EX-4.1 2 k09824exv4w1.txt AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT EXHIBIT 4.1 EXECUTION VERSION AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT AMENDMENT NO. 2 (this "Amendment"), dated as of November 3, 2006, among TECUMSEH PRODUCTS COMPANY, a Michigan corporation (the "Borrower"), the Lenders party hereto, and CITICORP USA, INC., as administrative agent and collateral agent for the Lenders and the Issuers (in such capacities, the "Administrative Agent"), amends certain provisions of the FIRST LIEN CREDIT AGREEMENT, dated as of February 6, 2006 and amended as of May 5, 2006 (as further amended hereby and as the same may be further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the financial institutions from time to time party thereto as lenders (the "Lenders"), the financial institutions from time to time party thereto as issuing banks (the "Issuers") and the Administrative Agent. WITNESSETH: WHEREAS, the Borrower has requested, and the Administrative Agent and each Lender signatory to an Acknowledgement and Consent have agreed to certain amendments of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and provisions hereinafter contained, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Capitalized terms used herein and not defined herein but defined in the Credit Agreement are used herein as defined in the Credit Agreement. 2. AMENDMENT TO THE CREDIT AGREEMENT. As of the Second Amendment Effective Date (as defined in Section 4), the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the following existing definitions in their entirety and inserting the following in lieu thereof: "Availability Reserve" means the sum of (a) the Permanent Availability Reserve, (b) effective upon receipt of written notice of any determination thereof to the Borrower by the Administrative Agent such amounts as the Administrative Agent may from time to time establish against the Facility, in the Administrative Agent's sole discretion and in accordance with customary business practices for comparable asset based transactions, in order either (i) to preserve the value of the Collateral or the Collateral Agent's Lien thereon or (ii) to provide for the payment of unanticipated liabilities of any Loan Party arising after the Closing Date and (c) Additional Reserve; provided, however, for purposes of determining the Applicable Margin, the Permanent Availability Reserve and the Additional Reserve shall not be in included in the calculation of the Quarterly Available Credit. "Available Credit" means, at any time, (a) the Maximum Credit minus (b) the aggregate Revolving Credit Outstandings at such time. For the purposes of calculating Available Credit, the Borrower shall not take into account any increase in cash balances ("Additional Cash") resulting from the extension of current payables or other changes to Current Payment Terms (and "Revolving Credit Outstandings" shall be deemed to be increased by the amount of any such Additional Cash). 1 "EBITDA" means, with respect to any Person for any period, (a) Consolidated Net Income of such Person for such period plus (b) the sum of, in each case to the extent deducted in the calculation of such Consolidated Net Income but without duplication, (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items, (iv) any aggregate loss from the sale, exchange or other disposition of capital assets by such Person outside the ordinary course of business, (v) depreciation, depletion and amortization expenses, (vi) non-cash expenses in respect of Fourth Quarter 2005 Reserves; provided, however, all such non-cash expenses in Fourth Quarter 2005 Reserves shall not exceed an aggregate amount of $8,500,000, (vii) certain cash and non-cash restructuring expenses in connection with the closing or consolidation of certain facilities; provided, however, the cash portion of such restructuring expenses shall not exceed an aggregate amount of $2,500,000 in any consecutive four Fiscal Quarter period, (viii) all other non-cash charges and non-cash losses for such period that are not payable in cash in any subsequent period and (ix) certain fees and costs payable to (x) Rothschild Inc., a financial advisor to the Loan Parties, in connection with certain corporate services provided by or to be provided by Rothschild Inc. to the Loan Parties, (y) BBK, Ltd., a financial advisor to the Loan Parties, in connection with certain financial services provided or to be provided by BBK, Inc. to the Loan Parties and (z) the Second Lien Advisors in connection with certain financial due diligence and monitoring services provided to or to be provided by such Second Lien Advisors to the Lenders and the Second Lien Secured Parties following the Second Amendment Effective Date for so long as such professional fees and costs are being borne by the Loan Parties, provided, however, all such fees and costs payable under clauses (x), (y) and (z) do not exceed $2,400,000 per Fiscal Quarter minus (c) the sum of, in each case to the extent added in the calculation of such Consolidated Net Income but without duplication, (i) any credit for income tax, (ii) interest income, (iii) gains from extraordinary items for such period, (iv) any aggregate gain from the sale, exchange or other disposition of capital assets by such Person outside the ordinary course of business and (v) any other non-cash gains or other items which have been added in determining Consolidated Net Income, including any reversal of a charge referred to in clause (b)(viii) above by reason of a decrease in the value of any Stock or Stock Equivalent. For the avoidance of doubt, the anticipated Brazilian Tax Benefit shall not constitute a non-cash gain or other item which have been added in determining Consolidated Net Income for purposes of clause (c)(v) above. "Net Cash Proceeds" means proceeds received by any Loan Party after the Closing Date in cash or Cash Equivalents from any (a) Asset Sale, other than an Asset Sale permitted under clauses (a), (b), (c)(i), (d), (e) or (h) of Section 8.4 (Sale of Assets), net of (i) the reasonable cash costs of sale, assignment or other disposition, (ii) taxes paid or reasonably estimated to be payable as a result thereof and (iii) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by the assets subject to such Asset Sale, provided, however, that evidence of each of clauses (i), (ii) and (iii) above is provided to the Administrative Agent in form and substance satisfactory to it, (b) Property Loss Event or (c) US Tax Receivable. 