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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CDW Computer Centers, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
MAY 24, 2000
CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
CDW COMPUTER CENTERS, INC.
--------------
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CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
APRIL 7, 2000
Dear Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
CDW Computer Centers, Inc. (the "Company") scheduled for 6:00 p.m. on Wednesday,
May 24, 2000, at the Company's headquarters, 200 North Milwaukee Avenue, Vernon
Hills, Illinois 60061.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Shareholders and Proxy
Statement.
Members of the Board of Directors, management and I look forward to
personally greeting those shareholders who are able to attend the Annual
Meeting.
Please be sure to sign and return the enclosed proxy card whether or not
you plan to attend the meeting so that your shares will be voted. You may revoke
your proxy by a later dated proxy or vote in person at the meeting, if you
prefer. The Board of Directors and I thank you for your continued support and
hope that you will attend the meeting.
Sincerely yours,
/s/MICHAEL P. KRASNY
--------------------
Michael P. Krasny
Chairman and Chief Executive Officer
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CDW COMPUTER CENTERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 2000
---------------
The Annual Meeting of Shareholders of CDW Computer Centers, Inc. (the
"Company") will be held at 6:00 p.m. on Wednesday, May 24, 2000 at the Company's
headquarters, 200 North Milwaukee Avenue, Vernon Hills, Illinois 60061 for the
purpose of considering and voting on:
1. The election of eight directors. Management's nominees are named in
the accompanying Proxy Statement.
2. The ratification of the selection of PricewaterhouseCoopers LLP,
independent accountants, as auditors for the Company for the year
ending December 31, 2000.
3. A charter amendment to increase the number of authorized shares of
Common Stock.
4. The approval and ratification of the CDW 2000 Incentive Stock Option
Plan.
5. The approval and ratification of the CDW Senior Management Incentive
Plan.
6. Such other business as may properly come before the meeting and all
adjournments thereof.
The Board of Directors has fixed March 31, 2000 as the record date for
determining the shareholders of the Company entitled to notice of and to vote at
the meeting. Only holders of record of the Company's stock at the close of
business on such date will be entitled to notice of and to vote at such meeting
and all adjournments.
Even if you plan to attend the meeting, please be sure to sign, date and
return the proxy in the enclosed envelope to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Proxy Section
/s/ Harry J. Harczak, Jr.
-------------------------
Harry J. Harczak, Jr.
Secretary
Vernon Hills, Illinois
April 7, 2000
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES
MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED. THE PROMPT RETURN OF YOUR SIGNED PROXY, REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD, WILL AID THE COMPANY IN REDUCING THE EXPENSE OF
ADDITIONAL PROXY SOLICITATION. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
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CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
-----------------------------
PROXY STATEMENT
ANNUAL MEETING - MAY 24, 2000
-----------------------------
INFORMATION REGARDING PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CDW Computer Centers, Inc. (the "Company"),
to be voted at the Annual Meeting of Shareholders on Wednesday, May 24, 2000 and
at any and all adjournments thereof.
This Proxy Statement and the accompanying proxy card are first being mailed
to shareholders on or about April 7, 2000. The cost of solicitation of proxies
will be borne by the Company. In addition to solicitation by mail, some of the
directors, officers and regular employees of the Company may, without extra
compensation, solicit proxies by telephone, e-mail, facsimile, telegraph and
personal interview. Arrangements will be made with brokerage houses, custodians,
nominees and other fiduciaries to send proxy material to their principals and
the Company will reimburse them for postage and clerical expense in doing so.
Votes cast by proxy or in person at the Annual Meeting of Shareholders will
be tabulated by the election inspectors appointed for the meeting and they will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as not-voted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
Shares as to which proxies have been executed will be voted as specified in the
proxies. If no specification is made in an otherwise properly executed proxy,
the shares will be voted "FOR" the election of management's nominees as
directors and "FOR" the other proposals listed. If a broker indicates on the
proxy that it does not have discretionary authority as to certain shares to vote
on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
Proxies may be revoked at any time prior to the exercise thereof by filing
with the Secretary of the Company, at the Company's executive offices, a written
revocation or a duly executed proxy bearing a later date. The executive offices
of the Company are located at 200 North Milwaukee Avenue, Vernon Hills, Illinois
60061.
UNLESS OTHERWISE INDICATED, ALL INFORMATION PROVIDED HEREIN IS GIVEN AS OF
THE DATE HEREOF.
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VOTING SECURITIES
The securities of the Company entitled to be voted at the meeting consist
of shares of its Common Stock, $0.01 par value ("Common Stock"). Each share of
Common Stock is entitled to one vote on all matters. On March 31, 2000 (the
"Record Date"), 43,333,361 shares of Common Stock were issued and outstanding.
In addition, 100,000 shares are held in Treasury by the Company and are deemed
issued but not outstanding.
Only shareholders of record at the close of business on the Record Date
will be entitled to receive notice of and to vote at the meeting. There are no
cumulative voting rights.
Assuming a quorum is present in person or by proxy, the affirmative vote of
a majority of the votes represented is required for election of the directors
and passage of proposals two, four and five. The affirmative vote of a majority
of the shares outstanding is required for passage of proposal three.
SHAREHOLDER PROPOSALS
Any shareholder desirous of including any proposal in the Company's proxy
soliciting material for the next regularly scheduled Annual Meeting of
Shareholders (for the year ending December 31, 2000) must submit his or her
proposal, in writing, directed to the Company's executive offices not later than
November 25, 2000. Any such proposal must comply with Rule 14a-8 of Regulation
14A of the proxy rules of the Securities Exchange Act of 1934, as amended, in
order for such proposal to be included in the 2001 Proxy Statement.
In addition, pursuant to the rules and regulations of the Securities and
Exchange Commission, at the Company's 2001 Annual Meeting of Shareholders the
proxy holders appointed by the Company may exercise discretionary authority when
voting on a shareholder proposal properly presented at such meeting that is not
included in the Company's proxy statement for such meeting if such proposal is
received by the Company after February 15, 2001. If notice of a shareholder
proposal is received by the Company on or prior to such date and such proposal
is properly presented at the 2001 Annual Meeting but not included in the
Company's proxy statement for such meeting, the proxy holders appointed by the
Company may exercise discretionary authority if in such proxy statement the
Company advises shareholders on the nature of such proposal and how the proxy
holders appointed by the Company intend to vote on such proposal, unless the
shareholder submitting such proposal satisfies certain requirements of the
Securities and Exchange Commission, including the mailing of a separate proxy
statement to the Company's shareholders.
All shareholder proposals should be directed to Harry J. Harczak, Jr.,
Secretary of the Company.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at February 29, 2000, except where noted
below, by: (i) each person or group that is known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock; (ii) each director and director nominee of the Company; (iii) each
of the Named Officers (as hereinafter defined); and (iv) all directors, director
nominees and executive officers of the Company as a group. All information with
respect to beneficial ownership has been furnished by the respective
shareholders to the Company.
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COMMON STOCK
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AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP STOCK
- ------------------------ ----------- ---------
Michael P. Krasny (1) (2) 20,909,806 48.3%
Gregory C. Zeman (1) (3) 4,267,314 9.9%
AMVESCAP PLC (4) 2,791,250 6.4%
FMR Corp. (5) 2,713,670 6.3%
Daniel B. Kass (6) 880,616 2.0%
Paul A. Kozak (7) 6,425 *
Harry J. Harczak, Jr. 1,500 *
James R. Shanks (8) 19,762 *
Joseph Levy, Jr. (9) 55,320 *
Michelle L. Collins (10) 11,320 *
Casey G. Cowell 18,870 *
Donald P. Jacobs 0 *
Brian E. Williams 800 *
All directors and officers as a group (13 persons) (11) 21,032,790 48.6%
* Less than 1%
(1) The address for Messrs. Krasny and Zeman is the executive office of the
Company.
(2) Includes 3,497,929 shares remaining subject to the MPK Stock Option
Plan (of which all shares are also included in the holdings of Messrs.
Zeman and Kass above), 510,858 shares remaining subject to the MPK
Restricted Stock Plan and 18,676 shares owned by Mr. Krasny's minor
stepson. Mr. Krasny disclaims beneficial ownership with respect to the
shares subject to the MPK Stock Option Plan and the MPK Restricted
Stock Plan.
(3) Includes 2,967,314 shares issuable pursuant to non-forfeitable options
granted under the MPK Stock Option Plan out of Mr. Krasny's own shares.
As of February 29, 2000 options for 767,039 shares are exercisable and
the remaining options become exercisable at the rate of 942,975 on each
December 31 thereafter until all options are exercisable. Additional
shares may be exercised proportionately to any shares sold by
Mr. Krasny from his holdings. All options granted to Mr. Zeman under
the MPK Stock Option Plan will become exercisable in the event that
Mr. Zeman terminates his employment with the Company. These shares are
also reported as being beneficially owned by Mr. Krasny.
(4) The address of AMVESCAP PLC is 1315 Peachtree Street NE, Atlanta, GA
30309. The number of shares held was obtained from the holder's
Schedule 13G filing with the Securities and Exchange Commission dated
February 4, 2000.
(5) The address of FMR Corp. is 82 Devonshire Street, Boston, MA 02109. The
number of shares held was obtained from the holder's Schedule 13G
filing with the Securities and Exchange Commission dated February 14,
2000.
(6) Includes 530,616 shares issuable pursuant to options granted under the
MPK Stock Option Plan out of Mr. Krasny's own shares. As of
February 29, 2000 options for 63,891 shares are exercisable and the
remaining options become exercisable at the rate of 200,025 on each
December 31 thereafter until all options are exercisable. Additional
shares may be exercised proportionately to any shares sold by
Mr. Krasny from his holdings. All options granted to Mr. Kass under the
MPK Stock Option Plan will become exercisable in the
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event that Mr. Kass terminates his employment with the Company. These
shares are also reported as being beneficially owned by Mr. Krasny.
(7) Includes options, exercisable as of February 29, 2000 or within 60 days
thereafter, to acquire 3,000 shares of Common Stock granted pursuant to
the CDW Incentive Stock Option Plan, and 3,125 shares of Common Stock
granted pursuant to the 1996 CDW Incentive Stock Option Plan.
(8) Includes options, exercisable as of February 29, 2000 or within 60 days
thereafter, to acquire 7,262 shares of Common Stock granted pursuant to
the CDW Incentive Stock Option Plan, and 12,500 shares of Common Stock
granted pursuant to a 1996 Nonstatutory Stock Option Agreement.
(9) Includes options, exercisable as of February 29, 2000 or within 60 days
thereafter, to acquire 10,320 shares of Common Stock granted pursuant
to the CDW Director Stock Option Plan.
(10) Includes options, exercisable as of February 29, 2000 or within 60 days
thereafter, to acquire 10,320 shares of Common Stock granted pursuant
to the CDW Director Stock Option Plan.
(11) For purposes of computing the 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 officer are counted only
once.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange Commission thereunder require the Company's executive
officers and directors and persons who own more than ten percent of the
Company's stock, as well as certain affiliates of such persons, to file initial
reports of ownership and changes in ownership with the Securities and Exchange
Commission and The Nasdaq Stock Market. Executive officers, directors and
persons owning more than ten percent of the Company's stock are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it and written representations that no other
reports were required for those persons, the Company believes that, during the
year ended December 31, 1999, all persons subject to Section 16(a) were in
compliance with all Section 16(a) filing requirements.
ANNUAL REPORT AND FORM 10-K
The 1999 Annual Report of the Company, which includes financial statements
for the years ended December 31, 1999, 1998 and 1997, has been mailed with this
Proxy Statement to shareholders of record on the Record Date. The Annual Report
does not constitute a part of the proxy material. A copy of the Company's Report
on Form 10-K for the year ended December 31, 1999, including the financial
statements and the financial statement schedule, as filed with the Securities
and Exchange Commission, is available to shareholders and may be obtained by
writing to the Secretary at the Company's executive offices.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day-to-day operating activities. Members of the Board are
kept informed of the Company's business by various reports and documents sent to
them on a regular basis, including operating and financial reports made at Board
and Committee meetings by the Chairman and other officers.
Eight directors, all of whom are members of the present Board of Directors,
are recommended for election at the Annual Meeting. All directors serve until
the annual meeting next following their election and until their successors have
been elected. There are no family relationships between or among any directors
of the Company.
All of the nominees have consented to serve if elected, and at the date of
this Proxy Statement, the Company has no reason to believe that any of the named
nominees will be unable to serve. Correspondence may be directed to nominees at
the Company's executive offices. Unless otherwise directed, the persons named as
proxies intend to vote in favor of the election of all nominees.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
Set forth below is certain information concerning the nominees for election
to the Board of Directors of the Company.
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Michael P. Krasny.................. 46 Chairman of the Board and Chief Executive Officer
Gregory C. Zeman................... 41 President and Director
Daniel B. Kass..................... 43 Executive Vice President-Sales and Director
Joseph Levy, Jr.................... 73 Director
Michelle L. Collins................ 40 Director
Casey G. Cowell.................... 47 Director
Donald P. Jacobs................... 72 Director
Brian E. Williams.................. 49 Director
Michael P. Krasny is the founder of the Company and currently serves as
Chairman of the Board and Chief Executive Officer. Mr. Krasny has had similar
positions and responsibilities with the Company since the Company's inception.
Mr. Krasny served as the Company's President from its incorporation through
December 1990. Mr. Krasny's responsibilities with the Company include the
overall supervision of its operations and focus on strategy, finance, human
resources, operations and management information systems functions. Mr. Krasny
serves on the Board of Directors of Prism Financial Corporation. Mr. Krasny is a
1975 graduate of the University of Illinois where he earned a Bachelor of
Science degree in Finance.
Gregory C. Zeman is President and a director of the Company. Mr. Zeman has
been an employee and officer of the Company, serving in varying capacities,
since March 1987. Prior to becoming President in January, 1991, Mr. Zeman served
as an Account Manager, Sales Manager, Purchasing Manager and Vice President of
Sales, Purchasing and Marketing. Mr. Zeman became a director of the Company in
June, 1990. Mr. Zeman's responsibilities with the Company focus on the sales,
purchasing and marketing functions. Mr. Zeman is a 1983 graduate of Marquette
University where he earned a Bachelor of Science degree in Computational Math.
Daniel B. Kass is Executive Vice President-Sales and a director of the
Company. Mr. Kass joined the Company in November, 1987 as an Account Manager. He
served as Sales Manager from January, 1989 through December, 1990. Mr. Kass
became Vice President-Operations in January, 1991, a director of the Company in
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March, 1993, Vice President-Sales in January, 1996, and Executive Vice
President-Sales in January, 2000. Mr. Kass' responsibilities with the Company
focus on sales, sales recruiting, sales training and customer service. Mr. Kass
is a 1981 graduate of Southern Illinois University where he earned a Bachelor of
Science degree in Journalism.
Joseph Levy, Jr. is a director of the Company. Mr. Levy is the founder, and
for more than the past five years has been chairman, of Levy Venture Management,
Inc., a real estate rental and development group that assists auto manufacturers
in establishing new dealerships. Levy Venture Management, Inc. currently has
holdings in Illinois, Texas and Minnesota. Mr. Levy became a director of the
Company in November 1993 and currently serves on the Audit, the Compensation and
Stock Option, and the Nominating Committees of the Company. Mr. Levy is a 1947
graduate of Northwestern University, where he earned a Bachelor of Science in
Business Administration.
Michelle L. Collins is a director of the Company. Ms. Collins has been a
cofounder and general partner in Svoboda, Collins, L.L.C., a venture capital
firm, since January 1998. From 1992 through January 1998, Ms. Collins was a
principal at William Blair & Company, L.L.C., an investment bank. Ms. Collins
became a director of the Company in April 1996 and currently serves on the Audit
and the Nominating Committees of the Company. Ms. Collins is a member of the
Board of Directors of Coldwater Creek, Inc. since January 1998. Ms. Collins is a
1982 graduate of Yale University where she earned a Bachelor of Arts degree in
Economics and a 1986 graduate of the Harvard Graduate School of Business, where
she earned a Masters Degree in Business Administration.
Casey G. Cowell is a director of the Company. Mr. Cowell is Chairman and
principal owner of Durandal, Inc., a holding company for a number of diversified
private companies. Previously, Mr. Cowell co-founded U.S. Robotics, one of the
world's leading suppliers of data communications products and systems. He served
as Chairman and CEO of U.S. Robotics from its inception in 1976 until its
acquisition by 3Com in June 1997. Mr. Cowell became a director of the Company in
November 1999 and currently serves on the Compensation and Stock Option and the
Nominating Committees of the Company. Mr. Cowell serves on the Board of
Directors of 3Com and is a member of the Board of Trustees for the University of
Chicago and the Illinois Institute of Technology. Mr. Cowell is a 1975 graduate
of the University of Chicago.
