Document:

<PAGE>

                                                                   EXHIBIT 10.23

                                FIRST AMENDMENT

                                      to

                     AMENDED AND RESTATED CREDIT AGREEMENT

                                     among

                         AMBAC ASSURANCE CORPORATION,

                                VARIOUS BANKS,

                             BANK OF AMERICA, NA,
                             as Syndication Agent,

                             THE BANK OF NEW YORK,
                            as Documentation Agent

                                      and

                      DEUTSCHE BANK AG, NEW YORK BRANCH,
                                   as Agent

                      __________________________________

                         Dated as of December 2, 1999

                      __________________________________
<PAGE>

                                FIRST AMENDMENT

          THIS FIRST AMENDMENT, dated as of December 2, 1999 (this "Amendment"),
                                                                    ---------
among AMBAC ASSURANCE CORPORATION, a Wisconsin stock insurance corporation (the
"Borrower"), the financial institutions which have executed this Amendment below
 --------
as Banks (as defined below), BANK OF AMERICA, NA, acting in its capacity as
Syndication Agent pursuant to Section 11 of the Original Credit Agreement (as
defined below), as amended hereby (in such capacity, the "Syndication Agent"),
                                                          -----------------
THE BANK OF NEW YORK, acting in its capacity as Documentation Agent pursuant to
Section 11 of the Original Credit Agreement, as amended hereby (in such
capacity, the "Documentation Agent"), and DEUTSCHE BANK AG, NEW YORK BRANCH,
               -------------------
acting in its capacity as Agent pursuant to Section 11 of the Original Credit
Agreement, as amended hereby (in such capacity, the "Agent").
                                                     -----

                             W I T N E S S E T H:
                             -------------------

          WHEREAS, the Borrower, certain of the Banks and the Agent are parties
to the Amended and Restated Credit Agreement, dated as of December 2, 1998, as
supplemented as of May 3, 1999 (the "Original Credit Agreement" and, as amended
                                     -------------------------
by this Agreement and from time to time hereafter amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"); and
                                           ----------------

          WHEREAS, at the request of the Borrower, the parties hereto have
agreed, upon the terms and subject to the conditions hereinafter set forth, to
extend the Expiry Date (as defined in the Credit Agreement), to increase the
aggregate Commitments of the Banks from $575,000,000 to $750,000,000 and modify
the Commitments (as defined in the Credit Agreement) of certain Banks, to
provide for the appointment of the Syndication Agent and the Documentation Agent
and otherwise to modify the Original Credit Agreement in certain respects;

          NOW, THEREFORE, IT IS AGREED:

                                   ARTICLE I

                       MODIFICATIONS TO CREDIT AGREEMENT

          Section 1.01.  Defined Terms.  Except as otherwise specified herein,
                         -------------
terms used in this Amendment and defined in the Credit Agreement shall have the
meanings provided therein.

          Section 1.02.  Extension of Expiry Date.  Section 3.04 of the Original
                         ------------------------
Credit Agreement is hereby amended to replace the date "December 2, 2005"
appearing therein with the date "December 2, 2006."

          Section 1.03.  Increase of Commitments.
                         -----------------------

               (a)  The aggregate Commitments of the Banks are hereby increased
     from $575,000,000 to $750,000,000, and the Commitments of the respective
     Banks and
<PAGE>

     the other information set forth in Schedule 1 to the Credit Agreement are
     hereby amended and restated to read as set forth on Schedule 1 to this
     Amendment.

               (b)  Each Bank which is a party hereto and is not a party to the
     Original Credit Agreement hereby (i) confirms that it has received a copy
     of the Original Credit Agreement and the other Credit Documents, together
     with copies of the financial statements referred to therein and such other
     documents and information as it has deemed appropriate to make its own
     credit analysis and decision to enter into the Credit Agreement; (ii)
     agrees that it will, independently and without reliance upon the Agent, the
     Syndication Agent, the Documentation Agent or any other Bank and based on
     such documents and information as it shall deem appropriate at the time,
     continue to make its own credit decisions in taking or not taking action
     under the Credit Agreement; (iii) agrees that it will perform in accordance
     with their terms all of the obligations which by the terms of the Credit
     Agreement are required to be performed by it as a Bank; and (iv) to the
     extent legally entitled to do so, agrees to provide to the Borrower on or
     before the Amendment Effective Date (as defined in Section 4.05 below) the
     forms described in the penultimate sentence of Section 12.04(b) of the
     Credit Agreement. The initial address for each such Bank for purposes of
     Section 12.03 of the Credit Agreement shall be as set forth opposite such
     Bank's signature to this Amendment.

          Section 1.04.  Section 10.03.  Section 10.03 of the Credit Agreement
                         -------------
is hereby amended and restated to read in its entirety as follows:

               "Section 10.03. Covenants. The Borrower or any of its
                               ---------
     Subsidiaries shall (i) default in the due performance or observance by it
     of any term, covenant or agreement contained in Section 8.01(e), 8.08,
     8.09, 8.10, 8.11, 8.12 or 9 hereof and such default shall continue
     unremedied for a period of 15 Business Days after written notice to the
     Borrower by the Agent or Bank, or (ii) default in the due performance or
     observance by it of any term, covenant or agreement (other than those
     referred to in Sections 10.01 and 10.02 and clause (i) of this Section
     10.03) contained in this Agreement and such default shall continue
     unremedied for a period of 30 days after written notice to the Borrower by
     the Agent or any Bank; or".

          Section 1.05.  Agents.  Section 11.01 of the Original Credit Agreement
                         ------
is hereby amended to add the following two paragraphs at the end thereof.

               "The Banks hereby designate Bank of America, NA as Syndication
     Agent to act as specified in the Credit Documents. Each Bank hereby
     irrevocably authorizes, and each holder of any Note by the acceptance of
     such Note shall be deemed irrevocably to authorize, the Syndication Agent
     to take such action on its behalf under the provisions of the Credit
     Documents and any other instruments and agreements referred to herein or
     therein and to exercise such powers and to perform such duties hereunder
     and thereunder as are specifically delegated to or required of the
     Syndication Agent by the terms hereof and thereof and such other powers as
     are reasonably incidental thereto. The Syndication Agent may perform any of
     its duties hereunder by or through its officers, directors, agents or
     employees. For purposes of Sections 11.02 through 11.08 hereof, the term

                                      -3-
<PAGE>

     "Agent" shall also include Bank of America, NA in its capacity as
     Syndication Agent.

               "The Banks hereby designate The Bank of New York as Documentation
     Agent to act as specified in the Credit Documents. Each Bank hereby
     irrevocably authorizes, and each holder of any Note by the acceptance of
     such Note shall be deemed irrevocably to authorize, the Documentation Agent
     to take such action on its behalf under the provisions of the Credit
     Documents and any other instruments and agreements referred to herein or
     therein and to exercise such powers and to perform such duties hereunder
     and thereunder as are specifically delegated to or required of the
     Documentation Agent by the terms hereof and thereof and such other powers
     as are reasonably incidental thereto. The Documentation Agent may perform
     any of its duties hereunder by or through its officers, directors, agents
     or employees. For purposes of Sections 11.02 through 11.08 hereof, the term
     "Agent" shall also include The Bank of New York in its capacity as
     Documentation Agent."

