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of Parent, threatened, against Parent or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to
be filed, by Parent or any of its subsidiaries concerning the release
of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental
Law from any properties owned by Parent or any of its subsidiaries as a
result of any activity of Parent or any of its subsidiaries during the
time such properties were owned, leased or operated by Parent or any of
its subsidiaries, (vii) no underground storage tanks have been
installed, closed or removed from any properties owned by Parent or any
of its subsidiaries during, in the case of Parent, the time such
properties were owned, leased or operated by Parent and during, in the
case of each subsidiary, the time such subsidiary has been owned by
Parent, (viii) there is no asbestos or asbestos containing material
present in any of the properties owned by Parent and its subsidiaries,
and no asbestos has been removed from any of such properties during the
time such properties were owned, leased or operated by Parent or any of
its subsidiaries, and (ix) neither Parent, its subsidiaries nor any of
their respective properties are subject to any liabilities or
expenditures (fixed or contingent) relating to any suit, settlement,
court order, administrative order, regulatory requirement, judgment or
claim asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (i) through (ix) that, singly or in
the aggregate, would not reasonably be expected to have a Parent
Material Adverse Effect.
<PAGE>
(b) As used herein, "ENVIRONMENTAL LAW" means any Federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine,
order, judgment, decree, injunction, requirement or agreement with any
governmental entity relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural
resource) or to human health or safety or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances, in each case as amended and as in effect on the
Closing Date. The term "ENVIRONMENTAL LAW" includes, without
limitation, (i) the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972,
the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal
Act and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal
Occupational Safety and Health Act of 1970, each as amended and as in
effect on the Closing Date, and (ii) any common law or equitable
doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(c) As used herein, "HAZARDOUS SUBSTANCE" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated,
under any Environmental Law. Hazardous Substance includes any substance
to which exposure is regulated by any government authority or any
Environmental Law including, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material,
asbestos, or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
SECTION 4.16 TITLE TO ASSETS. Parent and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good title
to all its leasehold interests and other owned properties as reflected in the
most recent balance sheet included in the Parent Financial Statements, except
for such properties and assets that have been disposed of in the ordinary course
of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet delinquent,
(ii) such imperfections in title and easements and encumbrances, if any, as are
not substantial in character, amount or extent and do not materially detract
from the value or interfere with the present use of the property subject thereto
or affected thereby, or otherwise materially impair the Parent's business
operations (in the manner presently carried on by the Parent), or (iii) as
disclosed in the Last Parent SEC Report, and except for such matters which,
singly or in the aggregate, could not reasonably be expected to have a Parent
Material Adverse Effect. All leases under which Parent leases any real or
personal property are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or event
which with notice or lapse of time or both would become a default other than
failures to be valid and effective and defaults under such leases which in the
aggregate will not have a Parent Material Adverse Effect.
SECTION 4.17 REORGANIZATION. None of the Parent, Subsidiary or, to
their knowledge, any of their Affiliates has taken or agreed or intends to take
any action or has any knowledge of any fact or
<PAGE>
circumstance that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
SECTION 4.18 PARENT STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of Parent required for approval of (i) the issuance of Parent Stock
in connection with the Merger (the "Parent Stock Issuance") is a majority of the
total votes cast thereon, in person or by proxy at a meeting of such
stockholders, by holders of Parent Stock and Parent Class B Common Stock
entitled to vote thereon, voting together as a single class and (ii) the
amendment to Parent's Amended and Restated Certificate of Incorporation to
increase the authorized Parent Stock to 85,000,000 shares in connection with the
Merger (the "Parent Charter Amendment") is a majority of the votes of the
outstanding shares of Parent Stock and Parent Class B Common Stock entitled to
vote thereon, voting together as a single class.
SECTION 4.19 BROKERS AND FINDERS. Except for the fees and expenses
payable to Goldman, Sachs & Co. and Hambrecht & Quist LLC, which fees are
reflected in their respective agreements with Parent (a copy of each of which
has been delivered to the Company), Parent has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Parent to pay any investment banking fees, finder's fees,
brokerage or agent commissions or other like payments in connection with the
transactions contemplated hereby.
SECTION 4.20 OPINION OF FINANCIAL ADVISOR. The financial advisor of
Parent, Goldman, Sachs & Co., has rendered a written opinion, dated December 13,
1999, to the Board of Directors of Parent to the effect that as of December 13,
1999, the Exchange Ratio pursuant to this Agreement is fair from a financial
point of view to Parent.
SECTION 4.21 COMPANY STOCK. Neither Parent nor Subsidiary is, nor at
any time during the last three years has it been, an "interested stockholder" of
the Company as defined in Section 203 of the DGCL (other than as contemplated by
this Agreement). Neither Parent nor Subsidiary owns (directly or indirectly,
beneficially or of record) or is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, any shares of capital stock of the Company (other than as
contemplated by this Agreement).
SECTION 4.22 SECTION 203. The action of the Board of Directors of
Parent in approving this Agreement (and the transactions provided for herein) is
sufficient to render inapplicable to this Agreement (and the transactions
provided for herein), in light of the Voting Agreement, dated as of the date
hereof, among the Company and certain of the stockholders of Parent, the
restrictions on "business combinations" (as defined in Section 203 of the DGCL)
as set forth in Section 203 of the DGCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary that,
except as set forth in the disclosure schedule dated as of the date hereof and
signed by an authorized officer of the Company (the "COMPANY DISCLOSURE
SCHEDULE"), each of which exceptions shall specifically identify the relevant
Section hereof to which it relates:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted. The Company is qualified to do business and is in
good standing in each jurisdiction
<PAGE>
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing is not reasonably likely to,
when taken together with all other such failures, have a Company Material
Adverse Effect. For purposes of this Agreement, a "COMPANY MATERIAL ADVERSE
EFFECT" is any event, change or effect that (i) is materially adverse to the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries taken as a whole,
other than any event, change or effect resulting from (a) changes in general
economic conditions (including United States stock market conditions) or (b)
changes in the market price of the Company Common Stock or Parent Stock as
reflected on the Nasdaq National Market, or (ii) prevents the Company from
consummating the transactions contemplated hereby, including the Merger, prior
to the date specified in Section 9.1(a)(i) hereof. True, accurate and complete
copies of the Company's Restated Certificate of Incorporation and Amended and
Restated Bylaws, in each case as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to Parent.
SECTION 5.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
15,000,000 shares of Company Common Stock, 1,000,000 shares of Class A
Common Stock, par value $.01 per share ("COMPANY CLASS A COMMON
STOCK"), and 750,000 shares of Preferred Stock, par value $.01 per
share, of which 80,000 shares have been designated as Series A Junior
Participating Preferred Stock ("COMPANY PREFERRED STOCK"). As of the
close of business on September 30, 1999, (i) 5,779,720 shares of
Company Common Stock were issued and outstanding, (ii) no shares of
Company Class A Common Stock or Company Preferred Stock were issued and
outstanding, (iii) 735,000 shares of Company Common Stock were held in
the treasury of the Company, (iv) no shares of Company Class A Common
Stock and no shares of Company Preferred Stock were held in the
treasury of the Company, (v) 929,904 shares of Company Common Stock
were reserved for issuance pursuant to the exercise of outstanding
options to purchase Company Common Stock; and (vi) 80,000 shares of
Company Preferred Stock were reserved for issuance in connection with
the rights (the "RIGHTS") to purchase shares of Company Preferred Stock
issued pursuant to the Rights Agreement, dated as of January 16, 1997,
as amended (the "RIGHTS AGREEMENT"), between the Company and LaSalle
National Bank, as Rights Agent. Between September 30, 1999 and the date
of this Agreement, the Company has issued no shares of its capital
stock except for 1,117 shares of Company Common Stock issued upon the
exercise of options granted pursuant to the Company Option Plans (as
defined below). As of the date of this Agreement all outstanding shares
of Company Common Stock are, and immediately prior to the Effective
Time all outstanding shares of Company Common Stock will be, validly
issued, fully paid and nonassessable and free of any preemptive (or
similar) right. As used herein, "COMPANY OPTION PLANS" means the
following, in each case as amended: the TI Investors Inc. Stock Option
Plan, Teltrend Inc. 1995 Stock Option Plan, Teltrend Inc. 1996 Stock
Option Plan, and Teltrend Inc. 1997 Non-Employee Director Stock Option
Plan.
(b) Except as disclosed in the Company Disclosure Schedule, and
except for the Rights and the Rights Agreement, as of the date hereof
there were no outstanding subscriptions, options, puts, calls,
contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under
any outstanding security, instrument or other agreement and also
including any rights plan or other anti-takeover agreement, obligating
the Company or any subsidiary of the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of the
capital stock of the Company or any subsidiary of the Company or
obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such agreement or commitment. There are no
voting trusts, proxies or other agreements or understandings to which
the Company or any subsidiary of the Company is a party or by which
<PAGE>
Company or any subsidiary of Company is bound with respect to the
voting of any shares of capital stock of the Company, although the
Company has been advised, as of the date hereof, that all of its
directors and executive officers intend to vote in favor of the
adoption of this Agreement, and, except as set forth on the Company
Disclosure Schedule, there are no registration rights or similar
agreements with respect to any shares of capital stock of the Company
or any of its subsidiaries.
(c) Except for the Company Common Stock, options to purchase
Company Common Stock granted under the Company Option Plans and the
Rights, the Company has outstanding no bonds, debentures, notes or
other obligations or securities the holders of which have the right to
vote (or are convertible or exchangeable into or exercisable for
securities having the right to vote) with the stockholders of Company
on any matter.
SECTION 5.3 SUBSIDIARIES. Each direct and indirect corporate subsidiary
of the Company is duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each subsidiary of the Company is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Company Material Adverse Effect. All of the outstanding
shares of capital stock of each corporate subsidiary of the Company are validly
issued, fully paid, nonassessable and free of preemptive rights and are owned
directly or indirectly by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever. There are no subscriptions, options, warrants, rights, puts, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
corporate subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to enter
into this Agreement and, subject to the Company Stockholders' Approval
(as defined in Section 7.3(a)) and the Company Required Statutory
Approvals (as defined in Section 5.4(c)), to consummate the
transactions contemplated hereby. The Board of Directors of the Company
has at a meeting duly called and held and at which a quorum was present
and acting throughout, by the affirmative vote of the majority of the
directors of the Company, (i) determined that this Agreement and the
Merger are advisable and in the best interests of the Company and its
stockholders, (ii) approved this Agreement in accordance with the
provisions of the DGCL, and (iii) resolved, in accordance with and
subject to the terms of this Agreement, to recommend adoption of this
Agreement by the Company's stockholders and directed that this
Agreement be submitted for consideration by the Company's stockholders.
No other corporate proceedings on the part of the Company are necessary
to authorize the execution and delivery of this Agreement or, except
for the Company Stockholders' Approval, the consummation by the Company
of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company, and, assuming the due
authorization, execution and delivery hereof by Parent and Subsidiary,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (b) general equitable
principles.
<PAGE>
(b) The execution and delivery of this Agreement by the Company do
not and will not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or
result in a right of termination, acceleration or amendment under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
of its subsidiaries under any of the terms, conditions or provisions of
(i) the certificates of incorporation, by-laws or similar
organizational documents of the Company or any of its subsidiaries,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which the Company or any of its subsidiaries
is now a party or by which the Company or any of its subsidiaries or
any of their respective properties or assets may be bound. The
consummation by the Company of the transactions contemplated hereby
will not result in any violation, conflict, breach, default,
termination, acceleration or creation of liens or rights under any of
the terms, conditions or provisions described in clauses (i) through
(iii) of the preceding sentence, subject (x) in the case of the terms,
conditions or provisions described in clauses (i) and (ii) above, to
obtaining (prior to the Effective Time) the Company Required Statutory
Approvals and the Company Stockholders' Approval and (y) in the case of
the terms, conditions or provisions described in clause (iii) above, to
obtaining (prior to the Effective Time) consents required from
commercial lenders, lessors or other third parties as specified in the
Company Disclosure Schedule. Excluded from the foregoing sentences of
this paragraph (b), insofar as they apply to the terms, conditions or
provisions described in clauses (ii) and (iii) of the first sentence of
this paragraph (b), are such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a
Company Material Adverse Effect.