2 "Scheduled Termination Date" shall mean the third anniversary of the Second Amendment Effective Date (as defined in Amendment No. 2 to the Credit Agreement). (b) Section 1.1 of the Credit Agreement is hereby amended by adding the following defined terms in alphabetical order: "Amendment No. 2 to the Credit Agreement" means that certain Amendment No. 2 to First Lien Credit Agreement, dated as of November 3, 2006, entered into among the Borrower, the Administrative Agent and the Lenders party thereto. "Additional Reserve" shall mean, collectively, each reserve established by the Administrative Agent pursuant to Section 7.16 hereof; provided, that the amount of each such reserve is equal to $5,000,000. "Brazilian Tax Benefit" means the anticipated increase in the Borrower's net income (not to exceed an aggregate amount of $7,000,000) resulting from the reversal of non-cash tax charges associated with the "PIS" and "COFINS" taxes under Brazilian Law accrued prior to June 30, 2006. "Disposition Adjustment" means those adjustments, if any, to Minimum EBITDA as set forth on Annex A hereto. "Master Global Manufacture and Supply Agreement" means that certain Master Global Manufacture and Supply Agreement, substantially in the form attached hereto as Exhibit D, by and between the Borrower and TMT. "Minimum EBITDA" means, for each reporting period set forth in Section 5.2 hereof, that amount of EBITDA set forth opposite such period in Section 5.2. "Second Lien Advisors" means and includes each Person providing or to provide certain financial due diligence and monitoring services to the Second Lien Secured Parties following the Second Amendment Effective Date. "Subject Units" means the business lines and concomitant entities set forth on Annex A attached hereto. "TMT" means TMT-Motoco do Brasil Ltda. "TMT Brazilian Out-of-Court-Restructurings" means any agreement between TMT and any creditor in Brazil holding 60% or more of the aggregate outstanding amount of TMT Indebtedness which share a common element among them, as defined by applicable Brazilian Legislation (Law 11.101) of February 9, 2005. "TMT Debt Documents" means those certain debt agreements set forth on Annex B hereto. "TMT Debt Document Arbitration Proceedings" means any arbitration proceedings instituted in Brazil in accordance with the provisions of the agreements set forth on Annex B hereto. 3 "TMT Enforcement Remedies or TMT Enforcement Remedy" means the filing of an enforcement action or any ordinary collection law suit or of a bankruptcy request or other formal proceedings, in each case filed or instituted in Brazil and arising from, or in connection with, any indebtedness having a principal amount in excess of $100,000; provided, however, that such action is not effectively stayed by a TMT Brazilian Out-of-Court Restructuring or by an order of a court of competent jurisdiction within ten (10) days of the commencement thereof. "TMT Indebtedness" means the Indebtedness of TMT outstanding in an amount equal to $121,373,599.80 on the Second Amendment Effective Date incurred in connection with certain agreements set forth on Annex B attached hereto. "Permanent Availability Reserve" means an amount equal to $15,000,000 which shall be applied at all times until all the Obligations have been paid in full and the Revolving Credit Commitments have been terminated unless (x) the Second Lien Secured Obligations have been paid in full and (y) the Administrative Agent has determined in its sole discretion that there has been no Liquidity Event Period occurring for 8 consecutive weeks, at which time the Administrative Agent shall terminate the Permanent Availability Reserve. "US Tax Receivable" means a United States income tax refund with respect to the 2003 tax year of any Loan Party in the amount of up to $14,000,000. (c) Section 2.5 of the Credit Agreement is hereby amended by inserting at the end of the first sentence the following language: On the Second Amendment Effective Date, the Revolving Credit Commitments of all Lenders shall be reduced ratably by an amount equal to $25,000,000. The Revolving Credit Commitments shall be $250,000,000. (d) Section 2.9(a) of the Credit Agreement is hereby amended in its entirety and inserting the following in lieu thereof: (a) Upon receipt by the Borrower or any other Loan Party of Net Cash Proceeds, the Borrower shall immediately prepay the Loans (or provide cash collateral in respect of Letters of Credit) in an amount equal to 100% of such Net Cash Proceeds. Any such mandatory prepayment shall be applied in accordance with clause (c) below; provided, however, that, subject to the Intercreditor Agreement (x) no prepayment of the Second Lien Secured Obligations from Net Cash Proceeds arising from any Asset Sale shall be permitted if, after giving effect to the application of such Net Cash Proceeds to the Obligations, the Available Credit (without giving effect to any Additional Reserve) is less than $25,000,000, (y) upon receipt by the Borrower or any other Loan Party of Net Cash Proceeds arising from any Loan Party's receipt of US Tax Receivable, such Net Cash Proceeds shall be applied as follows: (i) first, the Borrower shall immediately prepay the outstanding Loans to the extent that Available Credit (without giving effect to any Additional Reserve) is less than $25,000,000, and (ii) second, to the extent that Available Credit (without giving effect to any Additional Reserve) is greater than $25,000,000, the Borrower shall apply such Net Cash Proceeds as a mandatory prepayment of the loans under the Second Lien Facility and (z) upon receipt by the Borrower or any other Loan Party of 4 Net Cash Proceeds arising from any Asset Sale permitted under Section 8.4(j), such Net Cash Proceeds shall be applied as follows: (i) first, the Borrower shall immediately prepay that portion of the outstanding Loans (and provide cash collateral in respect of Letters of Credit) in an amount equal to that portion of the Available Credit created solely by the inclusion of the assets subject to such Asset Sale in the Borrowing Base immediately prior to the consummation of such Asset Sale; (ii) second, the Borrower shall apply the remaining balance of Net Cash Proceeds after giving effect to the application of such proceeds made under clause (i) above, as a mandatory prepayment of the loans under the Second Lien Facility and (iii) then, as long as no Liquidity Event Period is in effect, the Borrower or such Loan Party shall be entitled to retain any remaining Net Cash Proceeds. (e) Section 4.19 (c) is hereby amended by deleting the word "No" at the beginning such clause and inserting the following: (c) Except with respect to the Real Property located at 1925 Nebraska Ave., Toledo, Ohio, 43607 (and set forth on Schedule 4.19), no (f) Section 5.2 of the Credit Agreement is hereby amended in its entirety as follows: Section 5.2 Minimum EBITDA Subject to any applicable Disposition Adjustment, the Borrower shall have, on the last day of each period set forth below, EBITDA for such period of not less than the amount set forth opposite such period:
PERIOD MINIMUM EBITDA ------ -------------- October 1, 2006 through ($14,900,000) December 31, 2006 October 1, 2006 through ($8,000,000) March 31, 2007 October 1, 2006 through $21,800,000 June 30, 2007 October 1, 2006 through $57,000,000 September 30, 2007 January 1, 2007 through $88,900,000 December 31, 2007
(g) Section 6.1 of the Credit Agreement is hereby amended by inserting the following new clause (i) immediately following the existing subsection (h) to read as follows: (i) Cash Flow Forecast. The Borrower shall deliver on or prior to the Second Amendment Effective Date (as defined in Section 4), and thereafter as soon as available and in any event not later than Tuesday at 5:00 pm (New York time) of each week (A) until the repayment in full of all of the Second Lien Secured Obligations and thereafter (B) until the earlier of (x) the date that the Administrative 5 Agent determines in its sole discretion that there has been no Liquidity Event Period occurring for 8 consecutive weeks and (y) end of the Fiscal Year of 2007, a 13-week rolling cash flow forecast detailing cash receipts and cash disbursements on a weekly basis for the next 13 weeks, the information and calculations contained in which shall be reasonably satisfactory to the Administrative Agent, certified by a Responsible Officer of the Borrower that such forecast has been prepared in good faith. (h) Section 7.6 of the Credit Agreement is hereby amended by inserting the following immediately following the last sentence thereof: In addition, the Borrower shall authorize (and hereby does so authorize) its and its Subsidiaries' investment bankers and other financial advisors to discuss with the Administrative Agent or any Lender, during reasonable business hours, the status of the sale of the Subject Units and such other matters relating thereto. (i) Article VII (Affirmative Covenants) is hereby amended by inserting the following new Section 7.16 immediately after the existing Section 7.15 and a new Section 7.17 after Section 7.16, each to read as follows: Section 7.16 Additional Reserve The Borrower and each of its Subsidiaries hereby agree and acknowledge that the Administrative Agent shall include in the Availability Reserve an Additional Reserve upon the written notification from the administrative agent under the Second Lien Credit Facility stating that the Borrower has not, by the applicable Target Date (as defined in the Second Lien Credit Agreement) reduced the outstanding principal amount of the Second Lien Term Loans (as defined in the Second Lien Credit Agreement) to the applicable Target Date Principal Reduction Goal (as defined in the Second Lien Credit Agreement). Any such Additional Reserve shall continue to be in effect until such time as the Administrative Agent receives written notification from the administrative agent under the Second Lien Credit Facility that Borrower has reduced the outstanding principal amount of the Second Lien Term Loans to at or below the Target Date Principal Reduction Goal set forth opposite the applicable Target Date for which such Additional Reserve was instituted; provided, however, the Administrative Agent shall have no obligation to hold any Additional Reserve in trust for or for the benefit of the lenders under the Second Lien Credit Facility. Section 7.17 Current Payment Terms The Borrower shall, and shall cause each Subsidiary of the Borrower to, duly pay and discharge in accordance with each Loan Party's customary business practices in respect thereto, all current debts, obligations and Accounts payable as they become due in accordance with such customary business practices ("Current Payment Terms"); provided, however, under no circumstances shall the Borrower or any Subsidiary of the Borrower, willfully or otherwise, extend, modify or change the Current Payment Terms for the purpose of redirecting or redeploying cash toward repaying Revolving Credit Outstandings in an effort to temporarily inflate Available Credit. 