Rayovac 2010 Annual Report Download - page 163

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
In December 2009, San Francisco Technology, Inc. filed an action in the Federal District Court for the
Northern District of California against the Company, as well as a number of unaffiliated defendants, claiming
that each of the defendants had falsely marked patents on certain of its products in violation of Article 35,
Section 292 of the U.S. Code and seeking to have civil fines imposed on each of the defendants for such claimed
violations. The Company is reviewing the claims but is unable to estimate any possible losses at this time.
In May 2010, Herengrucht Group, LLC (“Herengrucht”) filed an action in the U.S. District Court for the
Southern District of California against the Company claiming that the Company had falsely marked patents on
certain of its products in violation of Article 35, Section 292 of the U.S. Code and seeking to have civil fines
imposed on each of the defendants for such claimed violations. Herengrucht dismissed its claims without
prejudice in September 2010.
Applica Consumer Products, Inc., a subsidiary of the Company is a defendant in NACCO Industries, Inc. et
al. v. Applica Incorporated et al., Case No. C.A. 2541-VCL, which was filed in the Court of Chancery of the
State of Delaware in November 2006. The original complaint in this action alleged a claim for, among other
things, breach of contract against Applica and a number of tort claims against certain entities affiliated with the
Harbinger Master Fund and Harbinger Special Fund and, together with Harbinger Master Fund, the HCP Funds.
The claims against Applica related to the alleged breach of the merger agreement between Applica and NACCO
Industries, Inc. (“NACCO”) and one of its affiliates, which agreement was terminated following Applica’s
receipt of a superior merger offer from the HCP Funds. On October 22, 2007, the plaintiffs filed an amended
complaint asserting claims against Applica for, among other things, breach of contract and breach of the implied
covenant of good faith relating to the termination of the NACCO merger agreement and asserting various tort
claims against Applica and the HCP Funds. The original complaint was filed in conjunction with a motion
preliminarily to enjoin the HCP Funds’ acquisition of Applica. On December 1, 2006, plaintiffs withdrew their
motion for a preliminary injunction. In light of the consummation of Applica’s merger with affiliates of the HCP
Funds in January 2007 (Applica is currently a subsidiary of Russell Hobbs), the Company believes that any claim
for specific performance is moot. Applica filed a motion to dismiss the amended complaint in December 2007.
Rather than respond to the motion to dismiss the amended complaint, NACCO filed a motion for leave to file a
second amended complaint, which was granted in May 2008. Applica moved to dismiss the second amended
complaint, which motion was granted in part and denied in part in December 2009.
The trial is currently scheduled for February 2011. The Company may be unable to resolve the disputes
successfully or without incurring significant costs and expenses. As a result, Russell Hobbs and Harbinger
Master Fund have entered into an indemnification agreement, dated as of February 9, 2010, by which Harbinger
Master Fund has agreed, effective upon the consummation of the Merger, to indemnify Russell Hobbs, its
subsidiaries and any entity that owns all of the outstanding voting stock of Russell Hobbs against any
out-of-pocket losses, costs, expenses, judgments, penalties, fines and other damages in excess of $3,000 incurred
with respect to this litigation and any future litigation or legal action against the indemnified parties arising out of
or relating to the matters which form the basis of this litigation. The Company is reviewing the claims but is
unable to estimate any possible losses at this time.
Applica is a defendant in three asbestos lawsuits in which the plaintiffs have alleged injury as the result of
exposure to asbestos in hair dryers distributed by that subsidiary over 20 years ago. Although Applica never
manufactured such products, asbestos was used in certain hair dryers distributed by it prior to 1979. The
Company believes that these actions are without merit, but may be unable to resolve the disputes successfully
without incurring significant expenses which we are unable to estimate at this time. At this time, the Company
does not believe it has coverage under its insurance policies for the asbestos lawsuits.
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