Rayovac 2010 Annual Report Download - page 28

Following consummation of the Share Exchange, any sale or other disposition by HRG to non-affiliates of a
sufficient amount of the common stock of SB Holdings could constitute a change of control under the agreements
governing Spectrum Brands’ debt, including any foreclosure on or sale of SB Holdings’ common stock pledged
as collateral by HRG pursuant to the indenture governing HRG’s $350 million 10.625% Senior Secured Notes
due 2015. Under the Term Loan and the ABL Revolving Credit Facility, a change of control is an event of
default and, if a change of control were to occur, Spectrum Brands would be required to get an amendment to
these agreements to avoid a default. If Spectrum Brands was unable to get such an amendment, the lenders could
accelerate the maturity of each of the Spectrum Brands Term Loan and the ABL Revolving Credit Facility. In
addition, under the indentures governing the 9.5% Notes and the 12% Notes, upon a change of control of SB
Holdings, Spectrum Brands is required to offer to repurchase such notes from the holders at a price equal to
101% of principal amount of the notes plus accrued interest or obtain a waiver of default from the holders of such
notes. If Spectrum Brands was unable to make the change of control offer or obtain a waiver of default, it would
be an event of default under the indentures that could allow holders of such notes to accelerate the maturity of the
notes. See “Risks Related to SB Holdings’ Common Stock—The Harbinger Parties and, following the Share
Exchange, HRG, will exercise significant influence over us and their interests in our business may be different
from the interest of our stockholders.”
We face risks related to the current economic environment.
The current economic environment and related turmoil in the global financial system has had and may
continue to have an impact on our business and financial condition. Global economic conditions have
significantly impacted economic markets within certain sectors, with financial services and retail businesses
being particularly impacted. Our ability to generate revenue depends significantly on discretionary consumer
spending. It is difficult to predict new general economic conditions that could impact consumer and customer
demand for our products or our ability to manage normal commercial relationships with our customers, suppliers
and creditors. The recent continuation of a number of negative economic factors, including constraints on the
supply of credit to households, uncertainty and weakness in the labor market and general consumer fears of a
continuing economic downturn could have a negative impact on discretionary consumer spending. If the
economy continues to deteriorate or fails to improve, our business could be negatively impacted, including as a
result of reduced demand for our products or supplier or customer disruptions. Any weakness in discretionary
consumer spending could have a material adverse effect on our revenues, results of operations and financial
condition. In addition, our ability to access the capital markets may be restricted at a time when it could be
necessary or beneficial to do so, which could have an impact on our flexibility to react to changing economic and
business conditions.
In 2010, concern over sovereign debt in Greece, Ireland and certain other European Union countries caused
significant fluctuations of the Euro relative to other currencies, such as the U.S. Dollar. Destabilization of the
European economy could lead to a decrease in consumer confidence, which could cause reductions in
discretionary spending and demand for our products. Furthermore, sovereign debt issues could also lead to
further significant, and potentially longer-term, economic issues such as reduced economic growth and
devaluation of the Euro against the U.S. Dollar, any of which could adversely affect our business, financial
conditions and operating results.
We may not be able to retain key personnel or recruit additional qualified personnel whether as a result of
the Merger or otherwise, which could materially affect our business and require us to incur substantial
additional costs to recruit replacement personnel.
We are highly dependent on the continuing efforts of our senior management team and other key personnel.
As a result of the Merger, our current and prospective employees could experience uncertainty about their future
roles. This uncertainty may adversely affect our ability to attract and retain key management, sales, marketing
and technical personnel. Any failure to attract and retain key personnel, whether as a result of the Merger or
otherwise, could have a material adverse effect on our business. In addition, we currently do not maintain “key
person” insurance covering any member of our management team.
18