-----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, DpjGLdrzD+qvh+RM3OGrqOf9hUswyyZ92ZlLvi8cDn7cGjVXFJwog28x1zXP6TLh 2LCrUaHfrXOPkj0OnKmgtg== 0000927016-01-501075.txt : 20010516 0000927016-01-501075.hdr.sgml : 20010516 ACCESSION NUMBER: 0000927016-01-501075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROVOX INC CENTRAL INDEX KEY: 0000856164 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 760254329 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18018 FILM NUMBER: 1637773 BUSINESS ADDRESS: STREET 1: 740 BELLEVILLE AVE CITY: NEW BEDFORD STATE: MA ZIP: 02745-6194 BUSINESS PHONE: 5089949661 MAIL ADDRESS: STREET 1: 740 BELLEVILLE AVE CITY: NEW BEDFORD STATE: MA ZIP: 02745-6194 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File #0-18018 AEROVOX INCORPORATED (Exact name of registrant as specified in its charter) Delaware 76-0254329 -------- ---------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 167 John Vertente Boulevard, New Bedford, MA 02745 -------------------------------------------------- (Address of principal executive offices) (Zip Code) (508) 994-9661 -------------- Registrant's telephone number Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: At April 30, 2001, 6,146,186 shares of registrant's common stock (par value, $1.00) were outstanding, 700,000 of which are restricted and redeemable under Stockholder Agreements as described in the footnotes to the financial statements included in the registrant's most recent Annual Report on Form 10-K. AEROVOX INCORPORATED Condensed Consolidated Statements of Operations (Amounts in thousands, except per share data) (Unaudited) Three Months Ended ------------------ March 31, April 1, 2001 2000 -------- -------- Net sales $ 28,199 $ 30,225 Cost of sales 23,096 25,026 -------- -------- Gross profit 5,103 5,199 Operating expenses 4,025 4,179 -------- -------- Income from operations 1,078 1,020 Other income (expense): Interest expense (821) (431) Other income 171 54 -------- -------- Income before income taxes 428 643 Provision for income taxes 300 195 -------- -------- Net income $ 128 $ 448 ======== ======== Earnings per share-basic $ 0.02 $ 0.08 ======== ======== Earnings per share-diluted $ 0.02 $ 0.07 ======== ======== Weighted average number of shares outstanding - basic 5,445 5,411 ======== ======== Weighted average number of shares outstanding - diluted 5,445 6,152 ======== ======== The accompanying notes are in integral part of the unaudited condensed consolidated financial statements. 2 AEROVOX INCORPORATED Condensed Consolidated Balance Sheets (Amounts in thousands) March 31, Dec. 30, 2001 2000 (unaudited) --------- ---------- ASSETS Current assets: Cash and cash equivalents $ 499 $ 834 Accounts receivable, net 19,564 17,465 Inventories 18,522 18,964 Prepaid expenses and other current assets 2,545 2,723 -------- -------- Total current assets 41,130 39,986 Property, plant and equipment, net 36,343 37,318 Goodwill, net 3,450 3,557 Deferred income taxes 3,504 3,504 Other assets 1,115 1,117 -------- -------- Total assets $ 85,542 $ 85,482 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 36,022 $ 35,148 Accounts payable 14,122 13,842 Accrued compensation and other expenses 4,339 4,594 Fair value of derivative instrument 1,314 -- -------- -------- Total current liabilities 55,797 53,584 Deferred income taxes 5,250 5,274 Long-term debt less current maturities 2,085 2,453 Reserve for environmental costs and plant remediation 6,330 6,614 Deferred compensation 345 453 -------- -------- Total liabilities 69,807 68,378 Redeemable common stock 1,746 1,750 Stockholders' equity: Common stock 5,446 5,442 Additional paid-in capital 1,169 1,162 Retained earnings 9,697 9,565 Accumulated other comprehensive loss (2,323) (815) -------- -------- Total stockholders' equity 13,989 15,354 -------- -------- Total liabilities and stockholders' equity $ 85,542 $ 85,482 ======== ======== The accompanying notes are in integral part of the unaudited condensed consolidated financial statements. 3 AEROVOX INCORPORATED Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited)
Three Months Ended ----------------------- March 31, April 1, 2001 2000 ---------- ---------- Cash flows from operating activities: Net income $ 128 $ 448 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 1,079 1,124 Changes in operating assets and liabilities: Accounts receivable (2,359) (4,714) Inventories 387 (468) Prepaid expenses and other current assets 165 121 Accounts payable 361 2,684 Accrued expenses and other liabilities (607) 448 -------- -------- Net cash used in operating activities (846) (357) -------- -------- Cash flows from investing activities: Acquisition of property and equipment (259) (2,656) Deposit into EPA trust fund and cash interest received - (753) Other (92) (118) -------- -------- Net cash used in investing activities (351) (3,527) -------- -------- Cash flows from financing activities: Net borrowings under lines of credit 1,402 3,932 Long-term borrowings - 10,748 Repayment of long-term debt (603) (694) Cash paid for debt issuance costs - (195) Proceeds from employee stock purchase plan and exercise of stock options 11 62 -------- -------- Net cash provided by financing activities 810 13,853 -------- -------- Effects of exchange rate on cash 52 24 -------- -------- Increase (decrease) in cash (335) 9,993 Cash at beginning of year 834 742 -------- -------- Cash at end of period $ 499 $ 10,735 ======== ========
The accompanying notes are in integral part of the unaudited condensed consolidated financial statements. 4 AEROVOX INCORPORATED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION These unaudited condensed consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for Aerovox Incorporated ("the Company") for the fiscal year ended December 30, 2000, and the consolidated financial statements and footnotes included therein. In our opinion, the accompanying consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations. The consolidated balance sheet data as of December 30, 2000, included herein, is derived from the Company's audited financial statements as of December 30, 2000. Fiscal 2001 consists of 52 weeks, and will end on December 29, 2001. (2) INVENTORIES Inventories consist of the following (in thousands):
March 31, 2001 December 30, 2000 ----------------------------------------------------------------------------------- Domestic Foreign Total Domestic Foreign Total - -------------------------------------------------------------------------------------------------------------- Raw materials $ 4,870 $3,797 $ 8,667 $ 5,493 $3,930 $ 9,423 Work in process 2,239 1,101 3,340 2,062 779 2,841 Finished goods 5,428 1,087 6,515 5,493 1,207 6,700 - -------------------------------------------------------------------------------------------------------------- $12,537 $5,985 $18,522 $13,048 $5,916 $18,964 ==============================================================================================================
5 (3) NET INCOME PER SHARE (BASIC AND DILUTED) Net income per share is computed based on the weighted average number of common and common equivalent shares outstanding during the period, calculated under the treasury stock method.
For the Three Months Ended For the Three Months Ended March 31, 2001 April 1, 2000 (Amounts in thousands, except per share data) - ---------------------------------------------------------------------------------------------------------------- Net income Shares Per share Net income Shares Per share amount amount - ---------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE $128 5,445,156 $0.02 $448 5,411,192 $0.08 - ---------------------------------------------------------------------------------------------------------------- DILUTIVE SECURITIES: Options - - - 40,536 - ---------------------------------------------------------------------------------------------------------------- Redeemable - - - 700,000 Common Stock - ---------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE $128 5,445,156 $0.02 $448 6,151,728 $0.07 - ----------------------------------------------------------------------------------------------------------------
Options to purchase 678,050 shares of common stock at prices ranging from $2.44 to $9.63 per share were outstanding at March 31, 2001, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of common shares for the period. Options to purchase 293,375 shares of common stock at prices ranging from $4.50 to $9.625 per share were outstanding at April 1, 2000, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of common shares for the period. Options to purchase 328,300 shares of common stock at prices ranging from $2.438 to $3.625 were outstanding at April 1, 2000, and were included in the calculation of diluted earnings per share because they had a dilutive effect on earnings per share for the three months ended April 1, 2000. Under the treasury stock method, the equivalent of 40,536 common shares were added to the average number of outstanding common shares in computing diluted earnings per share. Redeemable common stock aggregating 700,000 shares were not included in the calculation of diluted earnings per share because the book value per common share of the Company for the three months ended March 31, 2001 exceeded the average fair market value of the Company's outstanding common stock at March 31, 2001. Under these circumstances, it is presumed that, at the conclusion of the period of restriction, the shares would be purchased by the Company at the then book value per share and not registered. The reverse was true in 2000 with the average fair market value being greater than book value per share, resulting in the inclusion of the 700,000 shares in the calculation of diluted earnings per share. The redemption agreement stipulates that these shares can be redeemed at the book value per common share starting on April 4, 2003 through April 4, 2005, at the holders' discretion. 6 (4) COMPREHENSIVE INCOME (LOSS) The Company's comprehensive income was as follows (in thousands):
For the Three Months Ended ----------------------------------------------- March 31, 2001 April 1, 2000 --------------------- ------------------- Net income $ 128 $ 448 Foreign currency translation adjustment, net of taxes (194) (98) Net accumulated derivative loss (224) - --------- --------- Total comprehensive income (loss) $ (290) $ 350 ========= =========
(5) DEBT Our Revolving Credit Agreement, as amended on June 30, 1999 and September 30, 2000, provides for a credit line of $14,500,000 to the Company, subject to borrowing base limitations. The agreement, which extends to May 31, 2002, also includes various interest rate options which, for fiscal 2000 and the quarter ended March 30, 2001, have varied from 7.8% to 10.0% on an annualized basis. The collateral for this line of credit is accounts receivable and inventories. The outstanding balance of loans at March 31, 2001 and December 30, 2000 was $13,192,000 and $12,059,000, respectively. As reported in our Annual Report on Form 10-K for the year 2000, the Company is in default of this agreement for a financial covenant violation as of December 30, 2000. As a result, this loan has been classified as a current obligation. We are in negotiations with our three U.S. lenders with the objective of providing additional working capital availability for 2001. We expect to conclude these negotiations during the second quarter of 2001, but no assurance can be made that an agreement will be reached nor that any funding resulting from such an agreement will be sufficient to provide the Company with adequate working capital during 2001. BHC Aerovox Ltd. ("BHC"), the Company's British subsidiary, has an agreement with a bank which provides for (i) a ten-year mortgage on real property in the amount of 500,000 British pounds with an outstanding balance at March 31, 2001 of $613,000, (ii) a five-year loan collateralized by machinery and equipment in the amount of 500,000 British pounds with an outstanding balance at March 31, 2000 of $469,000 and (iii) an "Overdraft" credit line allowing borrowings in British pounds, euros or U.S. dollars up to the equivalent of 2,500,000 British pounds with an outstanding balance at March 31, 2001 of $3,403,000. On February 28, 2001, BHC renewed the credit line under the same terms except for the borrowing limit, which was raised to 3,000,000 British pounds. With the exception of the five-year loan collateralized by plant and machinery which has an interest rate of 5.73%, interest is charged at variable rates based upon the bank base rate. The ten-year mortgage agreement includes certain financial covenants. At March 31, 2001, BHC was in compliance with these covenants. BHC has an agreement with another bank which provides for a five-year loan at 8.0% per annum collateralized by machinery and equipment equivalent to the amount of 1,200,000 British pounds with an outstanding balance at March 31, 2001 of $1,032,000 which allows for borrowings in British pounds or euros. We have a term line of credit agreement with an equipment financing company in the amount of $9,000,000, collateralized by certain equipment. At March 31, 2001, borrowings outstanding under this agreement were $6,000,000 at an interest rate of 8.50% and maturing in the year 2005. 