Donald P. Jacobs is a director of the Company. Mr. Jacobs is the dean of
the J.L. Kellogg Graduate School of Management and has been a member of the
Kellogg faculty since joining the school in 1957. Mr. Jacobs became a director
of the Company in November 1999 and currently serves on the Audit and the
Nominating Committees of the Company. He serves on the Board of Directors of
several corporations, including Commonwealth Edison, Hartmarx, ProLogis Trust
and Terex. Mr. Jacobs is a 1949 graduate of Roosevelt University where he earned
a Bachelor of Arts degree in Economics and a graduate of Columbia University
where he earned a Master of Arts degree in Economics in 1951 and a Doctorate in
Economics in 1956. Mr. Jacobs has received numerous honorary degrees from
prestigious national and international universities.
Brian E. Williams is a director of the Company. Mr. Williams has been
President of Foote, Cone & Belding Chicago, an advertising firm, since 1998.
From 1987 to 1998, Mr. Williams was a Senior Vice President at Leo Burnett
Company, also an advertising firm. Mr. Williams became a director of the Company
in January 2000 and currently serves on the Compensation and Stock Option and
the Nominating Committees of the Company. He serves on the Board of Directors of
FCB Worldwide. Mr. Williams is a 1972 graduate of Northwestern's Kellogg
Graduate School of Management and earned his Bachelor of Arts degree from
Dartmouth College in 1975.
BOARD MEETINGS AND COMMITTEES
Regular meetings of the Board of Directors of the Company are conducted
quarterly. From time to time, special meetings of the Board of Directors are
conducted as required. The Board of Directors had four regular meetings during
the year ended December 31, 1999.
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The Audit Committee is currently comprised of Ms. Collins and Messrs.
Jacobs and Levy. The Audit Committee reviews and approves the general nature of
audit services by the independent accountants; monitors and reviews the internal
control system of the Company; monitors the integrity of the Company's financial
systems, reports and financial statements; reviews procedures to communicate
conflicts of interest and related party transactions; monitors the independence
and performance of the company's independent auditors; reviews with financial
management and the independent auditors the company's quarterly financial
results; and reviews matters where independence from management is indicated.
The Audit Committee met two times during the year ended December 31, 1999.
Additionally, commencing with the second quarter of 1999, the Audit Committee
met quarterly via a telephonic conference call with management and the
independent auditors to review financial results prior to public release.
The Compensation and Stock Option Committee is currently comprised of
Messrs. Cowell, Levy and Williams. The functions performed by the Compensation
and Stock Option Committee include approval of Chief Executive Officer
compensation; review and approval of the terms of performance-based compensation
programs for officers; review and certification of amounts due under
performance-based compensation programs for officers; review and approval of
allocation of the Employee Incentive Bonus Pool; review and approval of
compensation and/or adjustments thereto for other officers and employees to the
extent requested by the Chief Executive Officer or otherwise required by the
terms of existing employment agreements; and review and approval of the terms of
stock option grants. See "Report of the Compensation and Stock Option
Committee."
The Nominating Committee is currently comprised of Ms. Collins and Messrs.
Cowell, Jacobs, Levy and Williams. The functions performed by the Nominating
Committee include the review of the present and future composition of the Board
of Directors; recruitment of new directors; the recommendation and placing in
nomination at annual meetings of a slate of directors; and the review and
determination of director compensation. The Nominating Committee will also
consider nominees recommended by shareholders, in writing, provided such
candidates demonstrate a serious interest in serving as directors. The
Nominating Committee did not meet during the year ended December 31, 1999.
MANAGEMENT
Set forth below are the names, ages and titles of each executive officer of
the Company. Executive officers are elected by and serve at the discretion of
the Board of Directors until their successors are duly chosen and qualified.
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Michael P. Krasny................... 46 Chairman of the Board and Chief Executive Officer
Gregory C. Zeman.................... 41 President and Director
Daniel B. Kass...................... 43 Executive Vice President-Sales and Director
Paul A. Kozak....................... 35 Senior Vice President-Purchasing
Harry J. Harczak, Jr................ 43 Chief Financial Officer, Treasurer and Secretary
James R. Shanks..................... 35 Chief Information Officer
Douglas E. Eckrote.................. 35 Vice President-Operations
Joseph K. Kremer ................... 35 Vice President-Marketing
See "Election of Directors-Nominees for Election to Board of Directors" for
the discussion of Messrs. Krasny, Zeman and Kass.
Paul A. Kozak is Senior Vice President-Purchasing of the Company. Mr. Kozak
joined the Company in August 1987 and since that time has served as an Account
Manager, Sales Manager and Director of Purchasing. Mr. Kozak was appointed Vice
President-Purchasing in January 1995 and Senior Vice President-Purchasing in
January 2000. Mr. Kozak has primary responsibility for product acquisition and
managing vendor relationships. He is a 1986 graduate of the University of Iowa
where he earned a Bachelor of Science degree in Business Administration.
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Harry J. Harczak, Jr. became Chief Financial Officer of the Company on
May 1, 1994. Mr. Harczak was appointed Treasurer of the Company in 1998 and
Secretary in 2000. Prior to joining the Company, Mr. Harczak was an audit
partner in the accounting firm of Coopers & Lybrand L.L.P. where he worked since
1978. Mr. Harczak's responsibilities at the Company include the finance,
accounting, treasury, budgeting/planning, SEC reporting, investor relations and
human resource functions. He is a 1978 graduate of Depaul University, where he
earned a Bachelor of Science degree in Accounting, and a 1995 graduate of the
University of Chicago Executive Program, where he earned a Masters of Business
Administration. Mr. Harczak is a certified public accountant.
James R. Shanks is Chief Information Officer of the Company. Mr. Shanks
joined the Company as Director of Information Systems in August 1993 and was
appointed to Vice President-Information Systems in February 1996 and Chief
Information Officer in April 1999. Prior to joining the Company, Mr. Shanks was
employed by American Hotel Register from January 1985 to August 1993 as
Manager of Information Systems. Mr. Shanks has primary responsibility for the
Company's information technology and communication systems and its E-business
initiatives, conducted through www.cdw.com. Mr. Shanks is a 1991 graduate of
Barat College where he earned a Bachelor of Science degree in Computer
Information Systems, and a 1996 graduate of Northwestern University's J.L.
Kellogg Graduate School of Management.
Douglas E. Eckrote is Vice President-Operations of the Company. Mr. Eckrote
joined the Company in January 1989 and since that time has served as an Account
Manager, Sales Manager and Director of Operations. Mr. Eckrote was appointed
Vice President-Operations as of January 1, 1999. Mr. Eckrote has primary
responsibility for the Company's warehousing, distribution and technical service
functions. He is a 1986 graduate of Purdue University where he earned a Bachelor
of Science degree in Agricultural Sales and Marketing.
Joseph K. Kremer became Vice President-Marketing of the Company on February
16, 1998. Prior to joining the Company, Mr. Kremer was U.S. Manager of Channel
Marketing Programs at IBM Corporation, where he worked since 1987. Mr. Kremer
has primary responsibility for the Company's advertising, marketing and public
relations activities, including its branding initiatives. Mr. Kremer is a 1987
graduate of Virginia Polytechnic Institute and State University where he earned
a Bachelor of Science degree in Accounting and a 1989 graduate of University of
Scranton, where he earned a Masters of Business Administration Degree in
Finance.
DIRECTOR COMPENSATION; CDW DIRECTOR STOCK OPTION PLAN
Directors who are not also employees of the Company ("Independent
Directors") are paid an annual fee of $20,000. Additionally, the Company has
established the CDW Director Stock Option Plan for Independent Directors (the
"Director Option Plan"). A maximum of 2,100,000 shares of Common Stock, in the
aggregate, reduced on a share for share basis for options outstanding under the
CDW Incentive Stock Option Plan (the "Stock Option Plan"), subject to
adjustment, have been authorized for the granting of stock options under the
Director Option Plan. Except as stated herein, the Director Option Plan is
identical in terms to the Stock Option Plan available to officers and employee
directors and other employees of the Company or its subsidiaries.
In November 1993, the Board of Directors granted, effective as of January
3, 1994 and on the first trading day of each calendar year thereafter, each
Independent Director options to purchase shares of Common Stock of the Company
at a price based on the closing price of the Company's shares on the first
trading day of such calendar year, subject to the terms and conditions of the
Director Option Plan and pending modification by the Board of Directors (which
shall not be made more than once each six months other than to comport with
changes in the Internal Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act). The number of options authorized to be granted
to each Independent Director was initially 6,000 shares and each year thereafter
beginning January 1, 1995 shall be 6,000 shares, plus the product of 6,000
shares multiplied by the percentage increase in the Company's immediately
preceding year's net income over the second immediately preceding year's net
income, in each case calculated in accordance with generally accepted accounting
principles, applied on a consistent basis. The options
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shall vest on the third anniversary of the date of grant and shall expire on the
tenth anniversary of the date of grant. If an Independent Director ceases to be
a member of the Board of Directors, all options granted to such Independent
Director which have not vested shall expire by their terms. The Company receives
no monetary consideration for these grants.
The proposed CDW 2000 Stock Option Incentive Plan contains provisions for
the automatic grant of stock options to Independent Directors in the same
amounts and having the same terms as described above. If the proposed CDW 2000
Incentive Stock Option Plan is adopted by shareholders at the Annual Meeting, no
further options will be granted to directors under the Director Option Plan.
EXECUTIVE COMPENSATION
Information concerning the annual and long-term compensation for services
in all capacities to the Company for the years ended December 31, 1999, 1998 and
1997, of those persons who were, at December 31, 1999 (i) the chief executive
officer and (ii) the other five most highly compensated executive officers of
the Company whose total annual salary and bonus exceeded $100,000 in 1999 (the
"Named Officers") is shown below:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) SARS(#) ($) (3)
- --------------------------- ---- --------- ---------- ------------ ---------- ------------
Michael P. Krasny 1999 $230,784 $1,240,346 --- --- $4,000
Chairman of the Board and 1998 $227,373 $1,243,757 --- --- $4,155
Chief Executive Officer 1997 $223,574 $1,774,134 $2,407 --- $5,207
Gregory C. Zeman 1999 $201,936 $1,788,064 --- --- $3,500
President and Director 1998 $198,952 $1,050,614 --- --- $3,655
1997 $195,624 $1,498,630 $2,407 --- $5,207
Daniel B. Kass 1999 $201,936 $1,778,064 $2,174 --- $4,000
Executive Vice 1998 $198,952 $756,828 --- --- $4,155
President-Sales and
Director 1997 $195,624 $1,079,563 $3,739 --- $5,207
Paul A. Kozak 1999 $190,397 $710,629 $1,190 203,825 $4,000
Senior Vice 1998 $187,583 $290,889 --- 7,500 $4,155
President-Purchasing
1997 $184,447 $350,280 $2,407 15,596 $5,207
Harry J. Harczak, Jr. 1999 $140,448 $760,578 $1,190 203,825 $4,000
Chief Financial Officer, 1998 $138,372 $261,420 --- 7,478 $4,155
Treasurer and Secretary 1997 $136,059 $297,468 $2,407 8,595 $5,207
James R. Shanks 1999 $140,448 $760,578 --- 203,825 $4,000
Chief Information Officer 1998 $138,372 $261,420 --- 7,478 $4,155
1997 $136,059 $283,770 $4,397 8,595 $5,207
(1) Amounts reflected for Messrs. Kozak, Harczak and Shanks for all periods
are attributable to non-contractual bonuses. Amounts reflected for
Messrs. Krasny, Zeman and Kass are pursuant to the terms of employment
agreements which provide for allocations from the Employee Incentive
Bonus Pool, the total of which will not exceed twenty percent of the
Company's increase in income from operations as defined in accordance
with generally accepted accounting principles consistently applied over
the previous year. See "Executive
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Compensation -- Employment Related Agreements."
(2) Amounts represent travel incentive awards and a company-wide bonus plan
paid in 1997 relating to goals achieved in 1996.
(3) Reflects the Company's contributions to the account of each of the
Named Officers under the CDW Computer Centers, Inc. Employees' Profit
Sharing Plan and Trust, including employer matching contributions. The
amounts for the 1999 contributions represent the Company's best
estimate, as final calculations have not been completed at the date of
this Proxy Statement.
OPTION GRANTS
Information with respect to grants of stock options to Named Officers
during 1999 is set forth below. See "Incentive Stock Option Plans".
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (4)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total Exercise Market
Options Granted or Base Price on
Options Employees Price Grant Date Expiration
Named Officers(1) Granted in Fiscal Year ($/Sh) ($/Sh) Date 0% ($) 5% ($) 10%($)
- ----------------- ---------- --------------- --------- ---------- ---------- -------- ----------- -----------
Paul A. Kozak 200,000 (2) 10.90% $49.750 $49,750 10/08/2019 -- $16,450,000 $56,988,000
3,825 (3) 0.21% $ 0.01 $78.625 12/31/2019 $300,702 $ 797,933 $ 2,023,196
Harry J. Harczak, Jr. 200,000 (2) 10.90% $49.750 $49.750 10/08/2019 -- $16,450,000 $56,988,000
3,825 (3) 0.21% $ 0.01 $78.625 12/31/2019 $300,702 $ 797,933 $ 2,023,196
James R. Shanks 200,000 (2) 10.90% $49.750 $49.750 10/08/2019 -- $16,450,000 $56,988,000
3,825 (3) 0.21% $ 0.01 $78.625 12/31/2019 $300,702 $ 797,933 $ 2,023,196
(1) No other Named Officers received grants of stock options in 1999.
(2) Options are exercisable at the rate of 12.5% per year, beginning
October 8, 2002.
(3) Options are exercisable in full on April 30, 2004.
(4) All option terms are 20 years.
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
Information with respect to options exercised and shares sold during 1999,
unexercised options to purchase Common Stock granted under the MPK Stock Option
Plan and Incentive Stock Option Plans and restricted shares granted under the
MPK Restricted Stock Plan to the Named Officers and held by them at December 31,
1999 is set forth below.
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1999(#) DECEMBER 31, 1999($) (2)
ACQUIRED ON REALIZED --------------------------- -----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --- ----------- ------------- ----------- -------------
Michael P. Krasny --- --- --- --- --- ---
Gregory C. Zeman (1) 315,734 $14,481,661 2,100,389 2,200,275 (3) $165,125,547 $172,978,250
Daniel B. Kass (1) 66,752 $3,061,691 445,541 466,725 (3) $35,026,941 $36,692,356
Paul A. Kozak 4,500 $142,688 7,562 308,619 (4) $473,616 $12,663,455
Harry J. Harczak, Jr. 7,100 $370,199 5,062 308,463 $308,679 $12,025,411
James R. Shanks 6,900 $320,244 6,062 309,031 $372,741 $12,044,423
(1) All options held by Messrs. Zeman and Kass are held pursuant to the MPK
Stock Option Plan.
(2) Based on the closing price as reported by The Nasdaq Stock Market of
the Company's Common Stock on December 31, 1999 ($78.625), less the
respective exercise prices.
(3) Pursuant to the provisions of the MPK Stock Option Plan, the options
become fully exercisable upon termination of employment.
(4) Includes 37,502 shares of restricted stock allocated to Mr. Kozak under
the MPK Restricted Stock Plan which vest in equal installments on
January 1, 2000, 2001, 2002 and 2003. See MPK Restricted Stock Plan.
MPK STOCK OPTION PLAN
At the time of the Company's initial public offering, Mr. Krasny
established the MPK Stock Option Plan pursuant to which he granted to Messrs.
Zeman and Kass and a former employee of the Company options to purchase in the
aggregate 8,286,750 shares of Common Stock owned by him. As of February 29,
2000, options to acquire an aggregate of 3,497,929 shares of common stock remain
outstanding. These options are non-forfeitable and become exercisable during the
employment of such individual at the rate of 5% per year upon each of the first
four anniversaries of the grant and an additional 15% on each anniversary date
thereafter until all options are exercisable. Additional shares may be exercised
proportionately to any shares sold by Mr. Krasny from his holdings. The options
may be exercised at a price of $.00835 per share. The MPK Stock Option Plan
provides that, should any of these three individuals terminate his or her
employment with the Company, all options become exercisable and such individual
will be required to exercise his or her options at the option exercise price
within six months of the date of termination. Mr. Krasny will, in such event,
have a right to repurchase the shares relating to the terminating employee's
exercised options at the prevailing market rate, less costs and expenses
attendant to the sale of the stock. Mr. Krasny's acquisition may be made
pursuant to a note payable over a ten-year period with interest at the
applicable federal rate as defined in the Internal Revenue Code of 1986, as
amended. Upon the death or disability of any of these individuals, their options
shall become immediately exercisable, and said option privileges shall expire
unless exercised within one year after the date of death or disability. The MPK
Stock Option Plan, which is wholly
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funded from shares of Common Stock owned by Mr. Krasny, does not result in a
cash payment from plan participants to the Company or increase the number of
outstanding shares of Common Stock.