                                  ARTICLE II

                     CONDITIONS PRECEDENT TO EFFECTIVENESS

          This Amendment shall become effective as of the Amendment Effective
Date, subject to the satisfaction (or waiver by the Banks) of the following
conditions:

          Section 2.01.  No Default; Representations and Warranties.  There
                         ------------------------------------------
shall exist no Default or Event of Default, and all representations and
warranties set forth herein shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the Amendment Effective Date (or, in the case of any such
representation or warranty which expressly refers by its terms to a specified
date, as of such specified date).

          Section 2.02.  Execution of Amendment; Notes, etc.
                         -----------------------------------

               (a)  The Borrower, each Bank, the Agent, the Syndication Agent
     and the Documentation Agent shall have signed a copy hereof (whether the
     same or different copies) and shall have delivered the same to the Agent at
     its Notice Office.

               (b)  There shall have been delivered to each Bank having a new or
     modified Commitment pursuant to this Amendment a Note executed by the
     Borrower in the amount, maturity and as otherwise provided in the Credit
     Agreement.

               (c)  The Borrower, each Bank and the Agent shall have signed a
     copy of an amendment and restatement, dated as of the date of this
     Amendment, of the letter agreement, dated as of December 10, 1998, which
     was entered into pursuant to Section 3.01(a) of the Original Credit
     Agreement and sets forth the basis for the calculation of the Commitment
     Fees (such amendment and restatement, together with this Amendment and the
     additional Notes described in Section 2.02(b), the "Amendment Documents").
                                                         -------------------

                                      -4-
<PAGE>

          Section 2.03.  Opinions of Counsel.
                         -------------------

               (a)  The Agent shall have received an opinion addressed to it and
     the Banks and dated the Amendment Effective Date (i) from Stephen D. Cooke,
     Esq., Senior Vice-President and General Counsel of the Borrower covering
     the matters set forth in Exhibit A-1, (ii) from Shearman & Sterling,
     special New York counsel to the Borrower covering the matters set forth in
     Exhibit A-2, (iii) from DeWitt Ross & Stevens SC, special Wisconsin counsel
     to the Borrower covering the matters set forth in Exhibit A-3 [and (iv)
     from Sullivan & Worcester LLP, counsel to the Agent, in form and substance
     satisfactory to it].

               (b)  The Borrower shall have received an opinion addressed to
     each of the Borrower, Moody's and S&P and dated the Amendment Effective
     Date from counsel to each Bank having a new or modified Commitment pursuant
     to this Amendment, in form and substance satisfactory to each of them.

          Section 2.04.  Corporate Documents; Proceedings.
                         --------------------------------

               (a)  The Agent shall have received a certificate, dated the
     Amendment Effective Date, signed by the President or any Vice President of
     the Borrower, and attested to by the Secretary or any Assistant Secretary
     of the Borrower, in the form of Exhibit B with appropriate insertions,
     together with copies of the resolutions of the Borrower referred to in such
     certificate.

               (b)  All corporate and legal proceedings and all instruments and
     agreements in connection with the transactions contemplated in this
     Amendment and the other Credit Documents shall be satisfactory in form and
     substance to the Agent, and it shall have received all information and
     copies of all documents and papers, including records of corporate
     proceedings and governmental approvals, if any, which the Agent reasonably
     may have requested in connection therewith, such documents and papers where
     appropriate to be certified by proper corporate or governmental
     authorities.

          Section 2.05.  Adverse Change, Rating, etc.
                         ---------------------------

               (a)  Nothing shall have occurred (and no Bank shall have become
     aware of any facts or conditions not previously known) which such Bank
     shall reasonably determine has, or could reasonably be expected to have, a
     material adverse effect on the rights or remedies of such Bank, or on the
     ability of the Borrower to perform its obligations to such Bank or which
     has, or could reasonably be expected to have, a materially adverse effect
     on the business, operations, property, assets, liabilities or condition
     (financial or otherwise) of the Borrower.

               (b)  All necessary governmental (domestic and foreign) and third
     party approvals in connection with the transactions contemplated by this
     Amendment and the Credit Documents and otherwise referred to herein or
     therein shall have been obtained and remain in effect, and all applicable
     waiting periods shall have expired without any action being taken by any
     competent authority which restrains, prevents or imposes materially adverse
     conditions upon the consummation of the transactions contemplated

                                      -5-
<PAGE>

     hereby or by the Credit Documents and otherwise referred to herein or
     therein. Additionally, there shall not exist any judgment, order,
     injunction or other restraint issued or filed or a hearing seeking
     injunctive relief or other restraint pending or notified prohibiting or
     imposing materially adverse conditions upon the making of the Loans.

               (c)  On the Amendment Effective Date, the Borrower's Rating
     assigned by Moody's and S&P shall be Aaa and AAA, respectively.

          Section 2.06.  Litigation.  No litigation by any entity (private or
                         ----------
governmental) shall be pending or threatened with respect to this Amendment or
any Credit Document or any documentation executed in connection herewith or
therewith or the transactions contemplated hereby or thereby, or with respect to
any material Indebtedness of the Borrower or which any Bank shall determine
could reasonably be expected to have a materially adverse effect on the
business, operations, property, assets, liabilities or condition (financial or
otherwise) of the Borrower.

          Section 2.07.  Fees, etc.  The Borrower shall have paid to the Agent
                         ---------
and to the Banks all costs, fees and expenses (including, without limitation,
legal fees and expenses) payable to the Agent and/or the Banks to the extent
then due.

All of the certificates, legal opinions and other documents and papers referred
to in this Section 2, unless otherwise specified, shall have been delivered to
the Agent at its Notice Office.

                                  ARTICLE III

                  REPRESENTATIONS, WARRANTIES AND AGREEMENTS

          In order to induce the Agent, the Syndication Agent, the Documentation
Agent and the Banks to enter into this Amendment, the Borrower makes the
following representations, warranties and agreements as of the Amendment
Effective Date, which shall survive the execution and delivery of this Amendment
and the making of any Loans (it being understood and agreed that any
representation or warranty which expressly refers by its terms to a specified
date shall be required to be true and correct in all material respects only as
of such date):

          Section 3.01.  Corporate Power and Authority.  The Borrower has the
                         -----------------------------
corporate power to execute, deliver and perform the terms and provisions of the
Amendment Documents to which it is party and has taken all necessary corporate
action to authorize the execution, delivery and performance by it of each of
such Amendment Documents. The Borrower has, or in the case of the Amendment
Documents (other than this Amendment), by the Amendment Effective Date will
have, duly executed and delivered each of the Amendment Documents to which it is
party, and this Amendment constitutes and, when executed and delivered, each
other Amendment Document will constitute, its legal, valid and binding
obligation enforceable in accordance with its terms.