7 We were in default of two financial covenants on December 30, 2000. Because of these violations and since the Company is in payment default of certain terms of this agreement, this loan has been classified as a current obligation. Other long-term debt of the Company consists of an Industrial Revenue Bond with an annual interest rate of 7.42% and monthly payments of principal and interest. The outstanding principal balance at March 31, 2001 was $672,000. We were in payment default on this bond in April 2001. As a result of this default, the bondholders notified us on April 20, 2001 that the outstanding principal and interest was due and payable immediately. The Company's previous owner and guarantor of the bond was also notified of the acceleration and, in turn, requested the Company to repay all amounts outstanding by May 10, 2001. Given our inability to comply with this request, the guarantor is responsible for paying the outstanding principal and interest, $707,000 at May 10, 2001, and will become an unsecured creditor of the Company. The Company also had notes payable to each of the original shareholders of Capacitores Unidos, S.A. de C.V. ("CUSA") in the amounts of $1,089,000 and $350,000, accruing interest at rates of 5.22% and 5.32% per annum, respectively, and due April 4, 2001 and April 5, 2002, respectively. The notes were secured by 59% of the common shares outstanding of Aerovox de Mexico. The Company did not make its payment due April 4, 2001, but it has reached an agreement with the noteholders to delay repayment of the notes. Quarterly installments of $400,000 plus accrued interest are payable on April 4, 2002, July 4, 2002 and October 4, 2002. A final installment of $239,000 plus accrued interest is payable on January 4, 2003. As part of this agreement, the interest rates on the notes have been increased to 8.22% and the notes are now secured by 100% of the common shares outstanding of Aerovox de Mexico. Aerovox de Mexico has a note payable to Compania General de Electronica S.A. de C.V. ("CGE") in the amount of $211,000 which bears interest at 5.22% per annum, and matured on April 1, 2001. Aerovox de Mexico is repaying this note in four monthly installments from April through July 2001. Aerovox de Mexico also has a renewable bank loan with an outstanding balance at December 30, 2000 of $1,000,000 bearing interest at 9.30%, due on May 18, 2001. On March 21, 2000, we entered into a fifteen-year financing agreement with a bank and an investment company affiliated with the bank. Under the terms of the agreement, the Company received $10,179,000 of adjustable rate financing collateralized by our new facility in New Bedford, Massachusetts, which includes real property and manufacturing equipment. The Company entered into a staged interest rate swap in order to fix the interest rate at 7.66% over fifteen years. As of March 31, 2001, the $10,075,000 outstanding balance was covered by the interest rate swap. Including all amortizable fees, the effective interest rate is 9.26%. Since we are in payment default of this agreement in 2001, this loan has been classified as a current obligation. (6) COMMITMENTS AND CONTINGENCIES In September 1999, we filed a patent infringement lawsuit against three capacitor manufacturers. Because of the Company's liquidity issues and the high cost of pursuing this litigation, we were forced to discontinue prosecution of our claims. We have entered into agreements with two of the three defendants under which each such party agreed to bear its own costs of the litigation. We elected to dismiss the lawsuit as to the third defendant without such an agreement. The third defendant subsequently filed a motion 8 with the court to recover its attorney's fees and costs. On April 20, 2001, the United States District Court for the Central District of California allowed that motion. On May 10, 2001, the defendant submitted its fee request in the amount of $1,865,000. We intend to contest the amount of fees requested by the defendant. We also intend to vigorously pursue an appeal of any award by the Court of legal fees to the defendant in connection with this matter and request that the Court stay its order pending our appeal. No assurances can be given that the order will be stayed. As of March 31, 2001, no amounts have been accrued for this claim as the Company does not believe a loss is probable with respect to this claim. (7) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On December 31, 2000, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133") as amended by SFAS 137 and SFAS 138. SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that we recognize all derivative instruments as either current or non-current assets or liabilities in the Condensed Consolidated Balance Sheet and measure those instruments at fair value. The adoption of SFAS 133 on December 31, 2000 increased liabilities by approximately $1,100,000, all recognized in accumulated other comprehensive income. Accumulated other comprehensive loss included a net accumulated derivative loss of $224,000 for the quarter ended March 31, 2001. In the normal course of business, we manage risks associated with foreign exchange rates, and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with our policies. As a matter of policy, we do not use derivative instruments unless there is an underlying exposure. Any change in the value of our derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. We do not use derivative instruments for trading or speculative purposes. ACCOUNTING POLICIES Using qualifying criteria defined in SFAS 133, derivative instruments are designated and accounted for as either a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). For a fair value hedge, both the effective and ineffective portions of the change in fair value of the derivative instrument, along with an adjustment to the carrying amount of the hedged item for fair value changes attributable to the hedged risk, are recognized in earnings. For a cash flow hedge, changes in the fair value of the derivative instrument that are highly effective are deferred in accumulated other comprehensive income or loss until the underlying hedged item is recognized in earnings. The ineffective portion of fair value changes on qualifying hedges is recognized in earnings immediately. If a fair value or cash flow hedge were to cease to qualify for hedge accounting or be terminated, it would continue to be carried on the balance sheet at fair value until settled but hedge accounting would be discontinued prospectively. If a forecasted transaction were no longer probable of occurring, amounts previously deferred in accumulated other comprehensive income would be recognized immediately in earnings. 9 On occasion, we may enter into a derivative instrument for which hedge accounting is not required because it is entered into to offset changes in the fair value of an underlying transaction which is required to be recognized in earnings (natural hedge). These instruments are reflected in the Condensed Consolidated Balance Sheet at fair value with changes in fair value recognized in earnings. FOREIGN EXCHANGE Operating in international markets involves exposure to movements in foreign exchange rates, primarily the Mexican peso, British pound and euro, which principally impacts the translation of our international operating profit into U.S. dollars. On occasion, we may enter into derivative financial instruments, as necessary, to reduce the effect of foreign exchange rate changes. We manage the use of foreign exchange derivatives centrally. Forward exchange contracts used to hedge the foreign currency exposure resulting from assets and liabilities denominated in currencies other than the functional currency and anticipated intercompany purchases are accounted for as either natural or cash flow hedges, as applicable. The earnings impact from these hedges is classified as either cost of sales or selling, general and administrative expenses consistent with the expense classification of the underlying hedged items. No such contracts designated as cash flow hedges were in effect at March 31, 2001. INTEREST RATES We manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. We use interest rate swaps to effectively change the interest rate of specific debt issuances, with the objective of reducing and fixing our overall borrowing costs. These swaps are entered into concurrently with the issuance of the debt that they are intended to modify. The notional amount, interest payment and maturity dates of the swaps match the principal, interest payment and maturity dates of the related debt. Accordingly, any market risk or opportunity associated with these swaps is offset by the opposite market impact on the related debt. Our credit risk related to interest rate swaps is considered low because such swaps are entered into only with strong creditworthy counterparties and are generally settled on a net basis. Further, there is no concentration with counterparties. Interest rate swaps are designated as hedges of underlying fixed rate obligations and accounted for as fair value hedges. The earnings impact from these hedges is classified as interest expense. The ineffective portion of debt fair value hedges was not material to our results of operations during the quarter. 10 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Three Months Ended March 31, 2001 compared with Three Months Ended April 1, 2000. Net sales for the first quarter of 2001 totaled $28.2 million compared with $30.2 million for the first quarter of 2000, a decrease of $2.0 million or 6.7%. The decrease in revenue for the quarter resulted primarily from a slowdown of sales to customers supplying power products into the telecommunications and internet markets. Gross margin for the first quarter of 2001 at 18.1% of net sales ran ahead of last year's 17.2% reflecting improved operating efficiencies and a lower overhead structure achieved through relocations and plant consolidations undertaken in 2000. Selling, general and administrative expenses for the first quarter of 2001 totaled $4.0 million or 14.3% of net sales compared with $4.2 million or 13.8% of net sales for the same period in 2000. The decrease resulted from cost savings related to our December 2000 and January 2001 layoffs combined with tight spending controls over the first quarter of 2001. These savings were partially offset by increased professional services of $0.2 million related to our liquidity issues. Income from operations during the first quarter of 2001 increased to $1.1 million from $1.0 million the first quarter a year earlier. Interest expense for the first quarter of 2001 totaling $821,000 increased because of higher debt levels. Income before taxes was $428,000 or 1.5% compared to $643,000 or 2.1% in the first quarter of 2000. The provision for income taxes for the first quarter of 2000 was $300,000 or 70% of pretax income, reflecting taxes in foreign jurisdictions, compared with $195,000 or 30% of pretax income in the first quarter of 2000. No benefit was recorded for losses in the United States because of the uncertainty of the U.S. entity returning to profitability in the future. Net income for the quarter was $128,000 or $0.02 per common share-basic and diluted, compared with net income in the first quarter of 1999 of $448,000 or $0.08 per common share-basic and $0.07 per share-diluted. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at the end of the first quarter of 2001 totaled $0.5 million compared with $0.8 million as of December 30, 2000. Working capital decreased to a deficiency of $14.7 million at March 31, 2001, compared with a deficiency of $13.6 million at December 30, 2000, due primarily to the recognition of a liability for the fair value of a derivative instrument (interest rate swap) in accordance with our application of SFAS 133. (See Note 7.) Current ratio at March 31, 2001 was 0.74, compared with a ratio of 0.75 at December 30, 2000. At the end of the first quarter of 2001, we had borrowings of $38.1 million compared with $37.6 million at December 30, 2000. 