UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

Filed by the Registrant

Check the appropriate box:

 

WESTELL TECHNOLOGIES, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

o        Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

 

 

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WESTELL TECHNOLOGIES, INC.

750 North Commons Drive

Aurora, Illinois 60504

(630) 898-2500

Notice of Annual Meeting of Stockholders

September 27, 2007

 

 

TO THE STOCKHOLDERS:

 

The Annual Meeting of Stockholders of Westell Technologies, Inc. (the “Company”) will be held at the Hilton Lisle, 3003 Corporate West Drive, Lisle, Illinois on Thursday, September 27, 2007 at 10:00 a.m. Central Daylight Time for the following purposes:

 

 

 

 

The Board of Directors has fixed the close of business on July 30, 2007 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting.

 

By Order of the Board of Directors

 

Nicholas C. Hindman, Sr.

 

Secretary

 

August 10, 2007

 

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.

 

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WESTELL TECHNOLOGIES, INC.

750 North Commons Drive

Aurora, Illinois 60504

___________

 

Proxy Statement

Annual Meeting of Stockholders to be held September 27, 2007

___________

 

To the Stockholders of

WESTELL TECHNOLOGIES, INC.:

 

This Proxy Statement is being mailed to stockholders on or about August 24, 2007 and is furnished in connection with the solicitation by the Board of Directors of Westell Technologies, Inc. of proxies for the Annual Meeting of Stockholders to be held at our Corporate Headquarters, 750 North Commons Drive, Aurora, Illinois on Thursday, September 27, 2007 at 10:00 a.m. Central Daylight Time for the purpose of considering and acting upon the matters specified in the Notice of Annual Meeting of Stockholders accompanying this Proxy Statement. If the form of Proxy which accompanies this Proxy Statement is executed and returned, it will be voted. If no directions are specified on a duly submitted Proxy, the shares will be voted, in accordance with the recommendations of the Board of Directors, FOR the election of the directors nominated by the Board, FOR Proposal No. 2 and in accordance with the discretion of the persons appointed as proxies on any other matter properly brought before the meeting. A Proxy may be revoked at any time prior to the voting thereof by written notice to the Secretary of the Company or by attending the meeting and voting in person.

 

A majority of the outstanding voting power of our Class A Common Stock and Class B Common Stock entitled to vote at this meeting and represented in person or by proxy will constitute a quorum. A quorum is needed for any proposal to be adopted.

 

The affirmative vote of the holders of a plurality of the voting power of the Class A Common Stock and Class B Common Stock of the Company voting either as single or class and represented in person or by proxy at the meeting is required for the election of directors. The affirmative vote of holders of a majority of the voting power of the Class A Common Stock and Class B Common Stock of the Company, voting together as a single class, represented in person or by proxy at the meeting is required to ratify the appointment of the independent auditors.

 

Shares represented by proxies which are marked “abstain” or to deny discretionary authority on any matter will be treated as shares present and entitled to vote and will have the same effect as votes against any such matters. Broker “non-votes” and the shares as to which stockholders abstain are included for purposes of determining whether a quorum of shares is present at a meeting. Broker “non-votes” will have no effect on the outcome of the election of directors or the ratification of the appointment of independent auditors. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.

 

With regard to approving any other proposal submitted to a vote at the meeting, the affirmative vote of holders of a majority of the voting power of the Company presented in person or by proxy at the meeting is required. Expenses incurred in the solicitation of proxies will be borne by us. Officers of the Company may make additional solicitations in person or by telephone.

 

The Annual Report to Stockholders on Form 10-K for fiscal year ended March 31, 2007 (“fiscal 2007”) accompanies this Proxy Statement. If you did not receive a copy of the report, you may obtain one by writing to the Secretary of the Company at the address indicated above.

 

Only holders of record of our Class A Common Stock or Class B Common Stock at the close of business on July 30, 2007 are entitled to vote at the meeting. As of July 30, 2007, we had outstanding 56,568,074 shares of Class A Common Stock and 14,741,872 shares of Class B Common Stock, and such shares are the only shares entitled to vote at the Annual Meeting. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to four votes on each matter to be voted upon at the Annual Meeting.

 

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CORPORATE GOVERNANCE

Board Committees

 

The Board of Directors has a standing Audit, Compensation and Nominating Committee. The members of the committees during fiscal 2007 are identified in the following table.

 

 

The Board of Directors held fourteen meetings during fiscal 2007. All directors attended at least 75% of the aggregate number of such meetings and of meetings of Board committees on which they served in fiscal 2007. Following the regular Board meetings, the non-employee independent directors periodically conduct separate meetings. The Board is authorized to directly engage outside consultants and legal counsel to assist and advise.

 

The Audit Committee

 

The Audit Committee met nine times in fiscal 2007. The Audit Committee generally has direct responsibility for appointing, compensating, retaining and overseeing the work of any independent auditors. The Committee also is responsible for reviewing the plan and scope of the annual audit, reviewing our audit and control functions, reviewing and pre-approving audit and permissible non-audit services and reporting to the full Board of Directors regarding all of the foregoing and carrying out the other responsibilities set forth in its charter. The Board of Directors has designated each member of the Audit Committee as an “audit committee financial expert,” as that term is defined in the SEC rules adopted pursuant to the Sarbanes-Oxley Act. The Board of Directors has determined that each current member of the Audit Committee is independent as defined in the Nasdaq listing standards and in the Sarbanes-Oxley Act of 2002. The Audit Committee charter is available on our website at www.westell.com.

