-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AMYmpsKJs+3agXPEaXgCDsZ4DM6o/kEalmPOxPXMYIkk/kJoUTiWOscDB8h3fSmx KHorXXJLHUoErR619CZl5g== 0000950124-07-002105.txt : 20070410 0000950124-07-002105.hdr.sgml : 20070410 20070410164704 ACCESSION NUMBER: 0000950124-07-002105 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20070409 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Material Modifications to Rights of Security Holders ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070410 DATE AS OF CHANGE: 20070410 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECUMSEH PRODUCTS CO CENTRAL INDEX KEY: 0000096831 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 381093240 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00452 FILM NUMBER: 07759240 BUSINESS ADDRESS: STREET 1: 100 E PATTERSON ST CITY: TECUMSEH STATE: MI ZIP: 49286 BUSINESS PHONE: 5174238411 MAIL ADDRESS: STREET 1: 100 EAST PATTERSON STREET CITY: TECUMSEH STATE: MI ZIP: 49286 8-K 1 k13932e8vk.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): APRIL 9, 2007 TECUMSEH PRODUCTS COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 0-452 38-1093240 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.)
100 EAST PATTERSON STREET TECUMSEH, MICHIGAN 49286 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 423-8411 (NOT APPLICABLE) (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. Amendments to Credit Agreements and Related Agreements On April 9, 2007, we signed amendments to our First Lien and Second Lien Credit Agreements. We had been in default under both credit agreements since March 22, when our Brazilian engine manufacturing subsidiary filed a request for judicial restructuring under Brazilian law. As a result of the amendments, we are no longer in default, and we will be able to continue implementing our business turnaround plan. The principal terms of the amendments are: - The lenders waived the cross default resulting from our Brazilian engine subsidiary's filing for judicial restructuring and extended their deadline for us to provide audited 2006 financial statements to April 15, 2007. - The minimum cumulative adjusted EBITDA levels we are required to achieve (measured from October 1, 2006) through the third and fourth quarters of 2007 were reduced by $10 million and $20 million, respectively. As amended, the required levels (in millions) are:
Quarterly Period Ending First Lien Agreement Second Lien Agreement - ----------------------- -------------------- --------------------- December 31, 2006 ($14.9) ($16.9) March 31, 2007 ($8.0) ($10.0) June 30, 2007 $ 17.0 $ 15.0 September 30, 2007 $ 42.0 $ 40.0 December 31, 2007 $ 62.0 $ 60.0
- The interest rate on our First Lien debt is increased by 0.25% per annum. - We will be required to pay 2.5% per annum in additional cash interest on our Second Lien debt if we fail to engage a new CEO by May 1, 2007 unless the failure is due to specified reasons. - Until we appoint a new CEO, there are caps on the amounts of fees we can incur for financial advisors. - The limitation on our capital expenditures is reduced by $12.7 million for 2007 and $17.7 million for 2008. - There are new limitations on our ability to provide financial support to our Brazilian engine manufacturing facility. - Our Brazilian compressor manufacturing facility is permitted to incur up to $40 million of additional secured debt. - In consideration of the amendments, we paid the First and Second Lien lenders cash fees totaling approximately $1.375 million, plus expenses, and we issued a Class A share purchase warrant to the Second Lien lender. Please see Item 3.02 for more information about the terms of the warrant. We also entered into a registration rights agreement with the Second Lien lender, which is described in more detail below. After giving effect to the amendments, we are currently in compliance with the covenants of both credit agreements. Achieving the level of financial performance that would support our lending arrangements, which is required by the financial covenants, will depend on enhanced operational efficiency through a variety of initiatives, including customer price increases to cover increases in commodity costs, further employee headcount reductions, consolidation of productive capacity, and rationalization of various product platforms. While we are currently moving forward with these actions, there can be no assurance that any of these initiatives will be sufficient if certain risks continue to impede our progress. Those risks include currency fluctuations, weather, and the extent to which we may lose sales in reaction to higher product prices or adverse publicity. In the event that we fail to improve operational performance through these measures, our ability to raise additional funds through debt financing will be limited. We also continue to be concerned about the amount of debt we are carrying in this challenging operating environment and as we seek to improve our company's financial performance. As a result, we are continuing to evaluate the feasibility of asset sales as a means to reduce our total indebtedness and to increase liquidity. For more detailed information about the terms of the amendments, please see the copies filed as exhibits to this report. Registration Rights Agreement On April 9, 2007, as required by the amendment to our Second Lien Credit Agreement described above, we entered into a registration rights agreement with our Second Lien lender, Tricap Partners II L.P. providing for registration under the Securities Act of 1933 of the Class A shares it may purchase under the warrant described in Item 3.02 of this report, as well as the Class A and Class B shares it may purchase on exercise of the options previously granted to it by Herrick Foundation and Herrick family trusts. The agreement provides the Second Lien lender with so-called "piggyback" registration rights and the right to demand registration on a short-form S-3 registration statement. For more detailed information about the terms of the registration rights agreement, please see the copy filed as an exhibit to this report. Agreement Settling Litigation with Herrick Group On April 2, 2007, we signed a Settlement and Release Agreement settling the corporate governance disputes that had been the subject of two pending lawsuits. The agreement was subject to a condition subsequent that was satisfied by execution of the credit agreement amendments described above on April 9, 2007. The parties to the agreement are: Tecumseh Products Company; Herrick Foundation; Todd W. Herrick and Toni Herrick in their capacities as trustees of specified Herrick family trusts; Todd W. Herrick, Kent B. Herrick, and Michael Indenbaum in their capacities as members of the board of trustees of Herrick Foundation; Todd W. Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick in their individual capacities; and Albert A. Koch, Peter Banks, and David M. Risley in their capacities as directors of Tecumseh Products Company. The principal terms of the agreement are: - Board of directors - There will continue to be five directors until we name a new permanent CEO. -2- - Todd W. Herrick will resign from the board immediately and will become "Chairman Emeritus," with the right to attend board meetings and to receive materials distributed to the board, but with no vote. Todd W. Herrick will continue as "Chairman Emeritus" during the term of the settlement agreement, which continues until the earlier of the conclusion of our 2008 annual meeting of shareholders or April 30, 2008. - The board will appoint Kent B. Herrick to fill the vacancy created by Todd W. Herrick's resignation. The board will continue to nominate Kent B. Herrick for re-election to the board during the term of the settlement agreement. - A search committee is to be charged with immediately locating a new director with restructuring experience reasonably acceptable to the independent members of the board and who is not affiliated with AlixPartners. Albert A. Koch will resign from the board by the earliest of: (1) the date this new director is appointed; (2) 60 days after we appoint our new CEO; or (3) July 31, 2007. - When we name a new permanent CEO, the board will be expanded to seven members. The new CEO will become a director and Chairman of the Board. At that time, we also must appoint Steven Lebowski to the board if he qualifies as an "independent director" under Nasdaq rules, and we will continue to nominate Mr. Lebowski for re-election to the board during the term of the settlement agreement. (If Mr. Lebowski does not qualify as an independent director, we will follow a process set forth in the settlement agreement to select and appoint another person selected by Kent B. Herrick who does qualify.) - Management - The search for a new permanent CEO will continue. Appointment of a new CEO must be approved by majority vote of the full five-member board. - James J. Bonsall will continue as President and COO under our existing contract with his employer, AP Services, LLC, while the CEO search is in progress. - Todd W. Herrick will serve as a consultant to the company in a capacity to be determined by our new CEO. He will not receive any compensation but will be entitled to reimbursement for reasonable and documented expenses. - When our new CEO is appointed, he will decide whether or not to rehire Kent B. Herrick and, if so, in what capacity. If Mr. Herrick is rehired, he will receive an agreement to provide him with a lump sum severance payment on termination equal to one year's salary less any salary paid to him from the date he is rehired through the date of his termination. If the new CEO has not rehired Mr. Herrick within three months after his appointment, Mr Herrick will be entitled to a lump sum severance payment equal to one year's salary at the rate in effect when he was terminated from his position with the company on January 19, 2007. - Other matters - The parties will dismiss their pending lawsuits. We and our directors who were sued by Todd W. Herrick and related entities (Messrs. Banks, Koch, and Risley) agreed -3- not to challenge the right of Mr. Herrick and those related entities to vote their shares and agreed that they have the right to vote all of their shares. - We agreed to reimburse Todd W. Herrick and related entities for their reasonable and documented expenses in connection with the lawsuits, the settlement agreement, and other specified matters, up to a maximum of $300,000. - Todd W. Herrick and related entities agreed to exercise their voting rights in a manner consistent with the terms of the agreement. - The various parties release each other and specified related persons from claims in connection with the matters referenced in the agreement. For more detailed information about the terms of the agreement, please see the copy filed as an exhibit to this report. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. On April 9, 2007, in consideration of its entering into the amendment to our Second Lien Credit Agreement described above, we issued a Class A share purchase warrant to the Second Lien lender, Tricap Partners II L.P. Under the warrant, the Second Lien lender has the right to purchase 1,390,944 Class A shares directly from us, at any time during the warrant's five-year term, for a cash purchase price per share equal to 65% of the lowest closing price of the Class A common stock during the one-year period that began March 27, 2007. The warrant permits cashless exercise under a procedure by which the warrant holder could pay the exercise price by giving up some of the shares for which the warrant is being exercised, with those shares valued at the then current market price. If all the shares covered by the warrant were issued, they would constitute 9.4% of the Class A shares then outstanding and 7.0% of our then outstanding total common equity. We expect to use any cash proceeds we receive on exercise of the warrant for general corporate purposes. Our issuance of the warrant was exempt from registration under the Securities Act of 1933 by reason of the exemption provided under Section 4(2) of the Act since it was issued in a transaction not involving any public offering. For more detailed information about the terms of the warrant, please see the copy filed as an exhibit to this report. ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS. Please see Item 3.02 for information about the Class A share purchase warrant we issued to our Second Lien lender. ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. Under the settlement agreement described in Item 1.01 of this report, Todd W. Herrick has agreed to resign from our board of directors immediately, and we have agreed to appoint Kent Herrick to fill the vacancy created by his resignation. The circumstances of Todd Herrick's resignation and Kent B. Herrick's appointment are described in Item 1.01. At the time of this report, we do not expect Kent B. Herrick to be named to any board committees. -4- As a non-employee director, Kent B. Herrick will receive a monthly retainer of $2,500, a $1,500 fee for each board meeting attended, and a $1,200 fee for each committee meeting attended and will be entitled to reimbursement for travel expenses. He also will be eligible to receive phantom share awards under our Director Retention Phantom Share Plan, under which each non-employee director receives an annual award denominated in phantom Class A shares. The minimum award is $5,000, and the maximum is 100% of the director's annual retainer fee. The board of directors makes the awards at its organizational meeting following each annual meeting of shareholders on the basis of our actual return on equity for the preceding year as compared to a target established for that year. In addition, Mr. Herrick will be eligible to participate in our Outside Directors' Voluntary Deferred Compensation Plan, under which our non-employee directors can elect to defer receipt of a portion of their retainers and meeting fees. ITEM 7.01 REGULATION FD DISCLOSURE. On April 10, 2007, we issued a press release about the events described in this report. We are furnishing a copy of the press release as an exhibit. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. The following exhibits are filed or furnished with this report:
Exhibit No. Description - ----------- ----------- 4.1 Amendment No. 5 dated April 9, 2007 to First Lien Credit Agreement dated November 13, 2006 by and among Tecumseh Products Company and certain Lenders and Issuers listed therein and Citicorp USA, Inc. as Administrative Agent and Collateral Agent (Note: Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.) 4.2 Amendment No. 2 dated April 9, 2007 to Amended and Restated Second Lien Credit Agreement dated November 13, 2006 among Tecumseh Products Company, Tricap Partners II L.P. and Citicorp USA, Inc. (Note: Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.) 10.1 Warrant to Purchase Class A Common Stock of Tecumseh Products Company issued to Tricap Partners II L.P. on April 9, 2007 10.2 Registration Rights Agreement dated as of April 9, 2007 between Tecumseh Products Company and Tricap Partners II L.P. 10.3 Settlement and Release Agreement dated as of April 2, 2007 among Tecumseh Products Company; Herrick Foundation; Todd W. Herrick and Toni Herrick, each in their capacity as trustee for specified Herrick family trusts; Todd W. Herrick, Kent B. Herrick, and Michael Indenbaum, each in their capacity as members of the Board of Trustees of Herrick Foundation; Todd W. Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick, each in their individual capacities; and Albert A. Koch, Peter Banks, and David M. Risley, each in their capacity as directors of Tecumseh Products Company 99.1 Press release dated April 10, 2007
-5- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TECUMSEH PRODUCTS COMPANY Date: April 10, 2007 By /s/ James S. Nicholson ------------------------------------- James S. Nicholson Vice President, Treasurer and Chief Financial Officer NOTE: The information in Item 7.01 of this report and the related exhibit (Exhibit 99.1) is not to be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section unless the registrant specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act. -6- EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 4.1 Amendment No. 5 dated April 9, 2007 to First Lien Credit Agreement dated November 13, 2006 by and among Tecumseh Products Company and certain Lenders and Issuers listed therein and Citicorp USA, Inc. as Administrative Agent and Collateral Agent (Note: Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.) 4.2 Amendment No. 2 dated April 9, 2007 to Amended and Restated Second Lien Credit Agreement dated November 13, 2006 among Tecumseh Products Company, Tricap Partners II L.P. and Citicorp USA, Inc. (Note: Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.) 10.1 Warrant to Purchase Class A Common Stock of Tecumseh Products Company issued to Tricap Partners II L.P. on April 9, 2007 10.2 Registration Rights Agreement dated as of April 9, 2007 between Tecumseh Products Company and Tricap Partners II L.P. 10.3 Settlement and Release Agreement dated as of April 2, 2007 among Tecumseh Products Company; Herrick Foundation; Todd W. Herrick and Toni Herrick, each in their capacity as trustee for specified Herrick family trusts; Todd W. Herrick, Kent B. Herrick, and Michael Indenbaum, each in their capacity as members of the Board of Trustees of Herrick Foundation; Todd W. Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick, each in their individual capacities; and Albert A. Koch, Peter Banks, and David M. Risley, each in their capacity as directors of Tecumseh Products Company 99.1 Press release dated April 10, 2007
-7- EX-4.1 2 k13932exv4w1.txt AMENDMENT TO FIRST LIEN CREDIT AGREEMENT EXHIBIT 4.1 AMENDMENT NO. 5 TO FIRST LIEN CREDIT AGREEMENT AMENDMENT NO. 5 (this "Amendment"), dated as of April 9, 2007, 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 (as the same has heretofore been amended, as amended hereby, and as it 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 Brazilian court with jurisdiction over the Restructuring Agreement and the TMT Brazilian Out-of-Court Restructuring has declined to homologate the Restructuring Agreement under Brazilian law; and WHEREAS, the Borrower has informed the Administrative Agent that (A) a TMT Enforcement Remedy has occurred and is continuing and (B) on March 22, 2007, TMT commenced a bankruptcy proceeding in Brazil, which in the case of each of clause (A) and (B) above constitutes an Event of Default under Section 9.1(e) and Section 9.1(f) of the Credit Agreement, respectively (collectively, the "Existing Defaults"); and WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders constituting the Requisite Lenders waive the Existing Defaults and agree to certain amendments to the Credit Agreement; and WHEREAS, the Borrower has requested, and the Administrative Agent and each Lender signatory to an Acknowledgement and Consent has agreed to certain waivers and certain amendments of the Credit Agreement on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and provisions hereinafter contained, the parties hereto hereby agree as follows: SECTION 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. SECTION 2 AMENDMENT TO THE CREDIT AGREEMENT. As of the Fifth 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 adding the following defined terms in alphabetical order: "Amendment No. 5 to the Credit Agreement" means that certain Amendment No. 5 to First Lien Credit Agreement, dated as of April 9, 2007, entered into by the Borrower, the Administrative Agent and the Lenders party thereto. "Cross-Over Vendors" means those certain vendors to TMT that are also vendors to (i) the Borrower's U.S. engine business or (ii) TdB. "Effective Date" means April 9 2007. "Operations Advisor" means (i) Alix Partners or AP Services, LLC or (ii) a nationally recognized financial operations consulting or management firm acceptable to the Administrative Agent. "Restructuring Payments" means all amounts advanced, or directly incurred and paid by the Borrower or any of its Subsidiaries (other than TMT) in connection with the TMT Restructuring, including specifically (i) the reasonable fees and costs of Brazilian restructuring counsel and financial advisors for TMT and (ii) payments of liabilities of TMT, provided that in all cases, (1) no Restructuring Payments are made prior to the date that they are legally required to be paid; (2) funds of TMT are not otherwise available to make such Restructuring Payments; (3) Restructuring Payments are either (A) required to be made in order to avoid personal liability of TMT management or liability of TdB for claims against TMT for such amounts, or (B) otherwise reasonably necessary for the orderly administration of the TMT Restructuring; (4) such payments or advances are structured to the fullest extent possible to permit recovery thereof by Borrower and its Subsidiaries as priority claims in the TMT Restructuring; and (5) the aggregate amount of all Restructuring Payments shall not exceed $6,500,000. "TdB" means Tecumseh do Brasil Ltda. "TMT Restructuring" means and includes any or all of: (i) TMT's commencement of a voluntary case under the bankruptcy laws or equivalents thereof (as now or hereafter in effect) of Brazil, (ii) TMT's filing of a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (iii) TMT's consent to, or failure of TMT to contest, any petition filed against it in an involuntary case under such bankruptcy laws or other laws referred to in the immediately preceding clause (ii), (iv) TMT's application for or consent to, or failure to contest, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) TMT's admission in writing of its inability to pay its debts as they become due, and (vi) TMT's making of a general assignment for the benefit of creditors. "TPIL" means Tecumseh Power International Limited, a company incorporated in the United Kingdom. (b) The grid appearing in the definition of "Applicable Margin" is hereby deleted in its entirety and replaced with the following:
QUARTERLY AVAILABLE CREDIT BASE RATE LOANS EURODOLLAR RATE LOANS - -------------------------- --------------- --------------------- Greater than or equal to $150,000,000 1.00% 2.00% Less than $150,000,000 and greater than or equal to $50,000,000 1.25% 2.25% Less than $50,000,000 1.50% 2.50%
