<PAGE> 1
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.
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
May 18, 1999
CDW Computer Centers, Inc.
200 North Milwaukee Avenue
Vernon Hills, Illinois 60061
CDW COMPUTER CENTERS, INC.
--------------
<PAGE> 3
CDW COMPUTER CENTERS, INC.
200 North Milwaukee Avenue
Vernon Hills, Illinois 60061
March 26, 1999
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 Tuesday,
May 18, 1999, 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,
Michael P. Krasny
Chairman, Chief Executive Officer and
Secretary
<PAGE> 4
CDW COMPUTER CENTERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 18, 1999
---------------
The Annual Meeting of Shareholders of CDW Computer Centers, Inc. (the
"Company") will be held at 6:00 p.m. on Tuesday, May 18, 1999 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 five 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, 1999.
3. The approval and ratification of the CDW Officer and Manager Plan.
4. Such other business as may properly come before the meeting and all
adjournments thereof.
The Board of Directors has fixed March 25, 1999 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
Michael P. Krasny
Chairman, Chief Executive Officer
and Secretary
Vernon Hills, Illinois
March 26, 1999
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.
<PAGE> 5
CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
PROXY STATEMENT
ANNUAL MEETING - MAY 18, 1999
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 Tuesday, May 18, 1999 and
at any and all adjournments thereof.
Solicitation of proxies by mail is expected to commence March 31, 1999 and
the cost thereof will be borne by the Company. In addition to such solicitation
by mail, some of the directors, officers and regular employees of the Company
may, without extra compensation, solicit proxies by telephone, 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.
The Company may retain at its expense a proxy solicitation firm to assist it in
soliciting proxies.
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 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.
1
<PAGE> 6
UNLESS OTHERWISE INDICATED, ALL INFORMATION PROVIDED HEREIN IS GIVEN AS OF
THE DATE HEREOF.
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 25, 1998 (the
"Record Date"), 21,540,991 shares of Common Stock were issued and outstanding.
In addition, 50,000 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 each of the proposals presented at the meeting.
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, 1999) must submit his or her
proposal, in writing, directed to the Company's executive offices not later than
November 25, 1999. 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 2000 Proxy Statement.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at February 28, 1999, 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.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP STOCK
- ------------------------ ----------- ---------
<S> <C> <C>
Michael P. Krasny (1) (2) 11,785,715 54.6%
Gregory C. Zeman (1) (3) 2,308,199 10.7%
AIM Management Group (4) 2,156,200 10.0%
Fidelity Management & Research (5) 1,513,200 7.0%
Daniel B. Kass (6) 489,509 2.3%
Paul A. Kozak (7) 2,400 *
Harry J. Harczak, Jr. (8) 3,400 *
James R. Shanks (9) 3,450 *
Joseph Levy, Jr. (10) 32,400 *
Michelle L. Collins 500 *
All directors and executive officers as a group (11 persons) (11) 11,829,365 54.9%
</TABLE>
2
<PAGE> 7
* Less than 1%
(1) The address for Messrs. Krasny and Zeman is the executive office
of the Company.
(2) Includes 2,964,396 shares remaining subject to the MPK Stock Option
Plan (of which 2,797,708 shares are also included in the holdings of
Messrs. Zeman and Kass above), 391,219 shares remaining subject to the
MPK Restricted Stock Plan and 9,186 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) Reflects 2,308,199 shares issuable pursuant to non-forfeitable options
granted under the MPK Stock Option Plan out of Mr. Krasny's own shares.
As of December 31, 1998 options for 736,575 shares are exercisable and
the remaining options become exercisable at the rate of 471,488 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. These shares are also reported as being
beneficially owned by Mr. Krasny.
(4) The address of AIM Management Group is 1315 Peachtree Street NE, c/o
INVESCO, 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 11, 1999.
(5) The address of Fidelity Management & Research is 82 Devonshire Street,
Boston, MA 02109. The number of shares held was obtained from the
holder's Schedule 13G filing with the Securities Exchange and
Commission dated February 12, 1999.
(6) Reflects 489,509 shares issuable pursuant to options granted under the
MPK Stock Option Plan out of Mr. Krasny's own shares. As of December
31, 1998 options for 156,135 shares are exercisable and the remaining
options become exercisable at the rate of 100,013 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. These shares are also reported as being beneficially owned by
Mr. Krasny.
(7) Includes options to acquire 2,250 shares of Common Stock exercisable as
of February 28, 1999, granted pursuant to the CDW Incentive Stock
Option Plan.
(8) Includes options to acquire 2,650 shares of Common Stock exercisable as
of February 28, 1999, granted pursuant to the CDW Incentive Stock
Option Plan.
(9) Includes options to acquire 3,450 shares of Common Stock exercisable as
of February 28, 1999, granted pursuant to the CDW Incentive Stock
Option Plan.
(10) Includes options to acquire 9,900 shares of Common Stock exercisable as
of February 28, 1999, granted pursuant to the CDW Director Stock Option
Plan.
(11) For purposes of computing aggregate number of shares owned by directors
and officers of the Company as a group, shares of Common Stock
beneficially owned by more than one executive officer are counted only
once. These figures also include 19,750 shares subject to presently
exercisable options or options exercisable within 60 days from February
28, 1999.
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 the
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, 1998, all persons subject to Section 16(a) were in
compliance with all Section 16(a) filing requirements.
3
<PAGE> 8
ANNUAL REPORT AND FORM 10-K
The 1998 Annual Report of the Company which includes financial statements
for the years ended December 31, 1998, 1997 and 1996 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, 1998, 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.
4
<PAGE> 9
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.
Five 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.
The information presented as to principal occupation and shares of stock
beneficially owned as of February 28, 1999, is based in part on information
received from the respective persons and in part from the records of the
Company. All directors and executive officers as a group were the beneficial
owners of 11,829,365 shares of Common Stock representing approximately 54.9% of
the class.
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.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ------------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
Michael P. Krasny................... 45 Chairman of the Board, Chief Executive Officer and Secretary
Gregory C. Zeman.................... 40 President and Director
Daniel B. Kass...................... 42 Vice President-Sales and Director
Joseph Levy, Jr..................... 72 Director
Michelle L. Collins................. 39 Director
</TABLE>
Michael P. Krasny is the founder of the Company and currently serves as
Chairman of the Board, Chief Executive Officer and Secretary. 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 finance, human resources,
operations and management information systems functions. 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 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 March, 1993
and Vice President-Sales in January, 1996. 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.
5
<PAGE> 10
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. 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 is a partner
in Svoboda, Collins, L.L.C., a venture capital firm since January, 1998.
Previously, Ms. Collins was a principal at William Blair & Company, L.L.C. since
1992 and, prior to that time, she served as an associate at William Blair &
Company since 1986. Ms. Collins became a director of the Company in April, 1996.
Ms. Collins is a member of the Board of Directors of McWhorter Technologies,
Inc. since 1995 and 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 an undergraduate degree in Economics and a 1986 graduate of Harvard
University, where she earned a Masters Degree in Business Administration.
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 calendar year ended December 31, 1998. Each director attended all meetings
of the Board of Directors and the committees of which they were members.
The Audit Committee is currently comprised of Messrs. Krasny and Levy and
Ms. Collins. 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; and reviews matters where
independence from management is indicated. The Audit Committee met three times
during the year ended December 31, 1998.
The Compensation and Stock Option Committee is currently comprised of Mr.
Levy and Ms. Collins. 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; 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 incentive stock option grants. The Compensation and
Stock Option Committee met three times during the year ended December 31, 1998.
The Compensation and Stock Option Committee met twice in February of 1999 in
connection with stock option grants, ratification of the CDW 1998 Officer and
Manager Bonus Plan, the allocation of the 1998 Employee Incentive Bonus Pool and
the establishment of officer base compensation levels for the 1999 fiscal year.
See "Report of the Compensation and Stock Option Committee."
The Nominating Committee is currently comprised of Messrs. Krasny and Levy
and Ms. Collins. The functions performed by the Nominating Committee include the
review of the Board of Directors present and future composition; 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, 1998. The Nominating Committee acted pursuant to
Unanimous Written Consent in March, 1999, for the purpose of nominating the
persons presented herein for election as directors.