MPK RESTRICTED STOCK PLAN
Effective upon the closing of the initial public offering, Mr. Krasny
transferred 1,337,208 shares of his Common Stock to the MPK Restricted Stock
Plan (the "MPK Plan Shares"), to be held in escrow for the benefit of those
persons employed by the Company on December 31, 1992. Shares contributed on
behalf of participating employees were calculated on the basis of their months
of service and average salary. During such time as the MPK Plan Shares are held
in escrow, Mr. Krasny will retain the right to vote the MPK Plan Shares, and
dividends thereon, if any, will inure to the benefit of Mr. Krasny. The purpose
of the MPK Restricted Stock Plan was to provide participants with additional
incentives to remain in the Company's employ, to build upon employee loyalty and
to provide such employees with an opportunity to share in the Company's profits
and growth.
In accordance with the original terms of the MPK Restricted Stock Plan, all
of the MPK Plan Shares were scheduled to fully vest upon January 1, 2000,
provided that a participant has remained continually employed with the Company
or its subsidiaries during such period. Participants who do not complete
continuous full-time employment through such date will forfeit their right to
the MPK Plan Shares and such shares will revert to Mr. Krasny. As of December
31, 1998, 338,930 shares have been forfeited and reverted to Mr. Krasny. MPK
Plan Shares will immediately vest upon the death or total disability of a
participating employee. The MPK Restricted Stock Plan, which is wholly funded
from shares of Common Stock owned by Mr. Krasny, does not result in a cash
payment from Plan participants to the Company or increase the number of
outstanding shares of Common Stock.
On January 31, 1997, the terms of the MPK Restricted Stock Plan were
modified to provide participants the option to accelerate the vesting on 25% of
their shares in exchange for the extension of the vesting period on their
remaining shares through 2003. Under the terms of this modification,
participants who elected the acceleration were granted options by the Company
equal to the number of shares that became vested, with an exercise price equal
to the fair market value of the Company's Common Stock on the acceleration date.
EMPLOYMENT RELATED AGREEMENTS
The Company has entered into Employment and Non-Competition Agreements with
Messrs. Krasny, Zeman and Kass that became effective upon the consummation of
the initial public offering in 1993. In accordance with the terms of each
Agreement, employment is terminable with or without cause and the Company will
pay Messrs. Krasny, Zeman and Kass initial annual base salaries of $200,000,
$175,000 and $175,000, respectively, to be adjusted in each case annually in
accordance with the Consumer Price Index. Additionally, each Agreement provides
that the executive shall be eligible to receive an annual bonus to be paid out
of the Employee Incentive Bonus Pool, which pool shall be calculated not to
exceed twenty percent of the Company's increase in income from operations over
the prior year as determined in accordance with generally accepted accounting
principles consistently applied. Each bonus will be awarded in the discretion of
the Compensation and Stock Option Committee. In addition, each Agreement
contains a non-competition restriction prohibiting the executive from
undertaking certain competitive activities for a two year period after the date
his employment with the Company ceases.
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REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee (the "Compensation Committee")
is currently comprised of Messrs. Cowell, Williams and Levy.
Compensation Policy
General. The Company's executive compensation program is designed to
advance the interests of the Company by attracting, motivating and retaining
well-qualified executives, managers and other key employees of the Company and
to align the interests of such persons with the shareholders of the Company by
providing such persons with performance-based incentives linked to corporate
performance factors. The three primary components of the Company's executive
compensation program are:
(i) base salary;
(ii) annual incentive awards; and
(iii) long-term incentive awards in the form of stock option grants
Base Salary. The base salaries of Messrs. Krasny, Zeman and Kass
were established by the terms of their respective employment agreements with
annual adjustments based upon changes in the United States Consumer Price Index.
The base salaries of each of the other Named Officers were initially established
by Messrs. Krasny and Zeman at the time each of the respective officers assumed
their positions based upon their level of experience, past performance, expected
future performance and market conditions. The annual adjustments in the base
salaries of the other Named Officers are based upon changes in the United States
Consumer Price Index, as well as merit increases, where applicable. The base
salary of each executive officer of the Company, including Mr. Krasny, is set at
a level such that the greater portion of the executive officer's total
compensation is dependent upon Company performance.
Annual Incentive Awards. The annual incentive element of the Company's
executive compensation program is based upon the increase in the Company's
income from operations over its income from operations for the previous year.
Both the amount of the Employee Incentive Bonus Pool described below (the "Bonus
Pool") and the size of awards under the CDW Officer and Manager Bonus Plan have
been dependent upon the Company's increase in operating income. Annual incentive
awards for Messrs. Krasny, Zeman and Kass have been determined based upon their
respective participation in the Bonus Pool. Annual incentive awards for the
other executive officers of the Company have been determined based upon their
respective participation in the Bonus Pool and the CDW Officer and Manager Bonus
Plan.
Long-Term Incentive Awards. The long-term incentive element of the
Company's executive compensation program consists of the grant of stock options
to employees, including the Company's executive officers other than Messrs.
Krasny, Zeman and Kass. Stock options have been granted to the other executive
officers based upon factors discussed below either (i) with an exercise price
equal to 100% of fair market value as of the date of grant or (ii) in payment of
annual incentive awards which have been earned. When stock options are granted
in payment of annual incentive awards already earned, the number of stock
options granted is determined by dividing the amount of the award by the
difference between the market price of the Common Stock as of the date of grant
and the option exercise price of $0.01.
Implementation of Compensation Policy.
The Compensation Committee met on February 27, 1999 to review and certify
bonus and stock option allocations to officers and employees of the Company
relative to performance-based compensation programs in
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1998 and to establish, as necessary, the 1999 base compensation and
performance-based compensation programs for executive officers. The Compensation
Committee granted stock options to certain officers of the Company in October,
1999. The Compensation Committee met on December 17, 1999 to discuss various
matters, including the status of 1999 performance-based compensation programs.
The Compensation Committee met in January, 2000 to review and approve stock
option allocations to officers and employees of the Company relative to their
performance in 1999 and review and certify bonus allocations to officers and
employees pursuant to performance-based compensation programs.
As previously described in the Proxy Statement, Messrs. Krasny, Zeman and
Kass are each party to an Employment and Non-Competition Agreement with the
Company. With respect to compensation for these officers, each employment
agreement provides for: (i) a specific base salary to be adjusted annually based
upon changes in the United States Consumer Price Index, and (ii) an opportunity
for each of these executives to participate in the Bonus Pool as established
pursuant to the Company's By-laws. Pursuant to the By-laws, and as approved by
Shareholders on May 7, 1997, the Bonus Pool was established, on an annual basis,
in an amount up to twenty percent (20%) of the increase in the Company's income
from operations, as defined in accordance with generally accepted accounting
principles, over the prior fiscal year. The Compensation Committee set the Bonus
Pool at 15% of the increase in 1999 operating income over the prior year.
As a result of the increase in the Company's income from operations in 1999
versus 1998, an aggregate of approximately $8.8 million was available for
distribution pursuant to the Bonus Pool. The Committee allocated $7,854,000 for
distribution to executive officers of the Company and $946,000 for distribution
to a number of officers and employees of the Company. The Compensation Committee
allocated amounts to executive officers of the company based upon certain target
bonus amounts and each person's perceived contribution to the Company's 1999
results.
The Compensation Committee met in February 2000 to establish performance
based compensation programs for 2000. At the February meeting, the Committee
approved the elimination of the Bonus Pool from the By-laws of the Company and
the creation of the CDW 2000 Incentive Stock Option Plan (Proposal 4) and the
Senior Management Incentive Plan (Proposal 5). In March, 2000, the Board of
Directors ratified the elimination of the Bonus Pool from the By-laws of the
Company, subject to the approval by shareholders of the Senior Management
Incentive Plan. The Committee recommended the elimination of the Bonus Pool and
creation of the Senior Management Incentive Plan to more closely align the
performance-based compensation programs of all senior management with the
strategic objectives of the Company.
Each of the named officers, other than Messrs. Krasny, Zeman and Kass,
received a bonus out of the CDW Officer and Manager Bonus Plan which was payable
in stock options of the Company with an exercise price of $0.01 per share. The
aggregate amount of the bonus was determined based upon target bonus levels and
the Company's growth rate in operating income and approved by the Compensation
Committee. Messrs. Kozak, Shanks and Harczak were granted options, pursuant to
the CDW Officer and Manager Bonus Plan, to purchase 3,825 shares each.
The 200,0000 options granted to each of to Messrs. Kozak, Shanks and
Harczak in 1999, as reflected in the Option Grants table, were granted pursuant
to the CDW 1996 Incentive Stock Option Plan and were approved by the
Compensation Committee and the Board of Directors. The grants were made in
recognition of the efforts of the officers in the success of the Company and to
motivate and retain the officers for future performance. No stock options were
granted to Mr. Zeman or Mr. Kass in 1999.
Compensation of the Chief Executive Officer. Mr. Krasny's compensation for
1999 consisted of base salary and an annual incentive award based upon his
participation in the Bonus Pool. Mr. Krasny's base salary increased to $230,784
in 1999 from $227,373 in 1998, based upon a 1.5% increase in the United States
Consumer Price Index. Mr. Krasny's annual incentive award of $1,240,346 was
determined by his participation
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in the Bonus Pool. The aggregate amount available for distribution under the
Bonus Pool was equal to 15% of the increase in the Company's operating income
for fiscal 1999 over fiscal 1998 and Mr. Krasny's percentage participation in
the Bonus Pool was based upon his perceived contribution to the Company's 1999
results. No stock options were granted to Mr. Krasny during 1999.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a federal income tax deduction to public companies for compensation
over $1,000,000 paid to the corporation's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation will not be subject to the deduction limit if certain requirements
are met. The Company currently intends to structure the performance-based
portion of the compensation of its executive officers in a manner that complies
with this provision so that such amounts will be deductible to the Company.
COMPENSATION AND STOCK OPTION COMMITTEE
Casey G. Cowell
Joseph Levy, Jr.
Brian E. Williams
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SHAREHOLDER RETURN PERFORMANCE PRESENTATION
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock with the
cumulative total return of the S&P MidCap 400 Index and the S&P MidCap 400 -
Retail (Computers and Electronics) Index for the period commencing January 1,
1995 and ending December 31, 1999 where $100 was invested on January 1, 1995.
Historical stock price performance shown on the graph is not necessarily
indicative of the future price performance.
[CDW COMPUTER LINE GRAPH}
12/31/1994 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
---------- ---------- ---------- ---------- ---------- ----------
CDW Computer Centers, Inc. $ 100 $ 119 $ 261 $ 229 $ 422 $ 691
S&P Midcap 400 $ 100 $ 131 $ 156 $ 206 $ 246 $ 282
S&P MC400 Retail (C&E) $ 100 $ 122 $ 80 $ 153 $ 210 $ 279
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PROPOSAL 2
RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
Subject to ratification by shareholders at the Annual Meeting, the Audit
Committee has recommended to the Board of Directors, and the Board of Directors
has approved, the selection of the independent accounting firm of
PricewaterhouseCoopers LLP to audit the Company's financial statements for the
2000 fiscal year. PricewaterhouseCoopers LLP has audited the Company's financial
statements since March 31, 1992. It is expected that representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
If the foregoing recommendation is rejected or if PricewaterhouseCoopers
LLP declines to act or otherwise becomes incapable of acting or if their
appointment is otherwise discontinued, the Board of Directors will appoint other
independent accountants whose appointment for any period subsequent to the 2000
fiscal year shall be subject to the ratification by shareholders.
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PROPOSAL 3
PROPOSAL TO INCREASE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors has proposed that the Company's Articles of
Incorporation be amended to increase the number of authorized shares of Common
Stock from 75 million to 500 million. The proposed amendment is attached to this
Proxy Statement as Exhibit A. The increase in shares is necessary to ensure that
the Company has a sufficient number of authorized but unissued shares of Common
Stock available for corporate purposes, including possible acquisitions of
businesses, equity financing and stock dividends or distributions.
In April, 1999, the Board of Directors declared a two-for-one stock split,
distributed on May 19, 1999 in the form of a stock dividend. In connection with
this distribution, the Company issued 21,616,037 new shares of Common Stock,
thereby reducing the number of authorized shares of Common Stock available for
future issuance, and not otherwise reserved for issuance under stock plans, from
49,049,048 to 23,098,096.
Authorized but unissued shares of Common Stock are generally available for
future issuance at the discretion of the Board of Directors. Except for possible
grants under the 2000 Incentive Stock Option Plan and the Senior Management
Incentive Plan, the Company has no present plans, agreements or understandings
for the issuance of additional shares of Common Stock. Depending upon the nature
of the transaction in which the additional shares are issued, further
shareholder authorization may be required by the rules of any stock exchange on
which the Company's securities may be listed. At the present time, the Common
Stock is listed on the Nasdaq National Market. Holders of Common Stock have no
preemptive rights.
The amendment to the Company's Articles of Incorporation increasing the
number of authorized shares of Common Stock from 75 million to 500 million, if
passed, would become effective upon the filing with the Secretary of State of
Illinois of Articles of Amendment, which filing is expected to take place
shortly after the shareholders approve the amendment.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required to approve the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION.
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PROPOSAL 4
PROPOSAL TO APPROVE THE
CDW 2000 INCENTIVE STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted, subject to shareholder approval, the
CDW 2000 Incentive Stock Option Plan (the "2000 Option Plan"). If the 2000
Option Plan is approved by shareholders, the CDW Incentive Stock Option Plan
(the "1993 Option Plan"), the CDW 1996 Incentive Stock Option Plan (the "1996
Option Plan") and the CDW Director Stock Option Plan (the "Director Option
Plan") (collectively, the "Prior Option Plans") will be amended to provide that
no further stock options may be granted thereunder and that future stock options
that otherwise would have been granted thereunder will be granted pursuant to
the 2000 Option Plan. The amendment of the Prior Option Plans will not affect
the rights of the holders of options previously granted under those plans.
The purposes of the 2000 Option Plan are (i) to align the interests of the
shareholders of the Company and the recipients of stock options granted under
the plan and (ii) to advance the interests of the Company by attracting,
motivating and retaining well-qualified persons by providing such persons with
performance-related incentives.
The following is a summary of the 2000 Option Plan, which is qualified in
its entirety by reference to the text of the 2000 Option Plan. The 2000 Option
Plan is attached as Exhibit B to this Proxy Statement and incorporated herein by
reference.
ADMINISTRATION
The Compensation and Stock Option Committee (the "Compensation Committee")
will administer the 2000 Option Plan.. Each member of the Compensation Committee
is a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
The Compensation Committee is authorized to interpret the 2000 Option Plan
and its application and, subject to the terms of the 2000 Option Plan, to
establish rules and regulations as it deems necessary or desirable for the
administration of the 2000 Option Plan. The Compensation Committee may impose,
incidental to the grant of a stock option thereunder, conditions with respect to
the grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions are final, binding and
conclusive.
The Compensation Committee is authorized to select eligible persons for
participation in the 2000 Option Plan and, subject to the terms of the 2000
Option Plan, to determine the terms and conditions of each stock option granted
under the 2000 Option Plan. Each option granted will be evidenced by a written
agreement between the Company and the optionee setting forth the terms and
conditions of such option.
SHARES AVAILABLE
The maximum number of shares of Common Stock available under the 2000
Option Plan is 2,000,000 plus the number of shares available for the future
grant of stock options under the Prior Option Plans. Currently, the number of
shares available for the future grant of stock options under the Prior Option
Plans is 1,925,137, of which 1,557,813 are available under the 1996 Option Plan
and 367,324 are available under the 1993 Option Plan and the Director Option
Plan combined. Accordingly, a total of 3,925,137 shares will be available for
the future grant of stock options under the 2000 Option Plan, subject to
adjustment in the event of a stock split, stock
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dividend or other similar change in capitalization. If shares of Common Stock
subject to an option granted under the 2000 Option Plan or any of the Prior
Option Plans are not issued by reason of the expiration, termination,
cancellation or forfeiture of that option, those shares will be available for
the grant of new options under the 2000 Option Plan.