(c) Except for (i) the filings by the Company required by, and the
expiration or termination of any applicable waiting period under, the
HSR Act, (ii) the filing of the Joint Proxy Statement/Prospectus with
the SEC pursuant to the Exchange Act, and (iii) the making of the
Merger Filing with the Secretary of State of the State of Delaware in
connection with the Merger (the filings and approvals referred to in
clauses (i) through (iii) are collectively referred to as the "COMPANY
REQUIRED STATUTORY APPROVALS"), no declaration, filing or registration
with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, in the aggregate, have a Company
Material Adverse Effect.
SECTION 5.5 REPORTS AND FINANCIAL STATEMENTS. The Company has filed
with the SEC all material forms, statements, reports and documents (including
all post-effective amendments and supplements thereto) required to be filed by
it under each of the Securities Act, the Exchange Act and the respective rules
and regulations thereunder, all of which, as amended if applicable, complied
when filed in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. The Company has
previously delivered to Parent copies (including all exhibits, post-effective
amendments and supplements thereto) of its (a) Annual Reports on Form 10-K for
the year ended July 31, 1999, and for the immediately preceding fiscal year, as
filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from January 1, 1997, until
the date hereof, and (c) all
<PAGE>
other reports, including quarterly reports, and registration statements filed by
the Company with the SEC since January 1, 1997 (other than registration
statements filed on Form S-8) (the documents referred to in clauses (a), (b) and
(c) filed prior to the date hereof are collectively referred to as the "COMPANY
SEC REPORTS"). The Company SEC Reports are identified on the Company Disclosure
Schedule. As of their respective filing dates (and, in the case of any
registration statement, the date on which it was declared effective), the
Company SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements of the Company included in
the Company SEC Reports (collectively, the "COMPANY FINANCIAL STATEMENTS") have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present, in all material respects, the
financial position of the Company and its subsidiaries as of the dates thereof
and the results of their operations and their cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the Company SEC Reports or as contemplated by this Agreement, neither the
Company nor any of its subsidiaries had at July 31, 1999, or has incurred since
that date, any liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) which are accrued or reserved against in the Company Financial
Statements or reflected in the notes thereto or (ii) which were incurred after
July 31, 1999, and were incurred in the ordinary course of business and
consistent with past practices, (b) liabilities, obligations or contingencies
which (i) would not, in the aggregate, have a Company Material Adverse Effect or
(ii) have been discharged or paid in full prior to the date hereof, and (c)
liabilities and obligations which are of a nature not required to be reflected
in the consolidated financial statements of the Company and its subsidiaries
prepared in accordance with United States generally accepted accounting
principles consistently applied and which were incurred in the ordinary course
of business.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
balance sheet included in the most recently filed Company SEC Report (the "LAST
COMPANY SEC REPORT") that contains consolidated financial statements of the
Company, there has not been any Company Material Adverse Effect, other than
changes that affect the industries in which the Company and its subsidiaries
operate generally.
SECTION 5.8 LITIGATION. Except as disclosed in the Last Company SEC
Report or the Company Disclosure Schedule, there are no claims, suits, actions
or proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator,
that seek to restrain the consummation of the Merger or which would reasonably
be expected, either alone or in the aggregate with all such claims, actions or
proceedings, to have a Company Material Adverse Effect. Except as set forth in
the Last Company SEC Report, neither the Company nor any of its subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator, which prohibits or restricts the consummation of the
transactions contemplated hereby or would have any Company Material Adverse
Effect.
SECTION 5.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company or its subsidiaries or Affiliates for
inclusion in (a) the Registration Statement or (b) the Proxy Statement will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the
<PAGE>
circumstances under which they are made, not misleading, at any of: (i) the time
the Registration Statement (or any amendment or supplement thereto) is declared
effective; (ii) the time the Joint Proxy Statement/Prospectus (or any amendment
or supplement thereto) is first mailed to the stockholders of Parent and
Company; (iii) the time of each of the meetings of the stockholders of Parent
and Company to be held in connection with the transactions contemplated by this
Agreement; and (iv) the Effective Time. The Joint Proxy Statement/Prospectus, as
it relates to the meeting of the Company's stockholders to be held in connection
with the transactions contemplated hereby, will comply, as of its mailing date,
as to form in all material respects with all applicable laws, including the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made by
the Company with respect to information supplied by Parent, Subsidiary or any
stockholder or Affiliate of Parent for inclusion therein.
SECTION 5.10 NO VIOLATION OF LAW. Except as disclosed in the Last
Company SEC Report, neither the Company nor any of its subsidiaries is in
violation of, or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or regulation)
of any governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a Company
Material Adverse Effect. Except as disclosed in the Last Company SEC Report, as
of the date of this Agreement, to the knowledge of the Company, no investigation
or review by any governmental or regulatory body or authority is pending or
threatened, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, will not have a Company Material
Adverse Effect. The Company and its subsidiaries have all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the "COMPANY PERMITS"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
Company Material Adverse Effect. The Company and its subsidiaries are not in
violation of the terms of any Company Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a Company
Material Adverse Effect.
SECTION 5.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Last Company SEC Report, each of the Company and its subsidiaries is not in
breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (a) the respective
certificates of incorporation, by-laws or similar organizational instruments of
the Company or any of its subsidiaries or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which the Company or any of its subsidiaries is
a party or by which any of them is bound or to which any of their properties or
assets are subject, other than, in the case of clause (b) of this Section 5.11,
breaches, violations and defaults which would not have, in the aggregate, a
Company Material Adverse Effect.
SECTION 5.12 TAXES. The Company and its subsidiaries have as of the
date hereof and will have as of the Effective Time (i) duly filed with the
appropriate governmental authorities all Tax Returns required to be filed by
them for all periods ending on or prior to the Effective Time, other than those
Tax Returns the failure of which to file would not have a Company Material
Adverse Effect, and such Tax Returns were, as of their respective filing dates,
true, correct and complete in all material respects, and (ii) duly paid in full
or made adequate provision for the payment of all Taxes for all past and current
periods. The liabilities and reserves for Taxes reflected in the Company balance
sheet included in the Last Company SEC Report are adequate to cover all Taxes
for all periods ending at or prior to the date of such balance sheet and there
is no liability for Taxes for any period beginning after such date other than
Taxes arising in
<PAGE>
the ordinary course of business. There are no material liens for Taxes upon any
property or asset of the Company or any subsidiary thereof, except for liens for
Taxes not yet due. There are no unresolved issues of law or fact arising out of
a notice of deficiency, proposed deficiency or assessment from the IRS or any
other governmental taxing authority with respect to Taxes of the Company or any
of its subsidiaries which, if decided adversely, singly or in the aggregate,
would have a Company Material Adverse Effect. Except as set forth in the Company
Disclosure Schedule, neither the Company nor its subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency other than waivers and extensions
which are no longer in effect. Except as set forth in the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes with any entity that
is not, directly or indirectly, a wholly-owned corporate subsidiary of Company
other than agreements the consequences of which are fully and adequately
reserved for in the Company Financial Statements. Neither the Company nor any of
its corporate subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f) of the Code.
SECTION 5.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as disclosed in the Company SEC Reports, at the date
hereof, the Company and its subsidiaries do not maintain or contribute
to or have any obligation or liability to or with respect to any
material employee benefit plans, programs, arrangements or practices
(such plans, programs, arrangements or practices of the Company and its
subsidiaries being referred to as the "COMPANY PLANS"), including
employee benefit plans within the meaning set forth in Section 3(3) of
ERISA, or other similar material arrangements for the provision of
benefits. Neither the Company nor any of its subsidiaries maintains or
has any financial or funding liability with respect to any
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or
"Multiple Employer Plan" within the meaning of Section 413(c) of the
Code. Neither the Company nor any of its subsidiaries has any
obligation to create or contribute to any additional such plan,
program, arrangement or practice or to amend any such plan, program,
arrangement or practice so as to increase benefits or contributions
thereunder, except as required under the terms of the Company Plans,
under existing collective bargaining agreements or to comply with
applicable law. Neither the Company nor any of its subsidiaries has any
obligation to contribute to any plan subject to Title IV of ERISA.
(b) Except as disclosed in the Company SEC Reports, (i) there have
been no prohibited transactions within the meaning of Section 406 or
407 of ERISA or Section 4975 of the Code with respect to any of the
Company Plans that could result in penalties, taxes or liabilities
which, singly or in the aggregate, could have a Company Material
Adverse Effect, (ii) each of the Company Plans has been operated and
administered in all material respects in accordance with applicable
laws during the period of time covered by the applicable statute of
limitations, (iii) each of the Company Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and such
determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such
Company Plans, and the period for making any such necessary retroactive
amendments has not expired, (iv) to the best knowledge of the Company
and its subsidiaries, there are no material pending, threatened or
anticipated claims involving any of the Company Plans other than claims
for benefits in the ordinary course, and (v) no act, omission or
transaction (individually or in the aggregate) has occurred with
respect to any Company Plan that has resulted or could result in any
material liability (direct or indirect) of the Company or any
subsidiary under Sections 409 or 502(c)(i) or (l) of ERISA or Chapter
43 of Subtitle (A) of the Code. Except as set forth in the Company
Disclosure Schedule, each Company
<PAGE>
Plan can be unilaterally terminated by the Company or a subsidiary at
any time without material liability, other than for amounts previously
reflected in the financial statements (or notes thereto) included in
the Company SEC Reports.
(c) The Company SEC Reports, together with the Company Disclosure
Schedule, contain a true and complete summary or list of or otherwise
describe all material employment contracts and other employee benefit
arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
(d) There are no agreements which will or may provide payments to
any officer, employee, stockholder, or highly compensated individual
which will be "parachute payments" under Code Section 280G that are
nondeductible to the Company or subject to tax under Code Section 4999
for which the Company or any ERISA Affiliate would have withholding
liability.
SECTION 5.14 LABOR CONTROVERSIES. Except as disclosed in the Company
SEC Reports, (a) there are no material controversies pending or, to the
knowledge of the Company, threatened between the Company or its subsidiaries and
any representatives of any of their employees and (b) to the knowledge of the
Company, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of the Company or its
subsidiaries, except for such controversies and organizational efforts, which,
singly or in the aggregate, could not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 5.15 ENVIRONMENTAL MATTER. Except as disclosed in the Last
Company SEC Report or on the Company Disclosure Schedule, (i) the Company and
its subsidiaries have conducted their respective businesses in compliance with
all applicable Environmental Laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (ii) none of
the properties owned by the Company or any of its subsidiaries contain any
Hazardous Substance as a result of any activity of the Company or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company or any of its subsidiaries may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
their businesses, (iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by the Company or any of its subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned by
the Company or any of its subsidiaries as a result of any activity of the
Company or any of its subsidiaries during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (vii) no
underground storage tanks have been installed, closed or removed from any
properties owned by the Company or any of its subsidiaries during, in the case
of the Company, the time such properties were owned, leased or operated by the
Company and during, in the case of each subsidiary, the time such subsidiary has
been owned by the Company, (viii) there is no asbestos or asbestos containing
material present in any of the properties owned by the Company and its
subsidiaries, and no asbestos has been removed from any of such properties
during the time such properties were owned, leased or operated by the Company or
any of its subsidiaries, and (ix) neither the Company, its subsidiaries nor any
of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising
<PAGE>
under any Environmental Law, except for violations of the foregoing clauses (i)
through (ix) that, singly or in the aggregate, either (A) would not reasonably
be expected to have a Company Material Adverse Effect or (B) would not otherwise
cause the Company to incur or otherwise become responsible for liabilities or
expenditures in excess of $4.0 million.
SECTION 5.16 TITLE TO ASSETS. The Company and each of its subsidiaries
has good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other owned properties, as reflected in
the most recent balance sheet included in the Company Financial Statements,
except for properties and assets that have been disposed of in the ordinary
course of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet delinquent,
(ii) such imperfections in title and easements and encumbrances, if any, as are
not substantial in character, amount or extent and do not materially detract
from the value, or interfere with the present use of the property subject
thereto or affected thereby, or otherwise materially impair the Company's
business operations (in the manner presently carried on by the Company) or (iii)
as disclosed in the Last Company SEC Report, and except for such matters which,
singly or in the aggregate, could not reasonably be expected to have a Company
Material Adverse Effect. All leases under which the Company or any of its
subsidiaries leases any real or personal property are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both
would become a default, other than failures to be valid and effective and
defaults under such leases which in the aggregate will not have a Company
Material Adverse Effect.
SECTION 5.17 REORGANIZATION. Neither the Company nor, to the knowledge
of the Company, any of its Affiliates has taken or agreed or intends to take any
action or has any knowledge of any fact or circumstance that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
SECTION 5.18 COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of the Company required for adoption of this Agreement is a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon.
