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HomeMy WebLinkAboutCity Council Committees - Committee of the Whole - 08/10/2021 (2) KENT CITY COUNCIL COMMITTEE OF THE WHOLE Tuesday, August 10, 2021 4:00 PM Chambers Unvaccinated individuals must wear face coverings and practice physical social distancing from non-household members. A live broadcast is available on Kent TV21, www.facebook.com/CityofKent, and www.youtube.com/user/KentTV21 To listen to this meeting, call 1-888-475-4499 or 1-877-853-5257 and enter Meeting ID 885 0548 4241 Mayor Dana Ralph Council President Toni Troutner Councilmember Bill Boyce Councilmember Marli Larimer Councilmember Brenda Fincher Councilmember Zandria Michaud Councilmember Satwinder Kaur Councilmember Les Thomas ************************************************************** Item Description Speaker 1. CALL TO ORDER 2. ROLL CALL 3. AGENDA APPROVAL Changes from Council, Administration, or Staff. 4. DEPARTMENT PRESENTATIONS A. Payment of Bills - Authorize Paula Painter B. Kent School District Police Services Agreements - Authorize Commander Phil Johnson C. Ordinance Amending Chapter 15 of the Kent City Code Hayley Bonsteel Consistent with House Bill 1220 Adopt D. Consolidating Budget Adjustment Ordinance for Michelle Ferguson Adjustments between April 1, 2021 and June 30, 2021 - Adopt E. INFO ONLY: June Financial Report Michelle Ferguson F. U.S. Small Business Administration Shuttered Venue Paula Painter Committee of the Whole Committee of the Whole - August 10, 2021 Regular Meeting Operators Grant for ShoWare Ratify G. NetMotion Mobility Renewal - Authorize James Endicott H. Goods and Services Agreement with TriVan Truck Body, Commander Rob LLC for Customization of Evidence Van - Authorize Scholl I. Resolution Ratifying the WRIA 9 Salmon Habitat Plan - Mike Mactutis Adopt J. Pedestrian and Bicycle Safety Program State Funding - Erik Preston Authorize K. INFO ONLY: Quiet Zone Update Rob Brown L. Meeker Street Bridge Deck - Accept Grant Funds - Carla Maloney Authorize M. Meeker Street Bridge Painting - Accept Grant Funds - April Delchamps Authorize 5. ADJOURNMENT NOTE: A copy of the full agenda is available in the City Clerk's Office and at KentWA.gov. Any person requiring a disability accommodation should contact the City Clerk's Office in advance at 253-856-5725. For TDD relay service, call the Washington Telecommunications Relay Service 7-1-1. 5/B FINANCE DEPARTMENT Paula Painter, CPA 220 Fourth Avenue South Kent, WA 98032 253-856-5264 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: Payment of Bills - Authorize MOTION: I move to authorize the payment of bills. SUMMARY: Qbdlfu!Qh/!4 5/C POLICE DEPARTMENT Rafael Padilla, Police Chief 220 Fourth Avenue South Kent, WA 98032 253-852-2121 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: Kent School District Police Services Agreements - Authorize MOTION: I move to authorize the Mayor to sign the Police Services Agreement and School Resource Officer Agreement between the Kent Police Department and the Kent School District for the 2020-2021 and 2021-2022 school years to provide a school safety liaison and two school resource officers, subject to final contract terms and conditions acceptable to the Police Chief and City Attorney. SUMMARY: The Kent Police Department and the Kent School District have partnered for many years to provide school resource officers for various Kent schools, as well as a commander to serve as a liaison and safety advisor to the District. These agreements cover the 2020-2021 and 2021-2022 school years for an initial two-year term, with the option to extend the term of the contract for up to five successive periods of 12 months each. The agreements for the 2020-2021 school year were not executed last year. That contract has been built into the contract for the 2021-2022 school year to ensure the term is memorialized. Given the impacts from the COVID-19 pandemic, the parties agreed that the Department would not charge the District for those services provided by the Department during the 2020-2021 school year, as stated in the agreements. Entering into another contract with the Kent School District will further the Police development and education of our youth within the City. The mission of the School Resource Officer program is to help improve and maintain school safety and the educational climate at the school. The purpose of this Agreement is to fulfill the requirements of RCW 28A.320.124(2), which requires an agreement between school districts and the local law enforcement agency for implementation of a School Resource Officer program and specifies elements that must be incorporated into such an agreement. Additionally, this Agreement fulfills the requirements of RCW 10.93.160 and formalizes and clarifies the partnership between the Kent School District and the Police Department. Finally, House Bill 1214, effective July 25, 2021, established training for school resource officers and other requirements that were incorporated into the Agreements. The total reimbursement from the District to the City will be as follows: Qbdlfu!Qh/!5 5/C · $187,894.48, which is approximately 60% of the total cost to the Department for salaries and benefits. · 55,186.12, which is approximately 25% of the total cost to the Department for salaries and benefits. BUDGET IMPACT: None SUPPORTS STRATEGIC PLAN GOAL: Innovative Government - Delivering outstanding customer service, developing leaders, and fostering innovation. Thriving City - Creating safe neighborhoods, healthy people, vibrant commercial districts, and inviting parks and recreation. Sustainable Services - Providing quality services through responsible financial management, economic growth, and partnerships. Inclusive Community - Embracing our diversity and advancing equity through genuine community engagement. ATTACHMENTS: 1. KSD Police School Safety Services Liaison 2021-2022 (PDF) 2. KSD Police SRO Agreement 2021-2022 (PDF) Qbdlfu!Qh/!6 5/C/b SCHOOL SAFETY SERVICES LIAISON AGREEMENT PARTMENT BETWEEN THE KENT POLICE DE AND HE KENT SCHOOL DISTRICT T 2021 and 2021-2022 2020 – THIS AGREEMENT is made and entered into by and between the City of Kent and the Kent Police Department, hereinafter referred to collectively as the “Department,” and the Kent School District, hereinafter referred to as the “District.” RECITALS The District desires to fill the position of School Safety Services Liaison with a law enforcement officer who is employed by the Department and holds the rank of Commander or higher, and who can bring valuable experience and provide advice to District safety officers. The Department desires that its senior officers have the opportunity to: (a) partner with a large local school district in the community; (b) gain valuable administrative, command, and community relations experience; and (c) experience unique professional growth and development. The District and the Department share a compelling common value in seeing that the community enjoys a safe, secure environment for its students and staff, while reserving formal school discipline duties and responsibilities to school administrators. Under the provisions of the Laws of 2021, Ch. 38, § 6, the District is required, when it elects to engage the services of a commissioned law enforcement officer to work in schools to enter into an agreement that meets the requirements of that statutory provision, including evidencing that it meets the requirements of RCW 38A.320.124(1); that it addresses the joint hiring, placement, and performance evaluation of police officers to fulfill the role of school resource officer(s); and that school resources officers meet the training requirements of Laws of 2021, Ch. 38, § 3(2) or § 4(4); NOW, THEREFORE, and in consideration of the mutual promises set forth herein, the parties mutually agree as follows: AGREEMENT 1. TERM This Agreement shall be effective for a two-year term beginning from September 1, 2020, through August 31, 2022 (“Initial Term”), subject to any prior termination as provided herein and unless extended by written agreement of the parties. If this Agreement is signed on a date after the commencement of the District’s 2020-2021 school year, the terms of this Agreement shall apply retroactively to September 1, 2020. Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 1 Qbdlfu!Qh/!7 5/C/b The parties may opt to extend the term of this Agreement, on the same terms and conditions as set forth herein, for up to five (5) successive periods of twelve (12) months each (each, a “Renewal Term”); provided, Attachment A to Section 3 entitled “Consideration” shall be adjusted annually as provided in that section. All extensions shall be in writing and shall be approved by the District and the Department. The Mayor is authorized to approve and execute said extensions, without further authorization of the City Council. 2. DUTIES OF THE DEPARTMENT The Department, with the District’s approval, shall provide an officer the rank of Commander or higher to serve as the District’s School Safety Services Liaison, hereafter referred to as the “Liaison,” for the purpose of assisting with communication and logistics between the two organizations relating to school safety. The placement of a particular command level officer in the assigned Liaison role will be a decision mutually agreed upon by the Department and District. Additionally, the Department will consult with a representative designated by the District concerning the Liaison’s performance during the term of this Agreement as provided for by the Laws of 2021, Ch. 38, § 6. In accordance with District policy and procedure, and the terms of this Agreement, the following describes the general duties to be performed by the Liaison: a. Provide advice and direction to personnel regarding best practices to help ensure a safe and secure learning environment. b. Respond to school incidents as necessary. c. Periodically review and recommend revisions to the procedures and protocols for school safety. d. Support administrators and staff with school safety inquiries and/or needs for assistance. e. Assist in the development of Kent School District emergency management practices and procedures. f. Assist in the establishment and implementation of emergency operation procedures and threat assessment procedures for buildings. g. Help establish and maintain security procedures focused on prevention of problems in schools and the community. h. Help foster an attitude promoting a safe school environment. i. Present the monthly safety services report to the Board. j. Attend the monthly safety services meeting. The Department shall provide the Liaison a vehicle, radio communication, cellular phone, uniform, and other necessary equipment provided to the Department’s on-duty Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 2 Qbdlfu!Qh/!8 5/C/b commanders to enable the Liaison to perform his/her duties with the District. The District shall provide the use of office space, mobile computer or similar device, and a District email account to the Liaison. 3. DISTRICT POLICIES AND PROCEDURES CONCERNING LIAISON In accordance with the Laws of 2021, Ch. 38, § 5, and by the beginning of the 2021-2022 school year, the District is to adopt a policy and procedure that addresses a number of issues, including: a. A clear statement regarding safety and security staff duties and responsibilities related to student behavior and discipline that: (i) Prohibits the Liaison from becoming involved in formal school discipline situations that are the responsibility of school administrators, and (ii) Recognizes that trained safety and security staff know when to informally interact with students to reinforce school rules and when to enforce the law; b. Clarifies the circumstances under which teachers and school administrators may ask safety and security staff to intervene with a student; c. Explains how safety and security staff will be engaged in creating a possible school climate and positive relationships with students; and d. Describes the process for families to file complaints with the school and, when applicable, the local law enforcement agency that provides the safety and security staff, and a process for investigating and responding to complaints. e. For purposes of this section, the statutory term “safety and security staff” is defined as including the Liaison provided by the Department under this Agreement. At the time this Agreement was prepared and signed, the District had not yet adopted the statutorily required policy and procedure. The parties agree that at such time as the District prepares the necessary policy and procedure, it will provide a copy to the Department for its review and comment. If the Department does not accept or otherwise agree with the final policy and procedure adopted by the District under the Laws of 2021, Ch. 38, § 5, the parties agree the Department may immediately terminate this Agreement upon the Department providing written notice to the District. If the Department formally accepts the policy and procedure established by the District, that policy and procedure shall become an addendum to this Agreement, and the Department agrees that the Liaison will perform the duties and responsibilities provided for by this Agreement in accordance with that policy and procedure. Any changes to the District’s policy and procedure established under the provisions of this Section 3 shall be presented to the Department for its acceptance. If at any time the Department does not accept any changes the District makes to its policy and procedure, the Department may terminate this Agreement immediately. Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 3 Qbdlfu!Qh/!9 5/C/b 4. TRAINING In accordance with the Laws of 2021, Ch. 38, § 3 and § 4, the District and Department agree that the Liaison has, or will within the statutorily required time periods, obtained classroom training on the following subjects: a. Constitutional and civil rights of children in schools, including state law governing search and interrogation of youth in schools; b. Child and adolescent development; c. Trauma-informed approaches to working with youth; d. Recognizing and responding to youth mental health issues; e. Educational rights of students with disabilities, the relationship of disability to behavior, and best practices for interacting with students with disabilities; f. Bias-free policing and cultural competency, including best practices for interacting with students from particular backgrounds, including English learner, LGBTQ, immigrant, female, and nonbinary students; g. Local and national disparities in the use of force and arrests of children; h. Collateral consequences of arrest, referral for prosecution, and court involvement; i. Resources available in the community that serve as alternatives to arrest and prosecution and pathways for youth to access services without court or criminal justice involvement; j. De-escalation techniques when working with youth or groups of youth; k. State law regarding restraint and isolation in schools, including RCW 28A.600.485; l. The federal family educational rights and privacy act (20 4 U.S.C. Sec. 1232g) requirements including limits on access to and dissemination of student records for noneducational purposes; and m. Restorative justice principles and practices. Additionally, the District agrees to permit the Liaison to attend training sessions required by the Department, provided the Department notifies the District of such training ten (10) calendar days in advance. The Department shall provide the District’s Chief School Operations & Academic Support Officer, who oversees the District’s Safety Services department, notice sufficiently in advance to allow the District to make other security arrangements in the absence of the Liaison. The District may likewise provide training to the Liaison on school in-service days. 5. DATA COLLECTION AND REPORTING The Department and District agree to work cooperatively and in good faith with one another to ensure the District is able to collect and report the data required by the Laws of 2021, Ch. 38, § 2 concerning incidents that resulted in student discipline, use of force against a student, or a student arrest; complaints involving the Liaison; and other school safety and security information that may be required by the Washington State Office of the Superintendent of Public Instruction. 6. CONSIDERATION In consideration of those services provided under this Agreement, the District shall provide the Liaison with the unique opportunity to obtain administration and community Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 4 Qbdlfu!Qh/!: 5/C/b relations experience. The Liaison will be considered a part of the Superintendent’s Cabinet and the District Leadership Team. Given the impacts from the COVID-19 pandemic, the parties agree that the Department will not charge the District for those services provided by the Department during the 2020-2021 school year. For the 2021-2022 school year and those thereafter, the total compensation for an officer the rank of Commander or higher to serve as the School Safety Services Liaison position for the length of this Agreement is set forth in Attachment A to this Agreement. Attachment A reflects the District’s agreement to reimburse the Department twenty-five percent (25%) of the total compensation (salaries/benefits) for one officer the rank of Commander or higher, as mutually agreed by the parties in Attachment A. The twenty- five percent (25%) reimbursement obligation of the total compensation amount shall be spread across twelve (12) approximately equal monthly payments payable to the Department; provided, in the event this Agreement is executed after the term of this Agreement begins, the District shall pay the total compensation as set forth in Attachment A, but will have fewer months to make such payments. The District shall pay said reimbursement upon submission by the Department of a monthly invoice. Annual Cost Rate Increases. For each successive twelve-month Renewal Term, the parties agree that the total compensation (salaries/benefits) shall increase based on the actual salary and benefit costs as provided by the City of Kent. 7. WORK SCHEDULE The Liaison shall be on duty with the District, as needed, to fulfill the duties outlined in Section 2 above. The parties will coordinate the Liaison’s schedule, to the best extent practicable, to ensure the needs of the District and the Department are both adequately met. 8. MODIFICATION No waiver or modification of the Agreement or any covenants, conditions, or limitations herein contained shall be valid unless in writing and duly executed by the parties, and no evidence of any waiver of modification shall be offered or received in evidence during any proceedings or litigation between the parties unless such waiver or modification is in writing duly executed as aforesaid. The parties further agree that the provisions of this section may not be waived except as herein set forth. 9. TERMINATION OF AGREEMENT This Agreement may be terminated immediately by the Department as provided for in Section 3 above, or by either party upon the material breach of the Agreement by the other party. Otherwise, this Agreement may be terminated without cause at any time by mutual agreement of the parties or by either party sixty (60) days following the other Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 5 Qbdlfu!Qh/!21 5/C/b party’s receipt of written intent to terminate. In the event of termination under this section, the Department will be entitled to receive, to the date of such termination on a pro-rated basis, the compensation as set forth in Section 6 above. In addition, each party shall have the right to remove a specific Liaison from the District. Any command level officer selected to replace a Liaison will be mutually agreed upon by the Department and District as set forth in Section 2 above. 10. INDEMNIFICATION To the extent permitted by law, the District shall defend, indemnify, and hold harmless the Department and its officers, agents, and employees, or any of them, from any and all claims, actions, suits, liability, loss, costs, expenses, and damages of any nature whatsoever, arising out of any act or omission of the District, its officers, agents, and employees or any of them relating to or arising out of the performance of the Agreement. The District shall not defend, indemnify, or hold the Department harmless from any claims, actions, or suits for injury, damage, or loss of any kind caused by the negligence of the Department, its officers, agents, and employees or any of them where the District did not contribute to such negligence. Similarly, the Department shall defend, indemnify, and hold harmless the District and its officers, directors, agents, and employees, or any of them from any and all claims, actions, suits, liability, loss, costs, expenses, and damages of any nature whatsoever, out of any act or omission of the Department, its officers, agents, and employees, or any of them in the performance of this Agreement. The Department shall not defend, indemnify, or hold the District harmless from any claims, actions, or suits for injury, damage, or loss of any kind caused by the negligence of the District, its officers, directors, agents, and employees or any of them where the Department did not contribute to such negligence. Notwithstanding any other provision of this Agreement, in executing this Agreement, the Department does not assume liability or responsibility for, or in any way release the District from, any liability or responsibility which arises in whole or in part from the existence, effect, or enforcement of District policies, rules, or regulations or the acts of District employees, volunteers, or students. If any cause, claim, suit, action, or administrative proceedings is commenced in which the enforceability or validity of any District policy, rule, or regulation is at issue, the District shall defend the enforceability or validity of the policy, rule, or regulation at its sole expense, and if judgment is entered or damages are awarded against the District, the Department or both, the District shall satisfy the same, including all chargeable costs and attorney’s fees. 11. MEDICAL/HEALTH AND WORKERS COMPENSATION BENEFITS In the event of any injury, illness, or death of the Liaison, the Liaison shall be considered an employee of the Department while acting in performance of this Agreement, and the Department agrees to extend to the Liaison the medical/health and workers’ compensation benefits and other compensation, to the same extent and in the same manner as if such injury, illness, or death had occurred during the regular work assignment in and for the Department. Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 6 Qbdlfu!Qh/!22 5/C/b 12. LIAISON OF SCHOOL SAFETY IS AN EMPLOYEE OF THE DEPARTMENT The Liaison shall, at all times, be considered an employee of the Department, and shall for no purpose be considered an employee of the District. The District shall have no obligation to provide the Liaison with any workers’ compensation or other benefits, and the salary of the Liaison shall be paid in full by the Department. 13. VENUE STIPULATION This Agreement shall be construed as having been made and delivered within the State of Washington, and the laws of the State of Washington shall be applicable to its construction and enforcement. Any action at law, suit in equity, or judicial proceeding for the enforcement of this Agreement or any provision hereto shall be instituted in King County, Washington. 14. COMPLIANCE WITH LAWS In carrying out the terms of this Agreement, the parties agree to comply with all applicable federal, state, and local laws, ordinances, and regulations, including but not necessarily limited to the laws pertaining to civil rights and laws pertaining to the District and the Department. In carrying out this Agreement, the parties agree that they will not in any way discriminate against others on the basis of race, color, national origin, sex, age, creed, sexual orientation, marital status, veteran status, or disability. 15. NOTICES All notices shall be in writing and shall be sent by registered mail to the parties at their recognized business addresses. 16. HEADINGS The article headings contained in this Agreement are inserted solely as a matter of convenience and for reference and in no way do they define, limit, or describe the scope or intent of the provisions of this Agreement. 17. AGREEMENTS OUTSIDE OF THIS AGREEMENT This Agreement contains the complete agreement between the parties and shall, as of the effective date hereof, supersede all agreements, either written or oral, between the parties. The parties agree that neither of them has made any representations with respect to the subject matter of the Agreement except such representation as are specifically set forth herein, and each party acknowledges that it has relied on its own judgment in entering into this Agreement. 18. RATIFICATION All acts consistent with the authority of this Agreement and prior to its effective date are ratified and affirmed, and the terms of this Agreement shall be deemed to have applied. IN WITNESS WHEREOF, the parties have affixed their signatures on the dates below Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 7 Qbdlfu!Qh/!23 5/C/b Kent School District City of Kent Israel Vela, Interim Superintendent Dana Ralph (Mayor) Date Date Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 8 Qbdlfu!Qh/!24 5/C/b ATTACHMENT “A” TO SCHOOL SAFETY SERVICES LIAISON AGREEMENT The parties agree that the total cost to the Department to provide a School Safety Services Liaison, with a law enforcement officer who is employed by the Department and holds the rank of Commander or higher, to the District for the 2021-2022 school year, in accordance with the terms of the parties’ Agreement, is $220,744.48 regardless of actual salary or benefit adjustments that may be made by the Department for the Commander. The District’s reimbursement obligation, which is twenty-five percent (25%) of the total cost to the Department for the Liaison provided to the District, equals $55,186.12 This sum will be considered the District’s total reimbursement obligation for the Liaison provided by the Department for the duration of the performance period of this Agreement, regardless of actual salary or benefit adjustments that may be made by the Department for its officer the rank of Commander or higher. The District shall pay said reimbursement in twelve (12) approximately equal monthly payments spread over a one-year period starting September 1, 2021, with each payment being made upon submission by the Department of a monthly invoice; provided, in the event this Agreement is executed after the term of this Agreement begins, the District shall pay the total compensation as set forth in this Attachment, but will have fewer months to make such payments. The amounts provided for in this Attachment “A” shall be adjusted annually for each 12- month Renewal Term and shall be based upon the actual salary and benefit cost to the Department for the Liaison. Each adjustment shall be memorialized through an amendment to this Attachment “A”, which shall become an addendum to this Agreement upon acceptance by the District and the Department. IN WITNESS WHEREOF, the parties have affixed their signature on the dates below in order to evidence their acceptance of the District’s reimbursement obligation under the parties’ Agreement for the 2021-2022 school year. KENT SCHOOL DISTRICT CITY OF KENT Israel Vela, Interim Superintendent Dana Ralph, Mayor Date Date Buubdinfou;!LTE!Qpmjdf!Tdippm!Tbgfuz!Tfswjdft!Mjbjtpo!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 9 Qbdlfu!Qh/!25 5/C/c SCHOOL RESOURCE OFFICER AGREEMENT BETWEEN THE KENT POLICE DEPARTMENT AND THE KENT SCHOOL DISTRICT 2020-2021 and 2021-2022 THIS SCHOOL RESOURCE OFFICER AGREEMENT (hereinafter “Agreement”) is made and entered into by and between the City of Kent and its Kent Police Department (hereinafter referred to collectively as the “Department”) and the Kent School District (hereinafter referred to as the “District”) for the provision of School Resource Officers (SRO). WHEREAS, the District desires to have the presence and assistance on school campuses of commissioned law enforcement officers who can work collaboratively with school personnel to enforce the law while building healthy relationships with students of the District and reserving formal school discipline duties and responsibilities to school administrators; and WHEREAS, the Department desires to partner with local school districts and seeks an opportunity for its officers to positively impact the community; and WHEREAS, the District and the Department share a compelling common value in seeing that the community enjoys a safe, sustainable, healthy, and respectful learning environment for its students and staff; and WHEREAS, under the provisions of the Laws of 2021, Ch. 38, § 6, the District is required, when it elects to engage the services of school resource officers, to enter into an agreement that meets the requirements of that statutory provision, including evidencing that it meets the requirements of RCW 38A.320.124(1); that it addresses the joint hiring, placement, and performance evaluation of police officers to fulfill the role of school resource officer(s); and that school resources officers meet the training requirements of Laws of 2021, Ch. 38, § 3(2) or § 4(4); NOW, THEREFORE, for and in consideration of the mutual promises set forth herein, the parties hereto mutually agree as follows: 1. TERM The Agreement shall be effective for a two-year term beginning September 1, 2020 through August 31, 2022 (“Initial Term”), subject to any prior termination as provided herein and unless extended by written agreement of parties hereto. The parties may opt to extend the term of this Agreement, on the same terms and conditions as set forth herein, for up to five (5) successive periods of twelve (12) Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* months each (each, a “Renewal Term”); provided, Attachment A to Section 3 entitled “Consideration” shall be adjusted annually as provided in that section. All extensions shall be in writing and shall be approved by the District and the Department. The Mayor 1 Qbdlfu!Qh/!26 5/C/c is authorized to approve and execute said extensions, without further authorization of the City Council. 2. DUTIES OF THE DEPARTMENT AND ASSIGNED SROs The Department shall provide two (2) commissioned police officers to work as SROs in the District on days in which school is in session during the normal school year plus two workshop days, and one week after the last day of school. In addition, SROs will work on July 4, and up to ten (10) business days scheduled in the month of August for academy training prior to the start of school for the purpose of assisting school personnel in enforcing the law and maintaining a safe, sustainable, healthy, and respectful learning environment for students and staff. The placement of a particular officer in the role of SRO will be a decision mutually agreed upon by the Department and District. Additionally, the Department will consult with a representative designated by the District concerning each SROs performance during the term of this Agreement as provided for by the Laws of 2021, Ch. 38, § 6. In accordance with District policy and procedure, and the terms of this Agreement, the following describes the general duties of the Department and its SROs to be performed: a. One SRO will be assigned to the campuses of Kent-Meridian High School and Mill Creek Middle School, with time split between the campuses as deemed appropriate by school administrators and the respective school principals. b. One SRO will be assigned to the campuses of Kentridge High School and Meridian Middle School, with time split between the campuses as deemed appropriate by school administrators and the respective school principals. c. Each SRO shall respond to school incidents in the District as necessary and support District administrators and staff with school safety inquiries and/or needs for assistance. d. Each SRO will provide assistance to enforce the law on school grounds, conduct investigations as necessary, and advise/consult with school personnel regarding best practices for ensuring a safe and secure learning environment. e. Each SRO will develop a daily routine that ensures high visibility to staff, students, parents and community stakeholders. f. Each SRO will have access to education records of District students consistent with access available to members of the District’s Safety Services, but the Department acknowledges that each SRO is restricted in the same manner as other District personnel by the Family Educational Rights and Privacy Act (FERPA), 20 U.S.C. 1232g, accompanying regulations, corresponding state law, and District policies from nonconsensual disclosure of such records to third parties without lawful authorization. Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* g. Each SRO will be a positive adult role model and will develop positive relationships with students that promote learning and citizenship. 2 Qbdlfu!Qh/!27 5/C/c h. Each SRO will work collaboratively with the District’s Safety Services Director, including the preparation of reportsas needed regarding school safety activity for the Superintendent and Board of Directors. i. Each SRO will assist, as needed, in the establishment and implementation of emergency operation procedures and threat assessment procedures for buildings. j. Each SRO will assist with contacting truant children and their parents. k. Each SRO will perform other duties as mutually agreed upon by the Kent School District and the Department. l. The Department reserves the right to utilize one or both of the SROs for emergency Department operational needs as determined or declared by the Department’s Chief of Police and the Mayor of the City of Kent. Emergency operational needs include but are not limited to the following: severe staffing shortages, natural and/or manmade disasters, or unforeseen City emergencies. In the event that such an emergency arises, the Department will make reasonable efforts to give timely advanced notice to the District and will make reasonable efforts to minimize the duration of their utilization. The Department will also refund the District for all time that one or both SROs are not performing work for the District pursuant to this Section 2(l). 3. DISTRICT POLICIES AND PROCEDURES CONCERNING SROs In accordance with the Laws of 2021, Ch. 38, § 5, and by the beginning of the 2021- 2022 school year, the District is to adopt a policy and procedure that addresses a number of issues, including: a. A clear statement regarding safety and security staff duties and responsibilities related to student behavior and discipline that: (i) Prohibits SROs from becoming involved in formal school discipline situations that are the responsibility of school administrators, and (ii) Recognizes that trained safety and security staff know when to informally interact with students to reinforce school rules and when to enforce the law; b. Clarifies the circumstances under which teachers and school administrators may ask safety and security staff to intervene with a student; c. Explains how safety and security staff will be engaged in creating a possible school climate and positive relationships with students; and d. Describes the process for families to file complaints with the school and, Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* when applicable, the local law enforcement agency that provides the safety and security staff, and a process for investigating and responding to complaints. 3 Qbdlfu!Qh/!28 5/C/c e. For purposes of this section, the statutory term “safety and security staff” is defined as including the SROs provided by the Department under this Agreement. At the time this Agreement was prepared and signed, the District had not yet adopted the statutorily required policy and procedure. The parties agree that at such time as the District prepares the necessary policy and procedure, it will provide a copy to the Department for its review and comment. If the Department does not accept or otherwise agree with the final policy and procedure adopted by the District under the Laws of 2021, Ch. 38, § 5, the parties agree the Department may immediately terminate this Agreement upon the Department providing written notice to the District. If the Department formally accepts the policy and procedure established by the District, that policy and procedure shall become an addendum to this Agreement, and the Department agrees that its SROs will perform the duties and responsibilities provided for by this Agreement in accordance with that policy and procedure. Any changes to the District’s policy and procedure established under the provisions of this Section 3 shall be presented to the Department for its acceptance. If at any time the Department does not accept any changes the District makes to its policy and procedure, the Department may terminate this Agreement immediately. 4. TRAINING In accordance with the Laws of 2021, Ch. 38, § 3 and § 4, the District and Department agree that all SROs have, or will within the statutorily required time periods, obtained classroom training on the following subjects: a. Constitutional and civil rights of children in schools, including state law governing search and interrogation of youth in schools; b. Child and adolescent development; c. Trauma-informed approaches to working with youth; d. Recognizing and responding to youth mental health issues; e. Educational rights of students with disabilities, the relationship of disability to behavior, and best practices for interacting with students with disabilities; f. Bias-free policing and cultural competency, including best practices for interacting with students from particular backgrounds, including English learner, LGBTQ, immigrant, female, and nonbinary students; g. Local and national disparities in the use of force and arrests of children; h. Collateral consequences of arrest, referral for prosecution, and court involvement; i. Resources available in the community that serve as alternatives to arrest and prosecution and pathways for youth to access services without court or criminal justice involvement; j. De-escalation techniques when working with youth or groups of youth; k. State law regarding restraint and isolation in schools, including RCW 28A.600.485; l. The federal family educational rights and privacy act (20 4 U.S.C. Sec. Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 1232g) requirements including limits on access to and dissemination of student records for noneducational purposes; and m. Restorative justice principles and practices. 4 Qbdlfu!Qh/!29 5/C/c Additionally, the District agrees to permit SROs to attend training sessions required by the Department, provided the Department notifies the District of such training ten (10) calendar days in advance. The Department shall provide the District’s Chief School Operations & Academic Support Officer, who oversees the District’s Safety Services department, notice sufficiently in advance to allow the District to make other security arrangements in the absence of a school’s SRO. The District may likewise provide training to SROs on school in-service days. 5. DATA COLLECTION AND REPORTING The Department and District agree to work cooperatively and in good faith with one another to ensure the District is able to collect and report the data required by the Laws of 2021, Ch. 38, § 2 concerning incidents that resulted in student discipline, use of force against a student, or a student arrest; complaints involving SROs; and other school safety and security information that may be required by the Washington State Office of the Superintendent of Public Instruction. 6. CONSIDERATION Given the impacts from the COVID-19 pandemic, the parties agree that the Department will not charge the District for those services provided by the Department during the 2020-2021 school year. For the 2021-2022 school year and those thereafter, the total compensation for two (2) commissioned officers for the remaining Initial Term is set forth in Attachment A to this Agreement. Attachment A reflects the District’s agreement to reimburse the Department sixty percent (60%) of the total compensation (salaries/benefits) for two (2) commissioned SROs for the days they work for the District, as mutually agreed by the parties in Attachment A. The sixty percent (60%) reimbursement obligation of the total compensation amount shall be spread across twelve (12) approximately equal monthly payments payable to the Department; provided, in the event this Agreement is executed after the term of this Agreement begins, the District shall pay the total compensation as set forth in Attachment A, but will have fewer months to make such payments. The District shall pay said reimbursement upon submission by the Department of a monthly invoice. Annual Cost Rate Increases. For each successive twelve(12) month Renewal Term, the parties agree that the total compensation (salaries/benefits) shall increase based on the actual salary and benefit costs as provided by the City of Kent. 7. WORK SCHEDULE It is the intent of this Agreement that the SROs work during scheduled class times and cover the start of school and release of school. Each SRO shall work other hours and days agreed upon by the District, Department, and the officer providing the services; provided, that each SRO’s work schedule shall be subject to the terms and conditions set forth in his or her collective bargaining agreement, which sets forth hours of work, days off, Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* vacation, holidays, etc. One SRO will be assigned to work Monday through Thursday. The second SRO will be assigned to work Tuesday through Friday. 5 Qbdlfu!Qh/!2: 5/C/c 8. OVERTIME Costs associated with approved overtime for District business shall be paid by the District, except that costs associated with overtime for any Department trainings or functions not relating to District business will be paid by the Department. Overtime costs for District business shall be determined by the officers’ collective bargaining agreement with the City of Kent. 9. MODIFICATION No waiver or modification of this Agreement or any covenants, conditions, or limitations herein contained shall be valid unless in writing and duly executed by the parties to be charged therewith; and no evidence of any waiver of modification shall be offered or received in evidence of any proceeding or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing duly executed as aforesaid; and the parties further agree that the provisions of this section may not be waived except as herein set forth. 10. TERMINATION OF AGREEMENT This Agreement may be terminated immediately by the Department as provided for in Section 3 above, or by either party upon the material breach of the Agreement by the other party. Otherwise, this Agreement may be terminated without cause at any time by mutual agreement of the parties hereto, or by either party after thirty (30) days following the other party’s receipt of a written intent to terminate. In the event of termination under this section, the Department will be entitled to receive, to the date of such termination on a pro rata basis, the compensation as set forth in Section 6 above. In addition, each party shall have the right to remove a specific SRO from the District. Any officer selected to replace an SRO will be mutually agreed upon by the Department and District as set forth in Section 2 above. 11. INDEMNIFICATION To the extent permitted by law, the District shall defend, indemnify, and hold harmless the Department and its officers, agents, and employees, or any of them, from any and all claims, actions, suits, liability, loss, costs, expenses, and damages of any nature whatsoever, arising out of any act or omission of the District, its officers, agents, and employees or any of them relating to or arising out of the performance of the Agreement. The District shall not defend, indemnify, or hold the Department harmless from any claims, actions, or suits for injury, damage, or loss of any kind caused by the negligence of the Department, its officers, agents, and employees or any of them where the District did not contribute to such negligence. Similarly, the Department shall defend, indemnify, and hold harmless the District and its officers, directors, agents, and employees, or any of them from any and all claims, actions, suits, liability, loss, costs, expenses, and damages of any nature whatsoever, out of any act or omission of the Department, its officers, agents, and employees, or any Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* of them in the performance of this Agreement. The Department shall not defend, indemnify, or hold the District harmless from any claims, actions, or suits for injury, damage, or loss of any kind caused by the negligence of the District, its officers, directors, 6 Qbdlfu!Qh/!31 5/C/c agents, and employees or any of them where the Department did not contribute to such negligence. Notwithstanding any other provision of this Agreement, in executing this Agreement, the Department does not assume liability or responsibility for, or in any way release the District from, any liability or responsibility which arises in whole or in part from the existence, effect, or enforcement of District policies, rules, or regulations or the acts of District employees, volunteers, or students. If any cause, claim, suit, action, or administrative proceedings is commenced in which the enforceability or validity of any District policy, rule, or regulation is at issue, the District shall defend the enforceability or validity of the policy, rule, or regulation at its sole expense, and if judgment is entered or damages are awarded against the District, the Department or both, the District shall satisfy the same, including all chargeable costs and attorney’s fees. 12. MEDICAL/HEALTH AND WORKER’ COMPENSATION BENEFITS In the event of any injury to, or the illness or death of, an SRO, such officer will be considered an employee of the Department while acting in performance of this Agreement, and the Department agrees to extend to any Department SRO the medical/health and workers’ compensation benefits and other compensation, to the same extent and in the same manner as in such injury, illness, or death had occurred during regular work assignment in and for the Department. Any SRO provided pursuant to this Agreement is not an employee of the District, and the District shall have no obligation to provide an SRO with any workers’ compensation or other benefits. 13. VENUE STIPULATION This Agreement shall be construed as having been made and delivered within the state of Washington, and the laws of the state of Washington shall be applicable to its construction and enforcement. Any action at law, suit in equity, or judicial proceeding for the enforcement of this Agreement or any provision hereto shall be instituted in King County, Washington. 14. COMPLIANCE WITH LAWS The parties hereto agree to, in carrying out the terms of this Agreement, comply with all applicable federal, state, and local laws, ordinances, and regulations, including but not necessarily limited to, the laws pertaining to civil rights and laws pertaining to the District and the Department. The Department and its officers, agents and employees in carrying out this Agreement agree that they will not in any way discriminate against others on the basis of sex, race, creed, religion, color, national origin, age, honorably discharged veteran or military status, sexual orientation including gender expression or identity, or the presence of any sensory, mental or physical disability. 15. NOTICES All notices given herein shall be in writing and shall be sent by personal service or registered mail to the parties at their recognized business addresses. For the District, notice shall be sent by personal service or registered mail to the District’s Chief School Operations & Academic Support Officer who oversees the District’s Safety Services. 16. HEADINGS Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* The article headings contained in this Agreement are inserted solely as a matter of convenience and for reference and in no way do they define, limit, or describe the scope or intent of the provisions of this Agreement. 7 Qbdlfu!Qh/!32 5/C/c 17. AGREEMENTS OUTSIDE OF THIS AGREEMENT This Agreement contains the complete agreement between the parties and shall, as of the effective date hereof, supersede all agreements, either written or oral, between the parties. The parties agree that neither of them has made any representation with respect to the subject matter of this Agreement or any representations, including the executing and delivery hereof, except such representations as are specifically set forth herein, and each of the parties hereto acknowledges that it has relied on its own judgment in entering into this Agreement. 18. RATIFICATION All acts consistent with the authority of this Agreement and prior to its effective date are ratified and affirmed, and the terms of this Agreement shall be deemed to have applied. IN WITNESS WHEREOF, the parties have affixed their signature on the dates below. KENT SCHOOL DISTRICT CITY OF KENT Israel Vela, Interim Superintendent Dana Ralph, Mayor Date Date Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 8 Qbdlfu!Qh/!33 5/C/c ATTACHMENT “A” TO SRO AGREEMENT The parties agree that the total cost to the Department to provide SROs to the District for the 2021-2022 school year, in accordance with the terms of the parties’ Agreement, is $313,157.46 regardless of actual salary or benefit adjustments that may be made by the Department for its officers. The District’s reimbursement obligation, which is sixty percent (60%) of the total cost to the Department for the SROs provided to the District, equals $187,894.48 Unless overtime is authorized by the District in accordance with Section 8, or the Agreement modified as set forth in Section 9, this sum will be considered the District’s total reimbursement obligation for all SROs provided by the Department for the duration of the performance period of this Agreement, regardless of actual salary or benefit adjustments that may be made by the Department for its officers, subject to the Department’s obligations to refund the District as set forth in Section 2(l) . The District shall pay said reimbursement in twelve (12) approximately equal monthly payments spread over a one-year period starting September 1, 2021 with each payment being made upon submission by the Department of a monthly invoice; provided, in the event this Agreement is executed after the term of this Agreement begins, the District shall pay the total compensation as set forth in this Attachment, but will have fewer months to make such payments. The amounts provided for in this Attachment “A” shall be adjusted annually for each 12- month Renewal Term and shall be based upon the actual salary and benefit cost to the Department for the SROs. Each adjustment shall be memorialized through an amendment to this Attachment “A”, which shall become an addendum to this Agreement upon acceptance by the District and the Department. IN WITNESS WHEREOF, the parties have affixed their signature on the dates below in order to evidence their acceptance of the District’s reimbursement obligation under the parties’ Agreement for the 2021-2022 school year. KENT SCHOOL DISTRICT CITY OF KENT/KENT POLICE DEPT. Israel Vela, Interim Superintendent Dana Ralph, Mayor Date Date Buubdinfou;!LTE!Qpmjdf!TSP!Bhsffnfou!3132.3133!!)38:4!;!Lfou!Tdippm!Ejtusjdu!Qpmjdf!Tfswjdft!Bhsffnfou!.!Bvuipsj{f* 9 Qbdlfu!Qh/!34 5/D ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT Kurt Hanson, AICP, EDFP 220 Fourth Avenue South Kent, WA 98032 253-856-5454 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: Ordinance Amending Chapter 15 of the Kent City Code Consistent with House Bill 1220 Adopt MOTION: I move to adopt Ordinance No. 4410, amending Chapter 15 of the Kent City Code to allow indoor emergency shelters, permanent supportive housing, and transitional housing in a greater range of zoning districts with restrictions related to intensity of use, consistent with House Bill 1220, as recommended by staff. SUMMARY: During the regular legislative session of 2021, the state legislature passed House Bill 1220, supporting emergency shelters and housing through local planning and development regulations. The bill defines new parameters for the zoning of indoor emergency shelters, permanent supportive housing, and transitional housing, some of which are already met in Kent City Code. Staff are now proposing a draft set of code amendments to comply with the remaining provisions of HB 1220, including allowing facilities in a greater range of zones with restrictions related to intensity of use. BUDGET IMPACT: None SUPPORTS STRATEGIC PLAN GOAL: Innovative Government - Delivering outstanding customer service, developing leaders, and fostering innovation. Thriving City - Creating safe neighborhoods, healthy people, vibrant commercial districts, and inviting parks and recreation. ATTACHMENTS: 1. Ordinance 4410 (PDF) Qbdlfu!Qh/!35 5/D/b ORDINANCE NO. 4410 AN ORDINANCE of the City Council of the City of Kent, Washington, amending Chapter 15 of the Kent City Code entitled, ÐZoningÑ consistent with the requirements of House Bill 1220 to support emergency shelters and housing through local planning and development regulations. RECITALS A. During the regular legislative session of 2021, the state legislature passed House Bill 1220, supporting emergency shelters and housing through local planning and development regulations. The bill defines new parameters for the zoning of indoor emergency shelters, permanent supportive housing, and transitional housing. B. There are many types and models of housing and facilities that serve otherwise homeless persons; funding and operating trends change over time and statutes/zoning codes may or may not keep pace with these changes. Kent City Code specifically incorporates some, but not all, of these types of facilities. C. The City of Kent previously passed Ordinance 4358 on May 5, 2020, which expanded the zones in which indoor emergency shelters, known in Kent City Code as Ðemergency housingÑ was allowed, to comply with HB 1754 from the 2020 legislative session. This ordinance 1 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!36 5/D/b established reasonable requirements on indoor emergency shelters to ensure the safe development and operation of these facilities, and ensured existing emergency housing facilities in Kent (which operate on a ninety days on/ninety days off model) can continue serving KentÓs homeless population. D. The City of Kent has one permanent supportive housing project fully constructed within the city already; the project was permitted as multifamily due to its similarity in built form. No specific zoning parameters are codified in Kent City Code related to permanent supportive housing; it is a relatively new model of housing for the homeless. E. Transitional housing, a somewhat outdated model of supportive housing facility, is already defined and allowed in Kent City Code in several multifamily, mixed use and commercial zones. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: ORDINANCE SECTION 1. Î Amendment KCC 15.02.173. Section 15.02.173 of the Kent City Code, entitled ÐGroup HomeÑ is hereby amended as follows: Section 15.02.173. Group Home. A. Class I group home. Class I group home means publicly or privately operated residential facilities including state-licensed adult family homes as defined by RCW 70.128.010, state-licensed foster-family homes as defined by RCW 74.15.020(e); group homes for individuals who are developmentally, physically, or mentally disabled; and group homes or halfway houses for recovering alcoholics and former drug addicts; and permanent supportive housing as defined in RCW 36.70A.030 within a 2 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!37 5/D/b single-family dwelling. A class I group home shall have a maximum of six residents not including providers. B. Class II group home. Class II group home means publicly or privately operated residential facilities for juveniles under the jurisdiction of the criminal justice system. These homes include state-licensed group care homes or halfway homes for juveniles which provide residence in lieu of sentencing or incarceration, and halfway houses providing residence to juveniles needing correction or for juveniles selected to participate in state- operated work release and pre-release programs. The planning director shall have the discretion to classify a group home proposing to serve juveniles convicted of the offenses listed under class III group home in this section as a group home class III, and any such home shall be sited according to the regulations contained within the group III classification. 1. Group home, class II-A. A class II-A group home shall have a maximum of eight residents including resident staff. 2. Group home, class II-B. A class II-B group home shall have a maximum of 12 residents including resident staff. 3. Group home, class II-C. A class II-C group home shall have a maximum of 18 residents including resident staff. C. Class III group home. Class III group home means privately or publicly operated residential facilities for adults under the jurisdiction of the criminal justice system who have entered a pre- or post-charging diversion program, or been selected to participate in state-operated work/training release or other similar programs as provided in Chapters 137-56 and 137- 57 WAC. Such groups also involve individuals who have been convicted of a 3 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!38 5/D/b violent crime against a person, or a crime against property with a sexual motivation and convicted or charged as a sexual or assaultive violent predator. Secure community transition facilities are considered class III group homes. Secure community transition facilities shall have a maximum of three residents, excluding resident staff, unless the state agency proposing to establish and operate the facility can demonstrate that it has equitably distributed other secure community transition facilities with the same or a greater number of residents in other jurisdictions or communities throughout the entire geographic limits of King County. SECTION 2. Î Amendment KCC 15.02.125. Section 15.02.125 of the Kent City Code, entitled ÐDwelling, multifamilyÑ is hereby amended as follows: Section 15.02.125. Dwelling, multifamily. Multifamily dwelling means a residential building designed for or occupied by three or more families, with the number of families in residence not exceeding the number of dwelling units provided. This definition does not include independent senior living facilities, assisted living facilities, detached single-family structures designed as part of a multiple-structure development such as a planned unit development, residential facilities with health care, transitional housing, or group homes. This definition does include senior housing that does not provide meals, as well as permanent supportive housing as defined in RCW 36.70A.030. SECTION 3. Î Amendment KCC 15.04.020. Section 15.04.020 of the Kent City Code, entitled ÐResidential land usesÑ is hereby amended as follows: 4 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!39 5/D/b Section 15.04.020. Residential land uses. Zoning Districts Key P = Principally Permitted Uses S = Special Uses C = Conditional Uses A = Accessory Uses M = Minor Conditional Uses A-10 AG SR-1 SR-3 SR-4.5 SR-6 SR-8 MR-D MR-T12 MR-T16 MR-G MR-M MR-H MHP NCC CC DC DCE MTC-1 MTC-2 MCR CM GC I1 I2 I3 P P P P P P P P P P P P P A A A One single-family (1) (1) (1) dwelling per lot P P P P (27) (27) (27) One duplex per lot P P P P P P P P P P P P One modular home per lot P P P P P P P P P Duplexes (27) (27) (27) (22) P P P P P P P P P P P P P P Multifamily (27) (27) (27) (19) (19) (2) (2) townhouse units (20) (20) P P P P P P P P P P P P P P Multifamily dwellings (26) (26) (2) (4) (12) (2) (12) P Mobile homes and manufactured homes P P P P P P P Mobile home parks (13)(13) (13) (13) (13) (13) P P P P P P P P P P P P P P P P P P P P P P Group homes class I (32) (32) (32)(32) (32) (32) (32)(32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) C C C C C C C C C C C C C C C Group homes class (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) II-A C C C C C C C C C C C C C C C Group homes class (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) II-B C C C C C C C C C C C C C C C Group homes class (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) II-C C C C C C C C C C Group homes class (23) (23) (23) (23) (23) (23) (23) (23) (23) III (32) (32) (32) (32) (32) (32) (32) (32) (32) C C Secure community (23) (23) 23, transition facilities (24) (24) 24 P P P P P P P P P P P P P Communal (33) (33) (33) (33) (33) (33) (33) (33) (33) (33) (33) (33) (33) residences P P P P P P P P P P P P P Rebuild/accessory (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) uses for existing dwellings C C C C C C C C P P P P P P P P P P P P (29) (29) (29) (29) (29) (29) (29) (29) (29) (29) (29) (2) (4) (7) (7) (12) Transitional housing C C C 5 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!3: 5/D/b (5) (30) (30) A A A A A A A A A A Short-term rentals (34)(34) (34) (34) (34)(34) (34) (34) (34) (34) A A A Farm worker (17) (9) (17) accommodations A A A A A A A A A A A A A A A A A A A A A A A A A Accessory uses and (8) (8) (8) (8) (8) (18) (18) (18) (18) (18) (18) structures (18) (18) (18) (18) (18) customarily appurtenant to a permitted use A A A A A A A A A A A A A Accessory dwelling (8) (8) (8) (8) (8) (8) (8) (8) (8) (8) (8) (8) (8) units and guest (10) (10) (10) (10) (10) (10) (10) (10) (10) (10) (10) (10) (10) cottages A A A A A A A A A A A A Accessory living (14) (14) (14) (14) (14) (14) (14) (14) (14) (14) (14) (14) quarters P Live-work units (28) A A A A A A A A A A A A A A A A A A A A A A A A A A Home occupations (11) (11) (11) (11)(11) (11) (11) (11)(11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) A Service buildings A A A A A A A A A A A A A Storage of (16) (16) (16) (16) (16) (16) (16) (16) (16) (16) (16) (16) recreational vehicles C C C C C C C C C C C C Emergency housing (31) (31) (31) (31) (35) (35) (35) (35) (35) (35) (35) (35) facility; emergency shelter M M M M M P P P P P P P P P C P Independent senior (29) (29) (29) (2) (4) (2) M M living facilities (3) (3) M M M M M P P P P P P P P P C P Assisted living (29) (29) (29) (2) (4) (2) M M facilities (3) (3) M M M M M P P P P P P P P P C P Residential facilities (29) (29) (29) (2) (4) (2) M M with health care (3) (3) P P P P P P P P P P P P P Designated (25) (25) (25) (25) (25) (25) (25) (25) (25) (25) (25) (25) (25) manufactured home C C C Isolation and (36) (36) (36) quarantine facilities 6 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!41 5/D/b SECTION 4. Î Amendment KCC 15.04.030. Section 15.04.030 of the Kent City Code, entitled ÐResidential land use development conditionsÑ is hereby amended as follows: Section 15.04.030. Residential land use development conditions. 1. Dwelling units, limited to not more than one per establishment, for security or maintenance personnel and their families, when located on the premises where they are employed in such capacity. No other residential use shall be permitted. 2. Multifamily residential uses, or other residential facilities where allowed, are only permissible in a mixed-use overlay and must be included within a mixed-use development. 3. Assisted living facilities, residential facilities with health care, and independent senior living facilities, when not combined with commercial or office uses, require a minor conditional use permit and are subject to the following conditions: a. Must be located within one-half mile of publicly accessible amenities in at least three of the following categories, as determined by the economic and community development director. The distance shall be measured as the shortest straight-line distance from the property line of the proposed facility to the property line of the entities listed below: i. Public park or trail, as identified in the cityÓs most recently adopted park and open space plan, or owned or maintained by any agency of the state, or any political subdivision thereof; 7 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!42 5/D/b ii. Preschool, elementary, or secondary school (public or private); iii. Indoor recreational center (community center, senior center, physical recreation facility, bingo or casino hall); iv. Church, religious institution, or other place of worship; v. Cultural arts center (theater, concert hall, artistic, cultural, or other similar event center); vi. Retail services, including, but not limited to: medical services; food and beverage establishments; shopping centers; or other commercial services that are relevant (reasonably useful or germane) to the residents of the proposed facility, as determined by the cityÓs economic and community development director. b. Alternatively, if the facility provides amenities in one or more of the categories listed in subsection (3)(a) of this section on the ground floor of the facility itself, oriented towards the public (meaning that they are visible, accessible, and welcoming), the number of other amenities to which a half-mile proximity is required may be reduced, at the discretion of the cityÓs economic and community development director. 4. Multifamily residential uses, or other residential facilities where allowed, when established in buildings with commercial or office uses, and prohibited on the ground floor. 8 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!43 5/D/b 5. Multifamily residential uses, or other residential facilities where allowed, when not combined with commercial or office uses. 6. Existing dwellings may be rebuilt, repaired, and otherwise changed for human occupancy. Accessory buildings for existing dwellings may be constructed subject to the provisions of KCC 15.08.160. 7. Transitional housing facilities, limited to a maximum of 20 residents at any one time, plus up to four resident staff. 8. Accessory structures composed of at least two walls and a roof, not including accessory uses or structures customarily appurtenant to agricultural uses, are subject to the provisions of KCC 15.08.160. 9. Farm dwellings appurtenant to a principal agricultural use for the housing of farm owners, operators, or employees, but not accommodations for transient labor. 10. Accessory dwelling units shall not be included in calculating the maximum density. Accessory dwelling units are allowed only on the same lot with a principally permitted detached single-family dwelling unit, and are subject to the provisions of KCC 15.08.160 and 15.08.350. 11. Customary incidental home occupations subject to the provisions of KCC 15.08.040. 12. \[Reserved\] Multifamily buildings and transitional housing are only allowed on parcels where hotels or motels exist as of August 17, 2021, and are subject to a maximum dwelling unit density that is equal to the number of hotel rooms. (For transitional housing, density shall be calculated based 9 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!44 5/D/b on beds rather than dwelling units.) Replacement and remodel of existing hotels and motels are both allowed, and new or reconstructed development is not limited to the same footprint or height as existing buildings. Multifamily buildings and transitional housing are governed by the density limit described herein as well as the development standards in the zoning district. 13. Subject to the combining district requirements of the mobile home park code, Chapter 12.05 KCC. 14. Accessory living quarters are allowed per the provisions of KCC 15.08.359. 15. \[Reserved\]. 16. Recreational vehicle storage is permitted as an accessory use in accordance with KCC 15.08.080. 17. Accommodations for farm operators and employees, but not accommodations for transient labor. 18. Other accessory uses and buildings customarily appurtenant to a permitted use, except for onsite hazardous waste treatment and storage facilities, which are not permitted in residential zones. 19. The following zoning is required to be in existence on the entire property to be rezoned at the time of application for a rezone to an MR-T zone: SR-8, MR-D, MR-G, MR-M, MR-H, NCC, CC, GC, DC, or DCE. 10 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!45 5/D/b 20. All multifamily townhouse developments in an MR-T zone shall be recorded as townhouses with ownership interest, as defined in KCC 15.02.525.1, prior to approval of a certificate of occupancy by the city. 21. \[Reserved\]. 22. One duplex per lot is permitted. 23. Secure community transition facilities are only permitted within the boundaries depicted on the following map, and only with a conditional use permit: 24. A secure community transition facility shall also comply with applicable state siting and permitting requirements pursuant to Chapter 71.09 RCW. Secure community transition facilities are not subject to the siting criteria of KCC 15.08.280 for class III group homes, but they are subject to a 600-foot separation from any other class II or III group home. In no case shall a secure community transition facility be sited adjacent to, 11 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!46 5/D/b immediately across the street or parking lot from, or within the line of sight of risk-potential activities or facilities in existence at the time a site is listed for consideration. Within the line of sight means that it is possible to reasonably visually distinguish and recognize individuals. For the purposes of granting a conditional use permit for siting a secure community transition facility, the hearing examiner shall consider an unobstructed visual distance of 600 feet to be within the line of sight. During the conditional use permit process for a secure community transition facility, the line of sight may be considered to be less than 600 feet if the applicant can demonstrate that visual barriers exist or can be created that would reduce the line of sight to less than 600 feet. This distance shall be measured by following a straight line, without regard to intervening buildings, from the nearest point of the property or parcel upon which the proposed use is to be located, to the nearest point of the parcel or property or the land use district boundary line from which the proposed use is to be separated. For the purpose of granting a conditional use permit for a secure community transition facility, the hearing examiner shall give great weight to equitable distribution so that the city shall not be subject to a disproportionate share of similar facilities of a statewide, regional, or countywide nature. 25. A designated manufactured home is a permitted use with the following conditions: a. A designated manufactured home must be a new manufactured home; b. The designated manufactured home shall be set upon a permanent foundation, as specified by the manufacturer, and the space from the bottom of the home to the ground shall be enclosed by concrete or an approved concrete product that can be either load-bearing or decorative; 12 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!47 5/D/b c. The designated manufactured home shall comply with all city design standards applicable to all other single-family homes; d. The designated manufactured home shall be thermally equivalent to the State Energy Code; and e. The designated manufactured home shall meet all other requirements for a designated manufactured home as defined in RCW 35.63.160. 26. Multifamily dwellings shall be allowed only within the Kent downtown districts outlined in the downtown subarea action plan and shall be condominiums recorded pursuant to Chapter 64.32 or 64.34 RCW or similar dwelling units with ownership interest and recorded as such prior to approval of a certificate of occupancy by the city. 27. Within subdivisions, as defined by KCC 12.04.025, vested after March 22, 2007, or altered to comply with zoning and subdivision code amendments effective after March 22, 2007, 25 percent of the total number of permitted dwelling units may be duplex or triplex townhouse structures. 28. Live-work units; provided, that the following development standards shall apply for live-work units, in addition to those set forth in KCC 15.04.190: a. The unit shall contain a cooking space and sanitary facility in conformance with applicable building standards; 13 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!48 5/D/b b. Adequate and clearly defined working space must constitute no less than 50 percent of the gross floor area of the live-work unit. Said working space shall be reserved for and regularly used by one or more persons residing there; c. At least one resident in each live-work unit shall maintain at all times a valid city business license for a business on the premises; d. Persons who do not reside in the live-work unit may be employed in the live-work unit when the required parking is provided; e. Customer and client visits are allowed when the required parking is provided; f. No portion of a live-work unit may be separately rented or sold as a commercial space for a person or persons not living on the premises, or as a residential space for a person or persons not working on the premises; g. \[Reserved\]; h. Construct all nonresidential space, to the maximum allowed, to commercial building standards; and i. Provide an internal connection between the residential and nonresidential space within each unit. 29. Subject to the maximum permitted density of the zoning district. For assisted living facilities, residential facilities with health care, and independent senior living facilities, each residential care unit is considered 14 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!49 5/D/b one dwelling unit for purposes of density calculations. For transitional housing, one bed is considered one dwelling unit for the purposes of density calculations. 30. Conditional use when the number of residents exceeds 20 at any one time or more than four resident staff. 31. Emergency housing and emergency shelter facilities are allowed in the MR-D, MR-G, MR-M, and MR-H zoning districts, in conjunction with an approved conditional use permit that satisfies the below conditions, and must satisfy the requirements of RCW 35A.21.360(10) prior to opening. a. General conditions. Emergency housing and emergency shelter facilities are subject to the following general conditions: i. The emergency housing or shelter facility must be located on the same lot as an actively operating church or similar religious institution. ii. At the time of application for the conditional use permit, there shall be no other approved emergency housing or shelter facility located within 1,000 feet of the proposed emergency housing or shelter facility site. For the purposes of this subsection, distance shall be measured in a straight line between the closest property line of the existing facility and the closest property line of the proposed facility. For purposes of this section, if the city receives applications for proposed facilities that are within 1,000 feet of each other, the first complete application received by the city shall be given priority. 15 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!4: 5/D/b iii. An emergency housing facility and an emergency shelter facility may not be permitted on the same lot simultaneously. iv. Emergency housing and shelter facilities shall be permitted to operate for a maximum of 90 consecutive days, and there shall be a minimum period of 90 consecutive days between operational periods during which the emergency housing or shelter facility does not operate. The 90-day period of nonoperation shall apply to the operation of an emergency housing facility followed by an emergency shelter facility and vice versa. v. The building footprint of the emergency housing or shelter facility cannot exceed the building footprint of the church or similar religious institution that exists on the same lot. vi. The church or similar religious institution on the same lot as the emergency housing or shelter facility shall be primarily responsible for the operation and maintenance of the facility itself, as well as the conduct of the residents of the facility on and in the immediate vicinity of the lot, to the maximum extent permitted by law, regardless of whether the organization contracts with a third party for the provision of any services related to the facility itself or its residents. vii. The emergency housing or shelter facility shall comply with the setbacks and landscaping requirements for churches, as identified in KCC 15.08.020(A). viii. The possession or use of illegal drugs at an emergency housing or shelter facility or the property occupied by the facility is prohibited. 16 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!51 5/D/b ix. Emergency housing or shelter facilities shall be responsible for the safety of residents of the facility, and shall establish a plan to remove individuals who present a threat to other residents or the property of other residents. x. In the event of a public health emergency, the city may require an emergency response plan that is in substantial compliance with relevant guidance and requirements issued by Public Health Î Seattle and King County in response to the public health emergency. xi. Emergency housing and shelter facilities must comply with all applicable fire and building codes set forth in Chapters 13.01 and 14.01 KCC. xii. The church or religious institution must provide the city written documentation of the following: (a) A description of the proposed staffing and operational characteristics, including confirmation of sanitation and basic safety measures required for emergency shelters. (b) A description of the proposed population to be served and code of conduct to be observed including conflict resolution steps. (c) Criteria for rejection or removal of an individual seeking access to the facility. (d) A plan for managing the exterior appearance of the proposed site including trash/litter. 17 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!52 5/D/b (e) A phone number, email, and point of contact at the site of the facility for the community to report concerns. (f) A plan for addressing reported concerns and documenting resolution, and making this information publicly available. (g) A proposed site plan showing compliance with all requirements set forth in this subsection (31) and applicable fire and building codes set forth in Chapters 13.01 and 14.01 KCC. xiii. Emergency housing and shelter facilities must have two naloxone (Narcan) kits onsite, and staff must be trained in how to administer the naloxone (Narcan). xiv. The possession of any of the weapons described in RCW 9.41.280(1) at an emergency housing or shelter facility or the property occupied by the facility is prohibited. b. Emergency housing facilities Î Additional conditions. Emergency housing facilities must operate pursuant to an agreement with the city, approved by the director of economic and community development, and are subject to the following additional conditions: i. The emergency housing facility must be located within a permanent, enclosed building. ii. The emergency housing facility must be located on a lot that is a minimum of one acre in size. 18 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!53 5/D/b c. Emergency shelter facilities Î Additional conditions. Emergency shelter facilities must be located within a temporary structure as described below, and are subject to the following additional conditions: i. Emergency shelter facilities are limited to a maximum sleeping occupancy of 35 people. The design of the temporary structure shall include an occupant load factor of a minimum of 50 square feet per occupant and a three-foot aisle around the entire inside perimeter of the tent. ii. The emergency shelter facility must be located on a lot that is a minimum of two acres in size. iii. Emergency shelter facilities must be within a single, large temporary enclosure, such as a tensile membrane structure, or within multiple identical temporary enclosures, such as matching vinyl canvas tents, that are a minimum of 400 square feet in size. If the floor of a temporary enclosure does not provide insulation from the ground, camping cots or other off-ground sleeping structures must be provided. The use of small, individual tents or makeshift structures including, without limitation, those created with tarps or plastic is prohibited. iv. Gasoline-powered generators are prohibited. v. Smoking or open flames inside the temporary structure are prohibited, and the use of portable heaters within personal tents is prohibited. All heating equipment shall be in accordance with the adopted fire code. vi. Emergency shelter facilities shall provide sanitation and basic safety measures including the following: 19 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!54 5/D/b (a) One portable or permanent toilet per 20 persons at a minimum, with a handwashing station at each toilet. (b) Rodent-proof litter receptacles and food storage containers. (c) Two large first-aid kits that include emergency eye wash bottles. (d) Secured area for dry supplies storage (blankets, clothing, food, first-aid). (e) Covered kitchen area at least 20 feet from any sleeping areas, with handwashing and dishwashing stations stocked with soap. (f) Cleaning supplies including work gloves, disposable gloves, trash grabber-tool, disinfectant, hand sanitizer, masks, buckets, paper towels, etc. (g) Feminine hygiene products. (h) Three- to four-foot wide aisle between sleeping structures so as to be ADA compliant and accessible by emergency services personnel. 32. The following restrictions apply to all group homes: 20 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!55 5/D/b a. A group home is considered a single-family residential use and shall not be combined with another residential use on the same parcel including, but not limited to, a communal residence or short-term rental; b. A city of Kent business license is required in accordance with Chapter 5.01 KCC; c. The applicant is responsible for obtaining any relevant required state licenses and providing an up-to-date copy of any relevant up-to-date state license, or proof one is not required by the state, to the city of Kent prior to approval of a city business license; d. Family members of the provider may live in the group home, but such members are limited only to a spouse and children of the provider or spouse, and are subject to the background check requirements of WAC 388-73-10166 and 388-76-10161; and e. An accessory dwelling unit is permitted only if used as part of the operation of a group home and may not be leased or sub-leased to a separate family. f. Group homes functioning as permanent supportive housing are subject to a spacing requirement as follows: At the time of application for business license, there shall be no other approved group home functioning as permanent supportive housing located within 1,000 feet of the proposed group home functioning as supportive housing. There shall also be no public schools within 1,000 feet of the proposed group home functioning as supportive housing. For the purposes of this subsection, distance shall be measured in a straight line between the closest property line of the existing facility and the closest property line of the proposed facility. For purposes of 21 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!56 5/D/b this section, if the city receives applications for proposed facilities that are within 1,000 feet of each other, the first complete application received by the city shall be given priority. 33. The following restrictions apply to all communal residences: a. A city of Kent business license is required in accordance with Chapter 5.01 KCC; b. No more than three rooms within the home or accessory structure may be separately leased or sub-leased; and c. Each room being leased or sub-leased shall have adequate space, light, electricity, heating, emergency egress, a smoke detector, and access to adequate sanitation and eating facilities pursuant to the International Residential Code and International Property Maintenance Code as adopted in Chapter 14.01 KCC. Adequate space means floor area of no less than 70 square feet in size, no less than seven feet of ceiling height and shall not have any horizontal dimension less than seven feet. Egress means one emergency escape rescue opening at least 5.7 square feet, 24 inches high and 20 inches wide. 34. The following restrictions apply to short-term rentals: a. A city of Kent business license is required in accordance with Chapter 5.01 KCC; b. The home shall be occupied by the owner or a nontransient tenant for at least six months of each year; 22 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!57 5/D/b c. No more than three rooms within the home or accessory structure may be offered as short-term rentals; and d. The applicant is responsible for complying with the short-term rental requirements of Chapter 64.37 RCW. 35. Subject to an approved conditional use permit meeting the conditions set forth below, emergency housing facilities are allowed in the DC, DCE, MTC-1, MTC-2, and MCR, CM, GC and I1 zoning districts, and emergency shelters are not allowed in these same districts. Prior to opening, the requirements of RCW 35A.21.360(10) must be satisfied, whether or not the owner or operator is a religious organization. a. General conditions. Emergency housing facilities are subject to the following additional conditions: i. The emergency housing facility must be located within a permanent, enclosed building. ii. The emergency housing facility must be located on a lot that is a minimum of one acre in size. iii. Emergency housing facilities must operate pursuant to an agreement with the city, approved by the director of economic and community development. iv. At the time of application for the conditional use permit, there shall be no other approved emergency housing or shelter facility located within 1,000 feet of the proposed emergency housing facility site. For the purposes of this subsection, distance shall be measured in a straight 23 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!58 5/D/b line between the closest property line of the existing facility and the closest property line of the proposed facility. For purposes of this section, if the city receives applications for proposed facilities that are within 1,000 feet of each other, the first complete application received by the city shall be given priority. v. Emergency housing facilities shall be permitted to operate for a maximum of 90 consecutive days, and there shall be a minimum period of 90 consecutive days between operational periods during which the emergency housing facility does not operate. The 90-day period of nonoperation shall apply to the operation of any emergency housing facility followed by an emergency shelter facility and vice versa. vi. The person or organization that owns or operates the facility shall be primarily responsible for the operation and maintenance of the facility itself, as well as the conduct of the residents of the facility on and in the immediate vicinity of the lot, to the maximum extent permitted by law, regardless of whether the person or organization contracts with a third party for the provision of any services related to the facility itself or its residents. vii. The possession or use of illegal drugs at an emergency housing facility or the property occupied by the facility is prohibited. viii. Emergency housing facilities shall be responsible for the safety of residents of the facility, and shall establish a plan to remove individuals who present a threat to other residents or the property of other residents. 24 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!59 5/D/b ix. In the event of a public health emergency, the city may require an emergency response plan that is in substantial compliance with relevant guidance and requirements issued by Public Health Î Seattle and King County in response to the public health emergency. x. Emergency housing facilities must comply with all applicable fire and building codes set forth in Chapters 13.01 and 14.01 KCC. xi. The owner or operator of the emergency housing facility must provide the city written documentation of the following: (a) A description of the proposed staffing and operational characteristics. (b) A description of the proposed population to be served and code of conduct to be observed including conflict resolution steps. (c) Criteria for rejection or removal of an individual seeking access to the facility. (d) A plan for managing the exterior appearance of the proposed site including trash/litter. (e) A phone number, email, and point of contact at the site of the facility for the community to report concerns. (f) A plan for addressing reported concerns and documenting resolution, and making this information publicly available. 25 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!5: 5/D/b (g) A proposed site plan showing compliance with all requirements set forth in subsection (35) of this section and applicable fire and building codes set forth in Chapters 13.01 and 14.01 KCC. xii. Emergency housing facilities must have two naloxone (Narcan) kits on site, and staff must be trained in how to administer the naloxone (Narcan). xiii. The possession of any of the weapons described in RCW 9.41.280(1) at an emergency housing or shelter facility or the property occupied by the facility is prohibited. 36. Isolation and quarantine facilities are subject to the following general conditions: a. An isolation and quarantine facility may operate under a temporary use permit for 180 days as authorized by KCC 15.08.205. Any use beyond 180 days requires a conditional use permit in accordance with KCC. b. A minimum six-foot-tall perimeter fence with controlled access shall be installed prior to operation of the facility. c. On-site security personnel shall be present 24 hours a day, seven days a week to discourage quarantined or isolated individuals from leaving the facility and to control access. d. The operator shall provide meals, medical services, supplies, counseling, and other services as needed to individuals housed at the facility. 26 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!61 5/D/b e. The operator shall provide any necessary medical transportation service. f. The operator shall provide transportation for residents to and from the facility to ensure they are not reliant on public transportation. g. The possession or use of illegal drugs at an isolation and quarantine facility or the property occupied by the facility is prohibited. h. The facility will comply with applicable state and local building, plumbing, electrical, mechanical, utilities, and fire code requirements during operation of the temporary quarantine and isolation facility. i. Prior to the issuance of a temporary use permit or a conditional use permit, the operator of the isolation and quarantine facility shall provide the city a written operational plan that includes: i. A plan for meeting the general conditions listed in subsection (36) of this section. ii. A description of the proposed staffing and operational characteristics. iii. A description of the proposed population to be served. iv. A phone number, email, and point of contact at the site of the facility for the community to report concerns. 27 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!62 5/D/b v. A plan for addressing reported concerns and documenting resolution, and making this information publicly available. vi. A plan for transporting individuals back to their location of residence following the completion of the isolation or quarantine period. SECTION 5. Î Severability. If any one or more section, subsection, or sentence of this ordinance is held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this ordinance and the same shall remain in full force and effect. SECTION 6. Î Corrections by City Clerk or Code Reviser. Upon approval of the city attorney, the city clerk and the code reviser are authorized to make necessary corrections to this ordinance, including the correction of clerical errors; ordinance, section, or subsection numbering; or references to other local, state, or federal laws, codes, rules, or regulations. SECTION 7. Î Effective Date. This ordinance shall take effect and be in force 30 days from and after its passage, as provided by law. August 17, 2021 DANA RALPH, MAYOR Date Approved ATTEST: August 17, 2021 KIMBERLEY A. KOMOTO, CITY CLERK Date Adopted August 20, 2021 Date Published 28 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!63 5/D/b APPROVED AS TO FORM: ARTHUR ÐPATÑ FITZPATRICK, CITY ATTORNEY 29 Amend Chapter 15 KCC - Re: Emergency Shelters and Housing Buubdinfou;!Psejobodf!5521!!)38:5!;!Psejobodf!Bnfoejoh!Dibqufs!26!pg!uif!Lfou!Djuz!Dpef!dpotjtufou!xjui!Ipvtf!Cjmm!2331!