-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LTO8qYpbPkeBydwWp19lHBrvzGPvMSNSh1zepMacEBFWKeFkpx1Of+e3TYVOH7SJ YmcE0jobFOifm9SudGCTJQ== 0000912057-97-026858.txt : 19970812 0000912057-97-026858.hdr.sgml : 19970812 ACCESSION NUMBER: 0000912057-97-026858 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZEBRA TECHNOLOGIES CORP/DE CENTRAL INDEX KEY: 0000877212 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 362675536 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-33315 FILM NUMBER: 97655101 BUSINESS ADDRESS: STREET 1: 333 CORPORATE WOODS PKWY CITY: VERNON HILLS STATE: IL ZIP: 60061 BUSINESS PHONE: 7086346700 S-3 1 S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ZEBRA TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-6966580 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)
333 CORPORATE WOODS PARKWAY, VERNON HILLS, ILLINOIS 60061-3109, (847) 634-6700 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) EDWARD KAPLAN 333 CORPORATE WOODS PARKWAY, VERNON HILLS, ILLINOIS 60061-3109, (847) 634-6700 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ------------------------ COPIES TO: MATTHEW S. BROWN, ESQ. ROBERT F. WALL, ESQ. MARGUERITE M. ELIAS, ESQ. R. CABELL MORRIS, JR., ESQ. Katten Muchin & Zavis Winston & Strawn 525 West Monroe Street, Suite 1600 35 West Wacker Drive Chicago, Illinois 60661 Chicago, Illinois 60601 (312) 902-5200 (312) 558-5600 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ------------------------ If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE Class A Common Stock, $.01 par 2,364,795 value.............................. shares(1) $31.125(2) $73,604,244 $22,305
(1) Includes 308,451 shares to be offered upon exercise of the Underwriters' over-allotment option. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of the average of the high and low prices of the Class A Common Stock on the Nasdaq National Market on August 5, 1997. ------------------------ 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 SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 11, 1997 PROSPECTUS 2,056,344 SHARES [LOGO] CLASS A COMMON STOCK All of the 2,056,344 shares of Class A Common Stock offered hereby are being sold by the Selling Stockholders. See "Selling Stockholders." The Company will not receive any of the proceeds from the sale of the shares offered hereby. The Class A Common Stock is traded in the over-the-counter market and quoted on the Nasdaq National Market under the symbol "ZBRA." On August 8, 1997, the closing price of the Class A Common Stock as reported by Nasdaq was $31.25 per share. See "Price Range of Common Stock and Dividends." All of the shares being sold by the Selling Stockholders are shares of Class B Common Stock, which will automatically convert into shares of Class A Common Stock upon their sale in this offering. The holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to ten votes per share. SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROCEEDS TO PRICE TO UNDERWRITING SELLING PUBLIC DISCOUNT(1) STOCKHOLDERS(2) Per Share........................................ $ $ $ Total(3)......................................... $ $ $
(1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses, payable by the Selling Stockholders, estimated at $200,000. (3) Certain of the Selling Stockholders have granted to the Underwriters a 30-day option to purchase up to 308,451 additional shares of Class A Common Stock, solely to cover over-allotments, if any. See "Underwriting." If all such shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to Selling Stockholders will be $ , $ and $ , respectively. The Class A Common Stock is offered by the several Underwriters when, as and if delivered to and accepted by them and subject to their right to reject orders in whole or in part. It is expected that delivery of certificates representing the shares will be made on or about August , 1997. WILLIAM BLAIR & COMPANY THE ROBINSON-HUMPHREY COMPANY, INC. MONTGOMERY SECURITIES THE DATE OF THIS PROSPECTUS IS AUGUST , 1997 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information concerning the Company may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained upon written request addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other information concerning the Company can also be inspected at the offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. Copies of reports, proxy and information statements and other information regarding registrants that file electronically (including the Company) are available on the Commission's website at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement which may be inspected and copied in the manner and at the sources described above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996; (2) the Company's quarterly reports on Form 10-Q for the fiscal quarters ended March 29, 1997 and June 28, 1997; and (3) the description of the Company's Class A Common Stock contained in the registration statement on Form 8-A filed by the Company with the Commission on July 15, 1991. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in any subsequently filed document which is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge, to each person to whom a copy of this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits thereto, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Written or telephone requests for such copies should be directed to the Company's principal office: Zebra Technologies Corporation, 333 Corporate Woods Parkway, Vernon Hills, Illinois 60061, Attention: Secretary (telephone: (847) 634-6700). CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE COMPANY, INCLUDING SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND OTHER SELLING GROUP MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING." 2 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE "UNDERWRITING." THE COMPANY Zebra Technologies Corporation ("Zebra" or the "Company") provides bar code labeling solutions, principally to manufacturing and service entities worldwide, for use in automatic identification and data collection systems. The Company designs, manufactures, sells and supports a broad line of computerized label/ticket printing systems and related specialty supplies. The Company's equipment is designed to operate at the user's location to produce and dispense high quality bar coded labels in extremely time-sensitive and physically demanding environments. Zebra's solutions approach integrates its applications expertise, computerized printing systems, specialty supplies and software. Applications for the Company's systems include inventory control, automated warehousing, JIT (Just-In-Time) manufacturing, CIM (Computer Integrated Manufacturing), employee time and attendance records, weighing systems, tool room control, shop floor control, library systems, prescription labeling and scientific experimentation. The Company's net sales from continuing operations have grown from $58.7 million in 1992 to $164.0 million in 1996, a compound annual growth rate of 29.3%, while net income from continuing operations in the same period has grown from $11.8 million to $30.9 million, a compound annual growth rate of 27.1%. Management believes that Zebra's success results from its reputation for reliable and durable products and its focus on providing bar code labeling solutions for its customers. The Company estimates that over 250,000 Zebra bar code printing systems are presently installed at approximately 25,000 user sites around the world. Approximately 47.2% of the Company's net sales from continuing operations for the six months ended June 28, 1997 was generated from sales to international customers, as compared to 45.4% for the six months ended June 29, 1996. The Company expects this percentage to continue to increase in the future. Zebra anticipates that its future growth will be enhanced by two continuing trends: bar code label standardization programs and the focus of businesses worldwide on improving quality and productivity. Industry mandated standardization has been a major catalyst in the rapid development of bar coding, and management believes that the mandate of standards will continue to proliferate. Zebra also believes that increasing demands for improvements in productivity and quality in commercial and service organizations will lead to increased use of automatic identification systems. THE OFFERING Class A Common Stock offered by the Selling Stockholders................................... 2,056,344 shares Common Stock to be outstanding after the offering(1).................................... 19,058,686 shares of Class A Common Stock 5,199,060 shares of Class B Common Stock 24,257,746 total shares Nasdaq National Market Symbol................... ZBRA
- ------------------------ (1) Does not include 497,000 shares of Class A Common Stock reserved for issuance upon the exercise of certain options, at a weighted average exercise price of $23.03 per share, and 452,000 shares available for future grant under the Company's stock option and stock purchase plans. 3 The Company was founded in 1969 and its principal executive office is located at 333 Corporate Woods Parkway, Vernon Hills, Illinois 60061, telephone (847) 634-6700. The Company's website address is http://www.ZEBRA.COM. The Company's website is not and shall not be deemed to be a part of this Prospectus. The Company is a Delaware corporation. IBM is a registered trademark of International Business Machines Corporation, UNIX is a registered trademark of Novell, Inc., MS/DOS and Windows are registered trademarks of Microsoft Corporation and MAC is a registered trademark of Apple Computer. The Company, through its subsidiary Zebra Domestic Intangibles, Inc., currently holds U.S. trademarks on the words "STRETCH," "Value-Line," "Performance Line," "170Xi," "140Xi" and "90Xi," and holds U.S. registered trademarks on the Company's Zebra head logo and the words or marks "Zebra," "ZPL," "ZPL II," "STRIPE," "Element Energy Equalizer," "E3," and "Z Ultimate." The Company, through its subsidiary Zebra International Intangibles, Inc., holds trademarks on the word "Zebra" and the Company's Zebra head logo in France, Canada, Germany, the United Kingdom, Sweden and China. 4 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, POTENTIAL PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING THE COMPANY, ITS BUSINESS AND THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY: RISK OF PRODUCT INTRODUCTIONS AND NEW TECHNOLOGY. While the Company believes that thermal transfer printing will be the method of choice in its target markets for the foreseeable future, development of a new technology which better serves customers in these target markets and in which the Company does not participate could have a material adverse effect on the Company's operations and growth. See "-- Competition" and "Business -- Products." Furthermore, the Company's markets have frequent new product introductions and increasing customer expectations concerning product performance and price. As a result of these factors the Company believes that its future growth and financial performance will depend upon the Company's ability to develop and market new products that achieve market acceptance, while enhancing existing products to accommodate the latest technological advances and customer preferences. Failure by the Company to anticipate or respond adequately to change in technology or customer preferences or any significant delays in product development or introduction could adversely affect the Company's business, financial condition or results of operations. In addition, there can be no assurance that new product introductions will not result in a decrease in revenues from the Company's existing products or otherwise adversely affect the Company's business, financial condition or results of operations. COMPETITION. Many companies are engaged in the design, manufacture and marketing of automatic identification equipment. The Company considers its direct competition to be the providers of thermal transfer and direct thermal printing systems and supplies to the demand printing environment. Several of these providers have substantially greater resources than the Company. Competition in the Company's market depends on a number of factors, including reliability, quality and reputation of the manufacturer and its products, hardware innovations and specifications, price, level of technical support, supplies and applications support offered by the manufacturer and available distribution channels. In addition, various other methods of bar code printing exist, although the Company believes that thermal transfer printing offers clear advantages over such other methods for the Company's target markets. INTERNATIONAL OPERATIONS. Sales to international customers generated 47.2% of Zebra's net sales from continuing operations in the six months ended June 28, 1997 and 45.4% of its net sales from continuing operations in the six months ended June 29, 1996, and the Company expects this percentage to continue to increase in the future. In connection with international sales, fluctuations in currency conversion rates can expose the Company's products to price competition from products produced at lower costs in foreign countries and can otherwise affect the Company's results of operations and financial position. In addition, some of the Company's vendors are located in foreign countries and therefore base their pricing, in part, on currency exchange rates. The Company has engaged, and may engage in the future, in currency-hedging transactions intended to reduce the effect of fluctuations in foreign currency exchange rates on the Company's results of operations and financial position. However, there can be no assurance that any such hedging transactions will materially reduce the effect of foreign currency exchange rates on such results. The Company is also subject to certain other risks inherent in international business generally, including risks of trade embargoes, political instability and the possibility of war or other hostility. ACQUISITIONS. The Company regularly reviews acquisition opportunities which if pursued would be material to the Company, including one previously contemplated merger which was publicly disclosed but not consummated. To date, the Company's management has had limited experience in making acquisitions. Acquisitions involve a number of special risks and challenges, including the diversion of management's attention, assimilation of the operations and personnel of acquired companies, incorporation of acquired products into existing product lines, adverse short-term effects on reported operating results, amortization of acquired intangible assets, assumption of the liabilities of acquired companies, possible loss of key employees and difficulty of presenting a unified corporate image. No assurance can be given that any potential acquisition by the Company will or will not occur, or that, if an acquisition does occur, it will not ultimately have a material adverse effect on the Company or that any such acquisition will succeed in 5 enhancing the Company's business. For example, the Company recently discontinued the operations of its subsidiary, Zebra Technologies VTI ("VTI"), which was acquired in 1995 and which did not achieve management's expectations. RISK OF LIMITED SUPPLY SOURCES. The Company purchases certain parts and supplies from a limited number of vendors and in some instances from a single vendor. The Company currently relies on a primary source of supply, Kyocera Corporation, a publicly held Japanese corporation, for the majority of its thermal and thermal transfer printheads. Although management has taken what it believes are adequate precautions to limit the risk of short supplies, including maintaining adequate safety stocks, the Company could be vulnerable to limits in availability and changes in pricing and could experience delays in manufacturing and shipping in the event the Company is required to find new suppliers for any of these parts. Such delays could adversely affect the Company's business, financial condition or results of operations. See "Business -- Manufacturing." DEPENDENCE ON KEY PERSONNEL. The Company's success is largely dependent on the skills, experience and efforts of its senior management and certain other key personnel. If, for any reason, one or more key personnel were not to remain active in the Company, the Company's business, financial condition or results of operations could be adversely affected. Mr. Edward Kaplan assumed the responsibilities of President of the Company in April, 1997 on an interim basis. The Company is currently conducting an executive search for President of the Company and for a Vice President of Engineering to succeed Mr. Gerhard Cless, who currently serves as Executive Vice President of Engineering. The Company's future success will depend upon its ability to attract and retain additional qualified management, technical and marketing personnel. There is competition in the market for the services of such qualified personnel and there can be no assurance that the Company will be able to attract and retain such personnel. A failure to attract and retain such personnel could adversely affect the Company's business, financial condition or results of operations. CONTROL BY EXISTING STOCKHOLDERS. The Company's executive officers, directors, and their families and family trusts, will in the aggregate beneficially own substantially all of the outstanding Class B Common Stock, which will represent approximately 21.4% of the Company's outstanding shares, and approximately 73.2% of the voting power, of Common Stock after this offering. Holders of the Class B Common Stock are entitled to 10 votes per share, while holders of the Class A Common Stock are entitled to only one vote per share. As a result, the stockholders of the Class B Common Stock, if acting together, would be able effectively to control most matters requiring approval by the stockholders of the Company, including the election of all of the directors. If at any time the number of outstanding shares of Class B Common Stock represents less than 10% of the total number of outstanding shares of both classes of Common Stock, then such outstanding shares of Class B Common Stock will automatically convert into an equal number of shares of Class A Common Stock. Certain provisions of the Company's by-laws and certificate of incorporation could have the effect of delaying, deferring or preventing a change in control of the Company. Such ownership could result in conflicts of interest for such directors, officers and stockholders in situations where the Company's interests and those of such other companies are not identical. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS Forward looking statements contained in this Prospectus are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors which could cause actual results to differ materially from those reflected in such forward looking statements. The factors include those indicated in "Risk Factors" above. Also, profit will be affected by the Company's ability to control manufacturing and operating costs. Due to the Company's large investment portfolio, interest rate conditions will also have an impact on results, as will foreign exchange rates due to the large percentage of the Company's sales in international markets. When used in this document and documents referenced, the words "intend," "anticipate," "believe," "estimate," and "expect" and similar expressions as they relate to the Company or its management are included to identify such forward looking statements. 6 USE OF PROCEEDS The Company will not receive any of the proceeds from the sale of the Common Stock offered hereby. See "Selling Stockholders." PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Company's Class A Common Stock is quoted on the Nasdaq National Market under the symbol ZBRA. The following table sets forth, for the quarters indicated, the high and low closing prices as reported by Nasdaq.
MARKET PRICE --------------------- HIGH LOW ---------- --------- 1995 First Quarter............................................................................ $ 21.38 $ 18.13 Second Quarter........................................................................... 27.13 19.50 Third Quarter............................................................................ 32.00 26.63 Fourth Quarter........................................................................... 34.50 23.38 1996 First Quarter............................................................................ 35.25 25.25 Second Quarter........................................................................... 27.88 17.75 Third Quarter............................................................................ 26.25 15.50 Fourth Quarter........................................................................... 31.50 23.13 1997 First Quarter............................................................................ 27.25 21.38 Second Quarter........................................................................... 32.00 21.50 Third Quarter (through August 8, 1997)................................................... 33.13 27.44
On August 8, 1997, the last reported sales price of the Class A Common Stock was $31.25 and there were 534 and 14 holders of record of the Company's Class A Common Stock and Class B Common Stock, respectively. Since the Company's initial public offering in August 1991, the Company has not declared any cash dividends or distributions on its capital stock. The Company currently intends to retain its earnings to finance future growth and therefore does not anticipate paying any cash dividends in the foreseeable future. 7 SELECTED FINANCIAL DATA The following table presents selected consolidated financial information for the Company's five most recent fiscal years and for the six-month periods ended June 29, 1996 and June 28, 1997. In addition, the table presents the unaudited pro forma results of operations for the fiscal years ended December 31, 1995 and 1996 giving effect to the discontinuance of the Company's VTI subsidiary, which was acquired in July 1995. The Company made the decision to discontinue the operations of VTI in June 1997. The unaudited consolidated financial information for the six-month periods ended June 29, 1996 and June 28, 1997 include the effects of the discontinuance. The selected data presented below under the "Statement of Earnings Data" and "Balance Sheet Data" for, and as of the end of, each of the years in the five-year period ended December 31, 1996, are derived from the consolidated financial statements of Zebra Technologies Corporation, which statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The financial statements as of December 31, 1995 and 1996 and for each of the years in the three-year period ended December 31, 1996 are included in the Company's Annual Report on Form 10-K and are incorporated by reference to this Prospectus, together with the report of KPMG Peat Marwick LLP thereon. In the opinion of the Company, the information for the interim periods ended June 29, 1996 and June 28, 1997, which is derived from unaudited consolidated financial statements, reflects all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position of the Company at such dates and the results of operations for such periods. Results from the interim periods are not necessarily indicative of the results for the entire year.