SECTION 5.19 BROKERS AND FINDERS. Except for the fees and expenses
payable to Soundview Technology Group, which fees are reflected in its agreement
with the Company (a copy of which has been delivered to Parent), the Company has
not entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of the Company to pay any investment
banking fees, finder's fees, brokerage or agent commissions or other like
payments in connection with the transactions contemplated hereby.
SECTION 5.20 OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, Soundview Technology Group, has rendered a written opinion to the Board
of Directors of the Company, dated December 13, 1999, to the effect that the
Exchange Ratio pursuant to this Agreement is fair from a financial point of view
to the stockholders of the Company.
SECTION 5.21 SECTION 203. Assuming the accuracy of the representation
and warranty set forth in Section 4.21, the action of the Board of Directors of
the Company in approving this Agreement (and the transactions provided for
herein) is sufficient to render inapplicable to this Agreement (and the
transactions provided for herein) the restrictions on "business combinations"
(as defined in Section 203 of the DGCL) as set forth in Section 203 of the DGCL.
SECTION 5.22 RIGHTS AGREEMENT. The Company has amended the Rights
Agreement to ensure that (a) none of a "Flip-In Event," a "Distribution Date" or
a "Stock Acquisition Date" (in each case as defined in the Rights Agreement)
will occur, and none of Parent, Subsidiary or any of their "Affiliates" or
"Associates" will be deemed to be an "Acquiring Person" (in each case as defined
in the Rights Agreement), by reason of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby and (b)
the Rights will expire immediately prior to the Effective Time.
SECTION 5.23 NO RECENT NEGOTIATIONS WITH AFFILIATES. None of the
Company, any of its subsidiaries, or any of its directors or officers has, and,
to the knowledge of the Company, no other employee of, or any attorney,
accountant, investment banker, financial advisor or other agent retained by, the
Company or any of its subsidiaries has, initiated, solicited, negotiated,
knowingly encouraged or provided non-public or confidential information to
facilitate any proposal or offer with respect to an Acquisition Transaction (as
defined in Section 6.3) with or to any "affiliate" of the Company or any group
of which, to the Company's knowledge, any "affiliate" of the Company is a member
within the twelve months prior to the date hereof. As used in this Section 5.23,
(i) "affiliate" has the meaning assigned to it in Section 7.4 and (ii) "group"
has the meaning set forth in Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as otherwise contemplated by this Agreement or disclosed in Section 6.1
of the Company Disclosure Schedule, after the date hereof and prior to the
Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries
to:
(a) use their respective best efforts to conduct their respective
businesses in the ordinary and usual course of business and consistent
with past practice;
(b) not (i) amend or propose to amend their respective
certificates of incorporation, by-laws or other similar governing
documents, (ii) split, combine or reclassify their outstanding capital
stock or (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, except for the payment
of dividends or distributions by a wholly-owned subsidiary of the
Company;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their capital
stock of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that the Company may issue
(i) shares upon conversion of convertible securities and exercise of
options and warrants outstanding on the date hereof (or granted
hereafter in accordance with the terms of this Agreement) in accordance
with their terms or pursuant to the Rights Agreement and (ii) options
to purchase up to 25,000 shares of Company Common Stock to employees
who are hired by the Company after the date hereof and prior to the
Closing Date, provided, however, that all options referenced in this
clause (ii) shall be issued under the Company Option Plans and the
vesting of all such options shall not be accelerated or otherwise
modified as a result of the transactions contemplated hereby;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business or (B) borrowings to
<PAGE>
refinance existing indebtedness on terms which are reasonably
acceptable to Parent, (ii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) take or
fail to take any action which action or failure to take action would
cause the Company or its stockholders (except to the extent that any
stockholders receive cash in lieu of fractional shares and except to
the extent of stockholders in special circumstances) to recognize gain
or loss for federal income tax purposes as a result of the consummation
of the Merger or would otherwise cause the Merger not to qualify as a
reorganization under Section 368 of the Code, (iv) make any acquisition
of any assets or businesses other than expenditures for current assets
in the ordinary course of business and expenditures for fixed or
capital assets in the ordinary course of business and consistent with
the Company's capital budget disclosed in Section 6.1 of the Company
Disclosure Schedule, (v) sell, pledge, dispose of or encumber any
material assets or businesses other than sales in the ordinary course
of business, (vi) except as otherwise permitted pursuant to the
provisions hereof, take any action which would be reasonably likely to
prevent the Company from (A) obtaining any Company Statutory Approvals,
(B) performing its covenants and agreements under this Agreement, or
(C) consummating the transactions contemplated hereby, or (vii) enter
into any binding contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of
their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) not enter into or amend in any material respect any
employment, severance, special pay arrangement with respect to
termination of employment or other similar arrangements or agreements
with any directors, officers or key employees, except in the ordinary
course and consistent with past practice (it being expressly understood
that the interpretation and administration of any such arrangement by a
duly authorized administrator or administrative body consistent with
the terms thereof shall not constitute a breach hereof); provided,
however, that the Company and its subsidiaries shall in no event enter
into any written employment agreement, except for employment agreements
entered into with new employees of Theta Limited and then only so long
as (i) such employment agreements are entered into in the ordinary
course of business and consistent with past practices, (ii) such
employment agreements contain terms and provisions comparable to those
applicable to current employees of Theta Limited in comparable
positions, and (iii) if the employees with whom Theta Limited intends
to enter written agreements will hold positions at or above the Product
Marketing Manager level, then such new employees may only fill
positions which are vacated or up to three additional newly created
positions;
(g) not adopt, enter into or amend in any material respect any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, health care, employment or other employee
benefit plan, agreement, trust, fund or arrangement for the benefit or
welfare of any employee or retiree, except as required to comply with
changes in applicable law (it being expressly understood that the
interpretation and administration of any such plan or arrangement by a
duly authorized administrator or administrative body consistent with
the terms thereof shall not constitute a breach hereof), provided,
however, that the Company may make such amendments to certain of its
outstanding option agreements as required by Section 7.12;
<PAGE>
(h) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible
assets and its businesses in such amounts and against such risks and
losses as are consistent with past practice; and
(i) not implement any change in accounting principles, practices
or methods, other than as may be required by United States generally
accepted accounting principles, the Financial Accounting Standards
Board, the SEC or any other government authority or oversight agency;
and
(j) not make, change or revoke any material Tax election or make
any material agreement or settlement regarding Taxes with any taxing
authority.
SECTION 6.2 CONDUCT OF BUSINESS BY PARENT AND SUBSIDIARY PENDING THE
MERGER. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause its subsidiaries to:
(a) use their respective best efforts to conduct their respective
businesses in the ordinary and usual course of business and consistent
with past practice;
(b) not (i) amend or propose to amend their respective
certificates of incorporation (except for the amendment by Parent of
its Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Parent Stock as contemplated by the
Parent Charter Amendment), by-laws or similar organizational documents,
(ii) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock, or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions by a
wholly-owned subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their capital
stock of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that (i) Parent may issue
shares upon conversion of convertible securities and exercise of
options outstanding on the date hereof in accordance with their terms,
(ii) Parent may issue options to purchase Parent Stock (and shares upon
exercise of such options) pursuant to its employee stock option plans
in effect on the date hereof in the ordinary course of business,
consistent with past practices and in an aggregate amount not to exceed
2,000,000 shares of Parent Stock subject thereto, (iii) Parent may
issue shares in accordance with the terms of its Employee Stock
Purchase Plan in effect as of the date hereof, and (iv) Conference
Plus, Inc., a subsidiary of Parent, may issue options to purchase
shares of its common stock (the "CPI COMMON STOCK") (and shares of CPI
Common Stock upon exercise of such options in accordance with their
terms) in the ordinary course of business, consistent with past
practices, and in an aggregate amount not to exceed 5,000 shares of CPI
Common Stock.
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business or (B) borrowings to refinance existing
indebtedness on terms which are reasonably acceptable to the Company,
(ii) redeem, purchase, acquire or offer to purchase or acquire any
shares of its capital stock or any options, warrants or rights to
acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock, (iii) take or fail to take any
action which action or failure to take action would cause Parent or its
stockholders or Company's stockholders (except to the extent that any
Company stockholders receive cash in lieu of fractional shares) to
recognize gain or loss for
<PAGE>
federal income tax purposes as a result of the consummation of the
Merger or would otherwise cause the Merger not to qualify as a
reorganization under Section 368 of the Code, (iv) sell, pledge,
dispose of or encumber any material assets or businesses other than
sales in the ordinary course of business, (v) make any acquisition of
any assets or businesses other than expenditures for current assets in
the ordinary course of business and expenditures for fixed or capital
assets in the ordinary course of business, (vi) except as otherwise
permitted pursuant to the provisions hereof, take any action which
would be reasonably likely to prevent Parent or Subsidiary from (A)
obtaining the Parent Statutory Approvals, (B) performing its covenants
and agreements under this Agreement, or (C) consummating the
transactions contemplated hereby, or (vii) enter into any binding
contract, agreement, commitment or arrangement with respect to any of
the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of
their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) not implement any change in accounting principles, practices
or methods, other than as may be required by United States generally
accepted accounting principles, the Financial Accounting Standards
Board, the SEC or any other governmental authority or oversight agency;
and
(g) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible
assets and its businesses in such amounts and against such risks and
losses as are consistent with past practice.
SECTION 6.3 ACQUISITION TRANSACTIONS.
(a) After the date hereof and prior to the Effective Time or
earlier termination of this Agreement, the Company shall not, and shall
not permit any of its subsidiaries to, initiate, solicit, negotiate,
knowingly encourage or provide confidential information to facilitate,
and the Company shall, and shall cause each of its subsidiaries to,
cause any officer, director or employee of, or any attorney,
accountant, investment banker, financial advisor or other agent
retained by it, not to initiate, solicit, negotiate, knowingly
encourage or provide non-public or confidential information to
facilitate, any proposal or offer to acquire all or any substantial
part of the business and properties of the Company or any capital stock
of the Company, whether by merger, purchase of assets, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transaction (other than the Merger) being
referred to herein as an "ACQUISITION TRANSACTION").
(b) Notwithstanding the provisions of paragraph (a) above, the
Company may, in response to an unsolicited written proposal or
indication of interest with respect to a potential or proposed
Acquisition Transaction ("ACQUISITION PROPOSAL"), furnish (subject to
the execution of a confidentiality agreement and standstill agreement
containing provisions not more favorable than the confidentiality and
standstill provisions of the Confidentiality Agreements, as defined in
Section 10.4) confidential or non-public information to a financially
capable corporation, partnership, person or other entity or group (a
"POTENTIAL ACQUIRER") and negotiate with such Potential Acquirer if the
Board of Directors of the Company in good faith, after consultation
with its outside legal counsel, determines that the failure to provide
such confidential or non-public information to or negotiate with such
Potential Acquirer would constitute a breach of its fiduciary
<PAGE>
duty to the Company's stockholders. It is understood and agreed that
negotiations conducted in accordance with this paragraph (b) shall not
constitute a violation of paragraph (a) of this Section 6.3. The
Company and its subsidiaries have ceased, and have directed all of
their respective officers, directors, employees, financial advisors and
other agents or representatives to cease, all activities, discussions
or negotiations, if any, with any persons or entities conducted
heretofore with respect to any Acquisition Proposals.
(c) The Company shall notify Parent as soon as practicable after
(i) the Company has received any Acquisition Proposal, (ii) the
Company's Board of Directors or its chief executive officer or chief
financial officer has actual knowledge that any person or entity
intends to make an Acquisition Proposal, or (iii) the Company has
received any request for nonpublic information relating to the Company
or its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any
subsidiary by any person or entity that informs the Board of Directors
of the Company or such subsidiary that it is considering making, or has
made, an Acquisition Proposal. Such notice to Parent shall be made
orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal,
inquiry or contact. The Company will keep Parent fully informed of the
status and details of any such Acquisition Proposal or request.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 ACCESS TO INFORMATION.
