following was supplied by SB Holdings for inclusion in this Current
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS OF SPECTRUM BRANDS HOLDINGS, INC.
AND SPECTRUM BRANDS, INC.
Review, Approval or Ratification of Transactions with Related Persons
The policies and procedures of Spectrum Brands Holdings, Inc. (SB Holdings) and Spectrum
Brands, Inc. (Spectrum Brands and, together with SB Holdings, the Company) for review and
approval of related-person transactions appear in the Code of Ethics for the Principal Executive
Officer and Senior Financial Officers and the Spectrum Brands Code of Business Conduct and Ethics,
each of which is posted on the Companys website.
All of the Companys executive officers, directors and employees are required to disclose to
the Companys General Counsel all transactions which involve any actual, potential or suspected
activity or personal interest that creates or appears to create a conflict between the interests of
the Company and the interests of their executive officers, directors or employees. In cases
involving executive officers, directors or senior-level management, the Companys General Counsel
will investigate the proposed transaction for potential conflicts of interest and then refer the
matter to the Companys Audit Committee to make a full review and determination. In cases involving
other employees, the Companys General Counsel, in conjunction with the employees regional
supervisor and the Companys Vice President of Internal Audit, will review the proposed
transaction. If they determine that no conflict of interest will result from engaging in the
proposed transaction, then they will refer the matter to the Companys Chief Executive Officer for
The Companys Audit Committee is required to consider all questions of possible conflicts of
interest involving executive officers, directors and senior-level management and to review and
approve certain transactions, including all (i) transactions in which a director, executive officer
or an immediate family member of a director or executive officer has an interest, (ii) proposed
business relationships between the Company and a director, executive officer or other member of
senior management, (iii) investments by an executive officer in a company that competes with the
Company or an interest in a company that does business with the Company, and (iv) situations where
a director or executive officer proposes to be a customer of the Company, be employed by, serve as
a director of or otherwise represent a customer of the Company.
The Companys legal department and financial accounting department monitor transactions for an
evaluation and determination of potential related person transactions that would need to be
disclosed in the Companys periodic reports or proxy materials under generally accepted accounting
principles and applicable SEC rules and regulations.
Transactions with Related Persons
Merger Agreement and Exchange Agreement
On June 16, 2010 (the Closing Date), Spectrum Brands Holdings, Inc. (SB Holdings)
completed a business combination transaction pursuant to the Agreement and Plan of Merger (the
Mergers), dated as of February 9, 2010, as amended on March 1, 2010, March 26, 2010 and April 30,
2010, by and among SB Holdings, Russell Hobbs, Inc. (Russell Hobbs), Spectrum Brands, Inc.
(Spectrum Brands), Battery Merger Corp., and Grill Merger Corp. (the Merger Agreement). As a
result of the Mergers, each of Spectrum and Russell Hobbs became a wholly-owned subsidiary of SB
Holdings. At the effective time of the Mergers, (i) the outstanding shares of Spectrum Brands
common stock were canceled and converted into the right to receive shares of SB Holdings common
stock, and (ii) the outstanding shares of Russell Hobbs common stock and preferred stock were
canceled and converted into the right to receive shares of SB Holdings common stock.
Pursuant to the terms of the Merger Agreement, on February 9, 2010, Spectrum Brands entered
into support agreements with Harbinger Capital Partners Master Fund I, Ltd. (Harbinger Master
Fund), Harbinger Capital Partners Special Situations Fund, L.P. and Global Opportunities Breakaway
Ltd. (collectively, the Harbinger Parties) and Avenue International Master, L.P. and certain of
its affiliates (the Avenue Parties), in which the Harbinger Parties and the Avenue Parties agreed
to vote their shares of Spectrum Brands common stock acquired before the date of the Merger
Agreement in favor of the Mergers and against any alternative proposal that would impede the
Immediately following the consummation of the Mergers, the Harbinger Parties owned
approximately 64% of the outstanding SB Holdings common stock and the stockholders of Spectrum
Brands (other than the Harbinger Parties) owned approximately 36% of the outstanding SB Holdings
common stock. On January 7, 2011, pursuant to the terms of a Contribution and Exchange
Agreement (the Exchange Agreement), by and between the Harbinger Parties and Harbinger Group Inc.
(HRG), the Harbinger Parties contributed 27,756,905 shares of SB Holdings common stock to HRG and
received in exchange for such shares an aggregate of 119,909,829 shares of HRG common stock (the
Share Exchange). Immediately following the consummation of the Share Exchange, (i) HRG owned
27,756,905 shares of SB Holdings common stock and the Harbinger Parties owned 6,500,000 shares of
SB Holdings common stock, approximately 54.4% and 12.7% of the outstanding shares of SB Holdings
common stock, respectively, and
Harbinger Parties owned 129,859,890 shares of HRG common
stock, or approximately 93.3% of the outstanding HRG common stock.
