<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CDW COMPUTER CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
ILLINOIS 5961 36-3310735
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1020 EAST LAKE COOK ROAD
BUFFALO GROVE, ILLINOIS 60089
(847) 465-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL P. KRASNY
CHIEF EXECUTIVE OFFICER
CDW COMPUTER CENTERS, INC.
1020 EAST LAKE COOK ROAD
BUFFALO GROVE, ILLINOIS 60089
(847) 465-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C> <C>
ALAN B. PATZIK, ESQ. ROBERT F. WALL, ESQ.
SAITLIN, PATZIK, FRANK & SAMOTNY LTD. WINSTON & STRAWN
150 SOUTH WACKER DRIVE 35 WEST WACKER DRIVE
SUITE 900 CHICAGO, ILLINOIS 60601
CHICAGO, ILLINOIS 60606 (312) 558-5600
(312) 551-8300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE:
As soon as practicable after this Registration Statement has become effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number on 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
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
MAXIMUM OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO PRICE PER AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED(1) SHARE(2) OFFERING PRICE(2) FEE(3)
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Shares of Common Stock, $.01 par value per 550,000
share.................................... shares $59.00 $32,450,000 $9834.00
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</TABLE>
(1)Includes 50,000 shares which the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, and based on
the average of the high ($60.75) and low ($57.25) prices as reported in the
consolidated reporting system on February 6, 1997.
(3) The Registrant previously paid a filing fee in the amount of $2,600.33
covering 138,684 shares registered in Registration Statement No. 333-20935
of which 132,064 shares are included in the Prospectus included herein in
accordance with Rule 429 under the Securities Act of 1933, as amended.
------------------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS CONSTITUTING A PART OF THIS REGISTRATION STATEMENT ALSO RELATES TO
132,064 SHARES OF THE REGISTRANT'S COMMON STOCK REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, IN REGISTRATION STATEMENT NO. 333-20935.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
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 FEBRUARY 11, 1997
PROSPECTUS
632,064 SHARES
CDW COMPUTER CENTERS, INC.
CDW LOGO COMMON STOCK CDW LOGO
Of the 632,064 shares of Common Stock offered hereby, 500,000 are being sold
by certain officers (the "Management Selling Shareholders") of CDW Computer
Centers, Inc. (the "Company") and 132,064 shares are being sold by certain other
employees of the Company (the "MPK Plan Selling Shareholders"). The Management
Selling Shareholders and the MPK Plan Selling Shareholders are collectively
referred to herein as the "Selling Shareholders." See "Principal and Selling
Shareholders" and "Description of the MPK Restricted Stock Plan Modification."
The Company will not receive any of the proceeds from the sale of shares offered
by the Selling Shareholders.
The Company's Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the symbol CDWC. On February 10,
1997, the closing sale price of the Common Stock as reported by Nasdaq was
$56.625 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF 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.
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<TABLE>
<S> <C> <C> <C> <C>
UNDERWRITING
DISCOUNT TO PROCEEDS TO PROCEEDS TO
PRICE TO MANAGEMENT SELLING MANAGEMENT SELLING MPK PLAN SELLING
PUBLIC SHAREHOLDERS(1) SHAREHOLDERS(2) SHAREHOLDERS(2)(3)
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Per Share............... $ $ $ $
Total(4)................ $ $ $ $
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</TABLE>
(1) The Company and the Management Selling Shareholders 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 Management Selling Shareholders
estimated at $ . The Management Selling Shareholders have agreed to pay
any expenses attributable to the MPK Plan Selling Shareholders in this
offering.
(3) In order to facilitate an orderly distribution of the MPK Restricted Stock
Plan shares to be distributed to the MPK Plan Selling Shareholders pursuant
to the Company's Registration Statement on Form S-3 (No. 333-20935) declared
effective February 7, 1997, the Underwriters have agreed to underwrite such
shares as part of this offering without charge to the MPK Plan Selling
Shareholders.
(4) The Management Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to an additional 50,000 shares of Common Stock
solely to cover over-allotments, if any. See "Underwriting." If all such
shares are purchased, the total Price to Public, Underwriting Discount to
Management Selling Shareholders, and Proceeds to Management Selling
Shareholders will be $ , $ , and $ , respectively.
The shares of Common Stock are being 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 and certain other conditions. It is expected
that delivery of the certificates for the shares of Common Stock will be made on
or about , 1997.
WILLIAM BLAIR & COMPANY
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1997
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference: (1)
the Company's Annual Report on Form 10-K for the year ended December 31, 1996;
(2) the Company's Notice of Annual Meeting of Shareholders and Proxy Statement
dated March 26, 1996; and (3) the description of the Company's capital stock
contained in the Company's Registration Statement on Form 8-A filed May 19, 1993
registering the Company's Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of the Common Stock registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such documents. Any statements contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any 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 this Prospectus is delivered, upon a written or oral
request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to Investor
Relations, 1020 East Lake Cook Road, Buffalo Grove, Illinois 60089. Telephone
(847) 419-8243.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-3 under the Securities Act of 1933 with respect
to the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits and schedules
thereto, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and to the exhibits and schedules thereto. Copies of the Registration Statement
and the exhibits and schedules thereto may be inspected without charge at the
Commission's principal offices in Washington, D.C., and copies of all or any
part thereof may be obtained from such office upon payment of prescribed fees.
The Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copies made at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, IL
60661; and 7 World Trade Center, Suite 1300, New York, NY 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN COMMON STOCK OF THE COMPANY ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere or incorporated by reference in this Prospectus. Unless
otherwise indicated, all information in this Prospectus (i) reflects a
two-for-one stock split effected in the form of a stock dividend paid on May 6,
1994 pursuant to which each shareholder of record on April 20, 1994 received one
additional share of the Company's Common Stock for each share of Common Stock
owned as of that date, (ii) reflects a three-for-two stock split effected in the
form of a stock dividend paid on July 15, 1996 pursuant to which each
shareholder of record on July 5, 1996 received one additional share of the
Company's Common Stock for every two shares of Common Stock owned as of that
date (together with the 1994 two-for-one stock split, the "Stock Splits") and
(iii) assumes that the Underwriters' over-allotment option is not exercised. See
"Underwriting." This Prospectus, including information incorporated by
reference, contains forward-looking statements that involve certain risks and
uncertainties. Any statements contained herein which are not historical facts or
which contain the words expect, believe or anticipate, shall be deemed to be
forward-looking statements. Such forward-looking statements include, but are not
limited to, the Company's expectations regarding its future financial condition
and operating results, business and growth strategy, market conditions and
competitive environments. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, product demand, pricing, market
conditions, risks related to the Company's relocation to a new facility,
development of new products and advancement of technology by manufacturers,
acceptance of such new products and technologies by end-users, competition and
other matters as set forth under "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 20,000
microcomputer products, primarily to business, government, educational,
institutional and home office users in the United States. The Company sells a
broad range of name-brand microcomputer products, including hardware and
peripherals, software, networking products and accessories through knowledgeable
telemarketing account executives. Sales of products which utilize, or are
compatible with, the Microsoft Windows 95/Windows/Windows NT/ MS-DOS operating
platform account for substantially all of the Company's net sales. The Company
offers popular brand name microcomputer products from Apple, AST Research,
Compaq, Canon, Epson, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, NEC,
Novell, Toshiba and US Robotics, among others. The Company's high volume,
cost-efficient operation supported by its proprietary management information
systems, enables it to offer these products at discounted prices.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered by the Selling Shareholders.......... 632,064
Shares Outstanding Immediately After the Offering... 21,524,984(1)
Use of Proceeds..................................... The Company will not receive any
proceeds from the offering. See "Use of
Proceeds."
Nasdaq National Market Symbol....................... CDWC
</TABLE>
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(1) All of the shares being offered hereby presently are outstanding. Does not
include 4,110,260 shares of Common Stock reserved for issuance under
various incentive stock option plans established by the Company, of which
options for 1,196,728 shares (which includes options for 132,064 shares to
be granted pursuant to the modification to the MPK Restricted Stock Plan)
have been granted and are currently outstanding under such plans. See
"Description of the MPK Restricted Stock Plan Modification."
-------------------------
The Company was originally incorporated under the laws of the State of
Illinois in June, 1984, reincorporated under the laws of the State of Delaware
in May, 1993 and reincorporated under the laws of the State of Illinois in June,
1995. The Company's executive offices and distribution facility are located at
1020 East Lake Cook Road, Buffalo Grove, Illinois 60089 and its telephone number
is (847) 465-6000. The Company's Internet address is http://www.cdw.com. The
Company's website is not, and shall not be deemed to be, a part of this
Prospectus.
3
<PAGE> 5
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED TWELVE MONTHS ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------------------------
1992 1992(1) 1993 1994 1995 1996
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $138,769 $181,167 $270,919 $413,270 $628,721 $927,895
Cost of sales.................................. 121,163 158,412 236,718 359,274 548,568 805,413
-------- -------- -------- -------- -------- --------
Gross profit................................... 17,606 22,755 34,201 53,996 80,153 122,482
Selling and administrative expenses(2)......... 21,844 25,289 21,828 34,617 49,175 64,879
Exit charge(3)................................. -- -- -- -- -- 4,000
Special incentive compensation expense......... 9,281 9,281 -- -- -- --
-------- -------- -------- -------- -------- --------
Income (loss) from operations.................. (13,519) (11,815) 12,373 19,379 30,978 53,603
Other income (expense), net.................... (113) (168) (297) 511 2,020 3,281
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes.............. (13,632) (11,983) 12,076 19,890 32,998 56,884
Income tax provision (benefit)................. (16) 5 3,294 7,777 12,939 22,484
Benefit from change in tax status(4)........... -- -- (3,807) -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss).............................. $(13,616) $(11,988) $ 12,589 $ 12,113 $ 20,059 $ 34,400
======== ======== ======== ======== ======== ========
PRO FORMA INCOME DATA (UNAUDITED):
Income (loss) before income taxes.............. $(13,632) $(11,983) $ 12,076
Adjustment for executive and special incentive
compensation expense in excess of contractual
compensation(5).............................. 19,158 19,187 --
-------- -------- --------
Pro forma income before income taxes........... 5,526 7,204 12,076
Pro forma provision for income taxes(5)........ 2,155 2,809 4,725
(Benefit) from change in tax status(4)......... -- -- (3,807)
-------- -------- --------
Pro forma net income........................... $ 3,371 $ 4,395 $ 11,158
======== ======== ========
Net income per share (Pro forma for 1993
and 1992).................................... $ 0.18 $ 0.60 $ 0.61 $ 0.95 $ 1.58
======== ======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding (Pro forma for
1993 and 1992)............................... 18,300 18,750 20,003 21,080 21,785
SELECTED OPERATING DATA:
Average order size............................. $ 617 $ 610 $ 587 $ 590 $ 630 $ 704
Number of orders shipped (in thousands)........ 225 297 462 700 998 1,318
Customers serviced (in thousands).............. 100 N/A 190 274 374 462
Net sales per employee (in thousands).......... $ 1,039 1,058 $ 1,188 $ 1,223 $ 1,364 $ 1,459
Inventory turnover............................. 29.8 28.4 29.7 22.2 21.7 23.4
Accounts receivable -- Days sales
outstanding.................................. 15.6 16.0 16.9 20.7 21.8 22.6
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Working capital (deficit)...................... $ (33) $ 16,462 $ 49,217 $ 99,127 $123,614
Total assets................................... 18,725 34,159 77,860 132,929 198,830
Total debt and capitalized lease obligations... 6,704 3,603 -- -- --
Total shareholders' equity (deficit)........... (1,030) 21,852 55,843 106,161 141,622
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</TABLE>
(1) The Company adopted a fiscal year ending December 31, for the nine months
ended December 31, 1992 and all subsequent periods. The data for the twelve
months ended December 31, 1992 is unaudited and presented for comparative
purposes.