—!Bepqu* Qbdlfu!Qh/!64 5/E FINANCE DEPARTMENT Paula Painter, CPA 220 Fourth Avenue South Kent, WA 98032 253-856-5264 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: Consolidating Budget Adjustment Ordinance for Adjustments between April 1, 2021 and June 30, 2021 - Adopt MOTION: I move to adopt Ordinance No. 4411 consolidating budget adjustments made between April 1, 2021 and June 30, 2021, reflecting an overall budget increase of $23,845,656. SUMMARY: Authorization is requested to approve the technical gross budget adjustment ordinance reflecting an overall budget increase of $23,845,656. Adjustments totaling $10,642,160 have previously been approved by Council and are summarized as follows: A total of $8,127,130 in grants: · $7,350,000 KC Flood Control Grant for the Milwaukee II Levee project thth · $700,000 WSDOT Grant for the South 212 (EVH-76) project · $77,130 in other grants including Community Immersion Program ($50K), OPD Indigent Counsel Grant ($12K), Washington State Boat Grant ($10K), & KC Youth Marijuana Prevention ($5K) A total of $2,515,030 in carryforward budgets for Parks, Human Services and Facilities that were previously authorized in 2020. Highlights summarized by fund include: · General Fund: $473K in various Parks and Human Services program spending · · Management Operating Projects Fund: $70K for a Homeless Planner · $340K for roof repairs, $225K for a Facilities Masterplan update, $190K for HVAC lifecycle, $194K for public buildings major maintenance, $140K for floor covering replacements, and $100K in kitchen & parking lot lifecycle projects The remaining adjustments totaling $13,203,496 have not been previously approved by Council and include the following: · $4,400,000 transfer of General Fund reserves to the Liability Insurance Fund to cover a shortfall due to rising costs of liability insurance, claims experience and required fund reserves Qbdlfu!Qh/!65 5/E · $4,126,400 to establish the budget for revenues from the new HB 1590 Affordable Housing Sales Tax and adjust budgeted HB 1406 revenues as follows: o $3.4M for the transfer of 60% of anticipated revenues ($1.7M) to a capital project for affordable housing and mental health facility projects and the use of those funds within the project ($1.7M). o $1M to add to the already budgeted funds representing 40% of revenues to be used for operating costs related to mental health and housing- related services. o $(260K) reduction in the transfer of budgeted HB 1406 Affordable Housing Sales Tax revenues ($130K) and use of those funds ($130K) that should be HB 1590 related · $1,783,180 to set up a transfer of Cable Utility Tax revenues, now required to be receipted in the GF, to the IT Internal Services Fund where it was originally budgeted · $1,500,000 for the transfer of Drainage fund balance ($750K) and use of those funds ($750K) for the Mill Creek Culvert Cleaning project · $719,400 for the transfer of 2020 residual Surface Water Utility Taxes to the Unallocated Streets Project ($240K) and the subsequent transfer from Unallocated to the Residential Streets project ($240K) and use of those funds in the project ($240K). · $442,000 for transfers of utility funds ($181K) and uses of those and current funds for a Radio Replacement project ($107K), Master Program Logic Controller ($30K), and Water Main Replacement ($124K). · $270,200 use of Facilities funds ($220K) and KC Levy funds ($50K) for the Driving Range Expansion/Remodel project. o $174,600 for the transfer of 2020 residual B&O tax ($87K) and use of th those funds on 4 & Willis ($32K) and for Parks Planning Administration ($55K). · $(197,150) reduction to the Lake Fenwick Aeration System project due to an amendment to the 2019 KC SROF funds allocation. · $(15,134) net decrease due to the elimination of the ECD/LTAC allocation ($50K), offset by the allocation of 40% of a Project Manager S&B to the Tiburon project ($35k). BUDGET IMPACT: These expenditures are funded by grants, existing fund balance, or other new revenues. ATTACHMENTS: 1. Consolidating Budget Adjustment Ordinance Q2 2021 (PDF) Qbdlfu!Qh/!66 5/E/b ORDINANCE NO. 4411 AN ORDINANCE of the City Council of the City of Kent, Washington, approving the consolidating budget adjustments made between April 1, 2021 and June 30, 2021, reflecting an overall budget increase of $23,845,656. RECITALS A. Expenditures as classified in the final, adopted budget constitute the city’s appropriations for that year. After adoption, there are a variety of events that will precipitate the need to amend the adopted budget, such as grant awards, bonds issuance, collective bargaining agreements and additional budget requests. These modifications are periodically consolidated into a supplemental budget adjustment ordinance amending the original adopted budget. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: ORDINANCE SECTION 1. – Budget Adjustments. The 2021-2022 biennial budget is amended to include budget fund adjustments for the Second Quarter of 2021 from April 1 to June 30, 2021, as summarized and set forth in Exhibit “A,” which is attached and incorporated into this ordinance. Except 1 2021-2022 Budget Adjustment Second Quarter 2021 Buubdinfou;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!R3!3132!!)38:6!;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!gps!Bekvtunfout Qbdlfu!Qh/!67 5/E/b as amended by this ordinance, all terms and provisions of the 2021-2022 biennial budget Ordinance No. 4381, as amended by Ordinance No. 4404, shall remain unchanged. SECTION 2. – Severability. If any one or more section, subsection, or sentence of this ordinance is held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this ordinance and the same shall remain in full force and effect. SECTION 3. – Corrections by City Clerk or Code Reviser. Upon approval of the City Attorney, the City Clerk and the Code Reviser are authorized to make necessary corrections to this ordinance, including the correction of clerical errors; ordinance, section, or subsection numbering; or references to other local, state, or federal laws, codes, rules, or regulations. SECTION 4. – Effective Date. This ordinance shall take effect and be in force five days after publication, as provided by law. August 17, 2021 DANA RALPH, MAYOR Date Approved ATTEST: August 17, 2021 KIMBERLEY A. KOMOTO, CITY CLERK Date Adopted August 20, 2021 Date Published APPROVED AS TO FORM: ARTHUR “PAT” FITZPATRICK, CITY ATTORNEY 2 2021-2022 Budget Adjustment Second Quarter 2021 Buubdinfou;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!R3!3132!!)38:6!;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!gps!Bekvtunfout Qbdlfu!Qh/!68 5/E/b Exhibit A City of Kent Budget Adjustment Ordinance Adjustments from April 1, 2021 to June 30, 2021 Total PreviouslyApproval Fund TitleAdjustment ApprovedRequested Ordinance General Fund 485,010 6,270,480 6,755,490 Street Fund- (52,200) (52,200) Lodging Tax Fund- (50,000) (50,000) Capital Resource Fund393,570 - 393,570 Criminal Justice Fund65,130 - 65,130 Housing & Community Development Fund- 4,126,226 4,126,226 Management Operating Projects Fund70,000 - 70,000 Street Capital Projects700,000 811,490 1,511,490 Parks Capital Projects- 55,410 55,410 Technology Capital Projects- 35,040 35,040 Water Operating Fund- 154,000 154,000 Sewerage Operating Fund- 135,000 135,000 Drainage Operating Fund7,350,000 1,447,850 8,797,850 Golf Fund- 270,200 270,200 Facilities Management Fund1,578,450 - 1,578,450 Total10,642,160 13,203,496 23,845,656 Buubdinfou;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!R3!3132!!)38:6!;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!gps!Bekvtunfout Qbdlfu!Qh/!69 5/E/b Budget Adjustment Detail for Budget Changes April 1, 2021 to June 30, 2021 Approval Previously Not Previously Total Date or Approved by Approved by Adjustment Other FundCouncil Council Ordinance General Fund 12,000 87,300 4,400,000 1,783,180 473,010 Total General Fund 485,010 6,270,480 6,755,490 Street Fund (300,000)(300,000) 239,800239,800 41008,000 8,000 Total Street Fund (52,200)- (52,200) Lodging Tax Fund (50,000) Total Lodging Tax Fund - (50,000) (50,000) Capital Resource Fund 2020393,570 393,570 Total Capital Resource Fund393,570 - 393,570 Criminal Justice Fund 50,000 10,130 5,000 Total Criminal Justice Fund -65,130 65,130 Housing & Community Development Fund 4,126,4004,126,400 (174)(174) Total Housing & Community Development Fund- 4,126,226 4,126,226 Management Operating Projects Fund 70,00070,000 Total Management Operating Projects Fund70,000 - 70,000 Street Capital Projects 1100239,800 239,800 Transfer unallocated funds to Residential Streets project 239,800239,800 Use of unallocated funds in the Residential Streets project 1100300,000 300,000 Reallocation of Unallocated B&O for 4th & Willis Roundabout 100031,890 31,890 Use residual 2020 B&O revenues for 4th & Willis Roundabout 700,000700,000 811,490700,000 1,511,490 Total Street Capital Projects Fund Parks Capital Projects 100055,410 55,410 Total Parks Capital Projects - 55,410 55,410 Technology Capital Projects 35,04035,040 Total Technology Capital Projects - 35,040 35,040 Water Operating Fund 430015,000 15,000 440015,000 15,000 430080,000 80,000 440036,000 36,000 11008,000 8,000 Total Water Operating Fund - 154,000 154,000 Buubdinfou;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!R3!3132!!)38:6!;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!gps!Bekvtunfout Qbdlfu!Qh/!6: 5/E/b Budget Adjustment Detail for Budget Changes April 1, 2021 to June 30, 2021 Approval Previously Not Previously Total Date or Approved by Approved by Adjustment Other FundCouncil Council Ordinance Sewerage Operating Fund 410015,000 15,000 60,00060,000 60,00060,000 Total Sewerage Operating Fund- 135,000 135,000 Drainage Operating Fund (197,150)(197,150) 7,350,0007,350,000 797,000797,000 47,00047,000 750,000750,000 410015,000 15,000 410036,000 36,000 Total Drainage Operating Fund7,350,000 1,447,850 8,797,850 Golf Fund 220,200220,200 50,00050,000 270,200- 270,200 Total Golf Fund Facilities Management Fund (190,200) (190,200) 4800 190,200 190,200 (30,000) (30,000) 4800 30,000 30,000 2020 1,578,450 1,578,450 Total Facilities Management Fund 1,578,450 - 1,578,450 Grand Total All Funds10,642,16013,203,496 23,845,656 Buubdinfou;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!R3!3132!!)38:6!;!Dpotpmjebujoh!Cvehfu!Bekvtunfou!Psejobodf!gps!Bekvtunfout Qbdlfu!Qh/!71 5/F FINANCE DEPARTMENT Paula Painter, CPA 220 Fourth Avenue South Kent, WA 98032 253-856-5264 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: INFO ONLY: June Financial Report SUMMARY: Michelle Ferguson, Financial Planning Manager, will report out the June 2021 financial report. ATTACHMENTS: 1. June 2021 Financial Report (PDF) Qbdlfu!Qh/!72 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Overview 20212021 Adj BudgetYTD Revenues 108,486,16051,138,474 Expenditures114,523,98046,393,563 Net Revenues Less Expenditures(6,037,820)4,744,911 Beginning Fund Balance 40,302,69940,302,699 Ending Fund Balance 34,264,87945,047,610 Required Ending Fund Balance Calculation Estimated Expenditures for 2021 (from above)114,523,980 18.0% 18% GF Ending Fund Balance20,614,316 Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Qbdlfu!Qh/!73 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Overview - Revenues 20212021 Revenue Categories Adj BudgetYTD Taxes: Property31,684,60017,016,862 Sales & Use19,132,66011,880,667 Utility19,408,1709,493,505 Business & Occupation17,000,0004,152,775 Other866,26098,907 Licenses and Permits6,786,9803,215,319 Intergovernmental Revenue2,745,5601,628,258 Charges for Services5,695,1402,201,913 Fines and Forfeitures1,158,500450,638 Miscellaneous Revenue2,630,590999,629 Transfers In1,377,700- Total Revenues108,486,16051,138,474 Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Qbdlfu!Qh/!74 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Revenues ($ in Thousands) All Revenues Sources Prior Year Budgeted Actual RevenuesRevenuesRevenues January6,8776,2045,898 February5,7365,4794,174 March6,7747,8766,127 April16,92517,71721,521 May8,5888,0537,927 June7,6916,5655,491 July6,3767,4940 August4,9955,6460 September5,3286,5970 October19,96318,7350 November8,2117,6200 December11,26710,5000 Total108,732108,48651,138 Property Tax Prior Year Budgeted Actual RevenuesRevenuesRevenues January0120 February247248217 March1,4611,0341,438 April9,32812,35913,218 May3,1992,3981,945 June2,242618198 July1961460 August1521170 September5386240 October10,67311,8140 November3,1092,0730 December2322420 Total31,37531,68517,017 Sales Tax Prior Year Budgeted Actual RevenuesRevenuesRevenues January2,1581,5001,802 February2,4251,8032,264 March2,1431,4931,786 April1,9291,3881,753 Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* May1,9591,6202,270 June2,1271,4362,005 July6391,3600 August1,9061,7030 September1,9091,5740 October1,8291,6260 November2,0531,7370 December2,5521,8930 Total23,63019,13311,881 Qbdlfu!Qh/!75 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Revenues ($ in Thousands) Utility Tax Prior Year Budgeted Actual RevenuesRevenuesRevenues January2,0331,9552,141 February1,7791,7661,215 March1,6271,6881,583 April1,8451,7711,700 May1,5811,5801,542 June1,4941,4691,312 July1,3301,5790 August1,4731,4870 September1,5191,7100 October1,5611,4610 November1,5071,5590 December1,2221,3840 Total18,97119,4089,494 Other Taxes Prior Year Budgeted Actual RevenuesRevenuesRevenues January23283 February132 March33230(156) April2,7652,6492,912 May8981,2211,008 June117205203 July2,9373,3370 August7728150 September921440 October2,9793,6470 November9247400 December3,6834,8720 Total15,20317,8664,252 Other Revenues (Intergovernmental, Licenses & Permits, Charges for Service, Fines & Forfeits, and Misc Revenues) Prior Year Budgeted Actual RevenuesRevenuesRevenues January2,6841,8751,672 February1,284852475 March1,5082,1441,476 Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* April1,0591,4581,938 May9511,2311,161 June1,7112,1131,773 July1,2751,4740 August6921,1220 September1,2721,9590 October2,9211,8060 November6181,2760 December3,5793,0860 Total19,55420,3948,496 Qbdlfu!Qh/!76 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Overview - Expenditures 20212021 Department Adj BudgetYTD City Council279,960141,346 Administration2,786,2701,306,339 Economic & Community Dev8,228,3803,565,186 Finance2,781,7801,320,109 Fire Contracted Services3,795,9001,847,083 Human Resources1,613,730744,723 Information Technology Law1,503,350683,278 Municipal Court3,793,4201,664,995 Parks, Recreation & Comm Svcs19,687,9307,794,928 Police45,548,79021,940,676 Public Works Non-Departmental24,504,4705,384,899 Total Expenditures114,523,98046,393,563 Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Qbdlfu!Qh/!77 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund 20182019202020212021 ActualActualActualAdj BudgetYTD Beginning Fund Balance19,987,82823,750,46134,399,77540,302,69940,302,699 Revenues Taxes: Property29,971,15530,731,78631,374,82731,684,600 17,016,862 Sales & Use24,699,30127,121,40023,629,97219,132,660 11,880,667 Utility19,289,16219,600,34718,970,71519,408,170 9,493,505 Business & Occupation9,422,04812,999,56414,784,79517,000,000 4,152,775 Other1,074,356963,837418,235866,260 98,907 Licenses and Permits7,557,6587,483,6437,223,4206,786,980 3,215,319 Intergovernmental Revenue7,919,8606,645,9623,196,7012,745,560 1,628,258 Charges for Services6,602,6817,996,8463,658,2325,695,140 2,201,913 Fines and Forfeitures1,360,9761,289,334776,9481,158,500 450,638 Miscellaneous Revenue2,642,5113,586,9791,954,9372,630,590 999,629 Transfers In950,000984,4112,743,5811,377,700 - Total Revenues111,489,706119,404,108108,732,365108,486,16051,138,474 Expenditures City Council344,160392,115384,062279,960141,346 Administration2,759,9742,768,2731,774,8082,786,2701,306,339 Economic & Community Dev6,681,6717,044,2176,711,4898,228,3803,565,186 Finance3,061,4723,236,9602,323,6362,781,7801,320,109 Fire Contracted Services3,619,3853,927,0883,674,4013,795,9001,847,083 Human Resources2,075,5532,047,1021,405,2191,613,730744,723 Information Technology506,265513,448172,932 Law1,673,4381,801,5071,452,0881,503,350683,278 Municipal Court3,442,1073,646,2753,402,3143,793,4201,664,995 Parks, Recreation & Comm Svcs17,992,17118,396,67816,631,89919,687,9307,794,928 Police39,315,95843,849,28943,464,67945,548,79021,940,676 Public Works1,155,5621,208,835629,087 Non-Departmental26,706,70220,332,20420,802,82624,504,4705,384,899 109,163,991102,829,440114,523,980 Total Expenditures109,334,41946,393,563 Net Revenues less Expenditures2,155,28810,240,1175,902,925(6,037,820)4,744,911 Ending Fund Balance22,143,11633,990,57840,302,69934,264,87945,047,610 Ending Fund Balance Detail: Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* General Fund Reserves21,202,35632,309,35838,885,46934,003,089 based on same year actuals/budget19.4%29.6%37.8%29.7% Restricted for Annexation940,7601,681,2201,417,230261,791 Qbdlfu!Qh/!78 5/F/b June 2021 Monthly Financial Report City of Kent, Washington General Fund Year-to-Year Month Comparison 201920202021% o2021-20f thru Junthru Junthru JunBudVarianceget Revenues Taxes: Property16,253,193 16,476,886 17,016,862 539,976 3.3%53.7% Sales & Use12,399,945 12,741,901 11,880,667 (861,234) -6.8%62.1% Utility9, 10,358,480881,918 9,493,505 (864,975) -8.4%48.9% Business & Occupation2,906,813 3,633,193 4,152,775 519,583 14.3%24.4% Other248,482 182,935 98,907 (84,027) -45.9%11.4% Licenses and Permits3,876,832 3,340,109 3,215,319 (124,790) -3.7%47.4% Intergovernmental Revenue3,991,314 1,804,489 1,628,258 (176,231) -9.8%59.3% Charges for Services3,874,747 2,031,042 2,201,913 170,871 8.4%38.7% Fines and Forfeitures660,227 498,130 450,638 (47,492) -9.5%38.9% Miscellaneous Revenue1,440,818 1,073,620 999,629 (73,991) -6.9%38.0% Transfers In37,631 450,000 - (450,000) -100.0% Total Revenues55,571,92252,590,78451,138,474(1,452,310)-2.8%47.1% Expenditures City Council 202,170195,302(60,824)-30.1%50.5% 141,346 Administration 837,1571,380,643 469,18256.0%46.9% 1,306,339 Economic & Community Dev 3,431,9913,430,662 133,1953.9%43.3% 3,565,186 Finance 1,129,1761,672,454 190,93416.9%47.5% 1,320,109 Fire Contracted Services 1,746,9311,806,340 100,1525.7%48.7% 1,847,083 Human Resources 818,7111,077,642(73,988)-9.0%46.1% 744,723 Information Technology 249,667250,835(249,667)-100.0%#DIV/0! - Law 766,698877,284(83,420)-10.9%45.5% 683,278 Municipal Court 1,668,6051,768,759(3,610)-0.2%43.9% 1,664,995 Parks, Recreation & Comm Svcs 7,965,7388,773,239(170,810)-2.1%39.6% 7,794,928 Police 21,380,88720,947,051 559,7902.6%48.2% 21,940,676 Public Works 629,087575,008(629,087)-100.0%#DIV/0! - Non-Departmental 6,122,4741,481,980(737,575)-12.0%22.0% 5,384,899 Total Expenditures44,237,19946,949,29346,393,563(555,730)-1.2%40.5% Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* *General Govt. includes City Council, Mayor/Clerk, HR, IT, & Finance Qbdlfu!Qh/!79 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Fund Balances 20212021 Estimated20212021Estimated BeginningEstimatedEstimatedEnding Fund Fund BalanceRevenuesExpendituresBalance Operating revenues and expenditures only; capital and non-capital projects are excluded. General Fund General Fund40,302,695112,900,790112,466,17040,737,315 Special Revenue Funds Street Fund3,989,03317,518,85017,647,6803,860,203 LEOFF 1 Retiree Benefits1,579,3841,272,4301,541,9801,309,834 Lodging Tax89,665239,110184,900143,875 Youth/Teen Programs75,355924,390924,39075,355 Capital Resources14,369,67416,449,06018,439,85012,378,884 Criminal Justice8,550,9038,193,6208,686,8508,057,673 ShoWare Operating2,984,8881,150,0001,646,0502,488,838 Other Operating568,456109,320109,220568,556 Debt Service Funds Councilmanic Debt Service2,380,7026,997,8407,204,6602,173,882 Special Assessments Debt Service126,555728,560858,320(3,205) Enterprise Funds Water Utility15,906,53229,573,29029,850,57015,629,252 Sewer Utility5,573,95333,234,64033,124,9005,683,693 Drainage Utility20,733,89023,688,63024,144,30020,278,220 Solid Waste Utility607,388675,220859,760422,848 Golf Complex1,602,2072,861,6604,653,490(189,623) Internal Service Funds Fleet Services1,965,7425,516,1006,202,8201,279,022 Central Services78,444309,530404,190(16,216) Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Information Technology1,632,52110,718,73010,784,9901,566,261 Facilities4,771,8996,785,3408,432,9203,124,319 Unemployment1,366,498148,630238,1401,276,988 Workers Compensation2,847,6231,159,6801,545,2402,462,063 Employee Health & Wellness7,399,18916,205,06015,771,0307,833,219 Liability Insurance1,968,2412,740,7102,331,5402,377,411 Property Insurance658,089588,620583,920662,789 Qbdlfu!Qh/!7: 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) 2019202020212021 ActualActualAdj BudgetYTD Operating revenues and expenditures only; capital and non-capital projects are excluded. In instances where expenditures exceed revenues, fund balance is being utilized. Special Revenue Funds Street Fund Revenues17,415,00019,350,92817,518,8506,825,237 Expenditures18,858,48619,205,26617,647,6805,741,453 Net Revenues Less Expenditures(1,443,485)145,662(128,830)1,083,784 LEOFF 1 Retiree Benefits Revenues1,401,7861,232,5751,272,430444,375 Expenditures1,352,6241,571,5851,541,980703,970 Net Revenues Less Expenditures49,162(339,010)(269,550)(259,595) Lodging Tax Revenues314,588158,384239,11072,870 Expenditures465,527270,532179,19088,573 Net Revenues Less Expenditures(150,940)(112,148)59,920(15,703) Youth/Teen Programs Revenues941,240897,527924,390505,542 Expenditures957,730691,260924,3903,900 Net Revenues Less Expenditures(16,490)206,267501,642 Capital Resources Revenues22,567,13022,885,70716,449,07012,137,401 Expenditures19,339,04627,520,42618,439,8502,850,621 Net Revenues Less Expenditures3,228,084(4,634,719)(1,990,780)9,286,779 Criminal Justice Revenues7,054,2228,673,7948,193,6304,284,247 Expenditures6,432,3778,504,6728,686,8503,194,751 Net Revenues Less Expenditures621,845169,122(493,220)1,089,496 ShoWare Operating Revenues1,456,3111,512,5891,150,000855 Expenditures1,089,7631,451,7521,646,0501,010,460 Net Revenues Less Expenditures366,54860,837(496,050)(1,009,605) Other Operating Revenues185,821105,155109,320 Expenditures178,558106,003109,32021,813 Net Revenues Less Expenditures7,263(848)(21,813) Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Debt Service Funds Councilmanic Debt Service Revenues10,266,9239,144,5876,997,8402,314,811 Expenditures9,802,0978,679,7617,204,6602,334,290 Net Revenues Less Expenditures464,826464,826(206,820)(19,479) Special Assessment Debt Service Revenues1,339,332784,469728,560391,624 Expenditures1,119,3931,386,712858,4203,055 Net Revenues Less Expenditures219,939(602,243)(129,860)388,569 Qbdlfu!Qh/!81 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) 2019202020212021 ActualActualAdj BudgetYTD Operating revenues and expenditures only; capital and non-capital projects are excluded. In instances where expenditures exceed revenues, fund balance is being utilized. Enterprise Funds Water Utility Revenues28,578,90329,573,42429,573,29014,768,325 Expenditures30,237,15626,464,13329,850,57010,635,878 Net Revenues Less Expenditures(1,658,253)3,109,291(277,280)4,132,448 Sewer Utility Revenues33,063,79833,513,29433,234,65016,981,032 Expenditures31,664,33932,252,70633,124,90015,199,051 Net Revenues Less Expenditures1,399,4581,260,588109,7501,781,981 Note: Sewer Utility was combined with Drainage Utility in 2018. Drainage Utility Revenues26,947,64424,537,48323,688,63011,752,115 Expenditures25,690,58721,804,80224,144,3009,350,603 Net Revenues Less Expenditures1,257,0572,732,681(455,670)2,401,512 Solid Waste Utility Revenues874,164837,309675,230338,022 Expenditures809,006876,871859,760505,533 Net Revenues Less Expenditures65,158(39,562)(184,530)(167,511) Golf Complex Revenues2,698,6095,938,1832,861,6601,190,485 Expenditures2,636,1103,070,8994,653,4903,046,240 Net Revenues Less Expenditures62,4992,867,283(1,791,830)(1,855,755) Internal Service Funds Fleet Services Revenues8,514,1595,478,5895,516,1002,818,010 Expenditures6,413,5006,559,5396,202,8202,179,978 Net Revenues Less Expenditures2,100,659(1,080,950)(686,720)638,031 Central Services Revenues367,717309,535428,030146,872 Expenditures326,927277,640404,190153,940 Net Revenues Less Expenditures40,79031,89523,840(7,068) Information Technology Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Revenues9,063,6039,062,09910,600,2305,258,232 Expenditures8,702,49010,531,89210,784,9905,428,777 Net Revenues Less Expenditures361,113(1,469,793)(184,760)(170,545) Facilities Revenues5,417,6086,327,1406,785,3402,781,633 Expenditures5,035,5055,125,0268,433,0202,429,070 Net Revenues Less Expenditures382,1031,202,114(1,647,680)352,563 Unemployment Revenues178,465166,229148,63077,800 Expenditures220,850151,350238,140121,551 Net Revenues Less Expenditures(42,384)14,879(89,510)(43,751) Qbdlfu!Qh/!82 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) 2019202020212021 ActualActualAdj BudgetYTD Operating revenues and expenditures only; capital and non-capital projects are excluded. In instances where expenditures exceed revenues, fund balance is being utilized. Workers Compensation Revenues1,289,3641,551,5221,159,680583,041 Expenditures1,928,1012,106,6161,545,240883,164 Net Revenues Less Expenditures(638,737)(555,093)(385,560)(300,124) Employee Health & Wellness Revenues15,629,64915,929,22416,205,0608,076,223 Expenditures13,786,30814,097,29815,771,0306,952,149 Net Revenues Less Expenditures1,843,3421,831,926434,0301,124,075 Liability Insurance Revenues2,798,49338,1047,140,7106,315,205 Expenditures1,753,5452,852,6652,331,5402,955,358 Net Revenues Less Expenditures1,044,947(2,814,561)4,809,1703,359,847 Property Insurance Revenues1,328,717578,755588,620307,102 Expenditures1,213,255587,011583,920314,895 Net Revenues Less Expenditures115,462(8,257)4,700(7,793) Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Qbdlfu!Qh/!83 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) Year-to-Year Month Comparison 2019202020212021-2020 thru Junthru Junthru JunVariance Operating revenues and expenditures only; capital and non-capital projects are excluded. Special Revenue Funds Street Fund Revenues6,949,0746,050,3516,825,237774,88612.8% Expenditures7,611,3525,314,8065,741,453426,6478.0% Net Revenues Less Expenditures(662,278)735,5451,083,784 LEOFF 1 Retiree Benefits Revenues95,355307,320444,375137,05544.6% Expenditures699,387788,181703,970(84,210)-10.7% Net Revenues Less Expenditures(604,032)(480,860)(259,595) Lodging Tax Revenues120,94885,45272,870(12,582)-14.7% Expenditures199,987159,96988,573(71,396)-44.6% Net Revenues Less Expenditures(79,039)(74,517)(15,703) Youth/Teen Programs Revenues478,257499,255505,5426,2871.3% Expenditures3,5453,90035510.0% Net Revenues Less Expenditures478,257495,710501,642 Capital Resources Revenues8,049,7239,967,60912,137,4012,169,79121.8% Expenditures3,161,1111,591,4382,850,6211,259,18479.1% Net Revenues Less Expenditures4,888,6128,376,1719,286,779 Criminal Justice Revenues2,606,1553,520,6924,284,247763,55421.7% Expenditures3,273,3662,755,7803,194,751438,97015.9% Net Revenues Less Expenditures(667,212)764,9121,089,496 ShoWare Operating Revenues132,763128,429855(127,574)-99.3% Expenditures529,590903,6251,010,460106,83611.8% Net Revenues Less Expenditures(396,827)(775,195)(1,009,605) Admissions Tax revenues received quarterly(April, July, September, January) Other Operating Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Revenues Expenditures72,67473,77721,813(51,964)-70.4% Net Revenues Less Expenditures(72,674)(73,777)(21,813) Combines several small programs, including City Art Program and Neighborhood Matching Grants Qbdlfu!Qh/!84 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) Year-to-Year Month Comparison 2019202020212021-2020 thru Junthru Junthru JunVariance Operating revenues and expenditures only; capital and non-capital projects are excluded. Debt Service Funds Councilmanic Debt Service Revenues2,510,9012,410,0932,314,811(95,282)-4.0% Expenditures2,533,4682,469,6982,334,290(135,408)-5.5% Net Revenues Less Expenditures(22,567)(59,605)(19,479) Debt service payments are generally due in June and December. Special Assessments Debt Service Revenues440,636234,489391,624157,13567.0% Expenditures436,072328,2573,055(325,202)-99.1% Net Revenues Less Expenditures4,564(93,768)388,569 Enterprise Funds Water Utility Revenues14,794,53213,933,33714,768,325834,9886.0% Expenditures10,427,37410,816,96310,635,878(181,085)-1.7% Net Revenues Less Expenditures4,367,1583,116,3754,132,448 Sewer Utility Revenues16,180,82316,477,44216,981,032503,5903.1% Expenditures14,355,10814,451,91415,199,051747,1375.2% Net Revenues Less Expenditures1,825,7152,025,5281,781,981 Note: Sewer Utility was combined with Drainage Utility in 2018. Drainage Utility Revenues12,372,97811,497,83011,752,115254,2852.2% Expenditures7,184,5318,472,9949,350,603877,60910.4% Net Revenues Less Expenditures5,188,4483,024,8362,401,512 Note: Sewer Utility was combined with Drainage Utility in 2018. Solid Waste Utility (3,420)-1.0% Revenues337,019341,442338,022 Expenditures371,946534,634505,533(29,101)-5.4% Net Revenues Less Expenditures(34,927)(193,192)(167,511) Golf Complex Revenues1,217,9344,464,4071,190,485(3,273,922)-73.3% Expenditures1,365,1061,210,1123,046,2401,836,129151.7% Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Net Revenues Less Expenditures(147,172)3,254,295(1,855,755) Internal Service Funds Fleet Services Revenues4,461,2762,688,3572,818,010129,6534.8% Expenditures3,475,1282,768,1372,179,978(588,158)-21.2% Net Revenues Less Expenditures986,148(79,780)638,031 Central Services Revenues190,040145,446146,8721,4261.0% Expenditures163,954133,662153,94020,27815.2% Net Revenues Less Expenditures26,08611,784(7,068) Qbdlfu!Qh/!85 5/F/b June 2021 Monthly Financial Report City of Kent, Washington Other Funds Overview (Revenues and Expenditures) Year-to-Year Month Comparison 2019202020212021-2020 thru Junthru Junthru JunVariance Operating revenues and expenditures only; capital and non-capital projects are excluded. Information Technology Revenues4,888,3264,665,9445,258,232592,28712.7% Expenditures4,013,0124,904,4565,428,777524,32110.7% Net Revenues Less Expenditures875,314(238,512)(170,545) Facilities Revenues2,627,0692,637,9002,781,633143,7335.4% Expenditures2,088,0392,196,8922,429,070232,17810.6% Net Revenues Less Expenditures539,030441,008352,563 Unemployment (4,403)-5.4% Revenues81,72582,20377,800 Expenditures123,733129,885121,551(8,333)-6.4% Net Revenues Less Expenditures(42,008)(47,682)(43,751) Workers Compensation Revenues612,554748,497583,041(165,456)-22.1% Expenditures574,702570,106883,164313,05854.9% Net Revenues Less Expenditures37,852178,390(300,124) Employee Health & Wellness Revenues7,566,2417,819,1598,076,223257,0643.3% Expenditures6,638,7906,208,3726,952,149743,77612.0% Net Revenues Less Expenditures927,4511,610,7871,124,075 Liability Insurance Revenues1,096,6001,302,2566,315,2055,012,949384.9% Expenditures1,398,3741,185,8052,955,3581,769,553149.2% Net Revenues Less Expenditures(301,775)116,4513,359,847 Property Insurance Revenues1,033,328290,581307,10216,5215.7% Expenditures501,304256,750314,89558,14522.6% Net Revenues Less Expenditures532,02433,831(7,793) Buubdinfou;!Kvof!3132!Gjobodjbm!Sfqpsu!!)38:7!;!JOGP!POMZ;!Kvof!Gjobodjbm!Sfqpsu* Qbdlfu!Qh/!86 5/G FINANCE DEPARTMENT Paula Painter, CPA 220 Fourth Avenue South Kent, WA 98032 253-856-5264 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: U.S. Small Business Administration Shuttered Venue Operators Grant for ShoWare Ratify the Shuttered Venue Operators Grant, authorize the Mayor to accept funds from the U.S. Small Business Administration in the amount of $3,050,440.65 for COVID-19 emergency assistance for the accesso ShoWare Center, and to authorize the Mayor to take all other acts necessary to allow the City to obtain the grant funds. SUMMARY: Live venue operators were among the businesses hardest hit by the COVID-19 pandemic and the widespread restrictions on public gatherings. To provide assistance to eligible entities, the Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, and amended by the American Rescue Plan Act. The program includes over $16 billion in grants to shuttered venues, to be administered include an award of $3,050,440.65 to the City of Kent for the accesso ShoWare Center. SVOG funds must be spent on eligible expenses incurred during the period that began on March 1, 2020 and ends on December 31, 2021. Eligible expenses for the accesso ShoWare Center include payroll costs, contractual agreements, utility payments, ordinary and necessary business expenses, and administrative costs. The need for ratification stems from the fact that the City only had one week to sign and return the Notice of Award. Staff received notification that the application for grant funds was approved on Saturday, July 17. There was also a technical issue that needed to be resolved prior to accepting the award. Staff received confirmation that the issue had been resolved on July 22. In order to receive the funds, the Notice of Award had to be executed by the City before July 24, 2021. Given the likelihood that Council would authorize the acceptance of funds, and the inability to obtain such Council authorization prior to the deadline, the Mayor executed the Notice of Award to ensure the accesso ShoWare Center did not miss out on the significant grant funding. The Mayor's execution of the Notice of Award will be ratified by this action. BUDGET IMPACT: Revenues of up to $3,050,440.65 to the City for eligible Qbdlfu!Qh/!87 5/G expense incurred by the accesso ShoWare Center. SUPPORTS STRATEGIC PLAN GOAL: Evolving Infrastructure - Connecting people and places through strategic investments in physical and technological infrastructure. Thriving City - Creating safe neighborhoods, healthy people, vibrant commercial districts, and inviting parks and recreation. Sustainable Services - Providing quality services through responsible financial management, economic growth, and partnerships. ATTACHMENTS: 1. Signed SVOG Award (PDF) Qbdlfu!Qh/!88 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!89 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!8: 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!91 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!92 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!93 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!94 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!95 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!96 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!97 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!98 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!99 5/G/b Buubdinfou;!Tjhofe!TWPH!Bxbse!!)38:8!;!V/T/!Tnbmm!Cvtjoftt!Benjojtusbujpo!Tivuufsfe!Wfovf!Pqfsbupst!Hsbou!gps!TipXbsf!—!Sbujgz0Bvuipsj{f* Qbdlfu!Qh/!9: 5/H INFORMATION TECHNOLOGY DEPARTMENT Mike Carrington 220 Fourth Avenue South Kent, WA 98032-5895 253-856-4600 DATE: August 10, 2021 TO: Kent City Council - Committee of the Whole SUBJECT: NetMotion Mobility Renewal - Authorize MOTION: I move to authorize the IT Director to purchase software through the cooperative purchasing agreement the state Department of Enterprise Services has with CDW Government, LLC, if those purchases are within the tate contract, which is in effect through January 7, 2022, or any later contract extension the state may authorize, subject to final terms and conditions acceptable to the IT Director and City Attorney. SUMMARY: The City has entered into an agreement with the state Department of the state publicly bids and enters into with various vendors. The state has, in turn, entered into an agreement with a national purchasing cooperative, the NASPO Cooperative Purchasing Organization, LLC, doing business as NASPO ValuePoint, a 501(c)(3) limited liability company that is a subsidiary organization of the National ocal governments, public educational entities and other agencies with purchasing power that allows them to leverage their spending through a single solicitation that obtains best value pricing and superior contract terms than the agencies could obtain on their own. Purchases of software are exempt from competitive bid requirements under KCC 3.70.110.D., as are purchases made through a purchasing cooperative under KCC 3.70.110.F. One contract that NASPO has entered into, and which the state DES has elected to - value-added reseller. This contract is currently in effect through January 7, 2022. Should the City purchase from CDW- the terms a participating addendum and the master contract are attached. CDW-G provides hardware, software licensing and professional services. In 2017, s cooperative purchasing agreement with CDW- authority level. The City has a current need to renew its existing NetMotion rior purchase in Qbdlfu!Qh/!:1 5/H authority. As such, Council approval is sought to authorize this current purchase, in addition to authorization for future purchases of CDW-G products, on an as-needed basis, so long as those future purchases are within established budgets and made during the term of the current contract. BUDGET IMPACT: This was budgeted in the IT maintenance account for the 2021/2022 Biennium Budget. SUPPORTS STRATEGIC PLAN GOAL: Innovative Government - Delivering outstanding customer service, developing leaders, and fostering innovation. Evolving Infrastructure - Connecting people and places through strategic investments in physical and technological infrastructure. ATTACHMENTS: 1. 2021-2022_CDW-G-NASPO NetMotion (PDF) Qbdlfu!Qh/!:2 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:3 5/H/b RVPUF!DPOGJSNBUJPO EFBS!DPEZ!LPQQFMNBO- Uibol!zpv!gps!dpotjefsjoh!DEX–H!gps!zpvs!dpnqvujoh!offet/!Uif!efubjmt!pg!zpvs!rvpuf!bsf!cfmpx/!Dmjdl! ifsf!up!dpowfsu!zpvs!rvpuf!up!bo!psefs/ RVPUF$RVPUFEBUFRVPUFSFGFSFODFDVTUPNFS$HSBOEUPUBM NDHO:99503903132OFUNPUJPO!3Z6133697%97-798/8: RVPUFEFUBJMT JUFNRUZDEX$VOJUQSJDFFYU/QSJDF OFUNPUJPO!DPNQMFUF!QUGN!DPOW!MJD!SOX 21147299273%89/61%89-846/61 Ngh/!Qbsu$;!ONDPNQDPOSOX 80203132!.!704103134 Fmfduspojd!ejtusjcvujpo!.!OP!NFEJB Dpousbdu;!Xbtijohupo!OWQ!Tpguxbsf!)BETQP27.241763!17127* %89-846/61 QVSDIBTFSCJMMJOHJOGPTVCUPUBM Cjmmjoh!Beesftt;%1/11 TIJQQJOH DJUZ!PG!LFOU %8-:63/3: TBMFTUBY BDDPVOUT!QBZBCMF 331!5UI!BWF!T %97-798/8: HSBOEUPUBM LFOU-!XB!:9143.69:6 Qipof;!)364*!967.6345 Qbznfou!Ufsnt;!Ofu!41!Ebzt.Hpwu!Tubuf0Mpdbm EFMJWFSUPQmfbtfsfnjuqbznfoutup; Tijqqjoh!Beesftt; DEX!Hpwfsonfou DJUZ!PG!LFOU 86!Sfnjuubodf!Esjwf JOGPSNBUJPO!UFD Tvjuf!2626 511!X!HPXF!TU Dijdbhp-!JM!71786.2626 LFOU-!XB!:9143.712: Tijqqjoh!Nfuipe;!FMFDUSPOJD!EJTUSJCVUJPO Offe!Bttjtubodf@!DEX–H!TBMFT!DPOUBDU!JOGPSNBUJPO Ebo!Gfsofs!})977*!576.::2:}ebogfsoAdex/dpn Uijt!rvpuf!jt!tvckfdu!up!DEX(t!Ufsnt!boe!Dpoejujpot!pg!Tbmft!boe!Tfswjdf!Qspkfdut!bu iuuq;00xxx/dexh/dpn0dpoufou0ufsnt.dpoejujpot0qspevdu.tbmft/btqy Gps!npsf!jogpsnbujpo-!dpoubdu!b!DEX!bddpvou!nbobhfs ª!3132!DEX–H!MMD-!311!O/!Njmxbvlff!Bwfovf-!Wfsopo!Ijmmt-!JM!71172!}!911/919/534: Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:4 Qbhf!2!pg!2 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:5 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:6 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:7 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:8 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:9 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!:: 5/H/b Statewide IT Procurement Manager Qbdlfu!Qh/!211 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!212 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!213 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!214 5/H/b 2/20/2020 Stephen Nettles Senior Group Manager Qbdlfu!Qh/!215 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!216 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!217 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!218 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!219 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!21: 5/H/b Software Value-Added Reseller (SVAR) Services MASTER PRICE AGREEMENT with CDW Government LLC Contract No. ADSPO16-130652 State of Arizona Lead State Effective: April 8, 2016 to April 7, 2018 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2!}!Page Qbdlfu!Qh/!221 5/H/b Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 3!}!Page Qbdlfu!Qh/!222 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Ubcmf!pg!Dpoufout! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Ubcmf!pg!Dpoufout! FYFDVUFE!PGGFS!BOE!BDDFQUBODF!GPSN......................................................................................................... 2 UBCMF!PG!DPOUFOUT................................................................................................................................................. 3 TFDUJPO!2;!OBTQP!WbmvfQpjou!Tpmjdjubujpo!BETQP27.1111693:!—!HFOFSBM!JODGPSNBUJPO ......................... 4 TFDUJPO!3;!TDPQF!PG!XPSL ................................................................................................................................... 7 TFDUJPO!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe!Dpoejujpot ......................................................... 22 TFDUJPO!5;!Mfbe!Tubuf!)Tubuf!pg!Bsj{pob*!Ufsnt!boe!Dpoejujpot! ........................................................................ 37 Tubuf!pg!Bsj{pob!Tqfdjbm!Ufsnt!boe!Dpoejujpot ....................................................................................... 37 Tubuf!pg!Bsj{pob!Vojgpsn!Ufsnt!boe!Dpoejujpot ...................................................................................... 50 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!223 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!2;!Hfofsbm!Jogpsnbujpo Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2/2!Qvsqptf! The State of Arizona, State Procurement Office, is requesting proposals for Software Value-Added Reseller (SVAR) services in furtherance of the NASPO ValuePoint Cooperation Purchasing Program (NASPO ValuePoint). The purpose of this Request for Proposal (RFP) is to establish Master Agreements with qualified Offerors so that NASPO ValuePoint Cooperative Members may acquire Commercial off the Shelf Software (COTS) and related services from Software Value-Added Resellers. The objective of this RFP is to obtain best value, and in some cases achieve more favorable pricing, than is obtainable by an individual state or local government entity because of the collective volume of potential purchases by numerous state and local government entities. The Master Agreement(s) resulting from this procurement may be used by state governments (including departments, agencies, institutions), institutions of higher education, political subdivisions (i.e., colleges, school districts, counties, cities, etc.), the District of Colombia, territories of the United States, and other eligible entities subject to approval of the individuals state procurement director and compliance with local statutory and regulatory provisions, as explained in section 3 of the NASPO ValuePoint Master Agreement Terms and Conditions. The initial term of the Master Agreement shall be two (2) years with renewal provisions as outlined in Section 3 of the NASPO ValuePoint Master Terms and Conditions (Section 4). 2/3!Mfbe!Tubuf-!Tpmjdjubujpo!Ovncfs!boe!Mfbe!Tubuf!Dpousbdu!Benjojtusbups!)MTDB* The State of Arizona, State Procurement Office (SPO) is the Lead State and issuing office for this document and all subsequent addenda relating to it. This solicitation (RFP) is a competitive process, in accordance with the Arizona Procurement Code available at https://spo.az.gov/ . The Arizona Procurement Code is a compilation in one place of Arizona Revised Statutes (ARS) 41-2501 et seq. and administrative rules and regulations A.A.C R2-7-1010 et.seq. The Solicitation #ADSPO16- 00005829 must be referred to on all proposals, correspondence, and documentation relating to this RFP. The Lead State Contract Administrator (LSCA) identified below is the single point of contact during this procurement process. Offerors and interested persons shall direct to the Lead State Contract Administrator all questions concerning the procurement process, technical requirements of this RFP, contractual requirements, requests for brand approval, change, clarification, protests, the award process, and any other questions that may arise related to this solicitation and the resulting Master Agreement. The Lead State Contract Administrator (LSCA) designated by the State of Arizona, State Procurement Office is: Charlotte Righetti, CPPB, CTNS State Procurement Manager State of Arizona, State Procurement Office th 100 N. 15 Avenue, Suite 201 Phoenix, Arizona 85007 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Phone: (602)542.9127 2/4!OBTQP!WbmvfQpjou!Cbdlhspvoe!Jogpsnbujpo!! NASPO ValuePoint (formerly known as WSCA-NASPO) is a cooperative purchasing program of all 50 states, the District of Columbia and the territories of the United States. The Program is facilitated by the NASPO Cooperative Purchasing Organization LLC, a nonprofit subsidiary of the National Association of State Procurement Officials (NASPO), doing business as NASPO ValuePoint. NASPO is a non-profit association dedicated to strengthening the procurement community through education, research, and communication. It is made up of the directors of the central purchasing offices in each Qbdlfu!Qh/!224 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!2;!Hfofsbm!Jogpsnbujpo Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! of the 50 states, the District of Columbia and the territories of the United States. NASPO ValuePoint facilitates administration of the cooperative group contracting consortium of state chief procurement officials for the benefit of state departments, institutions, agencies, and political subdivisions and other eligible entities (i.e., colleges, school districts, counties, cities, some nonprofit organizations, etc.) for all states, the District of Columbia, and territories of the United States. For more information consult the following websites: www.naspovaluepoint.org and www.naspo.org . 2/5!Qbsujdjqbujoh!Tubuft In addition to the Lead State conducting this solicitation, the Participating States listed below have requested to be named in this RFP as potential Users of the resulting Master Agreement. Other entities may become Participating Entities after award of the Master Agreement. State specific terms and conditions will govern each state’s Participating Addendum that will govern each state’s Participating Addendum. A listing of the Participating States can be found in Exhibit I. 2/6!Efgjojujpot!—!bmm!dbqjubmj{fe!ufsnt!jo!uijt!epdvnfou!ibwf!uif!nfbojoh!bt!efgjofe!jo! BBD!S3.8.212/!!Boz!dbqjubmj{fe!ufsn!opu!efgjofe!jo!BBD!S3.8.212!ibt!uif!nfbojoh!efgjofe! cfmpx/! #Bqqmjbodf# means a separate and discrete hardware device with integrated software (firmware), specifically designed to provide a specific computing resource. For the purposes of this solicitation only an “Appliance” which is the sole means of obtaining the Software product is allowable. ”Buubdinfou• means any item the Solicitation requires an Offeror to submit as part of the Offer. ”Cftu!boe!Gjobm!Pggfs!)CBGP*• means a revision to an Offer submitted after negotiations are completed that contains the Offeror’s most favorable terms for price, service, and products to be delivered. ”Dpnnfsdjbm!Pgg!uif!Tifmg•!)”DPUT•* for the purposes of this solicitation means non-developmental software which has been created for specific uses and is available to the general public in the commercial marketplace. COTS products are designed to be implemented easily into existing systems without the need for customization. ”Foe.Vtfs!Mjdfotf!Bhsffnfou!)FVMB*•!is a legal contract between the manufacturer (publisher) and the end User of an application that details how the software can and cannot be used. ”fQspdvsfnfou!)Fmfduspojd!Qspdvsfnfou*• means conducting all or some of the procurement function over the Internet. Point, click, buy and ship Internet technology is replacing paper-based procurement and supply management business processes. Elements of eProcurement also include Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Invitation for Bids, Request for Proposals, and Request for Quotations. ”Fydmvefe!Tpguxbsf!Qvcmjtifst• means a Software Publisher who is unwilling to do business with a Reseller. ”Fyijcju• means any document or object labeled as an Exhibit in the Solicitation or placed in the Exhibits section of the Solicitation. 6!}!Page Qbdlfu!Qh/!225 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!2;!Hfofsbm!Jogpsnbujpo Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! ”Mfbe!Tubuf!Dpousbdu!Benjojtusbups•!)”MTDB•* means the Procurement Officer for the Master Agreement. ”Nbtufs!Bhsffnfou•!)”NQB•* means the contractual agreement executed between the winning (awarded) contractor (s) and the Lead State conducting the procurement on behalf of NASPO ValuePoint. ”Opo.qfsqfuvbm!mjdfotf•!ps!Tvctdsjqujpo!Mjdfotf• is a temporary license that provides the right to use a particular licensed product until the end of the license-agreement term. ”Qbsujdjqbujoh!Tubuf!Dpousbdu!Benjojtusbups•!)”QTDB•* means the Procurement Officer for the Participating State. ”Qfsqfuvbm!mjdfotf• means a license which is everlasting and valid if the software is being used in accordance with the license-agreement requirements. ”Qfstpo• means any corporation, business, individual, union, committee, club, or other organization or group of individuals ”Qvcmjtifs• means a software manufacturer (e.g., Microsoft) ”Sftfmmfs•means a Software Value-Added Reseller who is awarded under this solicitation, and who has a fully-executed (MPA and PA-s) contract. ”Sftfmmfs!Dptu• means the price that the Reseller pays the Publisher or Distributor to purchase software on behalf of the Participating State. Reseller Cost should not include any administrative or other mark-up costs. ”Tpguxbsf• means the computer program, including media and associated documentation. ”Tpguxbsf!Mjdfotjoh• means allowing an individual or group to use a piece of software. ”Tpguxbsf!Nbjoufobodf!boe!Tvqqpsu• means any software upgrades, annual updates, patches and fixes needed to improve functionality and keep the software in working order. ”Tpmjdjubujpo!Bnfoenfou• means a change to the Solicitation issued by the Procurement Officer. ”Wpmvnf!Mjdfotf!Bhsffnfout!)WMBt*• means an agreement with a Software Publisher wherein the Participating State’s total expected purchasing over a period of time is considered in establishing the discount level. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 7!}!Page Qbdlfu!Qh/!226 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 3/2!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)’Sftfmmfs“!—!”TWBS•*! 2.1.1 Software Value-Added Reseller (‘Reseller’ – “SVAR”) shall be a large account reseller authorized to sell products direct from Key Software Publishers or authorized Distributors. 2.1.2 SVAR shall do the following: 2.1.2.1 Provide Commercial Off-the-Shelf-Software (COTS). 2.1.2.2 Honor existing Volume or Enterprise license agreements. 2.1.2.3 Offer maintenance and support packages on licenses already owned by the Participating State and other Purchasing Entities. 2.1.2.4 Advise the LSCA, each PSCA, and other Purchasing Entities of SVAR’s channel partner status with Key Software Publishers. 2.1.2.5 Retain or enhance reseller certifications with software publishers - At a minimum, maintain Reseller certification levels held at time of award. If Reseller’s certification or reseller status is withdrawn or reduced, Reseller is required to immediately notify, in writing, the Lead State Contract Administrator (LSCA), each PSCA and other Purchasing Entities explaining: The change; The impact on their costs to obtain the product; Limitations on the products or services they may provide; and, The reasons for the change. Failure to provide the required notification, regarding significant negative changes in their reseller status, may be grounds for suspension or cancellation of the MPA and PA’s. 2.1.2.6 Provide Pre-Sale Advisement - Uifsf!tibmm!cf!op!dibshf!gps!uiftf!tfswjdft: 2.1.2.6.1 Advise the Purchasing Entity in making strategic software application decisions by providing evaluation copies, product comparisons, needs analysis, product information and application recommendations. 2.1.2.6.2 Act as liaison between the Purchasing Entity and individual publishers in identifying best approaches and cost savings opportunities for the Purchasing Entity. 2.1.1.6.3 Examples of such advice would be: In selecting appropriate software; In explaining Volume License Agreements with complicated rules; In determining the most cost-effective buying strategies; In ensuring that Participating States and other Purchasing Entities Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* are in compliance with licensing requirements; and, In finding software options to meet a specific need, for example, a flow-charting package. 2.1.2.7 Reseller shall negotiate to reduce Reseller Cost, to pass on savings to the Participating State and other Purchasing Entitites. 8!}!Page Qbdlfu!Qh/!227 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2.1.2.8 Provide assistance in explaining and developing Volume License and Enterprise Agreements. 2.1.2.9 Provide Software Installation Assistance. 2.1.2.9.1 Provide, at no additional cost, assistance or advice in basic installation or implementation of COTS product. 2.1.2.8.2 If the Purchasing Entity encounters difficulty in downloading or installing the software, the Reseller must provide assistance within eight (8) business hours of being informed of the problem. 2.1.2.10 Provide Software De-Installation Assistance. 2.1.2.11 Provide Tracking, Management, Usage Monitoring and Reporting of Licenses 2.1.2.11.1 Reseller shall have in place a product license inventory and asset management system, which will include an accurate inventory record of product licenses purchased under this Contract. 2.1.2.11.2 Reseller must also have the capability tracking maintenance renewal and other significant due dates. 2.1.2.11.3 At a minimum, this system shall be able to provide this information by Participating State and Purchasing Entity. 2.1.2.11.4 Reseller shall work with Participating State, other Purchasing Entities, publishers, previous and subsequent contract software resellers, and hardware computer contractors to ensure the most comprehensive record of licenses is created, maintained, and the information transferrable. 2.1.2.11.5 States may choose to award multiple PA’s under this Agreement. Details on how licenses are to be tracked and managed under multiple awards will be determined by that awarding State. 2.1.2.11.6 As may be required by a Participating State, or other Purchasing Entity, Reseller shall work with NASPO ValuePoint computing equipment contractors, or a Participating State’s comparable computer hardware contractor, to see that any software acquired under those contracts can be tracked through this contract. 2.1.2.12 Notify Participating State and Purchasing Entities of publisher publicly announced changes pertinent to User licensing. 2.1.3 SVAR shall Develop and Maintain Website Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.1.3.1For Participating States, Reseller shall develop and support a website specific to that State, with content approved from the LSCA or PSCA as appropriate based on content. 2.1.3.1.1 This web site information shall be available through the Internet without the use of additional software or licenses. 9!}!Page Qbdlfu!Qh/!228 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2.1.3.1.2 Website should be User friendly to allow for quick and easy access and use. 2.1.3.1.3 Website shall be available 24 x 7, except for scheduled maintenance. 2.1.3.1.4 Website shall be ADA compliant. 2.1.3.1.5 No costs or expenses associated with providing this information shall be charged to the States. 2.1.3.1.6 Universal Resource Locator (URL) for the website must be supplied to the PSCA and the LSCA within sixty (60) days of the execution of the PA. 2.1.3.1.7 The website will include contract information, product information/catalog, the capability to generate online reports, and other pertinent information as may be reasonably requested by States, such as copies of VLAs. 2.1.3.1.8Publisher Notifications and Other Industry Information. In the event that a publisher publicly announces changes that are pertinent to User licensing, the Reseller shall assist Users by posting the information on the state websites. 2.1.3.1.9 Reseller shall provide, at no additional cost, training on how to use their website and how to use this contract in obtaining quotes and placing orders. Online training should be available on the website, but supplementary electronic (e.g. Webinars, emails), telephone or on-site training should be provided, as needed, during standard working hours. 2.1.3.2Contract and General Information. The website shall provide contract and ordering information to include, at a minimum: 2.1.3.2.1 The contract number(s) (MPA and PA); 2.1.3.3.2 The Reseller primary contact and contacts to whom incidents are to be escalated: Name(s and titles Areas of responsibility for each contact name; Phone number(s); and, Email address(es). 2.1.3.3.3 Information on use of website, 2.1.3.3.4 Quote and ordering information; and, 2.1.3.3.5 Notifications regarding publishers and products, such as pending key product changes or upgrades. 2.1.3.3Online Catalog Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.1.3.3.1 Reseller shall provide COTS software, and software maintenance of new or existing licensed software, under this contract. Information on approved products, customized by Participating State, will be available through an online catalog and through Reseller’s representatives either through email or telephone inquiry during the standard working hours of the Participating State. The online catalog shall provide an expansive list :!}!Page Qbdlfu!Qh/!229 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! of products allowed per the contracts, particularly those products of itemized publishers. 2.1.3.3.2 The website shall provide contract and ordering information to include, at a minimum: publishers, product names, standard product pricing, and product descriptions (photos optional or links to access product literature). Regardless of the number and types of links to the Reseller’s electronic catalog, the Reseller shall ensure that all eligible agencies purchasing under one PA are accessing the same current base version of the product catalog. Online information shall include purchases of Volume or Enterprise License Agreement software as well as individual COTS software licenses. 2.1.3.3.3 Online catalog shall be restricted to just software. Non-authorized products or groups of products shall not be on the website. Reseller shall not use this proposed website to cross sell or cross advertise other products and or services the Reseller may be able to offer. 2.1.3.4Product Searching Capability. At a minimum, the online catalog should be searchable by Purchasing Entity and their VLAs, Software Publisher, Product name, OEM product number, and software description (e.g., GIS, Security). The online category can be modified as Users’ needs dictate, such as including products obtained through a distributor (non-itemized publisher products) that are frequently purchased. 2.1.3.5Online Product Quotes. Product price displayed online is a ‘not-to-exceed’ product price quote based on contract rate and real time Reseller Cost. For high dollar purchases, or quantity purchases, Purchasing Entity should request a quote by contacting Reseller representative off-line. The online pricing should allow for overrides when a quote with a negotiated better price has been offered and is being placed online. Website should have capability to track all quotes by Purchasing Entity and be easily accessible for viewing by quote number. Website shall include a shopping cart feature that allows Purchasing Entities to provide shipping instructions. Purchasing Entities can place orders on the web either via credit card or purchase order. Specifics regarding an individual state’s requirements for placing an order may be included in that State’s Participating Addendum (PA). 2.1.3.6User Differentiation. Catalog should be designed so as to provide a means to identify the Participating State (state agency or other eligible Purchasing Entity). This method used must not require any administrative tasks on the part of the LSCA for the MPA, the PSCA for the individual PSCA. Website should allow Users to develop personal lists and profiles, including an option to securely store and maintain procurement card information. Catalog should have the capability of being used as a ‘Punch Out’ to an Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* individual state’s electronic purchasing system. 2.1.3.7Online Reports. Website shall have capability to provide order history, as well as order status and order tracking. 2.1.3.8Other. Other information may be added to the website as may be required by State (such as copies of volume license agreements) or enhancements that may be proposed by Reseller and approved by State. 21!}!Page Qbdlfu!Qh/!22: 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 3/3!DPUT!Qspevdut! 3/3/2!Tpguxbsf!xijdi!sfrvjsft!mjuumf!ps!op!tfswjdft! JO!TDPQF!Pggfsjoht!PVU!PG!TDPQF!Pggfsjoht! Individual Licensing COTS Custom/Customized MJDFOTJOH!UZQF! Volume Licensing Enterprise Licensing Perpetual Subscription MJDFOTJOH! none QFSJPE Efmjwfsz!Shrink-Wrap Download none IPTUJOH!On Premise Off Premise Managed Service bt!qbsu!pg!efmjwfsz! Managed Services means the '!vtf/! proactive management of an IT (Information Technology) asset or object, by a third party typically known as a MSP, on behalf of a customer mspalliance.com/definition-of- managed-services/ 2.2.1.1 Most Current Version - Purchase orders shall be deemed to reference a manufacturer’s most recent release model or version of the product at the time of the order, unless the Purchasing Entity specifically requests in writing an earlier model or version and the Reseller is willing to provide such model or version. 2.2.1.2 Licenses and Maintenance Agreements 2.2.1.2.1Volume License Agreements (VLA) and Enterprise License Agreements (ELA) The Reseller will honor existing Participating State’s VLA’s or ELA’s with publishers and include those licenses as part of the Reseller’s license tracking service. Following an executed PA with a Participating State, and if so required by the Participating State, the Purchasing Entity and/or an individual publisher, the Reseller will identify itself to software publishers as Reseller for that Participating State or Purchasing Entity. If so required by the Publisher and Participating State, Reseller will execute a change of channel partner agreement with the Publisher. Resellers will sell additional seats consistent with Purchasing Entities’ Enterprise or Volume Agreements. Reseller will work with Participating State, Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Purchasing Entity(ies) and Publishers as needed to establish new VLAs or ELAs. The Reseller will work with the Publisher and Participating State as necessary to ensure the Participating State receives timely and pertinent license information, such as: license or agreement renewals, or opportunities based on actual volume. Reseller will work directly with Purchasing Entity(ies) in establishing, signing and maintaining enrollment agreements. If Reseller is sole SVAR contractor in a State, Reseller will aggregate all enrollments together for 22!}!Page Qbdlfu!Qh/!231 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Master Agreement reporting purposes. If a PSCA elects to have multiple SVAR contractors, Reseller’s responsibilities will be delineated in that State’s PA. Resellers shall monitor and be able to report on the current levels of software ordered towards any of the Participating State’s VLA required sales levels to ensure the Participating State does not fall short and thereby incur Publisher penalties. The Reseller shall be responsible for providing license usage information to the Publishers, if such information is required by the Publishers, in a timely manner (e.g., for ‘true up’ assessments) 2.2.1.2.2Individual Software Licenses. Purchasing Entities can purchase individual COTS licenses, such as perpetual and non-perpetual licenses, through the Reseller. 2.2.1.3 Software Maintenance and Support Agreements. Purchasing Entities can purchase maintenance agreements, including upgrade protection, through the Reseller. Resellers will sell software maintenance agreements, even if the software was not purchased under this agreement, such as on-going support for a User’s existing perpetual license. As requested, Reseller will explain what product support or services are included in a publisher’s maintenance agreement. 2.2.1.3.1Software Maintenance and Support/Reseller to provide needed services to support maintenance products such maintenance agreements, software upgrades, annual updates, patches and fixes needed to improve functionality and keep the software in working order. Such services may include providing recommendations on most cost-effective or appropriate long-term maintenance plan. Reseller will provide such support, not only to maintenance packages purchases under this agreement, but in support of any existing and current agreements. 2.2.1.3.2Software Updates. 2.2.1.3.2.1 Users are eligible to receive, from the Publisher, all new releases and updates of the software, at no additional charge, while under a maintenance agreement. A “Release” means any collection of enhancements or updates which the Publisher generally makes available to its installed base of customers of such programs. The Reseller shall assist the Purchasing Entity to obtain such releases or updates for their Users from the Publisher. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.2.1.3.2.2 Should a User not want to receive the next upgrade, the User shall so notify the respective Publisher. 2.2.1.3.3License Confirmations For licenses ordered under the contract by Purchasing Entity(ies), Reseller shall be able to provide: 23!}!Page Qbdlfu!Qh/!232 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! (i) Certified Licensing Confirmation Certificates for all software licenses; (ii) Reseller’s certified license confirmation certificates in the name of such Licensee; or, (iii) Written confirmation from the Reseller or Publisher accepting the Eligible Participating State’s contract or purchase order as proof of license. The form of “Proof of License” provided must be acceptable proof to the Publisher, and in the format requested by the Purchasing Entity. The Proof of License shall be provided as an electronic file and/or a hardcopy document, as required by the Purchasing Entity. Reseller will retain an electronic file of Participating State’s Proof of Licenses and provide copies to the Participating State as requested. 2.2.1.3.4Transitioning License Tracking Information at Contract Termination The license information data acquired and retained by Reseller will be stored as sortable data fields so the license information can be transferred to the Participating State upon contract termination. Reseller will work with States and Participating Entities, or their designees, to ensure that the license information data has been successfully transferred in a usable format. 2.2.1.4 Leases Lease purchase and term leases are allowable only for Purchasing States whose rules and regulations permit leasing of software. Individual Purchasing Entities may enter into a lease agreement for the products covered in this Master Agreement, if they have the legal authority to enter into these types of agreements without going through a competitive process. No lease agreements will be reviewed or evaluated as part of this RFP evaluation process. 2.2.1.5 Software Publishers, Categories. The identified software product needs under this solicitation have been divided into three tiers: Key Itemized Publishers, Other Itemized Publishers, and Non-Itemized Publishers. See descriptions and chart which follow. As indicated, it is most desirable for Reseller to have a direct reseller agreement with the itemized software publishers. If a direct reseller agreement is not already in place between itemized software publishers and the Reseller, the Reseller is expected to enter into a direct reseller agreement and submit a rate for that itemized publisher that is better than the rate for a Non-Itemized Publisher/Over the life of this contract, product needs or volumes may change and new publishers may be added by amendment to the itemized publishers’ lists. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.2.1.5.1Itemized Highest Volume Publishers (Highest Volume, Itemized Lines). The products of the publishers in this category represent the highest tier of sales volume identified for this solicitation, of those publishers who sell through resellers. This category is the one most likely to include a Participating State’s enterprise or high volume agreements with a publisher. Resellers shall be certified direct resellers for publishers in this 24!}!Page Qbdlfu!Qh/!233 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! category. The preferred pricing that a Reseller receives based on their reseller certification status, in conjunction with the anticipated considerable volume of purchases through these Contracts, is the expected foundation for a very competitive base Reseller Cost, with further reductions of Reseller Cost as they are achieved through ongoing Reseller negotiations. A percentage rate above or below Reseller Cost is to be provided for each itemized publisher. Specific requirements may be required for some publishers in this category in an individual State’s PA. 2.2.1.5.2Other Itemized Publishers (High Volume, Itemized Lines). The products of the publishers in this category represent a high level of sales volume as identified for this solicitation. This category may include a Participating State’s high volume agreements or VLAs with a publisher. It is desirable for Resellers to be certified direct resellers for publishers in this category. A percentage rate above or below Reseller Cost is to be provided for each itemized publisher 2.2.1.5.3Non-Itemized Publishers (all other distributed software purchases). This category is defined to include all other distributed computer software not specifically itemized. Enterprise or Volume Licensing Agreements are not anticipated in this category. New or existing software products can be added to this category at any time during the term of the Contract without the written consent of the LSCA and may be itemized in the online catalog, if volume justifies the addition. There should be one percentage rate above or below Reseller cost covering all products in this category PUIFS!JUFNJ\[FE!QVCMJTIFST! LFZ!JUFNJ\[FE!QVCMJTIFST!OPO.JUFNJ\[FE!QVCMJTIFS! Certification as direct reseller Certification as Direct One ‘not to exceed’ rate desirable. If not certified, the Reseller. percentage rate should be no greater than Non-Itemized rate ADOBE AI SQUARED AIRWATCH MOBILE DEVICE CITRIX MANAGEMENT VMWARE MICROSOFT ALLIANCE ENTERPRISES NOVELL APPLE SYMANTEC ATTACHMATE – MICROFOCUS VMWARE AUTODESK Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* AUTONOMY – HP BAKBONE – DELL BARRACUDA BOMGAR REMOTE SOFTWARE CA TECHNOLOGIES CISCO COMPUTRONIX USA 25!}!Page Qbdlfu!Qh/!234 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! COMPUWARE COREL DOUBLETAKE EMC ENCHOICE ESET ESRI FREEDOM SCIENTIFIC GUARDIAN EDGE – SYMANTEC GW MICRO IBM ICM CONVERSIONS INFOR INTERMEDIX EMSYSTEMS HP HUMANWARE INFORMATION BUILDERS KRONOS SOFTWARE LANDESK LASERFISCHE LIQUIDWARE STATUSPHERE MICROFOCUS INC MINJET MPS MQSOFTWARE – BMC SOFTWARE NCIRCLE NETOP NUANCE ORACLE OSAM PASSPORT PATCHLINK PROOFPOINT RSA SECURITY REFERENCIA SYSTEMS SAP AMERICA SAS Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* SOLUTIONS SOFTWARE SOPHOS SPLUNK SOFTWARE STASEEKER NETWORK INFRASTRUCTURE MONITORING STELLENT – ORACLE 26!}!Page Qbdlfu!Qh/!235 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! SUNGUARD SYBASE TECHSMITH TREND MICRO TRUSTWARE ULTRABAC VORMETRIC WEBSENSE 2.2.1.6Software Publishers, General Representation. 2.2.1.6.1Excluded Software Publishers. The Reseller must agree that there are no software publishers with whom they will refuse to do business if the Software Publisher is willing to do business with them. Resellers shall advise the LSCA or designee of any Excluded Software Publishers and provide explanations for the non-representation. 2.2.1.6.2Expanded Representation. The Reseller is expected to continue to work towards reseller certifications with publishers not currently represented, particularly with those publishers whose sales volume merit classification into the itemized publisher lines. Similarly, Reseller is expected to continue to work towards a higher certification level with current publishers 2.2.1.7 Price Quote, General/Pricing is submitted in the MPA as a percentage of Reseller Cost. Individual PA’s will use the MPA pricing as a base and may negotiate an adjusted rate. Any negotiated PA rates, exclusive of taxes or any individual state’s administrative fee, shall not exceed the MPA rates. As requested by Purchasing Entity, for example on a high volume single order, Reseller shall negotiate to reduce Reseller Cost, to pass on savings to the Participating State. Firm individual order quotes shall be provided to Purchasing Entity prior to order submittal. 2.2.1.7.1Telephone or Email Quote Support. Reseller shall accept requests for quotes by telephone, fax, email, or online. Reseller shall accept collect telephone calls and/or provide and maintain a toll-free number for eligible agency use. Reseller shall provide an email address for receipt of requests for price quotes. Reseller shall provide written quotes by fax, email or online as requested by the Participating State. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.2.1.7.2Quoted Delivery Method. The quote must clearly indicate the method of delivery, whether via media, download, or 4/4!Tfswjdft below. 2.2.1.7.3Timely Quotes. Reseller agrees to work with publishers and distributors to obtain quotes and deliver software in a timely fashion. Expected response should be within twenty-four (24) hours but no more than three (3) business days. If, after three (3) business days, the Reseller has been unable to obtain the quote or assurances that 27!}!Page Qbdlfu!Qh/!236 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! they can obtain the software, the Reseller shall contact the Participating State or other Purchasing Entity with a status report. The Reseller and the Participating State/Purchasing Entity will mutually agree as to whether the Reseller shall continue to pursue a quote and within what timeframe, or whether the Reseller will provide the Participating State/Purchasing Entity with a written statement that the Reseller cannot supply the software. If the Reseller has been unable to obtain a quote within ten (10) days of the request for quote, the Reseller shall provide a written statement (email is sufficient) to Participating State/Purchasing Entity, and the LSCA as may be required under the PA, that the Reseller cannot supply the software, and the reason why. 2.2.1.7.4Guaranteed 30 Day Quote. Reseller is required to honor all quotes for thirty (30) calendar days. If it is known that a price adjustment will occur during the thirty (30) calendar days following the quote, the Reseller may provide two quotes, based upon the date that the order is received. 2.2.1.7.5Sales Promotion. The Reseller may conduct sales promotions involving specific products or groups of products for specified time periods. If electing to exercise this provision, the Reseller shall submit a formal request for approval to the LSCA. The request should include: the product or product groups, the promotional price as compared to the standard price and the Master Agreement price for the product or product groups, and the start and end dates of the sales promotion. LSCA’s approval shall be in the form of an amendment to the MPA. Upon approval, the Reseller shall provide conspicuous notice of the promotion to all Participating Entities. 2.2.1.7.6 A Participating State or other Participating Entity may allow the Contractor to charge a credit card fee in their Participating Addendum. 2.2.1.8 Product Delivery and Returns 2.2.1.8.1 Media. The Reseller shall work with Participating State or other Purchasing Entity to provide media via any method available and as requested by the Participating State including, but not limited to: original Publisher media, CD copies of master media duplicated by the Reseller, electronic downloads, etc. In cases where original publisher’s media is not available, the Reseller shall provide CD’s copied from master disks of Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* the software purchased under any volume or enterprise license agreement. 2.2.1.8.2 Delivery Period. Reseller to provide delivery no longer than ten (10) business days after receipt of a valid order unless conditions arise that are outside the control of the Reseller. If delivery cannot be within this time frame, Reseller is to notify Purchasing Entity of delay and anticipated 28!}!Page Qbdlfu!Qh/!237 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! ship date. If this delayed delivery is unacceptable to Purchasing Entity, the order can be cancelled without penalty. 2.2.1.8.3 Product Returns. Unopened software can be returned with no restocking fee up to 30 days from date of receipt, if allowed by the software publisher. If the software publisher has a shorter timeframe for returns or requires a restocking fee, this must be stated on the quote. If that information is not provided to the Participating State by the Reseller, Reseller is responsible for the restocking fee. If delivered software is defective, or if the incorrect product was delivered, the Reseller must agree to accept returns. If delivered software is defective, the Reseller is responsible for return shipping and packaging costs and for restocking charges if applicable. The Reseller must agree that any defective or incorrectly delivered media will be replaced by overnight delivery at the Reseller’s expense if requested by the Participating State or Purchasing Entity. If overnight delivery is not requested, all replacement products must be received by the Participating State or Purchasing Entity within seven (7) days of initial notification. 2.2.1.8.4 Shipping Charges. Items covered under this contract are FOB Destination and shipping charges are not to be included on any invoice unless the Purchasing Entity has ordered expedited shipment. For expedited shipment, Purchasing Entity would submit their order including related shipping charges, which may not exceed the cost of delivery by the carrier. 3/4!Tfswjdft JO!TDPQF!PVU!PG!TDPQF! TPGUXBSF!'! Volume COTSCustom/Customized MJDFOTJOH!UZQF!Licensing MJDFOTJOH!QFSJPE Perpetual Subscription Not Applicable Efmjwfsz! Shrink-Wrap Download Not Applicable Iptujoh!bt!qbsu!pg! On-Premise Off-Premise Managed Services efmjwfsz!'!vtf! Basic Installation, Training and Maintenance Consulting, configuration, engineering, design, etc., Means that activity which does not require any type of service specific to a Purchasing Entity TFSWJDFT! Consulting, Configuration, Engineering, requiring description of tasks and deliverables and Design or any other type of service specific agreement by the parties to a Purchasing Entity requiring description Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* of tasks and deliverables and agreement by the parties (Statement of Work). 2.3.1 In Scope Services: Basic Installation, Maintenance packages and Training (3.4) are considered to be within the Scope of this Solicitation. This Master Agreement is intended for the acquisition of distributed, commercial off the shelf software 29!}!Page Qbdlfu!Qh/!238 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2.3.2 (RESERVED) 2.3.3 A Participating State may include a statement in their Participating Addendum allowing state employees to purchase software licenses. 2.3.4 Individual Participating Addendums may further limit the Scope of this Solicitation. 2.3.5 This Master Agreement is not intended for the purchase of custom software applications. 3/5!Usbjojoh/! 2.4.1 Training shall be available in the form of tutorials for basic installation and web-based training for software operation, basic phone support. 2.4.2 Provision of information on how to access a Software Publisher’s “Help Desk” (either telecom or web-based) for basic use questions. 3/6!Dvtupnfs!Tfswjdf!boe!Sfqsftfoubujpo/! 2.5.1Dedicated Representation and Timely Response. Reseller shall provide a dedicated representative for each Participating State. Such representative will become familiar with the State and its cooperative partners, provide a single point as needed for quote assistance, offer software recommendations, track and report on renewal deadlines, and serve as a contact point for the LSCA.Sftfmmfs!nvtu!dpnnju!up!sfuvsojoh!qipof!dbmmt!ps!sftqpoejoh!up!fnbjmt! xjuijo!uxp!)3*!cvtjoftt!ebzt. 2.5.2Problem Escalation. The Reseller must provide an incident escalation path for each State, showing on that State’s website, the name, contact information, and role of individuals to whom problems should be escalated if the problems are not resolved by primary assigned contacts. 2.5.3Product purchasing trends.Uif!Sftfmmfs!xjmm!tqfbl!xjui!MTDB!boe!tpvsdjoh!ufbn!rvbsufsmz to review usage and discuss possible revisions of the categorization of publishers based upon actual sales volume or other changes. 2.5.4Contract Reviews. 2.5.4.1 Reseller is expected to conduct rvbsufsmz!sfwjfxt of all sales volumes and report sales figures and savings from Publisher’s list price, by Publisher and by PA, as well as observed trends or purchasing patterns, and up!qsftfou!uif!jogpsnbujpo!up!uif! MTDB. 2.5.4.2 At the discretion of the individual participating states, an equivalent review, limited to Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* that state, will be presented to the PSCA. 2.5.4.3 Bmm!bxbsefft!voefs!uijt!dpousbdu!tibmm!nffu!podf!b!zfbs!xjui!uif!MTDB!boe! Tpvsdjoh!Ufbn to review usage and discuss possible revisions of the categorization of publishers based upon actual sales volume, and to discuss any service concerns, industry trends, and the effectiveness of the contract. 2.5.4.3.1 Reseller is expected to dpoevdu!b!dvtupnfs!tbujtgbdujpo!tvswfz and an audit prior to this discussion and be prepared to discuss the results, and 2:!}!Page Qbdlfu!Qh/!239 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! provide reports, at this review. At a minimum, the audit will report address quoting and billing accuracy, and any Reseller Cost that exceeds a Publisher’s List price for that item. 2.5.4.3.2 Based on historical sales volume information, Reseller should be prepared to discuss potential cost savings opportunities which could be passed through to Participating States. 2.5.4.3.2 In a renewal year, the annual review will take place prior to contract extensions. 3/7/!Joufsbdujpot!xjui!Tpguxbsf!Qvcmjtifst! 2.6.1Best Interests of Participating State. Reseller would represent the best interests of the Participating State and other Participating Entities in negotiating or otherwise working with Publishers for such items as: maximizing cost savings with best use of volume or enterprise license agreements, better pricing on individual volume buys, taking advantage of publishers’ specials, promotions, coupons or other savings opportunities. 2.6.2Liaison with Publisher. A State may establish, in their individual PA, a requirement for Reseller to arrange with the software publisher or software publisher’s designee for implementation, customization, training, support, maintenance and other software related services. Uif! qspwjtjpo!pg!tbje!tfswjdft!nvtu!cf!voefs!b!tfqbsbuf!bhsffnfou!cfuxffo!uif!Qbsujdjqbujoh! Tubuf!boe!uif!bqqmjdbcmf!qbsujft. 3/8!Sfqpsujoh! 2.7.1 Standard Reports Individual participating states may require their own standard reports, such as report on savings. Reseller shall provide these reports at the intervals, and in the format, as reasonably requested by the States. Reseller shall advise of standard reports which they can provide, and work with participating states on additional standard reports. 2.7.2 Online Reports The SVAR shall be able to provide online, real time, reporting capabilities using website established for the state. These reports may include Back Order or Current Order Status reports. In addition, the system shall be able to provide the ability for the User agency to create custom reports. The requesting Participating State shall be able to select specific fields and create a necessary report for their specific needs. Data Fields shall include, but not be limited to, purchasing entity, Purchase Order Number, Order date, Invoice date, Publisher, Publisher Part Number, Software Reseller’s Part Number, Description, Quantity Shipped, Unit actual Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* price, Extended Price, Sales Tax and order total. Reports shall be able to be shown online as well as emailed to the requesting Participating State, if requested. Examples of Reseller’s standard and online reports shall be submitted with the offer. 2.7.3 Custom Reports 31!}!Page Qbdlfu!Qh/!23: 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!3;!Tdpqf!pg!Xpsl!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Participating State and SVAR may mutually agree to include terms and conditions and pricing for the development and provision of customized reports as an optional service in a Participating Addendum. 3/9!Puifs!Wbmvf.Beefe!Tfswjdft! SVAR may proposeother Value-Added Services, e.g., key escrow, in their response. Such services from an awarded Offeror, if consistent with this Statement of Work, recommended by the Evaluation Team, and accepted by the PSCA, would be added to the final awarded contract. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 32!}!Page Qbdlfu!Qh/!241 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2/!Nbtufs!Bhsffnfou!Psefs!pg!Qsfdfefodf!! a. Any Order placed under this Master Agreement shall consist of the following documents: (1) A Participating State’s Participating Addendum (“PA”); (2) NASPO ValuePoint Master Agreement Terms & Conditions; (3) A Purchase Order issued against the Master Agreement; (4) The Statement of Work; (5) The Solicitation; and (6) Contractor’s response to the Solicitation, as revised (if permitted) and accepted by the Lead State. b. These documents shall be read to be consistent and complementary. Any conflict among these documents shall be resolved by giving priority to these documents in the order listed above. Contractor terms and conditions that apply to this Master Agreement are only those that are expressly accepted by the Lead State and must be in writing and attached to this Master Agreement as an Exhibit or Attachment. 3/!!Efgjojujpot Bddfqubodf is defined by the applicable commercial code, except Acceptance of a Product fo which acceptance testing is not required shall not occur before the completion of delivery in accordance with the Order, installation, if required, and a reasonable time for inspection of the Product. Dpousbdups means the person or entity delivering Products or performing services under the terms and conditions set forth in this Master Agreement. Fncfeefe!Tpguxbsf!means one or more software applications which permanently reside on a computing device. Joufmmfduvbm!Qspqfsuz means any and all patents, copyrights, service marks, trademarks, trade secrets, trade names, patentable inventions, or other similar proprietary rights, in tangible or intangible form, and all rights, title, and interest therein. Mfbe!Tubuf!means the State centrally administering any resulting Master Agreement(s). Nbtufs!Bhsffnfou means the underlying agreement executed by and between the Lead State, acting on behalf of the NASPO ValuePoint program, and the Contractor, as now or hereafter amended. OBTQP!WbmvfQpjou is the NASPO Cooperative Purchasing Organization LLC, doing business as NASPO Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* ValuePoint, a 501(c)(3) limited liability company that is a subsidiary organization the National Association of State Procurement Officials (NASPO), the sole member of NASPO ValuePoint. NASPO ValuePoint facilitates administration of the NASPO cooperative group contracting consortium of state chief procurement officials for the benefit of state departments, institutions, agencies, and political subdivisions and other eligible entities (i.e., colleges, school districts, counties, cities, some nonprofit organizations, etc.) for all states and the District of Columbia. NASPO ValuePoint is identified in the Master Agreement as the recipient of reports and may perform contract administration functions relating to collecting and receiving reports as well as other contract administration functions as assigned by the Lead State. Qbdlfu!Qh/!242 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Psefs or Qvsdibtf!Psefs means any purchase order, sales order, contract or other document used by a Purchasing Entity to order the Products. Qbsujdjqbujoh!Beefoevn!means a bilateral agreement executed by a Contractor and a Participating State incorporating this Master Agreement and any other additional Participating State specific language or other requirements, e.g. ordering procedures specific to the Participating State, other terms and conditions. Qbsujdjqbujoh!Tubuf!means a state, or other legal entity, properly authorized to enter into a Participating Addendum. Qbsujdjqbujoh!Tubuf means a state, the District of Columbia, or one of the territories of the United States that is listed in the Request for Proposal as intending to participate. A Participating State is not required to participate through execution of a Participating Addendum. Upon execution of the Participating Addendum, a Participating State becomes a Participating State. Qspevdu means any equipment, software (including embedded software), documentation, service or other deliverable supplied or created by the Contractor pursuant to this Master Agreement. The term Products, supplies and services, and products and services are used interchangeably in these terms and conditions. Qvsdibtjoh!Foujuz!means a state, city, county, district, other political subdivision of a State, and a nonprofit organization under the laws of some states if authorized by a Participating Addendum, who issues a Purchase Order against the Master Agreement and becomes financially committed to the purchase. 4/!!Ufsn!pg!uif!Nbtufs!Bhsffnfou!!!! The initial term of this Master Agreement is for two (2) years. This Master Agreement may be extended beyond the original contract period for successive periods with a maximum aggregate, including all extensions, not to exceed five (5) years at the Lead State’s discretion and by mutual agreement and upon review of requirements of Participating Entities, current market conditions, and Contractor performance. 5/!Bnfoenfout The terms of this Master Agreement shall not be waived, altered, modified, supplemented or amended in any manner whatsoever without prior written approval of the Lead State. 6/!Bttjhonfou0Tvcdpousbdut a. Contractor shall not assign, sell, transfer, subcontract or sublet rights, or delegate responsibilities under this Master Agreement, in whole or in part, without the prior written approval of the Lead State. b. The Lead State reserves the right to assign any rights or duties, including written assignment of contract administration duties to NASPO Cooperative Purchasing Organization LLC, doing business as NASPO ValuePoint. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 7/!Qsjdf!boe!Sbuf!Hvbsbouff!Qfsjpe! All prices and rates must be guaranteed for the initial term of the Master Agreement. Following the initial Master Agreement period, any request for price or rate adjustment must be for an equal guarantee period, and must be made at least ninety (90) days prior to the effective date. Requests for price or rate adjustment must include sufficient documentation supporting the request. Any adjustment or amendment to the Master Agreement shall not be effective unless approved by the Lead State. No retroactive adjustments to prices or 34!}!Page Qbdlfu!Qh/!243 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! rates will be allowed. 8/!Dbodfmmbujpo Unless otherwise stated, this Master Agreement may be canceled by either party upon 60 days written notice prior to the effective date of the cancellation. Further, any Participating State may cancel its participation upon 30 days written notice, unless otherwise limited or stated in the Participating Addendum. Cancellation may be in whole or in part. Any cancellation under this provision shall not affect the rights and obligations attending orders outstanding at the time of cancellation, including any right of and Purchasing Entity to indemnification by the Contractor, rights of payment for Products delivered and accepted, and rights attending any warranty or default in performance in association with any Order. Cancellation of the Master Agreement due to Contractor default may be immediate. 9/!Dpogjefoujbmjuz-!Opo.Ejtdmptvsf-!boe!Jokvodujwf!Sfmjfg!!! Provisions governing confidentiality of information during performance of orders for the State of Arizona are governed by The State of Arizona Special Terms and Conditions. Except where a Participating Addendum prescribes otherwise, this section governs confidentiality and disclosure of information of other Purchasing Entities. a. Confidentiality. Contractor acknowledges that it and its employees or agents may, in the course of providing a Product under this Master Agreement, be exposed to or acquire information that is confidential to Purchasing Entity’s or Purchasing Entity’s clients. Any and all information of any form that is marked as confidential or would by its nature be deemed confidential obtained by Contractor or its employees or agents in the performance of this Master Agreement, including, but not necessarily limited to (1) any Purchasing Entity’s records, (2) personnel records, and (3) information concerning individuals, is confidential information of Purchasing Entity (“Confidential Information”). Any reports or other documents or items (including software) that result from the use of the Confidential Information by Contractor shall be treated in the same manner as the Confidential Information. Confidential Information does not include information that (1) is or becomes (other than by disclosure by Contractor) publicly known; (2) is furnished by Purchasing Entity to others without restrictions similar to those imposed by this Master Agreement; (3) is rightfully in Contractor’s possession without the obligation of nondisclosure prior to the time of its disclosure under this Master Agreement; (4) is obtained from a source other than Purchasing Entity without the obligation of confidentiality, (5) is disclosed with the written consent of Purchasing Entity or; (6) is independently developed by employees, agents or subcontractors of Contractor who can be shown to have had no access to the Confidential Information. b. Non-Disclosure. Contractor shall hold Confidential Information in confidence, using at least the industry standard of confidentiality, and shall not copy, reproduce, sell, assign, license, market, transfer or otherwise dispose of, give, or disclose Confidential Information to third parties or use Confidential Information for any purposes whatsoever other than what is necessary to the performance of Orders placed under this Master Agreement. Contractor shall advise each of its employees and agents of their obligations to keep Confidential Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Information confidential. Contractor shall use commercially reasonable efforts to assist Purchasing Entity in identifying and preventing any unauthorized use or disclosure of any Confidential Information. Without limiting the generality of the foregoing, Contractor shall advise Purchasing Entity, applicable Participating State, and the Lead State immediately if Contractor learns or has reason to believe that any person who has had access to Confidential Information has violated or intends to violate the terms of this Master Agreement, and Contractor shall at its expense cooperate with Purchasing Entity in seeking injunctive or other equitable relief in the name of Purchasing Entity or Contractor against any such person. Except as directed by Purchasing Entity, Contractor will not at any time during or after the term of this Master Agreement disclose, directly or 35!