CDW 2006 Annual Report Download - page 22

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We are exposed to litigation risk. CDW is party to legal proceedings that arise from time to time,
both with respect to specific transactions and in the ordinary course of our business. We do not
believe that any currently pending or threatened litigation will have a material adverse effect on our
financial condition. Litigation, however, involves uncertainties and it is possible that the eventual
outcome of litigation could adversely affect our results of operations for a particular period.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2006, we owned or leased a total of approximately 1.8 million square feet of
space throughout North America. We own two properties: a combined corporate office and 450,000
square foot distribution center in Vernon Hills, Illinois, and a 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 North America, including Berbee data centers in Madison,
Wisconsin and Minneapolis, Minnesota.
We believe that our current facilities are suitable and adequate for the conduct of our business and
that our existing distribution centers are sufficient to support our anticipated growth for the
foreseeable future. For more information on lease obligations, see Note 9 to the Consolidated
Financial Statements.
Item 3. Legal Proceedings
On September 9, 2003, CDW completed the purchase of certain assets of Bridgeport Holdings,
Inc., Micro Warehouse, Inc., Micro Warehouse, Inc. of Ohio, and Micro Warehouse Gov/Ed, Inc.
(collectively, “Micro Warehouse”). On September 10, 2003, Micro Warehouse filed voluntary petitions
for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court
for the District of Delaware (the “Bankruptcy Court”). The Bankruptcy Court confirmed a plan of
distribution with respect to Micro Warehouse which became effective on October 14, 2004. On
March 3, 2005, the Bridgeport Holdings, Inc. Liquidating Trust (the “Liquidating Trust”) filed a civil
action in the Bankruptcy Court entitled Bridgeport Holdings Liquidating Trust, Inc. vs. CDW
Corporation and CDW SAC, Inc. alleging that CDW did not pay reasonably equivalent value for the
assets it acquired from Micro Warehouse and seeking to have CDW’s “purchase of Micro
Warehouse” set aside and an amount of damages, to be determined at trial, paid to it. On February
1, 2007, CDW entered into a settlement agreement (the "Settlement Agreement") to resolve the
above referenced action pursuant to which CDW agreed to pay $25 million to the Liquidating Trust in
return for a full release and complete dismissal of the litigation, with prejudice. While CDW believed it
had good defenses to the claims by the Liquidating Trust, it agreed to settle the case in order to avoid
the substantial costs and uncertainties involved with further litigation. The Settlement Agreement
represents the compromise of a disputed claim and does not constitute an admission of liability on
behalf of CDW. A Motion to Approve the Settlement Agreement was filed in the Bankruptcy Court by
the Liquidating Trust on February 1, 2007. No objections were filed with the Bankruptcy Court, and
the time for filing objections has expired. An order approving the Settlement Agreement was entered
by the Bankruptcy Court on February 21, 2007. That order becomes final and nonappealable on
March 5, 2007. CDW’s settlement payment, and a motion by the Liquidating Trust to dismiss the
litigation with prejudice, are both due on March 12, 2007.
From time to time, customers of CDW file voluntary petitions for reorganization under the United
States bankruptcy laws. In such cases, certain pre-petition payments received by CDW could be
considered preference items and subject to return to the bankruptcy administrator. CDW believes that