Shares of Common Stock delivered upon the exercise of a stock option
granted under the 2000 Option Plan may be treasury shares, authorized and
unissued shares, or a combination thereof. Stock options granted under the
2000 Option Plan may be either incentive stock options ("ISOs") or non-qualified
stock options ("NQSOs"). An ISO is a stock option granted in accordance with
Section 422 of the Code that is intended by the Compensation Committee to
constitute an ISO. An NQSO is a stock option that is not an ISO.
ELIGIBILITY TO PARTICIPATE
The Compensation Committee may grant options under the 2000 Option Plan to
any officer, employee or consultant of the Company or any subsidiary or
affiliate of the Company or to any director, including any non-employee
director, of the Company, as it may, in its sole discretion, from time to time
select. As of the date of this Proxy Statement, approximately 1,937 employees
(which number includes officers) and eight directors are eligible to participate
in the 2000 Option Plan. Except as described below under "Non-Discretionary
Grants of Stock Options to Non-Employee Directors," no determination has yet
been made as to the number of options, if any, that any individual who is
eligible to participate in the 2000 Option Plan will be granted.
DISCRETIONARY OPTIONS
The Compensation Committee will determine which eligible persons will
receive grants of stock options under the 2000 Option Plan and, subject to the
limitations described below, will determine the number of shares of Common Stock
subject to each stock option grant, the related purchase price per share of
Common Stock, the period during which the stock option may be exercised, whether
the stock option will become exercisable in cumulative or non-cumulative
installments and in part or in full at any time and whether the stock option is
intended to constitute an ISO. The Compensation Committee may, for any reason at
any time, take action to cause any or all outstanding options granted under the
2000 Option Plan to become exercisable in part or in full. The Compensation
Committee may also establish performance measures or other criteria that need to
be satisfied as conditions to the grant of an option or to the exercisability of
all or a portion of an option. We will refer to options granted automatically
under the 2000 Option Plan to non-employee directors as "non-discretionary
options" and all other options granted under the 2000 Option Plan as
"discretionary options."
Purchase Price. The purchase price per share of Common Stock subject to a
stock option granted under the 2000 Option Plan may not be less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant. If an ISO is
granted to a person who, at the time of the grant, owns more than 10 percent of
the Company's Common Stock, then the per share purchase price may not be less
than 110% of the Fair Market Value of a share of Common Stock on the date of
grant. The "Fair Market Value" of a share of Common Stock on a given date is the
closing transaction price of a share of Common Stock as reported on The Nasdaq
Stock Market on that date, or if there are no reported transactions on such
date, on the next preceding date for which a transaction was reported; provided,
however, that Fair Market Value may be determined by the Compensation Committee
by whatever means it, in the good faith exercise of its discretion, shall deem
appropriate.
The closing transaction price of a share of Common Stock on March 30, 2000
was $74.00.
Limitations on Number of Shares Subject to Stock Options. To the extent
necessary for an award to be qualified performance-based compensation under
Section 162(m) of the Code, and the rules and regulations
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thereunder, the maximum number of shares of Common Stock with respect to which
stock options may be granted under the 2000 Option Plan during any fiscal year
of the Company to any person is 1,000,000.
Limitations on Period of Exercisability of ISOs. An ISO may not be
exercisable later than 10 years after its date of grant. If an ISO is granted to
a person who, at the time of the grant, owns more than 10 percent of the
Company's Common Stock, then that ISO may not be exercised later than five years
after its date of grant.
Noncompetition. If an optionee is employed by, receives compensation from
or otherwise is associated with or agrees in principle to be employed by or to
receive compensation from or otherwise be associated as an officer, agent,
director, employee, shareholder, consultant or otherwise with a Competitor (as
defined in the 2000 Option Plan) at any time prior to the expiration of the
optionee's options, (i) all of that optionee's unexercised options shall be
forfeited and (ii) the optionee shall be required to repay to the Company all
Option Proceeds. The 2000 Option Plan defines Option Proceeds as (i) the
difference between (A) the Fair Market Value of a share of Common Stock on the
date of exercise and (B) the per share exercise price of the option, multiplied
by (ii) the number of shares of Common Stock acquired pursuant to any exercise
of options under the 2000 Option Plan that occurs after the date 24 months prior
to the date of the optionee's termination of employment with the Company.
Exercise of a Stock Option Following Termination of Employment or Service.
Unless otherwise provided in the agreement relating to a discretionary stock
option granted under the 2000 Option Plan, the following rules apply in the case
of an optionee's termination of employment with, or service to, the Company:
- - If an optionee's employment with, or service to, the Company terminates by
reason of the disability of the optionee, each discretionary stock option
granted under the 2000 Option Plan to the optionee will become fully
exercisable and may thereafter be exercised by such optionee (or such
optionee's legal representative or similar person) until and including the
earlier to occur of (i) the date that is one year after the date of the
termination of employment or service or (ii) the expiration date of the
term of such option.
- - If an optionee retires on or after age 62 and at the time of the optionee's
retirement the optionee has been continuously employed by the Company for a
period of not less than 10 years, each option held by such optionee shall,
to the extent not exercisable as of the effective date of the optionee's
retirement, become exercisable in accordance with the vesting provisions
set forth in the agreement relating to such option and upon becoming
exercisable may be exercised by such optionee (or such optionee's legal
representative or similar person) until the expiration date of the term of
such option.
- - If an optionee's employment with, or service to, the Company is terminated
because of the death of the optionee, each discretionary stock option
granted under the 2000 Option Plan to the optionee will become fully
exercisable and may thereafter be exercised by such optionee's executor,
administrator, legal representative, beneficiary or similar person until
and including the earlier to occur of (i) the date that is one year after
the date of death and (ii) the expiration date of the term of such option.
- - If an optionee's employment with, or service to, the Company terminates for
any other reason, each discretionary stock option granted under the 2000
Option Plan to the optionee will be exercisable only to the extent
exercisable on the date of termination of employment or service and may
thereafter be exercised by such optionee (or such optionee's legal
representative or similar person) until and including the earlier to occur
of (i) the date that is three months after the date of the termination of
employment or service or (ii) the expiration date of the term of such
option; provided, that if the optionee's employment with, or service to,
the Company is terminated for Cause, all stock options granted under the
2000 Option Plan and held by the optionee (including non-discretionary
options described below) will terminate automatically on the effective date
of the optionee's termination of employment or service. For purposes of the
2000 Option Plan, "Cause" includes (i) the commission of a criminal act,
fraud, gross negligence or willful misconduct against, or in derogation of
the
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interests of the Company, (ii) divulging confidential information regarding the
Company, (iii) interference with the relationship between the Company and any
major supplier or customer, or (iv) the performance of any similar action that
our Board or Compensation Committee, in its sole discretion, may deem to be
sufficiently injurious to the interests of the Company to constitute cause for
termination.
If an optionee dies during the period of exercisability following termination of
employment or service described above, each stock option granted under the 2000
Option Plan to the optionee will be exercisable only to the extent exercisable
on the date of death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earlier to occur of (i) the date that is one year after
the date of death or (ii) the expiration date of the term of such option.
NON-DISCRETIONARY GRANTS OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
The 2000 Option Plan provides that on the first trading day of each
calendar year, commencing with calendar year 2001, each person who served
throughout the entire previous calendar year as a non-employee director will be
granted an option to purchase a number of whole shares of Common Stock equal to
the sum of 6,000 plus the product of 6,000 multiplied by the percentage increase
in the Company's immediately preceding fiscal year's net income over the second
immediately preceding fiscal year's net income, in each case calculated in
accordance with generally accepted accounting principles, applied on a
consistent basis. The 2000 Option Plan further provides that on the first
trading day of each calendar year, each person who served as a non-employee
director for a portion, but less than all, of the previous calendar year will be
granted an option to purchase a number of whole shares of Common Stock equal to
the number determined by the formula set forth in the immediately preceding
sentence multiplied by a fraction, the numerator of which is the number of days
during the previous calendar year in which such person served as a non-employee
director and the denominator of which is 365. These non-discretionary options
are NQSOs, have a per share purchase price equal to the Fair Market Value of a
share of Common Stock on the date of grant, are exercisable three years after
the date of grant and expire 10 years after the date of grant.
A non-discretionary option will remain exercisable after its holder ceases
to be a member of the Board to the same extent, and for the same periods, as
discretionary stock options that are NQSOs, as specified in the 2000 Option
Plan.
CHANGE IN CONTROL
Upon a Change in Control (as defined in the 2000 Option Plan) in which the
Company's shareholders receive shares of common stock that are publicly traded,
all outstanding options granted under the 2000 Option Plan will immediately
become fully exercisable and there will be substituted for each share of Common
Stock available under the 2000 Option Plan, whether or not then subject to an
outstanding option, the number and class of shares into which each outstanding
share of Common Stock shall be converted pursuant to the Change in Control. In
the event of any such substitution, the purchase price per share of each option
will be appropriately adjusted by the Compensation Committee, without an
increase in the aggregate purchase price.
Upon a Change in Control in which the Company's shareholders receive
consideration other than shares of common stock that are publicly traded, each
outstanding option granted under the 2000 Option Plan will be surrendered to the
Company by the holder thereof, and each such option will immediately be
cancelled by the Company, and the holder will receive, within 10 days of the
occurrence of a Change in Control, a cash payment from the Company in an amount
equal to the number of shares of Common Stock then subject to the option,
multiplied by the excess, if any, of (i) the greater of (A) the highest per
share price offered to shareholders of the Company in any transaction whereby
the Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control over (ii) the
purchase price per share of Common Stock subject to the option.
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EXERCISE OF STOCK OPTIONS; NON-TRANSFERABILITY; DESIGNATION OF BENEFICIARIES
Payment for shares of Common Stock purchased upon the exercise of an option
granted pursuant to the 2000 Option Plan shall be made as set forth in the
agreement relating to such option. Except as otherwise set forth in the
agreement relating to an option, no stock option granted under the 2000 Option
Plan may be transferred other than by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. Except to the extent permitted by the foregoing sentence, each stock
option may be exercised during an optionee's lifetime only by the optionee or
the optionee's legal representative or similar person. Each optionee may file
with the Compensation Committee a written designation of one or more persons as
such optionee's beneficiary or beneficiaries (both primary and contingent) in
the event of such optionee's death.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief overview of the United States federal income tax
consequences of participation in the 2000 Option Plan and should not be relied
upon as being a complete description. It does not address the state or local tax
aspects of participation in the 2000 Option Plan.
Grant of Option. An optionee will not recognize taxable income upon the
grant of a stock option under the 2000 Option Plan.
Exercise of Non-Qualified Options. An optionee will recognize compensation
taxable as ordinary income, and the Company generally will be allowed a
corresponding deduction for federal income tax purposes, in an amount equal to
the excess of the fair market value, on the date of exercise of an NQSO, of the
shares of Common Stock acquired over the purchase price therefor.
Exercise of Incentive Stock Options. An optionee will not recognize any
taxable income by reason of exercise of an ISO, and the Company will not be
allowed any deduction with respect to the exercise at that time. However, the
excess, if any, of the fair market value, at the time of exercise, of the Common
Stock acquired upon the exercise over the purchase price therefor will be
included in alternative minimum taxable income subject to the alternative
minimum tax.
Qualifying Disposition of ISO Shares. If an optionee disposes of Common
Stock acquired pursuant to the exercise of an ISO two years or more after the
date of grant of the ISO or one year after the date of transfer of Common Stock
to the optionee, whichever is later, the amount, if any, realized in excess of
the purchase price for such Common Stock will be treated as long-term capital
gain or the amount, if any, by which the purchase price exceeds the amount
realized upon the disposition will be treated as a long-term capital loss. The
Company will not be entitled to any deduction with respect to a disposition of
Common Stock occurring under the circumstances described in this paragraph.
Disqualifying Disposition of ISO Shares. If an optionee disposes of Common
Stock acquired pursuant to the exercise of an ISO within two years after the
date of grant of the ISO or one year after the date of transfer of Common Stock
to the optionee, whichever is later, the optionee will recognize ordinary
income, and the Company will be entitled to a corresponding deduction, in an
amount equal to the amount, if any, realized in excess of the purchase price for
the Common Stock, but only considering the amount realized to the extent it does
not exceed the fair market value of the Common Stock on the date of exercise.
Any amount realized upon disposition in excess of the fair market value of the
Common Stock on the date of exercise will be treated as long-term capital gain
if the Common Stock has been held for more than 12 months or as a short-term
capital gain if the Common Stock has been held for a shorter period. If the
amount realized upon disposition is less than the purchase price for the shares,
the excess of the purchase price over the amount realized will be treated as a
long-term or short-term capital loss, depending on the holding period of the
Common Stock. The Company will not be entitled to any
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deduction with respect to the amount recognized by the employee as capital gain.
Income Tax Withholding. The taxable compensation recognized by the optionee
upon the exercise of a stock option will be subject to withholding of tax by the
Company.
EFFECTIVE DATE, AMENDMENT AND TERMINATION
If approved by shareholders at the Annual Meeting, the 2000 Option Plan
will become effective as of March 16, 2000, the date of its approval by our
Board. The Board may amend the 2000 Option Plan at any time, subject to any
requirement of shareholder approval required by applicable law, rule or
regulation, including Sections 162(m) and 422 of the Code. Nonetheless, the
Board may not increase the number of shares available under the 2000 Option
Plan, effect any change inconsistent with Section 422 of the Code, extend the
term of the 2000 Option Plan or permit the grant of a stock option having an
exercise price less than 100% of Fair Market Value on the date of grant of such
option, without shareholder approval. No amendment may impair the rights of a
holder of an outstanding stock option granted under the 2000 Option Plan without
the holder's consent.
The 2000 Option Plan will terminate on the tenth anniversary of the Annual
Meeting, but may be terminated earlier by our Board. Termination of the 2000
Option Plan will not affect the terms or conditions of any stock option granted
under the 2000 Option Plan prior to the termination date. No stock options may
be granted under the 2000 Option Plan after it has been terminated.
The approval of the 2000 Option Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented at the Annual
Meeting, in person or by proxy, and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 OPTION
PLAN.
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PROPOSAL 5
PROPOSAL TO APPROVE THE CDW SENIOR MANAGEMENT INCENTIVE PLAN
GENERAL
On March 16, 2000, based upon the recommendation of the Compensation
Committee, the Board of Directors adopted, subject to shareholder approval, the
CDW Senior Management Incentive Plan (the "Senior Management Plan"). The Senior
Management Plan is intended to provide incentives to certain senior officers and
managers of the Company and thereby advance the interests of the Company by
motivating such persons to act in the best interests of the Company's
shareholders. The Senior Management Plan is intended to replace the CDW Officer
and Manager Plan (the "Prior Officer and Manager Plan") and the Employee
Incentive Bonus Pool (collectively, the "Prior Annual Bonus Plans"). If the
Senior Management Plan is approved by shareholders, the Prior Annual Bonus Plans
will be amended to provide that no further awards may be made thereunder.
The following is a summary of the Senior Management Plan, which is
qualified in its entirety by reference to the text of the Senior Management
Plan. The Senior Management Plan is attached as Exhibit C to this Proxy
Statement and is incorporated herein by reference.
ADMINISTRATION
The Compensation Committee will administer the Senior Management Plan. Each
member of the Compensation Committee is a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director" within
the meaning of Section 162(m) of the Code ("Section 162(m)").
The Compensation Committee is authorized to interpret the Senior Management
Plan and its application and, subject to the terms of the Senior Management
Plan, to establish rules and regulations and to establish performance goals, as
it deems necessary or desirable for the administration of the Senior Management
Plan. The Compensation Committee may impose, incidental to the grant of an award
under the Senior Management Plan, conditions with respect to the grant, such as
limiting competitive employment or other activities. All such interpretations,
rules, regulations and conditions will be final, binding and conclusive.
The Senior Management Plan is intended to comply, whenever possible and
consistent with the objectives of the Senior Management Plan, with the
requirements of Section 162(m). Section 162(m) generally limits to $1 million
the amount that a publicly held corporation is allowed to deduct each year for
the compensation paid to the corporation's chief executive officer and each of
the corporation's four most highly compensated executive officers other than the
chief executive officer. This $1 million deduction limit does not apply,
however, to "qualified performance-based compensation." To qualify as
performance-based compensation, the following requirements must be satisfied:
(i) the compensation can be payable only if performance goals, determined by a
committee consisting solely of two or more "outside directors," are satisfied;
(ii) the material terms under which the compensation is to be paid, including
the performance goals, must be disclosed to shareholders and approved by a
separate majority vote of the corporation's shareholders before the compensation
is paid; and (iii) the committee must certify that the applicable performance
goals have been satisfied before payment of any performance-based compensation
is made.