}!Page Qbdlfu!Qh/!244 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! indirectly, any Confidential Information to any person, except in accordance with this Master Agreement, and that upon termination of this Master Agreement or at Purchasing Entity’s request, Contractor shall turn over to Purchasing Entity all documents, papers, and other matter in Contractor's possession that embody Confidential Information. Notwithstanding the foregoing, Contractor may keep one copy of such Confidential Information necessary for quality assurance, audits and evidence of the performance of this Master Agreement. c. Injunctive Relief. Contractor acknowledges that breach of this section, including disclosure of any Confidential Information, will cause irreparable injury to Purchasing Entity that is inadequately compensable in damages. Accordingly, Purchasing Entity may seek and obtain injunctive relief against the breach or threatened breach of the foregoing undertakings, in addition to any other legal remedies that may be available. Contractor acknowledges and agrees that the covenants contained herein are necessary for the protection of the legitimate business interests of Purchasing Entity and are reasonable in scope and content. d. Purchasing Entity Law. These provisions shall be applicable only to extent they are not in conflict with the applicable public disclosure laws of any Purchasing Entity. :/!Sjhiu!up!Qvcmjti! Throughout the duration of this Master Agreement, Contractor must secure from the Lead State prior approval for the release of any information that pertains to the potential work or activities covered by the Master Agreement. The Contractor shall not make any representations of NASPO ValuePoint’s opinion or position as to the quality or effectiveness of the services that are the subject of this Master Agreement without prior written consent. Failure to adhere to this requirement may result in termination of the Master Agreement for cause. 21/!Efgbvmut!boe!Sfnfejft a. The occurrence of any of the following events shall be an event of default under this Master Agreement: (1) Nonperformance of contractual requirements; or (2) A material breach of any term or condition of this Master Agreement; or (3) Any certification, representation or warranty by Contractor in response to the solicitation or in this Master Agreement that proves to be untrue or materially misleading; or (4) Institution of proceedings under any bankruptcy, insolvency, reorganization or similar law, by or against Contractor, or the appointment of a receiver or similar officer for Contractor or any of its property, which is not vacated or fully stayed within thirty (30) calendar days after the institution or occurrence thereof; or (5) Any default specified in another section of this Master Agreement. b. Upon the occurrence of an event of default, Lead State shall issue a written notice of default, identifying the nature of the default, and providing a period of 15 calendar days in which Contractor shall have an opportunity to cure the default. The Lead State shall not be required to provide advance written notice or a cure period and Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* may immediately terminate this Master Agreement in whole or in part if the Lead State, in its sole discretion, determines that it is reasonably necessary to preserve public safety or prevent immediate public crisis. Time allowed for cure shall not diminish or eliminate Contractor’s liability for damages, including liquidated damages to the extent provided for under this Master Agreement. c. If Contractor is afforded an opportunity to cure and fails to cure the default within the period specified in the written notice of default, Contractor shall be in breach of its obligations under this Master Agreement and Lead State shall have the right to exercise any or all of the following remedies: 36!}!Page Qbdlfu!Qh/!245 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! (1) Exercise any remedy provided by law; and (2) Terminate this Master Agreement and any related Contracts or portions thereof; and (3) Impose liquidated damages as provided in this Master Agreement; and (4) Suspend Contractor from being able to respond to future bid solicitations; and (5) Suspend Contractor’s performance; and (6) Withhold payment until the default is remedied. d. Unless otherwise specified in the Participating Addendum, in the event of a default under a Participating Addendum, a Participating State shall provide a written notice of default as described in this section and have all of the rights and remedies under this paragraph regarding its participation in the Master Agreement, in addition to those set forth in its Participating Addendum. Unless otherwise specified in a Purchase Order, a Purchasing Entity shall provide written notice of default as described in this section and have all of the rights and remedies under this paragraph and any applicable Participating Addendum with respect to an Order placed by the Purchasing Entity. Nothing in these Master Agreement Terms and Conditions shall be construed to limit the rights and remedies available to a Purchasing Entity under the applicable commercial code. 22/!Tijqqjoh!boe!Efmjwfsz/!! Section 3.2.1.8 of the solicitation prescribes requirements for product delivery and return. 23/!Dibohft!jo!Dpousbdups!Sfqsftfoubujpo! The Contractor must notify the Lead State of changes in the Contractor’s key administrative personnel, in writing within 10 calendar days of the change. The Lead State reserves the right to approve changes in key personnel, as identified in the Contractor’s proposal. The Contractor agrees to propose replacement key personnel having substantially equal or better education, training, and experience as was possessed by the key person proposed and evaluated in the Contractor’s proposal. 24/!Gpsdf!Nbkfvsf Neither party to this Master Agreement shall be held responsible for delay or default caused by “force majeure,” as that term is defined in and under conditions specified in section 6.4 of the State of Arizona Uniform Terms and Conditions. 25/!Joefnojgjdbujpo a. Section 5.1X1.1 of the State of Arizona Special Terms and Conditions governs indemnification of the State of Arizona. With respect to other entities, the Contractor shall defend, indemnify and hold harmless NASPO, NASPO Cooperative Purchasing Organization LLC (doing business as NASPO ValuePoint), the Lead State, Participating Entities, and Purchasing Entities, along with their officers, agents, and employees as well as any Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* person or entity for which they may be liable, from and against claims, damages or causes of action including reasonable attorneys’ fees and related costs for any death, injury, or damage to property arising from act(s), error(s), or omission(s) of the Contractor, its employees or subcontractors or volunteers, at any tier, relating to the performance under the Master Agreement. b. Indemnification – Intellectual Property. Section 6.3 of the State of Arizona Uniform Terms and Conditions governs indemnification of the State for intellectual property infringement claims. With respect to other entities the Contractor shall defend, indemnify and hold harmless NASPO, NASPO Cooperative Purchasing 37!}!Page Qbdlfu!Qh/!246 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Organization LLC (doing business as NASPO ValuePoint), Participating Entities, Purchasing Entities, along with their officers, agents, and employees as well as any person or entity for which they may be liable ("Indemnified Party"), from and against claims, damages or causes of action including reasonable attorneys’ fees and related costs arising out of the claim that the Product or its use, infringes Intellectual Property rights ("Intellectual Property Claim"). (1) The Contractor’s obligations under this section shall not extend to any combination of the Product with any other product, system or method, unless the Product, system or method is: (a) provided by the Contractor or the Contractor’s subsidiaries or affiliates; (b) specified by the Contractor to work with the Product; or (c) reasonably required, in order to use the Product in its intended manner, and the infringement could not have been avoided by substituting another reasonably available product, system or method capable of performing the same function; or (d) It would be reasonably expected to use the Product in combination with such product, system or method. (2) The Indemnified Party shall notify the Contractor within a reasonable time after receiving notice of an Intellectual Property Claim. Even if the Indemnified Party fails to provide reasonable notice, the Contractor shall not be relieved from its obligations unless the Contractor can demonstrate that it was prejudiced in defending the Intellectual Property Claim resulting in increased expenses or loss to the Contractor. If the Contractor promptly and reasonably investigates and defends any Intellectual Property Claim, it shall have control over the defense and settlement of it. However, the Indemnified Party must consent in writing for any money damages or obligations for which it may be responsible. The Indemnified Party shall furnish, at the Contractor’s reasonable request and expense, information and assistance necessary for such defense. If the Contractor fails to vigorously pursue the defense or settlement of the Intellectual Property Claim, the Indemnified Party may assume the defense or settlement of it and the Contractor shall be liable for all costs and expenses, including reasonable attorneys’ fees and related costs, incurred by the Indemnified Party in the pursuit of the Intellectual Property Claim. Unless otherwise agreed in writing, this section is not subject to any limitations of liability in this Master Agreement or in any other document executed in conjunction with this Master Agreement. 26/!Joefqfoefou!Dpousbdups The Contractor shall be an independent contractor. Contractor shall have no authorization, express or implied, to bind the Lead State, Participating States, other Participating Entities, or Purchasing Entities to any agreements, settlements, liability or understanding whatsoever, and agrees not to hold itself out as agent except as expressly set forth herein or as expressly agreed in any Participating Addendum. 27/!Joejwjevbm!Dvtupnfst!! Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Except to the extent modified by a Participating Addendum, each Purchasing Entity shall follow the terms and conditions of the Master Agreement and applicable Participating Addendum and will have the same rights and responsibilities for their purchases as the Lead State has in the Master Agreement, including but not limited to, any indemnity or right to recover any costs as such right is defined in the Master Agreement and applicable Participating Addendum for their purchases. Each Purchasing Entity will be responsible for its own charges, fees, and liabilities. The Contractor will apply the charges and invoice each Purchasing Entity individually. 38!}!Page Qbdlfu!Qh/!247 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 28/!Jotvsbodf a. The insurance requirements of the State of Arizona are specified in section 5.1 X 1.2 of the State of Arizona Special Terms and Conditions. For performance in other states, unless otherwise agreed in a Participating Addendum, Contractor shall, during the term of this Master Agreement, maintain in full force and effect, the insurance described in this section. Contractor shall acquire such insurance from an insurance carrier or carriers licensed to conduct business in each Participating State’s state and having a rating of A-, Class VII or better, in the most recently published edition of Best’s Reports. Failure to buy and maintain the required insurance may result in this Master Agreement’s termination or, at a Participating State’s option, result in termination of its Participating Addendum. b. Coverage shall be written on an occurrence basis. The minimum acceptable limits shall be as indicated below, with no deductible for each of the following categories: 1) Commercial General Liability (CGL) – Occurrence Form Policy shall include bodily injury, property damage, and broad form contractual liability coverage. General Aggregate $2,000,000 Products – Completed Operations Aggregate $1,000,000 Personal and Advertising Injury $1,000,000 Damage to Rented Premises $50,0000 Each Occurrence $1,000,000 2) Business Automobile Liability Bodily injury and Property Damage for any owned, hired, and/or non-owned automobiles used in the performance of this Contract. Combined Single Limit (CSL) $1,000,000 3) Technology Errors & Omissions Insurance Each Claim $2,000,000 Annual Aggregate $2,000,000 Such insurance shall cover any, and all errors, omissions, or negligent acts in the delivery of products, services, and/or licensed programs under this contract. Coverage shall include or shall not exclude services, and/or licensed programs under this contract. Coverage shall include or shall not exclude settlement and/or defense of claims involving intellectual property, including but not limited to patent or copyright infringement. In the event that Tech E&O insurance required by this Contact is written on a Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* claims-made basis, Contractor warrants that any retroactive date under the policy shall precede the effective date of this Contract and, either continuous coverage will be maintained or an extended discovery period will be exercised for a period of two (2) years, beginning at the time work under this contract is completed. c. Contractor shall pay premiums on all insurance policies. Such policies shall also reference this Master Agreement and shall have a condition that they not be revoked by the insurer until thirty (30) calendar days 39!}!Page Qbdlfu!Qh/!248 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! after notice of intended revocation thereof shall have been given to Purchasing Entity and Participating State by the Contractor. d. Prior to commencement of performance, Contractor shall provide to the Lead State a written endorsement to the Contractor’s general liability insurance policy or other documentary evidence acceptable to the Lead State that (1) names the Participating States identified in the Request for Proposal as additional insureds, (2) provides that no material alteration, cancellation, non-renewal, or expiration of the coverage contained in such policy shall have effect unless the named Participating State has been given at least thirty (30) days prior written notice, and (3) provides that the Contractor’s liability insurance policy shall be primary, with any liability insurance of any Participating State as secondary and noncontributory. Unless otherwise agreed in any Participating Addendum, the Participating State’s rights and Contractor’s obligations are the same as those specified in the first sentence of this subsection. Before performance of any Purchase Order issued after execution of a Participating Addendum authorizing it, the Contractor shall provide to a Purchasing Entity or Participating State who requests it the same information described in this subsection. e. Contractor shall furnish to the Lead State, Participating State, and, on request, the Purchasing Entity copies of certificates of all required insurance within thirty (30) calendar days of the execution of this Master Agreement, the execution of a Participating Addendum, or the Purchase Order’s effective date and prior to performing any work. The insurance certificate shall provide the following information: the name and address of the insured; name, address, telephone number and signature of the authorized agent; name of the insurance company (authorized to operate in all states); a description of coverage in detailed standard terminology (including policy period, policy number, limits of liability, exclusions and endorsements); and an acknowledgment of the requirement for notice of cancellation. Copies of renewal certificates of all required insurance shall be furnished within thirty (30) days after any renewal date. These certificates of insurance must expressly indicate compliance with each and every insurance requirement specified in this section. Failure to provide evidence of coverage may, at sole option of the Lead State, or any Participating State, result in this Master Agreement’s termination or the termination of any Participating Addendum. f. Coverage and limits shall not limit Contractor’s liability and obligations under this Master Agreement, any Participating Addendum, or any Purchase Order. 29/!Mbxt!boe!Sfhvmbujpot!!! Any and all Products offered and furnished shall comply with solicitation section 5.10, Compliance with Applicable Laws. 2:/!Mjdfotf!pg!Qsf.Fyjtujoh!Joufmmfduvbm!Qspqfsuz!!! Any rights to intellectual property shall be as prescribed in the Lead State’s solicitation and resulting contract, and Purchasing Entities shall have the same rights as the Lead State under those provisions. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 31/!Op!Xbjwfs!pg!Tpwfsfjho!Jnnvojuz!! In no event shall this Master Agreement, any Participating Addendum or any contract or any Purchase Order issued thereunder, or any act of a Lead State, a Participating State, or a Purchasing Entity be a waiver of any form of defense or immunity, whether sovereign immunity, governmental immunity, immunity based on the Eleventh Amendment to the Constitution of the United States or otherwise, from any claim or from the jurisdiction of any court. This section applies to a claim brought against the Participating State only to the extent Congress 3:!}!Page Qbdlfu!Qh/!249 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! has appropriately abrogated the Participating State’s sovereign immunity and is not consent by the Participating State to be sued in federal court. This section is also not a waiver by the Participating State of any form of immunity, including but not limited to sovereign immunity and immunity based on the Eleventh Amendment to the Constitution of the United States. 32/!Psefsjoh!! a. Master Agreement order and purchase order numbers shall be clearly shown on all acknowledgments, shipping labels, packing slips, invoices, and on all correspondence. b. The resulting Master Agreements permit Purchasing Entities to define project-specific requirements and informally compete the requirement among companies having a Master Agreement on an “as needed” basis. This procedure may also be used when requirements are aggregated or other firm commitments may be made to achieve reductions in pricing. This procedure may be modified in Participating Addenda and adapted to Purchasing Entity rules and policies. The Purchasing Entity may in its sole discretion determine which Master Agreement Contractors should be solicited for a quote. The Purchasing Agency may select the quote that it considers most advantageous, cost and other factors considered. c. Each Purchasing Entity will identify and utilize its own appropriate purchasing procedure and documentation. Contractor is expected to become familiar with the Purchasing Entities’ rules, policies, and procedures regarding the ordering of supplies and/or services contemplated by this Master Agreement. d. Contractor shall not begin work without a valid Purchase Order or other appropriate commitment document compliance with the law of the Purchasing Entity. e. Orders may be placed consistent with the terms of this Master Agreement during the term of the Master Agreement. f. All Orders pursuant to this Master Agreement, at a minimum, shall include: (1) The services or supplies being delivered; (2) The place and requested time of delivery; (3) A billing address; (4) The name, phone number, and address of the Purchasing Entity representative; (5) The price per hour or other pricing elements consistent with this Master Agreement and the contractor’s proposal; (6) A ceiling amount of the order for services being ordered; and (7) The Master Agreement identifier. g. All communications concerning administration of Orders placed shall be furnished solely to the authorized purchasing agent within the Purchasing Entity’s purchasing office, or to such other individual identified in writing in the Order. h. Orders must be placed pursuant to this Master Agreement prior to the termination date thereof, but may Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* have a delivery date or performance period up to 120 days past the then-current termination date of this Master Agreement. Contractor is reminded that financial obligations of Purchasing Entities payable after the current applicable fiscal year are contingent upon agency funds for that purpose being appropriated, budgeted, and otherwise made available. i. Notwithstanding the expiration or termination of this Master Agreement, Contractor agrees to perform in accordance with the terms of any Orders then outstanding at the time of such expiration or termination. Contractor shall not honor any Orders placed after the expiration or termination of this Master Agreement, or 41!}!Page Qbdlfu!Qh/!24: 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! otherwise inconsistent with its terms. Orders from any separate indefinite quantity, task orders, or other form of indefinite delivery order arrangement priced against this Master Agreement may not be placed after the expiration or termination of this Master Agreement, notwithstanding the term of any such indefinite delivery order agreement. 33/!Qbsujdjqbout a. Contractor may not deliver Products under this Master Agreement until a Participating Addendum acceptable to the Participating State and Contractor is executed. The NASPO ValuePoint Master Agreement Terms and Conditions are applicable to any Order by a Participating State (and other Purchasing Entities covered by their Participating Addendum), except to the extent altered, modified, supplemented or amended by a Participating Addendum. By way of illustration and not limitation, this authority may apply to unique delivery and invoicing requirements, confidentiality requirements, defaults on Orders, governing law and venue relating to Orders by a Participating State, indemnification, and insurance requirements. Statutory or constitutional requirements relating to availability of funds may require specific language in some Participating Addenda in order to comply with applicable law. The expectation is that these alterations, modifications, supplements, or amendments will be addressed in the Participating Addendum or, with the consent of the Purchasing Entity and Contractor, may be included in the ordering document (e.g. purchase order or contract) used by the Purchasing Entity to place the Order. b. Use of specific NASPO ValuePoint cooperative Master Agreements by state agencies, political subdivisions and other Participating Entities (including cooperatives) authorized by individual state’s statutes to use state contracts are subject to the approval of the respective State Chief Procurement Official. Issues of interpretation and eligibility for participation are solely within the authority of the respective State Chief Procurement Official. c. Obligations under this Master Agreement are limited to those Participating Entities who have signed a Participating Addendum and Purchasing Entities within the scope of those Participating Addenda. Financial obligations of Participating States are limited to the orders placed by the departments or other state agencies and institutions having available funds. Participating States incur no financial obligations on behalf of political subdivisions. Contractor shall email a fully executed PDF copy of each Participating Addendum to PA@wsca- naspo.org to support documentation of participation and posting in appropriate data bases. d. NASPO Cooperative Purchasing Organization LLC, doing business as NASPO ValuePoint, is not a party to the Master Agreement. It is a nonprofit cooperative purchasing organization assisting states in administering the NASPO cooperative purchasing program for state government departments, institutions, agencies and political subdivisions (e.g., colleges, school districts, counties, cities, etc.) for all 50 states, the District of Columbia and the territories of the United States. e. State Participating Addenda or other Participating Addenda shall not be construed to amend the terms of this Master Agreement between the Lead State and Contractor. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* f. Participating Entities who are not states may under some circumstances sign their own Participating Addendum, subject to the approval of participation by the Chief Procurement Official of the state where the Participating State is located. g. Resale. “Resale” means any transfer of software for compensation or assignment of services for compensation. Subject to any specific conditions included in the solicitation or Contractor’s proposal as accepted by the Lead State, or as explicitly permitted in a Participating Addendum, Purchasing Entities may not resell Products (the definition of which includes software and services that are deliverables). Absent any 42!}!Page Qbdlfu!Qh/!251 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! such condition or explicit permission, this limitation does not prohibit: payments by employees of a Purchasing Entity for Products; sales of Products to the general public as surplus property; and fees associated with inventory transactions with other governmental or nonprofit entities under cooperative agreements and consistent with a Purchasing Entity’s laws and regulations. Any sale or transfer permitted by this subsection must be consistent with license rights granted for use of intellectual property. 34/!Qbznfou! Payment for completion of a contract order is normally made within 30 days following the date the entire order is delivered or the date a correct invoice is received, whichever is later. After 45 days the Contractor may assess overdue account charges up to a maximum rate of one percent per month on the outstanding balance. Payments will be remitted by mail. Payments may be made via a State or political subdivision “Purchasing Card” with no additional charge. Any prompt payment terms proposed by contractor shall be extended to all Purchasing Entities. 35/!Qvcmjd!Jogpsnbujpo/ This Master Agreement and all related documents are subject to disclosure pursuant to the Purchasing Entity’s public information laws. 36/!Sfdpset!Benjojtusbujpo!boe!Bveju/ a. The Contractor shall maintain books, records, documents, and other evidence pertaining to this Master Agreement and orders placed by Purchasing Entities under it to the extent and in such detail as shall adequately reflect performance and administration of payments and fees. Contractor shall permit the Lead State, a Participating State, a Purchasing Entity, the federal government (including its grant awarding entities and the U.S. Comptroller General), and any other duly authorized agent of a governmental agency, to audit, inspect, examine, copy and/or transcribe Contractor's books, documents, papers and records directly pertinent to this Master Agreement or orders placed by a Purchasing Entity under it for the purpose of making audits, examinations, excerpts, and transcriptions. This right shall survive for a period of five (5) years following termination of this Agreement or final payment for any order placed by a Purchasing Entity against this Agreement, whichever is later, to assure compliance with the terms hereof or to evaluate performance hereunder. b. Without limiting any other remedy available to any governmental entity, the Contractor shall reimburse the applicable Lead State, Participating State, or Purchasing Entity for any overpayments inconsistent with the terms of the Master Agreement or orders or underpayment of fees found as a result of the examination of the Contractor’s records. c. The rights and obligations herein right exist in addition to any quality assurance obligation in the Master Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Agreement requiring the Contractor to self-audit contract obligations and that permits the Lead State to review compliance with those obligations. 37/!Benjojtusbujwf!Gfft a. The Contractor shall pay to NASPO ValuePoint, or its assignee, a NASPO ValuePoint Administrative Fee of one-quarter of one percent (0.25% or 0.0025) no later than 60 days following the end of each calendar quarter. The NASPO ValuePoint Administrative Fee shall be submitted quarterly and is based on all sales of products and services under the Master Agreement (less any charges for taxes or shipping). The NASPO ValuePoint 43!}!Page Qbdlfu!Qh/!252 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Administrative Fee is not negotiable. This fee is to be included as part of the pricing submitted with proposal. b. Additionally, some states, such as the State of Arizona, may require an additional fee be paid directly to the state only on purchases made by Purchasing Entities within that state. For all such requests, the fee level, payment method and schedule for such reports and payments will be incorporated into the Participating Addendum that is made a part of the Master Agreement. The Contractor may adjust the Master Agreement pricing accordingly for purchases made by Purchasing Entities within the jurisdiction of the state. All such agreements shall not affect the NASPO ValuePoint Administrative Fee percentage or the prices paid by the Purchasing Entities outside the jurisdiction of the state requesting the additional fee. The NASPO ValuePoint Administrative Fee in subsection 26a shall be based on the gross amount of all sales (less any charges for taxes or shipping) at the adjusted prices (if any) in Participating Addenda. 38/!OBTQP!WbmvfQpjou!Tvnnbsz!boe!Efubjmfe!Vtbhf!Sfqpsut!! In addition to other reports that may be required by this solicitation, the Contractor shall provide the following NASPO ValuePoint reports. a. Summary Sales Data. The Contractor shall submit quarterly sales reports directly to NASPO ValuePoint using the NASPO ValuePoint Quarterly Sales/Administrative Fee Reporting Tool found at http://www.naspo.org/WNCPO/Calculator.aspx. Any/all sales made under the contract shall be reported as cumulative totals by state. Even if Contractor experiences zero sales during a calendar quarter, a report is still required. Reports shall be due no later than 30 day following the end of the calendar quarter (as specified in the reporting tool). b. Detailed Sales Data. Contractor shall also report detailed sales data by: (1) state; (2) entity/customer type, e.g. local government, higher education, K12, non-profit; (3) Purchasing Entity name; (4) Purchasing Entity bill- to and ship-to locations; (4) Purchasing Entity and Contractor Purchase Order identifier/number(s); (5) Purchase Order Type (e.g. sales order, credit, return, upgrade, determined by industry practices); (6) Purchase Order date; (7) Ship Date; (8) and line item description, including product number if used. The report shall be submitted in any form required by the solicitation. Reports are due on a quarterly basis and must be received by the Lead State and NASPO ValuePoint Cooperative Development Team no later than thirty (30) days after the end of the reporting period. Reports shall be delivered to the Lead State and to the NASPO ValuePoint Cooperative Development Team electronically through a designated portal,email, CD-Rom, flash drive or other method as determined by the Lead State and NASPO ValuePoint. Detailed sales data reports shall include sales information for all sales under Participating Addenda executed under this Master Agreement. The format for the detailed sales data report is in shown in EXHIBIT III_Cooperative Contract Sales Reporting Data Requirements and Data Format. c. Reportable sales for the summary sales data report and detailed sales data report includes sales to employees for personal use where authorized by the solicitation and the Participating Addendum. Report data for employees should be limited to ONLY the state and entity they are participating under the authority of (state and agency, city, county, school district, etc.) and the amount of sales. No personal identification numbers, e.g. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* names, addresses, tpdjbm!tfdvsjuz!ovncfst!ps!boz!puifs!ovnfsjdbm!jefoujgjfs, may be submitted with any report. d. Contractor shall provide the NASPO ValuePoint Cooperative Development Coordinator with an executive summary each quarter that includes, at a minimum, a list of states with an active Participating Addendum, states that Contractor is in negotiations with and any PA roll out or implementation activities and issues. NASPO ValuePoint Cooperative Development Coordinator and Contractor will determine the format and content of the executive summary. The executive summary is due 30 days after the conclusion of each 44!}!Page Qbdlfu!Qh/!253 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! calendar quarter. e. Timely submission of these reports is a material requirement of the Master Agreement. The recipient of the reports shall have exclusive ownership of the media containing the reports. The Lead State and NASPO ValuePoint shall have a perpetual, irrevocable, non-exclusive, royalty free, transferable right to display, modify, copy, and otherwise use reports, data and information provided under this section. 39/!Tuboebse!pg!Qfsgpsnbodf!boe!Bddfqubodf/ Determination of the acceptability of services shall be made by the sole judgement of the Purchasing Entity. Acceptance shall be in writing, verbal acceptance will not be allowed. Services shall be completed in accordance with the Scope of Work, agreed to and accepted schedules, plans, and agreed to performance standards. Acceptance shall be one hundred percent (100%) functionality, which will be determined by the Purchasing Entity. Acceptance criteria shall include, but not be limited to conformity to the scope of work, quality of workmanship, and successfully performing all required Tasks. Nonconformance to a stated acceptance and performance criteria of both services and or products, as required, shall result in a delay for payment. The warranty period will begin upon Acceptance. 3:/!Xbssbouz!!! The Contractor warrants for a period of 90 days from the date of Acceptance in accordance with the provisions of section 7 of the State of Arizona Uniform Terms and Conditions and section 5.1 N. of the State of Arizona Special Terms and Conditions, with rights of the State available to other Purchasing Entities. Upon breach of the warranty, the Contractor will repair or replace (at no charge to the Purchasing Entity) the Product whose nonconformance is discovered and made known to the Contractor. If the repaired and/or replaced Product proves to be inadequate, or fails of its essential purpose, the Contractor will refund the full amount of any payments that have been made. The rights and remedies of the parties under this warranty are in addition to any other rights and remedies of the parties provided by law or equity, including, without limitation, actual damages, and, as applicable and awarded under the law, to a prevailing party, reasonable attorneys’ fees and costs. 41/!)SFTFSWFE*!! 42/!Ujumf!pg!Qspevdu!! Upon Acceptance by the Purchasing Entity, Contractor shall convey to Purchasing Entity title to Product consisting of tangible media free and clear of all liens, encumbrances, or other security interests. 43/!Xbjwfs!pg!Csfbdi Failure of the Lead State, Participating State, or Purchasing Entity to declare a default or enforce any rights and remedies shall not operate as a waiver under this Master Agreement or Participating Addendum. Any Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* waiver by the Lead State, Participating State, or Purchasing Entity must be in writing. Waiver by the Lead State or Participating State of any default, right or remedy under this Master Agreement or Participating Addendum, or by Purchasing Entity with respect to any Purchase Order, or breach of any terms or requirements of this Master Agreement, a Participating Addendum, or Purchase Order shall not be construed or operate as a waiver of any subsequent default or breach of such term or requirement, or of any other term or requirement under this Master Agreement, Participating Addendum, or Purchase Order. 45!}!Page Qbdlfu!Qh/!254 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 44/!Bttjhonfou!pg!Boujusvtu!Sjhiut Contractor irrevocably assigns to a Participating State any claim for relief or cause of action which the Contractor now has or which may accrue to the Contractor in the future by reason of any violation of state or federal antitrust laws (15 U.S.C. § 1-15 or a Participating State’s state antitrust provisions), as now in effect and as may be amended from time to time, in connection with any goods or services provided to the Contractor for the purpose of carrying out the Contractor's obligations under this Master Agreement or Participating Addendum, including, at a Participating State's option, the right to control any such litigation on such claim for relief or cause of action. 45/!Efcbsnfou The Contractor certifies that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction (contract) by any governmental department or agency. This certification represents a recurring certification made at the time any Order is placed under this Master Agreement. If the Contractor cannot certify this statement, attach a written explanation for review by the Lead State. 46/!Hpwfsojoh!Mbx!boe!Wfovf!!!! a. The procurement, evaluation, and award of the Master Agreement shall be governed by and construed in accordance with the laws of the Lead State sponsoring and administering the procurement. The construction and effect of the Master Agreement after award shall be governed by the law of the state serving as Lead State (in most cases also the Lead State). The construction and effect of any Participating Addendum or Order against the Master Agreement shall be governed by and construed in accordance with the laws of the Participating State’s or Purchasing Entity’s State. b. Unless otherwise specified in the RFP, the venue for any protest, claim, dispute or action relating to the procurement, evaluation, and award is in the Lead State. Venue for any claim, dispute or action concerning the terms of the Master Agreement shall be in the state serving as Lead State. Venue for any claim, dispute, or action concerning any Order placed against the Master Agreement or the effect of a Participating Addendum shall be in the Purchasing Entity’s State. c. If a claim is brought in a federal forum, then it must be brought and adjudicated solely and exclusively within the United States District Court for (in decreasing order of priority): the Lead State for claims relating to the procurement, evaluation, award, or contract performance or administration if the Lead State is a party; the Participating State if a named party; the Participating State state if a named party; or the Purchasing Entity state if a named party. 47/!OBTQP!WbmvfQpjou!fNbslfu!Dfoufs! In July 2011, NASPO ValuePoint entered into a multi-year agreement with SciQuest, Inc. whereby SciQuest Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* will provide certain electronic catalog hosting and management services to enable eligible NASPO ValuePoint’s customers to access a central online website to view and/or shop the goods and services available from existing NASPO ValuePoint Cooperative Contracts. The central online website is referred to as the NASPO ValuePoint eMarket Center. The Contractor will have visibility in the eMarket Center through Ordering Instructions. These Ordering Instructions are available at no cost to the Contractor and provided customers information regarding the Contractors website and ordering information. 46!}!Page Qbdlfu!Qh/!255 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!4;!OBTQP!WbmvfQpjou!Nbtufs!Bhsffnfou!Ufsnt!boe! Phoenix, AZ 85007 Dpoejujpot!! Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! At a minimum, the Contractor agrees to the following timeline: NASPO ValuePoint eMarket Center Site Admin shall provide a written request to the Contractor to begin Ordering Instruction process. The Contractor shall have thirty (30) days from receipt of written request to work with NASPO ValuePoint to provide any unique information and ordering instructions that the Contractor would like the customer to have. 48/!Dpousbdu!Qspwjtjpot!gps!Psefst!Vujmj{joh!Gfefsbm!Gvoet/ Pursuant to Appendix II to 2 Code of Federal Regulations (CFR) Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards, Orders funded with federal funds may have additional contractual requirements or certifications that must be satisfied at the time the Order is placed or upon delivery. These federal requirements may be proposed by Participating Entities in Participating Addenda and Purchasing Entities for incorporation in Orders placed under this master agreement. 49/!Tubuf!Hpwfsonfou!Tvqqpsu!! No support, facility space, materials, special access, personnel or other obligations on behalf of the states or other Participating Entity, other than payment, are required under the Master Agreement. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 47!}!Page Qbdlfu!Qh/!256 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 6/2!Tubuf!pg!Bsj{pob!Tqfdjbm!Ufsnt!boe!Dpoejujpot! B/!Qvsqptf! Pursuant to provisions of the Arizona Procurement Code, A.R.S. 41-2501 Et Seq., the State of Arizona intends to establish a Contract (Participating Addendum, PA) for the materials or services as listed herein in service to the State. C/!Ufsn!pg!Dpousbdu! The term of any resultant Contract shall commence on date of execution and shall be for an initial period of two (2) years, unless terminated, canceled or extended as otherwise provided herein. D/Dpousbdu!Fyufotjpot The Contract term is for period stated in Item B. subject to additional successive periods with a maximum aggregate including all extensions not to exceed five (5) years. E/!Dpousbdu!Uzqf!—!Gjyfe!Qsjdf! F/!Fmjhjcmf!Bhfodjft!)TUBUFXJEF* This Contract shall be for the use of all State of Arizona departments, agencies, commissions and boards. In addition, eligible State Purchasing Cooperative members may participate at their discretion. In order to participate in this contract, a cooperative member shall have entered into a Cooperative Purchasing Agreement with the Department of Administration, State Procurement Office as required by Arizona Revised Statues § 41-2632. Membership in the State Purchasing Cooperative is available to all Arizona political subdivisions including cities, counties, school districts, and special districts. Membership is also available to all non- profit organizations, as well as State governments, the US Federal Government and Tribal Nations. Non-profit organizations are defined in A.R.S. § 41-2631(4) as any nonprofit corporation as designated by the internal revenue service under section 501(c)(3) through 501(c)(6). Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* G/!Mjdfotft! The Contractor shall maintain in current status, all federal, state and local licenses and permits required for the operation of the business conducted by the Contractor. H/!Wpmvnf!pg!Xpsl! The State does not guarantee a specific amount of work either for the life of the Contract or on an annual basis. Qbdlfu!Qh/!257 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! I/!Lfz!Qfstpoofm It is essential that the Contractor provide adequate experienced personnel, capable of and devoted to the successful accomplishment of work to be performed under this Contract. The Contractor must agree to assign specific individuals to the key positions if required. 1. The Contractor agrees that, once assigned to work under this Contract, key personnel shall not be removed or replaced without written notice to the State. 2. Key personnel who are not available for work under this Contract for a continuous period exceeding thirty (30) calendar days, or are expected to devote substantially less effort to the work than initially anticipated, the Contractor shall immediately notify the State, and shall, subject to the concurrence of the State, replace such personnel with personnel of substantially equal ability and qualifications. J/Dibohft The State may at any time make changes within the general scope of this Contract. The Contractor shall respond to the Change Order with a proposal. If any such change causes an adjustment in the cost of, or the time required for the performance of any part of the work under this Contract, whether changed or not changed by the Change Order, the Procurement Officer shall modify the Contract in writing via a bilateral Contract Amendment. K/!Qsjdf!Bekvtunfou! Any price adjustment shall be within the confines of the awarded contract, or as negotiated in service to this Contract. Any negotiated price adjustments for this Contract shall be documented via a bilateral Contract Amendment. L/!Qbznfou!Qspdfevsft! The State will not make payments to any Entity, Group or individual other than the Contractor with the Federal Employer Identification (FEI) Number identified in the Contract. Contractor invoices requesting payment to any Entity, Group or individual other than the contractually specified Contractor shall be returned to the Contractor for correction. The Contractor shall review and insure that the invoices for services provided show the correct Contractor name prior to sending them for payment. If the Contractor Name and FEI Number change, the Contractor must complete an “Assignment and Agreement” form transferring contract rights and responsibilities to the new Contractor. The State must indicate consent on the form. A written Contract Amendment must be signed by both parties and a new W-9 form must be submitted by the new Contractor and entered into the system prior to any payments being made to the new Contractor. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* M/!Jogpsnbujpo!Ejtdmptvsf! The Contractor shall establish and maintain procedures and controls that are acceptable to the State for the purpose of assuring that no information contained in its records or obtained from the state or from others in carrying out its functions under the contract shall be used or disclosed by it, its agents, officers, or employees, except as required to efficiently perform duties under the Contract. Persons requesting such information should be referred to the State. The Contractor also agrees that any information pertaining to individual persons shall not be divulged other than to employees or officers of 49!}!Page Qbdlfu!Qh/!258 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! the Contractor as needed for the performance of duties under the Contract, unless otherwise agreed to in writing by the State. N/!Fnqmpzfft!pg!uif!Dpousbdups! All employees of the Contractor employed in the performance of work under the Contract shall be considered employees of the Contractor at all times, and not employees of the State. The Contractor shall comply with the Social Security Act, Workman’s Compensation laws and Unemployment laws of the State of Arizona and all State, local and Federal legislation relevant to the Contractor’s business. O/!Xbssbouz! All services supplied under this Contract shall be fully guaranteed by the Contractor for a minimum period of ninety (90) days from the date of acceptance by the State. Any defects of design, workmanship, or delivered materials, that would result in non-compliance shall be fully corrected by the Contractor without cost to the State. P/!Dpnqmjbodf!xjui!Bqqmjdbcmf!Mbxt! The Materials and services supplied under this Contract shall comply with all applicable Federal, state and local laws, and the Contractor shall maintain all applicable licenses and permit requirements. Contractor represents and warrants to the State that Contractor has the skill and knowledge possessed by members of its trade or profession and Contractor will apply that skill and knowledge with care and diligence so Contactor and Contractor's employees and any authorized subcontractors shall perform the Services described in this Contract in accordance with the Statement of Work. Contractor represents and warrants that the Materials provided through this Contract and Statement of Work shall be free of viruses, backdoors, worms, spyware, malware and other malicious code that will hamper performance of the Materials, collect unlawful personally identifiable information on Users or prevent the Materials from performing as required under the terms and conditions of this Contract. Q/!Opo.Fydmvtjwf!Dpousbdu! Any Contract resulting from this solicitation shall be awarded with the understanding and agreement that it is for the sole convenience of the State of Arizona. The State reserves the right to obtain like goods or services from another source when necessary, or when determined to be in the best interest of the State. R/!Benjojtusbujwf!Gff0Vtbhf!Sfqpsut! 1. In accordance with ARS § 41-2633 the Department of Administration, State Procurement Office includes an Administrative Fee, in the majority of its Statewide contracts – multiple agency, multiple government, cooperative contracts. The Administrative Fee is used by the State to defray the Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* additional costs associated with soliciting, awarding and administering statewide contracts. In addition to the State agencies, boards and commissions, statewide contracts are available to members of the State Purchasing Cooperative including cities, counties, school districts, special districts, other state governments, agencies of the federal government, tribal nations, schools, medical institutions, and nonprofit organizations. The Administrative Fee is the responsibility of the contractor. The Administrative Fee is a part of the contractor’s unit prices and is not to be charged directly to the customer in the form of a 4:!}!Page Qbdlfu!Qh/!259 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! separate line item. In accordance with Section 26 of the NASPO ValuePoint Master Agreement Terms and Conditions, the 0.25% NASPO ValuePoint Administrative fee shall be incorporated into the Offerors base price. Other states, including the State of Arizona, may negotiate additional Administrative Fees in their Participating Addenda following award of a Master Agreement. Further, Statewide contracts maintain one set of pricing for all customers and not separate prices for State agency customers and State Purchasing Cooperative customers. 3/!Tubuf!pg!Bsj{pob!Gff!Bnpvou;! Unless defined differently within the contract, the Statewide Contracts Administrative Fee shall be one percent (1.0%) of quarterly sales receipts under an active Statewide contract, transacted by only the members of the State Purchasing Cooperative, minus any taxes or regulatory fees, minus any returns or credits, and minus any shipping charges not already included in the unit prices. The Administrative Fee percentage is only applicable to amounts actually received by the contractor during the quarter and is not applicable to amounts ordered by customers but not yet paid for. The administrative fee is not paid on transactions with state agency customers. 3. Method of Assessment At the completion of each quarter, the contractor reviews all sales under their contract in preparation for submission of their Usage Report. The contractor identifies all sales receipts transacted by members of the State Purchasing Cooperative and assesses one percent (1.0%) of this amount in their Usage Report. An updated list of State Purchasing Cooperative members may be found at: https://spo.az.gov/state-purchasing-cooperative . At its option, the State may expand or narrow the applicability of this fee. The State shall provide thirty (30) written notice prior to exercising or changing this option. The contractor shall summarize all sales, along with all assessed Administrative Fee amounts within their Usage Report, including total amounts for the following: Total sales receipts from State agencies, boards and commissions; Total sales receipts from members of the State Purchasing Cooperative; and Total Administrative Fee amount based on one percent (1.0%) of the sales receipts from members of the State Purchasing Cooperative. 4. Submission of Reports and Fees. Within thirty (30) days following the end of the quarter, the contractor submits their Usage Report and if applicable, a check in the amount of one percent (1%) of their sales receipts from members of the State Purchasing Cooperative, to the Department of Administration, State Procurement Office. Contractors are required to use the State’s current report templates unless you have authorization from your contract officer to use a different format. You need to complete Form 799, which is a cover letter that gives the totals of your transactions; and Form 801, which is an Excel spreadsheet that details your transactions. Sales to state agencies and the cooperative members are to be totaled separately. The most Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* current forms can be downloaded at https://spo.az.gov/statewide-contracts-administrative-fee. 4.1 The submission schedule for Administrative Fees and Usage reports shall be as follows: FY Q1, July through September Due October 31 FY Q2, October through December Due January 31 FY Q3, January through March Due by April 30 FY Q4, April through June Due by July 31 51!}!Page Qbdlfu!Qh/!25: 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 4.2 Usage Reports and any questions are to be submitted by email to the state's designated usage report email address: usage@azdoa.gov 4.3 Administrative Fees shall be made out to the “State Procurement Office” and mailed to: Department of Administration General Services Division ATTN: “Statewide Contracts Administrative Fee” 100 N. 15th Avenue, Suite 202 Phoenix, AZ 85007 5. The Administrative Fee shall be a part of the Contractor’s unit prices and is not to be charged directly to the customer in the form of a separate line item. Statewide contracts shall not have separate prices for State Agency customers and State Purchasing Cooperative customers. 6. Contractor's failure to remit administrative fees in a timely manner consistent with the contract’s requirements may result in the State exercising any recourse available under the contract or as provided for by law. S/!Bddfqubodf! Determination of the acceptability of services shall be made by the sole judgment of the State. Acceptance shall be in writing, verbal acceptance will not be allowed. Services shall be completed in accordance with the Scope of Work, agreed to and accepted schedules, plans, and agreed to performance standards. Acceptance shall be one hundred percent (100%) functionality, which will be determined by the State. Acceptance criteria shall include, but not be limited to conformity to the scope of work, quality of workmanship and successfully performing all required Tasks. Nonconformance to any of the stated acceptance and performance criteria of both services and or products as required shall result in a delay for payment. Payment shall not be made until nonconformance to the criteria is corrected as determined by the State. U/!Qfsgpsnbodf! 1. Failure to Perform Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* If Contractor fails to complete any deliverable, then Contractor shall: 1.1 Promptly perform a root-cause analysis to identify the cause of such failure; 1.2 Use commercially reasonable efforts to correct such failure and to begin meeting the requirements as promptly as practicable; 1.3 Provide the State with a report detailing the cause of, and procedure for correcting, such 52!}!Page Qbdlfu!Qh/!261 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! failure; and 1.4 If appropriate under the circumstances, take action to avoid such failure in the future. 2. Root-Cause Analysis In the event of the Contractor's failure to perform required services or meet agreed upon service levels or other Contractor service standards as required by the State under this Contract, the Contractor shall perform an analysis of the cause of the service level problem and implement remediation steps as appropriate. The State shall have the right to review the analysis and approve the remediation steps prior to or subsequent to their implementation, as deemed appropriate by the State, if the remediation steps impact State assets or operational processes. V/!Dpnqfotbujpo! Should the Contractor fail to provide all required services or deliver work products, as agreed upon by State and the Contractor, the State shall be entitled to invoke applicable remedies, including but not limited to, withholding payment to the Contractor and declaring the Contractor in material breach of the Contract. If the Contractor is in any manner in default of any obligation or the Contractor’s work or performance is determined by the State to be defective, sub-standard, or if audit exceptions are identified, the State may, in addition to other available remedies, either adjust the amount of payment or withhold payment until satisfactory resolution of the default, defect, exception or sub-standard performance. The Contractor shall reimburse the State on demand, or the State may deduct from future payments, any amounts paid for work products or performance which are determined to be an audit exception, defective or sub-standard performance. The Contractor shall correct its mistakes or errors without additional cost to the State. The State shall be the sole determiner as to defective or sub-standard performance. The Contractor shall fulfill their contractual requirements including the Deliverables identified in the Statement of Work and fulfill the roles and responsibilities described in the Statement of Work for a firm fixed price, inclusive of travel and travel-related expenses. The fixed amount shall be inclusive of any fees for the use of any third party products or services required for use in the performance of this Contract W/!Dpousbdups!Qfsgpsnbodf!Sfqpsut! Program management shall document Contractor performance, both exemplary and needing improvements where corrective action is needed or desired. Copies of corrective action reports will be forwarded to the Procurement Office for review and any necessary follow-up. The Procurement Office may contact the Contractor upon receipt of the report and may request corrective action. The Procurement Office shall discuss the Contractor’s suggested corrective action plan with the Procurement Specialist for approval of the plan. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* X/!Pggtipsf!Qfsgpsnbodf!pg!Xpsl!Qspijcjufe! Due to security and identity protection concerns, direct services under this contract shall be performed within the borders of the United States. Any services that are described in the specifications or scope of work that directly serve the State of Arizona or its clients and may involve access to secure or sensitive data or personal client data or development or modification of software for the State shall be performed within the borders of the United States. Unless specifically stated otherwise in the specifications, this definition does not apply to indirect or “overhead” services, redundant back-up 53!}!Page Qbdlfu!Qh/!262 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! services or services that are incidental to the performance of the contract. This provision applies to work performed by subcontractors at all tiers. Y/!Joefnojgjdbujpo!boe!Jotvsbodf! 2/2!Joefnojgjdbujpo!Dmbvtf! To the fullest extent permitted by law, Contractor shall defend, indemnify, and hold harmless the State of Arizona, and its departments, agencies, boards, commissions, universities, and any jurisdiction or agency issuing permits for any work included in the project, and their respective directors, officers, officials, agents and employees (hereinafter referred to as "Indemnitee") from and against any and all claims, actions, liabilities, costs, losses, or expenses, (including reasonable attorney's fees), (hereinafter collectively referred to as "Claims") arising out of actual or alleged bodily injury or personal injury of any person (including death) or loss or damage to tangible or intangible property caused, or alleged to be caused, in whole or in part, by the negligent or willful acts or omissions of Contractor or any of Contractor's directors, officers, agents, employees, volunteers or subcontractors. This indemnity includes any claim or amount arising or recovered under the Workers' Compensation Law or arising out of the failure of Contractor to conform to any federal, state or local law, statute, ordinance, rule, regulation or court decree. It is the specific intention of the parties that the Indemnitee shall, in all instances, except for Claims arising solely from the negligent or willful acts or omissions of the Indemnitee, be indemnified by Contractor from and against any and all Claims. It is agreed that Contractor will be responsible for primary loss investigation, defense and judgment costs where this indemnification is applicable. This indemnification will survive the termination of the above listed contract with the Contractor. This indemnity shall not apply if the contractor or sub-contractor(s) is/are an agency, board, commission or university of the State of Arizona. 2/3!Jotvsbodf!Sfrvjsfnfout! 1.2.1 Contractor and subcontractors shall procure and maintain, until all of their obligations have been discharged, including any warranty periods under this Contract, insurance against claims for injury to persons or damage to property arising from, or in connection with, the performance of the work hereunder by the Contractor, its agents, representatives, employees or subcontractors. 1.2.2 The Insurance Requirements herein are minimum requirements for this Contract and in no way limit the indemnity covenants contained in this Contract. The State of Arizona in no way warrants that the minimum limits contained herein are sufficient to protect the Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Contractor from liabilities that arise out of the performance of the work under this Contract by the Contractor, its agents, representatives, employees or subcontractors, and the Contractor is free to purchase additional insurance. 2/4!Njojnvn!Tdpqf!boe!Mjnjut!pg!Jotvsbodf! Contractor shall provide coverage with limits of liability not less than those stated below. 54!}!Page Qbdlfu!Qh/!263 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 1.3.1 Commercial General Liability (CGL) – Occurrence Form Policy shall include bodily injury, property damage, and broad form contractual liability coverage. General Aggregate $2,000,000 Products – Completed Operations Aggregate $1,000,000 Personal and Advertising Injury $1,000,000 Damage to Rented Premises $50,000 Each Occurrence $1,000,000 a. The policy shall be endorsed, as required by this written agreement, to include the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees as additional insureds with respect to liability arising out of the activities performed by or on behalf of the Contractor. b. Policy shall contain a waiver of subrogation endorsement, as required by this written agreement, in favor of the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor. 1.3.2 Business Automobile Liability Bodily Injury and Property Damage for any owned, hired, and/or non-owned automobiles used in the performance of this Contract. Combined Single Limit (CSL) $1,000,000 Policy shall be endorsed, as required by this written agreement, to include the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees as additional insureds with respect to liability arising out of the activities performed by, or on behalf of, the Contractor involving automobiles owned, hired and/or non-owned by the Contractor. c. Policy shall contain a waiver of subrogation endorsement as required by this written agreement in favor of the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor. 1.3.3 Workers’ Compensation and Employers' Liability Workers' Compensation Statutory Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Employers' Liability Each Accident $1,000,000 Disease – Each Employee $1,000,000 Disease – Policy Limit $1,000,000 d. Policy shall contain a waiver of subrogation endorsement, as required by this written agreement, in favor of the State of Arizona, and its departments, agencies, boards, 55!}!Page Qbdlfu!Qh/!264 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor. e. This requirement shall not apply to each Contractor or subcontractor that is exempt under A.R.S. § 23-901, and when such Contractor or subcontractor executes the appropriate waiver form (Sole Proprietor or Independent Contractor). 1.3.4 Technology Errors & Omissions Insurance Each Claim$2,000,000 Annual Aggregate $2,000,000 f. Such insurance shall cover any, and all errors, omissions, or negligent acts in the delivery of products, services, and/or licensed programs under this contract. g. Coverage shall include or shall not exclude settlement and/or defense of claims involving intellectual property, including but not limited to patent or copyright infringement. h. In the event that the Tech E&O insurance required by this Contract is written on a claims-made basis, Contractor warrants that any retroactive date under the policy shall precede the effective date of this Contract and, either continuous coverage will be maintained or an extended discovery period will be exercised for a period of two (2) years, beginning at the time work under this Contract is completed. 1.3.5 Media Liability Coverage Each Claim$2,000,000 Annual Aggregate $2,000,000 i. Such insurance shall cover any and all errors and omissions or negligent acts in the production of content, including but not limited to plagiarism, defamation, libel, slander, false advertising, invasion of privacy, and infringement of copyright, title, slogan, trademark, service mark and trade dress. j. In the event that the Media Liability insurance required by this Contract is written on a claims-made basis, Contractor warrants that any retroactive date under the policy shall precede the effective date of this Contract and, either continuous coverage will be maintained, or an extended discovery period will be exercised for a period of two (2) years beginning at the time work under this Contract is completed. 2/5!Beejujpobm!Jotvsbodf!Sfrvjsfnfout! Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* The policies shall include, or be endorsed to include, as required by this written agreement, the following provisions: 1.4.1 The Contractor's policies, as applicable, shall stipulate that the insurance afforded the Contractor shall be primary and that any insurance carried by the Department, its agents, 56!}!Page Qbdlfu!Qh/!265 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! officials, employees or the State of Arizona shall be excess and not contributory insurance, as provided by A.R.S. § 41-621 (E). 2/5/3 Insurance provided by the Contractor shall not limit the Contractor’s liability assumed under the indemnification provisions of this Contract. 2/6!Opujdf!pg!Dbodfmmbujpo! Applicable to all insurance policies required within the Insurance Requirements of this Contract, Contractor’s insurance shall not be permitted to expire, be suspended, be canceled, or be materially changed for any reason without thirty (30) days prior written notice to the State of Arizona. Within two (2) business days of receipt, Contractor must provide notice to the State of Arizona if they receive notice of a policy that has been or will be suspended, canceled, materially changed for any reason, has expired, or will be expiring. Such notice shall be sent directly to the Department and shall be mailed, emailed, hand delivered or sent by facsimile transmission to (State Representative’s Name, Address & Fax Number). 2/7!Bddfqubcjmjuz!pg!Jotvsfst! Contractor’s insurance shall be placed with companies licensed in the State of Arizona or hold approved non-admitted status on the Arizona Department of Insurance List of Qualified Unauthorized Insurers. Insurers shall have an “A.M. Best” rating of not less than A- VII. The State of Arizona in no way warrants that the above-required minimum insurer rating is sufficient to protect the Contractor from potential insurer insolvency. 2/8!Wfsjgjdbujpo!pg!Dpwfsbhf! Contractor shall furnish the State of Arizona with certificates of insurance (valid ACORD form or equivalent approved by the State of Arizona) as required by this Contract. An authorized representative of the insurer shall sign the certificates. 1.7.1 All certificates and endorsements, as required by this written agreement, are to be received and approved by the State of Arizona before work commences. Each insurance policy required by this Contract must be in effect at, or prior to, commencement of work under this Contract. Failure to maintain the insurance policies as required by this Contract, or to provide evidence of renewal, is a material breach of contract. 2/8/3 All certificates required by this Contract shall be sent directly to the Department. The State of Arizona project/contract number and project description shall be noted on the certificate of insurance. The State of Arizona reserves the right to require complete copies of all insurance policies required by this Contract at any time. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2/9!Tvcdpousbdupst! Contractor’s certificate(s) shall include all subcontractors as insureds under its policies or Contractor shall be responsible for ensuring and/or verifying that all subcontractors have valid and collectable insurance as evidenced by the certificates of insurance and endorsements for each subcontractor. All coverages for subcontractors shall be subject to the minimum Insurance 57!}!Page Qbdlfu!Qh/!266 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! Requirements identified above. The Department reserves the right to require, at any time throughout the life of this contract, proof from the Contractor that its subcontractors have the required coverage. 2/:!Bqqspwbm!boe!Npejgjdbujpot! The Contracting Agency, in consultation with State Risk, reserves the right to review or make modifications to the insurance limits, required coverages, or endorsements throughout the life of this contract, as deemed necessary. Such action will not require a formal Contract amendment but may be made by administrative action. 2/21!Fydfqujpot! In the event the Contractor or subcontractor(s) is/are a public entity, then the Insurance Requirements shall not apply. Such public entity shall provide a certificate of self-insurance. If the Contractor or subcontractor(s) is/are a State of Arizona agency, board, commission, or university, none of the above shall apply. Z/!Ebub!Qsjwbdz!boe!Tfdvsjuz Contractor shall treat all information obtained through performance of the contract, as confidential or sensitive information consistent with State and federal law and State Policy. Contractor or its agents shall not use any data obtained in the performance of the contract in any manner except as necessary for the proper discharge of its obligations and protection of its rights related to this agreement. Contractor shall establish and maintain procedures and controls acceptable to the State for the purpose of assuring that data in its or its agents’ possession is not mishandled, misused, released, disclosed, or used in an inappropriate manner in performance of the contract. This includes data contained in Contractor’s records obtained from the State or others, necessary for contract performance. Contractor and its agents shall take all reasonable steps and precautions to safeguard this information and data and shall not divulge the information or data to parties other than those needed for the performance of duties under the contract. \[/!Ebub!Qsjwbdz0Tfdvsjuz!Jodjefou!Nbobhfnfou Contractor and its agents shall cooperate and collaborate with appropriate State personnel to identify and respond to an information security or data privacy incident, including a security breach. 1. Threat of Security Breach Contractor(s) agrees to notify the State Chief Information Officer (CIO), the State Chief Information Security Officer (CISO) and other key personnel as identified by the State of any Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* perceived threats placing the supported infrastructure and/or applications in danger of breach of security. The speed of notice shall be at least commensurate with the level of threat, as perceived by the Contractor(s). The State agrees to provide contact information for the State CIO, CISO and key personnel to the Contractor(s). 2. Discovery of Security Breach Contractor agrees to immediately notify the State CIO, the CISO and key personnel as identified by the State of a discovered breach of security. The State agrees to provide contact information 58!}!Page Qbdlfu!Qh/!267 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! for the State CIO, the CISO and key personnel. BB/!Tfdvsjuz!Sfrvjsfnfout!gps!Dpousbdups!Qfstpoofm! Each individual proposed to provide services through this contract agrees to security clearance and background check procedures, including fingerprinting, as defined by the Arizona Department of Administration in accordance with Arizona Revised Statutes §41-710. The results of the individual’s background check procedures must meet all HIPAA and law enforcement requirements. Contractor is responsible for all costs to obtain security clearance for their consultants providing services through this contract. Contractor personnel, agents or sub-contractors that have administrative access to the State’s networks may be subject to any additional security requirements of the State as may be required for the performance of the contract. The Contractor, its agents and sub-contractors shall provide documentation to the State confirming compliance with all such additional security requirements for performance of the contract. Additional security requirements include but are not limited to the following: 1. Identity and Address Verification – that verifies the individual is who he or she claims to be including verification of the candidate’s present and previous addresses; 2. UNAX/confidentiality Training; 3. HIPAA Privacy and Security Training; and 4. Information Security Training. CC/!Bddftt!Dpotusbjout!boe!Sfrvjsfnfout Contractor access to State facilities and resources shall be properly authorized by State personnel, based on business need and will be restricted to least possible privilege. Upon approval of access privileges, the Contractor shall maintain strict adherence to all policies, standards, and procedures. Policies / Standards, ADOA/ASET Policies / Procedures, and Arizona Revised Statues (A.R.S.) §28- 447, §28-449, §38-421, §13-2408, §13-2316, §41-770. Failure of the Contractor, its agents or subcontractors to comply with policies, standards, and procedures including any person who commits an unlawful breach or harmful access (physical or virtual) will be subject to prosecution under all applicable state and / or federal laws. Any and all recovery or reconstruction costs or other liabilities associated with an unlawful breach or harmful access shall be paid by the Contractor. DD/!Ifbmui!Jotvsbodf!Qpsubcjmjuz!boe!Bddpvoubcjmjuz!Bdu!pg!2::7! The Contractor warrants that it is familiar with the requirements of HIPAA, as amended by the Health Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Information Technology for Economic and Clinical Health Act (HITECH Act) of 2009, and accompanying regulations and will comply with all applicable HIPAA requirements in the course of this Contract. Contractor warrants that it will cooperate with the State in the course of performance of the Contract so that both the State and the Contractor will be in compliance with HIPAA, including cooperation and coordination with the Arizona Strategic Enterprise Technology (ASET) Group, Statewide Information Security and Privacy Office (SISPO), Chief Privacy Officer and HIPAA Coordinator and other compliance officials required by HIPAA and its regulations. Contractor will sign any documents that are reasonably necessary to keep the State and Contractor in compliance with 59!}!Page Qbdlfu!Qh/!268 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! HIPAA, including but not limited to, business associate agreements. If requested, the Contractor agrees to sign a “Pledge to Protect Confidential Information” and to abide by the statements addressing the creation, use and disclosure of confidential information, including information designated as protected health information and all other confidential or sensitive information as defined in policy. In addition, if requested, Contractor agrees to attend or participate in job related HIPAA training that is: (1) intended to make the Contractor proficient in HIPAA for purposes of performing the services required and (2) presented by a HIPAA Privacy Officer or other person or program knowledgeable and experienced in HIPAA and who has been approved by the ASET/SISPO Chief Privacy Officer and HIPAA Coordinator. Suggested References: https://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative- Simplification/HIPAAGenInfo/downloads/hipaalaw.pdf http://www.hhs.gov/ocr/privacy/hipaa/understanding/ EE/!Dpnqmjbodf!Sfrvjsfnfout!gps!B/S/T/!¨!52.5512-!Hpwfsonfou!Qspdvsfnfou;!!F.Wfsjgz! Sfrvjsfnfou! 1. The Contractor warrants compliance with all Federal immigration laws and regulations relating to employees and warrants its compliance with Section A.R.S. § 23-214, Subsection A. (That subsection reads: “After December 31, 2007, every employer, after hiring an employee, shall verify the employment eligibility of the employee through the E-Verify program.) 2. A breach of a warranty regarding compliance with immigration laws and regulations shall be deemed a material breach of the Contract and the Contractor may be subject to penalties up to and including termination of the Contract. 3. Failure to comply with a State audit process to randomly verify the employment records of Contractors and subcontractors shall be deemed a material breach of the Contract and the Contractor may be subject to penalties up to and including termination of the Contract. 4. The State Agency retains the legal right to inspect the papers of any employee who works on the Contract to ensure that the Contractor or subcontractor is complying with the warranty under paragraph One (1). 6/3!Tubuf!pg!Bsj{pob!Vojgpsn!Ufsnt!boe!Dpoejujpot! 2/!Efgjojujpo!pg!Ufsnt Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* As used in this Solicitation and any resulting Contract, the terms listed below are defined as follows: 1.1. “Attachment” means any item the Solicitation requires the Offeror to submit as part of the Offer. 1.2. “Contract” means the combination of the Solicitation, including the Uniform and Special Instructions to Offerors, the Uniform and Special Terms and Conditions, and the Specifications and Statement or Scope of Work; the Offer and any Best and Final Offers; and any Solicitation Amendments or Contract Amendments. 5:!}!Page Qbdlfu!Qh/!269 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 1.3. "Contract Amendment" means a written document signed by the Procurement Officer that is issued for the purpose of making changes in the Contract. 1.4. “Contractor” means any person who has a Contract with the State. 1.5. “Days” means calendar days unless otherwise specified. 1.6. “Exhibit” means any item labeled as an Exhibit in the Solicitation or placed in the Exhibits section of the Solicitation. 1.7.“Gratuity” means a payment, loan, subscription, advance, deposit of money, services, or anything of more than nominal value, present or promised, unless consideration of substantially equal or greater value is received. 1.8. “Materials” means all property, including equipment, supplies, printing, insurance and leases of property but does not include land, a permanent interest in land or real property or leasing space. 1.9. “Procurement Officer” means the person, or his or her designee, duly authorized by the State to enter into and administer Contracts and make written determinations with respect to the Contract. 1.10.“Services” means the furnishing of labor, time or effort by a contractor or subcontractor which does not involve the delivery of a specific end product other than required reports and performance, but does not include employment agreements or collective bargaining agreements. 1.11. “Subcontract” means any Contract, express or implied, between the Contractor and another party or between a subcontractor and another party delegating or assigning, in whole or in part, the making or furnishing of any material or any service required for the performance of the Contract. 1.12. “State” means the State of Arizona and Department or Agency of the State that executes the Contract. 1.13.“State Fiscal Year” means the period beginning with July 1 and ending June 30. 3/!Dpousbdu!Joufsqsfubujpo 2.1. Arizona Law. The Arizona law applies to this Contract including, where applicable, the Uniform Commercial Code as adopted by the State of Arizona and the Arizona Procurement Code, Arizona Revised Statutes (A.R.S.) Title 41, Chapter 23, and its implementing rules, Arizona Administrative Code (A.A.C.) Title 2, Chapter 7. 2.2. Implied Contract Terms. Each provision of law and any terms required by law to be in this Contract are a part of this Contract as if fully stated in it. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2.3. Contract Order of Precedence. In the event of a conflict in the provisions of the Contract, as accepted by the State and as they may be amended, the following shall prevail in the order set forth below: 2.3.1. Special Terms and Conditions; 2.3.2. Uniform Terms and Conditions; 2.3.3. Statement or Scope of Work; 61!}!Page Qbdlfu!Qh/!26: 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 2.3.4. Specifications; 2.3.5. Attachments; 2.3.6. Exhibits; 2.3.7. Documents referenced or included in the Solicitation. 2.4. Relationship of Parties. The Contractor under this Contract is an independent Contractor. Neither party to this Contract shall be deemed to be the employee or agent of the other party to the Contract. 2.5. Severability. The provisions of this Contract are severable. Any term or condition deemed illegal or invalid shall not affect any other term or condition of the Contract. 2.6. No Parole Evidence. This Contract is intended by the parties as a final and complete expression of their agreement. No course of prior dealings between the parties and no usage of the trade shall supplement or explain any terms used in this document and no other understanding either oral or in writing shall be binding. 2.7. No Waiver. Either party’s failure to insist on strict performance of any term or condition of the Contract shall not be deemed a waiver of that term or condition even if the party accepting or acquiescing in the nonconforming performance knows of the nature of the performance and fails to object to it. 4/!Dpousbdu!Benjojtusbujpo!boe!Pqfsbujpo 3.1. Records. Under A.R.S. § 35-214 and § 35-215, the Contractor shall retain and shall contractually require each subcontractor to retain all data and other “records” relating to the acquisition and performance of the Contract for a period of five years after the completion of the Contract. All records shall be subject to inspection and audit by the State at reasonable times. Upon request, the Contractor shall produce a legible copy of any or all such records. 3.2. Non-Discrimination. The Contractor shall comply with State Executive Order No. 2009-09 and all other applicable Federal and State laws, rules and regulations, including the Americans with Disabilities Act. 3.3. Audit. Pursuant to ARS § 35-214, at any time during the term of this Contract and five (5) years thereafter, the Contractor’s or any subcontractor’s books and records shall be subject to audit by the State and, where applicable, the Federal Government, to the extent that the books and records relate to the performance of the Contract or Subcontract. 3.4. Facilities Inspection and Materials Testing. The Contractor agrees to permit access to its facilities, subcontractor facilities and the Contractor’s processes or services, at reasonable times for inspection of the facilities or materials covered under this Contract. The State shall also Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* have the right to test, at its own cost, the materials to be supplied under this Contract. Neither inspection of the Contractor’s facilities nor materials testing shall constitute final acceptance of the materials or services. If the State determines non-compliance of the materials, the Contractor shall be responsible for the payment of all costs incurred by the State for testing and inspection. 3.5. Notices. Notices to the Contractor required by this Contract shall be made by the State to the person indicated on the Offer and Acceptance form submitted by the Contractor unless 62!}!Page Qbdlfu!Qh/!271 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! otherwise stated in the Contract. Notices to the State required by the Contract shall be made by the Contractor to the Solicitation Contact Person indicated on the Solicitation cover sheet, unless otherwise stated in the Contract. An authorized Procurement Officer and an authorized Contractor representative may change their respective person to whom notice shall be given by written notice to the other and an amendment to the Contract shall not be necessary. 3.6. Advertising, Publishing and Promotion of Contract. The Contractor shall not use, advertise or promote information for commercial benefit concerning this Contract without the prior written approval of the Procurement Officer. 3.7. Property of the State. Any materials, including reports, computer programs and other deliverables, created under this Contract are the sole property of the State. The Contractor is not entitled to a patent or copyright on those materials and may not transfer the patent or copyright to anyone else. The Contractor shall not use or release these materials without the prior written consent of the State. 3.8. Ownership of Intellectual Property. Any and all intellectual property, including but not limited to copyright, invention, trademark, trade name, service mark, and/or trade secrets created or conceived pursuant to or as a result of this contract and any related subcontract (“Intellectual Property”), shall be work made for hire and the State shall be considered the creator of such Intellectual Property. The agency, department, division, board or commission of the State of Arizona requesting the issuance of this contract shall own (for and on behalf of the State) the entire right, title and interest to the Intellectual Property throughout the world. Contractor shall notify the State, within thirty (30) days, of the creation of any Intellectual Property by it or its subcontractor(s). Contractor, on behalf of itself and any subcontractor(s), agrees to execute any and all document(s) necessary to assure ownership of the Intellectual Property vests in the State and shall take no affirmative actions that might have the effect of vesting all or part of the Intellectual Property in any entity other than the State. The Intellectual Property shall not be disclosed by contractor or its subcontractor(s) to any entity not the State without the express written authorization of the agency, department, division, board or commission of the State of Arizona requesting the issuance of this contract. 3.9. Federal Immigration and Nationality Act. The contractor shall comply with all federal, state and local immigration laws and regulations relating to the immigration status of their employees during the term of the contract. Further, the contractor shall flow down this requirement to all subcontractors utilized during the term of the contract. The State shall retain the right to perform random audits of contractor and subcontractor records or to inspect papers of any employee thereof to ensure compliance. Should the State determine that the contractor and/or any subcontractors be found noncompliant, the State may pursue all remedies allowed by law, including, but not limited to; suspension of work, termination of the contract for default and suspension and/or debarment of the contractor. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 3.10 E-Verify Requirements. In accordance with A.R.S. § 41-4401, Contractor warrants compliance with all Federal immigration laws and regulations relating to employees and warrants its compliance with Section A.R.S. § 23-214, Subsection A. 3.11 Offshore Performance of Work Prohibited. Any services that are described in the specifications or scope of work that directly serve the State of Arizona or its clients and involve access to secure or sensitive data or personal client data shall be performed within the defined territories of the United States. Unless specifically 63!}!Page Qbdlfu!Qh/!272 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! stated otherwise in the specifications, this paragraph does not apply to indirect or 'overhead' services, redundant back-up services or services that are incidental to the performance of the contract. This provision applies to work performed by subcontractors at all tiers. 5/!Dptut!boe!Qbznfout 4.1. Payments. Payments shall comply with the requirements of A.R.S. Titles 35 and 41, Net 30 days. Upon receipt and acceptance of goods or services, the Contractor shall submit a complete and accurate invoice for payment from the State within thirty (30) days. 4.2. Delivery. Unless stated otherwise in the Contract, all prices shall be F.O.B. Destination and shall include all freight delivery and unloading at the destination. 4.3. Applicable Taxes. 4.3.1. Payment of Taxes. The Contractor shall be responsible for paying all applicable taxes. 4.3.2. State and Local Transaction Privilege Taxes. The State of Arizona is subject to all applicable state and local transaction privilege taxes. Transaction privilege taxes apply to the sale and are the responsibility of the seller to remit. Failure to collect such taxes from the buyer does not relieve the seller from its obligation to remit taxes. 4.3.3. Tax Indemnification. Contractor and all subcontractors shall pay all Federal, state and local taxes applicable to its operation and any persons employed by the Contractor. Contractor shall, and require all subcontractors to hold the State harmless from any responsibility for taxes, damages and interest, if applicable, contributions required under Federal, and/or state and local laws and regulations and any other costs including transaction privilege taxes, unemployment compensation insurance, Social Security and Worker’s Compensation. 4.3.4. IRS W9 Form. In order to receive payment the Contractor shall have a current I.R.S. W9 Form on file with the State of Arizona, unless not required by law. 4.4. Availability of Funds for the Next State fiscal year. Funds may not presently be available for performance under this Contract beyond the current state fiscal year. No legal liability on the part of the State for any payment may arise under this Contract beyond the current state fiscal year until funds are made available for performance of this Contract. 4.5. Availability of Funds for the current State fiscal year. Should the State Legislature enter back into session and reduce the appropriations or for any reason and these goods or services are not funded, the State may take any of the following actions: 4.5.1. Accept a decrease in price offered by the contractor; 4.5.2. Cancel the Contract; or Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 4.5.3. Cancel the contract and re-solicit the requirements. 6/!Dpousbdu!Dibohft 5.1. Amendments. This Contract is issued under the authority of the Procurement Officer who signed this Contract. The Contract may be modified only through a Contract Amendment within the scope of the Contract. Changes to the Contract, including the addition of work or materials, the revision of payment terms, or the substitution of work or materials, directed by a person who is 64!}!Page Qbdlfu!Qh/!273 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! not specifically authorized by the procurement officer in writing or made unilaterally by the Contractor are violations of the Contract and of applicable law. Such changes, including unauthorized written Contract Amendments shall be void and without effect, and the Contractor shall not be entitled to any claim under this Contract based on those changes. 5.2. Subcontracts. The Contractor shall not enter into any Subcontract under this Contract for the performance of this contract without the advance written approval of the Procurement Officer. The Contractor shall clearly list any proposed subcontractors and the subcontractor’s proposed responsibilities. The Subcontract shall incorporate by reference the terms and conditions of this Contract. 5.3. Assignment and Delegation. The Contractor shall not assign any right nor delegate any duty under this Contract without the prior written approval of the Procurement Officer. The State shall not unreasonably withhold approval. 6.Sjtl!boe!Mjbcjmjuz! 6.1. Risk of Loss: The Contractor shall bear all loss of conforming material covered under this Contract until received by authorized personnel at the location designated in the purchase order or Contract. Mere receipt does not constitute final acceptance. The risk of loss for nonconforming materials shall remain with the Contractor regardless of receipt. 6.2. Indemnification 6.2.1. Contractor/Vendor Indemnification (Not Public Agency) The parties to this contract agree that the State of Arizona, its departments, agencies, boards and commissions shall be indemnified and held harmless by the contractor for the vicarious liability of the State as a result of entering into this contract. However, the parties further agree that the State of Arizona, its departments, agencies, boards and commissions shall be responsible for its own negligence. Each party to this contract is responsible for its own negligence. 6.2.2. Public Agency Language Only Each party (as 'indemnitor') agrees to indemnify, defend, and hold harmless the other party (as 'indemnitee') from and against any and all claims, losses, liability, costs, or expenses (including reasonable attorney's fees) (hereinafter collectively referred to as 'claims') arising out of bodily injury of any person (including death) or property damage but only to the extent that such claims which result in vicarious/derivative liability to the indemnitee, are caused by the act, omission, negligence, misconduct, or other fault of the indemnitor, its officers, officials, agents, employees, or volunteers." 