-----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, Te6qdls4X5ZcYoIrhOXnwzRTvTpybQrFi+UqW+TE7p+UHmbg03O//Ud1NJxYBuxu cTb+LoZzh1T3nFFB/GXlgw== 0000887730-98-000007.txt : 19980622 0000887730-98-000007.hdr.sgml : 19980622 ACCESSION NUMBER: 0000887730-98-000007 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980619 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: DEF 14A SEC ACT: SEC FILE NUMBER: 000-20289 FILM NUMBER: 98650678 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 DEF 14A 1 1998 PROXY STATEMENT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of The Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [ x ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 14a-12 KEMET CORPORATION --------------------------------------------------- (Name of Registrant as Specified In Its Charter) --------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 1) Title of each class of securities to which transaction applies: -------- 2) Aggregate number of securities to which transaction applies: --------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - --------------------------------- 4) Proposed maximum aggregate value of transaction: - ------------------------- 5) Total fee paid: --------------------------------------------------------- [ ] Fee paid previously with preliminary materials [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: - --------------------------------------------------- 2) Form, Schedule, or Registration Statement No.: - --------------------------- 3) Filing Party: - ------------------------------------------------------------- 4) Date Filed: --------------------------------------------------------- 2 KEMET CORPORATION P.O. Box 5928 Greenville, South Carolina 29606 June 22, 1998 Dear Stockholder: You are cordially invited to attend the 1998 Annual Meeting of Stockholders which will be held on Wednesday, July 22, 1998, at 1:00 p.m., local time, at the Palmetto Exposition Center, Woodside Conference Center, 1 Exposition Avenue, Greenville, South Carolina. The notice of meeting, proxy statement and proxy are included with this letter. The matters listed in the notice of meeting are more fully described in the proxy statement. It is important that your shares are represented and voted at the Annual Meeting, regardless of the size of your holdings. Accordingly, please mark, sign and date the enclosed proxy and return it promptly in the enclosed envelope. If you attend the Annual Meeting, you may, of course, withdraw your proxy should you wish to vote in person. Sincerely, /S/ David E. Maguire David E. Maguire Chairman, Chief Executive Officer, and President 3 KEMET CORPORATION P.O. Box 5928 Greenville, South Carolina 29606 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS The 1998 annual meeting of stockholders (the "Annual Meeting") of KEMET Corporation (the "Corporation") will be held on Wednesday, July 22, 1998, at 1:00 p.m., local time, at the Palmetto Exposition Center, Woodside Conference Center, 1 Exposition Avenue, Greenville, South Carolina, to consider and take action with respect to the following matters: 1. The election of two directors for a three-year term or until their successors are duly elected and qualified. 2. The ratification of the appointment of KPMG Peat Marwick LLP as independent public accountants for the year ending March 31, 1999. 3. The transaction of such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. Holders of record of the Corporation's Common Stock at the close of business on June 8, 1998, are entitled to receive notice of and to vote on all matters presented at the meeting and at any adjournments or postponements thereof. By order of the Board of Directors /S/ Glenn H. Spears Glenn H. Spears Secretary June 22, 1998 WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING. 4 Mailed to Stockholders on or about June 22, 1998 KEMET CORPORATION P.O. Box 5928 Greenville, South Carolina 29606 ------------------------------------------------------ PROXY STATEMENT ------------------------------------------------------ 1998 Annual Meeting of Stockholders July 22,1998 ------------------------------------------------------ This proxy is being furnished to the holders of common stock, par value $0.01 per share (the "Common Stock"), of KEMET Corporation (the "Corporation") in connection with the solicitation of proxies on behalf of the Board of Directors of the Corporation (the "Board of Directors" or "Board") for the 1998 annual meeting of stockholders (the "Annual Meeting") to be held on July 22, 1998, at the Palmetto Exposition Center, Woodside Conference Center, 1 Exposition Avenue, Greenville, South Carolina, and at any adjournments or postponements thereof. When you sign and return the enclosed proxy, the shares represented thereby will be voted FOR the directors described herein, FOR the proposal set forth in Item 2 in the Notice of Meeting, and, as to any other business as may properly be brought before the Annual Meeting and any adjournments or postponements thereof, in accordance with the judgment of the person or persons voting on such matter or matters. Returning your completed proxy will not prevent you from voting in person at the Annual Meeting should you be present and wish to do so. In addition, you may revoke your proxy any time before it is voted by written notice to the Secretary of the Corporation prior to the Annual Meeting or by submission of a later-dated proxy. Each outstanding share of Common Stock entitles the holder thereof to one vote. On June 8, 1998, the record date, there were 38,090,762 shares of Common Stock outstanding. The presence in person or by proxy of a majority of such shares of Common Stock shall constitute a quorum. A broker non-vote on a matter is considered not entitled to vote on that matter and thus is not counted in determining whether a matter requiring