          Section 3.02.  No Violation.  Neither the execution, delivery or
                         ------------
performance by the Borrower of the Amendment Documents to which it is a party,
nor compliance by it with the terms and provisions thereof, (i) will contravene
any provision of any law, statute, rule or

                                      -6-
<PAGE>

regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Agreement) upon any of the property or assets of the Borrower or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement, loan agreement or any other agreement, contract or instrument
to which the Borrower or any of its Subsidiaries is a party or by which it or
any of its property or assets is bound or to which it may be subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws of the
Borrower or any of its Subsidiaries.

          Section 3.03.  Governmental Approvals.  No order, consent, approval,
                         ----------------------
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Amendment Effective
Date), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any Amendment Document to
which the Borrower is a party or (ii) the legality, validity, binding effect or
enforceability of any such Amendment Document.

          Section 3.04.  Financial Statements; Financial Condition.
                         -----------------------------------------

               (a)  The consolidated balance sheets of the Parent and its
     Subsidiaries at December 31, 1998 and March 31, 1999, June 30, 1999 and
     September 30, 1999 and the related consolidated statements, of operations
     and cash flows of the Parent and its Subsidiaries for the fiscal year or
     period, as the case may be, ended on such date and heretofore furnished to
     the Agent present fairly, subject, in the case of such balance sheets as at
     March 31, 1999, June 30, 1999 and September 30, 1999 and such statements of
     operations and cash flows for the three, six and nine months then ended,
     respectively, to year-end audit adjustments, the consolidated financial
     condition of the Parent and its Subsidiaries at such dates and the
     consolidated results of operations of the Parent and its Subsidiaries for
     the periods ended on such dates. All such financial statements have been
     prepared in accordance with generally accepted accounting principles and
     practices consistently applied, subject, in the case of such balance sheets
     as at March 31, 1999, June 30, 1999 and September 30, 1999 and such
     statements of operations and cash flows for the three, six and nine months
     then ended, respectively, to year-end audit adjustments. Since September
     30, 1999, there has been no material adverse change in the business,
     operations, property, assets or condition (financial or otherwise) of the
     Parent or of the Borrower and its Subsidiaries taken as a whole.

               (b)  The Borrower's annual statements and its financial
     statements as filed with the Department for the year ended December 31,
     1998 and its quarterly statements and financial statements as filed with
     the Department for the periods ended March 31, 1999, June 30, 1999 and
     September 30, 1999 heretofore furnished to the Agent present fairly,
     subject, in the case of such financial statements as at March 31, 1999,
     June 30, 1999 and September 30, 1999 and for the three, six and nine months
     then ended, respectively, to year-end audit adjustments, the financial
     condition of the Borrower as of the respective dates of such statements.
     Such annual and quarterly statements and

                                      -7-
<PAGE>

     financial statements were prepared in accordance with the statutory
     accounting principles set forth in the Wisconsin Insurance Law, all of the
     assets described therein were the absolute property of the Borrower at the
     dates set forth therein, free and clear of any liens or claims thereon,
     except as therein stated, and each such annual statement is a full and true
     statement of all the assets and liabilities and of the condition and
     affairs of the Borrower as of December 31 of the year covered thereby and
     of its income and deductions therefrom for the year ended on such date.
     Since September 30, 1999, there has been no material adverse change in the
     business, operations, property, assets or condition (financial or
     otherwise) of the Borrower or the Borrower and its Subsidiaries taken as a
     whole.

          Section 3.05.  Covered Portfolio.  Substantially all of the Insured
                         -----------------
Obligations in the Covered Portfolio on the Amendment Effective Date were
insured by the Borrower under Insurance Contracts in the form or forms
heretofore supplied to the Agent in accordance with the Borrower's underwriting
criteria. The Borrower has no reason to believe that its rights included among
the Collateral are not valid and binding against the obligors thereunder in
accordance with their respective terms, except insofar as enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and the availability of equitable
remedies, except for such Collateral which, in the aggregate, could not
reasonably be expected to have a material adverse effect on the right and
ability of the Collateral Agent, in accordance with the Security Agreement, to
realize upon the Collateral as a whole.

          Section 3.06.  Confirmation of Representations and Warranties.  The
                         ----------------------------------------------
Borrower hereby confirms that its representations and warranties set forth in
the Credit Documents to which it is a party are true and correct in all material
respects as of the date hereof (or, in the case of any representation or
warranty set forth in any Credit Document which expressly refers by its terms to
a specified date, as of such specified date).

                                  ARTICLE IV

                                 MISCELLANEOUS

          Section 4.01.  Credit Agreement.  Except as expressly modified as
                         ----------------
contemplated hereby, the Credit Agreement and the other Credit Documents are
hereby confirmed to be in full force and effect in accordance with their
respective terms. This Amendment is intended by the parties to constitute an
amendment and modification to, and otherwise to constitute a continuation of,
the Credit Agreement and the Credit Documents, and is not intended by any party
and shall not be construed to constitute a novation thereof or of any
Indebtedness of the Borrower thereunder. For purposes of the Credit Agreement
and the other Credit Documents, the term "Banks" shall include each party which
has executed this Amendment below as a Bank, and the term "Credit Documents"
shall include this Amendment.

          Section 4.02.  Survival.  All covenants, agreements, representations
                         ---------
and warranties made herein or in any Credit Document or in any certificate,
document or instrument delivered pursuant hereto or thereto shall survive the
effective date hereof, the making of any Loan and the occurrence of the Expiry
Date and shall continue in full force and effect so long as

                                      -8-
<PAGE>

principal of or interest on any Loan or Note remains outstanding or unpaid, any
other amount payable by the Borrower under the Credit Agreement, any Note or any
other Credit Document remains unpaid or any other obligation of the Borrower to
perform any other act hereunder or under the Credit Agreement, any Note or any
other Credit Document remains unsatisfied or the Banks have any obligation to
make a Loan or any other advance of moneys to the Borrower under the Credit
Agreement.

          Section 4.03.  Governing Law.  This Amendment and the rights and
                         -------------
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the State of New York.

          Section 4.04.  Counterparts.  This Amendment may be executed in any
                         ------------
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.

          Section 4.05.  Effectiveness.  This Amendment shall become effective
                         -------------
as of December 2, 1999 (the "Amendment Effective Date") when the Borrower, the
                             ------------------------
Banks, the Agent, the Syndication Agent and the Documentation Agent shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Agent at its Notice Office and the conditions set
forth in Section 2 shall have been satisfied or waived by the Banks, as
evidenced by a written notice by the Agent to the Borrower confirming that the
Agreement has become effective and setting forth the Amendment Effective Date.
In the event that such written notice shall not have been delivered on or before
December 10, 1999, the provisions of this Amendment shall become and be null and
void.