6
<PAGE> 11
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.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ------------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
Michael P. Krasny................... 45 Chairman of the Board, Chief Executive Officer and Secretary
Gregory C. Zeman.................... 40 President and Director
Daniel B. Kass...................... 42 Vice President-Sales and Director
Douglas E. Eckrote.................. 34 Vice President-Operations
Harry J. Harczak, Jr................ 42 Chief Financial Officer and Treasurer
Paul A. Kozak....................... 34 Vice President-Purchasing
Joseph K. Kremer ................... 34 Vice President-Marketing
Sandra M. Rouhselang................ 43 Controller and Chief Accounting Officer
James R. Shanks..................... 34 Chief Information Officer
</TABLE>
See "Election of Directors-Nominees for Election to Board of Directors" for
the discussion of Messrs. Krasny, Zeman and Kass.
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. 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, 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.
Paul A. Kozak is Vice President-Purchasing of the Company. Mr. Kozak joined
the Company in August of 1987 and since that time has served as an Account
Manager, Sales Manager and Director of Purchasing. He is a 1986 graduate of the
University of Iowa where he earned a Bachelor of Science degree in Business
Administration.
James R. Shanks is Chief Information Officer of the Company. Mr. Shanks
joined the Company as Director of Information Systems in August of 1993. 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 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's Graduate School of Management.
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 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.
Douglas E. Eckrote is Vice President-Operations of the Company. Mr. Eckrote
joined the Company in January of 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. He is a 1986 graduate
of Purdue University where he earned a Bachelor degree in Agricultural Sales and
Marketing.
7
<PAGE> 12
Sandra M. Rouhselang became Controller and Chief Accounting Officer of the
Company on May 18, 1998. Prior to joining the Company, Ms. Rouhselang was
employed by Edward Don & Company from 1989 to 1998 as Vice President and
Controller. Ms. Rouhselang is a 1977 graduate of Purdue University, where she
earned a Bachelor degree in General Business, and a 1982 graduate of the
University of Chicago, where she earned a Masters of Business Administration.
Ms. Rouhselang is a certified public accountant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REPURCHASE OF STOCK FROM FORMER EXECUTIVE OFFICER
In December 1998, the Company and Michael P. Krasny, its majority
shareholder, Chairman and CEO, agreed to settle the litigation brought against
them in 1993 by a former shareholder, director and executive officer of the
Company. The lawsuit was related to the Company's redemption of the common stock
held by the former shareholder in July 1990, and requested actual and punitive
damages. Although the Company and Mr. Krasny believe their actions were honest
and proper and that the allegations were without merit, they agreed to the
settlement of the suit, whereby all pending litigation was dismissed with a one
time payment by Mr. Krasny to the former shareholder of approximately $4.4
million. The amount was determined based upon the difference between the agreed
upon estimated fair market value of the Company at the time of the redemption of
the former shareholder's interest in 1990 and the amount previously paid to the
former shareholder. Pursuant to Mr. Krasny's indemnification of the Company for
all costs, damages or settlements related to the litigation, the Company
recorded the payment by Mr. Krasny to the former shareholder as a capital
contribution, with an offsetting reduction of paid-in capital for the additional
redemption price paid to the former shareholder. Thus, the settlement had no
impact on the Company's results of operations or cash flows.
Mr. Krasny also reimbursed the Company for all expenses, net of tax
benefits received by the Company, related to this action. For the years ended
December 31, 1998, 1997 and 1996, the Company and Mr. Krasny incurred legal
expenses in the aggregate of approximately $1.3 million, $379,000 and $133,000,
respectively, which have been assumed by Mr. Krasny. These legal expenses are
recorded as a selling and administrative expense and the reimbursement, net of
tax, is recorded as an increase to paid-in capital. As a result of the
settlement, the Company does not anticipate incurring any additional expenses
related to this lawsuit.
8
<PAGE> 13
EXECUTIVE COMPENSATION
Information concerning the annual and long-term compensation for services
in all capacities to the Company for the years ended December 31, 1998, 1997 and
1996, of those persons who were, at December 31, 1998 (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 $100,000 in 1998 (the
"Named Officers") is shown below:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ---------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($) (1) (#) (2) SARS(#) ($) (3)
--------------------------- ---- --------- -------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Krasny 1998 $227,373 $1,243,757 --- --- $4,400
Chairman of the Board, Chief 1997 $223,574 $1,774,134 $2,407 --- $5,207
Executive Officer and Secretary 1996 $216,430 $1,781,276 --- --- $4,918
Gregory C. Zeman 1998 $198,952 $1,050,614 --- --- $4,400
President and Director 1997 $195,624 $1,498,630 $2,407 --- $5,207
1996 $189,377 $1,373,747 --- --- $4,918
Daniel B. Kass 1998 $198,952 $756,828 --- --- $4,400
Vice President-Sales and 1997 $195,624 $1,079,563 $3,739 --- $5,207
Director 1996 $189,377 $989,602 --- --- $4,918
Paul A. Kozak 1998 $187,583 $290,889 --- 7,500 $4,400
Vice President-Purchasing 1997 $184,447 $350,280 $2,407 15,596 $5,207
1996 $178,555 $265,413 --- 8,331 $4,918
Harry J. Harczak, Jr. 1998 $138,372 $261,420 --- 7,478 $4,400
Chief Financial Officer and 1997 $136,059 $297,468 $2,407 8,595 $5,207
Treasurer 1996 $131,713 $203,995 $13,050 32,827 $4,918
James R. Shanks 1998 $138,372 $261,420 --- 7,478 $4,400
Chief Information Officer 1997 $136,059 $283,770 $4,397 8,595 $5,207
1996 $131,713 $203,995 --- 32,511 $4,918
</TABLE>
(1) Amounts reflected for Messrs. Kozak, Harczak and Shanks for all periods
are attributable to a non-contractual bonus. 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 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, and travel
incentive awards for the years preceding 1997.
(3) Reflects the Company's contributions to the CDW Computer Centers, Inc.
Employees' Profit Sharing Plan. The figures for the 1998 contributions
represent the Company's best estimate, as final calculations have not
been completed at the date of this Proxy Statement.
9
<PAGE> 14
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 1,050,000 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 CDW Incentive 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 3,000 shares and each year thereafter
beginning January 1, 1995 shall be 3,000 shares, plus the product of 3,000
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 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 received no monetary
consideration for the grants.
Pursuant to the Director Option Plan, options that were granted and remain
outstanding as of February 28, 1999 are as follows:
<TABLE>
<CAPTION>
# OF OPTIONS
---------------------------
DIRECTOR GRANT DATE EXERCISABLE UNEXERCISABLE EXERCISE PRICE
-------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Mr. Levy January 3,1995 4,920 $22.83
January 3,1996 4,980 $27.00
January 3,1997 5,160 $53.75
January 3,1998 4,449 $51.25
January 3,1999 3,870 $97.25
===============================
9,900 13,479
===============================
Ms. Collins January 3,1997 5,160 $53.75
January 3,1998 4,449 $51.25
January 3,1999 3,870 $97.25
===============
13,479
===============
</TABLE>
10
<PAGE> 15
EMPLOYMENT RELATED AGREEMENTS
Mr. Krasny. The Company has entered into an Employment and Non-Competition
Agreement with Mr. Krasny that became effective upon the consummation of the
initial public offering in 1993. In accordance with the terms of the Agreement,
Mr. Krasny's employment is terminable with or without cause and the Company will
pay Mr. Krasny an initial annual base salary of $200,000, to be adjusted
annually in accordance with the Consumer Price Index. Additionally, the
Agreement provides that Mr. Krasny 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. This bonus will be awarded
in the discretion of the Compensation and Stock Option Committee. In addition,
the Agreement contains a non-competition restriction prohibiting Mr. Krasny from
undertaking certain competitive activities for a two year period after the date
Mr.Krasny ceases his employment with the Company.
Mr. Zeman. The Company has entered into an Employment and Non-Competition
Agreement with Mr. Zeman which became effective upon the consummation of the
initial public offering in 1993. In accordance with the terms of the Agreement,
Mr. Zeman's employment is terminable with or without cause and the Company will
pay Mr. Zeman an initial annual base salary of $175,000, to be adjusted annually
in accordance with the Consumer Price Index. Additionally, the Agreement
provides that Mr. Zeman 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. This bonus will be awarded in the discretion of
the Compensation and Stock Option Committee. In addition, the Agreement contains
a non-competition restriction prohibiting Mr. Zeman from undertaking certain
competitive activities for a two year period after the date Mr. Zeman ceases his
employment with the Company.
