E-Z-GO 2011 Annual Report Download - page 24

We are subject to increasing compliance risks that could adversely affect our operating results.
As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate. Our increased
focus on international sales and global operations requires importing and exporting goods and technology, some of which have
military applications subjecting them to more stringent import-export controls across international borders on a regular basis. Both
U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity. For example, we could be
affected by U.S. or foreign laws or regulations imposed in response to climate change concerns. Likewise, pursuant to the
requirements of the Dodd-Frank Act, we will be required to report on our use of “conflict minerals” originating from the
Democratic Republic of Congo and surrounding countries. Compliance with the proposed rules to implement this provision of the
Dodd-Frank Act is expected to be time-consuming and costly. In addition, these new requirements could affect the cost and
availability of minerals used to manufacture certain of our products. Changes in laws and regulations or in related interpretation
and policies and new laws and regulations could increase our costs of doing business, affect how we conduct our operations and
limit our ability to sell our products and services. In addition, a violation of U.S. and/or foreign laws by one of our 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. 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.
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