CDW 2012 Annual Report Download - page 120

Table of Contents
The SMIP payout curve had a payout range from 0% to 200% of each participant's target SMIP award for performance between 91.7%
and 115% of the Adjusted EBITDA goal, with different levels of payout for increased or constant/decreased market share, and no payout if the
Company failed to achieve 2011 actual Adjusted EBITDA. The threshold, target and maximum payout opportunities under the SMIP payout
curve are set forth below:
In 2012, the Committee determined that the Company had achieved 98.1% of its Adjusted EBITDA performance goal and, after
assessing the market share results as described in footnote (2) above, determined that the Company's market share grew, resulting in a payout
percentage of 75% of each Named Executive Officer's bonus target. The table below sets forth the SMIP payouts to each of the Named
Executive Officers based upon 2012 performance:
Long
-Term Incentive Program
The Equity Sponsors believe that members of senior management should hold a personally significant interest in the equity of the
Company to align their interests and the interests of our stakeholders. As described below, the Equity Sponsors implemented their management
investment philosophy by requiring members of senior management to invest in the Company and by establishing a “profits-interest program.”
“Profits-interest programs” are common practice in portfolio companies of private equity firms and allow participants to share in increases in the
equity value of the Company. Consistent with practices among similarly situated private equity financed companies, we typically provide named
executive officers with an initial long-term incentive grant upon hire. This initial grant is generally expected to cover a multi-year period;
however, executives may be provided an additional long-term incentive grant upon promotion, to reward sustained performance, or to provide
for internal parity among similarly situated executives at the Company. To further support the Company's long-term objectives, we also provide
Restricted Debt Unit awards, which are a deferred compensation vehicle.
A Units
The Equity Sponsors' investment in the Company is held in the form of Class A Common Units of CDW Holdings (“A Units”). Mr.
Richards, Ms. Ziegler and each of our current Named Executive Officers who were with the Company at the time of the Acquisition were
required to invest in A Units of CDW Holdings. Because A Units represent investment of personal funds by the executives, they are not subject
to a vesting requirement.
B Unit Program
The Company granted Class B Common Units of CDW Holdings (“B Units”) to each of our current Named Executive Officers who
was with the Company at the time of the Acquisition and in connection with the hiring of Named Executive Officers following the Acquisition.
The Committee has the authority to grant B Units to new members of senior management and additional B Units to current members of senior
management. A Units and B Units each represent an equity interest in CDW Holdings; however, the B Unit grants have what is called a
“participation threshold” based on the value assigned to an A
107
Adjusted EBITDA
Performance Goal
Market Share Governor
(2)
Payout Opportunity
(1)
(% of attainment of
performance goal)
Grow (% of target
bonus)
Flat/Decline (%
of target bonus)
Maximum
115.0
%
200
%
180
%
Adjusted EBITDA Performance Goal
100.0
%
100
%
90
%
Minimum Performance Threshold
91.7
%
25
%
15
%
(1) Payouts were determined under a grid based on various performance achievement levels for Adjusted EBITDA and market share
changes.
(2) Market share changes were measured internally based on data from seven industry surveys and reports and, based on the
availability of data, financial information regarding four publicly traded resellers and four publicly traded technology distributors
and/or manufacturers.
Named Executive Officer SMIP Bonus Target
Calculated SMIP Payout
Thomas E. Richards
$
1,162,500
$
871,875
John A. Edwardson
$
812,500
$
609,375
Ann E. Ziegler
$
700,000
$
525,000
Neal J. Campbell
$
275,000
$
206,250
Christina M. Corley
$
275,000
$
206,250