(a) The Company and its subsidiaries shall afford to Parent and
Subsidiary and their respective accountants, counsel, financial
advisors and other representatives (the "PARENT REPRESENTATIVES") and
Parent and its subsidiaries shall afford to the Company and its
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES") access at reasonably scheduled times
throughout the period prior to the Effective Time to all of their
respective properties, books, contracts, commitments and records
(including, but not limited to, Tax Returns) and, during such period,
shall furnish promptly to one another (i) a copy of each report,
schedule and other document filed or received by any of them pursuant
to the requirements of federal or state securities laws or filed by any
of them with the SEC throughout the period prior to the Effective Time,
(ii) a copy of each notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement, and (iii) such other information
concerning their respective businesses, properties and personnel as
Parent or Subsidiary or the Company, as the case may be, shall
reasonably request; provided, however, that (A) no investigation
pursuant to this Section 7.1 shall amend or modify any representations
or warranties made herein or the conditions to the obligations of the
respective parties to consummate the Merger and (B) no access or
disclosure shall be required to be provided if such access or
disclosure would impair any attorney-client privilege of the disclosing
party or would violate any applicable law or regulation. Parent and its
subsidiaries shall hold and shall use their reasonable best efforts to
cause the Parent Representatives to hold, and the Company and its
subsidiaries shall hold and shall use their reasonable best efforts to
cause the Company Representatives to hold, in strict confidence all
non-public documents and information furnished to Parent and Subsidiary
or to the Company, as the case may be, in connection with the
transactions contemplated by this Agreement in accordance with the
provisions of the Confidentiality Agreements, except that (i) Parent,
Subsidiary and the Company may disclose such information as may be
necessary in connection with seeking the Parent Required Statutory
Approvals and Parent
<PAGE>
Stockholders' Approval, the Company Required Statutory Approvals and
the Company Stockholders' Approval and (ii) each of Parent, Subsidiary
and the Company may disclose any information that it is required by law
or judicial or administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly redeliver to the other all
non-public written material provided pursuant to this Section 7.1 and
shall not retain any copies, extracts or other reproductions in whole
or in part of such written material. In such event, all documents,
memoranda, notes and other writings prepared by Parent or the Company
based on the information in such material shall be destroyed (and
Parent and the Company shall use their respective reasonable best
efforts to cause their respective advisors and representatives to
similarly destroy their documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing
by an authorized officer supervising such destruction.
(c) The Company shall promptly advise Parent and Parent shall
promptly advise the Company in writing of any change or the occurrence
of any event after the date of this Agreement having, or which, insofar
as can reasonably be foreseen, in the future may have, any Parent
Material Adverse Effect or Company Material Adverse Effect, as the case
may be, taken as a whole.
SECTION 7.2 REGISTRATION STATEMENT AND PROXY STATEMENT.
(a) Parent and the Company shall file with the SEC as soon as is
reasonably practicable after the date hereof the Joint Proxy Statement/
Prospectus and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as
practicable. Parent shall also take any action required to be taken
under applicable state blue sky or securities laws in connection with
the issuance of Parent Stock pursuant hereto. Parent and the Company
shall promptly furnish to each other all information, and take such
other actions, as may reasonably be requested in connection with any
action by any of them in connection with the preceding sentence. The
information provided and to be provided by Parent and the Company,
respectively, for use in the Joint Proxy Statement/Prospectus shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the parties agree that the financial information
(including pro forma financial data and information) supplied or to be
supplied by it or its representatives for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy
Statement/Prospectus shall comply as to form in all material respects
with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, shall be prepared in
accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of unaudited
financial information, as permitted by the rules of the SEC) and shall
fairly present (subject, in the case of unaudited financial
information, to normal, recurring audit adjustments) the financial
information reflected therein as of the dates thereof or for the
periods then ended.
(c) Prior to the date of approval of the Parent Stock Issuance and
Parent Charter Amendment by Parent's stockholders and adoption of this
Agreement by the Company's stockholders, each of the Company, Parent
and Subsidiary shall correct promptly any information provided by it to
be used specifically in the Joint Proxy Statement/Prospectus and
Registration Statement that shall have become false or misleading in
any material respect and shall take all steps necessary to file with
the SEC and have declared effective or cleared by the SEC any amendment
<PAGE>
or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint
Proxy Statement/Prospectus as so corrected to be disseminated to the
stockholders of the Company and Parent, in each case to the extent
required by applicable law.
(d) None of the Joint Proxy Statement/Prospectus or the
Registration Statement shall be filed or distributed, and, prior to the
termination of this Agreement, no amendment or supplement to the Joint
Proxy Statement/Prospectus or the Registration Statement shall be filed
or distributed, by or on behalf of Parent or Company, without
consultation with the other party and its counsel or without providing
the other party the reasonable opportunity to review and comment
thereon.
(e) Notwithstanding the foregoing, the Company shall not be
required to take any action pursuant to this Section 7.2 if, at the
time, the Company is not obligated to make the recommendation to its
stockholders contemplated by Section 7.3(a) hereof pursuant to the
terms of such Section 7.3(a).
SECTION 7.3 STOCKHOLDERS' APPROVALS.
(a) The Company shall, as promptly as practicable, submit this
Agreement for adoption by its stockholders at a meeting of stockholders
and, subject to the final sentence of this Section 7.3(a), shall use
its reasonable best efforts to obtain stockholder adoption (the
"COMPANY STOCKHOLDERS' APPROVAL") of this Agreement. Such meeting of
stockholders shall be held as soon as practicable following the date
upon which the Registration Statement becomes effective. Except as may
be required, in response to any unsolicited bona fide written
Acquisition Proposal, in order to comply with the fiduciary duties of
the Board of Directors under the DGCL as determined by the Board of
Directors in good faith, after consultation with the Company's outside
legal counsel, the Company's Board of Directors shall recommend to the
Company's stockholders adoption of this Agreement.
(b) Parent shall, as promptly as practicable, submit the Parent
Stock Issuance and Parent Charter Amendment for the approval of its
stockholders at a meeting of stockholders and, subject to the third to
last sentence of this Section 7.3(b), shall use its reasonable best
efforts to obtain stockholder approval (the "PARENT STOCKHOLDERS'
APPROVAL") of the Parent Stock Issuance and Parent Charter Amendment.
Such meeting of stockholders shall be held as soon as practicable
following the date on which the Registration Statement becomes
effective. Except as may be required, in response to any bona fide
"Parent Acquisition Proposal", in order to comply with the fiduciary
duties of Parent's Board of Directors under the DGCL as determined by
Parent's Board of Directors in good faith, after consultation with
Parent's outside legal counsel, Parent's Board of Directors shall
recommend to its stockholders approval of the Parent Stock Issuance and
Parent Charter Amendment. As soon as practicable after the date hereof,
Parent shall authorize and cause an officer of Parent to vote Parent's
shares of Subsidiary Common Stock for adoption of this Agreement and
shall take all additional actions as the sole stockholder of Subsidiary
necessary to adopt this Agreement. As used herein, a "PARENT
ACQUISITION PROPOSAL" shall mean a proposal or offer to acquire all or
any substantial part of the business and properties of Parent or any
capital stock of Parent, whether by merger, purchase of assets, tender
offer or otherwise, whether for cash, securities or any other
consideration or combination thereof .
(c) Subject to Sections 7.3(a) and (b), each of Parent and the
Company shall use its reasonable best efforts to schedule and hold
their respective stockholders' meetings so that the stockholders'
meetings occur on the same day, and otherwise so as not to delay the
transactions contemplated hereby.
<PAGE>
SECTION 7.4 COMPLIANCE WITH THE SECURITIES ACT AND EXCHANGE ACT.
(a) The Company shall cause each of its principal executive
officers and directors, and will use its reasonable best efforts to
cause the other persons who are "affiliates" (as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act) of the
Company (collectively, the "145 AFFILIATES"), to deliver to Parent on
or prior to the Effective Time a written agreement in form and
substance reasonably satisfactory to Parent and the Company (an
"AFFILIATE AGREEMENT") to the effect that such person will not offer to
sell, sell or otherwise dispose of any shares of Parent Stock issued in
connection with the Merger, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 145, as
amended from time to time, or in a transaction which, in the opinion of
legal counsel reasonably satisfactory to Parent, is exempt from the
registration requirements of the Securities Act. In addition, Parent
shall cause all certificates for Parent Stock to be received by the 145
Affiliates to bear a legend substantially similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
THE ACT AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO, (B) IN ACCORDANCE WITH RULE
145(d) UNDER THE ACT, OR (C) IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
(b) The Board of Directors or Compensation Committee of the
Company and Parent will each grant all approvals and take all other
actions required pursuant to Rules 16b-3(d) and 16b-3(e) under the
Exchange Act to cause the disposition in connection with the Merger of
Company Common Stock and Company Options (as hereinafter defined) and
the acquisition in connection with the Merger of Parent Stock and
options to acquire Parent Common Stock to be exempt from the provisions
of Section 16(b) of the Exchange Act. SECTION 7.5 NASDAQ LISTING.
Parent shall cause, at or before the Effective Time, authorization for
listing on the Nasdaq National Market ("NASDAQ"), upon official notice
of issuance, of the shares of Parent Stock (i) to be issued in
connection with the Merger and (ii) to be reserved for issuance upon
exercise of stock options issued in connection with the Merger.
SECTION 7.6 EXPENSES AND FEES.
(a) Except as set forth in this Section 7.6, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses, except that those expenses incurred in connection with
printing and filing the Joint Proxy Statement/Prospectus shall be
shared equally by Parent and the Company.
(b) The Company agrees to immediately pay to Parent a fee of
$7,177,632 if:
(i) the Company terminates this Agreement pursuant to clause
(iii) of Section 9.1(a); or
<PAGE>
(ii) Parent terminates this Agreement pursuant to clause (iv)
of Section 9.1(b); or
(iii) Parent terminates this Agreement pursuant to clause
(vi) of Section 9.1(b) or the Company terminates this Agreement
pursuant to clause (iv)(2) of Section 9.1(a), in each case if, but
only if, the Company enters into a definitive agreement with
respect to an Acquisition Transaction within three months
following such termination.
(c) Parent agrees to immediately pay to the Company a fee of
$7,177,632 if:
(i) Parent terminates this Agreement pursuant to clause (vii)
of Section 9.1(b) or the Company terminates this Agreement
pursuant to clause (vii) of Section 9.1(a) and, in each case, if,
but only if, Parent enters into a definitive agreement with
respect to a Parent Acquisition Proposal within nine months
following such termination; or
(ii) Parent, in accordance with Section 7.3(b), does not
recommend to its stockholders approval of the Parent Stock
Issuance and the Parent Charter Amendment and the Company
terminates this Agreement pursuant to clause (iv)(1) of Section
9.1(a), if, but only if, Parent enters into a definitive agreement
with respect to a Parent Acquisition Proposal within three months
following such termination.
SECTION 7.7 AGREEMENT TO COOPERATE.
(a) Subject to the terms and conditions herein provided, each of
the parties hereto shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all
necessary or appropriate waivers, consents or approvals of third
parties required in order to preserve material contractual
relationships of the Company and its subsidiaries, all necessary or
appropriate waivers, consents and approvals and SEC "no-action" letters
to effect all necessary registrations, filings and submissions and to
lift any injunction or other legal bar to the Merger (and, in such
case, to proceed with the Merger as expeditiously as possible).
(b) Without limitation of the foregoing, each of Parent and the
Company undertakes and agrees to file as soon as practicable after the
date hereof a Notification and Report Form under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "ANTITRUST DIVISION"). Each of Parent and
the Company shall (i) use its reasonable efforts to comply as
expeditiously as possible with all lawful requests of the FTC or the
Antitrust Division for additional information and documents and (ii)
not extend any waiting period under the HSR Act or enter into any
agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior
written consent of the other parties hereto.
(c) In the event any litigation is commenced against the Company
by any person or entity relating to the transactions contemplated by
this Agreement, including any Acquisition Transaction, Parent shall
have the right, at its own expense, to participate therein, and the
Company will not settle any such litigation without the consent of
Parent, which consent will not be unreasonably withheld or delayed;
provided, however, that nothing contained in this Section 7.7(c) shall
be construed as granting Parent a right to consent to a particular
settlement, if the Company's Board of Directors determines in good
faith after consultation with the Company's outside legal counsel that
<PAGE>
the existence or exercise of such right with respect to that particular
settlement would violate the fiduciary duties of the Company's Board of
Directors.
(d) Parent shall reasonably consider taking such actions as may be
useful in resolving any antitrust objections that may be asserted with
respect to the transactions contemplated by this Agreement by the FTC,
the Antitrust Division or any other federal or state agency.
SECTION 7.8 Each party hereto shall consult with each other before
issuing any press release or otherwise issuing any other similar written public
statement with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement without the prior consent
of each other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that a party may, without the prior consent of any
other party, issue such a press release or other similar written public
statement as may be required by law or any listing agreement with a national
securities exchange or market to which Parent or the Company is a party if it
has used all reasonable efforts to consult with such other party and to obtain
such other party's consent but has been unable to do so in a timely manner.
