Tecumseh Products to recapitalize, convert all stock to one class; board election to be contested

New York, Feb. 25 - Tecumseh Products Co. said it plans a recapitalization that will convert all its common stock into a single class.

Current shares of class A common stock will be converted into one share of new voting common stock and current shares of class B common stock will be converted into 1.1 shares of new voting common stock.

Tecumseh's directors have approved the plan. It also needs the backing of a majority of holders of each of the class A and class B shares.

The directors also said they will recommend that at the 2009 annual meeting shareholders elect a slate unanimously recommended by the independent governance and nominating committee of the board. Tecumseh also said that the Herrick Foundation has notified the company that it plans to run a competing slate of nominees.

While the board voted in favor of the recapitalization, it was opposed by directors Kent Herrick and Steve Lebowski.

Tecumseh's board said it believes the recapitalization "will result in substantial benefits" to shareholders, including a closer alignment of economic interests and voting rights, greater trading volume, a simplified capital structure, a more attractive financing vehicle, an improved corporate governance profile and increased acceptance by institutional investors, and facilitating the ability of class B holders, including the Herrick Foundation and the other Herrick family interests, to dispose of their interests in the company.

Tecumseh plans to hold the annual meeting soon after the proxy filing and registration statement are declared effective by the Securities and Exchange Commission.

The board's governance and nominating committee was advised by executive recruiters Korn/Ferry International in choosing directors.

The board's recommended candidates are existing directors Edwin L. Buker, William E. Aziz, Jeffry N. Quinn and new nominees Leonard M. Anthony, David A. Bloss, William E Redmond, Jr. and Greg C. Smith.

Anthony is president and chief executive officer of Severstal Warren, Bloss is chairman of Circor International, Redmond is president and CEO of GenTek, and Smith is principal of consulting firm Greg C. Smith LLC.

Current directors Peter Banks and David Risley are not standing for re-election.

The board decided against proposing Steve Lebowski as a director "based on the number of highly qualified director candidates willing to serve on the board."

The board said it decided not to renominate Kent Herrick because, among other reasons, he and Todd Herrick have not cooperated with the company in its own investigation into allegations of possible anti-competitive practices in the compressor industry being conducted by the antitrust authorities of the United States, Brazil and European Commission.

Tecumseh said it believes the two Herricks have also refused to cooperate with the investigating antitrust authorities, despite its request that they do so.

On Feb. 12, the U.S. Department of Justice granted the company conditional amnesty and it entered into an agreement under which it will not be subject to criminal prosecution with respect to the investigation so long as it continues to comply with the DOJ's Corporate Leniency Policy. This requires, among other things, continued full cooperation in the investigation. The amnesty arrangement specifically excludes Todd Herrick and Kent Herrick, Tecumseh said.

Kent Herrick and Steve Lebowski have agreed to be part of the Herrick Foundation's competing slate along with Zachary Savas and Terence Seikel.

Tecumseh is an Ann Arbor, Mich., manufacturer of hermetically sealed compressors for residential and commercial refrigerators, freezers, water coolers, dehumidifiers, window air conditioning units and residential and commercial central system air conditioners and heat pumps.

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