 

The Compensation Committee

 

The Compensation Committee met three times in fiscal 2007. The Board of Directors has determined that each current member of the Compensation Committee is independent as defined in the Nasdaq listing standards. The functions of the Compensation Committee consist of determining executive officers’ salaries and bonuses as well as administering and determining awards to be granted under the Company’s 1995 Stock Incentive Plan, the 2004 Stock Incentive Plan and the Employee Stock Purchase Plan.

 

The Nominating Committee

 

The Nominating Committee met once in fiscal 2007. The Nominating Committee is responsible for developing the criteria and qualifications for membership on the Board; reviewing and making recommendations to the Board as to whether existing directors should stand for re-election; considering, screening and recommending candidates to fill new or open positions on the Board; recommending Director nominees for approval by the Board and the stockholders; recommending Director nominees for each of the Board’s committees; reviewing candidates recommended by stockholders; and conducting appropriate inquiries into the backgrounds and qualifications of possible candidates. In general, director qualifications include highest ethical and moral standards, business experience and expertise, industry and technology experience and knowledge applicable to the industry and corporate management experience. The Board of Directors has determined that each of the members of the Nominating Committee is independent as such term is defined in the Nasdaq listing standards. The Nominating Committee charter is available on our website at www.westell.com.

 

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Director Nominations

 

The Nominating Committee considers many factors when considering candidates for the Board of Directors and strives for the Board to be comprised of directors with a variety of experience and backgrounds who have high-level managerial experience in a complex organization and who represent the balanced interest of stockholders as a whole rather than those of special interest groups.

 

Other important factors in Board composition include strength of character, mature judgment, specialized expertise, relevant technical skills, diversity, level of education, broad-based business acumen, experience and understanding of strategy and policy-setting and the extent to which the candidate would fill a present need on the Board of Directors. Depending upon the current needs of the Board of Directors, certain factors may be weighed more or less heavily by the Nominating Committee.

 

In considering candidates for the Board of Directors, the Nominating Committee considers the entirety of each candidate’s credentials and does not have any specific minimum qualifications that must be met by a Nominating Committee recommended nominee. However, the Nominating Committee does believe that all members of the Board of Directors should have the highest character and integrity, a reputation for working constructively with others, sufficient time to devote to Board matters, and no conflict of interest that would interfere with performance as a director. In the case of current Directors being considered for renomination, the Nominating Committee will also take into account the director’s history of attendance at meetings of the Board of Directors or its committees, the Director’s tenure as a member of the Board of Directors, and the Director’s preparation for and participation in such meetings.

 

The Nominating Committee considers candidates for the Board from any reasonable source, including stockholder recommendations. The Nominating Committee does not evaluate candidates differently based on who has made the proposal. The Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. No such consultants or search firms have been used to date and, accordingly, no fees have been paid to consultants or search firms in the past fiscal year. Candidates are recommended to the Board of Directors after consultation with the Chairman of the Board.

 

Stockholders who wish to suggest qualified candidates should write to the Secretary, Westell Technologies, Inc., 750 North Commerce Drive, Aurora, Illinois 60504, specifying the name of the candidates and stating in detail the qualifications of such persons for consideration by the Nominating Committee. A written statement from the candidate consenting to be named as a candidate and, if nominated and elected, to serve as a director should accompany any such recommendation. Stockholders who wish to nominate a director for election at an annual meeting of the stockholders must comply with our bylaws regarding stockholder proposals and nominations. See “Proposals of Stockholders” contained herein.

 

Attendance at Annual Stockholder Meetings

 

We expect all board members to attend the annual meeting of stockholders, but from time to time, other commitments may prevent all directors from attending each meeting. All directors attended the most recent annual meeting of stockholders, which was held on September 21, 2006.

 

Director Independence

 

In general, the Board determines whether a board member is independent by following the corporate governance rules of The Nasdaq Stock Market LLC (“Nasdaq”) and the applicable rules of the Securities and Exchange Commission (“SEC”). Our Board of Directors has determined that, in its business judgment, each of Messrs. Seazholtz, Dwyer, Penny, Plummer, Sergesketter and Simon and Ms. Kamerick are “independent” directors under the Nasdaq and SEC rules.

 

Communications with Directors

 

The Board of Directors has established a process for stockholders to communicate with members of the Board. If a stockholder has any concern, question or complaint regarding any accounting, auditing or internal controls matters, as well as any issues arising under Westell’s Code of Business Conduct or other matters that he or she wishes to communicate to Westell’s Audit Committee or Board of Directors, the stockholder can reach the Westell Board of Directors by mail at Westell Technologies, Inc., Board of Directors, 750 North Commons Drive, Aurora, Illinois 60504. From time to time, the Board of Directors may change the process that stockholders may communicate to the Board of Directors or its members. Please refer to our website at www.westell.com for any changes in this process.

