-----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, UI3XiBDjjH0WLR2nwzgyukXu4BQBta1mJiHazsaZ5+9o4X2KQ3s+RC7SFVSQ6ETp YxCB0HP7xrYe6eJB3uM0Lw== 0000887730-98-000003.txt : 19980212 0000887730-98-000003.hdr.sgml : 19980212 ACCESSION NUMBER: 0000887730-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980211 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEMET CORP CENTRAL INDEX KEY: 0000887730 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 570923789 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20289 FILM NUMBER: 98532234 BUSINESS ADDRESS: STREET 1: 2835 KEMET WAY CITY: SIMPSONVILLE STATE: SC ZIP: 29681 BUSINESS PHONE: 8039636300 MAIL ADDRESS: STREET 1: P O BOX 5928 STREET 2: 2835 KEMET WAY CITY: SIMPSONVILLE STATE: SC ZIP: 29681 10-Q 1 1 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 period ended December 31, 1997. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period from to Commission File Number: 0-20289 KEMET CORPORATION Exact name of registrant as specified in its charter DELAWARE 57-0923789 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2835 KEMET WAY, SIMPSONVILLE, SOUTH CAROLINA 29681 (Address of principal executive offices, zip code) 864-963-6300 (Registrant's telephone number, including area code) Former name, former address and former fiscal year, if changed since last report: N/A 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 [ ] Common Stock Outstanding at: February 11, 1998 Title of Each Class Number of Shares Outstanding Common Stock, $.01 Par Value 39,133,293 Non-Voting Common Stock, $.01 Par Value 1,096,610 2 PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in Thousands Except Per Share Data
December 31, March 31, 1997 1997 (unaudited) ------------ ------------ ASSETS Current assets: Cash $ 5,255 $2,188 Notes and accounts receivable (less allowances of $8,029 and $6,999 at December 31, 1997 and March 31, 1997, respectively) 52,123 55,189 Inventories: Raw materials and supplies 37,578 35,880 Work in process 53,492 39,373 Finished goods 26,726 22,116 ------------ ------------ Total inventories 117,796 97,369 Prepaid expenses 2,046 2,402 Deferred income taxes 16,251 12,552 ------------ ------------ Total current assets 193,471 169,700 Property and equipment (less accumulated depreciation of $176,038 and $145,124 at December 31, 1997 and March 31, 1997, respectively) 378,183 319,509 Intangible assets (less accumulated amortization of $13,489 and $12,278 at December 31, 1997 and March 31, 1997, respectively) 47,220 48,431 Other assets 4,991 5,604 -------------- ------------ Total assets $623,865 $543,244 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 20,000$ - Current installments of long-term debt - 72 Notes payable and accounts payable, trade 70,995 62,159 Accrued expenses 48,006 29,310 Income taxes 2,472 15,091 --------------- ------------ Total current liabilities 141,473 106,632 Long-term debt, excluding current installments 106,350 102,900 Other non-current obligations 67,137 68,848 Deferred income taxes 16,843 12,741 --------------- ------------ Total liabilities $331,803 $291,121 --------------- ------------ Stockholders' equity: Common stock, par value $.01, authorized 100,000,000 shares, issued and outstanding 38,006,467 shares as of December 31, 1997 and 37,717,011 shares as of March 31, 1997. 380 377 Non-voting common stock, par value $.01, authorized 12,000,000 shares as of December 31, 1997. Issued and outstanding 1,096,610 shares as of December 31, 1997 and March 31, 1997 11 11 Additional paid-in capital 143,472 139,352 Retained earnings 148,196 112,387 -------------- ------------ 292,059 252,127 Equity adjustments from foreign currency translation 3 (4) -------------- ------------ Total stockholders' equity 292,062 252,123 -------------- ------------ Total liabilities and stockholders' equity $623,865 $543,244 ============== ============
See accompanying notes to consolidated financial statements. 3 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Dollars in Thousands Except Per Share Data
Three months ended Nine months ended December 31, December 31, 1997 1996 1997 1996 (unaudited) (unaudited) (unaudited) (unaudited) ----------- ----------- ----------- ----------- Net Sales $170,359 $143,626 $497,041 $399,544 Operating costs and expenses: Cost of goods sold, exclusive of depreciation 116,807 99,076 342,570 271,072 Selling, general and administrative expenses 12,185 11,676 36,577 34,723 Research and development 6,484 4,986 17,535 15,445 Depreciation and amortization 10,216 8,565 28,960 24,764 Restructuring charge 10,500 - 10,500 - Early retirement costs - - - 15,407 ----------- ----------- ----------- ----------- 156,193 124,303 436,142 361,411 Operating income 14,167 19,323 60,899 38,133 Other expense: Interest expense 1,964 1,407 5,260 