11 Our Revolving Credit Agreement, as amended on June 30, 1999 and September 30, 2000, provides for a credit line of $14.5 million to the Company, subject to borrowing base limitations. The agreement also includes various interest rate options which, for fiscal year 2000 and the quarter ended March 30, 2001, have varied from 7.8% to 10.0% on an annualized basis. The collateral for this line of credit is accounts receivable and inventories. The outstanding balance of loans at March 31, 2001 and December 30, 2000 was $13.2 million and $12.1 million, respectively. As reported in our Annual Report on Form 10-K for the year 2000, the Company is in default of this agreement for a financial covenant violation as of December 30, 2000. As a result, this loan has been classified as a current obligation. We are in negotiations with our three U.S. lenders with the objective of providing additional working capital availability for 2001. We expect to conclude these negotiations during the second quarter of 2001, but no assurance can be made that an agreement will be reached nor that any funding resulting from such an agreement will be sufficient to provide the Company with adequate working capital during 2001. BHC, has an agreement with a bank which provides for (i) a ten-year mortgage on real property in the amount of 0.5 million British pounds with an outstanding balance at March 31, 2001 of $0.6 million, (ii) a five-year loan collateralized by machinery and equipment in the amount of 0.5 million British pounds with an outstanding balance at March 31, 2000 of $0.5 million and (iii) an "Overdraft" credit line allowing borrowings in British pounds, euros or U.S. dollars up to the equivalent of 2.5 million British pounds with an outstanding balance at March 31, 2001 of $3.4 million. On February 28, 2001, BHC renewed the credit line under the same terms except for the borrowing limit, which was raised to 3.0 million British pounds. With the exception of the five-year loan collateralized by plant and machinery which has an interest rate of 5.73%, interest is charged at variable rates based upon the bank base rate. The ten- year mortgage agreement includes certain financial covenants. At March 31, 2001, BHC was in compliance with these covenants. BHC has an agreement with another bank which provides for a five-year loan at 8.0% per annum collateralized by machinery and equipment equivalent to the amount of 1.2 million British pounds with an outstanding balance at March 31, 2001 of $1.0 million which allows for borrowings in British pounds or euros. We have a term line of credit agreement with an equipment financing company in the amount of $9.0 million, collateralized by certain equipment. At March 31, 2001, borrowings outstanding under this agreement were $6.0 million at an interest rate of 8.50% and maturing in the year 2005. We were in default of two financial covenants on December 30, 2000. Because of these violations and since the Company is in payment default of certain terms of this agreement, this loan has been classified as a current obligation. Other long-term debt of the Company consists of an Industrial Revenue Bond with an annual interest rate of 7.42% and monthly payments of principal and interest. The outstanding principal balance at March 31, 2001 was $0.7 million. We were in payment default on this bond in April 2001. As a result of this default, the bondholders notified us on April 20, 2001 that the outstanding principal and interest was due and payable immediately. The Company's previous owner and guarantor of the bond was also notified of the acceleration and, in turn, requested the Company to repay all amounts outstanding by May 10, 2001. Given our inability to comply with this request, the guarantor is responsible for paying the outstanding principal and interest, $0.7 million at May 10, 2001, and will become an unsecured creditor of the Company. The Company also had notes payable to each of the original shareholders of CUSA in the amounts of $1.1 million and $0.3 million, accruing interest at rates of 5.22% and 5.32% per annum, respectively, and due April 4, 2001 and April 5, 2002, respectively. The notes were secured by 59% of the common 12 shares outstanding of Aerovox de Mexico. The Company did not make its payment due April 4, 2001, but it has reached an agreement with the noteholders to delay repayment of the notes. Quarterly installments of $0.4 million plus accrued interest are payable on April 4, 2002, July 4, 2002 and October 4, 2002. A final installment of $0.2 million plus accrued interest is payable January 4, 2003. As part of this agreement, the interest rates on the notes have been increased to 8.22% and the notes are now secured by 100% of the common shares outstanding of Aerovox de Mexico. Aerovox de Mexico has a note payable to CGE in the amount of $0.2 million which bears interest at 5.22% per annum, and matured on April 1, 2001. Aerovox de Mexico is repaying this note in four monthly installments from April through July 2001. Aerovox de Mexico also has a renewable bank loan with an outstanding balance at December 30, 2000 of $1.0 million bearing interest at 9.30%, due on May 18, 2001. On March 21, 2000, we entered into a fifteen-year financing agreement with a bank and an investment company affiliated with the bank. Under the terms of the agreement, the Company received $10.2 million of adjustable rate financing collateralized by our new facility in New Bedford, Massachusetts, which includes real property and manufacturing equipment. The Company entered into a staged interest rate swap in order to fix the interest rate at 7.66% over fifteen years. As of March 31, 2001, the $10.1 million outstanding balance was covered by the interest rate swap. Including all amortizable fees, the effective interest rate is 9.26%. Since we are in payment default of this agreement in 2001, this loan has been classified as a current obligation. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In September 1999, we filed a patent infringement lawsuit against three capacitor manufacturers. Because of the Company's liquidity issues and the high cost of pursuing this litigation, we were forced to discontinue prosecution of our claims. We have entered into agreements with two of the three defendants under which each such party agreed to bear its own costs of the litigation. We elected to dismiss the lawsuit as to the third defendant without such an agreement. The third defendant subsequently filed a motion with the court to recover its attorney's fees and costs. On April 20, 2001, the United States District Court for the Central District of California allowed that motion. On May 10, 2001, the defendant submitted its fee request in the amount of $1.9 million. We intend to contest the amount of fees requested by the defendant. We also intend to vigorously pursue an appeal of any award by the Court of legal fees to the defendant in connection with this matter and request that the Court stay its order pending our appeal. No assurances can be given that the order will be stayed. As of March 31, 2001, no amounts have been accrued for this claim as the Company does not believe a loss is probable with respect to this claim. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Our Revolving Credit Agreement, as amended on June 30, 1999 and September 30, 2000, provides for a credit line of $14.5 million to the Company, subject to borrowing base limitations. As reported in our Annual Report on Form 10-K for the year 2000, the Company is in default of this agreement for a financial covenant violation as of December 30, 2000. As a result, this loan has been classified as a current obligation. We are in negotiations with our three U.S. lenders with the objective of providing additional working capital availability for 2001. We expect to conclude these negotiations during the second quarter of 2001, but no assurance can be made that an agreement will be reached nor that any funding resulting from such an agreement will be sufficient to provide the Company with adequate working capital during 2001. There were no principal and interest payments in arrears as of May 15, 2001. We have a term line of credit agreement with an equipment financing company in the amount of $9.0 million, collateralized by certain equipment. We were in default of two financial covenants on December 30, 2000. Because of these violations and since the Company is in payment default of this agreement, this loan has been classified as a current obligation. Principal and interest payments in arrears as of May 15, 2001 total $0.3 million. On March 21, 2000, we entered into a fifteen-year financing agreement with a bank and an investment company affiliated with the bank. Under the terms of the agreement, the Company received $10.2 million of adjustable rate financing collateralized by our new facility in New Bedford, Massachusetts, which includes real property and manufacturing equipment. Since we are in payment default of this agreement in 2001, this loan has been classified as a current obligation. There were no principal and interest payments in arrears as of May 15, 2001; however, the Company did not pay an annual letter of credit fee of $0.2 million due in March 2001. 13 ITEM 5. OTHER INFORMATION ENVIRONMENTAL STATUS On December 2, 1999, we reached a final agreement with the U.S. Environmental Protection Agency regarding the remediation of polychlorinated biphenyls ("PCBs") present in our former New Bedford facility. Under the agreement, we agreed to relocate our Belleville Avenue operations to another site within 16 months, demolish the building, and cap the site by November 2011. We completed our move out of the facility during the first quarter of 2001 and met the required closure date of April 2, 2001. In fiscal 1997, we recorded a provision of $13.0 million for environmental costs, plant remediation and impairment of assets. The provision included a $7.2 million reserve for environmental remediation and associated consulting, legal and engineering costs posted as a result of the identification of PCBs in the plant. From that date through March 31, 2001, $0.9 million was charged to the reserve, primarily for costs related to closing the Belleville Avenue facility. Management believes the reserve is adequate for the cost of activities described above. SAFE HARBOR STATEMENT Statements made in this form 10-Q which are not historical facts, including statements about the sufficiency of the Company's liquidity, are forward looking and involve risks and uncertainties. We caution you that actual events or results may differ as a result of risks facing us. Such risks include, but are not limited to, changes in the general economic conditions both in the U.S. and abroad, the actions of our customers, competitors, suppliers and lenders, variations in foreign currencies, the weather, the ability to control product quality and delivery and our ability to solidify and grow existing and new market segments. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 6 (a). Exhibits: None 6 (b). Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AEROVOX INCORPORATED DATE May 15, 2001 BY /S/ F. RANDAL HUNT ---------------------- F. Randal Hunt Senior Vice President and Chief Financial Officer 14 EXHIBIT INDEX Aerovox Incorporated Form 10-Q (for period ended March 31, 2001)
Exhibit Page/SEC Item Exhibit Document - ------------ ---------- ------------- (4) Instruments Defining the Rights of Security Holders, ----------------------------------------------------- Including Indentures. -------------------- Filed Herewith: 4.11 Restructuring Agreement dated April 4, between the Company and Aerovox de Mexico, Enrique Sanchez Aldunate, Hobir Holding B.V., Kato Holding B.V., 4.11 ---- Bires Investments B.V., Kasri Holding B.V., Tako Holding B.V. and Renko Investments B.V. 4.11.1 Second Restated Securities Pledge Agreement 4.11.1 ---- dated April 4, 2001 between the Company and Hobir Holding B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V., Tako Holding B.V. and Renko Investments B.V. 4.11.2 Escrow Instructions for the Company, First 4.11.2 ---- National Bank, Hobir Holding B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V., Tako Holding B.V. and Renko Investments B.V. 4.11.3 Replacement Promissory Note dated April 4, 4.11.3 ---- 2001 between the Company and Hobir Holding B.V. 4.11.4 Replacement Promissory Note dated April 4, 4.11.4 ---- 2001 between the Company and Kato Holdings B.V. 4.11.5 Replacement Promissory Note dated April 4, 4.11.5 ---- 2001 between the Company and Bires Investments B.V. 4.11.6 Replacement Promissory Note dated April 4, 4.11.6 ---- 2001 between the Company and Kasri Holdings B.V. 4.11.7 Replacement Promissory Note dated April 4, 4.11.7 ---- 2001 between the Company and Renko Investments B.V. 4.11.8 Replacement Promissory Note dated April 4, 4.11.8 ---- 2001 between the Company and Tako Holdings B.V.