YEARS ENDED YEARS --------------------------------------------------------- SIX MONTHS ENDED ENDED PRO FORMA PRO FORMA -------------------- --------- DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, JUNE 29, JUNE 28, DEC. 31, 1992 1993 1994 1995(1) 1996(1) 1996 1997 1995 ----------- ----------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF EARNINGS DATA: Net sales..................... $ 58,711 $ 87,456 $ 107,103 $ 145,348 $ 163,980 $ 75,446 $ 88,853 $ 148,593 Cost of sales................. 29,719 43,889 55,080 76,241 85,302 39,429 44,124 77,606 ----------- ----------- --------- --------- --------- --------- --------- --------- Gross profit................ 28,992 43,567 52,023 69,107 78,678 36,017 44,729 70,987 Operating expenses: Sales and marketing......... 6,632 9,204 9,011 12,421 15,445 7,370 8,945 14,527 Research and development.... 3,385 4,619 5,835 7,771 9,615 5,864 5,167 8,185 General and administrative............ 3,568 4,847 6,834 8,934 11,155 5,647 6,917 9,722 Merger costs................ -- -- -- -- 315 -- -- -- Acquired in-process technology (2)............ -- -- -- -- 1,117 1,114 -- 6,028 ----------- ----------- --------- --------- --------- --------- --------- --------- Total operating expenses...... 13,585 18,670 21,680 29,126 37,647 19,995 21,029 38,462 ----------- ----------- --------- --------- --------- --------- --------- --------- Income from operations........ 15,407 24,897 30,343 39,981 41,031 16,022 23,700 32,525 Total other income (3)........ 2,426 3,571 2,533 5,444 6,358 2,811 9,358 5,448 ----------- ----------- --------- --------- --------- --------- --------- --------- Income before income taxes.... 17,833 28,468 32,876 45,425 47,389 18,833 33,058 37,973 Income taxes.................. 5,990 10,213 11,803 15,851 16,536 6,343 11,887 15,409 ----------- ----------- --------- --------- --------- --------- --------- --------- Net income.................... $ 11,843 $ 18,255 $ 21,073 $ 22,564 ----------- ----------- --------- --------- ----------- ----------- --------- --------- Net income from continuing operations.................. 29,574 30,853 12,490 21,171 Discontinued operations: Loss from discontinued operations (4)............ (7,010) (1,938) (981) (1,692) Loss on disposal of discontinued operations (5)....................... -- -- -- (963) --------- --------- --------- --------- Net income.................... $ 22,564 $ 28,915 $ 11,509 $ 18,516 --------- --------- --------- --------- --------- --------- --------- --------- Net income per share.......... $.49 $.76 $.88 $.94 Net income per share from continuing operations....... $1.23 $1.27 $.52 $.87 Weighted average shares outstanding................... 23,958 23,982 24,034 24,113 24,203 24,194 24,242 24,113 BALANCE SHEET DATA (AT PERIOD END): Working capital............... $ 39,390 $ 55,972 $ 76,241 $ 111,981 $ 145,218 $ 99,833 Total assets.................. 54,845 76,697 95,043 139,364 180,904 131,071 Long-term obligations......... 347 293 236 2,147 295 2,177 Total stockholders' equity.... 42,177 60,635 82,032 121,855 157,385 108,206 DEC. 31, 1996 --------- STATEMENT OF EARNINGS DATA: Net sales..................... $ 169,715 Cost of sales................. 87,796 --------- Gross profit................ 81,919 Operating expenses: Sales and marketing......... 18,429 Research and development.... 10,452 General and administrative............ 13,388 Merger costs................ 315 Acquired in-process technology (2)............ 1,117 --------- Total operating expenses...... 43,701 --------- Income from operations........ 38,218 Total other income (3)........ 6,418 --------- Income before income taxes.... 44,636 Income taxes.................. 15,721 --------- Net income.................... $ 28,915 --------- --------- Net income from continuing operations.................. Discontinued operations: Loss from discontinued operations (4)............ Loss on disposal of discontinued operations (5)....................... Net income.................... Net income per share.......... $1.19 Net income per share from continuing operations....... Weighted average shares outstanding................... 24,203 BALANCE SHEET DATA (AT PERIOD END): Working capital............... $ 128,803 Total assets.................. 163,283 Long-term obligations......... 2,326 Total stockholders' equity.... 140,456
FOOTNOTES ON FOLLOWING PAGE 8 FOOTNOTES FOR PRECEDING PAGE - ------------------------------ (1) As of June 28, 1997, the Company made the decision to discontinue the operations of its VTI subsidiary. VTI was acquired in July 1995. (2) In conjunction with the acquisition of VTI in July 1995, acquired in-process technology valued at $6,028,000 was expensed immediately. In conjunction with the purchase of Fenestra Computer Services in February 1996, acquired in-process technology valued at $1,114,000 was expensed immediately. (3) Other income includes a one-time gain of $5,458,000 during the first quarter of 1997 from the sale of the Company's investment in Norand Corporation common stock. (4) Loss from discontinued operations is net of an income tax benefit of $564,000, $1,075,000, $579,000, and $1,213,000, respectively. (5) Loss on disposal of discontinued operations includes a provision of $1,819,000 for operating losses during the phase-out period (net of an income tax benefit of $615,000). 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS FOR SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996 REVENUES. Net sales for the six months ended June 28, 1997 increased by 17.8% to $88,853,000 versus net sales of $75,446,000 for the six months ended June 29, 1996. This sales increase for the period is attributed to unit growth in all product categories, as the average unit price of printer products has decreased due to product mix changes. Printer sales increased by 20.2% and supplies sales by 10.6% over the six months ended June 29, 1996, bringing printer sales to 74.4% and supplies sales to 23.2% of consolidated net sales, respectively, for the six months ended June 28, 1997 versus 72.9% and 24.8% for the comparable period of 1996. Approximately 47.2% of net sales during the six months ended June 28, 1997 were derived from international sources as compared to 45.4% during the comparable period in 1996. GROSS PROFIT. Gross profit increased to $44,729,000 for the six months ended June 28, 1997, a 24.2% gain over the gross profit of $36,017,000 for the six months ended June 29, 1996. As a percentage of net sales, gross profit increased 2.6% to 50.3% during the six months ended June 28, 1997 from 47.7% in the six months ended June 29, 1996. This increase for the period is principally due to decreased costs of materials used in high volume printer parts plus a favorable product mix within the Company's printer products and a lower percentage of supplies sales. SALES AND MARKETING EXPENSES. Sales and marketing expenses of $8,945,000 were up 21.4% in the six month ended June 28, 1997 compared to $7,370,000 in the comparable period in 1996. As a percentage of net sales, sales and marketing expenses increased slightly during the six months ended June 28, 1997 to 10.1% from 9.8% for the same period last year. Increased spending is principally due to increased staffing, advertising, public relations, and outside consulting services. These expense increases were offset in part by reductions in warranty and travel. RESEARCH AND DEVELOPMENT. Research and development expenses for the six months ended June 28, 1997 decreased by 11.9% to $5,167,000 versus $5,864,000 for the six months ended June 29, 1996. As a percentage of net sales, research and development expenses decreased 2.0% to 5.8% for the six months ended June 28, 1997 from 7.8% for the six months ended June 29, 1996. Decreases resulted from reductions in unusually high development costs in prior periods to more normal levels in the current period. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the six months ended June 28, 1997 increased by 22.5% to $6,917,000 as compared to $5,647,000 during the six months ended June 29, 1996. As a percentage of net sales, general and administrative expenses increased slightly to 7.8% for the six months ended June 28, 1997 from 7.5% for the comparable prior period. The increase in general and administrative expenses on both a dollar and percentage basis was primarily the result of increases in staffing, depreciation, and building expenses. The increases were offset in part by reductions in mainframe computer expenses. Both periods include the amortization of intangible assets and goodwill for the acquisition of the assets of Fenestra Computer Services, as described in the Liquidity and Capital Resources section below. INCOME FROM OPERATIONS. Income from operations for the six months ended June 28, 1997 increased by $7,678,000 or 47.9% to $23,700,000 compared to $16,022,000 for the six months ended June 29, 1996. As a percentage of net sales, income from operations increased to 26.7% for the six months ended June 28, 1997, as compared to 21.2% for the period ended June 29, 1996. These increases were due to higher gross profits and to the $1,114,000 non-recurring write-off of acquired in-process technology in the six months ended June 29, 1996 which resulted from the Company's acquisition of Fenestra Computer Services. 10 OTHER INCOME. Other income, which consists of investment income and gains on the sales of securities (net of interest expense), increased by 232.9% in the six months ended June 28, 1997 to $9,358,000, from $2,811,000 in the six months ended June 29, 1996. The substantial increase in investment income was largely the result of a one-time gain of $5,458,000 from the sale of 350,000 shares of Norand Corporation common stock, which was purchased in October of 1995 when management briefly considered Norand a possible acquisition candidate, and to a lesser extent, was the result of the Company's larger cash and marketable securities balances invested and its higher rate of return on such investments. INCOME BEFORE INCOME TAXES. Income before income taxes was $33,058,000 for the six months ended June 28, 1997 compared to $18,833,000 for the comparable period during 1996, an increase of $14,225,000 or 75.5%. PROVISION FOR INCOME TAXES. The provision for income taxes for the six months ended June 28, 1997 was $11,887,000 or 36.0% of income before income taxes. The provision for income taxes for the six months ended June 29, 1996 was $6,343,000, or 33.7% of income before income taxes. The increase in the effective rate in 1997 from 1996 was due to a decrease in tax-exempt income in the 1997 period compared with the 1996 period. NET INCOME. Net income for the six months ended June 28, 1997 was $21,171,000, or 23.8% of net sales, resulting in earnings per share of $.87 on 24,242,000 weighted average shares outstanding. Net income for the six months ended June 29, 1996 was $12,490,000, or 16.6% of net sales, resulting in earnings per share of $.52 on 24,194,000 weighted average shares outstanding. SETTLEMENT. As of June 28, 1997, the Company settled litigation between Zebra and Messrs. Carter and Flury, the former officers and principals of VTI. The legal actions initiated in March 1996 have been settled out of court. Terms are confidential and all payments have been completed. The Company acquired VTI in July 1995. At the time of the acquisition an accrual for future payments due to the officers and management of VTI was established. The amounts originally accrued for Messrs. Carter and Flury were adequate to cover the settlement amounts. In connection with the settlement of the litigation, the Company reduced long-term liabilities by $1,999,000 and paid-in capital by $1,372,000. DISCONTINUANCE OF OPERATIONS. As of June 28, 1997, the Company made the decision to discontinue the operations of its VTI subsidiary. The discontinuance of VTI and the related PC retail channel will be completed during the third quarter of 1997. Net of income tax benefits, a one-time charge of $2,655,000, was recorded in the six months ended June 28, 1997 related to the discontinuance of VTI and the Company's presence in the PC retail channel. The one-time charge includes a provision for expected product returns from present retail channel partners, a provision for slow moving/obsolete product, and provisions for estimated contingent liabilities. As part of recording the provisions and charges, the related remaining goodwill and intangible assets were written off as part of the discontinued operation charge. The transition of remaining salable products and the business records and duties will be made during the third quarter of 1997 to appropriate personnel at the Company's Vernon Hills facility. RESULTS OF OPERATIONS FOR 1996 COMPARED TO 1995 AND 1995 COMPARED TO 1994. The following paragraphs reflect the Company's historical results of operations, excluding the effects of the discontinuance of VTI. The impact of the discontinuance is discussed below in the paragraph titled "Adjustments for discontinued operations." REVENUES. During 1996, Zebra's net sales were $169,715,000, increasing by 14.2% from net sales of $148,593,000 in 1995. Net sales in 1994 were $107,103,000. Net sales growth in both 1995 and 1996 is attributed to unit growth, as the average unit price of the Company's printer products declined due to the product mix changes and price reductions on certain products. 11 PRINTERS VS. SUPPLIES. Zebra sells printer products, software and related supplies, which consist of self-adhesive labels and thermal transfer ribbons. In 1996, printer sales were $122,127,000 (72.0% of net sales), supplies sales were $39,561,100 (23.3% of net sales), and software and service revenues accounted for $8,027,000 (4.7% of net sales). In 1995, printer sales were $106,782,000 (71.9% of net sales), supplies sales were $36,033,000 (24.2% of net sales), and software and service revenues were $5,778,000 (3.9% of net sales). In 1994, printer sales were $74,686,000 (69.7% of net sales) and supplies sales were $30,140,000 (28.1% of net sales). The remaining 1994 sales consisted of service and other revenue sources. INTERNATIONAL SALES. Zebra products are sold through an international network of resellers in over 70 countries. International sales in 1996 were $75,055,000, an increase of 14.2% over 1995 international sales of $65,720,000. International sales comprised 44.2% of net sales in both years. In 1994, international sales were 39.8% of net sales, or $42,631,000. Management believes that international sales will continue to grow faster than domestic sales due to the lower penetration of bar code systems outside the United States. GROSS MARGINS. Gross margins increased slightly in 1996 to 48.3% of net sales, compared to 47.8% of net sales in 1995. Margins were 48.6% in 1994. The increase in gross margins in 1996 is attributed to the Company's increased sales in higher margin printers and software. Supplies sales, which is a lower portion of total sales in 1996, provide a lower gross margin than the other product lines. SALES AND MARKETING EXPENSES. Total sales and marketing expenses increased by $3,901,000 in 1996, to reach $18,429,000 or 10.8% of net sales, compared to 1995 expenses of $14,527,000 or 9.8% of net sales. In 1994, the Company incurred $9,011,000 of sales and marketing costs, or 8.4% of net sales. The increasing trend in sales and marketing expenses as a percentage of net sales over the past three years is principally the result of expenses related to development of the PC retail channel and expansion of the Company's sales infrastructure needed to support international sales, particularly with respect to Europe. The Company's acquisition of VTI in July of 1995, resulted in a significant expansion of sales and marketing expenses directly related to establishing and maintaining a position in the PC retail channel. In addition, the Company expanded its High Wycombe-based sales and marketing organization in order to support the growth of its distribution channels in Europe. These expenses included additional funds to promote the Zebra brand in specific national markets within Europe. RESEARCH AND DEVELOPMENT. Research and development expenses increased by 27.7% in 1996, to $10,452,000 from $8,185,000 in 1995, and $5,835,000 in 1994. As a percentage of net sales, these expenses increased to 6.2% in 1996 compared to 5.5% in 1995, and 5.4% in 1994. The increase in research and development expenses as a percentage of sales was primarily the result of increased staffing to support new product development as the Company introduced a significant number of new products in 1996. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased by 37.7% to $13,388,000 or 7.9% of net sales in 1996, compared to $9,722,000, or 6.5% of net sales in 1995. Included among the 1996 expenses are $739,000 of amortization of intangible assets and goodwill resulting from the acquisitions of VTI and Fenestra Computer Services. In 1994, general and administrative expenses were $6,834,000, or 6.4% of net sales. The increased level of general and administrative expenses in 1996 and 1995 was caused principally by higher staffing levels plus increased usage of professional services. In addition, 1996 expenses include increased information systems costs related to the Company's enterprise-wide software implementation project. ACQUIRED IN-PROCESS TECHNOLOGY. The charge for acquired in-process technology in 1996 relates to the Company's acquisition of software technologies as part of the acquisition of Fenestra Computer Services in the first quarter of 1996. This acquisition was accounted for under the purchase method, which requires that the purchase price be allocated to the fair market value of the assets acquired. Among these assets was in-process technology (projects that had not reached technological feasibility and had no alternative future use) that was valued at $1,117,000. Accounting rules require that this asset be immediately expensed. 12 Intangible assets and goodwill resulting from the acquisition are being amortized over periods of between three and ten years. OTHER INCOME. Other income, which consists of investment income and gains on the sales of securities (net of interest expense), increased by 17.8% in 1996 to $6,418,000, from $5,448,000 in 1995. The substantial increase in investment income is the result of larger investment balances as well as the recognition of gains resulting from the liquidation of certain security positions in 1996. Other income in 1995 was up 115.1% from $2,533,000 in 1994, again, principally due to gains on the Company's investment portfolio. INCOME BEFORE INCOME TAXES. Income before income taxes for 1996 was $44,636,000, or 26.3% of net sales, an increase of 17.5% from $37,973,000, or 25.6% of net sales, in the previous year. In 1994, income before income taxes was $32,876,000, or 30.7% of net sales. PROVISION FOR INCOME TAXES. The provision for income taxes in 1996 was $15,721,000, or 35.2% of income before income taxes. The provision for income taxes in 1995 was $15,409,000, or 40.6% of income before income taxes. The decrease in the effective tax rate in 1996 from 1995 was due to the 1995 non- deductibility for tax purposes of the acquired in-process technology charge and goodwill amortization related to the acquisition of Vertical Technologies, Inc. Excluding these amounts, the Company's provision for taxes in 1995, would have been 34.8% of pre-tax income. NET INCOME. Net income in 1996 was $28,915,000, or $1.19 per share, based on 24,203,000 average shares outstanding. In 1995, net income was $22,564,000, or $0.94 per share, based on 24,113,000 average shares outstanding during the year. In 1994, net income was $21,073,000, or $0.88 per share, based on 24,034,000 average shares outstanding. Outstanding shares have all been adjusted for the two-for-one stock split effective December 28, 1995. As a percentage of net sales, net income increased for 1996 to 17.0% of net sales compared to 15.2% in 1995, and 19.7% in 1994. The decrease in net income as a percentage of sales in 1995 compared to 1994 was due to the increased operating expenses and write-off of acquired in-process technology related to the acquisition of Vertical Technologies, Inc., as previously described. Similar expenses and write-offs incurred in 1996 related to the acquisition of Fenestra Computer Services were considerably lower, and consequently, had less of an impact on net income. ADJUSTMENTS FOR DISCONTINUED OPERATIONS. As of June 28, 1997, the Company made the decision to discontinue the operations of VTI. The discussions above regarding the Company's 1995 and 1996 results are before adjustments relating to the discontinued operations of VTI. After giving effect to the reclassification of the VTI operations as discontinued operations, net income from continuing operations was $30,853,000 in 1996 and $29,574,000 in 1995; earnings per share from continuing operations were $1.27 in 1996 and $1.23 in 1995; net sales from continuing operations were $163,980,000 in 1996 and $145,348,000 in 1995; and 45.8% of such net sales was derived from international sales in 1996 as compared to 45.2% in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of liquidity continues to be cash generated from operations and its cash and marketable securities balances. At June 28, 1997, the Company had $111,752,000 in cash and marketable securities versus $94,540,000 at the end of 1996. The Company has a $6,000,000 unsecured line of credit plus an additional $4,000,000 unsecured revocable line of credit with its bank. These credit facilities are priced at either the prime rate or 150 basis points over the London Inter-bank Offer Rate (LIBOR), at the Company's discretion. As of June 28, 1997, the Company had no outstanding borrowings under its lines of credit. Capital expenditures in the six months ended June 28, 1997 and the fiscal year ended December 31, 1996 were $2,700,000 and $5,994,000, respectively, compared to $4,333,000 in 1995, and $2,116,000 in 1994. 