approval of a majority of the shares present and entitled to vote has been approved. PROPOSAL TO ELECT DIRECTORS The Corporation's Restated Certificate of Incorporation provides that the Board of Directors will consist of not more than nine nor fewer than three directors with the number of directors to be established by the Board of Directors by resolution. The Corporation currently has five directors: Messrs. David E. Maguire, Charles E. Volpe, Stewart A. Kohl, Paul C. Schorr IV, and E. Erwin Maddrey, II. 5 In connection with the acquisition of the outstanding common stock of KEMET Electronics Corporation by the Corporation in 1990 (the "Acquisition"), Messrs. David E. Maguire, Glenn H. Spears, Kenneth L. Martin, D. Ray Cash, and Harris L. Crowley, Jr. (the "Senior Managers") and Charles E. Volpe, John Piper, Brian G. Hawthornthwaite, Bernd K. Scheumann, Robert A. Taylor, Jr., James J. Jerozal, Donald A. Adams, Donald J. Poinsette and Edwin H. Bost (retired "Senior Managers" but still a part of this agreement), Citicorp Venture Capital, Ltd. ("CVC") and certain other investors, have entered into an agreement (the "Voting Agreement") which provides, among other things, for the nomination of and voting for up to seven directors of the Corporation by such stockholders, which as of the record date own approximately 23% of all outstanding Common Stock. Under the Voting Agreement, CVC has the right to designate up to two directors if the Board of Directors consists of five directors, and up to three directors if the Board of Directors consists of seven directors. The two directors designated by CVC are currently Stewart A. Kohl and Paul C. Schorr IV. Each party to the Voting Agreement has agreed to vote its shares in favor of the nominees. A majority of the directors has the right to nominate the remainder of the directors, including up to two directors who are not affiliated with the Corporation or CVC. Each director nominated by parties to the Voting Agreement may be removed only at the request of the party who nominated such director. The Voting Agreement terminates upon the earlier of October 21, 2002, or at such time as CVC and its affiliates cease to own at least 10% of the Corporation's Common Stock. The stockholders who are parties to the Voting Agreement hold, in the aggregate, a substantial amount of the voting power of the Corporation and thus, if acting in unison or in various combinations, could likely be able to elect all the directors even if the Voting Agreement were not in place. The Board of Directors is currently comprised of five directors divided into three classes. The term of each class expires in different years. The two nominees for election to the Board of Directors this year to serve for three-year terms or until their successors are duly elected and qualified are David E. Maguire and Stewart A. Kohl, who are currently directors of the Corporation. The Board of Directors expects the nominees named above to be available for election. In case a nominee is not available, the proxy holders may vote for a substitute, unless the Board of Directors reduces the number of directors. The directors will be elected at the Annual Meeting by a majority of the votes cast at the meeting by the holders of shares represented in person or by proxy. There is no right to cumulative voting as to any matter, including the election of directors. The following sets forth information as to each continuing director and nominee for director, including age, as of June 8, 1998, principal occupation and employment during the past five years, directorships in other publicly held companies and period of service as a director of the Corporation. 6 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF MR. MAGUIRE AND MR. KOHL TO THE BOARD OF DIRECTORS. NOMINEES FOR BOARD OF DIRECTORS David E. Maguire,63, Chairman, Chief Executive Officer, President and Director, has served as Chairman of the Company since August 1992. Mr. Maguire has served as Chief Executive Officer, President, and Director of the Company since November 1997, and from December 1990 until October 1996. Mr. Maguire also served as Chairman, President and Chief Executive Officer of KEMET Electronics since April 1987. From January 1959 until April 1987, Mr. Maguire served in a number of capacities with the KEMET capacitor business of UCC, most recently as Vice President from June 1978 until April 1987. Stewart A. Kohl, 42, Director, was named a Director of the Corporation in May 1992. Mr. Kohl has been a Managing General Partner in The Riverside Company, an investment company, since October 1993. Mr. Kohl was previously a Vice President of Citicorp North America, Inc. and had been employed by various subsidiaries of Citicorp North America, Inc. since 1988. Mr. Kohl also serves on the board of directors of Agri-Max, Inc., The South Florida Newspaper Network, Inc., Shore Bank and Trust Company and Trend Holding, Inc. CONTINUING DIRECTORS Charles E. Volpe, 60, Director, was named a Director of the Corporation in December 1990. Mr. Volpe also served as Executive Vice President and Chief Operating Officer ("COO"), and most recently served as President and COO from October 1995 until his retirement on March 31, 1996. Mr. Volpe served as a Vice President of the Corporation from March 1996 until July 1997. Mr. Volpe had also served as Executive Vice President and Director of KEMET Electronics since April 1987. From August 1966 until April 1987, Mr. Volpe served in a number of capacities with the KEMET capacitor business of UCC, most recently as General Manager. Mr. Volpe is also a director of Trend Technologies, Inc., and Encad, Inc. Paul C. Shorr IV, 31, Director, was unanimously elected by members of the Board of Directors on April 21, 1998. Mr. Schorr is a Vice President of Citicorp Venture Capital, Ltd., a subsidiary of Citibank. Mr. Schorr joined Citicorp Venture Capital, Ltd. in 1996. Mr. Schorr was previously a manager for McKinsey and Company, Inc., a management consulting company, since 1993. Mr. Schorr also serves on the boards of Inland Resources Company, Inc., Sybron Chemicals, Inc. and Fairchild Semi-Conductors Company, Inc. E. Erwin Maddrey, II, 57, was named a Director of the Corporation in May 1992. Mr. Maddrey has been President, Chief Executive Officer and a director of Delta Woodside Industries, Inc., a textile manufacturer, and its predecessors since 1984. Prior thereto, Mr. Maddrey served as President and Chief Operating Officer and director of Riegel Textile Corporation. Mr. Maddrey also serves on the board of directors of Blue Cross of South Carolina and Renfro Corp. There are no family relationships among the foregoing persons. 