SHARES AVAILABLE
The maximum number of shares of Common Stock available under the Senior
Management Plan that may be issued at the discretion of the Compensation
Committee as either shares of Common Stock, restricted shares of Common Stock or
upon the exercise of non-qualified stock options is 750,000, subject to
adjustment in the event of
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a stock split, stock dividend or other similar change in capitalization. If the
Senior Management Plan is approved by shareholders, the number of shares
available for the future grant of stock options under the Prior Officer and
Manager Plan, currently 376,098, will no longer be available for the future
grant of stock options.
Shares of Common Stock to be delivered under the Senior Management Plan may
be treasury shares, authorized and unissued shares, or a combination thereof. If
shares of Common Stock subject to an award granted under the Senior Management
Plan are not issued by reason of the expiration, termination, cancellation or
forfeiture of that award, those shares will be available for issuance of new
awards under the Senior Management Plan.
ELIGIBILITY TO PARTICIPATE
Participants in the Senior Management Plan shall consist of such officers,
managers and other key employees of the Company, its affiliates and its
subsidiaries as the Compensation Committee in its sole discretion may select
from time to time. Approximately 17 employees currently are designated to
participate in the Senior Management Plan.
INCENTIVE AWARDS
General. The Compensation Committee will have the discretion under the
Senior Management Plan to award quarterly incentive awards ("Quarterly Incentive
Awards") and annual incentive awards ("Annual Incentive Awards") (collectively,
the "Incentive Awards"). Quarterly Incentive Awards shall be payable only in
cash. Annual Incentive Awards shall be payable, in the discretion of the
Compensation Committee, in cash, in shares of Common Stock, including restricted
shares of Common Stock, or in non-qualified stock options, or in any combination
of the foregoing. All payments in Common Stock, including restricted shares of
Common Stock, and stock options shall be made in lieu of payments in cash.
Payment of Incentive Awards will be contingent upon the satisfaction of
Performance Measures (as defined below) established by the Compensation
Committee and upon continued employment through the end of the applicable
quarterly or annual incentive period. The Compensation Committee will determine,
in its sole discretion, the amount, form and conditions, including the
satisfaction of Performance Measures, applicable to each Incentive Award.
The maximum amount that may be paid to any participant under any Quarterly
Incentive Award shall not exceed $750,000 and under any Annual Incentive Award
shall not exceed $3,000,000. In no event may the aggregate amount paid to any
participant in respect of any fiscal year of the Company under any Annual
Incentive Award and under all Quarterly Incentive Awards exceed $3,000,000. The
maximum number of shares of Common Stock with respect to which non-qualified
stock options may be granted under the Senior Management Plan (which stock
options are granted in lieu of payment in cash) during any fiscal year to any
participant shall be 100,000.
Performance Measures. Under the Senior Management Plan, the payment of
Incentive Awards will be subject to the satisfaction of certain performance
measures ("Performance Measures"). The Compensation Committee will establish the
Performance Measures applicable to each Incentive Award. Under the Senior
Management Plan, Performance Measures may be based upon one or more of the
following: operating income, net income, earnings per share, the price of a
share of Common Stock, return to shareholders (including dividends), return on
equity, return on assets, revenues, market share, cash flow, cost reduction
goals, or any combination of the foregoing. If the Compensation Committee
determines that the Performance Measure or Performance Measures applicable to an
Incentive Award have been satisfied, the holder of the award will be entitled to
payment. All determinations regarding whether a Performance Measure has been
satisfied, and all other decisions relating to Performance Measures, will be
within the sole discretion of the Compensation Committee.
Payment of Incentive Awards. The Company shall pay Incentive Awards
following certification by the Compensation Committee that the Performance
Measures applicable thereto have been satisfied. Payment of Annual Incentive
Awards shall be in cash, in shares of Common Stock, including restricted shares
of Common
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Stock, in non-qualified stock options, or in any combination of the foregoing.
Where an Annual Incentive Award is payable in Common Stock, in restricted shares
of Common Stock or in non-qualified stock options, the following provisions
shall be applicable to such payment:
- Common Stock. Shares of Common Stock will be subject to such terms and
conditions as the Compensation Committee may determine, including any
restrictions upon transfer of such shares of Common Stock. The number
of shares of Common Stock payable to a participant shall be equal to
the dollar amount of the Annual Incentive Award, or the portion
thereof that is to be paid in shares of Common Stock, as determined by
the Compensation Committee, divided by the Fair Market Value (as
defined in the Senior Management Plan) of a share of Common Stock as
of the date of the grant of such shares of Common Stock.
- Restricted Stock. Restricted shares of Common Stock will be
non-transferable and subject to forfeiture if the holder does not
remain continuously in the employment of the Company during the
restriction period. All the terms relating to the restricted shares of
Common Stock, including the length of the restriction period and the
terms of any forfeiture or cancellation upon a termination of
employment with the Company, will be determined by the Compensation
Committee. Unless otherwise determined by the Compensation Committee,
the holder of restricted shares of Common Stock will have the rights
of a shareholder of the Company, including the right to vote and
receive dividends with respect thereto.
The number of restricted shares of Common Stock payable to a
participant shall be equal to the dollar amount of the Annual
Incentive Award, or the portion thereof that is to be paid in
restricted shares of Common Stock, as determined by the Compensation
Committee, divided by the Fair Market Value of a share of Common Stock
on the date of the grant of such award of restricted shares of Common
Stock.
- Non-qualified Stock Options. Non-qualified options to purchase shares
of Common Stock will be subject to such terms and conditions as the
Compensation Committee shall determine, including the related exercise
price per share of Common Stock, the period during which the stock
option may be exercised, whether the stock option will become
exercisable in cumulative or non-cumulative installments and in part
or in full at any time, the extent of the restrictions upon transfer
of the stock option and all other terms applicable thereto. The number
of shares of Common Stock subject to a non-qualified stock option to
be granted to a participant shall be equal to the dollar amount of the
Annual Incentive Award, or the portion thereof, that is to be paid by
means of a non-qualified stock option, divided by an amount equal to
the difference between the exercise price designated by the
Compensation Committee with respect to such option and the Fair Market
Value of a share of Common Stock as of the date of the grant of such
option.
The Fair Market Value of a share of Common Stock on March 30, 2000 was
$74.00.
CHANGE IN CONTROL
In the event of a Change in Control (as defined in the Senior Management
Plan), the Performance Measures applicable to any outstanding Incentive Award
shall be deemed to be satisfied, the amount payable pursuant to such Incentive
Award shall be calculated based on performance through the date of the Change in
Control and such Incentive Award shall become payable in full. In addition, the
restriction period applicable to any restricted shares of Common Stock
previously granted shall lapse and all options outstanding under the Senior
Management Plan shall immediately become exercisable in full.
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Upon a Change in Control in connection with which the holders of Common
Stock receive shares of publicly-traded common stock, there shall be substituted
for each share of Common Stock available under the Senior Management Plan,
whether or not then subject to an outstanding award, the number and class of
shares into which each outstanding share of Common Stock shall be converted
pursuant to such Change in Control. In the event of any such substitution, the
exercise price per share of each option outstanding under the Senior Management
Plan shall be appropriately adjusted by the Compensation Committee.
Upon a Change in Control in which the Company's shareholders receive
consideration other than shares of common stock that are publicly traded, each
outstanding option outstanding under the Senior Management Plan will be
surrendered to the Company by the holder thereof, and each such option will
immediately be cancelled by the Company, and the holder will receive, within 10
days of the occurrence of a Change in Control, a cash payment from the Company
in an amount equal to the number of shares of Common Stock then subject to the
option, multiplied by the excess, if any, of (i) the greater of (A) the highest
per share price offered to shareholders of the Company in any transaction
whereby the Change in Control takes place or (B) the Fair Market Value of a
share of Common Stock on the date of occurrence of the Change in Control over
(ii) the purchase price per share of Common Stock subject to the option.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief overview of the United States federal income tax
consequences of participation in the Senior Management Plan and should not be
relied upon as being a complete description. It does not address the state or
local tax aspects of participation in the Senior Management Plan.
Grant of Incentive Award. A participant receiving an Incentive Award under
the Senior Management Plan will not recognize taxable income upon the grant of
such Incentive Award and the Company will not be entitled to a tax deduction at
such time.
Incentive Award Payable in Cash. Upon the payment of an Incentive Award in
cash, the participant will recognize ordinary income in an amount equal to the
cash paid by the Company. This amount will be deductible by the Company as a
compensation expense, except to the extent the $1 million deduction limit of
Section 162(m) applies.
Annual Incentive Award Payable in Common Stock. Upon the payment of an
Annual Incentive Award in shares of Common Stock, the participant will recognize
ordinary income in an amount equal to the fair market value of the shares of
Common Stock. This amount will be deductible by the Company as a compensation
expense, except to the extent the $1 million deduction limit of Section 162(m)
applies.
Annual Incentive Award Payable in Restricted Stock. Upon the settlement of
an Annual Incentive Award in restricted shares of Common Stock, the participant
will not recognize any taxable income at the time of the grant of restricted
shares of Common Stock, and the Company will not be entitled to a tax deduction
at that time, unless the participant makes an election to be taxed at the time
of the grant. If such an election is not made, the participant will recognize
compensation taxable as ordinary income (subject to income tax withholding) at
the time the restrictions lapse in an amount equal to the excess of the fair
market value of the shares at that time over the amount, if any, paid for the
shares (other than by settlement of the Annual Incentive Award). The amount of
ordinary income recognized by a participant will be deductible by the Company as
compensation, except to the extent the $1 million deduction limit of Section
162(m) applies. In addition, dividends received by the participant with respect
to restricted shares of Common Stock for which the above-described election has
not been made and prior to the time the restrictions lapse are treated as
taxable compensation (and subject to income tax withholding), rather than
dividend income, and the Company will be entitled to a corresponding deduction,
except to the extent that the $1 million deduction limit of Section 162(m)
applies.
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Annual Incentive Award payable in Non-qualified Stock Options. Upon the
settlement of an Incentive Award by means of a non-qualified stock option, the
participant will not recognize any taxable income upon the grant of the
non-qualified stock option. Upon exercise of the non-qualified stock option, the
participant will recognize compensation taxable as ordinary income (and be
subject to income tax withholding) equal to the excess of the fair market value
of the shares purchased over their exercise price, and the Company will be
entitled to a corresponding deduction, except to the extent the $1 million
deduction limit of Section 162(m) applies. Notwithstanding the foregoing, if the
non-qualified stock option has an exercise price that is not a significant
amount in relation to the fair market value of a share of Common Stock on the
date of grant, the participant will recognize compensation taxable as ordinary
income (and be subject to income tax withholding) at such time as the stock
option becomes exercisable. The amount of such taxable income will be equal to
the excess of the fair market value of the shares subject to the option at the
time the option becomes exercisable over their exercise price, and the Company
will be entitled to a corresponding deduction, except to the extent that the $1
million deduction limit of Section 162(m) applies.
EFFECTIVE DATE, TERMINATION AND AMENDMENT
If approved by shareholders at the Annual Meeting, the Senior Management
Plan will become effective as of January 1, 2000. The Board may amend the Senior
Management Plan at any time, subject to any requirement of shareholder approval
required by applicable law, rule or regulation, including Section 162(m).
Nonetheless, the Board may not increase the number of shares available under the
Senior Management Plan or extend the term of the Senior Management Plan, without
shareholder approval. No amendment may impair the rights of a holder of
outstanding restricted shares of Common Stock or outstanding stock options
granted under the Senior Management Plan without the holder's consent.
The Senior Management Plan shall expire on January 1, 2010, but may be
terminated earlier by our Board. Termination of the Senior Management Plan will
not affect the terms or conditions of any Annual Incentive Awards, any
restricted shares of Common Stock or any stock options granted under the Senior
Management Plan prior to the termination date. No Incentive Awards may be
granted under the Senior Management Plan after it has been terminated.
AWARDS IN FISCAL 2000
The Compensation Committee has, contingent upon approval of the Senior
Management Plan by the Company's shareholders, granted Annual Incentive Awards
for the fiscal year ending December 31, 2000 and has established the Performance
Measures with respect to such awards. The amounts that will become payable
pursuant to such awards are not determinable prior to December 31, 2000. The
following table shows the amounts that would have been payable to the persons
and groups set forth in the table, assuming that the Senior Management Plan had
been in effect for the fiscal year ended December 31, 1999.
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NEW PLAN BENEFITS
Name and Position Dollar Value Number of Units*
----------------- ------------ ----------------
Michael P. Krasny, $1,225,219
Chairman of the Board and
Chief Executive Officer
Gregory C. Zeman, $1,692,900
President and Director
Daniel B. Kass, $1,683,180
Executive Vice President-Sales and Director
Paul A. Kozak $ 924,939
Senior Vice-President-Purchasing
Harry J. Harczak, Jr. $ 924,939
Chief Financial Officer,
Treasurer and Secretary
James Shanks $ 924,939
Chief Information Officer
Executive Group (8 participants) $8,386,199
Non-Executive Director Group --
Non-Executive Officer Employee Group (9 participants) $1,556,150
* No Annual Incentive Awards are denominated in Units. All Annual Incentive
Awards, whether payable in cash, in shares of Common Stock, including
restricted shares of Common Stock, or in stock options, are denominated in
dollars.
The approval of the Senior Management Incentive Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting, in person or by proxy, and entitled to vote
thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SENIOR
MANAGEMENT INCENTIVE PLAN.
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OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of this date, the Company is not aware that any matters are to be
presented for action at the meeting other than those referred to in the Notice
of Annual Meeting, but the proxy form sent herewith, if executed and returned,
gives discretionary authority with respect to any other matters that may come
before the meeting.
By Order of the Board of Directors,
/s/ Harry J. Harczak, Jr.
----------------------------------------
Harry J. Harczak, Jr.
Secretary
Vernon Hills, Illinois
April 7, 2000
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Exhibit A
AMENDMENT TO ARTICLES OF INCORPORATION FOR
CDW COMPUTER CENTERS, INC.
RESOLVED, that the first sentence of Article FOURTH of the Articles of
Incorporation of the Company is hereby amended to read in its entirety as
follows:
"FOURTH: The aggregate number of shares of stock that the Corporation is
authorized to issue is five hundred five million (505,000,000), five hundred
million (500,000,000) of such shares being classified as common stock, each such
share having a par value of $.01 (the "Common Stock"), and five million
(5,000,000) of such shares being classified as preferred stock, each such share
having a par value of One and 00/100 Dollar ($1.00) (the "Preferred Stock")"
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Exhibit B
CDW 2000 INCENTIVE STOCK OPTION PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 2000 Incentive Stock Option Plan (the "Plan")
of CDW Computer Centers, Inc., an Illinois corporation (the "Company"), are (i)
to align the interests of the Company's stockholders and the recipients of
options under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success, (ii) to advance the interests of
the Company by attracting, motivating and retaining directors, officers, other
employees, consultants and well-qualified persons who are not officers or
employees of the Company ("Non-Employee Directors") for service as directors of
the Company and (iii) to motivate such persons to act in the long-term best
interests of the Company and its stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of two or more members of the Board. Each member of the Committee may
be a "Non-Employee Director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and shall determine the number of shares
of Common Stock subject to each option granted hereunder, the exercise price of
such option, the time and conditions of exercise of such option and all other
terms and conditions of such option, including, without limitation, the form of
the option agreement. The Committee may, in its sole discretion and for any
reason at any time, subject to the requirements of Section 162(m) of the Code
and regulations thereunder in the case of an option intended to be qualified
performance-based compensation, take action such that any or all outstanding
options shall become exercisable in part or in full. The Committee shall,
subject to the terms of this Plan, interpret this Plan and the application
thereof, establish rules and regulations it deems necessary or desirable for the
administration of this Plan and may impose, incidental to the grant of an
option, conditions with respect to the grant, such as limiting competitive
employment or other activities. All such interpretations, rules, regulations and
conditions shall be final, binding and conclusive. Each option shall be
evidenced by a written agreement (an "Agreement") between the Company and the
optionee setting forth the terms and conditions of such option.
The Committee may delegate some or all of its power and authority hereunder
to the Board or the Chairman of the Board and Chief Executive Officer or other
executive officer of the Company as the Committee deems appropriate; provided,
however, that (i) the Committee may not delegate its power and authority to the
Board or the Chairman of the Board and Chief Executive Officer or other
executive officer of the Company with regard to the grant of an award to any
person who is a "covered employee" within the meaning of Section 162(m) of the
Code or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period an award hereunder to such employee would be
outstanding and (ii) the Committee may not delegate its power and authority to
the Chairman of the Board and Chief Executive Officer or other executive officer
of the Company with regard to the selection for participation in this Plan of an
officer or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer or other
person.