In connection with the Mergers, the Harbinger Parties and SB Holdings entered into a
stockholder agreement, dated February 9, 2010 (the Stockholder Agreement), which provides for
certain protective provisions in favor of minority stockholders and provides certain rights and
imposes certain obligations on the Harbinger Parties, including:
for so long as the Harbinger Parties own 40% or more of the outstanding voting
securities of SB Holdings, the Harbinger Parties and HRG will vote their shares of SB
Holdings common stock to effect the structure of the SB Holdings board of directors as
described in the Stockholder Agreement;
the Harbinger Parties will not effect any transfer of equity securities of SB
Holdings to any person that would result in such person and its affiliates owning 40% or more
of the outstanding voting securities of SB Holdings, unless specified conditions are met; and
the Harbinger Parties will be granted certain access and informational rights
with respect to SB Holdings and its subsidiaries.
On September 10, 2010, the Harbinger Parties and HRG entered into a joinder to the Stockholder
Agreement, pursuant to which, effective upon the consummation of the Share Exchange, HRG became a
party to the Stockholder Agreement, subject to all of the covenants, terms and conditions of the
Stockholder Agreement to the same extent as the Harbinger Parties were bound thereunder prior to
giving effect to the Share Exchange.
Certain provisions of the Stockholder Agreement terminate on the date on which the Harbinger
Parties or HRG no longer constitutes a Significant Stockholder (as defined in the Stockholder
Agreement). The Stockholder Agreement terminates when any person (including the Harbinger Parties
or HRG) acquires 90% or more of the outstanding voting securities of SB Holdings.
Also in connection with the Mergers, the Harbinger Parties, the Avenue Parties and SB Holdings
entered into a registration rights agreement, dated as of February 9, 2010 (the SB Holdings
Registration Rights Agreement), pursuant to which the Harbinger Parties and the Avenue Parties
have, among other things and subject to the terms and conditions set forth therein, certain demand
and so-called piggy back registration rights with respect to their shares of SB Holdings common
stock. On September 10, 2010, the Harbinger Parties and HRG entered into a joinder to the SB
Holdings Registration Rights Agreement, pursuant to which, effective upon the consummation of the
Share Exchange, HRG became a party to the SB Holdings Registration Rights Agreement, entitled to
the rights and subject to the obligations of a holder thereunder.
On August 28, 2009, in connection with Spectrum Brands emergence from Chapter 11
reorganization proceedings, Spectrum Brands entered into a registration rights agreement with the
Harbinger Parties, the Avenue Parties and D.E. Shaw Laminar Portfolios, L.L.C. (D.E. Shaw),
pursuant to which the Harbinger Parties, the Avenue Parties and D.E. Shaw have, among other things
and subject to the terms and conditions set forth therein, certain demand and so-called piggy
back registration rights with respect to their Spectrum Brands 12% Senior Subordinated Toggle
Notes due 2019.
In connection with the Mergers, Russell Hobbs and Harbinger Master Fund entered into an
indemnification agreement, dated as of February 9, 2010 (the Indemnification Agreement), by which
Harbinger Master Fund agreed, among other things and subject to the terms and conditions set forth
therein, to guarantee the obligations of Russell Hobbs to pay (i) a reverse termination fee to
Spectrum Brands under the merger agreement and (ii) monetary damages awarded to Spectrum Brands in
connection with any willful and material breach by Russell Hobbs of the Merger Agreement. The
maximum amount payable by Harbinger Master Fund under the Indemnification Agreement is $50 million
less any amounts paid by Russell Hobbs or the Harbinger Parties, or any of their respective
affiliates as damages under any documents related to the Mergers. Harbinger Master Fund also agreed
to indemnify Russell Hobbs, SB Holdings and their subsidiaries for out-of-pocket costs and expenses
above $3 million in the aggregate that become payable after the consummation of the Mergers and
that relate to the litigation arising out of Russell Hobbs business combination transaction with
Certain of the Avenue Parties were lenders under Spectrum Brands senior credit facility,
dated March 30, 2007, originally loaning $75,000,000 as part of Spectrum Brands $1 billion U.S.
Dollar Term B Loan facility (the US Dollar Term B Loan) and 15,000,000 as part of Spectrum
Brands 262 million Term Loan facility (the Euro Facility). Subsequently, Avenue Special
Situations Fund V, L.P., along with several other Avenue Parties, increased their participation in
the US Dollar Term B Loan and the Euro Facility. During the fiscal year ended September 30, 2010,
those Avenue Parties received payments of interest on the same terms as the other lenders. In
connection with the Mergers, on June 16, 2010, Spectrum Brands repaid all of its outstanding
indebtedness under the U.S. Dollar Term B Loan and the Euro Facility.