          Section 4.06.  Headings Descriptive.  The headings of the several
                         --------------------
sections and subsections of this Amendment are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Amendment.

          Section 4.07.  Amendment or Waiver.  Neither this Amendment nor any
                         -------------------
terms hereof may be changed, waived, discharged or terminated except as provided
in Section 12.12 of the Credit Agreement.

                                      -9-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.

                                    AMBAC ASSURANCE CORPORATION

                                    By /s/ Robert W. Starr
                                      --------------------
                                       Name:
                                       Title: FVP & Treasurer

                                    LANDESBANK HESSEN-THURINGEN
                                      GIROZENTRALE

                                    By /s/ Lisa S. Pent
                                      -----------------
                                       Name:
                                       Title: Senior Vice President, Manager

                                    By /s/ John A. Sarno
                                      ------------------
                                       Name:
                                       Title: Vice President, Portfolio Manager

                                    COOPERATIEVE CENTRALE
                                      RAIFFEISEN-BOERENLEENBANK
                                      B.A., "RABOBANK NEDERLAND",
                                      NEW YORK BRANCH

                                    By /s/ W. Pieter C. Kodde
                                      -----------------------
                                       Name:
                                       Title: Senior Vice President

                                    By /s/ Angela R. Reilly
                                      ---------------------
                                       Name:
                                       Title: Vice President

                                      -10-
<PAGE>

                                    BAYERISCHE LANDESBANK
                                     GIROZENTRALE

                                    By /s/ Scott M. Allison
                                      ---------------------
                                       Name:
                                       Title: First Vice President

                                    By /s/ Alexander Kohnert
                                      ----------------------
                                       Name:
                                       Title: First Vice President

                                    WESTDEUTSCHE LANDESBANK
                                     GIROZENTRALE, NEW YORK
                                     BRANCH

                                    By /s/ Lillian T. Lum
                                      -------------------
                                       Name:
                                       Title: Director

                                    By /s/ Anne T. McKenna
                                      --------------------
                                       Name:
                                       Title: Vice President

535 Madison Avenue                  LANDESBANK BADEN-
New York, New York 10022                WURTTEMBERG, NEW YORK
Attention:  Franz Waas                  BRANCH
Telecopy:  (212) 584-1702
                                    By______________________________
                                       Name:
                                       Title:

                                    By /s/ Orly Watson
                                      ----------------
                                       Name:
                                       Title: Vice President

                                    FIRST UNION NATIONAL BANK
                                     OF NORTH CAROLINA

                                    By /s/ Thomas L. Stitchberry
                                      --------------------------
                                       Name:
                                       Title: Senior Vice President

                                      -11-
<PAGE>

                                    KBC BANK N.V.

                                    By /s/ Patrick L. Owens
                                      ---------------------
                                       Name:
                                       Title: Vice President

                                    By /s/ Robert Snauffer
                                      --------------------
                                       Name:
                                       Title: First Vice President

                                    LLOYDS TSB BANK PLC (formerly
                                     known as Lloyds Bank PLC)

                                    By /s/ Louise Miller
                                      ------------------
                                       Name:
                                       Title: Assistant VP, Structured Finance

                                    THE CHASE MANHATTAN BANK

                                    By /s/ Robert A. Fester
                                      ---------------------
                                       Name:
                                       Title: Vice President

222 Broadway                        BARCLAYS BANK PLC
New York, New York 10038
Attention:  Richard Herder
                                    By /s/ Richard Herder
                                      -------------------
                                       Name:
                                       Title: Director

                                      -12-
<PAGE>

                                    BANK OF AMERICA, NA (formerly,
                                     known as Nationsbank, N.A.), individually
                                     and as Syndication Agent

                                    By /s/ Joan L. D'Amico
                                      --------------------
                                       Name:
                                       Title: Principal

Insurance Division                  THE BANK OF NEW YORK,
One Wall Street, 17/th/ Floor           Individually and as Documentation Agent
New York, New York 10288
Attention:  Andrew Pollard
Telecopy:  (212) 809-9520           By /s/ Andrew J. Pollard
                                      ----------------------
                                       Name:
                                       Title: Vice President

                                    DEUTSCHE BANK AG,
                                     NEW YORK BRANCH,
                                     Individually and as Agent

                                    By /s/ George-Ann Tobin
                                      ---------------------
                                       Name:
                                       Title: Managing Director

                                    By /s/ John S. McGill
                                      -------------------
                                       Name:
                                       Title: Director

                                      -13-
<PAGE>

                                                                      SCHEDULE 1
                                                              TO FIRST AMENDMENT

                                  COMMITMENTS
                                  -----------

                                    PART A
                                  Commitments
                                  -----------

<TABLE>
<CAPTION>
Name                                                                                    Commitment
----                                                                                    ----------

<S>                                                                                  <C>
Landesbank Hessen-Thuringen Girozentrale                                             $110,000,000.00
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,                                  80,000,000.00
 "Rabobank Nederland", New York Branch
The Bank of New York                                                                   75,000,000.00
Bayerische Landesbank Girozentrale                                                     75,000,000.00
Westdeutsche Landesbank Girozentrale, New York Branch                                  75,000,000.00
Deutsche Bank AG, New York Branch                                                      70,000,000.00
Landesbank Baden-Wurttemburg, New York Branch                                          50,000,000.00
Bank of America, NA                                                                    45,000,000.00
First Union National Bank of North Carolina                                            40,000,000.00
KBC Bank N.V.                                                                          40,000,000.00
Lloyds TSB Bank PLC                                                                    35,000,000.00
The Chase Manhattan Bank                                                               30,000,000.00
Barclays Bank PLC                                                                      25,000,000.00
                                                                                     ---------------
  Total                                                                              $750,000,000.00
</TABLE>
<PAGE>

                                    PART B

                                 Part B Banks
                                 ------------

Name
----

Bank of America, NA
The Bank of New York
Barclays Bank PLC
The Chase Manhattan Bank
Deutsche Bank AG, New York Branch
First Union National Bank of North
  Carolina
KBC Bank N.V.
Lloyds TSB Bank PLC
Westdeutsche Landesbank Girozentrale,
  New York Branch

                                     (ii)
<PAGE>

                                    PART C
                      Part C Banks/Contingent Commitments
                      -----------------------------------

Name                                                           Commitment
----                                                           ----------

Bayerische Landesbank Girozentrale                        $100,000,000.00
Cooperatieve Centrale Raiffeisen-                           66,500,000.00
 Boerenleenbank B.A., "Rabobank                             -------------
  Nederland", New York Branch
                       Total                              $166,500,000.00

                                     (iii)
<PAGE>

                                                                     EXHIBIT A-1
                                                              TO FIRST AMENDMENT

           Form of Opinion of Senior General Counsel of the Borrower
           ---------------------------------------------------------
<PAGE>