No member of the Board or Committee, and neither the Chairman of the Board
and Chief Executive Officer nor other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board and the Committee and the
Chairman of the Board and Chief Executive Officer or other executive officer
shall be entitled to indemnification and reimbursement by the Company in respect
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of any claim, loss, damage or expense (including attorneys' fees) arising
therefrom to the full extent permitted by law, except as otherwise may be
provided in the Company's Articles of Incorporation and/or By-Laws, and under
any directors' and officers' liability insurance that may be in effect from time
to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such directors
(including Non-Employee Directors), officers and other employees, persons
expected to become directors, officers and other employees and consultants of
the Company, its affiliates and its subsidiaries from time to time (individually
a "Subsidiary" and collectively the "Subsidiaries") as the Committee in its sole
discretion may select from time to time. For purposes of this Plan, references
to employment shall also mean an agency relationship with the Company and
references to employment by the Company shall also mean employment by an
affiliate of the Company or a Subsidiary. The Committee's selection of a person
to participate in this Plan at any time shall not require the Committee to
select such person to participate in this Plan at any other time. Non-Employee
Directors of the Company shall be eligible to participate in this Plan in
accordance with Section III.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 4.6,
2,000,000 shares of the common stock, par value $0.01 per share, of the Company
("Common Stock") plus the sum of: (i) the number of shares of Common Stock
available for the future grant of stock options under the CDW 1996 Incentive
Stock Option Plan and (ii) the total number of shares of Common Stock available
for the future grant of stock options under the CDW Incentive Stock Option Plan
and the CDW Director Stock Option Plan combined, shall be available for grants
of options under this Plan, reduced by the sum of the aggregate number of shares
of Common Stock which become subject to outstanding options. To the extent that
shares of Common Stock subject to an outstanding option granted under this Plan,
or any plan described in clause (i) or (ii) of the preceding sentence, are not
issued or delivered by reason of the expiration, termination, cancellation or
forfeiture of such option (other than by reason of the delivery or withholding
of shares of Common Stock to pay all or a portion of the exercise price of such
option, or to satisfy all or a portion of the tax withholding obligations
relating to such option), then such shares of Common Stock shall again be
available under this Plan.
Shares of Common Stock shall be made available from authorized and unissued
shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
To the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations thereunder,
the maximum number of shares of Common Stock with respect to which options may
be granted during any calendar year to any person shall be 1,000,000, subject to
adjustment as provided in Section 4.6.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its discretion, grant options
to purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof, that is not an Incentive
Stock Option, shall be a "Non-Statutory Stock Option". An Incentive Stock Option
may not be granted to any person who is not an employee of the Company or any
subsidiary (as defined in Section 424 of the Code). An "Incentive Stock Option"
shall mean an option to purchase shares of Common Stock that meets the
requirements of Section 422 of the Code, or any successor provision, which is
intended by the Committee to constitute an Incentive Stock Option. Each
Incentive Stock Option shall be granted within ten years of the date this Plan
is adopted by the Board. To the extent that the aggregate Fair Market Value
(determined as of the date of grant) of shares of Common Stock with respect to
which options designated as Incentive Stock Options are exercisable for the
first time by a participant during any calendar year (under this Plan or any
other plan of the Company, or any parent or subsidiary as defined in Section 424
of the Code) exceeds the amount (currently $100,000) established by the Code,
such options
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shall constitute Non-Statutory Stock Options. "Fair Market Value" shall mean the
closing transaction price of a share of Common Stock as reported on The Nasdaq
Stock Market on the date as of which such value is being determined or, if there
shall be no reported transactions on such date, on the next preceding date for
which a transaction was reported; provided, however, that Fair Market Value may
be determined by the Committee by whatever means or method as the Committee, in
the good faith exercise of its discretion, shall at such time deem appropriate.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of an option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option; provided
further, that if an Incentive Stock Option shall be granted to any person who,
at the time such option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
shall be the price (currently 110% of Fair Market Value) required by the Code in
order to constitute an Incentive Stock Option.
(b) Option Period and Exercisability. The period during which an option may
be exercised shall be determined by the Committee; provided, however, that no
Incentive Stock Option shall be exercised later than ten years after its date of
grant and provided further, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five
years after its date of grant. The Committee may, in its discretion, establish
performance measures or other criteria, which shall be satisfied or met as a
condition to the grant of an option or to the exercisability of all or a portion
of an option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery (either actual delivery or by attestation procedures established by the
Company) of previously owned whole shares of Common Stock (which the optionee
has held for at least six months prior to the delivery of such shares or which
the optionee purchased on the open market and in each case for which the
optionee has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (D) a combination of (A) and (B), in each case
to the extent set forth in the Agreement relating to the option and (ii) by
executing such documents as the Company may reasonably request. The Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (B)-(D). Any fraction of a share of Common Stock which would be required
to pay such purchase price shall be disregarded and the remaining amount due
shall be paid in cash by the optionee. No certificate representing Common Stock
shall be delivered until the full purchase price therefor has been paid (or
arrangement made for such payment to the Company's satisfaction).
(d) Non-Competition. In the event that an optionee is employed by, receives
compensation from or otherwise is associated with or has agreed in principle to
be employed by or to receive compensation from or otherwise be associated as an
officer, agent, director, employee, shareholder, consultant or otherwise with a
Competitor (as hereinafter defined) of the Company at any time prior to the
expiration of the optionee's options: (i) any and all unexercised options shall
be forfeited and (ii) any and all Option Proceeds (as hereinafter defined)
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shall be immediately due and payable by the optionee to the Company. For
purposes of this Section, "Competitor" shall mean any entity or person which
engages for any portion of its business in the sale of personal computer
products to residents of the United States. For purposes of this Section,
"Option Proceeds" shall mean (i) the difference between (A) the Fair Market
Value of a share of Common Stock on at the date of exercise and (B) the per
share exercise price of the option, multiplied by (ii) the number of shares of
Common Stock acquired pursuant to any exercise of options issued under this Plan
which occurs after the date 24 months prior to the date of the optionee's
termination of employment with the Company. The remedy provided by this Section
shall be in addition to and not in lieu of any rights or remedies which the
Company may have against the optionee in respect of a breach by the optionee of
any duty or obligation to the Company.
2.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment
with or service to the Company terminates by reason of Disability, each option
held by such optionee shall be fully exercisable and may thereafter be exercised
by such optionee (or such optionee's legal representative or similar person)
until and including the earlier to occur of (i) the date which is one year after
the effective date of such optionee's termination of employment or service and
(ii) the expiration date of the term of such option. For purposes of this Plan,
"Disability" shall mean the inability of an optionee substantially to perform
such optionee's duties and responsibilities for a continuous period of at least
six months.
(b) Retirement. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment
with or service to the Company terminates by reason of retirement on or after
age 62 after a minimum of 10 years of continuous employment with or service to
the Company ("Retirement"), each option held by such optionee shall, to the
extent not exercisable as of the effective date of the optionee's retirement,
become exercisable in accordance with the vesting provisions set forth in the
Agreement relating to such option and upon becoming exercisable may be exercised
by such optionee (or such optionee's legal representative or similar person)
until the expiration date of the term of such option.
(c) Death. If an optionee's employment with or service to the Company
terminates by reason of death, each option held by such optionee shall be fully
exercisable and may thereafter be exercised by such optionee's executor,
administrator, legal representative, beneficiary or similar person until and
including the earlier to occur of (i) the date which is one year after the date
of death and (ii) the expiration date of the term of such option.
(d) Other Termination. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment
with or service to the Company terminates for any reason other than Disability,
Retirement or death or for Cause, each option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the effective
date of such optionee's termination of employment or service and may thereafter
be exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earlier to occur of (i) the date which
is three months after the effective date of such optionee's termination of
employment or service and (ii) the expiration date of the term of such option.
For purposes of this Plan, "Cause" shall mean (i) the commission of a criminal
act, fraud, gross negligence or willful misconduct against, or in derogation of,
the interests of the Company; (2) divulging confidential information regarding
the Company; (3) interference with the relationship between the Company and any
major supplier or customer; or (4) the performance of any similar action that
the Committee, in its sole discretion, may be deem to be sufficiently injurious
to the interests of the Company to constitute cause for termination.
(e) Termination of Employment - Incentive Stock Options. Unless otherwise
specified in the Agreement relating to an option, if the employment with the
Company of a holder of an Incentive Stock Option
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terminates by reason of Permanent and Total Disability (as defined in Section
22(e)(3) of the Code), each Incentive Stock Option held by such optionee shall
be exercisable to the extent set forth in Section 2.3(a), and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earlier to occur of (i) the date which is one
year after the effective date of such optionee's termination of employment and
(ii) the expiration date of the term of such option.
Unless otherwise specified in the Agreement relating to an option, if the
employment with the Company of a holder of an Incentive Stock Option terminates
for any reason other than Permanent and Total Disability or death or for Cause,
each Incentive Stock Option held by such optionee shall be exercisable to the
extent set forth in Section 2.3(a), Section 2.3(b) or Section 2.3(d), as
applicable, and may thereafter be exercised by such holder (or such holder's
legal representative or similar person) until and including the earlier to occur
of (i) the date which is three months after the effective date of such
optionee's termination of employment and (ii) the expiration date of the term of
such option.
(f) Death Following Termination of Employment or Service. Unless otherwise
specified in the Agreement relating to an option, if an optionee dies during the
period set forth in Section 2.3(a), Section 2.3(b), Section 2.3(d), if any, or
Section 2.3(e), each option held by such optionee shall be exercisable only to
the extent that such option is exercisable on the date of such optionee's death
and may thereafter be exercised by such optionee's executor, administrator,
legal representative, beneficiary or similar person until and including the
earlier to occur of (i) the date which is one year after the date of death and
(ii) the expiration date of the term of such option.
(g) Cause. Notwithstanding anything to the contrary in this Plan or in any
Agreement relating to an option, if the employment with or service to the
Company of the holder of an option is terminated by the Company for Cause, each
option held by such holder shall terminate automatically on the effective date
of such holder's termination of employment or service.
III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
3.1 ELIGIBILITY. Each Non-Employee Director shall be granted options to purchase
shares of Common Stock in accordance with this Section III. All options granted
under this Section III shall constitute Non-Statutory Stock Options.
3.2 AUTOMATIC GRANTS OF STOCK OPTIONS. Each Non-Employee Director shall be
granted Non-Statutory Stock Options as follows:
(a) Time of Grant. On the first trading day of each calendar year
commencing with calendar year 2001, each person who is a Non-Employee Director
as of such date shall be granted an option to purchase 6,000 shares of Common
Stock plus an additional number of whole shares of Common Stock determined by
multiplying 6,000 by the percentage increase in the Company's net income for the
fiscal year immediately preceding the year in which the grant is made over such
net income for the next preceding fiscal year, in each case calculated in
accordance with generally accepted accounting principles, applied on a
consistent basis (collectively, the "Director Shares"); provided, however, that
if such person did not serve as a Non-Employee Director during the entire
calendar year preceding the calendar year in which such grant is made, such
Non-Employee Director shall be granted an option to purchase a number of whole
shares of Common Stock equal to the Director Shares multiplied by a fraction,
the numerator of which is the number of days during such person's period of
service during such preceding calendar year and the denominator of which is 365.
Such options shall be granted at a purchase price per share equal to the Fair
Market Value of the Common Stock on the date of grant of such option.
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(b) Option Period and Exercisability. Except as otherwise provided herein,
each option granted under this Article III shall not be exercisable until the
third anniversary of its date of grant and as of such third anniversary date
such option shall be exercisable in its entirety. Each option granted under this
Article III shall expire ten years after its date of grant. An exercisable
option, or portion thereof, may be exercised in whole or in part only with
respect to whole shares of Common Stock. Options granted under this Article III
shall be exercisable in accordance with Section 2.2(c).
3.3 TERMINATION OF DIRECTORSHIP.
(a) Disability. If the holder of an option granted under Section 3.2 ceases
to be a director of the Company by reason of Disability, each such option held
by such holder shall be fully exercisable and may thereafter be exercised by
such holder (or such holder's legal representative or similar person) until and
including the earlier to occur of the (i) date which is one year after the
effective date of such holder's ceasing to be a director and (ii) the expiration
date of the term of such option.
(b) Retirement. If the holder of an option granted under Section 3.2 ceases
to be a director of the Company due to Retirement, each such option held by such
holder shall, to the extent not exercisable as of the effective date of the
optionee's Retirement, become exercisable in accordance with the vesting
provisions set forth in the Agreement relating to such option and upon becoming
exercisable may be exercised by such optionee (or such optionee's legal
representative or similar person) until the expiration date of the term of such
option.
(c) Death. If the holder of an option granted under Section 3.2 ceases to
be a director of the Company by reason of death, each such option held by such
holder shall be fully exercisable on the date of such holder's death and may
thereafter be exercised by such holder's executor, administrator, legal
representative, beneficiary or similar person until and including the earlier to
occur of the (i) date which is one year after the date of death and (ii) the
expiration date of the term of such option.
(d) Other Termination. If the holder of an option granted under Section 3.2
ceases to be a director of the Company for any reason other than Disability,
Retirement, death or for Cause, each such option held by such holder shall be
exercisable only to the extent such option is exercisable on the effective date
of such holder's ceasing to be a director and may thereafter be exercised by
such holder (or such holder's legal representative or similar person) until and
including the earlier to occur of the (i) date which is three months after the
effective date of such holder's ceasing to be a director and (ii) the expiration
date of the term of such option.
(e) Death Following Termination of Directorship. If the holder of an option
granted under Section 3.2 dies during the period set forth in Section 3.3(a),
Section 3.3(b) or Section 3.3(d), each such option held by such holder shall be
exercisable only to the extent that such option is exercisable on the date of
the holder's death and may thereafter be exercised by such holder's executor,
administrator, legal representative, beneficiary or similar person until and
including the earlier to occur of the (i) date which is one year after the date
of death and (ii) the expiration date of the term of such option.
(f) Cause. Notwithstanding anything to the contrary in this Plan or in any
Agreement relating to an option, if the holder of an option granted under
Section 3.2 ceases to be a director of the Company due to Cause, each option
held by such holder shall terminate automatically on the effective date of such
holder's ceasing to be a director of the Company.
3.4 DISCRETIONARY GRANTS OF STOCK OPTIONS. The Committee may, in its discretion,
grant additional options to purchase shares of Common Stock ("Discretionary
Director Options") to all Non-Employee Directors or to any one or more of them.
Each Discretionary Director Option shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the
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Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to a Discretionary Director Option and the purchase price per
share of Common Stock purchasable upon exercise of the option shall be
determined by the Committee; provided, however, that the purchase price per
share of Common Stock purchasable upon exercise of the option shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date of
grant of such option.
(b) Exercise Period and Exercisability. The period during which a
Discretionary Director Option may be exercised shall be determined by the
Committee. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of a Discretionary
Director Option or to the exercisability of all or a portion of a Discretionary
Director Option. The Committee shall determine whether a Discretionary Director
Option shall become exercisable in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable Director Discretionary Option, or
portion thereof, may be exercised only with respect to whole shares of Common
Stock. Each Discretionary Director Option shall be exercisable in accordance
with Section 2.2(c).
(c) Termination of Directorship. All of the terms relating to the exercise,
cancellation or other disposition of a Discretionary Director Option upon a
termination of service as a director of the Company of the recipient of a
Discretionary Director Option, whether by reason of Disability, Retirement,
death or any other reason, shall be determined by the Committee.
IV. GENERAL
4.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 2000 annual meeting of stockholders, shall become
effective as of the date of approval by the Board. No option may be exercised
prior to the date of such stockholder approval. This Plan shall terminate 10
years after its effective date, unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any option
granted prior to termination.
In the event that this Plan is not approved by the stockholders of the
Company on or before May 24, 2000, this Plan and any options granted hereunder
shall be null and void.
4.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) and Section 422 of the Code;
provided, however, that no amendment shall be made without stockholder approval
if such amendment would (a) increase the maximum number of shares of Common
Stock available under this Plan (subject to Section 4.6), (b) effect any change
inconsistent with Section 422 of the Code, (c) extend the term of this Plan or
(d) permit the grant of a stock option having a purchase price per share of
Common Stock of less that 100% of the Fair Market Value of a share of Common
Stock on the date of grant of such stock option. No amendment may impair the
rights of a holder of an outstanding option without the consent of such holder.