(2) Selling and administrative expenses include executive compensation expense
for the majority shareholder and President, which is pursuant to employment
agreements that commenced as of the closing date of the Company's initial
public offering. The total executive compensation expense for the majority
shareholder and President for the twelve months ended December 31, 1992 and
the nine months ended December 31, 1992 was $10,281,000 and $10,158,000,
respectively.
(3) The exit charge provides for estimated costs associated with vacating the
Company's current leased facility. See "Risk Factors -- Facilities."
(4) Net income and pro forma net income for the twelve months ended December 31,
1993 includes a $3,807,000 ($0.20 per share) tax benefit relating to the
Company's change in tax status from an S corporation to a C corporation on
May 25, 1993 and adoption of Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes."
(5) The Company terminated its election to be treated as an S corporation
effective May 25, 1993. The pro forma income statement data has been
computed by adjusting the Company's net income (loss), as reported, to: (a)
eliminate for the nine and twelve months ended December 31, 1992 (i)
executive compensation expense (including bonuses) in excess of contractual
compensation pursuant to employment agreements, which commenced as of the
closing date of the initial public offering, for the majority shareholder
and the President and (ii) special incentive compensation expense pursuant
to the MPK Stock Option Plan; and (b) compute income taxes for the twelve
months ended December 31, 1993 and the nine months ended December 31, 1992
assuming an effective tax rate of 39% which would have been recorded had the
Company been a C corporation.
4
<PAGE> 6
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating the Company, its business and the shares of Common Stock offered
hereby. This Prospectus, including information incorporated by reference,
contains forward-looking statements which involve certain risks and
uncertainties. Any statements contained herein which are not historical facts or
which contain the words expect, believe or anticipate, shall be deemed to be
forward looking statements. Such forward-looking statements include, but are not
limited to, the Company's expectations regarding its future financial condition
and operating results, business and growth strategy, market conditions and
competitive environment. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, product demand, pricing, market
conditions, risks related to the Company's relocation to a new facility,
development of new products and advancement of technology by manufacturers,
acceptance of such new products and technologies by end-users, competition and
other matters, as set forth in the following risk factors and elsewhere in this
Prospectus.
RAPID GROWTH
Since its formation in June, 1984, the Company has experienced rapid
growth. As part of its business strategy, the Company intends to pursue the
continuation of this growth through further development of marketing programs,
the hiring of additional account executives, technical support personnel and
operations personnel and investment in additional facilities and systems. The
Company's success will, in part, be dependent upon the ability of the Company to
manage its growth effectively. The Company's business and growth could be
affected by the spending patterns of existing or prospective customers, the
cyclical nature of capital expenditures of businesses, continued competition and
pricing pressures, the successful development of new products, and other trends
in the general economy. Recent statements by industry observers have indicated
that there may be a slowdown in the growth rate of the microcomputer industry.
As a result, future revenue and profit increases could occur at moderating
rates. There can be no assurance that the Company's rapid growth will continue
in the future.
FACILITIES
In the first quarter of 1996, the Company acquired a 27 acre parcel of land
in Vernon Hills, Illinois, near its present facility, upon which it presently is
constructing a combined warehouse, telemarketing, retail showroom and corporate
office facility. The initial phase of construction includes approximately
218,000 square feet. The Company expects to vacate its current leased facility
and relocate its operations to this new facility in the third quarter of 1997.
The Company will likely incur certain moving and other costs, not expected to
exceed $1.0 million, relating to this relocation which would be charged to
operating results in the period incurred. The Company recorded a $4.0 million
pre-tax non-recurring charge in the first quarter of 1996 for estimated costs
associated with vacating its current leased facility, including estimated lease
costs and costs to restore the facility to its original condition. The Company
calculated the exit charge based upon certain assumptions regarding its ability
to sublease the facility. There is no assurance that the $4.0 million charge
will be adequate to cover actual costs should the Company's actual experience in
subleasing the facility differ from its assumptions. Any additional costs would
adversely affect operating results at the time such costs are known.
In conjunction with the move to the new facility, the Company will acquire
and install certain new telephone and warehousing equipment. Any significant
unanticipated expense, capital cost or disruption of the Company's business or
operations caused by the construction of the new facility, relocation to the new
facility or implementation of new telephone and warehousing equipment could have
a material adverse effect on the Company's results of operations. If the Company
is unable to generate increased sales and gross profit sufficient to absorb
increased overhead and other costs associated with its expansion, the Company
would likely experience lower pre-tax margins.
Historically, the Company has operated, and upon relocation to its new
facility will continue to operate, its business from a single facility which is
a combined telemarketing, warehouse, corporate office and retail
5
<PAGE> 7
showroom facility. As a result, the Company's business could be adversely
affected by any interruption of the Company's business resulting from a natural
disaster or other event negatively impacting the facility.
MANAGEMENT INFORMATION SYSTEMS
The Company's success is dependent on the accuracy and proper utilization
of its management information systems, including its telephone system. The
Company's ability to manage its inventory and accounts receivable collections;
to purchase, sell and ship its products efficiently and on a timely basis; and
to maintain its cost-efficient operation is dependent upon the quality and
utilization of the information generated by its management information systems.
The Company recognizes the need to continually upgrade its management
information systems to most effectively manage its operations and customer data
base. In that regard, the Company anticipates that it will, from time to time,
require software and hardware upgrades for its present management information
systems. The Company believes that its management information systems, coupled
with these ongoing enhancements, are sufficient to sustain its present
operations and its anticipated growth for the foreseeable future. Any
interruption in the availability or use of the management information systems as
a result of system failure or otherwise could have a material adverse effect on
the Company's operations. The Company does not currently have a redundant or
back-up telephone system and any interruption in telephone service could have a
material adverse effect on the Company's operations.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's future performance will depend to a significant extent upon
the efforts and abilities of its senior management team, particularly those
executive officers who also serve as directors of the Company. Although the
Company has various programs in place to motivate, reward and retain its
management team, including annual incentive plans, restricted stock and stock
option plans, the loss of service of one or more of these persons could have an
adverse effect on the Company's business. Each of the Company's executive
officers who serves as a director is subject to an employment agreement with the
Company. The Company's success and plans for future growth will also depend on
its ability to hire, train and retain skilled personnel in all areas of its
business.
POTENTIAL QUARTERLY FLUCTUATIONS IN RESULTS AND VOLATILITY OF STOCK PRICE
The Company could experience variability in its net sales and net income on
a quarterly basis as a result of many factors, including the condition of the
personal computer industry in general, shifts in demand for hardware and
software products and the introduction of new products or upgrades. The
Company's operating results are also highly dependent upon its level of gross
profit as a percentage of net sales which fluctuates due to numerous factors
which may be outside of the Company's control. Such factors include the
availability of opportunistic purchases, changes in prices from suppliers,
rebate and incentive programs available from suppliers, general competitive
conditions, and the relative mix of products sold during the period.
The technology sector of the United States stock markets has experienced
substantial volatility in recent periods, and the market price of the Common
Stock has, likewise, experienced volatility during these periods. Numerous
conditions which impact the technology sector or the stock market in general or
the Company in particular, whether or not such events relate to or reflect upon
the Company's operating performance, could adversely affect the market price of
the Common Stock. Furthermore, fluctuations in the Company's operating results,
the loss of a significant vendor, increased competition, reduced vendor
incentives and trade credit, higher postage and operating expenses, and other
developments, could have a significant impact on the market price of the Common
Stock.
RELIANCE ON VENDORS AND PRODUCT LINES
The Company acquires products for resale both directly from manufacturers
and indirectly through distributors and other sources. The Company is generally
authorized by manufacturers to sell via direct marketing all or certain products
offered by the manufacturer. The Company's authorization with each manufacturer
provides for certain terms and conditions, which may include one or more of the
following: product
6
<PAGE> 8
return privileges, price protection policies, purchase discounts and vendor
incentive programs, such as purchase rebates and cooperative advertising
reimbursements. Additionally, certain products are subject to manufacturer
allocation, which limits the number of units of such products available to
resellers, including the Company. The Company's business and results of
operations may be adversely affected if the terms and conditions of the
Company's authorizations were significantly modified or if certain products
become unavailable to the Company, whether such unavailability is because the
manufacturer terminates the Company's authorization or the product is subject to
allocation or otherwise. In addition, the relocation of key distributors
utilized in the Company's just-in-time purchasing model could adversely impact
the Company's results of operations.
For the year ended December 31, 1996, Toshiba America Incorporated and
Ingram Micro/Alliance were the only vendors from whom purchases exceeded 10% of
total purchases, accounting for 10.3% and 14.8%, respectively, of the Company's
total purchases. The loss of either of these vendors or any other key vendors
could have an adverse effect on the Company.
Vendors currently provide the Company with trade credit as well as
substantial incentives in the form of discounts, rebates, credits, and
cooperative advertising reimbursements. Cooperative advertising reimbursements,
which represent the largest proportion of vendor incentives, were 2.2% of net
sales for the year ended December 31, 1996. A reduction in, discontinuance of,
or significant delay in receiving trade credit or incentives could adversely
affect the Company's profitability and cash flow.