                                                                     EXHIBIT A-2
                                                              TO FIRST AMENDMENT

                    Form of Opinion of Shearman & Sterling
                    --------------------------------------
<PAGE>

                                                                     EXHIBIT A-3
                                                              TO FIRST AMENDMENT

                  Form of Opinion of DeWitt Ross & Stevens SC
                  -------------------------------------------
<PAGE>

                                                                       EXHIBIT B
                                                              TO FIRST AMENDMENT

                          AMBAC ASSURANCE CORPORATION

                             Officers' Certificate

          I, the undersigned, Executive Vice President and Chief Financial
Officer of Ambac Assurance Corporation, a Wisconsin stock insurance corporation
(the "Borrower"), DO HEREBY CERTIFY that:

          1.   This Certificate is furnished pursuant to Section 2.04(a) of the
First Amendment, dated December 2, 1999 (the "First Amendment"), to the Amended
and Restated Credit Agreement, dated as of December 2, 1998, among the Borrower,
various Banks, Bank of America, NA, as Syndication Agent, The Bank of New York,
as Documentation Agent, and Deutsche Bank AG, New York Branch, as Agent (such
Credit Agreement, as in effect on the date of this Certificate, being herein
called the "Credit Agreement"). Unless otherwise defined herein capitalized
terms used in this Certificate have the meanings assigned to those terms in the
Credit Agreement.

          2.   The persons named below have been duly elected, have duly
qualified as and at all times since ____________, 1999 (to and including the
date hereof) have been officers of the Borrower, holding the respective offices
below set opposite their names, and the signatures below set opposite their
names are their genuine signatures.

     Name                         Office                         Signature
  ----------                  -------------                    -------------
Frank J. Bivona       Executive Vice President and Chief
                         Financial Officer                 ____________________

Stephen D. Cooke      Senior Vice President, General
                         Counsel and Secretary             ____________________

Robert W. Starr       First Vice President and Treasurer   ____________________

          3.   There have been no amendments adopted to the Borrower's Restated
Articles of Incorporation or By-laws since December 2, 1998, and the copies
thereof attached to the certificate, dated December 2, 1998 and delivered to the
Agent pursuant to Section 5.04(a) of the Credit Agreement, remain true and
correct copies thereof.

          4.   Attached hereto as Annex A is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Borrower at a meeting
on October 27, 1999, at which a quorum was present and acting throughout, which
resolutions have not been revoked, modified, amended or rescinded and are still
in full force and effect. Except as attached hereto as Annex A, no resolutions
have been adopted by the Board of Directors of the Borrower which deal with
<PAGE>

the execution, delivery or performance of any of the Credit Documents, other
than as may have been superseded or replaced by the resolutions attached hereto.

          5.   On the date hereof, the representations and warranties contained
in Article 3 of the First Amendment are true and correct.

          6.   On the date hereof, no Default or Event of Default has occurred
and is continuing.

          7.   I know of no proceeding for the dissolution or liquidation of the
Borrower or threatening its existence.

          IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
December, 1999.

                                   AMBAC ASSURANCE CORPORATION

                                   _________________________________________
                                   Name:  Frank J. Bivona
                                          Executive Vice President and Chief
                                          Financial Officer

                                      B-2
<PAGE>

I, the undersigned, Secretary of the Borrower, DO HEREBY CERTIFY that:

          1.   Frank J. Bivona is the duly elected and qualified Executive Vice
President and Chief Financial Officer of the Borrower and the signature above is
his genuine signature.

          2.   The certifications made by Frank J. Bivona in items 2, 3 and 4
above are true and correct.

          3.   I know of no proceeding for the dissolution or liquidation of the
Borrower or threatening its existence.

          IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
December, 1999.

                                 AMBAC ASSURANCE CORPORATION

                                 ______________________________________
                                 Name:   Stephen D. Cooke
                                 Title:  Senior Vice President, General
                                         Counsel and Secretary

                                      B-3<PAGE>

                                                                   EXHIBIT 10(c)

                                SECOND AMENDMENT
          TO FIFTH AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT

     Second Amendment dated as of December 31, 1999 to Fifth Amended and
Restated Multicurrency Credit Agreement (the "Amendment"), by and among
KOLLMORGEN CORPORATION, a New York corporation (the "Company"), PMI MOTION
TECHNOLOGIES GmbH, a German limited liability company ("PMI GmbH"), BANKBOSTON,
N.A. and the other lending institutions listed on Schedule 1 to the Credit
                                                  ----------
Agreement (as hereinafter defined) (collectively, the "Banks"), ABN AMRO Bank,
N.V., as the fronting bank (the "Fronting Bank") and BANKBOSTON, N.A., as agent
for the Banks and the Fronting Bank (in such capacity, the "Agent"), amending
certain provisions of the Fifth Amended and Restated Multicurrency Credit
Agreement dated as of September 30, 1997 (as amended and in effect from time to
time, the "Credit Agreement") by and among the Company, PMI GmbH, the Banks, the
Fronting Bank and the Agent.  Terms not otherwise defined herein which are
defined in the Credit Agreement shall have the same respective meanings herein
as therein.

     WHEREAS, the Company, PMI GmbH, the Fronting Bank, and the Banks have
agreed to modify certain terms and conditions of the Credit Agreement as
specifically set forth in this Amendment;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     (S)1.  Amendment to (S)1 of the Credit Agreement.  Section 1.1 of the
            --------- -- ---- -- --------------------
Credit Agreement is hereby amended as follows:

     (a)  the definition of "Applicable Margin" is hereby amended by deleting
such definition in its entirety and substituting in place thereof the following
definition:

          Applicable Margin.  For each period commencing on an Adjustment Date
          -----------------
     through the date immediately preceding the next Adjustment Date (each a
     "Rate Adjustment Period"), the Applicable Margin shall be the applicable
     margin set forth below with respect to the Company's Leverage Ratio, as
     determined for the fiscal period of the Company ending immediately prior to
     the applicable Rate Adjustment Period.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                   Base Rate         Eurodollar and                             Letter of
    Tier          Leverage Ratio                     Loans         Eurocurrency Rate       Commitment Fees     Credit Fees
                                                                         Loans
==============================================================================================================================
<C>           <S>                                   <C>                     <C>                  <C>           <C>
    1         Less than 2.00:1.00                      0%                   0.75%                .250%           0.75%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                   Base Rate         Eurodollar and                             Letter of
    Tier          Levarage Ratio                     Loans         Eurocurrency Rate       Commitment Fees     Credit Fees
                                                                          Loans
==============================================================================================================================
<C>          <S>                                   <C>             <C>                     <C>                 <C>
------------------------------------------------------------------------------------------------------------------------------
    2         Less than 2.50:1.00 but greater
              than or equal to 2.00:1.00               0%                   1.00%                .250%           1.00%