Mr. Kass. The Company has entered into an Employment and Non-Competition
Agreement with Mr. Kass which became effective upon the consummation of the
initial public offering in 1993. In accordance with the terms of the Agreement,
Mr. Kass's employment is terminable with or without cause and the Company will
pay Mr. Kass an initial annual base salary of $175,000, to be adjusted annually
in accordance with the Consumer Price Index. Additionally, the Agreement
provides that Mr. Kass shall be eligible to receive an annual bonus to be paid
out of the Employee Incentive Bonus Pool, which pool shall be calculated not to
exceed twenty percent of the Company's increase in income from operations over
the prior year as determined in accordance with generally accepted accounting
principles consistently applied. This bonus will be awarded in the discretion of
the Compensation and Stock Option Committee. In addition, the Agreement contains
a non-competition restriction prohibiting Mr. Kass from undertaking certain
competitive activities for a two year period after the date Mr. Kass ceases his
employment with the Company.
11
<PAGE> 16
OPTION GRANTS
Information with respect to grants of stock options to Named Officers
during 1998 is set forth below. See "Incentive Stock Option Plans".
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL EXERCISE
OPTIONS GRANTED OR BASE
OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAMED OFFICERS(1) GRANTED IN FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
- ----------------------- ------- --------------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul A. Kozak 5,750 (2) 0.82% $95.938 12/31/2018 $0 $912,019 $3,159,522
1,750 (3) 0.25% $0.01 12/31/2018 $167,874 $445,445 $1,129,468
Harry J. Harczak, Jr. 5,750 (2) 0.82% $95.938 12/31/2018 $0 $912,019 $3,159,522
1,728 (3) 0.25% $0.01 12/31/2018 $165,764 $439,845 $1,115,268
James R. Shanks 5,750 (2) 0.82% $95.938 12/31/2018 $0 $912,019 $3,159,522
1,728 (3) 0.25% $0.01 12/31/2018 $165,764 $439,845 $1,115,268
</TABLE>
(1) No other Named Officers received grants of stock options in 1998.
(2) Options are exercisable at the rate of 12.5% per year, beginning
December 31, 2002.
(3) Options are exercisable in full on January 1, 2003.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Information with respect to options exercised and shares sold during 1998,
unexercised options to purchase the Company's Common Stock granted under the MPK
Stock Option Plan and the Company's Incentive Stock Option Plans (as hereinafter
defined) and restricted shares granted under the MPK Restricted Stock Plan to
the Named Officers and held by them at December 31, 1998 is set forth below.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED DECEMBER 31, 1998(#) DECEMBER 31, 1998($) (1)
----------- -------- ----------------------------- --------------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------- -------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael P. Krasny --- --- --- --- --- ---
Gregory C. Zeman 125,000 $5,930,120 736,575 1,571,624 (2) $70,653,232 $150,752,217
Daniel B. Kass 26,625 $1,288,655 156,135 333,374 (2) $14,976,672 $31,977,667
Paul A. Kozak 750 $40,313 2,250 56,178 (3) $158,298 $3,616,989
Harry J. Harczak, Jr. --- --- 2,650 55,750 $199,536 $2,970,075
James R. Shanks --- --- 2,850 56,234 $209,111 $2,981,249
</TABLE>
(1) Based on the closing price as reported by The Nasdaq Stock Market of
the Company's Common Stock on December 31, 1998 ($95.938), less
the respective exercise prices.
(2) Pursuant to the provisions of the MPK Stock Option Plan, the options
become fully exercisable upon termination of employment.
(3) Includes 18,751 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.
12
<PAGE> 17
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 as of
December 31, 1992 to Messrs. Zeman and Kass and Ms. Mary Gerlits (a former
employee of the Company), options to purchase in the aggregate 4,143,375 shares
of Common Stock owned by him. As of February 28,1999, options to acquire an
aggregate of 2,964,396 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 $.0167 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 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.
In connection with the Company's secondary public offerings, Messrs. Zeman
and Kass and Ms. Gerlits exercised options to acquire 349,895, 74,220 and 37,109
shares, respectively, in June, 1994, 256,653, 54,441 and 27,221 shares,
respectively, in August, 1995, and 103,504, 21,955, and 10,978 shares,
respectively, in February, 1997. These shares were immediately sold in the
respective secondary public offerings.
In August 1998, Messrs. Zeman and Kass and Ms. Gerlits exercised options to
acquire 125,000, 26,625 and 13,313 shares, respectively, and subsequently sold
the shares in open market transactions, pursuant to a Registration Statement
Form S-3 filed by the Company on July 28, 1998.
On February 5, 1999, Ms. Gerlits terminated her employment with the Company
and, pursuant to the plan, her remaining 166,688 options became exercisable. On
February 22, 1999, Ms. Gerlits exercised 78,067 options, which were exercisable
prior to the date of her termination. On March 1, 1999, Ms. Gerlits exercised an
additional 50,006 options. Mr. Krasny has the right to purchase the 50,006
shares underlying Ms. Gerlits' March 1, 1999 exercise at the prevailing market
rate on the date of his exercise, less costs and expenses attendant to the sale
of the stock.
INCENTIVE STOCK OPTION PLANS
The Company has established the CDW Incentive Stock Option Plan, the CDW
1996 Incentive Stock Option Plan, the CDW 1996 Officer and Manager Bonus Plan,
the CDW 1997 Officer and Manager Bonus Plan, the CDW 1998 Officer and Manager
Bonus Plan and certain non-statutory stock option agreements (hereafter
collectively referred to as the "Incentive Stock Option Plans"), as described
below, to advance the interests of the Company and shareholders by providing
Company employees with an additional incentive to continue their efforts on
behalf of the Company, as well as to attract to the Company people of experience
and ability. The Incentive Stock Option Plans are intended to comply with Rule
16b-3 of the Securities Exchange Act of 1934, as amended. In addition, the
Company is seeking approval and ratification of the CDW Officer and Manager
Plan, more fully described below in Proposal 3.
13
<PAGE> 18
CDW Incentive Stock Option Plan
The Company established the CDW Incentive Stock Option Plan effective as of
May 18, 1993. A maximum of 1,050,000 shares of Common Stock in the aggregate,
subject to adjustment, were authorized for the granting of stock options under
both the CDW Incentive Stock Option Plan and the Director Option Plan. See
"Director Compensation; CDW Director Stock Option Plan." In 1998, no options
were granted pursuant to the CDW Incentive Stock Option Plan, except those
granted under the CDW Director Option Plan discussed herein.
CDW 1996 Incentive Stock Option Plan
The Board of Directors of the Company established the CDW 1996 Incentive
Stock Option effective as of November 14, 1996. A maximum of 3,000,000 shares of
Common Stock in the aggregate, subject to adjustment, was authorized for the
granting of stock options to directors, officers, employees and consultants.
During 1998, 694,943 options were granted pursuant to the CDW 1996 Incentive
Stock Option Plan, of which 27,510 were granted to executive officers. The
exercise price of options granted represent the fair market value of the
Company's Common Stock on the dates of grant, which were are follows:
<TABLE>
<CAPTION>
DATE FEBRUARY 16, 1998 MAY 18, 1998 JUNE 1, 1998 JUNE 29, 1998 DECEMBER 31, 1998
- ---- ----------------- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Options granted 10,000 2,000 5,000 4,000 673,943
Exercise price $64.813 $48.250 $41.188 $48.938 $95.938
</TABLE>
It is expected that all officers, directors, other employees and
consultants of the Company or its subsidiaries will be eligible to participate
under the CDW Incentive Stock Option Plan and/or the CDW 1996 Incentive Stock
Option Plan as deemed appropriate by the Compensation and Stock Option
Committee. Participants will not pay any cash consideration to the Company to
receive the options. These stock option plans will be administered by the
Compensation and Stock Option Committee. The options will have exercise prices
at least equal to 100% of the fair market value of the Common Stock at the date
of grant. Options will expire no later than the twentieth anniversary of the
date of grant. An option holder will be able to exercise options from time to
time, subject to the vesting schedule applicable to the options. Options will
not vest prior to the third anniversary of the date of grant, except that
options will vest immediately upon the earlier of death or disability of a
participant. Upon termination for cause by the Company, all vested and unvested
options will be forfeited. Upon termination of employment with the Company,
other than for cause by the Company or upon death, disability or retirement, all
unvested options shall be forfeited and vested options shall be exercisable only
during the ninety (90) day period following termination of employment. Subject
to the above conditions, the exercise price, duration of the options and vesting
provisions will be set by the Compensation and Stock Option Committee in its
discretion.