EX-4.11 2 dex411.txt RESTRUCTURING AGREEMENT Exhibit 4.11 RESTRUCTURING AGREEMENT THIS RESTRUCTURING AGREEMENT (this "Agreement") is made and entered into as --------- of April 4, 2001 by and among the following parties (the "Parties"): ------- (i) Aerovox Incorporated, a Delaware corporation ("Aerovox"); ------- (ii) Aerovox de Mexico, a Mexico corporation f/k/a Capacitores Unidos S.A. de C.V. (both the current and predecessor entities referred to herein as "ADM"); --- (iii) Enrique Sanchez Aldunate ("Mr. Sanchez"); and ----------- (iv) Hobir Holding B.V. ("Hobir"), Kato Holding B.V. ("Kato"), Bires ----- ---- Investments B.V. ("Bires"), Kasri Holding B.V. ("Kasri"), Tako Holding B.V. ----- ----- ("Tako"), and Renko Investments B.V. ("Renko"), each a Netherlands corporation ---- ----- (each, a "Seller"). ------ WHEREAS, on April 5, 1999, Aerovox and Robert Elliot acquired all of the outstanding shares of stock of Capacitores Unidos S.A. de C.V. from the Sellers (the "Acquisition") pursuant to Stock Purchase Agreements dated as of April 5, ----------- 1999 between Aerovox and each Seller (collectively, the "Stock Purchase -------------- Agreements"); - ---------- WHEREAS, in connection with the Acquisition, Aerovox issued to each Seller a promissory note payable on April 4, 2001 and a promissory note payable on April 4, 2002 (collectively, the "Notes"), the aggregate principal amount of ----- such Notes being $1,439,001; WHEREAS, the Notes are secured by pledges of shares of ADM pursuant to Restated Security Pledge Agreements dated as of January 1, 2001 between Aerovox and each Seller (the "Restated Pledge Agreements"); -------------------------- WHEREAS, in connection with the Acquisition, Aerovox issued to Sellers an aggregate of 700,000 shares of Aerovox common stock, par value U.S. $0.01 per share (the "Aerovox Shares"); -------------- WHEREAS, pursuant to a Stockholders Agreement dated as of April 5, 1999 among Aerovox, the Sellers and Mr. Sanchez (the "Stockholders Agreement"), ---------------------- Aerovox granted to Sellers a Put Option (as defined therein) on the Aerovox Shares; WHEREAS, pursuant to a Rent Agreement dated as of March 3, 2000 among Aerovox and ADM (the "Equipment Lease"), Aerovox leases certain equipment to ADM --------------- at ADM's facility in the Mexico City plant; WHEREAS, the Parties now wish to restructure their relationships and current rights and obligations in respect of the Notes and related matters pursuant to the terms and conditions contained herein; NOW THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, and each intending to be legally bound hereby, the Parties hereby agree as follows: Exhibit 4.11 1. Notes. At Closing, the twelve (12) outstanding Notes shall be canceled and ----- delivered to Aerovox and a replacement note shall be issued to each Seller substantially in the forms attached hereto as Exhibits 1.1-1.6, respectively (each a "Replacement Note"). All rights and obligations under the Notes shall ---------------- terminate upon the issuance of the Replacement Notes. 2. Restated Pledge Agreements. At Closing, the Restated Pledge Agreements -------------------------- shall be amended and restated and replaced with a single Second Restated Pledge Agreement substantially in the form attached hereto as Exhibit 2 (the "Second ------ Restated Pledge Agreement"). - ------------------------- 3. Delivery of Pledged Shares. At Closing, Aerovox shall deliver to First -------------------------- National Bank, as U.S. escrow agent for each Seller, the certificates representing the Pledged Securities (as defined in the Second Restated Pledge Agreement) securing such Seller's right to payment under such Seller's Note, together with duly executed forms of assignment sufficient to transfer title thereto to such Seller. Such escrow agent shall hold the Pledged Shares in accordance with an escrow agreement mutually agreeable to the parties hereto. At Closing, Aerovox shall also deliver UCC-1 financing statements and an irrevocable proxy in accordance with the terms of the Second Restated Pledge Agreement. 4. Juarez Operations. Not later than sixty (60) days following any default by ----------------- Aerovox under a Replacement Note (which period may be extended for an additional sixty (60) days for reasons outside the control of Aerovox), Aereovox will create a new Mexican subsidiary to become a holding company for ADM's Juarez and Mexico City operations ("Holding Company"). ADM will become a subsidiary of --------------- Holding Company and will transfer (the "Transfer") all assets related to the -------- Mexico City operations to a newly formed subsidiary ("Aerovox Mexico City") of ------------------- Holding Company and the Aerovox Mexico City shares will be substituted as Pledged Shares. In the event of any foreclosure on the Pledged Shares prior to the Transfer, Aerovox shall hold harmless ADM and after the Transfer Aerovox Mexico City in respect of liabilities associated with the Juarez operations of ADM. 5. Stockholders Agreement. Effective as of the Closing, Section 6 of the ---------------------- Stockholders Agreement shall automatically be amended to read in its entirety as set forth in Exhibit 5 hereto. 6. Foil Supply Contract. At the time of any default under a Replacement Note, -------------------- Aerovox will enter into a renewable foil supply contract with ADM (if prior to the Transfer) or Aerovox Mexico City (if after the Transfer) with the same transfer pricing as is currently in effect. The terms of such foil supply contract shall require ADM or Aerovox Mexico City, as the case may be, to purchase from Aerovox the lesser of certain minimum specified foil amounts or 100% of the demand of ADM or Aerovox Mexico City, as the case may be, for foil. 7. Equipment Lease. At the time of any default under a Replacement Note, the --------------- Equipment Lease shall automatically be extended for a five year term as of the date of such default. The Equipment Lease shall be assigned by ADM to Aerovox Mexico City as part of the Transfer. 8. Aerovox Trademark. In the event that all Sellers foreclose on the Pledged ----------------- Shares in accordance with the Second Restated Pledge Agreements, Aerovox shall license to ADM (if prior to the Transfer) or Aerovox Mexico (if after the Transfer) for a period of one year from the -2- Exhibit 4.11 date of such foreclosure the nonexclusive right to use the Aerovox trademark in connection with sales of current products. 9. Customer Information. In the event that all Sellers foreclose on the -------------------- Pledged Shares in accordance with the Restated Pledge Agreements, Aerovox shall grant to ADM (if prior to the Transfer) or Aerovox Mexico City (if after the Transfer) reasonable access to all information and records of the customers of Aerovox related to product sold in the U.S., but produced by ADM or Aerovox Mexico City, as the case may be, at its Mexico City plant for a period of one year from the date of such foreclosure. 10. Release. Effective as of the Closing, Aerovox hereby irrevocably releases ------- and discharges all other Parties hereto and their respective successors and assigns and any and all past, current and future officers, directors, employees, attorneys, agents, representatives, independent contractors and shareholders of such Parties and their respective successors and assigns, both individually and in their official capacities, as applicable from any and all claims, controversies, suits, actions, causes of action, debts, accounts, bonds, covenants, agreements, contracts, damages, liabilities or demands, whether under federal, state, local or foreign law or regulation, whether in law or in equity, whether known or unknown, whether express or implied, whether liquidated or unliquidated, which Aerovox has ever had, now has, or may hereafter possess from the beginning of time until the Closing, including, but not limited to claims arising out of the following agreements and transactions contemplated thereby: the (i) Notes, (ii) Restated Pledge Agreements, (iii) Stock Purchase Agreements, (iv) Stockholders Agreement, and (v) Equipment Lease. 11. Closing. The closing of the transactions contemplated hereby (the ------- "Closing") shall take place simultaneously with the signing of this Agreement or ------- at such other date and time as may be determined by the mutual agreement of the parties. The parties agree to work in good faith so that the Closing can occur prior to the tenth day after the date of signing this Agreement. 12. Miscellaneous. ------------- 12.1. Authority to Enter Into Agreement. Each of the Parties represents --------------------------------- as to itself that it has the requisite power and authority to enter into and perform this Agreement, and that this Agreement is and will remain such Party's valid and binding agreement, enforceable in accordance with its terms (subject, as to the enforcement of remedies, to any applicable bankruptcy, insolvency or other laws affecting the enforcement of creditors rights). 12.2. Entire Agreement. This Agreement, together with the other agreements ---------------- and transactions contemplated hereunder, sets forth the entire agreement and understanding of the Parties and supersedes any prior agreement or understanding, whether written or oral, relating the subject matter contained herein. 12.3. Amendment and Waivers. No amendment of any provision of this --------------------- Agreement shall be valid unless the same shall be in writing and signed by an authorized representative of each of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any other, prior or subsequent default, misrepresentation, or breach of warranty or covenant -3- Exhibit 4.11 hereunder or affect in any way any rights arising by virtue of any other, prior or subsequent such occurrence. 12.4. No Third Party Beneficiaries. Except as specifically provided for, ---------------------------- this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns. 12.5. Notices. Notices under this Agreement shall be in writing and shall ------- be deemed given when actually delivered to the recipient at the applicable address or facsimile number listed below (or at such other address as the recipient shall have designated by notice given hereunder): If to Aerovox or Aerovox de Mexico: Aerovox Incorporated 167 John Vertente Blvd. New Bedford, MA 02745-1221 Fax: 508-910-3179 Attn: Chief Executive Officer with a copy to: Ropes & Gray One International Place Boston, MA 02110 Fax: 617-951-7050 Attn: David A. Fine, Esq. If to Mr. Sanchez or a Seller: Tezozomoc 239 Mexico D.F. 02760 Mexico Fax: 525-352-5385 12.6. This Agreement, which may be executed in counter parts, shall be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of laws provisions or rule that would cause the application of the domestic substantive laws of any other jurisdiction. 12.7. Any dispute among the parties which arises hereunder shall be resolved exclusively in accordance with the arbitration procedures set forth in clause 8.13 of the Stock Purchase Agreements. -4- Exhibit 4.11 IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement (or caused this Agreement to be executed on its behalf by its officer or representative thereunto duly authorized ) under seal as of the date first above written. AEROVOX INCORPORATED By:_______________________ Name: Title: AEROVOX DE MEXICO, S.A. DE C.V. By:_______________________ Name: Title: HOBIR HOLDING B.V. By:_______________________ Name: Title: KATO HOLDING B.V. By:_______________________ Name: Title: BIRES INVESTMENTS, B.V. By:_______________________ Name: Title: -5- Exhibit 4.11 TAKO HOLDING, B.V. By:_______________________ Name: Title: KASRI HOLDING B.V. By:_______________________ Name: Title: RENKO INVESTMENTS B.V By:_______________________ Name: Title: ___________________________ Enrique Sanchez Aldunate -6- Exhibit 4.11 Exhibits 1.1-1.6 Replacement Notes -7- Exhibit 4.11 Exhibit 2 Second Restated Pledge Agreement -8- Exhibit 4.11 Exhibit 5 Amendment to Section 6 of Stockholders Agreement "6. PUT OPTION. 