Tecumseh Products 2012 Annual Report Download - page 64

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Platinum
On November 20, 2009 Snowstorm Acquisition Corporation (“Snowstorm”), a Delaware corporation affiliated with Platinum
Equity Capital Partners, L.P. (“Platinum”), filed a lawsuit against Tecumseh Products Company, Alix Partners LLP, AP Services
LLC and James Bonsall in the United States District Court for the District of Delaware, alleging breach of contract, violation of
Section 10(b) of the Securities Exchange Act and Rule 10b-5, violation of Section 20(a) of the Exchange Act, common law
fraud and negligent misrepresentation in connection with Snowstorm’s purchase of the issued and outstanding capital stock of
Tecumseh Power Company and its subsidiaries and Motoco a.s. (collectively “Tecumseh Power”) in November, 2007. At the
time of the sale, Tecumseh Power Company was a wholly-owned subsidiary of Tecumseh Products Company engaged in the
manufacture and sale of Tecumseh gas-powered engines used in snow throwers, lawnmowers, generators, power washers and
augers, among other applications. Snowstorm sought approximately $27.0 million (inclusive of interest and litigation
expenses), punitive damages and a declaratory judgment that we are obligated to indemnify Snowstorm for certain other claims
and losses allegedly related to the subject matter of the complaint.
On April 20, 2012, the parties reached an agreement settling this lawsuit. Plaintiff has dismissed the lawsuit with prejudice and
released each of the defendants in exchange for payment of $13.5 million. We were not responsible to pay any portion of the
settlement. The settlement was funded by our and James Bonsall’s Directors and Officers insurance carriers under a reservation
of rights and by the defendants other than us. Pursuant to the settlement agreement, we will continue to be responsible under
the Stock Purchase Agreement for certain third-party indemnity obligations which predate the sale of Tecumseh Power
Company, including the horsepower labeling lawsuits. We have also received a total of $1.2 million of reimbursements from
our Directors and Officers insurer for our litigation expenses in connection with this lawsuit.
Separately, the defendants agreed to mutual releases in exchange for the payment to us of $1.7 million in the second quarter of
2012, of which $1.3 million is recorded in “Other income, net” and $0.4 million is recorded in “(Loss) income from
discontinued operations, net of tax” in our Consolidated Statements of Operations.
Environmental Matters
At December 31, 2012 and December 31, 2011 we had accrued $2.2 million and $3.6 million, respectively, for environmental
remediation. Included in the December 31, 2012 balance is an accrual of $1.5 million for the remaining estimated costs
associated with remediation activities at our former Tecumseh, Michigan facility ("Site"). We met with the United States
Environmental Protection Agency ("USEPA") in October, 2012, to discuss the overall project at the Site. Based upon this
meeting and additional information that was requested by the USEPA, most of the investigation efforts are now expected to be
completed in the next 12 months and most of the remediation efforts are expected to be completed in the next 18 - 24 months.
The monitoring activities are anticipated to be completed by the end of 2019.
We were named by the USEPA as a potentially responsible party in connection with the Sheboygan River and Harbor
Superfund Site in Wisconsin. In 2003, with the cooperation of the USEPA, we and Pollution Risk Services, LLC (“PRS”)
entered into a Liability Transfer and Assumption Agreement (the “Liability Transfer Agreement”). Under the terms of the
Liability Transfer Agreement, PRS assumed all of our responsibilities, obligations and liabilities for remediation of the entire
site and the associated costs, except for potential future liabilities related to Natural Resource Damages (“NRD”). Also, as
required by the Liability Transfer Agreement, we purchased Remediation Cost Cap insurance, with a 30 year term, in the
amount of $100.0 million and Environmental Site Liability insurance in the amount of $20.0 million.
We believe such insurance coverage will provide sufficient assurance for completion of the responsibilities, obligations and
liabilities assumed by PRS under the Liability Transfer Agreement. In conjunction with the Liability Transfer Agreement, we
completed the transfer of title to the Sheboygan Falls, Wisconsin property to PRS. Remediation is expected to be completed in
2013. After the remediation is complete at the site, the natural resource trustees (Wisconsin Department of Natural Resources,
U.S. Fish and Wildlife Service, and the National Oceanic and Atmospheric Administration) will have the opportunity to assess
if there are any NRD. We received a letter from the State of Wisconsin Department of Justice ("WDOJ") on September 28,
2012. We were advised that the Sheboygan River Natural Resource Trustees conducted a preliminary natural resources
damages assessment related to the Sheboygan River and Harbor Site, including the Kohler Landfill Supersite and the
Campmarina Alternate Superfund Site. An initial meeting with the WDOJ and trustees, along with other potentially responsible
parties, took place in October 2012 to discuss the next steps in the assessment process and to provide a pathway for the
potentially responsible parties to participate in a formal NRD assessment at the site. The meeting was primarily informational
in nature. We expect to receive a more specific proposal about the assessment process and the possibility of a consensual
assessment in the next few months. At this time, we have not received a Notice of Intent to Sue or any claim or demand of any
kind regarding the NRD liabilities at Sheboygan River and Harbor. We do not have a reasonable estimate of the amount of our
ultimate liability, if any, or the amount of any potential future claims, but the amount could be material to our financial position,
consolidated results of operations and cash flows. .
In cooperation with the Wisconsin Department of Natural Resources (“WDNR”), we also conducted an investigation of soil
and groundwater contamination at our Grafton, Wisconsin plant. In 2010, the remainder of the work required on-site by the