<PAGE> 17
CDW 1998 Officer and Manager Bonus Plan
The Compensation and Stock Option Committee of the Company approved the CDW
1998 Officer and Manager Bonus Plan in February, 1999, pursuant to which a
portion of the 1998 annual bonus for certain executive officers and managers of
the Company would be paid by a grant of stock options with an exercise price of
$0.01 per share. The amount of the bonus due to each individual, which was
formula-based, and the market value of the Company's common stock as of December
31, 1998, were used to determine the number of options granted. There were
10,274 options granted pursuant to the CDW 1998 Officer and Manager Bonus Plan,
of which 6,974 were granted to executive officers. All options under the CDW
1998 Officer and Manager Bonus Plan vest on January 1, 2003.
14
<PAGE> 19
CDW Officer and Manager Plan
The Compensation and Stock Option Committee of the Company approved the CDW
Officer and Manager Plan in April, 1998, subject to shareholder approval.
Pursuant to this plan, a portion of the annual bonus for certain executive
officers and managers of the Company would be paid by a grant of stock options
with an exercise price which may be as low as $0.01 per share. The amount of the
bonus due to each individual, which would be formula-based, and the market value
of the Company's common stock as of December 31 of the year of the grant, will
determine the number of options granted. The specific recipients of these
options, and the exercise price, will be determined by the Compensation and
Stock Option Committee. The Company expects to award options under the CDW
Officer and Manager Plan in much the same way it awarded options under the CDW
1998 Officer and Manager Bonus Plan. In 1998, no options were granted pursuant
to the CDW Officer and Manager Plan. The Company is seeking the shareholders'
approval and ratification of this plan in this Proxy Statement (See Proposal 3
Proposal to Approve and Ratify the CDW Officer and Manager Plan).
Federal Tax Consequencies
The Incentive Stock Option Plans are neither subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended, nor are they
qualified plans under the Internal Revenue Code of 1986, as amended (the
"Code"). The granting of an option under the Incentive Stock Option Plans will
not result in any taxable income to the participant or deduction to the Company
at the time of grant. Under the CDW Incentive Stock Option Plan and the CDW 1996
Incentive Stock Option Plan, the holder of an option will recognize ordinary
income for federal income tax purposes at the time such participant exercises
the options and receives Common Stock. The amount of such taxable income will be
measured by the excess of the fair market value of the Common Stock at the time
of exercise over such option price and such excess will be treated for tax
purposes as compensation expense of the Company. Unlike the CDW Incentive Stock
Option Plan and the CDW 1996 Incentive Stock Option Plan, under the CDW 1998
Officer and Manager Bonus Plan and the CDW Officer and Manager Plan, the holder
of an option will recognize ordinary income for federal income tax purposes at
such time the option becomes exercisable. The amount of such taxable income will
be measured by the excess of the fair market value of the Common Stock at the
time the options become exercisable over such option price and such excess will
be treated for tax purposes as compensation expense of the Company.
MPK RESTRICTED STOCK PLAN
Effective upon the closing of the initial public offering, Mr. Krasny
transferred 668,604 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, 126,516 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.
15
<PAGE> 20
On January 31, 1997, the Company filed a Registration Statement on Form
S-3, which was declared effective on February 7, 1997, to modify the terms of
the MPK Restricted Stock Plan and 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. Pursuant to this modification, participants elected
accelerated vesting for an aggregate of 132,064 shares, which vested and were
sold in a secondary public offering on February 21, 1997, the acceleration date.
Participants who elected accelerated vesting were granted an aggregate of
132,064 options from the 1996 CDW Incentive Stock Option Plan. The newly granted
options have an exercise price of $59.00 per share and vest 25% per year
beginning January 1, 2001.
16
<PAGE> 21
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee (the "Compensation Committee")
is currently comprised of Mr. Levy and Ms. Collins. The Compensation Committee
met on January 21, 1998 and March 23, 1998 to review and approve bonus and stock
option allocations to officers and employees of the Company relative to their
performance in 1997 and to establish, as necessary, the 1998 base compensation
and performance-based compensation programs for executive officers. The
Compensation Committee met twice in February, 1999 to review and approve stock
option allocations to officers and employees of the Company relative to their
performance in 1998, review and approve bonus allocations to officers and
employees pursuant to the Employee Incentive Bonus Pool (as explained below),
ratify the CDW 1998 Officer and Manager Bonus Plan and to establish, as
necessary, the 1999 base compensation programs for executive officers.
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 (each an "Employment Agreement"). 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 an
Employee Incentive Bonus Pool ("the Bonus Pool") as established pursuant to
Article VIII of the Company's By-laws. Pursuant to the By-laws, the Bonus Pool
shall be 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. At the July 23, 1998 meeting, the Compensation Committee formally approved
the Bonus Pool at 15% of the increase in 1998 operating income over the prior
year. At the February 1, 1999 meeting, the Compensation Committee discussed the
Employment Agreements and confirmed the relevant cost of living increases in the
base salaries based upon the increase in the United States Consumer Price Index
for 1998. Additionally, the Compensation Committee reviewed the Company's 1998
financial performance for the purpose of determining allocations to be made
under the Bonus Pool.
As a result of the increase in the Company's income from operations in 1998
versus 1997, an aggregate of $3,318,128 was available for distribution pursuant
to the Bonus Pool. Additionally $229,301 of unallocated funds from the 1997
Bonus Pool was available for distribution. Of these amounts, the Committee
allocated $3,051,199 for distribution to Messrs. Krasny, Zeman and Kass and
$496,230 for distribution to a number of other Company officers and employees.
Of the $3,051,199, the Compensation Committee directed as follows, based upon
each person's perceived contribution to the Company's 1998 results:
<TABLE>
<CAPTION>
NAME BONUS POOL DISTRIBUTION
- ---------------------- -----------------------
<S> <C>
Michael P. Krasny $1,243,757
Gregory C. Zeman $1,050,614
Daniel B. Kass $756,828
</TABLE>
Included among the other Company officers and employees who received the
$496,230 were Mr. Harczak, who received $85,000 in recognition of his efforts on
behalf of the Company in connection with the development of the Company's
finance and accounting organization, Mr. Shanks, who received $85,000 in
recognition of his efforts in developing and maintaining the Company's
information systems and Web site and Mr. Kozak, who received $10,000 for his
efforts in developing and maintaining efficient inventory purchasing methods and
controls. The remaining $316,230 was distributed to other officers and employees
of the Company based upon the recommendation of Mr.Krasny and as approved by the
Compensation Committee.
17
<PAGE> 22
As of the date hereof, no Named Officers other than Messrs. Krasny, Zeman
and Kass are employed pursuant to employment agreements. The base compensation
for Named Officers not subject to employment agreements was established by Mr.
Krasny and Mr. Zeman at the time each of the respective officers assumed their
positions based upon their level of experience, past performance and expected
future performance. Each of the respective officers received a bonus out of the
CDW 1998 Officer and Manager Bonus Plan which was payable part in cash and part
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 1998 Officer and Manager Bonus Plan of 1,750, 1,728 and 1,728 shares,
respectively. Additionally, at the February 1, 1999 meeting the Compensation
Committee reviewed the base compensation of such officers and approved an
increase based upon the increase in the United States Consumer Price Index for
1998.
The 5,750 options granted to each of to Messrs. Kozak, Shanks and Harczak
in 1998, as reflected in the Option Grants table, were granted pursuant to the
CDW Incentive Stock Option Plan and were determined based on a formula for
executive officers of the Company that was reviewed and approved by the
Compensation Committee. No options were granted to the three Named Officers
subject to employment contracts.
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 five 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
Joseph Levy, Jr. Michelle L. Collins
18
<PAGE> 23
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 Nasdaq Composite Index and the Nasdaq Retail
Trade Index for the period commencing January 1, 1994 and ending December 31,
1998 where $100 was invested on January 1, 1994.
Historical stock price performance shown on the graph is not necessarily
indicative of the future price performance.
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CDW Computer Centers, Inc. $ 100 $ 244 $ 289 $ 635 $ 558 $ 1,028
Nasdaq Stock Market (US) $ 100 $ 98 $ 138 $ 170 $ 209 $ 293
Nasdaq Retail $ 100 $ 91 $ 100 $ 120 $ 141 $ 170
</TABLE>
19
<PAGE> 24
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
1999 year. PricewaterhouseCoopers LLP has audited the Company's financial
statements since March 31, 1993. 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 1999
Annual Meeting of Shareholders shall be subject to the ratification by the
shareholders at that meeting.