INVENTORY MANAGEMENT
Given the rapid technological changes that affect the market and pricing
for products sold by the Company, the Company seeks to minimize its inventory
exposure through a variety of inventory control procedures and policies,
including certain vendor programs. However, there can be no assurance that such
practices will continue or that unforeseen product developments will not
adversely impact the Company's operations. The Company periodically takes
advantage of cost savings associated with certain opportunistic bulk inventory
purchases. Such opportunistic bulk purchases could increase the Company's
exposure to inventory obsolescence. Additionally, if such opportunistic bulk
purchases are not available in the future, it could have a negative impact on
the Company's sales growth and gross profit. The Company maintained an
investment in product inventory of $41.5 million at December 31, 1996, of which
approximately $412,000 (1.13%) of product inventory on-hand was more than 90
days old. The Company's inventory turnover was 23.4 for the year ended December
31, 1996.
INDUSTRY EVOLUTION AND PRICE CHANGES
The microcomputer industry has evolved as a result of, among other things,
the development of new technologies which are translated by manufacturers into
new products and applications. The Company has been and will continue to be
dependent on the continued development of new technologies and products by its
vendors, as well as the acceptance of such technologies and new products by
end-users. A decrease in the rate of development of new technologies and new
products by manufacturers, or the lack of acceptance of such technologies and
products by end-users, could have a material adverse effect on the Company's
growth prospects and results of operations.
Additionally, the industry has become more accepting of large-volume,
cost-effective channels of distribution such as computer superstores, consumer
electronic and office supply superstores, national direct marketers and mass
merchants. In addition, several of the Company's competitors are attempting to
market computer products through electronic commerce, including the Internet.
While these efforts to date represent only a small percentage of industry-wide
sales, such sales may grow if end-user acceptance of electronic commerce
increases. Although the Company offers products for sale via electronic
commerce, there can be no assurance that the Company's sales via electronic
commerce will meet or exceed sales levels generated by competitors.
The current industry configuration may result in increased pricing
pressures. Decreasing prices of microcomputers and related products, resulting
in part from technological changes, may require the Company
7
<PAGE> 9
to sell a greater number of products to achieve the same level of net sales and
gross profit. Such a trend may adversely affect the Company's business and
results of operations and could make it more difficult for the Company to
continue to increase its net sales and earnings growth. In addition, if the
growth rate of microcomputer sales were to slow down, the Company's operating
results could be adversely affected.
COMPETITION
The microcomputer products industry is highly competitive. The Company
competes with a large number and variety of resellers of microcomputer and
related products. In the hardware category, the Company competes with
traditional microcomputer retailers, computer superstores, consumer electronic
and office supply superstores, mass merchandisers, national direct marketers and
value-added resellers. In the software and accessories categories, the Company
generally competes with these same resellers as well as specialty retailers and
resellers. Certain national computer resellers also have established or acquired
their own direct marketing operations. In addition, as a result of improving
technology, certain software manufacturers have developed and may continue to
develop sales methods that allow customers to download software programs and
packages directly onto the customer's system through the use of modem
telecommunications. The Company also competes with distributors and
manufacturers that sell hardware and software directly to certain customers.
Several of the Company's current and potential competitors are larger and have
substantially greater resources than the Company. Additionally, several
competitors in the direct marketing industry have raised capital in the public
markets through initial and subsequent public offerings. The increased
visibility of these companies and their access to the capital markets may
improve their market position and their ability to compete with the Company. The
Company believes that competition may increase in the future, which could
require the Company to reduce prices, increase advertising expenditures or take
other actions which may have an adverse effect on the Company's operating
results.
SHIPPING, POSTAGE AND PAPER COSTS
Shipping, postage and paper costs are significant expenses in the operation
of the Company's business. The Company ships its products to customers generally
by United Parcel Service, Federal Express and other overnight delivery and
surface services. The Company generally invoices customers for shipping and
handling charges. There can be no assurance that future increases in the cost of
commercial delivery services can be passed on to the Company's customers, which
could have an adverse effect on the Company's operating results. Additionally,
strikes or other service interruptions by such shippers could adversely affect
the Company's ability to market or deliver product on a timely basis.
The Company incurs substantial paper and postage costs related to its
marketing activities. Although these costs are partially offset by cooperative
advertising rebates from vendors, any increases in postal or paper costs (paid
by the Company for its catalog production and mailings) could have an adverse
effect on the Company's operating results.
STATE SALES TAX COLLECTION
The Company presently collects retail occupation tax, commonly referred to
as sales tax, or other similar tax only on sales of products to non-exempt
residents of the State of Illinois. Various states have sought to impose on
direct marketers the burden of collecting state sales taxes on the sale of
products shipped to that state's residents. The United States Supreme Court has
ruled that the various states, absent Congressional legislation, may not impose
tax collection obligations on an out-of-state mail order company whose only
contacts with the taxing state are the distribution of catalogs and other
advertisement materials through the mail and whose subsequent delivery of
purchased goods is by U.S. mail or interstate common carriers. Although a 1995
New York state court case has imposed tax collection obligations on out-of-state
companies, one of which was a mail order company whose contacts with the other
state consisted of visiting the state several times a year to aid customers or
visiting stores stocking their goods, the Company believes its operations are
different from the operations of the companies in that case and thus do not give
rise to tax collection obligations. However, the Company cannot predict the
level of contact with any state which would give rise to future or past tax
collection obligations within the parameters of the Supreme Court case.
Additionally, within the first or second quarter of 1997, the Company
anticipates that certain legislation will be
8
<PAGE> 10
reintroduced in the United States Senate which, if passed, would impose state
sales tax collection obligations on out-of-state mail order companies such as
the Company, whose sales to residents of the taxing state exceed $100,000 per
year in the aggregate. The Company's sales to residents of all states currently
exceeds this level. If the bill is enacted, or the Company is deemed to have a
physical presence in one or more states, the imposition of a tax collection
obligation on the Company may result in additional administrative expenses to
the Company and price increases to the customer that could adversely affect the
Company.
LEGAL PROCEEDINGS
In June, 1993 following the Company's initial public offering, a former
officer, director and shareholder of the Company filed a complaint against the
Company and its Chairman and Chief Executive Officer, Michael P. Krasny,
alleging violations of the federal securities laws, fraud and breach of
fiduciary duty in connection with the 1990 purchase by the Company of the former
shareholder's 20% interest in the Company. The complaint was dismissed by the
district court on procedural grounds in June, 1996, and the former shareholder
subsequently filed an appeal. The Company and Mr. Krasny believe that the
purchase of the shares was conducted honestly and properly and that the suit by
the former shareholder is without merit. The Company and Mr. Krasny are
committed to vigorously defending the litigation. Mr. Krasny has agreed to
indemnify and reimburse the Company for all damages and expenses, net of tax
benefits received by the Company, related to this action. The applicable
accounting rules provide that certain amounts assumed by Mr. Krasny on behalf of
the Company be recorded by the Company for financial reporting purposes as an
expense and a related increase to paid-in capital, net of tax effects.
Accordingly, while having no impact on the Company's cash flow, any such
expenses incurred by Mr. Krasny on behalf of the Company, including litigation,
settlement or judgment costs, would negatively impact the Company's results of
operations in the period incurred. If this action goes to trial, the expenses
attributable thereto are expected to increase significantly which, although
reimbursed by Mr. Krasny, will result in a decrease in the Company's reported
results of operations. Should a negative result occur in this action, Mr. Krasny
could be required to transfer certain of his shares of Common Stock to such
former shareholder or determine to sell certain of his shares to finance such
amounts. Such a transfer or sale by Mr. Krasny could adversely impact the market
price of the Common Stock.
CONTROL BY INSIDERS
Upon the completion of the offering, Michael P. Krasny and certain trusts
and entities controlled by Mr. Krasny and created for the benefit of Mr.
Krasny's family and certain employees will possess up to 56.6% of the total
combined voting power of the Company's outstanding stock. Accordingly, Mr.
Krasny will be able to determine the outcome of all corporate decisions, effect
all corporate transactions (including mergers, consolidations and the sale of
all or substantially all of the Company's assets), or prevent or cause a change
in control in the Company without the consent of the other holders of the Common
Stock. In addition, Mr. Krasny may be able to cause the Company to file a
registration statement enabling him to sell additional shares in the public
market.
However, in order to maintain and motivate the Company's workforce, in 1993
Mr. Krasny granted out of his personal holdings restricted stock and options to
acquire Common Stock to certain employees, the effect of which could be to
reduce, over time, the total voting power possessed by Mr. Krasny. After giving
effect to the exercise of all of the options issued by, and the vesting of the
restricted stock granted by, Mr. Krasny under the MPK Stock Option Plan and MPK
Restricted Stock Plan, respectively, and assuming that no additional shares of
Common Stock are issued by the Company, Mr. Krasny will own up to approximately
39.7% of the issued and outstanding shares of Common Stock. In addition, the
Company has adopted stock option plans pursuant to which it is authorized to
issue up to 4,110,260 shares of its Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE AND ISSUANCE OF ADDITIONAL SHARES
There will be 21,524,984 shares of Common Stock outstanding after
completion of this offering, of which 12,230,436 shares are "restricted shares"
for purposes of the Securities Act of 1933, as amended (the "Securities Act").
All of the restricted shares are currently eligible for sale into the market,
subject to the limitations set forth in Rule 144 promulgated under the
Securities Act and the terms of the MPK Restricted
9
<PAGE> 11
Stock Plan and the MPK Stock Option Plan. Sales of a substantial number of
shares of Common Stock in the public market, whether by purchasers in the
offering or other shareholders of the Company, could adversely affect the
prevailing market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities. In
addition, the issuance of additional shares of stock by the Company could result
in the dilution of voting power of the shares of Common Stock purchased in the
offering.
10
<PAGE> 12
THE COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 20,000
microcomputer products, primarily to business, government, educational,
institutional and home office users in the United States. The Company sells a
broad range of name-brand microcomputer products, including hardware and
peripherals, software, networking products and accessories through knowledgeable
telemarketing account executives. Sales of products which utilize, or are
compatible with, the Microsoft Windows 95/Windows/Windows NT/MS-DOS operating
platform account for substantially all of the Company's net sales. The Company
offers popular brand name microcomputer products from Apple, AST Research,
Compaq, Canon, Epson, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, NEC,
Novell, Toshiba and US Robotics, among others. The Company's high volume,
cost-efficient operation supported by its proprietary management information
systems, enables it to offer these products at discounted prices.
The Company directs its marketing efforts toward current and prospective
customers with a particular focus on business, government, educational,
institutional and home office users. The Company believes that these entities
and persons have a high level of product knowledge and are most likely to
purchase sophisticated systems and products through its direct marketing format.