6.1 Put Options. Subject to Section 6.4 hereof, at any time during the ----------- period commencing on April 4, 2003 and ending on April 4, 2005, the holders of the Company Shares shall have the right to sell, and the Company shall be required to purchase, for the Put Price (as determined herein) all, but not less than all, of the Company Shares (the "Put Option"). In order to obligate the ---------- Company to purchase the Company Shares pursuant to this Section 6.1, a majority of the holders of the Company Shares must deliver to the Company written notice of the exercise of such Put Option (the "Put Notice") on or prior to April 4, ---------- 2005, and if such notice is given, all holders of the Company Shares shall be obligated to sell their Company Shares pursuant to this Section 6. 6.2. Put Price. The purchase price for the purchase and sale of the --------- Company Shares pursuant to Section 6.1 (the "Put Price") shall be the book value --------- of the Company Shares at the end of the Company's most recent fiscal year ended not more than 90 days prior to the exercise of the Put Option, as determined in accordance with GAAP as then in effect and as shown on the audited balance sheet of the Company for the last day of the most recent audited fiscal period. 6.3. Closing. Except as otherwise provided in Section 6.4 hereof, the ------- closing of the purchase and sale of the Company Shares pursuant to the exercise of the Put Option pursuant to this Section 6 shall take place no later than 60 days after the Put Notice (the "Put Closing Date") at the principal office of ---------------- the Company or if such closing would violate applicable law, at such later date as permitted by applicable law, but in no event later than 90 days after the Put Notice. At the closing of the purchase and sale of Company Shares pursuant to this Section 6, each holder of Company Shares shall deliver to the Company a certificate or certificates representing its Company Shares duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock (or equivalent) transfer tax stamps affixed, and the Company shall pay to such holder by certified or bank check or wire transfer of immediately available federal funds the Put Price. The delivery of a certificate or certificates for the Company Shares by any Person selling Company Shares pursuant to this Section 6 shall be deemed a representation and warranty by such Person that: (i) such Person has full right, title and interest in and to such Company Shares; (ii) such Person has all necessary power and authority and has taken all necessary action to sell such Company Shares as contemplated; and (iii) such Company Shares are free and clear of any and all liens or encumbrances. 6.4 Effect of Certain Transactions. In the event of a merger, ------------------------------ consolidation or other change of control or sale of all or substantially all of the assets of the Company in a -9- Exhibit 4.11 single or series of related transactions (each of the foregoing a "Covered Transaction"), the Company shall notify the holders of the Company Shares of such Covered Transaction not later than thirty (30) days prior to the effective time of such Covered Transaction. Notwithstanding any other provisions contained herein, in the event of a Covered Transaction, the Put Option shall cease to be exercisable and terminate forever as of the effective time of the Covered Transaction; provided, however, that immediately prior to the consummation of -------- ------- such Covered Transaction, the exercisability of the Put Option shall be accelerated. In the event of a Covered Transaction, the closing of the purchase and sale of the Company Shares pursuant to the Put Option pursuant to this Section 6 shall take place simultaneously with the closing of the Covered Transaction and the Put Price shall be the greater of the price as calculated pursuant to Section 6.2 hereof and the per share purchase price, paid by the buyer in the Covered Transaction." -10- EX-4.11.1 3 dex4111.txt SECOND RESTATED SECURITIES PLEDGE AGREEMENT SECOND RESTATED SECURITIES PLEDGE AGREEMENT THIS SECOND RESTATED SECURITIES PLEDGE AGREEMENT is made as of April 4, 2001, between Aerovox Incorporated, a Delaware corporation (together with Mr. Elliot, "Pledgor"), Robert Elliott ("Mr. Elliott") and Hobir Holding B.V. ------- ("Hobir"), Kato Holding B.V. ("Kato"), Bires Investments B.V. ("Bires") Kasri Holding B.V. ("Kasri"), Tako Holding B.V. ("Tako") and Renko Investments B.V. ("Renko"), each a corporation organized under the laws of The Netherlands (collectively, the "Pledgee"). WHEREAS, Pledgor and Pledgee are parties to a Restructuring Agreement dated on or about the date hereof (the "Restructuring Agreement"). ----------------------- WHEREAS, pursuant to the Restructuring Agreement, Pledgor and Pledgee agreed to execute this Second Restated Securities Pledge Agreement to amend and restate the six Restated Securities Pledge Agreements dated January 31, 2001, pursuant to which Aerovox Incorporated agreed to pledge not more than 59% of its shares of common stock of Aerovox de Mexico, S.A. de C.V (f/k/a Capacitores Unidos, S.A. de C.V.) ("ADM Stock") in order to secure Pledgor's indebtedness --------- pursuant to the two promissory notes issued to each Pledgee by Pledgor on April 5, 1999 (the "Old Notes"). --------- WHEREAS, pursuant to the Restructuring Agreement each Old Note has been canceled and replaced by a replacement promissory note bearing interest at 8.22% per annum issued on or about the date hereof (each a "Replacement Note") ---------------- as follows: (a) In the principal amount of $251,250 (Two hundred fifty-one thousand two hundred fifty) to Hobir; (b) In the principal amount of $251,250 (Two hundred fifty-one thousand two hundred fifty) to Kato; (c) In the principal amount of $251,250 (Two hundred fifty-one thousand two hundred fifty) to Bires; (d) In the principal amount of $251,250 (Two hundred fifty-one thousand two hundred fifty) to Kasri; (e) In the principal amount of $331,140 (Three hundred thirty-one thousand one hundred forty) to Tako; and (f) In the principal amount of $255,261 (Two hundred fifty-five thousand two hundred sixty-one) to Renko. WHEREAS, Pledgor and each Pledgee are parties to Stock Purchase Agreements (the "Purchase Agreement"), dated April 5, 1999, as subsequently ------------------ amended, pursuant to which Pledgor purchased a total of 50,000 shares of ADM Stock from Pledgee. WHEREAS, Pledgor now agrees to pledge 100% of the issued and outstanding shares of ADM Stock in order to secure Pledgor's indebtedness pursuant to the Replacement Note. The 50,000 shares of Series B Class I and 22,333,830 shares of Series B Class II of the ADM Stock to be pledged hereunder are hereinafter referred to as "Pledged Securities." This Second Restated ------------------ Securities Pledge Agreement provides the terms and conditions upon which the Replacement Note is secured by a pledge to Pledgee of the Pledged Securities. NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree as follows: 1. Pledge. Pledgor hereby pledges to Pledgee, and grants to Pledgee ------ a security interest in the Pledged Securities as security for the prompt and complete payment when due of the unpaid principal of and interest on the Replacement Note and full payment and performance of the obligations and liabilities of Pledgor hereunder. Upon an event of default on the Replacement Note, Pledgee shall have all of the rights of a secured creditor. 2. Delivery of Pledged Securities. Upon the execution of this Second ------------------------------ Restated Securities Pledge Agreement, Pledgor shall deliver to First National Bank, the U.S. escrow agent of Pledgee any certificate(s) representing the Pledged Securities and duly executed forms of assignment sufficient to transfer title thereto to Pledgee. The escrow agent shall hold the Pledged Shares in accordance with an escrow agreement mutually agreeable to the parties hereto. Pledgor further agrees to deliver upon execution hereof to counsel to Pledgee UCC-1 financing statements which shall identify the Pledged Securities as 100% of the issued and outstanding capital stock of ADM, including the number of issued and outstanding shares, together with all proceeds of the Pledged Securities. The UCC-1 financing statements shall be filed in the appropriate recording offices in Massachusetts and Delaware. 3. Voting Rights; Cash Dividends. Upon execution of this Second ----------------------------- Restated Securities Pledge Agreement, Pledgor shall deliver to Enrique Sanchez Aldunate ("Mr. Sanchez") an irrevocable proxy to vote the Pledged Securities in the form of Exhibit A to this Agreement; provided, however, so long as no default exists in the payment of principal or interest on any Replacement Note, Pledgor shall be entitled to exercise all voting rights with respect to the Pledged Securities. All dividends or other distributions with respect to any Pledged Securities in the form of cash or cash equivalents shall be retained by or otherwise immediately remitted to Pledgee for application to the Note as provided therein. 4. Stock Dividends; Distributions, etc. If, while this Restated ------------------------------------ Securities Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, in exchange for or otherwise in respect of any of the Pledged Securities (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of Pledgee as additional security for Pledgor's obligations under the Replacement Note and shall promptly deliver such additional -2- security to Pledgee together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Securities hereunder. 5. Default. If Pledgor defaults in the payment of the principal or ------- interest under the Replacement Note when it becomes due (whether upon acceleration or otherwise) or any other event of default under the Replacement Note or this Second Restated Securities Pledge Agreement occurs (including the bankruptcy, Chapter 11 or insolvency of Pledgor), Pledgee may exercise any and all the rights, powers and remedies of any owner of the Pledged Securities (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Massachusetts or otherwise applicable to Pledgee under applicable law. Without limiting the foregoing, Pledgee is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Securities at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as Pledgee may deem advisable. Pledgor shall have no right to redeem the Pledged Securities after any such sale or assignment. At any such sale or auction, Pledgee may bid for, and become the purchaser of, the whole or any part of the Pledged Securities offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Replacement Note; provided that after payment in full of the indebtedness evidence by the Replacement Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Securities remaining in the hands of Pledgee. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Replacement Note in full, including the fees of any attorneys employed by Pledgee to collect such deficiency. 