Tecumseh Products 2014 Annual Report Download - page 66

64
Commitments to Former Chief Executive Officer
On June 27, 2014, we entered into a General Release of All Claims with our former Chief Executive Officer ("CEO") in
connection with the termination of his employment. We agreed to (i) the payment of $835,000 over 20 months and (ii)
continuation of his medical, dental and vision insurance until the earlier of the date he becomes a full-time employee of a third
party and 18 months after the date of the General Release of All Claims. The former CEO agreed to release us from claims,
rights and liabilities, including his previously vested stock appreciation rights and his previously unvested performance-based
phantom shares. This expense is included in "Selling and administrative expenses" on our Consolidated Statements of
Operations.
Accounts Receivable
A portion of accounts receivable at our Brazilian subsidiary are sold with limited recourse at a discount, which creates a
contingent liability for the business. Discounted receivables sold with limited recourse were $3.7 million and $12.1 million at
December 31, 2014 and 2013, respectively, and our weighted average interest rate for these receivables was 8.5% and 5.9% for
the twelve months ended December 31, 2014 and 2013, respectively. Under our factoring program in Europe, we may discount
receivables with recourse; however, at December 31, 2014 and 2013, there were no receivables sold with recourse.
Letters of credit
We issue letters of credit in the normal course of business as required by some vendor contracts and insurance policies. As of
December 31, 2014 and 2013, we had $6.4 million and $3.2 million, respectively, in outstanding letters of credit in the U.S.
Outside the U.S. we had $16.2 million and $7.9 million outstanding letters of credit at December 31, 2014 and 2013,
respectively.
Litigation
General
We are party to litigation in the ordinary course of business. Litigation occasionally involves claims for punitive as well as
compensatory damages arising out of use of our products. Although we are self-insured to some extent, we maintain insurance
against certain product liability losses. We are also subject to administrative proceedings with respect to claims involving the
discharge of hazardous substances into the environment. Some of these claims assert damages and liability for remedial
investigation and clean-up costs. We are also typically involved in commercial and employee disputes in the ordinary course of
business. Although their ultimate outcome cannot be predicted with certainty, and some may be disposed of unfavorably to us,
management considers that appropriate reserves have been established and, except as described below, does not believe that the
disposition of these matters will have a material adverse effect on our consolidated financial position, cash flows or results of
operations. With the exception of the settlement of the working capital adjustment made with the purchaser of our former
Engine & Power Train business segment, our reserves for contingent liabilities have not historically differed materially from
estimates upon their final outcomes. However, discovery of new facts, developments in litigation, or settlement negotiations
could cause estimates to differ materially from current expectations in the future. Except as disclosed below, we do not believe
we have any pending loss contingencies that are probable or reasonably possible of having a material impact to our
consolidated financial position, results of operations or cash flows.
Canadian Horsepower label litigation
On March 19, 2010, Robert Foster and Murray Davenport filed a lawsuit under the Class Proceedings Act in the Ontario
Superior Court of Justice against us and several other defendants (including Sears Canada Inc., Sears Holdings Corporation,
John Deere Limited, Platinum Equity, LLC, Briggs & Stratton Corporation, Kawasaki Motors Corp., USA, MTD Products Inc.,
The Toro Company, American Honda Motor Co., Electrolux Home Products, Inc., Husqvarna Consumer Outdoor Products
N.A., Inc. and Kohler Co.), alleging that defendants conspired to fix prices of lawn mowers and lawn mower engines in
Canada, to lessen competition in lawn mowers and lawn mower engines in Canada, and to mislabel the horsepower of lawn
mower engines and lawn mowers in violation of the Canadian Competition Act, civil conspiracy prohibitions and the Consumer
Packaging and Labeling Act. Plaintiffs seek to represent a class of all persons in Canada who purchased, for their own use and
not for resale, a lawn mower containing a gas combustible engine of 30 horsepower or less provided that either the lawn mower
or the engine contained within the lawn mower was manufactured and/or sold by a defendant or their predecessors between
January 1, 1994 and the date of judgment. Plaintiffs seek undetermined money damages, punitive damages, interest, costs and
equitable relief. In addition, Snowstorm Acquisition Corporation and Platinum Equity, LLC, the purchasers of Tecumseh Power