The Company efficiently markets to prospective customers through its catalog
mailing programs and through national advertising in computer magazines. The
Company's use of database management techniques to better qualify potential
customers and develop productive mailing strategies has enabled the Company to
increase its prospecting on a cost-effective basis. During the year ended
December 31, 1996, the Company serviced approximately 462,000 customers. The
Company continues to focus on generating repeat sales from existing customers
while attracting sales from new customers. The Company has consistently
maintained a high annual rate of repeat purchases from current customers by
offering excellent customer service and competitive pricing on a broad range of
microcomputer products. The Company enhances repeat purchases by offering add-on
and replacement products through its experienced telemarketing account
executives who are knowledgeable about a customer's needs, and by enhancing
product offerings such as networking products through targeted catalogs to such
users.
The Company has experienced significant growth in its business with net
sales growing to $927.9 million for the year ended December 31, 1996, a compound
annual growth rate of 50.4% for the four year period then ended. Net income
increased to $34.4 million representing a compound annual growth rate of 67.3%
for the four year period. In addition, its operating margin increased from 4.1%,
on a pro forma basis, in 1992 to 5.8% in 1996, reflecting the Company's low cost
operating model, high inventory turnover, generally exceeding 20 turns per year,
and cost-effective marketing programs.
To accommodate its anticipated future growth, the Company purchased 27
acres of vacant land and is constructing a 218,000 square foot combined
warehouse, telemarketing, retail showroom and corporate office facility in
Vernon Hills, Illinois. The Company intends to relocate to this facility in the
third quarter of 1997 and in the first quarter of 1996, recorded a non-recurring
pre-tax charge of $4.0 million to cover the estimated costs of exiting the
Company's current leased facility. The Company believes that the new facility
and available contiguous land will be sufficient to meet its needs for the
foreseeable future.
The Company's goal is to enhance its position as a leading direct marketer
of brand name microcomputer hardware and peripherals, software, networking
products and accessories in the U.S. The Company's strategy is to maintain a low
cost operating model by employing its product knowledgeable telemarketing
account executives, its expertise in product purchasing and pricing, its direct
marketing and database marketing skills, its proprietary management information
systems and its emphasis on customer service and technical support which
provides its customers value in the form of quality products at discounted
prices, with same-day shipping and after-sale technical support. The Company
believes that this strategy, coupled with technological advancement, new product
introductions and the growth of the market for microcomputer products, has
accounted for its success to date.
11
<PAGE> 13
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby. See "Principal and Selling Shareholders."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following table sets forth the high and low sales prices for the
Company's Common Stock (as adjusted for the Stock Splits) for the periods
indicated as reported by the Nasdaq National Market. Trading began in the
Company's Common Stock on May 27, 1993. As of December 31, 1996, the Company
believes that there were approximately 2,700 beneficial owners of Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE
------------------
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C>
March 31, 1995............................................. $26 5/32 $20 1/3
June 30, 1995.............................................. 36 5/32 22 1/2
September 30, 1995......................................... 42 1/3 32 53/64
December 31, 1995.......................................... 38 1/3 24 53/64
March 31, 1996............................................. 39 5/32 22 1/2
June 30, 1996.............................................. 59 32 53/64
September 30, 1996......................................... 74 35
December 31, 1996.......................................... 72 1/4 59 1/4
March 31, 1997 (through February 10, 1997)................. 70 52
</TABLE>
The last reported sale price of the Company's Common Stock on February 10,
1997 was $56.625 per share.
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends on Common Stock in the foreseeable future. The
payment of cash dividends on shares of Common Stock will depend upon the
earnings of the Company, the Company's capital requirements and other financial
factors which are considered relevant by the Company's Board of Directors.
12
<PAGE> 14
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996 and the number
of shares offered pursuant to this Prospectus by (i) each person or group that
is known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each of the directors of the Company,
(iii) each of the Named Officers, (iv) all Selling Shareholders and (v) all
directors and officers of the Company as a group. All information with respect
to beneficial ownership has been furnished by the respective shareholders to the
Company.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- NUMBER OF -----------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES PERCENT OFFERED(1) SHARES PERCENT
---- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Michael P. Krasny(2)................. 12,808,857 59.5% 363,563(3) 12,176,793(4) 56.6%(4)
1020 East Lake Cook Road
Buffalo Grove, IL 60089
Gregory C. Zeman(5).................. 2,536,703 11.8 103,504 2,433,199 11.3
1020 East Lake Cook Road
Buffalo Grove, IL 60089
Daniel B. Kass(6).................... 538,089 2.5 21,955 516,134 2.4
Mary C. Gerlits(7)................... 269,046 1.2 10,978 258,068 1.2
Paul A. Kozak(8)..................... 6,401 * 6,251 150 *
Harry J. Harczak, Jr. ............... 750 * -- 750 *
Joseph Levy, Jr. .................... 25,500 * -- 25,500 *
Michelle L. Collins.................. -- * -- -- *
All officers and directors as a
group (11 persons).............. 12,837,057(9) 59.6 512,160 12,204,993(9) 56.7
MPK PLAN SELLING SHAREHOLDERS(10)
Sylvia Alantzas.................... 14 * 14 -- --
Charlene Alvarez................... 227 * 227 -- --
John Arata......................... 2,508 * 2,508 -- --
Tim Austin......................... 1,718 * 1,718 -- --
Louis A. Baigorria................. 230 * 5 225 *
Long Barnes........................ 371 * 71 300 *
Diana Brakenbury................... 356 * 356 -- --
M. Brigid Burke.................... 645 * 645 -- --
Daniel F. Callen................... 5,909 * 5,909 -- --
Elmer Camposagrado................. 1,046 * 1,046 -- --
Fernando Chuw...................... 2,024 * 2,024 -- --
Loise Colson....................... 56 * 56 -- --
Patricia Comenduley................ 94 * 94 -- --
Carlton Connor..................... 1,304 * 1,304 -- --
Greg Cresta........................ 18,251 * 6,251 12,000 *
Dennis Dadas....................... 6,128 * 3,878 2,250 *
Linda Detweiler.................... 2,387 * 2,387 -- --
R. Michael Dubiel.................. 2,901 * 2,121 780 *
Doug Eckrote....................... 9,251 * 6,251 3,000 *
Mauro Figueroa..................... 466 * 466 -- --
Kenneth Z. Ford.................... 1,280 * 1,280 -- --
Marisa Foster...................... 926 * 926 -- --
Ivonne Franco...................... 101 * 101 -- --
Brian Fritz........................ 109 * 109 -- --
Donna Garner....................... 765 * 728 37 *
Brian Gilliam...................... 5,728 * 4,828 900 *
Juney Guaura....................... 117 * 117 -- --
Maurice Hamilton................... 6,251 * 6,251 -- --
Susan Handchetz.................... 81 * 81 -- --
Kathryn Hinton..................... 400 * 400 -- --
Jason Housinger.................... 2 * 2 -- --
</TABLE>
13
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C> <C>
Maureen Isenberg............................ 1,725 * 1,725 -- --
Cheryl Jarm................................. 560 * 560 -- --
Nannette Jensen............................. 270 * 20 250 *
Jeffrey Jorgensen........................... 3,350 * 3,350 -- --
Laura Kelly................................. 644 * 644 -- --
Lawrence Kirsch............................. 6,251 * 6,251 -- --
Kimberly Krotky............................. 212 * 212 -- --
Mark Kuffel................................. 241 * 241 -- --
Frank Lamascese............................. 461 * 92 369 *
Craig Langer................................ 149 * 149 -- --
Tammy Ley................................... 1,385 * 1,385 -- --
Kenny Lin................................... 264 * 264 -- --
Ann Lyp..................................... 1,138 * 1,138 -- --
Byron Moncayo............................... 4,937 * 4,837 100 *
Cynthia Moyes............................... 98 * 98 -- --
Cathleen Naslund............................ 3,941 * 3,941 -- --
Carl Nelson................................. 18 * 18 -- --
M. Angela Nickel............................ 691 * 691 -- --
Edwin Nieves................................ 806 * 806 -- --
Wendy Nikitenko............................. 2,396 * 2,396 -- --
Kathleen O'Sullivan......................... 2,147 * 2,147 -- --
Tirso Olivares.............................. 15 * 15 -- --
Diana Onofre................................ 73 * 73 -- --
Alan Pietrusiewicz.......................... 326 * 326 -- --
Erwin Piril................................. 271 * 271 -- --
Tina Rachuy................................. 1,174 * 1,174 -- --
Rick Roman.................................. 1,974 * 1,974 -- --
Cynthia Rospond............................. 2,111 * 1,961 150 *
Christina Rother............................ 1,300 * 950 350 *
Jay Rothschild.............................. 2,927 * 2,927 -- --
Lauren Rusk................................. 599 * 599 -- --
Kathleen Sacco.............................. 2,034 * 2,034 -- --
Joe Santander............................... 736 * 736 -- --
Enrique Santizo............................. 1,225 * 1,225 -- --
Brett Schmidt............................... 63 * 63 -- --
Andrew Schneeweis........................... 420 * 420 -- --
John Schorsch............................... 359 * 359 -- --
Tim Sheahen................................. 458 * 358 100 *
Mark Sheffer................................ 6,311 * 6,251 60 *
Daniel Sitowski............................. 1,658 * 1,658 -- --
David Solliday.............................. 240 * 173 67 *
Steven Staines.............................. 697 * 697 -- --
Kurt Swanson................................ 65 * 65 -- --
Elizabeth Tegtmeyer......................... 1,511 * 1,511 -- --
Bryan Testin................................ 4,976 * 4,376 600 *
Chi Ming Tong............................... 804 * 804 -- --
Donald Trunnell............................. 6,851 * 6,251 600 *
Jodi Uhler.................................. 1,916 * 1,916 -- --
Ricardo Vasquez............................. 2,900 * 2,600 300 *
Roderick Walker............................. 41 * 41 -- --
Alan Weiss.................................. 702 * 702 -- --
George White................................ 67 * 67 -- --
Neil Youngblood............................. 117 * 117 -- --
</TABLE>
- -------------------------
* Less than 1%
14
<PAGE> 16
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes the individuals named in this table have sole voting and
investment power with respect to all shares of Common Stock reflected as
being owned by them. This information assumes that the underwriters'
over-allotment option is not exercised. If the over-allotment option is
exercised in full, 36,356, 10,350, 2,196 and 1,098 of the additional shares
will be sold by Messrs. Krasny, Zeman and Kass and Ms. Gerlits,
respectively.
(2) Includes 3,343,838 shares subject to the MPK Stock Option Plan, 554,736
shares, net of forfeitures resulting from employee terminations, subject to
the MPK Restricted Stock Plan, with respect to such shares Mr. Krasny
disclaims beneficial ownership, 8,560 shares owned by Mr. Krasny's minor
stepson and shares in certain trusts. Mr. Krasny is the Chairman, Chief
Executive Officer, Treasurer and Secretary of the Company.