 

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Executive Officers

The following sets forth certain information with respect to our executive officers as of March 31, 2007. Please refer to the information contained below under the heading “Nominees for Election for Terms Expiring at the 2008 Annual Meeting” for biographical information of executive officers who are also directors of the Company.

 

 

 

Timothy J. Reedy – Timothy J. Reedy has served as Chief Executive Officer of Conference Plus, Inc since October 2002. Prior to joining the Company, Mr. Reedy was Vice President, Finance and Marketing with MCI/WorldCom Conferencing. From 1993 to 1995, Mr. Reedy also served as Vice President, Finance and Marketing at Darome Teleconferencing. From 1984 to 1993, Mr. Reedy held several management positions with the former Ameritech Mobile Communications, Inc.

 

Nicholas C. Hindman, Sr. – Nicholas C. Hindman, Sr. served as Chief Financial Officer since March, 2000 and as acting Treasurer, Secretary, Vice President and Chief Financial Officer of the Company from May 1999 to February 2000. Mr. Hindman was appointed to the newly created position of Chief Operating Officer in July 2007.

 

John C. Clark – John C. Clark served as Senior Vice President of Operations since April 2001. Prior to joining the Company, Mr. Clark was Vice President of Manufacturing from September 1998 to October 2000 with 3COM. Mr. Clark was Director of Material Management at US Robotics/3COM from January 1996 to September 1998. From 1994 to 1996, Mr. Clark served as Area Vice President of Operations for Caremark. He also served as Director of Materials Management for Caremark from 1991 to 1996. Mr. Clark was separated from the Company in June 2007.

 

William J. Noll – William J. Noll served as Senior Vice President and Chief Technology Officer of Westell, Inc. since May 1997. Prior to joining the Company, Mr. Noll was Vice President and General Manager of Residential Broadband at Northern Telecom from October 1995 to May 1997. Mr. Noll held other various Vice President and Assistant Vice President positions at Northern Telecom from June 1988 to October 1996, and was Vice President Network Systems at Bell Northern Research from November 1986 to June 1988. Mr. Noll retired from the Company in March 2007.

 

Code of Business Conduct

We have adopted a Code of Business Conduct within the meaning of Item 406(b) of Regulation S-K. This Code of Business Conduct applies to our principal executive officer, principal financial officer and principal accounting officer. The Company filed a copy of this Code of Business Conduct at Exhibit 14.1 to its amended Form 10-K. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting on its website (www.westell.com) any amendments to, or waivers from, its Code of Business Conduct applicable to these senior executives. Copies of the Code of Business Conduct will be provided free of charge upon written request directed to the Secretary of the Company.

 

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SECURITIES BENEFICIALLY OWNED BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT

 

Directors and Executive Officers

The following table sets forth the beneficial ownership (and the percentages of outstanding shares represented by such beneficial ownership) as of June 30, 2007, of (i) each director, (ii) our Chief Executive Officer, our former Chief Executive Officer, our Chief Financial Officer and our three most highly compensated executive officers during fiscal 2007 (the “named executive officers”) and (iii) all directors and executive officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below, based on information provided by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Persons, who have the power to vote or dispose of common stock of the Company, either alone or jointly with others, are deemed to be beneficial owners of such common stock.

__________________

** Served as both a director and Chief Executive Officer during fiscal 2007. Mr. Cullens retired from his position as Chief Executive Officer in January 2007.

 

 

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Certain Stockholders

 

The following table sets forth certain information with respect to each person known by us to be the beneficial owner of more than five percent of either class of its outstanding common stock, other than Messrs. Penny and Simon whose information is set forth above. Such information is based upon a review by us of the most recent reports filed with the Securities and Exchange Commission by such beneficial owners.

 

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PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

At the Annual Meeting, seven directors are to be elected to hold office until the next annual meeting of stockholders or until their successors are elected and qualified. Our Bylaws provide that not less than six nor more than ten directors shall constitute the Board of Directors.

 

The Board of Directors has no reason to believe that any such nominee will be unable to serve. It is intended that the proxies will be voted for the nominees listed below. It is expected that the nominees will serve, but if any nominee declines or is unable to serve for any unforeseen cause, the proxies will be voted to fill any vacancy so arising by the persons named in the proxies, based upon a recommendation by the Board of Directors. The persons named in the proxies may alternatively vote to allow the vacancy created thereby to remain open until filled by the Board of Directors.

 

Nominees for Election for Terms Expiring at the 2008 Annual Meeting

 

The following table sets forth certain information with respect to the nominees, all of whom are current members of the Board of Directors.

 

 

 

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The following table sets forth certain information with respect to persons who are current members of the Board of Directors, but are not standing for re-election.

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE NOMINEES.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our executive officers and places in perspective the data presented in the tables and narrative that follow.

 

Our Compensation Committee, which is comprised exclusively of four independent, non-employee directors, has responsibility for determining the compensation of our Chief Executive Officer (the “CEO”) and other officers. In carrying out these responsibilities, the Committee evaluates the Company’s past performance and each officer’s contribution to our achievements during the year.