20
<PAGE> 25
PROPOSAL 3
PROPOSAL TO APPROVE AND RATIFY THE CDW OFFICER
AND MANAGER PLAN
DESCRIPTION OF THE CDW OFFICER AND MANAGER PLAN
General. On April 21, 1998, our Board of Directors approved a form of
option plan called the CDW Officer and Manager Plan (the "Plan"). However,
because we would like to reserve 200,000 shares under the Plan, the Nasdaq Stock
Market rules require that we get our shareholders' approval of the Plan.
Therefore, we are presenting the Plan to you, our shareholders, for your
approval and ratification. There are presently no outstanding options under the
Plan. A copy of the Plan, as amended, is attached to this Proxy Statement as
Exhibit A.
The purpose of the Plan is to provide a means for us to award performance
bonuses to supervisory personnel in a form other than cash. We prefer options
for several reasons. First, we believe that we can motivate our employees to
increase the value of our stock to benefit of all of our shareholders because as
the value of our stock increases, the value of the Plan options will also
increase. Second, by making the options exercisable at some point in the future,
we believe we can retain key employees for a period of time (maybe even several
years) because they may fear losing these options if they leave us. Finally, we
believe that by offering creative compensation packages such as the Plan
options, we can attract and retain talented people.
The Plan is almost identical to the two existing company-wide incentive
stock option plans which the Company has used for several years. Those two plans
are called the CDW Incentive Stock Option Plan and the CDW 1996 Incentive Stock
Option Plan. The two major differences between this Plan and those two other
incentive option plans is that the exercise price for options under this Plan
may be less than the fair market value of our common stock on the date options
are granted under this Plan. The second major difference is that this Plan is
only available for our management employees. The other two Plans require that
the exercise price of every option we grant be the fair market value of our
Common Stock on the date of the grant and are available for all of our employees
and directors. Aside from these two major differences, the Plan effectively
mirrors the terms and conditions of our two other incentive stock option plans.
It is important for you to understand the terms of the Plan so that you can
make an informed decision on whether or not to approve it. For this reason, we
have summarized the material terms of the Plan below.
PLEASE NOTE THAT THE FOLLOWING IS ONLY A SUMMARY OF THE PLAN. A COPY OF THE
FULL TEXT OF THE PLAN, AS AMENDED, IS ATTACHED AS EXHIBIT A. PLEASE READ THE
FULL PLAN IN ADDITION TO THIS SUMMARY BECAUSE WE DID NOT ATTEMPT TO SUMMARIZE
EVERY TERM.
Shares Reserved Under the Plan. The Plan presently provides that we may not
issue more than 200,000 shares of our common stock for options granted under the
Plan. We may adjust this number in the event of a change in our capital
structure like a stock split or stock dividend. The market value of the 200,000
shares of common stock reserved under the Plan is $13,925,000, based on the
closing price of our common stock ($69.625) as reported by the Nasdaq Stock
Market on February 28, 1999.
Termination of the Plan. The Plan expires on May 18, 2009, and no options
will be granted after that date.
21
<PAGE> 26
Administration of the Plan. Our Compensation and Stock Option Committee
will administer the Plan. As mentioned elsewhere in this Proxy Statement, the
committee presently consists of two members of our Board of Directors, Mr.
Joseph Levy and Ms. Michelle Collins. Neither Mr. Levy nor Ms. Collins are
employees of the Company. If Mr. Levy or Ms. Collins resign from their positions
on the committee we would have to replace them with another director who is not
also one of our employees. We will do this to comply with certain rules
established by the Securities and Exchange Commission.
The committee will determine which employees will receive options, when the
options will be granted, the exercise price for the options, the number of
options to be granted to each employee, the date the options first become
exercisable and all other similar decisions. The committee will formalize all of
these decisions in an option agreement for all options granted under the Plan.
The committee may also interpret the Plan, execute, amend and rescind
regulations relating to the Plan, modify, extend, or renew any outstanding
option under the Plan, or accept outstanding options for the granting of new
options, all in accordance with the best interests of the Company and in
accordance with the Plan. The committee will not amend or modify the Plan or any
option agreements if it would impair any rights or obligations of any options
previously granted under the Plan.
Our Board of Directors may at any time terminate, suspend or modify the
Plan, except that the Board will not, without your authorization as the
Company's shareholders, make any change (other than for adjustments in
capitalization as provided in the Plan like a stock split or similar adjustment)
which would increase the total amount of common stock which may be awarded under
the Plan, change the class of individuals eligible to participate in the Plan,
withdraw the administration of the Plan from the committee, or extend the
duration of the Plan.
Eligible Persons. Management employees, as designated by the Chairman and
approved by the Compensation and Stock Option Committee on an annual basis, will
be eligible to receive options under the Plan. Although we have not made any
option grants under the Plan, we did grant a total of 10,274 bonus options to
several key employees in February 1999 relating to their performance in 1998,
pursuant to a similar plan. The Compensation and Stock Option Committee approved
those options under the CDW 1998 Officer and Manager Bonus Plan, which we
described previously in this Proxy Statement. We expect this plan to be used
similarly to that plan as well as the CDW 1997 and 1996 Officer and Manager
Bonus Plans.
Option Price. The exercise price of each option will be determined by the
committee on the date the option is granted. It is important to note that unlike
our other incentive stock option plans, the committee may grant an option with
an exercise price as low as one cent ($.01) per share because the options are in
lieu of a cash bonus.
Exercise of Options. The committee will determine when options granted
under the Plan will become exercisable. Options granted under the Plan may be
exercisable in one lump sum on some specified date or may be exercisable in
installments. However, the Plan expressly provides that no option will be
exercisable after the earlier of (i) one (1) year from disability or death of
the option holder or (ii) twenty (20) years from the date an option is granted.
If an option recipient dies or becomes disabled during his or her employment,
his or her successor will be entitled to exercise the option in full.
No option holder will be able to transfer any option except in his or her
will or by operation of the laws of descent and distribution. Additionally, with
certain exceptions in the event of death, disability or retirement of an option
holder, an option may be exercised by the option holder only during his or her
employment or within three months of the date he or she leave the Company.
Upon exercise of an option, the option holders must make payment in full of
the exercise price. The exercise price may be payable in cash or cash
equivalents unless the committee or our Board of Directors determines otherwise.
22
<PAGE> 27
Termination of Options. If any option holder ceases to be employed by us
for any reason other than death, disability, retirement, or pursuant to a change
in control, all of that option holder's rights under the option and the Plan
shall terminate after three months without notice. For the purpose of the Plan,
a change of control is defined to include either a sale of substantially all of
our assets, or a merger or consolidation pursuant to which we are not the
surviving company.
Upon the occurrence of any change in control, all options granted under the
Plan will convert into options on the common stock of the company which acquires
us. We may, however, determine to cancel all unexercised options under the Plan
as of the effective date of any change of control. In such case, we will give
notice to the holders of options of our intention to cancel the options and we
will permit the exercise of all options outstanding under the Plan during the
thirty (30) day period preceding the change of control transaction.
Upon the death or disability of an option holder, all of that person's
options will remain exercisable for a period of one (1) year from such death or
disability, but not beyond the expiration date of the options. If their
employment is terminated due to death or disability, all of his or her options
will become fully exercisable.
Upon an option holder's retirement, those options will continue to survive
and become exercisable in accordance with their original schedule, provided that
the option holder is over 62 years old and has been continuously employed by the
Company for at least ten years. However, if an option holder retires and goes
into competition with us, not only will that person's options expire, but we may
be able to recover any profits that the employee received from the options as
damages.
If any options granted under the Plan expire or terminate without being
exercised, the shares attached to those options will be available for other
grants under the Plan.
Adjustment of Shares. In the event there is any change in our common stock
by reason of any consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares or other similar change in our
capital structure, the number and kind of shares or interests subject to an
option and the exercise price will be appropriately adjusted by the committee in
accordance with the Plan.
Corporate Accounting Treatment. At the time options are exercised, our
common stock account will be increased by the par value ($.01 per share) of the
shares sold, and the remaining portion of the proceeds, if any, will be credited
to our capital in excess of the par value.
Federal Income Tax Consequences. All options under the Plan will be
non-qualified stock options for federal income tax purposes. All employees
receiving options will not realize taxable income upon the granting of an option
under the Plan, nor would we be subject to a deduction upon such grant. However,
at the time the option becomes exercisable, the employee will realize
compensation income in the amount of the excess of the fair market value of the
common stock on the day of exercise over the option exercise price, and we will
receive a corresponding deduction. The tax basis of any common stock received
will be the fair market value of such shares on the date the option becomes
exercisable.