6 (j) Section 8.1(f) of the Credit Agreement is herby amended in its entirety as follows: (f) Indebtedness arising from intercompany loans (i) from the Borrower to any Guarantor, (ii) from any Guarantor to the Borrower or any other Guarantor, (iii) from any Non-Guarantor Subsidiary to the Borrower or any Guarantor, (iv) from a Brazilian Subsidiary to any other Brazilian Subsidiary; provided, however, the aggregate outstanding principal amount of all such Indebtedness permitted under this clause (iv) and under Section 8.1(k)(iii)(y)(B) shall not exceed $10,000,000 or (v) from the Borrower or any Guarantor to any Non-Guarantor Subsidiary; provided, however, that, in the case of this clause (v), the Investment in such intercompany loan to such Non-Guarantor Subsidiary is permitted under Section 8.3(e)(iv) (Investments); (k) Section 8.1(k) of the Credit Agreement is hereby amended in its entirety as follows: (k) Indebtedness (not otherwise permitted under this Section 8.1) (i) incurred in connection with the Brazilian Receivables Transactions; provided, however, that the Dollar Equivalent of the aggregate outstanding principal amount (or equivalent repurchase obligation) of all such Indebtedness incurred pursuant to this clause (i) shall not exceed $150,000,000 at any time, (ii) incurred by any Material Foreign Subsidiary; provided, however, that the Dollar Equivalent of the aggregate outstanding principal amount of all Indebtedness permitted under this clause (ii) shall not exceed $25,000,000 at any time and (iii) incurred by Tecumseh do Brasil Ltda solely for the purpose of (x) paying a dividend to the Borrower or (y) making a capital contribution in or a loan to TMT; provided, that, the Dollar Equivalent of the aggregate outstanding principal amount of all Indebtedness permitted under this clause (iii) shall not exceed (A) $25,000,000, in the case of clause (x) above and (B) $10,000,000, in the case of clause (y) above; provided, further, the outstanding principal amount of all Indebtedness permitted under this clause (iii) shall not exceed $25,000,000 at any time. (l) Section 8.3 (e)(iv) of the Credit Agreement is hereby amended by adding the following immediately preceding the semi colon at the end of such clause (e)(iv): (other than Investments permitted under Section 8.1(f) and 8.1(k)) (m) Section 8.4(h) of the Credit Agreement is hereby amended in its entirety to read as follows: (h) the sale of certain Investment Property set forth on Schedule 8.4(a) in an aggregate Net Cash Proceeds of which shall not exceed $500,000 so long as such sale is consummated on or prior to January 1, 2007; and (n) Section 8.4 of the Credit Agreement is hereby amended by deleting the word "and" appearing at the end of clause (h) and inserting "and" at the end of clause (i) and inserting a new clause (j) immediately following the existing clause (i) to read as follows: 7 (j) as long as no Default or Event of Default is continuing or would result therefrom, an Asset Sale for Fair Market Value (i) payable in cash or (ii) payable in a combination of cash and other consideration; provided, however, (A) at least 85% of all the consideration received from such Asset Sale shall be in cash (except for Asset Sales of certain Subject Units set forth under clause III on Annex A hereto for which the greater of (x) 25% of the total purchase price and (y) an amount equal to that portion of the Available Credit created solely by the inclusion of the assets comprising the Subject Units set forth under clause III on Annex A hereof included in the Borrowing Base immediately prior to the consummation of such Asset Sale, shall be in cash and the balance of the purchase price shall be permitted to be in the form of the assumption of Indebtedness by the purchaser of such assets) and (B) the Net Cash Proceeds received from such Asset Sale is in an amount sufficient to satisfy the Second Lien Obligations, in respect of the Stock or assets of all or any part of any entity or combination of parts or entities comprising the Subject Units; provided, further, that such Net Cash Proceeds from such sale are applied to the Obligations as set forth in, and to the extent required by, Section 2.9(a). (o) Section 8.7 of the Credit Agreement is hereby amended by adding the following at the end of clause (a)(i): (other than with any other Loan Party), (p) Section 8.9 of the Credit Agreement is hereby amended by deleting the word "and" at the end of clause (e)(i) and inserting "and" at the end of clause (e)(ii) and inserting a new clause (e)(iii) immediately following the existing clause (e)(ii) to read as follows: (iii) that certain Master Global Manufacture and Supply Agreement between Tecumseh Power Company and TMT, in connection with the restructuring of the TMT Indebtedness, with terms and conditions that are as favorable to the Borrower as those that could be obtained in a comparable arm's length transaction with a Person not an Affiliate of the Borrower. (q) Schedule 4.19 to the Credit Agreement is hereby amended by adding that certain property set forth on Annex C hereto. (r) Schedule 8.4(b) to the Credit Agreement is hereby amended by adding that certain property set forth on Annex D hereto. 