CDW 2012 Annual Report Download - page 18

Table of Contents
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 competitors who may seek licensing revenue, lost profits and/or an injunction
preventing us from engaging in certain activities, including selling certain products and services.
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 are controlled by the Equity Sponsors, whose interests may differ from our other stakeholders.
Substantially all of the common stock of Parent is held indirectly by investment funds affiliated with, or co-investment vehicles
controlled by, the Equity Sponsors. As a result, the Equity Sponsors control us and have the power to elect all of the members of Parent's board
of directors and approve any action requiring the approval of the holders of Parent's stock, including approving acquisitions or sales of all or
substantially all of our assets. The directors appointed by the Equity Sponsors have the ability to control decisions affecting our capital structure,
including the issuance of additional debt and capital stock, the declaration of dividends, and to appoint new management. If we encounter
financial difficulties, or we are unable to pay our debts as they mature, the interests of the Equity Sponsors might conflict with the interests of
our other equity holders, debt holders or other stakeholders. Additionally, the Equity Sponsors are in the business of investing in companies and
may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. The Equity Sponsors may also
separately pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not
be available to us. Since our equity securities, which are not registered under the Securities Exchange Act of 1934, are not listed on any U.S.
securities exchange, we are not subject to any of the corporate governance requirements of any U.S. securities exchange.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2012, we owned or leased a total of approximately 2.1 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 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, 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.
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