(3) Includes shares which may be contributed by Mr. Krasny to a trust or
private foundation prior to the closing of this offering.
(4) Reflects the sale of an aggregate 136,437 shares issued pursuant to options
granted under the MPK Stock Option Plan out of Mr. Krasny's own shares
being sold by Messrs. Zeman and Kass and Ms. Gerlits and 132,064 shares
issued under the MPK Restricted Stock Plan out of Mr. Krasny's own shares
being sold by MPK Plan Selling Shareholders.
(5) Reflects 2,536,703 shares issuable pursuant to non-forfeitable options
granted by Mr. Krasny under the MPK Stock Option Plan effective December
31, 1992. The options are exercisable at the rate of 5% per year on each of
the first four anniversaries of the effective date and an additional 15% on
each anniversary date thereafter until all options are exercisable and are
fully exercisable in the event of Mr. Zeman's termination of employment.
These shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
103,504 shares have become exercisable by Mr. Zeman, all of which shares
are being sold by Mr. Zeman in this offering. Mr. Zeman is the President
and a director of the Company.
(6) Reflects 538,089 shares issuable pursuant to options granted by Mr. Krasny
under the MPK Stock Option Plan effective December 31, 1992. The options
are exercisable at the rate of 5% per year on each of the first four
anniversaries of the effective date and an additional 15% on each
anniversary date thereafter until all options are exercisable and are fully
exercisable in the event of Mr. Kass' termination of employment. These
shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
21,955 shares have become exercisable by Mr. Kass, all of which shares are
being sold by Mr. Kass in this offering. Mr. Kass is the Vice President --
Sales and a director of the Company.
(7) Reflects 269,046 shares issuable pursuant to options granted by Mr. Krasny
under the MPK Stock Option Plan effective December 31, 1992. The options
are exercisable at the rate of 5% per year on each of the first four
anniversaries of the effective date and an additional 15% on each
anniversary date thereafter until all options are exercisable and are fully
exercisable in the event of Ms. Gerlits' termination of employment. These
shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
10,978 shares have become exercisable by Ms. Gerlits, all of which shares
are being sold by Ms. Gerlits in this offering. Ms. Gerlits is the Vice
President -- Human Resources of the Company.
(8) Includes 6,251 shares issued pursuant to the MPK Restricted Stock Plan, as
modified, all of which shares are being sold by Mr. Kozak in this offering.
See "Description of MPK Restricted Stock Plan Modification." Mr. Kozak is
the Vice President -- Purchasing of the Company.
(9) For purposes of computing aggregate number of shares owned by directors and
officers of the Company as a group, shares of Common Stock beneficially
owned by more than one executive officer are counted only once.
(10) All shares being sold in this offering by such individuals represent shares
to be issued pursuant to the MPK Restricted Stock Plan, as modified. See
"Description of the MPK Restricted Stock Plan Modification."
15
<PAGE> 17
DESCRIPTION OF THE MPK RESTRICTED STOCK PLAN MODIFICATION
On January 31, 1997, the Company filed a Registration Statement on Form S-3
(No. 333-20935) in connection with a proposed modification (the "Modification")
to the MPK Restricted Stock Plan (the "Plan"), established in 1993 by Mr.
Krasny, the Company's Chairman and Chief Executive Officer, out of his own
Company shareholdings to reward certain of the Company's employees ("Plan
Participants") for past service on behalf of the Company. Pursuant to the
original terms of the Plan, each Plan Participant was entitled to receive a
designated number of shares of the Common Stock on January 1, 2000, assuming the
Plan Participants remained continuously employed by the Company until such date.
Plan Participants who failed to remain continuously employed until such date
(other than by reason of death or disability) forfeited their right to their
designated shares and such shares reverted to Mr. Krasny. The Modification was
proposed in order to permit Plan Participants to receive a portion of their Plan
shares prior to the original vesting date, while at the same time further
encouraging Plan Participants to remain in the employ of the Company after the
January 1, 2000 vesting date, and motivating the Plan Participants to exert
their best efforts toward the future performance of the Company.
Under the Modification, each Plan Participant was granted the right to
elect, in his/her sole and absolute discretion, to continue to be treated under
the original terms of the Plan or to adopt a modified vesting schedule for
his/her shares. The modified vesting schedule provides that any electing Plan
Participant would receive accelerated vesting for 25% of the shares allocated to
his/her account. The accelerated vesting date is intended to coincide with the
effective date of this Offering, thereby enabling the Plan Participants who
elected the Modification to sell in this Offering some or all of the shares they
received pursuant to the Modification. The vesting dates for the remaining 75%
of the shares for each Plan Participant who elected the Modification was
modified to vest in equal installments on January 1, 2000, 2001, 2002 and 2003.
Additionally, each Plan Participant who elected the Modification will
receive from the Company options to acquire the Company's Common Stock in an
amount equal to the number of shares received upon accelerated vesting. The
exercise price for these newly issued options will be the market price of the
Common Stock on the date immediately preceding the date the Plan shares are
distributed to the Plan Participants electing the Modification (which is
expected to coincide with the effective date of this Offering) and would vest in
equal installments on January 1, 2001, 2002, 2003 and 2004. These options will
be granted under the CDW 1996 Incentive Stock Option Plan, for which a
Registration Statement on Form S-8 will be filed by the Company prior to any
option exercise date.
All of the shares being offered hereby by the MPK Plan Selling Shareholders
represent shares to be received pursuant to accelerated vesting under the
Modification.
16
<PAGE> 18
UNDERWRITING
William Blair & Company, L.L.C., Montgomery Securities and Wessels, Arnold
& Henderson, L.L.C. (the "Underwriters") have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company, the Selling Shareholders and the Underwriters, to purchase from the
Selling Shareholders, the aggregate number of shares of Common Stock (excluding
the over-allotment shares) set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
William Blair & Company, L.L.C. ............................
Montgomery Securities.......................................
Wessels, Arnold & Henderson, L.L.C. ........................
-------
Total............................................. 632,064
=======
</TABLE>
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 Underwriter,
the Underwriting Agreement provides that, in certain circumstances, 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 Shareholders 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.
The Management Selling Shareholders have granted to the Underwriters an
option, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 50,000 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 Management Selling Shareholders 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 Management Selling Shareholders may sell shares pursuant to the
over-allotment option.
One or more of the Underwriters currently act as market makers for the
Company's Common Stock and may engage in "passive market making" in such
securities on Nasdaq National Market in accordance with Rule 10b-6A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Rule 10b-6A
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 10b-6A under the Exchange Act would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters engaged in passive market making generally
from entering a bid or effecting a purchase at a 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 10b-6A each
underwriter engaged in passive market making is subject to a daily net purchase
limitation equal to 30% of such entity's average daily trading volume during the
two full consecutive calendar months immediately preceding the date of the
filing of the registration statement under the Securities Act pertaining to the
security to be distributed.
17
<PAGE> 19
The Company and the Management Selling Shareholders 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. Michelle
L. Collins, a director of the Company, is a principal of William Blair &
Company, L.L.C. ("William Blair"). William Blair 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 validity of the shares of Common Stock offered hereby is being passed
upon for the Company and the Selling Shareholders by Saitlin, Patzik, Frank &
Samotny Ltd., Chicago, Illinois. Certain legal matters relating to this offering
will be passed upon for the Underwriter by Winston & Strawn, Chicago, Illinois.
Winston & Strawn also acts as co-counsel to the Company and Mr. Krasny with
respect to the litigation described under the caption "Risk Factors -- Legal
Proceedings."
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 have been audited by Coopers & Lybrand L.L.P.
independent accountants, as set forth in their reports thereon included therein
and incorporated herein by reference. The consolidated financial statements and
financial statement schedule of the Company are incorporated by reference herein
in reliance upon the reports of such firm given the authority of such firm as
experts in accounting and auditing.
18
<PAGE> 20
- -------------------------------------------------------
- -------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE, OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS
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 BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................. 2
Additional Information.................. 2
Prospectus Summary...................... 3
Risk Factors............................ 5
The Company............................. 11
Use of Proceeds......................... 12
Price Range of Common Stock and Dividend
Policy................................ 12
Principal and Selling Shareholders...... 13
Description of the MPK Restricted Stock
Plan Modification..................... 16
Underwriting............................ 17
Legal Matters........................... 18
Experts................................. 18
</TABLE>
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
632,064 SHARES
CDW LOGO
CDW COMPUTER CENTERS, INC.
COMMON STOCK
------------------------
PROSPECTUS
, 1997
------------------------
WILLIAM BLAIR & COMPANY
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 9,834
NASD Registration Fee....................................... 4,524
Printing and Engraving Expenses............................. 15,000+
Blue Sky Fees and Expenses (including counsel fees)......... 3,000+
Legal Fees and Expenses..................................... 25,000+
Accounting Fees and Expenses................................ 15,000+
Transfer Agent Fees and Expenses............................ 5,000+
Miscellaneous............................................... 2,642+
-------
Total..................................................... $80,000+
=======
</TABLE>
- -------------------------
+ Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The indemnification provisions applicable to the directors of the Company
are set out in Article Ninth of the Certificate of Incorporation and Article VII
of the By-Laws, respectively, as follows:
CERTIFICATE OF INCORPORATION:
Ninth: The Corporation shall, to the full extent permitted by Section 8.75
of the Illinois Business Corporation Act, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
BYLAWS:
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. The corporation shall indemnify 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 (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonable
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment or settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. The corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best
S-1
<PAGE> 22
interests of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application, that despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceedings, or (b) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (c)
by the Stockholders.
SECTION 5. Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding, as authorized by the Board of Directors in
the specific case, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation authorized in this Article.
SECTION 6. The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any contract, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article.
CONTRACTUAL:
The Company has entered into letter agreements with each of Michael P.
Krasny, the Company's Chairman, Chief Executive Officer, Secretary and
Treasurer, Gregory C. Zeman, the Company's President and a director, Daniel B.