4,205 Other 1,492 654 3,926 1,284 ----------- ----------- ----------- ----------- Earnings before income taxes 10,711 17,262 51,713 32,644 Income tax expense 3,154 5,179 15,904 10,563 Net earnings $ 7,557 $12,083 $35,809 $22,081 =========== =========== =========== ========== Per Common Share Information: Net earnings per common share-basic $ .19 $0.31 $ .92 $0.57 Weighted average shares outstanding-basic 39,092,517 38,768,745 38,996,448 38,714,968 ========== ========== ========== ========== Net earnings per common share-diluted $ .19 $0.31 $ .91 $0.56 Weighted average shares outstanding-diluted 39,424,840 39,291,629 39,424,797 39,255,064 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 4 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in Thousands
Nine months ended December 31, 1997 1996 (unaudited) (unaudited) ------------- ------------- Sources (uses) of cash: Net cash from operating activities $ 64,313 $36,913 Investing transactions: Additions to property and equipment (88,755) (63,124) Proceeds from sale of property and equipment 1 70 Other 7 5 ------------- ------------ Net cash from (used by) investing transactions (88,747) (63,049) Financing transactions: Proceeds from sale of common stock to Employee Savings Plan 902 967 Proceeds from exercise of stock options including related tax benefit 3,221 1,431 Repayment of debt (72) (200) Net proceeds from revolving/swingline loan 23,450 25,000 ------------- ------------- Net cash from financing transactions 27,501 27,198 Net increase (decrease) in cash 3,067 1,062 Cash at beginning of period 2,188 3,408 ------------- ------------- Cash at end of period $5,255 $4,470 ============= =============
See accompanying notes to consolidated financial statements. 5 Item 1. Financial Statements Note 1. Basis of Financial Statement Preparation The consolidated financial statements contained herein are unaudited and have been prepared from the books and records of KEMET Corporation and Subsidiaries (KEMET or the Company). In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these consolidated financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company's fiscal year ended March 31, 1997 Form 10-K. Net sales and operating results for the nine months ended December 31, 1997 are not necessarily indicative of the results to be expected for the full year. Note 2. Reconciliation of basic earnings per common share to diluted earnings per common share. In accordance with FASB Statement No. 128, the Company has included the following table presenting a reconciliation of basic EPS to diluted EPS fully displaying the effect of dilutive securities. COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
For the nine months ended December 31. 1997 1996 ---- ---- Income Shares Per Income Shares Per (numerator) (denominator) Share (numerator) (denominator) Share Amount Amount ----------- ------------ ------- ---------- ------------- ------- Basic EPS Income available to common stockholders $ 35,809 $38,996,448 $ 1.11 $ 22,081 $38,714,968 $0.57 Effect of diluted securities Stock Options - 428,349 - - 540,096 - ----------- --------------- ----------- ---------- ------------ --------- Diluted EPS Income available to $ 35,809 $39,424,797 $ 1.09 $ 22,081 $39,255,064 $0.56 common stockholders plus assumed conversions
Options to purchase 281,885 shares of common stock at $32.125 per share were outstanding for the nine months ended December 31, 1997 and 1996, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of common shares. The options expire on October 23, 2005. 6 Options to purchase 308,445 shares of common stock at $27.75 per share were outstanding for the nine months ended December 31, 1997, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of common shares. The options expire on October 22, 2007. The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. In consolidation all significant intercompany amounts and transactions have been eliminated. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Net sales for the quarter and nine months ended December 31, 1997, were $170.4 million and $497.0 million, an increase of $26.8 million or 19% and $97.5 million or 24%, respectively, from the comparable periods of the prior year. The increase in net sales was primarily attributable to the continuing strong demand for surface-mount products, expansion of distribution channels, and the Company's ability to increase manufacturing capacity through continued capital investment. Sales of surface-mount capacitors for the quarter and nine months ended December 31, 1997, were $133.8 million and $301.1 million, an increase of 25% and 33%, respectively, from comparable prior year periods and sales of leaded capacitors remained relatively constant comparable to prior years. Sales also increased in both domestic and