 

Compensation Philosophy

 

The compensation program for executive officers, including named executive officers, and other key employees is based on a “pay-for-performance” philosophy ensuring that a significant percentage of total compensation is contingent on achievement of performance goals.

 

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Compensation Objectives

 

 

 

 

 

Decisions regarding cash and equity compensation include subjective determinations and consideration of various factors as they apply to individual circumstances, such as an executive officer’s experience in the industry, the market value and the expected benefit of the executive officer’s position at the Company.

 

Our compensation program includes three major components: base salary and benefits, annual incentive compensation and long-term equity incentives. Each element is intended to reward and motivate executives in different ways consistent with our overall guiding principles for compensation. The portion of total compensation intended to come from each element reflects our belief that total compensation should increase with position and responsibility while, at the same time, making a greater percentage of an executive’s compensation tied to corporate and individual performance. We do not have any form of pension or retirement arrangements other than a company-wide 401(k) plan and the deferred compensation arrangement with Mr. Cullens, our former Chief Executive Officer, described below.

 

The Compensation Committee believes that for fiscal 2007, the overall compensation levels for our executive officers, including our named executive officers, were consistent with our “pay-for-performance” philosophy and the Company’s fiscal 2007 performance.

 

Methodology

 

The Compensation Committee considers various measures of the Company and the performance of other companies in the telecommunications equipment and/or conferencing industries that are similar in the number of employees, revenue and capitalization. The Compensation Committee determines appropriate levels of compensation for each executive officer and makes allocations between cash and non-cash elements of compensation. Our financial and business objectives, the salaries of executive officers in similar positions with comparably sized companies in similar industries, and individual performance are considered. We receive information on executive compensation of other companies by reviewing published materials such as proxy statements or through information provided by consultants. The Compensation Committee considers relevant industry data but does not target any overall industry percentage level or peer group average.

 

The Compensation Committee evaluates and establishes executive compensation on an annual basis and seeks the input of the CEO. The CEO does not participate in deliberations relating to his own compensation. The executive compensation process begins with consideration of the Company’s overall annual budget for employee compensation, which is created as part of the Company’s annual operating plan process under which business and financial objectives are initially developed by executive officers and then discussed with and approved by the CEO. These objectives are then reviewed by the Board of Directors and the Board sets the financial and business objectives for the Company from which incentive compensation is based. The Compensation Committee considers the salary data that is part of the annual budget and sets individual executive officer salaries with the goal of keeping the average executive officer salary within the budgeted range for all other employees. 

 

For fiscal 2007, the Compensation Committee reviewed and approved the total compensation package for all the executive officers, including the elements of compensation discussed below. The committee determined the amounts to be reasonable and competitive.

 

Components of Executive Compensation for Fiscal 2007

 

Base Salaries and Benefits. Base salaries of our executive officers are reviewed annually. When setting base salaries, the Compensation Committee reviews the business and financial objectives for the Company as a whole, and the objectives for each of

 

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the individual officers relative to their respective areas of responsibility. The Committee may also consider the salaries of executive officers in similar positions with comparably sized companies in the telecommunications equipment and/or conferencing industries. This review encompasses the objectives for both the preceding fiscal year and the upcoming fiscal year. After consideration of the factors described above, the average base salaries for our named executive officers were increased approximately 4.5% for fiscal 2007 over fiscal 2006.

 

Annual Incentive Compensation. A significant portion of each executive’s total compensation is variable and is dependent on the Company’s performance. Annual incentive cash bonuses are payable to executive officers and key employees under the Westell Management Incentive Compensation Plan, and semi-annually under our Conference Plus Incentive Compensation Plan (collectively, the “Incentive Compensation Plans”).

 

The Compensation Committee sets performance goals which, if met, result in payments to participants under the Incentive Compensation Plan. The Plans are designed to induce participants to achieve superior financial results and to award them for accomplishing strategic goals. The Plans are comprised of financial criteria and strategic objectives. The performance goals are established at levels that are expected to be achievable, but require a high level of performance. The aggregated bonus pool for the Incentive Compensation Plans budgets a fixed amount for each position, with amounts varying by position and responsibility. Actual payments under the Incentive Compensation Plans are predicated on Westell and/or Conference Plus meeting specific operating goals. Cash bonuses under the Incentive Compensation Plans are subject to a maximum award of 200% of target per individual on an annual basis at Westell and 150% at Conference Plus. All incentive compensation awards to date have been less than the maximum amount.

 

Financial Criteria:

 

The amount of a named executive officer’s cash bonus under the Incentive Compensation Plans is based on the following performance metrics in the relative proportions set forth below:

 

For executives of Westell:

 

For executives of Conference Plus:

 

Actual performance is measured based on the consolidated results of the Company. The results of Noran Tel, which we acquired in January 2007, were not included in determining bonus attainment.

 

Revenue – The pay out is the square of the actual percent attainment of the revenue target (beginning at 80%) up to a maximum pay out of 200%.

 

Margin – The pay out is 100% if the margin target is attained. For every $1,000,000 above or below the target, the pay out percentage will be increased or decreased by 1%. The pay out is capped at 200%

 

Earnings Before Tax – The pay out is the square of the actual percent attainment of the target (beginning at 80%) up to a maximum pay out of 200%.