The Borrower hereby acknowledges that the Quarterly Available Credit on the last day of the Fiscal Quarter ending March 31, 2007 was less than $50,000,000 and that the Applicable Margin for the Fiscal Quarter commencing on April 1, 2007 shall be 2.50% for Eurodollar Rate Loans and 1.50% for Base Rate Loans. (c) The definition of "EBITDA" in Section 1.1 of the Credit Agreement is hereby amended as follows: (i) by deleting clause (b)(ix)(y) in its entirety and inserting the following in lieu thereof: (y) (a) BBK, Ltd. and AP Services, LLC, financial advisors to the Loan Parties and Korn/Ferry International, in connection with certain financial and management search services provided to the Loan Parties, (b) financial advisors to the Lenders, and (c) Wachovia, Felsberg E Associados, Rothschild Inc., Miller, Canfield, Paddock and Stone, P.L.C., Kirkland & Ellis LLP, expenses of counsel to the Administrative Agent, and Squire, Sanders & Dempsey L.L.P., in each case under this clause (y)(c) for work performed in March and April 2007 but prior to the Effective Date, and (ii) by deleting the proviso to clause (b)(ix) which reads "provided, however, all such fees and costs payable under clauses (x), (y) and (z) do not exceed $2,400,000 per Fiscal Quarter" and inserting in lieu thereof "provided, however, all such fees and costs payable under clauses (x), (y) and (z) do not exceed (i) $6,000,000 in the Fiscal Quarter ending March 31, 2007, (ii) $4,500,000 in the Fiscal Quarter ending June 30, 2007, and (iii) $2,400,000 per Fiscal Quarter for each Fiscal Quarter thereafter"; (d) Clause (b) in the definition of "Change of Control" is hereby deleted in its entirety and replaced with the following in lieu thereof: or (b) during any period of twelve consecutive calendar months, individuals who, as of the Effective Date, constituted the board of directors of the Borrower (together with any new directors whose election by the board of directors of the Borrower or whose nomination for election by the stockholders of the Borrower was approved by a vote of at least two-thirds of the Independent Directors (as such term is defined in Marketplace Rule 4200(a)(15) of The NASDAQ Stock Market LLC ("Nasdaq"), or a comparable successor rule of Nasdaq, whether or not the securities of Borrower are listed on Nasdaq) then still in office who either were Independent Directors at the beginning of such period or whose elections or nomination for election was previously so approved); cease for any reason other than death or disability to constitute a majority of the directors then in office. (e) The following existing definitions are hereby deleted in their entirety from the Credit Agreement: "TMT Guaranty Agreement", "TMT Guaranty Conditions" and "TMT Guaranty Obligations". (f) Article V (Financial Covenants) of the Credit Agreement is hereby amended as follows: (i) 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 (and in the case of negative numbers, not worse than) the amount set forth opposite such period:
PERIOD MINIMUM EBITDA ------ -------------- October 1, 2006 through December 31, 2006 ($14,900,000) October 1, 2006 through March 31, 2007 ($8,000,000) October 1, 2006 through June 30, 2007 $ 17,000,000 October 1, 2006 through September 30, 2007 $ 42,000,000 October 1, 2006 through December 31, 2007 $ 62,000,000
(ii) Section 5.3 of the Credit Agreement is hereby amended in its entirety as follows: Section 5.3 Capital Expenditures (a) The Borrower shall not make or incur, or permit to be made or incurred, Capital Expenditures (it being understood that any Capital Expenditures financed solely through the proceeds obtained from property loss insurance shall not be covered under this Section 5.3), during the four Fiscal Quarters ending on the last day of each Fiscal Quarter set forth below to be, in the aggregate, in excess of the maximum amount set forth opposite such Fiscal Quarter:
Fiscal Quarter Maximum Capital Expenditures -------------- ---------------------------- March 31, 2007 $52,100,000 June 30, 2007 $49,300,000 September 30, 2007 $46,500,000 December 31, 2007 $40,000,000 March 31, 2008 $43,800,000 June 30, 2008 $47,500,000 September 30, 2008 $51,300,000 December 31, 2008 $55,000,000 March 31, 2009 $58,800,000 June 30, 2009 $62,500,000 September 30, 2009 $66,300,000
(b) For purposes of Section 5.3(a), the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new plant to replace the Hyderabad facility covered by this Section 5.3 and counted toward the limits established in Section 5.3(a) above shall be equal to the amount calculated as follows: X - Y = CCE Where X is the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new Hyderabad Indian plant; Y is the Net Cash Proceeds from the sale of the current Hyderabad Indian plant and realty; and CCE is the amount of Capital Expenditures charged against the amounts set forth opposite the applicable period in the chart in Section 5.3(a) above; provided, however, that (1) in no event shall the Capital Expenditures amount set forth above for any period be increased in the event CCE is a negative number and (2) in no event shall the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new Hyderabad Indian plant exceed $25,000,000 and (3) all such Capital Expenditures shall be funded solely by financial institutions located in India. (c) In the event that the Borrower completes the sale or disposition of one or more Subject Units, the Borrower shall promptly provide Lender with a schedule of the budgeted Capital Expenditures for such Subject Units for the periods following the date of consummation of such sale, and the amounts set forth for such periods in clause (a) above shall be, subject to the prior review by and approval of the Administrative Agent, correspondingly reduced. (g) Article VII (Affirmative Covenants) of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory paragraph therein and inserting the following in lieu thereof: The Borrower agrees with the Lenders, the Issuers and the Administrative Agent to each of the following (except that the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy, (y) TMT so long as there is a pending TMT Restructuring or (z) TPIL so long as any Loan Party is pursuing the discontinuance of the operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or from the proceeds of the sale or liquidation of TPIL's assets), as long as any Obligation remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing: (ii) by deleting the existing Section 7.19 and inserting the following in lieu thereof: Section 7.19 Certain Reporting On or before the Effective Date, the Borrower's President and Chief Operating Officer shall deliver to the Administrative Agent a letter with regard to the Borrower's efforts to address certain operational items. During the period beginning on the Effective Date and ending on the date on which a new Chief Executive Officer assumes his or her duties with the Borrower, the Borrower shall deliver to the Administrative Agent copies of all reports (other than any portions thereof containing attorney-client or other privileged information) regarding the items set forth in the above-referenced letter prepared by outside professionals engaged in connection therewith or by management of the Borrower or its Subsidiaries within 3 Business Days of delivery of the same to the Borrower's board of directors. (iii) by inserting the following new Section 7.20 immediately after the existing Section 7.19 as follows: Section 7.20 Retention of the Operations Advisor The Borrower shall retain the services of an Operations Advisor, at all times after the Effective Date, and through the date on which a new Chief Executive Officer of the Borrower has been appointed (and such Chief Executive Officer has commenced his/her duties) and for so long thereafter as the Chief Executive Officer shall determine in good faith to be necessary or advisable. (h) Article VIII (Negative Covenants) of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory paragraph therein and inserting the following in lieu thereof: The Borrower agrees with the Lenders, the Issuers and the Administrative Agent to each of the following (except that (A) the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy or (y) TPIL so long as any Loan Party is pursuing the discontinuance of the operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or from the proceeds of the sale or liquidation of TPIL's assets and (z) TMT so long as there is a pending TMT Restructuring, provided, however, that (B) neither the Borrower nor any of its Subsidiaries shall provide any financial, credit or other support to TMT pursuant to any of the exceptions to the restrictions imposed on the Borrower and its Subsidiaries under Article VIII (Negative Covenants), except as expressly provided in Section 8.20), as long as any Obligation remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing: (ii) by striking in its entirety clause (m) of Section 8.1 and inserting the following in lieu thereof: (m) Indebtedness (not otherwise permitted by this Section 8.1) incurred by TdB at any time after the Effective Date; provided, however, such Indebtedness shall not exceed an aggregate amount of $40,000,000 and, provided, further, that not less than $25,000,000 of such Indebtedness shall be utilized to refinance the TdB BNDES facility that matured in March 2007. (iii) by (A) striking the word "and" immediately following the semicolon in clause (g) of Section 8.2, (B) striking the period at the end of clause (h) of Section 8.2 and inserting "; and" in lieu thereof, and (c) inserting a new clause (i) to read as follows: (i) Liens on the assets of Tecumseh do Brazil Ltda. securing additional Indebtedness of Tecumseh do Brazil permitted under Section 8.1(n). (iv) by inserting the following new Section 8.20 immediately after the existing Section 8.19 as follows: SECTION 8.20 RESTRICTIONS ADVANCES TO TMT Neither the Borrower nor any of its Subsidiaries shall (i) in respect of TMT, incur or suffer to exist any Indebtedness (other than Indebtedness existing immediately prior to the Effective Date), (ii) make any additional Investment in TMT or transfer of assets to TMT (other than payments made (x) to Cross-Over Vendors described in clause (i) of such definition so long as such payments do not exceed in the aggregate $2,500,000, (y) to Cross-Over Venders described in clause (ii) of such definition so long as such payments do not exceed in the aggregate $1,000,000, and (z) for purchases of inventory and equipment by the Borrower or any of its Subsidiaries from TMT so long as such purchases are made for Fair Market Value and on a basis no less favorable to the Borrower or, as the case may be, such Subsidiary, as would be obtained in a comparable arm's length transaction with a Person that is not an Affiliate of TMT, (iii) pay any Indebtedness or other obligations of TMT, or (iv) otherwise provide any additional funding, financing or credit to TMT; provided, however, that the foregoing prohibition shall not limit the ability of the Borrower or any of its Subsidiaries to make the Restructuring Payments. (i) Article IX of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory clause thereof and inserting the following in lieu thereof: Each of the following events shall be an Event of Default (except that the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy, (y) TPIL so long as any Loan Party is pursuing the discontinuance of the operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or from the proceeds of the sale or liquidation of TPIL's assets or (z) TMT so long as a TMT Restructuring is pending): (ii) by deleting in clause 9.1(d)(i) the word "or" immediately before each of "Section 7.14 (Real Property)" and "Section 7.16 (Transfer and Termination of Title IV Plans)" and inserting immediately after "Section 7.16 (Transfer and Termination of Title IV Plans)" and prior to "or Article VIII (Negative Covenants)" the following: or Section 7.20 (Retention of the Operations Advisor) (j) Annex A to the definition of Disposition Adjustment is amended by deleting the charts on the existing Annex A thereto and inserting the charts on attached Annex A in lieu thereof. SECTION 3 WAIVER AND CONSENT. (a) As of the Fifth Amendment Effective Date, the Administrative Agent and each Lender signatory to an Acknowledgement and Consent hereby waives the Existing Defaults. (b) The Administrative Agent and each Lender signatory to an Acknowledgement and Consent hereby waive any default interest chargeable on the Loans pursuant to Section 2.10 (c) solely in respect to the Existing Defaults. (c) The Administrative Agent and each Lender signatory to an Acknowledgement and Consent hereby consent to the Borrower's request for a one time extension of the delivery date of the annual report for the Fiscal Year ended December 31, 2006, due within 90 days after the end of such Fiscal Year pursuant to Section 6.1(c) of the Credit Agreement, to April 15, 2007. SECTION 4 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall become effective as of March 31, 2007 on the date (the "Fifth Amendment Effective Date") when the Administrative Agent shall have received all of the following: (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 Acknowledgement and Consent, in the form attached hereto as Exhibit A, duly executed by each of the Requisite Lenders; (iii) the Consent of Guarantors, in the form attached hereto as Exhibit B, executed by each Guarantor; (iv) Amendment No. 2 to the Second Lien Credit Agreement, executed by the Borrower, the Second Lien Agent and the Lenders party thereto; (v) the Fee Letter, dated as of the date hereof, executed by the Borrower; and (vi) such additional documentation as the Administrative Agent or the Requisite Lenders may reasonably require. (b) Payment of Fees, Costs and Expenses. The Administrative Agent shall have received payment of all fees, costs and expenses as required by Sections 9 and 10 hereof, 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. (c) Representations and Warranties. Each of the representations and warranties contained in Section 5 below shall be true and correct. (d) 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. SECTION 5 REPRESENTATIONS AND WARRANTIES. On and as of the date hereof, and as of the Fifth 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. SECTION 6 RELEASE. Each of the Borrower and each Guarantor (A) acknowledges and agrees that it has no defenses, counterclaim or offset to the amounts outstanding under the Credit Agreement or the other Loan Documents and that it has no actual or potential claim or cause of action against the Administrative Agent or any Lender with respect to any matters through the Effective Date, and (B) hereby waives and agrees not to assert any claims or causes of action against the Administrative Agent, any Lender or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, whether known or unknown, matured or contingent, including, without limitation, for special, indirect, consequential or punitive damages, arising by virtue of any actions taken, actions omitted, or the occurrence of any event prior to the Effective Date, arising out of or relating to, or in connection with, this Amendment No. 5, the Credit Agreement, the use of the proceeds of any Loan or Letters of Credit, the other Loan Documents or any of the transactions entered into in connection therewith or contemplated thereby. SECTION 7 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, waivers 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. SECTION 8 LOAN DOCUMENTS. This Amendment is deemed to be a "Loan Document" for the purposes of the Credit Agreement. SECTION 9 FEES. As consideration for the execution of this Amendment, the Borrower agrees to pay on the Fifth Amendment Effective Date 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 April 9, 2007, a fee equal to 0.25% of such Lender's Revolving Credit Commitment then in effect. SECTION 10 COSTS AND EXPENSES. The Borrower agrees to pay on demand on the Fifth Amendment Effective Date 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. SECTION 11 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 Fifth 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. (e) Delivery of an executed signature page of this Amendment by facsimile or by email in portable document format (.pdf) shall be effective as delivery of an original manually executed counterpart hereof. [signature pages follow] IN WITNESS WHEREOF, the undersigned parties have executed this Amendment No. 5 to the Credit Agreement to be effective for all purposes as of the Fifth 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. 5 TO FIRST LIEN CREDIT AGREEMENT] Administrative Agent CITICORP USA, INC., as Administrative Agent, Collateral Agent, Swing Loan Lender, Issuer and as a Lender By: /s/ Sebastien Delasnerie ------------------------------------ Name: Sebastien Delasnerie ---------------------------------- Title: Vice President --------------------------------- [SIGNATURE PAGE TO AMENDMENT NO. 5 TO FIRST LIEN CREDIT AGREEMENT] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, North Fork Business Capital Corporation ---------------------------------------- [Name of Lender] By: /s/ Ari Kaplan ------------------------------------ Name: Ari Kaplan ---------------------------------- Title: Vice President --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, Comerica Bank ---------------------------------------- [Name of Lender] By: /s/ Blake Arnett ------------------------------------ Name: Blake Arnett ---------------------------------- Title: Assistant Vice President --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, Wells Fargo Foothill, LLC ---------------------------------------- [Name of Lender] By: /s/ Juan Barrera ------------------------------------ Name: Juan Barrera ---------------------------------- Title: Vice President --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, LaSalle Bank Midwest, N.A. ---------------------------------------- [Name of Lender] By: /s/ Steven Fenton ------------------------------------ Name: Steven Fenton ---------------------------------- Title: Authorized Signatory --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, JPMorgan Chase Bank N.A. ---------------------------------------- [Name of Lender] By: /s/ Beverly J. Gray ------------------------------------ Name: Beverly J. Gray ---------------------------------- Title: Regional Portfolio Manager --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, Ableco Finance LLC ---------------------------------------- [Name of Lender] By: /s/ Kevin Genda ------------------------------------ Name: Kevin Genda ---------------------------------- Title: Senior Vice President --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT A 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 Acknowledgment and Consent shall have the meanings ascribed to such terms in the Credit Agreement. The Borrower has requested that the Lenders consent to the terms and provisions of Amendment No. 5 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 and provisions of the Amendment and authorizes the Administrative Agent to execute and deliver such Amendment on its behalf. Very truly yours, Bank of America, N.A. ---------------------------------------- [Name of Lender] By: /s/ Walter T. Shellman ------------------------------------ Name: Walter T. Shellman ---------------------------------- Title: Senior Vice President --------------------------------- Dated as of April 9, 2007 [EXHIBIT A] EXHIBIT B CONSENT OF GUARANTORS Dated as of April 9, 2007 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] [EXHIBIT B] IN WITNESS WHEREOF, the parties hereto have consented to this Amendment No. 5, 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: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President and Treasurer EUROMOTOR, INC. as U.S. Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President HAYTON PROPERTY COMPANY, LLC TECUMSEH DO BRASIL USA, LLC as U.S. Guarantors By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: President [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 5 TO FIRST LIEN CREDIT AGREEMENT] TECUMSEH PRODUCTS OF CANADA LIMITED, as Canadian Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson ---------------------------------- Title: Vice President and Treasurer --------------------------------- FASCO MOTORS COMPANY, as Canadian Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson ---------------------------------- Title: Vice President --------------------------------- [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 5 TO FIRST LIEN CREDIT AGREEMENT] ANNEX A * Indicates information omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission ***:
CUMULATIVE EBITDA CUMULATIVE SALES COVENANT ADJUSTMENT PROJECTION CUMULATIVE 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 * * 10/1/06-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
**:
CUMULATIVE EBITDA CUMULATIVE SALES 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 * * 10/1/06-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[ANNEX A] **:
CUMULATIVE EBITDA CUMULATIVE SALES 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 * * 10/1/06-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[ANNEX A] EX-4.2 3 k13932exv4w2.txt AMENDMENT TO AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT EXHIBIT 4.2 AMENDMENT NO. 2 TO AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT Amendment No. 2 (this "Amendment"), dated as of April 9, 2007, among Tecumseh Products Company, a Michigan corporation (the "Borrower"), Tricap Partners II L.P., as Lender (the "Lender"), Tricap Partners II GP L.P. as Administrative Agent (the "Administrative Agent") and Citicorp USA, Inc., as Collateral Agent for the Secured Parties (in such capacity, the "Collateral Agent"), amends certain provisions of the Amended And Restated Second Lien Credit Agreement, dated as of November 13, 2006 (as the same has heretofore been amended, as amended hereby, and as it may be further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lender, the Administrative Agent and the Collateral Agent. WITNESSETH: WHEREAS, the Borrower has informed the Lender that (A) a TMT Enforcement Remedy has occurred and is continuing and (B) on March 22, 2007, TMT commenced a bankruptcy proceeding in Brazil, which in the case of each of clause (A) and (B) above constitutes an Event of Default under Section 9.1(e) and Section 9.1(f) of the Credit Agreement, respectively (collectively, the "Existing Defaults"); and WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders constituting the Requisite Lenders waive the Existing Defaults; and WHEREAS, the Borrower has informed the Lender of its desire to enter into certain agreements or take certain action in connection with TMT and the TMT Indebtedness; and WHEREAS, the Lender and the Administrative Agent have agreed, subject to the conditions herein provided, to waive the Existing Defaults; and WHEREAS, the Borrower has requested, and the Lender, the Administrative Agent and the Collateral Agent have agreed, subject to the conditions herein provided, to amend the Credit Agreement as set forth below; 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 adding the following defined terms in alphabetical order: "Additional Cash Rate" means: 2.5 % per annum. "Amendment No. 2 to the Credit Agreement" means that certain Amendment No. 2 to Amended and Restated Second Lien Credit Agreement, dated as of April 9, 2007, entered into by the Borrower, the Lender, the Administrative Agent, and the Collateral Agent. "CEO" means the new chief executive officer of the Borrower. "Cross-Over Vendors" means those certain vendors of TMT that are also vendors to (i) the Borrower's U.S. engine business or (ii) TdB. "Effective Date" means April 9, 2007. "Operations Advisor" means (i) AlixPartners or AP Services, LLC or (ii) a nationally recognized financial operations consulting or management firm acceptable to the Administrative Agent. "Professional Fees" means all fees, costs and expenses of each of AP Services, LLC (other than those payable in consideration of the services of Jim Bonsall as interim chief operating officer), BBK, Ltd., Rothschild (other than transaction based fees, when and as paid, payable upon completion of the sale of assets for which it was engaged), Galeazzi, Brazilian consultant engaged in connection with TdB financing, and other material financial and investment banking service providers. Borrower has previously delivered to Lender copies of the engagement letters for all material financial and investment banking service providers engaged by the Borrower or its Subsidiaries as of the date hereof, together with a description of the terms of their engagements. "Restructuring Payments" means all amounts advanced, or directly incurred and paid by the Borrower or any of its Subsidiaries (other than TMT) in connection with the TMT Restructuring, including specifically (i) the reasonable fees and costs of Brazilian restructuring counsel and financial advisors for TMT and (ii) payments of liabilities of TMT, provided that (1) no Restructuring Payments are made prior to the date that they are legally required to be paid; (2) funds of TMT are not otherwise available to make such Restructuring Payments; (3) Restructuring Payments are either (A) required to be made in order to avoid personal liability of TMT management or liability of TdB for claims against TMT, or (B) otherwise reasonably necessary for the orderly administration of the TMT Restructuring; (4) such payments or advances are structured to the fullest extent possible to permit recovery thereof by Borrower and its Subsidiaries as priority claims in the TMT Restructuring; and (5) the aggregate amount of all Restructuring Payments shall not exceed $6,500,000. "Settlement Agreement" means that certain Settlement and Release Agreement, dated as of April 2, 2007, entered into by the Borrower, the Herrick Entities (as defined therein) and the Defendant Directors (as defined therein) attached hereto as Exhibit C. "TdB" means Tecumseh do Brasil Ltda. "TMT Restructuring" means and includes any or all of: (a)(i) TMT's commencement of a voluntary case under the bankruptcy laws or equivalents thereof (as now or hereafter in effect) of Brazil, (ii) TMT's filing of a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (iii) TMT's consent to, or failure of TMT to contest, any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) TMT's application for or consent to, or failure to contest, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) TMT's admission in writing of its inability to pay its debts as they become due, and (vi) TMT's making of a general assignment for the benefit of creditors. "TPIL" means Tecumseh Power International Limited, a company incorporated under the laws of the United Kingdom "Warrants" means warrants in substantially the form attached hereto as Exhibit A to purchase a number of shares of Class A Common Stock equal to 7% of the fully diluted Common Stock of Borrower, at a per share price equal to 65% of the lowest daily closing price of the Class A Common Stock for the period commencing March 27, 2007 and ending twelve months following the Second Amendment Effective Date, which warrants shall expire unless exercised on or before the fifth anniversary of the Second Amendment Effective Date. (b) Clause (b) in the definition of "Change of Control" is hereby deleted in its entirety and replaced with the following in lieu thereof: or (b) during any period of twelve consecutive calendar months, individuals who, as of the Effective Date, constituted the board of directors of the Borrower (together with any new directors whose election by the board of directors of the Borrower or whose nomination for election by the stockholders of the Borrower was approved by a vote of at least two-thirds of the Independent Directors (as such term is defined in Marketplace Rule 4200(a)(15) of The NASDAQ Stock Market LLC ("Nasdaq"), or a comparable successor rule of Nasdaq, whether or not the securities of Borrower are listed on Nasdaq) then still in office who either were Independent Directors at the beginning of such period or whose elections or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office. (c) The definition of "EBITDA" in Section 1.1 of the Credit Agreement is hereby amended as follows: (i) by deleting clause (b)(ix)(y) in its entirety and inserting the following in lieu thereof: (y)(a) BBK, Ltd. and AP Services, LLC, financial advisors to the Loan Parties and Korn/Ferry International, in connection with certain financial and management search services provided to the Loan Parties, (b) financial advisors to the First Lien Lenders, and (c) Wachovia, Felsberg E Associados, Rothschild Inc., Miller, Canfield, Paddock and Stone, P.L.C., expenses of counsel to the First Lien Lenders and First Lien Administrative Agent, Kirkland & Ellis LLP, and Squire, Sanders & Dempsey L.L.P., in each case under this clause (y)(c) for work performed in March and April 2007 but prior to the Effective Date and (ii) by deleting the proviso to clause (b)(ix) which reads "provided, however, all such fees and costs payable under clauses (x), (y) and (z) do not exceed $2,400,000 per Fiscal Quarter" and inserting in lieu thereof "provided, however, all such fees and costs payable under clauses (x), (y) and (z) do not exceed (i) $6,000,000 in the Fiscal Quarter ending March 31, 2007, (ii) $4,500,000 in the Fiscal Quarter ending June 30, 2007, and (iii) $2,400,000 per Fiscal Quarter for each Fiscal Quarter thereafter"; (d) The following existing definitions are hereby deleted in their entirety from the Credit Agreement: "TMT Guaranty Agreement" and "TMT Guaranty Conditions". (e) Article II Section 2.7(e) is hereby amended by deleting the existing Section 2.7(e) in its entirety and inserting the following in lieu thereof: (e) Additional Interest; Payments. (i) If Borrower shall not have disposed of its Engine and Powertrain Products Segment (as reported on the Financial Statements) on or before December 31, 2007, additional PIK interest shall accrue on the Loan at the Additional PIK Rate from and after January 1, 2008. (ii) If the Borrower shall not have engaged and have in place the CEO on or before May 1, 2007, additional cash interest shall accrue on the Loan at the Additional Cash Rate during the period beginning on May 1, 2007 and ending on that date on which the CEO assumes his duties with the Borrower, provided, however, that no such cash interest shall accrue if the failure to meet such deadline is as a result of (x) the inability of an engaged candidate to undertake his duties by such date due to a personal emergency on the part of the candidate or (y) the inability to reach agreement with a candidate on the terms of employment despite the Borrowers best commercially reasonable efforts to do so. (iii) Interest (a) accrued at the Additional PIK Rate under this clause (e) will be added to the principal amount outstanding under the Loan on the last day of each calendar month and (b) accrued at the Additional Cash Rate shall be payable in cash on the last day of each calendar month. (f) Article V (Financial Covenants) of the Credit Agreement is hereby amended as follows: (i) Section 5.2 of the Credit Agreement is hereby amended as follows: (1) by deleting the number "$50,000,000" set forth opposite September 30, 2007 in the table under the heading "Minimum Cumulative EBITDA" and inserting "$40,000,000" in lieu thereof; and (2) by deleting the number "$80,000,000" set forth opposite December 31, 2007 in the table under the heading "Minimum EBITDA and inserting "$60,000,000" in lieu thereof (ii) Section 5.3 of the Credit Agreement is hereby amended in its entirety as follows: Section 5.3 Capital Expenditures (a) The Borrower shall not make or incur, or permit to be made or incurred, Capital Expenditures (it being understood that any Capital Expenditures financed solely through the proceeds obtained from property loss insurance shall not be covered under this Section 5.3), during the four Fiscal Quarters ending on the last day of each Fiscal Quarter set forth below to be, in the aggregate, in excess of the maximum amount set forth opposite such Fiscal Quarter:
FISCAL QUARTER MAXIMUM CAPITAL EXPENDITURES -------------- ---------------------------- March 31, 2007 $52,100,000 June 30, 2007 $49,300,000 September 30, 2007 $46,500,000 December 31, 2007 $40,000,000 March 31, 2008 $43,800,000 June 30, 2008 $47,500,000 September 30, 2008 $51,300,000 December 31, 2008 $55,000,000 March 31, 2009 $58,800,000
June 30, 2009 $62,500,000 September 30, 2009 $66,300,000
(b) For purposes of Section 5.3(a), the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new plant to replace the Hyderabad facility covered by this Section 5.3 and counted toward the limits established in Section 5.3(a) above shall be equal to the amount calculated as follows: X - Y = CCE Where X is the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new Hyderabad Indian plant; Y is the Net Cash Proceeds from the sale of the current Hyderabad Indian plant and realty; and CCE is the amount of Capital Expenditures charged against the amounts set forth opposite the applicable period in the chart in Section 5.3(a) above; provided, however, that (1) in no event shall the Capital Expenditures amount set forth above for any period be increased in the event CCE is a negative number and (2) in no event shall the aggregate Capital Expenditures in connection with the acquisition, construction and startup of the new Hyderabad Indian plant exceed $25,000,000 and (3) all such Capital Expenditures shall be funded solely by financial institutions located in India. (c) In the event that the Borrower completes the sale or disposition of one or more Subject Units, the Borrower shall promptly provide Lender with a schedule of the budgeted Capital Expenditures for such Subject Units for the periods following the date of consummation of such sale, and the amounts set forth for such periods in clause (a) above shall be, subject to the prior review by and approval of the Administrative Agent, correspondingly reduced (g) by inserting a new Section 5.4 immediately after the existing Section 5.3 to read as follow: 5.4 Professional Fees For each Fiscal Quarter during the period beginning on the Second Amendment Effective Date and ending on that date on which the CEO assumes his or her duties with the Borrower, neither the Borrower nor its Subsidiaries, on a consolidated basis, shall make or incur, or permit to be made or incurred, Professional Fees during each Fiscal Quarter set forth below, in excess of the maximum amount set forth opposite such Fiscal Quarter. Notwithstanding the introductory paragraph to this Article V, any amendments to or waivers of the provisions of this Section 5.4 shall not require the consent of the Requisite Lenders but only of the Administrative Agent.
FISCAL QUARTER ENDING MAXIMUM PROFESSIONAL FEES - --------------------- ------------------------- June 30, 2007 $7,431,000 September 30, 2007 $3,160,000 December 31, 2007 $1,683,000
(h) Article VII (Affirmative Covenants) of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory paragraph therein and inserting the following in lieu thereof: The Borrower agrees with the Lenders and the Administrative Agent to each of the following (except that the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy, (y) TMT so long as there is a TMT Restructuring or (z) TPIL so long as any Loan Party is pursuing the discontinuance of operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or funds from the proceeds of the sale or liquidation of TPIL's assets), as long as any Obligation remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing: (ii) by inserting the following immediately after the term "Borrower" and immediately preceding the period in Section 7.14(a) , it being understood that the Borrower shall not engage a new CEO unless such person shall have been recommended to the Borrower's board of directors by a majority of the membership of the Advisory Board (iii) by deleting in its entirety Section 7.14(b) and inserting the following in lieu thereof: (b) Concurrently with the Borrower's engagement of the CEO, any person holding such position shall resign, or the Borrower's board of directors shall remove such person, from the position of chief executive officer. (iv) by inserting a new section 7.14(c) immediately after the existing Section 7.14(b) to read as follows: (c) At all times prior to the engagement of a new CEO, the Borrower shall maintain an interim chief operating officer of the Borrower who shall be a person from a nationally recognized operations consulting or management firm and the Borrower shall provide the Administrative Agent with not less than thirty (30) days' advance notice of such change in staffing of the chief operating officer position, which notice shall include the name of the person to serve and the company that will be providing his services. (v) by inserting a new section 7.14(d) immediately after the existing Section 7.14(c) to read as follows: (d) From and after the Second Amendment Effective Date the Borrower undertakes and agrees to use all reasonable efforts to engage the CEO and have him or her in place on or prior to July 1, 2007 and, in the event the CEO is not engaged and in place by such date, the Borrower will continue to use all reasonable efforts until the CEO is engaged and in place. (vi) by inserting a new Section 7.20 immediately after the existing Section 7.19 to read as follows: On or before the Effective Date, the Borrower's President and Chief Operating Officer shall deliver to the Lender a letter with regard to the Borrower's efforts to address certain operational items. During the period beginning on the Effective Date and ending on the date on which the CEO assumes his or her duties with the Borrower, the Borrower shall deliver to the Lender copies of all reports (other than any portions thereof containing attorney-client or other privileged information) regarding the items set forth in the above-referenced letter prepared by outside professionals engaged in connection therewith or by management of the Borrower or its Subsidiaries within 3 Business Days of delivery of the same to the Borrower's board of directors. (vii) By inserting a new Section 7.21 immediately after the new Section 7.20 to read as follows: Section 7.21 Retention of the Operations Advisor The Borrower shall retain the services of an Operations Advisor, at all times after the Effective Date, and through the date on which a new Chief Executive Officer of the Borrower has been appointed (and such Chief Executive Officer has commenced his/her duties) and for so long thereafter as the Chief Executive Officer shall determine in good faith to be necessary or advisable. (i) Article VIII (Negative Covenants) of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory paragraph therein and inserting the following in lieu thereof: The Borrower agrees with the Lenders and the Administrative Agent to each of the following (except that (A) the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy or (y) TPIL so long as any Loan Party is pursuing the discontinuance of the operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or from the proceeds of the sale or liquidation of TPIL's assets and (z) TMT so long as there is a pending TMT Restructuring, provided, however that (B) neither the Borrower nor any of its Subsidiaries shall be allowed to provide any financial, credit or other support to TMT pursuant to the exceptions to the restrictions imposed on the Borrower and its Subsidiaries under Article VIII (Negative Covenants), except as expressly provided in Section 8.20), as long as any Obligation remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing: (ii) by (A) striking the word "or" immediately following the semicolon in clause (k) of Section 8.1, (B) striking the period at the end of clause (l) of Section 8.1 and inserting "; and" in lieu thereof, and (c) inserting a new clause (m) to read as follows: (m) Indebtedness (not otherwise permitted by this Section 8.1) incurred by TdB at any time after the Effective Date; provided, however, such Indebtedness shall not exceed an aggregate amount of $40,000,000 and, provided, further, that not less than $25,000,000 of such Indebtedness shall be utilized to refinance the TdB BNDES facility that matured in March 2007. (iii) by (A) striking the word "and" immediately following the semicolon in clause (g) of Section 8.2, (B) striking the period at the end of clause (h) of Section 8.2 and inserting "; and" in lieu thereof, and (c) inserting a new clause (i) to read as follows: (i) Liens on the assets of TdB securing additional Indebtedness of TdB permitted under Section 8.1(m) (iv) By inserting the following new Section 8.20 immediately after the existing Section 8.19 to read as follows: Neither the Borrower nor any of its Subsidiaries shall (i) in respect of TMT, incur or suffer to exist any Indebtedness (other than Indebtedness existing immediately prior to the Effective Date), (ii) make any additional Investment in TMT or transfer of assets to TMT (other than payments made (x) to Cross-Over Vendors described in clause (i) of such definition so long as such payments do not exceed in the aggregate $2,500,000, (y) to Cross-Over Vendors described in clause (ii) of such definition so long as such payments do not exceed in the aggregate $1,000,000, and (z) for purchases of inventory and equipment by the Borrower or any of its Subsidiaries from TMT so long as such purchases are made for Fair Market Value and on a basis no less favorable to the Borrower or, as the case may be, such Subsidiary thereof as would be obtained in comparable arm's length transactions with a Person that is not an Affiliate of TMT, (iii) pay any Indebtedness or other obligations of TMT, or (iv) otherwise provide any additional funding, financing or credit to TMT; provided, however, that the foregoing prohibition shall not limit the ability of the Borrower or any of its Subsidiaries to make the Restructuring Payments. (j) Article IX of the Credit Agreement is hereby amended as follows: (i) by deleting the introductory clause thereof and inserting the following in lieu thereof: Each of the following events shall be an Event of Default (except that the following shall have no application to (x) Tecumseh Italy as long as the Borrower is diligently pursuing the dissolution or liquidation of Tecumseh Italy, (y) TPIL so long as any Loan Party is pursuing the discontinuance of the operation and liquidation of TPIL provided such discontinuance and liquidation is funded entirely from existing funds available to TPIL or from the proceeds of the sale or liquidation of TPIL's assets or (z) TMT so long as a TMT Restructuring is pending): (ii) by deleting in clause 9.1(d)(i) the word "or" immediately before "Article VII (Negative Covenants)" and inserting immediately after "Section 7.18 (Transfer and Termination of Title IV Plans)" and prior to "or Article VII (Negative Covenants)" the following: or Section 7.21 (Retention of the Operations Advisor) (iii) by deleting the word "or" following the semicolon in clause (l) of Section 9.1; and: (iv) by deleting the period at the end of clause (m) of Section 9.1 and inserting "; or" in lieu thereof; and (v) by inserting a new clause (n) in Section 9.1 to read as follows: (n) There shall occur a breach of the provisions of Sections 1, 2, 3 or 5 of the Settlement Agreement which breach shall remain unremedied for 30 days. (k) Annex A to the definition of Disposition Adjustment is amended by deleting the charts on the existing Annex A thereto and inserting the charts on attached Annex A in lieu thereof. 3. WAIVER AND CONSENT. (a) As of the Second Amendment Effective Date, the Lender and the Administrative Agent hereby waive the Existing Defaults. (b) The Administrative Agent and the Lender hereby waive any default interest chargeable on the Loans pursuant to Section 2.7 (f) solely in respect of the Existing Defaults (b) The Lender hereby consents to the Borrower's request for a one time extension of the delivery date of the annual report for the Fiscal Year ended December 31, 2006, due within 90 days after the end of such Fiscal Year pursuant to Section 6.1(c) of the Credit Agreement, to April 15, 2007. 4. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall become effective as of March 31, 2007 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 Collateral Agent; (ii) the Consent of Guarantors, in the form attached hereto as Exhibit B, executed by each Guarantor; (iii) Amendment No. 5 to the First Lien Credit Agreement, executed by the Borrower and the First Lien Secured Parties; (iv) the Warrants; and (v) such additional documentation as the Lender may reasonably require. (b) Payment of Fees, Costs and Expenses. The Administrative Agent shall have received payment of all fees, costs and expenses as required by Sections 9 and 10 hereof, 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. (c) Expense Deposit. The Administrative Agent shall have received a deposit in an amount equal to Two Hundred Fifty Thousand Dollars ($250,000) to be applied by the Administrative Agent to the payment of fees, costs and expenses payable to the Administrative Agent under Section 11.3 of the Credit Agreement following the Second Amendment Effective Date, 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). (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. 5 to the First 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. 