13 Effective February 16, 1996, the Company purchased the assets of Fenestra Computer Services, a UK partnership, in exchange for $1,314,000 paid with a combination of cash and Zebra Class A Common Stock. The transaction has been accounted for under the purchase method of accounting. Assets and liabilities, including software and hardware technology, and trade names were recorded at their respective fair market values with $1,117,000 assigned to acquired in-process technology based on an independent third-party appraisal. The entire amount of the acquired in-process technology was expensed in 1996. The Company has no commitments or agreements with respect to acquisitions or other significant capital expenditures. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share" ("EPS"). Implementation of SFAS No. 128 is required for the periods ending after December 15, 1997. The standard establishes new methods for computing and presenting EPS and replaces the presentation of primary and fully-diluted EPS with basic and diluted EPS. The new methods under this standard are not expected to have a significant impact on the Company's EPS amounts. SIGNIFICANT CUSTOMER Sales to The Peak Technologies Group, Inc. ("Peak") accounted for more than 20.0% of the Company's total net sales in the fiscal year ended December 31, 1996 and 16.8% in the six months ended June 28, 1997. Peak was recently acquired by Moore Corporation. The Company believes it has an excellent long-term relationship with Peak. However, the effect which the acquisition will have on the Company's relationship with this customer--positive or negative--is currently unknown. 14 BUSINESS SUMMARY The Company provides bar code labeling solutions, principally to manufacturing and service entities worldwide, for use in automatic identification and data collection systems. The Company designs, manufactures, sells and supports a broad line of computerized label/ticket printing systems and related specialty supplies. The Company's equipment is designed to operate at the user's location to produce and dispense high quality bar coded labels in extremely time-sensitive and physically demanding environments. Zebra's solutions approach integrates its applications expertise, computerized printing systems, specialty supplies and software. Applications for the Company's systems include inventory control, automated warehousing, JIT (Just-In-Time) manufacturing, CIM (Computer Integrated Manufacturing), employee time and attendance records, weighing systems, tool room control, shop floor control, library systems, prescription labeling and scientific experimentation. The Company's net sales from continuing operations have grown from $58.7 million in 1992 to $164.0 million in 1996, a compound annual growth rate of 29.3%, while net income from continuing operations in the same period has grown from $11.8 million to $30.9 million, a compound annual growth rate of 27.1%. Management believes that Zebra's success results from its reputation for reliable and durable products and its focus on providing bar code labeling solutions for its customers. The Company estimates that over 250,000 Zebra bar code printing systems are presently installed at approximately 25,000 user sites around the world. Approximately 47.2% of the Company's net sales from continuing operations for the six months ended June 28, 1997 was generated from sales to international customers, as compared to 45.4% for the six months ended June 29, 1996. The Company expects this percentage to continue to increase in the future. Zebra anticipates that its future growth will be enhanced by two continuing trends: bar code label standardization programs and the focus of businesses worldwide on improving quality and productivity. Industry mandated standardization has been a major catalyst in the rapid development of bar coding, and management believes that the mandate of standards will continue to proliferate. Zebra also believes that increasing demands for improvements in productivity and quality in commercial and service organizations will lead to increased use of automatic identification systems. PRODUCTS The Company's products consist of a broad line of computerized demand bar code label printers and print engines, specialty bar code labeling/ticketing materials, ink ribbons and PC-based bar code software. These products are integrated to provide automatic identification labeling solutions for manufacturing, business and industrial applications. The Company's equipment and supplies are designed for operating at the user's location to produce bar coded labels in extremely time-sensitive and physically demanding environments. The Company works closely with its distributors, other resellers and the end users of its products to fashion labeling solutions which meet the technical demands of the end user. To achieve this, the Company provides its customers with the ability to configure printing systems with various options available on the Company's systems. Additionally, the Company will select and, if necessary, create appropriate labeling stock, ink ribbons and adhesives to suit the particular intended use. In-house engineering personnel with years of experience in the disciplines of software, mechanical, electronic and chemical engineering all participate in the creation and realization of bar code solutions for particular applications. LABEL PRINTING SYSTEMS. The Company produces a broad range of "on demand" thermal transfer and direct thermal bar code label printers with, the Company believes, more models, options and features than any of its competitors. Zebra manufactures 8 thermal transfer label printing systems, which range in list price from $1,395 to $7,495, direct thermal printers which range in list price from $595 to $895, and a high performance print engine for label applicator systems. The Company's products include hundreds of 15 optional configurations which can be selected as necessary to meet particular customer needs. Zebra's printing systems, and their prices, vary based upon performance criteria including label width, speed, image density and optional features. Zebra's thermal transfer product line is split into two parts: the Performance Line-TM- and the Value-Line-TM-. The Performance Line-TM- consists of four basic models targeted at applications that require continuous operation in high output, mission critical operations. These units provide a wide variety of option configurations, features, print widths, dot densities and speeds. The four units comprising the Value Line-TM- are targeted at distributed printing applications where heavy duty cycles are less important. These units have fewer option configurations and features, but are offered at a significantly lower price. The A-100 and A-300 direct thermal, and the T-300 thermal transfer Personal Printers, the Company's new offerings in the sub-$1,000 market, are targeted at applications where convenience, ease of use, small size and price are important to the user. The Company's 170PAX print engine is targeted at manufacturers of high speed automatic label applicator systems. This product contains options and performance characteristics not available on competitive products. In addition to use in demand printing situations, the Company's products can also be used to meet customers' needs for continuous duty production of small or large quantities of custom bar code labels and other graphics, permitting on-site label production with less lead time and more efficient use of supplies than off-site printing can provide. Management believes that of the major on-site printing technologies, thermal transfer is best suited for most industrial applications. Thermal transfer printing produces dark and solid blacks and sharply defined lines which are important for printing readily scannable bar codes. In addition, thermal transfer printing creates the image very near the edge of the printer so that no blank areas must be fed out before the label exits the printer. Finally, this technology permits the use of many different label materials, adhesives and inks and produces durable images. The Company's printing systems incorporate Company-designed computer hardware, electro-mechanisms and software which operate the printing functions of the system and communicate with the host computer. All Zebra printing systems, except the A-100 personal printer, operate using Zebra Programming Language ("ZPL-Registered Trademark-") and Zebra Programming Language II ("ZPL II-Registered Trademark-"), proprietary printer driver languages which were designed by the Company and are compatible with virtually all computer operating systems, including UNIX, MS/DOS and Windows. ZPL-Registered Trademark- and ZPL II-Registered Trademark- allow users of the Company's systems to replace older Zebra printers with newer equipment, which is plug and software compatible and therefore requires no reprogramming, to operate different Zebra equipment for different applications using standardized programs and to integrate printers into a network using additional software available from the Company. Management believes ZPL-Registered Trademark- and ZPL II-Registered Trademark- give the Company a competitive strength by ensuring compatibility across the full family of the Company's present and future printer products and by facilitating system upgrades and customer loyalty to Zebra products. Certain independent software vendors have written label preparation programs with ZPL-Registered Trademark- and ZPL II-Registered Trademark- drivers specifically for Zebra printers. ZPL-Registered Trademark- and ZPL II-Registered Trademark- label format programs can be run on a personal computer with ordinary word processing programs, making ZPL-Registered Trademark- and ZPL II-Registered Trademark- particularly adaptable to PC based systems. In 1996, the Company upgraded the Zebra 105S printer to include 300 dpi capability. The Zebra 105S and 160S printers, both feature a rugged metal case and full roll internal rewind at a Value-Line-TM- price. The Company's STRIPE-Registered Trademark- printer product line rounds out the Value-Line-TM- family of products. The Model S-500 at a list price of $1,795 and S-300 at a list price of $1,395 are the lowest priced printers in the Value-Line-TM-. These units employ design concepts that have allowed the Company to offer these products at a lower price point in the market but with performance, quality, reliability and durability equal to more expensive models. In 1996, the Company began shipping the 220XiII-TM- and the 170PAX print and apply engine from its Performance Line-TM- products. The Zebra 220XiII-TM- printer is a wide-web printer that rounds out the Performance Line-TM- family of printers which includes the 170XiII-TM-, 140XiII-TM-, and 90XiII-TM-. These printers are based on an advanced electronics package that includes dual microprocessors based on RISC technology. As a result, these printers offer greatly increased print speed, dramatically reduced formatting 16 time, improved throughput and image resolution. The 170PAX print and apply engine, also based on XiII electronics, is the Company's first product offering in the component sector of the automatic identification market. The print and apply engine is designed to increase print speeds, reduce formatting times, and improve image resolution in comparison to competitive products. Sales of the Company's printer line accounted for $66,143,000 in the six months ended June 28, 1997, $120,889,000 in the fiscal year ended December 31, 1996, $106,778,000 in 1995, and $74,666,000 in 1994. These sales amounted to 74.4%, 73.7%, 73.5%, and 69.7% of the Company's total net sales in the six months ended June 28, 1997 and in each of the last three fiscal years, respectively. SUPPLIES. The Company sells label/ticketing stock, custom labels and tags, and thermal transfer ribbons worldwide, to support its printing systems and systems users. Zebra supplies are selected for a particular user's needs based on the specific application and environment in which the labeling system must operate. Critical criteria include levels of abrasion, possible exposure to chemicals and liquids, variations in both the environment (such as temperature or humidity) in which the labels will be used and the surfaces to which the labels will be affixed. These factors are all taken into account in selecting the type of ribbon, the type of labeling material and the adhesive to be used. Zebra supplies include proprietary ribbon formulations developed according to Company specifications. Zebra develops its printers and supplies contemporaneously, as if they were a single unit, to optimize performance of Zebra printers and genuine Zebra supplies. Performance is typically measured as a function of both print speed and print quality and both these factors can be adversely affected by the use of supplies that are not suited to particular printers. Because of the close relationship between the printing system, the supplies and the specific applications, the Company sells supplies together with printing systems. In addition, the Company sells supplies to existing users of its printing systems. Zebra promotes the use of Zebra supplies with Zebra equipment. Management believes that owners of Zebra's printing systems purchase Zebra supplies to attain peak performance and optimum print quality and to minimize costly downtime and malfunctions in their automatic identification systems. Supplies sales in the six months ended June 28, 1997 and the fiscal years ended December 31, 1996, 1995, and 1994 were $20,683,000, $39,538,000, $36,033,000, and $30,140,000, respectively, comprising 23.3%, 24.1%, 24.8%, and 28.1%, of total net sales, respectively MAINTENANCE SERVICES. The Company provides service for its printing systems with depot repair at its Vernon Hills, Illinois facility and its distributors' locations in addition to on-site service, which is provided by distributors and Wang Laboratories, Inc. ("Wang"). Under a service support agreement, Wang and the Company share the revenue for on-site service contracts sold by Wang for Zebra printing systems installed in the United States. The Company in turn provides maintenance parts as needed to repair units under contract. IBM also provides service for the Company's products. This technical support is available to end users and to the Company's distributors and resellers. International maintenance service is handled by the Company's distributors in each country, either directly or through service agents. Zebra provides service and technical support assistance from in-house support personnel located both in the United States and the United Kingdom who are available by telephone hotline five days a week during regular business hours. SALES, MARKETING AND CUSTOMERS SALES. The Company sells its products in the United States and internationally through a multi-channel distribution system including distributors, VARs, OEMs, and international accounts. Software is sold principally through PC software catalogs in addition to the Company's traditional channels. This multi-channel distribution system purchases, warehouses, and sells a variety of automatic identification components including printers, supplies, scanners, and application software, and brings system integration expertise to the end users. Two of the Company's distributors are classified as National Distributors because of their broad territorial representation within the United States. Other distributors have qualified for Zebra Solution Center (ZSC) status. ZSCs carry the full range of Zebra printers and supplies, and 17 focus on providing a Zebra bar code solution to their customers. VARs, OEMs and systems integrators provide customers with a variety of automatic identification components including scanners, accessories, applications software and systems integration expertise, and, in the case of some OEMs, then resell the products under their own logos. The Company utilizes 72 U.S. and approximately 100 international resellers. The resellers typically cover specific geographic areas of the United States and 70 other countries around the world. The Company has a subsidiary in the United Kingdom that serves as a sales office, product distribution warehouse and service center. For the six months ended June 28, 1997 and the fiscal years ended December 31, 1996, 1995, and 1994, sales to international customers comprised 47.2%, 45.8%, 45.2% and 39.8%, respectively, of total net sales for the Company. Because of the wide variety of end users and applications for the Company's products and because the Company's products are frequently integrated with products from other manufacturers to form a complete automatic identification system, management believes that it is more effective to sell printing systems principally through multiple distributors and resellers with defined market niche expertise and presence rather than directly to end users. By forming relationships with distributors who serve various submarkets and types of end users and who have existing customers and in-place sales and distribution networks which identify new customers and sales opportunities, the Company is able to reach end users throughout the world in a variety of industries. The Company may designate a customer as a key account when purchases of Company products reach certain levels. Zebra sales personnel, together with the Company's distribution partners, manage these accounts to ensure their complete needs are met, including consistent support for projects and applications around the world. MARKETING. The Company's marketing operations include product management, marketing communications, technical services, training, market research and market development functions. The product management group specifies new products and product enhancements that create customer value, and manages product positioning and introductions. The marketing services group operates as an internal advertising and public relations resource. This group, working with advertising agencies and contractors, creates advertising, brochures and documentation, manages trade show exhibits and places articles highlighting applications of Zebra products in trade and industry publications. The technical services group offers technical support to the Company's distribution channels and end users of the Company's products. These services include, among other things, a hotline staffed by experienced technical personnel and, when necessary, trips to customer sites. The Company's market research group is a strategic planning, research oriented group, which focuses on market definition and analysis of Company and competitor strengths. This group identifies and analyzes market opportunities for current, planned and potential products, and gathers and analyzes competitive and market intelligence. The market development group is responsible for the development of new market opportunities and relationships with key customers, vendors and government regulatory and industry standards committees. This group also prepares speeches, application training and seminars which are presented around the world to industry and customer groups. CUSTOMERS. The Company estimates that it presently has over 250,000 bar code printing systems installed at approximately 25,000 user sites around the world. Sales to The Peak Technologies Group, Inc., one of the Company's National Distributors, accounted for more than 20.0% of the Company's total net sales in the fiscal year ended December 31, 1996 and 16.8% in the six months ended June 28, 1997. MANUFACTURING The Company's strategy is to create and produce production designs which optimize product performance, quality, reliability, durability and versatility. These designs facilitate cost-efficient materials sourcing and assembly methods with high standards of workmanship. The Company has aggressively pursued a manufacturing strategy of increasing control over the manufacture of its hardware products by developing in-house capability to produce all mechanical and electronic assemblies, and it has designed many of its 18 own tools, fixtures and test equipment. The Company's manufacturing engineering staff is dedicated to co-engineering new products with Zebra's new products engineers and with vendors, thereby creating products that are highly manufacturable, and to specifying and designing manufacturing processes and facilities simultaneously with product design. RESEARCH AND DEVELOPMENT The Company devotes significant resources to developing new products to serve the needs of targeted markets, providing bar code solutions to users of the Company's printing systems and developing new and reliable products that have a high degree of manufacturability. The Company spent $5,167,000, $9,850,000, $7,771,000, and $5,835,000, in the six months ended June 28, 1997 and the fiscal years ended December 31, 1996, 1995, and 1994, respectively, on research and development. 19 SELLING STOCKHOLDERS The Selling Stockholders are as follows:
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING SHARES BENEFICIALLY OWNED AFTER OFFERING ------------------------------------------- ------------------------ % OF COMBINED NUMBER OF VOTING SHARES NAME CLASS NUMBER PERCENT(1) POWER(1)(2) OFFERED(3) NUMBER PERCENT(4) - ------------------------------- ----- --------- ------------- ----------------- ----------- --------- ------------- Edward L. Kaplan(5)............ A -- -- -- 0 -- -- B 2,736,504(6) 11.3% 30.6% 1,153,710 1,582,794 6.5% Carol K. Kaplan................ A -- -- -- 0 -- -- B 563,800(7) 2.3% 6.3% 237,698 326,102 1.3% Gerhard Cless(8)............... A 140,000(9) * * 0 140,000 * B 2,812,052 10) 11.6% 31.4% 344,000 2,468,052 10.2% Ruth I. Cless.................. A -- 11) -- -- 0 -- -- B 1,104,740 12) 4.6% 12.3% 320,936 783,804 3.2% % OF COMBINED VOTING NAME POWER(2)(4) - ------------------------------- ----------------- Edward L. Kaplan(5)............ -- 22.3% Carol K. Kaplan................ -- 4.6% Gerhard Cless(8)............... * 34.7% Ruth I. Cless.................. -- 11.0%
- ------------------------------ * Less than one percent. (1) Percentages based upon 17,002,342 shares of Class A Common Stock and 7,255,404 shares of Class B Common Stock outstanding on August 8, 1997. (2) Each share of Class A Common Stock has one vote and each share of Class B Common Stock has ten votes. (3) Assumes no exercise of the Underwriters' over-allotment option. If such option is exercised, Mr. Kaplan, Mrs. Kaplan and Mr. Cless will sell up to an additional 173,057, 35,654 and 99,740 shares, respectively. Following such sale, Mr. Kaplan, Mrs. Kaplan and Mr. Cless would own 5.8%, 1.2% and 9.8%, respectively, of the combined outstanding Class A and Class B Common Stock (with 20.6%, 4.3% and 34.7%, respectively, of the combined voting power). (4) Percentages based upon the number of shares of Class A Common Stock and Class B Common Stock outstanding on August 8, 1997, after giving effect to the offering of the shares hereby. (5) Mr. Kaplan is the Chairman and Chief Executive Officer of the Company and has also served as President of the Company since April 1997 on an interim basis. (6) Excludes 563,800 shares which may be deemed held of record or beneficially by Mr. Kaplan's wife, Carol, which may be deemed to be beneficially owned by Mr. Kaplan. (7) Excludes 2,736,504 shares which may be deemed held of record or beneficially by Mr. Kaplan, which may be deemed to be beneficially owned by Mrs. Kaplan. (8) Mr. Cless is the Company's Executive Vice President for Engineering and Technology and Secretary and a member of the Board of Directors. (9) Includes 140,000 shares held by a foundation of which Mr. Cless is a director. (10) Includes 344,000 shares held by Jerry I. Rudman, as Trustee under the Gerhard Cless 1990 Income Trust, which shares are being sold in the offering. Excludes 1,104,740 shares held of record or beneficially by Mr. Cless' wife, Ruth, which may be deemed to be beneficially owned by Mr. Cless. (11) Excludes 140,000 shares held of record or beneficially by Mr. Cless which may be deemed to be beneficially owned by Mrs. Cless. (12) Includes 320,936 shares held by Jerry I. Rudman, as Trustee under the Ruth I. Cless 1990 Income Trust, which shares are being sold in the offering. Excludes 2,812,052 shares held of record or beneficially by Mr. Cless, which may be deemed to be beneficially owned by Mrs. Cless. 20 Upon its sale in this offering, each share of Class B Common Stock sold by the Selling Stockholders automatically converts into a share of Class A Common Stock. The Company's executive officers, directors, and their families and family trusts, will in the aggregate beneficially own substantially all of the outstanding Class B Common Stock, which will represent approximately 21.4% of the Company's outstanding shares, and approximately 73.2% of the voting power, of Common Stock after this offering. Holders of the Class B Common Stock are entitled to 10 votes per share, while holders of the Class A Common Stock are entitled to only one vote per share. As a result, the holders of the Class B Common Stock, if acting together, would be able effectively to control most matters requiring approval by the stockholders of the Company, including the election of all of the directors. If at any time the number of outstanding shares of Class B Common Stock represents less than 10% of the total number of outstanding shares of both classes of Common Stock, then such outstanding shares of Class B Common Stock will automatically convert into an equal number of shares of Class A Common Stock. Certain provisions of the Company's Bylaws and Certificate of Incorporation could have the effect of delaying, deferring or preventing a change in control of the Company. Certain of the Company's directors, officers and stockholders own Unique Building Corporation, which transacts business with the Company. Such ownership could result in conflicts of interest for such directors, officers and stockholders in situations where the Company's interests and those of such other companies are not identical. 21 UNDERWRITING William Blair & Company, L.L.C., The Robinson-Humphrey Company, Inc. and Montgomery Securities (collectively, the "Underwriters") have severally agreed, subject to the terms and conditions set forth in the Underwriting Agreement by and among the Company, the Selling Stockholders and the Underwriters, to purchase from the Selling Stockholders the aggregate number of shares of Common Stock (excluding the over-allotment shares) set forth opposite each Underwriter's name below:
NUMBER OF UNDERWRITERS SHARES - ---------------------------------------------------------------------------------- ----------- William Blair & Company, L.L.C.................................................... The Robinson-Humphrey Company, Inc................................................ Montgomery Securities............................................................. ----------- Total......................................................................... ----------- -----------
The nature of the Underwriters' obligations under the Underwriting Agreement is such that all shares of the Common Stock offered hereby, excluding shares covered by the over-allotment option granted to the Underwriters, must be purchased if any are purchased. In the event of a default by any Underwriters, the Underwriting Agreement provides, in certain circumstances, that purchase commitments of the nondefaulting Underwriters may be increased or such Underwriting Agreement may be terminated. The Underwriters have advised the Company and the Selling Stockholders that they propose to offer the Common Stock directly to the public initially at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession of not more than $ per share. Additionally, the Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. After the shares are released for sale to the public, the public offering price and other selling terms may be changed by the Underwriters. Certain Selling Stockholders have granted to the Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an additional 308,451 shares of Common Stock at the same price per share to be paid by the Underwriters for the other shares offered hereby. The Underwriters may exercise the option only for the purpose of covering over-allotments, if any, made in connection with the distribution of the Common Stock offered hereby. The Company, the Selling Stockholders and the Company's directors and executive officers have agreed, subject to certain gifting exceptions, that they will not sell, offer to sell, issue, distribute or otherwise dispose of any shares of Common Stock or any options, rights or warrants with respect to any shares of Common Stock or register any shares of Common Stock for sale under the Securities Act, for a period of 90 days after the effective date of the Registration Statement of which this Prospectus is a part without the prior written consent of William Blair & Company, L.L.C., except that the Selling Stockholders may sell shares pursuant to the over-allotment option. The Underwriters have provided services to the Company in the past and received customary compensation. The Representatives have advised the Company that, pursuant to Regulation M under the Exchange Act, certain persons participating in the offering may engage in transactions that may stabilize, maintain or otherwise affect the market price of the Common Stock, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids. A "stabilizing bid" is a bid for, or the purchase of, the Common Stock on behalf of the Underwriters for the purposes of fixing or maintaining the price of the Common Stock. A "syndicate covering transaction" is a bid for, or the purchase of, the Common Stock on behalf of the Underwriters to reduce a short position incurred by the Underwriters in connection with the offering. A "penalty bid" is an arrangement permitting a managing underwriter to reclaim the selling concession otherwise accruing to an Underwriter or syndicate member in connection with the offering if the Common Stock originally sold by such Underwriter or syndicate member is purchased by the 22 Underwriters in a syndicate covering transaction and has therefore not been effectively placed by such Underwriter or syndicate member. The Underwriters have advised the Company that such transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time. One or more of the Underwriters currently act as market makers for the Common Stock and may engage in "passive market making" in such securities on the Nasdaq National Market in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 permits, upon the satisfaction of certain conditions, underwriters participating in a distribution that are also Nasdaq market makers in the security being distributed to engage in limited market making transactions during the period when Rule 103 would otherwise prohibit such activity. Rule 103 prohibits underwriters engaged in passive market making generally from entering a bid or effecting a purchase price that exceeds the highest bid for those securities displayed on the Nasdaq National Market by a market maker that is not participating in the distribution. Under Rule 103, each underwriter engaged in passive market making is subject to a daily net purchase limitation equal to the greater of (i) 30% of such entity's average daily trading volume during the two full calendar months immediately preceding, or any 60 consecutive calendar days ending within the ten calendar days preceding, the date of the filing of the registration statement under the Securities Act pertaining to the security to be distributed or (ii) 200 shares of common stock. The Company and the Selling Stockholders have agreed to indemnify the Underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Underwriters may be required to make in respect thereof. William Blair & Company, L.L.C. from time to time provides and in the past has provided investment banking services to the Company and is serving as the lead manager in this offering. LEGAL MATTERS The legality of the shares of Class A Common Stock offered hereby will be passed upon for the Company and the Selling Stockholders by Katten Muchin & Zavis, a partnership including professional corporations, Chicago, Illinois. Winston & Strawn, Chicago, Illinois, is acting as counsel for the Underwriters in connection with certain legal matters relating to the Class A Common Stock offered hereby. EXPERTS The consolidated financial statements and schedule of the Company as of December 31, 1995 and 1996, and for each of the years in the three-year period ended December 31, 1996, have been incorporated by reference in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere and incorporated by reference in the Registration Statement, and upon the authority of said firm as experts in accounting and auditing. With respect to the unaudited interim consolidated financial information for the periods ended March 29, 1997 and June 28, 1997, incorporated by reference herein, the independent certified public accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports included in the Company's quarterly reports on Form 10-Q for the quarters ended March 29, 1997 and June 28, 1997 and incorporated by reference herein, state that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of section 11 of the Securities Act for their reports on the unaudited interim financial information because those reports are not a "report" or a "part" of the registration statement prepared or certified by the accountants within the meaning of sections 7 and 11 of the Securities Act. 23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 3 Risk Factors.............................................................. 5 Safe Harbor for Forward-Looking Statements................................ 6 Use of Proceeds........................................................... 7 Price Range of Common Stock and Dividends................................. 7 Selected Financial Data................................................... 8 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................. 10 Business.................................................................. 15 Selling Stockholders...................................................... 20 Underwriting.............................................................. 22 Legal Matters............................................................. 23 Experts................................................................... 23
2,056,344 SHARES [LOGO] CLASS A COMMON STOCK ------------------- PROSPECTUS AUGUST , 1997 ------------------- WILLIAM BLAIR & COMPANY THE ROBINSON-HUMPHREY COMPANY, INC. MONTGOMERY SECURITIES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Set forth below is an estimate of the approximate amount of fees and expenses (other than underwriting commissions and discounts) payable by the Selling Stockholders in connection with the issuance and distribution of the Class A Common Stock pursuant to the Prospectus contained in this Registration Statement.
TO BE PAID BY THE SELLING STOCKHOLDERS ------------ Securities and Exchange Commission registration fee....................................... $ 22,305 Nasdaq filing fee......................................................................... 7,860 Nasdaq listing fee........................................................................ -- Accountants' fees and expenses............................................................ 25,000 Blue Sky fees and expenses................................................................ 3,000 Legal fees and expenses................................................................... 50,000 Transfer Agent and Registrar fees and expenses............................................ 5,000 Printing and Engraving.................................................................... 40,000 Miscellaneous expenses.................................................................... 46,835 ------------ Total................................................................................... $ 200,000 ------------ ------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article Ninth of the Registrant's Certificate of Incorporation provides that the Registrant shall indemnify its directors to the full extent permitted by the Delaware General Corporation Law and may indemnify its officers to such extent, except that the Company shall not be obligated to indemnify any such person (i) with respect to proceedings, claims or actions initiated or brought voluntarily by any such person and not by way of defense, or (ii) for any amounts paid in settlement of an action indemnified against by the Company without the prior written consent of the Company. With the approval of its stockholders, the Company has entered into indemnity agreements with each of its directors and certain of its officers. These agreements may require the Company, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers, to advance expenses to them as they are incurred, provided that they undertake to repay the amount advanced if it is ultimately determined by a court that they are not entitled to indemnification, and to obtain directors' and officers' liability insurance if available on reasonable terms. In addition, Article Eighth of the Registrant's Certificate of Incorporation provides that a director of the Registrant shall not be personally liable to the Registrant or its stockholders for monetary damages for breach of his or her fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derives an improper personal benefit. Reference is made to Section 145 of the General Corporation Law of the State of Delaware which provides for indemnification of directors and officers in certain circumstances. The Company has an insurance policy which entitles the Company to be reimbursed for certain indemnity payments it is required or permitted to make to its directors and officers. II-1 ITEM 16. EXHIBITS.
1 Form of Underwriting Agreement. 3.1 Certificate of Incorporation of the Registrant, as amended. 3.2* Bylaws of the Registrant. 3.3** Amendment to Bylaws of the Registrant. 3.4* Specimen stock certificate representing Class A Common Stock. 5 Opinion of Katten Muchin & Zavis as to the legality of the securities being registered (including consent). 24.1 Consent of KPMG Peat Marwick LLP. 24.2 Acknowledgement Letter of KPMG Peat Marwick LLP regarding unaudited interim financial information. 24.3 Consent of Katten Muchin & Zavis (contained in their opinion filed as Exhibit 5 hereto). 25 Power of Attorney (contained on the signature page hereto).
- ------------------------ * Filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Registration Statement on Form S-1, File No. 33-41576, and incorporated herein by reference. ** Filed with the Securities and Exchange Commission as an Exhibit to the Registrant's 1992 Annual Report on Form 10-K and incorporated herein by reference. ITEM 17. UNDERTAKINGS. The Registrant hereby undertakes: (1) For purposes of determining any liability under the Securities Act of 1933 (the "Securities Act"), each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") 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. (2) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (3) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (4) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on August 8, 1997. ZEBRA TECHNOLOGIES CORPORATION By: /S/ EDWARD L. KAPLAN ----------------------------------------- Edward L. Kaplan CHIEF EXECUTIVE OFFICER AND CHAIRMAN
POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Edward L. Kaplan, Charles R. Whitchurch and Matthew S. Brown, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution, to sign on his behalf, individually and in each capacity stated below, all amendments and post-effective amendments to this Registration Statement on Form S-3 (including any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933 and all amendments thereto) and to file the same, with all exhibits thereto and any other documents in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, granting unto said attorneys-in-fact and agents 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 and to all intents and purposes as each might or could do in person, hereby ratifying and confirming each act that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE - ------------------------------ -------------------------- ------------------- Chief Executive Officer /s/ EDWARD L. KAPLAN (Principal Executive - ------------------------------ Officer), Chairman and August 8, 1997 Edward L. Kaplan Director /s/ GERHARD CLESS - ------------------------------ Executive Vice President, August 8, 1997 Gerhard Cless Secretary and Director Chief Financial Officer /s/ CHARLES R. WHITCHURCH and Treasurer (Principal - ------------------------------ Financial and Accounting August 8, 1997 Charles R. Whitchurch Officer) /s/ CHRISTOPHER G. KNOWLES - ------------------------------ Director August 8, 1997 Christopher G. Knowles
II-3
NAME TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ DAVID P. RILEY - ------------------------------ Director August 8, 1997 David P. Riley /s/ MICHAEL A. SMITH - ------------------------------ Director August 8, 1997 Michael A. Smith
II-4 INDEX TO EXHIBITS
SEQUENTIAL EXHIBITS DESCRIPTION PAGE NO. - ----------- -------------------------------------------------------------------------------------------- ----------- 1 Form of Underwriting Agreement. 3.1 Certificate of Incorporation of the Registrant, as amended. 3.2* Bylaws of the Registrant. 3.3** Amendment to Bylaws of the Registrant. 3.4* Specimen stock certificate representing Class A Common Stock. 5 Opinion of Katten Muchin & Zavis as to the legality of the securities being registered (including consent). 24.1 Consent of KPMG Peat Marwick LLP. 24.2 Acknowledgement Letter of KPMG Peat Marwick LLP regarding unaudited interim financial information. 24.3 Consent of Katten Muchin & Zavis (contained in their opinion filed as Exhibit 5 hereto). 25 Power of Attorney (contained on the signature page hereto).