7 BOARD AND COMMITTEE MEETINGS The Board of Directors held four meetings (exclusive of committee meetings) during the preceding fiscal year. Each current director attended 100% of the number of meetings held during the preceding fiscal year of the Board of Directors and all committees on which such director served. The Board of Directors has established the following committees, the functions and current members of which are noted below. Executive Committee. The Executive Committee of the Board of Directors consists of Messrs. Maguire, Volpe and Kohl. The Executive Committee exercises the powers of the Board of Directors during intervals between Board meetings and acts as an advisory body to the Board by reviewing various matters prior to their submission to the Board. The Executive Committee met three times during the preceding fiscal year. Compensation Committee. The Compensation Committee of the Board of Directors consists of Messrs. Schorr, Kohl and Maddrey. The Compensation Committee reviews and makes recommendations to the Board of Directors regarding salaries, compensation and benefits of executive officers and key employees of the Corporation and grants all options to purchase Common Stock of the Corporation. The Compensation Committee met three times during the preceding fiscal year. Audit Committee. The Audit Committee of the Board of Directors consists of Messrs. Schorr, Kohl and Maddrey. The Audit Committee, among other duties, reviews the internal and external financial reporting of the Corporation, reviews the scope of the independent audit and considers comments by the auditors regarding internal controls and accounting procedures and management's response to those comments. The Audit Committee met twice during the preceding fiscal year. The Corporation does not have a standing nominating committee. COMPENSATION OF DIRECTORS The Voting Agreement provides that each director (other than directors that are employed by the Corporation or CVC and its affiliates) is entitled to an annual directors' fee of $20,000. Directors that are employed by CVC or its affiliates are entitled to an annual directors' fee of $8,000, and directors that are employed by the Corporation are not entitled to an annual directors' fee. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Corporation's officers, directors and persons who beneficially own more than ten percent of a registered class of the Corporation's equity securities to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than ten-percent beneficial owners also are required by rules promulgated by the SEC to furnish the Corporation with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to the Corporation, or written representations that no Form 5 filings were required, the Corporation believes that during the period from March 31, 1997, through March 31, 1998, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with. 8 PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors, upon recommendation by the Audit Committee, has appointed KPMG Peat Marwick LLP as independent public accountants to examine the financial statements of the Corporation for the year ending March 31, 1999, and to perform other appropriate accounting services. A proposal will be presented at the Annual Meeting to ratify the appointment of KPMG Peat Marwick LLP as the Corporation's independent public accountants. One or more members of that firm are expected to be present at the Annual Meeting to respond to questions and to make a statement if they desire to do so. If the stockholders do not ratify this appointment by the affirmative vote of a majority of the shares represented in person or by proxy at the meeting, other independent public accountants will be considered by the Board of Directors upon recommendation by the Audit Committee. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS. OTHER BUSINESS At the date of this proxy statement, the Corporation has no knowledge of any business other than that described above that will be presented at the Annual Meeting. If any other business should come before the Annual Meeting, the proxies will be voted in the discretion of the proxy holders. SECURITY OWNERSHIP As of June 8 1998, the Corporation's issued and outstanding common stock consisted of 38,090,762 shares of Common Stock and 1,096,610 shares of Non-Voting Common Stock. The Non-Voting Common Stock generally is convertible (subject to certain limitations) into an equal number of shares of Common Stock at any time, at the option of the holder thereof. 9 The following information with respect to the outstanding shares of Common Stock beneficially owned by each director and nominee for director of the Corporation, the five executive officers (including the Chief Executive Officer), the directors and executive officers as a group, and all beneficial owners of more than 5% of the Common Stock is furnished as of June 8, 1998. Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the securities beneficially owned by him as set forth opposite its or his name.