5 to the First Lien Credit Agreement, the Borrower hereby represents and warrants to the Lender 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 or were 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. RELEASE. Each of the Borrower and each Guarantor (A) acknowledges and agrees that it has no defenses, counterclaim or offset to the amounts outstanding under the Credit Agreement or the other Loan Documents and that it has no actual or potential claim or cause of action against the Administrative Agent or any Lender with respect to any matters through the Effective Date, and (B) hereby waives and agrees not to assert any claims or causes of action against the Administrative Agent, any Lender or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, whether known or unknown, matured or contingent, including, without limitation, for special, indirect, consequential or punitive damages, arising by virtue of any actions taken, actions omitted, or the occurrence of any event prior to the Effective Date, arising out of or relating to, or in connection with, this Amendment No. 2, the Credit Agreement, the use of the proceeds of any Loan, the other Loan Documents or any of the transactions entered into in connection therewith or contemplated thereby. 7. 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, waiver and consents contained herein shall not constitute an amendment, waiver or consent to any other provision of the Credit Agreement or the other Loan Documents or for any other purpose except as expressly set forth herein. 8. LOAN DOCUMENTS. This Amendment is deemed to be a "Loan Document" for the purposes of the Credit Agreement. 9. FEES. As consideration for the execution of this Amendment, the Borrower agrees (a) to pay on the Second Amendment Effective Date to the Lender a fee equal to $750,000, and (b) to issue the Warrants to the Lender on the Second Amendment Effective Date. 10. COSTS AND EXPENSES. The Borrower agrees to pay on demand on the Second Amendment Effective Date all costs and expenses of the Administrative Agent incurred from and after the Closing Date through and including the Second Amendment Effective Date and payable to the Administrative Agent under Section 11.3 of the Credit Agreement, including, without limitation, 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 and financial advisor (including financial advisory fees and expenses payable pursuant to the invoice presentable for payment on April 15, 2007 in the amount of $252,252.57) for the Administrative Agent with respect thereto. 11. 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. (e) Delivery of an executed signature page of this Amendment by facsimile or by email in portable document format (.pdf) shall be effective as delivery of an original manually executed counterpart hereof. [signature pages follow] 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 SECOND LIEN CREDIT AGREEMENT] Lender TRICAP PARTNERS II L.P. as Lender By: Tricap Partners II GP L.P. Its: General Partner By: Tricap Partners Ltd. Its: General Partner By: /s/ Gary Franko ------------------------------------ Name: Gary Franko Its: Vice President [SIGNATURE PAGE TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] Administrative Agent TRICAP PARTNERS II GP L.P. as Administrative Agent By: Tricap Partners Ltd. Its: General Partner By: /s/ Gary Franko ------------------------------------ Name: Gary Franko Title: Vice President [SIGNATURE PAGE TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] Collateral Agent Citicorp USA, Inc., as Collateral Agent By: /s/ Matthew Clendenny ------------------------------------ Name: Matthew Clendenny ---------------------------------- Title: Vice President --------------------------------- [SIGNATURE PAGE TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] EXHIBIT A WARRANTS (SEE ATTACHED) [EXHIBIT A TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] EXHIBIT B CONSENT OF GUARANTORS Dated as of April 9, 2007 Each of the undersigned companies, as a Guarantor under the Guaranty dated November 13, 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] GUARANTOR CONSENT TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT 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: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President and Treasurer EUROMOTOR, INC. as U.S. Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President HAYTON PROPERTY COMPANY, LLC Tecumseh do Brasil USA, LLC as U.S. Guarantors By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: President [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] TECUMSEH PRODUCTS OF CANADA LIMITED, as Canadian Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President and Treasurer FASCO MOTORS COMPANY, as Canadian Guarantor By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President [SIGNATURE PAGE TO GUARANTOR CONSENT TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] EXHIBIT C [SETTLEMENT AND RELEASE AGREEMENT] [EXHIBIT C TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] ANNEX A SUBJECT UNITS * Indicates information omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission ***:
CUMULATIVE CUMULATIVE SALES EBITDA ADJUSTMENT PROJECTION CUMULATIVE 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 * * 10/01/2006-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ----------------------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[ANNEX A TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] **:
CUMULATIVE CUMULATIVE SALES EBITDA 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 * * 10/01/2006-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ----------------------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[ANNEX A TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] **:
CUMULATIVE SALES CUMULATIVE PROJECTION REPORTING PERIOD EBITDA ADJUSTMENT ($ 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 * * 10/01/2006-12/31/07 * *
QUARTERLY PROJECTED EBITDA COVENANT SALES PROJECTION QUARTER ($ IN MILLIONS) ($ IN MILLIONS) - ------- ----------------------------------- ---------------- Q4-2006 * * Q1-2007 * * Q2-2007 * * Q3-2007 * * Q4-2007 * *
[ANNEX A TO AMENDMENT NO. 2 TO SECOND LIEN CREDIT AGREEMENT] EX-10.1 4 k13932exv10w1.txt WARRANT TO PURCHASE CLASS A COMMON STOCK EXHIBIT 10.1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,THE MICHIGAN UNIFORM SECURITIES ACT, OR ANY OTHER STATE SECURITIES LAW, AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,THE MICHIGAN UNIFORM SECURITIES ACT, AND ANY OTHER STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. No. CAW-1 April 9, 2007 WARRANT TO PURCHASE CLASS A COMMON STOCK OF TECUMSEH PRODUCTS COMPANY, A MICHIGAN CORPORATION VOID AFTER APRIL 9, 2012 This certifies that for value received TRICAP PARTNERS II L.P., a Delaware limited liability company, or its permitted registered assigns ("Holder"), is entitled, subject to the terms set forth below, at any time before 5:00 p.m., Detroit, Michigan time, on April 9, 2012, to purchase from TECUMSEH PRODUCTS COMPANY, a Michigan corporation (the "Company"), up to 1,390,944 shares of the Class A common stock of the Company ("Common Stock") at a price per share equal to the applicable Purchase Price (as defined below), upon surrender of this Warrant at the principal office of the Company referred to below, with the attached subscription form (the "Subscription Form") duly executed, and simultaneous payment therefor in the manner specified in Section 1. The Purchase Price and the number of shares of Common Stock purchasable hereunder (the "Warrant Shares") are subject to adjustment as provided in Section 3. As used in this Warrant: "Business Day" means any day other than Saturday, Sunday or any other day which is a legal holiday under the laws of the state of New York or any day on which commercial banks are not authorized or required by law to close in the City of New York, New York. "Closing Price" means, for a Trading Day, the price at which the Common Stock last traded on that day, as reported by the Trading Market. "Exercise Date" means the particular date (or dates) on which this Warrant is exercised. "Issue Date" means April 9, 2007. "Purchase Price" means: (a) with respect to any Exercise Date on or before the first anniversary of the Issue Date, 65% of the lowest Closing Price of the Common Stock during the period beginning on March 27, 2007 and ending on the day before the Exercise Date; and (b) with respect to any Exercise Date after the first anniversary of the Issue Date, 65% of the lowest Closing Price of the Common Stock during the period beginning on March 27, 2007 and ending on the first anniversary of the Issue Date. "Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded on the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day. "Trading Market" means the markets or exchanges on which the Common Stock is or may become listed or quoted for trading on the date in question, including the American Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market, OTC Bulletin Board, or the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices). "Warrant" means this Warrant and any warrant delivered in substitution or exchange for this Warrant as provided herein. "Warrant Shares" means any shares of Common Stock acquired by Holder upon exercise of this Warrant. 1. Exercise. (a) This Warrant may be exercised, in whole or in part, at any time or from time to time, on any Business Day, for all or any part of the number of shares of Common Stock called for hereby, by surrendering it at the principal office of the Company, 100 East Patterson Street, Tecumseh, Michigan 49286, together with: (A) a completed and executed Subscription Form; and (B) a certified or cashier's check in an amount equal to the number of shares of Common Stock being purchased multiplied by the applicable Purchase Price unless such exercise is by means of a cashless exercise pursuant to Section 5. (b) This Warrant may be exercised for less than the full number of shares as of the Exercise Date. Upon such partial exercise, this Warrant shall be surrendered, and a new Warrant of the same tenor and for the purchase of the Warrant Shares not purchased upon such exercise shall be issued to Holder by the Company. (c) A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As soon as practicable on or after such date, and in any event within five Business Days thereafter, the Company shall provide its transfer agent with instructions to issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full shares of Common Stock issuable upon such exercise, together with cash, in lieu of any fraction of a share, 2 equal to such fraction of the current fair market value of one full share as reasonably determined in good faith by the Company's Board of Directors. 2. Payment of Taxes. All shares of Common Stock issued upon the exercise of a Warrant shall be validly issued, fully paid, and nonassessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof, other than any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered Holder of the Warrant surrendered in connection with the purchase of such shares, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due. 3. Certain Adjustments. (a) Adjustment for Dividends in Securities or Property; Reclassifications. In case at any time or from time to time after the Issue Date the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible shareholders (a "Record Date"), shall have become entitled to receive, without payment therefor, (1) other or additional stock or other securities or property (including cash) by way of dividend, (2) other or additional stock or other securities or property by way of stock-split, spin-off, reclassification, combination of shares, or similar corporate rearrangement, (other than additional shares of Common Stock of the Company issued as a stock dividend or stock-split, which events shall be covered by the terms of Section 3(b) or 3(c)), then and in each such case Holder, upon the exercise hereof as provided in Section 1, shall be entitled to receive the amount of stock and other securities and property which such Holder would have received if, upon the Record Date such Holder had been the holder of the number of shares of Common Stock called for on the face hereof and had thereafter, during the period from the Issue Date through the date of such exercise, retained such shares and/or all other or additional stock and other securities and property receivable by it as aforesaid during such period, giving effect to all adjustments called for during such period by Sections 3(a) and 3(b). (b) Adjustment for Reclassification, Merger, or Share Exchange. In case of any reclassification, merger, share exchange, or other similar corporate reorganization on or after the Issue Date in which holders of outstanding Common Stock receive stock or other securities or property in exchange for their Common Stock, then and in each such case Holder, upon the exercise hereof at any time after the consummation of such reclassification, merger, share exchange, or other reorganization, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon such consummation if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in paragraph (a), and in each such case, the terms of this Section 3 shall be applicable to the Company securities properly receivable upon the exercise of this Warrant after such consummation. 3 (c) Adjustments for Dividends in Common Stock. In case at any time after the Issue Date the Company shall declare any dividend on the Common Stock which is payable in Common Stock, the number of Warrant Shares evidenced hereby shall be proportionately increased and the Purchase Price shall be proportionately decreased. (d) Stock Split and Reverse Stock Split. If the Company at any time or from time to time after the Issue Date effects a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased, and the number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately increased. If the Company at any time or from time to time after the Issue Date combines the outstanding shares of Common Stock into a smaller number of shares, the Purchase Price then in effect immediately before that combination shall be proportionately increased, and the number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately decreased. Each adjustment under this Section 3(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Accountants' Certificate as to Adjustment. In each case of an adjustment in the shares of Common Stock receivable on the exercise of the Warrant, the Company at its expense shall cause independent public accountants of recognized standing selected by the Company (who may be the independent public accountants then auditing the books of the Company) to compute such adjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment and showing the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to each holder of a Warrant at the time outstanding. (f) No Dilution or Impairment. Subject to the provisions of Section 7, the Company will not, by amendment of its restated articles of incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect Holder's rights under this Warrant against dilution or other impairment. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Purchase Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 4. Notices of Record Date. In case (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of the Warrants) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or (b) of any Extraordinary Transaction (as defined below) or reorganization, reclassification, consolidation, merger, share exchange, conveyance, voluntary dissolution, liquidation, or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to Holder a notice specifying, as the case may be, (1) the date on which a record is to be taken for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution or right, or (2) the date on which such Extraordinary Transaction, reorganization, reclassification, consolidation, merger, 4 share exchange, conveyance, dissolution, liquidation, or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, share exchange, conveyance, dissolution, liquidation, or winding-up. Such notice shall be mailed at least 30 days prior to the date therein specified. 5. Cashless Exercise. Holder may, at its option, in lieu of paying the Purchase Price upon exercise of this Warrant pursuant to Section 1, elect to instead receive a number of Warrant Shares computed using the following formula: X = Y(A-B)/A where: X = the number of Warrant Shares issuable to Holder upon exercise under this Section 5; Y = the number of Warrant Shares issuable to Holder upon exercise under the terms of this Warrant if Holder had elected to exercise otherwise than under this Section 5; A = the Closing Price on the Trading Day before the Exercise Date; and B = the Purchase Price. 6. Registration Rights. The Warrant Shares are entitled to the benefits of the Registration Rights Agreement dated as of the Issue Date between the Company and the original Holder. 7. Reorganization, Merger, Consolidation, or Disposition of Assets. In case the Company shall (i) reorganize its capital, (ii) consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or (iii) sell, transfer or otherwise dispose of all or substantially all its property, assets, or business to another corporation (each of (i) through (iii), an "Extraordinary Transaction") and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at the option of the Holder, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. Notwithstanding anything contained herein to the contrary, in the event of any Extraordinary Transaction, the Company shall provide the Holder with notice of the Extraordinary Transaction in accordance with Section 4, and the Holder must exercise its Warrant at least three calendar days prior to the effective date of the Extraordinary Transaction ("Extraordinary Transaction Election Date") in accordance with the exercise 5 procedures set forth herein in exchange for the consideration set forth in the first sentence of this Section 7, and if Holder does not exercise the Warrant prior to the Extraordinary Transaction Election Date, Holder shall forfeit all of its rights under this Warrant and this Warrant shall terminate as of the Extraordinary Transaction Election Date. For purposes of this Section 7, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 7 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations, or disposition of assets. 8. Transfer, Division, and Combination. (a) Subject to compliance with any applicable securities laws and the conditions set forth herein, this Warrant and all rights hereunder are transferable, in whole or, subject to Section 8(f), in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. (b) This Warrant may be divided, subject to Section 8(f), or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 8(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. (c) The Company shall prepare, issue, and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 8. (d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. (e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), the Michigan Uniform Securities Act (the "Michigan Act") if applicable, and any other applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance, and scope customary for opinions of counsel in comparable 6 transactions) to the effect that such transfer may be made without registration under the Securities Act, the Michigan Act, and any applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company, and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act. (f) No Warrant shall be issued in a denomination of less than 25,000 Warrant Shares. Accordingly, (i) any partial assignment of this Warrant must be in a denomination of at least 25,000 Warrant Shares and the portion retained by the assignor must cover at least 25,000 Warrant Shares, and (ii) this Warrant may not be divided so as to result in the issuance of any new Warrant in a denomination of less than 25,000 Warrant Shares. 9. No Rights as Shareholder. Prior to the exercise of this Warrant, Holder shall not be entitled to any rights of a shareholder with respect to the Warrant Shares, including without limitation the right to vote such Warrant Shares, receive dividends or other distributions thereon, exercise preemptive rights, or be notified of shareholder meetings, and Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. However, nothing in this Section 9 shall limit the right of Holder to be provided the notices required under this Warrant. 10. Compliance with Securities Laws. Holder, by acceptance hereof, agrees that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired for investment and not with a view towards resale and that it will not offer, sell, or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act, the Michigan Uniform Securities Act, or any other applicable state securities act. Upon exercise of this Warrant, Holder hereof shall confirm in writing, in the form of Exhibit A, that the Warrant Shares so purchased are being acquired for investment and not with a view toward distribution or resale. This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act, the Michigan Act if applicable, and any other applicable state securities act) shall be stamped or imprinted with the legend indicated on the first page of this Warrant. 11. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction, or mutilation of any Warrant and (in the case of loss, theft, or destruction) of indemnity satisfactory to it (in the exercise of reasonable discretion but shall not include the posting of any bond), and (in the case of mutilation) upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor. 12. Reservation of Common Stock. The Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 7 13. Notices. All notices and other communications from the Company to Holder shall be mailed by first-class registered or certified mail, postage prepaid, to the address furnished to the Company by Holder. 14. Change; Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge, or termination is sought. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers, or remedies. 15. Headings. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof. 16. Saturdays, Sundays, Holidays, Etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday, or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday, or legal holiday. 17. Law Governing. This Warrant is delivered in Michigan and shall be construed and enforced in accordance with and governed by the internal laws, and not the law of conflicts, of such State. 18. Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 20. Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 21. Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the date set forth above. TECUMSEH PRODUCT COMPANY By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President, Treasurer and Chief Financial Officer Accepted and agreed to: (Holder) TRICAP PARTNERS II L.P. By: Tricap Partners II GP L.P., its general partner By: Tricap Partners Ltd., its general partner By: /s/ Gary Franko --------------------------------- Name: Gary Franko Title: Vice President [Warrant - Signature Page] SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant and purchases ____________ of the number of shares of Class A Common Stock of Tecumseh Products Company, a Michigan corporation, purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant. The undersigned hereby represents and warrants that the undersigned is acquiring such shares for its own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof. (Holder) Dated: _______________, 20___ ---------------------------------------- By: ------------------------------------ [name] --------------------------------- [title] -------------------------------- ---------------------------------------- [Street address] ---------------------------------------- [City, state, and ZIP code] FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below: Name of Assignee: ------------------------------------ Address: --------------------------------------------- No. of Shares: --------------------------------------- and does hereby irrevocably constitute and appoint ___________________________ Attorney to make such transfer on the books of Tecumseh Products Company, a Michigan corporation, maintained for the purpose, with full power of substitution in the premises. (Holder) Dated: _______________, 20___ ---------------------------------------- Witnessed by: By: - ------------------------------ ------------------------------------ [name] --------------------------------- [title] -------------------------------- EX-10.2 5 k13932exv10w2.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of the 9th day of April, 2007 by and between Tecumseh Products Company, a Michigan corporation (the "Company") and Tricap Partners II L.P., a Delaware limited partnership (the "Investor"). WITNESSETH: WHEREAS, Tricap Partners LLC ("Tricap I") and the Herrick Foundation, a Michigan nonprofit corporation (the "Foundation"), previously entered into the Class A Option Agreement dated November 1, 2006, as amended (the "Foundation A Option"), pursuant to which Tricap I was granted the option to purchase 331,347 shares of Class A Common Stock (the "Foundation Class A Shares"); WHEREAS, Tricap I and the Foundation previously entered into the Class B Option Agreement dated November 1, 2006 (the "Foundation B Option"), pursuant to which Tricap I was granted the option to purchase 500,000 shares of Class B Common Stock (the "Foundation Class B Shares"); WHEREAS, Tricap I, the Ray W. Herrick and Hazel M. Herrick Trusts u/a/d February 26, 1949 and February 24, 1956 f/b/o Kenneth Herrick and his descendants (a/k/a Ray W. Herrick and Hazel M. Herrick Trust u/a/d February 26, 1949 and February 24, 1956 f/b/o Todd W. Herrick and his descendants and Ray W. Herrick and Hazel M. Herrick Trust u/a/d February 26, 1949 and February 24, 1956 f/b/o Toni Herrick and her descendants) (the "Trusts") previously entered into the Class A Option Agreement dated November 1, 2006, as amended (the "Trust Option"), pursuant to which Tricap I was granted the option to purchase 168,653 shares of Class A Common Stock (the "Trust Class A Shares"); WHEREAS, Tricap I has previously transferred the Foundation A Option, the Foundation B Option and Trust Option to the Investor; WHEREAS, concurrently with the execution of this Agreement, the Company and the Investor, as lender thereunder, are entering into that certain Amendment No. 2 to Amended and Restated Second Lien Credit Agreement (the "Amendment"); WHEREAS, concurrently with the execution of this Agreement, the Company is granting a Warrant to Purchase Class A Common Stock (the "Warrant") to Investor pursuant to which the Investor will have the right, in accordance with the terms and subject to the conditions of the Warrant, to purchase 1,390,944 shares of Class A Common Stock (the "Warrant Shares"); and WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Amendment. AGREEMENT NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings ascribed to them below: "Affiliate" (i) means, with respect to any Person, any other Person directly or indirectly controlling or that is controlled by or is under common control with such Person, each officer, director, general partner or joint-venturer of such Person, and each Person that is the beneficial owner of 5% or more of any class of Voting Stock of such Person. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (ii) with respect to any individual, shall also mean the spouse, sibling, child, step-child, grandchild, niece, nephew or parent of such Person, or the spouse thereof. "Class A Common Stock" means the Class A Common Stock, $1.00 par value per share, of the Company and any equity securities issued or issuable with respect to the Class A Common Stock in connection with a reclassification, recapitalization, merger, consolidation or other reorganization. "Class B Common Stock" means the Class B common stock, par value $1.00 per share, of the Company and any equity securities issued or issuable with respect to the Class B Common Stock in connection with a reclassification, recapitalization, merger, consolidation or other reorganization. "Common Stock" means Class A Common Stock and Class B Common Stock. "Conversion Shares" means the shares of Common Stock issued or issuable upon exercise of rights under any or all of the Foundation A Option, the Foundation B Option, the Trust Option or the Warrant. "Effective Time" means the date on which the SEC declares the Registration Statement effective or on which the Registration Statement otherwise becomes effective. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means any holder (including Investor, its assigns or any assigns of a Holder) of Registrable Securities, the Foundation A Option, the Foundation B Option, the Trust Option or the Warrant. "Person" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivisions thereof. 2 "Prospectus" means the prospectus (including, without limitation, any preliminary prospectus, any final prospectus and any prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A under the Securities Act) included in the Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act, as amended, and incorporated by reference therein. "Registrable Securities" means any Conversion Shares owned by the Investor and shares of Common Stock issued or issuable, directly or indirectly, with respect to the Common Stock referenced above by way of stock dividend, stock split or combination of shares. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, or (ii) such securities shall have been sold (other than in a privately negotiated sale) pursuant to Rule 144 (or any successor provision) under the Securities Act. "Registration Statement" means a registration statement of the Company filed under the Securities Act covering the Registrable Securities, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement, including, without limitation, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the SEC, filed by the Company pursuant to the provisions of Section 2 of this Agreement. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. 2. REGISTRATION RIGHTS. 2.1 Piggyback Registrations. (a) Piggyback Registrations. If, at any time, the Company proposes or is required to register any of its equity securities under the Securities Act (other than pursuant to registrations on Form S-4 or Form S-8 or such form or similar form(s) solely for registration of securities in connection with an employee benefit plan or dividend reinvestment plan or a merger, consolidation or acquisition) on a registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent general registration form then in effect), whether or not for its own account, the Company shall give prompt prior written notice (which shall include 3 the number of shares the Company or other holders propose to register and, if known, the name of the proposed underwriter) of its intention to do so to the Investor and each Holder. Upon the written request of any Holder, made within 20 days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company shall use, subject to Sections 2.1(b) and 2.6 hereof, its best efforts to cause all such Registrable Securities to be registered under the Securities Act and included in the securities to be covered by the registration statement proposed to be filed by the Company (a "Piggyback Registration"). There is no limitation on the number of such Piggyback Registrations pursuant to the preceding sentence which the Company is obligated to effect. No registration effected under this Section 2.1(a) shall relieve the Company of its obligations to effect Demand Registrations or registrations pursuant to Section 2.2 hereof. (b) Abandonment or Delay. If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company shall give written notice of such determination to the Holders and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of the Investor and Holders with respect to subsequent Piggyback Registrations under this Section 2.1 or Demand Registrations under Section 2.2, and (ii) in the case of a determination to delay registration of such equity securities, shall be permitted to delay the registration of the Registrable Securities that any Holder had requested to be registered in connection with such delayed registration for the same period as the delay in registering such other equity securities. (c) The Holders' Right to Withdraw. Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.1 by giving written notice to the Company of its request to withdraw; provided, however, that (i) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, such Investor shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made, without prejudice, however, to the rights of such Holder with respect to subsequent Piggyback Registrations under this Section 2.1 or Demand Registrations under Section 2.2 of this Agreement. 2.2 S-3 Registrations. 4 (a) S-3 Registrations. If at any time and for so long as the Investor or any Holder owns beneficially or of record any Registrable Securities, the Foundation A Option, the Foundation B Option, the Trust Option or the Warrant, the Company shall, upon the written request (hereinafter an "S-3 Registration Request") of the Investor or any Holder, the Company shall prepare and file a Registration Statement on Form S-3 under the Securities Act, pursuant to Rule 415 under the Securities Act, covering the resale from time to time, of the number of shares of Registrable Securities as such Holders shall request, provided, however, that the aggregate proposed offering price of the Registrable Securities is at least $1,000,000, and the Company shall use its reasonable best efforts to have the Registration Statement declared effective as soon as practicable thereafter (a "Demand Registration"). There is no limitation on the number of Demand Registrations pursuant to this Section 2.2 that the Company is obligated to effect. (b) Registration. The Company shall, as expeditiously as possible following an S-3 Registration Request, give written notice of such S-3 Registration Request to all other Holders. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall use all reasonable best efforts to enable it to use Form S-3. If the Company is unable to qualify for Form S-3 after taking such efforts, the Company shall fulfill its obligations hereunder on such other available form of Registration Statement reasonably acceptable to the requesting Holders. (c) Postponement. The Company shall be entitled to postpone for up to 30 consecutive days in any calendar year (or 60 days in the aggregate in any calendar year) (the "Maximum Delay Period") the filing of any Registration Statement required to be prepared and filed by it pursuant to this Section 2.2 if (i) the Company is in possession of material non-public information the disclosure of which would have a material adverse effect on the business, operations, prospects, condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole or (ii) the Board of Directors of the Company determines in good faith that a delay in the effectiveness of the Registration Statement, or the Registration Statement ceasing to be effective or a Prospectus thereunder ceasing to be usable, as the case may be, is appropriate due to the occurrence or existence of any material pending corporate development with respect to the Company (each of (i) and (ii) being a "Delay Condition"). The Delay Conditions shall be deemed to no longer exist if (x) in the case of clause (i) above, the Company is no longer in possession of such material non-public information or the Board of Directors of the Company determines in good faith that the disclosure of such material information would not be prejudicial to or contrary to the interest of the Company and (y) in the case of clause (ii) above, the Board of Directors of the Company determines in good faith that such delay or cessation is no longer appropriate. The Company shall give the Holders immediate notice when a Delay Condition is deemed to no longer exist. If the Company shall so postpone the filing of a registration statement, the Holders shall have the right to withdraw the applicable 5 S-3 Registration Request by giving written notice to the Company within 20 days after receipt of the notice of postponement from the Company. The Company may not postpone the filing of any registration statement more than once in any given calendar year. (d) Notice to Holders. Immediately following receipt of any S-3 Registration Request pursuant to Section 2.2(a), the Company shall promptly notify all Holders from whom such S-3 Registration Request has not been received and, as soon thereafter as practicable, shall file a Registration Statement with the SEC and use all reasonable best efforts to have such Registration Statement declared effective under the Securities Act as soon as practicable, so as to permit the public sale in accordance with the method of disposition specified in such S-3 Registration Request (such method of disposition shall be as requested by such Holders of a majority of Registrable Securities included in such S-3 Registration Request received by the Company) of the number of shares of Registrable Securities specified in such S-3 Registration Request (and in all requests for registration received by the Company from other Holders within twenty (20) days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering, subject to the covenants, terms and conditions herein, the Company shall designate the managing underwriter of such offering, following consultation and subject to the approval of the Holders of a majority of the Registrable Securities to be included in such offering, which approval shall not be unreasonably withheld or delayed. All Holders providing notice to the Company pursuant to the foregoing must participate in such underwriting and shall enter into an underwriting agreement mutually agreeable to the underwriter or underwriters selected by the Company and each selling Holder, it being understood that if the Investor or a selling Holder disapproves of the terms of any such underwriting, the Investor or such selling Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter in which case the Company shall have no liability for damages to the Investor or any other selling Holder with respect to such inability to reach agreeable terms with the underwriter(s); provided however that such withdrawal will not relieve the Company of its registration obligations hereunder nor waive the right of a Holder to enforce such obligations. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. The Company's registration obligation hereunder shall be deemed satisfied only when a Registration Statement(s) covering all shares of Registrable Securities specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the requesting Holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto. (e) Ongoing Obligations. The Company shall use all reasonable best efforts: 6 (i) to keep the Registration Statement continuously effective in order to permit the Prospectus to be usable by holders for resales of Registrable Securities until the sale under the Registration Statement of all the Registrable Securities registered thereunder (such period being referred to herein as the "Effectiveness Period"); and (ii) after the Effective Time and during the Effectiveness Period, promptly upon the request of any Holder, to take any action reasonably necessary to enable such Holder to use the Prospectus for resales of Registrable Securities, including without limitation any action necessary to identify such holder as a selling stockholder in the Registration Statement; provided, however, that nothing in this subparagraph shall relieve such Holder of the obligation to return a completed and signed questionnaire to the Company relating to such Holder in connection with the Registration Statement. 2.3 Cutbacks; Priority. (a) Cutbacks. If the managing underwriter of any underwritten offering pursuant to Section 2.1 shall advise the Holders that the Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the Holders of a majority of the Registrable Securities, then such Holders shall have the right to notify the Company in writing that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such registration statement. (b) Priority in Requested Registrations. If the managing underwriter of a registration effected pursuant to Section 2.1 of this Agreement advises the Company in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) exceeds the number which can be sold in such offering without having an adverse effect on such offering as contemplated by the Holders participating in the registration (including the price at which such Holders propose to sell such Registrable Securities), the Company will: first reduce on a pro rata basis any securities proposed to be included in the registration by persons (other than the Company) other than the Holders; second, if required, reduce on a pro rata basis all Registrable Securities proposed to be included in the registration among the Holders participating in the registration; and third, if required, reduce on a pro rata basis any securities of the Company that the Company had proposed to sell in such registration. 2.4 Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its reasonable best efforts to effect or cause the registration of any Registrable Securities under the Securities Act, the Company shall, as expeditiously as possible: 7 (a) prepare and file with the SEC a Registration Statement on an registration form of the SEC in accordance herewith for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof, which form (i) shall be selected by the Company in accordance with the terms hereof and (ii) shall, in the case of a shelf registration, be available for the sale of the Registrable Securities by the Holders and such Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and the Company shall use its best efforts to cause such Registration Statement to become and remain effective for the Effectiveness Period; (b) furnish to each participating Holder and their counsel, no fewer than five (5) business days prior to the initial filing of the Registration Statement, a copy of such Registration Statement, and shall furnish to such Holders and their counsel, no fewer than two (2) business days prior to the filing of any amendment or supplement to the Registration Statement or the Prospectus, a copy of such amendment or supplement and shall use all reasonable best efforts to reflect in each such document when so filed with the SEC such comments as such Holders and their such counsel reasonably may propose; provided, however, that the Company shall make the final decision as to the content of each such document. If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company and such reference is not required by the Securities Act or any similar federal statute, then such Holder shall have the right to require the deletion of the reference to such Holder in such Registration Statement or in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required; (c) promptly prepare and file with the SEC such amendments and supplements to the Registration Statement and the Prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective in accordance herewith and to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of the Registrable Securities; (d) furnish, without charge, to the Holders and each underwriter, if any, of the securities covered by such Registration Statement such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary prospectus) in conformity with the requirements of the Securities Act, and other documents, as the Holders and underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the Holders (the Company hereby consenting to the use in accordance with applicable law of each such Registration Statement (or amendment or post-effective amendment thereto) and each such Prospectus (or preliminary prospectus or supplement thereto) by 8 the Holders and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Registration Statement or Prospectus; (e) use its commercially reasonable best efforts to register or qualify the Registrable Securities covered by such Registration Statement under such other securities or "blue sky" laws of such jurisdictions as the Holders participating in the registration or any managing underwriter, if any, shall reasonably request in writing, and do any and all other acts and things which may be reasonably necessary or advisable to enable the Holders participating in the registration, or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions (including using its best efforts to keep such registrations or qualifications in effect for so long as the Registration Statement remains in effect) except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where it would not, but for the requirements of this paragraph (d), be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (f) promptly notify the Holders and each managing underwriter, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the SEC or any state securities authority for amendments or supplements to the Registration Statement or the Prospectus related thereto or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose; (v) of the existence of any fact of which the Company becomes aware which results in the Registration Statement, the Prospectus or any amendment related thereto or any document incorporated therein by reference containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and if the notification relates to an event described in clause (v), the Company shall promptly prepare and furnish to each such Holder and each underwriter, if any, a reasonable number of copies of a Prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and if the notification relates to an event described in clause (iii) or (iv), the Company shall promptly use its reasonable best efforts to prevent the issuance of any stop order 9 or suspension of the qualification of any Registrable Securities or to obtain the withdrawal of any stop order, if issued, or to cause the qualification of any Registrable Securities to not be suspended; (g) comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement and in any event within 16 months thereafter, an earnings