------------------------------------------------------------------------------------------------------------------------------
    3         Less than 3.00:1.00 but greater
              than or equal to 2.50:100                0%                   1.25%                .375%           1.25%

------------------------------------------------------------------------------------------------------------------------------
    4         Less than 3.25:1.00 but greater
              than or equal to 3.00:100              .25%                   1.50%                .375%           1.50%

------------------------------------------------------------------------------------------------------------------------------
    5         Less than 3.75:1.00 but greater        .50%                   1.75%                .500%           1.75%
              than or equal to 3.25:1.00

------------------------------------------------------------------------------------------------------------------------------
    6         Less than 4.25:.100 but greater        1.00%                  2.25%                .500%           2.25%
              than or equal to 3.75:1.00
------------------------------------------------------------------------------------------------------------------------------
    7         Less than 4.75:1.00 but greater        1.50%                  2.75%                .500%           2.75%
              than or equal to 4.25:1.00
------------------------------------------------------------------------------------------------------------------------------
    8         Greater than or equal to 4.75:1.00     2.00%                  3.25%                .500%           3.25%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

          Notwithstanding the foregoing, (a) for Loans outstanding and the
     commitment fee and Letter of Credit fees payable during the period
     commencing on January 1, 2000 through the date immediately preceding the
     first Adjustment Date to occur after the fiscal quarter ending March 31,
     2000, the Applicable Margin shall be the applicable margin set forth in
     Tier 6 and (b) if the Company fails to deliver any Compliance Certificate
     pursuant to (S)9.4(c) hereof then, for the period commencing on the
     Adjustment Date to occur subsequent to such failure through the date
     immediately following the date on which such Compliance Certificate is
     delivered, the Applicable Margin shall be the highest Applicable Margin set
     forth above.

     (b)  the definition of "Consolidated Debt Service" is hereby amended by
inserting immediately at the end of the text of such definition  the words
"provided, however, when calculating Consolidated Debt Service for any period in
 --------  -------
which a Permitted Acquisition has occurred, the calculation of Consolidated Debt
Service shall be made on a Pro Forma Basis".

     (c)  the definition of "Consolidated Net Income" is hereby amended by
inserting immediately after the words "extraordinary gains" the words "or
losses".

     (d)  the definitions of "Guarantors" and "Guaranty" are each hereby amended
by deleting such definitions in their entirety and restating them as follows:

          Guarantors.  Collectively, all Domestic Subsidiaries of the Company.
          ----------
     As of December 31, 1999 the Guarantors shall be KODC, Proto-Power,
     Kollmorgen Securities Corporation, Kollmorgen Magnedyne Corporation and
     Kollmorgen International LLC.

          Guaranty.  The Guaranty, dated or to be dated on or prior to December
          --------
     31, 1999, made by the Guarantors in favor of the Banks and the Agent
     pursuant to which such Guarantors guarantee to the Banks and the Agent the
     payment and performance of the Obligations and in form and substance
     satisfactory to the Agent.
<PAGE>

     (e)  the definition of "Leverage Ratio" is hereby amended by inserting
immediately at the end of the text of such definition the words "provided,
                                                                 --------
however, when calculating the Leverage Ratio for any period in which a Permitted
-------
Acquisition has occurred, the calculation of the Leverage Ratio shall be made on
a Pro Forma Basis".

     (f)  the definition of "Loan Documents" is hereby amended by deleting the
words "the Guaranty" which appears in such definition and substituting in place
thereof the words "the Security Documents"

     (g)  Section 1.1 of the Credit Agreement is further amended by inserting
the following definitions in the appropriate alphabetical order:

          Collateral. All of the property, rights and interests of the Company
          ----------
     and its Domestic Subsidiaries that are or are intended to be subject to the
     security interests and mortgages created by the Security Documents.

          Perfection Certificates. The Perfection Certificates as defined in the
          -----------------------
     Security Agreements.

          Permitted Acquisition.  See (S)10.5(a).
          ---------------------

          Pro Forma Basis.  Following a Permitted Acquisition, the Consolidated
          ---------------
     Debt Service and EBITDA for the fiscal quarter in which such Permitted
     Acquisition occurred and each of the three fiscal quarters immediately
     following such Permitted Acquisition being calculated with reference to the
     audited historical financial results of the Person so acquired (or, to the
     extent such financial results are unaudited, such unaudited results shall
     have been prepared in a manner which is reasonably acceptable to the Agent)
     and the Company and its Subsidiaries for the applicable Test Period after
     giving effect on a pro forma basis to such Permitted Acquisition and
     assuming that such Permitted Acquisition had been consummated at the
     beginning of such Test Period in the manner described in (i), (ii) and
     (iii) below:

               (i) all Indebtedness (whether under this Credit Agreement or
          otherwise) and any other balance sheet adjustments incurred or made in
          connection with the Permitted Acquisition shall be deemed to have been
          incurred or made on the first day of the Test Period, and all
          Indebtedness of the Person acquired or to be acquired in such
          Permitted Acquisition which was or will have been repaid in connection
          with the consummation of the Permitted Acquisition shall be deemed to
          have been repaid concurrently with the incurrence of the Indebtedness
          incurred in connection with the Permitted Acquisition;
<PAGE>

               (ii) all Indebtedness assumed to have been incurred pursuant to
          the preceding clause (i) shall be deemed to have borne interest at the
          sum of (a) the arithmetic average of (x) the Eurocurrency Rate for
          Eurocurrency Rate Loans having an Interest Period of one month in
          effect on the first day of the Test Period and (y) the Eurocurrency
          Rate for Eurocurrency Rate Loans having an Interest Period of one
          month in effect on the last day of the Test Period plus (b) the
                                                             ----
          Applicable Margin for Revolving Credit Loans then in effect (after
          giving effect to the Permitted Acquisition on a Pro Forma Basis); and
                                                          ---------

               (iii)  other reasonable cost savings, expenses and other income
          statement or operating statement adjustments which are attributable to
          the change in ownership and/or management resulting from such
          Permitted Acquisition as may be approved by the Agent in writing
          (which approval shall not be unreasonably withheld) shall be deemed to
          have been realized on the first day of the Test Period.

          Security Agreements. The several Security Agreements, dated or to be
          -------------------
     dated on or prior to December 31, 1999, between the Company and its
     Domestic Subsidiaries and the Agent and in form and substance satisfactory
     to the Agent.

          Security Documents.  The Guaranty, the Security Agreements, the Stock
          ------------------
     Pledge Agreements and all other instruments and documents, including
     without limitation Uniform Commercial Code financing statements, required
     to be executed or delivered pursuant to any Security Document.

          Acquisition.  The acquisition by the Company or any Subsidiary of the
          -----------
     capital stock or certain assets of                 , on terms and
     conditions acceptable to the Agent.