Common Stock ---------------------- DIRECTORS, EXECUTIVE OFFICERS, No. of Percent SELLING STOCKHOLDER AND 5% STOCKHOLDERS Shares of Class(8) - --------------------------------------- ---------- ----------- Citicorp Venture Capital, Ltd.(1)(2) 5,713,910 14.6% David E. Maguire(2)(3) 1,276,576 3.3 Glenn H. Spears(2)(3) 161,221 * D. Ray Cash (2)(3) 284,601 * Harris L. Crowley (2) (3) 76,108 * Charles M. Culbertson (3) 9,452 * Stewart A. Kohl(5) 10,000 * Charles E. Volpe(2)(3) 455,266 1.2 E. Erwin Maddrey, II(6) 2,000 * Paul C. Schorr IV (7) 0 * All Directors and Executive Officers as a group(9 persons) 2,275,074 5.8
- ------------ (1) Includes 4,617,300 shares of Common Stock and 1,096,610 shares of Non-Voting Common Stock beneficially owned by Citicorp Venture Capital, Ltd. The address for Citicorp Venture Capital, Ltd. is 399 Park Avenue, 14th Floor, New York, New York 10043. (2) All of these parties have entered into an agreement providing for the election of directors. Each such party disclaims beneficial ownership of shares of Common Stock owned by each other party. (3) The address of these individuals is c/o KEMET Corporation, P.O. Box 5928, Greenville, South Carolina 29606. (5) The address of this individual is c/o The Riverside Company, The Terminal Tower, 50 Public Square, Suite 4000, Cleveland, Ohio 44113. (6) The address of this individual is c/o Delta Woodside Industries, Inc., 233 North Main Street, Greenville South Carolina 29601. (7) The address of this individual is c/o Citicorp Venture Capital, Ltd., 399 Park Avenue, 14th Floor, New York, New York 10043. (8) Percentages less than one percent are denoted by an asterisk. 10 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following summary compensation table specifies the components of the compensation packages for the Corporation's five executive officers (including the Chief Executive Officer)(the "named executives") for the fiscal years ended March 31, 1996, 1997 and 1998.