3. CONSENT AND WAIVER. (a) As of the Second Amendment Effective Date (as defined in Section 4) and until the earlier of (i) ninety (90) days from the date that TMT has failed to make a payment that is due and payable under any TMT Debt Document (as in effect on the date hereof) or has otherwise failed to comply with the terms of any TMT Debt Document (as in effect on the date hereof), and (ii) the date that any TMT Enforcement Remedy has occurred, the Administrative Agent and each Lender signatory to an Acknowledgement and Consent hereby waive any Default or Event of Default under (A) Section 9.1(e) (Events of Default) arising from TMT's failure to make any payment on any TMT Indebtedness when the same becomes due and payable and (B) Section 9.1(f) (Events of Default) with respect to TMT solely in connection with any Brazilian Out-of-Court Restructuring or any TMT Debt Document Arbitration Proceeding that may occur or be instituted. 8 (b) Each Lender signatory to an Acknowledgement and Consent hereby consents to the Borrower's request of a one time extension of the delivery date of the (x) monthly report solely for the fiscal month of September 2006, due within 30 days after the end of such fiscal month pursuant to Section 6.1(a) (the "September Reporting"), and (y) Borrowing Base Certificate solely for the fiscal month of September 2006 due no later than 10 Business Days after the end of such fiscal month pursuant to Section 6.10(a), in each case in clause (x) and (y) above, to November 14, 2006. (c) Each Lender signatory to an Acknowledgement and Consent hereby waives any Default or Event of Default (i) under Section 5.2 of the Credit Agreement that may have arisen from the Borrower's expected failure to meet the minimum EBITDA requirement for the Fiscal Quarter ending September 30, 2006 and which will be reflected in the September Reporting to be delivered to the Administrative Agent by November 14, 2006, (ii)(A) Section 4.1(b) of the Credit Agreement that may have arisen due to the Borrower's failure to disclose the property set forth on Annex C in Schedule 4.19 and (B) Section 4.19(c) and (iii) Section 6.1(a) of the Credit Agreement that may have arisen due to the Borrower's failure to deliver the monthly report for the fiscal month of August 2006 at the appropriate delivery date. (d) Each Lender signatory to an Acknowledgement and Consent hereby consents to the terms contained in Amendment No. 2 to the Second Lien Credit Agreement. (e) Each Lender signatory to an Acknowledgement and Consent hereby consents to the terms contained in Amendment No.1 to the Intercreditor Agreement, in form set forth hereto as Exhibit A. 4. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall become effective on the date (the "Second Amendment Effective Date") when the Administrative Agent shall have received all of the following, each of which shall be in form and substance satisfactory to the Administrative Agent: (a) Certain Documents. The Administrative Agent shall have received each of the following, in form and substance satisfactory to the Administrative Agent: (i) this Amendment, executed by the Borrower and the Administrative Agent; (ii) an Acknowledgment and Consent, in the form set forth hereto as Exhibit B, duly executed by each of the Requisite Lenders; (iii) the Consent of Guarantors, in the form set forth hereto as Exhibit C, executed by each Guarantor; (iv) an amendment to the Intercreditor Agreement substantially in the form of Exhibit A hereto, duly executed and delivered to the Administrative Agent; and (v) such additional documentation as the Administrative Agent or the Requisite Lenders may reasonably require. 9 (b) Second Amendment Effective Date - Second Lien. The Second Amendment Effective Date (as defined in Amendment No. 2 to the Second Lien Credit Agreement) shall have occurred. (c) Payment of Fees, Costs and Expenses. The Administrative Agent shall have received payment of all fees, costs and expenses, including, without limitation, all fees, costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent) in connection with this Amendment, the Credit Agreement and each other Loan Document, as required by Sections 8 and 9 hereof. (d) Representations and Warranties. Each of the representations and warranties contained in Section 5 below shall be true and correct. (e) No Default or Event of Default. After giving effect to this Amendment and Amendment No. 2 to the Second Lien Credit Agreement, no Default or Event of Default shall have occurred and be continuing. 5. REPRESENTATIONS AND WARRANTIES. On and as of the date hereof, and as of the Second Amendment Effective Date, after giving effect to this Amendment and Amendment No. 2 to the Second Lien Credit Agreement, the Borrower hereby represents and warrants to the Lenders as follows: (a) Each of the representations and warranties contained in Article IV of the Credit Agreement, the other Loan Documents or in any certificate, document or financial or other statement furnished at any time under or in connection therewith are true and correct in all material respects on and as of the date as if made on and as of such date, except to the extent that such representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date; and (b) No Default or Event of Default has occurred and is continuing. 6. CONTINUING EFFECT; NO OTHER AMENDMENTS. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect. The amendments and consents contained herein shall not constitute an amendment or a waiver of any other provision of the Credit Agreement or the other Loan Documents or for any other purpose except as expressly set forth herein. 