          Stock Pledge Agreements. Collectively, (a) the Stock Pledge Agreement,
          -----------------------
     dated or to be dated on or prior to December 31, 1999 between the Company
     and the Agent and in form and substance satisfactory to the Agent; (b) the
     Pledge Agreement, dated or to be dated on or prior to December 31, 1999
     between the Company, and the Agent, and in form and substance satisfactory
     to the Agent; (c) the Stock Pledge Agreement, dated or to be dated on or
     prior to December 31, 1999 between KODC and the Agent and in form and
     substance satisfactory to the Agent; and (d) the various pledge agreements
     between KODC and the Agent as to the capital stock of Kollmorgen Artus and
     PMI, each dated or to be dated on or prior to February 29, 2000, and in
     form and substance satisfactory to the Agent.
<PAGE>

          Test Period.  The period of all fiscal quarters (and any portion of a
          -----------
     fiscal quarter) being tested in any covenant calculation period prior to
     the date of such Permitted Acquisition as set forth in the definition of
     Pro Forma Basis.

     (S)2.  Amendment to (S)7 of the Credit Agreement.  Section 7 of the Credit
            --------- -- ---- -- --------------------
Agreement is hereby amended by inserting immediately after the text of (S)7.8
the following:
            7.8  Security of Company. The Obligations shall be secured by a
                 -------------------
     perfected first priority security interest (subject only to Permitted Liens
     entitled to priority hereunder or under applicable law) in all of the
     assets of the Borrower, whether now owned or hereafter acquired, pursuant
     to the terms of the Security Documents to which the Borrower is a party.

            7.9 Guaranties and Security of Subsidiaries. The Obligations shall
                ---------------------------------------
     also be guaranteed pursuant to the terms of the Guaranty. The obligations
     of the Domestic Subsidiaries under the Guaranty shall be in turn secured by
     a perfected first priority security interest (subject only to Permitted
     Liens entitled to prioity hereunder or under applicable law) in all of the
     assets of each such Subsidiary, whether now owned or hereafter acquired,
     pursuant to the terms of the Security Documents to which such Subsidiary is
     a party.

     (S)3.  Amendment to (S)8 of the Credit Agreement.  Section 8 of the Credit
            --------- -- ---- -- --------------------
Agreement is hereby amended by inserting immediately after the text of (S)8.22
the following:

            8.23 Perfection of Security Interest. All filings, assignments,
                 -------------------------------
          pledges and deposits of documents or instruments have been made and
          all other actions have been taken that are necessary or advisable,
          under applicable law, to establish and perfect the Agent's security
          interest in the Collateral. The Collateral and the Agent's rights with
          respect to the Collateral are not subject to any setoff, claims,
          withholdings or other defenses. The Company or a Subsidiary of the
          Company party to one of the Security Agreements is the owner of the
          Collateral free from any lien, security interest, encumbrance and any
          other claim or demand, except for Permitted Liens.

     (S)4.  Amendment to (S)9 of the Credit Agreement.  Section 9 of the Credit
            --------- -- ---- -- --------------------
Agreement is hereby amended as follows:

     (a)  Section 9.4 of the Credit Agreement is hereby amended by deleting
(S)9.4(d) of the Credit Agreement in its entirety and substituting in place
thereof the following:

          (d) (i) as soon as practicable, but in any event within thirty (30)
     days after the end of each month in each fiscal year of the Company,
     unaudited monthly consolidated income statement and balance sheet of the
     Borrower and its Subsidiaries for such month and, to the extent prepared by
     the Company, the unaudited monthly income statement and balance sheet of

<PAGE>

     the Borrower and its Subsidiaries for such month, each prepared in
     accordance with generally accepted accounting principles, together with a
     certification by the principal financial or accounting officer of the
     Borrower that the information contained in such financial statements fairly
     presents the financial condition of the Borrower and its Subsidiaries on
     the date thereof (subject to year-end adjustments); and
     (ii)contemporaneously with the filing or mailing thereof, copies of all
     material of a financial nature filed with the Securities and Exchange
     Commission or sent to the shareholders of the Company; and

     (b)  Section 9.5 of the Credit Agreement is hereby amended by inserting
immediately after the text of (S)9.5(c) the following:

          (d)  Notification of Claims against Collateral.  The Company will,
               -----------------------------------------
     immediately upon becoming aware thereof, notify the Agent and each of the
     Banks in writing of any setoff, claims, withholdings or other defenses to
     which any of the Collateral, or the Agent's rights with respect to the
     Collateral, are subject.

     (S)5.  Amendment to (S)10 of the Credit Agreement.  Section 10 of the
            --------- -- ----- -- --------------------
Credit Agreement is hereby amended as follows:

     (a)  Section 10.1(o) of the Credit Agreement is hereby amended by inserting
immediately after the end of the text thereof the word "and";

     (b)  Section 10.1 of the Credit Agreement is hereby amended by inserting
the following immediately after (S)10.1(o):

          (p) Indebtedness incurred in connection with the Acquisition, provided
                                                                        --------
     that the aggregate principal amount of such Indebtedness shall not exceed
     the aggregate amount of the Dollar equivalent of $10,000,000.

     (c)  Section 10.2(vii) of the Credit Agreement is hereby amended by
inserting immediately after the words "Schedule 10.2 hereto" the words "and
liens in favor of the Agent for the benefit of the Banks and the Agent under the
Loan Documents"; and

     (d)  Section 10.2(viii) of the Credit Agreement is hereby amended by
deleting the reference "(S)11.0(h)" which appears in (S)10.2(viii) and
substituting in place thereof the reference (S)10.1(h) and 10.1(p)".

     (e)  Section 10.3(i) of the Credit Agreement is hereby amended by deleting
the text of (S)10.3(i) in its entirety and restating it as follows:

          (i)  so long as no Default or Event of Default has occurred and is
     continuing or would exist as a result thereof, Investments (i) by the
     Company made pursuant to the Company's investment guidelines as in
<PAGE>

     effect on the Closing Date and attached hereto as Schedule 10.1(i); and
                                                       ----------------
     (ii) by the Company or any Subsidiary consisting of the purchase by the
     Company or such Subsidiary of the capital stock of any Person to the extent
     such a purchase is a Permitted Acquisition otherwise permitted by
     (S)10.5.1. hereof; and

     (f)  Section 10.3 of the Credit Agreement is further amended by deleting
the amount "$2,000,000" which appears in (S)10.3(j) and substituting in place
thereof the amount "$3,000,000".