 

Strategic Objectives:

 

The Compensation Committee also established strategic objectives which, if achieved, would enhance the bonus to which the named executive officer would otherwise be entitled based on the financial performance of the Company. The strategic objectives included key customer wins and achieving specified sales of certain products. Fulfilling the strategic objectives would result in bonus accelerators to be applied to the total bonus percentage as calculated based on financial performance, not to exceed 200%.

 

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The table below outlines the attainment of the annual incentive goals.

 

 

 

 

Long-Term Equity Incentives. Equity compensation, including stock option grants and restricted stock, constitutes a significant portion of our compensation program because we believe that officers and key employees should hold a long-term equity stake in the Company to align their collective interests with the interests of our stockholders. We adopted and stockholders approved a Stock Incentive Plan in 2004 to achieve these goals. We typically make equity compensation grants to executive officers and key employees in connection with their initial employment, and periodic equity grants are issued to incentivize employees on a continuing basis.

 

We also make grants of stock options and restricted stock under the 2004 Stock Incentive Plan in connection with promotions or changes in responsibilities, in recognition of other individual achievements, or in conjunction with patent filings. On March 31, 2007, all full-time employees worldwide held restricted stock or options to purchase our common stock. 

 

 

 

 

 

 

We do not separately target the equity element of our executive officer compensation programs as a specific percentage of overall compensation.  However, overall total compensation is structured to be competitive so that we can attract and retain highly qualified executive officers. In setting equity award levels, we also take into consideration the impact of the equity-based awards on the dilution of our stockholders’ interests in our common stock.

 

Tax Considerations

 

Internal Revenue Code section 162(m), in general, precludes a public corporation from claiming a tax deduction for compensation in excess of $1 million in any taxable year for any executive officer named in the summary compensation table in such corporation’s proxy statement. Certain performance-based compensation is exempt from this tax deduction limitation. The Compensation Committee’s policy is to structure executive compensation in order to maximize the amount of the Company’s tax deduction.

 

Overview of Fiscal 2007 Summary

 

In fiscal 2007, we did not grant stock options to our executive officers as a group. However, we did award shares of restricted stock to executives of Conference Plus, Inc., including Mr. Reedy. In addition, Mr. Mader received a restricted stock grant of 500,000 shares in connection with his appointment as our Chief Executive Officer. For fiscal 2007, payments under the Incentive Compensation Plans for our named executive officers totaled $1,008,846. 

 

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Management Transition

 

On January 22, 2007, Thomas E. Mader became our President and Chief Executive Officer and a member of our Board of Directors. E. Van Cullens, the outgoing President and Chief Executive Officer, agreed to make himself available at our request to advise the Board and Mr. Mader on strategic and transitional matters, pursuant to the terms of a consulting agreement. Because Mr. Mader and Mr. Cullens both served as Chief Executive Officer during fiscal 2007, both are considered named executive officers under the federal securities laws and therefore appear in the compensation tables below.

 

On March 30, 2007, William J. Noll retired from his position as our Senior Vice President and Chief Technology Officer to pursue other interests. On June 11, 2007, John C. Clark, the Senior Vice President of Operations, was separated from the Company. Because both executives were among our most highly compensated executive officers during fiscal 2007, both are named executive officers under the federal securities laws and therefore appear in the compensation tables below.

 

In addition, Nicholas C. Hindman, Sr. served as our Chief Financial Officer during fiscal 2007, and accordingly, he is listed as a named executive officer in the tables below. On July 2, 2007, Mr. Hindman assumed the responsibilities of the newly created position of Chief Operating Officer (COO). Amy Forster assumed the position of Senior Vice President and Chief Financial Officer. Ms. Forster will be included as a named executive officer in our compensation tables for fiscal 2008.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

The Compensation Committee is currently composed of Messrs. Dwyer (Chair), Penny, Plummer and Seazholtz. No interlocking relationships exist between our Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past.

 

We have granted Robert C. Penny III and Melvin J. Simon, as Trustees of the Voting Trust, certain registration rights with respect to the shares of Common Stock held in the Voting Trust.

 

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with management and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

 

 

 

 

 

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SUMMARY COMPENSATION TABLE

 

The table below summarizes the total compensation earned by each of our named executive officers for fiscal 2007.

 

 

ALL OTHER COMPENSATION

 

 

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GRANTS OF PLAN-BASED AWARDS

The following table sets forth specific information with respect to each grant of an award made under any Company plan to a named executive officer during fiscal 2007.

 

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table below includes certain information with respect to stock options and restricted stock previously awarded to the named executive officers that were outstanding as of March 31, 2007.

 

 

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OPTION EXERCISES AND STOCK VESTED

The table below includes certain information with respect to vesting of restricted stock units for the named executive officers during fiscal 2007. No stock options were exercised by the named executive officers during fiscal 2007.