6. Release of Pledged Securities. ----------------------------- a. Upon payment in full of the indebtedness evidenced by the Replacement Note, Pledgee shall surrender the Pledged Securities to Pledgor together with all forms of assignment. b. Upon termination of Enrique Sanchez Aldunate ("Mr. Sanchez") as an executive officer or director of Pledgor by his decision for any reason except for Mr. Sanchez's death or disability, the security interest granted hereunder shall immediately terminate and Pledgee shall surrender the Pledged Securities to Pledgor together with all applicable forms of assignment. For purposes of this Section 6.1.b, Mr. Sanchez shall be considered to have a disability if he becomes disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities for twelve weeks or more during any period of three hundred and sixty-five (365) consecutive calendar days. 7. No Other Liens; No Sales or Transfers. Pledgor hereby represents ------------------------------------- and warrants that he has good and valid title to all of the Pledged Securities, free and clear of all liens, security -3- interests and other encumbrances, and Pledgor hereby covenants that, until such time as all of the outstanding principal of and interest on the Replacement Note have been repaid, Pledgor shall not (i) create, incur, assume or suffer to exist any pledge, security interest, encumbrance, lien or charge of any kind against the Pledged Securities or Pledgor's rights as a holder thereof, other than pursuant to this Second Restated Securities Pledge Agreement or (ii) sell or otherwise transfer any Pledged Securities or any interest therein. 8. Further Assurances. Pledgor agrees that at any time and from time to ------------------ time upon the written request of Pledgee, Pledgor shall execute and deliver such further documents (including UCC financing statements) and do such further acts and things as Pledgee may reasonably request in order to effect the purposes of this Second Restated Securities Pledge Agreement. 9. Severability. Any provision of this Second Restated Securities Pledge ------------ Agreement which 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10. No Waiver; Cumulative Remedies. Pledgee shall not by any act, delay, ------------------------------ omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid against Pledgee unless in writing and signed by Pledgee, and then only to the extent therein set forth. A waiver by Pledgee of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Pledgee would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of Pledgee, of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. Waivers, Amendments; Applicable Law; Dispute Resolution; Consent to ------------------------------------------------------------------- Jurisdiction. None of the terms or provisions of this Second Restated - ------------ Securities Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of Pledgee hereunder, inure to the benefit of Pledgee and its respective successors and assigns. This Second Restated Securities Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of The Commonwealth of Massachusetts with regard to any conflict of law provisions. Any dispute which arises between the parties hereunder shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement. Notwithstanding the foregoing, each party hereto, by its execution hereof, (a) consents to the jurisdiction of the competent courts of Mexico City, Federal District, for the sole purpose of enforcing an arbitral award relating to this Agreement under Clause 8.13 of the Purchase Agreement, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, and agrees not to allow any of its subsidiaries to assert, by way of motion, as a defense or otherwise, in any such -4- action, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution, that any such proceeding brought in one of the above named courts is improper, or that this Agreement or the subject matter hereof or thereof may not be enforced by such court and (c) hereby agrees not to commence or maintain any actions, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof or thereof other than in the courts and for the purpose described in clause (a) above nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation to any court other than one of the above- named courts whether on the grounds of inconvenient forum or otherwise. -5- IN WITNESS WHEREOF, this Second Restated Securities Pledge Agreement has been executed as of the date first above written. AEROVOX INCORPORATED ______________________________ Robert D. Elliott RENKO INVESTMENTS, B.V. ______________________________ Francisco Lucia S. HOBIR HOLDING B.V. ______________________________ Francisco Lucia S. KATO HOLDING B.V. ______________________________ Francisco Lucia S. BIRES INVESTMENTS B.V. ______________________________ Francisco Lucia S. -6- KASRI HOLDING B.V. ______________________________ Francisco Lucia S. TAKO HOLDING B.V. ______________________________ Francisco Lucia S. Exhibit A Irrevocable Proxy Reference is made to the (i) Restructuring Agreement dated as of April ___, 2001 by and among Aerovox Incorporated ("Aerovox"), Aerovox de Mexico (the "Company"), Enrique Sanchez Aldunate ("Mr. Sanchez"), Hobir Holding B.V. ("Hobir"), Kato Holding B.V. ("Kato"), Bires Investments B.V. ("Bires"), Kasri Holding B.V. ("Kasri"), Tako Holding B.V. ("Tako"), and Renko Investments B.V. ("Renko") (the "Restructuring Agreement") and (ii) the six Replacement Promissory Notes dated April ___, 2001 issued by Aerovox to each of Hobir, Kato, Bires, Kasri, Tako and Renko (the "Replacement Notes"). Each of Aerovox and Robert Elliott (each a "Stockholder") hereby irrevocably appoints Mr. Sanchez as attorney and proxy with the power of substitution to represent and vote at any annual or special meeting of stockholders the Company all of their respective shares of the capital stock of the Company (the "Pledged Securities") which each such Stockholder could vote if present, in such manner as he may determine on any matters which may properly come before any such meeting or any adjournments thereof and to take any action by written consent of stockholders of ADM; provided, however, that so long as no default exists in the payment of principal or interest on any Replacement Note, Aerovox shall be entitled to exercise all voting rights with respect to the Pledged Securities and this Irrevocable Proxy shall have no effect. AEROVOX INCORPORATED By:_______________________ Robert Elliott Chief Executive Officer __________________________ Robert Elliott -2- April ___, 2001 First National Bank 401 West A Street San Diego, CA 92101-7917 Attention: Ms. Carlee Harmonson Re: General Escrow Instructions Ladies and Gentlemen: Reference is made to the General Escrow Instructions (the "General Instructions") dated on or about the date hereof by and among First National Bank as Escrow Agent ("Escrow Agent"), Aerovox Incorporated ("Pledgor"); Hobir Holding B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V., Tako Holding B.V., and Renko Investments B.V., (collectively, "Pledgee"); and Enrique Sanchez Aldunate as Pledgee's representative ("Pledgee's Representative"). The General Instructions are hereby incorporated by reference herein and made a part of this letter agreement. To the extent that anything contained in the General Instructions conflicts with any provisions of this letter agreement, the terms of this letter agreement shall control. Upon execution hereof, Pledgor shall deposit into escrow with Escrow Agent 50,000 shares of Series B Class I and 22,333,830 shares of Series B Class II of the capital stock of Aerovox de Mexico (the "Pledged Shares"). It is agreed by the parties hereto that Escrow Agent is serving only as escrow holder and Pledgee's collateral agent for purposes of establishing Pledgee's control of the Pledged Shares under Section 8-106 of the Uniform Commercial Code. In the event that an event of default occurs as a result of any non-payment of interest or principal due under any Replacement Promissory Notes dated as of April 4, 2001 issued to Pledgee, Pledgee's Representative, on behalf of Pledgee, may deliver a written notice to Escrow Agent that such default has occurred and request that Escrow Agent release the Pledged Shares at the direction of Pledgee's Representative to the person or persons acquiring such shares pursuant to the foreclosure of Pledgee's security interest in the Pledged Shares conducted in accordance with the Pledge Agreement and the law of the jurisdiction governing the enforcement of Pledgee's rights thereunder. Upon receipt of such notice, Escrow Agent shall deliver a copy of the notice to Pledgor. Pledgor shall then have ten (10) business days from the date of receipt of such notice to object to such release by delivery to Escrow Agent of an Officers Certificate of Pledgor executed by two officers of the Pledgor, at least one of which shall be its President or Chief Financial Officer, certifying under penalty of perjury that either (i) no default has occurred as a result of any non-payment of interest or principal due under any Replacement Promissory Notes dated as of April 4, 2001 issued to Pledgee, or (ii) based upon written advise of counsel to Pledgor, the foreclosure of Pledgee's security interest in the Pledged Shares was not lawfully conducted e in accordance with the Pledge Agreement of the laws of the jurisdiction governing the enforcement of Pledgee's rights under the Pledge Agreement. If Pledgor objects to such release by delivery of the such Officers Certificate, Escrow Agent shall continue to hold the Pledged Shares in escrow until it receives written instructions from Pledgee's Representative and Pledgor or is otherwise directed by a judicial order. If Pledgor does not object as provided herein within the specified time period, Escrow Agent shall release the Pledged Shares to Pledgee's Representative. Fees of $2,000 per annum are payable to Escrow Agent for its ordinary and usual services hereunder. Should there be any extraordinary or unusual services approved by the parties hereto to be rendered by Escrow Agent, Pledgor and Pledgee shall pay reasonable compensation to Escrow Agent for such extraordinary or unusual services, together with any reasonable costs and expenses which may be incurred by Escrow Agent in connection with the same. Pledgor and Pledgee agree that all fees paid to Escrow Agent hereunder shall be paid 50% by Pledgor and 50% by Pledgee. Notices hereunder shall be deemed given when actually delivered to the recipient at the applicable address or facsimile number listed below (or at such other address as the recipient shall have designated by notice given hereunder): If to Escrow Agent: First National Bank 401 West A Street San Diego, Ca 92101-7917 Attention: Trust Department, Ms. Carlee Harmonson, Sr. Vice President If to Pledgor: Aerovox Incorporated 167 John Vertente Blvd. New Bedford, MA 02745-1221 Fax: 508-910-3179 Attn: Chief Executive Officer with a copy to: Ropes & Gray One International Place Boston, MA 02110 Fax: 617-951-7050 Attn: David A. Fine, Esq. If to Pledgee or Pledgee's Representative: Mr. Enrique Sanchez Aldunate Tezozomoc 239 Mexico D.F. 02760 -2- Mexico Fax: 525-352-5385 The rights and obligations of Escrow Agent under this letter agreement and the General Instructions shall be governed by and construed and interpreted in accordance with the laws of the State of California without regard to any conflict of law provision. [Remainder of page intentionally left blank.] -3- Please acknowledge your agreement to and acceptance of the foregoing by signing as indicated below. Very truly yours, Pledgor: AEROVOX, INC. By:_______________________ Name: Title: Pledgees: HOBIR HOLDING B.V. By:_______________________ Name: Title: KATO HOLDING B.V. By:_______________________ Name: Title: BIRES INVESTMENTS, B.V. By:_______________________ Name: Title: TAKO HOLDING, B.V. By:_______________________ Name: Title: -4- KASRI HOLDING B.V. By:_______________________ Name: Title: RENKO INVESTMENTS B.V By:_______________________ Name: Title: Pledgee's Representative: ___________________________ Enrique Sanchez Aldunate Agreed and Accepted: Escrow Agent: FIRST NATIONAL BANK By:_______________________ Name: Title: -5- EX-4.11.2 4 dex4112.txt ESCROW INSTRUCTIONS FIRST NATIONAL BANK GENERAL ESCROW INSTRUCTIONS --------------------------- 1. These instructions will become effective only when First National Bank ("Escrow Agent") receives them fully executed by all parties hereto. Such parties acknowledge that no escrow will exist and none of the provisions herein will be effective until such fully executed instructions have been received by Escrow Agent. If any funds, documents or property are delivered to Escrow Agent prior to receipt of these fully executed escrow instructions, Escrow Agent will return such items to the party so depositing at their request. 