6.3. Indemnification - Patent and Copyright/The Contractor shall indemnify and hold harmless the State against any liability, including costs and expenses, for infringement of any patent, Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* trademark or copyright arising out of Contract performance or use by the State of materials furnished or work performed under this Contract. The State shall reasonably notify the Contractor of any claim for which it may be liable under this paragraph. If the contractor is insured pursuant to A.R.S. § 41-621 and § 35-154, this section shall not apply. 6.4. Force Majeure. 6.4.1 Except for payment of sums due, neither party shall be liable to the other nor deemed in 65!}!Page Qbdlfu!Qh/!274 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! default under this Contract if and to the extent that such party’s performance of this Contract is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the party affected and occurs without its fault or negligence. Without limiting the foregoing, force majeure includes acts of God; acts of the public enemy; war; riots; strikes; mobilization; labor disputes; civil disorders; fire; flood; lockouts; injunctions-intervention-acts; or failures or refusals to act by government authority; and other similar occurrences beyond the control of the party declaring force majeure which such party is unable to prevent by exercising reasonable diligence. 6.4.2. Force Majeure shall not include the following occurrences: 6.4.2.1. Late delivery of equipment or materials caused by congestion at a manufacturer’s plant or elsewhere, or an oversold condition of the market; 6.4.2.2. Late performance by a subcontractor unless the delay arises out of a force majeure occurrence in accordance with this force majeure term and condition; or 6.4.2.3. Inability of either the Contractor or any subcontractor to acquire or maintain any required insurance, bonds, licenses or permits. 6.4.3. If either party is delayed at any time in the progress of the work by force majeure, the delayed party shall notify the other party in writing of such delay, as soon as is practicable and no later than the following working day, of the commencement thereof and shall specify the causes of such delay in such notice. Such notice shall be delivered or mailed certified-return receipt and shall make a specific reference to this article, thereby invoking its provisions. The delayed party shall cause such delay to cease as soon as practicable and shall notify the other party in writing when it has done so. The time of completion shall be extended by Contract Amendment for a period of time equal to the time that results or effects of such delay prevent the delayed party from performing in accordance with this Contract. 6.4.4. Any delay or failure in performance by either party hereto shall not constitute default hereunder or give rise to any claim for damages or loss of anticipated profits if, and to the extent that such delay or failure is caused by force majeure. 6.5. Third Party Antitrust Violations. The Contractor assigns to the State any claim for overcharges resulting from antitrust violations to the extent that those violations concern materials or services supplied by third parties to the Contractor, toward fulfillment of this Contract. 8/!Xbssboujft 7.1. Liens. The Contractor warrants that the materials supplied under this Contract are free of liens and shall remain free of liens. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 7.2. Quality. Unless otherwise modified elsewhere in these terms and conditions, the Contractor warrants that, for one year after acceptance by the State of the materials, they shall be: 7.2.1. Of a quality to pass without objection in the trade under the Contract description; 7.2.2. Fit for the intended purposes for which the materials are used; 7.2.3. Within the variations permitted by the Contract and are of even kind, quantity, and quality within each unit and among all units; 66!}!Page Qbdlfu!Qh/!275 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! 7.2.4. Adequately contained, packaged and marked as the Contract may require; and 7.2.5. Conform to the written promises or affirmations of fact made by the Contractor. 7.3. Fitness. The Contractor warrants that any material supplied to the State shall fully conform to all requirements of the Contract and all representations of the Contractor, and shall be fit for all purposes and uses required by the Contract. 7.4. Inspection/Testing. The warranties set forth in subparagraphs 7.1 through 7.3 of this paragraph are not affected by inspection or testing of or payment for the materials by the State. 7.5. Compliance With Applicable Laws. The materials and services supplied under this Contract shall comply with all applicable Federal, state and local laws, and the Contractor shall maintain all applicable license and permit requirements. 7.6. Survival of Rights and Obligations after Contract Expiration or Termination. 7.6.1. Contractor's Representations and Warranties. All representations and warranties made by the Contractor under this Contract shall survive the expiration or termination hereof. In addition, the parties hereto acknowledge that pursuant to A.R.S. § 12-510, except as provided in A.R.S. § 12-529, the State is not subject to or barred by any limitations of actions prescribed in A.R.S., Title 12, Chapter 5. 7.6.2. Purchase Orders. The Contractor shall, in accordance with all terms and conditions of the Contract, fully perform and shall be obligated to comply with all purchase orders received by the Contractor prior to the expiration or termination hereof, unless otherwise directed in writing by the Procurement Officer, including, without limitation, all purchase orders received prior to but not fully performed and satisfied at the expiration or termination of this Contract. 9/!Tubuf(t!Dpousbduvbm!Sfnfejft 8.1. Right to Assurance. If the State in good faith has reason to believe that the Contractor does not intend to, or is unable to perform or continue performing under this Contract, the Procurement Officer may demand in writing that the Contractor give a written assurance of intent to perform. Failure by the Contractor to provide written assurance within the number of Days specified in the demand may, at the State’s option, be the basis for terminating the Contract under the Uniform Terms and Conditions or other rights and remedies available by law or provided by the contract. 8.2. Stop Work Order. 8.2.1. The State may, at any time, by written order to the Contractor, require the Contractor to stop all or any part, of the work called for by this Contract for period(s) of days indicated by the State after the order is delivered to the Contractor. The order shall be specifically Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* identified as a stop work order issued under this clause. Upon receipt of the order, the Contractor shall immediately comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage. 8.2.2. If a stop work order issued under this clause is canceled or the period of the order or any extension expires, the Contractor shall resume work. The Procurement Officer shall make an equitable adjustment in the delivery schedule or Contract price, or both, and 67!}!Page Qbdlfu!Qh/!276 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! the Contract shall be amended in writing accordingly. 8.3. Non-exclusive Remedies. The rights and the remedies of the State under this Contract are not exclusive. 8.4. Nonconforming Tender. Materials or services supplied under this Contract shall fully comply with the Contract. The delivery of materials or services or a portion of the materials or services that do not fully comply constitutes a breach of contract. On delivery of nonconforming materials or services, the State may terminate the Contract for default under applicable termination clauses in the Contract, exercise any of its rights and remedies under the Uniform Commercial Code, or pursue any other right or remedy available to it. 8.5. Right of Offset. The State shall be entitled to offset against any sums due the Contractor, any expenses or costs incurred by the State, or damages assessed by the State concerning the Contractor’s non-conforming performance or failure to perform the Contract, including expenses, costs and damages described in the Uniform Terms and Conditions. :/!Dpousbdu!Ufsnjobujpo 9.1. Cancellation for Conflict of Interest. Pursuant to A.R.S. § 38-511, the State may cancel this Contract within three (3) years after Contract execution without penalty or further obligation if any person significantly involved in initiating, negotiating, securing, drafting or creating the Contract on behalf of the State is or becomes at any time while the Contract or an extension of the Contract is in effect an employee of or a consultant to any other party to this Contract with respect to the subject matter of the Contract. The cancellation shall be effective when the Contractor receives written notice of the cancellation unless the notice specifies a later time. If the Contractor is a political subdivision of the State, it may also cancel this Contract as provided in A.R.S. § 38-511. 9.2. Gratuities. The State may, by written notice, terminate this Contract, in whole or in part, if the State determines that employment or a Gratuity was offered or made by the Contractor or a representative of the Contractor to any officer or employee of the State for the purpose of influencing the outcome of the procurement or securing the Contract, an amendment to the Contract, or favorable treatment concerning the Contract, including the making of any determination or decision about contract performance. The State, in addition to any other rights or remedies, shall be entitled to recover exemplary damages in the amount of three times the value of the Gratuity offered by the Contractor. 9.3. Suspension or Debarment. The State may, by written notice to the Contractor, immediately terminate this Contract if the State determines that the Contractor has been debarred, suspended or otherwise lawfully prohibited from participating in any public procurement activity, including but not limited to, being disapproved as a subcontractor of any public procurement unit or other governmental body. Submittal of an offer or execution of a contract shall attest that the Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* contractor is not currently suspended or debarred. If the contractor becomes suspended or debarred, the contractor shall immediately notify the State. 9.4. Termination for Convenience. The State reserves the right to terminate the Contract, in whole or in part at any time when in the best interest of the State, without penalty or recourse. Upon receipt of the written notice, the Contractor shall stop all work, as directed in the notice, notify all subcontractors of the effective date of the termination and minimize all further costs to the State. In the event of termination under this paragraph, all documents, data and reports prepared by 68!}!Page Qbdlfu!Qh/!277 5/H/b Tubuf!pg!Bsj{pob! Tubuf!Qspdvsfnfou!Pggjdf! Nbtufs!Bhsffnfou! th 100 North 15 Avenue, Suite 201 Tfdujpo!5;!Mfbe!Tubuf!)BSJ\[POB*!Ufsnt!boe!Dpoejujpot!! Phoenix, AZ 85007 Contract No:BETQP27.241763! Description:!!!!!!!!!Tpguxbsf!Wbmvf.Beefe!Sftfmmfs!)TWBS*!Tfswjdft! the Contractor under the Contract shall become the property of and be delivered to the State upon demand. The Contractor shall be entitled to receive just and equitable compensation for work in progress, work completed and materials accepted before the effective date of the termination. The cost principles and procedures provided in A.A.C. R2-7-701 shall apply. 9.5. Termination for Default. 9.5.1. In addition to the rights reserved in the contract, the State may terminate the Contract in whole or in part due to the failure of the Contractor to comply with any term or condition of the Contract, to acquire and maintain all required insurance policies, bonds, licenses and permits, or to make satisfactory progress in performing the Contract. The Procurement Officer shall provide written notice of the termination and the reasons for it to the Contractor. 9.5.2. Upon termination under this paragraph, all goods, materials, documents, data and reports prepared by the Contractor under the Contract shall become the property of and be delivered to the State on demand. 9.5.3. The State may, upon termination of this Contract, procure, on terms and in the manner that it deems appropriate, materials or services to replace those under this Contract. The Contractor shall be liable to the State for any excess costs incurred by the State in procuring materials or services in substitution for those due from the Contractor. 9.6. Continuation of Performance Through Termination. The Contractor shall continue to perform, in accordance with the requirements of the Contract, up to the date of termination, as directed in the termination notice. 10.Dpousbdu!Dmbjnt All contract claims or controversies under this Contract shall be resolved according to A.R.S. Title 41, Chapter 23, Article 9, and rules adopted thereunder. 11.Bscjusbujpo The parties to this Contract agree to resolve all disputes arising out of or relating to this contract through arbitration, after exhausting applicable administrative review, to the extent required by A.R.S. § 12-1518, except as may be required by other applicable statutes (Title 41). 12.Dpnnfout!Xfmdpnf The State Procurement Office periodically reviews the Uniform Terms and Conditions and welcomes any comments you may have. Please submit your comments to: State Procurement Administrator, State th Procurement Office, 100 North 15 Avenue, Suite 201, Phoenix, Arizona, 85007. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 69!}!Page Qbdlfu!Qh/!278 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Buubdinfou!B;!Rvbmjgjdbujpot 2/!Pwfsbmm!Dpnqboz!Jogpsnbujpo Requirement 1.1 Business Operations 1.1.1 Provide a Brief overview of business operations, with an emphasis on the provision of services as a Software Value-Added Reseller. Sftqpotf CDW was founded in 1984 as a home-based business, and has since grown tremendously through strategic partnerships, online and onsite inventories and services, and strong technical expertise to earn $12 billion in net sales in 2014. CDW partners with over 1,000 manufacturers to offer a portfolio of 100,000-plus products. Over 7,000 individuals constitute the CDW workforce, ranging from salespeople and field executives to administrative and service experts to highly skilled technology specialists and engineers. Incorporated in 1998, CDW¸G is the wholly owned subsidiary of CDW LLC that focuses on the public sector,including federal, state, and local government agencies, educational institutions, and healthcare facilities. With over 200 government and education contracts, we are the nation’s largest direct response provider of multi-brand IT solutions. We are currently the largest value-added reseller in the United States, ranked #253 on the 2015 Fortune 500 list. CDW¸G focuses on building strong customer relationships by leveraging our knowledgeable account managers and technical specialists to provide extensive pre-and post-award support. Our experts lead the industry in public-sector customer service and product knowledge, directly benefitting the various personnel of our public-sector customers. Tpguxbsf!Tfswjdft CDW is a market-leading software providerwith $3billionannually insoftware revenue. Through our distribution partner network, we offer nearly every software title available on the market today and have direct partnerships withover 300 software partners. As a company, we manage25,000softwareagreements andprocess over 180,000 annual software Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* renewals. For the key itemized publishers named inthis RFP, we maintain top-tier partnerships (e.g., Adobe Platinum Partner) and regularly receive annual awards (e.g., 2014 Microsoft O365 Sales Achievement Award). Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.2 Qbdlfu!Qh/!279 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services Qsppg!pg!Bvuipsj{bujpo Our ability to supply NASPO ValuePoint members with the key and secondary itemized software publishers listed in the RFP rests on the strong partnerships forged withindustry- leading manufacturers, whose solutions meet the needs of our public sector customers. Letters of authorization for each publisher can be provided upon request. Lfz!Jufnj{fe!Qvcmjtifst QvcmjtifsSfmbujpotijq!xjui!DEX¸HMfbso!Npsf Fully authorized Adobe Licensing Center (ALC)www.cdwg.com/cont Platinum Channel Partnerent/brands/adobe/ Adobe’s largest and most successful reseller partner since 2001 CDW named Bepcf!3126!Dpotvnfs!boe!Cvtjoftt! Xpsmexjef!Qbsuofs!pg!uif!Zfbs!at Global Sales Bepcf Conference (12/15/2015) Internal Adobe support team (8 licensing specialists, 1 Creative Cloud programspecialists, 1 senior brand manager) The only Adobe reseller with multiple dedicated, onsite channel account managers (23 total) Citrix LAR Certified Partner certificationwww.cdwg.com/cont Large Account Reseller Partner of the Year 2013, 2012, ent/brands/citrix/ 2011 at Citrix Summit conference Internal Citrix specialist team (1 partner specialist, 3 technical specialists, 2 business development specialists, Djusjy 1 brand manager) Hold over 400 Citrix certifications (e.g., CCA/Certified Administrator, CCEA/Certified Enterprise Administrator, CCSP/Certified Sales Professional) Microsoft Gold Certified Partner, Software Asset www.cdwg.com/cont Management (SAM) Partner, Authorized Direct Reseller ent/brands/microsoft/ (ADR) for Open Value licensing programs Number-one ranked Licensing Solution Provider (LSP) and Enterprise Software Advisor (ESA) Manage over 25,000 active Microsoft agreements Njdsptpgu Largest Microsoft Partner in Office 365 customer deployments, contract volume LSP of EAs/SAs, new enterprise agreements 2014 US OEM Reseller of the Year, Office 365 Sales Achievement Award, Experience Center (MEC) Partner of the Year Novell Gold Partner with distinctions: www.cdwg.com/cont o ALA, MLSA, SLA, VLA, VLA academic, VLA ent/brands/novell/ nonprofit/government authorized reseller o End-user computing sales specialization o California SLP contract authorized reseller Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* o NetIQ authorized reseller Opwfmm 50703126;!Micro Focus completed its merger with The Attachmate Group, which acquiredacquired Novell, Inc. (4/27/2011);Novell now operates as two separate business units under Novell® and SUSE® brand names, having joined Attachmate® and NetIQ® as holdings of The Attachmate Group Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.3 Qbdlfu!Qh/!27: 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Lfz!Jufnj{fe!Qvcmjtifst QvcmjtifsSfmbujpotijq!xjui!DEX¸HMfbso!Npsf Symantec Platinum Partnerwww.cdwg.com/cont Named the Tznboufd!3126!Obujpobm!Bddftt!Sftfmmfs!ent/brands/symantec / )OBS*!Joopwbujpo!Qbsuofs!pg!uif!Zfbs at Partner Engage awards (11/5/2015) Largest/top-selling LAR partner; Specialization Member (includes Endpoint Management, Data Loss Prevention, Tznboufd IT Compliance, Managed Security Services, SMB Backup, SMB Security, Enterprise Security, Archiving and eDiscovery, Data Protection with NetBackup, Storage Management) Dedicated internal Symantec team (16 CDW-badged coworkers (segment, renewals)) VMware Authorized Consulting (VAC) Program Gold www.cdwg.com/cont memberent/brands/vmware/ 2014 Global and Americas Marketing Partner of the Year award at VMware Partner Exchange 55+ dedicated internal VMware personnel (1 onsite brand manager, 6 pre-sales support specialists, 4 vCloud Air pre-sales/technical/business development specialists, 1 end-user computing channel account representative, 3 WNxbsf business development specialists, 5 renewal specialists, 5 capacity planner assessment engineers, 2 national account managers, 12 inside sales reps, 2 systems engineers, 14 virtualization solution architects) Over 1,500 VMware Sales Professional (VSP) accreditations; 34 VMware Certified Professional (VCP) accreditations; 71 VMware Technical Sales Professional (VTSP) accreditations Requirement 1.1.2 Provide the following information using the format below. Sftqpotf 2/2!Cvtjoftt!Pqfsbujpot Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.1.2.1 Offeror’s full legal nameCDW Government LLC (CDW¸G) Jason Schwartz, Sales Manager 1.1.2.2 Primary business 230 N Milwaukee Ave contact information (name, Vernon Hills, IL 60061 address, phone number, email P: 877.325.0934 address, website)E: jasons@cdw.com W: cdwg.com/PeopleWhoGetIT 1.1.2.3 Date Company was CDW¸G was incorporated in 1998; parent company CDW was Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* establishedfounded in 1984. 1.1.2.4 Location where the CDW¸G is incorporated in the state of Illinois. Offeror is incorporated 1.1.2.5 Ownership structure CDW Government LLC is a wholly owned subsidiary of CDW (public, partnership, subsidiary, LLC, which is owned by CDW Corporation, a publicly traded etc.)entity under NASDAQ (ticker symbol “CDW”). 1.1.2.6 Office location(s) Dpsqpsbuf!Ifbervbsufst Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.4 Qbdlfu!Qh/!281 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services 2/2!Cvtjoftt!Pqfsbujpot Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf responsible for performance of 230N Milwaukee Ave contract. Include address, Vernon Hills, IL 60061 contact information.P: 800.808.4239 Fbtufso!Ejtusjcvujpo!Dfoufs 200 N Milwaukee Ave Vernon Hills, IL 60061 P: 847.465.6000 Xftufso!Ejtusjcvujpo!Dfoufs 3201 E Alexander Road North Las Vegas, NV 89030 P: 702.495.5000 1.1.2.7 Organizational chart An organizational chart pertaining to this solicitation immediately relevant to Scope of Work of follows this table. Names in sfe!cpyft have resumes included in this solicitation.this Attachment. 1.1.2.8 Contact information for the individual who is Edie Harris, Proposal Manager responsible for any P: 312.705.6285 clarifications or discussions E: ellharr@cdw.com regarding the submitted response. The following organizational chart is indicative of the personnel structure that will be supporting the NASPO ValuePoint contract and its members throughout the life of the agreement. Names in sfe!cpyft have resumes included in this Attachment. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.5 Qbdlfu!Qh/!282 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Requirement 1.2 Key Personnel—Provide the information, using the format below, regarding each Key Personnel for a resultant contract for items 1.2.1 through 1.2.5: Sftqpotf The following key personnel will participate in serving the NASPO ValuePoint contract and its participating member agencies. Please note that the named personnel included in this response are not meant to provide an exhaustive list of the CDW¸G sales, software, and support individuals who will be involved in serving this contract’s participatingstates. Qsphsbn!Nbobhfnfou 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameJumana Dihu 1.2.2 Position/Title and reporting Program Manager, State & Local Government responsibilities Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 1.2.3 Years of industry experience13 years 1.2.4 Years in current positionTwo (2)years 1.2.5 Proposed role relative to Offered Program Manager; will oversee NASPO ValuePoint services. Include the functions and tasks for contract details post-award, including reports, which they will have prime responsibilities.audits, and management Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.6 Qbdlfu!Qh/!283 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services Tpguxbsf!Tpmvujpot 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameGabriel Adler 1.2.2 Position/Title and reporting Sales Manager, Software Solutions responsibilities 1.2.3 Years of industryexperienceNine (9) Years 1.2.4 Years in current positionTwo (2) years 1.2.5 Proposed role relative to Offered Sales Manager, Software; oversees team of services. Include the functions and tasks for licensing account executives and field specialists, which they will have prime responsibilities.grows public-sector software sales 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameGabe Arias 1.2.2 Position/Title and reporting Licensing Account Executive, Software Solutions responsibilities 1.2.3 Years of industry experienceNine (9) years 1.2.4 Years in current positionFour (4) years Licensing Account Executive, Software; helps 1.2.5 Proposed role relative to Offered NASPO ValuePoint customers manage software services. Include the functions and tasks for investments and cultivates trusted client which they will have prime responsibilities.relationships at CIO/Director level within state agencies Tubuf!'!Mpdbm!Tbmft 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameJason Schwartz 1.2.2 Position/Title and reporting SalesManager, State & Local responsibilities 1.2.3 Years of industry experience10 years 1.2.4 Years in current positionTwo (2) years Sales Manager, Pacific Geography; oversees 1.2.5 Proposed role relative to Offered account managers handling NASPO ValuePoint services. Include the functions and tasks for members, maintains regional relationships with which they will have prime responsibilities.publishers/manufacturers, long-term contract success strategy 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameMichael Truncone Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 1.2.2 Position/Title and reporting Sales Manager, State & Local responsibilities 1.2.3 Years of industry experience11 years 1.2.4 Years in current positionOne (1) year 1.2.5 Proposed role relative to Offered Sales Manager, Keystone Geography; oversees services. Include the functions and tasks for account managers handling NASPO ValuePoint which they will have prime responsibilities.members, maintains regional relationships with Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.7 Qbdlfu!Qh/!284 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf publishers/manufacturers, long-term contract success strategy 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameClayton Boras 1.2.2 Position/Title and reporting Sales Manager, State & Local responsibilities 1.2.3 Years of industry experience17 years 1.2.4 Years in current position12 years Sales Manager,Keystone Geography; oversees 1.2.5 Proposed role relative to Offered account managers handling NASPO ValuePoint services. Include the functions and tasks for members, maintains regional relationships with which they will have prime responsibilities.publishers/manufacturers, long-term contract success strategy 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameDave Stephens 1.2.2 Position/Title and reporting Business Development Manager, Public Safety responsibilities 1.2.3 Years of industry experience30 years 1.2.4 Years in current positionSeven (7) years Business Development, Northwest and Pacific 1.2.5 Proposed role relative to Offered Geographies (15 states); works with services. Include the functions and tasks for publishers/manufacturers and NASPO ValuePoint which they will have prime responsibilities. customers to determine best-fit solution options L—23!Tbmft 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameRussell Keene 1.2.2 Position/Title and reporting Sales Manager, K–12 Sales responsibilities 1.2.3 Years of industry experience19 years 1.2.4 Years in current position12years Sales Manager, Pacific Geography (includes Arizona, Hawaii); oversees account managers 1.2.5 Proposed role relative to Offered handling NASPO ValuePoint members, maintains services. Include the functions and tasks for regional relationships with which they will have prime responsibilities. publishers/manufacturers, long-term contract Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* success strategy Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.8 Qbdlfu!Qh/!285 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameAlex Haycock 1.2.2 Position/Title and reporting Sales Manager, K–12 Sales responsibilities 1.2.3 Years of industry experienceFive (5)years 1.2.4 Years in current positionOne (1)year Sales Manager, North Pacific (California and Alaska) Geography; oversees account managers 1.2.5 Proposed role relative to Offered handling NASPO ValuePoint members, maintains services. Include the functions and tasks for regional relationships with which they will have prime responsibilities. publishers/manufacturers, long-term contract success strategy 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameSean Galligan 1.2.2 Position/Title and reporting Sales Manager, K–12 Sales responsibilities 1.2.3 Years of industry experienceEight (8)years 1.2.4 Years in current positionOne (1)year Sales Manager, New England Geography; 1.2.5 Proposed role relative to Offered oversees account managers handling NASPO services. Include the functions and tasks for ValuePoint members, maintains regional which they will have prime responsibilities.relationships with publishers/manufacturers, long- term contract success strategy Ijhifs!Fevdbujpo!Tbmft 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameMike Clinton 1.2.2 Position/Title and reporting Sales Manager, Higher Education responsibilities 1.2.3 Years of industry experience13 years 1.2.4 Years in current positionOne (1)year Sales Manager, Northwest Geography; oversees 1.2.5 Proposed role relative to Offered account managers handling NASPO ValuePoint services. Include the functions and tasks for members, maintains regional relationships with which they will have prime responsibilities.publishers/manufacturers, long-term contract success strategy 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 1.2.1 NameChris Webb 1.2.2 Position/Title and reporting Business Development Manager, Higher Education responsibilities 1.2.3 Years of industry experience11 years 1.2.4 Years in current positionSeven (7) years 1.2.5 Proposed role relative to Offered Business Development, National Contracts; works Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.9 Qbdlfu!Qh/!286 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf services. Include the functions and tasks for with publishers/manufacturers and NASPO which they will have prime responsibilities.ValuePoint customers to determine best-fit solution options 2/3!Lfz!Qfstpoofm Sfrvjsfe!JogpsnbujpoPggfsps“t!Sftqpotf 1.2.1 NameEric Goff 1.2.2 Position/Title and reporting Sales Manager, Higher Education responsibilities 1.2.3 Years of industry experience15 years 1.2.4 Years in current positionSeven (7) years Sales Manager, Pacific Geography; oversees 1.2.5 Proposed role relative to Offered account managers handling NASPO ValuePoint services. Include the functions and tasks for members, maintains regional relationships with which they will have prime responsibilities.publishers/manufacturers, long-term contract success strategy Requirement 1.2.6 In addition, provide a brief resume which contains education/credentials/certifications/employment. Sftqpotf Resumes for the named key personnel in the previous requirement are featured at the end of this section, in the following order: Russell Keene Jumana Dihu Gabriel AdlerAlex Haycock Gabe AriasSean Galligan Jason SchwartzMike Clinton Michael TrunconeChris Webb Clayton BorasEric Goff Dave Stephens Requirement 1.3 Account Management Team—Providea description of the responsibilities of the dedicated account management team(s) that would be assigned to each Participating State under resultant contract. Include a description of how the account management structure ensures that service will continuedespite vacations, illness, other absences or resignations. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Sftqpotf Whenever an bddpvou!nbobhfs(AM) is out of the office(e.g., vacation, illness, absence), they designate a fellow coworker to assist their customers, leaving no gap in support. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.: Qbdlfu!Qh/!287 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services This designated backup AM will be an individual who supports other NASPO ValuePoint customers, to ensure knowledge of contract requirements. As an extra point of redundancy, customers can also reach out to our CDW¸G general sales support team at the following: Phone: 800.808.4239 Email: cdwgsales@web.cdwg.com Chat: www.cdwg.com Our Connecticut-based team staffing these lines of communication is available Monday- Friday, 7am-6pm CST. In instances of coworker resignation, the sales manager overseeing a given account team will assign the departing AM’s customers to an experienced account manager who possesses familiarity with the NASPO ValuePoint contract and purchase history. Account managers are proactively available to their customers to make regular solution recommendations, in addition to addressing support concerns. For more familiar and less complex public-sector software solutions, the AM can call our Supplemental Presales Support line to assist with product research, competitive comparison, simple design, standard architecture, and more. If necessary, the AM will include the customer on this call to further craft the best solution. With complex customer requests or solutions, the AM engages our tpguxbsf!mjdfotjoh! ufbn, and their technology specialists and solution architects. Within 48 hoursof the initial request, this group works out an offer/solution to present to the customer, including (but not limited to) features, cost analysis, licensing agreement/contract details, interoperability with current environment, implementation actions, and any available maintenance or software assurance programs. Tbmft!nbobhfst work with our AMs to develop strategies that best serve customers for long-term success. They spend significant time meeting with customers to understand the dynamics of the local market, and will ensure NASPO ValuePoint customers receive full advantage of CDW¸G’s software offerings. Additionally, sales managers are responsible for building and maintaining strong relationships with our top manufacturing partners in each region. For example, leveraging a strong existing relationship with the area Symantec representative can provide contract-specific cost savings thatbenefit NASPO ValuePoint members. When the number of customers being supported in a particular geographic location reaches Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* a certain capacity, CDW¸G dedicates a local resource to support the group. Gjfme!bddpvou! nbobhfst work jointly with our AMs to provide comprehensive sales support, and are available for onsite business meetings as needed to offer project development, technical expertise, roadmapping, and business reviews. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.21 Qbdlfu!Qh/!288 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services These coworkers are responsible for promoting the contract to end-users, including gsff trainings in the field, presentations, and attendance at regional tech fairs. They will meet with NASPO ValuePoint, the LSCA, or agency customers for contract status and progress reports, and will assist in solving customer-service issues in the field. Requirement 1.4 Subcontractors—Provide the following information for items 1.4.1 through 1.4.3, using the format below, for any subcontractors you propose to use. 1.4.1 Name of individual or company; 1.4.2 Proposed work to be performed; 1.4.3 Approximate percentage of work directed to subcontractor relative to total work under a resultant contract; 1.4.4 In addition, provide a brief resume which contains education / credentials / certifications / employment. Sftqpotf For the purposes of this RFP, at the time of this submission, CDW¸G is not proposing the use of any subcontracting partners. 3/!Dpnqboz“t!Fyqfsjfodf Requirement Describe the Offeror’s experience and expertise providing the following services: 2.1 Account Management (assume ‘accounts’ as equivalent to a state contract, and to a using municipality). Sftqpotf Expert contract support is a hallmark of CDW¸G’s qsphsbn!nbobhfnfou!ufbn. Most vendors—even large resellers—neglect to have a team devoted to managing their contracts, instead relying on salespeople for compliance and reporting issues, which can result in delayed responses, unreliable support, and potentially faulty reporting. CDW¸G, however, understands that contracts are serious commitments, and we honor these commitments through our dedicated program management team. Kvnbob!Ejiv will manage the NASPO ValuePoint SVAR contract and agreements. Ms. Dihu has over a decade ofcontract management experience and has been supporting our NASPO ValuePoint reseller agreements for over two years. Our account teams and manufacturing partners know Ms. Dihu is the resident expert for our NASPO ValuePoint contracts and often reach out to her for assistance on related issues. Other knowledgeable program managers will be actively supporting the contract, both as out-of-office backup for Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Ms. Dihu or in a scenario where she transitions to a new career level. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.22 Qbdlfu!Qh/!289 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services To support our NASPO ValuePointcustomers, CDW¸G provides one primary point-of- contact—an account manager (as described in sfrvjsfnfou!2/4). Our account managers, their supporting product specialists, and their sales managers understand the current technology trends and are specialized to only work public-sector customers. The multiple teams that will be supporting the participating states are,by and large, generalists; they understand the broad range of equipment and services we offer and often have sales certifications for several leading manufacturers. Rather than organizing our account teams by solution type, we’ve seen greater customer benefit organizing them by the type and location of the patrons they serve. By asking our generalist sales teams to have laser-like focus on their customers and a strong general understanding of our product offering, we ensure that we’re matching the right products to each customer’s highly individual needs. For this reason, we go through the effort of breaking down the geography that each of our account managers covers by having them work with customers that are closely located to each other. This is done because we understand that our government customers like to benchmark how they purchase and what they purchase in relation to their neighbors. Due to this degree of granularity when distributing accounts, our account managers can propose products that an agency’s counterpart is using in the next town, middle school, or university in many instances from personal experience. However, we recognize that some of our products and services are so complex that a generalist’s approach is notenough.That is where our specialized sales force comes in. Similar to the general account teams, our specialists are split between in-house teams and field teams. They are organized primarily around technology type (e.g., cloud, mobility, data centers, etc.) and secondarily around customer type. If an account manager or field account executive requires additional depth of knowledge for a certain type of solution, they’ll call in their specialist resources. Requirement 2.2 License Management. Sftqpotf The Software Licensing Support Team is vital in ensuring purchases that are scalable and complement software that is currently in place, as well as those forecasted for future projects. Our software support team includes over 85 Software Licensing Specialists, 250 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Presales Systems Engineers, and 45 Licensing Account Executives. They assist with the full scope of software licensing and assist customers with leveraging their buying power for software purchases; provide the right mix of software products; and offer cost analysis of available discounts and credits. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.23 Qbdlfu!Qh/!28: 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Dedicated account managers will help NASPO ValuePoint customers with software license management needs. License management is detailed further in Buubdinfou!C. Requirement 2.3 Training Sftqpotf After the six-week intensive trainingmembers of our sales team undergo, they continue to receive an average of 165 hours of training in their first yearat CDW¸G, and participate in more than 140 hours in each subsequent year of employment. Our sales teams are also proactive in beingcertified experts in the products they sell, with proof of this dedication in the numbers. For example, we have over 1,500 VMware Sales Professionals (VSPs) on staff; the result is more leads generated, stronger customer relationships, and the ability to help our customers prioritize their technology needs. Requirement 2.4 Software Advisement Sftqpotf Thesoftware-specific coworkers of CDW¸Gwho collaborate with our account managersto help advise customers on their right-size solutioninclude the following: Tpguxbsf!Mjdfotjoh!Tqfdjbmjtut!)TMT*/This team is certified in a wide array of the licensing programs members seek. SLSs are dedicated to assisting customers in understanding and navigating complex licensing options for the top software publishers. They help compare key features of different programs, and ensure interoperability of products and the accuracy and comprehensiveness of software quotes. They assist users in finding the best software to fit their needs, along with the most advantageous licensing level. Qbsuofs!Tqfdjbmjtut/!These individuals provide insight into product features and functionality, making sure that software is being sold correctly. Among their duties, they provide accurate licensing solutions. The Partner Specialist teams providing support to CDW¸G solutions include over 30 experts focused on our software offering. These coworkers are designated to a specific brand, such as Microsoft, or to a solution, such as cloud. This relates to expert assistance for not only key itemized manufacturers, but to all the publishers users are purchasing. Dmpve!Dmjfou!Fyfdvujwft!)DDF*/Similar to our SLS team, our 14 CCEs work with Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* our customers to provide guidance and optional engagements to align their unique business goals with a cloud plan that provides maximum benefits. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.24 Qbdlfu!Qh/!291 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services Requirement 2.5 Other (specify) Sftqpotf CDW¸G also leverages the following resources to provide unmatched support for customers’ IT solutions: Fohjoffst Also included in our recognizable attributes is an investment in engineers that are available to help design custom solutions. We have the largest team of engineers when compared to our direct IT competitors, more on par with the big integrator firms that serve the federal market—such as Boeing—than other potential respondents. Through the account teams located in strategic geographies across the nation, our engineers provide customers design and consultative services at op!beejujpobm!dibshf. Qbsuofs!Sftpvsdft Many of our OEM partners have staff dedicated to support CDW•G customers exclusively. In March 2015, over 340partner coworkers from over 100various partners were collocated with CDW•G, collaborating with our sales teams and engineers to provide expert help to our customers. The wide variety of partners that are onsite allows us to help customers analyze the best value among the products under consideration and provide the right product for each customer the first time. Ejtusjcvujpo!Gbdjmjujft Our distribution infrastructure is another key reason why no other IT solution provider in the industry can match our ability to service NASPO ValuePoint customers. As our number of orders has increased across the public and corporate sector, we continue to achieve higher order accuracy year over year. We own two distribution centers that have one million square feet of storage space and stock over $200 million in inventory at any given time. This combination of stock and shipping infrastructure allows us to ship on average 37,000 boxes per day. Despite all of these capabilities, we do not solely rely on our facilities to meet customer needs; we complement our own distribution centers with our distribution partner network, leveraging the most cost-effective solution foreach individual product line and customer order. Ejtusjcvujpo!Qbsuofs!Ofuxpsl Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Our Distribution Partner Network includes over 130 different suppliers, meaning we can provide any solution customersneed. Similarly to our OEM partners, we’re the largest partner for many of our distributors. Like our manufacturer partner relationships, this results in direct benefits for CDW•G, which we pass along to our customers. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.25 Qbdlfu!Qh/!292 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Most partners send us EDI (Electronic Data Interchange) downloads or real time information on their available inventory, resulting in access to products usually in as little as a day. As an example, we are a top Ingram Micro partner and hold Elite Partner status. This partnership provides acustomized and exclusive support resource to our account teams and customers, among other benefits. 4/!Dmjfout Requirement 3.1 Provide information on Offeror’s current government client list. 3.1.1 Explain the services provided to each and how long Offeror has been working with each. Sftqpotf CDW¸G has vested partnerships with nearly every government entityin the US.For insight into our customer base, we served over 5,200 customers in 2014 on our NASPO ValuePoint reseller agreements alone. Our 2014 net sales to federal, state, and local governments totaled $1.5 billion; state and local government sales accounted for approximately 41 percent of these net sales. The top product categories provided to state and local government customers included software, notebooks/mobile devices, and enterprise storage. Specific to this RFP, software is a multibillion-dollar component of CDW’s net revenue. As a whole, we manage more than 25,000 software agreements and conduct over 18,000 software renewals annually.Additionally, we offer electronic delivery of many of our software solutions (about one-fifth of our total revenue). Many of these product sales were components of integrated solutions and coupled with services typical of solutions, such as Data Center, Unified Communications and Collaboration, Security, Mobility, and Cloud. The average customer relationship for CDW, as a whole,is eightyears. Our government customers sit at the highest end of the average, as our corporate customer relationships are typically no more than three years. Multiyear contracts and the cultivation of personal connections between customer and account manager attribute greatly to the lengthy tenure of these government relationships. Requirement 3.1.2 List government contracts Offeror has gained over the past three (3) years. Provide an explanation of why Offeror was chosen. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Sftqpotf CDW¸G has gained 363public-sector contracts (non-federal) over the past (3) years; the list of these contracts is attached to this section of our response. Most often, customers select CDW¸G for contract award due to our capacity for managing large-scale agreements, as well as the value we can provide their purchasers and end- Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.26 Qbdlfu!Qh/!293 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services users. Unique differentiators that lead to an award decision include our vendor agnosticism and the investment of ongoing sales training to best serve our customers. CDW¸G employs over 1,300 account managers, meaning that size and consistency of support staff is a consistent development initiative in order to support national contracts such as NASPO ValuePoint with any necessary transitions. Requirement 3.1.3 List government contracts Offeror has lost or resigned over the past three (3) years. Provide an explanation of why they were lost or resigned. Sftqpotf As you can see from the following table, of the total 512 contracts lost or resigned, we were named to a new contract in 211 instances and awarded upon rebid in 73 instances, meaning that over half of the no-longer-current contracts are in new iterations being held by CDW¸G. 4/2/4!Mptu!ps!Sftjhofe!Hpwfsonfou!Dpousbdut SfbtpoOvncfs Agreement out to RFP1 Agreement rebid and awarded to CDW¸G73 Agreement rebid and not awarded to CDW¸G7 CDW¸G was named to a new Contract211 Contract may be renewed, pending NY OGS9 Moved purchasing to local cooperative agreements7 Signed a new agreement11 Unknown reason82 We are still awaiting renewal3 OEM did not sign a new contract22 Contract expired and was not rebid/renewed86 HSBOE!UPUBM623 A full list is attached to thissection of the response, as well. Through the normal course of business, CDW¸G’s contract portfolio changes year to year. Contracts in the Public segment are generally terminable at any time for convenience of the contracting agency or group purchasing organization (GPO) or upon default. An adverse change in government spending policies (including ongoing budget cuts), budget priorities, or revenue levels could cause our government customers to reduce their purchases or to terminate or not renew their contracts with us. In the past three (3) years, CDW¸G has not lost a contract to default. The primary reason our contracts end is when a customer is out of available options to extend the contract. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.27 Qbdlfu!Qh/!294 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Requirement 3.2 If Offeror has no government clients, note this in your response and answer questions 3.1.1 through 3.1.3 based on non-government clients. Sftqpotf As detailed, CDW¸G has a substantial number of government clients. We provide our responses to 3.1.1 through 3.1.3 to reflect these relationships. Requirement 3.3 References—Provide information for three (3) client references that replicate or are similar to the requirements of this solicitation. All references shall be for engagements received and completed within the last five (5) years. The State may,at its sole discretion, contact additional clients not presented as references. Reference information is to be provided using the following table format: Sftqpotf The following references are submitted for NASPO ValuePoint review. 4/4!Sfgfsfodft Sfgfsfodf! Dmjfou!PofDmjfou!UxpDmjfou!Uisff Jogpsnbujpo State of IllinoisCentral Company Federal Aviation Management Services University of Washington NameAdministration (FAA) (CMS) Software contract includes Software agreements but is not limited to ACD under contract include CDW¸G’s IL CMS Systems, Software AG, Microsoft EES Microsoft Large Account EMC, HP, IBM, Oracle, and Agreement, VMware Reseller contract Symantec (among dozens ELA, Citrix ELA, Adobe includes Microsoft of other publishers, CLP (all Adobe products Select, Enterprise including “weirdware”). With = 1,000+ orders Agreements, and CDW¸G has grown annually) Microsoft Academic software sales from $5 Select. CMS currently million the first year of the Support through Type of has both a Microsoft contract to $26 million in assessing changes in Contract Select and an GFY15, and grown UW’s licensing needs, Product and Enterprise Agreement. hardware sales from $15 deploying software to Services million to $37 million.end-users, providing Delivered CDW¸G has held this guidance on new contract for three Both catalog contracts licensing/support consecutive iterations, (Software DTFACT-13-D-structures, renewing starting in 2005. The 00004, Hardware maintenance for all current contract, DTFAWA-11-D-00057) are OEMs, identifying large recently awarded, administered by the SAVES spend of similar products expires September Contracts Office; across campus to drive 2019.mandatory for the FAA and campus-wide Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* open to the Department of agreements that reduce Transportationcost Contact Name, James Ellenburg, Harry Lutz, Contracting Ray Hsu, Assistant Mailing Contracting OfficerOfficerDirector, Procurement Address, 120 W JeffersonUSDOT/FAAServices rd Phone 3Floor800 Independence Ave SW4300 Roosevelt Way NE Number, Email Springfield, IL 62702Washington, DC 20591Seattle, WA 98195 Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.28 Qbdlfu!Qh/!295 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services 4/4!Sfgfsfodft Sfgfsfodf! Dmjfou!PofDmjfou!UxpDmjfou!Uisff Jogpsnbujpo AddressP: 217.785.0897P: 609.485.6127P: 206.543.0793 E: E: harry.lutz@faa.orgE: rayhsu@uw.edu james.ellenburg@illinois .govElizabeth Ford Ochs, Authorized Contract Officer P: 609.485.5557 E: elizabeth.ford@faa.gov Robert Cochran, Contracting Officer Representative P: 571.209.3111 E: robert.cochron@faa.gov Software: May 2013-April Contract Start October 2015-20182010-2020 (10-year and End DateNovember 2019Hardware: September renewal) 2011-September 2016 Software: sales through September 2015 = $52 Estimated $140 million Contract Valuemillion/duration of $5 million/annual Hardware: sales through contract September 2015 = $96 million 5/!Gjobodjbm0Bddpvoujoh!Jogpsnbujpo!boe! Ejtdmptvsft Requirement 4.1 Offerormust provide evidence of financial stability and capability to fund all cost associated with providing the services through the term of the Contract. The latest two (2) years audited annual financial statement(s), including Total Revenue, Net Income, and Total Assets, must be submitted with the Offeror’s Offer. If audited financial data is unavailable, explain in full the reason and provide latest non-audited financial information to include Balance Sheet, Income Statement, as well as, Statement of Cash flows and Change in Financial position. Include information to attest to the accuracy of the information provided. Sftqpotf Jodmvefe!bu!uif!foe!pg!uijt!buubdinfou are CDW’s most recent 10K audit reports (2013 and 2014); audited financial statements are located in Item 8: Financial Statements and Supplementary Data. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* DEX!Gjobodjbm!Jogpsnbujpo 31253124 Upubm!Sfwfovf!(listed as Net Sales)$12,074.5 million$10,768.6 million Ofu!Jodpnf$244.9 million$132.8 million Upubm!Bttfut$6,099.9 million$5,924.6 million Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.29 Qbdlfu!Qh/!296 5/H/b OBTQP!WbmvfQpjou|Software Value-Added Reseller Services Online versions of these documents are also located at investor.cdw.com. 5/3!Ejtdmptvsft Requirement 4.2.1 Information regarding any irregularities that were discovered in any account maintained by the Offeroron behalf of others. Describe the circumstances and disposition of the irregularities. Sftqpotf To the best of our knowledge, at the time of this submission, accounts maintained by CDW on behalf of others have not been subject to any irregularities of circumstance or disposition. Requirement 4.2.2 Full disclosure of any potential conflict of interest, i.e. serving as a member, board member, officer, or having significant financial interest with any company, firm or joint venture with interests in the provision of software. Sftqpotf To the best of our knowledge, at the time of this submission, CDW does not have any potential conflicts of interest that would prevent us from serving NASPO ValuePoint members via this contract. Requirement 4.2.3 Whether or not, in the last ten (10) years, the Offeror has filed (or had filed against it) any bankruptcy or insolvency proceeding, whether voluntary or involuntary, or undergone the appointment of a receiver, trustee, or assignee for the benefit of creditors, and if so,an explanation providing relevant details; Sftqpotf To the best of our knowledge, at the time of this submission, CDW has not filed (nor had filed against it) any bankruptcy or insolvency proceeding. No receiver, trustee, or assignee for the benefit of creditors has been specifically appointed. Requirement 4.2.4 Whether or not there are any pending Securities Exchange Commission investigations involving the Offeror, and if such are pending or in progress, an explanation providing relevant details and an attached opinion of counsel as to whether the pending investigation(s) may impair the Offeror’s performance in a Contract under this RFP. Sftqpotf On 29 October 2015, CDW (the Company) received a request for production of documents in connection with an investigation by the SEC of our vendor partner program incentives. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* We are cooperating with the SEC in this matter. 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. Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.2: Qbdlfu!Qh/!297 5/H/b OBTQP!WbmvfQpjou| Software Value-Added Reseller Services The Company is also subject to audit by federal, state, and local authorities by various partners, group purchasing organizations, and customers (e.g., 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 US 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. As of 30 September 2015, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one of more of these proceedings or matters. Requirement 4.2.5 Documenting all open or pending litigation initiated by the Offeror or where the Offeror is a dependent or party in litigation that may have a material impact on Offeror’s ability to deliver the contracted services; Sftqpotf To the best of our knowledge, at the time of this submission, CDW does not have any open or pending litigation that would present a material impact on our ability to deliver the contracted services. Requirement 4.2.6 Full disclosure of any public sector contracts terminated for cause or convenience in the past five (5) years. Sftqpotf To the best of our knowledge, at the time of this submission, CDW has not had any public sector contracts terminated for cause or convenience in the past five(5)years. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Buubdinfou!B;!DEX¸H!Rvbmjgjdbujpot}B.31 Qbdlfu!Qh/!298 5/H/b Kvnbob!Ejiv Sfmfwbou!Fyqfsjfodf DEX Qsphsbn!Nbobhfs!)3124—Qsftfou* Manages contract portfolio for healthcare, higher education, K–12, state & local sales segments within CDW Government LLC Responsible for full range of customer-facing contracts and partner contracts, including master purchase agreement, subcontractor agreements, teaming agreements, referral agreements Initiates and responds to requests for contract changes, product substitutions, technical refreshments Facilitates preliminary dispute resolution and coordinates with legal department as necessary to maintain customer satisfaction and bring prompt closure Ensures document compliance and analyzes success of program to make recommendations for improvement, including product add/drop, offer expansion Manages all reporting capabilities for high-visibility contracts Tjswb-!Jod/ Qsphsbn!Nbobhfs!)3113—3124* Handled contract negotiation, cost/price analysis, compliance, market and channel analysis, development of strategic initiatives, and directed business goals and project management Fevdbujpo BS, International Economics, DePaul University Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!299 5/H/b Hbcsjfm!Bemfs Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Tpguxbsf!Tpmvujpot)3125˜Qsftfou* Responsible for software sales in multiple public-sector segments with CDW Government LLC (e.g., federal, state & local, K–12, higher education) Manages team of six inside software solution and licensing sellers, five outside software solution and licensing sellers Manages continuous pipeline of software number, including cascade of forecast to upper management Goes in-market with field sellers and interfaces with clients Develops coworkers via education around products, services, solutions Qsphsbn!Nbobhfs-!Tpguxbsf!Tbmft!)3122—3125* Responsible for multiple software programs, including Microsoft T36 Contract Management, Select Plus, NGVL (Next Generation Volume Licensing), OTRR (On Time Renewal Rate), Licensing Help Desk Njdsptpgu!Jotjef!Foufsqsjtf!Mjdfotjoh!Tqfdjbmjtu!)311:—3122* Njdsptpgu!Tbmft!Fyfdvujwf!)3117—311:* BNTC!Bddpvou!Nbobhfs!)3116—3117* Ebwf!Bemfs-!Jod/ Dpouspmmfs!'!Mfbe!Tbmft!Qfstpo Fevdbujpo BA,Business, Northeastern Illinois University Qspgfttjpobm!Nfncfstijqt International Association of Web Masters and Designers Tljmmt Microsoft Office Suite (Excel, Microsoft Certified Professional— Word, Access, Outlook)SAM (Software Asset Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Microsoft FrontPageManagement) HTML ProgrammerMicrosoft ESA/LAR FY09 Certified Adobe PhotoshopVMware VSP 5.5 Cute FTPCitrix CSP Adapta 2000AS/400 Qbdlfu!Qh/!29: 5/H/b Hbcf!Bsjbt Sfmfwbou!Fyqfsjfodf DEX Mjdfotjoh!Bddpvou!Fyfdvujwf!)3122—Qsftfou* Supports state & local government customers manage software investments, including Microsoft volume licensing Builds trusted client relationships at CIO/Director level within state agencies, counties, cities Presents CDW Government LLC’s software solution capabilities at client-facing meetings, hosted events, selected software partner events Acts as subject matter expert for all Microsoft licensing agreements, VMware, Adobe, Citrix, Red Hat, HP, IBM, and professional services offerings Manages multiple government contracts, answers complex licensing and product questions/scenarios, supports CDW account teams, proactively manages client software business (e.g., EA enrollment process, QBRs, trend analysis, technology briefings) Efmm-!Jod/ Mjdfotjoh!Tqfdjbmjtu-!Hmpcbm!Bddpvout!)3118—3122* Focused on software and service solutions for large Enterprise and global segment BTBQ!Tpguxbsf Jotjef!Bddpvou!Nbobhfs!)3117—3118* Fevdbujpo BS, Marketing, Illinois State University Bxbset-!Dfsujgjdbujpot!'!Usbjojoht Certified Microsoft Licensing Cloud Computing & Virtualization ExpertConference CDW¸G Most Valuable Player, Microsoft Volume Licensing Software Team (2013, 2015)Certification CDW Presidents Achievement VMware LicensingCertification Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* (2014)Symantec Licensing Certification Classroom Training ProgramCitrix Licensing Certification Sales Leadership TrainingOracle Licensing Certification Yellow Belt Certification Training IBM Licensing Certification Microsoft Solution Selling TrainingEffective Presentations Training Qbdlfu!Qh/!2:1 5/H/b Kbtpo!Tdixbsu{ Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Tubuf!'!Mpdbm!Tbmft!)3126—Qsftfou* Manages 20 account managers supporting state & local government customers in California, Arizona, Alaska, and Hawaii Builds relationships with coworkers, customers, partners for both small and large enterprises in the public sector Leads team of sales professionals through motivational coaching, effective partner management, and customer engagement Consistently interacts with field personnel, customer base, and OEM partners Performs business pipeline review calls with sales teams to ensure financial objectives are achieved monthly, quarterly, and annually Tbmft!Nbobhfs-!Tbmft!Bdbefnz!)3125—3126* Responsible for onboarding account managers hired into Medium Large Central and South regions and Small Business teams; developed individual coaching plans for each account manager Tfojps!Bddpvou!Nbobhfs!)3121—3125* Achieved strong sales results with higher education customers through consultative selling of hardware, software, and professional services solutions to assist in long-term strategic IT plan of each customer Fevdbujpo BA,Political Science & Business Administration, University of Iowa Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:2 5/H/b Njdibfm!Usvodpof Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Tubuf!'!Mpdbm!Tbmft!)3126—Qsftfou* Travels to discover, develop, and increase relationships with key clients, manufacturers, and service business partners Performs business pipeline reviews with sales teams to ensure financial objectives are achieved monthly, quarterly, and annually Conducts services scope reviews on opportunities with integration services to ensure successful project execution Fyfdvujwf!Bddpvou!Nbobhfs!)3116—3126* Worked to develop partner relationships while holding weekly cadence with partners including Cisco, HP, and Lenovo Demonstrated consistent sales growth throughout career Pursued relevant certifications within IT field, including partners HP, NetApp, EMC, Cisco, and Microsoft Participated in Emerging Leaders Program Worked efficiently and effectively while coordinating and managing within large sales organization Coached and developed high-performing coworkers Fevdbujpo BA, Economics & Business Administration, University of Connecticut Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:3 5/H/b Dmbzupo!Cpsbt Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Ijhifs!Fevdbujpo!)3122—Qsftfou* Supervises 20 inside sales and field sales personnel supporting higher education business in Northeast and Keystone geographies Develops team members with career opportunities in Emerging Leaders program and promotion to Sales Operations Consistently interacts with field personnel, customer base, and OEM partners Lead sales team ranked #1 in Higher Education (2012) Executes large higher education wins for hardware, software, licensing, and services solutions Tbmft!Nbobhfs-!L—23!Tbmft!)3118—3122* Oversaw 22 internal sales and two field sales personnel supporting K–12 education business for Keystone geography Created sales strategies to identify lucrative contract opportunities and leveraged vendor relationships to achieve significant sales and gain visibility Interfaced with vendors, executive management contracts for key accounts, and information technology, purchasing, and general services personnel at state level Sfhjpobm!Tbmft!Nbobhfs!)3114—3118* Ufssjupsz!Tbmft!Nbobhfs!)3112—3114* Njdsp!Xbsfipvtf!Jod/ Hspvq!Cvtjoftt!Voju!Fevdbujpo!Nbobhfs!)2:::—3114* Tusbufhjd!Cvtjoftt!Voju!Bddpvou!Nbobhfs!)2::9—2:::* Fevdbujpo MBA, Marketing, Sacred Heart University BS, Finance, Sacred Heart University Bxbset!'!Dfsujgjdbujpot CDW Presidents Club Achievement Award (2008, 2012) CDW #1 Ranked K–12 Sales Manager (2003, 2008) Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* CDW #1 Ranked Higher Education SalesManager (2012) Mitsubishi Sales Award (2006-2009) Qbdlfu!Qh/!2:4 5/H/b Ebwf!Tufqifot Sfmfwbou!Fyqfsjfodf DEX Cvtjoftt!Efwfmpqnfou!Nbobhfs-!Qvcmjd!Tbgfuz!)3121—Qsftfou* Manages sales engineering process for large-scale integration projects involving public safety agencies Provides subject matter expertise to CDW Government LLC resources and offers resource training, as well as partner development and management Presents at state, regional, and national public safety conferences on topics such as mobility, digital evidence management, CJIS mandate compliance Tfojps!Gjfme!Bddpvou!Fyfdvujwf!)3113—3121* Worked with account teams to grow state & local government marketplace; additionally developed high-visibility opportunities within specific sales geography DBUH!Jod/!ecb!NCT!DPOOFDUJOH!QPJOU Pqfsbujpo!Ejsfdups!)3111—3112* Qsftjefou!boe!Hfofsbm!Nbobhfs!)2:::—3111* Obujpobm!Tbmft!Nbobhfs!)2::8—2:::* Tubuf!Dpousbdu!Tbmft!Nbobhfs!)2::2—2::8* Bddpvou!Nbobhfs!)2:99—2::1* WBMDPN!DPNQVUFS Bddpvou0Bttjtubou0Tfswjdf!Nbobhfs)2:95—2:99* Fevdbujpo BA,Data Processing & Business Administration, Weber State University Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:5 5/H/b Svttfmm!Lffof Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!L—23!Tbmft!)3117—Qsftfou* Trains and manages inside sales team of 27 account managers covering K–12 accounts in California, Arizona,Alaska, and Hawaii Manages a team of six field account executives in California and Arizona Travels to discover, develop, and increase relationships with key clients, manufacturers, and service business partners Performs business pipeline reviews with sales teams to ensure financial objectives are achieved monthly, quarterly, and annually Conducts services scope reviews on opportunities with integration services to ensure successful project execution Acts as Education liaison for CDW Emerging Leaders Program Analyzes contracts prior to RFP response submission to ensure positive outcome and acceptable company risk Ejtusjdu!Nbobhfs-!Opsuixftu!'!Qbdjgjd!Sfhjpot!)3116—3117* Created regional business plan leading to sales increase and trained/coached inside account teams covering customers in western US Tfojps!Bddpvou!Nbobhfs!)2::8—3116* Proactively targeted key contracts and successfully bid to further business opportunities while acting as team mentor for new sales coworkers Fevdbujpo BS, Marketing, North Central College Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:6 5/H/b Bmfy!Ibzdpdl Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!L—23!Tbmft!)3126—Qsftfou* Mentors account team with various lengths of tenure across multiple CDW segments Leads account team to exceed goals via one-on-one coaching and focused selling efforts Builds strong relationships with vendor partners, inside sales reps, and field resources to ensure customer satisfaction and support Tfojps!Bddpvou!Nbobhfs!)3125—3126* Guided peers through daily and monthly sales activities while maintaining and expanding customer relationships in Aggregation Services team Bddpvou!Nbobhfs!)3122—3125* Developed strong and long-lasting relationships with back-end departments and vendors to become consistent and reliable resource to customers and colleagues Fevdbujpo BA,Business Administration, Columbia College Bxbset!'!Dfsujgjdbujpot Cisco CCE EMC Sales Professional NetApp Sales Professional VMware Sales Professional Tripp Lite Sales Professional Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:7 5/H/b Tfbo!Hbmmjhbo Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!L—23!Tbmft!)3125—Qsftfou* Manages recruitment, selection, training, and coaching of 18 direct reports handling millions in total business to ensure sales goals are met Drives business growth by capitalizing on new revenue potential in existing markets in New England geography Leverages strategic relationships with customers, peers, and vendor partners Provides customer service management and problem resolution training and mentorship Utilizes knowledge of partner sales programs and procedures to effectively steer sales growth projects with key partners such as Cisco, NetApp, VMware, and Aruba Bddpvou!Nbobhfs!)3118—3125* Managed, fostered, and maintained successful working relationship with multiple vendor partners in K–12 education IT sales Ojfmtfo!Nfejb!Sftfbsdi Tqpsut!Qspevdu!Qmbdfnfou!Bvejups!)3117—3118* Edited and evaluated analysis of sports marketing initiatives of product vendors, athletic teams, sports venues to assist in formulation of appropriate business strategy Tqpsut!Qspevdu!Qmbdfnfou!Bobmztu!)3116—3117* Fevdbujpo BBA, Finance, University of Connecticut Bxbset!'!Dfsujgjdbujpot Cisco Sales Expert NetApp Accredited Sales Professional Microsoft Sales Accreditation EMC Velocity Sales Accreditation Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Nbkps!Qspkfdut Project Name 1 (Project Date), 5-7 word description Project Name 2 (Project Date), 5-7 word description Qbdlfu!Qh/!2:8 5/H/b Njlf!Dmjoupo Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Ijhifs!Fevdbujpo!)3126—Qsftfou* Covers higher education sales in Northwest geography Leads experienced inside and outside sales team to sell best-in-class manufacturers and technology from Cisco, Lenovo, Microsoft, Adobe, VMware, etc. Qsjodjqbm!JTB-!Vojgjfe!Dpnnvojdbujpot!)3119—3126* Subject matter expert for CDW’s unified communications portfolio to customers, colleagues, account managers Assessed customer business goals and technical requirements to develop UC strategies Leveraged extensive knowledge of CDW’s Professional Services to provide customers with turnkey solutions Supported Med/Lar, nonprofit, and healthcare teams Tfojps!Bddpvou!Nbobhfs-!Nfe0Mbs!)3113—3119* Provided IT solutions and services to mid-market and Enterprise clients Fevdbujpo BS, Telecommunications Management, DeVry University Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:9 5/H/b Disjt!Xfcc Sfmfwbou!Fyqfsjfodf DEX Cvtjoftt!Efwfmpqnfou!Nbobhfs-!Ijhifs!Fevdbujpo!)3126—Qsftfou* Owns higher-education strategy for contracts, eProcurement, and key OEM partnership in CDW Government LLC Directs team of five field-based business development resources focuses on higher education market Builds strategic partnerships with key OEM partners, providers, and third-party service organizations Drives customer relationships through C-level engagement, partnership reviews, mutually beneficial contracts Reports to VP, Higher Education Sales Cvtjoftt!Efwfmpqnfou-!Ijhifs!Fevdbujpo!)3119—3126* Positioned CDW and negotiated contracts for west coast higher education business Conducted business reviews with executive-level large clients to identify growth opportunities Tbmft!Nbobhfs-!Ijhifs!Fevdbujpo!)3118—3119* Led team of 18 account mangers covering higher education in mid-Atlantic and Keystone geographies Jotjef!Bddpvou!Nbobhfs-!L—23!Fevdbujpo!)3116—3118* Proactively sought new customers and innovative ways to solve the technology needs of K– 12 education Fevdbujpo BS, Information Systems, Wake Forest University Bxbset!'!Dfsujgjdbujpot CDW Annual Sales Top Performers (2005, 2006, 2007) CDW#1 Higher Education/Sales Manager (2008) Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!2:: 5/H/b Fsjd!Hpgg Sfmfwbou!Fyqfsjfodf DEX Tbmft!Nbobhfs-!Ijhifs!Fevdbujpo-!Qbdjgjd!Sfhjpo!)311:—Qsftfou* Manages day-to-day sales team activities to achieve financial plan, interacting with direct reports, coworkers, customers, and partners Responsible for two territories consisting of 15 states; develops, improves, and maintains customer and partner relationships Hosts meetings, delivers presentations, conducts onsite visits, develops plans and strategic planning sessions, handles contract negotiation Works effectively with internal and external stakeholders to achieve business objectives and exceed sales goals Motivates and coaches sales team, educates and teams with OEM partners, engages customers to provide consultation and value Tbmft!Nbobhfs-!Dpsqpsbuf!Bdbefnz!)3118—311:* Responsible for managing newest sales representatives, coaching effective career strategies, and providing selling assistance Bddpvou!Nbobhfs!)3112—3118* Responsible forcorporate accounts across the country (focus on Northern California) Fevdbujpo BS, Marketing, Illinois State University Bxbset!'!Dfsujgjdbujpot CDW Presidents Achievement Award of Excellence (2009, 2014) Public Sales Manager Advisory Council (PSMAC) Higher Education liaison, CDW Emerging Leaders Program Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!311 American Lebanese Syrian Associated Charities, Inc (ALSAC)Master Services and Product Sales Agreement be 12/18/2013 American Public University SystemMaster Product Sales Agreement04/15/2013 Arlington Independent School DistrictComputer, AV Equipment, Supplies and Services07/01/2015 Aruba Networks, Inc.California Aruba WSCA Data Communications02/17/2015 Aruba Networks, Inc.Aruba WSCA Data Communications02/17/2015 Aruba Networks, Inc.Florida Aruba NASPO Data Communications05/11/2015 Aruba Networks, Inc.Alaska Aruba NVP Data Communications08/18/2015 Aruba Networks, Inc.Nevada Aruba NVP Data Communications08/19/2015 Aruba Networks, Inc.Montana Aruba NVP Data Communications08/24/2015 Aruba Networks, Inc.New Jersey Aruba NVP Data Communications08/24/2015 Aruba Networks, Inc.South Carolina Aruba NVP Data Communications08/24/2015 Aruba Networks, Inc.Washington Aruba NVP Data Communications08/24/2015 Aruba Wireless Networks, Inc.Ohio STS Aruba11/13/2014 Associated Colleges of the Twin CitiesNJPA Stretch Agreement12/01/2014 Association of Computer Technology Educators of MaineMaster Product Sales Agreement05/30/2014 Baltimore City Public SchoolsSymantec Software Maintenance07/01/2014 Beaufort County School DistrictAPC Smart UPSs and Batteries06/05/2015 Mutual Non-Disclosure Agreement11/20/2013 Board of Regents of the Nevada System of Higher Education on behalf of Bus NJPA Stretch Agreement12/01/2014 Bossier Parish School BoardTechnology Catalog Contract11/01/2015 Brocade Communications Systems, Inc.State of Georgia Brocade04/30/2013 Brocade Communications Systems, Inc.Brocade WSCA Data Communications07/10/2014 Brocade Communications Systems, Inc.Alaska Brocade NVP Data Communications07/10/2014 Brocade Communications Systems, Inc.Delaware Brocade NVP Data Communications07/10/2014 Brocade Communications Systems, Inc.Montana Brocade NVP Data Communications07/10/2014 Brocade Communications Systems, Inc.Nevada Brocade NVP Data Communications07/10/2014 Brocade Communications Systems, Inc.South Dakota Brocade NVP Data Communication07/10/2014 Brocade Communications Systems, Inc.Washington Brocade NVP Data Communications07/10/2014 Brocade Communications Systems, Inc.Wyoming Brocade WSCA Data Communications07/10/2014 Brocade Communications Systems, Inc.New Jersey Brocade NVP Data Communications09/08/2014 Brocade Communications Systems, Inc.Wyoming Brocade NVP Data Communications09/08/2014 Brocade Communications Systems, Inc.California Brocade NVP Data Communications09/09/2014 Brocade Communications Systems, Inc.Oregon Brocade WSCA Data Communications09/09/2014 Brocade Communications Systems, Inc.Oregon Brocade NVP Data Communications09/09/2014 Brocade Communications Systems, Inc.Florida Brocade NVP Data Communications10/06/2014 Brocade Communications Systems, Inc.Hawaii Brocade NVP Data Communications10/06/2014 Brocade Communications Systems, Inc.South Carolina Brocade NVP Data Communicatio07/14/2015 Brocade Communications Systems, Inc. TX DIR Brocade09/24/2014 Brother International Corp. TX DIR Brother06/05/2015 Brother International CorporationNC Brother Printer04/10/2013 Brother International CorporationNY OGS Brother Printing and Imaging11/06/2014 Capistrano Unified School DistrictAudio Visual Equipment08/01/2015 Carahsoft Technology CorpTX DIR Carahsoft/Adobe08/29/2013 Carahsoft Technology CorpTexas DIR Carahsoft/VMWare03/13/2014 Carahsoft Technology CorpOklahoma OneNet Carahsoft/VMWare04/15/2014 Carahsoft Technology CorpOH STS Carahsoft/Nutanix06/01/2015 Technology Catalog03/01/2014 Chicago Public SchoolsAudio Visual Equipment08/01/2013 Cisco Systems, Inc.TX DIR Cisco05/05/2014 Cisco Systems, Inc.Cisco WSCA08/07/2014 Cisco Systems, Inc.Nevada Cisco WSCA08/07/2014 Cisco Systems, Inc.Oregon Cisco WSCA08/15/2014 Cisco Systems, Inc.Michigan Cisco WSCA08/29/2014 Cisco Systems, Inc.Washington Ciso WSCA08/29/2014 Cisco Systems, Inc.Hawaii Cisco WSCA09/08/2014 Cisco Systems, Inc.Wyoming Ciso WSCA09/08/2014 City of Denver Ipads06/20/2013 City of Richmond Department of Procurement ServicesRichmond IT Products05/14/2014 City of Spokane Product Sales and Service Projec 09/23/2015 City of Tucson, ArizonaNational IPA Technology Solutions08/18/2013 Clarkstown Central School DistrictSamsung Chromebooks09/08/2015 Cobb County School DistrictiPad Cases05/01/2013 Cobb County School DistrictAudiovisual Equipment06/01/2015 Commonwealth of Massachusetts Operational Services DivisionMassachusetts Converged Voice & Data Commu09/18/2013 Commonwealth of PennsylvaniaPA Commonwealth- Enterprise IT Peripherals10/01/2013 Commonwealth of PennsylvaniaPA Commonwealth- PC and Monitors02/15/2014 Community Unified School District 300Master Services Agreement10/13/2014 Community Unified School District 300Computer & Tablets Purchase04/13/2015 Concorde CollegesConcorde Colleges Master Product Sales Agreem03/22/2013 Conejo Valley Unified School DistrictTechnology Solutions08/06/2015 Connecticut General Assembly, Joint Committe on Legislative ManagementIBM Express x3650 M4 Servers04/24/2014 Cook County GovernmentCook County Hardware Software Contract05/15/2013 County of Los Angeles Internal Services DepartmentCounty of Los Angeles Wireless Accessories11/01/2013 County of Los Angeles Internal Services DepartmentCounty of Los Angeles Media04/01/2014 County of Los Angeles Internal Services DepartmentCounty of Los Angeles Orchid Peripherals06/06/2014 County of Los Angeles Internal Services DepartmentCounty of Los Angeles Orchid Ergotron Periphera09/10/2014 Department of Information Technology and Telecommunications (DoITT)NYC DOITT Panasonic04/10/2013 Desert Sands Unified School DistrictChromebook Carts11/06/2013 Desert Sands Unified School DistrictChromebooks09/02/2014 Desert Sands Unified School DistrictTablets03/18/2015 Desert Sands USD Display SolutionsDesert Sands USD Display Solutions05/21/2015 Master Product Purchase Agreement04/01/2013 Digital Edge Wireless Mobile Devices05/28/2014 DigitalEdge Wireless Mobile Devices - Spectrum, 05/28/2014 D-Link Systems, Inc.TX DIR D-Link Networking06/01/2015 Dutchess County BOCESDutchess County BOCES Cooperative Lock and C 09/10/2015 Eastern Suffolk BOCESMicrocomputers, Perioherals & Software01/15/2015 EC America Ohio STSEC America Ohio State Term Schedule08/31/2015 PA Cisco immixGroup11/27/2013 Ector County Independent School DistrictElectronic Surveillance System Upgrade12/23/2014 Education Service Center Region VIIComputer Hardware & Supplies08/20/2015 El Paso Independent School DistrictDistrict Printers07/01/2014 Elk Area Schools ISD 78Projector Bulb Contract03/01/2014 EMC NVP Computer Equipment08/24/2015 Alaska EMC NVP Computer Equipment08/25/2015 Arizona EMC NVP Computer Equipment08/26/2015 South Dakota EMC NVP Computer Equipment08/26/2015 Alaska EMC NVP Data Communications10/23/2015 California EMC NVP Data Communications10/27/2015 Florida EMC NVP Data Communications10/27/2015 Hawaii EMC NVP Data Communications10/27/2015 Missouri EMC NVP Data Communications10/27/2015 Montana EMC NVP Data Communications10/27/2015 Utah EMC NVP Data Communications10/27/2015 Kansas EMC NVP Computer Equipment12/01/2015 New Jersey EMC NVP Computer Equipment12/03/2015 Epson America, Inc.TX DIR Epson Projectors03/29/2013 Extreme Networks, Inc.Extreme WSCA06/17/2014 Extreme Networks, Inc.Nevada Extreme WSCA06/17/2014 Extreme Networks, Inc.New Jersey Extreme WSCA09/09/2014 Extreme Networks, Inc.Florida Extreme NASPO Data Communications05/11/2015 Florida Department of Management ServicesCommercial Off-The-Shelf (COTS) Software09/30/2014 Hewlett Packard CompanyHP NVP Computer Equipment08/12/2015 Hewlett Packard CompanyArizona HP NVP Computer Equipment08/13/2015 Hewlett Packard CompanyDelaware HP NVP Computer Equipment08/14/2015 Hewlett Packard CompanyKansas HP NVP Computer Equipment08/14/2015 Hewlett Packard CompanyNevada HP NVP Computer Equipment09/03/2015 Hewlett Packard CompanyFlorida HP NVP Computer Equipment09/04/2015 Hewlett Packard CompanyNorth Dakota HP NVP Computer Equipment09/09/2015 Hewlett Packard CompanyUtah HP NVP Computer Equipment09/09/2015 Hewlett Packard CompanyWyoming HP NVP Computer Equipment09/09/2015 Hewlett Packard CompanyArkansas HP NVP Computer Equipment10/01/2015 Hewlett Packard CompanyWashington HP NVP Computer Equipment10/01/2015 Hewlett Packard CompanyWisconsin HP NVP Computer Equipment10/01/2015 Hewlett Packard CompanyCalifornia HP NVP Computer Equipment10/08/2015 Hewlett Packard CompanyColorado HP NVP Computer Equipment10/08/2015 Hewlett Packard CompanySouth Carolina HP NVP Computer Equipment10/08/2015 Hewlett Packard CompanyOregon State University11/25/2015 Hewlett Packard CompanyLouisiana HP Inc NVP Computer Equipment12/11/2015 Hewlett-Packard CompanyOhio STS HP203/11/2013 Hewlett-Packard CompanyState of Georgia HP Server and Storage06/12/2014 Hewlett-Packard CompanyNorth Carolina HP Microcomputers06/18/2014 Hewlett-Packard CompanyTX DIR HP07/03/2014 Hewlett-Packard CompanyState of Georgia HP PC Hardware08/04/2014 Hewlett-Packard CompanyHP WSCA Data Communications09/16/2014 Hewlett-Packard CompanyCalifornia HP WSCA Data Communications09/16/2014 Hewlett-Packard CompanyAlaska HP WSCA Data Communications09/18/2014 Hewlett-Packard CompanyHawaii HP WSCA Data Communications09/18/2014 Hewlett-Packard CompanyNevada HP WSCA Data Communications09/19/2014 Hewlett-Packard CompanyUtah HP WSCA Data Communications09/19/2014 Hewlett-Packard CompanyWashington HP WSCA Data Communications09/19/2014 Hewlett-Packard CompanyNY OGS HP Printing and Imaging10/03/2014 Hewlett-Packard CompanyKentucky HP WSCA Data Communications10/13/2014 Hewlett-Packard CompanyOhio STS HP10/15/2014 Hewlett-Packard CompanyLouisiana HP WSCA Data Communications10/17/2014 Hewlett-Packard CompanyWyoming HP NASPO Data Communications05/07/2015 Howard County Public SchoolsCareer and Technology Education Supplies and E01/15/2015 Howard University-MedAssets Stretch AgreementMedAssets Stretch Agreement between CDW Go 07/01/2013 Humanscale CorporationHumanscale IT Support Equipment02/23/2015 Illinois Department of Central Mangement ServicesIllinois Sniffer07/11/2013 Illinois Learning Technology Purchasing ProgramIllinois Learning Technology Purchasing Program10/20/2015 Illinois Public Higher Education CooperativeIPHEC Networking and Equipment Services12/06/2013 Irvine Unified School DistrictMaster Services And Product Sales Agreement07/22/2013 Jefferson County Public School DistrictMobile Device Management System05/12/2014 Juniper Networks (US), Inc.Louisiana Juniper NASPO Data Communications04/30/2015 Juniper Networks (US), Inc.Juniper VALP Data Communications04/30/2015 Juniper Networks, Inc.TX DIR Juniper08/22/2014 Kansas Department of AdministrationKansas Sophos Contract07/01/2013 Kentucky Department of EducationInstructional Devices07/01/2015 NY OGS Kodak PT6660601/23/2015 NY OGS Kodak Printers PT6660601/23/2015 Laramie County School District No. 1Windows Mobile 8 Devices Tablets07/01/2013 Laredo Independent School DistrictComputer Supplies & Peripherals04/17/2014 Laureate Education, Inc.Confidentiality and Non-Disclosure Agreement04/15/2014 Laureate Education, Inc.Laureate Education Master Services Sales Agreem11/11/2014 Master Service Agreement01/18/2013 Lenovo (United States) Inc.Arizona Lenovo NVP Computer Equipment08/25/2015 Lenovo (United States) Inc.Lenovo NVP Computer Equipment08/25/2015 Lincoln Public SchoolsVendor Discount Request01/01/2015 Los Angeles Unified School DistrictKeyboards for Tablet Devices12/23/2014 Lubbuck Independent School DistrictCatalog Bid11/25/2014 Magnolia Independent School DistrictTechnology Equipment & Peripherals02/19/2015 Massachusetts Higher Education Consortium MHEC Consortium Contract- Multi-media equpm12/01/2014 McKinney Independent School DistrictTechnology Products & Services03/26/2014 Meridian Health System, Inc.Business Associate Agreement08/23/2013 Mesa Unified School District No. 4Computer Parts & Peripherals03/24/2015 Metropolitan Transportation AuthorityMTA Peripherals03/14/2014 Middlesex Regional Educational Services CommissionTechnology Supplies & Services07/01/2015 Milwaukee Public SchoolsVarious Electronic Supplies, Blanket Contract02/01/2013 Milwaukee Public SchoolsChromebook Agreement05/30/2014 Milwaukee Public SchoolsCharging Carts for Chromebooks08/22/2014 Minnesota Department of AdministrationMinnesota Professional and Technical Services S 07/03/2014 Mississippi Department of Information Technology Services Mississippi IT Hardware EPL 376003/11/2015 Momentum Ventures, LLCGroup Purchasing Agreement05/15/2013 Montgomery County Department of Technology ServicesMontgomery County MD IT Commodities09/16/2014 National Cooperative Purchasing AllianceRed Hat Software09/02/2015 National Joint Powers AllianceTechnology Solutions with Related Equipment an 12/01/2014 Oklahoma State Regents NetApp03/01/2014 TX DIR NetApp08/19/2014 Alaska NetApp NVP Computer Equipment10/13/2015 Arkansas NetApp NVP Computer Equipment10/15/2015 New Mexico Cooperative Educational ServicesWindows Desktop, Accessories and Software for 05/19/2014 New York City Department of EducationAV and Interactive Whiteboard Agreement01/31/2014 Noble County ClerkNoble County Office Supplies07/01/2015 Northwestern UniversityNorthwestern University Lenovo Desktop Compu09/01/2014 Northwestern UniversityNorthwestern Computer Peripherals and Supplie10/31/2014 Ohio Council of Educational Purchasing ConsortiaTechnology Catalog03/01/2014 Ohio Inter University Council Purchasing Group Ohio Inter University Purchasing Group Price Ag 10/01/2014 Ohio State University Medical CenterOhio State Unvi Med Ctr Material Systems and P 10/18/2013 Oki Data America's Inc.TX DIR Okidata06/05/2015 Oki Data Americas, Inc.NY OGS Oki Data02/27/2013 Oki Data Americas, Inc.NY OGS Oki Data Printers and Imaging Equipmen09/01/2014 Onondaga-Cortland-Madison Board of Cooperative Educational Services COMPUTER PERIPHERALS 01/01/2014 Orange County Public SchoolsComputer Peripheral Equipment01/17/2013 Orange County Public SchoolsSingle Sign On Software06/25/2014 Oregon Department of Administrative Services-Enterprise Technolog ServiceEnterprise Technology Hardware, Software, and 05/14/2015 Oregon State UniversityContract for the Purchase of Computer Hardwar11/12/2013 Palo Alto Networks, IncCalifornia Palo Alto NVP Data Communications04/16/2015 Palo Alto Networks, IncPalo Alto NVP Data Communications04/16/2015 Palo Alto Networks, IncNevada Palo Alto NVP Data Communications06/08/2015 Palo Alto Networks, IncWashington Palo Alto NVP Data Communication08/19/2015 Palo Alto Networks, IncAlaska Palo Alto NVP Data Communications08/27/2015 Palo Alto Networks, IncColorado Palo Alto NVP Data Communications08/27/2015 Palo Alto Networks, IncLouisiana Palo Alto NVP Data Communications08/27/2015 Palo Alto Networks, IncUtah Palo Alto VALP Data Communications08/27/2015 Palo Alto Networks, IncFlorida Palo Alto NVP Data Communications12/08/2015 Panasonic Computer Solutions CompanyTX DIR Panasonic12/20/2013 Pemayetv Emahakv Charter SchoolPrinter Supplies Management Program04/16/2015 Pennsylvania Department of General ServicesPA Commonwealth- Server Equipment06/01/2014 General Hardware and Software01/01/2014 PEPPM 2014 Steelcase Product Line BId05/28/2014 PEPPM 2015 Ruckus Product Line Bid01/01/2015 PEPPM Panasonic Product Line Bid 201503/09/2015 PEPPM Product Line Bid03/26/2015 Regional Educational Media Center Association of MichiganSupplies & Equipment 201501/01/2015 Regional Educational Media Center Association of MichiganSoftware, Digital Content & Automated Notificat 07/01/2015 Regional Educational Media Center Association of MichiganComputer Equipment08/11/2015 NY OGS Ricoh Printing and Imaging11/06/2014 Rocky Point Union Free School DistrictLexmark OEM Toner Catridges & Supplies Bid07/01/2013 Samsung Electronics America, Inc.North Carolina 204D Samsung04/01/2013 Samsung Electronics America, Inc.NY OGS Samsung Printing01/12/2015 School Board of Hernando CountyInteractive Solutions05/07/2014 School Board of Sarasota CountyAudio Visual and Video Equipment01/20/2015 Hawaii ShoreTel NVP Data Communications02/17/2015 Nevada ShoreTel NVP Data Communications02/17/2015 ShoreTel WSCA02/17/2015 Utah ShoreTel NVP Data Communications02/17/2015 ShoreTel NVP Data Communications02/17/2015 California ShoreTel NVP Data Communications08/19/2015 Arkansas ShoreTel NVP Data Communications08/28/2015 Florida ShoreTel NVP Data Communications08/28/2015 Missouri ShoreTel NVP Data Communications08/28/2015 Washington ShoreTel NVP Data Communication09/18/2015 Snohomish County Public Utility DistrictSnohomish County PUD Fireye10/21/2014 Socorro Independent School DistrictDistrict Interactive Projectors11/20/2014 South Carolina Information Technology Management OfficeSouth Carolina Symantec02/20/2013 South Carolina Information Technology Management OfficeSouth Carolina Aerohive05/29/2015 Southeast Kansas Educational Services CooperativeSoutheast Kansas Educational Services Cooperat 03/01/2014 Spectrum Industries, Inc.State of Connecticut Classroom Furniture07/23/2014 St. Mary's County Public SchoolsPromethean Interactive Whiteboards & Related 04/01/2013 Stanford UniversityStanford University MPSA10/27/2015 State of California, Department of General ServicesSLP Academic Microsoft06/27/2013 State of California, Department of General ServicesCMAS Cisco08/07/2013 State of California, Department of General ServicesSLP Microsoft11/15/2013 State of California, Department of General ServicesSLP Adobe01/24/2014 State of California, Department of General ServicesSLP Novell06/09/2014 State of California, Department of General ServicesSLP VMware07/21/2014 State of California, Department of General ServicesCisco PC Servers06/30/2015 State of California, Department of General ServicesSLP Commvault08/03/2015 State of California, Department of General Services SLP Symantec09/19/2014 State of Connecticut, Dept of Administrative ServicesInformation Processing Systems Agreement01/17/2014 State of Connecticut, Dept of Information TechnologyAudio Visual05/01/2014 IT Hardware Value Added Reseller09/25/2015 State of Tennessee, Department of General ServicesTennessee Cisco Hardware, Software, and Servic01/01/2013 State of Tennessee, Department of General ServicesTennessee Ultrabooks and Related Peripherals07/11/2014 State of Tennessee, Department of General ServicesTennessee Multi Manufacturer Software04/01/2015 State of Texas, Department of Information ResourcesTX DIR Networking09/20/2014 State of Texas, Department of Information ResourcesTX DIR Education IT Products06/18/2015 Tegile Systems, Inc.Florida Tegile NASPO ValuePoint Computer Equi07/22/2015 Tegile Systems, Inc.Tegile NASPO ValuePoint Computer Equipment07/22/2015 Texas A&M UniversityTCPN Stretch Agreement07/01/2013 Texas Christian UniversityTexas Christian Managed Print Services Contract08/19/2013 The Catholic University of AmericaThe Catholic University of America-MPA10/26/2015 The Interlocal Purchasing SystemTIPS/TAPS Computers, Equipment, Components 06/26/2015 The Interlocal Purchasing System TIPS-TAPS Software 07/16/2015 Tri-Consortia Technology CommitteeCategory 2-Products and Services02/13/2015 Tuskegee UniversityTuskegee University05/14/2013 University Hospitals Health System, IncLetter of Understanding for VDI project12/02/2013 University of AlabamaUniversity of Alabama Computer Peripherals03/01/2014 University of Alabama at BirminghamBusiness Associates Agreement08/13/2013 Village of LombardMPS-Village of Lombard10/30/2013 Village of LombardVillage of Lombard PSMP10/30/2013 Virginia Information Technologies AgencyVITA Governance, Risk and Compliance Software02/04/2013 Virginia Information Technologies AgencyVITA Hardware and Maintenance03/31/2014 Virginia Information Technologies AgencyVITS Software License Contract04/01/2014 Wayne-Finger Lakes BOCESChrome Books & Accessories06/01/2013 Western Suffolk BOCESWestern Suffolk BOCES Smartboard & Audio Vis 02/24/2015 Unknown reasonSigned a new agreementUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonAgreement not renewed due to lack of salesUnknown reasonSigned new NJPA Stretch AgreementSigned new Stretch Agreement under new NJPA AgreementSigned new Stretch Agreement under new NJPA AgreementUnknown reasonUnknown reasonUnknown reasonUnknown reason 02/28/201403/22/201304/16/201305/16/201306/07/201306/22/201306/25/201306/30/201306/30/201306/30/201306/30/201306/30/201308/30/201308/31/201308/31/201308/31/201308/31/201310/13/201311/19/201311/22/201 311/22/201311/23/201312/17/201312/31/201312/31/201312/31/201312/31/201301/31/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/201402/28/20 1402/28/201402/28/201402/28/2014 03/01/201003/23/201104/15/200805/17/201106/09/201006/23/201206/24/201109/18/200807/01/201109/19/201207/01/201103/15/201305/23/201309/01/201009/01/201210/01/201109/11/201211/20/201211/20/200912/17/201 208/08/201210/11/201212/18/201109/25/200601/01/201301/01/201301/01/201202/01/201203/01/201303/01/201003/01/201003/01/201003/01/201003/01/201003/01/201003/01/201003/01/201003/01/201003/01/201003/01/20 1001/03/200607/01/201309/27/2010 Technology CatalogClassroom Visual Presentation Equipment and AccessoriesIrvine Unified School District Product Purchase Agreement 56943Special Education SuppliesInteractive Whiteboard Classroom SolutionComputer Hardware, Software, Supplies and AccessoriesDistrict SoftwareComputer, Technology, Electrical Parts and SuppliesAudio Visual EquipmentAudio Visual EquipmentProjectorsSlate -Tablet Computers22i SPOT DevicePeripheralsComputer Hardware & EquipmentAudio VisualTechnology SolutionsComputer Software, Peripherals, Accessories & Repair PartsNJPA Stretch AgreementTechnology CatalogTechnology Solutions and Related ServicesAudio Visual EquipmentCatalog Bid for Incidental Suppliesuipment & Supplies 2013Computer Technology and PeripheralsRepair Parts for AV, Computer, Printer & Miscellaneous Office EquipAudio, Visual & DVD SoftwareLenovo ProductTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology CatalogTechnology Catalog New Caney Independent School DistrictJackson-Madison County School SystemCopper Country Intermediate School DistrictEagle Pass Independent School DistrictHarlingen Consolidated Independent School DistrictAssociated Colleges of the Twin CitiesRegional Educational Media Center Association of MichiganSchool District of Kansas City MissouriCypress-Fairbanks Independent School DistrictNorthside Independent School DistrictPanhandle Area Education ConsortiumIndiana Association Educational Service CentersNorth Dakota Educators Service CooperativeTexBuy (Region 16 Education Service Center) Unknown reasonUnknown reasonMoved purchasing to local cooperative agreementsUnknown reasonUnknown reasonSigned a new NJPA Stretch AgreementSigned new Stretch Agreement under new NJPA AgreementSigned new Stretch Agreement under new NJPA AgreementSigned new Stretch Agreement under new NJPA AgreementAgreement not renewedSigned new NJPA Stretch AgreementUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonAgreement not rebidAgreement not rebidUnknown reasonUnknown reasonUnknown reasonUnknown reasonMoved purchasing to local cooperative agreementsUnknown reasonUnknown reasonUnknown reasonUnknown reason 06/30/201406/30/201406/30/201407/31/201407/31/201407/31/201408/20/201408/22/201408/31/201409/19/201409/20/201409/23/201411/27/201412/08/201412/15/201412/15/201412/15/201412/15/201412/15/201412/15/201 412/15/201412/31/201401/21/201501/26/201501/30/201503/02/201505/31/201506/14/201506/22/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/201506/30/20 1506/30/201507/31/201508/22/2015 07/15/201408/20/201308/16/201308/01/201311/13/201204/23/201408/21/201308/22/201309/01/201309/20/201309/21/201109/24/301304/25/201212/09/200912/09/200911/06/201305/01/201406/05/201409/01/201309/16/201 403/14/201110/01/201401/22/201301/27/201408/18/201403/03/201406/01/201306/15/201306/23/201404/25/201305/07/201301/26/201407/01/201207/01/201207/01/201207/01/201306/01/201407/01/201407/01/201407/01/20 1411/19/201409/30/201508/23/2013 Chrome-Android-Windows Mobile DevicesComputer RequirementsComputer / Audio Visual Equipment, Supplies and/or ServicesAV Equipment & SuppliesCatalog Discount Term Contract22i SPOT DeviceChromebooksCom puter Hardware & Supplies Bid AwardAudio VisualDistrict Interactive ProjectorsInstructional Supplies & EquipmentStudent DevicesKindle FireClassroom Supplies & Equipment CatalogTechnology CatalogNJPAStretch AgreementNJPA Stretch AgreementNJPA Stretch AgreementNJPA Stretch AgreementNJPA Stretch AgreementTechnology Solutions with Related Equipment and AccesoriesLocknCharge Carrier Charging CartsAudio Visual & Video EquipmentMaster Services Sales AgreementMicrosoft Office 365Laptop & Ultrabook ContractEducational Computer SoftwareTelevisions for Schools and OfficesCatalog BidVisual and Audio InstallationInstallation of Interactive Classroom Promethean BoardsAudio Visual & Video Equipment/MaterialsTechnology - Electronic ProductsLenovo ThinkPadsSoftware 2012Technology CatalogNutrition Services Computers/SuppliesBirdville ISDCareet and Technical Education CatalogComputer, AV Equipment, Supplies and ServicesComputer Peripherals & IPads 2014-2015Projection, A/V and Charging CartsComputer Equipment, Servers, Microsoft Licensing, Services and Fina Jackson-Madison County School SystemJefferson County School District No. R-1Copper Country Intermediate School DistrictBoard of Regents of the Nevada System of Higher Education on beh Massapequa Union Free School DistrictWest Hempsted Unified Free School DistrictFountain Fort Carson School District 8Alum Rock Union Elementary School DistrictAlum Rock Union Elementary School DistrictDes Moines Independent Community School DistrictRegional Educational Media Center Association of MichiganMiddlesex Regional Educational Services CommissionMetropolitan Nashville Public SchoolsPharr-San Juan-Alamo Independent School District Unknown reasonAgreement not renewedUnknown reasonNot renewed for lack of salesMoved purchasing to local cooperative agreementsUnknown reasonUnknown reasonNot renewed for lack of salesUnknown reasonUnknown reasonUnknown reasonAgreement not rebidAgreement not rebidUnknown reasonContract expired. No reason on file for why this was not renewed.Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract was extended until 2016.Contract expired. No reason on file for why this was not renewed. 12/31/201512/31/201503/31/201306/22/201306/25/201306/30/201306/30/201307/06/201307/31/201308/14/201308/14/201308/14/201308/14/201308/14/201308/14/201308/14/201308/14/201308/14/201308/14/201308/18/201 310/01/201312/14/201303/01/201403/24/201405/15/201405/15/201407/31/201407/31/201401/31/201506/29/201507/23/201512/31/201504/21/201510/31/201512/16/201508/21/201504/30/201510/21/201512/31/201502/28/20 1409/30/201606/30/201505/30/2014 01/01/201409/02/201503/20/200506/23/200906/25/200909/30/201007/01/201207/07/200908/01/201008/15/201208/15/201208/15/201208/15/201208/15/201208/15/201208/15/201208/15/201209/10/201211/02/201208/16/201 210/01/200812/14/200403/01/201103/25/200905/16/201109/25/201207/13/200705/22/200902/01/201306/28/201208/09/201005/28/201404/22/201011/01/201312/17/201208/22/201304/06/201210/21/201401/24/201403/07/20 1110/01/201312/12/201308/01/2010 Audio Visual Equipment & SuppliesRed Hat SoftwareEpson Brighter Futures PrintersMaster Service and Product Sales AgreementProduct Purchase AgreementAudio Visual EquipmentTechnology SuppliesMSPSASoftw are Resale and Support ServicesALJP 2012 - Amazon Kindle & ServiceNet WarrantyALJP 2012 - AsusALJP 2012 - BrocadeALJP 2012 - McAfeeALJP 2012 - RuckusALJP 2012 - SpectrumALJP 2012 - Trend MicroALJP 2012 - XeroxALJP 2012 - BelkinALJP 2012 - Tripp LiteComputer Hardware & SuppliesRockwood School District Product Purchase Agreement 92547Technology CatalogTechnology RFPTechnology & Technical Products & ServicesALJP 2011 - PlanarALJP2011-037: AVerMediaAdobe CLP SoftwareAruba Networking EquipmentMSPSA 41025Computer Equipment, Components and PeripheralsTIPS-TAPS SoftwareDigital Edge Wireless Mobile DevicesBlackberry SupportAlabama Apple PC and ServersAlabama Printers and ScannersAlbany County Printers, Accessories and SuppliesState of Arkansas XeroxBaldwin County Commission MicrocomputerSLP AdobeCity of St. Petersburg Computers, Ruggedized LaptopPA Commonwealth- Networking EquipmentCounty of Ventura CiscoAudio Visual National Cooperative Purchasing AllianceCalifornia Charter Schools AssociationSouth County Support Service AgencyHarris County Department of EducationMcKinney Independent School DistrictManagement Council Ohio Education Computer NetworkState of Alabama Department of FinanceState of Alabama Department of FinanceState of Alabama Department of FinanceState of Connecticut, Dept of Information Technology Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.We are still awaiting renewalContract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract expired and was not renewed, but Ricoh is looking to award a new cont Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract was extended until 2016.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Contract expired. No reason on file for why this was not renewed.Still awaiting 06/30/201506/30/201506/30/201512/31/201307/01/201506/30/201309/30/201509/30/201511/23/201410/31/201512/31/201508/25/201510/20/201510/04/201511/14/201506/10/201511/30/201509/30/201512/09/201506/01/201 406/30/201402/13/201509/11/201503/31/201306/14/201307/31/201310/31/201310/31/201303/31/201409/09/201503/31/201609/20/201510/31/201502/09/201402/09/201412/31/201510/31/201310/31/201310/31/201310/31/20 1302/10/201402/10/201402/11/2014 12/31/201407/01/201207/01/201206/19/201206/27/201307/14/200810/01/201110/01/201111/24/201303/05/201407/23/200708/26/201307/21/201004/05/201205/15/201210/01/201412/01/201105/18/201012/10/201412/01/201 006/23/200907/01/201111/20/201408/01/200706/15/201208/01/201206/01/200706/01/200704/01/201309/10/201409/20/201209/20/201211/01/201304/25/201104/25/201107/01/201511/01/200811/01/200810/01/200805/06/20 1011/25/200908/17/201102/11/2004 Microsoft Licenses, Terminal Services CAL and Core CAL Step-upIL EMC Capacity Expansion/Maint. ContractIllinois Adobe Master ContractIL Microsoft EA AgreementIllinois Microsoft LAR AgreementIllinois DOT Microsoft Premier Support ServiceKansas Cisco ContractLouisiana ArubaCounty of Los Angeles Cisco HardwareState of Louisiana PrometheanState of Louisiana Tripp LiteState of Louisiana EpsonComputer Workstation HardwareMisc Computer Hardware & Software for the Police DepartmentMississippi Microsoft EPL 3640Software Express Products ListMississippi IT Hardware EPL 3658North Carolina Carahsoft VMwareNC Ricoh Printer 204DNorth Carolina HP Thin ClientNorth Carolina CitrixNC Ruggedized Accessories 204BNC Panasonic Rugged ComputersNorth Carolina HP PrinterCarahsoft VMWare SoftwareNC Mass Storage ITS-006498NC 204J NetApp Mass StorageNC Ruggedized Computers and AccessoriesNorth Central EMS CooperativeNorth Central EMS CooperativeNoble County Office Supplies Illinois Department of Central Management Services Illinois Department of Central Management ServicesIllinois Department of Central Management ServicesIllinois Department of Central Management ServicesKansas Department of AdministrationCounty of Los Angeles Internal Services DepartmentMississippi Department of Information Technology ServicesMississippi Department of Information Technology ServicesMississippi Department of Information Technology ServicesNorth Carolina Department of AdministrationNorth Carolina Department of AdministrationPanasonic Computer Solutions CompanyNorth Carolina Department of AdministrationNorth Carolina Department of Administration Contract will expire and not being renewed.Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Still awaitingStill awaitingStill awaitingWe are still awaiting renewalEpson has renewed and is working with DIR to update site soonNot technically expired but we are still awaiting renewalContract expired and was not renewed. There was no replacement RFP.Contract expired and was not renewed. There was no replacement RFP.Contract was extended until 2016.Contract expired. No reason on file for why this was not renewed. 12/28/201512/28/201512/28/201512/28/201512/28/201512/28/201512/28/201512/28/201512/29/201508/31/201309/30/201302/19/201509/08/201511/30/201503/31/201503/31/201509/30/201309/30/201308/02/201508/05/201 508/05/201509/07/201512/31/201512/31/201512/31/201512/31/201505/04/201505/18/201506/07/201506/07/201506/10/201508/07/201509/10/201512/07/201512/20/201512/28/201504/30/201404/30/201303/31/201403/31/20 1403/31/201411/29/201609/30/2015 12/29/201012/29/201012/29/201012/29/201012/29/201012/29/201002/24/201104/21/201104/10/201309/01/201010/01/201002/20/201409/23/200508/01/200804/01/201404/01/201401/15/200908/12/200808/03/201108/11/200 608/03/201109/08/201009/03/200907/10/200608/02/200601/01/201305/04/201109/27/201205/30/200703/26/200708/09/201203/17/201409/10/201403/29/201312/20/201312/28/201204/16/200810/29/201002/06/200902/06/20 0901/11/201001/13/201110/12/2011 Oakland County Microsoft EnterpriseOakland County Michigan Fujitsu TabletsState of Oklahoma Aruba NetworkingCostars-3 IT HardwareCostars SoftwarePhiladelphia Housing Authority HardwarePhiladelphia Housing Authority SoftwarePA IT Hardware Rugged ToughbooksPA IT Networking ContractSouth Carolina AverMediaSouth Carolina Mitsubishi AVSouth Carolina PolyvisionSouth Carolina EnterasysSouth Carolina BretfordSouth Carolina Epson AVSouth Carolina NEC Audio VisualTennessee Cisco Hardware, Software, and ServicesTX DIR EMC SoftwareTX DIR LexmarkTX DIR OkidataTX DIR XeroxTX DIR RicohTexas DIR SamsungTX DIR EMCTX DIR Epson ProjectorsTX DIR PanasonicTX DIR LenovoRichmond Information Technology Supply ScheduleVITA Statewide Printer Wide Format DeviceVITA Hardware and Maintenance ContractVITA Software License ContractVITA Server and Maintenance ContractVITA StorageVT Computer Peripherals Fujitsu Computer Systems, CorporationPanasonic Computer Solutions CompanyToshiba America Information Systems, Inc.Department of Information Technology and Telecommunications (DSouth Carolina Information Technology Management OfficeSouth Carolina Information Technology Management OfficeSouth Carolina Information Technology Management OfficePanasonic Computer Solutions CompanyCity of Richmond Department of Procurement ServicesVirginia Information Technologies AgencyVirginia Information Technologies AgencyVirginia Information Technologies AgencyVirginia Information Technologies AgencyVirginia Information Technologies Agency Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. 05/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201405/31/201408/31/201408/31/201408/31/201408/31/201408/31/201408/31/201 408/31/201408/31/201408/31/201408/31/201412/31/201412/31/201412/31/201412/31/201412/31/201403/31/201503/31/201503/31/201503/31/201506/30/201506/30/201506/30/201509/30/201509/30/201509/30/201509/30/20 1509/30/201509/30/201509/30/2015 10/23/201205/02/201204/29/201004/21/200904/29/201008/14/200905/13/201309/01/200910/24/201104/29/201002/08/201004/29/201010/24/201109/22/201003/15/201110/09/200910/24/201112/28/201109/01/200909/01/200 909/01/200910/24/201109/01/200909/01/200909/01/200910/20/201003/29/201209/01/200909/01/200909/01/200909/08/201011/30/201501/13/201106/04/201306/13/201211/08/201009/01/200909/01/200909/01/200909/01/20 0909/01/200911/08/201005/19/2010 Louisiana Cisco WSCAMichigan Cisco WSCAMinnesota HP WSCA Data CommunicationsNew Jersey Cisco WSCANew Jersey HP WSCA Data CommunicationsNevada Extreme WSCANevada Cisco WSCAOregon Cisco WSCASouth Dakota Extreme WSCAUtah HP WSCA Data CommunicationsWashington Cisco WSCA NASPOWashington HP WSCA Data CommunicationsWashington Extreme WSCAWisconsin Cisco WSCACalifornia Extreme WSCAColorado EMC WSCAMissouri Extreme WSCASouth Carolina Panasonic WSCA NASPOSouth Carolina Lexmark WSCA NASPOSouth Dakota Lexmark WSCA NASPOUtah Lexmark WSCA NASPOUtah Extreme WSCAWashington Lexmark WSCA NASPOWisconsin Lexmark WSCA NASPOConnecticut EMC WSCAMinnesota NetApp WSCAOhio Lenovo WSCA NASPORhode Island EMC WSCANetApp WSCA NASPOArizona NetApp WSCAFlorida EMC NVP Computer EquipmentIdaho NetApp WSCAAlaska HP WSCA NASPODelaware HP WSCA NASPOIdaho Fujitsu WSCA NASPOLenovo WSCA NASPOPanasonic WSCA NASPOEMC WSCA/NASPOLexmark WSCA NASPOHP WSCA NASPOFujitsu WSCA NASPORicoh WSCA NASPO Panasonic Systems Communications CompanyPanasonic Systems Communications Company Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. Lexmark did not sign a new contract. 09/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201 509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/20 1509/30/201509/30/201509/30/2015 09/01/200911/08/201005/09/201307/17/201208/01/200909/08/201009/01/200911/08/201006/04/201311/22/201009/02/200909/01/200901/13/201105/19/201011/08/201006/01/201206/14/201208/30/201311/08/201001/27/201 503/09/201511/01/201002/28/201305/19/201009/01/200905/04/201011/03/201009/28/201009/01/200911/08/201008/31/200909/01/200909/01/200911/08/201009/01/200912/13/201004/18/201109/01/200906/05/201309/01/20 0908/28/200909/01/200903/29/2012 California Lexmark WSCA NASPOCalifornia Fujitsu WSCA NASPOCalifornia HP WSCA NASPOColorado Lenovo WSCA NASPOColorado Panasonic WSCA NASPOColorado NetApp WSCAColorado Lexmark WSCA NASPOColorado Fujitsu WSCA NASPOColorado HP WSCA NASPODelaware Lenovo WSCA NASPODelaware Panasonic WSCA NASPODelaware EMC WSCADelaware NetApp WSCADelaware Ricoh WSCA NASPODelaware Fujitsu WSCA NASPOFlorida Lenovo WSCA NASPOFlorida Panasonic WSCA NASPOFlorida HP WSCA NASPOFlorida Fujitsu WSCA NASPOFlorida EMC WSCAFlorida NetApp WSCAHawaii Ricoh WSCA NASPOIowa Lenovo WSCA NASPOIowa Panasonic WSCA NASPOIowa EMC WSCAIowa NetApp WSCAIowa Lexmark WSCA NASPOIowa Fujitsu WSCA NASPOIdaho Panasonic WSCA NASPOKansas Lenovo WSCA NASPOKansas Lexmark WSCA NASPOKansas Fujitsu WSCA NASPOLouisiana Lenovo WSCA NASPOLouisiana EMC WSCALouisiana NetApp WSCALouisiana Lexmark WSCA NASPOLouisiana HP WSCA NASPOMissouri Lenovo WSCA NASPOMissouri Panasonic WSCA NASPOMissouri EMC WSCAMissouri NetApp WSCA Panasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications Company Xerox did not sign a new contract.Lexmark did not sign a new contract. Lexmark did not sign a new contract. Xerox did not sign a new contract.Lexmark did not sign a new contract. Xerox did not sign a new contract. 09/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201 509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/201509/30/20 1509/30/201509/30/201509/30/2015 12/28/201101/11/201210/01/201202/10/201009/01/200903/23/201102/23/201111/16/201109/01/200905/19/201009/01/200909/01/200903/29/201205/19/201009/01/200911/08/201011/16/201106/14/201207/01/201007/31/200 909/01/200903/29/201203/01/201109/01/200909/01/200911/23/201109/01/200911/08/201003/29/201203/22/201306/14/201209/01/201006/30/201006/04/201306/13/201209/01/200909/01/200905/19/201011/08/201008/10/20 1109/28/201004/25/201109/02/2009 Nebraska Panasonic WSCA NASPONebraska NetApp WSCANebraska EMC WSCANew Jersey Panasonic WSCA NASPONew Jersey EMC WSCANew Jersey NetApp WSCANew Jersey Xerox WSCANew Jersey HP WSCA NASPONew Jersey Lexmark WSCA NASPONew Mexico Ricoh WSCA NASPONevada Panasonic WSCA NASPONevada EMC WSCANevada NetApp WSCANevada Ricoh WSCA NASPONevada Lexmark WSCA NASPONevada Fujitsu WSCA NASPOOhio HP WSCA NASPOOklahoma Panasonic WSCA NASPOOR PC Peripherals AgreementOregon Panasonic WSCA NASPOOregon EMC WSCAOregon NetApp WSCAOregon Xerox WSCAOregon HP WSCA NASPOOregon Lexmark WSCA NASPOSouth Dakota Panasonic WSCA NASPOSouth Dakota EMC WSCASouth Dakota Fujitsu WSCA NASPOSouth Dakota NetApp WSCATennessee EMC WSCAUtah Panasonic WSCA NASPOUtah EMC WSCAUtah NetApp WSCAUtah HP WSCA NASPOVermont HP WSCA NASPOVermont Panasonic WSCA NASPOVermont EMC WSCAVermont Ricoh WSCA NASPOVermont Fujitsu WSCA NASPOWashington Panasonic WSCA NASPOWashington NetApp WSCAWashington Xerox WSCAWashington EMC WSCA Panasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications CompanyPanasonic Systems Communications Company Contract expired. No reason on file for why this was not renewed.Unknown reasonCustomer is using other contarcts CDW holdsNew Contract was awarded to CDWNew Contract was awarded to CDWNot Enough contract spend so Agreement was not extendedNew Contract was awarded to CDWCDW was not awarded a new agreementUnknown reasonNot Enough contract spend so Agreement was not extendedUnknown reasonAgreement was not renewed as they became a member of a co-opSpend was not high enough to extendUnknown reasonUnknown reasonUnknown reasonUnknown reasonAgreement was not renewed as they use other agreementsNot Enough contract spend so Agreement was not extendedAgreement was not renewed as they became a member of a co-opAgreement was not renewed customer uses oterh agreements insteadUnknown reasonUnknown reasonUnknown reasonUnknown reason 05/31/201405/31/201408/31/201408/31/201408/31/201408/31/201408/31/201408/31/201410/31/201410/27/201504/13/201306/20/201306/30/201308/18/201309/14/201309/30/201309/30/201303/09/201404/13/201404/16/201 404/22/201405/20/201406/07/201406/30/201406/30/201406/30/201406/30/201407/13/201408/03/201408/18/201408/21/201404/14/201507/31/201501/15/201508/31/201301/23/201411/30/201401/29/2015 11/01/201211/01/201211/01/201211/01/201203/21/201311/01/201211/01/201211/01/201211/01/201310/28/201404/14/201006/21/201011/15/200803/01/200909/14/201111/01/201010/01/200803/08/201004/13/201104/17/200 604/22/201309/12/200806/07/201007/01/201207/10/200906/16/201007/01/201007/13/201008/04/200908/19/200908/22/201104/15/201308/06/201101/16/201411/19/201201/24/201401/01/201401/30/2014 Delaware Brocade WSCA Data CommunicationsWashington Brocade WSCA Data CommunicationsBrocade WSCA Data CommunicationsColorado Brocade WSCA Data CommunicationsHawaii Brocade WSCA Data CommunicationsMissouri Brocade WSCA Data CommunicationsNew Jersey Brocade WSCA Data CommunicationsUtah Brocade WSCA Data CommunicationsHarris County Virtualization Software UpgradeCISCO Unified Communications ProductsMaster Product Sales AgreementElectronic Commerce Agreement between the University of Minneso National IPA Technology SolutionsMaster Product Sales AgreementMassachus etts Consortium Contract - Multi-Media Equipment MC10Microcomputers University of TennesseeCisco Networking Products and ServicesManaged Print ServicesMaster Product Sales AgreementNetwork and Security SoftwareManaged Print Services AgreementManaged Print ServicesMaster Product Sales AgreementProduct Sales and Service Projects AgreementBroome-Tioga BOCES AV and Related Technology EquipmentCity of Hartford - Hartford Public Schools Desktop, Laptop, Tablet Devices, Servers, Deployment/Other Technical Services, Device Parts/Peripherals, and Software LicensingClarkstown Central School District Chromebooks (as needed)Eastern Suffolk BOCES Wireless Tablets and NotebooksNassau BOCES Computer Hardware, Software, Networking Supplies Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.Brocade Communications Systems, Inc.City of Tucson Department of Procurement-EXPIREDMassachusetts Higher Education ConsortiumMassachus etts Higher Education ConsortiumMassachusetts Higher Education ConsortiumMassachusetts Higher Education ConsortiumCity of Hartford - Hartford Public Schools Unknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reasonUnknown reason 11/02/201510/18/201406/30/201512/31/201312/31/201406/30/201412/31/201406/30/201509/01/201507/01/201508/31/201406/30/201412/30/201306/30/2014 11/01/201410/19/201303/27/201501/01/201004/21/201101/17/201307/11/201309/05/201409/01/201407/10/201412/20/201207/01/201301/01/201307/01/2013 Onondaga-Cortland-Madison Board of Cooperative Educational Services (BOCES) OCM Data Communications Equip RFB-215-20Patchogue Medford Schools AV Supply Bid& Ink CartridgesSouthern Westchester Board of Cooperative Educational Services ChromebooksSouthern Westchester Board of Cooperative Educational Services Misc. PrintersSouthern Westchester Board of Cooperative Educational Services Microcomputer HardwareSouthern Westchester Board of Cooperative Educational Services Southern Westchester BOCES AV PricingSouthern Westchester Board of Cooperative Educational Services Ulster County BOCES Chromebook & ChromeboxWestern Suffolk BOCES Printer & Toner CartidgesWestern Suffolk BOCES Professional Days for Computer Network Support LAN/WAN Onondaga-Cortland-Madison Board of Cooperative Educational Serv Southern Westchester Board of Cooperative Educational ServicesSouthern Westchester Board of Cooperative Educational ServicesSouthern Westchester Board of Cooperative Educational ServicesSouthern Westchester Board of Cooperative Educational Services Southern Westchester Board of Cooperative Educational Services Table of Contents 5/H/b UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-35985 CDW CORPORATION (Exact name of registrant as specified in its charter) Delaware26-0273989 (State or other jurisdiction of(I.R.S. Employer incorporation or organization)Identification No.) 200 N. Milwaukee Avenue Vernon Hills, Illinois60061 (Address of principal executive offices)(Zip Code) (847) 465-6000 (Registrant’s telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) ____________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class:Name of each exchange on which registered Common stock, par value $0.01 per shareNASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None ____________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filerAccelerated filer Non-accelerated filer (Do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No Qbdlfu!Qh/!328 Table of Contents 5/H/b The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, was $654,984,661, based on the per share closing sale price of $18.62 on that date (assuming the closing of the registrant's initial public offering). As of February 28, 2014, there were 171,954,277 shares of common stock, $0.01 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for use in connection with its 2014 Annual Meeting of Shareholders, to be filed not later than 120 days after December 31, 2013, are incorporated by reference into Part III of this report. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Qbdlfu!Qh/!329 5/H/b CDW CORPORATION AND SUBSIDIARIES ANNUAL REPORT ON FORM 10-K Year Ended December 31, 2013 TABLE OF CONTENTS ItemPage PART I Item 1. Business4 Item 1A. Risk Factors9 Item 1B. Unresolved Staff Comments20 Item 2. Properties20 Item 3. Legal Proceedings21 Item 4. Mine Safety Disclosures21 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities24 Item 6. Selected Financial Data26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk60 Item 8. Financial Statements and Supplementary Data61 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure109 Item 9A. Controls and Procedures109 Item 9B. Other Information111 PART III Item 10. Directors, Executive Officers and Corporate Governance112 Item 11. Executive Compensation112 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters112 Item 13. Certain Relationships and Related Transactions, and Director Independence112 Item 14. Principal Accountant Fees and Services112 PART IV Item 15. Exhibits and Financial Statement Schedules113 SIGNATURES 114 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2 Qbdlfu!Qh/!32: Table of Contents 5/H/b FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact included in this report are forward-looking statements. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. We claim the protection of The Private Securities Litigation Reform Act of 1995 for all forward-looking statements in this report. These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the section entitled “Risk Factors” included elsewhere in this report. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in the section entitled “Risk Factors” included elsewhere in this report as well as other cautionary statements that are made from time to time in our other Securities and Exchange Commission ("SEC") filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 3 Qbdlfu!Qh/!331 Table of Contents 5/H/b PART I Item 1. Business Our Company CDW is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions in the U.S. and Canada. We help our customer base of approximately 250,000 small, medium and large business, government, education and healthcare customers by delivering critical solutions to their increasingly complex IT needs. Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. We are technology "agnostic," with a product portfolio that includes more than 100,000 products from more than 1,000 brands. We provide our products and solutions through sales force and service delivery teams consisting of more than 4,400 coworkers, including nearly 1,800 field sellers, highly-skilled technology specialists and advanced service delivery engineers. We are a leading U.S. sales channel partner for many original equipment manufacturers (“OEMs”) and software publishers (collectively, our “vendor partners”), whose products we sell or include in the solutions we offer. We believe we are an important extension of our vendor partners' sales and marketing capabilities, providing them with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage and extensive customer access. We provide value to our customers by simplifying the complexities of technology across design, selection, procurement, integration and management. Our goal is to have our customers, regardless of their size, view us as an indispensable extension of their IT staffs. We seek to achieve this goal by providing our customers with superior service through our large and experienced sales force and service delivery teams. Our multi-brand offering approach enables us to identify the products or combination of products that best address each customer's specific organizational IT requirements and to evolve our offerings as new technologies develop. We believe we offer the following value proposition to our customers and our vendor partners: Our value proposition to our customersOur value proposition to our vendor partners Broad selection of products and multi-branded IT Access to approximately 250,000 customers throughout solutionsthe U.S. and Canada Value-added services with integration capabilities Large and established customer channels Highly-skilled specialists and engineersStrong distribution and implementation capabilities Solutions across a very broad IT landscape Value-added solutions and marketing programs that generate end-user demand Our customers include private sector businesses that typically employ fewer than 5,000 employees, government agencies and educational and healthcare institutions. We serve our customers through channel-specific sales teams and service delivery teams with extensive technical skills and knowledge of the specific markets they serve. This market segmentation allows us to customize our offerings and to provide enhanced expertise in designing and implementing IT solutions for our customers. We currently have five dedicated customer channels: medium/large business, small business, government, education and healthcare, each of which generated over $1 billion in net sales in 2013. The scale and diversity of our customer channels provide us with multiple avenues for growth and a balanced customer base to weather economic and technology cycles. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 4 Qbdlfu!Qh/!332 Table of Contents 5/H/b The following table provides information regarding our reportable segments and our customer channels: Corporate SegmentPublic Segment Medium/ Customer Small Large Channels BusinessGovernmentEducationHealthcareOther Business Target 100 - 5,00010 - 100Various federal,HigherHospitals,Advanced Customers employeesemployeesstate and localeducationambulatory serviceservices agenciesand K-12providers and long-customers plus term care facilitiesCanada 2013 Net $4.9$1.1$1.3$1.4$1.5$0.6 Sales (in billions) For further information on our segments, including financial results, see Note 16 to the accompanying audited consolidated financial statements included elsewhere in this report. We offer more than 1,000 brands, from well-established companies such as APC, Apple, Cisco, EMC, Hewlett- Packard, IBM, Lenovo, Microsoft, NetApp, Symantec and VMware to emerging vendor partners such as Drobo, Fusion-io, Meraki, Nimble Storage, Salesforce.com, Sophos and Splunk. In 2013, we generated over $1 billion of revenue for each of four of our vendor partners and over $100 million of revenue for each of 11 other vendor partners. We have received the highest level of certification from major vendor partners such as Cisco, EMC and Microsoft, which reflects the extensive product and solution knowledge and capabilities that we bring to our customers' IT challenges. These certifications also provide us with access to favorable pricing, tools and resources, including vendor incentive programs, which we use to provide additional value to our customers. Our vendor partners also regularly recognize us with top awards and select us to develop and grow new customer solutions. History CDW was founded in 1984. In 2003, we purchased selected U.S. assets and the Canadian operations of Micro Warehouse, which extended our growth platform into Canada. In 2006, we acquired Berbee Information Networks Corporation, a regional provider of technology products, solutions and customized engineering services in advanced technologies primarily across Cisco, IBM and Microsoft portfolios. This acquisition increased our capabilities in customized engineering services and managed services. On October 12, 2007, CDW Corporation, an Illinois corporation, was acquired through a merger transaction by an entity controlled by investment funds affiliated with Madison Dearborn Partners, LLC and Providence Equity Partners L.L.C. (the “Acquisition”). CDW Corporation continued as the surviving corporation and same legal entity after the Acquisition, but became a wholly owned subsidiary of VH Holdings, Inc., a Delaware corporation. On December 31, 2009, CDW Corporation merged into CDWC LLC, an Illinois limited liability company owned by VH Holdings, Inc., with CDWC LLC as the surviving entity. This change had no impact on our operations or management. On December 31, 2009, CDWC LLC was renamed CDW LLC (“CDW LLC”). On August 17, 2010, VH Holdings, Inc. was renamed CDW Corporation (“Parent”), a Delaware corporation. Throughout this report, the terms “the Company” and “CDW” refer to Parent and its 100% owned subsidiaries subsequent to the Acquisition. Parent was previously owned directly by CDW Holdings LLC ("CDW Holdings"), a company controlled by investment funds affiliated with Madison Dearborn Partners, LLC and Providence Equity Partners L.L.C. (the "Sponsors"), certain other co-investors and certain members of CDW management. See "Sponsors" below. On July 2, 2013, Parent Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* completed an initial public offering ("IPO") of its common stock. In connection with the IPO, CDW Holdings distributed all of its shares of Parent's common stock to its members in June 2013 in accordance with the members' respective membership interests and was subsequently dissolved in August 2013. See Note 9 to the accompanying audited consolidated financial statements included elsewhere in this report for additional discussion of the IPO. The Sponsors beneficially owned approximately 63.7% of our common stock as of December 31, 2013. 5 Qbdlfu!Qh/!333 Table of Contents 5/H/b Our Market We operate in the U.S. and Canadian IT market, which is a large and growing market. According to IDC, the overall U.S. IT market generated approximately $660 billion in sales in 2013. We believe our addressable market in the U.S. in the indirect sales channel represents more than $200 billion in annual sales and for the year ended December 31, 2013, our U.S. net sales of $10.3 billion represented approximately 5% of that highly diverse and fragmented market. According to IDC, the overall Canadian IT market generated more than $50 billion in sales in 2013. We believe our addressable market in Canada in the indirect sales channel represents more than $10 billion in annual sales and for the year ended December 31, 2013, our net sales of $475 million in Canada represented approximately 4% of that market. We believe we have the largest market share in our addressable market, with our 2013 net sales exceeding the cumulative North American net sales of our four largest publicly traded sales channel competitors, based upon publicly available information for those companies. New technologies, including cloud, virtualization and mobility, coupled with the resulting increase in demand for data as well as aging infrastructure, are increasingly requiring businesses and institutions to seek integrated solutions to their IT needs. We expect this trend to continue for the foreseeable future, with end-user demand for business efficiency and productivity driving future IT spending growth. Our Offerings Our offerings range from discrete hardware and software products and services to complex integrated solutions that include one or more of these elements. We believe our customers increasingly view technology purchases as integrated solutions rather than discrete product and service categories and we estimate that approximately 51% of our net sales in 2013 came from sales of product categories and services typically associated with solutions. Our hardware products include notebooks/mobile devices (including tablets), network communications, enterprise and data storage, video monitors, printers, desktop computers and servers. Our software products include application suites, security, virtualization, operating systems, network management and Software as a Service (“SaaS”) offerings. We also provide a full suite of value-added-services, which range from basic installation, warranty and repair services to custom configuration, data center and network implementation services, as well as managed services that include Infrastructure as a Service (“IaaS”) offerings. We also offer a variety of integrated solutions, such as: • Mobility: We assist our customers with the selection, procurement and integration of mobile security software, hardware devices such as smartphones, tablets and notebooks, and cellular wireless activation systems. We also provide mobile device management applications with policy and security management capabilities across a variety of mobile operating systems and platforms. • Security: We assess our customers' security needs and provide them with threat prevention tools in order to protect their networks, servers and applications, such as anti-virus, anti-spam, content filtering, intrusion prevention, firewall and virtual private network services, and network access control. We also design and implement data loss prevention solutions, using data monitoring and encryption across a wide array of devices to ensure the security of customer information, personal employee information and research and development data. • Data Center Optimization: We help our customers evaluate their data centers for convergence and optimization opportunities. Our data center optimization solutions consist of server virtualization, physical server consolidation, data storage management and energy-efficient power and cooling systems. • Cloud Computing: Cloud computing is a combination of software and computing delivered on demand as a service. We provide SaaS and IaaS solutions that reside in the public cloud, meaning any person or organization interested in porting applications and resources to an external “public” cloud system can do so. Likewise, we provide similar private cloud-based solutions to our customers that prefer to avoid running their infrastructure on a shared public platform but want to obtain the flexibility, scalability and access offered by cloud computing and collaboration. • Virtualization: We design and implement server, storage and desktop virtualization solutions. Virtualization enables our customers to efficiently utilize hardware resources by running multiple, independent, virtual operating Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* systems on a single computer and multiple virtual servers simultaneously on a single server. Virtualization also can separate a desktop environment and associated application software from the hardware device that is used to access it, and provides employees with remote desktop access. Our specialists assist customers with the steps of implementing virtualization solutions, including evaluating network environments, deploying shared storage options and licensing platform software. • Collaboration: We provide our customers with communication tools that allow employees to share knowledge, ideas and information among each other and with clients and partners effectively and quickly. Our collaboration solutions unite communications and applications via the integration of products that facilitate the use of 6 Qbdlfu!Qh/!334 Table of Contents 5/H/b multiple enterprise communication methods including email, instant messaging, presence, social media, voice, video, hardware, software and services. We also host cloud-based collaboration solutions. While we believe customers increasingly view technology purchases as solutions rather than discrete product and service categories, the following table shows our net sales by major category, based upon our internal category classifications. (1)(1) Year Ended December 31, 2013Year Ended December 31, 2012Year Ended December 31, 2011 PercentagePercentagePercentage Dollars inDollars inDollars in of Total of Total of Total MillionsMillionsMillions Net SalesNet SalesNet Sales Notebooks/Mobile Devices$1,706.015.8%$1,470.114.5%$1,336.913.9% NetComm Products1,489.113.81,351.113.31,237.712.9 Enterprise and Data Storage (Including Drives) 998.19.3979.49.7929.99.7 Other Hardware4,173.338.84,068.840.23,988.341.5 Software1,994.718.51,849.418.31,767.218.4 Services327.13.0284.62.8254.32.6 (2) Other 80.30.8124.81.288.11.0 Total net sales$10,768.6100.0%$10,128.2100.0%$9,602.4100.0% (1) Amounts have been reclassified for changes in individual product classifications to conform to the presentation for the year ended December 31, 2013. (2) Includes items such as delivery charges to customers and certain commission revenue. Our Customers We provide integrated IT solutions to approximately 250,000 small, medium and large business, government, education and healthcare customers throughout the U.S. and Canada. Sales to the U.S. federal government, which are diversified across multiple agencies and departments, collectively accounted for approximately 7%, 10% and 10% of total net sales in 2013, 2012 and 2011, respectively. However, there are several independent purchasing decision-makers across these agencies and departments. Excluding these sales to the federal government, we are not reliant on any one customer, as our next five largest customers cumulatively comprised approximately 3% of our net sales in 2013. Inventory Management We utilize our IT systems to manage our inventory in a cost-efficient manner, resulting in a rapid-turn inventory model. We generally only stock items that have attained a minimum sales volume. Our distribution process is highly automated. Once a customer order is received and credit approved, orders are automatically routed to one of our distribution centers for picking and shipping as well as configuration and imaging services. We operate two distribution centers: an approximately 450,000 square foot facility in Vernon Hills, Illinois, and an approximately 513,000 square foot facility in North Las Vegas, Nevada. We ship almost 35 million units annually on an aggregate basis from our two distribution centers. We believe that the location of our distribution centers allows us to efficiently ship products throughout the U.S. and provide timely access to our principal distributors. In addition, in the event of weather-related or other disruptions at one of our distribution centers, we are able to shift order processing and fulfillment from one center to the other quickly and efficiently, enabling us to continue to ship products in a timely manner. We believe that competitive sources of supply are available in substantially all of the product categories we offer. We continue to improve the productivity of our distribution centers as measured by key performance indicators such as units shipped per hour worked and bin accuracy. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* We also have drop-shipment arrangements with many of our OEMs and wholesale distributors, which permit us to offer products to our customers without having to take physical delivery at either of our distribution centers. These arrangements generally represent approximately 40% to 50% of total net sales, including approximately 10% to 15% related to electronic delivery for software licenses. Information Technology Systems We maintain customized IT and unified communication systems that enhance our ability to provide prompt, efficient and expert service to our customers. In addition, these systems enable centralized management of key functions, including 7 Qbdlfu!Qh/!335 Table of Contents 5/H/b purchasing, inventory management, billing and collection of accounts receivable, sales and distribution. Our systems provide us with thorough, detailed and real-time information regarding key aspects of our business. This capability helps us to continuously enhance productivity, ship customer orders quickly and efficiently, respond appropriately to industry changes and provide high levels of customer service. We believe that our websites, which provide electronic order processing and advanced tools, such as order tracking, reporting and asset management, make it easy for customers to transact business with us and ultimately strengthen our customer relationships. Product Procurement We may purchase all or only some of the products that our vendor partners offer for resale to our customers or for inclusion in the solutions we offer. Each vendor partner agreement provides for specific terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also purchase software from major software publishers for resale to our customers or for inclusion in the solutions we offer. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In addition to purchasing products directly from our vendor partners, we purchase products from wholesale distributors for resale to our customers or for inclusion in the solutions we offer. These wholesale distributors provide logistics management and supply-chain services for us, as well as for our vendor partners. For the year ended December 31, 2013, we purchased 54% of the products we sold as discrete products or as components of a solution directly from our vendor partners and the remaining 46% from wholesale distributors. Purchases from wholesale distributors Tech Data, SYNNEX and Ingram Micro represented 11%, 9% and 9%, respectively, of our total purchases. Sales of products manufactured by Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft, whether purchased directly from these vendor partners or from a wholesale distributor, represented in the aggregate 56% of our net sales in 2013. Sales of products manufactured by Hewlett-Packard and Cisco represented 20% and 14%, respectively, of our 2013 net sales. Competition The market for technology products and services is highly competitive. Competition is based on the ability to tailor specific solutions to customer needs, quality and breadth of product and service offerings, knowledge and expertise of sales force, customer service, price, product availability, speed of delivery and credit availability. Our competition includes: • resellers such as Dimension Data, ePlus, Insight Enterprises, PC Connection, PCM, Presidio, Softchoice, World Wide Technology and many smaller resellers; • manufacturers who sell directly to customers, such as Dell, Hewlett-Packard and Apple; • large service providers and system integrators, such as IBM, Accenture, Hewlett-Packard and Dell; • e-tailers such as Amazon, Newegg, and TigerDirect.com; • cloud providers such as AT&T, Amazon Web Services and Box; and • retailers (including their e-commerce activities) such as Staples and Office Depot. We expect the competitive landscape in which we compete to continue to change as new technologies are developed. While innovation can help our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors. For a discussion of the risks associated with competition, see “Risk Factors” included elsewhere in this report. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 8 Qbdlfu!Qh/!336 Table of Contents 5/H/b Marketing We market the CDW brand to both national and local audiences using a variety of channels that include online, broadcast, print, social and other media. This promotion is supported by integrated communication efforts that target decision- makers, influencers and the general public using a combination of news releases, case studies, media interviews and speaking opportunities. We also market to current and prospective customers through integrated marketing programs that include behaviorally targeted email, print, online media, events and sponsorships, as well as broadcast media. As a result of our relationships with our vendor partners, a significant portion of our advertising and marketing expenses are reimbursed through cooperative advertising reimbursement programs. These programs are at the discretion of our vendor partners and are typically tied to sales or purchasing volumes or other commitments to be met by us within a specified period of time. We believe that our national scale and analytical techniques that measure the efficacy of our marketing programs differentiate us from our competitors. Coworkers As of December 31, 2013, we employed nearly 7,000 coworkers, none of whom is covered by collective bargaining agreements. We consider our coworker relations to be good. Intellectual Property The CDW trademark and certain variations thereon are registered or subject to pending trademark applications in the U.S., Canada and certain other jurisdictions. We believe our trademarks have significant value and are important factors in our marketing programs. In addition, we own registrations for domain names, including cdw.com and cdwg.com, for certain of our primary trademarks. We also have unregistered copyrights in our website content. Sponsors Madison Dearborn Partners, LLC is a leading private equity investment firm based in Chicago, Illinois that has raised over $18 billion of equity capital. Since its formation in 1992, it has invested in approximately 125 companies across a broad spectrum of industries, including basic industries, business and government services, consumer, financial and transaction services, healthcare and telecom, media and technology services. Madison Dearborn's objective is to invest in companies in partnership with outstanding management teams to achieve significant long-term appreciation in equity value. Providence Equity Partners L.L.C. ("Providence") is a leading global private equity firm focused on media, communications, education and information investments. Providence manages funds with $39 billion of commitments and has invested in more than 130 companies over its 25-year history. Providence is headquartered in Providence, Rhode Island and has offices in New York, London, Hong Kong, Beijing and New Delhi. Providence's objective is to build extraordinary companies that will shape the future of the media, communications, education and information industries. Item 1A. Risk Factors There are many factors that affect our business and the results of operations, some of which are beyond our control. The following is a description of some important factors that may cause the actual results of operations in future periods to differ materially from those currently expected or desired. Risks Related to Our Business General economic conditions could negatively affect technology spending by our customers and put downward pressure on prices, which may have an adverse impact on our business, results of operations or cash flows. Weak economic conditions generally, sustained uncertainty about global economic conditions, U.S. federal government spending cuts and the impact of new government programs, or a tightening of credit markets could cause our Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows. 9 Qbdlfu!Qh/!337 Table of Contents 5/H/b Our financial performance could be adversely affected by decreases in spending on technology products and services by our Public segment customers. Our sales to our Public segment customers are impacted by government spending policies, budget priorities and revenue levels. Although our sales to the federal government are diversified across multiple agencies and departments, they collectively accounted for approximately 7% of 2013 net sales. An adverse change in government spending policies (including ongoing budget cuts at the federal level), budget priorities or revenue levels could cause our Public segment customers to reduce their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operations or cash flows. For example, in 2013, as a result of sequestration and related budget uncertainty and the partial shutdown of the federal government for 16 days, we experienced significantly reduced Federal sales in our Public segment. Our business depends on our vendor partner relationships and the availability of their products. We purchase products for resale from vendor partners, which include OEMs and software publishers, and wholesale distributors. For the year ended December 31, 2013, we purchased approximately 54% of the products we sold directly from vendor partners and the remaining amount from wholesale distributors. We are authorized by vendor partners to sell all or some of their products via direct marketing activities. Our authorization with each vendor partner is subject to specific terms and conditions regarding such things as sales channel restrictions, product return privileges, price protection policies, purchase discounts and vendor partner programs and funding, including purchase rebates, sales volume rebates, purchasing incentives and cooperative advertising reimbursements. However, we do not have any long-term contracts with our vendor partners and many of these arrangements are terminable upon notice by either party. A reduction in vendor partner programs or funding or our failure to timely react to changes in vendor partner programs or funding could have an adverse effect on our business, results of operations or cash flows. In addition, a reduction in the amount of credit granted to us by our vendor partners could increase our need for, and the cost of, working capital and could have an adverse effect on our business, results of operations or cash flows, particularly given our substantial indebtedness. From time to time, vendor partners may terminate or limit our right to sell some or all of their products or change the terms and conditions or reduce or discontinue the incentives that they offer us. For example, there is no assurance that, as our vendor partners continue to sell directly to end users and through resellers, they will not limit or curtail the availability of their products to solutions providers like us. Any such termination or limitation or the implementation of such changes could have a negative impact on our business, results of operations or cash flows. Although we purchase from a diverse vendor base, in 2013, products we purchased from distributors Tech Data, SYNNEX and Ingram Micro represented 11%, 9% and 9%, respectively, of our total purchases. In addition, sales of Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft products comprise a substantial portion of our sales, representing approximately 56% of net sales in 2013. Sales of products manufactured by Hewlett-Packard and Cisco represented approximately 20% and 14%, respectively, of our 2013 net sales. The loss of, or change in business relationship with, any of these or any other key vendor partners, the diminished availability of their products, or backlogs for their products leading to manufacturer allocation, could reduce the supply and increase the cost of products we sell and negatively impact our competitive position. Additionally, the relocation of key distributors utilized in our purchasing model could increase our need for, and the cost of, working capital and have an adverse effect on our business, results of operations or cash flows. Further, the sale, spin- off or combination of any of our vendor partners and/or certain of their business units, including any such sale to or combination with a vendor with whom we do not currently have a commercial relationship or whose products we do not sell, could have an adverse impact on our business, results of operations or cash flows. Our sales are dependent on continued innovations in hardware, software and services offerings by our vendor partners and the competitiveness of their offerings, and our ability to partner with new and emerging technology providers. The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* hardware, software and services offerings, such as cloud-based solutions, including SaaS, IaaS and Platform as a Service ("PaaS"). We have been and will continue to be dependent on innovations in hardware, software and services offerings, as well as the acceptance of those innovations by customers. A decrease in the rate of innovation, or the lack of acceptance of innovations by customers, could have an adverse effect on our business, results of operations or cash flows. In addition, if we are unable to keep up with changes in technology and new hardware, software and services offerings, for example by providing the appropriate training to our account managers, sales technology specialists and engineers to enable them to effectively sell and deliver such new offerings to customers, our business, results of operations or cash flows could be adversely affected. 10 Qbdlfu!Qh/!338 Table of Contents 5/H/b We also are dependent upon our vendor partners for the development and marketing of hardware, software and services to compete effectively with hardware, software and services of vendors whose products and services we do not currently offer or that we are not authorized to offer in one or more customer channels. In addition, our success is dependent on our ability to develop relationships with and sell hardware, software and services from new emerging vendors and vendors that we have not historically represented in the marketplace. To the extent that a vendor's offering that is highly in demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another vendor that we are authorized to sell in such customer channels, or we are unable to develop relationships with new technology providers or companies that we have not historically represented, our business, results of operations or cash flows could be adversely impacted. Substantial competition could reduce our market share and significantly harm our financial performance. Our current competition includes: • resellers, such as Dimension Data, ePlus, Insight Enterprises, PC Connection, PCM, Presidio, Softchoice, World Wide Technology and many smaller resellers; • manufacturers who sell directly to customers, such as Dell, Hewlett-Packard and Apple; • large service providers and system integrators, such as IBM, Accenture, Hewlett-Packard and Dell; • e-tailers, such as Amazon, Newegg and TigerDirect.com; • cloud providers, such as AT&T, Amazon Web Services and Box; and • retailers (including their e-commerce activities), such as Staples and Office Depot. We expect the competitive landscape in which we compete to continue to change as new technologies are developed. While innovation can help our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors. For instance, technologies that deliver technology solutions as a service, such as cloud- based solutions, could increase the amount of sales directly to customers rather than through solutions providers like us, or could lead to a reduction in our profitability. In addition, some of our hardware and software vendor partners sell, and could intensify their efforts to sell, their products directly to our customers. Moreover, traditional OEMs have increased their services capabilities through mergers and acquisitions with service providers, which could potentially increase competition in the market to provide comprehensive technology solutions to customers. If any of these trends becomes more prevalent, it could adversely affect our business, results of operations or cash flows. We focus on offering a high level of service to gain new customers and retain existing customers. To the extent we face increased competition to gain and retain customers, we may be required to reduce prices, increase advertising expenditures or take other actions which could adversely affect our business, results of operations or cash flows. Additionally, some of our competitors may reduce their prices in an attempt to stimulate sales, which may require us to reduce prices. This would require us to sell a greater number of products to achieve the same level of net sales and gross profit. If such a reduction in prices occurs and we are unable to attract new customers and sell increased quantities of products, our sales growth and profitability could be adversely affected. The success of our business depends on the continuing development, maintenance and operation of our information technology systems. Our success is dependent on the accuracy, proper utilization and continuing development of our information technology systems, including our business systems, such as our sales, customer management, financial and accounting, marketing, purchasing, warehouse management, e-commerce and mobile systems, as well as our operational platforms, including voice and data networks and power systems. The quality and our utilization of the information generated by our Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* information technology systems, and our success in implementing new systems and upgrades, affects, among other things, our ability to: • conduct business with our customers, including delivering services and solutions to them; • manage our inventory and accounts receivable; • purchase, sell, ship and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis; and 11 Qbdlfu!Qh/!339 Table of Contents 5/H/b • maintain our cost-efficient operating model while scaling our business. The integrity of our information technology systems is vulnerable to disruption due to forces beyond our control. While we have taken steps to protect our information technology systems from a variety of threats, including computer viruses, malware, phishing, social engineering, unauthorized access and other malicious attacks, both internal and external, and human error, there can be no guarantee that those steps will be effective. Furthermore, although we have redundant systems at a separate location to back up our primary systems, there can be no assurance that these redundant systems will operate properly if and when required. Any disruption to or infiltration of our information technology systems could significantly harm our business and results of operations. Breaches of data security could adversely impact our business. Our business involves the storage and transmission of proprietary information and sensitive or confidential data, including personal information of coworkers, customers and others. In addition, we operate data centers for our customers which host their technology infrastructure and may store and transmit both business-critical data and confidential information. In connection with our services business, our coworkers also have access to our customers' confidential data and other information. We have privacy and data security policies in place that are designed to prevent security breaches; however, as newer technologies evolve, we could be exposed to increased risk of breaches in security. Breaches in security could expose us, our customers or other individuals to a risk of public disclosure, loss or misuse of this information, resulting in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, as well as the loss of existing or potential customers and damage to our brand and reputation. In addition, the cost and operational consequences of implementing further data protection measures could be significant. Such breaches, costs and consequences could adversely affect our business, results of operations or cash flows. The failure to comply with our Public segment contracts or applicable laws and regulations could result in, among other things, termination, fines or other liabilities, and changes in procurement regulations could adversely impact our business, results of operations or cash flows. Revenues from our Public segment customers are derived from sales to governmental departments and agencies, educational institutions and healthcare customers, through various contracts and open market sales of products and services. Sales to Public segment customers are highly regulated. Noncompliance with contract provisions, government procurement regulations or other applicable laws or regulations (including but not limited to the False Claims Act and the Medicare and Medicaid Anti-Kickback Statute) could result in civil, criminal and administrative liability, including substantial monetary fines or damages, termination of government contracts or other Public segment customer contracts, and suspension, debarment or ineligibility from doing business with the government and other customers in the Public segment. In addition, generally contracts in the Public segment are terminable at any time for convenience of the contracting agency or group purchasing organization (“GPO”) or upon default. Furthermore, our inability to enter into or retain contracts with GPOs may threaten our ability to sell to customers in those GPOs and compete. The effect of any of these possible actions could adversely affect our business, results of operations or cash flows. In addition, the adoption of new or modified procurement regulations and other requirements may increase our compliance costs and reduce our gross margins, which could have a negative effect on our business, results of operations or cash flows. If we fail to provide high-quality services to our customers, or if our third-party service providers fail to provide high-quality services to our customers, our reputation, business, results of operations or cash flows could be adversely affected. Our service offerings include field services, managed services, warranties, configuration services, partner services and telecom services. Additionally, we deliver and manage mission critical software, systems and network solutions for our customers. We also offer certain services, such as implementation and installation services and repair services, to our customers through various third-party service providers engaged to perform these services on our behalf. If we or our third-party service providers fail to provide high quality services to our customers or such services result in a disruption of our customers' businesses, this could, among other things, result in legal claims and proceedings and liability. Moreover, as we expand our Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* services and solutions business, we may be exposed to additional operational, regulatory and other risks. We also could incur liability for failure to comply with the rules and regulations applicable to the new services and solutions we provide to our customers. If any of the foregoing were to occur, our reputation with our customers, our brand and our business, results of operations or cash flows could be adversely affected. If we lose any of our key personnel, or are unable to attract and retain the talent required for our business, our business could be disrupted and our financial performance could suffer. Our success is heavily dependent upon our ability to attract, develop, engage and retain key personnel to manage and grow our business, including our key executive, management, sales, services and technical coworkers. 12 Qbdlfu!Qh/!33: Table of Contents 5/H/b Our future success will depend to a significant extent on the efforts of Thomas E. Richards, our Chairman and Chief Executive Officer, as well as the continued service and support of our other executive officers. Our future success also will depend on our ability to retain our customer-facing coworkers, who have been given critical CDW knowledge regarding, and the opportunity to develop strong relationships with, many of our customers. In addition, as we seek to expand our offerings of value-added services and solutions, our success will even more heavily depend on attracting and retaining highly skilled technology specialists and engineers, for whom the market is extremely competitive. Our inability to attract, develop and retain key personnel could have an adverse effect on our relationships with our vendor partners and customers and adversely affect our ability to expand our offerings of value-added services and solutions. Moreover, our inability to train our sales, services and technical personnel effectively to meet the rapidly changing technology needs of our customers could cause a decrease in the overall quality and efficiency of such personnel. Such consequences could adversely affect our business, results of operations or cash flows. The interruption of the flow of products from suppliers could disrupt our supply chain. A significant portion of the products we sell are manufactured or purchased by our vendor partners outside of the U.S., primarily in Asia. Political, social or economic instability in Asia, or in other regions in which our vendor partners purchase or manufacture the products we sell, could cause disruptions in trade, including exports to the U.S. Other events that could also cause disruptions to our supply chain include: • the imposition of additional trade law provisions or regulations; • the imposition of additional duties, tariffs and other charges on imports and exports; • foreign currency fluctuations; • natural disasters or other adverse occurrences at, or affecting, any of our suppliers' facilities; • restrictions on the transfer of funds; • the financial instability or bankruptcy of manufacturers; and • significant labor disputes, such as strikes. We cannot predict whether the countries in which the products we sell are purchased or manufactured, or may be purchased or manufactured in the future, will be subject to new or additional trade restrictions or sanctions imposed by the U.S. or foreign governments, including the likelihood, type or effect of any such restrictions. Trade restrictions, including new or increased tariffs or quotas, embargoes, sanctions, safeguards and customs restrictions against the products we sell, as well as foreign labor strikes and work stoppages or boycotts, could increase the cost or reduce the supply of product available to us and adversely affect our business, results of operations or cash flows. A natural disaster or other adverse occurrence at one of our primary facilities or customer data centers could damage our business. Substantially all of our corporate, warehouse and distribution functions are located at our Vernon Hills, Illinois facilities and our second distribution center in North Las Vegas, Nevada. If the warehouse and distribution equipment at one of our distribution centers were to be seriously damaged by a natural disaster or other adverse occurrence, we could utilize the other distribution center or third-party distributors to ship products to our customers. However, this may not be sufficient to avoid interruptions in our service and may not enable us to meet all of the needs of our customers and would cause us to incur incremental operating costs. In addition, we operate three customer data centers and numerous sales offices which may contain both business-critical data and confidential information of our customers. A natural disaster or other adverse occurrence at any of the customer data centers or at any of our major sales offices could negatively impact our business, results of operations or Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* cash flows. We are heavily dependent on commercial delivery services. We generally ship hardware products to our customers by FedEx, United Parcel Service and other commercial delivery services and invoice customers for delivery charges. If we are unable to pass on to our customers future increases in the cost of commercial delivery services, our profitability could be adversely affected. Additionally, strikes, inclement weather, natural disasters or other service interruptions by such shippers could adversely affect our ability to deliver products on a timely basis. 13 Qbdlfu!Qh/!341 Table of Contents 5/H/b We are exposed to accounts receivable and inventory risks. We extend credit to our customers for a significant portion of our net sales, typically on 30-day payment terms. We are subject to the risk that our customers may not pay for the products they have purchased, or may pay at a slower rate than we have historically experienced, the risk of which is heightened during periods of economic downturn or uncertainty or, in the case of Public segment customers, during periods of budget constraints. We are also exposed to inventory risks as a result of the rapid technological changes that affect the market and pricing for the products we sell. We seek to minimize our inventory exposure through a variety of inventory management procedures and policies, including our rapid-turn inventory model, as well as vendor price protection and product return programs. However, if we were unable to maintain our rapid-turn inventory model, if there were unforeseen product developments that created more rapid obsolescence or if our vendor partners were to change their terms and conditions, our inventory risks could increase. We also from time to time take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by our vendor partners or we may decide to carry high inventory levels of certain products that have limited or no return privileges due to customer demand or request. These bulk purchases could increase our exposure to inventory obsolescence. We could be exposed to additional risks if we make acquisitions or enter into alliances. We may pursue transactions, including acquisitions or alliances, in an effort to extend or complement our existing business. These types of transactions involve numerous business risks, including finding suitable transaction partners and negotiating terms that are acceptable to us, the diversion of management's attention from other business concerns, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, the potential loss of key coworkers or business relationships and successfully integrating acquired businesses, any of which could adversely affect our operations. In addition, our financial results could be adversely affected by financial adjustments required by accounting principles generally accepted in the United States of America (“GAAP”) in connection with these types of transactions where significant goodwill or intangible assets are recorded. To the extent the value of goodwill or identifiable intangible assets with indefinite lives becomes impaired, we may be required to incur material charges relating to the impairment of those assets. Our future operating results may fluctuate significantly. We may experience significant variations in our future quarterly results of operations. These fluctuations may cause the market price of our common stock to be volatile and may result from many factors, including the condition of the technology industry in general, shifts in demand and pricing for hardware, software and services and the introduction of new products or upgrades. Our operating results are also highly dependent on our level of gross profit as a percentage of net sales. Our gross profit percentage fluctuates due to numerous factors, some of which may be outside of our control, including general macroeconomic conditions; pricing pressures; changes in product costs from our vendor partners; the availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product, order size and customer mix; the risk of some items in our inventory becoming obsolete; increases in delivery costs that we cannot pass on to customers; and general market and competitive conditions. In addition, our cost structure is based, in part, on anticipated sales and gross margins. Therefore, we may not be able to adjust our cost structure quickly enough to compensate for any unexpected sales or gross margin shortfall, and any such inability could have an adverse effect on our business, results of operations or cash flows. We are exposed to risks from legal proceedings and audits. We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* employment, tort and other litigation. We are subject to intellectual property infringement claims against us in the ordinary course of our business, either because of the products and services we sell or the business systems and processes we use to sell such products and services, in the form of cease-and-desist letters, licensing inquiries, lawsuits and other communications and demands. In our industry, such intellectual property claims have become more frequent as the complexity of technological products and the intensity of competition in our industry have increased. Increasingly, many of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing revenue, but we may also be subject to suits from inventors, competitors or other patent holders who may seek licensing revenue, lost profits and/or an injunction preventing us from engaging in certain activities, including selling certain products and services. 14 Qbdlfu!Qh/!342 Table of Contents 5/H/b Because of our significant sales to governmental entities, we also are subject to audits by federal, state and local authorities. We also are subject to audits by various vendor partners and large customers, including government agencies, relating to purchases and sales under various contracts. In addition, we are subject to indemnification claims under various contracts. Current and future litigation, infringement claims, governmental proceedings, audits or indemnification claims that we face may result in substantial costs and expenses and significantly divert the attention of our management regardless of the outcome. In addition, current and future litigation, infringement claims, governmental proceedings, audits or indemnification claims could lead to increased costs or interruptions of our normal business operations. Litigation, infringement claims, governmental proceedings, audits or indemnification claims involve uncertainties and the eventual outcome of any litigation, infringement claim, governmental proceeding, audit or indemnification claim could adversely affect our business, results of operations or cash flows. We have significant deferred cancellation of debt income. As a result of a 2009 debt modification, we realized $395.5 million of cancellation of debt income (“CODI”). We made an election under Code Section 108(i) to defer this CODI from taxable income, pursuant to which we are also required to defer certain original issue discount (“OID”) deductions as they accrue. As of December 31, 2013, we had already deferred approximately $114.5 million of OID deductions. Starting in 2014, we will be required to include the deferred CODI into taxable income ratably over a five-year period ending in 2018. During this same period, we will also be permitted to benefit from our deferred OID deductions. Because we have more CODI than the aggregate of our deferred and unaccrued OID on the relevant remaining debt instruments, we will have a future cash tax liability associated with our significant deferred CODI. We have reflected the associated cash tax liability in our deferred taxes for financial accounting purposes. All of our deferred CODI will be accelerated into current taxable income if, prior to 2018, we engage in a so-called “impairment transaction” and the gross value of our assets immediately afterward is less than 110% of the sum of our total liabilities and the tax on the net amount of our deferred CODI and OID (the “110% test”) as determined under the applicable Treasury Regulations. An “impairment transaction” is any transaction that impairs our ability to pay the tax on our deferred CODI, and includes dividends or distributions with respect to our equity and charitable contributions, in each case in a manner that is not consistent with our historical practice within the meaning of the applicable Treasury Regulations. Prior to 2018, our willingness to pay dividends or make distributions with respect to our equity could be adversely affected if, at the time, we do not meet the 110% test and, as a result, the payment of a dividend or the making of a distribution would accelerate the tax payable with respect to our deferred CODI. We believe that, based on our interpretation of applicable Treasury Regulations, the gross value of our assets exceeds 110% of the sum of our total liabilities and the tax on the net amount of our deferred CODI and OID as of the filing date of this Annual Report on Form 10-K. However, we cannot assure you that this will continue to be true in the future. Risks Related to Our Indebtedness We have a substantial amount of indebtedness, which could have important consequences to our business. We have a substantial amount of indebtedness. As of December 31, 2013, we had $3.3 billion of total long-term debt outstanding, as defined by GAAP, and $256.6 million of obligations outstanding under our inventory financing agreements, and the ability to borrow an additional $641.1 million under our senior secured asset-based revolving credit facility (the “Revolving Loan”). Our substantial indebtedness could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our indebtedness; • requiring us to dedicate a substantial portion of our cash flow from operations to debt service payments on our and our subsidiaries' debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes; Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* • requiring us to comply with restrictive covenants in our senior credit facilities and indentures, which limit the manner in which we conduct our business; • making it more difficult for us to obtain vendor financing from our vendor partners; • limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate; • placing us at a competitive disadvantage compared to any of our less-leveraged competitors; 15 Qbdlfu!Qh/!343 Table of Contents 5/H/b • increasing our vulnerability to both general and industry-specific adverse economic conditions; and • limiting our ability to obtain additional debt or equity financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing. Restrictive covenants under our senior credit facilities and indentures may adversely affect our operations and liquidity. Our senior credit facilities and our indentures contain, and any future indebtedness of ours may contain, various covenants that limit our ability to, among other things: • incur or guarantee additional debt; • pay dividends or make distributions to holders of our capital stock or to make certain other restricted payments or investments; • repurchase or redeem capital stock; • make loans, capital expenditures or investments or acquisitions; • receive dividends or other payments from our subsidiaries; • enter into transactions with affiliates; • create liens; • merge or consolidate with other companies or transfer all or substantially all of our assets; • transfer or sell assets, including capital stock of subsidiaries; and • prepay, repurchase or redeem debt. As a result of these covenants, we are limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or finance future operations or capital needs. A breach of any of these covenants or any of the other restrictive covenants would result in a default under our senior credit facilities. Upon the occurrence of an event of default under our senior credit facilities, the lenders: • will not be required to lend any additional amounts to us; • could elect to declare all borrowings outstanding thereunder, together with accrued and unpaid interest and fees, to be due and payable; • could require us to apply all of our available cash to repay these borrowings; or • could prevent us from making payments on our senior subordinated notes due 2017; • any of which could result in an event of default under the indentures. If we were unable to repay those amounts, the lenders under our senior credit facilities could proceed against the collateral granted to them to secure our borrowings thereunder. We have pledged a significant portion of our assets as collateral under our senior credit facilities and our senior secured notes due 2018. If the lenders under our senior credit facilities or the holders of our senior secured notes due 2018 accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our senior credit facilities and our other indebtedness or the ability to borrow sufficient funds to refinance such indebtedness. Even if we were able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* In addition, under our Revolving Loan, we are permitted to borrow an aggregate amount of up to $900 million; however, our ability to borrow under our Revolving Loan is limited by a borrowing base and a liquidity condition. The borrowing base at any time equals the sum of up to 85% of CDW LLC and its subsidiary guarantors’ eligible accounts receivable (net of accounts reserves) (up to 30% of such eligible accounts receivable which can consist of federal government accounts receivable) plus the lesser of (i) 70% of CDW LLC and its subsidiary guarantors’ eligible inventory (valued at cost and net of inventory reserves) and (ii) the product of 85% multiplied by the net orderly liquidation value percentage multiplied by eligible inventory (valued at cost and net of inventory reserves), less reserves (other than accounts reserves and inventory reserves). The borrowing base in effect as of December 31, 2013 was $1,065.5 million. 16 Qbdlfu!Qh/!344 Table of Contents 5/H/b Our ability to borrow under our Revolving Loan is also limited by a minimum liquidity condition, which provides that, if excess cash availability is less than the lesser of (i) $90 million or (ii) the greater of (A) 10% of the borrowing base or (B) $60 million, the lenders are not required to lend any additional amounts under our Revolving Loan unless the consolidated fixed charge coverage ratio (as defined in the credit agreement for our Revolving Loan) is at least 1.0 to 1.0. Moreover, our Revolving Loan provides discretion to the agent bank acting on behalf of the lenders to impose additional availability reserves, which could materially impair the amount of borrowings that would otherwise be available to us. We cannot assure you that the agent bank will not impose such reserves or, were it to do so, that the resulting impact of this action would not materially and adversely impair our liquidity. We will be required to generate sufficient cash to service our indebtedness and, if not successful, we may be forced to take other actions to satisfy our obligations under our indebtedness. Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. Our outstanding long-term debt will impose significant cash interest payment obligations on us in 2014 and subsequent years and, accordingly, we will have to generate significant cash flow from operating activities to fund our debt service obligations. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” included elsewhere in this report. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional debt or equity capital, restructure or refinance our indebtedness, or revise or delay our strategic plan. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or satisfy our capital requirements, or that these actions would be permitted under the terms of our existing or future debt agreements, including our senior credit facilities and indentures. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our senior credit facilities and indentures restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. Furthermore, the Sponsors have no obligation to provide us with debt or equity financing. If we cannot make scheduled payments on our debt, we will be in default and, as a result: • our debt holders could declare all outstanding principal and interest to be due and payable; • the lenders under our senior credit facilities could foreclose against the assets securing the borrowings from them and the lenders under our term loan facility could terminate their commitments to lend us money; and • we could be forced into bankruptcy or liquidation. Despite our indebtedness levels, we and our subsidiaries may be able to incur substantially more debt, including secured debt. This could further increase the risks associated with our leverage. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of our senior credit facilities and indentures do not fully prohibit us or our subsidiaries from doing so. To the extent that we incur additional indebtedness or such other obligations, the risks associated with our substantial indebtedness described above, including our possible inability to service our debt, will increase. As of December 31, 2013, we had approximately $641.1 million available for additional borrowing under our Revolving Loan after taking into account borrowing base limitations (net of $2.2 million of issued and undrawn letters of credit and $256.7 million of reserves related to our floorplan sub-facility). Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Certain of our borrowings, primarily borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. As of December 31, 2013, we had $1,528.9 million of variable rate debt outstanding. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. Although we have entered into interest rate cap agreements on our term loan facility to reduce interest rate volatility, we cannot assure you we will be able to do so in the future on acceptable terms or that such caps or the caps we have in place now will be effective. 17 Qbdlfu!Qh/!345 Table of Contents 5/H/b Risks Related to Ownership of Our Common Stock Our common stock price may be volatile and may decline regardless of our operating performance, and holders of our common stock could lose a significant portion of their investment. The market price for our common stock may be volatile. Our stockholders may not be able to resell their shares of common stock at or above the price at which they purchased such shares, due to fluctuations in the market price of our common stock, which may be caused by a number of factors, many of which we cannot control, including the risk factors described in this Annual Report on Form 10-K and the following: • changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of securities analysts to initiate or maintain coverage of our common stock; • downgrades by any securities analysts who follow our common stock; • future sales of our common stock by our officers, directors and significant stockholders, including the Sponsors; • market conditions or trends in our industry or the economy as a whole; • investors’ perceptions of our prospects; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments; • changes in key personnel; and • our limited public float in light of the Sponsors’ beneficial ownership of a majority of our common stock, which may result in the trading of relatively small quantities of shares by our stockholders having a disproportionate positive or negative influence on the market price of our common stock. In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including companies in our industry. In the past, securities class action litigation has followed periods of market volatility. If we were involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business. The Sponsors have the ability to control significant corporate activities and their interests may not align with yours. The Sponsors beneficially own approximately 63.7% of our common stock as of February 28, 2014. As a result of their ownership, the Sponsors, so long as they hold a majority of our outstanding common stock, will have the ability to control the outcome of matters submitted to a vote of stockholders and, through our board of directors, the ability to control decision- making with respect to our business direction and policies. Matters over which the Sponsors will, directly or indirectly, exercise control include: • the election of our board of directors and the appointment and removal of our officers; • mergers and other business combination transactions, including proposed transactions that would result in our stockholders receiving a premium price for their shares; • other acquisitions or dispositions of businesses or assets; • incurrence of indebtedness and the issuance of equity securities; • repurchase of stock and payment of dividends; and Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* • the issuance of shares to management under our equity incentive plans. Even if the Sponsors’ ownership of our shares falls below a majority, they may continue to be able to strongly influence or effectively control our decisions. Under our amended and restated certificate of incorporation, the Sponsors and their affiliates do not have any obligation to present to us, and the Sponsors may separately pursue, corporate opportunities of which they become aware, even if those opportunities are ones that we would have pursued if granted the opportunity. 18 Qbdlfu!Qh/!346 Table of Contents 5/H/b Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. As of February 28, 2014, there were 171,954,277 shares of our common stock outstanding. The shares of our common stock sold in our initial public offering and secondary offering in 2013 are freely tradable without restriction under the Securities Act of 1933, as amended (the “Securities Act”), except that any shares of our common stock that may be acquired by our directors, executive officers and other affiliates may be sold only in compliance with certain volume limitations and other restrictions of Rule 144 of the Securities Act. The remaining shares of our common stock, to the extent not previously sold pursuant to an exemption from registration, will continue to be “restricted shares” within the meaning of Rule 144 of the Securities Act and subject to certain restrictions on resale. Restricted shares may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144 or Rule 701 under the Securities Act. As of February 28, 2014, approximately 119,000,000 shares of our common stock will continue to have the right to require us to register the sales of their shares under the Securities Act, under the terms of an agreement between us and the holders of these securities. In the future, we may also issue our securities in connection with investments or acquisitions. The number of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then- outstanding shares of our common stock. Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable. Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of the Company more difficult without the approval of our board of directors. These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • establish a classified board of directors so that not all members of our board of directors are elected at one time; • generally prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders, except that any action required or permitted to be taken by our stockholders may be effected by written consent until such time as the Sponsors cease to beneficially own 50% or more of our common stock; • provide that special meetings of the stockholders can only be called by or at the direction of (i) our board of directors pursuant to a written resolution adopted by the affirmative vote of the majority of the total number of directors that the Company would have if there were no vacancies or (ii) until such time as the Sponsors cease to beneficially own 50% or more of our common stock (a) the chairman or vice chairman of our board of directors, (b) our chief executive officer, (c) a majority of our board of directors through a special resolution or (d) the holders of at least 10% of our common stock; • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • provide that our board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws. Our amended and restated certificate of incorporation also contains a provision that provides us with protections Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* similar to Section 203 of the Delaware General Corporation Law, and will prevent us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions our stockholders desire. 19 Qbdlfu!Qh/!347 Table of Contents 5/H/b Conflicts of interest may arise because some of our directors are principals of our largest stockholders. Paul Finnegan and Robin Selati, who are principals of Madison Dearborn, and Glenn Creamer and Michael Dominguez, who are managing directors of Providence Equity, serve on our board of directors. As of February 28, 2014, the Sponsors continue to hold a majority of our outstanding common stock. The Sponsors and the entities respectively controlled by them may hold equity interests in entities that directly or indirectly compete with us, and companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts arise between the interests of Madison Dearborn or Providence Equity, on the one hand, and of other stockholders, on the other hand, these directors may not be disinterested. Although our directors and officers have a duty of loyalty to us under Delaware law and our amended and restated certificate of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as (1) the material facts relating to the director’s or officer’s relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors approves the transaction, (2) the material facts relating to the director’s or officer’s relationship or interest as to the transaction are disclosed to our stockholders and a majority of our disinterested stockholders approve the transaction or (3) the transaction is otherwise fair to us. Our amended and restated certificate of incorporation also provides that any principal, officer, member, manager and/or employee of a Sponsor or any entity that controls, is controlled by or under common control with a Sponsor (other than us or any company that is controlled by us) or a Sponsor-managed investment fund will not be required to offer any transaction opportunity of which they become aware to us and could take any such opportunity for themselves or offer it to other companies in which they have an investment, unless such opportunity is offered to them solely in their capacities as our directors. We cannot assure you that we will continue to pay dividends on our common stock, and our indebtedness and certain tax considerations could limit our ability to continue to pay dividends on our common stock. If we do not continue to pay dividends, you may not receive any return on investment unless you are able to sell your common stock for a price greater than your purchase price. In each of the fourth quarter of 2013 and the first quarter of 2014, our board of directors declared a quarterly cash dividend of $0.0425 per share of common stock. We expect to continue to pay a cash dividend on our common stock of $0.0425 per share per quarter, or $0.17 per share per annum. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, including those under our senior credit facilities and indentures, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors our board of directors deems relevant. There can be no assurance that we will continue to pay a dividend at the current rate or at all. Accordingly, if we do not pay dividends in the future, realization of a gain on your investment will depend entirely on the appreciation of the price of our common stock, which may never occur. See “-Risks Related to Our Business-We have significant deferred cancellation of debt income” for a discussion of certain tax considerations that could affect our willingness to pay dividends in the future. We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations. We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us. Item 1B. Unresolved Staff Comments None. Item 2. Properties Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* As of December 31, 2013, we owned or leased a total of approximately 2.0 million square feet of space throughout the U.S. and Canada. We own two properties: a combined office and an approximately 450,000 square foot distribution center in Vernon Hills, Illinois, and an approximately 513,000 square foot distribution center in North Las Vegas, Nevada. In addition, we conduct sales, services and administrative activities in various leased locations throughout the U.S. and Canada, including data centers in Madison, Wisconsin and Minneapolis, Minnesota. We believe that our facilities are well maintained, suitable for our business and occupy sufficient space to meet our operating needs. As part of our normal business, we regularly evaluate sales center performance and site suitability. Leases 20 Qbdlfu!Qh/!348 Table of Contents 5/H/b covering our currently occupied leased properties expire at varying dates, generally within the next ten years. We anticipate no difficulty in retaining occupancy through lease renewals, month-to-month occupancy or replacing the leased properties with equivalent properties. We believe that suitable additional or substitute leased properties will be available as required. Item 3. Legal Proceedings We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, intellectual property, employment, tort and other litigation matters. We are also subject to audit by federal, state and local authorities, and by various partners and large customers, including government agencies, relating to purchases and sales under various contracts. In addition, we are subject to indemnification claims under various contracts. From time to time, certain of our customers file voluntary petitions for reorganization or liquidation under the U.S. bankruptcy laws. In such cases, certain pre-petition payments received by us could be considered preference items and subject to return to the bankruptcy administrator. As of December 31, 2013, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, our financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. We previously filed a claim as part of a class action settlement in a case alleging price fixing during the period of January 1, 1996 through December 31, 2006, by certain manufacturers of thin-film liquid crystal display panels. On July 13, 2013, the United Stated District Court for the Northern District of California approved distribution of the settlement proceeds, including a net payment to us of $10.4 million after fees and expenses. We have recognized a pre-tax benefit of $10.4 million within selling and administrative expenses in the consolidated statement of operations for the year ended December 31, 2013. The first of two settlement payments was received by us on July 29, 2013 in the amount of $8.5 million. The balance of $1.9 million was received in February 2014. Item 4. Mine Safety Disclosures Not applicable. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 21 Qbdlfu!Qh/!349 Table of Contents 5/H/b Executive Officers NameAgePosition Thomas E. Richards59Chairman, President and Chief Executive Officer, and Director Dennis G. Berger49Senior Vice President and Chief Coworker Services Officer Neal J. Campbell52Senior Vice President and Chief Marketing Officer Christina M. Corley46Senior Vice President - Corporate Sales Douglas E. Eckrote49Senior Vice President - Strategic Solutions and Services Christine A. Leahy49Senior Vice President, General Counsel and Corporate Secretary Christina V. Rother50Senior Vice President - Public and Advanced Technology Sales Jonathan J. Stevens44Senior Vice President - Operations and Chief Information Officer Matthew A. Troka43Senior Vice President - Product and Partner Management Ann E. Ziegler55Senior Vice President and Chief Financial Officer Thomas E. Richards serves as our Chairman, President and Chief Executive Officer, as a member of our board of directors and as a manager of CDW LLC. From October 2011 to December 31, 2012, Mr. Richards served as our Chief Executive Officer. From September 2009 to October 2011, Mr. Richards served as our President and Chief Operating Officer. Prior to joining CDW, Mr. Richards held leadership positions with Qwest Communications, a telecommunications carrier. From 2008 to 2009, he served as Executive Vice President and Chief Operating Officer, where he was responsible for the day-to-day operation and performance of Qwest Communications, and before assuming that role, was the Executive Vice President of the Business Markets Group from 2005 to 2008. Mr. Richards also has served as Chairman and Chief Executive Officer of Clear Communications Corporation and as Executive Vice President of Ameritech Corporation. He currently serves as a board member of Junior Achievement of Chicago, Rush University Medical Center and the University of Pittsburgh. Mr. Richards is also a member of the Economic Club of Chicago and the Executives’ Club of Chicago. Mr. Richards is a graduate of the University of Pittsburgh where he earned a bachelor’s degree and a graduate of Massachusetts Institute of Technology where he earned a Master of Science in Management as a Sloan Fellow. As a result of these and other professional experiences, Mr. Richards possesses particular knowledge and experience in technology industries, strategic planning and leadership of complex organizations that strengthen the board’s collective qualifications, skills and experience. Dennis G. Berger serves as our Senior Vice President and Chief Coworker Services Officer. Mr. Berger joined CDW in September 2005 as Vice President-Coworker Services. In January 2007, he was named Senior Vice President and Chief Coworker Services Officer. Mr. Berger is responsible for leading CDW’s programs in coworker learning and development, benefits, compensation, performance management, coworker relations and talent acquisition. Prior to joining CDW, he served as Vice President of Human Resources at PepsiAmericas, a beverage company, from 2002 to 2005. Mr. Berger has also held human resources positions of increasing responsibility at Pepsi Bottling Group, Inc., Pepsico, Inc. and GTE Corporation. Mr. Berger serves on the board of directors of Glenwood Academy, Anti-Defamation League of Chicago and Skills for Chicagoland’s Future. Mr. Berger is a graduate of Northeastern University where he earned a bachelor’s degree and a graduate of John M. Olin School of Business at Washington University in St. Louis where he earned a Master of Business Administration. Neal J. Campbell serves as our Senior Vice President and Chief Marketing Officer. Mr. Campbell joined CDW in January 2011, and is responsible for the strategy and development of CDW’s advertising, public relations, channel marketing, marketing intelligence and research, merchandising, microsites, creative services and direct marketing content, along with relationship marketing, corporate communications and e-commerce initiatives including content development, online marketing and e-procurement. Prior to joining CDW, Mr. Campbell served as Chief Executive Officer of TrafficCast, a provider of real- time and predictive traffic information to Google, Yahoo and others from 2008 to 2011. From 2006 to 2008, he served as Executive Vice President and General Manager-Strategic Marketing and Next Generation Products for ISCO International, a Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* manufacturer of wireless telecommunications components. Mr. Campbell also spent 17 years with Motorola, most recently as Vice President and General Manager, GSM Portfolio Marketing and Planning for the company’s mobile device business. He currently serves as a board member of TrafficCast and Junior Achievement of Chicago, and is on the Executive Advisory Council of Bradley University. Mr. Campbell is a graduate of Bradley University where he earned a bachelor’s degree and a graduate of Northwestern University’s Kellogg School of Management where he earned a Master of Business Administration. Christina M. Corley serves as our Senior Vice President of Corporate Sales and is responsible for managing all aspects of our corporate sales force, including sales force strategy, structure, goals, operations, revenue generation and training and development. Prior to joining CDW in September 2011, Ms. Corley served as President and Chief Operating Officer of Zones, Inc., a provider of IT products and solutions, from 2006 to 2011. She served as Executive Vice President of Purchasing 22 Qbdlfu!Qh/!34: Table of Contents 5/H/b and Operations for Zones, Inc. from April 2005 to October 2006. She served as President of Corporate PC Source (“CPCS”), a wholly owned subsidiary of Zones, Inc., from March 2003 to April 2005. Prior to its acquisition by Zones, Inc., Ms. Corley served as Chief Executive Officer of CPCS from 1999 to 2003. Ms. Corley began her career in sales and marketing, holding various positions at IBM, Dataflex and VisionTek. She currently serves as a board member of the Boys and Girls Club of Chicago. Ms. Corley is a graduate of the University of Illinois at Urbana-Champaign where she earned a bachelor’s degree and a graduate of Northwestern University’s Kellogg School of Management where she earned a Master of Business Administration in management and strategy. Douglas E. Eckrote serves as our Senior Vice President of Strategic Solutions and Services and is responsible for our technology specialist teams focusing on servers and storage, unified communications, security, wireless, power and cooling, networking, software licensing and mobility solutions. He also holds responsibility for CDW Canada, Inc. Mr. Eckrote joined CDW in 1989 as an account manager. Mr. Eckrote was appointed Director of Operations in 1996, Vice President of Operations in 1999 and Senior Vice President of Purchasing in April 2001. In October 2001, he was named Senior Vice President of Purchasing and Operations. He was named Senior Vice President of Operations, Services and Canada in 2006 and assumed his current role in 2009. Prior to joining CDW, Eckrote worked in outside sales for Arrow Electronics and Cintas Uniform Company. From 2003 to 2009, Mr. Eckrote served on the board of directors of the Make-A-Wish Foundation of Illinois, completing the last two years as board chair, and currently serves on the Make-A-Wish Foundation of America National Chapter Performance Committee. Mr. Eckrote also served on the board of directors of the Center for Enriched Living from 2002-2011, serving as Vice President from 2004-2005, President from 2006-2008, board emeritus from 2009-2011 and currently serves as a trustee. Mr. Eckrote is a graduate of Purdue University where he earned a bachelor’s degree and a graduate of Northwestern University’s Kellogg School of Management where he earned an Executive Master of Business Administration. Christine A. Leahy serves as our Senior Vice President, General Counsel and Corporate Secretary and is responsible for our legal, corporate governance, enterprise risk management and compliance functions. Ms. Leahy joined CDW in January 2002 as Vice President, General Counsel and Corporate Secretary. In January of 2007, she was named Senior Vice President. Before joining CDW, Ms. Leahy served as a corporate partner in the Chicago office of Sidley Austin LLP where she specialized in corporate governance, securities law, mergers and acquisitions and strategic counseling. Ms. Leahy serves on the board of trustees of Children’s Home and Aid. Ms. Leahy is a graduate of Brown University where she earned a bachelor’s degree and a graduate of Boston College Law School where she earned her Juris Doctor. She also completed the CEO Perspective and Women’s Director Development Programs at Northwestern University’s Kellogg School of Management. Christina V. Rother serves as our Senior Vice President of Public and Advanced Technology Sales and is responsible for managing all aspects of our public sector and advanced technology sales forces, including sales force strategy, structure, goals, operations, revenue generation and training and development. Ms. Rother joined CDW in 1991 as an account manager. In 2002, she was appointed Vice President for Education and State and Local Sales. In 2005, she was chosen to lead our newly formed healthcare sales team. Beginning in 2006, Ms. Rother has held various positions ranging from Group Vice President of CDW Government LLC, President of CDW Government LLC and Senior Vice President of Sales. In September 2011, Ms. Rother assumed her current role as Senior Vice President of Public and Advanced Technology Sales. Prior to joining CDW, Ms. Rother held a number of sales positions with technology companies including Laser Computers and Price Electronics. Ms. Rother currently serves as chair of the board of directors of the Make-A-Wish Foundation of Illinois. Ms. Rother is a graduate of the University of Illinois at Chicago where she earned a bachelor’s degree. Jonathan J. Stevens serves as our Senior Vice President of Operations and Chief Information Officer. Mr. Stevens joined CDW in June 2001 as Vice President-Information Technology, was named Chief Information Officer in January 2002 and Vice President-International and Chief Information Officer from 2005 until December 2006. In January 2007, he was named Senior Vice President and Chief Information Officer and assumed his current role in November 2009. Mr. Stevens is responsible for the strategic direction of our information technology. Additionally, he holds responsibility for our distribution centers, transportation, facilities, customer relations, operational excellence and the business technology center. Prior to joining CDW, Mr. Stevens served as regional technology director for Avanade, an international technology integration company formed through a joint venture between Microsoft and Accenture from 2000 to 2001. Prior to that, Mr. Stevens was a principal Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* with Microsoft Consulting Services and led an information technology group for a corporate division of AT&T/NCR. He currently serves on the board of directors of SingleWire Software, LLC and Northeast Illinois Council: Boy Scouts of America. Mr. Stevens is a graduate of the University of Dayton where he earned a bachelor’s degree. Matthew A. Troka serves as our Senior Vice President of Product and Partner Management. Mr. Troka is responsible for managing our relationships with all of our vendor partners. In addition, he directs the day-to-day operations of our purchasing department. Mr. Troka joined CDW in 1992 as an account manager and became a sales manager in 1995. From 1998 to 2001, he served as Corporate Sales Director. From 2001 to 2004, Mr. Troka was Senior Director of Purchasing. From 2004 to 2006, Mr. Troka served as Vice President of Purchasing. From 2006 to 2011, Mr. Troka was Vice President of Product and Partner Management. On March 3, 2011, Mr. Troka was elected Senior Vice President of Product and Partner Management. 23 Qbdlfu!Qh/!351 Table of Contents 5/H/b Mr. Troka serves as a member of the board of directors of Encompass Championship Charities. Mr. Troka is a graduate of the University of Illinois where he earned a bachelor’s degree. Ann E. Ziegler joined CDW in April 2008 as Senior Vice President and Chief Financial Officer. Prior to joining CDW, Ms. Ziegler spent 15 years at Sara Lee Corporation (“Sara Lee”), a global consumer goods company, in a number of executive roles including finance, mergers and acquisitions, strategy and general management positions in both U.S. and international businesses. Most recently, from 2005 until April 2008, Ms. Ziegler served as Chief Financial Officer and Senior Vice President of Administration for Sara Lee Food and Beverage. Prior to joining Sara Lee, Ms. Ziegler was a corporate attorney at Skadden, Arps, Slate, Meagher & Flom. Ms. Ziegler serves on the board of directors of Hanesbrands, Inc. During the previous five years, Ms. Ziegler also served on the board of directors of Unitrin, Inc. Ms. Ziegler is a graduate of The College of William and Mary where she earned a bachelor’s degree and a graduate of the University of Chicago Law School where she earned her Juris Doctor. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been listed on the NASDAQ Global Select Market since June 27, 2013 under the symbol “CDW.” Prior to that date, there was no public market for our common stock. Shares sold in our initial public offering ("IPO") were priced at $17.00 per share on June 26, 2013. The following table sets forth the ranges of high and low sales prices per share of our common stock as reported on the NASDAQ Global Select Market for the periods indicated. Year ended December 31, 2013HighLow Second quarter (beginning June 27, 2013).......................................................................................................$19.17$17.38 Third quarter.....................................................................................................................................................$24.51$18.26 Fourth quarter...................................................................................................................................................$23.56$20.50 Holders As of February 28, 2014, there were 143 holders of record of our common stock. The number of beneficial stockholders is substantially greater than the number of holders of record because a portion of our common stock is held through brokerage firms. Dividends We expect to continue to pay a quarterly cash dividend on our common stock of $0.0425 per share, or $0.17 per annum. The initial quarterly cash dividend of $0.0425 per share was paid on December 2, 2013 to all common stockholders of record as of the close of business on November 15, 2013. On February 13, 2014, we announced that our board of directors declared a quarterly cash dividend on our common stock of $0.0425 per share. The dividend will be paid on March 10, 2014 to all stockholders of record as of the close of business on February 25, 2014. The payment of dividends in quarters beyond the first quarter of 2014 remains at the discretion of our board of directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors that our board of directors deems relevant. In addition, our ability to pay dividends on our common stock will be limited by restrictions on our ability to pay dividends or make distributions to our stockholders and on the ability of our subsidiaries to pay dividends or make distributions to us, in each case, under the terms of our current and any future agreements governing our indebtedness. For a discussion of our cash resources and needs and restrictions on our ability to pay dividends, see “Management’s Discussion and Analysis of Financial Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Condition and Results of Operations—Liquidity and Capital Resources” included elsewhere in this report. For additional discussion of restrictions on our ability to pay dividends, see Note 7 "Long-Term Debt", to the accompanying audited consolidated financial statements included elsewhere in this report. Stock Performance Graph The information contained in this Stock Performance Graph section shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that CDW specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. 24 Qbdlfu!Qh/!352 Table of Contents 5/H/b The following graph compares the cumulative total shareholder return, calculated on a dividend reinvested basis, on $100.00 invested at the opening of the market on June 27, 2013, the date our common stock first traded on the NASDAQ Global Select Market, through and including the market close on December 31, 2013, with the cumulative total return for the same time period of the same amount invested in the S&P MidCap 400 index and a peer group index. The Company's peer group index for 2013 consists of the following companies: Accenture plc, Anixter International, Inc., Arrow Electronics, Inc., Avnet, Inc., CGI Group Inc., Genuine Parts Company, Henry Schein, Inc., Insight Enterprises, Inc., Owens & Minor, Inc., Patterson Companies, Inc., SYNNEX Corporation, United Stationers Inc., W.W. Grainger, Inc. and Wesco International, Inc. This peer group was selected based on a review of publicly available information about these companies and the Company’s determination that they met one or more of the following criteria: (i) similar size in terms of revenue and/or enterprise value (one-third to three times the Company’s revenue or enterprise value); (ii) operates in a business-to-business distribution environment; (iii) members of the technology industry; (iv) similar customers (i.e., business, government, healthcare, and education); (v) companies that provide services and/or solutions; and (vi) similar EBITDA and gross margins. Shareholder returns over the indicated period are based on historical data and should not be considered indicative of future shareholder returns. June 27, 2013December 31, 2013 CDW Corp$100$138 S&P MidCap 400 index100118 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* CDW Peers100113 Use of Proceeds from Registered Securities On July 2, 2013, the Company completed an IPO of its common stock in which it issued and sold 23,250,000 shares of common stock. On July 31, 2013, the Company completed the sale of an additional 3,487,500 shares of common stock to the underwriters of the IPO pursuant to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO. Such shares were registered under the Securities Act of 1933, as amended, pursuant to the Company's Registration Statement on Form S-1 (File 333-187472), which was declared effective by the SEC on June 26, 2013. 25 Qbdlfu!Qh/!353 Table of Contents 5/H/b The shares of common stock are listed on the NASDAQ Global Select Market under the symbol “CDW.” The Company's shares of common stock were sold to the underwriters at a price of $17.00 per share in the IPO and upon the exercise of the overallotment option, which together, generated aggregate net proceeds of $424.7 million to the Company after deducting $29.8 million in underwriting discounts, expenses and transaction costs. Using a portion of the net proceeds from the IPO (exclusive of proceeds from the exercise of the overallotment option), the Company paid a $24.4 million termination fee to affiliates of Madison Dearborn Partners, LLC and Providence Equity Partners, L.L.C. in connection with the termination of the management services agreement with such entities that was effective upon completion of the IPO, redeemed $175.0 million aggregate principal amount of senior secured notes due 2018, and redeemed $146.0 million aggregate principal amount of senior subordinated notes due 2017. The redemption price of the senior secured notes due 2018 was 108.0% of the principal amount redeemed, plus accrued and unpaid interest to the date of redemption. The Company used cash on hand to pay such accrued and unpaid interest. The redemption price of the senior subordinated notes due 2017 was 106.268% of the principal amount redeemed, plus accrued and unpaid interest to the date of redemption. The Company used cash on hand to pay such accrued and unpaid interest. On October 18, 2013, proceeds from the overallotment option exercise of $56.0 million and cash on hand were used to redeem $155.0 million aggregate principal amount of senior subordinated notes due 2017. The redemption price of the senior subordinated notes due 2017 was 104.178% of the principal amount redeemed, plus accrued and unpaid interest to the date of redemption. The Company used cash on hand to pay such redemption premium and accrued and unpaid interest. J.P. Morgan Securities LLC, Barclays Capital Inc. and Goldman, Sachs & Co. acted as joint book-running managers of the IPO and as representatives of the underwriters. Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC acted as additional book-running managers in the IPO. Robert W. Baird & Co. Incorporated, Raymond James & Associates, Inc., William Blair & Company, L.L.C., Needham & Company, LLC, Stifel, Nicolaus & Company, Incorporated, Loop Capital Markets LLC and The Williams Capital Group, L.P. acted as managing underwriters in the IPO. Item 6. Selected Financial Data The selected financial data set forth below are not necessarily indicative of the results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this report. We have derived the selected financial data presented below as of December 31, 2013 and December 31, 2012 and for the years ended December 31, 2013, 2012, and 2011 from our audited consolidated financial statements and related notes, which are included elsewhere in this report. The selected financial data as of December 31, 2010 and December 31, 2009 have been derived from our audited consolidated financial statements as of and for those periods, which are not included in this report. The following are some of the items affecting comparability of the selected financial data for the periods presented: • During the year ended December 31, 2013, we recorded IPO- and secondary-offering related expenses of $75.0 million. • During the years ended December 31, 2013, 2012, and 2011, we recorded net losses on extinguishments of long-term debt of $64.0 million, $17.2 million, and $118.9 million, respectively. The losses represented the difference between the amount paid upon extinguishment, including call premiums and expenses paid to the debt holders and agents, and the net carrying amount of the extinguished debt, adjusted for a portion of the unamortized deferred financing costs. • During the year ended December 31, 2009, we recorded goodwill impairment charges of $241.8 million. This impairment was primarily attributable to deterioration in macroeconomic conditions and overall declines in net sales. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 26 Qbdlfu!Qh/!354 Table of Contents 5/H/b Years Ended December 31, (dollars and shares in millions, except per share amounts)20132012201120102009 Statement of Operations Data: Net sales $10,768.6$10,128.2$9,602.4$8,801.2$7,162.6 Cost of sales 9,008.38,458.68,018.97,410.46,029.7 Gross profit 1,760.31,669.61,583.51,390.81,132.9 Selling and administrative expenses 1,120.91,029.5990.1932.1821.1 Advertising expense 130.8129.5122.7106.0101.9 Goodwill impairment ————241.8 Income (loss) from operations 508.6510.6470.7352.7(31.9) Interest expense, net (307.4(324.2(391.9(431.7 (250.1))))) Net (loss) gain on extinguishments of long-term debt (64.0)(17.2)(118.9)2.0— Other income, net 1.00.10.70.22.4 Income (loss) before income taxes (37.0(461.2 195.5186.128.3)) Income tax (expense) benefit (62.7)(67.1)(11.2)7.887.8 Net income (loss) $132.8$119.0$17.1$(29.2)$(373.4) Net income (loss) per common share: Basic $0.85$0.82$0.12$(0.20)$(2.60) Diluted $0.84$0.82$0.12$(0.20)$(2.60) Weighted-average common shares outstanding: Basic 156.6145.1144.8144.4143.8 Diluted 158.7145.8144.9144.4143.8 Balance Sheet Data (at period end): $188.1$37.9$99.9$36.6$88.0 Cash and cash equivalents Working capital 810.9666.5538.1675.4923.2 Total assets 5,924.65,720.05,967.75,943.85,976.0 (1) 3,251.23,771.04,066.04,290.04,621.9 Total debt and capitalized lease obligations Total shareholders’ equity (deficit)711.7136.5(7.3)(43.5)(44.7) Other Financial Data: Capital expenditures $47.1$41.4$45.7$41.5$15.6 Depreciation and amortization 208.2210.2204.9209.4218.2 Gross profit as a percentage of net sales 16.3%16.5%16.5%15.8%15.8% (2) 1.81.61.1(a)(a) Ratio of earnings to fixed charges (3) EBITDA $653.8$703.7$557.4$564.3$188.7 (3) Adjusted EBITDA 808.5766.6717.3601.8465.4 (4) 314.3247.1198.885.7(14.5) Non-GAAP net income (loss) Statement of Cash Flows Data: Net cash provided by (used in): Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Operating activities$366.3$317.4$214.7$423.7$107.6 Investing activities (47.1)(41.7)(56.0)(125.4)(82.6) (338.0(95.4(350.1(31.9 Financing activities(168.3))))) (1) Excludes borrowings of $256.6 million, $249.2 million, $278.7 million, $28.2 million and $25.0 million, as of December 31, 2013, 2012, 2011, 2010 and 2009, respectively, under our inventory financing agreements. We do not include these borrowings in total debt because we have not in the past incurred, and in the future do not expect to incur, any interest expense or late fees under these agreements. 27 Qbdlfu!Qh/!355 Table of Contents 5/H/b (2) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of earnings before income taxes minus income from equity investees plus fixed charges. Fixed charges consist of interest expense and the portion of rental expense we believe is representative of the interest component of rental expense. (a) For the years ended December 31, 2010 and 2009, earnings available for fixed charges were inadequate to cover fixed charges by $37.0 million and $461.2 million, respectively. (3) EBITDA is defined as consolidated net income (loss) before interest expense, income tax expense (benefit), depreciation, and amortization. Adjusted EBITDA, which is a measure defined in our credit agreements, is calculated by adjusting EBITDA for certain items of income and expense including (but not limited to) the following: (a) non- cash equity-based compensation; (b) goodwill impairment charges; (c) sponsor fees; (d) certain consulting fees; (e) debt-related legal and accounting costs; (f) equity investment income and losses; (g) certain severance and retention costs; (h) gains and losses from the early extinguishment of debt; (i) gains and losses from asset dispositions outside the ordinary course of business; and (j) non-recurring, extraordinary or unusual gains or losses or expenses. We have included a reconciliation of EBITDA and Adjusted EBITDA in the table below. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. The following unaudited table sets forth reconciliations of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA for the periods presented: Years Ended December 31, (in millions)20132012201120102009 Net income (loss)$132.8$119.0$17.1$(29.2)$(373.4) Depreciation and amortization 208.2210.2204.9209.4218.2 Income tax expense (benefit) 62.767.111.2(7.8)(87.8) Interest expense, net 250.1307.4324.2391.9431.7 EBITDA 653.8703.7557.4564.3188.7 Non-cash equity-based compensation 8.622.119.511.515.9 Sponsor fees 2.55.05.05.05.0 Consulting and debt-related professional fees 0.10.65.115.114.1 Goodwill impairment ————241.8 Net loss (gain) on extinguishments of long- term debt 64.017.2118.9(2.0)— (i) Litigation, net (4.1)4.3——— IPO- and secondary-offering related expenses75.0———— (ii) Other adjustments 8.613.711.47.9(0.1) Adjusted EBITDA $808.5$766.6$717.3$601.8$465.4 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* (i) Relates to unusual, non-recurring litigation matters. (ii) Includes certain retention costs and equity investment income, certain severance costs in 2009 and a gain related to the sale of the Informacast software and equipment in 2009. 28 Qbdlfu!Qh/!356 Table of Contents 5/H/b The following unaudited table sets forth a reconciliation of EBITDA to net cash provided by operating activities for the periods presented: Years Ended December 31, (in millions)20132012201120102009 EBITDA$653.8$703.7$557.4$564.3$188.7 Depreciation and amortization(208.2)(210.2)(204.9)(209.4)(218.2) (11.2 Income tax (expense) benefit(62.7)(67.1))7.887.8 Interest expense, net(250.1)(307.4)(324.2)(391.9)(431.7) (29.2(373.4 Net income (loss)132.8119.017.1)) Depreciation and amortization208.2210.2204.9209.4218.2 Goodwill impairment————241.8 Equity-based compensation expense46.622.119.511.515.9 Amortization of deferred financing costs, debt premium, and debt discount, net8.813.615.718.016.2 Deferred income taxes(48.7)(56.3)(10.2)(4.3)(94.4) Allowance for doubtful accounts——0.4(1.3)(0.2) Realized loss on interest rate swap agreements——2.851.5103.2 Mark to market loss on interest rate derivatives0.10.94.24.7— Net loss (gain) on extinguishments of long-term debt64.017.2118.9(2.0)— Net loss (gain) on sale and (1.7 disposal of assets—0.10.30.7) Changes in assets and liabilities(47.1)(9.4)(158.3)165.3(18.0) (0.6(0.6 Other non-cash items1.6—))— Net cash provided by operating activities$366.3$317.4$214.7$423.7$107.6 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 29 Qbdlfu!Qh/!357 Table of Contents 5/H/b (4) Non-GAAP net income (loss) is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that non-GAAP net income (loss) provides meaningful information regarding our operating performance and our prospects for the future. This supplemental measure excludes, among other things, charges related to the amortization of Acquisition-related intangibles, non-cash equity-based compensation and gains and losses from the early extinguishment of debt. The following unaudited table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented: Years Ended December 31, (in millions)20132012201120102009 Net income (loss) (29.2(373.4 $132.8$119.0$17.1$)$) (i) Amortization of intangibles 161.2163.7165.7166.8168.9 Non-cash equity-based compensation 8.622.119.511.515.9 (ii) Litigation, net (6.3)———— Net loss on extinguishments of long-term debt (2.0 64.017.2118.9)— Interest expense adjustment related to (iii) (7.5(3.3(19.4(0.7 extinguishments of long-term debt ))))— (iv) IPO- and secondary-offering related expenses 75.0———— (v) Debt-related refinancing costs ——3.85.6— Goodwill impairment ————241.8 Severance expense ————1.4 (vi) Aggregate adjustment for income taxes (113.5)(71.6)(106.8)(66.3)(69.1) Non-GAAP net income (loss) (14.5 $314.3$247.1$198.8$85.7$) (i) Includes amortization expense for Acquisition-related intangible assets, primarily customer relationships and trade names. (ii) Relates to unusual, non-recurring litigation matters. (iii) Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. (iv) IPO- and secondary-offering related expenses consist of the following: (in millions)Year Ended December 31, 2013 Acceleration charge for certain equity awards and related employer payroll taxes$40.7 RDU Plan cash retention pool accrual7.5 Management services agreement termination fee24.4 Other expenses2.4 IPO- and secondary-offering related expenses$75.0 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* (v) Represents fees and costs expensed related to the December 2010 and March 2011 amendments to our prior senior secured term loan facility. (vi) Based on a normalized effective tax rate of 39.0%. 30 Qbdlfu!Qh/!358 Table of Contents 5/H/b Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Unless otherwise indicated or the context otherwise requires, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “we,” “us,” “the Company,” “our,” “CDW” and similar terms refer to CDW Corporation and its subsidiaries. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements that are subject to numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements. See “Forward- Looking Statements” above. Overview CDW is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions in the U.S. and Canada. We help our customer base of approximately 250,000 small, medium and large business, government, education and healthcare customers by delivering critical solutions to their increasingly complex IT needs. Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. We are technology "agnostic," with a product portfolio that includes more than 100,000 products from more than 1,000 brands. We provide our products and solutions through sales force and service delivery teams consisting of more than 4,400 coworkers, including nearly 1,800 field sellers, highly-skilled technology specialists and advanced service delivery engineers. We are a leading U.S. sales channel partner for many original equipment manufacturers (“OEMs”) and software publishers (collectively, our “vendor partners”), whose products we sell or include in the solutions we offer. We believe we are an important extension of our vendor partners' sales and marketing capabilities, providing them with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage and extensive customer access. We have two reportable segments: Corporate, which is comprised primarily of private sector business customers, and Public, which is comprised of government agencies and education and healthcare institutions. Our Corporate segment is divided into a medium/large business customer channel, primarily serving customers with more than 100 employees, and a small business customer channel, primarily serving customers with up to 100 employees. We also have two other operating segments, CDW Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and, accordingly, are combined together as “Other.” The CDW Advanced Services business consists primarily of customized engineering services delivered by technology specialists and engineers, and managed services that include Infrastructure as a Service (“IaaS”) offerings. Revenues from the sale of hardware, software, custom configuration and third-party provided services are recorded within our Corporate and Public segments. We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also resell software for major software publishers. Our agreements with software publishers allow the end- user customer to acquire software or licensed products and services. In addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements, including warranties and renewals. A significant portion of our advertising and marketing expenses is reimbursed through cooperative advertising reimbursement programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied to sales or purchasing volumes or other commitments to be met by us within a specified period of time. Trends and Key Factors Affecting our Financial Performance We believe the following trends may have an important impact on our financial performance: Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* • Our Public segment sales are impacted by government spending policies, budget priorities and revenue levels. An adverse change in any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew contracts with us, which could adversely affect our business, results of operations or cash flows. Although our sales to the federal government are diversified across multiple agencies and departments, they collectively accounted for approximately 7%, 10% and 10% of our net sales for the years ended December 31, 2013, 2012 and 2011, respectively. Second half 2013 Public segment results were negatively impacted by federal government budget uncertainty, sequestration and the partial shutdown of the federal government for 16 days. 31 Qbdlfu!Qh/!359 Table of Contents 5/H/b • An important factor affecting our ability to generate sales and achieve our targeted operating results is the impact of general economic conditions on our customers’ willingness to spend on information technology. In the second quarter of 2012, we began to see customers take a more cautious approach to spending as increased macroeconomic uncertainty impacted decision-making and led to some customers delaying purchases. As we moved through 2013, we saw improvements in operating results for certain sales channels. We will continue to closely monitor macroeconomic conditions during 2014. Uncertainties related to potential reductions in government spending, requirements associated with implementation of the Affordable Care Act, potential changes in tax and regulatory policy, weakening consumer and business confidence or increased unemployment could result in reduced or deferred spending on information technology products and services by our customers and result in increased competitive pricing pressures. • We believe that our customers’ transition to more complex technology solutions will continue to be an important growth area for us in the future. However, because the market for technology products and services is highly competitive, our success at capitalizing on this transition will be based on our ability to tailor specific solutions to customer needs, the quality and breadth of our product and service offerings, the knowledge and expertise of our sales force, price, product availability and speed of delivery. 2013 Initial Public Offering On July 2, 2013, we completed an initial public offering ("IPO") of 23,250,000 shares of common stock. On July 31, 2013, we completed the sale of an additional 3,487,500 shares of common stock to the underwriters of the IPO pursuant to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO. Our shares of common stock were sold to the underwriters at a price of $17.00 per share in the IPO and upon the exercise of the overallotment option, which together, generated aggregate net proceeds of $424.7 million to the Company after deducting underwriting discounts, expenses and transaction costs. On November 19, 2013, we completed a secondary public offering, whereby certain selling stockholders sold 15,000,000 shares of common stock. On December 18, 2013, such selling stockholders sold an additional 2,250,000 shares of common stock to the underwriters of the secondary public offering pursuant to the underwriters' December 13, 2013 exercise in full of the overallotment option granted to them in connection with the secondary public offering. We did not receive any proceeds from the sale of shares in the secondary public offering or upon the exercise of the overallotment option. The consolidated statement of operations for the year ended December 31, 2013 included pre-tax IPO- and secondary- offering related expenses of $75.0 million. See Note 9 of the accompanying audited consolidated financial statements for additional discussion of our IPO and secondary offering. Key Business Metrics Our management monitors a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business and make adjustments as necessary. We believe that the most important of these measures and ratios include average daily sales, gross margin, operating margin, net income, Non-GAAP net income, net income per common share, Non-GAAP net income per diluted share, EBITDA and Adjusted EBITDA, return on invested capital, cash and cash equivalents, net working capital, cash conversion cycle (defined to be days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average), debt levels including available credit and leverage ratios, sales per coworker and coworker turnover. These measures and ratios are compared to standards or objectives set by management, so that actions can be taken, as necessary, in order to achieve the standards and objectives. Non-GAAP net income and Adjusted EBITDA are non-GAAP financial measures. We believe these measures provide helpful information with respect to the company’s operating performance and cash flows including our ability to meet our future debt service, capital expenditures, dividend payments, and working capital requirements, Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our senior credit facilities. See "Selected Financial Data" included elsewhere in this report for the definitions of Non-GAAP net income and Adjusted EBITDA and reconciliations to net income. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 32 Qbdlfu!Qh/!35: Table of Contents 5/H/b The results of certain key business metrics are as follows: (dollars in millions)Years Ended December 31, 201320122011 Net sales$10,768.6$10,128.2$9,602.4 Gross profit1,760.31,669.61,583.5 Income from operations508.6510.6470.7 Net income132.8119.017.1 Non-GAAP net income314.3247.1198.8 Adjusted EBITDA808.5766.6717.3 Average daily sales42.439.937.7 Net debt (defined as total debt minus cash and cash equivalents)3,063.13,733.13,966.1 (1) Cash conversion cycle (in days) 242428 (1) Cash conversion cycle is defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. Results of Operations Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 The following table presents our results of operations, in dollars and as a percentage of net sales, for the years ended December 31, 2013 and 2012: Year Ended December 31, 2013Year Ended December 31, 2012 Dollars inPercentage ofDollars inPercentage of MillionsNet SalesMillionsNet Sales Net sales $10,768.6100.0%$10,128.2100.0% Cost of sales 9,008.383.78,458.683.5 Gross profit 1,760.316.31,669.616.5 Selling and administrative expenses 1,120.910.41,029.510.2 Advertising expense 130.81.2129.51.3 Income from operations 508.64.7510.65.0 Interest expense, net (250.1)(2.3)(307.4)(3.0) Net loss on extinguishments of long-term debt (64.0(0.6(17.2(0.2 )))) Other income, net 1.0—0.1— Income before income taxes 195.51.8186.11.8 Income tax expense (62.7(0.6(67.1(0.7 )))) Net income $132.81.2%$119.01.1% Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 33 Qbdlfu!Qh/!361 Table of Contents 5/H/b Net sales The following table presents our net sales by segment, in dollars and as a percentage of total net sales, and the year- over-year dollar and percentage change in net sales for the years ended December 31, 2013 and 2012: Years Ended December 31, 20132012 Percentage ofPercentage of Dollars inTotal Net Dollars inTotal Net DollarPercent (1) MillionsSalesMillionsSalesChangeChange Corporate$5,960.155.3%$5,512.854.4%$447.38.1% Public4,164.538.74,023.039.7141.53.5 Other644.06.0592.45.951.68.7 Total net sales$10,768.6100.0%$10,128.2100.0%$640.46.3% (1) There were 254 selling days in both the years ended December 31, 2013 and 2012. The following table presents our net sales by customer channel for our Corporate and Public segments and the year- over-year dollar and percentage change in net sales for the years ended December 31, 2013 and 2012: (dollars in millions)Years Ended December 31, 20132012Dollar ChangePercent Change Corporate: Medium / Large $4,902.6$4,448.5$454.110.2% Small Business 1,057.51,064.3(6.8)(0.6) Total Corporate $5,960.1$5,512.8$447.38.1% Public: Government $1,250.6$1,394.1$(143.5)(10.3)% Education 1,449.01,192.3256.721.5 Healthcare 1,464.91,436.628.32.0 Total Public $4,164.5$4,023.0$141.53.5% Total net sales in 2013 increased $640.4 million, or 6.3%, to $10,768.6 million, compared to $10,128.2 million in 2012. There were 254 selling days for both the years ended December 31, 2013 and 2012. The increase in total net sales was primarily the result of growth in hardware and software, a more tenured sales force, a continued focus on seller productivity across all areas of the organization and the addition of nearly 120 customer-facing coworkers, the majority in pre- and post-sale technical positions such as technical specialists and service delivery roles. Our total net sales growth for the year ended December 31, 2013 reflected growth in notebooks/mobile devices, netcomm products and software. Software gains were driven by growth in security, document management software and network management software, partially offset by a decline in application suites. Corporate segment net sales in 2013 increased $447.3 million, or 8.1%, compared to 2012, driven by sales growth in the medium/large customer channel. Within our Corporate segment, net sales to medium/large customers increased 10.2% between years primarily due to certain of these customers increasing their IT spending, a more tenured sales force, a continued focus on seller productivity and additional customer-facing coworkers, the majority in pre- and post-sale technical positions Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* such as technical specialists and service delivery roles. This increase was led by unit volume growth in netcomm products and growth in notebooks/mobile devices and software. Partially offsetting the growth in the medium/large customer channel was a 0.6% decline in net sales to small business customers, due to certain of these customers taking a more cautious approach to spending as macroeconomic and regulatory uncertainty impacted decision-making. This decrease was led by unit volume declines in notebooks/mobile devices, partially offset by growth in netcomm products. Public segment net sales in 2013 increased $141.5 million, or 3.5%, between years, driven by strong performance in the education customer channel. Net sales to education customers increased $256.7 million, or 21.5%, between years, led by growth in net sales to K-12 customers, reflecting increased sales of notebooks/mobile devices to support new standardized digital testing requirements that will take effect in 2014. Net sales to government customers decreased $143.5 million, or 34 Qbdlfu!Qh/!362 Table of Contents 5/H/b 10.3%, in 2013 compared to 2012 due to reductions and delays in federal government spending following sequestration, uncertainty over future budget negotiations and the partial shutdown of the federal government. The government customer channel net sales decline was led by decreases in sales of enterprise storage and notebooks/mobile devices, partially offset by growth in software. Net sales to healthcare customers increased $28.3 million, or 2.0%, between years, driven by growth in notebooks/mobile devices and desktop computers. Gross profit Gross profit increased $90.7 million, or 5.4%, to $1,760.3 million in 2013, compared to $1,669.6 million in 2012. As a percentage of total net sales, gross profit decreased 20 basis points to 16.3% in 2013, down from 16.5% in 2012. Gross profit margin was negatively impacted 30 basis points by unfavorable price/mix changes within product margin, as we experienced product margin compression in transactional product categories such as desktops and notebooks. Partially offsetting this decrease was an increase of 10 basis points due to a higher mix of net service contract revenue. Net service contract revenue, including items such as third-party services and warranties, has a positive impact on gross profit margin as our cost paid to the vendor or third-party service provider is recorded as a reduction to net sales, resulting in net sales being equal to the gross profit on the transaction. The gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs, cooperative advertising funds classified as a reduction of cost of sales, product mix, net service contract revenue, commission revenue, pricing strategies, market conditions and other factors, any of which could result in changes in gross profit margins. Selling and administrative expenses Selling and administrative expenses increased $91.4 million, or 8.9%, to $1,120.9 million in 2013, compared to $1,029.5 million in 2012. As a percentage of total net sales, selling and administrative expenses increased 20 basis points to 10.4% in 2013, up from 10.2% in 2012. Sales payroll, including sales commissions and other variable compensation costs, increased $28.9 million, or 6.4%, between years, consistent with higher sales and gross profit. Additionally, selling and administrative expenses for 2013 included IPO- and secondary-offering related expenses of $75.0 million, as follows: • Pre-tax charges of $36.7 million related to the acceleration of the expense recognition for certain equity awards and $4.0 million for the related employer payroll taxes. See Note 10 of the accompanying audited consolidated financial statements for additional discussion of the impact of the IPO on our equity awards. • A pre-tax charge of $24.4 million related to the payment of a termination fee to affiliates of the Sponsors in connection with the termination of the management services agreement with such entities. • A pre-tax charge of $7.5 million related to compensation expense in connection with the Restricted Debt Unit Plan. See Note 12 of the accompanying audited consolidated financial statements for additional discussion of this charge. • Other IPO- and secondary-offering related expenses of $2.4 million. We did not record any IPO- or secondary-offering related expenses during 2012. Partially offsetting these increases in 2013, was the favorable resolution of a class action legal proceeding in which we were a claimant, which reduced selling and administrative expenses by $10.4 million in 2013 compared to 2012. Total coworker count increased by 163 coworkers, from 6,804 at December 31, 2012, to 6,967 at December 31, 2013. Advertising expense Advertising expense increased $1.3 million, or 0.9%, to $130.8 million in 2013, compared to $129.5 million in 2012. As a percentage of net sales, advertising expense was 1.2% in 2013, compared to 1.3% in 2012. The dollar increase in advertising expense was due to a continued focus on advertising our solutions and products, which reinforces our reputation as a leading IT solutions provider. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 35 Qbdlfu!Qh/!363 Table of Contents 5/H/b Income from operations The following table presents income (loss) from operations by segment, in dollars and as a percentage of net sales, and the year-over-year percentage change in income (loss) from operations for the years ended December 31, 2013 and 2012: Year Ended December 31, 2013Year Ended December 31, 2012 OperatingOperatingPercent Change Dollars inMarginDollars inMarginin Income (Loss) MillionsPercentageMillionsPercentagefrom Operations (1) Segments: Corporate $363.36.1%$349.06.3%4.1% Public 246.55.9246.76.1(0.1) Other 27.24.218.63.146.3 (2) (103.7 Headquarters (128.4)nm*)nm*(23.8) Total income from operations $508.64.7%$510.65.0%(0.4)% * Not meaningful (1) Segment income (loss) from operations includes the segment’s direct operating income (loss) and allocations for Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors. (2) Includes certain Headquarters’ function costs that are not allocated to the segments. Income from operations was $508.6 million in 2013, a decrease of $2.0 million, or 0.4%, compared to $510.6 million in 2012. The decrease in income from operations was driven by higher selling and administrative expenses primarily resulting from $75.0 million of IPO- and secondary-offering related expenses recorded during 2013, mostly offset by higher net sales and gross profit. Total operating margin percentage decreased 30 basis points to 4.7% in 2013, from 5.0% in 2012. Operating margin percentage was negatively impacted by the increase in selling and administrative expenses as a percentage of net sales and gross profit margin compression, partially offset by a decrease in advertising expense as a percentage of net sales. Corporate segment income from operations was $363.3 million in 2013, an increase of $14.3 million, or 4.1%, compared to $349.0 million in 2012. Corporate segment operating margin percentage decreased 20 basis points to 6.1% in 2013, from 6.3% in 2012. Results for 2013 included $26.4 million of IPO- and secondary-offering related expenses, which reduced Corporate segment operating margin by 40 basis points. Higher sales and gross profit dollars offset the effect of IPO- and secondary-offering related expenses on income from operations for 2013. Public segment income from operations was $246.5 million in 2013, a decrease of $0.2 million, or 0.1%, compared to $246.7 million in 2012. Public segment operating margin percentage decreased 20 basis points to 5.9% in 2013, from 6.1% in 2012. Results for 2013 included $14.4 million of IPO- and secondary-offering related expenses, which reduced Public segment operating margin by 30 basis points. Higher sales and gross profit dollars nearly offset the effect of IPO- and secondary- offering related expenses on income from operations for 2013. Interest expense, net At December 31, 2013, our outstanding long-term debt totaled $3,251.2 million, compared to $3,771.0 million at December 31, 2012. We reduced long-term debt throughout the year primarily through the use of a portion of the net proceeds from the IPO and cash flows provided by operating activities. Net interest expense in 2013 was $250.1 million, a decrease of $57.3 million compared to $307.4 million in 2012. This decrease was primarily due to lower debt balances and effective interest rates for 2013 compared to 2012 as a result of debt repayments and refinancing activities completed during 2012 and Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 2013. See "Liquidity and Capital Resources" below. Net loss on extinguishments of long-term debt During 2013, we recorded a net loss on extinguishments of long-term debt of $64.0 million compared to $17.2 million in 2012. In October 2013, we redeemed $155.0 million aggregate principal amount of senior subordinated notes. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $8.5 million, representing the difference 36 Qbdlfu!Qh/!364 Table of Contents 5/H/b between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In August 2013, we redeemed $324.0 million aggregate principal amount of senior subordinated notes. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $24.6 million, representing the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In July 2013, we redeemed $175.0 million aggregate principal amount of senior secured notes. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $16.7 million, representing the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In April 2013, we entered into a new seven-year, $1,350.0 million aggregate principal amount senior secured term loan facility. Substantially all of the proceeds were used to repay the $1,299.5 million outstanding aggregate principal amount of the prior senior secured term loan facility. In connection with this refinancing, we recorded a loss on extinguishment of long-term debt of $10.3 million, representing a write-off of the remaining unamortized deferred financing costs related to the prior senior secured term loan facility. In March 2013, we redeemed $50.0 million aggregate principal amount of senior subordinated notes. We recorded a loss on extinguishment of long-term debt of $3.9 million, representing the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In December 2012, we redeemed $100.0 million aggregate principal amount of senior subordinated notes. We recorded a loss on extinguishment of long-term debt of $7.8 million representing the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In February and March 2012, we purchased or redeemed the remaining $129.0 million of senior notes due 2015, funded with the issuance of an additional $130.0 million of senior notes due 2019. As a result, we recorded a loss on extinguishment of long-term debt of $9.4 million, representing the difference between the purchase or redemption price of the senior notes due 2015 and the net carrying amount of the purchased debt, adjusted for the remaining unamortized deferred financing costs. Income tax expense Income tax expense was $62.7 million in 2013, compared to $67.1 million in 2012. The effective income tax rate, expressed by calculating income tax expense or benefit as a percentage of income before income taxes, was 32.1% and 36.0% for 2013 and 2012, respectively. For 2013, the effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, including current year state income tax credits and an adjustment to deferred state income taxes due to changes in apportionment factors. For 2012, the effective tax rate differed from the U.S. federal statutory rate primarily due to favorable adjustments to state tax credits which were partially offset by the unfavorable impact of adjustments to deferred state income taxes due to changes in state tax laws and non-deductible expenses, primarily equity-based compensation and meals and entertainment. The lower effective tax rate for 2013 as compared to 2012 was primarily driven by the favorable impact of adjustments to deferred state income taxes due to changes in state tax apportionment factors and lower non-deductible expenses. Net income Net income was $132.8 million in 2013, compared to $119.0 million in 2012. Significant factors and events causing the net changes between the periods are discussed above. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Non-GAAP net income Non-GAAP net income was $314.3 million for the year ended December 31, 2013, an increase of $67.2 million, or 27.2%, compared to $247.1 million for the year ended December 31, 2012. 37 Qbdlfu!Qh/!365 Table of Contents 5/H/b We have included a reconciliation of Non-GAAP net income for the years ended December 31, 2013 and 2012 below. Non-GAAP net income excludes, among other things, charges related to the amortization of acquisition-related intangibles, non-cash equity-based compensation, IPO- and secondary-offering related expenses and gains and losses from the early extinguishment of debt. Non-GAAP net income is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that Non-GAAP net income provides helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures and working capital requirements. (in millions)Years Ended December 31, 20132012 Net income$132.8$119.0 (1) Amortization of intangibles 161.2163.7 Non-cash equity-based compensation8.622.1 (2) Litigation, net (6.3)— Net loss on extinguishments of long-term debt64.017.2 Interest expense adjustment related to extinguishments of (3) (7.5(3.3 long-term debt )) (4) IPO- and secondary-offering related expenses 75.0— (5) (113.5(71.6 Aggregate adjustment for income taxes)) Non-GAAP net income$314.3$247.1 (1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names. (2) Relates to unusual, non-recurring litigation matters. (3) Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. (4) IPO- and secondary-offering related expenses consist of the following: (in millions)Years Ended December 31, 20132012 Acceleration charge for certain equity awards and related employer payroll taxes$40.7$— RDU Plan cash retention pool accrual7.5— Management services agreement termination fee24.4— Other expenses2.4— IPO- and secondary-offering related expenses$75.0$— (5) Based on a normalized effective tax rate of 39.0%. Adjusted EBITDA Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Adjusted EBITDA was $808.5 million in 2013, an increase of $41.9 million, or 5.5%, compared to $766.6 million in 2012. As a percentage of net sales, Adjusted EBITDA was 7.5% and 7.6% in 2013 and 2012, respectively. We have included a reconciliation of EBITDA and Adjusted EBITDA for 2013 and 2012 in the table below. EBITDA is defined as consolidated net income before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA, which is a measure defined in our credit agreements, means EBITDA adjusted for certain items which are described in the table below. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non- GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used 38 Qbdlfu!Qh/!366 Table of Contents 5/H/b by other companies, even when similar terms are used to identify such measures. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. (in millions)Years Ended December 31, 20132012 Net income$132.8$119.0 Depreciation and amortization208.2210.2 Income tax expense62.767.1 Interest expense, net250.1307.4 EBITDA653.8703.7 Adjustments: Non-cash equity-based compensation8.622.1 Sponsor fee2.55.0 Consulting and debt-related professional fees0.10.6 Net loss on extinguishments of long-term debt64.017.2 (1) Litigation, net (4.1)4.3 (2) IPO- and secondary-offering related expenses 75.0— (3) Other adjustments 8.613.7 Total adjustments154.762.9 Adjusted EBITDA$808.5$766.6 (1) Relates to unusual, non-recurring litigation matters. (2) As defined under Non-GAAP net income above. (3) Other adjustments primarily include certain retention costs and equity investment income. The following table sets forth a reconciliation of EBITDA to net cash provided by operating activities for the years ended December 31, 2013 and 2012. Years Ended December 31, (in millions)20132012 EBITDA$653.8$703.7 Depreciation and amortization(208.2)(210.2) (62.7(67.1 Income tax expense)) Interest expense, net(250.1)(307.4) Net income132.8119.0 Depreciation and amortization208.2210.2 Equity-based compensation expense46.622.1 Deferred income taxes(48.7)(56.3) Amortization of deferred financing costs, debt premium, and debt discount, net 8.813.6 Net loss on extinguishments of long-term debt64.017.2 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Other1.71.0 Changes in assets and liabilities(47.1)(9.4) Net cash provided by operating activities$366.3$317.4 39 Qbdlfu!Qh/!367 Table of Contents 5/H/b Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 The following table presents our results of operations, in dollars and as a percentage of net sales, for the years ended December 31, 2012 and 2011: Year Ended December 31, 2012Year Ended December 31, 2011 Dollars inPercentage ofDollars inPercentage of MillionsNet SalesMillionsNet Sales Net sales $10,128.2100.0%$9,602.4100.0% Cost of sales 8,458.683.58,018.983.5 Gross profit 1,669.616.51,583.516.5 Selling and administrative expenses 1,029.510.2990.110.3 Advertising expense 129.51.3122.71.3 Income from operations 510.65.0470.74.9 Interest expense, net (307.4)(3.0)(324.2)(3.4) Net loss on extinguishments of long-term debt (17.2)(0.2)(118.9)(1.2) Other income, net 0.1—0.7— Income before income taxes 186.11.828.30.3 Income tax expense (67.1)(0.7)(11.2)(0.1) Net income $119.01.1%$17.10.2% Net sales The following table presents our net sales by segment, in dollars and as a percentage of total net sales, and the year- over-year dollar and percentage change in net sales for the years ended December 31, 2012 and 2011: Years Ended December 31, 20122011 Percentage ofPercentage of Dollars inTotal Net Dollars inTotal Net DollarPercent (1) MillionsSalesMillionsSalesChangeChange Corporate$5,512.854.4%$5,334.455.6%$178.43.3% Public4,023.039.73,757.239.1265.87.1 Other592.45.9510.85.381.616.0 Total net sales$10,128.2100.0%$9,602.4100.0%$525.85.5% (1) There were 254 and 255 selling days in the years ended December 31, 2012 and 2011, respectively. On an average daily basis, total net sales increased 5.9%. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 40 Qbdlfu!Qh/!368 Table of Contents 5/H/b The following table presents our net sales by customer channel for our Corporate and Public segments and the year- over-year dollar and percentage change in net sales for the years ended December 31, 2012 and 2011: (in millions)Years Ended December 31, 20122011Dollar ChangePercent Change Corporate: Medium / Large $4,448.5$4,287.1$161.43.8% Small Business 1,064.31,047.317.01.6 Total Corporate $5,512.8$5,334.4$178.43.3% Public: Government $1,394.1$1,343.5$50.63.8% Education 1,192.31,197.7(5.4)(0.4) Healthcare 1,436.61,216.0220.618.1 Total Public $4,023.0$3,757.2$265.87.1% Total net sales in 2012 increased $525.8 million, or 5.5%, to $10,128.2 million, compared to $9,602.4 million in 2011. There were 254 and 255 selling days in the years ended December 31, 2012 and 2011, respectively. On an average daily basis, total net sales increased 5.9%. The increase in total net sales was the result of general volume growth, market share gains, a more tenured sales force, and a continued focus on seller productivity across all areas of the organization. Our net sales growth for the year ended December 31, 2012 reflected growth in notebooks/mobile devices, netcomm products, software products, desktop computers and enterprise storage. Corporate segment net sales in 2012 increased $178.4 million, or 3.3%, compared to 2011. Within our Corporate segment, net sales to medium/large customers increased 3.8% between years, and net sales to small business customers increased 1.6% between years. Customers within the Corporate segment continued to take a more cautious approach to spending as increased macroeconomic uncertainty impacted decision-making and led to some customers delaying purchases. The increases in Corporate segment net sales were primarily a result of hardware growth, most notably in netcomm products, and unit volume growth in desktop computers. Software product growth, led by network management and security software, also contributed to the increase in net sales. Partially offsetting the growth was a decline in net sales of memory products due to several large orders in the second and third quarters of 2011 that did not recur. Public segment net sales in 2012 increased $265.8 million, or 7.1%, between years, driven by continued strong performance in the healthcare customer channel. Net sales to healthcare customers increased $220.6 million, or 18.1%, between years, led by hardware growth, most notably in enterprise storage, and unit volume growth in netcomm products, desktop computers and point of care technology carts. Software product growth also contributed to the increase in net sales in healthcare. The healthcare customer channel growth was primarily the result of deeper relationships with several group purchasing organizations and increased healthcare industry demand for IT products, as the healthcare industry continued its adoption of electronic medical records and point of care technologies. Net sales to government customers increased $50.6 million, or 3.8%, in 2012 compared to 2011 led by unit volume increases in sales of notebooks/mobile devices, partially offset by a decline in net sales of netcomm products. Net sales to education customers decreased $5.4 million, or 0.4%, between years, reflecting budget constraints. A decline in sales to K-12 customers was partially offset by growth in sales to higher education customers that was led by increased sales of netcomm products, as higher education customers refreshed and added additional enterprise technology. Gross profit Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Gross profit increased $86.1 million, or 5.4%, to $1,669.6 million in 2012, compared to $1,583.5 million in 2011. As a percentage of total net sales, gross profit was 16.5% in both 2012 and 2011. Gross profit margin was positively impacted 10 basis points by a higher mix of commission and net service contract revenue. Fully offsetting these increases in gross profit margin were declines in vendor funding primarily due to program changes for certain vendors. Commission revenue, including agency fees earned on sales of software licenses and software assurance under enterprise agreements, has a positive impact on our gross profit margin, as we record the fee or commission as a component of net sales when earned and there is no corresponding cost of sales. Net service contract revenue, including items such as third-party services and warranties, also has a positive impact on gross profit margin as our cost paid to the vendor or third-party service provider is recorded as a reduction to net sales, resulting in net sales being equal to the gross profit on the transaction. Vendor funding includes purchase discounts, volume rebates and cooperative advertising. 41 Qbdlfu!Qh/!369 Table of Contents 5/H/b The gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs, cooperative advertising funds classified as a reduction of cost of sales, product mix, net service contract revenue, commission revenue, pricing strategies, market conditions, and other factors, any of which could result in changes in gross profit margins. Selling and administrative expenses Selling and administrative expenses increased $39.4 million, or 4.0%, to $1,029.5 million in 2012, compared to $990.1 million in 2011. As a percentage of total net sales, selling and administrative expenses decreased 10 basis points to 10.2% in 2012, down from 10.3% in 2011. The dollar increase in selling and administrative expenses was primarily due to higher payroll costs (excluding bonus compensation tied to Adjusted EBITDA) of $43.0 million. The higher payroll costs reflected in selling and administrative expenses were driven by increased sales commissions and other variable compensation costs consistent with higher sales and gross profit. While total coworker count increased by 59 coworkers, from 6,745 coworkers at December 31, 2011 to 6,804 coworkers at December 31, 2012, the increase was primarily comprised of service delivery coworkers, the cost of which is reflected in cost of sales. Other factors that increased selling and administrative expenses included a $5.8 million increase in health benefits due to higher claims costs and a higher average number of participants in 2012 compared to 2011, a $5.3 million increase in depreciation and amortization expense related primarily to additional capital expenditures for information technology systems, and a $2.6 million increase in stock compensation expense, primarily due to incremental expense related to a modified Class B Common Unit grant agreement with our former chief executive officer. Partially offsetting these increases was an $11.8 million decline in bonus compensation tied to Adjusted EBITDA, as performance fell below target, $3.8 million of expenses related to the modification of our senior secured term loan facility in 2011 that did not recur in 2012, and a $3.3 million decline in litigation expenses between years. The decrease in selling and administrative expenses as a percentage of sales of 10 basis points between years was driven by the decline in incentive compensation tied to Adjusted EBITDA performance. Advertising expense Advertising expense increased $6.8 million, or 5.6%, to $129.5 million in 2012, compared to $122.7 million in 2011. As a percentage of net sales, advertising expense was 1.3% in both 2012 and 2011. The increase in advertising expense was due to a focus on continuing to advertise our solutions and products and to build our reputation as a leading IT solutions provider, primarily through targeted digital advertising, partially offset by decreases in expenditures for print advertising. Income from operations The following table presents income (loss) from operations by segment, in dollars and as a percentage of net sales, and the year-over-year percentage change in income (loss) from operations for the years ended December 31, 2012 and 2011: Year Ended December 31, 2012Year Ended December 31, 2011 OperatingOperatingPercent Change Dollars inMarginDollars inMarginin Income (Loss) MillionsPercentageMillionsPercentagefrom Operations (1) Segments: Corporate $349.06.3%$331.66.2%5.2% Public 246.76.1233.36.25.7 Other 18.63.117.53.46.5 (2) (111.7 Headquarters (103.7)nm*)nm*7.2 Total income from operations $510.65.0%$470.74.9%8.5% * Not meaningful Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* (1) Segment income (loss) from operations includes the segment’s direct operating income (loss) and allocations for Headquarters’ costs, allocations for logistics services, certain inventory adjustments, and volume rebates and cooperative advertising from vendors. (2) Includes Headquarters’ function costs that are not allocated to the segments. Income from operations was $510.6 million in 2012, an increase of $39.9 million, or 8.5%, compared to $470.7 million in 2011. This increase was driven by higher net sales and gross profit, partially offset by higher selling and administrative expenses and advertising expense. Total operating margin percentage increased 10 basis points to 5.0% in 2012, 42 Qbdlfu!Qh/!36: Table of Contents 5/H/b compared to 4.9% in 2011. Operating margin percentage was positively impacted by the decrease in selling and administrative expenses as a percentage of net sales. Corporate segment income from operations was $349.0 million in 2012, an increase of $17.4 million, or 5.2%, compared to $331.6 million in 2011. This increase was primarily driven by higher net sales and gross profit margin, partially offset by higher selling and administrative expenses, resulting in a net increase in segment operating income before allocations of $14.4 million in 2012 compared to 2011. In addition, Corporate segment income from operations benefited from an increase of $2.5 million in income allocations from our logistics operations and a decrease of $0.5 million in Headquarters' expense allocations in 2012 compared to 2011. The improved profitability of our logistics operations was driven by stronger operating leverage given higher purchase volumes while support costs remained flat. Public segment income from operations was $246.7 million in 2012, an increase of $13.4 million, or 5.7%, compared to $233.3 million in 2011. This increase reflected higher segment operating income before allocations of $4.0 million as a result of increased net sales and gross profit dollars, partially offset by higher selling and administrative costs. In addition, Public segment income from operations benefited from an increase of $5.7 million in income allocations from our logistics operations and a decrease in Headquarters’ expense allocations of $3.7 million in 2012 compared to 2011. Interest expense, net At December 31, 2012, our outstanding long-term debt totaled $3,771.0 million, compared to $4,066.0 million at December 31, 2011. Net interest expense in 2012 was $307.4 million, a decrease of $16.8 million compared to $324.2 million in 2011. Interest expense in 2011 included a benefit of $19.4 million, due to an adjustment to the long-term accrued interest liability associated with the extinguishment of $1,078.0 million of senior notes due 2015. The long-term accrued interest liability represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. Of the remaining net decrease of $36.2 million, $27.2 million was due to lower effective interest rates and lower debt balances in 2012 compared to the prior year as a result of debt repayment and refinancing activities completed during 2011 and 2012. The remaining net decrease was primarily attributable to additional interest expense in 2011 related to the interest rate swaps that terminated in January 2011, higher 2011 mark-to-market losses on interest rate caps, higher amortization of deferred financing costs in 2011 compared to 2012 and a 2012 benefit related to an adjustment to the long-term accrued interest liability associated with the extinguishment of $100.0 million of senior subordinated notes due 2017. Net loss on extinguishments of long-term debt During 2012, we recorded a net loss on extinguishments of long-term debt of $17.2 million compared to $118.9 million in 2011. In February and March 2012, we purchased or redeemed the remaining $129.0 million of senior notes due 2015, funded with the issuance of an additional $130.0 million of senior notes due 2019. As a result, we recorded a loss on extinguishment of long-term debt of $9.4 million, representing the difference between the purchase or redemption price of the senior notes due 2015 and the net carrying amount of the purchased debt, adjusted for the remaining unamortized deferred financing costs. In December 2012, we redeemed $100.0 million aggregate principal amount of senior subordinated notes. We recorded a loss on extinguishment of long-term debt of $7.8 million representing the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In March 2011, we amended our senior secured term loan facility and recorded a loss on extinguishment of long-term debt of $3.2 million, representing a write-off of a portion of the unamortized deferred financing costs on this facility. In April and May 2011, we purchased $1,078.0 million of senior notes due 2015, funded with the issuance of $1,175.0 million of senior notes due 2019. As a result, we recorded a loss on extinguishment of long-term debt of $114.1 million, representing the difference between the purchase price of the senior notes due 2015 at 109% of principal amount and the net Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. In June 2011, we entered into a new $900.0 million senior secured asset-based revolving credit facility, replacing the existing $800.0 million facility. As a result, we recorded a loss on extinguishment of long-term debt of $1.6 million representing a write-off of a portion of the unamortized deferred financing costs related to the previous facility. Income tax expense Income tax expense was $67.1 million in 2012, compared to $11.2 million in 2011. The effective income tax rate was 36.0% and 39.7% for 2012 and 2011, respectively. 43 Qbdlfu!Qh/!371 Table of Contents 5/H/b For 2012, the effective tax rate differed from the U.S. federal statutory rate primarily due to favorable adjustments to state tax credits which are partially offset by the unfavorable impact of adjustments to deferred taxes due to changes in state tax laws and permanent differences. For 2011, the effective tax rate differed from the U.S. federal statutory rate primarily due to the unfavorable impact of permanent differences offset by a benefit for state income taxes. The lower effective tax rate for 2012 as compared to 2011 was primarily driven by the impact of favorable adjustments to state tax credits in 2012 and the lower rate impact of permanent differences in 2012 due to the significantly greater amount of pre-tax income. Net income Net income was $119.0 million in 2012, compared to $17.1 million in 2011. The 2012 and 2011 results included after tax losses on extinguishments of long-term debt of $10.5 million and $72.5 million, respectively. Other significant factors and events causing the net changes from 2011 to 2012 are discussed above. Non-GAAP net income Non-GAAP net income was $247.1 million for the year ended December 31, 2012, an increase of $48.3 million, or 24.3%, compared to $198.8 million for the year ended December 31, 2011. We have included a reconciliation of Non-GAAP net income for the years ended December 31, 2012 and 2011 below. Non-GAAP net income excludes, among other things, charges related to the amortization of acquisition-related intangibles, non-cash equity-based compensation and gains and losses from the early extinguishment of debt. Non-GAAP net income is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that Non-GAAP net income provides helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures and working capital requirements. (in millions)Years Ended December 31, 20122011 Net income$119.0$17.1 (1) Amortization of intangibles 163.7165.7 Non-cash equity-based compensation22.119.5 Net loss on extinguishments of long-term debt17.2118.9 Interest expense adjustment related to extinguishments of (2) (3.3(19.4 long-term debt )) (3) Debt related refinancing costs —3.8 (4) Aggregate adjustment for income taxes(71.6)(106.8) Non-GAAP net income$247.1$198.8 (1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names. (2) Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. (3) Reflects expenses for the March 2011 amendment to the prior term loan facility. (4) Based on a normalized effective tax rate of 39.0%. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Adjusted EBITDA Adjusted EBITDA was $766.6 million in 2012, an increase of $49.3 million, or 6.9%, compared to $717.3 million in 2011. As a percentage of net sales, Adjusted EBITDA was 7.6% and 7.5% in 2012 and 2011, respectively. We have included a reconciliation of EBITDA and Adjusted EBITDA for 2012 and 2011 in the table below. EBITDA is defined as consolidated net income before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA, which is a measure defined in our credit agreements, means EBITDA adjusted for certain items which are described in the table below. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non- GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either 44 Qbdlfu!Qh/!372 Table of Contents 5/H/b excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. See “Selected Financial Data” included elsewhere in this report for a reconciliation of EBITDA to cash flows from operating activities. (in millions)Years Ended December 31, 20122011 Net income$119.0$17.1 Depreciation and amortization210.2204.9 Income tax expense67.111.2 Interest expense, net307.4324.2 EBITDA703.7557.4 Adjustments: Non-cash equity-based compensation22.119.5 Sponsor fee5.05.0 Consulting and debt-related professional fees0.65.1 Net loss on extinguishments of long-term debt17.2118.9 (1) Litigation, net 4.3— (2) Other adjustments 13.711.4 Total adjustments62.9159.9 Adjusted EBITDA$766.6$717.3 (1) Relates to unusual, non-recurring litigation matters. (2) Other adjustments include certain retention costs and equity investment income. The following table sets forth a reconciliation of EBITDA to net cash provided by operating activities for the years ended December 31, 2012 and 2011. Years Ended December 31, (in millions)20122011 EBITDA$703.7$557.4 Depreciation and amortization(210.2)(204.9) Income tax expense(67.1)(11.2) Interest expense, net(307.4)(324.2) Net income119.017.1 Depreciation and amortization210.2204.9 Equity-based compensation expense22.119.5 Deferred income taxes(56.3)(10.2) Allowance for doubtful accounts—0.4 Amortization of deferred financing costs and debt premium13.615.7 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Net loss on extinguishments of long-term debt17.2118.9 Other1.06.7 Changes in assets and liabilities(9.4)(158.3) Net cash provided by operating activities$317.4$214.7 45 Qbdlfu!Qh/!373 Table of Contents 5/H/b Seasonality While we have not historically experienced significant seasonality throughout the year, sales in our Corporate segment, which primarily serves private sector business customers, are typically higher in the fourth quarter than in other quarters due to customers spending their remaining technology budget dollars at the end of the year. Additionally, sales in our Public segment have historically been higher in the third quarter than in other quarters primarily due to the buying patterns of the federal government and education customers. Liquidity and Capital Resources Overview We finance our operations and capital expenditures through a combination of internally generated cash from operations and from borrowings under our senior secured asset-based revolving credit facility. We believe that our current sources of funds will be sufficient to fund our cash operating requirements for the next year. In addition, we believe that, in spite of the uncertainty of future macroeconomic conditions, we have adequate sources of liquidity and funding available to meet our longer-term needs. However, there are a number of factors that may negatively impact our available sources of funds. The amount of cash generated from operations will be dependent upon factors such as the successful execution of our business plan and general economic conditions. On July 2, 2013, we completed an IPO of 23,250,000 shares of common stock. On July 31, 2013, we completed the sale of an additional 3,487,500 shares of common stock to the underwriters of the IPO pursuant to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO. Such shares were registered under the Securities Act of 1933, as amended, pursuant to our Registration Statement on Form S-1, which was declared effective by the SEC on June 26, 2013. Our shares of common stock are listed on the NASDAQ Global Select Market under the symbol “CDW.” Our shares of common stock were sold to the underwriters at a price of $17.00 per share in the IPO and upon the exercise of the overallotment option, which together generated aggregate net proceeds of $424.7 million to us after deducting underwriting discounts, expenses and transaction costs. Using a portion of the net proceeds from the IPO, we paid a $24.4 million termination fee to affiliates of the Sponsors in connection with the termination of the management services agreement with such entities that was effective upon completion of the IPO and redeemed $175.0 million aggregate principal amount of senior secured notes due 2018. The redemption price of the senior secured notes due 2018 was 108.0% of the principal amount redeemed, plus $0.7 million of accrued and unpaid interest to the date of redemption. We used cash on hand to pay such accrued and unpaid interest. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $16.7 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $14.0 million in redemption premium and $2.7 million for the write-off of a portion of the remaining deferred financing costs related to the senior secured notes due 2018. On August 1, 2013, we redeemed $324.0 million aggregate principal amount of senior subordinated notes due 2017. We used a portion of the net proceeds from the IPO to redeem $146.0 million aggregate principal amount of senior subordinated notes due 2017 and incremental borrowings of $190.0 million under the senior secured term loan facility to redeem $178.0 million aggregate principal amount of senior subordinated notes due 2017. The redemption price of the senior subordinated notes due 2017 was 106.268% of the principal amount redeemed, plus $12.0 million of accrued and unpaid interest to the date of redemption. We used cash on hand to pay such accrued and unpaid interest. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $24.6 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $20.3 million in redemption premium and $4.3 million for the write-off of a portion of the remaining deferred financing costs related to the senior subordinated notes due 2017. On October 18, 2013, we redeemed $155.0 million aggregate principal amount of senior subordinated notes due 2017 at a redemption price that was 104.178% of the principal amount redeemed plus $0.2 million in accrued and unpaid interest to Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* the date of redemption. We used a combination of cash on hand and the net proceeds from the sale of shares of common stock related to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO, in the amount of $56.0 million, to redeem the $155.0 million aggregate principal amount of senior subordinated notes due 2017, including the redemption premium and accrued and unpaid interest. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $8.5 million in the consolidated statement of operations during the year ended December 31, 2013. This loss represented $6.5 million in redemption premium and $2.0 million for the write-off of a portion of the remaining deferred financing costs related to the senior subordinated notes due 2017. See "Subsequent Events" below for a description of refinancing transactions completed during 2014. 