- ------------------------ * Filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Registration Statement on Form S-1, File No. 33-41576, and incorporated herein by reference. ** Filed with the Securities and Exchange Commission as an Exhibit to the Registrant's 1992 Annual Report on Form 10-K and incorporated herein by reference. EX-1 2 EX 1 UNDERWRITING AGREEMENT ZEBRA TECHNOLOGIES CORPORATION 2,056,344 SHARES CLASS A COMMON STOCK UNDERWRITING AGREEMENT August [___], 1997 William Blair & Company The Robinson-Humphrey Company, Inc. Montgomery Securities As Underwriters Named in Schedule A c/o William Blair & Company 222 West Adams Street Chicago, Illinois 60606 Ladies and Gentlemen: SECTION 1. INTRODUCTORY. Zebra Technologies Corporation, a Delaware corporation (the "Company"), has an authorized capital stock consisting of [10,000,000] shares of Preferred Stock, $.01 par value, of which [_________] shares have been issued as of August [___], 1997, [35,000,000] shares of Class A Common Stock, $.01 par value (the "Class A Common Stock"), of which [___________] shares were outstanding as of August [___], 1997 and [35,000,000] shares of Class B Common Stock, $.01 par value (the "Class B Common Stock"; the Class B Common Stock and the Class A Common Stock are hereinafter collectively referred to as the "Common Stock"), of which [__________] shares were outstanding as of August [___], 1997. Certain stockholders of the Company (collectively referred to as the "Selling Stockholders" and named in Schedule B) propose to sell 2,056,344 shares of the Company's issued and outstanding Class B Common Stock, which shares of Class B Common Stock, pursuant to their terms, shall automatically be converted into an equal number of shares of Class A Common Stock upon such sale, to you as the underwriters named in Schedule A hereto as it may be amended by the Pricing Agreement hereinafter defined (the "Underwriters"), who are acting severally and not jointly. Collectively, such total of 2,056,344 shares of Class A Common Stock proposed to be sold by the Selling Stockholders are hereinafter referred to as the "Firm Shares." In addition, certain Selling Stockholders propose to grant to the Underwriters an option to purchase up to 308,451 additional shares of Class A Common Stock (the "Option Shares") as provided in Section 5 hereof. The Firm Shares and, to the extent such option is exercised, the Option - --------------- * Plus an option to acquire up to 308,451 additional shares from the Selling Stockholders to cover overallotment. Shares, are hereinafter collectively referred to as the "Shares." You have advised the Company and the Selling Stockholders that the Underwriters propose to make a public offering of their respective portions of the Shares as soon as you deem advisable after the registration statement hereinafter referred to becomes effective, if it has not yet become effective, and the Pricing Agreement hereinafter defined has been executed and delivered. Prior to the purchase and public offering of the Shares by the several Underwriters, the Company, the Selling Stockholders and the Underwriters shall enter into an agreement substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the form of an exchange of any standard form of written telecommunication between the Company, the Selling Stockholders and the Underwriters and shall specify such applicable information as is indicated in Exhibit A hereto. The offering of the Shares will be governed by this Agreement, as supplemented by the Pricing Agreement. From and after the date of the execution and delivery of the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement. The Company and each of the Selling Stockholders hereby confirm their agreements with the Underwriters as follows: SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the several Underwriters that: (a) A registration statement on Form S-3 (File No. 333-[________]) and a related preliminary prospectus with respect to the Shares have been prepared and filed with the Securities and Exchange Commission (the "Commission") by the Company in conformity with the requirements of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "1933 Act;" all references herein to specific rules are rules promulgated under the 1933 Act); and the Company has so prepared and has filed such amendments thereto, if any, and such amended preliminary prospectuses as may have been required to the date hereof and will file such additional amendments thereto and such amended prospectuses as may hereafter be required. There have been or will promptly be delivered to you three signed copies of such registration statement and amendments, three copies of each exhibit filed therewith, and conformed copies of such registration statement and amendments (but without exhibits) and of the related preliminary prospectus or prospectuses and final forms of prospectus for each of the Underwriters. Such registration statement (as amended, if applicable) at the time it becomes effective and the prospectus -2- constituting a part thereof (including the information, if any, deemed to be part thereof pursuant to Rule 430A(b) and/or Rule 434), as from time to time amended or supplemented, are hereinafter referred to as the "Registration Statement," and the "Prospectus," respectively, except that if any revised prospectus shall be provided to the Underwriters by the Company for use in connection with the offering of the Shares which differs from the Prospectus on file at the Commission at the time the Registration Statement became or becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b)), the term Prospectus shall refer to such revised prospectus from and after the time it was provided to the Underwriters for such use. If the Company elects to rely on Rule 434 of the 1933 Act, all references to "Prospectus" shall be deemed to include, without limitation, the form of prospectus and the term sheet, taken together, provided to the Underwriters by the Company in accordance with Rule 434 of the 1933 Act (the "Rule 434 Prospectus"). Any registration statement (including any amendment or supplement thereto or information which is deemed part thereof) filed by the Company under Rule 462(b) (the "Rule 462(b) Registration Statement") shall be deemed to be part of the "Registration Statement" as defined herein, and any prospectus (including any amendment or supplement thereto or information which is deemed part thereof) included in such registration statement shall be deemed to be part of the "Prospectus," as defined herein, as appropriate. The Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder are hereinafter collectively referred to as the "Exchange Act." Any reference herein to any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Form S-3 under the 1933 Act ("Incorporated Documents"), as of the date of such preliminary prospectus or Prospectus, as the case may be. Any document filed by the Company under the Exchange Act after the effective date of the Registration Statement or the date of the Prospectus and incorporated by reference in the Prospectus shall be deemed to be included in that Registration Statement and the Prospectus as of the date of such filing. The Incorporated Documents, when filed with the Commission, conformed or will conform in all material respects to the requirements of the Exchange Act and none of such documents contained or will contain an untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (b) The Commission has not issued any order preventing or suspending the use of any preliminary prospectus, and each preliminary prospectus has conformed in all material respects with the requirements of the 1933 Act and, as of its date, has -3- not included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading; and when the Registration Statement became or becomes effective, and at all times subsequent thereto, up to the First Closing Date or the Second Closing Date hereinafter defined, as the case may be, the Registration Statement, including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b), if applicable, and the Prospectus and any amendments or supplements thereto, contained or will contain all statements that are required to be stated therein in accordance with the 1933 Act and in all material respects conformed or will in all material respects conform to the requirements of the 1933 Act, and neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, included or will include any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company makes no representation or warranty as to information contained in or omitted from any preliminary prospectus, the Registration Statement, the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter specifically for use in the preparation thereof. (c) The Company and each of its subsidiaries has been duly incorporated and are existing as corporations in good standing under the laws of their respective places of incorporation, with corporate power and authority to own their properties and conduct their business as described in the Prospectus; the Company and each of its subsidiaries are duly qualified to do business as foreign corporations under the corporation law of, and are in good standing as such in, each jurisdiction in which they own or lease properties, have an office, or in which business is conducted and such qualification is required except in any such case where the failure to so qualify or be in good standing would not have a material adverse effect upon the Company as a whole; and no proceeding of which the Company has knowledge has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. (d) Except as disclosed in the Registration Statement, the Company owns directly 100 percent of the issued and outstanding capital stock of each of its subsidiaries, free and clear of any claims, liens, encumbrances or security interests and all of such capital stock has been duly authorized and validly issued and is fully paid and nonassessable. -4- (e) The issued and outstanding shares of capital stock of the Company as set forth in the Prospectus have been duly authorized and validly issued, are fully paid and nonassessable; and there is no commitment, plan or arrangement to issue, and no outstanding option, warrant, or other right calling for the issuance of, any share of capital stock of the Company or any of its subsidiaries, or any security or other instrument which by its terms is convertible into or exchangeable for capital stock of the Company or any of its subsidiaries, except as described in the Prospectus. Except as described in the Prospectus, there is outstanding no security or other instrument which by its terms is convertible into or exchangeable for capital stock of the Company or any of its subsidiaries. (f) The making and performance by the Company of this Agreement and the Pricing Agreement have been duly authorized by all necessary corporate action and will not violate any provision of the Company's charter or bylaws and will not result in the breach, or be in contravention, of any provision of any agreement, franchise, license, indenture, mortgage, deed of trust, or other instrument to which the Company or any of its subsidiaries is a party or by which the Company, any of its subsidiaries or the respective property of any of them may be bound or affected, or any order, rule or regulation applicable to the Company or any of its subsidiaries of any court or regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, or any order of any court or governmental agency or authority entered in any proceeding to which the Company or any of its subsidiaries was or is now a party or by which it is bound. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the Pricing Agreement or the consummation of the transactions contemplated herein or therein, except for compliance with the 1933 Act and blue sky laws applicable to the public offering of the Shares by the several Underwriters and clearance of such offering with the National Association of Securities Dealers, Inc. (the "NASD"). This Agreement has been duly executed and delivered by the Company. (g) KPMG Peat Marwick, who have expressed their opinions with respect to certain of the financial statements included or incorporated by reference in the Registration Statement are independent accountants as required by the 1933 Act. (h) The consolidated financial statements of the Company included or incorporated by reference in the Registration Statement present fairly the consolidated financial position of the Company as of the respective dates of such financial statements, and the consolidated results of operations and -5- cash flows of the Company for the respective periods covered thereby, all in conformity with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed in the Prospectus. The financial information set forth in the Prospectus under "Summary Financial Data" presents fairly on the basis stated in the Prospectus, the information set forth therein; and the pro forma information included in the Prospectus presents fairly the information shown therein, has been prepared in accordance with the Commission's rules and guidelines with respect to pro forma information, has been properly compiled on the pro forma basis described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate under the circumstances. (i) Neither the Company nor any of its subsidiaries is in violation of its charter or in default under any consent decree, or in default with respect to any material provision of any lease, loan agreement, franchise, license, permit or other contract obligation to which it is a party; and there does not exist any state of facts which constitutes an event of default as defined in such documents or which, with notice or lapse of time or both, would constitute such an event of default, in each case, except for defaults which neither singly nor in the aggregate are material to the Company and its subsidiaries taken as a whole. (j) There are no material legal or governmental proceedings pending, or to the Company's knowledge, threatened to which the Company or any of its subsidiaries is or may be a party or of which material property owned or leased by the Company or any of its subsidiaries is or may be the subject, or related to environmental or discrimination matters which are not disclosed in the Prospectus, or which question the validity of this Agreement or the Pricing Agreement or any action taken or to be taken pursuant hereto or thereto. (k) There are no holders of securities of the Company having rights to registration thereof or preemptive rights to purchase Common Stock except as disclosed in the Prospectus. (l) The Company and its subsidiaries have good and marketable title to all the properties and assets reflected as owned in the financial statements hereinabove described (or elsewhere in the Prospectus), subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those, if any, reflected in such financial statements (or elsewhere in the Prospectus) or which are not material to the Company and its subsidiaries taken as a whole. Except for the approximately 154,300 square foot expanded facility in Vernon Hills, Illinois which the Company expects to lease from Unique Building Corporation (as described in the Prospectus), the -6- Company and its subsidiaries hold their respective leased properties which are material to the Company and its subsidiaries taken as a whole under valid and binding leases. (m) The Company has not taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares. (n) Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, and except as set forth or contemplated by the Prospectus, the Company and its subsidiaries, taken as a whole, have not incurred any material liabilities or obligations, direct or contingent, nor entered into any material transactions not in the ordinary course of business and there has not been any material adverse change in their condition (financial or otherwise), business, assets, operations or prospects, nor any change in their capital stock, short-term debt or long-term debt. (o) The Company agrees not to sell, contract to sell or otherwise dispose of any Class A Common Stock or securities convertible into Class A Common Stock (except Common Stock issued pursuant to currently outstanding options, warrants or convertible securities) for a period of 90 days after this Agreement becomes effective without the prior written consent of the Underwriters. (p) There is no material document of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. (q) The Company or its subsidiaries own and possess all right, title and interest in and to, or has duly licensed from third parties, all trademarks, copyrights and other proprietary rights ("Trade Rights") material to the business of the Company and its subsidiaries taken as a whole and neither the Company nor any of its subsidiaries has granted any lien or encumbrance on, or granted any right of license (other than in the ordinary course of its business) with respect to, any such Trade Rights. Neither the Company nor any of its subsidiaries has received any notice of infringement, misappropriation or conflict from any third party as to such material Trade Rights that has not been resolved or disposed of and neither the Company nor any of its subsidiaries has infringed, misappropriated or otherwise conflicted with material Trade Rights of any third parties, which infringement, misappropriation or conflict would have a material adverse effect upon the condition (financial or -7- otherwise), business, assets, operations or prospects of the Company and its subsidiaries taken as a whole. (r) The conduct of the business of the Company and its subsidiaries is in compliance in all respects with applicable federal, state, local and foreign laws and regulations, except where the failure to be in compliance would not have a material adverse effect upon the condition (financial or otherwise), business, assets, operations or prospects of the Company and its subsidiaries taken as a whole. (s) The Company and its subsidiaries have filed all necessary federal and state income and franchise tax returns and have paid all taxes shown as due thereon, and there is no tax deficiency that has been, or to the knowledge of the Company might be, asserted against the Company or any of its subsidiaries or any of their respective properties or assets that would or could be expected to adversely affect the financial condition, assets, operations or prospects of the Company and its subsidiaries taken as a whole. (t) The Shares have been authorized for trading over-the-counter on the Nasdaq National Market System. (u) The Company is not, and does not intend to conduct its business in a manner in which it would become, an "investment company" as defined in Section 3(a) of the Investment Company Act of 1940, as amended. SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING STOCKHOLDERS. (a) Each Selling Stockholder severally represents and warrants to, and agrees with, the Company and the Underwriters that: (i) Such Selling Stockholder has, and on the First Closing Date or the Second Closing Date hereinafter defined, as the case may be, will have, valid marketable title to the Shares proposed to be sold by such Selling Stockholder hereunder on such date and full right, power and authority to enter into this Agreement and the Pricing Agreement and to sell, assign, transfer and deliver such Shares hereunder, free and clear of all voting trust arrangements, liens, encumbrances, equities, claims and community property rights; and upon delivery of and payment for such Shares hereunder, the Underwriters will acquire valid marketable title thereto, free and clear of all voting trust arrangements, liens, encumbrances, equities, claims and community property rights. -8- (ii) Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to or which might be reasonably expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares. (iii) Such Selling Stockholder, other than the trusts named in Section 3(a)(iv) below, has executed and delivered a Power of Attorney (the "Power of Attorney") among the Selling Stockholder, [____________ and ___________] (the "Agents"), naming the Agents as such Selling Stockholder's attorneys-in-fact (and, by the execution by any Agent of this Agreement, such Agent hereby represents and warrants that he has been duly appointed as attorney-in-fact by the Selling Stockholders pursuant to the Power of Attorney) for the purpose of entering into and carrying out this Agreement and the Pricing Agreement, and the Power of Attorney has been duly executed by such Selling Stockholder and a copy thereof has been delivered to you. (iv) Each of The Ruth Cless Income Trust and The Gerhard Cless Income Trust (together the "Trusts") has executed and delivered a Power of Attorney (the "Trust Power of Attorney") among the Trusts, [________ and ________] (the "Trust Agents"), naming the Trust Agents as each of the Trust's attorneys-in-fact (and, by the execution by any Trust Agent of this Agreement, such Trust Agent hereby represents and warrants that he has been duly appointed as attorney-in-fact by the Trusts pursuant to the Trust Power of Attorney) for the purpose of entering into and carrying out this Agreement and the Pricing Agreement, and the Trust Power of Attorney has been duly executed by each Trust and a copy thereof has been delivered to you. (v) Such Selling Stockholder further represents, warrants and agrees that such Selling Stockholder has deposited in custody, under a Custody Agreement (the "Custody Agreement") with [__________], as custodian (the "Custodian"), certificates in negotiable form for the Shares to be sold hereunder by such Selling Stockholder, for the purpose of further delivery pursuant to this Agreement. Such Selling Stockholder agrees that the Shares to be sold by such Selling Stockholder on deposit with the Custodian are subject to the interests of the Company, the Underwriters and the other Selling Stockholders, that the arrangements made for such custody, and the appointment of the Agents pursuant to the Power of Attorney and the Trust Agents pursuant to the Trust Power of Attorney, as the case may be, are to -9- that extent irrevocable, and that the obligations of such Selling Stockholder hereunder and under the Power of Attorney and the Trust Power of Attorney, as the case may be, and the Custody Agreement shall not be terminated except as provided in this Agreement, the Power of Attorney, the Trust Power of Attorney or the Custody Agreement by any act of such Selling Stockholder, by operation of law, whether, in the case of an individual Selling Stockholder, by the death or incapacity of such Selling Stockholder or, in the case of a trust or estate, by the death of the trustee or trustees or the executor or executors or the termination of such trust or estate, or, in the case of a partnership or corporation, by the dissolution, winding-up or other event affecting the legal life of such entity, or by the occurrence of any other event. If any individual Selling Stockholder, trustee or executor should die or become incapacitated, or any such trust, estate, partnership or corporation should be terminated, or if any other event should occur before the delivery of the Shares hereunder, the documents evidencing Shares then on deposit with the Custodian shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such death, incapacity, termination or other event had not occurred, regardless of whether or not the Custodian shall have received notice thereof. Each Agent has been authorized by such Selling Stockholder to execute and deliver this Agreement and the Pricing Agreement and the Custodian has been authorized to receive and acknowledge receipt of the proceeds of sale of the Shares to be sold by such Selling Stockholder against delivery thereof and otherwise act on behalf of such Selling Stockholder. The Custody Agreement has been duly executed by such Selling Stockholder and a copy thereof has been delivered to you. (vi) Each preliminary prospectus, insofar as it has related to such Selling Stockholder and, to the knowledge of such Selling Stockholder in all other respects, as of its date, has conformed in all material respects with the requirements of the 1933 Act and, as of its date, has not included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading; and when the Registration Statement becomes effective, and at all times subsequent thereto, up to the First Closing Date or the Second Closing Date hereinafter defined, as the case may be, (1) such parts of the Registration Statement and the Prospectus and any amendments or supplements thereto as relate to such Selling Stockholder, and the Registration Statement and the Prospectus and any amendments or supplements thereto, to the knowledge of such Selling Stockholder in all other respects, contained -10- or will contain all statements that are required to be stated therein in accordance with the 1933 Act and in all material respects conformed or will in all material respects conform to the requirements of the 1933 Act, and (2) neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, as it relates to such Selling Stockholder, and, to the knowledge of such Selling Stockholder in all other respects, included or will include any untrue statement of a material fact or omitted or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided that neither clause (1) nor (2) shall have any effect if information has been given by such Selling Stockholder to the Company and the Underwriters in writing which would eliminate or remedy any such untrue statement or omission. (vii) Such Selling Stockholder agrees with the Company and the Underwriters not to sell, contract to sell or otherwise dispose of any Common Stock for a period of 90 days after this Agreement becomes effective without the prior written consent of the Underwriters. (b) Neither Edward L. Kaplan nor Gerhard Cless has reason to believe that the representations and warranties of the Company set forth in Section 2 of this Agreement are not true and correct in all material respects. In order to document the Underwriters' compliance with the reporting and withholding provisions of the Code with respect to the transactions herein contemplated, each of the Selling Stockholders agrees to deliver to you prior to or on the First Closing Date, as hereinafter defined, a properly completed and executed United States Treasury Department Form W-8 or W-9 (or other applicable form of statement specified by Treasury Department regulations in lieu thereof). SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. The Underwriters represent and warrant to the Company and the Selling Stockholders that the information set forth (a) on the cover page of the Prospectus with respect to price, underwriting discount and terms of the offering and (b) under "Underwriting" in the Prospectus was furnished to the Company by and on behalf of the Underwriters for use in connection with the preparation of the Registration Statement and is correct and complete in all material respects. SECTION 5. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Stockholders, severally and not jointly, agree -11- to sell to the Underwriters named in Schedule A hereto, and the Underwriters agree, severally and not jointly, to purchase from the Selling Stockholders the respective number of Firm Shares set forth opposite the names of the Selling Stockholders in Schedule B hereto at the price per share set forth in the Pricing Agreement. The obligation of each Underwriter to each Selling Stockholder shall be to purchase from such Selling Stockholder the number of full shares which (as nearly as practicable, as determined by you) bears to that number of Firm Shares set forth opposite the name of such Selling Stockholder in Schedule B hereto, the same proportion as the number of Shares set forth opposite the name of such Underwriter in Schedule A hereto bears to the total number of Firm Shares to be purchased by all Underwriters under this Agreement. The public offering price and the purchase price shall be set forth in the Pricing Agreement. At 9:00 A.M., Chicago time, on the fourth business day, if permitted under Rule 15c6-1 under the Exchange Act (or the third business day if required under Rule 15c6-1 under the Exchange Act or unless postponed in accordance with the provisions of Section 12), following the date the Registration Statement becomes effective (or, if the Company has elected to rely upon Rule 430A, the fourth business day, if permitted under Rule 15c6-1 under the Exchange Act (or the third business day if required under Rule 15c6-1 under the Exchange Act) after execution of the Pricing Agreement), or such other time not later than ten business days after such date as shall be agreed upon by you, the Company and the Custodian, the Selling Stockholders will deliver to you at the offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois, or through the facilities of The Depository Trust Company for the accounts of the several Underwriters, certificates representing the Firm Shares to be sold by them, against payment of the purchase price therefor by Federal or other funds immediately available to an account or accounts designated by the Selling Stockholders. Such time of delivery and payment is herein referred to as the "First Closing Date." The certificates for the Firm Shares so to be delivered will be in such denominations and registered in such names as you request by notice to the Custodian prior to 10:00 A.M., Chicago time, on the second full business day preceding the First Closing Date, and will be made available at the Company's expense for checking and packaging by the Underwriters at 10:00 A.M., Chicago time, on the first full business day preceding the First Closing Date. Payment for the Firm Shares so to be delivered shall be made at the time and in the manner described above at the offices of Katten Muchin & Zavis. In addition, on the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Stockholders hereby grant an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of [___________] Option Shares, at the same purchase price per share to be paid for the Firm Shares, for use solely in covering any overallotments made -12- by the Underwriters in the sale and distribution of the Firm Shares. The option granted hereunder may be exercised at any time (but not more than once) within 30 days after the date of this Agreement upon notice by you to the Company and the Agents setting forth the aggregate number of Option Shares as to which the Underwriters are exercising the option, the names and denominations in which the certificates for such shares are to be registered and the time and place at which such certificates will be delivered. Such time of delivery (which may not be earlier than the First Closing Date), being herein referred to as the "Second Closing Date," shall be determined by you, but if at any time other than the First Closing Date, shall not be earlier than three nor later than 10 full business days after delivery of such notice of exercise. The maximum number of Option Shares to be purchased from each such Selling Stockholder is set forth in Schedule B hereto. If less than the maximum number of Option Shares are to be purchased hereunder each such Selling Stockholder agrees to sell the number of Option Shares purchased by the Underwriters pursuant to this paragraph times a fraction the numerator of which is the maximum number of Option Shares to be purchased from such Selling Stockholder as set forth on Schedule B hereto and the denominator of which is the maximum number of Option Shares to be purchased from all Selling Stockholders as set forth on Schedule B hereto (subject to such adjustments to eliminate any fractional share purchases as you in your absolute discretion may make). The number of Option Shares to be purchased by each Underwriter shall be determined by multiplying the number of Option Shares to be sold by the Selling Stockholders pursuant to such notice of exercise by a fraction, the numerator of which is the number of Firm Shares to be purchased by such Underwriter as set forth opposite its name in Schedule A and the denominator of which is the total number of Firm Shares (subject to such adjustments to eliminate any fractional share purchases as you in your absolute discretion may make). Certificates for the Option Shares will be made available at the Company's expense for checking and packaging at 10:00 A.M., Chicago time, on the first full business day preceding the Second Closing Date. The manner of payment for and delivery of the Option Shares shall be the same as for the Firm Shares as specified in the preceding paragraph. You have advised the Selling Stockholders that each Underwriter has authorized you to accept delivery of its Shares, to make payment and to give receipt therefore. Each of you individually may make payment for any Shares to be purchased by any Underwriter whose funds shall not have been received by you by the First Closing Date or the Second Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any obligation hereunder. SECTION 6. COVENANTS OF THE COMPANY. The Company covenants and agrees that: (a) The Company will advise you and the Selling -13- Stockholders promptly of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the institution of any proceedings for that purpose, or of any notification of the suspension of qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceedings for that purpose, and will also advise you and the Selling Stockholders promptly of any request of the Commission for amendment or supplement of the Registration Statement, of any preliminary prospectus or of the Prospectus, or for additional information, and will not file any amendment or supplement to the Registration Statement, to any preliminary prospectus or to the Prospectus of which you and the Selling Stockholders have not been furnished with a copy prior to such filing or to which you reasonably object. (b) The Company will give you and the Selling Stockholders notice of its intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment) or any Rule 462(b) Registration Statement or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use by the Underwriters in connection with the offering of the Shares which differs from the prospectus on file at the Commission at the time the Registration Statement became or becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) and any term sheet as contemplated by Rule 434) and will furnish you and the Selling Stockholders with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which you or counsel for the Underwriters shall reasonably object in writing. (c) If the Company elects to rely on Rule 434 of the 1933 Act, the Company will prepare a term sheet that complies with the requirements of Rule 434. If the Company elects not to rely on Rule 434, the Company will provide the Underwriters with copies of the form of prospectus, in such numbers as the Underwriters may reasonably request, and file with the Commission such prospectus in accordance with Rule 424(b) of the 1933 Act by the close of business in New York City on the second business day immediately succeeding the date of the Pricing Agreement. If the Company elects to rely on Rule 434, the Company will provide the Underwriters with copies of the form of Rule 434 Prospectus, in such numbers as the Underwriters may reasonably request, by the close of business in New York City on the business day immediately succeeding the date of the Pricing Agreement. (d) If at any time when a prospectus relating to the Shares is required to be delivered under the 1933 Act any -14- event occurs as a result of which the Prospectus, including any amendments or supplements, would include an untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus, including any amendments or supplements thereto and including any revised prospectus which the Company proposes for use by the Underwriters in connection with the offering of the Shares which differs from the prospectus on file with the Commission at the time of effectiveness of the Registration Statement, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) to comply with the 1933 Act, the Company promptly will advise you thereof and will promptly prepare and file, if required pursuant to Rule 424(b), with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance; and, in case any Underwriter is required to deliver a prospectus nine months or more after the effective date of the Registration Statement, the Company upon request, but at the expense of such Underwriter, will prepare promptly such prospectus or prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the 1933 Act. (e) Neither the Company nor any of its subsidiaries will, prior to the earlier of the Second Closing Date or termination or expiration of the related option, incur any liability or obligation, direct or contingent, or enter into any material transaction, other than in the ordinary course of business, except as contemplated by the Prospectus. (f) Neither the Company nor any of its subsidiaries will acquire any capital stock of the Company prior to the earlier of the Second Closing Date or termination or expiration of the option related to the Additional Shares nor will the Company declare or pay any dividend or make any other distribution upon the Common Stock payable to stockholders of record on a date prior to the earlier of the Second Closing Date or termination or expiration of the option related to the Additional Shares, except in either case as contemplated by the Prospectus. (g) As soon as practicable, but in any event not later than November 15, 1998 the Company will make generally available to its security holders and the Underwriters an earnings statement (which need not be audited) covering a period of at least 12 months beginning after the effective date of the Registration Statement, which will satisfy the provisions of the last paragraph of Section 11(a) of the 1933 Act and Rule 158 under the 1933 Act. -15- (h) During such period as a prospectus is required by law to be delivered in connection with offers and sales of the Shares by an Underwriter or dealer, the Company will furnish to the Underwriters and counsel for the Underwriters, at its expense, subject to the provisions of subsection (d) hereof, signed copies of the Registration Statement (including exhibits thereto), and to each Underwriter copies of the Registration Statement (without exhibits thereto) and the Prospectus, each preliminary prospectus, the Incorporated Documents and all amendments and supplements to any such documents in each case as soon as available and in such quantities as you may reasonably request, for the purposes contemplated by the 1933 Act. (i) The Company will cooperate with the Underwriters in qualifying or registering the Shares for sale under the blue sky laws of such jurisdictions as you designate, and will continue such qualifications in effect so long as reasonably required for the distribution of the Shares. The Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any such jurisdiction where it is not currently qualified or where it would be subject to taxation as a foreign corporation. (j) During the period of five years hereafter, the Company will furnish you and each of the other Underwriters with a copy (i) as soon as practicable after the filing thereof, of each report filed by the Company with the Commission; and (ii) as soon as available, of each report of the Company mailed to its stockholders. (k) If, at the time of effectiveness of the Registration Statement, any information shall have been omitted therefrom in reliance upon Rule 430A and/or Rule 434, then immediately following the execution and delivery of the Pricing Agreement, the Company will prepare, and file or transmit for filing with the Commission in accordance with such Rule 430A, Rule 424(b) and/or Rule 434, copies of an amended prospectus or Term Sheet, or, if required by such Rule 430A and/or Rule 434, a post-effective amendment to the Registration Statement (including an amended prospectus), containing all information so omitted. If required, the Company will prepare and file, or transmit for filing, a Rule 462(b) Registration Statement not later than the date of the execution of the Pricing Agreement. If a Rule 462(b) Registration Statement is filed, the Company shall make payment of, or arrange for payment of, the additional registration fee owing to the Commission required by Rule 111. (l) The Company will use its best efforts to maintain the designation of the Shares to be sold hereunder on the Nasdaq National Market System, unless the Company's board of directors determines otherwise. The Company will pay the fee -16- of the NASD in connection with the review of the offering. (m) The Company will promptly deliver to the Underwriters copies of all correspondence to and from, and all documents issued to and by, the Commission in connection with the registration of the Shares under the Act. (n) Prior to the First Closing Date, the Company will issue no press release or other communication directly or indirectly and hold no press conference with respect to the Company or any of its subsidiaries or with respect to the financial condition, results of operations, business, properties, assets or liabilities of any of them, or the offering of the Shares, without your prior written consent, which consent shall not be unreasonably withheld. SECTION 7. PAYMENT OF EXPENSES. Whether or not the transactions contemplated hereunder are consummated or this Agreement becomes effective as to all of its provisions or is terminated, the Company and the Selling Stockholders agree to pay (i) all costs, fees and expenses (other than legal fees and disbursements of counsel for the Underwriters and the expenses incurred by the Underwriters) incurred in connection with the performance of the Company's obligations hereunder, including without limiting the generality of the foregoing, all fees and expenses of legal counsel for the Company and of the Company's independent accountants, all costs and expenses incurred in connection with the preparation, printing, filing and distribution of the Registration Statement, each preliminary prospectus and the Prospectus (including all Incorporated Documents, exhibits and financial statements) and all amendments and supplements provided for herein, this Agreement, the Pricing Agreement and the Blue Sky Memorandum, (ii) all costs, fees and expenses (including legal fees and disbursements of counsel for the Underwriters not to exceed $5,000) incurred by the Underwriters in connection with qualifying all or any part of the Shares for offer and sale under blue sky laws, including the preparation of a blue sky memorandum relating to the Shares and clearance of such offering with the NASD; and (iii) all fees and expenses of the Company's transfer agent, printing of the certificates for the Shares and all transfer taxes, if any, with respect to the sale and delivery of the Shares to the several Underwriters. The provisions of this Section shall not affect any agreement which the Company and the Selling Stockholders may make for the allocation or sharing of such expenses and costs. SECTION 8. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Shares on the First Closing Date and the Option Shares on the Second Closing Date shall be subject to the accuracy of the representations and warranties on the part of -17- the Company and the Selling Stockholders herein set forth as of the date hereof and as of the First Closing Date or the Second Closing Date, as the case may be, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholders of their respective obligations hereunder, and to the following additional conditions: (a) The Registration Statement shall have become effective either prior to the execution of this Agreement or not later than 1:00 P.M., Chicago time, on the first full business day after the date of this Agreement, or such later time as shall have been consented to by you but in no event later than 1:00 P.M., Chicago time, on the third full business day following the date hereof; and prior to the First Closing Date or the Second Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Company, the Selling Stockholders or you, shall be contemplated by the Commission. If the Company has elected to rely upon Rule 430A and/or Rule 434, the information concerning the public offering price of the Shares and price-related information shall have been transmitted to the Commission for filing pursuant to Rule 424(b) within the prescribed period and the Company will provide evidence satisfactory to the Underwriters of such timely filing (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rules 430A and 424(b)). If a Rule 462(b) Registration Statement is required, such Registration Statement shall have been transmitted to the Commission for filing and become effective within the prescribed time period and, prior to the First Closing Date, the Company shall have provided evidence of such filing and effectiveness in accordance with Rule 462(b). (b) The Shares shall have been qualified for sale under the blue sky laws of such states as shall have been specified by the Underwriters. (c) The legality and sufficiency of the authorization, issuance and sale or transfer and sale of the Shares hereunder, the validity and form of the certificates representing the Shares, the execution and delivery of this Agreement and the Pricing Agreement, and all corporate proceedings and other legal matters incident thereto, and the form of the Registration Statement and the Prospectus (except financial statements) shall have been approved by counsel for the Underwriters exercising reasonable judgment. (d) You shall not have advised the Company that the Registration Statement or the Prospectus or any amendment or -18- supplement thereto, contains an untrue statement of fact, which, in the opinion of counsel for the Underwriters, is material or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or necessary to make the statements therein not misleading. (e) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, which, in the judgment of the Underwriters, makes it impractical or inadvisable to proceed with the public offering or purchase of the Shares as contemplated hereby. (f) There shall have been furnished to you, on the First Closing Date or the Second Closing Date, as the case may be, except as otherwise expressly provided below: (i) An opinion of Katten Muchin & Zavis, counsel for the Company and for the Selling Stockholders, addressed to the Underwriters and dated the First Closing Date or the Second Closing Date, as the case may be, to the effect that: (1) the Company has been duly incorporated and is existing as a corporation in good standing under the laws of the State of Delaware with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and the Company has been duly qualified to do business as a foreign corporation under the corporation law of, and is in good standing as such in Illinois; (2) an opinion to the same general effect as clause (1) of this subparagraph (i) in respect of each of Company's subsidiaries; (3) all of the issued and outstanding capital stock of each of the Company's subsidiaries has been duly authorized, validly issued and is fully paid and nonassessable, and, except as disclosed in the Registration Statement, the Company is the sole registered owner of 100 percent of the outstanding capital stock of each of its subsidiaries, and such counsel knows, with respect to such capital stock, of (i) no claims, liens, encumbrances or security interests and (ii) no outstanding rights, subscriptions, warrants, calls, preemptive rights, options or other agreements of any kind; -19- (4) the issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and nonassessable and free of preemptive rights; (5) the Shares to be sold hereunder have been duly and validly authorized and qualified for trading over-the-counter on the Nasdaq National Market System, subject to notice of listing of additional shares; (6) the Registration Statement has become effective under the 1933 Act, and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the 1933 Act, and the Registration Statement (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b) and/or Rule 434, if applicable), the Prospectus and each amendment or supplement thereto (except for the financial statements and other statistical or financial data included therein as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the 1933 Act. In addition such counsel shall state that they have no reason to believe that either the Registration Statement (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b) and/or Rule 434, if applicable) or the Prospectus, or the Registration Statement or the Prospectus as amended or supplemented (except as aforesaid), as of their respective effective or issue dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus as amended or supplemented, if applicable, as of the First Closing Date or the Second Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made; and such counsel does not know of any legal or governmental proceedings pending or threatened required to be described in the Prospectus which are not described as required, nor of any contracts or documents of a character -20- required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement which are not described or filed, as required; (7) this Agreement and the Pricing Agreement and the performance of the Company's obligations hereunder have been duly authorized by all necessary corporate action and this Agreement and the Pricing Agreement have been duly executed and delivered by and on behalf of the Company, and are legal, valid and binding agreements of the Company, except insofar as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and subject to general principles of equity and except insofar as indemnification and contribution provisions may be limited by applicable law; and, to such counsel's knowledge, no approval, order, authorization or consent of any public board, agency, or instrumentality of the United States or of any state or other jurisdiction is necessary in connection with the consummation by the Company of any transactions contemplated by this Agreement (other than the 1933 Act, applicable blue sky laws and the rules of the NASD); (8) to such counsel's knowledge, neither the Company nor any of its subsidiaries is in breach of, or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), any indenture, mortgage, deed of trust, credit agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them or their respective properties may be bound or affected where such breach or default could have a material adverse effect on the condition (financial or otherwise), business, assets, operations or prospects of the Company and its subsidiaries, taken as a whole; (9) the execution and performance of this Agreement will not contravene any of the provisions of, or result in a default under, any agreement, franchise, license, indenture, mortgage, deed of trust, or other instrument known to such counsel, of the Company or any of its subsidiaries or by which the property of any of them is bound and which contravention or default would be material to the Company and its subsidiaries taken as a whole; or violate any of the provisions of the charter or -21- bylaws of the Company or any of its subsidiaries or, so far as is known to such counsel, violate any order, rule or regulation of any regulatory or governmental body having jurisdiction over the Company or any of its subsidiaries; (10) all documents incorporated by reference in the Prospectus, when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act; and such counsel has no reason to believe that any of such documents, when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; such counsel need express no opinion as to the financial statements or other financial or statistical data contained in any such document; (11) except as disclosed in the Prospectus, to such counsel's knowledge, no person has the right, contractual or otherwise, to cause the Company to register pursuant to the Act, any shares of capital stock of the Company, upon the issue and sale of the Shares to be sold by the Selling Stockholders to the Underwriters pursuant to this Agreement; (12) neither the Company nor any of its subsidiaries is an "investment company" or a person "controlled by" an "investment company" within the meaning of the Investment Company Act; (13) with respect to each Selling Stockholder, this Agreement and the Pricing Agreement have been duly authorized, executed and delivered by or on behalf of each such Selling Stockholder; the Agents and the Custodian for each such Selling Stockholder have been duly and validly authorized to carry out all transactions contemplated herein on behalf of each such Selling Stockholder; and the performance of this Agreement and the Pricing Agreement and the consummation of the transactions herein contemplated by such Selling Stockholders will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any indenture, mortgage, deed of trust, note agreement or other agreement or instrument known to such counsel to which any of such Selling Stockholders is a party or by which any are bound or to which any of the property of such Selling Stockholders is subject, or any order known to such -22- counsel of any court or governmental agency or body having jurisdiction over any of such Selling Stockholders or any of their properties; and to such counsel's knowledge, no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement and the Pricing Agreement in connection with the sale of Shares to be sold by such Selling Stockholders hereunder, except such as have been obtained under the 1933 Act and such as may be required under applicable blue sky laws in connection with the purchase and distribution of such Shares by the Underwriters and the clearance of such offering with the NASD; (14) each Selling Stockholder has full right, power and authority to enter into this Agreement and the Pricing Agreement and is the sole record holder of the Shares to be sold by such Selling Stockholder under this Agreement and, to such counsel's knowledge, possesses full right, power and authority to sell, assign, transfer and deliver such Shares hereunder. Immediately prior to the consummation of the transactions described in this Agreement, each Selling Stockholder was the sole registered owner of the Shares to be sold hereunder by such Selling Stockholder. Upon registration of such Shares in the Underwriters' name(s) in the stock records of the Company and assuming the Underwriters have purchased such Shares in good faith and without notice of any adverse claim, the Underwriters will have acquired all of such Selling Stockholder's rights in such Shares free of any adverse claim, any lien in favor of the Company and any restrictions on transfer imposed by the Company. Such counsel is not aware of any such adverse claim, lien in favor of the Company or restrictions on transfer imposed by the Company; and (15) this Agreement and the Pricing Agreement are legal, valid and binding agreements of each Selling Stockholder except insofar as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and subject to general principles of equity and except insofar as indemnification and contribution provisions may be limited by applicable law. In rendering such opinion, such counsel may state -23- that they are relying upon the certificate of Harris Trust and Savings Bank, the transfer agent for the Common Stock, as to the number of shares of Common Stock at any time or times outstanding, and that insofar as their opinion under clause (6) above relates to the accuracy and completeness of the Prospectus and Registration Statement, it is based upon a general review with the Company's representatives and independent accountants of the information contained therein, without independent verification by such counsel of the accuracy or completeness of such information. Such counsel may also rely upon the opinions of other competent counsel and, as to factual matters, on certificates of the Selling Stockholders and of officers of the Company and of state officials, in which case their opinion is to state that they are so doing and copies of said opinions or certificates are to be attached to the opinion unless said opinions or certificates (or, in the case of certificates, the information therein) have been furnished to the Underwriters in other form. (ii) Such opinion or opinions of Winston & Strawn, counsel for the Underwriters, dated the First Closing Date or the Second Closing Date, as the case may be, with respect to the incorporation of the Company, the Registration Statement and the Prospectus and other related matters as you may reasonably require, and the Company shall have furnished to such counsel such documents and shall have exhibited to them such papers and records as they request for the purpose of enabling them to pass upon such matters. (iii) A certificate of the chief executive officer and the principal financial officer of the Company, dated the First Closing Date or the Second Closing Date, as the case may be, to the effect that: (1) the representations and warranties of the Company set forth in Section 2 of this Agreement are true and correct as of the date of this Agreement and as of the First Closing Date or the Second Closing Date, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date; (2) the Commission has not issued an order preventing or suspending the use of the Prospectus or any preliminary prospectus filed as a part of the Registration Statement or any amendment thereto; no stop order suspending the effectiveness of the Registration Statement has been issued; and -24- to the best knowledge of the respective signers, no proceedings for that purpose have been instituted or are pending or contemplated under the 1933 Act; and (3) subsequent to the date of the most recent financial statements included in the Registration Statement and the Prospectus (exclusive of any supplement thereto), and except as set forth or contemplated in the Prospectus (exclusive of any supplement thereto), (A) neither the Company nor any of its subsidiaries has incurred any material liabilities or obligations, direct or contingent, nor entered into any material transactions not in the ordinary course of business, and (B) there has not been any material adverse change in their condition (financial or otherwise), business, assets, operations or prospects, or any change in their capital stock or short-term debt or long-term debt. The delivery of the certificate provided for in this subparagraph shall be and constitute a representation and warranty of the Company as to the facts required in the immediately foregoing clauses (1) and (2) of this subparagraph to be set forth in said certificate. (iv) A certificate of each Selling Stockholder dated the First Closing Date or the Second Closing Date, as the case may be, to the effect that the representations and warranties of such Selling Stockholder set forth in Section 3 of this Agreement are true and correct as of such date and the Selling Stockholder has complied with all the agreements and satisfied all the conditions on the part of such Selling Stockholder to be performed or satisfied at or prior to such date. (v) At the time the Pricing Agreement is executed and also on the First Closing Date or the Second Closing Date, as the case may be, there shall be delivered to you a letter addressed to you from KPMG Peat Marwick, independent accountants, the first one to be dated the date of the Pricing Agreement, the second one to be dated the First Closing Date and the third one (in the event of a second closing) to be dated the Second Closing Date, to the effect set forth in Schedule C. The letter shall not disclose any material change, or any development involving a prospective material change, in or affecting the business or properties of the Company which, in your reasonable judgment, makes it impractical or inadvisable to proceed with the public offering of the Shares or the purchase of the Option Shares as contemplated by the Prospectus. -25- (vi) Such further information, certificates and documents as you may reasonably request. All such opinions, certificates, letters and documents shall be in compliance with the provisions hereof only if they are satisfactory to you and to counsel for the Underwriters, which approval shall not be unreasonably withheld. The Company shall furnish you with such manually signed or conformed copies of such opinions, certificates, letters and documents as you request. If any condition to the Underwriters' obligations hereunder to be satisfied prior to or at the First Closing Date is not so satisfied, this Agreement at your election will terminate upon notification to the Company and the Selling Stockholders without liability on the part of any Underwriter or the Company or any Selling Stockholder, except for the expenses to be paid or reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof. SECTION 9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale to the Underwriters of the Shares on the First Closing Date is not consummated because any condition of the Underwriters' obligations hereunder is not satisfied or because of any refusal, inability or failure on the part of the Company or the Selling Stockholders to perform any agreement herein or to comply with any provision hereof, unless such failure to satisfy such condition or to comply with any provision hereof is due to the default or omission of any Underwriter, the Company agrees to reimburse you and the other Underwriters upon demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been reasonably incurred by you and them in connection with the proposed purchase and the sale of the Shares. Any such termination shall be without liability of any party to any other party except that the provisions of this Section, Section 7 and Section 11 shall at all times be effective and shall apply. SECTION 10. EFFECTIVENESS OF REGISTRATION STATEMENT. You, the Company and the Selling Stockholders will use your, its and their best efforts to cause the Registration Statement to become effective, if it has not yet become effective, and to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement and, if such stop order be issued, to obtain as soon as possible the lifting thereof. SECTION 11. INDEMNIFICATION. (a) The Company and each Selling Stockholder (other than the Trusts), jointly and severally, and each of the Trusts severally but not jointly, agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the 1933 Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject under the 1933 Act, the -26- Exchange Act or other federal or state statutory law or regulation, at common law or otherwise (including in settlement of any litigation if such settlement is effected with the written consent of the Company and/or such Selling Stockholders, as the case may be), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A and/or Rule 434, if applicable, any preliminary prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that neither the Company nor any Selling Stockholder will be liable in any such case to the extent that (i) any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by any Underwriter specifically for use therein; or (ii) if such statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus and (1) any such loss, claim, damage or liability suffered or incurred by any Underwriter (or any person who controls any Underwriter) resulted from an action, claim or suit by any person who purchased Shares that are the subject thereof from such Underwriter in the offering and (2) such Underwriter failed to deliver or provide a copy of the Prospectus to such person at or prior to the confirmation of the sale of such Shares in any case where such delivery is required by the 1933 Act. This indemnity agreement will be in addition to any liability which the Company and the Selling Stockholders may otherwise have. Without limiting the full extent of the Company's agreement to indemnify each Underwriter, as herein provided, (i) each Selling Stockholder, other than Edward L. Kaplan and Gerhard Cless, shall be liable under the indemnity agreements contained in paragraph (a) of this Section only for an amount not exceeding the proceeds received by such Selling Stockholder from the sale of Shares hereunder, and (ii) Gerhard Cless shall be liable under the indemnity agreements contained in paragraph (a) of this Section only for an amount not exceeding the aggregate of the proceeds received by Gerhard Cless, The Gerhard Cless Income Trust and The Ruth Cless Income Trust from the sale of Shares hereunder. The Company and the Selling Stockholders may agree, as among themselves and without limiting the rights of the Underwriters under this Agreement, as to the respective amounts of such liability for which -27- each of them shall be responsible. (b) Each Underwriter will severally indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement, and each Selling Stockholder and each person, if any, who controls the Company within the meaning of the 1933 Act or the Exchange Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer, Selling Stockholder or controlling person may become subject under the 1933 Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement, any preliminary prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any preliminary prospectus, the Prospectus, or any amendment or supplement thereto in reliance upon and in conformity with Section 4 of this Agreement or any other written information furnished to the Company by such Underwriter specifically for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer, Selling Stockholder or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party except to the extent that the indemnifying party was prejudiced by such failure to notify. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified -28- parties that are different from or additional to those available to the indemnifying party, or the indemnified and indemnifying parties may have conflicting interests that would make it inappropriate for the same counsel to represent both of them, the indemnified party or parties shall have the right to select separate counsel to assume such legal defense and otherwise to participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defense in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by the Underwriters in the case of paragraph (a) representing all indemnified parties not having different or additional defenses or potential conflicting interest among themselves who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability arising out of such proceeding. (d) If the indemnification provided for in this Section is unavailable to an indemnified party under paragraph (a) or (b) hereof in respect of any losses, claims, damages or liabilities referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Selling Stockholders and the Underwriters from the offering of the Shares (such relative benefits to be determined in accordance with the next succeeding sentence) or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Selling Stockholders and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The respective -29- relative benefits received by the Company, the Selling Stockholders and the Underwriters shall be deemed to be in the same proportion in the case of the Company and the Selling Stockholders, as the total price paid to the Selling Stockholders for the Shares by the Underwriters (net of underwriting discount but before deducting expenses), and in the case of the Underwriters as the underwriting discount received by them bears to the total of such amounts paid to the Selling Stockholders and received by the Underwriters as underwriting discount in each case as contemplated by the Prospectus. The relative fault of the Company and the Selling Stockholders and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or by the Selling Stockholders or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement to omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section are several in proportion to their respective underwriting commitments and not joint. (e) The provisions of this Section shall survive any termination of this Agreement. SECTION 12. DEFAULT OF UNDERWRITERS. It shall be a condition to the agreement and obligation of the Selling Stockholders to sell and deliver the Shares hereunder, and of each Underwriter to purchase the Shares hereunder, that, except as hereinafter in this paragraph provided, each of the Underwriters shall purchase and pay for all Shares agreed to be purchased by such Underwriter hereunder upon tender to the Underwriters of all such Shares in accordance with the terms hereof. If any Underwriter or Underwriters default in their obligations to -30- purchase Shares hereunder on the First Closing Date and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10 percent of the total number of Shares which the Underwriters are obligated to purchase on the First Closing Date, the Underwriters may make arrangements satisfactory to the Selling Stockholders for the purchase of such Shares by other persons, including any of the Underwriters, but if no such arrangements are made by such date the nondefaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Shares which such defaulting Underwriters agreed but failed to purchase on such date. If any Underwriter or Underwriters so default and the aggregate number of Shares with respect to which such default or defaults occur is more than the above percentage and arrangements satisfactory to the Underwriters and the Selling Stockholders for the purchase of such Shares by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any nondefaulting Underwriter or the Selling Stockholders, except for the expenses to be paid by the Company pursuant to Section 7 hereof and except to the extent provided in Section 11 hereof. In the event that Shares to which a default relates are to be purchased by the nondefaulting Underwriters or by another party or parties, the Underwriters, the Selling Stockholders or the Company shall have the right to postpone the First Closing Date for not more than seven business days in order that the necessary changes in the Registration Statement, Prospectus and any other documents, as well as any other arrangements, may be effected. As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. SECTION 13. EFFECTIVE DATE. This Agreement shall become effective immediately as to Sections 7, 9, 11 and 14 and as to all other provisions at 8:30 A.M., Chicago time, on the day following the date upon which the Pricing Agreement is executed and delivered, unless such a day is a Saturday, Sunday or holiday (and in that event this Agreement shall become effective at such hour on the business day next succeeding such Saturday, Sunday or holiday); but this Agreement shall nevertheless become effective at such earlier time after the Pricing Agreement is executed and delivered as you may determine on and by notice to the Company and the Selling Stockholders or by release of any Shares for sale to the public. For the purposes of this Section, the Shares shall be deemed to have been so released upon the release for publication of any newspaper advertisement relating to the Shares or upon the release by you of telegrams (i) advising Underwriters that the Shares are released for public offering, or (ii) offering the Shares for sale to securities dealers, whichever may occur first. SECTION 14. TERMINATION. Without limiting the right -31- to terminate this Agreement pursuant to any other provision hereof: (a) This Agreement may be terminated by the Company by notice to you and the Selling Stockholders or by you by notice to the Company and the Selling Stockholders at any time prior to the time this Agreement shall become effective as to all its provisions, and any such termination shall be without liability on the part of the Company or the Selling Stockholders to any Underwriter (except for the expenses to be paid or reimbursed pursuant to Section 7 hereof and except to the extent provided in Section 11 hereof) or of any Underwriter to the Company or the Selling Stockholders. (b) This Agreement may also be terminated by you prior to the First Closing Date, and the option referred to in Section 5, if exercised, may be canceled at any time prior to the Second Closing Date, if (i) trading in securities on the New York Stock Exchange shall have been suspended or minimum prices shall have been established on such exchange, or (ii) a banking moratorium shall have been declared by Illinois, New York, or United States authorities, or (iii) there shall have been an outbreak of major armed hostilities between the United States and any foreign power which in the opinion of the Underwriters makes it impractical or inadvisable to offer or sell the Shares. Any termination pursuant to this paragraph (b) shall be without liability on the part of any Underwriter to the Company or the Selling Stockholders or on the part of the Company to any Underwriter or the Selling Stockholders (except for expenses to be paid or reimbursed pursuant to Section 7 hereof and except to the extent provided in Section 11 hereof). SECTION 15. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers, of the Selling Stockholders and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, or the Selling Stockholders as the case may be, and will survive delivery of and payment for the Shares sold hereunder. SECTION 16. NOTICES. All communications hereunder will be in writing and, if sent to the Underwriters will be mailed, delivered or telecopied and confirmed to you c/o William Blair & Company, 222 West Adams Street, Chicago, Illinois 60606, Fax (312) 368-9418, with a copy to Robert F. Wall, Esq., Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601, Fax (312) 558-5700; if sent to the Company will be mailed, delivered or telecopied and confirmed to Zebra Technologies Corporation, 333 Corporate Woods Parkway, Vernon Hills, Illinois 60061-3109, Fax (708) 634-1830 with a copy to Matthew S. Brown, Esq., Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661, Fax (312) -32- 902-1061; and if sent to the Selling Stockholders will be mailed, delivered or telegraphed and confirmed to the Agents at the addresses they have previously furnished to the Company and the Underwriters. SECTION 17. SUCCESSORS. This Agreement and the Pricing Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors, personal representatives and assigns, and to the benefit of the officers and directors and controlling persons referred to in Section 11, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Shares as such from any of the Underwriters merely by reason of such purchase. SECTION 18. PARTIAL UNENFORCEABILITY. If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other section, paragraph or provision hereof. SECTION 19. APPLICABLE LAW. This Agreement and the Pricing Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to principles of conflicts of laws. -33- If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company, the Selling Stockholders and the several Underwriters, including you, all in accordance with its terms. Very truly yours, ZEBRA TECHNOLOGIES CORPORATION By -------------------------------- Edward L. Kaplan, President and Chief Executive Officer SELLING STOCKHOLDERS By -------------------------------- Agent and Attorney-in-Fact for the Selling Stockholders listed in Schedule B other than the Trusts By -------------------------------- Agent and Attorney-in-Fact for the Trusts The foregoing Agreement is hereby confirmed and accepted as of the date first above written: WILLIAM BLAIR & COMPANY THE ROBINSON-HUMPHREY COMPANY, INC. MONTGOMERY SECURITIES As Underwriters named in Schedule A By William Blair & Company By --------------------------- Title ------------------------ -34- EXHIBIT A ZEBRA TECHNOLOGIES CORPORATION [___________] Shares Class A Common Stock PRICING AGREEMENT August [___], 1997 William Blair & Company Montgomery Securities The Robinson-Humphrey Company, Inc. As Underwriters c/o William Blair & Company 222 West Adams Street Chicago, Illinois 60606 Ladies and Gentlemen: Reference is made to the Underwriting Agreement dated, August [___], 1997 (the "Underwriting Agreement") relating to the sale by the Selling Stockholders named therein and the purchase by William Blair & Company, The Robinson-Humphrey Company, Inc. and Montgomery Securities(the "Underwriters") of the above Shares. All terms herein shall have the definitions contained in the Underwriting Agreement except as otherwise defined herein. Pursuant to Section 5 of the Underwriting Agreement, the Company and each of the Selling Stockholders agree with the Underwriters as follows: 1. The public offering price per share for the Shares shall be $[_____]. 2. The purchase price per share for the Shares to be paid by the several Underwriters shall be $[_____], being an amount equal to the public offering price set forth above less $[_____] per share. - --------------- * Plus an option to acquire up to [________] additional shares from the Selling Stockholders to cover overallotments. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company, the Selling Stockholders and the several Underwriters, including you, all in accordance with its terms. Very truly yours, ZEBRA TECHNOLOGIES CORPORATION By -------------------------------- Edward L. Kaplan, President, Chief Executive Officer SELLING STOCKHOLDERS By -------------------------------- Agent and Attorney-in-Fact for the Selling Stockholders listed in Schedule B other than the Trusts By -------------------------------- Agent and Attorney-in-Fact for the Trusts The foregoing Agreement is hereby confirmed and accepted as of the date first above written. WILLIAM BLAIR & COMPANY THE ROBINSON-HUMPHREY COMPANY, INC. MONTGOMERY SECURITIES As Underwriters By William Blair & Company By --------------------------- Title ------------------------ SCHEDULE A Number of Firm Shares to be Underwriter Purchased - ----------- --------- William Blair & Company . . . . . . . . . The Robinson-Humphrey Company, Inc. . . . Montgomery Securities . . . . . . . . . . --------- Total . . . . . . . . . . . . . . . . . . --------- --------- SCHEDULE B Maximum Number of Number of Firm Option Shares Shares Selling Stockholders: to be Sold to be Sold - -------------------- ---------- ---------- Edward L. Kaplan. . . . . . . . . 1,153,710 173,057 Carol Kaplan . . . . . . . . . . 237,698 35,654 Gerhard Cless . . . . . . . . . . 99,740 The Gerhard Cless Income Trust. . 