     (g)  Section 10.5(a)(iv)(1) of the Credit Agreement is hereby amended by
deleting the text of (S)10.5(a)(iv)(1) in its entirety and restating it as
follows:

     (1) the Company has provided the Agent with five (5) Business Days prior
     written notice of such Permitted Acquisition, which notice shall include a
     reasonably detailed description of such Permitted Acquisition, together
     with historical financial statements of the Person to be acquired and any
     and all additional financial information and due diligence information as
     the Agent or any Bank may reasonably request (with the Agent agreeing to
     send copies of such information to the Banks) and, as to the Acquisition,
     the Company shall have provided the Agent and each of the Banks, five (5)
     Business Days prior to the consummation of such Acquisition, copies of the
     acquisition documents pertaining thereto (or the most recent draft of such
     documents as exist at such time, with supplements of revised drafts as they
     become available)

     (h)  Section 10.5(a)(iv)(6) of the Credit Agreement is hereby amended by
inserting immediately after the words "on a pro forma basis" the words "(taking
into account the projected future performance of the Company and its
Subsidiaries after giving effect to such acquisition)"; and

     (i) Section 10.5(a) is further amended by inserting immediately at the end
of (S)10.5(a) the sentence "Notwithstanding anything to the contrary contained
in (S)10.5(a)(iv)(7), the aggregate purchase price for the Acquisition shall not
exceed the Dollar equivalent of $14,000,000 and not more than $5,500,000 of such
purchase price shall be payable within the first year of consummating such
acquisition".

     (S)6.  Amendment to (S)11 of the Credit Agreement.  Section 11.4 of the
            --------- -- ----- -- --------------------
Credit Agreement is hereby amended by deleting (S)11.4 in its entirety and
restating it as follows:

          11.4. Consolidated Total Funded Indebtedness to EBITDA. The Borrowers
                ------------------------------------------------
     will not at any time during any period described in the table set forth
     below permit the Leverage Ratio to be greater than the ratio appearing
     opposite such period in such table:
<PAGE>

<TABLE>
<CAPTION>
                 Period                                           Ratio
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
<S>                                                     <C>
December 31, 1999 - March 30, 2000                                      4.50:1.00
---------------------------------------------------------------------------------
March 31, 2000 - June 29, 2000                                          5.25:1.00
---------------------------------------------------------------------------------
June 30, 2000 - September 29, 2000                                      4.50:1.00
---------------------------------------------------------------------------------
September 30, 2000 - December 30, 2000                                  4.00:1.00
---------------------------------------------------------------------------------
December 31, 2000 and at any time thereafter                            3.50:1.00
---------------------------------------------------------------------------------
</TABLE>

     (S)7. Amendment to (S)14 of the Credit Agreement. Section 14 of the Credit
           ------------------------------------------
Agreement is hereby amended as follows:

     (a)  Section 14.1(k) of the Credit Agreement is hereby amended by deleting
(S)14.1(k) in its entirety and restating it as follows:

          (k) if any of the Loan Documents shall be cancelled, terminated,
     revoked or rescinded or the Agent's security interests, mortgages or liens
     in a substantial portion of the Collateral shall cease to be perfected, or
     shall cease to have the priority contemplated by the Security Documents, in
     each case otherwise than in accordance with the terms thereof or with the
     express prior written agreement, consent or approval of the Banks, or any
     action at law, suit or in equity or other legal proceeding to cancel,
     revoke or rescind any of the Loan Documents shall be commenced by or on
     behalf of the Company or any of its Subsidiaries party thereto or any of
     their respective stockholders, or any court or any other governmental or
     regulatory authority or agency of competent jurisdiction shall make a
     determination that, or issue a judgment, order, decree or ruling to the
     effect that, any one or more of the Loan Documents is illegal, invalid or
     unenforceable in accordance with the terms thereof;

     (b)  Section 14.4 of the Credit Agreement is hereby amended by deleting
words "any enforcement of remedies hereunder" and substituting in place thereof
the words "the enforcement of any of the Security Documents, or otherwise with
respect to the realization upon any of the Collateral,"

     (S)8.  Conditions to Effectiveness.  This Amendment shall not become
            ---------------------------
effective until the Agent receives the following:

     (a)  a counterpart of this Amendment executed by the Company, PMI GmbH, the
Agent, the Fronting Bank and the Majority Banks;

     (b)  a counterpart of each of the Security Documents, executed by the
Company, the applicable Domestic Subsidiary and the Agent;

     (c)  evidence that all appropriate corporate action has been taken to
consummate the transactions contemplated hereby;
<PAGE>

     (d)  legal opinion from counsel to the Company in form and substance
satisfactory to the Agent; and

     (e)  payment by the Company to the Agent for the pro rata accounts of the
Banks an amendment fee of $125,000.

     (S)9.  Representations and Warranties.  Each of the Company and PMI GmbH
            ------------------------------
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in (S)8 of the Credit Agreement (except to the extent of
changes resulting from matters contemplated or permitted by the Credit Agreement
and the other Loan Documents, changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an earlier
date), provided, that all references therein to the Credit Agreement shall refer
       --------
to such Credit Agreement as amended hereby.  In addition, each of the Company
and PMI GmbH hereby represents and warrants that the execution and delivery by
the Company and PMI GmbH of this Amendment and the performance by the Company
and PMI GmbH of all of its agreements and obligations under the Credit Agreement
as amended hereby are within the corporate authority of the Company and PMI GmbH
and have been duly authorized by all necessary corporate action on the part of
the Company and PMI GmbH.

     (S)10.  Ratification, Etc.  Except as expressly amended hereby, the Credit
             ------------  ---
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Guarantees, are hereby ratified and confirmed
in all respects and shall continue in full force and effect.  The Credit
Agreement and this Amendment shall be read and construed as a single agreement.
All references in the Credit Agreement, the Loan Documents or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.

     (S)11.  No Waiver.  Nothing contained herein shall constitute a waiver of,
             ---------
impair or otherwise affect any Obligations, any other obligation of the
Borrowers or any rights of the Agent or the Banks consequent thereon.

     (S)12.  Counterparts.  This Amendment may be executed in one or more
             ------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

     (S)13.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
             -------------
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.

                        KOLLMORGEN CORPORATION

                        By:
                           ------------------------------------
                        Name:
                        Title:

                        PMI MOTION TECHNOLOGIES GmbH

                        By:
                           ------------------------------------
                        Name:
                        Title:

                        BANKBOSTON, N.A., individually and as Agent

                        By:
                           ------------------------------------
                        Name:
                        Title:

                        ABN AMRO Bank N.V., individually and as
                        Fronting Bank

                        By:
                           ------------------------------------
                        Name:
                        Title:

                        By:
                           ------------------------------------
                        Name:
                        Title:

                        FIRST UNION NATIONAL BANK

                        By:
                           ------------------------------------
                        Name:
                        Title:
<PAGE>

                            RATIFICATION OF GUARANTY

     The undersigned guarantors hereby acknowledges and consents to the
foregoing Second Amendment as of December 31, 1999, and agrees that the Guaranty
dated as of September 30, 1997 from each of the undersigned in favor of the
Agent and each of the Banks remains in full force and effect, and each Guarantor
confirms and ratifies all of its obligations thereunder.

                                       KOLLMORGEN OVERSEAS
                                        DEVELOPMENT CORP.

                                       By:__________________________________
                                       Title:

                                       PROTO-POWER CORPORATION

                                       By:__________________________________
                                       Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}]]