E-Z-GO 2010 Annual Report Download - page 24

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employees or business partners could subject us or our employees to civil or criminal penalties, including material monetary fines, or
other adverse actions, including denial of import or export privileges and debarment as a government contractor. These improper
actions could damage our reputation and have an adverse effect on our business.
We are subject to legal proceedings and other claims.
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims
relating to commercial and financial transactions; government contracts; lack of compliance with applicable laws and regulations;
production partners; product liability; patent and trademark infringement; employment disputes; and environmental, safety and health
matters. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our being
suspended or debarred from U.S. Government contracting for a period of time. On the basis of information presently available, we do
not believe that existing proceedings and claims will have a material effect on our financial position or results of operations. However,
litigation is inherently unpredictable, and we could incur judgments or enter into settlements for current or future claims that could
adversely affect our financial position or our results of operations in any particular period.
Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our
business and our customers.
Intellectual property infringement claims may be asserted by third parties against us or our customers. Any related indemnification
payments or legal costs we may be obliged to pay on behalf of our businesses, our customers or other third parties could be costly. In
addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our
business. The inability to enforce these intellectual property rights may have an adverse effect on our results of operations.
Additionally, our intellectual property could be at risk due to various cyber threats.
Certain of our products are subject to laws regulating consumer products and could be subject to repurchase or recall as a result
of safety issues.
As a distributor of consumer products in the U.S., certain of our products also are subject to the Consumer Product Safety Act, which
empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or
hazardous. Under certain circumstances, the CPSC could require us to repair, replace or refund the purchase price of one or more of
our products, or potentially even discontinue entire product lines, or we may voluntarily do so, but within strictures recommended by
the CPSC. The CPSC also can impose fines or penalties on a manufacturer for non-compliance with its requirements. Furthermore,
failure to timely notify the CPSC of a potential safety hazard can result in significant fines being assessed against us. Any
repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and could damage the reputation or
the value of our brands. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in
which we sell our products, and more restrictive laws and regulations may be adopted in the future.
If we fail to comply with the covenants contained in our various debt agreements, it may adversely affect our liquidity, results of
operations and financial condition.
Our credit facility contains affirmative and negative covenants, including (i) limitations on creation of liens on assets of Textron Inc.
or of its manufacturing subsidiaries; (ii) maintenance of existence and properties; and (iii) maintenance of a maximum debt to capital
ratio (as defined and excluding our Finance segment) of 65%. The indentures governing our outstanding senior notes also contain
covenants, including limitations on creation of liens on certain principal manufacturing facilities and shares of stock of subsidiaries
that own such facilities and restrictions on sale and leaseback transactions with respect to such facilities. In addition, both the credit
facility and the indentures provide that consolidations, mergers or sale of all or substantially all of our assets may be effected only if
we comply with certain provisions. Some of these covenants may limit our ability to engage in certain financing structures, create
liens, sell assets, or effect a consolidation or merger.
Our credit facility also contains a cross-default provision that would trigger an event of default thereunder if we fail to pay or
otherwise have a continued default under other indebtedness of Textron Inc. or any of our subsidiaries, other than any of our
subsidiaries that primarily are engaged in the business of a finance company, of more than $100 million. Similarly, the supplemental
indenture governing our convertible notes contains a cross-default provision that would trigger an event of default thereunder if we
fail to pay or otherwise have a continued default under other indebtedness of Textron Inc. or any of our subsidiaries, other than TFC or
its subsidiaries, of more than $100 million. Therefore, Cessna Finance Export Corporation, a subsidiary of Textron Inc. that is the
borrower under the Export-Import Bank facility entered into on July 14, 2009, and Textron Aviation Finance Corporation, a subsidiary
of Textron Inc. that is the borrower under the Economic Development Canada Bank (EDC) facility entered into on August 6, 2010,
would be included within the cross-default provision of the supplemental indenture for the convertible notes, although not within the
similar provision in our credit facility. As a result, a failure to pay or a continued default under the Export-Import Bank facility or the
EDC facility, if the outstanding balance thereunder exceeded $100 million, could give rise to an event of default with respect to our
convertible notes.
In addition, a bankruptcy or monetary judgment in excess of $100 million against us or any of our subsidiaries that accounts for more
than 5% of our consolidated revenues or our consolidated assets, including our finance subsidiaries, also would result in an event of
default under our credit facility, and a bankruptcy against us or any of our non-finance “significant subsidiaries” (within the meaning