export markets for the quarter and nine months ended December 31, 1997, from the comparable prior year periods with domestic sales increasing 15% and 21% to $95.8 million and $282.6 million, respectively, and export sales increasing 24% and 29% to $74.6 million and $214.4 million, respectively. Cost of sales, exclusive of depreciation for the quarter and nine months ended December 31, 1997, were $116.8 million and $342.6 million, respectively, as compared to $99.1 million and $271.1 million for the quarter and nine months ended December 31, 1996. As a percentage of net sales, cost of sales, exclusive of depreciation was 69% for both the quarter and nine months ended December 31, 1997, as compared to 69% and 68% for the comparable periods of the prior year. The Company's ongoing pursuit of cost reduction activities are targeted toward protecting margins in the current aggressive pricing environment and resulted in a restructuring program announced during the period ended December 31, 1997. (Described below) Selling, general and administrative expenses for the quarter and nine months ended December 31, 1997 were $12.2 million and $36.6 million (both 7% of net sales), as compared to $11.7 million and $34.7 million (8% and 9% of net sales) for the comparable periods of the prior year. The decrease in selling, general and administrative expenses as a percent of sales is primarily due to increased sales volume and the resulting efficiencies. Research, development and engineering expenses for the quarter and nine months ended December 31, 1997, were $6.5 million and $17.5 million, respectively, as compared to $5.0 million and $15.4 million for the prior comparable periods. The increase reflects the Company's continued efforts to develop new products and processes and the continued enhancement of manufacturing systems. Depreciation and amortization expense for the quarter and nine months ended December 31, 1997, were $10.2 million and $29.0 million as compared to $8.6 7 million and $24.8 million for the comparable periods of the prior year. The increase is due to additional capital expenditures over the prior fiscal years. The Company recorded a pretax charge of $10.5 million ($7.3 million after tax) in the quarter ended December 31, 1997, in conjunction with a plan to restructure the manufacturing and support operations between its U.S. facilities in North and South Carolina and its Mexican operations in Monterrey, Mexico. The restructuring plan is expected to reduce the Company's U.S. work force by approximately 1,000 employees and result in an annualized pretax cost savings of approximately $18.0 million. Operating income for the quarter and nine months ended December 31, 1997, was $14.2 million and $60.9 million, respectively, compared to $19.3 million and $38.1 million for the comparable periods in the prior year. The decline for the quarter ended December 31, 1997 resulted primarily from the restructuring charge as discussed above. Operating income for the quarter ended December 31, 1997, of $24.7 million (excluding the restructuring charge) was a 28% increase compared to $19.3 million reported in the quarter ended December 31, 1996. Income tax expense totaled $3.2 million and $15.9 million for the quarter and nine months ended December 31, 1997 (30% and 31% of pretax earnings), respectively, compared to income tax expense of $5.2 million and $10.6 million (30% and 32% of pretax earnings) for the quarter and nine months ended December 31, 1996. The decrease in the effective rate for the nine months ended December 31, 1997, was primarily the result of increased foreign sales corporation benefits and lower effective state tax rates. Liquidity and Capital Resources The Company's liquidity needs arise primarily from working capital requirements, capital expenditures and interest payments on its indebtedness. The Company intends to satisfy its liquidity requirements primarily with funds provided by operations, borrowings under its credit facilities and amounts advanced under its foreign accounts receivable discounting arrangements. On November 12, 1997, the Company entered into an agreement with SunTrust Bank, Atlanta, whereby SunTrust Bank, Atlanta has offered to extend unsecured short- term loans to the Company of which the aggregate principal amount of all loans outstanding may not exceed $20.0 million. The term of each loan may have a maturity of not more than 90 days and the interest rate on each loan will be negotiated and determined at the time of each borrowing. During the period ended December 31, 1997 the Company initiated short-term borrowings with an average effective interest rate of 5.848%. SunTrust Bank, Atlanta does not have any commitment to lend any funds in the future, and may cease to consider loan requests from the Company