CDW 2012 Annual Report Download - page 84

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
compensation arrangements for the years ended December 31, 2012, 2011 and 2010 , respectively. No portion of equity-based
compensation was capitalized. Equity-based compensation cost included incremental expense of $6.6 million and $3.3 million
related to
the Class B Common Unit modification for Mr. Edwardson for the years ended December 31, 2012 and 2011, respectively. During the
year ended December 31, 2010, the Company recognized a $5.3 million reduction to equity-based compensation expense due to a
change in the cumulative forfeiture rate assumed with respect to the MPK Plan.
On March 10, 2010, in connection with the Company’s purchase of $28.5 million of the principal amount of its outstanding senior
subordinated debt as described in Note 7, the Company established the Restricted Debt Unit Plan (the “RDU Plan”), an unfunded
nonqualified deferred compensation plan. Participants in the RDU Plan were granted Restricted Debt Units (“RDUs”) that entitle the
participant to a proportionate share of payments under the RDU Plan, determined by dividing the number of RDUs held by the
participant by the total number of RDUs outstanding. The total number of RDUs that can be granted under the RDU Plan is 28,500 . At
December 31, 2012 , 26,174 RDUs were outstanding.
RDUs vest daily on a pro rata basis through December 31, 2014. Vesting ceases upon separation from service except in certain
conditions as set forth in the RDU Plan. All outstanding RDUs become vested immediately prior to a sale of the Company. Upon
completion of the vesting period, December 31, 2014, or earlier in the case of a sale of the Company, any unallocated RDUs will be
allocated to participants on a pro rata basis according to each participant’s total RDUs.
The total amount of compensation available to be paid under the RDU Plan is based on two components, a principal component and an
interest component. The principal component credits the RDU Plan with an amount equal to the $28.5 million face value of the
Company’s senior subordinated debt. Payment of the principal component of the RDU Plan will be made on October 12, 2017, unless
accelerated due to a sale of the Company. By December 31, 2014, amounts accrued under the RDU Plan are expected to equal the
present value of future principal payments, plus any unpaid accrued interest thereon. The interest component credits the RDU Plan with
amounts equal to the interest expense on $28.5 million principal of the senior subordinated debt from March 10, 2010 through
October 12, 2017. Payments totaling $5.6 million , $0.9 million , and $1.6 million were made to participants of the RDU Plan in
January, April and October of 2012, respectively. Payments under the RDU Plan may be impacted if certain significant events occur or
circumstances change that would impact the financial condition or structure of the Company.
Compensation expense of $8.4 million , $8.1 million , and $7.1 million related to the RDU Plan was recognized in the years ended
December 31, 2012, 2011 and 2010 , respectively. As of December 31, 2012 , total unrecognized compensation expense of
approximately $17.7 million related to the RDU Plan is expected to be recognized over the next 2.0 years.
At December 31, 2012 and 2011 , the Company had $15.5 million and $15.2 million of liabilities related to the RDU Plan recorded on
the consolidated balance sheets, respectively.
The Company has a profit sharing plan that includes a salary reduction feature established under the Internal Revenue Code Section 401
(k) covering substantially all coworkers. Company contributions to the profit sharing plan are made in cash and determined at the
discretion of the Board of Directors. For the years ended December 31, 2012, 2011 and 2010 , the amounts charged to expense for this
plan totaled $14.6 million , $15.3 million and $10.4 million , respectively.
The Company is party to various legal proceedings that arise in the ordinary course of its business, which include commercial,
intellectual property, employment, tort and other litigation matters. The Company is also subject to audit by federal, state and local
authorities, by various partners and large customers, including government agencies, relating to purchases and sales under various
contracts. In addition, the Company is subject to indemnification claims under various contracts. From time to time, certain customers
of the Company file voluntary petitions for reorganization or liquidation under the U.S. bankruptcy laws. In such cases, certain pre-
petition payments received by the Company could be considered preference items and subject to return to the bankruptcy administrator.
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12.
Deferred Compensation Plan
13.
Profit Sharing and 401(k) Plan
14.
Commitments and Contingencies