4.3 AGREEMENT. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee and
delivery of the Agreement to the Company, such option shall be effective as of
the effective date set forth in the Agreement.
4.4 NON-TRANSFERABILITY. Unless otherwise specified in the Agreement relating to
an option, no option hereunder shall be transferable other than by will or the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, each
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option may be exercised during the optionee's lifetime only by the optionee or
the optionee's legal representative or similar person. Except as permitted by
the second preceding sentence, no option hereunder shall be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any option hereunder, such option and all
rights thereunder shall immediately become null and void.
4.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the optionee of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with an option hereunder. An Agreement may provide that (i)
the Company shall withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with the option (the "Tax Date") in the amount necessary to satisfy
any such obligation or (ii) the optionee may satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery (either
actual delivery or by attestation procedures established by the Company) to the
Company of previously owned whole shares of Common Stock (which the optionee has
held for at least six months prior to the delivery of such shares or which the
optionee purchased on the open market and in each case for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (C) authorizing the Company to
withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having an aggregate Fair Market Value determined as of
the Tax Date, equal to the amount necessary to satisfy any such obligation, (D)
a cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement relating to
the option; provided, however, that the Company shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E). Shares of Common
Stock to be delivered or withheld may not have an aggregate Fair Market Value in
excess of the amount determined by applying the minimum statutory withholding
rate. Any fraction of a share of Common Stock which would be required to satisfy
such an obligation shall be disregarded and the remaining amount due shall be
paid in cash by the optionee.
4.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise of such option
or the delivery of shares thereunder, such option shall not be exercised and
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any option hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
4.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
maximum number and class of securities with respect to which options may be
granted during any calendar year to any person, the number and class of
securities subject to each outstanding option, the purchase price per security,
and the number and class of securities subject to each option to be granted to
Non-Employee Directors pursuant to Article III shall be appropriately adjusted
by the Committee, such adjustments to be made in the case of outstanding options
without an increase in the aggregate purchase price. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
If any adjustment would result in a fractional security being (a) available
under this Plan, such fractional security shall be disregarded, or (b) subject
to an option under this Plan, the Company shall pay the optionee, in connection
with the first exercise of the option in
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whole or in part occurring after such adjustment, an amount in cash determined
by multiplying (A) the fraction of such security (rounded to the nearest
hundredth) by (B) the excess, if any, of (x) the Fair Market Value on the
exercise date over (y) the exercise price of the option.
4.8 CHANGE IN CONTROL.
(a)(1) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common stock
that are registered under Section 12 of the Exchange Act, all outstanding
options shall immediately become exercisable in full and there shall be
substituted for each share of Common Stock available under this Plan, whether or
not then subject to an outstanding option, the number and class of shares into
which each outstanding share of Common Stock shall be converted pursuant to such
Change in Control. In the event of any such substitution, the purchase price per
share of each option shall be appropriately adjusted by the Committee (whose
determination shall be final, binding and conclusive), such adjustments to be
made without an increase in the aggregate purchase price or base price.
(2) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of common stock that are registered under Section 12 of the Exchange
Act, each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be canceled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control, a cash payment from the Company in an amount equal to the number of
shares of Common Stock then subject to such option, multiplied by the excess, if
any, of (i) the greater of (A) the highest per share price offered to
stockholders of the Company in any transaction whereby the Change in Control
takes place or (B) the Fair Market Value of a share of Common Stock on the date
of occurrence of the Change in Control over (ii) the purchase price per share of
Common Stock subject to the option. The Company may, but is not required to,
cooperate with any person who is subject to Section 16 of the Exchange Act to
assure that any cash payment in accordance with the foregoing to such person is
made in compliance with Section 16 and the rules and regulations thereunder.
(b) "Change in Control" shall mean
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act , of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of both (x) 25% or more of the combined
voting power of the then outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") and (y) combined voting power of the Outstanding Company Voting
Securities equal to or in excess of the combined voting power of the Outstanding
Company Voting Securities held by the Krasny Family (as hereinafter defined);
excluding, however, the following: (A) any acquisition directly from the Company
or any member of the Krasny Family (excluding any acquisition resulting from the
exercise of an exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly from the
Company or from any member of the Krasny Family), (B) any acquisition by the
Company , any member of the Krasny Family or any group that includes a member of
the Krasny Family, (C) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (3) of this Section
4.7(b) shall be satisfied, provided that, for purposes of clause (B), if any
Person (other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or any member of the Krasny Family) shall, by reason of an acquisition
of Outstanding Company Voting Securities by the Company, become the beneficial
owner of both (x) 25% or more of the Outstanding Company Voting Securities and
(y) combined voting power of the Outstanding Company Voting Securities equal to
or in excess of the combined voting power of the Outstanding Company Voting
Securities held by the Krasny Family, and such Person shall, after such
acquisition of Outstanding
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Company Voting Securities by the Company, become the beneficial owner of any
additional Outstanding Company Voting Securities and such beneficial ownership
is publicly announced, such additional beneficial ownership shall constitute a
Change in Control;
(2) individuals who, as of the date of approval of this Plan by the
stockholders of the Company, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a director of the Company subsequent to
the date of approval of this Plan by the stockholders of the Company whose
election, or nomination for election by the Company's stockholders, was approved
by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of the
Company as a result of an actual or threatened solicitation by a person or group
for the purpose of opposing a solicitation by any other person or group with
respect to the election or removal of directors, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board shall be deemed a member of the Incumbent Board;
(3) consummation of a reorganization, merger or consolidation unless, in
any such case, immediately after such reorganization, merger or consolidation,
(i) more than 50% of the combined voting power of the then outstanding
securities of the corporation resulting from such reorganization, merger or
consolidation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals or entities who were the beneficial owners, respectively, of the
Outstanding Company Voting Securities immediately prior to such reorganization,
merger or consolidation, (ii) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or the
corporation resulting from such reorganization, merger or consolidation (or any
corporation controlled by the Company) and any Person which beneficially owned,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Voting Securities)
beneficially owns, directly or indirectly, both (x) 25% or more of the combined
voting power of the then outstanding securities of such corporation entitled to
vote generally in the election of directors and (y) combined voting power of the
then outstanding securities of such corporation equal to or in excess of the
combined voting power of the then outstanding securities of such corporation
held by the Krasny Family and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
(4) consummation of (i) a plan of complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of all or substantially all of
the assets of the Company other than to a corporation with respect to which,
immediately after such sale or other disposition, (A) more than 50% of the
combined voting power of the then outstanding securities thereof entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Voting
Securities immediately prior to such sale or other disposition, (B) no Person
(other than the Company, any employee benefit plan (or related trust) sponsored
or maintained by the Company or such corporation (or any corporation controlled
by the Company) and any Person which beneficially owned, immediately prior to
such sale or other disposition, directly or indirectly, 25% or more of the
Outstanding Company Voting Securities) beneficially owns, directly or
indirectly, both (x) 25% or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election of
directors and (y) combined voting power of the then outstanding securities
thereof equal to or in excess of the combined voting power of the then
outstanding securities thereof held by the Krasny Family and (C) at least a
majority of the members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition.
(c) "Krasny Family" shall mean Michael P. Krasny, Janet Krasny, any
descendant of Michael P. Krasny or Janet Krasny or the spouse of any such
descendant (collectively, the "Krasny Family Group"), any trust, partnership or
other entity for the benefit of any member of the Krasny Family Group, the
estate of any member of the Krasny Family Group or any charitable organization
established by any member of the Krasny Family Group.
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4.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
4.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock which are subject to an
option hereunder until such person becomes a stockholder of record with respect
to such shares of Common Stock.
4.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
file with the Committee a written designation of one or more persons as such
optionee's beneficiary or beneficiaries (both primary and contingent) in the
event of the optionee's death. To the extent an outstanding option granted
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during the optionee's lifetime on a form prescribed
by the Committee. The spouse of a married optionee domiciled in a community
property jurisdiction shall join in any designation of a beneficiary other than
such spouse. The filing with the Committee of a new beneficiary designation
shall cancel all previously filed beneficiary designations.
If an optionee fails to designate a beneficiary, or if all designated
beneficiaries of an optionee predecease the optionee, then each outstanding
option hereunder held by such optionee, to the extent exercisable, may be
exercised by such optionee's executor, administrator, legal representative or
similar person.
4.12 GOVERNING LAW. This Plan, each option hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Illinois and construed in accordance
therewith without giving effect to principles of conflicts of laws.
4.13 FOREIGN EMPLOYEES. Without amending this Plan, the Committee may grant
options to eligible persons who are subject to laws of foreign countries or
jurisdictions on such terms and conditions different from those specified in
this Plan as may in the judgment of the Committee be necessary or desirable to
foster and promote achievement of the purposes of this Plan and, in furtherance
of such purposes the Committee may make such modifications, amendments,
procedures, subplans and the like as may be necessary or advisable to comply
with provisions of laws of other countries or jurisdictions in which the Company
or its Subsidiaries operates or has employees.
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Exhibit C
CDW SENIOR MANAGEMENT INCENTIVE PLAN
I. INTRODUCTION
1.1 PURPOSE. The CDW Senior Management Incentive Plan (the "Plan") of CDW
Computer Centers, Inc., an Illinois Corporation (the "Company"), is intended to
provide incentives to certain senior officers and managers of the Company and
its subsidiaries and affiliates and thereby advance the interests of the Company
by attracting and retaining senior officers and managers and motivating such
persons to act in the best interests of the Company's stockholders.
1.2 CERTAIN DEFINITIONS.
"AGREEMENT" shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
"ANNUAL INCENTIVE AWARD" shall mean a right, contingent upon the attainment
of specified Performance Measures within an Annual Incentive Period and
continued employment with the Company through the end of such Annual Incentive
Period, to receive payment in cash, in shares of Common Stock, including
restricted shares of Common Stock, in non-statutory stock options or in any
combination of the foregoing, reduced by the sum of all Quarterly Incentive
Awards received during such Annual Incentive Period.
"ANNUAL INCENTIVE PERIOD" shall mean a fiscal year of the Company.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE IN CONTROL" shall have the meaning set forth in Section 3.6(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
two or more members of the Board, each of whom shall be an "outside director"
within the meaning of Section 162(m) of the Code.
"COMMON STOCK" shall mean the common stock, $.01 per value, of the Company.
"COMPANY" has the meaning specified in Section 1.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the closing transaction price of a share of
Common Stock as reported on The Nasdaq Stock Market on the date as of which such
value is being determined or, if there shall be no reported transaction for such
day, on the next preceding day for which a transaction was reported.
"INCENTIVE AWARD" shall mean an Annual Incentive Award or a Quarterly
Incentive Award.
"INCUMBENT BOARD" shall have the meaning set forth in Section 3.6(b)(2)
hereof.
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"MATURE SHARES" shall mean previously acquired shares of Common Stock for
which the holder thereof has good title, free and clear of all liens and
encumbrances, and which such holder either (i) has held for at least six months
or (ii) has purchased on the open market.
"PARTICIPANT" shall mean a senior officer or manager of the Company or a
Subsidiary who has been selected for participation in the Plan by the Committee.
"PERFORMANCE MEASURES" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met during the applicable
Quarterly Incentive Period or Annual Incentive Period as a condition to the
holder's receipt of the payment with respect to an Incentive Award. Such
criteria and objectives may include one or more of the following: operating
income, net income, earnings per share, the attainment by a share of Common
Stock of a specified Fair Market Value for a specified period of time, return to
stockholders (including dividends), return on equity, return on assets,
revenues, market share, cash flow or cost reduction goals, or any combination of
the foregoing. If the Committee desires that compensation payable pursuant to
any award subject to Performance Measures be "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code, the Performance
Measures (i) shall be established by the Committee (A) no later than 21 days
after the beginning of the Quarterly Incentive Period (or such other time
designated by the Internal Revenue Service) in the case of a Quarterly Incentive
Award and (B) no later than 90 days after the beginning of the Annual Incentive
Period (or such other time designated by the Internal Revenue Service) in the
case of an Annual Incentive Award and (ii) shall satisfy all other applicable
requirements imposed under Treasury Regulations promulgated under Section 162(m)
of the Code, including the requirement that such Performance Measures be stated
in terms of an objective formula or standard.
"QUARTERLY INCENTIVE AWARD" shall mean a right, contingent upon the
attainment of specified Performance Measures within a Quarterly Incentive Period
and continued employment with the Company through the end of such Quarterly
Incentive Period, to receive payment in cash.
"QUARTERLY INCENTIVE PERIOD" shall mean one quarter of the fiscal year of
the Company.
"SUBSIDIARY" shall have the meaning set forth in Section 1.4.
1.3 ADMINISTRATION. The Committee shall administer this Plan. The Committee
shall, subject to the terms of this Plan, select eligible persons for
participation in this Plan and determine the form, amount and timing of each
award to such persons, the time and conditions of payment of the award and all
other terms and conditions of the award. The Committee may, in its sole
discretion and for any reason at any time, subject to the requirements imposed
under Section 162(m) of the Code and regulations promulgated thereunder in the
case of an award intended to be qualified performance-based compensation, take
action such that all or a portion of the Quarterly Incentive Period or the
Annual Incentive Period applicable to any outstanding Incentive Award shall
lapse, the Performance Measures applicable to any outstanding Incentive Award
shall be deemed to be satisfied, the amount payable pursuant to such Incentive
Award shall be calculated based on performance through the date specified in
such action and such Incentive Award shall be payable in full. The Committee
shall, subject to the terms of this Plan, interpret this Plan and the
application thereof and establish rules and regulations it deems necessary or
desirable for the administration of this Plan. The Committee may impose,
incidental to the grant of an Incentive Award, conditions with respect to such
grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive.
The Committee may delegate some or all of its power and authority hereunder
to the Chairman of the Board and Chief Executive Officer (the "CEO") or such
other executive officer of the Company as the Committee deems appropriate;
provided, however, that (i) the Committee may not delegate its power and
authority with regard to the grant of an award to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code or who, in the
Committee's judgment, is likely to be a covered employee at any time during the
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period an award hereunder to such employee would be outstanding and (ii) the
Committee may not delegate its power and authority to the CEO or other executive
officers of the Company with regard to the selection for participation in this
Plan of an officer or other person subject to Section 16 of the Exchange Act or
decisions concerning the timing, price or an amount of an award to such officer
or other person.
No member of the Board or Committee, and neither the CEO nor other
executive officer to whom the Committee delegates any of its power and authority
hereunder, shall be liable for any act, omission, interpretation, construction
or determination made in connection with this Plan in good faith, and the
members of the Board and the Committee and the CEO or other executive officer
shall be entitled to indemnification and reimbursement by the Company in respect
of any claim, loss, damage or expense (including attorneys' fees) arising
therefrom to the full extent permitted by law, except as otherwise may be
provided in the Company's Articles of Incorporation and/or By-Laws, and under
any directors' and officers' liability insurance that may be in effect from time
to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.4 ELIGIBILITY. Participants in this Plan shall consist of such senior officers
and managers of the Company, its subsidiaries (individually a "Subsidiary" and
collectively the "Subsidiaries") and its affiliates, as the Committee in its
sole discretion may select from time to time. For purposes of this Plan,
references to employment by the Company shall also mean employment by a
Subsidiary or an affiliate. The Committee's selection of a person to participate
in this Plan at any time shall not require the Committee to select such person
to participate in this Plan at any other time.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 3.5, 750,000
shares of Common Stock shall be available for grants of Common Stock, restricted
shares of Common Stock and/or non-statutory stock options under this Plan,
reduced by the sum of the aggregate number of shares of Common Stock which
become subject to outstanding options and outstanding stock awards. To the
extent that shares of Common Stock subject to an outstanding option or stock
award are not issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such award or by reason of the delivery or
withholding of shares of Common Stock to pay all or a portion of the exercise
price of an award, if any, or to satisfy all or a portion of the tax withholding
obligations relating to an award, then such shares of Common Stock shall again
be available under this Plan.
Shares of Common Stock shall be made available from authorized and unissued
shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
II. INCENTIVE AWARDS
2.1 INCENTIVE AWARDS. The Committee may, in its discretion, grant Incentive
Awards to such eligible persons as may be selected by the Committee.
2.2 TERMS OF INCENTIVE AWARDS. Incentive Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.
(a) Amount of Incentive Award. The amount of an Incentive Award shall be
determined by the Committee; provided, however, that the maximum amount that may
be paid to any Participant under any Quarterly Incentive Award for any Quarterly
Incentive Period shall not exceed $750,000, and any Annual Incentive Award for
any Annual Incentive Period shall not exceed $3,000,000. In no event may the
aggregate
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amount paid to any Participant in respect of any fiscal year of the Company
under any Annual Incentive Award and under all Quarterly Incentive Awards exceed
$3,000,000.