344,000 The Ruth Cless Income Trust . . . 320,936 ---------- ---------- Total . . . . . . . . . . . . . . 2,056,344 308,451 ---------- ---------- ---------- ---------- SCHEDULE C Comfort Letter of KPMG Peat Marwick (1) They are independent public accountants with respect to the Company and each of its subsidiaries within the meaning of the 1933 Act and the answer to Item 10 of the Registration Statement, as it relates to them, is correct. (2) In their opinion the consolidated financial statements and schedules of the Company and its subsidiaries included in the Registration Statement and the consolidated financial statements of the Company from which the information presented under the captions "Summary Financial Data" and "Selected Financial Data" has been derived which are stated therein to have been examined by them comply as to form in all material respects with the applicable accounting requirements of the 1933 Act. (3) On the basis of specified procedures (but not an examination in accordance with generally accepted auditing standards), including inquiries of certain officers of the Company and its subsidiaries responsible for financial and accounting matters as to transactions and events subsequent to December 31, 1996, a reading of minutes of meetings of the stockholders and directors of the Company and its subsidiaries since December 31, 1996, a reading of the latest available interim unaudited consolidated financial statements of the Company and its subsidiaries (with an indication of the date hereof and other procedures as specified in such letter, nothing came to their attention which caused them to believe that (i) the unaudited financial statements of the Company included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act or that such unaudited financial statements are not fairly presented in accordance with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement, and (ii) at a specified date not more than five days prior to the date thereof in the case of the first letter and not more than two business days prior to the date thereof in the case of the second and third letters, there was any change in the capital stock or long-term debt or short-term debt (other than normal payments) of the Company and its subsidiaries on a consolidated basis or any decrease in consolidated net current assets or consolidated stockholders' equity as compared with amounts shown on the latest consolidated balance sheet of the Company included in the Registration Statement or for the period from the date of such consolidated balance sheet to a date not more than five days prior to the date thereof in the case of the first letter and not more than two business days prior to the date thereof in the case of the second and third letters, there were any decreases, as compared with the corresponding period of the prior year, in consolidated net sales, consolidated income before income taxes or in the total or per share amounts of consolidated net income except, in all instances, for changes or decreases which the Prospectus discloses have occurred or may occur or which are set forth in such letter. (4) On the basis of reading the unaudited pro forma financial statement data included in the Registration Statement and the Prospectus, carrying out specified procedures, inquiries of certain officials of the Company who have responsibility for financial and accounting matters, and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial statement data, nothing came to their attention that caused them to believe that the pro forma financial statement data does not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X of or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements. (5) They have carried out specified procedures, which have been agreed to by the Underwriters, with respect to certain information in the Prospectus specified by the Underwriters, and on the basis of such procedures, they have found such information to be in agreement with the general accounting records of the Company and its subsidiaries. EX-3.1 3 EX 3.1 CERTIFICATE OF INCORPORATION OF REGISTRANT CERTIFICATE OF INCORPORATION OF ZEBRA TECHNOLOGIES CORPORATION FIRST: The name of the Corporation is Zebra Technologies corporation. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 80,000,000 shares, which shall be divided as follows: (i) 35,000,000 shares of Class A common stock, par value $.01 per share (the "Class A Common Stock"), (ii) 35,000,000 shares of Class B common stock, par value $.01 per share (the "Class B Common Stock"), and (iii) 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). "Common Stock", when used herein, shall mean the Class A Common Stock and the Class B Common Stock together. The designations and the powers, preferences and relative, participating, optional or other rights of the capital stock and the qualifications, limitations or restrictions thereof are as follows: 4.A. COMMON STOCK PROVISIONS. 4.A.1. VOTING RIGHTS. Except as otherwise required by law or expressly provided herein, the holder of each share of Class A Common Stock shall have one vote per share on each matter submitted to a vote of the stockholders of the Corporation and the holder of each share of Class B Common Stock shall have ten votes per share on each matter submitted to a vote of the stockholders of the Corporation. 4.A.2. DIVIDEND RIGHTS. Subject to all of the rights of any Series of Preferred Stock authorized after the date hereof, the holders of the Common Stock shall be entitled to receive dividends at such times and in such amounts as may be determined by the Board of Directors of the Corporation. Dividends shall be declared and paid to holders of either Class A Common Stock or Class B Common Stock only if such dividends are declared and paid to holders of both classes on an equal per share basis. If at any time a distribution of Class A Common Stock, Class B Common Stock or any other securities of the Corporation is to be made to holders of either Class A Common Stock or Class B Common Stock (hereinafter sometimes referred to as a "share distribution"), such share distribution may be declared and paid only as follows: (a) A share distribution consisting of shares of Class A Common Stock to holders of Class A Common Stock; provided, there shall also be a simultaneous share distribution consisting of shares of Class B Common Stock to holders of Class B Common Stock on an equal per share basis; or (b) A share distribution consisting of shares of Class B Common Stock to holders of Class B Common Stock; provided, there shall also be a simultaneous share distribution consisting of shares of Class A Common Stock to holders of Class A Common Stock on an equal per share basis; or (c) A share distribution consisting of any other class of securities of the Corporation to the holders of Class A Common Stock and Class B Common Stock on an equal per share basis. 4.A.3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and the preferential amounts to which the holders of any outstanding shares of Preferred Stock shall be entitled upon dissolution, liquidation or winding up, each holder of shares of Class A Common Stock and Class B Common Stock shall receive whatever kind of assets are available for distribution on an equal per share basis. 4.A.4. MERGER OR CONSOLIDATION RIGHTS. In the event of a merger or consolidation of the Corporation with or into another entity (whether or not the Corporation is the surviving entity), each holder of shares of Class A Common Stock and Class B Common Stock shall receive whatever kind of assets are available for distribution to such holders, or stock into which such shares of the Corporation are converted, on an equal per share basis; provided, however, in any merger or consolidation in which shares of capital stock are distributed, such shares distributed to the holders of shares of Class A Common Stock and Class B Common Stock may differ to the extent and only to the extent that the voting rights of the Class A Common Stock and Class B Common Stock differ as provided herein. 4.A.5. CONVERSION. In the event that at any time the number of issued and outstanding shares of Class B Common Stock is less than 10% of the aggregate number of issued and outstanding shares of Class A Common Stock and Class B Common Stock together, each authorized share of Class B Common Stock (whether or not then issued) shall automatically be converted into one share of Class A Common Stock. Upon such conversion, the total number of shares of Class A Common Stock the Corporation shall have authority to issue shall be 70,000,000 and the total number of shares of Class B Common Stock the Corporation shall have authority to issue shall be zero. Such conversion ratio as set forth herein shall in all events be accurately preserved in the event of any recapitalization of the Corporation by means of a stock dividend on, or split or combination of, outstanding shares of Class A Common Stock or Class B Common Stock, or in the event of any merger, consolidation or other reorganization of the Corporation. Upon the occurrence of such conversion, the shares of Class B Common Stock shall be deemed -2- without further action to be immediately and automatically converted into shares of Class A Common Stock, and stock certificates formerly representing Class B Common Stock shall thereupon and thereafter be deemed to represent alike number of shares of Class A Common Stock. Shares of Class B Common Stock shall be convertible into shares of Class A Common Stock of the Corporation at the option of the holder thereof at any time on a share for share basis. Such conversion ratio shall in all events be accurately preserved in the event of any recapitalization of the Corporation by means of a stock dividend on, or stock split or combination of, outstanding shares of Class A Common Stock or Class B, Common Stock, or ia the event of any merger, consolidation or other reorganization of the Corporation with another corporation. Upon the conversion of shares of Class B Common Stock into shares of Class A Common stock, such shares of Class B Common Stock shall be retired and not subject to reissue. Each share of Class B Common Stock shall automatically be converted into one share of Class A Common Stock upon its sale, gift, assignment, distribution, conveyance or other disposition or transfer whether by operation of law or otherwise (collectively, a "Transfer") to other than a Permitted Transferee (as defined herein). The term Transfer as used herein shall not include a Pledge or hypothecation of shares of Class B Common Stock; provided, however, that a Transfer shall have occurred if a pledgee or party to whom such shares are hypothecated forecloses thereon. The term "Permitted Transferee" as used herein shall mean: (i) Edward L. Kaplan, Carol K. Kaplan, Gerhard Cless, Ruth I. Cless, Stewart A. Shiman, Meyer S. Kaplan, Bee R. Kaplan, John H. Kindsvater, Jr., Lenin Pellegrino, M.D., any of their respective descendants (including adopted children), any spouses, widows or widowers or any of their respective descendants (including adopted children) (collectively, the "Family Holders"); (ii) any trust, a majority of the interest of which is held, directly or indirectly, by or for the benefit of one or more of the Family Holders or any entity or entities described in clauses (iii), (iv), (v) or (vi) of this Article FOURTH Section A.5.; (iii) any estate of a Family Holder; (iv) any foundation, or any charitable organization established by one or more of the Family Holders that qualifies as an exempt organization under the Internal Revenue Code of 1986, as amended, or any successor statute; (v) any charitable lead trust or charitable remainder trust established by one or more of the Family Holders; or (vi) any corporation or partnership or other entity of which voting control is held, directly or indirectly, by or for the benefit of one or more of the Family Holders or any entity or entities described in clauses (ii), (iii), (iv) or (v) above. For Purposes of this clause (vi), "voting control" shall mean either (a) the beneficial ownership, direct or indirect, of more than -3- 50% of the outstanding voting securities of a corporation, or in the case of an unincorporated entity, of the similar power to control the affairs of such entity, or (b) the contractual power to elect or designate a majority of the directors of a corporation or in the case of an unincorporated entity, of individuals exercising similar functions. If any shares of Class B Common Stock are held by a Permitted Transferee as described in clauses (ii), (iii), (iv) or (v) of this Article FOURTH Section A.5. and such Permitted Transferee shall cease to be a Permitted Transferee, then such shares of Class B Common Stock shall automatically be converted into an equal number of shares of Class A Common Stock. A majority of the Board of Directors of the Corporation shall have, the power and duty to determine for purposes of this Article FOURTH Section A.5., on the basis of information known to the Board of Directors after reasonable inquiry, (a) whether a person or entity is a Permitted Transferee or shall have ceased to be a Permitted Transferee, and (b) whether a transfer of shares of Class B Common Stock shall have occurred so as to effect a conversion of such shares of Class B Common Stock to an equal number of shares of Class A Common Stock. The holders of Class B Common Stock shall upon demand disclose to the Board of Directors in writing such information with respect to the direct and indirect beneficial ownership of such shares of Class B Common Stock as the Board of Directors deem necessary to make the determination required of it pursuant to this paragraph. 4.A.6. STOCK SPLITS, DIVISIONS AND COMBINATIONS. The Corporation may not split, divide or combine the shares of the Class A Common Stock or the Class B Common Stock, unless, at the same time, the Corporation splits, divides or combines, as the case may be, the shares of the other class of Common Stock in the same proportion and manner. 4.A.7. ISSUANCE OF ADDITIONAL SHARES OF CLASS B COMMON STOCK. Additional shares of Class B Common Stock may only be issued to Permitted Transferees (as the term Permitted Transferee is defined in Article FOURTH Section A.5. hereof) unless such issuance to such other persons is approved by a majority of the issued and outstanding shares of Class B Common Stock. 4.B. PREFERRED STOCK PROVISIONS. The Preferred Stock may be issued from time to time in one or more series. Subject to the other provisions of this Certificate of Incorporation, the Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of and issue shares of the Preferred Stock in series, and by filing a certificate pursuant to the laws Of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the votes entitled to be cast by the outstanding Common Stock, without a vote of the holders of any Preferred Stock, or of any -4- series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing such series of Preferred Stock. 4.C. GENERAL PROVISIONS. 4.C.1. QUORUM AT STOCKHOLDERS' MEETINGS. At any meeting of stockholders, the presence in person or by proxy of the holders of record of outstanding shares of stock of the corporation entitled to vote a majority of the votes entitled to be voted at such meeting shall constitute a quorum for all purposes, except as otherwise provided by this Certificate of Incorporation or required by applicable law. 4.C.2. NO PREEMPTIVE RIGHTS. No stockholder of this Corporation shall by reason of holding shares of any class of stock have any pre-emptive or preferential right to purchase or subscribe to any shares of any class of stock of this Corporation, now or hereafter to be authorized, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class of such stock, now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities would adversely affect the dividend or voting rights of such stockholder, other than such rights, if any, as the board of directors, in its discretion from time to time, may grant and at such price as the board of the directors in its discretion may fix; and the board of directors may issue shares of any class of stock of this Corporation, or any notes, debentures, bonds or other securities convertible into or carrying options or warrants to purchase shares of any class of such stock, without offering any such shares of any class, either in whole or in part, to the existing stockholders of any class of such stock. FIFTH: 5.(a) WRITTEN CONSENT. At any time after the closing of a public offering of the Corporation's securities registered under the Securities Act of 1933, as amended, any action required or permitted to be taken by the holders of the Common Stock (whether voting separately as a class or together with other classes) of the Corporation may be effected by a consent in writing by such holders only if such consent is signed by holders of shares of Common Stock representing at least 66-2/3% of the votes entitled to be cast by the outstanding Common Stock. 5.(b) SPECIAL MEETINGS. Special meetings of stockholders of the Corporation may be called upon not less than 10 or more than 60 days' prior written notice only by (1) the Board of Directors pursuant to a resolution approved by a majority of the Board of Directors, or (2) by holders of shares of Common Stock representing at least 66-2/3% of the votes entitled to be cast generally in the election of directors. 5.(c) AMENDMENT. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of shares of Common Stock representing at least 66-2/3% of the votes entitled to be cast generally in the election of directors shall be required to amend, alter or repeal, or to adopt any provision inconsistent with, this Article FIFTH. -5- SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation. The By-Laws of the Corporation may be altered, amended or repealed, or new By-Laws may be adopted, by the Board of Directors in accordance with the preceding sentence or by the vote of the holders of shares representing at least 66-2/3% of the votes entitled to be cast by the outstanding Common Stock. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of shares representing at least 66-2/3% of the votes entitled to be cast by the outstanding Common Stock shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article SIXTH. SEVENTH: Meetings of stockholders may be held within or without the State of Delaware as the By-Laws may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors of the Corporation or in the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws of the Corporation so provide. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided, however, that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. NINTH: The Corporation shall indemnify, in accordance with and to the full extent now or hereafter permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the Corporation), by reason of his acting as a director of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an officer or employee of the Corporation or is or was serving at the request of the Corporation in any other capacity for or on behalf of the Corporation) against any liability or expense actually and reasonably incurred by such person in respect thereof; provided, however, that, the Corporation shall not be obligated to indemnify any such person (i) with respect to proceedings, claims or actions initiated or brought voluntarily by such person and not by way of defense, or (ii) for any amounts paid in settlement of an action effected without the prior written consent of the corporation to such settlement. Such indemnification is not exclusive of any other right to indemnification provided by law, agreement or otherwise. TENTH: No amendment to or repeal of Article EIGHTH or NINTH of this Certificate of Incorporation shall apply to or have any effect on the rights of any individual referred to in Articles EIGHTH or NINTH for or with respect to acts or omissions of such individual occurring prior to such amendment or repeal. -6- This Certificate of Incorporation has been signed by the sole incorporator of the Corporation on July 10, 1991. Zebra Technologies Corporation By: ---------------------------------------- Karen S. McDonald 525 W. Monroe, #1600 Chicago, IL 60661 Being the Sole Incorporator of Zebra Technologies Corporation CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ZEBRA TECHNOLOGIES CORPORATION ZEBRA TECHNOLOGIES CORPORATION (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Act"), DOES HEREBY CERTIFY THAT: 1. In accordance with the provisions of Section 242 of the Act, and the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), an amendment to the Certificate of Incorporation has been duly adopted by the Board of Directors acting at a duly convened meeting and approved by the requisite votes of the stockholders of the Corporation entitled to vote thereon voting at a duly convened meeting. 2. Said amendment amends the first paragraph of Article Fourth of the Certificate of Incorporation so that, as amended, said first paragraph of Article Fourth, in its entirety, shall read as follows: "Fourth: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 88,358,189 shares, which shall be divided as follows: (i) 50,000,000 shares of Class A common stock, par value $.01 per share (the "Class A Common Stock"), (ii) 28,358,189 shares of Class B common stock, par value $.01 per share (the "Class B Common Stock"), and (iii) 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). "Common Stock", when used herein, shall mean the Class A Common Stock and the Class B Common Stock together." 3. Said amendment amends the second sentence of the first paragraph of Section 4.A.5. of the Certificate of Incorporation so that, as amended, said sentence, in its entirety, shall read as follows: "Upon such conversion, the total number of shares of Class A Common Stock the Corporation shall have authority to issue shall be 78,358,189 and the total number of shares of Class B Common Stock the Corporation shall have authority to issue shall be zero." IN WITNESS WHEREOF, ZEBRA TECHNOLOGIES CORPORATION has caused this Certificate of Amendment to be executed this 25th day of June, 1997. ZEBRA TECHNOLOGIES CORPORATION By: /s/ Edward L. Kaplan ----------------------------------- Edward L. Kaplan Chairman and Chief Executive Officer -2- EX-5 4 EX 5 CONSENT Zebra Technologies Corporation August 11, 1997 Page 1 August 11, 1997 Zebra Technologies Corporation 333 Corporate Woods Parkway Vernon Hills, Illinois 60061 Re: Registration Statement on Form S-3 ---------------------------------- Ladies and Gentlemen: We have acted as counsel for Zebra Technologies Corporation, a Delaware corporation (the "Company"), and certain stockholders of the Company (the "Selling Stockholders") in connection with the preparation and filing of a Registration Statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission under the Securities Act of 1933, as amended. The Registration Statement relates to 2,364,795 shares of the Company's Class A Common Stock, $.01 par value per share (the "Class A Common Stock"). In connection with this opinion, we have relied as to matters of fact, without investigation, upon certificates of public officials and others and upon affidavits, certificates and written statements of directors, officers and employees of, and the accountants for, the Company. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such instruments, documents and records as we have deemed relevant and necessary to examine for the purpose of this opinion, including (a) the Registration Statement, (b) the proposed Underwriting Agreement among the Company, the Selling Stockholders and William Blair & Company, The Robinson-Humphrey Company Inc. and Montgomery Securities (the "Underwriting Agreement"), (c) the Certificate of Incorporation of the Company, as amended, (d) the By-laws of the Company, as amended, and (e) resolutions adopted by the Board of Directors of the Company. In connection with this opinion, we have assumed the accuracy and completeness of all documents and records that we have reviewed, the genuineness of all signatures, the due authority of the parties signing such documents, the authenticity of the documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or reproduced copies. Zebra Technologies Corporation August 11, 1997 Page 2 Based upon and subject to the foregoing, it is our opinion that: (1) The Company is a corporation duly incorporated and existing under the laws of the State of Delaware. (2) The 2,364,795 shares of Class A Common Stock covered by the Registration Statement, when sold by the Selling Stockholders in accordance with the provisions of the Underwriting Agreement, will be legally issued, fully paid and non-assessable shares of Class A Common Stock. We hereby consent to the reference to our name in the Registration Statement under the caption "Legal Matters" and further consent to the inclusion of this opinion as Exhibit 5 to the Registration Statement. Very truly yours, /s/ Katten Muchin & Zavis KATTEN MUCHIN & ZAVIS EX-24.1 5 CONSENT OF KPMG PEAT MARWICK EXHIBIT 24.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Zebra Technologies Corporation: We consent to the use of our reports dated February 7, 1997 on the consolidated financial statements and schedule of Zebra Technologies Corporation and subsidiaries as of December 31, 1996 and 1995, and for each of the years in the three-year period ended December 31, 1996 incorporated herein by reference and to the reference to our firm under the headings "Selected Financial Data" and "Experts" in the prospectus. KPMG Peat Marwick LLP Chicago, Illinois August 8, 1997 EX-24.2 6 EX 24.2 ACKNOWLEDGEMENT LETTER OF KPMG EXHIBIT 24.2 LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION Zebra Technologies Corporation 333 Corporate Woods Parkway Vernon Hills, Illinois 60061-3109 Ladies and Gentlemen: With respect to the registration statement on Form S-3, we acknowledge our awareness of the use therein of our reports dated April 15, 1997 and July 15, 1997 related to our reviews of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. Very truly yours, KPMG Peat Marwick LLP Chicago, Illinois August 8, 1997 -----END PRIVACY-ENHANCED MESSAGE-----