Kass, the Company's Vice President -- Sales and a director and Mary C. Gerlits,
the Company's Vice President -- Human Resources (collectively, the
"Indemnitees") pursuant to which, among other things, the Company has agreed to
indemnify and hold the Indemnitees harmless, to the full extent permitted by
law, from and against any and all losses, claims, damages, liabilities,
judgments, fines, penalties, amounts paid in settlement and expenses (including
reasonable attorneys' fees and costs of investigation and preparation) incurred
by the Indemnitees in connection with any action, claim, suit or other
proceeding instituted or threatened against the Indemnitees by any person, firm,
corporation, governmental body, agency or instrumentality, or other entity
(including, without limiting the generality of the foregoing, any action, claim,
suit or other proceeding brought by one or more of the security holders of the
Company, or in the name thereof), by reason of the Indemnitees' indemnification
of the Underwriters or the fact of, or in any way relating to, the Indemnitees
serving as a director or officer, or in a similar capacity of the Company or of
any of its affiliates, at any time, except to the extent that any such
liabilities or expenses result from the Indemnitees' willful misconduct, gross
negligence, fraud, acts or omissions not in good faith or transactions in which
the
S-2
<PAGE> 23
Indemnitees derived an improper personal benefit, in each case, as determined by
a court of competent jurisdiction in a final judgment from which no further
appeal can be taken. It shall not be deemed to be willful misconduct, gross
negligence or fraud if the Indemnitees act in good faith in accordance with
recommendations or policies of the management or any third party professional
advisor of the Company or its affiliates.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. None
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1 Form of Underwriting Agreement
4 Specimen of Certificate for Common Stock(i)
5 Opinion of Saitlin, Patzik, Frank & Samotny Ltd. re:
Legality
23(a) Consent of Coopers & Lybrand L.L.P. Independent Accountants
23(b) Consent of Saitlin, Patzik, Frank & Samotny Ltd. (included
in Exhibit 5)
24 Power of Attorney (included on page S-4)
</TABLE>
- -------------------------
(i) Incorporated by reference from the exhibits filed with the Company's
registration statement (33-59802) on Form S-1 filed under the Securities
Act of 1933.
(B) FINANCIAL STATEMENT SCHEDULE
None.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "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 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the 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 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the 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.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
S-3
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant hereby 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 Village of Buffalo Grove, State of Illinois, on February
11, 1997.
CDW COMPUTER CENTERS, INC.
By: /s/ MICHAEL P. KRASNY
--------------------------------------
Michael P. Krasny,
Chief Executive Officer
Secretary and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Michael P. Krasny and Gregory C. Zeman
and each of them acting alone, his true and lawful attorneys-in-fact or agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, 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 to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on its behalf by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL P. KRASNY Chairman of the Board, Chief February 11, 1997
- --------------------------------------------- Executive Officer, Secretary
Michael P. Krasny and Treasurer
(Principal Executive Officer)
/s/ GREGORY C. ZEMAN President and Director February 11, 1997
- ---------------------------------------------
Gregory C. Zeman
/s/ DANIEL B. KASS Vice President-Sales February 11, 1997
- --------------------------------------------- and Director
Daniel B. Kass
/s/ MICHELLE L. COLLINS Director February 11, 1997
- ---------------------------------------------
Michelle L. Collins
Director
- ---------------------------------------------
Joseph Levy, Jr.
/s/ HARRY J. HARCZAK, JR. Chief Financial Officer February 11, 1997
- --------------------------------------------- (Principal Financial Officer)
Harry J. Harczak, Jr.
/s/ DANIEL F. CALLEN Vice President-Finance, February 11, 1997
- --------------------------------------------- Controller and Chief
Daniel F. Callen Accounting Officer
(Principal Accounting Officer)
</TABLE>
S-4
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ------------
<S> <C> <C> <C>
1 -- Form of Underwriting Agreement
4 -- Specimen of Certificate for Common Stock(i)
5 -- Opinion of Saitlin, Patzik, Frank & Samotny Ltd. re:
Legality
23(a) -- Consent of Coopers & Lybrand L.L.P., Independent Accountants
23(b) -- Consent of Saitlin, Patzik, Frank & Samotny Ltd. (included
in Exhibit 5)
24 -- Power of Attorney (included on page S-4)
</TABLE>
- -------------------------
(i) Incorporated by reference from the exhibits filed with the Company's
registration statement (33-59802) on Form S-1 filed under the Securities Act
of 1933.
<PAGE> 1
EXHIBIT 1
FORM OF UNDERWRITING AGREEMENT
<PAGE> 2
EXHIBIT 1
CDW COMPUTER CENTERS, INC.
632,064 Shares Common Stock*
UNDERWRITING AGREEMENT
February __, 1997
William Blair & Company, L.L.C.
Montgomery Securities
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the
Several Underwriters Named
in Schedule A
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
SECTION 1. INTRODUCTORY. CDW Computer Centers, Inc., an Illinois
corporation (the "Company"), has an authorized capital stock consisting of
5,000,000 shares of Preferred Stock, $1.00 par value, of which as of the
closing of the offering of shares contemplated by this Agreement no shares will
have been issued, and 75,000,000 shares of Common Stock, $.01 par value (the
"Common Stock"), of which immediately prior to the closing of the offering of
shares contemplated by this Agreement 21,524,984 shares will be outstanding.
Certain stockholders of the Company propose to sell 632,064 shares of the
Company's issued and outstanding Common Stock, to the several underwriters
named in Schedule A as it may be amended by the Pricing Agreement hereinafter
defined (the "Underwriters"), who are acting severally and not jointly. Of the
632,064 shares of Common Stock, certain officers of the Company (the
"Management Selling Stockholders" named in Schedule B) propose to sell 500,000
shares, and certain employees of the Company (the "MPK Plan Selling
Stockholders" named in Schedule B) propose to sell 132,064 shares. The
Management Selling Stockholders and the MPK Plan Selling Stockholders are
collectively referred to herein as the "Selling Stockholders." Collectively,
such total of 632,064 shares of Common Stock proposed to be sold by the Selling
Stockholders are hereinafter referred to as the "Firm Shares." In addition,
the Management Selling Stockholders propose to grant to the Underwriters an
option to purchase up to 50,000 additional __________________
* Plus an option to acquire up to 50,000 additional shares from the
Management Selling Stockholders to cover overallotments.
<PAGE> 3
shares of Common Stock (the "Option Shares") as provided in Section 5 hereof.
The Firm Shares and, to the extent such option is exercised, the Option 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 Representatives,
acting on behalf of the several 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
Representatives 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) Registration statements on Form S-3 (File Nos. 333-20935 and
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. If the Company has elected to rely upon Rule 430A, it will
prepare and file either (i) a final prospectus pursuant to Rule 424(b)
that discloses the information previously omitted from the prospectus in
reliance upon Rule 430A or (ii) a term sheet or abbreviated term sheet
(the "Term Sheet") as described in and pursuant to Rules 434 and 424(b)
that supplements the preliminary prospectus
2
<PAGE> 4
included in the Registration Statement at the time it becomes effective
omitting information in reliance upon Rule 430A (the "Preliminary
Prospectus"). There have been or will promptly be delivered to you four
signed copies of such registration statement and amendments, together with
four copies of all documents incorporated by reference therein, four
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 or the Term Sheet and Preliminary Prospectus for each of the
Underwriters.
Such registration statements and prospectus as amended on file with
the Commission at the time the registration statement became or becomes
effective, including (i) the information deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule
430A(b) and (ii) a registration statement, if any, filed pursuant to Rule
462(b) relating to the Shares, if applicable, are hereinafter called the
"Registration Statement" and the "Prospectus," respectively, except that
if (i) the prospectus filed by the Company pursuant to Rule 424(b) differs
from the prospectus on file at the time the Registration Statement became
or becomes effective, the term "Prospectus" shall refer to the Rule 424(b)
prospectus from and after the time it is filed with the Commission or
transmitted to the Commission for filing or (ii) if a Term Sheet is used,
the term "Prospectus" shall refer to the Term Sheet filed by the Company
pursuant to Rule 424(b) together with the Preliminary Prospectus. 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 for the
Exchange Act and none of such documents, as of the date of such
Incorporated Document, 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.
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(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 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 through the Representatives specifically for use
in the preparation thereof.
(c) Each of the Company and its subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the laws
of its place of incorporation, with corporate power and authority to own
its properties and conduct its business as described in the Prospectus;
the Company and its subsidiary 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 and its subsidiary 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 one hundred percent (100%) of the
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<PAGE> 6
issued and outstanding capital stock of its subsidiary, 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.
(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 conform to the description
thereof included or incorporated by reference in the Prospectus; 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 its subsidiary, or any security or other
instrument which by its terms is convertible into or exchangeable for
capital stock of the Company or its subsidiary, except as described in the
Prospectus. Except as described in the Prospectus, there is outstanding
no security or other instrument that by its terms is convertible into or
exchangeable for capital stock of the Company or its subsidiary.
(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 subsidiary is a
party or by which the Company, any subsidiary or the property of any of
them may be bound or affected, or any order, rule or regulation applicable
to the Company or any subsidiary of any court or regulatory body,
administrative agency or other governmental body having jurisdiction over
the Company or any subsidiary 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 subsidiary 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) Coopers & Lybrand L.L.P. who have expressed their opinion with
respect to certain of the financial statements
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<PAGE> 7
and schedules included in the Registration Statement, are independent
accountants as required by the 1933 Act.
(h) The consolidated financial statements and schedules of the
Company and its subsidiary included or incorporated by reference in the
Registration Statement present fairly the financial position of the
Company and its subsidiary as of the respective dates of such financial
statements, and the results of operations and cash flows of the Company
and its subsidiary 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 supporting schedules included or incorporated by reference
in the Registration Statement present fairly the information required to
be stated therein. The financial information set forth or incorporated by
reference in the Prospectus under the caption "Selected Financial and
Operating Data" presents fairly on the basis stated in the Prospectus, the
information set therein; and the pro forma information included or
incorporated by reference 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 subsidiary 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 subsidiary 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
subsidiary is or may be a party or of which material property owned or
leased by the Company or any subsidiary is or may be the subject, or
related to environmental or discrimination matters that 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.
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<PAGE> 8
(k) There are no holders of securities of the Company having rights
to registration thereof, preemptive rights or rights of first refusal to
purchase Common Stock.
(l) The Company and its subsidiary 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 subsidiary
taken as a whole. The Company and its subsidiary hold their respective
leased properties which are material to the Company and its subsidiary
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 in or contemplated by the Prospectus, the Company and its
subsidiary, 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, nor any material change in short-term debt or long-term debt.
(o) The Company agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into 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 William
Blair & Company, L.L.C., acting on behalf of the Representatives. The
Company has obtained similar agreements from the Selling Stockholders and
each director and executive officer of the Company that is not a Selling
Stockholder.
(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.
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<PAGE> 9
(q) The Company together with its subsidiary owns and possesses 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 subsidiary taken
as a whole and neither the Company nor its subsidiary 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 its subsidiary 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 its subsidiary 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 otherwise), business,
assets, operations or prospects of the Company and its subsidiary taken as
a whole.
(r) The conduct of the business of the Company and its subsidiary 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 subsidiary taken as a whole.
(s) The Company and its subsidiary 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 is threatened to be, asserted against the Company
or its subsidiary 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 subsidiary taken as
a whole.