Further, the parties shall use their respective reasonable best efforts to
coordinate and jointly schedule and interface with the various governmental
authorities and other applicable regulatory bodies involved or otherwise
interested in the transactions contemplated by this Agreement.
SECTION 7.9 OPTION PLANS.
(a) Prior to the Effective Time, the Company and Parent shall take
such action as may be necessary to cause each unexpired and unexercised
option to purchase shares of Company Common Stock (each a "COMPANY
Option") to be automatically converted at the Effective Time into an
option (each a "PARENT OPTION") which will be (1) to purchase a number
of shares of Parent Stock equal to the number of shares of Company
Common Stock that could have been purchased under the Company Option
multiplied by the Exchange Ratio, at a price per share of Parent Stock
equal to the option exercise price determined pursuant to the Company
Option divided by the Exchange Ratio and (2) otherwise subject to the
same terms and conditions as the Company Option; provided that (i) if
the applicable agreement evidencing the Company Option provides for
acceleration of vesting of such Company Option upon the Merger, the
converted stock option will be so vested following the Merger and, (ii)
the terms of the Company Options outstanding under the Company's 1997
Non-Employee Director Stock Option Plan shall be amended so that such
options may be exercised (A) with respect to those directors of the
Company who do not become directors of Parent, until the earlier of (x)
six months following the Effective Time or (y) the date on which the
options expire in accordance with their terms, and (B) with respect to
those directors of the Company who are appointed directors of Parent
pursuant to Section 2.4, until the earlier of (x) 90 days following the
date on which such persons cease to be directors of Parent and (y) the
date on which the options expire in accordance with their terms. The
date of grant of a substituted Parent Option shall be the date on which
the corresponding Company Option was granted. At the Effective Time,
all references in the Company Options to the Company shall be deemed to
refer to Parent. Parent shall assume all of the Company's obligations
with respect to Company Options as so amended and shall, from and after
the Effective Time, make available for issuance upon exercise of the
Parent Options all shares of Parent Stock covered thereby and, at or
prior to the Effective Time, amend its Registration Statement on Form
S-8 or file a new registration statement to cover the additional shares
of Parent Stock subject to Parent Options granted in replacement of
Company Options. Following the Effective Time, Parent will use all
reasonable efforts to maintain the effectiveness of the foregoing
registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as any of the
converted Company Options remain outstanding and unexercised.
<PAGE>
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Options immediately prior to the
Effective Time appropriate notices setting forth (1) such holders'
rights pursuant to the respective Company Options, and (2) stating that
the Company Options have been converted into Parent Options as
contemplated herein and have been assumed by Parent and shall continue
in effect on the same terms and conditions (subject to the adjustments
required by this Section to give effect to the Merger).
(c) The holders of Company Options immediately prior to the
Effective Time, and their respective legal representatives and heirs,
shall be deemed third-party beneficiaries of this Section 7.9.
SECTION 7.10 NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
Parent and Subsidiary agrees to give prompt notice to each other of, and to use
their respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.10 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.11 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) From and after the Effective Time, the Surviving Corporation
shall indemnify and hold harmless all past and present officers and
directors of the Company (the "COVERED PARTIES") to the same extent and
in the same manner and subject to the same limits as such persons are
indemnified as of the date of this Agreement by the Company pursuant to
the DGCL, the Company's Certificate of Incorporation or the Company's
By-Laws for acts or omissions occurring at or prior to the Effective
Time.
(b) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain, and Parent shall cause the Certificate of
Incorporation and By-laws of the Surviving Corporation to contain,
provisions no less favorable with respect to indemnification,
advancement of expenses and exculpation of present and former
directors, officers, employees and agents of the Company and its
subsidiaries than are presently set forth in the Restated Certificate
of Incorporation, as amended, and Amended and Restated Bylaws of the
Company.
(c) The Surviving Corporation shall use its reasonable best
efforts to provide, and Parent shall cause the Surviving Corporation to
use its reasonable best efforts to provide, for a period of not less
than 6 years from the Effective Time, one or more policies of
directors' and officers' liability insurance that provide(s) coverage
for events occurring prior to the Effective Time (the "D&O INSURANCE")
that is/are substantially similar to the Company's existing policy or,
if substantially equivalent insurance coverage is unavailable, the most
similar available coverage; provided, however, that in no event shall
the Surviving Corporation be required to pay an annual premium for the
D&O Insurance in excess of 150% of the last annual premium paid prior
to the date hereof (the "MAXIMUM PREMIUM"). If the Company's existing
insurance expires, is terminated or canceled during such six-year
period or exceeds the Maximum Premium, the Surviving Corporation shall
obtain, and Parent shall cause the Surviving Corporation to obtain, as
much directors' and officers' liability insurance as can be obtained
for the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on terms and conditions no
<PAGE>
less advantageous to the Covered Parties than the Company's existing
directors' and officers' liability insurance.
(d) In addition to the indemnification and advancement of expenses
provisions set forth herein, in the event that (i) the indemnification
or advancement of expenses to be provided by the Surviving Corporation
in accordance with Section 7.11(a) or 7.11(b) above, together with the
D&O Insurance to be maintained by the Surviving Corporation in
accordance with Section 7.11(c) above, after each is fully exhausted,
is not adequate to fully indemnify or provide advancement of expenses
to any Covered Party to the same extent and in the same manner that
such indemnification or advancement of expenses would have been
required to be provided by the Company prior to the Effective Time, and
(ii) there has been a diminution of the net book value of the Surviving
Corporation from the net book value of the Company as reflected on the
balance sheet included in the Last Company SEC Report, then Parent
shall indemnify such Covered Party to the extent of such diminution.
(e) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at
or after the Effective Time) is made against any Covered Party, on or
prior to the sixth anniversary of the Effective Time, the provisions of
this Section 7.11 shall continue in effect until the final disposition
of such claim, action, suit, proceeding or investigation.
(f) The covenants contained in this Section are intended to be for
the benefit of, and shall be enforceable by, each of the Covered
Parties and their respective heirs and legal representatives and shall
not be deemed exclusive of any other rights to which a Covered Party is
entitled, whether pursuant to law, contract or otherwise.
(g) In the event that Parent, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers
or conveys all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so
that the successors or assigns of Parent, the Surviving Corporation or
any of their respective successors or assigns, as the case may be,
shall succeed to the obligations set forth in this Section 7.11.
SECTION 7.12 CERTAIN BENEFITS. At the Effective Time, Parent will
assume, and, subject to Parent's right to thereafter amend, modify or terminate
the Policy in accordance with its terms, Parent will thereafter pay, perform and
discharge when due, all of the Company's obligations under the Company's
Executive Officer Severance Plan, as amended (the "POLICY"), with respect to the
individuals who participate in the Policy (the "PARTICIPANTS"). A copy of the
Policy and a list of the Participants is attached to the Company Disclosure
Schedule. With respect to those Participants who become employed by Parent or
any of its subsidiaries in connection with the Merger, all references in the
Policy to the "Company" shall be deemed to be references to Parent and its
subsidiaries, each such Participant shall be an "Executive" for all purposes
under the Policy and such Participants' service to the Company and its
subsidiaries prior to the Merger shall be included in determining their total
years of services for purposes of the Policy. The Participants, and their
respective legal representatives and heirs, shall be third-party beneficiaries
of this Section 7.12. Prior to the Effective Time, the Company shall use its
reasonable best efforts to amend the options to acquire Company Common Stock
which are held by Participants so that the provisions of Section 2.6 of the
Policy are reflected in such options.
<PAGE>
SECTION 7.13 SEC REPORTS. The parties agree that whenever a
representation or warranty contained in this Agreement is made subject to any
fact or circumstance referenced, disclosed, set forth or described in either the
Parent SEC Reports or the Company SEC Reports (collectively, the "SEC REPORTS"),
such representation or warranty shall be subject only to those matters that it
is reasonably apparent from a reading of such SEC Reports would apply thereto.
ARTICLE VIII
CONDITIONS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) the Parent Stock Issuance and Parent Charter Amendment shall
have been approved by the requisite vote of the stockholders of the
Parent and this Agreement shall have been adopted by the requisite vote
of the stockholders of the Company, in each case under applicable law
and applicable listing requirements of the Nasdaq National Market
("Nasdaq");
(b) the shares of Parent Stock issuable in connection with the
Merger and those to be reserved for issuance upon exercise of stock
options or warrants or the conversion of convertible securities shall
have been authorized for listing on Nasdaq upon official notice of
issuance;
(c) the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in
effect and no proceeding for that purpose shall have been instituted,
or to the knowledge of Parent and the Company no such proceeding shall
have been threatened, by the SEC or any state regulatory authorities;
(e) no governmental authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger
or any transaction contemplated by this Agreement (it being understood
that the parties hereto hereby agree to use their reasonable efforts to
cause any such decree, judgment, injunction or other order to be
vacated or lifted as promptly as possible);
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the
consummation of the Merger or make the consummation of the Merger
illegal; and
(g) all governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and be in
effect at the Effective Time, except where the failure to obtain the
same would not be reasonably likely to have a Company Material Adverse
Effect, following the Effective Time.
<PAGE>
SECTION 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall
be true and correct in all material respects on and as of the date made
and (except to the extent that such representations and warranties
expressly speak as of an earlier date, which shall be true and correct
in all material respects as of the specified date) on and as of the
Closing Date as if made at and as of such date;
(b) since the date hereof, there shall have been no changes that
constitute, and no event or events (including, without limitation,
litigation developments) shall have occurred which have resulted in or
constitute, a Parent Material Adverse Effect; and
(c) the Company shall have received certificates, dated the
Closing Date, of:
(i) the President or any Vice President of each of Parent and
Subsidiary certifying as to the matters specified in Sections
8.2(a) and (b) hereof; and
(ii) the Secretary of each of Parent and Subsidiary
certifying as to: (A) the content and continuing effectiveness as
of the Closing Date of the resolutions of the Board of Directors
of Parent approving this Agreement and the transactions
contemplated hereby; (B) the fact that the Parent Stock Issuance
and Parent Charter Amendment have been duly approved by the
requisite vote of the stockholders of Parent in accordance with
the certificate of incorporation and by-laws of Parent, the rules
of Nasdaq and the DGCL and that such approval is in full force and
effect; and (C) the fact that this Agreement has been duly adopted
by the requisite vote of Parent as the sole stockholder of
Subsidiary in accordance with the certificate of incorporation and
by-laws of Subsidiary and the DGCL and that such adoption is in
full force and effect.
SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO
EFFECT THE MERGER. Unless waived by Parent and Subsidiary, the obligations of
Parent and Subsidiary to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects on and as of the date made and (except to the extent
that such representations and warranties expressly speak as of an
earlier date, which shall be true and correct in all material respects
as of the specified date) on and as of the Closing Date as if made at
and as of such date;
(b) the Affiliate Agreements to the extent required to be
delivered to Parent pursuant to Section 7.4, shall have been furnished
as required by Section 7.4;
(c) those certain options to acquire Company Common Stock shall
have been amended, to the extent required by Section 7.12;
<PAGE>
(d) since the date hereof, there shall have been no changes that
constitute, and no event or events (including, without limitation,
litigation developments) shall have occurred which have resulted in or
constitute, a Company Material Adverse Effect.