7. LOAN DOCUMENTS. This Amendment is deemed to be a "Loan Document" for the purposes of the Credit Agreement. 8. FEES. As consideration for the execution of this Amendment, the Borrower agrees to pay to the Administrative Agent, for the account of each Lender from which the Administrative Agent shall have received (by facsimile or otherwise) an executed Acknowledgment and Consent with respect to this Amendment by 5:00 p.m. (New York time) on November 3, 2006, a fee equal to 0.25% of such Lenders' Revolving Credit Commitment then in effect. 10 9. COSTS AND EXPENSES. The Borrower agrees to pay on demand all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and other instruments and documents to be delivered pursuant hereto, including the reasonable and documented fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. 10. GOVERNING LAW; COUNTERPARTS; MISCELLANEOUS. (a) This Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. (b) This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. (c) Section captions used in this Amendment are for convenience only and shall not affect the construction of this Amendment. (d) From and after the Second Amendment Effective Date, all references in the Credit Agreement to the "Agreement" shall be deemed to be references to such Agreement as modified hereby and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. [signature pages follow] 11 IN WITNESS WHEREOF, the undersigned parties have executed this Amendment No. 2 to the Credit Agreement to be effective for all purposes as of the Second Amendment Effective Date. Borrower TECUMSEH PRODUCTS COMPANY as Borrower By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President, Treasurer and Chief Financial Officer [SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] Administrative Agent CITICORP USA, INC., as Administrative Agent, Collateral Agent, Dollar Swing Loan Lender, Issuer and as a Lender By: /s/ Sebastien Delasnerie ------------------------------------ Name: Sebastien Delasnerie Title: Vice President [SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] *indicates information omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. ANNEX A SUBJECT UNITS I. * II. * and III. * CERTAIN DEFINITIONS RELATING TO DISPOSITION ADJUSTED SET FORTH IN SECTION 5.2 "Reporting Period" has the meaning specified on Annex A. "Electrical Segment" has the meaning specified on Annex A. "Engines Segment" has the meaning specified on Annex A. "Segment" means, individually, each of *, * and * as shown on Annex A. "Cumulative EBITDA Covenant Adjustment" means, with respect to each Reporting Period, that number set forth opposite such Reporting Period under the heading "Cumulative EBITDA Covenant Adjustment" in the chart on Annex A. "Cumulative Sales Projection" means, with respect to each Reporting Period, that number set forth opposite such Reporting Period under the heading "Cumulative Sales Projection" in the chart on Annex A. "Quarterly Projected EBITDA Covenant" means, with respect to each quarter specified in the applicable chart on Annex A, that number set forth opposite such quarter under the heading "Quarterly Projected EBITDA Covenant" in the chart on Annex A. "Sales Projection" means, with respect to each quarter specified in the applicable chart on Annex A, that number set forth opposite such quarter under the heading "Sales Projection" in the chart on Annex A. In the event of an Asset Sale of a Subject Unit permitted under Section 8.4(j), Minimum EBITDA shall be adjusted downward, for each reporting period specified in Section 5.2 (each a "Reporting Period") (other than Reporting Periods ended prior to the date of the Asset Sale being examined), by the Cumulative EBITDA Covenant Adjustment amount set forth opposite each of (x) the Reporting Period in which the Asset Sale takes place for the applicable Segment below and (y) each Reporting Period subsequent to the Reporting Period in which the Asset Sale takes place for the applicable Segment below; provided, however, that (A) in the event the subject Asset Sale is of less than the entire Segment, then the Cumulative EBITDA Covenant Adjustment specified below for each Reporting Period shall be an amount equal to the product obtained by multiplying (x) the Cumulative EBITDA Covenant Adjustment specified for such Reporting Period by (y) a fraction (i) the numerator of which is that portion of the Segment's Sales Projection attributable to the assets being sold and (ii) the denominator of which is Sales Projection for the subject Segment set forth opposite such Reporting Period; and (B) shall be further adjusted in accordance with GAAP accounting standards to reflect the timing of the Asset Sale to reflect the EBITDA contribution to such Segment's Cumulative EBITDA Covenant Adjustment that was projected for the Segment (or portion thereof) that was the subject of the Asset Sale as set forth in the Quarterly Projected EBITDA Covenant table below: *
CUMULATIVE CUMULATIVE SALES CUMULATIVE REPORTING EBITDA COVENANT ADJUSTMENT PROJECTION PERIOD ($ IN MILLIONS) ($ IN MILLIONS) 10/01/2006-12/31/06 * * 10/01/2006-3/31/07 * * 10/01/2006-6/30/07 * * 10/01/2006-9/30/07 * * 1/1/07-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
*
CUMULATIVE EBITDA COVENANT CUMULATIVE SALES ADJUSTMENT PROJECTION REPORTING PERIOD ($ IN MILLIONS) ($ IN MILLIONS) 10/01/2006-12/31/06 * * 10/01/2006-3/31/07 * * 10/01/2006-6/30/07 * * 10/01/2006-9/30/07 * * 1/1/07-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
*:
CUMULATIVE CUMULATIVE SALES EBITDA COVENANT ADJUSTMENT PROJECTION REPORTING PERIOD ($ IN MILLIONS) ($ IN MILLIONS) 10/01/2006-12/31/06 * * 10/01/2006-3/31/07 * * 10/01/2006-6/30/07 * * 10/01/2006-9/30/07 * * 1/1/07-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] ANNEX B LIST OF BRAZILIAN DEBT DOCUMENTS