(t) The Shares have been authorized for trading over-the-counter on
the Nasdaq National Market.
(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.
(v) The Company and its subsidiary are in compliance with Florida
blue sky law relating to disclosure of issuers doing business with Cuba.
The Company is not presently doing business with the government of Cuba or
with any person or affiliate located in Cuba and will notify the Florida
Department of Banking and Finance, Division of Securities and
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<PAGE> 10
Investor Protection, if the Company or its subsidiary commence doing
business with the government of Cuba or any person or affiliate located in
Cuba.
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) This Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling
Stockholder.
(ii) The execution and delivery by such Selling Stockholder of,
and the performance by such Selling Stockholder of its obligations
under, this Agreement and the Pricing Agreement will not contravene
any provision of applicable law, or any agreement or other
instrument binding upon such Selling Stockholder or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over such Selling Stockholder, and no consent,
approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by such
Selling Stockholder of its obligations under this Agreement and the
Pricing Agreement, except such as may be required by the securities
or blue sky laws of the various states in connection with the offer
and sale of the Shares.
(iii) 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.
(iv) 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
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<PAGE> 11
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(v) Such Management 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
William Blair & Company, L.L.C., acting on behalf of the
Representatives.
(vi) Such Selling Stockholder has executed and delivered a
Power of Attorney (the "Power of Attorney") among such Selling
Stockholder, Michael P. Krasny and Gregory C. Zeman (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.
(vii) Such Selling Stockholder further represents, warrants and
agrees that such Selling Stockholder has deposited in custody, under
a Custody Agreement (the "Custody Agreement") with Harry J. Harczak,
Jr., 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 are to
that extent irrevocable, and that the obligations of such Selling
Stockholder hereunder and under the Power of Attorney and the
Custody Agreement shall not be terminated except as provided in this
Agreement, the Power of Attorney or the Custody Agreement by any act
of such Selling Stockholder, by operation of law or by the death or
incapacity of such Selling Stockholder. If any individual Selling
Stockholder should die or become incapacitated, 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 or other
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<PAGE> 12
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.
(b) Each of Michael P. Krasny and Gregory C. Zeman severally
represents and warrants to, and agrees with, the Company and the
Underwriters to the same effect as the representations and warranties of
the Company set forth in Section 2 of this Agreement.
(c) Each of Daniel P. Kass and Mary C. Gerlitz severally represents
and warrants to the Company and the Underwriters that to their knowledge
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.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, 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
Representatives, on behalf of the several Underwriters, represents and warrants
to the Company 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 the heading "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 to sell to the Underwriters named in Schedule A hereto,
and the
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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 third or fourth full business day, as
applicable under Rule 15c6-1 of the Exchange Act, following the date of this
Agreement, or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives and the Company, the Company and
the Selling Stockholders will deliver to you at the offices of Winston &
Strawn, 35 West Wacker Drive, 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, respectively,
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 Representatives 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 Winston & Strawn.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Management Selling Stockholders hereby grant an option to the
several Underwriters to purchase, severally and not jointly, up to an aggregate
of 50,000 Option Shares, at the same purchase price per share to be paid for
the Firm Shares, for use solely in covering any overallotments made 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
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<PAGE> 14
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 Management 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 Management 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 Management
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
Management 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 Management 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. You, individually and not as the Representatives of the
Underwriters, 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 Stockholders promptly
of the issuance by the Commission of any
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<PAGE> 15
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) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a result
of which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, 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 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.
(c) Neither the Company nor its subsidiary 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.
(d) Neither the Company nor its subsidiary will acquire any capital
stock of the Company prior to the earlier of the
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<PAGE> 16
Second Closing Date or termination or expiration of the option
relating to the Option 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 relating to the
Option Shares, except in either case as contemplated by the Prospectus.
(e) As soon as practicable, but in any event not later than August
15, 1998, the Company will make generally available to its security
holders and the Representatives 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.
(f) 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 Representatives and
counsel for the Underwriters at its expense, subject to the provisions of
subsection (b) 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.
(g) 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.
(h) 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.
(i) 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
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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 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.
(j) The Company will use its best efforts to maintain the designation
of the Shares to be sold hereunder on the Nasdaq National Market, unless
the Company's board of directors determines otherwise. The Company will
pay the fee of the NASD in connection with the review of the offering.
(k) The Company will promptly deliver to the Representatives 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
1933 Act.
(l) 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 its subsidiary 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 a blue sky
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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 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 8:30 A.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 Representatives 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
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<PAGE> 19
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 Representatives.
(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 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 its subsidiary, whether or not arising in the
ordinary course of business, which, in the judgment of the
Representatives, 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, as Representatives of the
Underwriters, 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 Saitlin, Patzik, Frank & Samotny Ltd.,
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 validly
existing as a corporation in good standing under the laws of
the State of Illinois
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<PAGE> 20
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, every jurisdiction where the ownership or
leasing of property, or the conduct of its business requires
such qualification except where the failure so to qualify
would not have a material adverse effect upon the condition
(financial or otherwise), business, assets, operations or
prospects of the Company and its subsidiary taken as a whole;
(2) an opinion to the same general effect as clause (1)
of this subparagraph (i) in respect of each subsidiary of the
Company;
(3) all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized,
validly issued and is fully paid and nonassessable, and,
except as disclosed in the Registration Statement, the Company
owns directly 100 percent of the outstanding capital stock of
each subsidiary, and to the best knowledge of such counsel,
such stock is owned free and clear of any claims, liens,
encumbrances or security interests and there are no
outstanding rights, subscriptions, warrants, calls, preemptive
rights, options or other agreements of any kind with respect
to the capital stock of each subsidiary of the Company;
(4) the authorized capital stock of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and Prospectus (except for subsequent issuances, if
any, pursuant to stock options or other rights referred to in
the Prospectus), conforms as to legal matters in all material
respects to the description thereof included or incorporated
by reference in the Registration Statement and Prospectus;
(5) 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 or
rights of first refusal;
(6) the Shares to be sold hereunder have been duly and
validly authorized and qualified for
19
<PAGE> 21
trading over-the-counter on the Nasdaq National Market;
(7) the Registration Statement has become effective under
the 1933 Act, and, to the best 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 or incorporated
by reference 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; such counsel 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 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;
(8) all documents incorporated by reference in the
Prospectus, when they were filed with the Commission, complied
as to form in all material
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<PAGE> 22
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;
(9) 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 as
enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies and except as to those
provisions relating to indemnities for liabilities arising
under the 1933 Act as to which no opinion need be expressed;
and 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 performance by the Company of its obligations under
this Agreement (other than under the 1933 Act, applicable blue
sky laws and the rules of the NASD);
(10) to the best of such counsel's knowledge after due
inquiry, neither the Company nor its subsidiary 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 its subsidiary are 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 subsidiary,
taken as a whole;
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<PAGE> 23
(11) 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 its subsidiary or by which the
property of any of them is bound and which contravention or
default would be material to the Company and its subsidiary
taken as a whole; or violate any of the provisions of the
charter or bylaws of the Company or its subsidiary or, so far
as is known to such counsel, violate any statute, order, rule
or regulation of any regulatory or governmental body having
jurisdiction over the Company or its subsidiary;
(12) the descriptions in the Registration Statement of
laws, regulations and rules, of legal and governmental
proceedings and of contracts, agreements, leases and other
documents including, without limitation, under the headings
"Risk Factors -- Legal Proceedings" and "Business -- Legal
Proceedings" have been reviewed by such counsel and are
accurate in all material respects, and comply as to form in
all material respects with the applicable requirements of the
1933 Act and the rules and regulations thereunder;
(13) except as disclosed in the Prospectus, no person has
the right, contractual or otherwise, to cause the Company to
issue or register pursuant to the 1933 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, nor does any person
have preemptive rights, rights of first refusal, or other
rights to purchase any capital stock of the Company;
(14) neither the Company nor its subsidiary is an
"investment company" or a person "controlled by" an
"investment company" within the meaning of the Investment
Company Act;
(15) 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
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<PAGE> 24
each such Selling Stockholder; and the performance of this
Agreement and the Pricing Agreement and the consummation of
the transactions herein contemplated by each such Selling
Stockholder will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under,
any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument known to such
counsel to which each such Selling Stockholder is a party or
by which any are bound or to which any of the property of each
such Selling Stockholder is subject, or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over each such Selling
Stockholder 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 each such Selling Stockholder
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;
(16) each such 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 such 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
23
<PAGE> 25
Company or restrictions on transfer imposed by the Company;
and
(17) this Agreement and the Pricing Agreement are legal,
valid and binding agreements of each such Selling Stockholder
except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights and by the exercise
of judicial discretion in accordance with general principles
applicable to equitable and similar remedies and except with
respect to those provisions relating to indemnities for
liabilities arising under the 1933 Act, as to which no opinion
need be expressed.
In rendering such opinion, such counsel may state that they are
relying upon the certificate of American Stock Transfer and Trust
Company, 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 (7) 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 Representatives 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
Chief Financial Officer of the Company, dated the
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<PAGE> 26
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 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 or incorporated by reference 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 its subsidiary 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 the condition (financial or otherwise),
business, assets, operations or prospects of the Company and
its subsidiary taken as a whole, or any change in the capital
stock or short-term debt or long-term debt of the Company and
its subsidiary taken as a whole.
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), (2) and (3) 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
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<PAGE> 27
warranties of such Selling Stockholder set forth in Section 3 of
this Agreement are true and correct as of such date and each 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, as
Representatives of the Underwriters, from Coopers & Lybrand L.L.P.,
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. There
shall not have been any change or decrease specified in the letters
referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representatives to proceed with
the public offering or purchase of the Shares as contemplated
hereby.
(vi) At the time the Pricing Agreement is executed, there shall
be delivered to you a letter substantially in the form of Exhibit B
hereto from each director and executive officer of the Company that
is not a Selling Stockholder, in which each such person agrees not
to sell, contract to sell or otherwise dispose of any Common Stock
or securities convertible into Common Stock (except Common Stock
issued pursuant to currently outstanding options) for a period of 90
days after the date of such letter without the prior written consent
of William Blair & Company, L.L.C., acting on behalf of the
Representatives.
(vii) 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
26
<PAGE> 28
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 (i) the default or omission of
any Underwriter, or (ii) the bad faith failure of counsel for the Underwriters
to deliver the opinion required pursuant to Section 8(f)(ii) hereof, 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 Management
Selling Stockholder, jointly and severally, 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 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 Management 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, if
applicable, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission
27
<PAGE> 29
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 or pursuing its rights to indemnification provided
by this Section 11; provided, however, that neither the Company nor any
Management 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 or on behalf of
any Underwriter through the Representatives, 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 that the Company and
the Management Selling Stockholders may otherwise have.
