Rayovac 2007 Annual Report Download - page 66

64 SPECTRUM BRANDS | 2007 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Spectrum Brands, Inc.
The Company is a defendant in various other matters of litiga-
tion generally arising out of the normal course of business. Such
litigation includes legal proceedings with Philips in Europe and
Latin America with respect to trademark or other intellectual
property rights. The Company does not believe that any other
matters or proceedings presently pending will have a material
adverse effect on the results of operations, fi nancial condition,
liquidity or cash fl ow of the Company.
The Company is involved in an ongoing arbitration proceeding
with Tabriza Brasil Empreendimentos Ltda., Interelectrica
Administração e Participações Ltda., and VARTA AG, the former
owners of the Company’s subsidiary Microlite S.A., with respect
to a number of matters arising out of the Company’s acquisition
of Microlite, including the Company’s right to receive indemnifi -
cation for various alleged breaches of representations, warran-
ties, covenants and agreements made by the selling shareholders
in the acquisition agreement and the Company’s obligation to
pay additional amounts to Tabriza arising out of its earn-out
rights under the acquisition agreement. The Company acquired
Microlite in Fiscal 2004. The arbitration on this matter is sched-
uled to be heard in February 2008. In November 2007, the arbi-
tration panel resolved certain matters at the summary judgment
stage. All other disputed matters remain open pending the Feb-
ruary 2008 hearing and the decision thereafter by the arbitration
panel. Among the matters decided at the summary judgment
stage, the arbitration panel found in favor of Tabriza with respect
to the questions of whether Tabriza is entitled to receive from the
Company interest on certain earn-out payments previously made
and whether Tabriza is entitled to receive from the Company an
additional amount with respect to the earn-out as a result of a
decision issued by an independent auditor engaged by the parties
to determine certain disputed matters submitted to it with
respect to the earn-out calculation. The Company currently esti-
mates that the additional earn-out amounts owed to Tabriza
arising out of the decisions on these two matters, which has been
refl ected as additional acquisition consideration, will be at least
$5,000. Such additional amount due Tabriza is included in
Accrued liabilities: Other in the Consolidated Balance Sheets as
of September 30, 2007. Determination of the total net amount
owed by or payable to the Company arising out of the arbitration
proceeding cannot be determined until the arbitration panel has
issued its fi nal decision following the February 2008 hearing.
Future minimum rental commitments under noncancelable
operating leases, principally pertaining to land, buildings and
equipment, are as follows:
2008 $ 22,085
2009 20,275
2010 17,199
2011 15,360
2012 14,497
Thereafter 53,498
Total minimum lease payments $ 142,914
All of the leases expire during the years 2008 through 2020.
Total rental expenses were $19,004, $19,431, and $11,656 for
2007, 2006 and 2005, respectively.
(15) Related Party Transactions
On February 7, 2005, the Company acquired all of the equity
interests of United pursuant to the Agreement and Plan of Merger
(as amended, the “Merger Agreement”) by and among the Com-
pany, Lindbergh Corporation and United dated as of January 3,
2005 fi led as an exhibit to the Current Report on Form 8-K fi led
by the Company on January 4, 2005. Pursuant to the terms of the
Merger Agreement, Lindbergh Corporation merged with and into
United, with United continuing as the surviving corporation (the
“Merger”). The purchase price for the acquisition, excluding fees
and expenses, consisted of $70,000 in cash, 13,750 shares of the
Company’s Common Stock and the assumption of outstanding
United indebtedness, which was $911,500 as of January 21, 2005.
The purchase price was determined through negotiations between
representatives of the Company, who were operating under super-
vision and direction of an acquisition committee of the Board of
Directors of the Company, and representatives of United.
Certain affi liates of Thomas H. Lee Partners, L.P. were the
majority shareholders of United as of immediately prior to the
consummation of the Company’s acquisition of United, and as a
result of the Company’s acquisition of United, are signifi cant
shareholders of the Company. In addition, two of the Company’s
directors are members of Thomas H. Lee Advisors, LLC, which
is the general partner of Thomas H. Lee Partners, L.P., which is
the manager of THL Equity Advisors IV, LLC, which, in turn, is
the general partner of each of the Thomas H. Lee related funds
that were shareholders of United immediately prior to the
Merger and now are signifi cant shareholders of the Company.
Mr. Jones, the Company’s former Chairman of the Board and
Chief Executive Offi cer, and trusts for his family members, col-
lectively owned approximately 203 shares of United common
stock as of immediately prior to the Merger, which shares were
converted into an aggregate of approximately 36 shares of Com-
pany Common Stock pursuant to the Merger. Mr. Jones was a
member of the Board of Directors of United from January 20,
1999 to December 31, 2003, and provided consulting services to
United under an agreement that was terminated on September 28,
2004. A member of the Company’s Board of Directors is an inves-
tor in Thomas H. Lee Equity Fund IV, L.P., a large shareholder of
United immediately prior to the Merger, and, as a result of the
Merger, currently is a large shareholder of the Company.
In connection with the acquisition of United, the Company
entered into certain agreements with UIC Holdings, L.L.C.
(“Holdings”), the majority stockholder of United as of the date the
Company entered into the defi nitive agreement to acquire United,
Thomas H. Lee Partners, L.P. and certain of its affi liates and cer-
tain former stockholders of United. The agreements are described
further below.