Long Term Annual Compensation Compensation --------------------- - --------------- All Other Name and Fiscal Stock Compensation Principal Position Year Salary($)(1) Bonus($)(2) Options(#)(3) ($)(4)(6) - -------------------------- -------- ------------- -------------- - ------------- ------------ David E. Maguire 1998 $434,000 $476,000 24,000 $41,112 (Chairman, Chief 1997 411,000 395,000 24,000 56,037 Executive Officer, and 1996 390,000 831,000 24,000 60,181 President) Harris L. Crowley (5) 1998 $187,000 $121,000 12,000 $ 9,850 (Senior Vice President, 1997 158,000 71,000 12,000 12,034 General Manager Ceramics) 1996 150,000 150,000 8,000 9,157 Charles M. Culbertson (5) 1998 $187,000 $121,000 12,000 $10,557 (Senior Vice President, 1997 156,000 90,000 12,000 12,137 General Manager Tantalum) 1996 130,000 156,000 8,000 6,016 Glenn H. Spears 1998 $210,000 $135,000 12,000 $14,832 (Senior Vice President 1997 200,000 114,000 12,000 18,973 and Secretary) 1996 190,000 238,000 8,000 14,194 D. Ray Cash 1998 $158,000 $102,000 12,000 $8,700 (Senior Vice President, 1997 138,000 62,000 8,000 10,449 Administration/Treasurer) 1996 130,000 130,000 8,000 8,560 Terry R. Weaver 1998 $203,000 $149,000 0 $132,375 (Former President 1997 289,000 214,000 16,000 22,887 and Chief Operating Officer) 1996 240,000 300,000 16,000 10,216 11 (1)Includes $62,175, $24,300,$18,650, $20,075, $16,500 and $30,300 in fiscal year 1998 deferred by Messrs. Maguire, Spears, Crowley, Culbertson, Cash and Weaver, respectively, $93,150, $32,850 $23,100 $23,400, $20,100 and $44,175 in fiscal year 1997 and $50,266, $24,056, $17,650, $11,363, $16,350 and $20,325 in fiscal year 1996 pursuant to a 401(K) account and personal investment account. (2) Pursuant to Corporation policy, bonuses for a fiscal year are paid in May of the following year. The amounts recorded above relate to the fiscal year for which the bonuses were earned. (3) All stock option grants were made pursuant to the Corporation's 1995 Executive Stock Option Plan. (4) Represents payments made by the Corporation for the named executives pursuant to a 401(k) account and personal investment account and for the payment of premiums on the term portion of life insurance, and with respect to Mr. Weaver, see note 6. (5)Effective June 1, 1998, the annual salary for each of Messrs. Crowley and Culbertson was increased to $230,000 per year. (6)Mr. Weaver resigned as President and Chief Operating Officer in November, 1997 and subsequently received payments for severance related to the resignation.
Option Grant Table The following table sets forth certain information with respect to stock options granted during the fiscal year ended March 31, 1998, to the named executives.
% OF TOTAL POTENTIAL REALIZABLE OPTIONS VALUE AT ASSUMED ANNUAL GRANTED TO RATE OF STOCK PRICE OPTION EMPLOYEES EXERCISE APPRECIATION FOR OPTION GRANTED IN FISCAL PRICE EXPIRATION TERMS NAME (#)(1)(2) YEAR ($/SH) DATE 5%($)(3) 10%($)(3) - ---------------- -------- ---------- --------- ---------- - ------------------------- David E. Maguire 24,000 15.8% $27.75 10/22/07 $388,657 $984,933 Glenn H. Spears 12,000 7.9% $27.75 10/22/07 194,328 492,466 Harris L. Crowley 12,000 7.9% $27.75 10/22/07 194,328 492,466 Charles M. Culbertson 12,000 7.9% $27.75 10/22/07 194,328 492,466 D. Ray Cash 12,000 7.9% $27.75 10/22/07 194,328 492,466 (1) These options are granted under the 1995 Executive Stock Option Plan to acquire shares of Common Stock. (2) These options were granted at fair market value at the time of the grant and are generally not exercisable until two years after grant. (3) The potential realizable value of the options, if any, granted in fiscal year 1998 to each of these officers was calculated by multiplying those options by the excess of (a) the assumed market value, as of October 22, 2007, of Common Stock if the market value of Common Stock were to increase 5% or 10% in each 12 year of the option's 10-year term, over (b) the base price shown. This calculation does not take into account any taxes or other expenses which might be owed. The assumed market value at a 5% assumed annual appreciation rate over the 10-year term is $43.94 and such value at a 10% assumed annual appreciation rate over that term is $68.79. The 5% and 10% assumed appreciation rates are set forth in the Securities and Exchange Commission rules and no representation is made that the Common Stock will appreciate at these rates or at all.