statement (which need not be audited) covering the period of at least twelve consecutive months beginning with the first day of the Company's first calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (h) cause all such Registrable Securities covered by such Registration Statement to be listed on the principal securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange; (i) provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement; (j) enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Holders shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (k) obtain an opinion from the Company's counsel and a "cold comfort" letter from the Company's independent public accountants in customary forms and covering such matters as are customarily covered by such opinions and "cold comfort" letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the underwriters, if any, and to the Holders participating in the registration and furnish to such Holders and to each underwriter, if any, a copy of such opinion and letter addressed to such Holders (in the case of the opinion) and underwriter (in the case of the opinion and the "cold comfort" letter); (l) deliver promptly to the Holders participating in the registration and counsel for such Holders and each underwriter, if any, copies of all correspondence between the SEC and the Company, its counsel or auditors and any memoranda relating to discussions with the SEC or its staff with respect to the Registration Statement, other than those portions of any such memoranda which contain information subject to attorney-client privilege with respect to the Company, and, upon receipt of such confidentiality agreements as the Company may reasonably request, make reasonably available for inspection by such Holders and by any underwriter, if any, participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant 10 or other agent retained by such Holders or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by such Holder, underwriter, attorney, accountant or agent in connection with such Registration Statement; (m) use its reasonable best efforts to promptly obtain the withdrawal of any order suspending the effectiveness of the Registration Statement; (n) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement; (o) make reasonably available its employees and personnel (including its chief executive officer and chief financial officer) and otherwise provide reasonable assistance to the underwriters (taking into account the needs of the Company's business and the requirements of the marketing process) in the marketing of Registrable Securities in any underwritten offering; (p) promptly, prior to the filing of any document which is to be incorporated by reference into the Registration Statement or the Prospectus (after the initial filing of such Registration Statement), provide copies of such document to counsel for the Holders participating in the registration, and to each managing underwriter, if any, and make the Company's representatives reasonably available for discussion of such document and make such changes in such document concerning the Holders prior to the filing thereof as counsel for the Holders or underwriters may reasonably request; (q) furnish to the Holders, and the managing underwriter, without charge, at least one signed copy of the Registration Statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (r) cooperate with the Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the Holders participating in the registration at least three business days prior to any sale of Registrable Securities; and (r) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities. 11 The Company may require as a condition precedent to the Company's obligations under this Section 2.4 that the Holders participating in the registration furnish the Company such information regarding such Holder and the distribution of their Registrable Securities as the Company may from time to time reasonably request, provided that such information shall be used only in connection with such registration. The Holders participating in the registration agree that upon receipt of any notice from the Company of the happening of any event of the kind described in clause (v) of paragraph (f) of this Section 2.4, each Investor will discontinue its disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until its receipt of the copies of the supplemented or amended Prospectus contemplated by paragraph (f) of this Section 2.4 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in its possession of the prospectus covering such Registrable Securities that was in effect at the time of receipt of such notice. Notwithstanding the foregoing, the Company may suspend the use of the Prospectus and shall not be required to amend or supplement the Registration Statement, any related Prospectus or any document incorporated by reference, for a period not to exceed the Maximum Delay Period if and so long as the Delay Conditions exist. If any such Registration Statement or comparable statement under "blue sky" laws refers to any Holder by name or otherwise as the holder of any securities of the Company, then the Holder, shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to any Holder by name or otherwise is not, in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state "blue sky" or securities law then in force, the deletion of the reference to such Investor. 12 2.5 Registration Expenses. (a) "Expenses" shall mean any and all fees and expenses incident to the Company's performance of or compliance with this Article 2, including, without limitation: (i) SEC, stock exchange or National Association of Securities Dealers, Inc. registration, listing and filing fees and all fees with respect to the inclusion of securities in NASDAQ, (ii) fees and expenses of compliance with state securities or "blue sky" laws and in connection with the preparation of a "blue sky" survey, including without limitation, reasonable fees and expenses of blue sky counsel, (iii) printing and copying expenses, (iv) messenger and delivery expenses, (v) expenses incurred in connection with any road show, (vi) fees and disbursements of counsel for the Company, (vii) with respect to each registration, the reasonable fees and disbursements of one counsel for the participating Holders, (viii) fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) and fees and expenses of other persons, including special experts, retained by the Company, (ix) fees and expenses payable to an underwriter, and (x) any other fees and disbursements of underwriters, if any, customarily paid by issuers or sellers of securities. (b) The Company shall pay all Expenses with respect to this Article 2. (c) Notwithstanding the foregoing, (x) the provisions of this Section 2.5 shall be deemed amended to the extent necessary to cause these expense provisions to comply with "blue sky" laws of each state in which the offering is made and (y) the Company shall, in the case of all registrations under this Article 2, be responsible for all its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties). 2.6 Certain Limitations on Registration Rights. In the case of any registration under Section 2.1, if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such registration shall be subject to an underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person's securities on the basis provided therein and completes and executes all reasonable questionnaires and other documents (including custody agreements and powers of attorney) which must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such Person's securities. 2.7 Limitations on Sale or Distribution of Other Securities. (a) Notwithstanding anything herein to the contrary, nothing in this Agreement shall be deemed to restrict any Holder from (i) selling, transferring or otherwise disposing of any Common Stock or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (A) to any of its Affiliates or (B) in any private 13 transaction exempt from the registration requirements of the Securities Act or (ii) engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, merger advisory, financing, asset management, trading, market making, arbitrage and other similar activities conducted in the ordinary course of its or its Affiliates' business. (b) The Company hereby agrees that, if it shall previously have received a request for registration pursuant to Section 2.1 or 2.2, and if such previous registration shall not have been withdrawn or abandoned, the Company shall not sell, transfer, or otherwise dispose of, any Common Stock or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (other than as part of such underwritten public offering, a registration on Form S-4 or Form S-8 or any successor or similar form which is then in effect or upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent (as such term is defined in the Articles)), until a period of 180 days shall have elapsed from the effective date of such previous registration; and the Company shall so provide in any registration rights agreements hereafter entered into with respect to any of its securities. 2.8 No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of the Investor or any Holders to sell any Registrable Securities pursuant to any effective registration statement. 2.9 Indemnification. (a) In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Article 2, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, the Investor, the Holders, their directors, officers, Affiliates, legal counsel, accountants, employees, stockholders, members and partners (and the directors, officers, Affiliates, employees, stockholders, members and partners thereof), each other Person who participates as an underwriter, if any, in the offering or sale of such Registrable Securities, each officer, director, employee, stockholder, member or partner of such underwriter and each other Person, if any, who controls any Investor, Holder or any such underwriter within the meaning of the Securities Act, against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof ("Claims") and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise, insofar as such Claims or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) under which such Registrable Securities were registered under the Securities Act, together with 14 the documents incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (iii) any violation by the Company of applicable securities laws in the jurisdictions in which the registration was made; or (iv) any breach of this Agreement; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim or expense arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such Registration Statement or amendment thereof or supplement thereto or in any such Prospectus or any preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by such indemnified party with respect to such indemnified party specifically for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such Registrable Securities by such indemnified party. (b) In the event of a registration of any of the Registrable Securities under the Securities Act pursuant to the provisions of this Agreement, each seller of such Registrable Securities thereunder shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.9) to the fullest extent permitted by law, the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers in such registration and their directors, officers, general and limited partners, underwriters and respective controlling Persons, with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, the Registration Statement under which such Registrable Securities shall have been registered, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such seller, specifically for use therein; provided, however, that the aggregate amount which any seller shall be required to pay pursuant to this Section 2.9 shall in no case be greater than the amount of the net proceeds received by such seller upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such claim for indemnification. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities 15 by such seller. The indemnity provisions under this Section 2.9(b) will not be applicable to amounts paid in settlements effected without consent of the indemnifying seller (which consent will not be unreasonably withheld). (c) Indemnification similar to that specified in the preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any state securities and "blue sky" laws. (d) If the indemnification provided for in this Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any Claim or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions that resulted in such Claim or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.9(d) were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentence. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Holders and any underwriters, selling agents or other securities professionals in this Section 2.9(d) to contribute shall be several in proportion to the percentage of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) Any person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.9, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.9, except to the extent the indemnifying party is materially prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Article 2. In case any action or proceeding is brought against an indemnified party and it shall notify the indemnifying party of the 16 commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; or (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above and the indemnifying party shall be liable for any reasonable expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (f) The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party. (g) Notwithstanding any other provision of this Section 2.9, in no event will any Holder be required to undertake liability to any person under this Section 2.9 for any amounts in excess of the dollar amount of the proceeds received by such Holder from the sale of such Holder's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement. 17 (h) The indemnification and contribution required by this Section 2.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 2.10 Termination of Registration Rights. All registration rights provided for in Sections 2.1 or 2.2 expire on the earlier of (i) five years following the date hereof or (ii) the date on which all Registrable Securities have been sold (other than in a privately negotiated sale) pursuant to Rule 144 (or any successor provision) under the Securities Act. For the avoidance of doubt, this Agreement and the Company's obligations hereunder shall continue regardless of whether or not the Second Lien Credit Agreement, as amended, between the parties is then in effect. 3. UNDERWRITTEN OFFERINGS. 3.1 Requested Underwritten Offerings. If requested by the underwriters for any underwritten offering pursuant to a registration requested under Section 2.2, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Holders of a majority of the Registrable Securities to be included in such registration, and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally included in the standard underwriting agreement of such underwriters, including, without limitation, indemnities and contribution agreements. Such Holders shall be a party to such underwriting agreement and Holders of a majority of the Registrable Securities to be included in such registration may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by any of the Holders for inclusion in the Registration Statement. Such underwriting agreement shall also contain such representations and warranties by such Holder as are customary in agreements of that type. 3.2 Piggyback Underwritten Offerings. In the case of a registration pursuant to Section 2.1 hereof, if the Company shall have determined to enter into an underwriting agreement in connection therewith, the participating Holders shall be subject to such underwriting agreement. Such Holders may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders. Such underwriting agreement shall also contain such representations and warranties by such Investor as are customary in agreements of that type. 18 4. GENERAL. 4.1 Capitalization. The Company represents and warrants to the Investor, at and as of the Issue Date (as defined in the Warrant), that the authorized capital stock of the Company consists of 75,000,000 shares of Class A Common Stock, of which 13,401,938 are issued and outstanding and 25,000,000 shares of Class B Common Stock, of which 5,077,746 are issued and outstanding (collectively the "Company Shares"). All of the issued and outstanding Company Shares have been duly authorized and validly issued and all such shares are fully paid and nonassessable. There are no outstanding options, warrants, commitments, or other rights or instruments to purchase or acquire from the Company any Company Shares, or any securities (including any bonds, debentures, notes or other indebtedness) or rights convertible into or exchangeable for Company Shares, except for (i) this Warrant, (ii) the Class A Common Stock Purchase Rights pursuant to the Class A Rights Agreement dated April 22, 1992, as amended and on file with the Securities and Exchange Commission (the "Class A Rights Agreement") and (iii) the Class B Common Stock Purchase Rights pursuant to the Amended and Restated Class B Rights Agreement dated April 22, 1992, as amended and on file with the Securities and Exchange Commission (the "Class B Rights Agreement" and collectively with the Class A Rights Agreement, the "Rights Agreements"). As of the date hereof, assuming issuance of all of the Warrant Shares on the Issue Date but excluding any Company Shares issuable pursuant to the Rights Agreements, there are 19,870,628 Company Shares outstanding. 4.2 Adjustments Affecting Registrable Securities. The Company agrees that it shall not effect or permit to occur any combination or subdivision of its securities which would adversely affect the ability of the Investor or any Holders to include Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. 4.3 Rule 144. The Company covenants that (i) so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities Act), and (ii) it will take such further action (including providing opinions or other statements of its legal counsel) to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (A) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (B) any similar rule or regulation hereafter adopted by the SEC. 4.4 Amendments and Waivers. This Agreement may be amended, modified, supplemented or waived only upon the written agreement of the Company and the Investor. 4.5 Notices. Except as otherwise provided in this Agreement, all notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or by telecopy, 19 nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties: (i) if to the Company, to: Tecumseh Products Company 100 E. Patterson Street Tecumseh, Michigan 49286 Facsimile: (517) 423-8839 Attention: President with a copy (which shall not constitute notice) to: Miller, Canfield, Paddock and Stone, P.L.C. 840 Long Lake Road, Suite 200 Troy, Michigan 48098 Facsimile: (248) 879-2001 Attention: David D. Joswick, Esq (ii) if to the Investor, to: Tricap Partners II L.P. BCE Place, Suite 3000 181 Bay Street, P.O. Box 762 Toronto, Ontario M5J 2T3 Facsimile: (416) 365-9642 Attention: Cyrus Madon with additional notice to: Tricap Partners LLC 3 World Financial Center 200 Vesey Street-11th Floor New York, New York 10281 Facsimile: (212) 417-7292 Attention: Alexander D. Green with a copy (which shall not constitute notice) to: Squire, Sanders & Dempsey L.L.P. Two Renaissance Square 20 40 North Central Avenue Suite 2700 Phoenix, Arizona 85004 Facsimile: (602) 253-8129 Attention: Christopher D. Johnson All such notices, requests, consents and other communications shall be deemed to have been given when received. 4.6 No Inconsistent Agreements. Without the prior written consent of the Investor, the Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities which is inconsistent with the rights granted in this Agreement or otherwise conflicts with the provisions hereof. The Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is superior to the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. 4.7 Mergers. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to be references to the securities which the Holders would be entitled to receive in exchange for Registrable Securities under any such merger, consolidation or reorganization; provided, however, that the provisions of this Agreement shall not apply in the event of any merger, consolidation or reorganization in which the Company is not the surviving corporation if the Holders of Registrable Securities are entitled to receive in exchange therefor (i) cash, or (ii) securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act. 4.8 Miscellaneous. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, personal representatives and assigns, whether so expressed or not. If any Person shall acquire Registrable Securities in any manner, whether by assignment from a Holder, operation of law or otherwise, such transferee shall promptly notify the Company, which notice shall include the name and address of said transferee or assignee and identify the securities with respect to which such registration rights are being transferred or assigned, and such Registrable Securities acquired from the Investor shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. The parties to this Agreement intend that all Holders shall be entitled to receive the benefits of 21 this Agreement and that any Holder participating in a registration shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities that are included in a Registration Statement. If the Company shall so request, any such successor or assign shall agree in writing to acquire and hold the Registrable Securities acquired from the Investor subject to all of the terms hereof. If the Investor shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of the terms, and entitled to all the benefits, of this Agreement. No Persons other than the Investor and its assigns shall be entitled to any benefits under this Agreement, except as otherwise expressly provided herein. (b) This Agreement (with the documents referred to herein or delivered pursuant hereto) embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. Each of the parties hereto hereby agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in this Agreement shall be effective service of process for any action, proceeding or investigation in any court or before any governmental authority ("Litigation") brought against it in any such court. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to this Agreement or the transactions contemplated hereby. (d) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. All section references are to this Agreement unless otherwise expressly provided. (e) This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed with facsimile signatures, which shall be considered and treated as original signatures. (f) Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. (g) The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may 22 be entitled at law or in equity, shall be entitled to injunctive relief, including specific performance, to enforce such obligations without the posting of any bond, and, if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under this Agreement may result in material irreparable injury to the Investor or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Investor or any Holders may obtain such relief as may be required to specifically enforce the Company's obligations hereunder. (h) Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (i) The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect and shall survive the transfer and registration of the Registrable Securities. (j) This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 23 IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. TECUMSEH PRODUCT COMPANY By: /s/ James S. Nicholson ------------------------------------ Name: James S. Nicholson Title: Vice President, Treasurer and Chief Financial Officer TRICAP PARTNERS II L.P. By: Tricap Partners II GP L.P., its general partner By: Tricap Partners Ltd., its general partner By: /s/ Gary Franko ------------------------------------ Name: Gary Franko Title: Vice President Registration Rights Agreement - Signature Page EX-10.3 6 k13932exv10w3.txt SETTLEMENT AND RELEASE AGREEMENT Exhibit 10.3 SETTLEMENT AND RELEASE AGREEMENT This SETTLEMENT AND RELEASE AGREEMENT (the "SETTLEMENT AGREEMENT") is made and entered into as of April 2, 2007, by and among: (i) Tecumseh Products Company, a Michigan corporation (the "COMPANY"); (ii) Herrick Foundation, a Michigan nonprofit corporation, Todd W. Herrick and Toni Herrick, each in their capacity as trustee for the Ray W. Herrick and Hazel M. Herrick Trusts u/a/d February 26, 1949 and February 24, 1956 f/b/o Todd W. Herrick and his descendants and Ray W. Herrick and Hazel M. Herrick Trusts u/a/d February 26, 1949 and February 24, 1956 f/b/o Toni Herrick and her descendants (the "Herrick Trusts"), Todd W. Herrick, Kent B. Herrick and Michael Indenbaum, each in their capacity as members of the Board of Trustees of Herrick Foundation, Todd W. Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick, each in their individual capacities (collectively referred to herein as the "HERRICK ENTITIES"); and (iii) Albert A. Koch, Peter Banks, and David M. Risley, each in their capacity as directors of the Company and collectively referred to herein as the "DEFENDANT DIRECTORS." The Company, the Herrick Entities and the Defendant Directors, and any subsequent Person that becomes a party hereto in accordance with the terms hereof, are each referred to herein as a "PARTY," and collectively, the "PARTIES." WITNESSETH: WHEREAS AlixPartners, LLP, through its affiliate AP Services, LLC ("ALIXPARTNERS") is currently engaged to work on a turnaround plan for the Company; WHEREAS James Bonsall has been appointed interim President and Chief Operating Officer ("COO") of the Company pending selection of a Chief Executive Officer (the "CEO"), the hiring of a CEO being a condition required by that certain Amended And Restated Second Lien Credit Agreement, dated as of November 13, 2006 (as the same has heretofore been amended and as it may be further amended, supplemented or otherwise modified from time to time, the "SECOND LIEN CREDIT AGREEMENT") among the Company, Tricap Partners, LLC, as Lender (the "SECOND LIEN LENDER"), Tricap Partners II L.P. as Administrative Agent (the "SECOND LIEN ADMINISTRATIVE AGENT") and Citicorp USA, Inc., as Collateral Agent for the Secured Parties; WHEREAS, on March 6, 2007, Herrick Foundation and Todd Herrick commenced an action against the Company and the Defendant Directors in the Circuit Court for the County of Lenawee, State of Michigan, Case No. 07-2525-CZ (the "STATE COURT ACTION"), requesting that the court declare as void and of no force or effect resolutions passed by the Board of Directors of the Company (the "BOARD") on February 28, 2007 increasing the size of the Board to seven members, amending the Company's bylaws, and removing Todd Herrick as Chairman of the Board, but having him remain as a Board member; WHEREAS, on March 15, 2007, the Company commenced an action against each of the Herrick Entities in the United States District Court for the Eastern District of Michigan, Case No. 2:07-cv-11144 (the "FEDERAL ACTION," and together with the State Court Action, the "GOVERNANCE LAWSUITS") requesting that the court declare certain shareholder voting rights of Herrick Foundation, the Herrick Trusts and Todd Herrick suspended, and enjoin the Herrick Entities from exercising those rights; WHEREAS, the Company, the Herrick Entities and the Defendant Directors have agreed to fully and finally settle all their disputes and claims with respect to the Governance Lawsuits, as set forth in this Settlement Agreement, which global settlement will be effected in the manner and subject to the conditions set forth herein; and WHEREAS, this Settlement Agreement is being executed in connection with (i) Amendment No. 5 (the "FIRST LIEN AMENDMENT") to that certain First Lien Credit Agreement, dated as of February 6, 2006 (as the same has heretofore been amended and as it may be further amended, supplemented or otherwise modified from time to time, the "FIRST LIEN CREDIT AGREEMENT"), among the Company, the financial institutions from time to time a party thereto as lenders (the "FIRST LIEN LENDER"), the financial institutions from time to time a party thereto as issuing banks (the "ISSUERS") and Citicorp USA, Inc., as administrative agent and collateral agent for the First Lien Lenders and the Issuers (in such capacities, the "FIRST LIEN ADMINISTRATIVE AGENT"), and (ii) Amendment No. 2 to the Second Lien Credit Agreement (the "SECOND LIEN AMENDMENT" and together with the First Lien Amendment, the "AMENDMENTS"), and it is a condition precedent to the effectiveness of each of the First Lien Amendment and the Second Lien Amendment that this Settlement Agreement be executed and delivered to the First Lien Administrative Agent and the Second Lien Administrative Agent, respectively; WHEREAS, the First Lien Lender, the First Lien Administrative Agent, the Second Lien Lender, and the Second Lien Administrative Agent (collectively, the "LENDER PARTIES"), have agreed to provide the Amendments for the benefit of the Company and its shareholders; WHEREAS, each of the Parties recognizes and is aware that a breach of this Settlement Agreement during the term of the First Lien Credit Agreement and the Second Lien Credit Agreement will constitute an "Event of Default" under each of the First Lien Credit Agreement and the Second Lien Credit Agreement; WHEREAS, each of the Parties has reviewed, or has had the opportunity to review, this Settlement Agreement with the assistance of their respective legal and financial advisors of their own choosing. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: Section 1. Composition of the Board. (a) Resignation of Todd Herrick. Upon execution of this Settlement Agreement, Todd Herrick will immediately resign from his current position as a member of the Board, and the Company and the Defendant Directors will cause the Company's Board of Directors to appoint Todd Herrick as "Chairman Emeritus" during the term of this Settlement Agreement, subject to his earlier death or resignation, with Board observer rights, including the right (but not the obligation) to attend and participate in all meetings of the Company's Board of Directors (but not the right to vote at any such meeting) and the right to receive all notices of Board and Board committee meetings and a copy of all materials provided to any Board member (other than materials provided to members of standing committees in existence as of the date of this Settlement Agreement and as to which Todd Herrick does not have observer rights) concurrently with the provision of the same to any Board member and in the same manner as provided to such Board member. 2 (b) Initial Five Member Board. The Board will initially be comprised of five members, as follows: (i) Messrs Risley, Banks and Kevin Sheehan will remain as independent directors. (ii) Kent Herrick will replace Todd Herrick as a member of the Board and shall be nominated and recommended by the Company for election as a director of the Company during the term of this Settlement Agreement (including, without limitation, at the 2007 Annual Meeting of Shareholders), subject only to his earlier death or resignation. (iii) Upon the execution of this Settlement Agreement, a search committee will be charged with immediately locating a director with restructuring experience reasonably acceptable to the independent members of the Board and who is not affiliated with AlixPartners. Upon the earliest of (1) 60 days following the appointment of the CEO, but in no event later than 120 days after the date of this Settlement Agreement, and (2) such time as a replacement director with restructuring experience and who is not affiliated with AlixPartners is appointed, Albert Koch will resign from his current position as a member of the Board and of all Board committees of which he is a member and from all other positions he holds with the Company or any of its Subsidiaries; provided, however, that Mr. Koch's director position must eventually be filled by a director with restructuring experience who is reasonably acceptable to the independent directors of the Board and in accordance with the Company's bylaws. (iv) Each Board member shall have the right to attend and participate in all meetings of the Company's Board of Directors and the right to receive all notices of Board and Board committee meetings and a copy of all materials provided to any Board member (other than materials provided to members of standing committees in existence as of the date of this Settlement Agreement as to which the receiving Board member is not a member) concurrently with the provision of the same to any Board member and in the same manner as provided to such Board member. (c) Expansion to Seven Member Board. Upon the hiring of a CEO, the Board will expand and be comprised of two additional members, for a total of seven members, for the term of this Settlement Agreement, as follows: (i) The CEO will be appointed to the Board and will become the Chairman of the Board. (ii) So long as, at the time of his appointment, Steven Lebowski qualifies as an "independent" director, Steven Lebowski will be appointed to the Board and shall be nominated and recommended by the Company for election as a director of the Company during 3 the term of this Settlement Agreement, subject only to his earlier death or resignation. The Company and the Defendant Directors acknowledge that, based on materials provided to date in support of Steven Lebowski's nomination to the Board, they are not aware of any facts and circumstances that would lead them to conclude that Mr. Lebowski is not "independent." The Parties agree, however, that between the date hereof and the time of his proposed appointment, Mr. Lebowski will meet with the members of the Board and provide any additional materials the Board reasonably requests. If, after receiving the requested information, the Board is unable to determine Mr. Lebowski's independence, the Parties agree to defer the matter to mutually acceptable counsel and, so long as an opinion of reputable counsel is delivered to the Company stating that it would be reasonable for the Board to conclude that Mr. Lebowski is independent, he shall be appointed to the Board. If Steven Lebowski is not determined to be "independent," Kent Herrick will propose two nominees to fill the seventh Board seat. The independent directors will select one of the proposed nominees, whose independence shall be determined in accordance with the protocol described in this paragraph. In the event such nominee is determined not to be independent, the nomination and independence determination process set forth in this paragraph recommences until such time as a candidate is appointed. (d) Conduct of Board Business. For the term of this Settlement Agreement all of the Company's business and affairs conducted by members of the Board of Directors as directors of the Company shall be conducted at meetings of the Board of Directors (or actions by unanimous written consent in lieu of such meetings), except for (i) business conducted through the standing committees of the Board of Directors in existence as of the date of this Settlement Agreement and consistent with their authority as of the date of this Settlement Agreement or (ii) business conducted by committees hereafter created upon unanimous Board approval (collectively, the "Permitted Committees"). For purposes of this provision, any committee appointed pursuant to section 1(b)(iii) of this Settlement Agreement (for the purpose of finding a replacement director with restructuring experience) shall be created by a majority vote of the Board of Directors and shall be included in the definition of Permitted Committees. Section 2. Management Roles. (a) CEO. The search for a CEO will continue and all information relating to potential candidates will be shared with all members of the Board. The selection of a CEO will be decided by a vote of the full five member Board as set forth in Section 1(b) hereto; provided, however, that the provisions of this Section 2(a) shall not be deemed to amend or otherwise alter the provisions of Section 7.14 of the Second Lien Credit Agreement. James Bonsall shall not be the CEO. 4 (b) AlixPartners. Mr. Bonsall will remain interim President and COO of the Company, and AlixPartners will continue to provide turnaround services to the Company, at the discretion of the Company's Board of Directors until such time as the CEO has been transitioned. Thereafter, the continued provision of services by Mr. Bonsall and AlixPartners to the Company, if any, will be subject to the discretion of the Company's Board of Directors and shall be conducted at the discretion of the CEO subject to the terms of the Company's agreement with AlixPartners. (c) Todd Herrick. The Parties agree that Todd Herrick will serve as a consultant to the Company in such capacity as to be determined by the new CEO, as applicable; provided, however, that Mr. Herrick will not be compensated for such consulting services, but will be entitled to reimbursement of all reasonable and documented expenses incurred in providing such services. (d) Kent Herrick. The Parties agree that the determination to rehire Kent Herrick and the capacity of such hiring will be decided by the CEO. If Kent Herrick is rehired, he will receive an agreement to provide him with a lump sum severance upon termination equal to one year's salary less any salary paid to him from the date he is rehired through the date of his termination, payable on termination. If the CEO has not hired Kent Herrick within three months of his appointment, Kent Herrick will be entitled to a lump sum severance payment equal to one year's salary as was in effect immediately prior to his January 19, 2007 termination date. Section 3. Dismissal of Governance Lawsuits. Immediately upon execution of this Settlement Agreement, the Company, the Director Defendants, Todd Herrick, Herrick Foundation, and the other Herrick Entities will dismiss, with prejudice, the Governance Lawsuits; provided, however, that nothing herein shall in any way limit the rights of any third parties, including shareholders, that are not parties to this Settlement Agreement. The Company and the Director Defendants acknowledge and agree that the Herrick Entities have the right to vote all of their voting shares in the Company with respect to all matters subject to a vote of shareholders of the Company. The Company and the Director Defendants agree not to claim or assert, or aid, assist or encourage any other person in claiming or asserting, based upon actions or events occurring on or before the date of this Settlement Agreement or based upon the existence, execution, delivery or performance of this Settlement Agreement, that any of the Herrick Entities' shares are not entitled to vote all or any part of their voting shares in the Company with respect to any or all matters subject to a vote of shareholders of the Company; provided, however, that such agreement shall in no way limit or in any way constitute a determination of the rights of any third parties, including shareholders, that are not parties to this Settlement Agreement. During the term of this Settlement Agreement, the Company and the Director Defendants agree not to take any action that is inconsistent with the terms of this Settlement Agreement. During the term of this Settlement Agreement, the Herrick Entities agree to vote for the slate of directors provided for herein in order to effectuate the terms of this Settlement Agreement. Section 4. Herrick Entities' Attorneys' Fees. The Company hereby agrees to pay the reasonable and documented attorneys' fees and other fees and expenses incurred by any of the Herrick Entities in connection with executing, delivering and performing this Settlement Agreement, pursuing any actions or proceedings related hereto and any nominations or notices of nominations of directors for election at the 2007 Annual Meeting of Shareholders, including the Governance Lawsuits, or consummating the transactions contemplated hereby; provided, however, that the total amount of attorneys' fees payable 5 under this Section 4 shall not exceed $300,000. Simultaneously with the execution of this Settlement Agreement, the Company shall pay its reasonable and documented outstanding invoices to Honigman Miller Schwartz and Cohn; provided, however, that the total amount of attorneys' fees payable under this Section 4 shall not exceed $90,000. Section 5. Covenant to Vote. During the term of this Settlement Agreement, the Herrick Entities and the Defendant Directors agree to exercise all of their respective voting rights in a manner consistent with the terms and conditions set forth in this Settlement Agreement. Section 6. Release of the Herrick Entities by the Company and the Director Defendants. Upon and following the resignation of Todd Herrick provided for in Section 1 hereto, and except with respect to the obligations expressly contained in this Settlement Agreement, each of the Director Defendants and the Company and, where appropriate, each of their respective directors, officers, managers, members, trustees, agents, employees, partners, shareholders, subsidiaries, successors, assigns, and other affiliates hereby release each of the Herrick Entities from any and all claims, demands, rights, actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, matters, indemnification claims, any claim arising out of issues of any kind or nature whatsoever, known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, with respect to, and in connection with, the matters specifically referenced in this Settlement Agreement, including, without limitation, the Amendments. Section 7. Release of the Defendant Directors by the Company and the Herrick Entities. Immediately upon execution of this Settlement Agreement, and except with respect to the obligations expressly contained in this Settlement Agreement, each of the Herrick Entities and the Company, and, where appropriate, each of their respective directors, officers, managers, members, trustees, agents, employees, partners, shareholders, subsidiaries, successors, assigns, and other affiliates hereby release the Defendant Directors from any and all claims, demands, rights, actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, matters, indemnification claims, any claim arising out of issues of any kind or nature whatsoever, known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, with respect to, and in connection with, the matters specifically referenced in this Settlement Agreement, including, without limitation, the Amendments. Section 8. Release of the Lender Parties by the Company and the Herrick Entities. In consideration for their willingness and agreement to enter into the Amendments for the benefit of the Company and its shareholders, each of the Herrick Entities and the Company, and, where appropriate, each of their respective directors, officers, managers, members, trustees, agents, employees, partners, shareholders, subsidiaries, successors, assigns, and other affiliates hereby release the Lender Parties from any and all claims, demands, rights, actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, matters, indemnification claims, any claim arising out of issues of any kind or nature whatsoever, known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, with respect to, and in connection with, the matters specifically referenced in this Settlement Agreement. Section 9. Covenant Not to Sue. Each of the releasing parties in Section 6, Section 7 and Section 8 agrees not to assert or bring any claim that is released in any of those 6 sections, and, in addition to any other remedy available to the released parties, agrees to pay all liabilities, losses and expenses (including, without limitation, attorneys' fees and costs of investigation) incurred by any released party as a result of any breach of this Section 9. Section 10. Non-Disparagement. Upon execution of this Settlement Agreement, throughout the term of this Settlement Agreement, and for 12 months thereafter, the Parties shall not make any disparaging statements in a public forum or to the media concerning the Company, its officers, directors, employees, attorneys, agents, or contracting parties, or its business or operations; provided, however, that this non-disparagement agreement shall not in any way prevent the Parties from disclosing any information to their attorneys or in response to a lawful subpoena or court order requiring disclosure of information; provided, further, however, that this non-disparagement agreement shall not in any way restrict the Parties or their agents in their statements to other directors or at meetings of the Company's Board of Directors, during their membership on the board. Section 11. Term. This Settlement Agreement shall terminate at the earlier of the conclusion of the 2008 Annual Shareholders Meeting and April 30, 2008; provided, however, that any provisions of this Settlement Agreement intended to survive such termination shall be binding on the Parties thereafter. Section 12. Condition Subsequent. It shall be a condition subsequent to the effectiveness of this Settlement Agreement that the Amendments are executed and delivered to the Company within ten business