(e) Parent shall have received certificates, dated the Closing
Date, of:
(i) the President or any Vice President of the Company
certifying as to the matters specified in Sections 8.3(a) and (c)
hereof; and
(ii) the Secretary of the Company certifying as to: (A) the
content and continuing effectiveness as of the Closing Date of the
resolutions of the Board of Directors of the Company (1) approving
and declaring the advisability of this Agreement, (2) rendering
Section 203 of the DGCL inapplicable to this Agreement and the
transactions contemplated hereby, and (3) amending the Rights
Agreement as described in Section 5.22 hereof; and (B) the fact
that this Agreement has been duly adopted by the requisite vote of
the stockholders of the Company in accordance with the Company's
Restated Certificate of Incorporation and Amended and Restated
Bylaws and the DGCL and that such adoption is in full force and
effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after adoption by the stockholders
of the Company or Parent, by the mutual written consent of the Company and
Parent or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the Merger is not completed by June 30, 2000 (unless
due to a delay or default on the part of the Company), provided,
however, that such date shall be extended to September 30, 2000
if, as of June 30, 2000, the parties are engaged in ongoing
discussions with the FTC or Antitrust Division regarding the
transactions contemplated hereby;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the
Company and if the Company shall have used reasonable efforts to
prevent the entry of such order;
(iii) if (A) the Company receives an offer or proposal from
any Potential Acquirer (excluding any director or officer of the
Company or any group of which any director or officer of the
Company is a member) with respect to a merger, sale of substantial
assets or other business combination involving the Company, (B)
the Company's Board of Directors determines, in good faith and
after consultation with an independent financial advisor, that
such offer or proposal (if consummated pursuant to its terms)
would result in an Acquisition Transaction more favorable to the
Company's stockholders than the Merger (any such offer or proposal
being referred to as a "SUPERIOR PROPOSAL") and resolves to accept
such Superior Proposal and (C) the Company shall have given Parent
two days' prior written notice of its intention to terminate
pursuant to this provision; provided, however, that such
termination shall not be effective until such time as the payment
required by Section 7.6(b) shall have been received by Parent;
<PAGE>
(iv) if (1) the stockholders of Parent fail to approve the
Parent Stock Issuance and Parent Charter Amendment at a duly held
meeting of stockholders called for such purpose or any adjournment
thereof or (2) the stockholders of the Company fail to adopt this
Agreement at a duly held meeting of stockholders called for such
purpose or any adjournment thereof;
(v) if the representations and warranties of the Parent shall
fail to be true and correct in all material respects on and as of
the date made or, except in the case of any such representations
and warranties made as of a specified date, on and as of any
subsequent date as if made at and as of such subsequent date and
such failure shall not have been cured in all material respects
within 30 days after written notice of such failure is given to
the Parent by the Company;
(vi) if Parent (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not
cure such default in all material respects within 30 days after
notice of such default is given to Parent by the Company; or
(vii) if the Board of Directors of Parent shall have resolved
to accept a Parent Superior Proposal.
(b) Parent shall have the right to terminate this Agreement:
(i) if the representations and warranties of the Company
shall fail to be true and correct in all material respects on and
as of the date made or, except in the case of any such
representations and warranties made as of a specified date, on and
as of any subsequent date as if made at and as of such subsequent
date and such failure shall not have been cured in all material
respects within 30 days after written notice of such failure is
given to the Company by Parent;
(ii) if the Merger is not completed by June 30, 2000 (unless
due to a delay or default on the part of Parent or Subsidiary),
provided, however, that such date shall be extended to September
30, 2000 if, as of June 30, 2000, the parties are engaged in
ongoing discussions with the FTC or Antitrust Division regarding
the transactions contemplated hereby;
(iii) if the Merger is enjoined by a final, unappealable
court order not entered at the request or with the support of
Parent or Subsidiary and if Parent shall have used reasonable
efforts to prevent the entry of such order;
(iv) if the Board of Directors of the Company shall have
resolved to accept a Superior Proposal or shall have recommended
to the stockholders of the Company that they tender their shares
in a tender or an exchange offer commenced by a third party
(excluding any affiliate of Parent or any group of which any
affiliate of Parent is a member);
(v) if the Company (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B)
does not cure such default in all material respects within 30 days
after notice of such default is given to the Company by Parent;
(vi) if the stockholders of the Company fail to adopt this
Agreement at a duly held meeting of stockholders called for such
purpose or any adjournment thereof; or
<PAGE>
(vii) if (A) Parent receives a Parent Acquisition Proposal,
which proposal expressly states in writing that it is subject to
Parent terminating this Agreement or to otherwise not consummating
the transactions contemplated hereby, (B) as a result thereof,
Parent's Board of Directors does not recommend to Parent's
stockholders approval of the Parent Stock Issuance and Parent
Charter Amendment in reliance on the third sentence of Section
7.3(b) hereof, and (C) Parent's Board of Directors determines, in
good faith and after consultation with an independent financial
advisor, that such offer or proposal (if consummated pursuant to
its terms) would result in a transaction more favorable to
Parent's stockholders than the Merger (any such offer or proposal
being referred to as a "PARENT SUPERIOR PROPOSAL") and resolves to
accept such Parent Superior Proposal.
SECTION 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
9.1, this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Company, Parent, Subsidiary or their respective
officers or directors (except as set forth in this Section 9.2, in the second
sentence of Section 7.1(a) and in Sections 7.1(b) and 7.6, all of which shall
survive the termination). Nothing in this Section 9.2 shall relieve any party
from liability for any willful or intentional breach of this Agreement.
SECTION 9.3 AMENDMENT. This Agreement may not be amended except by
action taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. Such amendment
may take place at any time prior to the Closing Date, whether before or after
approval by the stockholders of the Company, Parent or Subsidiary; provided,
however, that after any such approval, there shall not be made any amendment
that by law requires the further approval of such stockholders without such
further approval.
SECTION 9.4 WAIVER. At any time prior to the Effective Time, subject to
applicable law, the parties hereto may (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NON-SURVIVAL AND SCOPE OF REPRESENTATIONS AND WARRANTIES
AND AGREEMENTS. No representations, warranties or agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Merger, and after effectiveness of the Merger neither the Company, Parent,
Subsidiary or their respective officers or directors shall have any further
obligation with respect thereto except for the agreements contained in Articles
II, III and X, Section 7.9, Section 7.11 and Section 7.12. Except as set forth
in Articles IV and V hereof, the parties make no representations or warranties
whatsoever, and each party disclaims all liability and responsibility for any
other representation, warranty, statement or information made or communicated
(orally or in writing) to another party (including, but not limited to, any
opinion, information or advice which may have been provided to Parent by any
officer, stockholder, director, employee, agent or consultant of the Company,
its financial advisors or any other agent or representative of the Company).
<PAGE>
SECTION 10.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Subsidiary to:
Westell Technologies, Inc.
750 N. Commons Drive
Aurora, Illinois 60504
Attention: Chief Executive Officer
Facsimile: 630-375-4128
with a copy to:
McDermott, Will & Emery
227 West Monroe
Chicago, Illinois 60606
Attention: Helen R. Friedli, Esq.
Facsimile: 312-984-3669
(b) If to the Company, to:
Teltrend Inc.
620 Stetson Avenue
St. Charles, Illinois 60174
Attention: Chief Executive Officer
Facsimile: 630-377-0128
with a copy to:
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Jodi A. Simala, Esq.
Facsimile: 312-840-7692
SECTION 10.3 INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, (ii) reference to any Article or Section
means such Article or Section hereof and (iii) "including" shall be deemed to
mean including without limitation. No provision of this Agreement shall be
interpreted or construed against any party hereto solely because such party or
its legal representative drafted such provision.
SECTION 10.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
(provided, that the provisions of those certain agreements dated September 3,
1999 by and between
<PAGE>
the Company and Parent concerning confidentiality and related matters (the
"CONFIDENTIALITY AGREEMENTS"), shall remain in effect), (b) is not intended to
confer upon any other person any rights or remedies hereunder, except under
Section 7.9, Section 7.11, Section 7.12 and Article III and (c) shall not be
assigned by operation of law or otherwise. THIS AGREEMENT SHALL BE GOVERNED IN
ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE.
SECTION 10.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.6 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and except as set forth in
Article III, Section 7.9, Section 7.11 and Section 7.12, nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.7 SEVERABILITY. Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
WESTELL TECHNOLOGIES, INC.
By: /s/ Robert H. Gaynor
Name: Robert H. Gaynor
Title: Chairman and Chief Executive
Officer
THETA ACQUISITION CORP.
By: /s/ Robert H. Gaynor
Name: Robert H. Gaynor
Title: Chairman and Chief Executive
Officer
TELTREND INC.
By: /s/ Douglas P. Hoffmeyer
Name: Douglas P. Hoffmeyer
Title: Sr. Vice President, Finance
<PAGE>
APPENDIX B
Goldman, Sachs & Co.
85 Broad Street
New York, New York 1004
Tel: 212-902-1000
PERSONAL AND CONFIDENTIAL
- -------------------------
December 13, 1999
Board of Directors
Westell Technologies, Inc.
750 N. Commons Drive
Aurora, IL 60504
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to Westell Technologies, Inc. (the "Company") of the exchange ratio (the
"Exchange Ratio") of 3.30 shares of Class A Common Stock, par value $0.01 per
share (the "Company Shares"), of the Company to be exchanged by the Company for
each share of Common Stock, par value $0.01 per share (the "Teltrend Shares"),
of Teltrend Inc. ("Teltrend") pursuant to the Agreement and Plan of Merger,
dated as of December 13, 1999, by and among the Company, Theta Acquisition
Corp., a wholly owned subsidiary of the Company, and Teltrend (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. Goldman,
Sachs & Co. provides a full range of financial advisory and securities services
and, in the course of its normal trading activities, may from time to time
effect transactions and hold securities, including derivative securities, of the
Company or Teltrend for its own account and for the accounts of customers.
We understand that SoundView Technology Group, Inc. ("SoundView") is acting as
financial advisor to Teltrend in connection with the transaction contemplated by
the Agreement. SoundView and Wit Capital Group, Inc. ("Wit") have entered into
an agreement pursuant to which Wit will acquire SoundView. Goldman, Sachs & Co.
currently owns approximately 16.5% of the outstanding shares of common stock of
Wit and warrants to acquire additional shares of common stock of Wit which, if
exercised, would result in Goldman, Sachs & Co. owning approximately 24.7% of
the outstanding shares of common stock of Wit.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
Teltrend and of the Company for the five fiscal years ended July 31, 1999 and
the four fiscal years ended March 31, 1999, respectively; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of Teltrend and the
Company; certain other communications from Teltrend and the Company to their
respective stockholders; and certain internal financial analyses and forecasts
for Teltrend and the Company prepared by the managements of Teltrend and the
Company, including certain cost savings and operating synergies projected by the
management of the Company to result from the transaction contemplated by the
<PAGE>
Agreement (the "Synergies"). We also have held discussions with members of the
senior management of Teltrend and the Company regarding their assessment of the
strategic rationale for, and the potential benefits of, the transaction
contemplated by the Agreement and the past and current business operations,
financial condition and future prospects of their respective companies. In
addition, we have reviewed the reported price and trading activity for the
Teltrend Shares and the Company Shares, compared certain financial and stock
market information for Teltrend and the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the
telecommunications equipment, data communications and networking industries
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed, with your consent, that the internal financial
forecasts prepared by the managements of Teltrend and the Company, including the
Synergies, have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Teltrend and the Company, and
that the Synergies will be realized in the amounts and time periods contemplated
thereby. In addition, we have not made an independent evaluation or appraisal of
the assets and liabilities of Teltrend or the Company or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed that all material governmental, regulatory or
other consents and approvals necessary for the consummation of the transaction
contemplated by the Agreement will be obtained without any adverse effect on
Teltrend or the Company or on the benefits of the transaction contemplated by
the Agreement. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement, and such opinion does not constitute a recommendation as to how
any holder of Company Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
Company.
Very truly yours,
/s/ Goldman, Sachs & Co.
(GOLDMAN, SACHS & CO.)
<PAGE>
APPENDIX C
SoundView Technology Group, Inc.
22 Gatehouse Road
Stamford, Connecticut 06902-7908
December 13, 1999
Board of Directors
Teltrend Inc.
620 Stetson Avenue
St. Charles, IL 60174
Ladies and Gentlemen:
We understand that Westell Technologies, Inc. ("Westell"), Theta
Acquisition Corp., a wholly owned subsidiary of Westell ("Merger Sub"), and
Teltrend Inc. ("Teltrend" or the "Company") are considering entering into an
agreement and plan of merger substantially in the form of the draft dated
December 13, 1999 (the "Draft Merger Agreement") pursuant to which, among other
things, Merger Sub shall be merged with and into the Company in a transaction
(the "Merger") in which each share of common stock, par value $.01 per share, of
the Company, subject to the conditions and limitations set forth in the Draft
Merger Agreement, shall be converted into the right to receive, without
interest, 3.3 shares (the "Exchange Ratio") of the Class A Common Stock, par
value $0.01 per share, of Westell. The terms and conditions of the Merger are
set forth in more detail in the Draft Merger Agreement, a copy of which has been
furnished to us.
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the stockholders of the Company, of
the Exchange Ratio.