at any time. Additional liquidity is generated by the Company through its accounts receivable discounting arrangements. On November 18, 1997 KEMET Electronics, S.A., a wholly owned subsidiary of the Company, renewed its discounting agreement with Swiss Bank Corporation. The agreement has been amended to decrease the maximum amount of purchased receivables from $50.0 million to $30.0 million through June 1998 at which time the maximum will be reduced to $20.0 million for the duration of the agreement. In addition, the discount has been increased from a rate per annum equal to .50% above LIBOR to a rate per annum equal to .65% above LIBOR. The above amendments were effective as of December 9, 1997. All other terms and conditions remain in full force and effect until November 30, 1998. 8 Cash flows from operating activities for the nine months ended December 31, 1997, were $64.3 million compared with $36.9 million for the nine months ended December 31, 1996. The increase in cash flows was primarily a result of the increase in net income and the timing of cash flows from current assets and liabilities such as accounts receivables, inventories, accounts payables, accrued liabilities and income taxes payable. The Company incurred a pretax restructuring charge of $10.5 million for the nine months ended December 31, 1997. Approximately $6.0 million of these charges will relate to employee termination costs. The restructuring plan is expected to be completed by the end of the third fiscal quarter of 1999. Management has initiated an aggressive enterprise wide program to prepare the Company's computer systems and applications for the year 2000. The program is a combination of remediation efforts both internally and with the Company's suppliers and the implementation of client server applications. The acquisition costs of the new software and equipment has and continues to be capitalized and all other expenses have been charged against operating income. Amounts incurred for the nine months ended December 31, 1997 were not material and the Company does not expect the amounts required to be expensed for the remaining activities to have a material effect on its financial position or results of operations. The Company expects its year 2000 date conversion projects to be completed on a timely basis. However, there can be no assurance that other companies' systems will be converted on a timely basis or that any such failure to convert by another company would not have an adverse effect on the Company's systems. Capital expenditures were $88.8 million for the nine months ended December 31, 1997 compared to $63.1 million for the nine months ended December 31, 1996. Expenditures were primarily used for expanding production capabilities of the tantalum and ceramic surface-mount product lines to support the Company's long- term growth objectives. During the nine months ended December 31, 1997, the Company increased its indebtedness (long-term debt and current portion of long-term debt) by $23.4 million which consisted primarily of the financing of capital expenditures. The Company had unused availability under its revolving credit facilities as of December 31, 1997, of approximately $68.7 million. The Company believes its strong financial position will permit the financing of its business needs and opportunities in an orderly manner. It is anticipated that ongoing operations will be financed primarily by internally generated funds. In addition, the Company has the flexibility to meet short-term working capital and other temporary requirements through the utilization of borrowings under its credit facilities. From time to time, information provided by the Company, including but not limited to statements in this report, or other statements made by or on behalf of the Company, may contain "forward-looking" information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such statements involve a number of risks and uncertainties. The Company's actual results could differ materially from those discussed in the forward-looking statements. The cautionary statements set forth in the Company's 1997 Annual Report under the heading Safe Harbor Statement identify important factors that could cause actual results to differ materially from those in any forward-looking statements made by or on behalf of the Company. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Other than as reported in the Company's Form 10-K for the fiscal year ended March 31, 1997 under the caption "Item 3. Legal Proceedings" and Form 10-Q for the quarters ended June 30, 1997 and September 30, 1997, under the caption "Part II - Other Information", the Company is not currently a party to any material pending legal proceedings, other than routine litigation incidental to the business of the Company. Item 2. Change in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10.1Demand Note, dated as of November 12, 1997, between KEMET Corporation, as borrower, and SunTrust Bank, Atlanta, as lender. 