 

 

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NON-QUALIFIED DEFERRED COMPENSATION

 

 

 

Narrative to the Non-qualified Deferred Compensation Table

We previously entered into a deferred compensation program with Mr. Cullens, our former Chief Executive Officer, which we amended on January 21, 2007. The amount of deferred incentive compensation to be awarded to Mr. Cullens in each year of his service as Chief Executive Officer was based on our consolidated net income before income taxes as set forth in the Company’s audited financial statements. The amount of the award was determined on an annual basis as follows:

 

All amounts awarded under the deferred compensation program vested on March 31, 2006. Any amounts earned by Mr. Cullens in the fiscal years ending after March 31, 2006 are fully vested at the time the amounts are determined as set forth above. Unless otherwise elected, the deferred incentive compensation earned by Mr. Cullens and vested thereunder is paid to Mr. Cullens upon his retirement or other termination of employment. Mr. Cullens also has the right to withdraw all vested amounts earned under the program at any time, provided that 5% of the amount withdrawn shall be forfeited to the Company. We shall establish a rabbi trust and pay to the trust from time to time an amount equal to any amount earned under the deferred incentive compensation program. The balance in the deferred compensation account will be paid to Mr. Cullens in a lump sum within 30 days after a change in control of the Company or within 90 days after his death or termination of employment by permanent and total disability.

Equity Compensation Plan Information

The following table provides information as of March 31, 2007 with respect to shares of our common stock that may be issued under equity compensation plans.

 

*Reflects non-qualified stock options to acquire shares of Class A Common Stock granted to E. Van Cullens in fiscal 2002. 1.0 million of these options originally vested over a four-year period with 25% vesting per year, and are now fully vested. The remaining options are performance based and vest at the earlier of achievement of certain performance goals or eight years. The strike price on 590,192, 400,000, and 400,000 of the options is $1.95, $2.00, and $5.00 per share, respectively.

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

The following tables show potential payments to our named executives under existing contracts, agreements, plans or arrangements for various scenarios under termination or a change-in-control of each of our named executives, assuming a March 31, 2007 triggering event and using a stock price of $2.22 per share, which represents the average of the high and low sales prices of our common stock on March 30, 2007, the last trading day prior to fiscal year end.

E. Van Cullens

Former President and Chief Executive Officer

E. Van Cullens was our Chief Executive Officer in fiscal 2007 until he retired on January 22, 2007, at which time he was replaced by Thomas Mader. Mr. Cullens received payments totaling $264,615 in connection with his retirement, $165,623 for pro-rated bonus and $98,992 in consulting fees.

In addition, we have entered into a consulting agreement with Mr. Cullens under which he has agreed to make himself available at our request to advise the Board and new President and Chief Executive Officer on strategic and transitional matters. Mr. Cullens compensation under the consulting agreement is as follows: through June 30, 2007 – a monthly consulting fee of $39,167, thereafter – a monthly consulting fee of $1,000 plus, as to any day in which Mr. Cullens furnishes services, $1,500, payable monthly. In addition, stock options will continue to vest if Mr. Cullens is engaged as a consultant. The term of the consulting agreement expires on December 31, 2009, subject to the right of either party to terminate the agreement with thirty days prior written notice.

The consulting agreement provides that medical benefits will be made available to Mr. Cullens through COBRA at his expense. At the expiration of COBRA benefits, we will pay up to $3,500 a month for an individual policy with similar coverage for the first six months the policy is in effect. Mr. Cullens’ deferred compensation plan was amended to allow for a fiscal year contribution for the fiscal year ending March 31, 2007 with respect to his consulting services as if he was still actively employed through March 31, 2007.

Our Compensation Committee determined the consulting services to be rendered pursuant to the consulting agreement will, as provided in certain stock option agreements, constitute continued employment solely for the purpose of those options, and that termination of the consulting agreement will accordingly constitute retirement for the purpose of those options.

Thomas E. Mader

President and Chief Executive Officer

 

 

We have entered into an employment agreement with Thomas E. Mader, our Chief Executive Officer. Under the terms of Mr. Mader’s employment agreement, he will receive an annual base salary of $450,000 per year. Mr. Mader’s base salary will be reviewed annually and may be increased, but not decreased, without his consent. Mr. Mader is not entitled to a bonus for the fiscal 2007. For the fiscal year ending March 31, 2008, Mr. Mader will be guaranteed a bonus of $225,000, which amount will be paid to Mr. Mader in a single lump sum payment on or before May 1, 2008. For subsequent fiscal years during the term of his employment, Mr. Mader will be eligible to receive a bonus based upon the achievement of performance goals to be developed for each year by our

 

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Board and Compensation Committee.

Mr. Mader received a relocation payment of $60,000 on the commencement of employment and will receive an additional $90,000 upon the sale of his residence in Texas. In the event Mr. Mader resigns without good reason, he will repay any relocation payments received by him within the twelve month period immediately preceding the effective date of his resignation.

If we terminate Mr. Mader’s employment without cause during the first three years of his employment or if Mr. Mader resigns for good reason during the first three years of his employment, he will be entitled to receive as severance (A) one year’s base salary payable in regular installments, provided, that such payments will be deferred until the six-month anniversary of the date of Mr. Mader’s termination of employment if deferral to such anniversary date is required to comply with the provisions of Section 409A of the Internal Revenue Code and (B) a pro rata portion of Mr. Mader’s anticipated bonus for the fiscal year in which the termination occurs.