When the option becomes exercisable, we will be entitled to require that
the employee tender to us an amount sufficient to satisfy all federal, state and
local withholding taxes relating thereto.
Should an employee exercise an option by exchanging other shares of our
common stock owned by him or her instead of, or in addition to, payment of the
option price in cash, or for withholding taxes, no gain or loss will be
recognized with respect to the exchange of any such "old stock", and the "new
stock" acquired upon exercise of the option will not be subject to tax, as
described above, until the shares are sold.
23
<PAGE> 28
PROPOSED ACTION
It is proposed that the shareholders approve and ratify the adoption of the
Plan. Approval and ratification of the Plan is being requested to comply with
the requirements of the Nasdaq Stock Market, the exchange upon which our stock
is traded. The Nasdaq Stock Market requires shareholder approval for any company
option plan which proposes to grant options on 25,000 or more shares and which
is not a "broad based" plan. Because we intend to grant options under the Plan
only to management personnel, we believe it is prudent to seek your approval and
ratification of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL
AND RATIFICATION OF THE CDW OFFICER AND MANAGER PLAN.
24
<PAGE> 29
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,
Michael P. Krasny
Chairman, Chief Executive Officer and
Secretary
Vernon Hills, Illinois
March 26, 1999
25
<PAGE> 30
EXHIBIT A
CDW OFFICER AND MANAGER PLAN
1. PURPOSE OF THE PLAN
(a) The purpose of the CDW Officer and Manager Plan (the "Plan") as
hereinafter set forth, is to enable CDW Computer Centers, Inc., an Illinois
corporation (the "Company"), to attract, retain and reward certain officers and
other management personnel by offering them an opportunity to have a greater
proprietary interest in and closer identity with the Company and with its
financial success and thereby encourage such individuals to remain in the employ
or service of the Company or to attract to the Company people of exceptional
experience and ability.
(b) Pursuant to the Plan, awards will be granted as stock options
("Options"). Options granted under the Plan are intended to be non-statutory
stock options for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). The provisions of this Plan and of each Option granted hereunder shall
be interpreted in a manner consistent with the Code and with all valid
regulations issued thereunder. Proceeds of cash or property received by the
Company from the sale of common stock pursuant to Options granted under the Plan
will be used for general corporate purposes.
26
<PAGE> 31
(c) It is intended that this Plan shall comply in all material respects
with the provisions of Rule 16b-3 promulgated under Section 16 of the Exchange
Act. Any provision herein which would have the effect of causing the Plan to
fail to comply with Rule 16b-3 shall be invalid but shall not render other
provisions of the Plan invalid. This document shall constitute a written plan
which shall include the means or basis for determining eligibility to
participate as it relates to directors, officers, employees and consultants, and
the price at which the securities may be offered and the amount of securities to
be awarded, or the method by which the foregoing will be determined.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be operated and administered under the direction of
the Compensation and Stock option Committee of the Company (the "Committee"),
including the Option grant, Option surrender and Option acceleration provisions.
(b) The Committee shall administer the Plan with respect to all
individuals eligible to receive options under the Plan. Options shall be granted
only to purchase common stock of the Company ($.01 par value) ("Shares"). The
Committee shall be constituted such that as long as the Company has securities
registered under Section 12 of the Exchange Act, the Committee shall be made up
of Non-Employee Directors so that the Plan in all applicable respects will
qualify transactions related to the Plan for the exemptions from Section 16(b)
of the Exchange Act provided by Rule 16b-3, to the extent exemptions thereunder
may be available. For purposes of this section, the term "Non-Employee
Directors" shall have the meaning ascribed to it in Rule 16b-3, as it may be
amended.
(c) The Committee has been delegated responsibility for the
administration of the Plan and shall have full power and authority (subject to
the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for the proper administration of the Plan and to make such
determinations under, or issue such interpretations of, the Plan and any
outstanding Option as it may deem necessary or advisable. Decisions of the
Committee shall be final and binding on all parties who have an interest in the
Plan or any outstanding Option.
3. ELIGIBILITY
(a) Options may be granted under this Plan to certain officers and
management personnel of the Company (collectively "Employees"). The Committee
shall determine, within the limits of the express provisions of the Plan, those
Employees to whom, and the time or times at which, Options shall be granted.
(b) The Committee shall also determine, subject to the terms and
conditions hereof, the number of Shares to be subject to each Option, the
duration of each Option, the exercise price ("Option Price") under each Option
(which may be any exercise price as determined by the Committee), the time or
times in which (during the term of the Option) all or portions of each Option
may be exercised, and whether cash, Shares, or other property may be accepted in
full or partial payment upon exercise of an Option. In making such
determinations, the Committee may take into account the nature of the services
rendered by the Employee, his or her present and potential contributions to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant.
4. COMMON STOCK
(a) Options may be granted for a number of Shares not to exceed, in the
aggregate, 200,000 Shares, which number shall be subject to adjustment under
Section 6 hereof. Such Shares may be either authorized but unissued shares or
reacquired Shares. If and to the extent that Options granted under the Plan are
exercised, the Shares covered by such exercise shall be unavailable for grants
of new Options under the Plan.
27
<PAGE> 32
(b) In the event that any Option granted under the Plan expires
unexercised, or is surrendered by a participant for cancellation, or is
terminated or ceases to be exercisable for any other reason without having been
fully exercised, prior to the end of the period during which Options may be
granted under the Plan, the Shares theretofore subject to such Option, or to the
unexercised portion thereof, shall again become available for new Options to be
granted under the Plan to any eligible Employee (including the holder of such
former Option) at an Option Price determined in accordance with Section 5(a)
hereof, which price may then be greater, or less than the Option Price of such
former Option.
5. REQUIRED TERMS AND CONDITIONS OF OPTIONS
Each Option granted hereunder shall be subject to the following additional
terms and conditions:
(a) Option Price. The Option Price of each Option to purchase
Shares shall be any such price as determined in the discretion of the
Committee and shall be payable in full in cash or cash equivalents
unless otherwise determined by the Board or the Committee.
(b) Maximum Term. All Options issued under the Plan shall be
for such period as the Committee shall determine, but for not more than
twenty (20) years from the date the Option is first granted.
(c) Installment Exercise Limitations. Each Option shall become
exercisable in such number of cumulative annual installments as the
Committee shall establish.
(d) Modification, Extension or Renewal. Except as otherwise
provided and subject to the terms and conditions of the Plan and Rule
16b-3, the Committee may (i) modify, extend or renew outstanding
Options granted under the Plan and (ii) accept the surrender of Options
outstanding and authorize the granting of new Options in substitution
thereof.
(e) Investment Purpose. If necessary or advisable to comply
with applicable federal or state securities laws, any Option granted
under the Plan may be granted on the condition that the optionee agree
that the Shares purchased thereunder are for investment purposes only
and not for resale or distribution and that such Shares shall be
disposed of only in accordance with such laws. As a condition to
issuance of any Shares purchased upon the exercise of any Option
granted pursuant to the Plan, the optionee, his or her executor,
administrator, heir or legatee (as the case may be) receiving such
Shares may be required to deliver to the Company an instrument, in form
and substance satisfactory to the Company and its counsel, implementing
such agreement. Any such condition may be eliminated by the Committee
if the Committee determines it is no longer necessary or advisable.
28
<PAGE> 33
(f) Termination of Option.
(i) In the event that an Employee shall cease to be
employed by the Company for any reason other than
death or Disability (as defined below) or for cause
(as defined below), the Employee or personal
representative shall have the right, subject to the
provisions of Section 5(b) and 6 hereof, to
exercise his or her Options at any time within three
(3) months after such cessation of employment but
only as to such number of Shares as to which his or
her Options were vested and exercisable at the date
of such cessation of employment. The Employee
shall forfeit all unvested Options. Notwithstanding
the provisions of the preceding sentence:
(A) if cessation of employment occurs by reason
of the Disability of the Employee (as
hereinafter defined), such three (3) month
period shall be extended to one (1) year and
all Options shall automatically vest
immediately;
(B) if cessation of employment occurs by reason
of death while in the employ of the Company
or within three (3) months after cessation
of such employment (other than by reason of
termination by the Company for cause), his
or her estate, personal representative or
the person that acquires his or her Options
by bequest or inheritance may exercise the
Options at any time within one (1) year from
the date of death and all Options shall
automatically vest immediately; and
(C) if employment is terminated at the request
of the Company for cause, the Employee's
right to exercise his or her Options shall
terminate at the time notice of termination
of employment is given by the Company to
such Employee. For purposes of this
provision, cause shall include: (I) the
commission of a criminal act, fraud, gross
negligence or willful misconduct against,
or in derogation of the 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 the Board or the
Committee, in its sole discretion, may
deem to be sufficiently injurious to the
interests of the Company to constitute cause
for termination.