10.1.1 Acceptance Agreement, dated as of November 12, 1997, between KEMET Corporation, as borrower, and SunTrust Bank, Atlanta, as lender. 10.2Thirteenth amendment to the Purchase Agreement, as amended, by and between KEMET Electronics, S.A., Geneva and Swiss Bank Corporation, Geneva dated as of November 18, 1997. (b)Reports on Form 8-K. On November 6, 1997, Form 8-K was filed by the Company announcing the resignation of Terry R. Weaver as President and Chief Operating Officer of the Company and as a member of the board of directors. 10 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 11 , 1998 KEMET Corporation /S/ D. R. Cash D. R. Cash Senior Vice President of Administration and Treasurer (Principal Accounting and Financial Officer) EX-10.1 2 1 DEMAND NOTE November 12, 1997 KEMET Corporation, a Delaware corporation (the "Company"), promises to pay to the order of SUNTRUST BANK, ATLANTA (the "Bank") ON DEMAND the principal sum of twenty-million dollars ($20,000,000) or so much thereof as may be from time to time disbursed hereunder, plus interest on the unpaid principal balance as hereinafter provided. Principal may be disbursed hereunder in the sole discretion of the Bank in one or more disbursements (hereinafter an "Advance" and collectively the "Advances"), which in the aggregate shall at no time exceed the principal amount of this Note. The interest period of any Advance shall not exceed 90 days. On the last day of any applicable interest period with respect to each Advance, the Company may request a renewal of such Advance; provided, that the Bank shall have no obligation or commitment to renew such Advance, notwithstanding that the Bank may have previously renewed such Advance or any other Advance. Interest shall accrue at the Quoted Rate and shall be due and payable on the last day of each interest period and ON DEMAND for final payment. Should the Company fail for any reason to pay this Note in full on the date of any demand, the Company further promises to pay interest on the unpaid amount from such date until the date of final payment at a default rate equal to the Bank's Prime Rate plus 4% per annum. Should legal action or an attorney at law be utilized to collect any amount due hereunder, the Company further promises to pay all costs of collection, including 15% of such unpaid amount as attorneys' fees. All amounts due hereunder may be paid at any office of Bank. "Prime Rate" shall mean that rate of interest designated by the Bank from time to time as its Prime Rate, which may not be its lowest rate of interest. "Quoted Rate" shall mean the per annum rate of interest quoted by the Bank in its discretion to the Company on the day of any requested advance. The amount of interest accruing and payable hereunder shall be calculated on the basis of a 360-day year for the actual number of days elapsed. Upon default, the Bank may, without notice, immediately take possession of and then sell or otherwise dispose of the collateral, signing any necessary documents as the Company's attorney-in-fact, and apply the proceeds against any liability of the Company to the Bank. Upon demand, the Company will furnish such additional collateral, and execute any appropriate documents related thereto, deemed necessary by the Bank for its security. The Company further authorizes the Bank, without notice, to set-off any deposit or account and apply any indebtedness due or to become due from the Bank to the Company in satisfaction of any liability described in this paragraph, whether or not matured. The Bank may, without notice, transfer or register any property constituting security for this note into its or its nominee name with or without any indication of its security interest therein. This Note shall immediately become due and payable, without notice or demand, upon the filing of any petition or the commencement of any proceeding by or against the Company for relief under bankruptcy or insolvency laws, or any law relating to the relief of debtors, readjustment of indebtedness, debtor reorganization, or composition or extension of debt. 2 The failure or forebearance of the Bank to exercise any right hereunder, or otherwise granted by law or another agreement, shall not affect or release the liability of the Company, and shall not constitute a waiver of such right unless so stated by the Bank in writing. The Bank may enforce its rights against the Company or any property securing this Note without enforcing its rights against any guarantor or other obligor, property, or indebtedness due or to become due to any such guarantor or obligor. The Company agrees that the Bank shall have no responsibility for the collection or protection of any property securing this Note, and expressly consents that the Bank may from time to time, without notice, extend the time for payment of this Note, or any part thereof, waive its rights with respect to any property or indebtedness, and release any guarantor or other obligor from liability, without releasing the Company from any liability to the Bank. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL. TIME IS OF THE ESSENCE. PRESENTMENT, NOTICE OF DISHONOR, NOTICE OF DEMAND AND PROTEST ARE HEREBY WAIVED BY THE COMPANY. Executed under hand and seal on the date set forth above. KEMET Corporation By /S/ D.R. Cash ----------------------------------- CORPORATE SEAL Title:Senior Vice President - Administration & Treasurer Attested By /S/ G.H. Spears -------------------------- Title:Senior Vice President - Human Resources & Secretary EX-10.1.1 3 1 ACCEPTANCE AGREEMENT SunTrust Bank, Atlanta P.O. Box 4418, Center Code 118 Atlanta, Georgia 30302 Attn: Jason P. Owen Ladies and Gentlemen: You have informed us that SUNTRUST BANK, ATLANTA (the "Bank") has established an uncommitted guidance line of credit in the principal amount of $20,000,000 (the "Credit Facility") to KEMET Corporation, a Delaware corporation (the "Company"), pursuant to that certain letter dated November 12, 1997 and the Demand Note dated November 12, 1997 (the "Note"). Disbursements under the Credit Facility shall be payable ON DEMAND and shall be made in the sole discretion of the Bank. Upon receiving a request for a disbursement under the Credit Facility from the Company, which request shall include the principal amount requested and the interest period requested , which shall be a period of between one (1) and ninety (90) days (the "Interest Period"), the Bank will promptly advise the Company whether or not the Bank will make such disbursement and, if the Bank determines to make such disbursement, the interest rate to be applicable thereto calculated on the basis of a 360-day year for the actual number of days elapsed (the "Quoted Rate"). If the Quoted Rate is accepted by the Company, the Bank may, in its sole discretion, make such disbursement available to the Company either as a loan advance pursuant to the Note or by creating Acceptances (as hereinafter defined) on the terms and conditions hereinafter set forth; provided, that the aggregate unpaid principal balance of all loan advances from time to time outstanding pursuant to the Note plus the aggregate discounted amount of all outstanding Acceptances from time to time created by the Bank pursuant to this Agreement shall not at any time exceed $20,000,000. The Company hereby agrees with the Bank as follows: 1. Creation. Upon any request by the Company for a disbursement under the Credit Facility which the Bank, in its sole discretion, elects to make, the Company hereby authorizes the Bank, on behalf of the Company pursuant to the authority granted in Paragraph 4 hereof, to accept one or more drafts drawn on the Bank by the Company and payable to the order of the Bank in such amounts as the Bank may reasonably deem necessary in order to sell, rediscount or otherwise transfer in accordance with Paragraph 2 hereof (each such draft shall hereinafter be referred to as an "Acceptance" and collectively, the "Acceptances") . The aggregate face amount of the Acceptances so created at such time shall equal an amount sufficient to provide the Company, after deduction of interest at the Quoted Rate (calculated on a discounted basis), with the principal amount of such requested disbursement. 2. Discount. Each Acceptance shall be purchased by the Bank at a discount. The discount rate shall equal the Quoted Rate. Upon the discount of such Acceptance(s), the net proceeds will be credited to the Company's account at the Bank or transferred in accordance with the Company's written instructions to the Bank. The Bank may at any time and from time to time sell, rediscount or otherwise transfer such discounted Acceptances. 2 3. Maturity. Each Acceptance shall be payable ON DEMAND; provided, that the Company may request the Bank to renew the disbursement evidenced by such Acceptance on the last day of the interest period applicable to such disbursement (which shall be the maturity date of such Acceptance). PROVIDED, THAT, the Bank shall have no obligation or commitment to renew such disbursement (notwithstanding that the Bank may have previously renewed such disbursement or any other disbursement), in which case the Company will pay to the Bank an amount equal to the face amount of such Acceptance. 