If Mr. Mader remains employed at the time of a change of control that occurs within five years, and within twelve months following the change of control, either the total of Mr. Mader’s salary and target bonus is reduced without his written consent or Mr. Mader’s primary duties and responsibilities as President and Chief Executive Officer of the Company are, without his written consent, materially reduced or modified in such a way as to be qualitatively beneath the duties and responsibilities befitting of the president and chief executive officer of a publicly held company of comparable size in the telecommunication industry in the United States, and if Mr. Mader resigns within six (6) months after such reduction in compensation or change in duties and responsibilities, he will be entitled to receive (A) one year’s base salary payable in regular installments, provided, that such payments will be deferred until the six-month anniversary of the date of Mr. Mader’s termination of employment if deferral to such anniversary date is required to comply with the provisions of Section 409A of the Internal Revenue Code and (B) 100% of the target bonus amount authorized and approved for Mr. Mader by our Compensation Committee for such fiscal year or for the prior fiscal year, if higher.

Mr. Mader is subject to a non-competition covenant during the term of his employment and for an additional one-year period following termination if, following termination of his employment with us, Mr. Mader is entitled to receive severance or if we elect to pay him the severance even if he would not otherwise be entitled. Mr. Mader is subject to a non-solicitation covenant with respect to our employees for one year following termination of his employment whether or not he is entitled to severance pay.

Nicholas C. Hindman (1)

Chief Operating Officer and Former Chief Financial Officer

 

 

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John C. Clark (1)

Former Senior Vice President of Operations

 

 

Effective as of June 11, 2007, Mr. Clark was no longer serving as our Senior Vice President of Operations. Mr. Clark received severance of $216,000 payable bi-weekly over a period of one year in connection with his separation.

William J. Noll

Former Senior Vice President and Chief Technology Officer

On March 30, 2007, William J. Noll retired from his position as our Senior Vice President and Chief Technology Officer. No payments were made to Mr. Noll as a result of his retirement.

Timothy J. Reedy (1)

Chief Executive Officer of Conference Plus, Inc.

 

 

DIRECTOR COMPENSATION

On September 21, 2006, the Compensation Committee set the compensation levels for our directors. The annual retainer for all directors was increased from $25,000 to $30,000. Annual retainers for the chairpersons of our committees were established as follows: Chairman of the Board - $25,000; Chairperson of the Audit Committee - $10,000; Chairperson of the Compensation Committee - $5,000; all other Chairpersons - $2,000. The in-person committee meeting fee was reduced from $2,000 to $1,500 and a new fee of $750 for committee meetings attended via teleconference was established. In addition, all directors may be reimbursed for certain expenses incurred in connection with attendance at Board and Committee meetings. Mr. Simon receives $1,250 each quarter for his services as a director of Conference Plus, Inc., a subsidiary of the Company. Directors who are employees of the Company do not receive additional compensation for service as directors. In addition, non-employee directors are also eligible to receive awards under our 2004 Stock Incentive Plan. For fiscal 2007, no awards were granted.

 

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Director Summary Compensation Table

The following table details the total compensation for non-employee directors for fiscal 2007.

 

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

In connection with the commencement of Mr. Reedy’s employment as Chief Executive Officer of Conference Plus in October 2002, Mr. Reedy was granted an option to acquire 400,000 shares of Conference Plus stock at an exercise price of $1.79 per share. The options vest in equal annual installments of 20% per year beginning on the first anniversary of his start date. The options are currently 80% vested and will become fully vested in October 2007. The options will become fully vested upon a change in control of Conference Plus.

In the event of a sale of Conference Plus (defined as a 51% change of control), Mr. Reedy will also receive compensation based on the EBITDA run rate of Conference Plus at the time of sale based on the EBITDA for the trailing twelve months. Mr. Reedy’s compensation would equal 5% of the EBITDA run rate. The minimum compensation regardless of the actual EBITDA at the time of sale is $250,000. The compensation is capped at $1,250,000 even if a sale of the business occurs when the EBITDA run rate exceeds $25,000,000. Payment is conditional on Mr. Reedy remaining in his capacity as Chief Executive Officer, if desired by the acquirer, for a minimum of six months. The compensation would be paid six months after the change of control or until Mr. Reedy’s termination, whichever occurs first.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors and persons who own more than 10 percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based on a review of documents in our possession and on written representations from reporting persons, we believe that during fiscal 2007, all such persons filed on a timely basis all reports required by Section 16(a) of the Securities Exchange Act of 1934, except for William Noll, who filed a late Form 4 to report a stock option granted on January 16, 2007.

 

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AUDIT COMMITTEE REPORT

 

The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements in the Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.

 

The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Committee by Statement on Auditing Standards No. 61 (Communication With Audit Committees), as amended. In addition, the Committee has discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and considered the compatibility of non-audit services with the auditors’ independence.

 

The Audit Committee discussed with our independent auditors the overall scope and plans for their respective audits. The Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of our internal control, and the overall quality of our financial reporting.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended March 31, 2007 for filing with the SEC. The Audit Committee and the Board have also recommended, subject to stockholder approval, the selection of our independent auditors.

 

During fiscal 2007, management documented, tested and evaluated internal controls pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Management and Ernst & Young LLP kept the Audit Committee apprised of our progress. Management has provided the Audit Committee with a report on the effectiveness of internal controls.

