Rayovac 2012 Annual Report Download - page 24

Restrictive covenants in the Senior Secured Facilities and the 2020 Indenture may restrict our ability to
pursue our business strategies.
The Senior Secured Facilities and the 2020 Indenture each restrict, among other things, asset dispositions,
mergers and acquisitions, dividends, stock repurchases and redemptions, other restricted payments, indebtedness
and preferred stock, loans and investments, liens and affiliate transactions. The Senior Secured Facilities and the
2020 Indenture also contain customary events of default. These covenants, among other things, limit our ability
to fund future working capital and capital expenditures, engage in future acquisitions or development activities,
or otherwise realize the value of our assets and opportunities fully because of the need to dedicate a portion of
cash flow from operations to payments on debt. In addition, the Senior Secured Facilities contain financial
covenants relating to maximum leverage and minimum interest coverage. Such covenants could limit the
flexibility of our restricted entities in planning for, or reacting to, changes in the industries in which they operate.
Our ability to comply with these covenants is subject to certain events outside of our control. If we are unable to
comply with these covenants, the lenders under our Senior Secured Facilities or 6.75% Notes could terminate
their commitments and the lenders under our Senior Secured Facilities or 6.75% Notes could accelerate
repayment of our outstanding borrowings and, in either case, we may be unable to obtain adequate refinancing of
outstanding borrowings on favorable terms. If we are unable to repay outstanding borrowings when due, the
lenders under the Senior Secured Facilities or 6.75% Notes will also have the right to proceed against the
collateral granted to them to secure the indebtedness owed to them. If our obligations under the Senior Secured
Facilities and the 6.75% Notes are accelerated, we cannot assure you that our assets would be sufficient to repay
in full such indebtedness.
The sale or other disposition by Harbinger Group Inc., the holder of a majority of the outstanding shares of
our common stock, to non-affiliates of a sufficient amount of the common stock of SB Holdings would
constitute a change of control under the agreements governing Spectrum Brands’ debt.
Harbinger Group Inc. (“HRG”) owns a majority of the outstanding shares of the common stock of SB
Holdings. The 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 certain of 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 10.625% Senior Secured Notes due 2015. A change in control under Spectrum
Brands’ debt could also result from a change in control of HRG following the sale or other disposition by
Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. or
Global Opportunities Breakaway Ltd. (together the “Harbinger Parties”) to non-affiliates of a sufficient amount
of the common stock of HRG. Such a disposition could include any foreclosure on or sale of HRG common stock
pledged as collateral by the Harbinger Parties. One of the Harbinger Parties has pledged all of the shares of HRG
common stock that it owns (representing a majority of the outstanding common stock of HRG), together with
securities of other issuers, to secure portfolio financing. The 2020 Indenture provides a different definition of
“Change of Control” than in the Senior Secured Facilities and a sale by Harbinger Capital of its shares in HRG or
a foreclosure on our stock by the HRG noteholders would generally not be a change of control. 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 6.75% 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 the 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 to 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 HRG exercise significant influence over us and
their interests in our business may be different from the interests of our stockholders” in this Form 10-K.
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