Rayovac 2010 Annual Report Download - page 41

This influence and actual control may have the effect of discouraging offers to acquire SB Holdings because
any such consummation would likely require the consent of HRG and perhaps HRG and the Harbinger Parties.
HRG and the Harbinger Parties may also delay or prevent a change in control of SB Holdings. See “Risks
Related to our Business—Assuming consummation of a pending transaction by which Harbinger Group, Inc.
(“HRG”) would acquire a majority of the outstanding shares of our common stock, any sale or other disposition
by HRG to non-affiliates of a significant amount of the common stock of SB Holdings would constitute a change
of control under the agreements governing Spectrum Brands’ debt.”
In addition, because, as of the date hereof the Harbinger Parties owned, and, assuming the consummation of
the Share Exchange, HRG and the Harbinger Parties will own more than 50% of the voting power of SB
Holdings, SB Holdings is considered a controlled company under the NYSE listing standards. As such, the
NYSE corporate governance rules requiring that a majority of SB Holdings’ board of directors and SB Holdings’
entire compensation committee be independent do not apply. As a result, the ability of SB Holdings’ independent
directors to influence its business policies and affairs may be reduced.
If HRG and/or the Harbinger Parties sell substantial amounts of SB Holdings’ common stock in the public
market, or investors perceive that these sales could occur, the market price of SB Holdings’ common stock could
be adversely affected. SB Holdings has entered into a registration rights agreement (the “Registration Rights
Agreement”) with HRG, the Harbinger Parties and certain other stockholders. If requested properly under the
terms of the Registration Rights Agreement, these stockholders have the right to require SB Holdings to register
all or some of such shares for sale under the Securities Act in certain circumstances and also have the right to
include those shares in a registration initiated by SB Holdings. If SB Holdings is required to include the shares of
its common stock held by these stockholders pursuant to these registration rights in a registration initiated by SB
Holdings, sales made by such stockholders may adversely affect the price of SB Holdings’ common stock and
SB Holdings’ ability to raise needed capital. In addition, if these stockholders exercise their demand registration
rights and cause a large number of shares to be registered and sold in the public market or demand that SB
Holdings register their shares on a shelf registration statement, such sales or shelf registration may have an
adverse effect on the market price of SB Holdings’ common stock.
The interests of HRG and the Harbinger Parties, which have investments in other companies, may from time
to time diverge from the interests of other SB Holdings stockholders and from each other, particularly with
regard to new investment opportunities. Neither HRG nor the Harbinger Parties are restricted from investing in
other businesses involving or related to the marketing or distribution of household products, pet and pest
products and personal care products. Both HRG and the Harbinger Parties may also engage in other businesses
that compete or may in the future compete with SB Holdings.
Even though SB Holdings’ common stock is currently traded on the NYSE, it has less liquidity than many
other stocks quoted on a national securities exchange.
The trading volume in SB Holdings’ common stock on the NYSE has been relatively low when compared
with larger companies listed on the NYSE or other stock exchanges. Because of this, it may be more difficult for
stockholders to sell a substantial number of shares for the same price at which stockholders could sell a smaller
number of shares. We cannot predict the effect, if any, that future sales of SB Holdings’ common stock in the
market, or the availability of shares of its common stock for sale in the market, will have on the market price of
SB Holdings’ common stock. We can give no assurance that sales of substantial amounts of SB Holdings’
common stock in the market, or the potential for large amounts of sales in the market, would not cause the price
of SB Holdings’ common stock to decline or impair SB Holdings’ future ability to raise capital through sales of
its common stock. Furthermore, because of the limited market and generally low volume of trading in SB
Holdings’ common stock that could occur, the share price of its common stock could be more likely to be
affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in
the market’s perception of our business, and announcements made by SB Holdings, its competitors or parties
with whom SB Holdings has business relationships. The lack of liquidity in SB Holdings’ common stock may
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