 

The Audit Committee is governed by a charter. The Board of Directors has determined that the current members of the Audit Committee each qualify as an “audit committee financial expert” as defined by Item 401(h) of the Regulation S-K and that each of them is “independent” as the term is used in the Item 7(d)(3)(iv) of Schedule 14A under the Securities Act of 1934 as amended.

 

 

 

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PROPOSAL NO. 2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

 

The Audit Committee has appointed Ernst & Young LLP, an independent registered public accounting firm, as auditors for the fiscal year ending March 31, 2008 (“fiscal 2008”). The Board of Directors and the Audit Committee recommend that stockholders ratify the appointment of Ernst & Young. Although we are not required to do so, we believe that it is appropriate to request that stockholders ratify the appointment of Ernst & Young as our independent auditors for fiscal 2008. If stockholders do not ratify the appointment, the Audit Committee will investigate the reasons for the stockholders’ rejection and reconsider the appointment. Representatives of Ernst & Young will be at the Annual Meeting, will be given the opportunity to make a statement, and will be available to respond to appropriate questions.

 

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS FOR FISCAL YEAR ENDING MARCH 31, 2008.

 

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Fees Incurred for Services of Ernst & Young

 

Set forth below is a summary of certain fees paid to our independent auditors, Ernst & Young LLP, for services for the fiscal years 2007 and 2006.

 

 

Audit Fees

 

Audit fees were for professional services rendered in connection with the audit of our annual financial statements set forth in our Annual Reports on Form 10-K and the review of our quarterly financial statements set forth in our Quarterly Reports on Form 10-Q.

 

Audit-Related Fees

Audit-related fees were for professional services rendered in connection with responding to an SEC comment letter.

 

Tax Fees

 

Approval of Services Provided by Independent Registered Public Accounting Firm

 

The Audit Committee has considered whether the services provided under other non-audit services are compatible with maintaining the auditor’s independence and has determined that such services are compatible. The Audit Committee has adopted policies and procedures for pre-approving all non-audit work performed by Ernst & Young. The Committee will annually pre-approve services in specified accounting areas. The Committee also annually pre-approves the budget for annual GAAP and statutory audits.

 

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PROPOSALS OF STOCKHOLDERS

 

A stockholder proposal to be included in our proxy statement and presented at the 2008 Annual Meeting must be received at our executive offices, 750 North Commons Drive, Aurora, Illinois 60504 by no later than April 27, 2008 for evaluation as to inclusion in the Proxy Statement in connection with such meeting.

 

Stockholders wishing to nominate a director or bring a proposal before the 2008 Annual Meeting (but not include the proposal in our proxy statement) must cause written notice of the proposal to be received by the Secretary of the Company at our principal executive offices in Aurora, Illinois, by no later than 60 days prior to the Annual Meeting date, as well as comply with certain provisions of our bylaws. In order for a stockholder to nominate a candidate for director, such 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 stockholder to bring other business before a stockholders meeting, the notice for such 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 our proxy statement.

 

FINANCIAL INFORMATION

 

We have furnished our financial statements to stockholders in our 2007 Annual Report, which accompanies this Proxy Statement. In addition, we will promptly provide, without charge to any stockholder, on the request of such stockholder, an additional copy of the 2007 Annual Report and our most recent Form 10-K. Written requests for such copies should be directed to Westell Technologies, Inc., Attention: Amy Forster, Senior Vice President and Chief Financial Officer, 750 North Commons Drive, Aurora, Illinois 60504; telephone number (630) 898-2500.

 

OTHER MATTERS TO COME BEFORE THE MEETING

 

The Board of Directors knows of no other business that may come before the Annual Meeting. However, if any other matters are properly presented to the meeting, the persons named in the proxies will vote upon them in accordance with their best judgment.

 

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND RETURN IT IN THE ENCLOSED STAMPED ENVELOPE.

 

By Order of the Board of Directors

Nicholas C. Hindman, Sr.

Secretary

 

Date: August 10, 2007

 

 

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This Proxy is solicited by the Board of Directors of Westell Technologies, Inc. for the Annual Meeting of Stockholders to be held at the Hilton Lisle, 3003 Corporate West Drive, Lisle, Illinois on Thursday, September 27, 2007 at 10:00 a.m., Central Daylight Time.

 

The undersigned hereby appoints John W. Seazholtz 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 annual meeting, and at any adjournments thereof, including the matters described in the proxy statement furnished herewith, subject to any directions indicated on the reverse side of this card. The votes entitled to be cast by the undersigned will be cast in the direction of the proxy holders on any other matter that may properly come before the meeting and any adjournment thereof.

 

The undersigned hereby revokes any proxy heretofore given and acknowledges receipt of the proxy statement for the annual meeting.

 

This proxy when properly executed will be voted in the manner directed by the undersigned. If no direction is made, this proxy will be voted for proposals 1 and 2.

 

(THIS PROXY IS CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)

 

(Comments/Change of Address)

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(This proxy is continued and to be signed on the reverse side.) (If you have written in the above space, please mark the corresponding box on the reverse side)

 

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