46 Qbdlfu!Qh/!374 Table of Contents 5/H/b On December 2, 2013, we paid a cash dividend on our common stock of $0.0425 per share to all stockholders of record as of the close of business on November 15, 2013. On February 13, 2014, we announced that our board of directors declared a quarterly cash dividend on our common stock of $0.0425 per share. The dividend will be paid on March 10, 2014 to all stockholders of record as of the close of business on February 25, 2014. The payment of any future dividends will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors that our board of directors deems relevant. In addition, our ability to pay dividends on our common stock will be limited by restrictions on our ability to pay dividends or make distributions to our stockholders and on the ability of our subsidiaries to pay dividends or make distributions to us, in each case, under the terms of our current and any future agreements governing our indebtedness. In connection with the establishment of the MPK Incentive Plan II (the “MPK Plan”) in 2007, we agreed to make charitable contributions in amounts equal to the net income tax benefits derived from payouts to participants under the MPK Plan (net of any related employer payroll tax costs). As of December 31, 2013, we have accrued approximately $21 million related to this arrangement within other current liabilities. We expect to make the related cash contribution during the first quarter of 2014. See Note 10 of the accompanying audited consolidated financial statements for additional discussion of this arrangement. Cash Flows Cash flows from operating, investing and financing activities were as follows: (in millions)Years Ended December 31, 201320122011 Net cash provided by (used in): Operating activities$366.3$317.4$214.7 Investing activities(47.1)(41.7)(56.0) Net change in accounts payable - inventory financing7.4(29.5)250.5 Other financing activities(175.7)(308.5)(345.9) Financing activities(168.3)(338.0)(95.4) Effect of exchange rate changes on cash and cash equivalents(0.7)0.3— Net increase (decrease) in cash and cash equivalents$150.2$(62.0)$63.3 Operating Activities Net cash provided by operating activities for 2013 increased $48.9 million compared to 2012. Net income adjusted for the impact of non-cash items such as depreciation and amortization, equity-based compensation expense and net loss on extinguishments of long-term debt was $413.4 million during 2013, compared to $326.8 million during 2012, an increase of $86.6 million. The increase in cash of $86.6 million reflected stronger operating results in 2013 compared to 2012. Net changes in assets and liabilities reduced cash by $47.1 million in 2013 compared to a reduction of $9.4 million in 2012, resulting in a change of $37.7 million between periods. While changes in assets and liabilities were relatively flat during 2012, during 2013, accounts receivable and accounts payable balances decreased and increased cash by $170.8 million and $146.1 million, respectively, primarily as a result of accelerated sales growth during the final month of 2013. Merchandise inventory also increased during 2013 to support strong sales order volume near the end of 2013. Net cash provided by operating activities for 2012 increased $102.7 million compared to 2011. The increase was primarily driven by changes in assets and liabilities, resulting in a $148.9 million increase in net cash provided by operating activities between periods. Despite a 2012 fourth quarter increase in net sales of 4.9% between years, accounts receivable remained relatively flat from the prior year end driven by improved collection results, particularly within the Public segment. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Accounts receivable in 2011 represented a use of cash of $183.4 million, primarily due to a 2011 fourth quarter increase in net sales of 9.3% from the same period in the prior year. Merchandise inventory also contributed $36.1 million of the increase in cash between years driven by a return to more normalized inventory levels in 2012 following the build-up at the end of 2011 related to the hard drive shortage from the Thailand floods, along with a higher percentage of drop shipments from vendor partners and distributors in 2012 compared to 2011. Partially offsetting these factors in 2012 was a $54.1 million decrease in other assets as we collected $53.3 million in income tax refunds in 2011 that did not repeat in 2012. Net income adjusted for the impact of non-cash items such as losses on extinguishment of long-term debt was $326.8 million in 2012 compared to $373.0 million in 2011, or a decrease of $46.2 million. Improved operating performance in 2012 drove higher net income between years, but also higher net cash income taxes paid. Net cash income taxes paid in 2012 were $123.2 million compared to a net 47 Qbdlfu!Qh/!375 Table of Contents 5/H/b cash tax refund of $20.9 million in 2011. In addition to the $53.3 million in cash tax refunds received in 2011, we also fully utilized our remaining federal net operating tax loss carryforwards during 2011. In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. The following table presents the components of our cash conversion cycle: (in days)December 31, 201320122011 (1) Days of sales outstanding (DSO) 444245 (2) Days of supply in inventory (DIO) 151415 (3) Days of purchases outstanding (DPO) (35)(32)(32) Cash conversion cycle242428 (1) Represents the rolling three-month average of the balance of trade accounts receivable, net at the end of the period divided by average daily net sales for the same three-month period. Also incorporates components of other miscellaneous receivables. (2) Represents the rolling three-month average of the balance of inventory at the end of the period divided by average daily cost of goods sold for the same three-month period. (3) Represents the rolling three-month average of the combined balance of accounts payable-trade, excluding cash overdrafts, and accounts payable-inventory financing at the end of the period divided by average daily cost of goods sold for the same three-month period. The cash conversion cycle remained flat at 24 days for both December 31, 2013 and 2012. The increase in DSO was primarily driven by an increase in receivables for third-party services such as software assurance and warranties. These services have an unfavorable impact on DSO as the receivable is recognized on the balance sheet on a gross basis while the corresponding sales amount in the statement of operations is recorded on a net basis. The DPO increase was primarily due to an increase in payables for third-party services, which offsets the related increase in DSO discussed above. These services have a favorable impact on DPO as the payable is recognized on the balance sheet without a corresponding cost of sales in the statement of operations because the cost paid to the vendor or third-party service provider is recorded as a reduction to net sales. The timing of quarter-end payments also had a favorable impact on DPO at December 31, 2013. The increase in DIO was primarily due to an increase in inventory to support strong sales order volume near the end of 2013. The cash conversion cycle decreased to 24 days at December 31, 2012 compared to 28 days at December 31, 2011, driven by improvements in DSO and DIO. The DSO decline was primarily related to improved collections in the Public segment. The DIO decline was primarily related to an increase in the percentage of products delivered to customers via drop- shipment in 2012 compared to 2011, which had the effect of increasing cost of sales without a corresponding increase in inventory-related working capital. Investing Activities Net cash used in investing activities increased $5.4 million in 2013 compared to 2012. Capital expenditures were $47.1 million and $41.4 million for 2013 and 2012, respectively, primarily for improvements to our information technology systems during both years. Net cash used in investing activities in 2012 decreased $14.3 million compared to 2011. This decline was primarily due to a reduction in cash payments between years of $6.6 million related to interest rate swap agreements, as the $6.6 million paid in 2011 reflected the final payment upon termination of the swap agreements on January 14, 2011. Capital expenditures were $41.4 million and $45.7 million for 2012 and 2011, respectively, primarily for improvements to our information technology systems during both years. During 2012 and 2011, we paid $0.3 million and $3.7 million, respectively, for new Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* interest rate cap agreements. Financing Activities Net cash used in financing activities decreased $169.7 million in 2013 compared to 2012. The decrease was primarily driven by various debt transactions during each period and our July 2013 IPO, which generated net proceeds of $424.7 million after deducting underwriting discounts, expenses and transaction costs. The net impact of our debt transactions resulted in cash outflows of $569.4 million and $310.6 million during 2013 and 2012, respectively, as cash was used in each period to reduce 48 Qbdlfu!Qh/!376 Table of Contents 5/H/b our total long-term debt. Debt transactions impacting each period presented are described below under "Long-Term Debt and Financing Arrangements." Net cash used in financing activities increased $242.6 million in 2012 compared to 2011. This change was primarily driven by 2011 net inflows from accounts payable-inventory financing of $250.5 million compared to 2012 outflows of $29.5 million, resulting in a total impact on the change in cash used in financing activities of $280.0 million from accounts payable- inventory financing. The reduction in cash during 2012 from accounts payable-inventory financing was primarily due to the termination of one of our inventory financing agreements in the first quarter of 2012, with amounts owed for subsequent purchases being included in accounts payable-trade on the consolidated balance sheet and classified as cash flows from operating activities on the consolidated statement of cash flows. As discussed below under “Inventory Financing Arrangements,” in June 2011 we entered into a new inventory financing agreement with a financial intermediary to facilitate the purchase of inventory from a certain vendor. Inventory purchases from this vendor under the June 2011 inventory financing agreement are included in accounts payable-inventory financing and reported as cash flows from financing activities. The net impact of our debt transactions resulted in cash outflows of $310.6 million during 2012 and $346.5 million during 2011 as cash was used in each period to reduce our total long-term debt. Debt transactions impacting each period presented are described below under "Long-Term Debt and Financing Arrangements." Long-Term Debt and Financing Arrangements Long-term debt was as follows: (dollars in millions)December 31, (1) Interest Rate 20132012 Senior secured asset-based revolving credit facility—%$—$— Senior secured term loan facility3.25%1,528.91,339.5 (4.4 Unamortized discount on senior secured term loan facility)— Senior secured notes due 20188.0%325.0500.0 Senior notes due 20198.5%1,305.01,305.0 Unamortized premium on senior notes due 20194.25.0 Senior subordinated notes due 201712.535%92.5621.5 Total long-term debt3,251.23,771.0 (45.4(40.0 Less current maturities of long-term debt)) Long-term debt, excluding current maturities$3,205.8$3,731.0 (1) Interest rate at December 31, 2013. At December 31, 2013, we were in compliance with the covenants under our various credit agreements and indentures as described below. Under the indentures governing the 8.5% Senior Notes due 2019 and 8.0% Senior Secured Notes due 2018, which contain the most restrictive restricted payment provisions in our various credit agreements and indentures, CDW LLC and its restricted subsidiaries are generally restricted from paying dividends and making other restricted payments unless CDW LLC could incur an additional dollar of indebtedness under its fixed charges ratio covenant and the amount of such dividend or other restricted payment, together with the amount of all other dividends and restricted payments made from January 1, 2011 through the end of the most recently ended fiscal quarter, is less than the sum of 50% of cumulative consolidated net income or 100% of any consolidated net loss incurred over the period plus the amount of certain other items occurring during that period that increase (and in some cases decrease) the amounts available for such payments. For the purpose of determining restricted payment capacity, consolidated net income or loss includes certain adjustments that are defined in the indentures. At December 31, 2013, the amount of cumulative consolidated net income free of restrictions under the credit agreements and indentures ("Restricted Payment Capacity") was $148.0 million. However, the transactions described below under "Subsequent Events" have since reduced the Restricted Payment Capacity to approximately $89 million. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Senior Secured Asset-Based Revolving Credit Facility (“Revolving Loan”) At December 31, 2013, we had no outstanding borrowings under the Revolving Loan, $2.2 million of undrawn letters of credit and $256.7 million reserved related to the floorplan sub-facility. On June 24, 2011, we entered into the Revolving Loan, a five-year $900.0 million senior secured asset-based revolving credit facility, with the facility being available to us for borrowings, issuance of letters of credit and floorplan financing for certain vendor products. The Revolving Loan matures on June 24, 2016. The Revolving Loan replaced our previous revolving loan credit facility that was to mature on October 12, 2012. In connection with the termination of the 49 Qbdlfu!Qh/!377 Table of Contents 5/H/b previous facility, we recorded a loss on extinguishment of long-term debt of $1.6 million in the consolidated statement of operations for the year ended December 31, 2011, representing a write-off of a portion of unamortized deferred financing costs. Fees of $7.2 million related to the Revolving Loan were capitalized as deferred financing costs and are being amortized over the term of the facility on a straight-line basis. As described in Note 5 to the consolidated financial statements, we have entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers. In connection with the floorplan sub-facility, we entered into the Revolving Loan inventory financing agreement. Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and noninterest bearing. We will either pay the outstanding Revolving Loan inventory financing agreement amounts when they become due, or the Revolving Loan's administrative agent will automatically initiate an advance on the Revolving Loan and use the proceeds to pay the balance on the due date. At December 31, 2013, the financial intermediary reported an outstanding balance of $246.8 million under the Revolving Loan inventory financing agreement. The total amount reported on the consolidated balance sheet as accounts payable-inventory financing related to the Revolving Loan inventory financing agreement is $9.3 million more than the $246.8 million owed to the financial intermediary due to differences in the timing of reporting activity under the Revolving Loan inventory financing agreement. The outstanding balance reported by the financial intermediary excludes $9.9 million in reserves for open orders that reduce the availability under the Revolving Loan. Changes in cash flows from the Revolving Loan inventory financing agreement are reported in financing activities on the consolidated statements of cash flows. Borrowings under the Revolving Loan bear interest at a variable interest rate plus an applicable margin. The variable interest rate is based on one of two indices, either (i) LIBOR, or (ii) the Alternate Base Rate (“ABR”) with the ABR being the greatest of (a) the prime rate, (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus 1.00%. The applicable margin varies (2.00% to 2.50% for LIBOR borrowings and 1.00% to 1.50% for ABR borrowings) depending upon our average daily excess cash availability under the agreement and is subject to a reduction of 0.25% if, and for as long as, the senior secured leverage ratio is less than 3.0. The senior secured leverage ratio is defined as the ratio of senior secured debt (including amounts owed under certain inventory floorplan arrangements) less cash and cash equivalents, to Adjusted EBITDA, a non-GAAP measure, for the four most recently ended fiscal quarters. For the four quarters ended December 31, 2013, the senior secured leverage ratio was 2.1. Availability under the Revolving Loan is limited to (a) the lesser of the revolving commitment of $900.0 million and the amount of the borrowing base less (b) outstanding borrowings, letters of credit, and amounts outstanding under the Revolving Loan inventory financing agreement plus a reserve of 15% of open orders. The borrowing base is (a) the sum of the products of the applicable advance rates on eligible accounts receivable and on eligible inventory as defined in the agreement less (b) any reserves. At December 31, 2013, the borrowing base was $1,065.5 million based on the amount of eligible inventory and accounts receivable balances as of November 30, 2013. We could have borrowed up to an additional $641.1 million under the Revolving Loan at December 31, 2013. The fee on the unused portion of the Revolving Loan ranges from 25 basis points to either 37.5 or 50 basis points, depending on the amount of utilization. CDW LLC is the borrower under the Revolving Loan. All obligations under the Revolving Loan are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. Borrowings under the Revolving Loan are collateralized by a first priority interest in inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5), deposits, and accounts receivable, and a second priority interest in substantially all other assets. The Revolving Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Revolving Loan also includes maintenance of a minimum average daily excess cash availability requirement. Should we fall below the minimum average daily excess cash availability requirement for five consecutive business days, we become subject to a fixed charge coverage ratio until such time as the daily excess cash availability requirement is met for 30 consecutive business days. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Senior Secured Term Loan Facility On April 29, 2013, we entered into a new seven-year, $1,350.0 million aggregate principal amount senior secured term loan facility (the "Term Loan"). The Term Loan was issued at a price that was 99.75% of par, which resulted in a discount of $3.4 million. Substantially all of the proceeds from the Term Loan were used to repay the $1,299.5 million outstanding aggregate principal amount of the prior senior secured term loan facility (the "Prior Term Loan Facility"). In connection with this refinancing, we recorded a loss on extinguishment of long-term debt of $10.3 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented a write-off of the remaining unamortized deferred financing costs related to the Prior Term Loan Facility. 50 Qbdlfu!Qh/!378 Table of Contents 5/H/b On July 31, 2013, we borrowed an additional $190.0 million aggregate principal amount under the Term Loan at a price that was 99.25% of par, which resulted in a discount of $1.4 million. Such proceeds were used to redeem a portion of outstanding Senior Subordinated Notes. The discounts are reported on the consolidated balance sheet as a reduction to the face amount of the Term Loan and are being amortized to interest expense over the term of the related debt. Fees of $6.1 million related to the Term Loan were capitalized as deferred financing costs and are being amortized over the term of the facility using the effective interest method. Borrowings under the Term Loan bear interest at either (a) the alternate base rate ("ABR") plus a margin or (b) LIBOR plus a margin; provided that for the purposes of the Term Loan, LIBOR shall not be less than 1.00% per annum at any time ("LIBOR Floor"). The margin is based upon a net leverage ratio as defined in the agreement governing the Term Loan, ranging from 1.25% to 1.50% for ABR borrowings and 2.25% to 2.50% for LIBOR borrowings. An interest rate of 3.25%, LIBOR Floor plus a 2.25% margin, was in effect during the three-month period ended December 31, 2013. Unlike the Prior Term Loan Facility, the Term Loan does not include a senior secured leverage ratio requirement or a hedging requirement. Additionally, the definition of debt under the Term Loan was revised to exclude amounts outstanding under our inventory financing agreements. The Term Loan is subject to certain requirements as was the Prior Term Loan Facility to make mandatory annual excess cash flow prepayments under designated circumstances, including (i) a prepayment in an amount equal to 50% of our excess cash flow for a fiscal year (the percentage rate of which decreases to 25% when the total net leverage ratio, as defined in the governing agreement, is less than or equal to 5.5 but greater than 4.5; and decreases to 0% when the total net leverage ratio is less than or equal to 4.5), and (ii) the net cash proceeds from the incurrence of certain additional indebtedness by us or our subsidiaries. The total net leverage ratio was 3.8 at December 31, 2013. We are required to pay quarterly principal installments equal to 0.25% of the original principal amount of the Term Loan, with the remaining principal amount payable on the maturity date of April 29, 2020. The quarterly principal installment payments commenced during the quarter ended June 30, 2013. At December 31, 2013, the outstanding principal amount of the Term Loan was $1,528.9 million, excluding $4.4 million in unamortized discount. We have interest rate cap agreements in effect through January 14, 2015 with a combined notional amount of $1,150.0 million. These cap agreements have not been designated as cash flow hedges of interest rate risk for GAAP accounting purposes. Of the total $1,150.0 million notional amount, $500.0 million entitle us to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The remaining cap agreements with a notional amount of $650.0 million entitle us to payments from the counterparty of the amount, if any, by which the three-month LIBOR exceeds 1.5% during the agreement period. The fair value of our interest rate cap agreements was zero at December 31, 2013 and $0.1 million at December 31, 2012. During the first quarters of 2013, 2012 and 2011, we made principal prepayments totaling $40.0 million, $201.0 million and $132.0 million, respectively, under the Prior Term Loan Facility. These prepayments satisfied the excess cash flow payment provision of the Prior Term Loan Facility with respect to the years ended December 31, 2012, 2011 and 2010, respectively. On March 11, 2011, we entered into an amendment to the Prior Term Loan Facility, which became effective on March 14, 2011. In connection with this amendment, we recorded a loss on extinguishment of long-term debt of $3.2 million in the consolidated statement of operations for the year ended December 31, 2011. This loss represented a write-off of a portion of the unamortized deferred financing costs related to the Prior Term Loan Facility. CDW LLC is the borrower under the Term Loan. All obligations under the Term Loan are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5 to the consolidated financial statements), deposits, and accounts receivable, and by a first priority interest in substantially all other assets. The Term Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. 8.0% Senior Secured Notes due 2018 (“Senior Secured Notes”) The Senior Secured Notes were issued on December 17, 2010 and will mature on December 15, 2018. At December 31, 2013, the outstanding principal amount of the Senior Secured Notes was $325.0 million. 51 Qbdlfu!Qh/!379 Table of Contents 5/H/b On July 2, 2013, we used a portion of the net proceeds from the IPO to redeem $175.0 million aggregate principal amount of Senior Secured Notes. The redemption price of the Senior Secured Notes was 108.0% of the principal amount redeemed, plus $0.7 million of accrued and unpaid interest to the date of redemption. We used cash on hand to pay such accrued and unpaid interest. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $16.7 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $14.0 million in redemption premium and $2.7 million for the write-off of a portion of the remaining deferred financing costs related to the Senior Secured Notes. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Secured Notes and the obligations under the notes are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Secured Notes are secured on a pari passu basis with the Term Loan by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5 to the consolidated financial statements), deposits, and accounts receivable, and by a first priority interest in substantially all other assets. The Senior Secured Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Secured Note indenture does not contain any financial covenants. 11.0% Senior Exchange Notes due 2015 (“Senior Exchange Notes”); 11.5% / 12.25% Senior PIK Election Exchange Notes due 2015 (“PIK Election Notes” together with the Senior Exchange Notes, the “Senior Notes due 2015”) At December 31, 2013, there were no outstanding Senior Notes due 2015. On April 13, 2011, we completed a cash tender offer (the “Initial Senior Notes due 2015 Tender Offer”) and purchased $665.1 million aggregate principal amount of Senior Notes due 2015 comprised of $519.2 million of the Senior Exchange Notes and $145.9 million of the PIK Election Notes. We concurrently issued $725.0 million aggregate principal amount of Senior Notes (as defined below). The proceeds from this offering, together with cash on hand and borrowings under the then- outstanding revolving loan credit facility, were used to fund the purchase of the tendered Senior Notes due 2015, including $665.1 million aggregate principal amount of Senior Notes due 2015, $59.9 million in tender offer premium and $36.5 million of accrued and unpaid interest, along with transaction fees and expenses. On May 20, 2011, we completed a follow-on cash tender offer (the “Follow-on Senior Notes due 2015 Tender Offer,” and together with the Initial Senior Notes due 2015 Tender Offer, the “Senior Notes due 2015 Tender Offers”) and purchased an additional $412.8 million aggregate principal amount of Senior Notes due 2015 comprised of $321.4 million of the Senior Exchange Notes and $91.4 million of the PIK Election Notes. We concurrently issued $450.0 million in aggregate principal amount of additional Senior Notes. The proceeds from this offering, together with cash on hand and borrowings under the then- outstanding revolving loan credit facility, were used to fund the purchase of the tendered Senior Notes due 2015, including $412.8 million aggregate principal amount of Senior Notes due 2015, $37.2 million in tender offer premium and $4.5 million of accrued and unpaid interest, along with transaction fees and expenses. In connection with the Senior Notes due 2015 Tender Offers, we recorded a loss on extinguishment of long-term debt of $114.1 million in the consolidated statement of operations for the year ended December 31, 2011. This loss represented $97.0 million in tender offer premiums and $17.1 million for the write-off of a portion of the unamortized deferred financing costs related to the Senior Notes due 2015. In connection with the issuance of Senior Notes, fees of $19.1 million were capitalized as deferred financing costs and are being amortized over the term of the notes using the effective interest method. On February 2, 2012, we commenced a tender offer to purchase any and all of the remaining $129.0 million aggregate principal amount of Senior Notes due 2015. On February 17, 2012, we accepted for purchase $120.6 million aggregate principal amount of the outstanding Senior Notes due 2015 that were tendered. On March 5, 2012, we accepted for purchase an additional $0.1 million aggregate principal amount of the outstanding Senior Notes due 2015 that were tendered prior to the Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* expiration of the tender offer on March 2, 2012. On March 19, 2012, we redeemed the remaining $8.3 million aggregate principal amount that was not tendered. We funded the purchases and redemptions of the Senior Notes due 2015 with the issuance of $130.0 million aggregate principal amount of additional Senior Notes on February 17, 2012. The proceeds from this issuance, together with cash on hand and borrowings under the Revolving Loan, funded the payment of $129.0 million aggregate principal amount of Senior Notes due 2015, $7.9 million in tender and redemption premiums and $5.0 million of accrued and unpaid interest, along with transaction fees and expenses. 52 Qbdlfu!Qh/!37: Table of Contents 5/H/b In connection with these transactions, we recorded a loss on extinguishment of long-term debt of $9.4 million in the consolidated statement of operations for the year ended December 31, 2012. This loss represented $7.9 million in tender and redemption premiums and $1.5 million for the write-off of the remaining unamortized deferred financing costs related to the Senior Notes due 2015. 8.5% Senior Notes due 2019 (“Senior Notes”) At December 31, 2013, the outstanding principal amount of Senior Notes was $1,305.0 million, excluding $4.2 million in unamortized premium. The Senior Notes mature on April 1, 2019. On February 17, 2012, we issued $130.0 million aggregate principal amount of additional Senior Notes at an issue price of 104.375% of par. The $5.7 million premium received is reported on the consolidated balance sheet as an addition to the face amount of the Senior Notes and is being amortized as a reduction of interest expense over the term of the related debt. As discussed above, on April 13, 2011, we issued $725.0 million aggregate principal amount of Senior Notes and on May 20, 2011, we issued an additional $450.0 million aggregate principal amount of Senior Notes. The proceeds from these issuances together with cash on hand and borrowings under the then-outstanding revolving loan credit facility were used to fund the Senior Notes due 2015 Tender Offers. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Notes. Obligations under the Senior Notes are guaranteed on an unsecured senior basis by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Notes do not contain any financial covenants. 12.535% Senior Subordinated Exchange Notes due 2017 (“Senior Subordinated Notes”) At December 31, 2013, the outstanding principal amount of the Senior Subordinated Notes was $92.5 million. The Senior Subordinated Notes have a maturity date of October 12, 2017. On October 18, 2013, we redeemed $155.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 104.178% of the principal amount redeemed. A combination of cash on hand and the net proceeds from the sale of shares of common stock related to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO, in the amount of $56.0 million, was used to fund the redemption of $155.0 million aggregate principal amount, $6.5 million of redemption premium and $0.2 million in accrued and unpaid interest to the date of redemption. See Note 9 in the consolidated financial statements for additional discussion of the underwriters' overallotment option. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $8.5 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $6.5 million in redemption premium and $2.0 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. On August 1, 2013, we redeemed $324.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. We used a portion of the net proceeds from the IPO to redeem $146.0 million aggregate principal amount of Senior Subordinated Notes and incremental borrowings of $190.0 million under the Term Loan to redeem $178.0 million aggregate principal amount of Senior Subordinated Notes. We used cash on hand to pay $12.0 million of accrued and unpaid interest to the date of redemption. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $24.6 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $20.3 million in redemption premium and $4.3 million for the write-off of a portion of the remaining deferred financing costs related to the Senior Subordinated Notes. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* On March 8, 2013, we redeemed $50.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. Cash on hand was used to fund the redemption of $50.0 million aggregate principal amount, $3.1 million of redemption premium and $2.5 million in accrued and unpaid interest to the date of redemption. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $3.9 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $3.1 million in redemption premium and $0.8 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. 53 Qbdlfu!Qh/!381 Table of Contents 5/H/b On December 21, 2012, we redeemed $100.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. Cash on hand was used to fund the redemption of $100.0 million aggregate principal amount, $6.3 million of redemption premium and $2.3 million in accrued and unpaid interest to the date of redemption. In connection with this redemption, we recorded a loss on extinguishment of long-term debt of $7.8 million in the consolidated statement of operations for the year ended December 31, 2012. This loss represented $6.3 million in redemption premium and $1.5 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Subordinated Notes. Obligations under the Senior Subordinated Notes are guaranteed on an unsecured senior basis by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Subordinated Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Subordinated Notes do not contain any financial covenants. Inventory Financing Agreements We have entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below. These amounts are classified separately as accounts payable-inventory financing on the consolidated balance sheets. We do not incur any interest expense associated with these agreements as balances are paid when they are due. The following table presents the amounts included in accounts payable-inventory financing: December 31, (in millions) 20132012 Revolving Loan inventory financing agreement$256.1$248.3 Other inventory financing agreements0.50.9 Accounts payable-inventory financing$256.6$249.2 We maintain a senior secured asset-based revolving credit facility as described in Note 7 to our consolidated financial statements, which incorporates a $400.0 million floorplan sub-facility to facilitate the purchase of inventory from a certain vendor. In connection with the floorplan sub-facility, we maintain the Revolving Loan inventory financing agreement. Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and non-interest bearing. At December 31, 2013 and 2012, we reported $256.1 million and $248.3 million, respectively, for this agreement within accounts payable- inventory financing on the consolidated balance sheets. We also maintain other inventory financing agreements with financial intermediaries to facilitate the purchase of inventory from certain vendors. At December 31, 2013 and 2012, amounts owed under other inventory financing agreements of $0.5 million and $0.9 million, respectively, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable. Contractual Obligations We have future obligations under various contracts relating to debt and interest payments, operating leases and asset retirement obligations. The following table presents our estimated future payments under contractual obligations that existed as of December 31, 2013, based on undiscounted amounts. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 54 Qbdlfu!Qh/!382 Table of Contents 5/H/b (in millions)Payments Due by Period Total< 1 year1-3 years4-5 years> 5 years (1) Revolving Loan $—$—$—$—$— (2) Term Loan 1,832.764.9128.3126.31,513.2 (3) Senior Secured Notes 455.026.052.0377.0— (3) Senior Notes 1,915.1110.9221.9221.91,360.4 (3) Senior Subordinated Notes 124.838.815.770.3— (4) Operating leases 89.217.930.919.720.7 (5) Asset retirement obligations 0.5—0.5—— Total $4,417.3$258.5$449.3$815.2$2,894.3 (1) Includes only principal payments. Excludes interest payments and fees related to this facility because of variability with respect to the timing of advances and repayments. (2) Includes future principal and cash interest payments on long-term borrowings through scheduled maturity dates. Interest payments for variable rate debt were calculated using interest rates as of December 31, 2013. Excluded from these amounts are the amortization of debt issuance and other costs related to indebtedness. (3) Includes future principal and cash interest payments on long-term borrowings through scheduled maturity dates. Interest on the Senior Secured Notes, Senior Notes and Senior Subordinated Notes is calculated using the stated interest rate. Excluded from these amounts are the amortization of debt issuance and other costs related to indebtedness. See "Subsequent Events" for a description of refinancing transactions completed during 2014. (4) Includes the minimum lease payments for non-cancelable leases of properties and equipment used in our operations. (5) Represent commitments to return property subject to operating leases to original condition upon lease termination. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Inflation Inflation has not had a material impact on our operating results. We generally have been able to pass along price increases to our customers, though certain economic factors and technological advances in recent years have tended to place downward pressure on pricing. We also have been able to generally offset the effects of inflation on operating costs by continuing to emphasize productivity improvements and by accelerating our overall cash conversion cycle. There can be no assurances, however, that inflation would not have a material impact on our sales or operating costs in the future. Commitments and Contingencies We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, intellectual property, employment, tort and other litigation matters. We are also subject to audit by federal, state and local authorities, and by various partners and large customers, including government agencies, relating to purchases and sales under various contracts. In addition, we are subject to indemnification claims under various contracts. From time to time, certain of our customers file voluntary petitions for reorganization or liquidation under the U.S. bankruptcy laws. In such cases, certain pre-petition payments received by us could be considered preference items and subject to return to the bankruptcy administrator. As of December 31, 2013, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* these proceedings and matters are inherently unpredictable. As such, our financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. We previously filed a claim as part of a class action settlement in a case alleging price fixing during the period of January 1, 1996 through December 31, 2006, by certain manufacturers of thin-film liquid crystal display panels. On July 13, 2013, the United Stated District Court for the Northern District of California approved distribution of the settlement proceeds, including a net payment to us of $10.4 million after fees and expenses. We have recognized a pre-tax benefit of $10.4 million within selling and administrative expenses in the consolidated statement of operations for the year ended December 31, 2013. 55 Qbdlfu!Qh/!383 Table of Contents 5/H/b The first of two settlement payments was received by us on July 29, 2013 in the amount of $8.5 million. The balance of $1.9 million was received in February 2014. Critical Accounting Policies and Estimates The preparation of financial statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. In Note 1 to the accompanying audited consolidated financial statements, we include a discussion of the significant accounting policies used in the preparation of our consolidated financial statements. We believe the following are the most critical accounting policies and estimates that include significant judgments used in the preparation of our financial statements. We consider an accounting policy or estimate to be critical if it requires assumptions to be made that were uncertain at the time they were made, and if changes in these assumptions could have a material impact on our financial condition or results of operations. Revenue Recognition We are a primary distribution channel for a large group of vendors and suppliers, including OEMs, software publishers and wholesale distributors. We record revenue from sales transactions when title and risk of loss are passed to our customer, there is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Our shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. Revenues from the sales of hardware products and software products and licenses are generally recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. These items can be delivered to customers in a variety of ways, including (i) as physical product shipped from our warehouse, (ii) via drop-shipment by the vendor or supplier, or (iii) via electronic delivery for software licenses. At the time of sale, we record an estimate for sales returns and allowances based on historical experience. Our vendor partners warrant most of the products we sell. We leverage drop-shipment arrangements with many of our vendors and suppliers to deliver products to our customers without having to physically hold the inventory at our warehouses, thereby increasing efficiency and reducing costs. We recognize revenue for drop-shipment arrangements on a gross basis upon delivery to the customer with contract terms that typically specify F.O.B. destination. We recognize revenue on a gross basis as the principal in the transaction because we are the primary obligor in the arrangement, we assume inventory risk if the product is returned by the customer, we set the price of the product charged to the customer, we assume credit risk for the amounts invoiced, and we work closely with our customers to determine their hardware and software specifications. These arrangements generally represent approximately 40% to 50% of total net sales, including approximately 10% to 15% related to electronic delivery for software licenses. Revenue from professional services is either recognized as provided for services billed at an hourly rate or recognized using a proportional performance model for services provided at a fixed fee. Revenue from cloud computing solutions including Software as a Service ("SaaS") and Infrastructure as a Service ("IaaS") arrangements, as well as data center services such as managed and remote managed services, server co-location, internet connectivity and data backup and storage, is recognized over the period service is provided. We also sell certain products for which we act as an agent. Products in this category include the sale of third-party services, warranties, software assurance (“SA”) and third-party hosted SaaS and IaaS arrangements. SA is a product that allows customers to upgrade, at no additional cost, to the latest technology if new applications are introduced during the period that the Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* SA is in effect. These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under net sales recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in net sales being equal to the gross profit on the transaction. Our larger customers are offered the opportunity by certain of our vendors to purchase software licenses and SA under enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of users over the year. With most EAs, our vendors will transfer the license and bill the customer directly, paying resellers such as us an agency fee or commission on these sales. We record these fees as a component of net sales as earned and 56 Qbdlfu!Qh/!384 Table of Contents 5/H/b there is no corresponding cost of sales amount. In certain instances, we bill the customer directly under an EA and account for the individual items sold based on the nature of the item. Our vendors typically dictate how the EA will be sold to the customer. From time to time, we sell some of our products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of the products and services. For each deliverable that represents a separate unit of accounting, total arrangement consideration is allocated based upon the relative selling prices of each element. The allocated arrangement consideration is recognized as revenue in accordance with the principles described above. Selling prices are determined by using vendor specific objective evidence (“VSOE”) if it exists. Otherwise, selling prices are determined using third party evidence (“TPE”). If neither VSOE or TPE is available, we use our best estimate of selling prices. We record freight billed to our customers as net sales and the related freight costs as a cost of sales. Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services, and (2) amounts deferred if other conditions of revenue recognition have not been met. We perform an analysis of the estimated number of days of sales in-transit to customers at the end of each period based on a weighted-average analysis of commercial delivery terms that includes drop-shipment arrangements. This analysis is the basis upon which we estimate the amount of sales in-transit at the end of the period and adjust revenue and the related costs to reflect only what has been received by the customer. Changes in delivery patterns may result in a different number of business days used in making this adjustment and could have a material impact on our revenue recognition for the period. Inventory Valuation Inventory is valued at the lower of cost or market value. Cost is determined using a weighted-average cost method. Price protection is recorded when earned as a reduction to the cost of inventory. We decrease the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. If future demand or actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Vendor Programs We receive incentives from certain of our vendors related to cooperative advertising allowances, volume rebates, bid programs, price protection and other programs. These incentives generally relate to written agreements with specified performance requirements with the vendors and are recorded as adjustments to cost of sales or inventory, depending on the nature of the incentive. Vendors may change the terms of some or all of these programs, which could have an impact on our results of operations. We record receivables from vendors related to these programs when the amounts are probable and reasonably estimable. Some programs are based on the achievement of specific targets, and we base our estimates on information provided by our vendors and internal information to assess our progress toward achieving those targets. If actual performance does not match our estimates, we may be required to adjust our receivables. We record reserves for vendor receivables for estimated losses due to vendors’ inability to pay or rejections by vendors of claims; however, if actual collections differ from our estimates, we may incur additional losses that could have a material impact on gross margin and operating income. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 57 Qbdlfu!Qh/!385 Table of Contents 5/H/b Goodwill and Other Intangible Assets Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level. Our reporting units used to assess potential goodwill impairment are the same as our operating segments. We are required to perform an evaluation of goodwill on an annual basis or more frequently if circumstances indicate a potential impairment. The annual test for impairment is conducted as of December 1. We have the option of performing a qualitative assessment of a reporting unit's fair value from the last quantitative assessment to determine if it is more likely than not that the reporting unit's goodwill is impaired or performing a quantitative assessment by comparing a reporting unit's estimated fair value to its carrying amount. Under the quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a weighted combination of an income approach and a market approach, as this combination is considered the most indicative of the reporting units’ fair value in an orderly transaction between market participants. Under the income approach, we determine fair value based on estimated future cash flows of a reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. Under the market approach, we utilize valuation multiples derived from publicly available information for peer group companies to provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. We have weighted the income approach and the market approach at 75% and 25%, respectively. Determining the fair value of a reporting unit (and the allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of goodwill in the event a step two analysis is required) is judgmental in nature and requires the use of significant estimates and assumptions. These estimates and assumptions include primarily, but are not limited to, discount rate, terminal growth rate, selection of appropriate peer group companies and control premium applied, and forecasts of revenue growth rates, gross margins, operating margins, and working capital requirements. The allocation requires analysis to determine the fair value of assets and liabilities including, among others, customer relationships, trade names, and property and equipment. Any changes in the judgments, estimates, or assumptions used could produce significantly different results. Although we believe our assumptions are reasonable, actual results may vary significantly and may expose us to material impairment charges in the future. Intangible assets include customer relationships, trade names, internally developed software and other intangibles. Intangible assets with determinable lives are amortized on a straight-line basis over the estimated useful lives of the assets. The cost of software developed or obtained for internal use is capitalized and amortized on a straight-line basis over the estimated useful life of the software. These intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. Allowance for Doubtful Accounts We record an allowance for doubtful accounts related to trade accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We take into consideration historical loss experience, the overall quality of the receivable portfolio and specifically identified customer risks. If actual collections of customer receivables differ from our estimates, additional allowances may be required which could have an impact on our results of operations. Income Taxes Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements using enacted tax rates in effect for the year in which the differences are expected to reverse. We perform an evaluation of the realizability of our deferred tax assets on a quarterly basis. This Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* evaluation requires us to use estimates and make assumptions and considers all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, the mix of earnings in the jurisdictions in which we operate, and prudent and feasible tax planning strategies. We account for unrecognized tax benefits based upon our assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. We report a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or expected to be taken in a tax return and recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. 58 Qbdlfu!Qh/!386 Table of Contents 5/H/b Recent Accounting Pronouncements Disclosure of the Effects of Reclassifications from Accumulated Other Comprehensive Income In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, which required that the effects of significant reclassifications from accumulated other comprehensive income to net income be shown parenthetically on the face of the consolidated financial statements or disclosed in a note. The adoption of this new guidance on January 1, 2013 did not have an impact on our consolidated financial position, results of operations or cash flows. Subsequent Events We redeemed $30.0 million and $20.0 million aggregate principal amounts of Senior Subordinated Notes on January 22, 2014 and February 21, 2014, respectively. The redemption prices were 104.178% of the principal amounts redeemed plus $1.0 million and $0.9 million in accrued and unpaid interest to the date of each redemption, respectively. Following these redemptions, $42.5 million aggregate principal amount of the Senior Subordinated Notes remain outstanding, which we expect to fully redeem during the next six months. In connection with these redemptions, we expect to record a loss on extinguishment of long-term debt of $2.7 million in the consolidated statement of operations during the first quarter of 2014. This loss represents $2.1 million in redemption premiums and $0.6 million for the write-off of a portion of the remaining deferred financing costs related to the Senior Subordinated Notes. On February 13, 2014, we announced that our board of directors declared a cash dividend on our common stock of $0.0425 per share. The dividend will be paid on March 10, 2014 to all stockholders of record as of the close of business on February 25, 2014. Future dividends will be subject to the approval of our board of directors. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 59 Qbdlfu!Qh/!387 Table of Contents 5/H/b Item 7A. Quantitative and Qualitative Disclosures of Market Risks Our market risks relate primarily to changes in interest rates. The interest rates on borrowings under our senior secured asset-based revolving credit facility and our senior secured term loan facility are floating and, therefore, are subject to fluctuations. In order to manage the risk associated with changes in interest rates on borrowings under our senior secured term loan facility, we have entered into interest rate derivative agreements to economically hedge a portion of the cash flows associated with the facility. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate fluctuations. W e utilize interest rate caps for the purpose of limiting current and future exposure to interest rate risk on our floating- rate debt under the senior secured term loan facility. We have interest rate cap agreements in effect through January 14, 2015 with a combined notional amount of $1,150.0 million. These cap agreements have not been designated as cash flow hedges of interest rate risk for GAAP accounting purposes. Of the total $1,150.0 million notional amount, $500.0 million entitle us to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The remaining cap agreements with a notional amount of $650.0 million entitle us to payments from the counterparty of the amount, if any, by which the three-month LIBOR exceeds 1.5% during the agreement period. See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations” for information on cash flows, interest rates and maturity dates of our debt obligations. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 60 Qbdlfu!Qh/!388 Table of Contents 5/H/b Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 62 Consolidated Balance Sheets as of December 31, 2013 and 2012 63 Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 64 Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011 65 Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2013, 2012 and 2011 66 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 67 Notes to Consolidated Financial Statements 68 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 61 Qbdlfu!Qh/!389 Table of Contents 5/H/b Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of CDW Corporation We have audited the accompanying consolidated balance sheets of CDW Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CDW Corporation and subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CDW Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 5, 2014 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Chicago, Illinois March 5, 2014 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 62 Qbdlfu!Qh/!38: Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts) December 31, 20132012 Assets Current assets: Cash and cash equivalents$188.1$37.9 Accounts receivable, net of allowance for doubtful accounts of $5.4 and $5.4, respectively1,451.01,285.0 Merchandise inventory382.0314.6 Miscellaneous receivables146.3148.5 Deferred income taxes—14.1 Prepaid expenses and other46.134.6 Total current assets2,213.51,834.7 Property and equipment, net131.1142.7 Goodwill2,220.32,209.3 Other intangible assets, net1,328.01,478.5 Deferred financing costs, net30.153.2 Other assets1.61.6 Total assets $5,924.6$5,720.0 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable-trade$662.8$518.6 Accounts payable-inventory financing256.6249.2 Current maturities of long-term debt45.440.0 Deferred revenue94.857.8 Accrued expenses: Compensation112.299.4 Interest31.850.7 Sales taxes29.222.6 Advertising33.233.9 Income taxes6.30.2 Other130.395.8 Total current liabilities1,402.61,168.2 Long-term liabilities: Debt3,205.83,731.0 Deferred income taxes563.5624.3 Other liabilities41.060.0 Total long-term liabilities3,810.34,415.3 Commitments and contingencies Shareholders’ equity: Preferred shares, $0.01 par value, 100.0 and no shares authorized, respectively; no shares issued or outstanding for both periods —— Common shares, $0.01 par value, 1,000.0 and 286.1 shares authorized, respectively; 172.0 and 145.2 shares issued, respectively; 172.0 and 145.1 shares outstanding, respectively 1.71.4 Paid-in capital2,688.12,207.7 Accumulated deficit(1,971.8)(2,073.0) Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Accumulated other comprehensive (loss) income(6.3)0.4 Total shareholders’ equity711.7136.5 Total liabilities and shareholders’ equity $5,924.6$5,720.0 The accompanying notes are an integral part of the consolidated financial statements. 63 Qbdlfu!Qh/!391 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) Years Ended December 31, 201320122011 Net sales$10,768.6$10,128.2$9,602.4 Cost of sales9,008.38,458.68,018.9 Gross profit1,760.31,669.61,583.5 Selling and administrative expenses1,120.91,029.5990.1 Advertising expense130.8129.5122.7 Income from operations508.6510.6470.7 Interest expense, net(250.1)(307.4)(324.2) Net loss on extinguishments of long-term debt(64.0)(17.2)(118.9) Other income, net1.00.10.7 Income before income taxes195.5186.128.3 Income tax expense(62.7)(67.1)(11.2) Net income$132.8$119.0$17.1 Net income per common share: Basic$0.85$0.82$0.12 Diluted$0.84$0.82$0.12 Weighted-average number of common shares outstanding: Basic156.6145.1144.8 Diluted158.7145.8144.9 Cash dividends declared per common share$0.0425$—$— The accompanying notes are an integral part of the consolidated financial statements. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 64 Qbdlfu!Qh/!392 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Years Ended December 31, 201320122011 Net income$132.8$119.0$17.1 Reclassification of realized loss on interest rate swap agreements from accumulated other comprehensive (loss) income to net income, net of tax ——1.9 Foreign currency translation adjustment(6.7)2.5(1.8) Other comprehensive (loss) income, net of tax(6.7)2.50.1 Comprehensive income$126.1$121.5$17.2 The accompanying notes are an integral part of the consolidated financial statements. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 65 Qbdlfu!Qh/!393 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (in millions) Preferred StockCommon Stock AccumulatedTotal OtherShareholders’ Paid-inAccumulatedComprehensive Equity SharesAmountSharesAmountCapitalDeficit(Loss) Income(Deficit) Balance at December 31, 2010—$—144.6$1.4$2,165.3$(2,208.0)$(2.2)$(43.5) Equity-based compensation expense————19.5——19.5 Investment from CDW Holdings LLC————1.0——1.0 Repurchase of common shares—————(0.4)—(0.4) Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax——0.3—(1.1)——(1.1) Net income—————17.1—17.1 Reclassification of realized loss on interest rate swap agreements from accumulated other comprehensive loss to net income, net of tax——————1.91.9 Foreign currency translation adjustment——————(1.8)(1.8) Balance at December 31, 2011 —$—144.9$1.4$2,184.7$(2,191.3)$(2.1)$(7.3) Equity-based compensation expense————22.1——22.1 Investment from CDW Holdings LLC————2.8——2.8 Repurchase of common shares—————(0.7)—(0.7) Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax——0.3—(1.4)——(1.4) Incentive compensation plan units withheld for taxes————(0.5)——(0.5) Net income—————119.0—119.0 Foreign currency translation adjustment——————2.52.5 Balance at December 31, 2012—$—145.2$1.4$2,207.7$(2,073.0)$0.4$136.5 Equity-based compensation expense————46.6——46.6 Issuance of common shares——26.80.3424.4——424.7 Repurchase of common shares—————(0.2)—(0.2) Dividends declared—————(7.3)—(7.3) Reclassification to goodwill for accrued charitable contributions————9.4——9.4 Incentive compensation plan units withheld for taxes—————(24.1)—(24.1) Net income—————132.8—132.8 Foreign currency translation adjustment——————(6.7)(6.7) Balance at December 31, 2013—$—172.0$1.7$2,688.1$(1,971.8)$(6.3)$711.7 The accompanying notes are an integral part of the consolidated financial statements. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 66 Qbdlfu!Qh/!394 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Years Ended December 31, 201320122011 Cash flows from operating activities: Net income$132.8$119.0$17.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization208.2210.2204.9 Equity-based compensation expense46.622.119.5 Deferred income taxes(48.7)(56.3)(10.2) Allowance for doubtful accounts——0.4 Amortization of deferred financing costs, debt premium, and debt discount, net8.813.615.7 Net loss on extinguishments of long-term debt64.017.2118.9 Realized loss on interest rate swap agreements——2.8 Mark to market loss on interest rate derivatives0.10.94.2 Net loss on sale and disposals of assets—0.10.3 Other1.6—(0.6) Changes in assets and liabilities: Accounts receivable(170.8)(10.4)(183.4) Merchandise inventory(67.5)7.1(29.0) Other assets(10.1)(3.8)50.3 Accounts payable-trade146.10.8(19.8) Other current liabilities64.1(2.1)39.6 Long-term liabilities(8.9)(1.0)(16.0) Net cash provided by operating activities366.3317.4214.7 Cash flows from investing activities: Capital expenditures(47.1)(41.4)(45.7) Cash settlements on interest rate swap agreements——(6.6) Premium payments on interest rate cap agreements—(0.3)(3.7) Net cash used in investing activities(47.1)(41.7)(56.0) Cash flows from financing activities: Proceeds from borrowings under revolving credit facility63.0289.01,295.0 Repayments of borrowings under revolving credit facility(63.0)(289.0)(1,483.2) Repayments of long-term debt(51.1)(201.0)(132.0) Proceeds from issuance of long-term debt1,535.2135.71,175.0 Payments to extinguish long-term debt(2,047.4)(243.2)(1,175.0) Payments of debt financing costs(6.1)(2.1)(26.3) Investment from CDW Holdings LLC, net—2.81.0 Net change in accounts payable-inventory financing7.4(29.5)250.5 Payment of incentive compensation plan withholding taxes(24.1)—— Net proceeds from issuance of common shares424.7—— Repurchase of common shares(0.2)(0.7)(0.4) Dividends paid(7.3)—— Excess tax benefits from equity-based compensation0.6—— Net cash used in financing activities(168.3)(338.0)(95.4) Effect of exchange rate changes on cash and cash equivalents(0.7)0.3— Net increase (decrease) in cash and cash equivalents 150.2(62.0)63.3 Cash and cash equivalents – beginning of period 37.999.936.6 Cash and cash equivalents – end of period $188.1$37.9$99.9 Supplementary disclosure of cash flow information: Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Interest paid$(267.6)$(302.7)$(332.9) Taxes (paid) refunded, net$(82.5)$(123.2)$20.9 Non-cash investing and financing activities: Capital expenditures accrued in accounts payable-trade$0.2$0.5$1.1 The accompanying notes are an integral part of the consolidated financial statements. 67 Qbdlfu!Qh/!395 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Summary of Significant Accounting Policies Description of Business CDW is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions to small, medium and large business, government, education and healthcare customers in the U.S. and Canada. The Company's offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). On October 12, 2007, CDW Corporation, an Illinois corporation, was acquired through a merger transaction by an entity controlled by investment funds affiliated with Madison Dearborn Partners, LLC and Providence Equity Partners L.L.C. (the “Acquisition”). CDW Corporation continued as the surviving corporation and same legal entity after the Acquisition, but became a wholly owned subsidiary of VH Holdings, Inc., a Delaware corporation. On December 31, 2009, CDW Corporation merged into CDWC LLC, an Illinois limited liability company owned by VH Holdings, Inc., with CDWC LLC as the surviving entity. This change had no impact on the operations or management of the Company. On December 31, 2009, CDWC LLC was renamed CDW LLC (“CDW LLC”). On August 17, 2010, VH Holdings, Inc. was renamed CDW Corporation (“Parent”). Parent has two 100% owned subsidiaries, CDW LLC and CDW Finance Corporation. CDW LLC is an Illinois limited liability company that, together with its 100% owned subsidiaries, holds all material assets and conducts all business activities and operations of the Company. On August 6, 2010, CDW Finance Corporation, a Delaware corporation, was formed for the sole purpose of acting as co-issuer of certain debt obligations as described in Note 17 and does not hold any material assets or engage in any business activities or operations. Throughout this report, the terms “the Company” and “CDW” refer to Parent and its 100% owned subsidiaries. Parent was previously owned directly by CDW Holdings LLC ("CDW Holdings"), a company controlled by investment funds affiliated with Madison Dearborn Partners, LLC ("Madison Dearborn") and Providence Equity Partners L.L.C. ("Providence Equity," and together with Madison Dearborn, the "Sponsors"), certain other co- investors and certain members of CDW management. On July 2, 2013, Parent completed an initial public offering ("IPO") of its common stock. In connection with the IPO, CDW Holdings distributed all of its shares of Parent's common stock to its members in June 2013 in accordance with the members’ respective membership interests and was subsequently dissolved in August 2013. See Note 9 for additional discussion of the IPO. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Parent and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation. 68 Qbdlfu!Qh/!396 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash and Cash Equivalents Cash and cash equivalents include all deposits in banks and short-term (original maturities of three months or less), highly liquid investments that are readily convertible to known amounts of cash and are so near maturity that there is insignificant risk of changes in value due to interest rate changes. Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and typically do not bear interest. The Company provides allowances for doubtful accounts related to accounts receivable for estimated losses resulting from the inability of its customers to make required payments. The Company takes into consideration the overall quality of the receivable portfolio along with specifically-identified customer risks. Merchandise Inventory Inventory is valued at the lower of cost or market value. Cost is determined using a weighted-average cost method. Price protection is recorded when earned as a reduction to the cost of inventory. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. Miscellaneous Receivables Miscellaneous receivables generally consist of amounts due from vendors. The Company receives incentives from vendors related to cooperative advertising allowances, volume rebates, bid programs, price protection and other programs. These incentives generally relate to written vendor agreements with specified performance requirements and are recorded as adjustments to cost of sales or inventory, depending on the nature of the incentive. Property and Equipment Property and equipment are stated at cost. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their useful lives or the initial lease term. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The following table shows estimated useful lives of property and equipment: Estimated ClassificationUseful Lives Machinery and equipment 5 to 10 years Building and leasehold improvements 5 to 25 years Computer and data processing equipment 3 to 5 years Computer software 3 to 5 years Furniture and fixtures 5 to 10 years The Company has asset retirement obligations associated with commitments to return property subject to operating leases to its original condition upon lease termination. The Company’s asset retirement liability was $0.5 million as of December 31, 2013 and 2012. Goodwill and Other Intangible Assets The Company is required to perform an evaluation of goodwill on an annual basis or more frequently if circumstances Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* indicate a potential impairment. The annual test for impairment is conducted as of December 1. The Company’s reporting units used to assess potential goodwill impairment are the same as its operating segments. The Company has the option of performing a qualitative assessment of a reporting unit's fair value from the last quantitative assessment to determine if it is more likely than not that the reporting unit's goodwill is impaired or performing a quantitative assessment by comparing a reporting unit's estimated fair value to its carrying amount. Under the quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a weighted 69 Qbdlfu!Qh/!397 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS combination of an income approach and a market approach, as this combination is considered the most indicative of the Company’s fair value in an orderly transaction between market participants. This assessment uses significant accounting judgments, estimates and assumptions. Any changes in the judgments, estimates or assumptions used could produce significantly different results. During the years ended December 31, 2013, 2012 and 2011, the Company recorded no goodwill impairment charges. See Note 4 for more information on the Company’s evaluations of goodwill for impairment. Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives. The cost of computer software developed or obtained for internal use is capitalized and amortized on a straight- line basis over the estimated useful life of the software. These intangible assets are reviewed for impairment when indicators are present using undiscounted cash flows. The Company uses the undiscounted cash flows, excluding interest charges, to assess the recoverability of the carrying value of such assets. To the extent carrying value exceeds the undiscounted cash flows, an impairment loss is recorded based upon the excess of the carrying value over fair value. In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets. If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life. During the years ended December 31, 2013, 2012 and 2011, no impairment existed with respect to the Company’s intangible assets with determinable lives and no significant changes to the remaining useful lives were necessary. The following table shows estimated useful lives of definite-lived intangible assets: Estimated ClassificationUseful Lives Customer relationships 11 to 14 years Trade name 20 years Internally developed software 3 to 5 years Other 1 to 10 years Deferred Financing Costs Deferred financing costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and recognized in interest expense over the estimated life of the related debt instrument using the effective interest method or straight-line method, as applicable. Derivatives The Company has entered into interest rate cap agreements for the purpose of economically hedging its exposure to fluctuations in interest rates. These derivatives are recorded at fair value in the Company’s consolidated balance sheets. The Company’s interest rate cap agreements are not designated as cash flow hedges of interest rate risk. Changes in fair value of the derivatives are recorded directly to interest expense, net in the Company’s consolidated statements of operations. Fair Value Measurements Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 – observable inputs such as quoted prices for identical instruments traded in active markets. Level 2 – inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 70 Qbdlfu!Qh/!398 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques. Accumulated Other Comprehensive (Loss) Income Foreign currency translation adjustments are included in shareholders’ equity under accumulated other comprehensive (loss) income. The components of accumulated other comprehensive (loss) income are as follows: (in millions)December 31, 201320122011 Foreign currency translation adjustment$(6.3)$0.4$(2.1) (6.3(2.1 Accumulated other comprehensive (loss) income$)$0.4$) Revenue Recognition The Company is a primary distribution channel for a large group of vendors and suppliers, including original equipment manufacturers (“OEMs”), software publishers and wholesale distributors. The Company records revenue from sales transactions when title and risk of loss are passed to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. The Company's shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. Revenues from the sales of hardware products and software products and licenses are generally recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. These items can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company's warehouse, (ii) via drop-shipment by the vendor or supplier, or (iii) via electronic delivery for software licenses. At the time of sale, the Company records an estimate for sales returns and allowances based on historical experience. The Company's vendor partners warrant most of the products the Company sells. The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses, thereby increasing efficiency and reducing costs. The Company recognizes revenue for drop-shipment arrangements on a gross basis upon delivery to the customer with contract terms that typically specify F.O.B. destination. Revenue from professional services is either recognized as provided for services billed at an hourly rate or recognized using a proportional performance model for services provided at a fixed fee. Revenue from cloud computing solutions including Software as a Service ("SaaS") and Infrastructure as a Service ("IaaS") arrangements, as well as data center services such as managed and remote managed services, server co-location, internet connectivity and data backup and storage, is recognized over the period service is provided. The Company also sells certain products for which it acts as an agent. Products in this category include the sale of third-party services, warranties, software assurance (“SA”) and third-party hosted SaaS and IaaS arrangements. SA is a product that allows customers to upgrade, at no additional cost, to the latest technology if new applications are introduced during the period that the SA is in effect. These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under net sales recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in net sales being equal to the gross profit on the transaction. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* The Company's larger customers are offered the opportunity by certain of its vendors to purchase software licenses and SA under enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of users over the year. With most EAs, the Company's vendors will transfer the license and bill the customer directly, paying resellers such as the Company an agency fee or commission on these sales. The Company records these fees as a component of net sales as earned and there is no corresponding cost of sales amount. In certain instances, the Company bills the customer directly under an EA and accounts for the individual items sold based on the nature of the item. The Company's vendors typically dictate how the EA will be sold to the customer. 71 Qbdlfu!Qh/!399 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS From time to time, the Company sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of accounting, total arrangement consideration is allocated based upon the relative selling prices of each element. The allocated arrangement consideration is recognized as revenue in accordance with the principles described above. Selling prices are determined by using vendor specific objective evidence (“VSOE”) if it exists. Otherwise, selling prices are determined using third party evidence (“TPE”). If neither VSOE or TPE is available, the Company uses its best estimate of selling prices. The Company records freight billed to its customers as net sales and the related freight costs as a cost of sales. Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services, and (2) amounts deferred if other conditions of revenue recognition have not been met. The Company performs an analysis of the estimated number of days of sales in-transit to customers at the end of each period based on a weighted-average analysis of commercial delivery terms that includes drop-shipment arrangements. This analysis is the basis upon which the Company estimates the amount of sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been received by the customer. Changes in delivery patterns may result in a different number of business days used in making this adjustment and could have a material impact on the Company's revenue recognition for the period. Sales Taxes Sales tax amounts collected from customers for remittance to governmental authorities are presented on a net basis in the Company’s consolidated statements of operations. Advertising Advertising costs are generally charged to expense in the period incurred. Cooperative reimbursements from vendors are recorded in the period the related advertising expenditure is incurred. The Company classifies vendor consideration as a reduction to cost of sales. Equity-Based Compensation The Company measures all equity-based payments using a fair-value-based method and records compensation expense over the requisite service period in its consolidated financial statements. Forfeiture rates have been developed based upon historical experience. Interest Expense Interest expense is typically recognized in the period incurred at the applicable interest rate in effect. For increasing- rate debt, the Company determines the periodic interest cost using the effective interest method over the estimated outstanding term of the debt. The difference between interest expense recorded and cash interest paid is reflected as short-term or long-term accrued interest in the Company’s consolidated balance sheets. Foreign Currency Translation The Company’s functional currency is the U.S. dollar. The functional currency of the Company’s Canadian subsidiary is the local currency, the Canadian dollar. Assets and liabilities of this subsidiary are translated at the spot rate in effect at the applicable reporting date and the consolidated results of operations are translated at the average exchange rates in effect during the applicable period. The resulting foreign currency translation adjustment is recorded as accumulated other comprehensive (loss) income, which is reflected as a separate component of shareholders’ equity. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Income Taxes Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company performs an evaluation of the realizability of deferred tax assets on a quarterly basis. This evaluation requires management to make use of estimates and assumptions and considers all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, the mix of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies. 72 Qbdlfu!Qh/!39: Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company accounts for unrecognized tax benefits based upon its assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company reports a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or expected to be taken in a tax return and recognizes interest and penalties, if any, related to its unrecognized tax benefits in income tax expense. 2. Recent Accounting Pronouncements Disclosure of the Effects of Reclassifications from Accumulated Other Comprehensive Income In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, which required that the effects of significant reclassifications from accumulated other comprehensive income to net income be shown parenthetically on the face of the consolidated financial statements or disclosed in a note. The adoption of this new guidance on January 1, 2013 did not have an impact on the Company's consolidated financial position, results of operations or cash flows. 3. Property and Equipment Property and equipment consisted of the following: (in millions)December 31, 20132012 Land$27.7$27.7 Machinery and equipment53.050.9 Building and leasehold improvements104.8104.0 Computer and data processing equipment61.256.4 Computer software30.930.2 Furniture and fixtures21.621.6 Construction in progress10.911.9 Total property and equipment310.1302.7 Less accumulated depreciation179.0160.0 Net property and equipment$131.1$142.7 During 2013, 2012 and 2011, the Company recorded disposals of $7.9 million, $12.2 million and $10.5 million, respectively, to remove assets that were no longer in use from property and equipment. The Company recorded a pre- tax loss of $0.0 million, $0.1 million and $0.3 million in 2013, 2012 and 2011, respectively, for certain disposed assets that were not fully depreciated. Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $27.2 million, $32.0 million and $31.3 million, respectively. 4. Goodwill and Other Intangible Assets As described in Note 1, the Company is required to perform an evaluation of goodwill on an annual basis or more frequently if circumstances indicate a potential impairment. The annual test for impairment is conducted as of December 1. The Company’s reporting units used to assess potential goodwill impairment are the same as its operating segments. The Company has two reportable segments: Corporate, which is comprised primarily of business customers, and Public, which is comprised of government entities and education and healthcare institutions. The Company also has two other operating segments, CDW Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and, accordingly, are combined together as “Other” for segment reporting purposes. The Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Company has the option of performing a qualitative assessment of a reporting unit's fair value from the last quantitative assessment to determine if it is more likely than not that the reporting unit's goodwill is impaired or performing a quantitative assessment by comparing a reporting unit's estimated fair value to its carrying amount. Under the quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a weighted combination of an income approach and a market approach, as this combination is considered the most indicative of the Company’s fair value in an orderly transaction between market participants. Under the income 73 Qbdlfu!Qh/!3:1 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS approach, the Company determined fair value based on estimated future cash flows of a reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. Under the market approach, the Company utilized valuation multiples derived from publicly available information for guideline companies to provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. The valuation multiples were applied to the reporting units. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, gross margins, operating margins, discount rates and future market conditions, among others. December 1, 2013 Evaluation The Company performed its annual evaluation of goodwill as of December 1, 2013 by utilizing a quantitative assessment for all reporting units. All reporting units passed the first step of the goodwill evaluation (with the fair value exceeding the carrying value by 107%, 82%, 167% and 168% for the Corporate, Public, Canada and CDW Advanced Services reporting units, respectively) and, accordingly, the Company was not required to perform the second step of the goodwill evaluation. To determine the fair value of the reporting units, the Company used a 75%/25% weighting of the income approach and market approach, respectively. Under the income approach, the Company estimated future cash flows of each reporting unit based on internally generated forecasts for the remainder of 2013 and the next six years. The Company used a 3.5% long-term assumed consolidated annual revenue growth rate for periods after the six-year forecast. The estimated future cash flows for the Corporate and Public reporting units were discounted at 10.0%; cash flows for the Canada and CDW Advanced Services reporting units were discounted at 10.3% and 10.5%, respectively, based on the future growth rates assumed in the discounted cash flows. Discount rates utilized during the 2013 goodwill evaluation declined compared to those used in 2012 as a result of the market performance of the Company's common stock and a lower equity risk premium. December 1, 2012 Evaluation The Company performed its annual evaluation of goodwill as of December 1, 2012 by utilizing a quantitative assessment for all reporting units. All reporting units passed the first step of the goodwill evaluation (with the fair value exceeding the carrying value by 49%, 44%, 104% and 17% for the Corporate, Public, Canada and CDW Advanced Services reporting units, respectively) and, accordingly, the Company was not required to perform the second step of the goodwill evaluation. To determine the fair value of the reporting units, the Company used a 75%/25% weighting of the income approach and market approach, respectively. Under the income approach, the Company estimated future cash flows of each reporting unit based on internally generated forecasts for the remainder of 2012 and the next six years. The Company used a 3.5% long-term assumed consolidated annual revenue growth rate for periods after the six-year forecast. The estimated future cash flows for the Corporate and Public reporting units were discounted at 11.5%; cash flows for the Canada and CDW Advanced Services reporting units were discounted at 11.8% and 12.0%, respectively, based on the future growth rates assumed in the discounted cash flows. December 1, 2011 Evaluation The Company performed its annual evaluation of goodwill as of December 1, 2011 by utilizing a quantitative assessment for all reporting units. All reporting units passed the first step of the goodwill evaluation (with the fair value exceeding the carrying value by 43%, 27%, 159% and 17%, for the Corporate, Public, Canada and CDW Advanced Services reporting units, respectively) and, accordingly, the Company was not required to perform the second step of the goodwill evaluation. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* To determine the fair value of the reporting units, the Company used a 75%/25% weighting of the income approach and market approach, respectively. Under the income approach, the Company estimated future cash flows of each reporting unit based on internally generated forecasts for the remainder of 2011 and the next six years. The Company used a 3.5% long-term assumed consolidated annual revenue growth rate for periods after the six-year forecast. The estimated future cash flows for the Corporate, Public and CDW Advanced Services reporting units were discounted at 11.5%; cash flows for the Canada reporting unit were discounted at 12.0% given inherent differences in the business model and risk profile. 74 Qbdlfu!Qh/!3:2 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the change in goodwill by segment for the years ended December 31, 2013 and 2012: (1) (in millions)CorporatePublicOther Consolidated Balances as of December 31, 2011: Goodwill $2,794.4$1,261.4$106.4$4,162.2 Accumulated impairment charges (1,571.4)(354.1)(28.3)(1,953.8) $1,223.0$907.3$78.1$2,208.4 2012 Activity: Translation adjustment $—$—$0.9$0.9 $—$—$0.9$0.9 Balances as of December 31, 2012: Goodwill $2,794.4$1,261.4$107.3$4,163.1 Accumulated impairment charges (1,571.4)(354.1)(28.3)(1,953.8) $1,223.0$907.3$79.0$2,209.3 2013 Activity: Translation adjustment $—$—$(2.1)$(2.1) (2) Contingent consideration 8.84.00.313.1 $8.8$4.0$(1.8)$11.0 Balances as of December 31, 2013: Goodwill $2,803.2$1,265.4$105.5$4,174.1 Accumulated impairment charges (1,571.4)(354.1)(28.3)(1,953.8) $1,231.8$911.3$77.2$2,220.3 (1) Other is comprised of CDW Advanced Services and Canada reporting units. (2) During 2013, the Company recorded a $13.1 million net-of-tax addition to goodwill in connection with the settlement of the MPK Coworker Incentive Plan II and related charitable contribution. The charitable contribution was accounted for as additional purchase price (goodwill) in accordance with pre-2009 business combinations accounting guidance. See Note 10 for additional discussion of this transaction. The following table presents a summary of intangible assets at December 31, 2013 and 2012: (in millions) Gross CarryingAccumulatedNet Carrying December 31, 2013AmountAmortizationAmount Customer relationships $1,860.8$872.8$988.0 Trade name 421.0130.9290.1 Internally developed software 128.579.848.7 Other 3.11.91.2 Total $2,413.4$1,085.4$1,328.0 December 31, 2012 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Customer relationships $1,861.7$733.3$1,128.4 Trade name 421.0109.9311.1 Internally developed software 97.460.137.3 Other 3.31.61.7 Total $2,383.4$904.9$1,478.5 Amortization expense related to intangible assets for the years ended December 31, 2013, 2012 and 2011 was $181.0 million, $178.2 million and $173.5 million, respectively. 75 Qbdlfu!Qh/!3:3 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Estimated future amortization expense related to intangible assets for the next five years is as follows: (in millions) Years ending December 31, 2014 $179.0 2015 171.7 2016 163.9 2017 161.5 2018 161.3 5. Inventory Financing Agreements The Company has entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below. These amounts are classified separately as accounts payable-inventory financing on the accompanying consolidated balance sheets. The Company does not incur any interest expense associated with these agreements as balances are paid when they are due. The following table presents the amounts included in accounts payable-inventory financing: December 31, (in millions) 20132012 Revolving Loan inventory financing agreement$256.1$248.3 Other inventory financing agreements0.50.9 Accounts payable-inventory financing$256.6$249.2 The Company maintains a senior secured asset-based revolving credit facility as described in Note 7, which incorporates a $400.0 million floorplan sub-facility to facilitate the purchase of inventory from a certain vendor. In connection with the floorplan sub-facility, the Company maintains an inventory financing agreement on an unsecured basis with a financial intermediary to facilitate the purchase of inventory from this vendor (the “Revolving Loan inventory financing agreement”). Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and non-interest bearing. At December 31, 2013 and 2012, the Company reported $256.1 million and $248.3 million, respectively, for this agreement within accounts payable-inventory financing on the consolidated balance sheets. The Company also maintains other inventory financing agreements with financial intermediaries to facilitate the purchase of inventory from certain vendors. At December 31, 2013 and 2012, amounts owed under other inventory financing agreements of $0.5 million and $0.9 million, respectively, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable. 6. Lease Commitments The Company is obligated under various non-cancelable operating lease agreements for office facilities that generally provide for minimum rent payments and a proportionate share of operating expenses and property taxes and include certain renewal and expansion options. For the years ended December 31, 2013, 2012 and 2011, rent expense under these lease arrangements was $20.7 million, $22.4 million and $21.6 million, respectively. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 76 Qbdlfu!Qh/!3:4 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future minimum lease payments are as follows: (in millions) Years ending December 31, 2014 $17.9 2015 17.7 2016 13.2 2017 10.7 2018 9.0 Thereafter 20.7 Total future minimum lease payments $89.2 7. Long-Term Debt Long-term debt was as follows: (dollars in millions)December 31, (1) Interest Rate 20132012 Senior secured asset-based revolving credit facility—%$—$— Senior secured term loan facility3.25%1,528.91,339.5 Unamortized discount on senior secured term loan facility(4.4)— Senior secured notes due 20188.0%325.0500.0 Senior notes due 20198.5%1,305.01,305.0 Unamortized premium on senior notes due 20194.25.0 Senior subordinated notes due 201712.535%92.5621.5 Total long-term debt3,251.23,771.0 Less current maturities of long-term debt(45.4)(40.0) Long-term debt, excluding current maturities$3,205.8$3,731.0 (1) Interest rate at December 31, 2013. At December 31, 2013, the Company was in compliance with the covenants under its various credit agreements and indentures as described below. Under the indentures governing the 8.5% Senior Notes due 2019 and 8.0% Senior Secured Notes due 2018, which contain the most restrictive restricted payment provisions in the Company’s various credit agreements and indentures, CDW LLC and its restricted subsidiaries are generally restricted from paying dividends and making other restricted payments unless CDW LLC could incur an additional dollar of indebtedness under its fixed charges ratio covenant and the amount of such dividend or other restricted payment, together with the amount of all other dividends and restricted payments made from January 1, 2011 through the end of the most recently ended fiscal quarter, is less than the sum of 50% of cumulative consolidated net income or 100% of any consolidated net loss incurred over the period plus the amount of certain other items occurring during that period that increase (and in some cases decrease) the amounts available for such payments. For the purpose of determining restricted payment capacity, consolidated net income or loss includes certain adjustments that are defined in the indentures. At December 31, 2013, the amount of cumulative consolidated net income free of restrictions under the credit agreements and indentures ("Restricted Payment Capacity") was $148.0 million. However, the subsequent events transactions described in Note 19 have since reduced the Restricted Payment Capacity to approximately $89 million. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Senior Secured Asset-Based Revolving Credit Facility (“Revolving Loan”) At December 31, 2013, the Company had no outstanding borrowings under the Revolving Loan, $2.2 million of undrawn letters of credit and $256.7 million reserved related to the floorplan sub-facility. On June 24, 2011, the Company entered into the Revolving Loan, a five-year $900.0 million senior secured asset- based revolving credit facility, with the facility being available to the Company for borrowings, issuance of letters of credit and floorplan financing for certain vendor products. The Revolving Loan matures on June 24, 2016. The Revolving Loan replaced the Company's previous revolving loan credit facility that was to mature on October 12, 2012. In connection with the termination of the previous facility, the Company recorded a loss on extinguishment of 77 Qbdlfu!Qh/!3:5 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS long-term debt of $1.6 million in the Company's consolidated statement of operations for the year ended December 31, 2011, representing a write-off of a portion of unamortized deferred financing costs. Fees of $7.2 million related to the Revolving Loan were capitalized as deferred financing costs and are being amortized over the term of the facility on a straight-line basis. As described in Note 5, the Company has entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers. In connection with the floorplan sub-facility, the Company entered into the Revolving Loan inventory financing agreement. Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and noninterest bearing. The Company will either pay the outstanding Revolving Loan inventory financing agreement amounts when they become due, or the Revolving Loan's administrative agent will automatically initiate an advance on the Revolving Loan and use the proceeds to pay the balance on the due date. At December 31, 2013, the financial intermediary reported an outstanding balance of $246.8 million under the Revolving Loan inventory financing agreement. The total amount reported on the Company's consolidated balance sheet as accounts payable-inventory financing related to the Revolving Loan inventory financing agreement is $9.3 million more than the $246.8 million owed to the financial intermediary due to differences in the timing of reporting activity under the Revolving Loan inventory financing agreement. The outstanding balance reported by the financial intermediary excludes $9.9 million in reserves for open orders that reduce the availability under the Revolving Loan. Changes in cash flows from the Revolving Loan inventory financing agreement are reported in financing activities on the Company's consolidated statements of cash flows. Borrowings under the Revolving Loan bear interest at a variable interest rate plus an applicable margin. The variable interest rate is based on one of two indices, either (i) LIBOR, or (ii) the Alternate Base Rate (“ABR”) with the ABR being the greatest of (a) the prime rate, (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus 1.00%. The applicable margin varies (2.00% to 2.50% for LIBOR borrowings and 1.00% to 1.50% for ABR borrowings) depending upon the Company's average daily excess cash availability under the agreement and is subject to a reduction of 0.25% if, and for as long as, the senior secured leverage ratio is less than 3.0. The senior secured leverage ratio is defined as the ratio of senior secured debt (including amounts owed under certain inventory floorplan arrangements) less cash and cash equivalents, to Adjusted EBITDA, a non-GAAP measure, for the four most recently ended fiscal quarters. For the four quarters ended December 31, 2013, the senior secured leverage ratio was 2.1. Availability under the Revolving Loan is limited to (a) the lesser of the revolving commitment of $900.0 million and the amount of the borrowing base less (b) outstanding borrowings, letters of credit, and amounts outstanding under the Revolving Loan inventory financing agreement plus a reserve of 15% of open orders. The borrowing base is (a) the sum of the products of the applicable advance rates on eligible accounts receivable and on eligible inventory as defined in the agreement less (b) any reserves. At December 31, 2013, the borrowing base was $1,065.5 million based on the amount of eligible inventory and accounts receivable balances as of November 30, 2013. The Company could have borrowed up to an additional $641.1 million under the Revolving Loan at December 31, 2013. The fee on the unused portion of the Revolving Loan ranges from 25 basis points to either 37.5 or 50 basis points, depending on the amount of utilization. CDW LLC is the borrower under the Revolving Loan. All obligations under the Revolving Loan are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. Borrowings under the Revolving Loan are collateralized by a first priority interest in inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5), deposits, and accounts receivable, and a second priority interest in substantially all other assets. The Revolving Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Revolving Loan also includes maintenance of a minimum average daily excess cash availability requirement. Should the Company fall below the minimum average daily excess cash availability requirement for five consecutive business days, the Company becomes subject to a fixed charge coverage ratio until such time as the daily excess cash availability requirement is met for 30 consecutive business days. Senior Secured Term Loan Facility On April 29, 2013, the Company entered into a new seven-year, $1,350.0 million aggregate principal amount senior secured term loan facility (the "Term Loan"). The Term Loan was issued at a price that was 99.75% of par, which 78 Qbdlfu!Qh/!3:6 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS resulted in a discount of $3.4 million. Substantially all of the proceeds from the Term Loan were used to repay the $1,299.5 million outstanding aggregate principal amount of the prior senior secured term loan facility (the "Prior Term Loan Facility"). In connection with this refinancing, the Company recorded a loss on extinguishment of long-term debt of $10.3 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented a write-off of the remaining unamortized deferred financing costs related to the Prior Term Loan Facility. On July 31, 2013, the Company borrowed an additional $190.0 million aggregate principal amount under the Term Loan at a price that was 99.25% of par, which resulted in a discount of $1.4 million. Such proceeds were used to redeem a portion of outstanding Senior Subordinated Notes. The discounts are reported on the consolidated balance sheet as a reduction to the face amount of the Term Loan and are being amortized to interest expense over the term of the related debt. Fees of $6.1 million related to the Term Loan were capitalized as deferred financing costs and are being amortized over the term of the facility using the effective interest method. Borrowings under the Term Loan bear interest at either (a) the alternate base rate ("ABR") plus a margin or (b) LIBOR plus a margin; provided that for the purposes of the Term Loan, LIBOR shall not be less than 1.00% per annum at any time ("LIBOR Floor"). The margin is based upon a net leverage ratio as defined in the agreement governing the Term Loan, ranging from 1.25% to 1.50% for ABR borrowings and 2.25% to 2.50% for LIBOR borrowings. An interest rate of 3.25%, LIBOR Floor plus a 2.25% margin, was in effect during the three-month period ended December 31, 2013. Unlike the Prior Term Loan Facility, the Term Loan does not include a senior secured leverage ratio requirement or a hedging requirement. Additionally, the definition of debt under the Term Loan was revised to exclude amounts outstanding under the Company's inventory financing agreements. The Term Loan is subject to certain requirements as was the Prior Term Loan Facility to make mandatory annual excess cash flow prepayments under designated circumstances, including (i) a prepayment in an amount equal to 50% of the Company's excess cash flow for a fiscal year (the percentage rate of which decreases to 25% when the total net leverage ratio, as defined in the governing agreement, is less than or equal to 5.5 but greater than 4.5; and decreases to 0% when the total net leverage ratio is less than or equal to 4.5), and (ii) the net cash proceeds from the incurrence of certain additional indebtedness by the Company or its subsidiaries. The total net leverage ratio was 3.8 at December 31, 2013. The Company is required to pay quarterly principal installments equal to 0.25% of the original principal amount of the Term Loan, with the remaining principal amount payable on the maturity date of April 29, 2020. The quarterly principal installment payments commenced during the quarter ended June 30, 2013. At December 31, 2013, the outstanding principal amount of the Term Loan was $1,528.9 million, excluding $4.4 million in unamortized discount. The Company has interest rate cap agreements in effect through January 14, 2015 with a combined notional amount of $1,150.0 million. These cap agreements have not been designated as cash flow hedges of interest rate risk for GAAP accounting purposes. Of the total $1,150.0 million notional amount, $500.0 million entitle the Company to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The remaining cap agreements with a notional amount of $650.0 million entitle the Company to payments from the counterparty of the amount, if any, by which the three-month LIBOR exceeds 1.5% during the agreement period. The fair value of the Company's interest rate cap agreements was zero at December 31, 2013 and $0.1 million at December 31, 2012. During the first quarters of 2013, 2012 and 2011, the Company made principal prepayments totaling $40.0 million, $201.0 million and $132.0 million, respectively, under the Prior Term Loan Facility. These prepayments satisfied the excess cash flow payment provision of the Prior Term Loan Facility with respect to the years ended December 31, 2012, 2011 and 2010, respectively. On March 11, 2011, the Company entered into an amendment to the Prior Term Loan Facility, which became effective on March 14, 2011. In connection with this amendment, the Company recorded a loss on extinguishment of long-term Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* debt of $3.2 million in the Company's consolidated statement of operations for the year ended December 31, 2011. This loss represented a write-off of a portion of the unamortized deferred financing costs related to the Prior Term Loan Facility. CDW LLC is the borrower under the Term Loan. All obligations under the Term Loan are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5), deposits, and accounts receivable, and by a first priority interest in substantially all other assets. The Term Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of 79 Qbdlfu!Qh/!3:7 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. 8.0% Senior Secured Notes due 2018 (“Senior Secured Notes”) The Senior Secured Notes were issued on December 17, 2010 and will mature on December 15, 2018. At December 31, 2013, the outstanding principal amount of the Senior Secured Notes was $325.0 million. On July 2, 2013, the Company used a portion of the net proceeds from the IPO to redeem $175.0 million aggregate principal amount of Senior Secured Notes. The redemption price of the Senior Secured Notes was 108.0% of the principal amount redeemed, plus $0.7 million of accrued and unpaid interest to the date of redemption. The Company used cash on hand to pay such accrued and unpaid interest. In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $16.7 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $14.0 million in redemption premium and $2.7 million for the write- off of a portion of the remaining deferred financing costs related to the Senior Secured Notes. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Secured Notes and the obligations under the notes are guaranteed by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Secured Notes are secured on a pari passu basis with the Term Loan by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5), deposits, and accounts receivable, and by a first priority interest in substantially all other assets. The Senior Secured Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Secured Note indenture does not contain any financial covenants. 11.0% Senior Exchange Notes due 2015 (“Senior Exchange Notes”); 11.5% / 12.25% Senior PIK Election Exchange Notes due 2015 (“PIK Election Notes” together with the Senior Exchange Notes, the “Senior Notes due 2015”) At December 31, 2013, there were no outstanding Senior Notes due 2015. On April 13, 2011, the Company completed a cash tender offer (the “Initial Senior Notes due 2015 Tender Offer”) and purchased $665.1 million aggregate principal amount of Senior Notes due 2015 comprised of $519.2 million of the Senior Exchange Notes and $145.9 million of the PIK Election Notes. The Company concurrently issued $725.0 million aggregate principal amount of Senior Notes (as defined below). The proceeds from this offering, together with cash on hand and borrowings under the then-outstanding revolving loan credit facility, were used to fund the purchase of the tendered Senior Notes due 2015, including $665.1 million aggregate principal amount of Senior Notes due 2015, $59.9 million in tender offer premium and $36.5 million of accrued and unpaid interest, along with transaction fees and expenses. On May 20, 2011, the Company completed a follow-on cash tender offer (the “Follow-on Senior Notes due 2015 Tender Offer,” and together with the Initial Senior Notes due 2015 Tender Offer, the “Senior Notes due 2015 Tender Offers”) and purchased an additional $412.8 million aggregate principal amount of Senior Notes due 2015 comprised of $321.4 million of the Senior Exchange Notes and $91.4 million of the PIK Election Notes. The Company concurrently issued $450.0 million in aggregate principal amount of additional Senior Notes. The proceeds from this offering, together with cash on hand and borrowings under the then-outstanding revolving loan credit facility, were used to fund the purchase of the tendered Senior Notes due 2015, including $412.8 million aggregate principal amount Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* of Senior Notes due 2015, $37.2 million in tender offer premium and $4.5 million of accrued and unpaid interest, along with transaction fees and expenses. In connection with the Senior Notes due 2015 Tender Offers, the Company recorded a loss on extinguishment of long- term debt of $114.1 million in the Company's consolidated statement of operations for the year ended December 31, 2011. This loss represented $97.0 million in tender offer premiums and $17.1 million for the write-off of a portion of the unamortized deferred financing costs related to the Senior Notes due 2015. In connection with the issuance of Senior Notes, fees of $19.1 million were capitalized as deferred financing costs and are being amortized over the term of the notes using the effective interest method. 80 Qbdlfu!Qh/!3:8 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On February 2, 2012, the Company commenced a tender offer to purchase any and all of the remaining $129.0 million aggregate principal amount of Senior Notes due 2015. On February 17, 2012, the Company accepted for purchase $120.6 million aggregate principal amount of the outstanding Senior Notes due 2015 that were tendered. On March 5, 2012, the Company accepted for purchase an additional $0.1 million aggregate principal amount of the outstanding Senior Notes due 2015 that were tendered prior to the expiration of the tender offer on March 2, 2012. On March 19, 2012, the Company redeemed the remaining $8.3 million aggregate principal amount that was not tendered. The Company funded the purchases and redemptions of the Senior Notes due 2015 with the issuance of $130.0 million aggregate principal amount of additional Senior Notes on February 17, 2012. The proceeds from this issuance, together with cash on hand and borrowings under the Revolving Loan, funded the payment of $129.0 million aggregate principal amount of Senior Notes due 2015, $7.9 million in tender and redemption premiums and $5.0 million of accrued and unpaid interest, along with transaction fees and expenses. In connection with these transactions, the Company recorded a loss on extinguishment of long-term debt of $9.4 million in the Company's consolidated statement of operations for the year ended December 31, 2012. This loss represented $7.9 million in tender and redemption premiums and $1.5 million for the write-off of the remaining unamortized deferred financing costs related to the Senior Notes due 2015. 8.5% Senior Notes due 2019 (“Senior Notes”) At December 31, 2013, the outstanding principal amount of Senior Notes was $1,305.0 million, excluding $4.2 million in unamortized premium. The Senior Notes mature on April 1, 2019. On February 17, 2012, the Company issued $130.0 million aggregate principal amount of additional Senior Notes at an issue price of 104.375% of par. The $5.7 million premium received is reported on the consolidated balance sheet as an addition to the face amount of the Senior Notes and is being amortized as a reduction of interest expense over the term of the related debt. As discussed above, on April 13, 2011, the Company issued $725.0 million aggregate principal amount of Senior Notes and on May 20, 2011, the Company issued an additional $450.0 million aggregate principal amount of Senior Notes. The proceeds from these issuances together with cash on hand and borrowings under the then-outstanding revolving loan credit facility were used to fund the Senior Notes due 2015 Tender Offers. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Notes. Obligations under the Senior Notes are guaranteed on an unsecured senior basis by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Notes do not contain any financial covenants. 12.535% Senior Subordinated Exchange Notes due 2017 (“Senior Subordinated Notes”) At December 31, 2013, the outstanding principal amount of the Senior Subordinated Notes was $92.5 million. The Senior Subordinated Notes have a maturity date of October 12, 2017. On October 18, 2013, the Company redeemed $155.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 104.178% of the principal amount redeemed. A combination of cash on hand and the net proceeds from the sale of shares of common stock related to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO, in the amount of $56.0 million, was used to fund Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* the redemption of $155.0 million aggregate principal amount, $6.5 million of redemption premium and $0.2 million in accrued and unpaid interest to the date of redemption. See Note 9 for additional discussion of the underwriters' overallotment option. In connection with this redemption, the Company recorded a loss on extinguishment of long- term debt of $8.5 million in the Company's consolidated statement of operations for the year ended December 31, 2013. This loss represented $6.5 million in redemption premium and $2.0 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. On August 1, 2013, the Company redeemed $324.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. The Company used a portion of the net 81 Qbdlfu!Qh/!3:9 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS proceeds from the IPO to redeem $146.0 million aggregate principal amount of Senior Subordinated Notes and incremental borrowings of $190.0 million under the Term Loan to redeem $178.0 million aggregate principal amount of Senior Subordinated Notes. The Company used cash on hand to pay $12.0 million of accrued and unpaid interest to the date of redemption. In connection with this redemption, the Company recorded a loss on extinguishment of long- term debt of $24.6 million in the consolidated statement of operations for the year ended December 31, 2013. This loss represented $20.3 million in redemption premium and $4.3 million for the write-off of a portion of the remaining deferred financing costs related to the Senior Subordinated Notes. On March 8, 2013, the Company redeemed $50.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. Cash on hand was used to fund the redemption of $50.0 million aggregate principal amount, $3.1 million of redemption premium and $2.5 million in accrued and unpaid interest to the date of redemption. In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $3.9 million in the Company's consolidated statement of operations for the year ended December 31, 2013. This loss represented $3.1 million in redemption premium and $0.8 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. On December 21, 2012, the Company redeemed $100.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. Cash on hand was used to fund the redemption of $100.0 million aggregate principal amount, $6.3 million of redemption premium and $2.3 million in accrued and unpaid interest to the date of redemption. In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $7.8 million in the Company's consolidated statement of operations for the year ended December 31, 2012. This loss represented $6.3 million in redemption premium and $1.5 million for the write-off of a portion of the remaining unamortized deferred financing costs related to the Senior Subordinated Notes. CDW LLC and CDW Finance Corporation are the co-issuers of the Senior Subordinated Notes. Obligations under the Senior Subordinated Notes are guaranteed on an unsecured senior basis by Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. The Senior Subordinated Note indenture contains negative covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Senior Subordinated Notes do not contain any financial covenants. Long-Term Debt Maturities As of December 31, 2013, the maturities of long-term debt were as follows: (in millions) Years ending December 31, 2014 $45.4 2015 15.4 2016 15.4 2017 77.9 2018 340.4 Thereafter 2,756.9 $3,251.4 See Note 19 for a description of refinancing transactions completed during 2014. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Fair Value The fair value of the Company's long-term debt instruments at December 31, 2013 was $3,415.2 million. The fair value of the Senior Secured Notes, Senior Notes and Senior Subordinated Notes is estimated using quoted market prices for identical assets or liabilities that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Term Loan is estimated using dealer quotes for identical assets or liabilities in markets that are not considered active. Consequently, the Company's long-term debt is classified as Level 2 within the fair value hierarchy. 82 Qbdlfu!Qh/!3:: Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At December 31, 2013, the carrying value of the Company's long-term debt was $3,251.4 million, excluding $4.2 million in unamortized premium and $4.4 million in unamortized discount. Deferred Financing Costs The following table summarizes the deferred financing costs activity for the years ended December 31, 2013 and 2012: (in millions)December 31, 20132012 Beginning balance$53.2$68.5 Additional costs capitalized6.12.1 Recognized in interest expense(9.1)(14.4) Write-off of unamortized deferred financing costs(20.1)(3.0) Ending balance$30.1$53.2 As of December 31, 2013 and December 31, 2012, the weighted-average remaining life of unamortized deferred financing costs was 4.9 and 5.1 years, respectively. 8. Income Taxes Income before income taxes was taxed under the following jurisdictions: (in millions)Years Ended December 31, 201320122011 Domestic$179.4$170.3$11.4 Foreign16.115.816.9 Total$195.5$186.1$28.3 Components of the income tax expense (benefit) consisted of the following: (in millions)Years Ended December 31, 201320122011 Current: Federal$96.7$110.3$17.9 (0.6 State10.18.0) Foreign4.65.14.1 Total current111.4123.421.4 Deferred: Domestic(48.6)(56.2)(9.9) Foreign(0.1)(0.1)(0.3) (56.3(10.2 Total deferred(48.7))) Income tax expense$62.7$67.1$11.2 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 83 Qbdlfu!Qh/!411 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The reconciliation between the statutory tax rate expressed as a percentage of income before income taxes and the effective tax rate is as follows: (dollars in millions)Years Ended December 31, 201320122011 Statutory federal income tax rate$68.435.0%$65.135.0%$9.935.0% State taxes, net of federal effect(5.0)(2.6)0.40.2(3.4)(11.8) Equity-based compensation1.50.75.73.15.117.9 Effect of rates different than statutory(1.4)(0.7)(1.4)(0.8)(1.1)(4.0) Valuation allowance————(0.9)(3.1) Other(0.8)(0.3)(2.7)(1.5)1.65.7 Effective tax rate$62.732.1%$67.136.0%$11.239.7% The tax effect of temporary differences that give rise to the net deferred income tax liability is presented below: (in millions)December 31, 20132012 Deferred Tax Assets: Deferred interest$42.5$58.3 State net operating loss and credit carryforwards, net20.618.0 Payroll and benefits16.216.7 Rent6.41.2 Accounts receivable5.44.2 Equity compensation plans1.610.3 Trade credits1.51.8 Interest rate caps0.81.8 Charitable contribution carryforward0.54.1 Deferred financing costs0.22.3 Other7.17.2 Total deferred tax assets102.8125.9 Deferred Tax Liabilities: Software and intangibles486.2551.4 Deferred income145.5146.3 Property and equipment25.029.3 Other11.69.1 Total deferred tax liabilities668.3736.1 Deferred tax asset valuation allowance—— Net deferred tax liability$565.5$610.2 The Company has state income tax net operating loss carryforwards of $202.8 million, which will expire at various dates from 2014 through 2033 and state tax credit carryforwards of $17.0 million, which expire at various dates from 2016 through 2018. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* The Company has not provided for U.S. federal income taxes or tax benefits on the undistributed earnings of its international subsidiary because such earnings are reinvested and it is currently intended that they will continue to be reinvested indefinitely. At December 31, 2013, the Company has not provided for federal income taxes on earnings of approximately $52.5 million from its international subsidiary. The Company had no unrecognized tax benefits at December 31, 2013, 2012 and 2011. In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities, including the Internal Revenue Service (“IRS”). In general, the Company is no longer subject to audit by the IRS for 84 Qbdlfu!Qh/!412 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS tax years through 2010 and state, local or foreign taxing authorities for tax years through 2008. Various other taxing authorities are in the process of auditing income tax returns of the Company and its subsidiaries. The Company does not anticipate that any adjustments from the audits would have a material impact on its consolidated financial position, results of operations or cash flows. The Company accrues net interest and penalties related to unrecognized tax benefits in income tax expense in its consolidated statements of operations. For the years ended December 31, 2013, 2012 and 2011, the Company had no liability recorded for the payment of interest and penalties on unrecognized tax benefits and did not recognize any such interest and penalty expense. 9. Shareholders' Equity On July 2, 2013, the Company completed an IPO of 23,250,000 shares of common stock. On July 31, 2013, the Company completed the sale of an additional 3,487,500 shares of common stock to the underwriters of the IPO pursuant to the underwriters' July 26, 2013 exercise in full of the overallotment option granted to them in connection with the IPO. Such shares were registered under the Securities Act of 1933, as amended, pursuant to the Company's Registration Statement on Form S-1, which was declared effective by the SEC on June 26, 2013. The shares of common stock are listed on the NASDAQ Global Select Market under the symbol “CDW.” The Company's shares of common stock were sold to the underwriters at a price of $17.00 per share in the IPO and upon the exercise of the overallotment option, which together, generated aggregate net proceeds of $424.7 million to the Company after deducting underwriting discounts, expenses and transaction costs. On November 19, 2013, the Company completed a secondary public offering, whereby certain selling stockholders sold 15,000,000 shares of common stock. On December 18, 2013, such selling stockholders sold an additional 2,250,000 shares of common stock to the underwriters of the secondary public offering pursuant to the underwriters' December 13, 2013 exercise in full of the overallotment option granted to them in connection with the secondary public offering. The Company did not receive any proceeds from the sale of shares in the secondary public offering or upon the exercise of the overallotment option. The following pre-tax IPO- and secondary-offering related expenses were included within selling and administrative expenses in the consolidated statement of operations for the year ended December 31, 2013: Year Ended (in millions) December 31, 2013 Acceleration charge for certain equity awards and related employer payroll (1) $40.7 taxes (2) RDU Plan cash retention pool accrual7.5 (3) Management services agreement termination fee24.4 Other expenses2.4 IPO- and secondary-offering related expenses$75.0 (1) See Note 10 for additional discussion of the impact of the IPO on the Company's equity awards. (2) See Note 12 for additional discussion of this transaction. (3) Represents the payment of a termination fee to affiliates of the Sponsors in connection with the termination of the management services agreement with such entities. In June 2013, the Company’s Board of Directors and the Company's sole shareholder at that time, CDW Holdings, Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* approved the reclassification of the Company’s Class A common shares and Class B common shares into a single class of common shares and a 143.0299613-for-1 stock split, effective immediately. The par value of the common shares was maintained at $0.01 per share. All references to common shares and per share amounts in the accompanying consolidated financial statements have been adjusted to reflect the reclassification and stock split on a retroactive basis. In June 2013, the Company amended and restated its certificate of incorporation to authorize the issuance of 100,000,000 shares of preferred stock with a par value of $0.01. No shares of preferred stock have been issued or are outstanding as of December 31, 2013. Additionally, the amended and restated certificate of incorporation increased the number of authorized common shares to 1,000,000,000. 85 Qbdlfu!Qh/!413 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On December 2, 2013, the Company paid a cash dividend on the Company's common stock of $0.0425 per share, or $7.3 million, to all stockholders of record as of the close of business on November 15, 2013. See Note 19 for a discussion of the dividend declared during the first quarter of 2014. Future dividends will be subject to the approval of the Company's board of directors. 10. Equity-Based Compensation Equity-Based Compensation Plan Descriptions CDW has established certain equity-based compensation plans for the benefit of the Company’s coworkers and senior management. 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. On June 30, 2011, the Board of Managers approved the terms of a modified Class B Common Unit grant agreement with the Company's former Chief Executive Officer, who retired as the Company's Chief Executive Officer effective October 1, 2011 but continued to serve as Chairman of the Board through December 31, 2012. As a result of this modification, the Company recorded incremental equity-based compensation expense of $6.6 million and $3.3 million during the years ended December 31, 2012 and 2011, respectively. MPK II Units Contemporaneous with the Acquisition, the Company agreed with Michael P. Krasny, CDW Corporation founder, former chairman and CEO and significant selling shareholder, to establish the MPK Coworker Incentive Plan II (the “MPK Plan”) for the benefit of all of the coworkers of the Company other than members of senior management who received incentive equity awards under the Plan. The MPK Plan established an “account” for each eligible participant which was notionally credited with a number of Class A Common Units of CDW Holdings LLC on October 15, 2007, the day the plan was established. The notional units credited to participants' accounts were to cliff-vest at the end of ten years, subject to acceleration upon the occurrence of certain events. On July 2, 2013, the Company completed an IPO of its common shares. Under the terms of the MPK Plan, vesting accelerated for all unvested units upon completion of the IPO. The Company recorded a pre-tax charge of $36.7 million for compensation expense related to the acceleration of the expense recognition for MPK Plan units in the year ended December 31, 2013. In connection with the completion of the IPO, the Company distributed common stock to each participant and withheld the number of shares of common stock equal to the required tax withholding for each Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* participant. The Company paid required withholding taxes of $24.0 million to federal, state and foreign taxing authorities. This amount is reported as a financing activity in the consolidated statement of cash flows and as an increase to accumulated deficit in the consolidated statement of shareholders' equity for the year ended December 31, 2013. In addition, the Company paid $4.0 million of employer payroll taxes that are included as an operating activity in the consolidated statement of cash flows for the year ended December 31, 2013. In connection with the establishment of the MPK Plan, the Company agreed to make charitable contributions in amounts equal to the net income tax benefits derived from payouts to participants under the MPK Plan (net of any related employer payroll tax costs). The contributions of these amounts are due by March 15 of the calendar year 86 Qbdlfu!Qh/!414 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS following the year in which the Company realizes the benefits of the deductions. This arrangement has been accounted for as contingent consideration. Pre-2009 business combinations were accounted for under a former accounting standard which, among other aspects, precluded the recognition of certain contingent consideration as of the business combination date. Instead, under the former accounting standard, contingent consideration is accounted for as additional purchase price (goodwill) at the time the contingency is resolved. As of December 31, 2013, the Company has accrued approximately $21 million related to this arrangement within other current liabilities, as the Company expects to realize the tax benefit of the compensation deductions during the 2013 tax year. The Company expects to make the related cash contribution during the first quarter of 2014. Post-IPO Equity Awards 2013 Long-Term Incentive Plan (the "2013 LTIP") In June 2013, the Company adopted the 2013 Long-Term Incentive Plan (the "2013 LTIP"). The 2013 LTIP provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock and performance awards. The maximum aggregate number of shares that may be issued under the 2013 LTIP is 11,700,000 shares of the Company's common stock, in addition to the 3,798,508 shares of restricted stock granted in exchange for unvested Class B Common Units in connection with the Company's IPO, as discussed below. 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. For the year ended December 31, 2013, 1,200,544 shares of such restricted stock vested/settled and 5,931 shares were forfeited. As of December 31, 2013, 2,592,033 shares of restricted stock were outstanding. Stock Options In addition, in connection with the IPO, the Company issued 1,268,986 stock options to the Class B Common Unit holders to preserve their fully diluted equity ownership percentage. These options were issued with a per-share exercise price equal to the IPO price of $17.00 and are also subject to the same vesting provisions as the Class B Common Units to which they relate. The Company also granted 19,412 stock options under the 2013 LTIP during the year ended December 31, 2013. Restricted Stock Units ("RSUs") In connection with the IPO, the Company granted 1,416,543 RSUs under the 2013 LTIP at a weighted-average grant- date fair value of $17.03 per unit. The RSUs cliff-vest at the end of four years. Valuation Information The Company attributes the value of equity-based compensation awards to the various periods during which the recipient must perform services in order to vest in the award using the straight-line method. Post-IPO Equity Awards The Company has elected to use the Black-Scholes option pricing model to estimate the fair value of stock options Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* granted. The Black-Scholes option pricing model incorporates various assumptions including volatility, expected term, risk-free interest rates and dividend yields. The assumptions used to value the stock options granted during the year ended December 31, 2013 are presented below. 87 Qbdlfu!Qh/!415 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2013 Assumptions Weighted-average grant date fair value$4.75 (1) Weighted-average volatility 35.00% (2) Weighted-average risk-free rate 1.58% Dividend yield1.00% (3) Expected term (in years) 5.4 (1) Based upon an assessment of the two-year, five-year and implied volatility for the Company’s selected peer group, adjusted for the Company’s leverage. (2) Based on a composite U.S. Treasury rate. (3) The expected term is calculated using the simplified method. The simplified method defines the expected term as the average of the option’s contractual term and the option’s weighted-average vesting period. The Company utilizes this method as it has limited historical stock option data that is sufficient to derive a reasonable estimate of the expected stock option term. The following table sets forth a summary of the Company's stock option activity for the year ended December 31, 2013: Weighted- Average Weighted-RemainingAggregate Number ofAverageContractualIntrinsic Value OptionsOptionsExercise PriceTerm(millions) Outstanding at January 1, 2013—$— Granted1,288,398$17.00 Forfeited/Expired(8,143)$17.00 Exercised—$—N/A Outstanding at December 31, 20131,280,255$17.008.4$8.1 Vested at December 31, 2013393,517$17.008.0$2.5 Exercisable at December 31, 2013393,517$17.008.0$2.5 Expected to vest at December 31, 2013852,713$17.008.6$5.4 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 88 Qbdlfu!Qh/!416 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth a summary of the Company's RSU activity for the year ended December 31, 2013: Weighted- Average Number ofGrant-Date UnitsFair Value Nonvested at January 1, 2013—$— Granted1,416,54317.03 Vested/Settled(1,844)17.00 Forfeited(63,127)17.01 Nonvested at December 31, 20131,351,572$17.04 The aggregate fair value of restricted stock and RSUs that vested during the year ended December 31, 2013, was $26.7 million. Pre-IPO Equity Awards 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. The following table summarizes the assumptions and resulting fair value of the Class B Common Unit grants for the years ended December 31, 2013, 2012 and 2011: Class B Common Units Years Ended December 31, 201320122011 Assumptions Weighted-average grant date fair value$119.00$125.65$148.89 Weighted-average volatility65.50%65.26%82.87% Weighted-average risk-free rate0.18%0.19%0.84% Dividend yield0.00%0.00%0.00% The Company calculated the expected future volatility based upon an assessment of the two-year, five-year and implied volatility for the Company’s selected peer group, adjusted for the Company’s leverage. The risk-free interest rate of return used is based on a composite U.S. Treasury rate. Notional units granted under the MPK Plan were valued on the grant date at $1,000 per unit, the fair value equivalent of the Class A Common Units at the time the awards were granted. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 89 Qbdlfu!Qh/!417 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth a summary of equity plan activity for the year ended December 31, 2013: Class BMPK Plan Common UnitsUnits Outstanding at January 1, 2013216,48366,137 Granted400— Forfeited(860)(2,228) (1) Converted/Settled (216,023)(63,909) Outstanding at December 31, 2013—— Vested at December 31, 2013 —— (1) As discussed above, the Class B Common Units and MPK Plan Units were converted/settled into shares of the Company's common stock upon completion of the IPO. The converted Class B Common Units, to the extent unvested at the time of the IPO, relate to the grants of restricted stock disclosed above. Expense Information The Company’s net income included $46.6 million, $22.1 million and $19.5 million of compensation cost and $16.5 million, $2.3 million and $1.9 million of income tax benefits related to the Company’s equity-based compensation arrangements for the years ended December 31, 2013, 2012 and 2011, respectively. No portion of equity-based compensation was capitalized. Equity-based compensation expense for the year ended December 31, 2013 included incremental expense of $36.7 million related to the acceleration of the expense recognition for MPK units as discussed above. Equity-based compensation expense included incremental expense of $6.6 million and $3.3 million related to the Class B Common Unit modification for the Company's former Chief Executive Officer for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2013, the Company estimated there was $24.9 million of total unrecognized compensation cost to be recognized over the next 3.3 years. 11. Earnings per Share The numerator for both basic and diluted earnings per share is net income. The denominator for basic earnings per share is the weighted-average number of common shares outstanding during the period. The 2013 denominator was impacted by the common shares issued during both the IPO and the underwriters' exercise in full of the overallotment option granted to them in connection with the IPO. Because such common shares were issued on July 2, 2013 and July 31, 2013, respectively, they are only partially reflected in the 2013 denominator. Such shares will be fully reflected in the 2014 denominator. See Note 9 for additional discussion of the IPO. The dilutive effect of outstanding restricted stock, restricted stock units, stock options and MPK Plan units is reflected in the denominator for diluted earnings per share using the treasury stock method. The following is a reconciliation of basic shares to diluted shares: Years Ended December 31, 201320122011 (in millions) Weighted-average shares - basic156.6145.1144.8 Effect of dilutive securities2.10.70.1 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Weighted-average shares - diluted158.7145.8144.9 For the years ended December 31, 2013, 2012 and 2011, diluted earnings per share excludes the impact of 0.0 million, 0.0 million, and 4.3 million potential common shares, respectively, as their inclusion would have had an anti-dilutive effect. 90 Qbdlfu!Qh/!418 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. Deferred Compensation Plan On March 10, 2010, in connection with the Company’s purchase of $28.5 million principal amount of its outstanding senior subordinated debt, the Company established the Restricted Debt Unit Plan (the “RDU Plan”), an unfunded nonqualified deferred compensation plan. The total number of RDUs that can be granted under the RDU Plan is 28,500. At December 31, 2013, 28,500 RDUs were outstanding. RDUs that are outstanding vest daily on a pro rata basis over the three-year period from January 1, 2012 (or, if later, the date of hire or the date of a subsequent RDU grant) through December 31, 2014. Participants have no rights to the underlying debt. The total amount of compensation available to be paid under the RDU Plan was initially to be based on two components, a principal component and an interest component. The principal component credits the RDU Plan with a notional amount equal to the $28.5 million face value of the Senior Subordinated Notes (the "Debt Pool"), together with certain redemption premium equivalents as noted below. The interest component credits the RDU Plan with amounts equal to the interest that would have been earned on the Debt Pool from March 10, 2010 through maturity on October 12, 2017, except as discussed below. Interest amounts for 2010 and 2011 were deferred until 2012, and thereafter, interest amounts were paid to participants semi-annually on the interest payment due dates. Payments totaling $1.7 million and $1.3 million were made to participants under the RDU Plan in April and October 2013, respectively, in connection with the semi-annual interest payments due. The Company used a portion of the IPO proceeds together with incremental borrowings to redeem $324.0 million of the total Senior Subordinated Notes outstanding on August 1, 2013. In connection with the IPO and the partial redemption of the Senior Subordinated Notes, the Company amended the RDU Plan to increase the retentive value of the plan. In accordance with the original terms of the RDU Plan, the principal component of the RDUs converted to a cash-denominated pool upon the redemption of the Senior Subordinated Notes. In addition, the Company added $1.4 million to the principal component in the year ended December 31, 2013 as redemption premium equivalents in accordance with the terms of the RDU plan. Under the terms of the amended RDU Plan, upon the partial redemption of outstanding Senior Subordinated Notes, the RDUs ceased to accrue the proportionate related interest component credits. The amended RDU Plan provides participants the opportunity to share on a pro rata basis in cash retention pools payable to participants who satisfy certain retention requirements. The aggregate amount of the retention pools was determined to be $15.0 million based upon the amount of interest component credits that would have been allocated to the RDU Plan if the Senior Subordinated Notes had remained outstanding from August 1, 2013 through maturity. The Company recorded a pre-tax charge of $7.5 million in the year ended December 31, 2013 for payment of the first cash retention pool. The second cash retention pool payment is expected to be made to participants who remain employed through December 31, 2015 in the first quarter of 2016. Participants continue to accrue an interest component credit for the proportionate amount of Senior Subordinated Notes still outstanding, payable on the aforementioned semi-annual due dates; such payments, however, will be deducted from the second retention pool payment amount of $7.5 million. Unrecognized compensation expense as of December 31, 2013 of approximately $9 million is expected to be recognized through 2014 and approximately $7 million in 2015 through 2017. 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 $16.8 million, $8.4 million, and $8.1 million related to the RDU Plan was recognized in the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, the Company had $21.8 million and $15.5 million of liabilities related to the RDU Plan recorded on the consolidated balance sheets, respectively. Payment of the principal component of the RDU Plan is expected to be made on October 12, 2017, unless accelerated Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* due to a sale of the Company. 13. Profit Sharing and 401(k) Plan 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, 2013, 2012 and 2011, the amounts charged to expense for this plan totaled $17.3 million, $14.6 million and $15.3 million, respectively. 91 Qbdlfu!Qh/!419 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Commitments and Contingencies 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, and 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. As of December 31, 2013, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. The Company previously filed a claim as part of a class action settlement in a case alleging price fixing during the period of January 1, 1996 through December 31, 2006, by certain manufacturers of thin-film liquid crystal display panels. On July 13, 2013, the United Stated District Court for the Northern District of California approved distribution of the settlement proceeds, including a net payment to the Company of $10.4 million after fees and expenses. The Company has recognized a pre-tax benefit of $10.4 million within selling and administrative expenses in the consolidated statement of operations for the year ended December 31, 2013. The first of two settlement payments was received by the Company on July 29, 2013 in the amount of $8.5 million. The balance of $1.9 million was received in February 2014. 15. Related Party Transactions The Company had previously entered into a management services agreement with the Sponsors pursuant to which they had agreed to provide it with management and consulting services and financial and other advisory services. Pursuant to such agreement, the Sponsors received an annual management fee of $5.0 million and reimbursement of out-of- pocket expenses incurred in connection with the provision of such services. Such amounts were classified as selling and administrative expenses within the consolidated statements of operations. The management services agreement included customary indemnification and provisions in favor of the Sponsors. On July 2, 2013, the Company completed an IPO of its common stock. Using a portion of the net proceeds from the IPO, the Company paid a $24.4 million termination fee to affiliates of the Sponsors in connection with the termination of the management services agreement with such entities that was effective upon completion of the IPO. The Company paid an annual management fee of $2.5 million, $5.0 million and $5.0 million in the years ended December 31, 2013, 2012 and 2011, respectively. 16. Segment Information Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the chief operating decision-maker for making decisions and assessing performance as the source of the Company's reportable segments. The Company's segments are organized in a manner consistent with which separate financial information is available and evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company has two reportable segments: Corporate, which is comprised primarily of business customers, and Public, which is comprised of government entities and education and healthcare institutions. The Company also has Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* two other operating segments, CDW Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and, accordingly, are combined together as “Other.” The Company has centralized logistics and headquarters functions that provide services to the segments. The logistics function includes purchasing, distribution and fulfillment services to support both the Corporate and Public segments. As a result, costs and intercompany charges associated with the logistics function are fully allocated to both of these segments based on a percent of sales. The centralized headquarters function provides services in areas such as accounting, information technology, marketing, legal and coworker services. Headquarters' function costs that are not allocated to the segments are included under the heading of “Headquarters” in the tables below. Depreciation expense is included in Headquarters as it is not allocated among segments or used in measuring segment performance. 92 Qbdlfu!Qh/!41: Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IPO- and secondary-offering related expenses primarily relating to coworker compensation were included within operating segment results for the year ended December 31, 2013. See Note 9 for additional discussion of IPO- and secondary-offering related expenses. The Company allocates resources to and evaluates performance of its segments based on net sales, income (loss) from operations and Adjusted EBITDA, a non-GAAP measure as defined in the Company's credit agreements. However, the Company has concluded that income (loss) from operations is the more useful measure in terms of discussion of operating results, as it is a GAAP measure. Segment information for total assets and capital expenditures is not presented, as such information is not used in measuring segment performance or allocating resources between segments. Selected Segment Financial Information The following table presents information about the Company’s segments for the years ended December 31, 2013, 2012 and 2011: (in millions)CorporatePublicOtherHeadquartersTotal 2013: Net sales$5,960.1$4,164.5$644.0$—$10,768.6 (128.4 Income (loss) from operations363.3246.527.2)508.6 Depreciation and amortization expense(97.3)(44.0)(8.6)(58.3)(208.2) IPO- and secondary-offering related expenses(26.4)(14.4)(3.6)(30.6)(75.0) 2012: Net sales$5,512.8$4,023.0$592.4$—$10,128.2 (103.7 Income (loss) from operations349.0246.718.6)510.6 Depreciation and amortization expense(97.6)(44.0)(9.3)(59.3)(210.2) IPO- and secondary-offering related expenses————— 2011: Net sales$5,334.4$3,757.2$510.8$—$9,602.4 (111.7 Income (loss) from operations331.6233.317.5)470.7 Depreciation and amortization expense(97.4)(43.9)(8.7)(54.9)(204.9) IPO- and secondary-offering related expenses————— Major Customers, Geographic Areas, and Product Mix Net sales to the federal government were $764.4 million, $964.7 million and $953.6 million and accounted for approximately 7%, 10% and 10% of total net sales in 2013, 2012 and 2011, respectively. Net sales to customers outside of the U.S., primarily in Canada, were approximately 4% of the Company's total net sales in 2013, 2012 and 2011. Approximately 1% and 2% of the Company’s long-lived assets were located outside of the U.S. as of December 31, 2013 and 2012, respectively. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 93 Qbdlfu!Qh/!421 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents net sales by major category for the years ended December 31, 2013, 2012 and 2011. Categories are based upon internal classifications. Amounts for the years ended December 31, 2012 and 2011 have been reclassified for certain changes in individual product classifications to conform to the presentation for the year ended December 31, 2013. Year EndedYear EndedYear Ended December 31, 2013December 31, 2012December 31, 2011 PercentagePercentagePercentage Dollars inof Total NetDollars inof Total NetDollars inof Total Net MillionsSalesMillionsSalesMillionsSales Notebooks/Mobile Devices$1,706.015.8%$1,470.114.5%$1,336.913.9% NetComm Products 1,489.113.81,351.113.31,237.712.9 Enterprise and Data Storage 998.19.3979.49.7929.99.7 (Including Drives) Other Hardware 4,173.338.84,068.840.23,988.341.5 Software 1,994.718.51,849.418.31,767.218.4 Services 327.13.0284.62.8254.32.6 (1) Other 80.30.8124.81.288.11.0 Total net sales $10,768.6100.0%$10,128.2100.0%$9,602.4100.0% (1) Includes items such as delivery charges to customers and certain commission revenue. 17. Supplemental Guarantor Information As described in Note 7, the Senior Secured Notes, Senior Subordinated Notes and Senior Notes are guaranteed by Parent and each of CDW LLC’s direct and indirect, 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”). All guarantees by Parent and Guarantor Subsidiaries are joint and several, and full and unconditional; provided that each guarantee by the Guarantor Subsidiaries is subject to certain customary release provisions contained in the indentures governing the Senior Secured Notes, Senior Subordinated Notes and Senior Notes. CDW LLC’s Canada subsidiary (the “Non-Guarantor Subsidiary”) does not guarantee the debt obligations. CDW LLC and CDW Finance Corporation, as co-issuers, are 100% owned by Parent, and each of the Guarantor Subsidiaries and the Non-Guarantor Subsidiary is 100% owned by CDW LLC. The following tables set forth condensed consolidating balance sheets as of December 31, 2013 and 2012, consolidating statements of operations for the years ended December 31, 2013, 2012 and 2011, condensed consolidating statements of comprehensive income for the years ended December 31, 2013, 2012 and 2011, and condensed consolidating statements of cash flows for the years ended December 31, 2013, 2012 and 2011, in accordance with Rule 3-10 of Regulation S-X. The consolidating financial information includes the accounts of CDW Corporation (the “Parent Guarantor”), which has no independent assets or operations, the accounts of CDW LLC (the “Subsidiary Issuer”), the combined accounts of the Guarantor Subsidiaries, the accounts of the Non-Guarantor Subsidiary, and the accounts of CDW Finance Corporation (the “Co-Issuer”) for the periods indicated. The information was prepared on the same basis as the Company’s consolidated financial statements. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 94 Qbdlfu!Qh/!422 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Balance Sheet December 31, 2013 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Assets Current assets: Cash and cash equivalents $—$196.5$—$14.0$—$(22.4)$188.1 Accounts receivable, net ——1,375.975.1——1,451.0 Merchandise inventory ——378.93.1——382.0 Miscellaneous receivables —49.991.05.4——146.3 Prepaid expenses and other —10.733.45.1—(3.1)46.1 Total current assets —257.11,879.2102.7—(25.5)2,213.5 Property and equipment, net —69.759.61.8——131.1 Goodwill —751.91,439.029.4——2,220.3 Other intangible assets, net —338.5982.86.7——1,328.0 Deferred financing costs, net —30.1————30.1 Other assets 4.91.40.10.9—(5.7)1.6 Investment in and advances to subsidiaries (3,616.2 706.82,909.4———)— Total assets $711.7$4,358.1$4,360.7$141.5$—$(3,647.4)$5,924.6 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable-trade (22.4 $—$21.4$637.3$26.5$—$)$662.8 Accounts payable- inventory financing ——256.6———256.6 Current maturities of long- term debt —45.4————45.4 Deferred revenue ——89.94.9——94.8 Accrued expenses —163.5175.17.5—(3.1)343.0 Total current liabilities —230.31,158.938.9—(25.5)1,402.6 Long-term liabilities: Debt —3,205.8————3,205.8 Deferred income taxes (4.8 —178.3388.41.6—)563.5 Other liabilities —36.93.61.4—(0.9)41.0 Total long-term liabilities —3,421.0392.03.0—(5.7)3,810.3 Total shareholders’ equity711.7706.82,809.899.6—(3,616.2)711.7 Total liabilities and shareholders' equity $711.7$4,358.1$4,360.7$141.5$—$(3,647.4)$5,924.6 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 95 Qbdlfu!Qh/!423 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Balance Sheet December 31, 2012 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Assets Current assets: Cash and cash equivalents $—$48.0$—$9.8$—$(19.9)$37.9 Accounts receivable, net ——1,217.767.3——1,285.0 Merchandise inventory ——313.21.4——314.6 Miscellaneous receivables —61.782.04.8——148.5 Deferred income taxes —8.75.5(0.1)——14.1 Prepaid expenses and other —10.124.40.1——34.6 Total current assets —128.51,642.883.3—(19.9)1,834.7 Property and equipment, net —73.966.22.6——142.7 Goodwill —749.41,428.531.4——2,209.3 Other intangible assets, net —348.61,121.78.2——1,478.5 Deferred financing costs, net —53.2————53.2 Other assets 5.41.10.40.6—(5.9)1.6 Investment in and advances to subsidiaries 131.12,946.0———(3,077.1)— Total assets (3,102.9 $136.5$4,300.7$4,259.6$126.1$—$)$5,720.0 Liabilities and Shareholders' Equity Current liabilities: Accounts payable-trade $—$16.5$500.3$21.7$—$(19.9)$518.6 Accounts payable- inventory financing ——249.2———249.2 Current maturities of long- term debt —40.0————40.0 Deferred revenue ——57.8———57.8 Accrued expenses —139.3157.45.9——302.6 Total current liabilities —195.8964.727.6—(19.9)1,168.2 Long-term liabilities: Debt —3,731.0————3,731.0 Deferred income taxes —188.1440.01.7—(5.5)624.3 Accrued interest —8.0————8.0 Other liabilities —46.74.01.7—(0.4)52.0 Total long-term liabilities —3,973.8444.03.4—(5.9)4,415.3 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Total shareholders’ equity 136.5131.12,850.995.1—(3,077.1)136.5 Total liabilities and shareholders’ equity$136.5$4,300.7$4,259.6$126.1$—$(3,102.9)$5,720.0 96 Qbdlfu!Qh/!424 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidating Statement of Operations Year Ended December 31, 2013 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net sales$—$—$10,293.3$475.3$—$—$10,768.6 Cost of sales——8,592.1416.2——9,008.3 Gross profit——1,701.259.1——1,760.3 Selling and administrative expenses24.4103.9957.335.3——1,120.9 Advertising expense——126.84.0——130.8 (Loss) income from operations(24.4)(103.9)617.119.8——508.6 Interest (expense) income, net—(250.6)0.20.3——(250.1) Net loss on extinguishments of long-term debt—(64.0)————(64.0) Management fee—4.3—(4.3)——— Other (expense) income, net—(0.5)1.20.3——1.0 (Loss) income before income taxes(24.4)(414.7)618.516.1——195.5 Income tax benefit (expense)9.2142.2(209.5)(4.6)——(62.7) (Loss) income before equity in earnings of subsidiaries(15.2)(272.5)409.011.5——132.8 Equity in earnings of subsidiaries148.0420.5———(568.5)— (568.5 Net income$132.8$148.0$409.0$11.5$—$)$132.8 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 97 Qbdlfu!Qh/!425 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidating Statement of Operations Year Ended December 31, 2012 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net sales $—$—$9,683.0$445.2$—$—$10,128.2 Cost of sales ——8,071.5387.1——8,458.6 Gross profit ——1,611.558.1——1,669.6 Selling and administrative expenses —103.7891.634.2——1,029.5 Advertising expense ——125.14.4——129.5 (Loss) income from operations —(103.7)594.819.5——510.6 Interest (expense) income, net —(308.0)0.40.2——(307.4) Net loss on extinguishments of long-term debt —(17.2)————(17.2) Management fee —3.8—(3.8)——— Other income (expense), net ——0.2(0.1)——0.1 (Loss) income before income taxes —(425.1)595.415.8——186.1 Income tax benefit (expense) —210.6(272.6)(5.1)——(67.1) (Loss) income before equity in earnings of subsidiaries —(214.5)322.810.7——119.0 Equity in earnings of subsidiaries119.0333.5———(452.5)— (452.5 Net income$119.0$119.0$322.8$10.7$—$)$119.0 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 98 Qbdlfu!Qh/!426 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidating Statement of Operations Year Ended December 31, 2011 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net sales $—$—$9,222.4$380.0$—$—$9,602.4 Cost of sales ——7,688.8330.1——8,018.9 Gross profit ——1,533.649.9——1,583.5 Selling and administrative expenses —111.7849.229.2——990.1 Advertising expense ——119.03.7——122.7 (Loss) income from operations —(111.7)565.417.0——470.7 Interest (expense) income, net —(324.5)0.20.1——(324.2) Net loss on extinguishments of long-term debt —(118.9)————(118.9) Management fee —9.2—(9.2)——— Other income (expense), net —0.40.5(0.2)——0.7 (Loss) income before income taxes —(545.5)566.17.7——28.3 Income tax benefit (expense) —215.1(222.4)(3.9)——(11.2) (Loss) income before equity in earnings of subsidiaries —(330.4)343.73.8——17.1 Equity in earnings of subsidiaries17.1347.5———(364.6)— Net income$17.1$17.1$343.7$3.8$—$(364.6)$17.1 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 99 Qbdlfu!Qh/!427 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2013 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Comprehensive income $126.1$141.3$409.0$4.8$—$(555.1)$126.1 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 100 Qbdlfu!Qh/!428 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2012 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Comprehensive income $121.5$121.5$322.8$13.2$—$(457.5)$121.5 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 101 Qbdlfu!Qh/!429 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2011 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Comprehensive income $17.2$17.2$343.7$2.0$—$(362.9)$17.2 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 102 Qbdlfu!Qh/!42: Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2013 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net cash (used in) provided by operating activities $(15.2)$(130.3)$508.8$5.5$—$(2.5)$366.3 Cash flows from investing activities: Capital expenditures (6.2(0.1(47.1 —(40.8)))——) Net cash used in investing activities —(40.8)(6.2)(0.1)——(47.1) Cash flows from financing activities: Proceeds from borrowings under revolving credit facility —63.0————63.0 Repayments of borrowings under revolving credit facility (63.0 —(63.0)————) Repayments of long-term debt —(51.1)————(51.1) Proceeds from issuance of long-term debt —1,535.2————1,535.2 Payments to extinguish long- term debt —(2,047.4)————(2,047.4) Payment of debt financing costs (6.1 —(6.1)————) Net change in accounts payable-inventory financing ——7.4———7.4 Payment of incentive compensation plan —(4.0)(19.6)(0.5)——(24.1) withholding taxes Net proceeds from issuance of 424.7—————424.7 common shares Dividends paid (7.3 (7.3)—————) Advances to/from affiliates (402.2)892.6(490.4)———— Other financing activities —0.4————0.4 Net cash provided by (used in) financing activities 15.2319.6(502.6)(0.5)——(168.3) Effect of exchange rate changes on cash and cash equivalents ———(0.7)——(0.7) Net increase in cash and cash equivalents —148.5—4.2—(2.5)150.2 Cash and cash equivalents – beginning of period —48.0—9.8—(19.9)37.9 Cash and cash equivalents – end of period $—$196.5$—$14.0$—$(22.4)$188.1 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 103 Qbdlfu!Qh/!431 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2012 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net cash (used in) provided by operating activities $—$(204.3)$514.2$1.3$—$6.2$317.4 Cash flows from investing activities: Capital expenditures (14.0(0.4(41.4 —(27.0)))——) Premium payments on interest rate cap agreements —(0.3)————(0.3) Net cash used in investing activities —(27.3)(14.0)(0.4)——(41.7) Cash flows from financing activities: Proceeds from borrowings under revolving credit facility —289.0————289.0 Repayments of borrowings under revolving credit facility —(289.0)————(289.0) Repayments of long-term debt —(201.0)————(201.0) Proceeds from issuance of long-term debt —135.7————135.7 Payments to extinguish long- term debt (243.2 —(243.2)————) Payment of debt financing costs —(2.1)————(2.1) Net change in accounts payable-inventory financing ——(29.5)———(29.5) Advances to/from affiliates —486.0(486.5)0.5——— Other financing activities —2.1————2.1 Net cash provided by (used in) financing activities —177.5(516.0)0.5——(338.0) Effect of exchange rate changes on cash and cash equivalents ———0.3——0.3 Net (decrease) increase in cash and cash equivalents —(54.1)(15.8)1.7—6.2(62.0) Cash and cash equivalents – beginning of period (26.1 —102.115.88.1—)99.9 Cash and cash equivalents – end of period $—$48.0$—$9.8$—$(19.9)$37.9 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 104 Qbdlfu!Qh/!432 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2011 ParentSubsidiaryGuarantorNon-GuarantorConsolidating (in millions)GuarantorIssuerSubsidiariesSubsidiaryCo-IssuerAdjustmentsConsolidated Net cash (used in) provided by operating activities $—$(93.8)$327.5$(0.3)$—$(18.7)$214.7 Cash flows from investing activities: Capital expenditures (10.6(1.7(45.7 —(33.4)))——) Cash settlements on interest rate swap agreements —(6.6)————(6.6) Premium payments on interest rate cap agreements —(3.7)————(3.7) Net cash used in investing activities —(43.7)(10.6)(1.7)——(56.0) Cash flows from financing activities: Proceeds from borrowings under revolving credit facility —1,295.0————1,295.0 Repayments of borrowings under revolving credit facility —(1,483.2)————(1,483.2) Repayments of long-term debt —(132.0)————(132.0) Proceeds from issuance of long-term debt —1,175.0————1,175.0 Payments to extinguish long- term debt —(1,175.0)————(1,175.0) Payment of debt financing costs (26.3 —(26.3)————) Net change in accounts payable-inventory financing ——250.5———250.5 Advances to/from affiliates —552.6(552.7)0.1——— Other financing activities —0.6————0.6 Net cash provided by (used in) financing activities —206.7(302.2)0.1——(95.4) Effect of exchange rate changes on cash and cash equivalents ——————— Net increase (decrease) in cash and cash equivalents —69.214.7(1.9)—(18.7)63.3 Cash and cash equivalents – beginning of period —32.91.110.0—(7.4)36.6 Cash and cash equivalents – end of period (26.1 $—$102.1$15.8$8.1$—$)$99.9 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 105 Qbdlfu!Qh/!433 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. Selected Quarterly Financial Results (unaudited) (in millions, except per-share amounts)2013 First QuarterSecond QuarterThird QuarterFourth Quarter Net Sales Detail: Corporate: Medium/Large $1,146.2$1,271.4$1,203.4$1,281.6 Small Business 257.7266.0262.4271.4 Total Corporate 1,403.91,537.41,465.81,553.0 Public: Government 252.3295.7375.3327.3 Education 232.2420.6513.4282.8 Healthcare 362.3366.3355.9380.4 Total Public 846.81,082.61,244.6990.5 Other 161.0159.3153.9169.8 Net sales $2,411.7$2,779.3$2,864.3$2,713.3 Gross profit $402.0$451.6$458.4$448.3 (1) Income from operations $120.1$153.6$92.9$142.0 (1) Net income (loss) $28.3$46.7$(2.2)$60.0 (1) (2) Net income (loss) per common share : (0.01 Basic$0.19$0.32$)$0.35 Diluted$0.19$0.32$(0.01)$0.35 (in millions, except per-share amounts)2012 First QuarterSecond QuarterThird QuarterFourth Quarter Net Sales Detail: Corporate: Medium/Large $1,089.6$1,124.7$1,055.7$1,178.5 Small Business 273.2269.7257.1264.3 Total Corporate 1,362.81,394.41,312.81,442.8 Public: Government 262.6318.0408.6404.9 Education 221.7349.5394.7226.4 Healthcare 333.3372.9360.4370.0 Total Public 817.61,040.41,163.71,001.3 Other 138.8149.9146.8156.9 Net sales $2,319.2$2,584.7$2,623.3$2,601.0 Gross profit $384.6$426.9$432.7$425.4 Income from operations $103.6$136.4$139.7$130.9 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Net income $10.9$36.8$38.0$33.3 (2) Net income per common share : Basic $0.08$0.25$0.26$0.23 Diluted $0.07$0.25$0.26$0.23 (1) The third quarter of 2013 included pre-tax IPO-related charges of $74.1 million. See Note 9 for additional discussion of the IPO. 106 Qbdlfu!Qh/!434 Table of Contents 5/H/b CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) Basic and diluted net income (loss) per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted net income (loss) per share. 19. Subsequent Events The Company redeemed $30.0 million and $20.0 million aggregate principal amounts of Senior Subordinated Notes on January 22, 2014 and February 21, 2014, respectively. The redemption prices were 104.178% of the principal amounts redeemed plus $1.0 million and $0.9 million in accrued and unpaid interest to the date of each redemption, respectively. Following these redemptions, $42.5 million aggregate principal amount of the Senior Subordinated Notes remain outstanding. In connection with these redemptions, the Company expects to record a loss on extinguishment of long-term debt of $2.7 million in the consolidated statement of operations during the first quarter of 2014. This loss represents $2.1 million in redemption premiums and $0.6 million for the write-off of a portion of the remaining deferred financing costs related to the Senior Subordinated Notes. On February 13, 2014, the Company announced that its board of directors declared a cash dividend on the Company's common stock of $0.0425 per share. The dividend will be paid on March 10, 2014 to all stockholders of record as of the close of business on February 25, 2014. Future dividends will be subject to the approval of the Company's board of directors. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 107 Qbdlfu!Qh/!435 Table of Contents 5/H/b SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2013, 2012 and 2011 (in millions) Balance atCharged toBalance at BeginningCosts andEnd of Deductions of PeriodExpensesPeriod Allowance for doubtful accounts: Year Ended December 31, 2013$5.4$2.8$(2.8)$5.4 Year Ended December 31, 20125.43.9(3.9)5.4 Year Ended December 31, 20115.03.6(3.2)5.4 Reserve for sales returns: Year Ended December 31, 2013$4.4$35.0$(34.3)$5.1 Year Ended December 31, 20124.533.2(33.3)4.4 Year Ended December 31, 20113.232.0(30.7)4.5 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 108 Qbdlfu!Qh/!436 Table of Contents 5/H/b Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding required disclosure. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. Management based this assessment on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control — Integrated Framework (1992 framework).” Based on its assessment, management concluded that, as of December 31, 2013, the Company’s internal control over financial reporting is effective. Ernst & Young LLP, independent registered public accounting firm, has audited the consolidated financial statements of the Company and the Company's internal control over financial reporting and has included their reports herein. Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 109 Qbdlfu!Qh/!437 Table of Contents 5/H/b Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of CDW Corporation We have audited CDW Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). CDW Corporation and subsidiaries’management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, CDW Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CDW Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2013 of CDW Corporation and subsidiaries and our report dated March 5, 2014 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Chicago, Illinois March 5, 2014 Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 110 Qbdlfu!Qh/!438 Table of Contents 5/H/b Item 9B. Other Information None. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 111 Qbdlfu!Qh/!439 Table of Contents 5/H/b PART III Item 10. Directors, Managers, Executive Officers and Corporate Governance We have adopted The CDW Way Code, our code of business conduct and ethics, that is applicable to all of our coworkers. Additionally, within The CDW Way Code is a Financial Integrity Code of Ethics that sets forth an even higher standard applicable to our executives, officers, members of our internal disclosure committee and all managers and above in our finance department. A copy of this code is available on our corporate website at www.cdw.com. If we make any substantive amendments to this code or grant any waiver from a provision to our chief executive officer, principal financial officer or principal accounting officer, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8- K. See Part I - “Executive Officers” for information about our executive officers, which is incorporated by reference in this Item 10. Other information required under this Item 10 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting of stockholders on May 22, 2014 (“2014 proxy statement”), which we will file with the SEC on or before 120 days after our 2013 fiscal year-end. Item 11. Executive Compensation Information required under this Item 11 is incorporated herein by reference to the 2014 proxy statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required under this Item 12 is incorporated herein by reference to the 2014 proxy statement. Item 13. Certain Relationships and Related Transactions, and Director Independence Information required under this Item 13 is incorporated herein by reference to the 2014 proxy statement. Item 14. Principal Accountant Fees and Services Information required under this Item 14 is incorporated herein by reference to the 2014 proxy statement. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 112 Qbdlfu!Qh/!43: Table of Contents 5/H/b PART IV Item 15. Exhibits and Financial Statement Schedules (a) Financial Statements and Schedules The following documents are filed as part of this report: (1) Consolidated Financial Statements: Page Report of Independent Registered Public Accounting Firm62 Consolidated Balance Sheets as of December 31, 2013 and 2012 63 Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 201164 Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011 65 Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2013, 2012 and 201166 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 201167 Notes to Consolidated Financial Statements68 (2) Financial Statement Schedules: Page Schedule II – Valuation and Qualifying Accounts108 All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto. (b) Exhibits The information required by this Item is set forth on the exhibit index that follows the signature page of this report. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 113 Qbdlfu!Qh/!441 Table of Contents 5/H/b SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDW CORPORATION Date:March 5, 2014By:/s/ Thomas E. Richards Thomas E. Richards Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SignatureTitleDate /s/ Thomas E. RichardsMarch 5, 2014 Chairman, President and Chief Executive Officer Thomas E. Richards(principal executive officer) and Director /s/ Ann E. ZieglerMarch 5, 2014 Senior Vice President and Chief Financial Officer Ann E. Ziegler(principal financial officer) /s/ Virginia L. SeggermanMarch 5, 2014 Vice President and Controller Virginia L. Seggerman(principal accounting officer) /s/ Steven W. Alesio Director March 5, 2014 Steven W. Alesio /s/ Barry K. Allen Director March 5, 2014 Barry K. Allen /s/ Benjamin D. Chereskin Director March 5, 2014 Benjamin D. Chereskin /s/ Glenn M. Creamer Director March 5, 2014 Glenn M. Creamer /s/ Michael J. DominguezDirectorMarch 5, 2014 Michael J. Dominguez /s/ Paul J. FinneganDirectorMarch 5, 2014 Paul J. Finnegan Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* /s/ David W. Nelms Director March 5, 2014 David W. Nelms /s/ Robin P. Selati Director March 5, 2014 Robin P. Selati /s/ Donna F. Zarcone Director March 5, 2014 Donna F. Zarcone 114 Qbdlfu!Qh/!442 Table of Contents 5/H/b EXHIBIT INDEX Exhibit Number Description 3.1Fifth Amended and Restated Certificate of Incorporation of CDW Corporation, previously filed as Exhibit 3.1 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 3.2Amended and Restated By-Laws of CDW Corporation, previously filed as Exhibit 3.2 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 3.3Articles of Organization of CDW LLC, previously filed as Exhibit 3.3 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.4Amended and Restated Limited Liability Company Agreement of CDW LLC, previously filed as Exhibit 3.4 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.5Certificate of Incorporation of CDW Finance Corporation, previously filed as Exhibit 3.5 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.6By-Laws of CDW Finance Corporation, previously filed as Exhibit 3.6 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.7Amended and Restated Articles of Incorporation of CDW Technologies, Inc., previously filed as Exhibit 3.7 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.8Amended and Restated By-Laws of CDW Technologies, Inc., previously filed as Exhibit 3.8 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.9Articles of Organization of CDW Direct, LLC, previously filed as Exhibit 3.9 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.10Amended and Restated Limited Liability Company Agreement of CDW Direct, LLC, previously filed as Exhibit 3.10 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.11Articles of Organization of CDW Government LLC, previously filed as Exhibit 3.11 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.12Amended and Restated Limited Liability Company Agreement of CDW Government LLC, previously filed as Exhibit 3.12 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.13Articles of Incorporation of CDW Logistics, Inc., previously filed as Exhibit 3.13 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 3.14By-Laws of CDW Logistics, Inc., previously filed as Exhibit 3.14 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 4.1Specimen Common Stock Certificate, previously filed as Exhibit 4.1 with CDW Corporation’s Amendment No. 3 to Form S-1 filed on June 25, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 4.2Senior Secured Note Indenture, dated as of December 17, 2010, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on December 21, 2010 and incorporated herein by reference. 115 Qbdlfu!Qh/!443 Table of Contents 5/H/b Exhibit Number Description 4.3Senior Secured Note Supplemental Indenture, dated as of March 29, 2011, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on March 30, 2011 and incorporated herein by reference. 4.4Second Senior Secured Note Supplemental Indenture, dated as of May 10, 2012, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on May 11, 2012 and incorporated herein by reference. 4.5Form of Senior Secured Note (included as Exhibit A to Exhibit 4.1), previously filed as Exhibit 4.2 with CDW Corporation's Form 8-K filed on December 21, 2010 and incorporated herein by reference. 4.6Senior Note Indenture, dated as of April 13, 2011, between CDW Escrow Corporation and U.S. Bank National Association as trustee, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on April 14, 2011 and incorporated herein by reference. 4.7Senior Note Supplemental Indenture, dated as of April 13, 2011, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.2 with CDW Corporation's Form 8-K filed on April 14, 2011 and incorporated herein by reference. 4.8Second Senior Note Supplemental Indenture, dated as of May 20, 2011, by and among CDW LLC, CDW Finance Corporation, CDW Escrow Corporation, the guarantors party thereto and U.S. Bank National Association as Trustee, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on May 23, 2011 and incorporated herein by reference. 4.9Third Senior Note Supplemental Indenture, dated as of February 17, 2012, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as Trustee, previously filed as Exhibit 4.5 with CDW Corporation's Form 8-K filed on February 17, 2012 and incorporated herein by reference. 4.10Fourth Senior Note Supplemental Indenture, dated as of May 10, 2012, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.3 with CDW Corporation's Form 8-K filed on May 11, 2012 and incorporated herein by reference. 4.11Form of Senior Note (included as Exhibit A to Exhibit 4.5), previously filed as Exhibit 4.3 with CDW Corporation's Form 8-K filed on April 14, 2011 and incorporated herein by reference. 4.12Senior Notes Registration Rights Agreement, dated as of February 17, 2012, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and Barclays Capital Inc. as initial purchaser, previously filed as Exhibit 4.7 with CDW Corporation's Form 8-K filed on February 17, 2012 and incorporated herein by reference. 4.13Senior Subordinated Exchange Note Indenture, dated as of October 10, 2008, by and among CDW Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.6 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 4.14Senior Subordinated Exchange Note Supplemental Indenture, dated as of May 10, 2010, by and among CDW LLC, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.7 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 4.15Second Senior Subordinated Exchange Note Supplemental Indenture, dated as of August 23, 2010, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.8 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 4.16Third Senior Subordinated Exchange Note Supplemental Indenture, dated as of May 10, 2012, by and among CDW LLC, CDW Finance Corporation, the guarantors party thereto and U.S. Bank National Association as trustee, previously filed as Exhibit 4.2 with CDW Corporation's Form 8-K filed on May 11, 2012 and incorporated herein by reference. 116 Qbdlfu!Qh/!444 Table of Contents 5/H/b Exhibit Number Description 4.17Form of Fixed Rate Senior Subordinated Exchange Note due 2017 (included as Exhibit B to Exhibit 4.12), previously filed as Exhibit 4.10 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 4.18Form of Global Fixed Rate Senior Subordinated Exchange Note due 2017, Series B, previously filed as Exhibit 4.11 with CDW Corporation's Form 10-K for the fiscal year ended December 31, 2010 and incorporated herein by reference. 10.1Revolving Loan Credit Agreement, dated as of June 24, 2011, by and among CDW LLC, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, GE Commercial Distribution Finance Corporation, as floorplan funding agent, and the joint lead arrangers, joint bookrunners, co-collateral agents and other agents party thereto, previously filed as Exhibit 10.1 with CDW Corporation's Amendment No. 1 to Form S-4 filed on September 26, 2011 (Reg. No. 333-175597) and incorporated herein by reference. 10.2Term Loan Agreement, dated as of April 29, 2013, by and among CDW LLC, the lenders from time to time party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and the joint lead arrangers, joint bookrunners, co-syndication agents and co-documentation agents party thereto, previously filed as Exhibit 10.1 with CDW Corporation’s Form 8-K filed on May 1, 2013 and incorporated herein by reference. 10.3First Amendment to Term Loan Agreement, dated as of May 30, 2013, by and among CDW LLC, the lenders from time to time party thereto, and Barclays Bank PLC, as administrative agent and collateral agent, previously filed as Exhibit 10.3 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.4Incremental Amendment, dated as of July 31, 2013, by and among CDW LLC, the lenders party thereto and Barclays Bank PLC, as administrative agent, previously filed as Exhibit 10.1 with CDW Corporation’s Form 8-K filed on August 1, 2013 and incorporated herein by reference. 10.5Third Amendment to the Term Loan Agreement, dated as of September 12, 2013, by and among CDW LLC, the lenders from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent, previously filed as Exhibit 10.2 with CDW Corporation's Form 10-Q filed on November 7, 2013 and incorporated herein by reference. 10.6Second Amended and Restated Guarantee and Collateral Agreement, dated April 29, 2013, by and among CDW LLC, the guarantors party thereto and Barclays Bank PLC, as collateral agent, previously filed as Exhibit 10.2 with CDW Corporation’s Form 8-K filed on May 1, 2013 and incorporated herein by reference. 10.7Management Services Agreement, dated as of October 12, 2007, by and between CDW Corporation, Madison Dearborn Partners V-B, L.P. and Providence Equity Partners L.L.C., previously filed as Exhibit 10.9 with CDW Corporation’s Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.8Termination Agreement, dated as of June 12, 2013, by and among CDW Corporation, Madison Dearborn Partners V-B, L.P. and Providence Equity Partners L.L.C., previously filed as Exhibit 10.6 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.9Registration Agreement, dated as of October 12, 2007, by and among VH Holdings, Inc., CDW Holdings LLC, Madison Dearborn Capital Partners V-A, L.P., Madison Dearborn Capital Partners V-C, L.P., Madison Dearborn Partners V Executive-A, L.P., Providence Equity Partners VI L.P., Providence Equity Partners VI- A L.P., and the other securityholders party thereto, previously filed as Exhibit 10.10 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.10*Withdrawal from Registration Agreement, dated as of November 12, 2013, by and between CDW Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* Corporation and Paul S. Shain. 10.11*Withdrawal from Registration Agreement, dated as of November 20, 2013, by and among CDW Corporation, James R. Shanks and BOS Holdings, LLC. 10.12§ CDW Holdings LLC 2007 Incentive Equity Plan, adopted as of October 12, 2007, previously filed as Exhibit 10.11 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 117 Qbdlfu!Qh/!445 Table of Contents 5/H/b Exhibit Number Description 10.13§Form of CDW Holdings LLC Class A Common Unit Purchase and Exchange Agreement under the CDW Holdings LLC 2007 Incentive Equity Plan (executed by Thomas E. Richards, John A. Edwardson, Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler), previously filed as Exhibit 10.12 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.14§Form of CDW Holdings LLC Class A Common Unit Purchase and Exchange Agreement under the CDW Holdings LLC 2007 Incentive Equity Plan (executed by Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka and to be used for certain future investors), previously filed as Exhibit 10.13 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.15§Form of CDW Holdings LLC Class B Common Unit Grant Agreement under the CDW Holdings LLC 2007 Incentive Equity Plan (executed by Thomas E. Richards, John A. Edwardson, Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler), previously filed as Exhibit 10.12 with CDW Corporation's Form 10-K filed on March 8, 2013 and incorporated herein by reference. 10.16§Form of CDW Holdings LLC Class B Common Unit Grant Agreement under the CDW Holdings LLC 2007 Incentive Equity Plan (executed by Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka and to be used for certain future grantees), previously filed as Exhibit 10.13 with CDW Corporation's Form 10-K filed on March 8, 2013 and incorporated herein by reference. 10.17§Form of Compensation Protection Agreement (executed by Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler), previously filed as Exhibit 10.18 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.18§CDW Compensation Protection Plan, adopted as of December 10, 2002 and amended and restated effective as of January 1, 2009 (applicable to Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka), previously filed as Exhibit 10.19 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.19§First Amendment to CDW Compensation Protection Plan, adopted as of December 10, 2002 and amended and restated effective as of January 1, 2009, dated as of January 3, 2012, previously filed as Exhibit 10.18 with CDW Corporation's Form 10-K filed on March 9, 2012 and incorporated herein by reference. 10.20§Form of Noncompetition Agreement under the Compensation Protection Agreement, previously filed as Exhibit 10.20 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.21§Form of Noncompetition Agreement under the CDW Compensation Protection Plan, previously filed as Exhibit 10.21 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.22§CDW Restricted Debt Unit Plan, adopted as of March 10, 2010, previously filed as Exhibit 10.22 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.23§Form of CDW Restricted Debt Unit Grant Notice and Agreement (executed by Thomas E. Richards, Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler), previously filed as Exhibit 10.23 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.24§Form of CDW Restricted Debt Unit Grant Notice and Agreement (executed by Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka and to be used for certain future grantees), previously Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* filed as Exhibit 10.24 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. 10.25§Senior Management Incentive Plan, as amended and restated effective January 1, 2010, previously filed as Exhibit 10.1 with CDW Corporation's Form 8-K filed on November 15, 2010 and incorporated herein by reference. 10.26§Amended and Restated Compensation Protection Agreement, dated as of June 30, 2011, by and between CDW LLC and Thomas E. Richards, previously filed as Exhibit 10.3 with CDW Corporation's Form 8-K filed on July 1, 2011 and incorporated herein by reference. 118 Qbdlfu!Qh/!446 Table of Contents 5/H/b Exhibit Number Description 10.27§Letter Agreement, dated as of September 13, 2011, by and between CDW Direct, LLC and Christina M. Corley, previously filed as Exhibit 10.31 with CDW Corporation's Form 10-K filed on March 9, 2012 and incorporated herein by reference. 10.28§Form of CDW Holdings LLC (Director) Class A Common Unit Purchase Agreement (executed by Steven W. Alesio, Barry K. Allen, Benjamin D. Chereskin and Chereskin Dynasty Trust and Donna F. Zarcone), previously filed as Exhibit 10.32 with CDW Corporation's Form 10-K filed on March 8, 2013 and incorporated herein by reference. 10.29§Form of Indemnification Agreement by and between CDW Corporation and its directors and officers, previously filed as Exhibit 10.32 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.30Stockholders Agreement, dated as of June 10, 2013, by and among CDW Corporation, Madison Dearborn Capital Partners V-A, L.P., Madison Dearborn Capital Partners V-C, L.P., Madison Dearborn Capital Partners V Executive-A, L.P., Providence Equity Partners VI L.P., Providence Equity Partners VI-A L.P. and the other securityholders party thereto, previously filed as Exhibit 10.33 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.31§CDW Corporation 2013 Senior Management Incentive Plan, previously filed as Exhibit 10.34 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.32§CDW Corporation 2013 Long-Term Incentive Plan, previously filed as Exhibit 10.35 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.33§CDW Corporation Coworker Stock Purchase Plan, previously filed as Exhibit 10.36 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.34§Form of CDW Corporation Option Award Notice and Stock Option Agreement (executed by Thomas E. Richards), previously filed as Exhibit 10.37 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.35§Form of CDW Corporation Option Award Notice and Stock Option Agreement (executed by Neal J. Campbell and Christina M. Corley), previously filed as Exhibit 10.38 with CDW Corporation’s Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. 10.36§Form of CDW Corporation Restricted Stock Award Notice and Restricted Stock Award Agreement (executed by Thomas E. Richards, Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler), previously filed as Exhibit 10.12 with CDW Corporation’s Form 10-Q filed on August 12, 2013 and incorporated herein by reference. 10.37§Form of CDW Corporation Restricted Stock Award Notice and Restricted Stock Award Agreement (executed by Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka), previously filed as Exhibit 10.13 with CDW Corporation’s Form 10-Q filed on August 12, 2013 and incorporated herein by reference. 10.38§CDW Amended and Restated Restricted Debt Unit Plan, previously filed as Exhibit 10.3 with CDW Corporation’s Form 10-Q filed on November 7, 2013 and incorporated herein by reference. 12.1*Computation of ratio of earnings to fixed charges. Buubdinfou;!3132.3133`DEX.H.OBTQP!OfuNpujpo!!)3916!;!OfuNpujpo!Npcjmjuz!Sfofxbm!.!Bvuipsj{f* 21.1List of subsidiaries, previously filed as Exhibit 21.1 with CDW Corporation's Form S-4 filed on April 13, 2012 (Reg. No. 333-180715) and incorporated herein by reference. 23.1*Consent of Ernst & Young LLP. 31.1*Certification of Chief Executive Officer pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934. 119 Qbdlfu!Qh/!447 Table of Contents 5/H/b Exhibit Number Description 31.2*Certification of Chief Financial Officer pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934. 32.1**Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350. 32.2**Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350. 101.INS*XBRL Instance Document 101.SCH*XBRL Taxonomy Extension Schema Document 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*XBRL Taxonomy Extension Label Linkbase Document 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document ________________ * Filed herewith ** These items are furnished and not filed. § A management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. 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