OUTSTANDING PRINCIPAL IN REAIS DEBTOR CREDITOR DOCUMENT (9/30/06) --------------- ---------------------- --------------------------------------------------------------------------- ----------- TMT Motoco do Banco Nacional De BNDES Facility Agreement No. 05.2.0306.1 dated August 12, 2005 36,803,000 Brasil Ltda Desenvolvimento Economico E Social - BNDES ("BNDES"), Unibanco - Banco Nacional De Guaratee Letter dated August 22, 2005 (re BNDES Financing Contract NIHIL Uniao De Bancos Desenvolvimento No. 05.2.0306.1) Brasileiros Economico E Social - S.A. BNDES ("BNDES"), TMT Motoco do Unibanco - Uniao De Guarantee Agreement dated August 22, 2005 (re BNDES Financing Contract NIHIL Brasil Ltda Bancos Brasileiros No. 05.2.0306.1) S.A. TMT Motoco do Banco Alfa De Advance on Export Contract ACC 06/001123 dated 9.5.2006 1.114.495 Brasil Ltda Investimento S.A. Advance on Export Contract ACC 06/001132 dated 10.5.2006 1.216.821 Advance on Export Contract ACC 06/001292 dated 23.5.2006 1.777.961 Advance on Export Contract ACC 06/001332 dated 29.5.2006 3.581.056 Advance on Export Contract ACC 06/001387 dated 7.6.2006 1.487.333
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT]
OUTSTANDING PRINCIPAL IN REAIS DEBTOR CREDITOR DOCUMENT (9/30/06) --------------- ---------------------- --------------------------------------------------------------------------- ----------- Advance on Export Contract ACC 06/001388 dated 7.6.2006 1.775.920 Advance on Export Contract ACC 06/001408 dated 14.6.2006 150.791 Advance on Export Contract ACC 06/001773 dated 28.8.2006 2.853.609 ========== 13,957,986 TMT Motoco do Banco Bradesco S.A. Advance on Export Contract ACC 06/005075 dated 30.6.2006 1.107.708 Brasil Ltda Advance on Export Contract ACC 06/005170 dated 30.6.2006 1.107.214 Advance on Export Contract ACC 06/005231 dated 3.7.2006 805.555 Advance on Export Contract ACC 06/005452 dated 10.7.2006 1.591.311 Advance on Export Contract ACC 06/005453 dated 10.7.2006 651.995 Advance on Export Contract ACC 06/005607 dated 13.7.2006 1.479.922 Advance on Export Contract ACC 06/006530 dated 9.8.2006 1.179.705 Advance on Export Contract ACC 06/006531 dated 9.8.2006 878.737 Advance on Export Contract ACC 06/006532 dated 9.8.2006 219.684 Advance on Export Contract ACC 06/006649 dated 11.8.2006 988.201 Advance on Export Contract ACC 06/006650 dated 11.8.2006 994.789 Advance on Export Contract ACC 06/006778 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006779 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006780 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006781 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006782 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006784 dated 16.8.2006 219.385 Advance on Export Contract ACC 06/006785 dated 16.8.2006 329.077 Advance on Export Contract ACC 06/006786 dated 16.8.2006 219.385 Advance on Export Contract ACC 06/006979 dated 23.8.2006 328.619 Advance on Export Contract ACC 06/006980 dated 23.8.2006 1.095.396 Advance on Export Contract ACC 06/006981 dated 23.8.2006 974.903 Advance on Export Contract ACC 06/007140 dated 28.8.2006 1.094.305
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT]
OUTSTANDING PRINCIPAL IN REAIS DEBTOR CREDITOR DOCUMENT (9/30/06) --------------- ---------------------- --------------------------------------------------------------------------- ----------- Advance on Export Contract ACC 06/007141 dated 28.8.2006 656.583 Advance on Export Contract ACC 06/007559 dated 11.9.2006 436.499 Advance on Export Contract ACC 06/007561 dated 11.9.2006 436.499 Advance on Export Contract ACC 06/007562 dated 11.9.2006 218.250 Advance on Export Contract ACC 06/007563 dated 11.9.2006 2.149.759 Advance on Export Contract ACC 06/007764 dated 13.9.2006 4.403.264 Advance on Export Contract ACC 06/074200 dated 14.9.2006 1.714.276 Advance on Export Contract ACC 06/077936 dated 27.9.2006 2.819.470 ========== 29,745,876 TMT Motoco do HSBC Bank Brasil Advance on Export Contract ACC 05/070072 dated 1.11.2005 7.330.707 Brasil Ltda S.A. - Banco Multiplo Advance on Export Contract ACC 05/073442 dated 16.11.2005 4.125.818 Advance on Export Contract ACC 06/031332 dated 25.4.2006 2.308.042 Advance on Export Contract ACC 06/035254 dated 10.5.2006 2.328.943 Advance on Export Contract ACC 06/038119 dated 17.5.2006 445.846 Advance on Export Contract ACC 06/039810 dated 22.5.2006 1.336.562 Advance on Export Contract ACC 06/049962 dated 22.6.2006 1.161.796 Advance on Export Contract ACC 06/051829 dated 29.6.2006 1.225.224 Advance on Export Contract ACC 06/055126 dated 11.7.2006 773.469 Advance on Export Contract ACC 06/056736 dated 17.7.2006 145.724 Advance on Export Contract ACC 06/057958 dated 20.7.2006 1.102.863 Advance on Export Contract ACC 06/057962 dated 20.7.2006 1.094.040 Advance on Export Contract ACC 06/059007 dated 25.7.2006 1.295.680 Advance on Export Contract ACC 06/060457 dated 28.7.2006 1.634.136 Advance on Export Contract ACC 06/062166 dated 3.8.2006 250.734 Advance on Export Contract ACC 06/063032 dated 7.8.2006 1.120.984 ========== 27,680,568
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT]