4. Limited Bank Authority. The Company does hereby nominate, constitute and appoint the Bank as its true and lawful attorney-in-fact (its "attorney-in- fact") to represent and act for it and on its behalf relative to the following: 1. To execute the Acceptances in the Company's name, as drawer; and 2. To complete the Acceptances with the following information: (a) the maturity date, which shall be the last day of the interest period requested by the Company and agreed to by the Bank, (b) the payee, which shall be the Bank, and (c) the dollar amount of each Acceptance. The Bank shall not incur any liability to the Company by reason of the Bank's reliance upon the authority herein given to the attorney-in-fact, unless and until said attorney-in-fact shall have received, and had reasonable time to act upon, written notice of revocation. The Company further agrees to indemnify the Bank and its directors, officers, employees and agents, and hold all of the aforementioned harmless from and against any loss, cost or expense, including reasonable attorney's fees actually incurred, that the Bank may incur in reliance upon this limited power of attorney, except for any losses, costs or expenses caused by the Bank's or such person's gross negligence or wilful misconduct. The indemnity contained in this paragraph shall survive the termination of this Acceptance Agreement. Until the Bank's receipt of written notice of revocation from the Company, and reasonable time to act thereon, any actions by the Bank in reliance upon this power of attorney shall be fully binding upon the Company, its successors and assigns. 5. Relationship with Note. This Acceptance Agreement does not replace or amend the the Note, which remains in full force and effect, and the terms and conditions of the Note are hereby incorporated into this Acceptance Agreement by reference thereto. 6. Default Interest. Should the Company fail for any reason to pay any Acceptance in full on the date of any demand, the Company further promises to pay interest on the unpaid amount from such date until the date of final payment at a default rate equal to the Bank's Prime Rate plus 2% per annum but in no event shall the interest rate so charged exceed the highest rate permitted by applicable law, if any. Should legal action or an attorney at law be utilized to collect any amount due hereunder, the Company further promises to pay all costs of collection, including 15% of such unpaid amount as attorneys' fees. 7. Bankruptcy. All Acceptances shall immediately become due and payable, without notice or demand, upon the filing of any petition or the commencement of any proceeding by or against the Company for relief under any bankruptcy or insolvency laws, or any law relating to the relief of debtors, readjustment of indebtedness, debtor reorganization, or composition or extension of debt. 8. Miscellaneous. Should legal action or an attorney-at-law be utilized to collect any amount due under this Acceptance Agreement, the Company promises to pay all costs of collection plus reasonable attorneys' fees. This Acceptance Agreement shall be binding upon the Company, its legal representatives, successors and assigns; provided, that the Company may not assign any of its rights or obligations hereunder to any other person or entity. TIME IS OF THE ESSENCE OF THIS ACCEPTANCE AGREEMENT. 3 THIS ACCEPTANCE AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL. The Company hereby authorizes the Bank at any time and from time to time, without notice to the Company or any other entity or 4 person, such notice being expressly waived, to set off, appropriate and apply any and all deposits (including all general and special deposits and matured and unmatured certificates of deposit) maintained by the Company with the Bank to the obligations of the Company under this Acceptance Agreement upon demand or the failure of the Company to pay any Acceptances. The Company and the Bank agree that the right of the set off provided herein is not a lien or security interest. PRESENTMENT, NOTICE OF DISHONOR, NOTICE OF DEMAND AND PROTEST ARE HEREBY WAIVED BY THE COMPANY. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 4 IN WITNESS WHEREOF, the undersigned executes this Acceptance Agreement under seal this 12th day of November, 1997. ----- Very truly yours, KEMET Corporation By /S/ D.R. Cash Title: Senior Vice President - Administration & Treasurer Attest: /S/ G.H. Spears Title: Senior Vice President - Human Resources & Secretary CORPORATE SEAL Acknowledged and Agreed as of the 12 day of November, 1997. SUNTRUST BANK, ATLANTA By /S/ J.P. Owen Title: Jason P. Owen, Banking Officer By /S/ Margaret A. Jaketic Title: Vice President EX-10.2 4 ORIGINAL FOR THE BANK THIRTEENTH AMENDMENT TO PURCHASE AGREEMENT THIRTEENTH AMENDMENT (the "Thirteenth Amendment") to the PURCHASE AGREEMENT, dated as of April 22, 1988, to the FIRST AMENDMENT, dated as of July 22, 1988, to the SECOND