In conducting our analysis and arriving at our opinion as expressed
herein, we have, among other things:
(i) reviewed the Draft Merger Agreement and the specific terms
of the Merger set forth therein;
(ii) reviewed the draft Voting Agreement dated December 13, 1999;
(iii)reviewed Teltrend's financial and operating information for
the two-year period ended July 31, 1999 and the three-month
period ended October 30, 1999;
(iv) reviewed Westell's financial and operating information for
the two-year period ended March 31, 1999 and the six-month
period ended September 30, 1999;
(v) reviewed certain information regarding the private placement
by Westell of 6% Subordinated Convertible Debentures and
Stock Purchase Warrants to Capital Ventures International,
Castle Creek Technology Partners LLC, and Marshall Capital
Management, Inc.;
(vi) reviewed certain financial and operating information
regarding the business, operations and prospects of Teltrend
and Westell, including forecasts and projections, provided
to us by the managements of the Company and Westell,
respectively;
(vii)reviewed certain publicly available information concerning
certain other companies we deemed to be reasonably similar
to the Company and Westell and the trading markets for
certain of such companies' securities;
<PAGE>
(viii) reviewed the financial terms of certain recent mergers and
acquisitions that we deemed relevant;
(ix) conducted discussions with certain members of senior
management of the Company and Westell concerning their
respective businesses and operations, assets, present
condition and future prospects; and
(x) performed such other analyses, examinations and procedures,
reviewed such other agreements and documents, and considered
such other factors as we have deemed, in our sole judgment,
to be necessary, appropriate or relevant to render the
opinion set forth herein.
In arriving at our opinion, we have not made, obtained or assumed any
responsibility for any independent evaluation or appraisal of the properties and
facilities or of the assets and liabilities (contingent or otherwise) of either
the Company or Westell. We have assumed and relied upon the accuracy and
completeness of the financial and other information supplied to or otherwise
used by us in arriving at our opinion and have not attempted independently to
verify, or undertaken any obligation to verify such information. We have further
relied upon the assurances of the managements of Teltrend and Westell that they
were not aware of any facts that would make such information inaccurate or
misleading. In addition, we have assumed that the forecasts and projections
provided to SoundView Technology Group, Inc. by Westell and the Company
represent the best currently available estimates and judgments of Westell's and
the Company's managements as to the future financial condition and results of
operations of Westell and the Company, respectively, and have assumed that such
forecasts and projections have been reasonably prepared based on such currently
available estimates and judgments. We assume no responsibility for and express
no view as to such forecasts and projections or the assumptions on which they
are based.
We have also taken into account our assessment of general economic,
market and financial conditions and our experience in similar transactions, as
well as our experience in securities valuation in general. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the date
hereof.
We do not express any view as to the price at which the Company's stock
will trade prior to the closing of the Merger, or the price at which Westell's
stock will trade prior to or subsequent to the closing of the Merger. This
letter is for the benefit and use of the Board of Directors of the Company in
its consideration of the Merger. This letter does not constitute a
recommendation of the Merger over any other alternative transactions which may
be available to the Company and does not address the underlying business
decision of the Board of Directors of the Company to proceed with or effect the
Merger.
We have, in the past, provided financial advisory and investment
banking services for the Company and have received fees for the rendering of
such services. In the ordinary course of our business, we may trade in the
equity securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities. The Company has agreed to indemnify us for certain liabilities
that may arise out of the rendering of this opinion.
Based upon and subject to the foregoing, it is our opinion as
investment bankers that, as of the date hereof, the Exchange Ratio pursuant to
the Draft Merger Agreement is fair, from a financial point of view, to the
Company's stockholders.
Very truly yours,
/s/ SoundView Technology Group, Inc.
SoundView Technology Group, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. 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, officer, employee or agent 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 disinterested members of the
board of directors even though less than a quorum, or (2) by a committee of
disinterested directors designated by a majority vote of such directors, even
though less than a quorum, or (3) by independent legal counsel in a written
opinion, if there are no disinterested directors or if the disinterested
directors so direct, or (4) by the stockholders. The General Corporation Law of
the State of Delaware also provides for mandatory indemnification of any present
or former director or officer 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, officer's, employee's and agent's
litigation expenses 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.
Westell's Amended and Restated Certificate of Incorporation and
Westell's Amended and Restated By-laws provide for indemnification of Westell's
directors, officers, employees and other agents to the fullest extent not
prohibited by the Delaware law.
Westell maintains liability insurance for the benefit of its directors
and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of December 13, 1999,
by and among Westell Technologies, Inc., Theta Acquisition
Corp. and Teltrend Inc. (included as Appendix A to the joint
proxy statement/prospectus and incorporated herein by
reference to Exhibit 99.2 to Westell Technologies, Inc.'s
Current Report on Form 8-K filed December 17, 1999)
4.1 Amended and Restated Certificate of Incorporation, as amended
(incorporated herein by reference to Exhibit 3.1 to Westell
Technologies, Inc.'s Registration Statement on Form S-3, as
amended, Registration No. 333-79407)
4.2 Amended and Restated By-laws
<PAGE>
5.1 Opinion of McDermott, Will & Emery*
23.1 Consent of Arthur Andersen LLP, on behalf of Westell
Technologies, Inc.
23.2 Consent of Ernst & Young LLP, on behalf of Teltrend Inc.
23.3 Consent of McDermott, Will & Emery (included in Exhibit 5.1)
23.4 Consent of Goldman, Sachs & Co.*
23.5 Consent of SoundView Technology Group, Inc.
24.1 Powers of Attorney (included in the signature page of this
Registration Statement)
99.1 Voting Agreement, dated December 13, 1999, by and among
Robert C. Penny III and Melvin J. Simon, individually, as
trustees pursuant to a Voting Trust Agreement dated February
23, 1994, as amended, and as trustees for any Holder (as
defined in the Voting Trust), and Teltrend Inc. (incorporated
herein by reference to Exhibit 99.3 to Westell Technologies,
Inc.'s Current Report on Form 8-K filed December 17, 1999)
99.2 Consent of Howard L. Kirby, Jr. to become a director of
Westell Technologies, Inc.
99.3 Consent of Bernard F. Sergesketter to become a director of
Westell Technologies, Inc.
99.4 Form of Proxy Card to be mailed to stockholders of Westell
Technologies, Inc.
99.5 Form of Proxy Card to be mailed to stockholders of Teltrend
Inc.
*To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES. None
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 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.
(c) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
<PAGE>
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Aurora, Illinois on
January 26, 2000.
WESTELL TECHNOLOGIES, INC.
By: /s/ Marc Zionts
--------------------------------------
Marc Zionts,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert H. Gaynor, Marc Zionts and Melvin
J. Simon and each of them, his true and lawful attorney-in-fact and agent, with
full power to act without the other and with full power of substitution and
resubstitution, for him and on his behalf and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Westell Technologies, Inc.) to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to sign any
registration statement for the same offering to which this Registration
Statement relates, that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act, and any amendments thereto, and to file all of the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on January 26, 2000.
/s/ Robert H. Gaynor Chairman of the Board of Directors
Robert H. Gaynor
/s/ Marc Zionts Chief Executive Officer (Principal Executive
Marc Zionts Officer) and Director
/s/ Nicholas C. Hindman Interim Chief Financial Officer (Principal
Nicholas C. Hindman Financial and Accounting Officer)
/s/ Paul A. Dwyer Director
Paul A. Dwyer
/s/ Robert C. Penny III Director
Robert C. Penny III
/s/ John W. Seazholtz Director
John W. Seazholtz
/s/ Melvin J. Simon Director
Melvin J. Simon
/s/ J. William Nelson Director
J. William Nelson
/s/ Thomas A. Reynolds, III Director
Thomas A. Reynolds, III
AMENDED AND RESTATED
BY-LAWS
OF
WESTELL TECHNOLOGIES, INC.
<PAGE>
AMENDED AND RESTATED
BY-LAWS OF
WESTELL TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have
offices at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders
for the election of directors shall be held at such place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Time of Annual Meeting. Annual meetings of
stockholders shall be held on the second Wednesday in August if not a legal
holiday, and if a legal holiday, then on the next business day following, at
10:00 a.m., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
the stockholders shall elect directors to succeed those whose terms then expire
and transact such other business as may properly be brought before the meeting.
No stockholder shall have cumulative voting rights.
Section 3. Notice of Annual Meetings. Written or printed
notice of the annual meeting stating the place, date and hour of the meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten or more than sixty days before the date of the meeting.
Section 4. Voting Lists. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called by the chairman of
the board or the president and shall be called by the president or secretary at
the request in writing of a majority of the board of directors then in office,
or at the request in writing of stockholders owning shares having at least a
majority of the voting power represented by all of the issued and outstanding
capital stock of the corporation. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Notice of Special Meetings. Written or printed
notice of a special meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called, shall be given not less
than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. Business to be Transacted. Business transacted at
any meeting of stockholders shall be limited to the purposes stated in the
notice. Any stockholder desiring to nominate an individual to serve as a
director of the corporation or desiring to take up any matter at a meeting shall
make such nomination or state such business in writing and file such notice with
the secretary at least sixty days prior to the meeting date. This provision
shall be in addition to any requirement under Rule 14a-8 of Regulation 14A under
the Securities Exchange Act of 1934.
Section 8. Quorum and Adjournments. The holders of a majority
of the voting power represented by the issued and outstanding Class A Common
Stock and the Class B Common Stock, taken together as a single class, and
entitled to vote thereat, present in person and represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation; provided, however, that with respect to any matter on which any
class of stock is entitled to vote separately as a class, the holders of a
majority of the voting power represented by the issued and outstanding shares of
such class, present in person and represented by proxy, shall constitute a
quorum for purposes of such matter. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 9. Vote Required. When a quorum is present at any
meeting, the vote of the holders of a majority of the voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of a
statute or of the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 10. Voting Rights. Except to the extent required by
statute or the certificate of incorporation, holders of Class A Common Stock and
Class B Common Stock shall vote together as a single class, each holder of Class
A Common Stock shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of Class A Common Stock held by such
stockholder, and each holder of Class B Common Stock shall at every meeting of
the stockholders be entitled to four votes in person or by proxy for each share
of Class B Common Stock held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. Number and Term of Office. The number of directors
which shall constitute the whole board shall be not less than six nor more than
ten and shall be established from time to time by resolution of the board. No
reduction in number of directors shall affect the term of any directors then in
office. Except as provided in Section 2 of this Article, each director elected
shall hold office until his successor is elected and qualified. Directors need
not be stockholders.
Section 2. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3. General Powers. The business of the corporation
shall be managed by its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or these by-laws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. Place of Meetings. The board of directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 5. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this by-law, immediately
after, and at the same place as, the annual meeting of stockholders. The board
of directors may provide, by resolution, the time and place, either within or
without the State of Delaware, for the holding of additional regular meetings
without other notice than such resolution.
Section 6. Special Meetings. Special meetings of the board may
be called by the chairman of the board or the president on one day's notice to
each director, either personally or by mail or by telegram; special meetings
shall be called by the president or secretary in like manner and on like notice
on the written request of any two or more directors.
Section 7. Quorum. At all meetings of the board of directors,
a minimum of 5 directors shall constitute a quorum for the transaction of
business and the act of 80% of the directors present at any meeting duly held at
which a quorum is present shall be the act of the board of directors. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 8. Resignations. Any director of the corporation may
resign at any time by giving written notice to the board of directors, the
chairman of the board, the president, or the secretary of the corporation. Such
resignation shall take effect at the time specified therein; and, unless
tendered to become effective only upon acceptance thereof, the acceptance of
such resignation shall not be necessary to make it effective.
Section 9. Removal. At any meeting of the stockholders any
director or directors may be removed from office, without assignment of any
reason therefor, by a majority of the voting power entitled to vote in elections
of directors.
Section 10. Informal Action. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 11. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors at which
action on any corporate matter is taken shall be conclusively presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
<PAGE>
COMMITTEES OF DIRECTORS
Section 12. Appointment and Powers. The board of directors
may, by resolution passed by a majority of the whole board, designate one or
more committees, each committee to consist of one or more of the directors of
the corporation, including an Executive Committee, a Compensation Committee and
an Audit Committee. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of a committee, to act at the meeting in the place of any such
absent or disqualified member. Three (3) members of a committee must be present
to constitute a quorum for any committee meeting and the unanimous vote of all
committee members present shall be required to approve any matter presented to a
committee. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have power or authority
in reference to amending the certificate of incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution so provided, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.
COMPENSATION OF DIRECTORS
Section 13. Compensation. The board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as a director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Manner of Notice. Whenever, under the provisions of
a statute or of the certificate of incorporation or of these by-laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
Section 2. Waiver. Whenever any notice is required to be given
under the provisions of a statute or of the certificate of incorporation or of
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Number and Qualifications. The officers of the
corporation shall be chosen by the board of directors and shall be a CEO, a
chairman of the board, a vice-president, a secretary and a treasurer. The board
of directors may also choose a vice-chairman of the board, a president,
additional vice-presidents, and one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide.