2. It is agreed by the parties hereto that as far as Escrow Agent's rights and liabilities are involved, this transaction is an escrow and not any other legal relationship, and Escrow Agent is an escrow holder only on the foregoing expressed terms. Escrow Agent shall not be responsible or liable in any manner whatsoever for the following: (1) the sufficiency or correctness as to form, manner of execution or validity of any documents deposited in escrow; (2) the identity, authority, or right of any person executing the same, either as to documents of record or those handled in this escrow; or (3) the failure of any party to comply with any of the provisions of any agreement contract or other instrument filed or deposited in this escrow or referred to in these escrow instructions. Escrow Agent's duties hereunder shall be limited to the safekeeping of funds, documents or property received by Escrow Agent, and for the disposition of the same in accordance with the written instructions accepted by Escrow Agent in this escrow. Escrow Agent shall not be required to take any action regarding the collection, maturity or legality of any obligations deposited therewith unless otherwise instructed in writing. Escrow Agent shall not be liable for any of Escrow Agent's acts or omissions done in good faith, nor for any claims, demands, losses or damages made, claimed or suffered by any party to this escrow, excepting such as may arise through or may be caused by Escrow Agent's willful misconduct or gross negligence. 3. It is mutually understood and agreed by all parties in this escrow, jointly and severally, that all funds received in this escrow may be deposited with a state-chartered or national bank with other escrow funds, by Escrow Agent. Escrow Agent is authorized and instructed to utilize the services of a sub- escrow agent, within the scope of Sections 1738.4 and 1738.5 of the California Administrative Code, as a depository for any funds and/or documents deposited with Escrow Agent prior to close of escrow, if necessary. All disbursements shall be made by check of Escrow Agent, unless Escrow Agent is otherwise instructed in writing and deemed to be acceptable by Escrow Agent. Escrow Agent shall not be obligated to identify or to guarantee the signature of any payee of any disbursement check of Escrow Agent. 4. The knowledge of Escrow Agent of matters affecting this escrow, provided such facts do not prevent compliance with these instructions, does not create any liability or duty in addition to the responsibility of Escrow Agent set forth hereunder. Escrow Agent shall not be obligated to make any physical examination of any real or personal property described in any document deposited into this escrow. The parties hereto agree Escrow Agent is not making any representations whatsoever regarding any such property and that it is not to be concerned with nor liable for the condition of said property. 5. Escrow Agent shall not be responsible for conducting a lien or title search with respect to any party to this escrow or property which may be deposited in this escrow or referred to in any document related hereto. Should the parties desire that Escrow Agent conduct any lien or title search, the parties requesting the same shall deliver separate and specific written escrow instructions to Escrow Agent along with an agreement to pay Escrow Agent's additional escrow fees. 6. Escrow Agent shall be under no obligation or liability for failure to inform the parties to this escrow regarding any sale, loan, exchange, or other transaction or facts within the knowledge of Escrow Agent concerning this escrow, provided it does not prevent Escrow Agent's compliance with these instructions. Escrow Agent shall not be responsible for in any way whatsoever nor concerned with any question of usury in any loan or encumbrance, whether new or of record, which may arise before the close of escrow. Escrow Agent shall not be concerned with giving any disclosures otherwise required by Federal or State law. 7. ALL NOTICES, DEMANDS AND INSTRUCTIONS MUST BE IN WRITING. No notice, demand, instruction, amendment, supplement or modification of these escrow instructions shall be of any effect in this escrow until delivered in writing to Escrow Agent and mutually executed by all parties. Escrow Agent shall only be concerned with the directives expressly set forth in the escrow instructions, supplements and amendments thereto. These escrow instructions may be executed in counterparts, each of which shall be deemed an original regardless of the date of its execution and delivery. All such counterparts together shall constitute the same document. 8. It is agreed that the parties hereto shall cooperate with Escrow Agent in carrying out these escrow instructions and completing this escrow. Said parties shall deposit into escrow, upon request, any additional funds, instruments, documents, instructions, authorizations, or other items that may be necessary to enable Escrow Agent to comply with demands made on it by third parties, to secure policies of title insurance, or to otherwise carry out the terms of their instructions and close this escrow. 9. In the event conflicting demands are made or served upon Escrow Agent or any controversy arises between the parties hereto or with any third person growing out of or relating to this escrow, Escrow Agent shall have the absolute right to withhold and stop all further proceedings in, and performance of, this escrow, until Escrow Agent receives written notification satisfactory to Escrow Agent of the settlement of the controversy by agreement of the parties thereto, or by the final judgment of a court of competent jurisdiction. All of the parties to this escrow hereby jointly and severally promise and agree to pay promptly on demand as well as to indemnify Escrow Agent and to hold Escrow Agent harmless from and against all claims, demands, costs, damages, judgments, attorneys' fees, expenses, obligations and liabilities of every kind which Escrow Agent may incur or suffer in connection with or arising out of this escrow, whether said litigation, interpleader, obligation, liabilities or expense arise during the performance of this escrow or subsequent thereof, directly or indirectly. In the event of conflicting demands on the Escrow Agent by the parties hereto, the Escrow Agent may, at its option, deposit any and all funds in question with the court that would have jurisdiction over such matter, and in such event, Escrow Agent is relieved of any further responsibility in connection with this escrow. 10. Escrow Agent shall be given a lien upon all rights, titles and interests of each of the parties hereto and all escrow papers and other property, funds and monies deposited into this escrow to protect Escrow Agent's rights, including but not limited to, it rights as to indemnification and reimbursement. If the parties fail to timely pay any fees, costs or expenses due Escrow Agent hereunder, on demand, or fail to timely pay for costs and attorneys' fees incurred in any litigation, administrative action and/or arbitration, each of the parties hereto agree to pay a reasonable fee for any attorney services which may be required to collect such fees or expenses, whether attorneys' fees are incurred before trial, at trial, on appeal or in arbitration. 11. It is agreed and understood by the parties hereto that the fees to be paid to Escrow Agent for its services are for ordinary and usual services only, and should there be any extraordinary or unusual services rendered by Escrow Agent, the parties agree to pay reasonable compensation to Escrow Agent for such extraordinary or unusual services, to-ether with any costs and expenses which may be incurred by Escrow Agent in connection with the same. It is also agreed and understood that in the event this escrow is canceled, Escrow Agent shall be entitled to compensation for such services as Escrow Agent has rendered in connection with this escrow. 12. This escrow shall close on the day upon which Escrow Agent has disbursed all funds, documents or property being held by Escrow Agent under these instructions, and has performed all other duties required hereunder. Escrow Agent is authorized to destroy or otherwise dispose of any and all documents, papers, escrow instructions, correspondence and records or other material constituting or pertaining to this escrow at any time after five (5) years from the date of: (1) the close of escrow; (2) the date of cancellation; or (3) the date of the last activity without liability and without further notice to the parties. 