days of the date of this Agreement. Section 13. Governing Law; Jurisdiction. This Settlement Agreement shall be governed by, and construed in accordance with, the laws of the State of Michigan, regardless of the laws that might otherwise govern under applicable principles of conflict of laws of the State of Michigan. By execution and delivery of this Settlement Agreement, each of the Parties hereto hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Settlement Agreement or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, shall be brought in a federal court of competent jurisdiction in the United States District Court for the Eastern District of Michigan, if such court has subject matter jurisdiction. By execution and delivery of this Settlement Agreement, each of the Parties hereto hereby irrevocably accepts and submits to the nonexclusive jurisdiction of such courts, generally and unconditionally, with respect to any such action, suit or proceeding. Section 14. Notices. All demands, notices, requests, consents and communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or by courier service, messenger, facsimile or, if duly deposited in the mails, by certified or registered mail, postage prepaid-return receipt requested, and shall be deemed to have been duly given or made: (a) upon delivery, if delivered personally or by courier service or messenger, in each case with record of receipt; (b) upon transmission with confirmed delivery, if sent by facsimile or telecopy; or (c) when received after being sent by certified or registered mail, postage pre-paid, return receipt requested, to the following addresses or such other addresses as may be furnished hereafter by notice in writing, to the following Parties: 7 IF TO THE COMPANY: Attn: President and Chief Operating Officer Tecumseh Products Company 100 E. Patterson St. Tecumseh MI 49286 Facsimile: (517) 423-8619 with copies to: Attn: Paul M. Basta Kirkland & Ellis, LLP 153 E. 53rd Street New York, NY 10022-4611 Facsimile: 212-446-4900 IF TO THE HERRICK ENTITIES: Todd W. Herrick 261 Wildwood Circle Tecumseh, MI 49286-8706 Herrick Foundation c/o Michael Indenbaum c/o Honigman Miller Schwartz & Cohn LLP 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226-3506 Facsimile: 313.465.7633 Herrick Trusts c/o Michael Indenbaum c/o Honigman Miller Schwartz & Cohn LLP 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226-3506 Facsimile: 313.465.7633 Toni Herrick 7028 Foxmoor Court E. P.O. Box 19555 Kalamazoo, MI 49009 Kent Herrick 9693 Woodbend Saline, MI 48176 Michael Indenbaum c/o Honigman Miller Schwartz & Cohn LLP 8 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226-3506 Facsimile: 313.465.7633 in each case with copies to: Attn: Todd R. Mendel Barris, Sott, Denn & Driker, P.L.L.C. 211 West Fort Street, 15th Floor Detroit, MI 48226-3281 Facsimile: 313-965-2493 IF TO THE DEFENDANT DIRECTORS: Attn: Albert A. Koch c/o Alix Partners, LLC 2000 Town Center Southfield, MI 48075 Facsimile: 248-262-8491 Attn: Peter M. Banks 5602 Newanga Avenue Santa Rosa, CA 95405 Attn: David M. Risley 2710 Derby Road Ottawa Hills, OH 43615 in each case with copies to: Attn: Richard A. Chesley Paul Hastings Janofsky & Walker LLP 191 North Wacker Drive, 30th Floor Chicago, IL 60606 Facsimile: (312) 499-6150 Section 15. Entire Agreement. This Settlement Agreement constitutes the full and entire understanding and agreement among the Parties with regard to the subject matter hereof and supersedes all prior agreements with respect to the subject matter hereof. Section 16. Headings. The headings of the paragraphs and subparagraphs of this Settlement Agreement are inserted for convenience only and shall not affect the interpretation hereof. Section 17. Successors and Assigns. This Settlement Agreement is intended to bind and inure to the benefit of the Parties and their respective permitted successors and assigns. 9 Section 18. Covenant Not to Assign. The Parties hereby agree that no Party may assign, directly or indirectly, all or part of its rights or obligations under this Settlement Agreement without the prior written consent of each Party, which consent shall not be unreasonably withheld or delayed. Section 19. Specific Performance. Each Party hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Settlement Agreement will cause the other Parties to sustain damages for which such other Parties would not have an adequate remedy at law for money damages and, therefore, each Party hereto agrees that, in the event of any such breach, such other parties shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which such parties may be entitled at law or in equity. Section 20. Remedies Cumulative. All rights, powers and remedies provided under this Settlement Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power or remedy thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. Nothing herein shall impact the rights heretofore existing, if any, of Todd Herrick or Kent Herrick to receive pension and other benefits as a result of his prior employment with the Company, its subsidiaries or both. Moreover, nothing herein shall prohibit the Company, including any and all successors in interest, from asserting any defenses, objections or any other rights it may have with respect to any claim by Todd Herrick or Kent Herrick to receive such pension and other benefits. The Company and the Director Defendants are not presently aware of any defenses, objections or any other rights the Company may have with respect to any claim by Todd Herrick or Kent Herrick to receive such pension and other benefits. Section 21. No Waiver. The failure of any Party hereto to exercise any right, power or remedy provided under this Settlement Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such Party of its right to exercise any such or other right, power or remedy or to demand such compliance. Section 22. Counterparts. This Settlement Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Settlement Agreement. Delivery of an executed signature page of this Settlement Agreement by facsimile or email shall be as effective as delivery of a manually executed signature page of this Settlement Agreement. Section 23. Severability. Any provision of this Settlement Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction and any such prohibited or unenforceable provision shall be deemed reformed and construed so that it will be valid, legal and enforceable and not prohibited to the maximum extent permitted by applicable law. 10 Section 24. Third-Party Beneficiaries. Unless expressly stated herein, this Settlement Agreement shall be solely for the benefit of the Parties and no other person or entity shall be a third party beneficiary hereof. Section 25. Settlement Discussions. This Settlement Agreement is part of a proposed settlement of a dispute among the Parties. Nothing herein shall be deemed an admission of any kind. Pursuant to Federal Rule of Evidence 408 and any applicable state rules of evidence, this Settlement Agreement and all negotiations relating thereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce the terms of this Settlement Agreement. Section 26. Consideration. It is hereby acknowledged by the Parties hereto that, other than the agreements, covenants, representations and warranties set forth herein, no consideration shall be due or paid to any Party for its entry into this Settlement Agreement. Section 27. Receipt of Adequate Information; Representation by Counsel. Each Party acknowledges that it has received adequate information to enter into this Settlement Agreement and that it has been represented by counsel in connection with this Settlement Agreement and the transactions contemplated by this Settlement Agreement. Accordingly, any rule of law or any legal decision that would provide any party with a defense to the enforcement of the terms of this Settlement Agreement against such party shall have no application and is expressly waived. The provisions of the Settlement Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties. Section 28. Time of the Essence. Time is of the essence with respect to all provisions of this Settlement Agreement that specify a time for performance. [SIGNATURE PAGES FOLLOW] 11 IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Settlement Agreement as of the date first above written. TECUMSEH PRODUCTS COMPANY By: /s/ James Bonsall ------------------------------------ Name: James Bonsall Title: President and Chief Operating Officer 12 IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Settlement Agreement as of the date first above written. HERRICK FOUNDATION By: /s/ Todd W Herrick ------------------------------------ Name: Todd W. Herrick Title: Chairman TODD W. HERRICK, INDIVIDUALLY, AS TRUSTEE FOR THE HERRICK TRUSTS AND AS A MEMBER OF THE BOARD OF TRUSTEES OF HERRICK FOUNDATION /s/ Todd W. Herrick ---------------------------------------- TONI HERRICK, INDIVIDUALLY AND AS TRUSTEE FOR THE HERRICK TRUSTS /s/ Toni Herrick ---------------------------------------- KENT B. HERRICK, INDIVIDUALLY AND AS A MEMBER OF THE BOARD OF TRUSTEES OF HERRICK FOUNDATION /s/ Kent B. Herrick ---------------------------------------- MICHAEL INDENBAUM /s/ Michael Indenbaum ---------------------------------------- IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Settlement Agreement as of the date first above written. ALBERT A. KOCH By: /s/ Albert A. Koch ------------------------------------ PETER BANKS By: /s/ Peter Banks ------------------------------------ DAVID M. RISLEY By: /s/ David M. Risley ------------------------------------ EX-99.1 7 k13932exv99w1.txt PRESS RELEASE EXHIBIT 99.1 TECUMSEH PRODUCTS COMPANY ANNOUNCES AMENDMENTS TO ITS DOMESTIC CREDIT AGREEMENTS, AGREEMENT SETTLING LITIGATION WITH HERRICK GROUP TECUMSEH, Mich., April 10, 2007--Tecumseh Products Company (Nasdaq: TECUA, TECUB) ("Tecumseh" or the "Company") announced today that it has signed amendments to its First Lien and Second Lien Credit Agreements. Tecumseh had been in default under both its credit agreements since March 22, when its Brazilian engine manufacturing subsidiary filed a request for judicial restructuring under Brazilian law. As a result of the amendments, the Company is no longer in default, and will be able to continue implementing its business turnaround plan. The principal terms of the amendments are: - The lenders waived the cross default resulting from the Company's Brazilian engine subsidiary's filing for judicial restructuring and extended their deadline for the Company to provide audited 2006 financial statements to April 15, 2007. - The minimum cumulative adjusted EBITDA levels the Company is required to achieve (measured from October 1, 2006) through the third and fourth quarters of 2007 were reduced by $10 million and $20 million, respectively. As amended, the required levels (in millions) are:
Quarterly Period Ending First Lien Agreement Second Lien Agreement - ----------------------- -------------------- --------------------- December 31, 2006 ($14.9) ($16.9) March 31, 2007 ($8.0) ($10.0) June 30, 2007 $ 17.0 $ 15.0 September 30, 2007 $ 42.0 $ 40.0 December 31, 2007 $ 62.0 $ 60.0
- The interest rate on the Company's First Lien debt is increased by 0.25% per annum. - The Company will be required to pay 2.5% per annum in additional cash interest on its Second Lien debt if it fails to engage a new CEO by May 1, 2007 unless the failure is due to specified reasons. - Until Tecumseh appoints a new CEO, there are caps on the amounts of fees it can incur for financial advisors. - The limitation on the Company's capital expenditures is reduced by $12.7 million for 2007 and $17.7 million for 2008. - There are new limitations on the Company's ability to provide financial support to its Brazilian engine manufacturing facility. - The Brazilian compressor manufacturing facility is permitted to incur up to $40 million of additional secured debt. - In consideration of the amendments, the Company paid the First and Second Lien lenders cash fees totaling approximately $1.375 million, plus expenses, and issued a Class A share purchase warrant to the Second Lien lender. The Company also entered into a registration rights agreement with the Second Lien lender, which is described in more detail below. After giving effect to the amendments, the Company is currently in compliance with the covenants of both credit agreements. Achieving the level of financial performance that would support its lending arrangements, and that is required by the financial covenants, will depend on enhanced operational efficiency through a variety of initiatives, including customer price increases to cover increases in commodity costs, further employee headcount reductions, consolidation of productive capacity, and rationalization of various product platforms. While the Company is currently moving forward with these actions, there can be no assurance that any of these initiatives will be sufficient if certain risks continue to impede our progress. Those risks include currency fluctuations, weather, and the extent to which the Company may lose sales in reaction to higher product prices or adverse publicity. In the event that the Company fails to improve operational performance through these measures, its ability to raise additional funds through debt financing will be limited. The Company also continues to be concerned about the amount of debt it is carrying in this challenging operating environment and as it seeks to improve its financial performance. As a result, the Company is continuing to evaluate the feasibility of asset sales as a means to reduce our total indebtedness and to increase liquidity. CLASS A SHARE PURCHASE WARRANT On April 9, 2007, in consideration of its entering into the amendment to our Second Lien Credit Agreement described above, Tecumseh issued a Class A share purchase warrant to the Second Lien lender, Tricap Partners II L.P. Under the warrant, the Second Lien lender has the right to purchase 1,390,944 Class A shares directly from the Company, at any time during the warrant's five-year term, for a cash purchase price per share equal to 65% of the lowest closing price of the Class A common stock during the one-year period that began March 27, 2007. The warrant permits cashless exercise under a procedure by which the warrant holder could pay the exercise price by giving up some of the shares for which the warrant is being exercised, with those shares valued at the then current market price. If all the shares covered by the warrant were issued, they would constitute 9.4% of the Class A shares then outstanding and 7.0% of Tecumseh's then outstanding total common equity. REGISTRATION RIGHTS AGREEMENT On April 9, 2007, as required by the amendment to its Second Lien Credit Agreement described above, the Company entered into a registration rights agreement with its Second Lien lender, Tricap Partners II L.P. providing for registration under the Securities Act of 1933 of the Class A shares it may purchase under the warrant described above, as well as the Class A and Class B shares it may purchase on exercise of the options previously granted to it by Herrick Foundation and Herrick family trusts. The agreement provides the Second Lien lender with so- 2 called "piggyback" registration rights and the right to demand registration on a short-form S-3 registration statement. AGREEMENT SETTLING LITIGATION WITH HERRICK GROUP On April 2, 2007, Tecumseh signed a Settlement and Release Agreement settling the corporate governance disputes that had been the subject of two pending lawsuits. The agreement was subject to a condition subsequent that was satisfied by execution of the credit agreement amendments described above on April 9, 2007. The parties to the agreement are: Tecumseh Products Company; Herrick Foundation; Todd W. Herrick and Toni Herrick in their capacities as trustees of specified Herrick family trusts; Todd W. Herrick, Kent B. Herrick, and Michael Indenbaum in their capacities as members of the board of trustees of Herrick Foundation; Todd W. Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick in their individual capacities; and Albert A. Koch, Peter Banks, and David M. Risley in their capacities as directors of Tecumseh Products Company. The principal terms of the agreement are: - Board of directors - There will continue to be five directors until Tecumseh names a new permanent CEO. - Todd W. Herrick will resign from the board immediately and will become "Chairman Emeritus," with the right to attend board meetings and to receive materials distributed to the board, but with no vote. Todd W. Herrick will continue as "Chairman Emeritus" during the term of the settlement agreement, which continues until the earlier of the conclusion of the Company's 2008 annual meeting of shareholders or April 30, 2008. - The board will appoint Kent B. Herrick to fill the vacancy created by Todd W. Herrick's resignation. The board will continue to nominate Kent B. Herrick for re-election to the board during the term of the settlement agreement. - A search committee is to be charged with immediately locating a new director with restructuring experience reasonably acceptable to the independent members of the board and who is not affiliated with AlixPartners. Albert A. Koch will resign from the board by the earliest of: (1) the date this new director is appointed; (2) 60 days after the Company appoints its new CEO; or (3) July 31, 2007. - When the Company names a new permanent CEO, the board will be expanded to seven members. The new CEO will become a director and Chairman of the Board. At that time, the Company also will appoint Steven Lebowski to the board if he qualifies as an "independent director" under Nasdaq rules, and it will continue to nominate Mr. Lebowski for re-election to the board during the term of the settlement agreement. (If Mr. Lebowski does not qualify as an independent director, the Company must follow a process set forth in the settlement agreement to select and appoint another person selected by Kent B. Herrick who does qualify.) - Management - The search for a new permanent CEO will continue. Appointment of a new CEO must be approved by majority vote of the full five-member board. 3 - James J. Bonsall will continue in his current capacity as President and COO under Tecumseh's existing contract with his employer, AP Services, LLC, while the CEO search is in progress. - Todd W. Herrick will serve as a consultant to the Company in a capacity to be determined by its new CEO. He will not receive any compensation but will be entitled to reimbursement for reasonable and documented expenses. - When Tecumseh's new CEO is appointed, he or she will decide whether or not to rehire Kent B. Herrick and, if so, in what capacity. If Mr. Herrick is rehired, he will receive an agreement to provide him with a lump sum severance payment on termination equal to one year's salary less any salary paid to him from the date he is rehired through the date of his termination. If the new CEO has not rehired Mr. Herrick within three months after his or her appointment, Mr. Herrick will be entitled to a lump sum severance payment equal to one year's salary at the rate in effect when he was terminated from his position with the Company on January 19, 2007. - Other matters - The parties will dismiss their pending lawsuits. Tecumseh and its directors who were sued by Todd W. Herrick and related entities (Messrs. Banks, Koch, and Risley) agreed not to challenge the right of Mr. Herrick and those related entities to vote their shares and agreed that they have the right to vote all of their shares. - The Company agreed to reimburse Todd W. Herrick and related entities for their reasonable and documented expenses in connection with the lawsuits, the settlement agreement, and other specified matters, up to a maximum of $300,000. - Todd W. Herrick and related entities agreed to exercise their voting rights in a manner consistent with the terms of the agreement. - The various parties release each other and specified related persons from claims in connection with the matters referenced in the agreement. CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor provision created by that Act. In addition, forward-looking statements may be made orally in the future by or on behalf of the Company. Forward-looking statements can be identified by the use of terms such as "expects," "should," "may," "believes," "anticipates," "will," and other future tense and forward-looking terminology. Readers are cautioned that actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to i) changes in business conditions and the economy in general in both foreign and domestic markets; ii) the effect of terrorist activity and armed conflict; iii) weather conditions affecting demand for air conditioners, lawn and garden products, portable power generators and snow throwers; iv) the success of our ongoing effort to bring costs in line with projected production levels and product mix; v) financial market changes, including fluctuations in interest rates and foreign currency exchange rates; vi) economic trend factors such as housing starts; vii) emerging governmental regulations; viii) availability and cost of materials, particularly commodities, including steel, 4 copper and aluminum, whose cost can be subject to significant variation; ix) actions of competitors; x) the ultimate cost of resolving environmental and legal matters; xi) our ability to profitably develop, manufacture and sell both new and existing products; xii) the extent of any business disruption that may result from the restructuring and realignment of our manufacturing operations or system implementations, the ultimate cost of those initiatives and the amount of savings actually realized; xiii) the extent of any business disruption caused by work stoppages initiated by organized labor unions; xiv) the ability of the Company to maintain adequate liquidity in total and within each foreign operation; xv) potential political and economic adversities that could adversely affect anticipated sales and production in Brazil; xvi) potential political and economic factors that could adversely affect anticipated sales and production in India, including potential military conflict with neighboring countries; xvii) our ability to reduce a substantial amount of costs in the Engine & Power Train group associated with excess capacity; and xviii) the ongoing financial health of major customers. The forward-looking statements are made only as of the date of this report, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Contacts: Teresa Hess Director, Investor Relations Tecumseh Products Company 517-423-8455 teresa.hess@tecumseh.com Press releases and other investor information can be accessed via the Investor Relations section of Tecumseh Products Company's Internet web site at http://www.tecumseh.com. 5 -----END PRIVACY-ENHANCED MESSAGE-----