AMENDMENT, dated as of April 11, 1989, to the THIRD AMENDMENT, dated as of August 20, 1990, to the FOURTH AMENDMENT, dated as of March 21, 1991, to the FIFTH AMENDMENT, dated as of September 17, 1992, to the SIXTH AMENDMENT, dated as of December 3, 1992 to the SEVENTH AMENDMENT, dated as of June 30, 1993, to the EIGHTH AMENDMENT, dated as of July 25, 1994, to the NINTH AMENDMENT dated as of August 8, 1994, to the TENTH AMENDMENT, dated as of March 17, 1995, to the ELEVENTH AMENDMENT dated as of September 27, 1995, to the TWELFTH AMENDMENT dated as of August 26, 1996, between SWISS BANK CORPORATION, Geneva Branch (the "Bank")and KEMET ELECTRONICS S.A. (the "Seller"). PREAMBLE: WHEREAS, the Bank and the Seller are parties to the Purchase Agreement referred to above (the "Purchase Agreement") under which the Bank has agreed to purchase from the Seller and the Seller has agreed to sell to the Bank certain trade receivables subject to the terms and conditions therein set forth; and WHEREAS, the Bank and the Seller desire to amend the Purchase Agreement and the subsequent Amendments referred to above as follows: a. to reduce the aggregate amount of the Purchased Receivables; and b. to extend the expiration date of the Purchase Agreement; and c. to increase the margin over LIBOR applicable to the discount rate; NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained it is hereby agreed as follows: 1) Clause 1 (a) of the Purchase Agreement is hereby amended by deleting the amount "USD 50'000'000.--(fifty million US Dollars)" which appears therein and substituting in lieu thereof the amount "USD 30'000'000.--(thirty million US Dollar) through June 1998 at which time it will be reduced to "USD 20'000'000.-- (twenty million US Dollars)" to finally expire in November 1998. 2) Clause 1 (a) of the Purchase Agreement is hereby amended -2- by deleting "Unless extended by mutual consent of the Bank and the Seller given on or before July 31, 1997, this Agreement shall expire on September 30, 1997, by which date all the Purchase Receivables must be repaid to the Bank" which appears therein and substituting in lieu thereof "Unless extended by mutual consent of the Bank and the Seller given n or before September 30, 1998, this Agreement shall expire on November 30, 1998, by which date all Purchased Receivables must be repaid to the Bank". 3) Clause 2 of the chase Agreement is hereby amended in the first paragraph by deleting "For each period commencing on the Closing Date on which the purchase of the receivables takes effect and ending on the next succeeding Closing Date (herein called the "Discount Period"), the Bank shall pay to the Seller the amount of the Purchased Receivables less an interest (herein called the "Discount") calculated at a rate per annum equal to 1/2 % above the LIBOR for the respective currency and duration as determined by the BANK two business days prior to the commencement of such Discount Period" which appears therein and substituting in lieu thereof "For each period commencing on the Closing Date on which the purchase of the receivables takes effect and ending on the next succeeding Closing Date (herein called the "Discount Period"), the Bank shall pay to the Seller the amount of the Purchased Receivables less an interest (herein called the "Discount") calculated at a rate per annum equal to 0,65% above the LIBOR for the respective currency and duration as determined by the Bank two business days prior to the commencement of such Discount Period". The remaining two other paragraphs of this Clause 2 remain valid. 4) This Thirteenth Amendment shall become effective on the date it is signed, with effect on December 9th, 1997. 5) Except as expressly modified by the terms and conditions of this Amendment, the Purchase Agreement, the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth Amendments shall continue to be and shallo remain in full force and effect. 6) All terms used in this Thirteenth Amendment which are defined in the Purchase Agreement shall have their respective meanings set forth therein, unless otherwise indicated. IN WITNESS WHEREOF, the parties have caused this Thirteenth Amendment to be duly executed in two originals by the proper and duly authorized officers as of the day and year hereunder written.. Geneva, November 18, 1997 SWISS BANK CORPORATION Geneva, ....................................... KEMET ELECTRONICS S.A. ................................................... EX-27 5 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. 1 Date: February 11, 1998EXHIBIT 27
5 1000 9-MOS MAR-31-1997 DEC-31-1997 5255 0 60152 8029 117796 193471 554221 176038 623865 141473 0 0 0 380 291682 623865 497041 497041 342570 436142 3926 0 5260 51713 15904 35809 0 0 0 35809 .91 .91
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