13. These instructions shall supersede any provisions contained in any agreement, document or instrument deposited with Escrow Agent that conflict with or otherwise vary with these instructions. IN WITNESS WHEREOF, the undersigned have executed these escrow instructions effective as of _____________, 2001. Escrow Agent: FIRST NATIONAL BANK By:_______________________ Name: Title: Pledgor: AEROVOX, INC. By:_______________________ Name: Title: Pledgees: HOBIR HOLDING B.V. By:_______________________ Name: Title: KATO HOLDING B.V. By:_______________________ Name: Title: BIRES INVESTMENTS, B.V. By:_______________________ Name: Title: TAKO HOLDING, B.V. By:_______________________ Name: Title: KASRI HOLDING B.V. By:_______________________ Name: Title: RENKO INVESTMENTS B.V By:_______________________ Name: Title: Pledgee's Representative ___________________________ Enrique Sanchez Aldunate EX-4.11.3 5 dex4113.txt REPLACEMENT PROMISSORY NOTE - HOBIR HOLDING THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Hobir Holding B.V. AEROVOX INCORPORATED Replacement Promissory Note US $251,250 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Hobir Holdings B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $251,250.00 (two hundred fifty-one thousand two hundred fifty dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on April 4, 2002; (ii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on July 4, 2002; (iii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on October 4, 2002; and (iv) US $61,794 (sixty-one thousand seven hundred ninety-four) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Renko Investments B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V. and Tako Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By___________________________________ (CORPORATE SEAL) Name: Title: -3- EX-4.11.4 6 dex4114.txt REPLACEMENT PROMISSORY NOTE - KATO HOLDINGS THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Kato Holding B.V. AEROVOX INCORPORATED Replacement Promissory Note US $251,250 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Kato Holdings B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $251,250.00 (two hundred fifty-one thousand two hundred fifty dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on April 4, 2002; (ii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on July 4, 2002; (iii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on October 4, 2002; and (iv) US $61,794 (sixty-one thousand seven hundred ninety-four) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Renko Investments B.V., Hobir Holding B.V., Bires Investments B.V., Kasri Holding B.V. and Tako Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By___________________________________ (CORPORATE SEAL) Name: Title: -3- EX-4.11.5 7 dex4115.txt REPLACEMENT PROMISSORY NOTE - BIRES INVESTMENTS THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Bires Investments B.V. AEROVOX INCORPORATED Replacement Promissory Note US $251,250 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Bires Investments B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $251,250.00 (two hundred fifty-one thousand two hundred fifty dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $63,152 (sixty- three thousand one hundred fifty two) plus accrued but unpaid interest on April 4, 2002; (ii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on July 4, 2002; (iii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on October 4, 2002; and (iv) US $61,794 (sixty-one thousand seven hundred ninety-four) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Renko Investments B.V., Kato Holding B.V., Hobir Holding B.V., Kasri Holding B.V. and Tako Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By _____________________________________ (CORPORATE SEAL) Name: Title: -3- EX-4.11.6 8 dex4116.txt REPLACEMENT PROMISSORY NOTE - KASRI HOLDINGS THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Kasri Holding B.V. AEROVOX INCORPORATED Replacement Promissory Note US $251,250 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Kasri Holdings B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $251,250.00 (two hundred fifty-one thousand two hundred fifty dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on April 4, 2002; (ii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on July 4, 2002; (iii) US $63,152 (sixty-three thousand one hundred fifty two) plus accrued but unpaid interest on October 4, 2002; and (iv) US $61,794 (sixty-one thousand seven hundred ninety-four) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Renko Investments B.V., Kato Holding B.V., Bires Investments B.V., Hobir Holding B.V. and Tako Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By ___________________________________ (CORPORATE SEAL) Name: Title: -3- EX-4.11.7 9 dex4117.txt REPLACEMENT PROMISSORY NOT - RENKO INVESTMENTS THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Renko Investments B.V. AEROVOX INCORPORATED Replacement Promissory Note US $255,261 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Renko Investments B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $255,261.00 (two hundred fifty-five thousand two hundred sixty-one dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $64,160 (sixty-four thousand one hundred sixty) plus accrued but unpaid interest on April 4, 2002; (ii) US $64,160 (sixty-four thousand one hundred sixty) plus accrued but unpaid interest on July 4, 2002; (iii) US $64,160 (sixty-four thousand one hundred sixty) plus accrued but unpaid interest on October 4, 2002; and (iv) US $62,781 (sixty-two thousand seven hundred eighty-one) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Hobir Holding B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V. and Tako Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By ___________________________________ (CORPORATE SEAL) Name: Title: -3- EX-4.11.8 10 dex4118.txt REPLACEMENT PROMISSORY NOTE - TAKO HOLDINGS THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE ABSENCE OF SUCH OPINION. This Replacement Promissory Note replaces the two Promissory Notes dated April 5, 1999, payable on April 4, 2001 and April 4, 2002, respectively, issued by Aerovox, Inc. to Tako Holding B.V. AEROVOX INCORPORATED Replacement Promissory Note US $331,140 APRIL 4, 2001 AEROVOX INCORPORATED, a Delaware corporation (hereinafter called the "Company") for value received, hereby promises to pay to Tako Holdings B.V. at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam (hereinafter called "Payee") the principal sum of US $331,140.00 (three hundred thirty-one thousand one hundred forty dollars and 00/100, currency of the United States of America), together with all accrued but unpaid interest as follows: (i) US $83,232 (eighty-three thousand two hundred thirty-two) plus accrued but unpaid interest on April 4, 2002; (ii) US $83,232 (eighty-three thousand two hundred thirty-two) plus accrued but unpaid interest on July 4, 2002; (iii) US $83,232 (eighty-three thousand two hundred thirty-two) plus accrued but unpaid interest on October 4, 2002; and (iv) US $81,444 (eighty-one thousand four hundred forty-four) plus accrued but unpaid interest on January 4, 2003. Interest shall accrue beginning as of April 1, 2001 on the unpaid principal amount of this Note at a per annum rate of interest equal to 8.22%. Principal and interest under this Note shall be payable without setoff of any kind. For purposes of determining the person entitled to payment of the principal of and interest on this Note, the Company is entitled to pay the person who is the holder of this Note at the close of business on the third day (whether or not a business day) next preceding the date for such payment. All payments of principal on this Note shall be payable at the address set forth above for such holder or at such other place as such holder may from time to time in writing appoint at least 15 days before the date such payment is due upon surrender of this Note to the Company. This Note is transferable in whole, but not in part, without the prior written consent of the Company, upon registration in the books and records of the Company. Unless a third party is appointed by the Company, the Company shall act as Registrar and Transfer Agent with respect to this Note. Upon receipt of this Note duly endorsed for transfer, subject to compliance with the Securities Act of 1933, as amended, the Company, at its cost, shall cause this Note to be canceled and a new Note with the terms hereof to be issued to the named transferee. The Company may prepay all or any part of the principal amount of this Note at any time on 30 days' prior written notice to the holder hereof. If any one or more of the following events (each of which is herein termed an "event of default") shall happen, that is to say: (1) Any default shall be made by the Company in any payment in respect of principal or interest on this Note as the same shall become due, whether by acceleration or otherwise, and such default shall continue for a period of three business days; (2) The Company shall be involved in financial difficulties as evidenced: (a) by its admitting its inability to pay its debts generally as they become due or otherwise acknowledging its insolvency; (b) by its filing a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the United States Bankruptcy Act (or similar law of the United States or any other jurisdiction which relates to the liquidation or reorganization of companies or to the modification or alteration of the rights of creditors, each such law, as from time to time in effect, being sometimes referred to as a "bankruptcy act", each as now or in the future amended) or an answer or other pleading admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) by its making an assignment, or so-called trust mortgage or the like, for the benefit of its creditors or by its making a proposal to its creditors under any bankruptcy act; (d) by its consent to the appointment of a receiver or a trustee (or other person performing a similar function) for all or a substantial part of its property; (e) by its being adjudicated bankrupt; (f) by the entry of a court order which shall not be vacated, set aside or stayed within 120 days form the date of entry, (i) appointing a receiver or a trustee for all or a substantial part of its property, or (ii) approving a petition filed or application made against it for, or effecting an arrangement in, bankruptcy or for a reorganization or other relief pursuant to any bankruptcy act or for any other judicial modification or alteration of the rights of creditors; or (g) by the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of its property, which custody or sequestration shall not be suspended or terminated within 120 days from its inception; or -2- (3) An "event of default" shall have occurred and be continuing under any of the other Notes issued by the Company on the date hereof to Payee and any of Renko Investments B.V., Kato Holding B.V., Bires Investments B.V., Kasri Holding B.V. and Hobir Holding B.V; then, Payee may declare the entire unpaid principal balance of the Note and all accrued and unpaid interest immediately due and payable without notice. Upon the occurrence of an event of default, Payee shall be entitled to recover from the Company, in addition to the unpaid principal balance and all accrued and unpaid interest, all costs of collection incurred by Payee including, without limitation, attorney's fees and court costs. An event of default shall not be deemed to be in existence for any purpose of this Note if the registered holder of this Note shall have waived such event in writing or stated in writing that the same has been cured to his reasonable satisfaction, but no such waiver shall extend to or affect any subsequent event of default or impair any of such holder's rights upon the occurrence thereof, and no such waiver shall be granted unless and until notice of any such default or notice of any event which, by the passage of time or otherwise, is expected to result in an event of default shall have been received by Payee. Any notice required or permitted to be given hereunder shall be deemed given if mailed, first class, postage prepaid, if to the holder, at Amsterdam, Strawisnkylaan 1725, 1077 XX Amsterdam, or if to the Company, at 167 John Vertente Blvd., New Bedford, Massachusetts 02745-1221, Attention: Chief Executive Officer, or in any case as either such person may designate to the other in writing. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of time of payment, or forbearance or other indulgence without notice. This Note shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to conflict of law provisions. Any dispute between Payer and Payee with respect to this Note shall be resolved exclusively in accordance with the arbitration procedures set forth in Clause 8.13 of the Purchase Agreement dated as of April 5, 1999 by and between the Company and Payee. IN WITNESS WHEREOF, Aerovox Incorporated has caused this Note to be duly executed under its corporate seal. AEROVOX INCORPORATED By___________________________________ (CORPORATE SEAL) Name: Title: -3- -----END PRIVACY-ENHANCED MESSAGE-----