Section 2. Election. The board of directors, at its first
meeting after each annual meeting of stockholders shall choose a chairman of the
board, one or more vice-presidents, a secretary, and a treasurer.
Section 3. Other Officers and Agents. The board of directors
may appoint such other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 4. Salaries. The salaries of all officers and agents
of the corporation shall be fixed by the board of directors or a duly authorized
committee of the board.
Section 5. Term of Office. The officers of the corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the directors then in office. Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors.
Section 6. CEO. The CEO shall be the chief executive officer
of the corporation. The CEO shall have executive authority to see that all
orders and resolutions of the board of directors are carried into effect and,
subject to the control vested in the board of directors by statute, by the
certificate of incorporation or by these by-laws, shall administer and be
responsible for the overall management of the business and affairs of the
corporation. The CEO shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation
Section 7. The Chairman. The chairman of the board shall
preside at all meetings of the shareholders and of the board of directors, and
in general shall perform all duties incident to the office of the chairman of
the board and such other duties as from time to time may be assigned to the
chairman of the board by the board of directors.
Section 8. The Vice-Chairman of the Board. The vice-chairman
of the board, if one is elected, shall perform such duties and have such powers
as the board of directors may from time to time prescribe.
Section 9. The President. The president, if one is elected,
shall have such duties and have such powers as the board of directors may from
time to time prescribe. In the absence of the CEO, or in the event of the
absence or inability or refusal to act of the CEO, then the president shall
perform the duties of the CEO, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the CEO.
Section 10. The Vice-Presidents. In the absence of the CEO and
the President, or in the event of the absence or inability or refusal to act of
the CEO and the President, then the vice-president (or in the event that there
be more than one vice-president, then any executive vice-president and then the
other vice-president or vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the CEO, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the CEO. The vice-presidents shall perform
such other duties and have such other powers as the chief executive officer or
the board of directors may from time to time prescribe.
Section 11. The Secretary. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or the chief executive officer, under whose supervision he shall
be. He shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of an assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 12. The Assistant Secretary. The assistant secretary,
or if there be more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the secretary or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the chief executive officer or the board of directors may from time to time
prescribe.
Section 13. The Treasurer. The treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the board
of directors. He shall disburse the funds of the corporation as may be ordered
by the board of directors, taking proper vouchers for such disbursements, and
shall render to the chairman of the board, the president and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in the sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in the case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The Assistant Treasurer. The assistant treasurer,
or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the chief executive officer or the board of directors may from
time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFERS, AND RECORD DATES
Section 1. Form of Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the board of directors, or the chairman of the board or
the president or a vice-president and the treasurer or an assistant treasurer,
or the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designation, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, provided that, except as otherwise provided in Section 202 of the
Delaware General Corporation Law, in lieu of the foregoing requirements, there
may be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Facsimile Signatures. Where a certificate is
countersigned (1) by a transfer agent other than the corporation or its
employee, or (2) by a registrar other than the corporation or its employee, any
other signature on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 3. Lost Certificates. The board of directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representatives, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sums it may direct to indemnify against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. Transfers of Stock. Upon surrender to the
corporation or the transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. Fixing Record Date. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect or any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the Delaware General Corporation Law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the corporation's capital stock, subject to the provisions of the
certificate of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors, in their absolute discretion, think
proper, and the directors may modify or abolish any such reserve in the manner
in which it was created.
Section 2. Checks. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation,
unless otherwise provided by resolution of the board of directors, shall begin
on the first day of April in each year and end on the last day of March in each
year.
Section 4. Seal. The corporate seal shall be inscribed thereon
with the name of the corporation and the words "Corporate Seal, Delaware." The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
Section 5. Stock in Other Corporations. Shares of any other
corporation which may from time to time be held by this corporation may be
represented and voted at any meeting of shareholders of such corporation by the
chairman of the board, president or vice-president, or by any proxy appointed in
writing by the chairman of the board, president or a vice-president of the
corporation, or by any other person or persons thereunto authorized by the board
of directors. Shares represented by certificates standing in the name of the
corporation may be endorsed for sale or transfer in the name of the corporation
by the chairman of the board, president or any vice-president or by any other
officer or officers thereunto authorized by the board of directors. Shares
belonging to the corporation need not stand in the name of the corporation, but
may be held for the benefit of the corporation in the individual name of the
treasurer or of any other nominee designated for that purpose by the board of
directors.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification. (a) 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, agent or fiduciary
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, 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 person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph (B) of
Article EIGHTH of the corporation's certificate of incorporation with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such person in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the board of directors of the corporation. The right to
indemnification conferred in this Section 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; provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by a person 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
person, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that the director or officer is not entitled to be
indemnified under this Section or otherwise. The corporation may, by action of
its board of directors, grant rights to indemnification, and to the advancement
of expenses, to employees and agents of the corporation to the fullest extent
and with the same scope and effect as the foregoing indemnification of, and
advancement of expenses to, directors and officers.
(b) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Section shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the certificate of
incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
(c) 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 Delaware law.
(d) Any amendment, repeal or modification of any provision of
this Section by the stockholders or the directors of the corporation shall not
adversely affect any right or protection of a director or officer of the
corporation existing at the time of such amendment, repeal or modification.
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors at any
regular meeting of the board of directors or of the stockholders or at any
special meeting of the board of directors or of the stockholders, if notice of
such alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting of the stockholders.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated May 11, 1999
included (or incorporated by reference) in Westell Technologies, Inc. and
Subsidiaries Form 10-K for the year ended March 31, 1999 and to all references
to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 2000
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Westell
Technologies, Inc. for the registration of 19,267,337 shares of its common stock
and to the incorporation by reference therein of our report dated August 24,
1999, with respect to the consolidated financial statements of Teltrend Inc.
included in its Annual Report (Form 10-K) for the year ended July 31, 1999,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
January 27, 2000
EXHIBIT 23.5
CONSENT OF SOUNDVIEW TECHNOLOGY GROUP, INC.
We hereby consent to (i) the use of our opinion letter dated December
13, 1999 to the Board of Directors of Teltrend Inc. (the "Company") included as
Appendix C to the Joint Proxy Statement/Prospectus which forms part of the
Registration Statement on Form S-4 relating to the proposed merger involving the
Company and Theta Acquisition Corp., a subsidiary of Westell Technologies, Inc.,
and (ii) the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
SOUNDVIEW TECHNOLOGY GROUP, INC.
By: /s/ Paul J. Mejean
-------------------------------
Name: Paul J. Mejean
Title: Managing Director
January 26, 2000
EXHIBIT 99.2
CONSENT
The undersigned hereby consents to being named, in the Registration
Statement on Forms S-4, prepared by Westell Technologies, Inc. and Teltrend Inc.
in connection with Westell's Technologies, Inc. proposed acquisition of Teltrend
Inc., as one of the individuals who will be appointed to the Board of Directors
of Westell Technologies, Inc. following the transaction.
/s/ Howard L. Kirby, Jr.
-----------------------------
Howard L. Kirby, Jr.
EXHIBIT 99.3
CONSENT
The undersigned hereby consents to being named, in the Registration
Statement on Forms S-4, prepared by Westell Technologies, Inc. and Teltrend Inc.
in connection with Westell's Technologies, Inc. proposed acquisition of Teltrend
Inc., as one of the individuals who will be appointed to the Board of Directors
of Westell Technologies, Inc. following the transaction.
/s/ Bernard F. Sergesketter
------------------------------
Bernard F. Sergesketter
EXHIBIT 99.4
PROXY
WESTELL TECHNOLOGIES, INC.
This Proxy is solicited by the Board of Directors of Westell
Technologies, Inc. for the Special Meeting of Stockholders, on ______ __, 2000,
10:00 a.m., local time, at the Westell Corporate Headquarters, 750 North Commons
Drive, Aurora, Illinois 60504.
The undersigned hereby appoints Robert H. Gaynor, Marc Zionts and
Melvin J. Simon, and each of them proxies with the powers the undersigned would
possess if personally present, and with full power of substitution, to vote all
Class A Common Stock and/or Class B Common Stock held of record by the
undersigned in Westell Technologies, Inc., upon all subjects that may properly
come before the special meeting, including the matters described in the joint
proxy statement/prospectus furnished herewith, subject to any directions
indicated on the reverse side of this card.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND
ACKNOWLEDGES RECEIPT OF THE NOTICE AND JOINT PROXY STATEMENT/PROSPECTUS FOR THE
SPECIAL MEETING.
(THIS PROXY IS CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
(Comments/Change of Address)
_________________________________________
_________________________________________
_________________________________________
_________________________________________
(If you have written in the above space,
please mark the corresponding box on the
reverse side)
<PAGE>
THE FOLLOWING MATTERS ARE PROPOSED BY THE BOARD OF DIRECTORS
1.Approval of the Issuance For Against Abstain 3. In their discretion the
of Shares of Class A Common [ ] [ ] [ ] proxies are authorized to
Stock in the Merger vote on such other matters
Approval of the issuance as may properly come
of shares of Class A Common before the special
Stock of Westell Technologies, meeting.
Inc. in accordance with the
agreement and plan of merger,
dated as of December 13, 1999,
by and among Westell Technologies,
Inc., Theta Acquisition Corp.
and Teltrend Inc.
_______________ ________________
2. Approval of an Amendment to Westell's For Against Abstain
Amended and Restated Certificate of [ ] [ ] [ ]
Incorporation
Approval of an amendment to Westell's
Amended and Restated Certificate of
Incorporation to increase to 85 million
the total number of shares of Class A
Common Stock that Westell Technologies,
Inc. is authorized to issue.
_______________
This proxy when properly executed
will be voted in the manner
directed herein by the
undersigned stockholder. If no
direction is made, this proxy
will be deemed to constitute
direction to vote "for" each of
the above proposals.
Please mark, sign, date and
return the proxy card using the
enclosed envelope.
Comments/Change |_|
of Address Date ________________, 2000
___________________________
Signature(s)
___________________________
Signature(s)
(NOTE: Please sign exactly
as name appears on this
Proxy. When shares are held
jointly, both should sign.
When signing as attorney,
executor, administrator,
trustee, guardian,
corporate officer or
partner, give full title as
such. If a corporation,
please sign in corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.)
EXHIBIT 99.5
TELTREND INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS ________, 2000
Howard L. Kirby, Jr. and Douglas P. Hoffmeyer, or any one of them, with
power of substitution in each, are hereby appointed the proxies of the
undersigned to vote all shares of the common stock, $.01 par value per share, of
Teltrend Inc. that the undersigned is entitled to vote at the Special Meeting of
Stockholders to be held ________, 2000 at the hour of 10:00 a.m., local time, at
the Teltrend Inc. corporate headquarters, 620 Stetson Avenue, St. Charles,
Illinois 60174, and at all adjournments or postponements thereof, upon such
business as may properly come before the meeting, including the items listed on
the reverse side and as more completely described in the enclosed Notice of
Special Meeting of Stockholders and Proxy Statement.
(THIS PROXY IS CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
(Comments/Change of Address)
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side)
<PAGE>
THE FOLLOWING MATTERS ARE PROPOSED BY THE BOARD OF DIRECTORS
For Against Abstain
1.Adoption of The Merger Agreement [ ] [ ] [ ]
Adoption of the agreement and plan of
merger, dated as of December 13, 1999, by
and among Westell Technologies, Inc.,
Theta Acquisition Corp. and Teltrend Inc.
2. UPON SUCH OTHER For Against Abstain
MATTERS AS MAY BE PROPERLY [ ] [ ] [ ]
COME BEFORE THE MEETING:
In their discretion the
proxies are authorized to
vote on such other matters
as may properly come
before the special meeting. ____________________
This proxy when properly executed will be voted
in the manner directed herein by the undersigned
stockholder. If no direction is made, this proxy
will be deemed to constitute direction to vote
"for" each of the above proposals.
Please mark, sign, date and return the proxy card
using the enclosed envelope.
_________________________
Comments/Change |_|
of Address Date ________________________, 2000
---------------------------------
Signature(s)
---------------------------------
Signature(s)
(NOTE: Please sign exactly as name
appears on this Proxy. When shares
are held by joint tenants, both
should sign. When signing as
attorney, executor, administrator,
trustee, guardian, corporate
officer or partner, give full
title as such. If a corporation,
please sign in corporate name by
president or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.)