(b) Performance Measures. The Performance Measures applicable to a
Quarterly Incentive Award or an Annual Incentive Award shall be determined by
the Committee based upon the achievement during the applicable Quarterly
Incentive Period or Annual Incentive Period of the goals established by the
Committee.
(c) Settlement of Quarterly Incentive Awards. Quarterly Incentive Awards
may be settled only in cash.
(d) Settlement of Annual Incentive Awards. Annual Incentive Awards may be
settled in cash, in shares of Common Stock, including restricted shares of
Common Stock, in non-statutory stock options or in any combination of the
foregoing, as determined by the Committee in its sole discretion.
(1) Settlement in Common Stock. If an Annual Incentive Award, or a portion
thereof, is settled in shares of Common Stock, the Committee in its sole
discretion shall determine all the terms and conditions relating to the award of
shares of Common Stock, including any restrictions upon the transfer of such
shares of Common Stock. The number of shares of Common Stock awarded to a
participant in settlement of an Annual Incentive Award, or a portion thereof,
shall be equal to the dollar amount of the Annual Incentive Award, or a portion
thereof, to be paid in shares of Common Stock divided by the Fair Market Value
of a share of Common Stock as of the date of the award of such shares of Common
Stock.
(2) Settlement in Restricted Stock. If an Annual Incentive Award, or a
portion thereof, is settled in restricted shares of Common Stock, such
restricted shares shall be subject to forfeiture if the Participant holding such
restricted shares does not remain continuously employed by the Company during
the restriction period. The Committee in its sole discretion shall determine all
of the terms relating to the restricted shares of Common Stock, including the
length of the restriction period. Unless otherwise determined by the Committee,
any Participant holding restricted shares of Common Stock shall have the rights
of a stockholder of the Company, including the right to vote and receive
dividends with respect to such restricted shares of Common Stock. The number of
restricted shares of Common Stock granted to a Participant in settlement of an
Annual Incentive Award, or a portion thereof, shall be equal to the dollar
amount of the Annual Incentive Award, or portion thereof, to be paid in
restricted shares of Common Stock divided by the Fair Market Value of a share of
Common Stock as of the date of grant of such restricted shares of Common Stock.
(3) Settlement in Non-Statutory Stock Options. If an Annual Incentive
Award, or a portion thereof, is settled by means of the grant of a non-statutory
stock option, the Committee shall determine the number of shares of Common Stock
subject to such stock option, the related exercise price per share of Common
Stock, the period during which the stock option may be exercised, whether the
stock option shall become exercisable in cumulative or non-cumulative
installments and in part or in full at any time, the extent of the restrictions
upon transfer of the stock option and all other terms and conditions applicable
thereto. The number of shares of Common Stock subject to non-statutory stock
options granted in settlement of an Annual Incentive Award, or a portion
thereof, shall be equal to the dollar amount of the Annual Incentive Award, or a
portion thereof, to be settled by means of the grant of a stock option, divided
by an amount equal to the difference between the exercise price per share of
Common Stock designated by the Committee with respect to such stock option and
the Fair Market Value of a share of Common Stock as of the date of grant of such
stock option. To the extent necessary for an award to be qualified
performance-based compensation under Section 162(m) of the Code and the
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options may be granted under this Plan during any fiscal year
to any Participant shall be 100,000, subject to adjustment as provided in
Section 3.5.
2.3 TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms relating to the
satisfaction of Performance Measures and the termination of a Quarterly
Incentive Period or an Annual Incentive Period, or any cancellation
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or forfeiture of an Incentive Award upon a termination of employment with the
Company of the holder of such Incentive Award, whether by reason of disability,
retirement, death or other termination, shall be determined by the Committee.
Notwithstanding anything herein to the contrary, in furtherance of this Plan's
objective of retaining senior officers and managers of the Company, an Incentive
Award shall not accrue on a pro rata basis and shall not become earned in any
amount or to any extent unless and until a Participant has been employed by the
Company throughout the entire applicable incentive period, at which time the
Incentive Award will become earned in its entirety, subject to the Committee's
certification that the Performance Measures applicable to such Incentive Award
have been satisfied.
III. GENERAL
3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 2000 annual meeting of stockholders of the Company,
shall become effective as of January 1, 2000. This Plan shall terminate 10 years
after its effective date, unless earlier terminated by the Board.
3.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) of the Code; provided, however,
that no amendment shall be made without stockholder approval if such amendment
would (a) increase the maximum number of shares of Common Stock available under
this Plan (subject to Section 3.5) or (b) extend the term of this Plan. No
amendment may impair the rights of a holder of an outstanding Incentive Award
without the consent of such holder.
3.3 NON-TRANSFERABILITY OF AWARDS. No Incentive Award and, unless otherwise
specified in the Agreement relating thereto, no shares of Common Stock,
restricted shares of Common Stock or stock options received in payment of an
Annual Incentive Award, shall be transferable other than by will, the laws of
descent and distribution or pursuant to beneficiary designation procedures
approved by the Company. Each Incentive Award may be settled during the holder's
lifetime only by the holder or the holder's legal representative or similar
person. No Incentive Award may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any such award, such award and all rights thereunder shall
immediately become null and void.
3.4 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement
of such award or the delivery of shares thereunder, such award shall not be
exercised or settled and such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
3.5 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of
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securities available under this Plan, the maximum number and class of securities
with respect to which options may be granted during any fiscal year to any
person, the number and class of securities subject to each outstanding option
and the purchase price per security and the number and class of securities
subject to each outstanding restricted stock award shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options without an increase in the aggregate purchase price. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any such adjustment would result in a fractional security
being (a) available under this Plan, such fractional security shall be
disregarded, or (b) subject to an award under this Plan, the Company shall pay
the holder of such award, in connection with the first vesting, exercise or
settlement of such award in whole or in part occurring after such adjustment, an
amount in cash determined by multiplying (i) the fraction of such security
(rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair
Market Value on the vesting, exercise or settlement date over (B) the exercise,
if any, of such award.
3.6 CHANGE IN CONTROL.
(a) (1) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common stock
that are registered under Section 12 of the Exchange Act, (i) all outstanding
stock options shall immediately become exercisable in full, (ii) the restriction
period applicable to any outstanding restricted stock previously granted shall
lapse, (iii) the Performance Measures applicable to any outstanding Incentive
Award shall be deemed to be satisfied, the amount payable pursuant to such
Incentive Award shall be calculated based on performance through the date of the
Change in Control and such Incentive Award shall become payable in full and (iv)
there shall be substituted for each share of Common Stock available under this
Plan, whether or not then subject to an outstanding award, the number and class
of shares into which each outstanding share of Common Stock shall be converted
pursuant to such Change in Control. In the event of any such substitution, the
purchase price per share in the case of a stock option shall be appropriately
adjusted by the Committee (whose determination shall be final, binding and
conclusive), such adjustments to be made in the case of outstanding stock
options without an increase in the aggregate purchase price.
(2) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of common stock that are registered under Section 12 of the Exchange
Act, each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be canceled by the Company, and
the holder thereof shall receive, within ten days of the occurrence of a Change
in Control, a cash payment from the Company in an amount equal to (i) in the
case of a stock option, the number of shares of Common Stock then subject to
such stock option, multiplied by the excess, if any, of the greater of (A) the
highest per share price offered to stockholders of the Company in any
transaction whereby the Change in Control takes place or (B) the Fair Market
Value of a share of Common Stock on the date of occurrence of the Change in
Control, over the purchase price per share of Common Stock subject to the stock
option, (ii) in the case of a restricted stock award, the number of shares of
Common Stock then subject to such award, multiplied by the greater of (A) the
highest per share price offered to stockholders of the Company in any
transaction whereby the Change in Control takes place or (B) the Fair Market
Value of a share of Common Stock on the date of occurrence of the Change in
Control. The Company may, but is not required to, cooperate with any person who
is subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act , of beneficial ownership within the meaning of Rule
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13d-3 promulgated under the Exchange Act, of both (x) 25% or more of the
combined voting power of the then outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities") and (y) combined voting power of the Outstanding Company Voting
Securities equal to or in excess of the combined voting power of the Outstanding
Company Voting Securities held by the Krasny Family (as hereinafter defined);
excluding, however, the following: (A) any acquisition directly from the Company
or any member of the Krasny Family (excluding any acquisition resulting from the
exercise of an exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly from the
Company or from any member of the Krasny Family), (B) any acquisition by the
Company, any member of the Krasny Family or any group that includes a member of
the Krasny Family, (C) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (3) of this Section
3.6(b) shall be satisfied, provided that, for purposes of clause (B), if any
Person (other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or any member of the Krasny Family) shall, by reason of an acquisition
of Outstanding Company Voting Securities by the Company, become the beneficial
owner of both (x) 25% or more of the Outstanding Company Voting Securities and
(y) combined voting power of the Outstanding Company Voting Securities equal to
or in excess of the combined voting power of the Outstanding Company Voting
Securities held by the Krasny Family, and such Person shall, after such
acquisition of Outstanding Company Voting Securities by the Company, become the
beneficial owner of any additional Outstanding Company Voting Securities and
such beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;
(2) individuals who, as of the date of approval of this Plan by the
stockholders of the Company, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a director of the Company subsequent to
the date of approval of this Plan by the stockholders of the Company whose
election, or nomination for election by the Company's stockholders, was approved
by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of the
Company as a result of an actual or threatened solicitation by a person or group
for the purpose of opposing a solicitation by any other person or group with
respect to the election or removal of directors, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board shall be deemed a member of the Incumbent Board;
(3) consummation of a reorganization, merger or consolidation unless, in
any such case, immediately after such reorganization, merger or consolidation,
(i) more than 50% of the combined voting power of the then outstanding
securities of the corporation resulting from such reorganization, merger or
consolidation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals or entities who were the beneficial owners, respectively, of the
Outstanding Company Voting Securities immediately prior to such reorganization,
merger or consolidation, (ii) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or the
corporation resulting from such reorganization, merger or consolidation (or any
corporation controlled by the Company) and any Person which beneficially owned,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Voting Securities)
beneficially owns, directly or indirectly, both (x) 25% or more of the combined
voting power of the then outstanding securities of such corporation entitled to
vote generally in the election of directors and (y) combined voting power of the
then outstanding securities of such corporation equal to or in excess of the
combined voting power of the then outstanding securities of such corporation
held by the Krasny Family and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
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(4) consummation of (i) a plan of complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of all or substantially all of
the assets of the Company other than to a corporation with respect to which,
immediately after such sale or other disposition, (A) more than 50% of the
combined voting power of the then outstanding securities thereof entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Voting
Securities immediately prior to such sale or other disposition, (B) no Person
(other than the Company, any employee benefit plan (or related trust) sponsored
or maintained by the Company or such corporation (or any corporation controlled
by the Company) and any Person which beneficially owned, immediately prior to
such sale or other disposition, directly or indirectly, 25% or more of the
Outstanding Company Voting Securities) beneficially owns, directly or
indirectly, both (x) 25% or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election of
directors and (y) combined voting power of the then outstanding securities
thereof equal to or in excess of the combined voting power of the then
outstanding securities thereof held by the Krasny Family and (C) at least a
majority of the members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition.
(c) "Krasny Family" shall mean Michael P. Krasny, Janet Krasny, any
descendant of Michael P. Krasny or Janet Krasny or the spouse of any such
descendant (collectively, the "Krasny Family Group"), any trust, partnership or
other entity for the benefit of any member of the Krasny Family Group, the
estate of any member of the Krasny Family Group or any charitable organization
established by any member of the Krasny Family Group.
3.7 TAX WITHHOLDING. The Company shall have the right to withhold any Federal,
state, local or other taxes that may be required to be withheld in connection
with an Incentive Award. With respect to any portion of an Annual Incentive
Award that is paid in Common Stock, in restricted shares of Common Stock or as a
non-statutory stock option, the Company shall have the right to require, prior
to the issuance or delivery of any shares of Common Stock, payment by the holder
of such award of any federal, state, local or other taxes which may be required
to be withheld or paid in connection with such portion of an Annual Incentive
Award. An Agreement may provide that (i) the Company shall withhold whole shares
of Common Stock which would otherwise be delivered to a holder, having an
aggregate Fair Market Value determined as of the date the obligation to withhold
or pay taxes arises in connection with an award (the "Tax Date"), or withhold an
amount of cash which would otherwise be payable to a holder, in the amount
necessary to satisfy any such obligation or (ii) the holder may satisfy any such
obligation by any of the following means: (A) a cash payment to the Company, (B)
delivery (either actual delivery or by attestation procedures established by the
Company) to the Company of Mature Shares having an aggregate Fair Market Value,
determined as of the Tax Date, equal to the amount necessary to satisfy any such
obligation, (C) authorizing the Company to withhold whole shares of Common Stock
which would otherwise be delivered having an aggregate Fair Market Value,
determined as of the Tax Date, or withhold an amount of cash which would
otherwise be payable to a holder, equal to the amount necessary to satisfy any
such obligation, (D) in the case of the exercise of an option, a cash payment by
a broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in
each case to the extent set forth in the Agreement relating to the award;
provided, however, that the Company shall have sole discretion to disapprove of
an election pursuant to any of clauses (ii)(B)-(E). Any fraction of a share of
Common Stock, which would be required to satisfy such an obligation, shall be
disregarded and the remaining amount due shall be paid in cash by the holder.
3.8 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
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3.9 GOVERNING LAW. This Plan, each award hereunder, and all determinations made
and actions taken pursuant thereto, to the extent not otherwise governed by the
Code or the laws of the United States, shall be governed by the laws of the
State of Illinois and construed in accordance therewith without giving effect to
principles of conflicts of laws.
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Please date, sign and mail your
proxy card back as soon as possible
Annual Meeting of Shareholders
CDW COMPUTER CENTERS, INC.
MAY 24, 2000
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- ----------------------------------------------------------------------------------------------------------------------------------
[ X ] Please mark your
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION [ ] [ ] Nominees: Michael P. Krasny 2. Ratification of the selection of [ ] [ ] [ ]
OF Gregory Z. Zeman PricewaterhouseCoopers LLP. as the
DIRECTORS Daniel B. Kass independent accountants of CDW
Joseph Levy, Jr.
INSTRUCTION: To withhold authority Michelle L. Collins 3. A charter amendment to increase the [ ] [ ] [ ]
to vote for any of the nominee(s) Casey G. Cowell number of authorized shares of
listed at right, please write that Donald P. Jacobs Common Stock.
nominee's name on the line below.) Brian E. Williams
- ---------------------------------- 4. Approval and ratification of the [ ] [ ] [ ]
CDW2000 Incentive Stock Option Plan.
5. Approval and ratification of the [ ] [ ] [ ]
CDW Senior Management Incentive Plan.
This proxy, when properly executed, will be voted in the
manner directed herein. If no direction is made, this proxy
will be voted FOR election of directors and FOR proposal 2,
as permitted by law. The Board of Directors of CDW recommends
a vote FOR proposals 1 and 2 set forth hereon.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD TODAY IN THE
ENCLOSED ENVELOPE.
SIGNATURE(S) _______________________ Date _________________ _________________________________________________ Date _____________
(IF STOCK IS HELD JOINTLY, EACH OWNER SHOULD SIGN)
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
58
CDW COMPUTER CENTERS, INC.
200 N. MILWAUKEE AVE., VERNON HILLS, IL 60061
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF CDW COMPUTER CENTERS, INC.
The undersigned hereby appoints Michael P. Krasny and Gregory C. Zeman, and
each of them with full power of substitution, the attorneys and the proxies of
the undersigned, to represent and vote all shares of common stock, par value
$.01 per share, of CDW Computer Centers, Inc., an Illinois corporation ("CDW"),
the undersigned may be entitled to vote (or such lesser number as is specified
on the reverse), with all powers of the undersigned would possess if personally
present at the Annual Meeting of Shareholders of CDW to be held on May 24, 2000
(the "Annual Meeting") and at any adjournment(s) or postponement(s) thereof,
on the matters and in the manner indicated on the reverse side hereof and
described in the Proxy Statement (the "Proxy Statement") of CDW. This proxy
revokes all prior proxies given by the undersigned. Unless otherwise specified,
this proxy will be voted FOR each proposal listed on the reverse side of this
proxy card. This proxy will also be voted in the discretion of the proxies on
such other matters as may properly come before the Annual Meeting and at any
adjournment(s) or postponement(s) thereof.
(TO BE SIGNED ON REVERSE SIDE.)