Note 5 – Debt

Credit Agreement

The Company, together with certain direct and indirect subsidiaries have an outstanding Credit Agreement (the “Credit Agreement”) with a syndicate of banks led by Bank of America, N.A.

The Credit Agreement provides for a $50,000 secured term loan facility for Gentherm (the “US Term Loan”), and a €20,000 secured term loan facility for Gentherm GmbH (the “Europe Term Loan”), and a $100,000 secured revolving credit facility (the “US Revolving Note”) with specific borrowing limits for foreign subsidiaries party to such agreement. The Credit Agreement allows the Company to increase the revolving credit facility or incur additional secured term loans in an aggregate amount of $50,000, subject to specific conditions.

Note 5 – Debt – Continued

All obligations under the Credit Agreement (including all the obligations of any US or non-US loan party) are unconditionally guaranteed by Gentherm and specified US subsidiaries. Additionally, such parties entered into a pledge and security agreement, granting a security interest in substantially all of their personal property to secure their respective obligations under the Credit Agreement, including the stock and membership interests of specified subsidiaries (limited to 66% of the stock in the case of certain non-US subsidiaries). Further, specified foreign subsidiaries guarantee all obligations of the non-US loan parties under the Credit Agreement.

The Company must maintain certain financial ratios consisting of a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Leverage Ratio as defined by the Credit Agreement. The Credit Agreement places specific restrictions on the amount of dividend payments to shareholders.

Under the Credit Agreement, US Dollar denominated loans bear interest at either a base rate (“Base Rate Loans”) or Eurocurrency rate (“Eurocurrency Rate Loans”), plus a margin (“Applicable Rate”). Base Rate Loans are equal to the highest of the Federal Funds Rate (0.07% at September 30, 2015) plus 0.50%, Bank of America’s prime rate (3.25% as of September 30, 2015), or a one month Eurocurrency rate plus 1.00%. Eurocurrency Rate Loans denominated in US Dollars or European Euros (“Euros”) are equal to the London Interbank Offered Rate and the Canadian Dealer Offered Rate for Canadian Dollar denominations. All loans denominated in a currency other than the US Dollar, including the Europe Term Loan, must be Eurocurrency Rate Loans. Interest is payable at least quarterly.

The Applicable Rate varies based on the Consolidated Leverage Ratio of the Company, as defined by the Credit Agreement. As long as the Company is not in default of the terms and conditions of the Credit Agreement, the lowest and highest possible Applicable Rate is 1.50% and 2.00%, respectively, for Eurocurrency Rate Loans and 0.50% and 1.00%, respectively, for Base Rate Loans. Our leverage ratio as of September 30, 2015 qualified us for the lowest Applicable Rate available.

DEG China Loan

The Company has two fixed interest rate loans with the German Investment Corporation, a subsidiary of KfW banking group (“DEG”), a German government-owned development bank. The first, a loan we used to fund capital investments in China (the “DEG China Loan”), is subject to semi-annual principal payments beginning March, 2015 and ending September, 2019. Under the terms of the DEG China Loan, the Company must maintain a minimum Debt-to-Equity Ratio, Current Ratio and Debt Service Coverage Ratio based on the financial statements of Gentherm’s wholly owned subsidiary, Gentherm Automotive Systems (China) Limited, as defined by the DEG China Loan agreement.

DEG Vietnam Loan

On June 24, 2015, we entered into the second loan agreement with DEG for a long-term senior loan in an amount of $15,000 to finance the construction and set up of the Vietnam production facility (“DEG Vietnam Loan”). On August 27, 2015, the entire $15,000 was drawn and interest was fixed at 5.21% for the duration of the loan. The DEG Vietnam Loan is subject to semi-annual principal payments beginning November, 2017 and ending May, 2023. Under the terms of the DEG Vietnam Loan, the Company must maintain a minimum Current Ratio, Equity Ratio and Enhanced Equity Ratio based on the financial statements of Gentherm’s wholly owned subsidiary, Gentherm Vietnam Co. LTD, each as defined by the DEG Vietnam Loan agreement.

Note 5 – Debt – Continued

The following table summarizes the Company’s debt at September 30, 2015 and at December 31, 2014.

	September 30, 2015						December 31, 2014
	Interest Rate			Principal Balance			Principal Balance
Credit Agreement:
US Term Loan		1.83	%	$	47,500		$	49,375
Europe Term Loan		1.50	%		21,217			23,963
US Revolving Note		1.69	%		12,000			12,000
DEG China Loan		4.25	%		3,574			4,805
DEG Vietnam Loan		5.21	%		15,000			—
Capital leases					—			632
Total debt					99,291			90,775
Current portion					(4,510	)		(5,306	)
Long-term debt, less current maturities				$	94,781		$	85,469

As of September 30, 2015, we were in compliance with all terms as outlined in the Credit Agreement, DEG China Loan and DEG Vietnam Loan.