29
<PAGE> 34
The time of cessation of employment and whether an
authorized leave of absence or absence on military or
government service shall constitute cessation of
employment, for the purpose of the Plan, shall be
determined by the Board.
(ii) "Disability" for purposes of this Agreement shall be
defined as follows:
(A) If an Employee becomes disabled during the
term of this Agreement by reason of illness,
accident or any other cause, the Company
shall have the right to appoint a physician
or physicians to (I) examine the Employee at
reasonable intervals from time to time in
connection with such disability and (II)
deliver to the Company: (1) a certificate
("Initial Certificate") certifying whether
or not such disability occurred and, if so,
the date on which it commenced ("Onset
Date"); and (2) if the condition or
disability continues uninterrupted for a one
(1) year period beginning on the Onset Date
and ending on the one (1) year anniversary
thereof, a certificate ("Final Certificate")
certifying that fact. The Employee shall
cooperate fully with the physician(s) as set
forth in either the Initial Certificate or
the Final Certificate or both and the
Employee shall have the right to appoint
another physician to examine the Employee
and determine the same matters. If the
physicians appointed by the Company and by
the Employee do not agree, such physicians
shall jointly appoint a third physician to
examine the Employee and determine the same
matters. The determination of the third
physician shall be binding on the Company
and the Employee; and
(B) In determining whether the Employee is
disabled for purposes of the Initial
Certificate, the standard to be applied by
any physician appointed in accordance with
this Paragraph shall be, at the Company's
election, either of the following: the
Employee will be deemed disabled if on the
applicable Onset Date (I) he or she is
unable to render to the Company services of
substantially the kind and nature, and to
substantially the extent, being rendered by
him or her pursuant to this Agreement
during the fiscal quarter next preceding
such Onset Date, or (II) his or her medical
condition satisfies such other standard of
total disability as is to be applied under
any policy of insurance, the proceeds of
which would be payable to fund a claim or
claims of disability with respect to the
Employee. If more than one such policy is
in effect at the time of such physician's
determination, the Company shall designate
which policy standard shall apply. The
standard used for purposes of the Initial
Certificate shall also be used for purposes
of the Final Certificate.
30
<PAGE> 35
(iii) The Committee may adopt such additional restrictions
and limitations on the exercisability of Options as
it deems advisable, including, without limitation,
disgorgement provisions in the event an Employee goes
to work for a competitor of the Company.
(g) Method of Exercise. Options may be exercised by giving
ninety (90) days, or such shorter period as the Committee may
establish, written notice to the Treasurer (or its designee) of the
Company, stating the number of Shares with respect to which the Option
is being exercised and tendering payment therefor, if any. Payment for
the Shares, whether in cash, other Shares or other property, shall be
made in full at the time that an Option, or any part thereof, is
exercised.
(h) Withholding of Taxes Due Upon Exercise. An Employee, or
upon the Employee's death, his or her estate, personal representative
or the person that acquires his or her Option by bequest or inheritance
("Beneficiary"), may satisfy, in whole or in part, the obligation, if
any, to pay the Company an amount required to be withheld under the
applicable federal, state and local income tax laws in connection with
the exercise of an Option under the Plan or if larger, the actual tax
which could be incurred in connection with the exercise of an Option
under the Plan by either: (A) having the Company withhold from the
Shares to be acquired upon the exercise of the Option; or (B)
delivering to the Company either previously acquired Shares or Shares
acquired upon the exercise of the Option which the Employee or
Beneficiary unconditionally obligated himself to deliver to the
Company. The Shares withheld or delivered will be valued at their fair
market value as of the date the amount of tax to be withheld is
determined ("Tax Date"). The fair market value of Shares will be
determined in accordance with procedures established by the Committee.
Any amounts required to be withheld in excess of the values of whole
Shares withheld or delivered will be paid in cash or withheld from
other compensation paid by the Company.
(i) Stockholder Rights. An Option holder shall have no
stockholder rights with respect to any Shares covered by the Option
until such Option holder has exercised the Option, paid the Option
Price and been issued a certificate for the purchased Shares.
6. ADJUSTMENTS
(a) The aggregate number of Shares with respect to which Options may be
granted hereunder, the number of Shares subject to each outstanding Option, and
the Option Price per Share for each such Option, may all be appropriately
adjusted, as the Board or the Committee may determine, for any increase or
decrease in the number of Shares issued resulting from a subdivision or
consolidation of Shares either through reorganization, payment of a Share
dividend or other increase or decrease in the number of such Shares outstanding
effected without receipt of consideration by the Company; provided, however,
that no adjustment in the number of Shares with respect to which Options may be
granted under the Plan or in the number of Shares subject to outstanding Options
shall be made except in the event, and then only to the extent, that such
adjustment, together with all respective prior adjustments which were not made
as a result of this provision, involve a net change of more than ten percent
(10%) (i) from the number of Shares with respect to which Options may be granted
under the Plan, or (ii) with respect to the each outstanding Option, from the
respective number of Shares subject thereto on the date of grant thereof.
31
<PAGE> 36
(b) Subject to any required action by the stockholders, if the Company
shall be a party to a transaction involving a sale of substantially all its
assets, a merger or a consolidation, any Option granted hereunder shall pertain
and apply to the securities to which a holder of the number of Shares subject to
the Option would have been entitled if he or she actually owned the Shares
subject to the Option immediately prior to the time any such transaction became
effective; provided, however, that all unexercised Options under the Plan may be
canceled by the Company as of the effective date of any such transaction, by
giving notice to the holders thereof of its intention to do so and by permitting
the exercise, during the thirty (30) day period preceding the effective date of
such transaction, of all partly or wholly unexercised Options in full (without
regard to installment exercise limitations).
(c) In the case of dissolution of the Company, every Option outstanding
hereunder shall terminate; provided, however, that each Option holder shall have
thirty (30) days prior written notice of such event, during which time he or she
shall have a right to exercise his or her partly or wholly unexercised Options
(without regard to installment exercise limitations).
(d) On the basis of information known to the Company, the Committee
shall make all determinations under this Section 6, including whether a
transaction involves a sale of substantially all the Company's assets; and all
such determinations shall be conclusive and binding.
7. OPTION AGREEMENTS
Each Employee receiving an Option shall agree to such terms and
conditions in connection with the Option, including restrictions on the
disposition of the shares received or to be received, and shall agree to such
other terms and conditions, including restrictions on competition with the
Company, as the Committee may deem appropriate. Option Agreements need not be
identical. The certificates evidencing the Shares awarded under the Plan or
acquired upon exercise of an Option may bear a legend referring to the terms and
conditions contained in the respective Option Agreement and the Plan, and the
Company may place a stop transfer order with its transfer agent against the
transfer of such shares.
32
<PAGE> 37
8. LEGAL AND OTHER REQUIREMENTS
(a) The obligation of the Company to deliver Shares under Options
granted under the Plan shall be subject to all applicable laws, regulations,
rules and approvals, including, but not by way of limitation, Rule 16b-3 under
the Exchange Act, if deemed necessary or appropriate by the Committee, of the
Shares reserved for issuance upon exercise of Options under the Plan. No
adjustment other than pursuant to Section 6 hereof shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is delivered. The Committee may condition any delivery of Shares
pursuant to an Option under the Plan upon payment of any consideration the
Committee determines to be required in order to ensure compliance with
applicable state law. Any payment required under the preceding sentence must be
made no later than sixty (60) days after the exercise of the Option. No other
consideration shall be required with respect to an award of Shares under the
Plan.
(b) The Company shall comply with the obligations imposed on the
Company under the applicable tax withholding laws, if any, with respect to the
Options granted hereunder, the Shares transferred upon exercise of such Options,
the disposition of any such Shares thereafter and the lapse of any restriction
imposed upon any such Shares, and shall be entitled to do any act or thing to
effectuate any such required compliance, including, without limitation,
withholding from amounts payable by the Company to an Employee and including
making demand on an Employee for the amounts required to be withheld.