Without limiting the full extent of the Company's agreement to indemnify
each Underwriter, as herein provided, each Management Selling Stockholder 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
Management Selling Stockholder from the sale of Shares hereunder. The Company
and the Management 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 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, each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act, and each Management Selling
Stockholder against any losses, claims, damages or liabilities to which the
Company, or any such director, officer or controlling person or Management
Selling Stockholder 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
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<PAGE> 30
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 through the Representatives
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 or controlling person or Management Selling Stockholder 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 parties which are different from or additional to those
available to the indemnifying party, or the indemnified and indemnifying
parties may have conflicting interests which 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
29
<PAGE> 31
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 Representatives 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.
Prior to making demand on the Management Selling Stockholders to
satisfy his or her obligations under Section 11(a), an indemnified party must
first make a written demand on the Company requesting that the Company satisfy
its obligations hereunder. If (i) the Company does not agree to satisfy such
demands by notifying the indemnified party in writing within seven days after
receipt of such demand, or (ii) after such seven day period, the indemnified
party, in its sole judgment, believes that the Company has not, or is not,
fully complying with its obligations hereunder, then the indemnified party may,
but is under no obligation to do so, make demand on the Management Selling
Stockholders to satisfy his or her obligations hereunder. An indemnified
party's failure to comply with the provisions of this paragraph shall not
relieve the Company or the Management Selling Stockholders from any liability
which it may have to any indemnified party.
(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
30
<PAGE> 32
Company, the Selling Stockholders and the Underwriters from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company, the Selling Stockholders and the Underwriters in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
respective relative benefits received by the Company, the Selling Stockholders
and the Underwriters shall be deemed to be in the same proportion in the case
of the Company and the Selling Stockholders, as the total price paid to the
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 which
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 underwriting discount applicable to the Shares
underwritten by it and distributed 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.
31
<PAGE> 33
(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 Representatives of all such
Shares in accordance with the terms hereof. If any Underwriter or Underwriters
default in their obligations to purchase Shares hereunder on the First Closing
Date or the Second Closing Date, as the case may be, 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 or the Second
Closing Date, as the case may be, the Representatives 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 Representatives
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
Representatives, the Company or the Selling Stockholders shall have the right
to postpone the First Closing Date or the Second Closing Date, as the case may
be, 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
32
<PAGE> 34
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 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 Representatives 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
33
<PAGE> 35
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, L.L.C., 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 CDW Computer Centers, Inc., 1020 East Lake Cook Road, Buffalo
Grove, Illinois 60089, Attention: Michael P. Krasny, Chief Executive Officer,
Fax (708) 465-3833, with a copy to Alan B. Patzik, Esq., Saitlin, Patzik, Frank
& Samotny Ltd., 150 South Wacker Drive, Suite 900, Chicago, Illinois 60606, Fax
(312) 551-1101 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 Representatives.
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. REPRESENTATION OF UNDERWRITERS. You will act as
Representatives for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
SECTION 19. 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 20. 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.
34
<PAGE> 36
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,
CDW COMPUTER CENTERS, INC., an
Illinois corporation
By _________________________________
Chief Executive Officer
SELLING STOCKHOLDERS
listed in Schedule B
By:__________________________
Agent and Attorney-in-Fact
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
WILLIAM Blair & Company, L.L.C.
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON, L.L.C.
Acting as Representatives of the
several Underwriters named in
Schedule A.
By: William Blair & Company, L.L.C.
By __________________________
Partner
35
<PAGE> 37
EXHIBIT A
CDW COMPUTER CENTERS, INC.
632,064 Shares Common Stock*
PRICING AGREEMENT
February __, 1997
William Blair & Company, L.L.C.
Montgomery Securities
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the
Several Underwriters
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated, February __,
1997 (the "Underwriting Agreement") relating to the sale by the Selling
Stockholders and the purchase by the several Underwriters for whom William
Blair & Company, L.L.C., Montgomery Securities and Wessels, Arnold & Henderson,
L.L.C. are acting as representatives (the "Representatives"), 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 Management Selling Stockholders agree with the Representatives as
follows:
1. The public offering price per share for the Shares to be sold by the
Management Selling Stockholders shall be $_______.
2. The purchase price per share for the Shares to be paid by the several
Underwriters to the Management Selling __________________
* Plus an option to acquire up to 50,000 additional shares from the
Management Selling Stockholders to cover overallotments.
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<PAGE> 38
Stockholders shall be $______, being an amount equal to the public offering
price set forth above less $_______ per share.
Pursuant to Section 5 of the Underwriting Agreement, the Company and
each of the MPK Plan Selling Stockholders agree with the Representatives that
the public offering price per share and the purchase price per share to be paid
by the several Underwriters for the Shares shall be $________.
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,
CDW COMPUTER CENTERS, INC.,
an Illinois corporation
By __________________________________
Chief Executive Officer
SELLING STOCKHOLDERS
listed in Schedule B
By:__________________________
Agent and Attorney-in-Fact
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
WILLIAM Blair & Company, L.L.C.
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON, L.L.C.
Acting as Representatives of the
several Underwriters named in Schedule A
By: William Blair & Company, L.L.C.
By __________________________
Partner
37
<PAGE> 39
EXHIBIT B
[Letterhead of each director and
executive officer of CDW Computer Centers, Inc.
that is not a Selling Stockholder]
CDW Computer Centers, Inc.
Public Offering of Common Stock
February __, 1997
William Blair & Company, L.L.C.
Montgomery Securities
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the
Several Underwriters
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among CDW Computer
Centers, Inc., an Illinois corporation (the "Company"), each of the Selling
Stockholders named therein and you as representatives (the "Representatives")
of a group of Underwriters named therein, relating to an underwritten public
offering of Common Stock, $.01 par value (the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned agrees not to sell, contract to sell or
otherwise dispose of any Common Stock or securities convertible into Common
Stock for a period of 90 days after the date hereof without the prior written
consent of William Blair & Company, L.L.C., acting on behalf of the
Representatives.
If for any reason the Underwriting Agreement shall be terminated prior to
the First Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Very truly yours,
[Signature of each applicable
director and executive officer]
[Name and address of each
applicable director and
executive officer]
38
<PAGE> 40
SCHEDULE A
Number of
Firm Shares
to be
Purchased
-----------
Underwriter
- -----------
William Blair & Company, L.L.C................. _______
Montgomery Securities.......................... _______
Wessels, Arnold & Henderson, L.L.C.,........... _______
____________
Total ........................ 632,064
============
39
<PAGE> 41
SCHEDULE B
<TABLE>
<CAPTION>
Maximum
Number of Number of
Firm Option
Shares Shares
to be Sold to be Sold
----------- ----------
Selling Stockholders:
--------------------
<S> <C> <C>
Management Selling Stockholders:
Michael P. Krasny .................. 363,563 36,356
Gregory C. Zeman ................... 103,504 10,350
Daniel B. Kass ..................... 21,955 2,196
Mary C. Gerlitz .................... 10,978 1,098
MPK Plan Selling Stockholder:
Paul A. Kozak ...................... 6,251
Daniel F. Callen ................... 5,909
[List remaining MPK Plan Participants]
_______ ________
Total ................................. 632,064 50,000
======= ========
</TABLE>
40
<PAGE> 42
SCHEDULE C
Comfort Letter of Coopers & Lybrand L.L.P.
(1) They are independent public accountants with respect to the Company
and its subsidiary within the meaning of the 1933 Act and the answer to Item 10
of the Registration Statement, insofar as it relates to them, is correct.
(2) In their opinion the consolidated financial statements and
schedules of CDW Computer Centers, Inc. and subsidiary included or incorporated
by reference in the Registration Statement and the consolidated financial
statements of the Company from which the information presented under the
caption "Selected Combined 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 subsidiary 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 subsidiary since December 31, 1996, a reading of the latest
available interim unaudited consolidated financial statements of the Company
and its subsidiary (with an indication of the date thereof) and other
procedures as specified in such letter, nothing came to their attention which
caused them to believe that (i) the unaudited consolidated financial statements
of the Company and its subsidiary included or incorporated by reference 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 or incorporated by reference
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 subsidiary
on a consolidated basis or any decrease in consolidated net current assets or
consolidated stockholders' equity as compared with amounts shown on the latest
unaudited balance sheet of the Company included or incorporated by reference in
the Registration Statement
41
<PAGE> 43
or for the period from the date of such 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 or incorporated by reference 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 which 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 Representatives, with respect to certain information included or
incorporated by reference in the Prospectus specified by the Representatives,
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
subsidiary.
42
<PAGE> 1
EXHIBIT 5
OPINION OF SAITLIN, PATZIK, FRANK & SAMOTNY LTD. RE: LEGALITY
<PAGE> 2
EXHIBIT 5
[SAITLIN, PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
February 11, 1997
Board of Directors
CDW Computer Centers, Inc.
1020 East Lake Cook Road
Buffalo Grove, Illinois 60089
RE: CDW Computer Centers, Inc. Registration Statement on Form S-3
Gentlemen:
We have acted as special counsel to CDW Computer Centers, Inc., an Illinois
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement"), together
with Exhibits, filed with the Securities and Exchange Commission (the
"Commission") on February 11, 1997, relating to the registration of an offering
by certain of its shareholders of up to 550,000 shares (including the
over-allotment option) of the Company's common stock, par value $.01 per share
(the "Common Stock"). We have reviewed such records, documents and matters of
law as we have considered relevant for the purpose of delivering this opinion.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, the shares of Common Stock, when sold in the
manner contemplated in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We do not find it necessary for the purpose of this opinion, and
accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the sale of the Common
Stock.
<PAGE> 3
[SAITLIN, PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
Board of Directors
February 11, 1997
Page 2
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
We hereby consent to the inclusion in the Registration Statement of this
opinion and to the references to our firm under the caption "Legal Matters."
Very truly yours,
/s/ Saitlin, Patzik, Frank & Samotny Ltd.
SAITLIN, PATZIK, FRANK & SAMOTNY LTD.
SMP/cc
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF COOPERS & LYBRAND L.L.P.,
INDEPENDENT ACCOUNTANTS
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of CDW Computer Centers, Inc. on Form S-3 of our reports dated January 22, 1997,
except for Note 10 as to which the date is February 10, 1997, on our audits of
the consolidated financial statements and financial statement schedule of CDW
Computer Centers, Inc. as of December 31, 1996 and 1995 and for the years ended
December 31, 1996, 1995 and 1994, which reports are included in the 1996 Annual
Report on Form 10-K. We also consent to the reference to our firm under the
caption "Experts."
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 10, 1997
