CDW 2015 Annual Report Download - page 87

Table of Contents
CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
performance period. The weighted-average grant-date fair value of the PSAs granted during the year ended December 31, 2015 was $37.79 per award. During the
year ended December 31, 2015 , no PSAs were forfeited or vested.
RestrictedStock
In connection with the IPO, CDW Holdings distributed all of its shares of the Company’s common stock to its existing members in accordance with their respective
membership interests. Common stock received by holders of Class B Common Units in connection with the distribution is subject to any vesting provisions
previously applicable to the holder’s Class B Common Units. Class B Common Unit holders received 3,798,508 shares of restricted stock with respect to Class B
Common Units that had not yet vested at the time of the distribution. As of January 1, 2015, there were 260,514 shares of restricted stock outstanding. For the year
ended December 31, 2015 , 165,697 shares of such restricted stock vested/settled and 2,789 shares were forfeited. As of December 31, 2015 , there were 92,028
shares of unvested stock outstanding. The aggregate fair value of restricted stock that vested during the years ended December 31, 2015, 2014 and 2013 was $2.8
million , $39.5 million and $20.4 million , respectively.
Equity Awards Granted by Seller of Kelway
The Company issued 1.6 million shares of CDW common stock as part of the consideration transferred to certain sellers for the acquisition of Kelway. One of the
sellers granted 0.6 million stock options to certain Kelway coworkers over his shares of CDW common stock received in this transaction. The options are not
dilutive for purposes of calculating diluted weighted-average shares outstanding as the underlying shares were issued as part of the consideration transferred and are
included within basic weighted-average shares outstanding since the acquisition date. The weighted average grant date fair value of the stock options was $21.8
million or $35.93 per option. The grant date fair value of the options was determined by calculating the fair value of the common stock that was issued which will
eventually settle these options. The exercise price of these stock options is $0.01 . The fair value of these stock options has been accounted for as post-combination
stock-based compensation, as service is required for the coworkers to retain the awards, and is being amortized over the weighted-average requisite service period.
No options were forfeited or vested during the year ended December 31, 2015 . Options that are forfeited prior to vesting will not be available for future option
issuances and will revert as consideration to the seller. For further details regarding the acquisition, refer to Note 3 (Acquisition) .
Pre-IPO Equity Awards
Prior to the IPO, the Company had the following equity-based compensation plans in place:
ClassBCommonUnits
The Board of Managers of CDW Holdings adopted the CDW Holdings LLC 2007 Incentive Equity Plan (the “Plan”) for coworkers, managers, consultants and
advisors of the Company and its subsidiaries. The Plan permitted a committee designated by the Board of Managers of CDW Holdings (the “Committee”) to grant
or sell to any participant Class A Common Units or Class B Common Units of CDW Holdings in such quantity, at such price, on such terms and subject to such
conditions that were consistent with the Plan and as established by the Committee.
The Class B Common Units that were granted vested daily on a pro rata basis between the date of grant and the fifth anniversary thereof and were subject to
repurchase by, with respect to vested units, or forfeiture to, with respect to unvested units, the Company upon the coworker’s separation from service as was set
forth in each holder’s Class B Common Unit Grant Agreement.
The grant date fair value of Class B Common Unit grants was calculated using the Option-Pricing Method. This method considered Class A Common Units and
Class B Common Units as call options on the total equity value, giving consideration to liquidation preferences and conversion of the preferred units. Such Class A
Common Units and Class B Common Units were modeled as call options that gave their owners the right, but not the obligation, to buy the underlying equity value
at a predetermined (or exercise) price. Class B Common Units were considered to be call options with a claim on equity value at an exercise price equal to the
remaining value immediately after the Class A Common Units and Class B Common Units with a lower participation threshold were liquidated. The Option-Pricing
Method is highly sensitive to key assumptions, such as the volatility assumption. As such, the use of this method can be applied when the range of possible future
outcomes is difficult to predict.
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