9. NON-TRANSFERABILITY
During the lifetime of any Employee, any Option granted to him or her shall
be exercisable only by him or her or by his or her guardian or legal
representative. No Option shall be assignable or transferable, except by will or
by the laws of descent and distribution. The granting of an Option shall impose
no obligation upon the Employee to exercise such Option or right.
10. NO CONTRACT OF EMPLOYMENT
Neither the adoption of this Plan, nor the grant of any Option shall be
deemed to obligate the Company to continue the employment of any participant for
any particular period, nor shall the granting of an Option constitute a request
or consent to postpone the retirement date of any Employee.
33
<PAGE> 38
11. INDEMNIFICATION OF THE COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorney's fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal thereof), to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for gross negligence or gross
misconduct in the performance of his or her duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding a Committee
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
12. TERMINATION AND AMENDMENT OF PLAN
No Option shall be granted under the Plan more than twenty (20) years after
the date the Plan was adopted by the Board. The Committee, without further
action on the part of the stockholders, may from time to time alter, amend or
suspend the Plan or any Option granted hereunder or may at any time terminate
the Plan, including, without limitation, the ability to (i) (except as provided
in Section 6 hereof) change the total number of Shares available for Option
under the Plan, (ii) extend the duration of the Plan, (iii) increase the maximum
term of Options, (iv) decrease the minimum Option Price or otherwise materially
increase the benefits accruing to participants under the Plan, or (v) materially
modify the eligibility requirements of the Plan; and provided further that no
such action shall materially and adversely affect any outstanding Options.
13. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board.
APPROVED BY BOARD OF DIRECTORS - April 21, 1998
34
<PAGE> 39
SIGNATURES
IN WITNESS WHEREOF, the undersigned have executed this CDW Officer and
Manager Bonus Plan as of this 21st day of April, 1998, in Vernon Hills, State of
Illinois.
SIGNATURE TITLE
--------- -----
/s/ Michael P. Krasny Chairman and Chief Executive
Michael P. Krasny Officer
/s/ Gregory C. Zeman President and Director
Gregory C. Zeman
/s/ Daniel B. Kass Vice President - Sales
Daniel B. Kass and Director
/s/ Michelle L. Collins Director
Michelle L. Collins
/s/ Joseph Levy, Jr. Director
Joseph Levy, Jr.
35
<PAGE> 40
FIRST AMENDMENT
TO
CDW OFFICER AND MANAGER PLAN
This First Amendment (the "Amendment") to the CDW Officer and Management
Plan is made as of this 17th day of March, 1999 with effect from July 23, 1998.
W I T N E S S E T H:
WHEREAS, on April 21, 1998, the Board of Directors of CDW Computer Centers,
Inc., an Illinois corporation (the "Company"), adopted the CDW Officer and
Manager Plan (the "Plan"), pursuant to which the Company is authorized to grant
awards, in the form of stock options ("Options"), to certain officers and other
management personnel of the Company designated by the CDW Compensation and Stock
Option Committee (the "Committee");
WHEREAS, on July 23, 1998, the Committee deemed it to be in the best
interests of the Company that the Plan be amended as reflected herein; and
WHEREAS, the Committee is vested with the ability to amend the Plan
pursuant to Section 12 thereof.
NOW, THEREFORE, in accordance with the powers vested in the Committee under
the Plan, the Plan shall be amended as follows:
1. Section 5(f) of the Plan shall be restated in its entirety as follows:
(f) Termination of Option.
(i) In the event that an Employee shall cease to be
employed by the Company for any reason other than
death, Disability (as defined below), Retirement (as
defined below) or for cause (as defined below), the
Employee or personal representative shall have the
right, subject to the provisions of Section 5(b) and
6 hereof, to exercise his or her Options at any time
within three (3) months after such cessation of
employment but only as to such number of Shares as to
which his or her Options were vested and exercisable
at the date of such cessation of employment. The
Employee shall forfeit all unvested Options.
Notwithstanding the provisions of the preceding
sentence:
(A) if cessation of employment occurs by reason
of the Disability of the Employee (as
hereinafter defined), such three (3) month
period shall be extended to one (1) year and
all Options shall automatically vest
immediately;
36
<PAGE> 41
(B) if cessation of employment occurs by reason
of death of the Employee while in the employ
of the Company or within three (3) months
after cessation of such employment (other
than by reason of termination by the Company
for cause), his or her estate, personal
representative or the person that acquires
his or her Options by bequest or inheritance
may exercise the Options at any time within
one (1) year from the date of death and all
Options shall automatically vest
immediately;
(C) if cessation of employment occurs by reason
of the Retirement (as hereinafter defined)
of the Employee, the Options granted to such
Employee shall continue to vest in
accordance with their original vesting
schedule and Employee shall be entitled to
exercise said Options as if the Employee was
still employed by the Company; and
(D) if employment is terminated at the request
of the Company for cause (as hereinafter
defined), the Employee's right to exercise
his or her Options shall terminate at the
time notice of termination of employment is
given by the Company to such Employee. For
purposes of this provision, cause shall
include: (I) the commission of a criminal
act, fraud, gross negligence or willful
misconduct against, or in derogation of the
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 the
Board or the Committee, in its sole
discretion, may deem to be sufficiently
injurious to the interests of the Company to
constitute cause for termination.
The time of cessation of employment and whether an
authorized leave of absence or absence on military or
government service shall constitute cessation of
employment, for the purpose of the Plan, shall be
determined by the Board.
(ii) "Disability" for purposes of this Plan shall be
defined as follows:
37
<PAGE> 42
(A) If an Employee becomes disabled during the
term of this Plan by reason of illness,
accident or any other cause, the Company
shall have the right to appoint a physician
or physicians to (I) examine the Employee at
reasonable intervals from time to time in
connection with such disability and (II)
deliver to the Company: (1) a certificate
("Initial Certificate") certifying whether
or not such disability occurred and, if so,
the date on which it commenced ("Onset
Date"); and (2) if the condition or
disability continues uninterrupted for a one
(1) year period beginning on the anniversary
thereof, a certificate ("Final Certificate")
certifying that fact. The Employee shall
cooperate fully with the physician(s) as
set forth in either the Initial Certificate
or the Final Certificate or both and the
Employee shall have the right to appoint
another physician to examine the Employee
and determine the same matters. If the
physicians appointed by the Company and by
the Employee do not agree, such physicians
shall jointly appoint a third physician to
examine the Employee and determine the same
matters. The determination of the third
physician shall be binding on the Company
and the Employee; and
(B) In determining whether the Employee is
disabled for purposes of the Initial
Certificate, the standard to be applied by
any physician appointed in accordance with
this Paragraph shall be, at the Company's
election, either of the following: the
Employee will be deemed disabled if on the
applicable Onset Date (I) he or she is
unable to render to the Company services
of substantially the kind and nature, and to
substantially the extent, being rendered by
him or her pursuant to this Plan during the
fiscal quarter next preceding such Onset
Date, or (II) his or her medical condition
satisfies such other standard of total
disability as is to be applied under any
policy of insurance, the proceeds of which
would be payable to fund a claim or claims
of disability with respect to the Employee.
If more than one such policy is in effect at
the time of such physician's determination,
the Company shall designate which policy
standard shall apply. The standard used for
purposes of the Initial Certificate shall
also be used for purposes of the Final
Certificate.
(iii) "Retirement" for purposes of this Plan shall be
defined as the voluntary termination of employment by
the Employee at any time after attaining age 62 and
provided that said Employee has been continuously
employed by the Company for a period of not less than
ten (10) years at the time of the Employee's
voluntary termination."
38
<PAGE> 43
(iv) The Committee may adopt such additional restrictions
and limitations on the exercisability of Options as
it deems advisable, including, without limitation,
disgorgement provisions in the event an Employee goes
to work for a competitor of the Company.
2. This Amendment shall be incorporated into and made a part of the Plan.
3. All terms and provisions of the Plan, except as expressly modified
herein, shall continue in full force and effect, and the parties hereby confirm
each and every one of their obligations under the Plan as amended herein.
4. This Amendment shall be governed by and construed in accordance with the
internal laws of the State of Illinois.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment to
the CDW Officer and Manager Plan as of this 17th day of March, 1999, in Vernon
Hills, State of Illinois.
SIGNATURE TITLE
--------- -----
/s/ Michelle L. Collins Director and Member of Compensation
Michelle L. Collins and Stock Option Committee
/s/ Joseph Levy, Jr. Director and Member of Compensation
Joseph Levy, Jr. and Stock Option Committee
39