OUTSTANDING PRINCIPAL IN REAIS DEBTOR CREDITOR DOCUMENT (9/30/06) --------------- ---------------------- --------------------------------------------------------------------------- ----------- TMT Motoco do Banco Itau BBA S.A. Advance on Export Contract ACC 05/018001 dated 6.10.2005 2.447.495 Brasil Ltda Advance on Export Contract ACC 05/018536 dated 17.10.2005 2.410.372 Advance on Export Contract ACC 05/019934 dated 4.11.2005 918.237 Advance on Export Contract ACC 05/020684 dated 17.11.2005 2.522.189 Advance on Export Contract ACC 05/020968 dated 21.11.2005 687.399 Advance on Export Contract ACC 05/021502 dated 25.11.2005 916.092 ========== 9,901,784 TMT Motoco do Banco Itau BBA S.A. Bank Credit Bills representing Dual Index Loans Contract 106306091100100 Brasil Ltda dated 11.9.2006 8.999.761 Bank Credit Bills representing Dual Index Loans Contract 106306091301500 dated 13.9.2006 5.364.066 Bank Credit Bills representing Dual Index Loans Contract MC6.63/12 dated 15.9.2006 1.581.902 Bank Credit Bills representing Dual Index Loans Contract 106306092000100 dated 20.9.2006 4.678.354 Bank Credit Bills representing Dual Index Loans Contract 106306092200100 dated 22.9.2006 6.617.995 Bank Credit Bills representing Dual Index Loans Contract EC5.63/01 B dated 25.9.2006 1.135.968 ========== 28,378,046 TMT Motoco do Banco Safra S.A. BNDES Facility Agreement 32106591-3 dated 412.106 Brasil Ltda BNDES Facility Agreement 32108874-3 dated 07.12.2005 460.138 BNDES Facility Agreement 32108523-0 dated 30.12.2004 491.226 ========== 1,363,470 TMT Motoco do Banco Bradesco S.A. BNDES Facility Agreement (proposal no 2004018) dated 19.04.2005 49,493,000 Brasil Ltda
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT]
OUTSTANDING PRINCIPAL IN REAIS DEBTOR CREDITOR DOCUMENT (9/30/06) --------------- ---------------------- --------------------------------------------------------------------------- ----------- TMT Motoco do Fleet National Bank Brazilian Pre-Export Financing Agreement 03/023970 dated 18.6.2003 2.174.207 Brasil Ltda d.b.a BankBoston, N.A Brazilian Pre-Export Financing Agreement 03/027035 dated 10.7.2003 2.610.858 Brazilian Pre-Export Financing Agreement 03/031835 dated 8.8.2003 2.590.933 Brazilian Pre-Export Financing Agreement 03/033941 dated 22.8.2003 2.575.366 Brazilian Pre-Export Financing Agreement 04/018926 dated 31.3.2004 3.261.303 Brazilian Pre-Export Financing Agreement 04/026608 dated 6.5.2004 3.660.592 ========== 16,873,259 TMT Motoco do Tecumseh do Brasil Loan Agreement dated June 22, 2004 48,798,000 Brasil Ltda Ltda.
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] ANNEX C PROPERTY TO BE ADDED TO SCHEDULE 4.19
FACILITY OWNER/LESSEE (LESSOR) STREET ADDRESS -------- --------------------- -------------- Toledo, Ohio Owner: Tecumseh Products Company 1925 Nebraska Ave., Toledo, Lessee: Ice Investments, Inc. Ohio 43607
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] ANNEX D PROPERTY TO BE ADDED TO SCHEDULE 8.4 (b) 16045 Michigan Avenue New Holstein, WI 53061 [SIGNATURE PAGE TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] EXHIBIT A AMENDMENT NO. 1 TO THE INTECREDITOR AGREEMENT EXHIBIT B ACKNOWLEDGEMENT AND CONSENT To: CITICORP USA, INC., as Administrative Agent 388 Greenwich Street, 19th Floor New York, New York 10013 RE: TECUMSEH PRODUCTS COMPANY Reference is made to the CREDIT AGREEMENT, dated as of February 6, 2006, as amended (as the same may be further amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among TECUMSEH PRODUCTS COMPANY, a Michigan corporation (the "BORROWER"), the Lenders and Issuers party thereto and CITICORP USA, INC. ("CITICORP"), as administrative agent and collateral agent for the Lenders and the Issuers (in such capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise specified herein, all capitalized terms used in this Waiver shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to amend the Credit Agreement on the terms described in Amendment No. 2 to First Lien Credit Agreement (the "AMENDMENT"), the form of which is attached hereto. Pursuant to Section 11.1(a) (Amendments, Waivers, Etc.) of the Credit Agreement, the undersigned Lender hereby consents to the terms of the Amendment and authorizes the Administrative Agent to execute and deliver the Waiver on its behalf. Very truly yours, ---------------------------------------- [Name of Lender] By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Dated as of November 3, 2006 EXHIBIT C CONSENT OF GUARANTORS Dated as of November 3, 2006 Each of the undersigned companies, as a Guarantor under the Guaranty dated February 6, 2006 (the "Guaranty") in favor of the Secured Parties under the Credit Agreement referred to in the foregoing Amendment, hereby consents to such Amendment and hereby confirms and agrees that notwithstanding the effectiveness of such Amendment, the Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of such Amendment, each reference in the Guaranty to the "Credit Agreement", "thereunder", "thereof" or words of like import shall mean and be a reference to the Credit Agreement, as amended by such Amendment. [Signature pages follow] IN WITNESS WHEREOF, the parties hereto have consented to this Amendment No. 2, as of the date first written above. CONVERGENT TECHNOLOGIES INTERNATIONAL, INC. TECUMSEH TRADING COMPANY EVERGY, INC. FASCO INDUSTRIES, INC. MANUFACTURING DATA SYSTEMS, INC. M. P. PUMPS, INC. TECUMSEH CANADA HOLDING COMPANY TECUMSEH COMPRESSOR COMPANY TECUMSEH POWER COMPANY VON WEISE GEAR COMPANY as U.S. Guarantors By: ------------------------------------ Name: James S. Nicholson Title: Vice President and Treasurer EUROMOTOR, INC. as U.S. Guarantor By: ------------------------------------ Name: James S. Nicholson Title: Vice President HAYTON PROPERTY COMPANY, LLC TECUMSEH DO BRASIL USA, LLC as U.S. Guarantors By: ------------------------------------ Name: James S. Nicholson Title: President [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] TECUMSEH PRODUCTS OF CANADA LIMITED, as Canadian Guarantor By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- FASCO MOTORS COMPANY, as Canadian Guarantor By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 2 TO FIRST LIEN CREDIT AGREEMENT] EXHIBIT D MASTER GLOBAL MANUFACTURE AND SUPPLY AGREEMENT