Option Exercises and Year-End Option Value Table The following table sets forth certain information concerning the value of unexercised stock options held by the named executives as of March 31, 1998. Aggregated Option Exercises in Last Fiscal Year, and Year-End Option Values
NUMBER OF VALUE OF UNEXERCISED UNEXERCISED IN- OPTION AT FY- THE-MONEY OPTIONS SHARES END(#) AT FY-END($) ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE REALIZABLE($) UNEXERCISABLE UNEXERCISABLE - --------------- ------------- -------------- --------------- --------------- David E. Maguire - - 24,000/48,000 $0/$0 Glenn H. Spears - - 8,000/24,000 $0/$0 Harris L. Crowley - - 8,000/24,000 $0/$0 Charles M. Culbertson 15,000 $296,625 8,000/24,000 $0/$0 D. Ray Cash - - 8,000/24,000 $0/$0
Compensation Committee Interlocks and Insider Participation The members of the Corporation's Compensation Committee are Messrs. Schorr, Kohl and Maddrey. No officers of the Corporation serve on the Compensation Committee. Defined Benefit Plan The Corporation maintains a noncontributory defined benefit plan (the "Defined Benefit Plan" or the "Plan") for all U.S. employees in active employment with the Corporation on or after April 27, 1987, who have met certain minimum service requirements. The Defined Benefit Plan provides a full retirement pension with an unreduced benefit to the following participants: participants who have reached age 62 if they have at least ten years of service with the Corporation; participants who have reached age 65 or older if they have at least five years of service with the Corporation; and participants who have a combined age and years of service with the Corporation equal to at least 85, as long as such participants had a combined age and years of service with the Corporation equal to at least 75 on April 26, 1988. The Company also maintains a supplementary retirement plan in which key managers, including the named executive officers, participate. Under the terms of the Deferred Compensation Plan for key managers ("DCKM Plan") additions to a participant's account are made to offset contributions to which each was entitled under the Company's noncontributory defined benefit plan which was limited by the Employee Retirement Security Act of 1974 and the Internal Revenue Code. The benefit provided under the Defined Benefit and the DCKM Plan is the 13 equivalent of a single life annuity for a participant's life commencing the month following the participant's last day of employment with the Corporation in a monthly amount equal to the sum of: (A) the greater of (1) 1.2% of the participant's average monthly compensation (based on a participant's five highest calendar year earnings (including certain bonuses) with the Corporation over the last ten years worked or, if greater, the final 60 months prior to a participant's retirement) multiplied by the participant's years of credited service prior to April 27,1988, plus $12.00 per month; or (2)1.5% of a participant's average monthly compensation multiplied by the participant's years of credited service prior to April 27, 1988, less the product of (x) the participant's estimated Social Security benefit based on the law in effect at actual retirement assumed to commence at the later of retirement or age 62, and (y) a factor determined to be the least of: 1.5% multiplied by the participant's years of credited service prior to April 27, 1988 (up to a maximum of 33 1/3 years), 50%, or the maximum offset based on Internal Revenue Service integration rules in effect at actual retirement; or (3) $5.00 per month for each year of credited service prior to April 27, 1988, for the first ten years, $7.00 per month for each year of credited service prior to April 27, 1988, for the next ten years, and $9.00 per month for each year of credited service prior to April 27, 1988, in excess of 20 years, plus 10% of a participant's average monthly compensation reduced by 1% for each year by which credited service is less than eight years, plus $12.00 per month; plus (B) .8% of a participant's average monthly compensation multiplied by the participant's years of credited service after April 26, 1988; plus (C) .6% of the excess of a participant's average monthly compensation over a participant's covered compensation (defined as the average of the Social Security Taxable Wage Base for the same period over which the pay is averaged in calculating Social Security benefits under the Federal Social Security Act in effect at the time of a participant's termination) multiplied by the participant's years of credited service after April 26, 1988. Notwithstanding the foregoing, the amount of a participant's monthly benefits under the Defined Benefit Plan shall be offset and reduced by the amount of any benefits payable to such participant or former participant under the Union Carbide Retirement Program in effect on April 27, 1987, or under certain other plans. Reduced benefits are payable in the case of early retirement and to participants who terminate employment prior to retirement, provided they have completed at least five years of credited service. The following table shows the total estimated annual benefits payable under the Defined Benefit Plan's Trust Fund and the DCKM Plan on a single-life annuity basis upon normal retirement to participants in specified years of Corporation service and average annual compensation. Annual benefits payable to the Corporation's employees from Union Carbide's Retirement Program in effect on April 27, 1987, will offset and reduce the annual benefit listed below. 14
Average Annual Compensation of Highest Five Years Covered Remuneration for Pension Purposes in Ten Years Preceding Normal Retirement Age Annual Benefit for Years of Service Indicated (1) - ------------------- --------------------------------------------------------- 10 YEARS 20 YEARS 30 YEARS 35 YEARS ---------- ---------- ---------- ---------- $25,000 2,000 5,244 8,144 9,644 $50,000 5,200 11,344 17,344 20,344 $75,000 8,700 17,844 26,844 31,344 $100,000 12,200 24,833 37,466 43,783 $125,000 15,700 32,083 48,466 56,658 $150,000 19,200 39,333 59,466 69,533 $175,000 22,700 46,583 70,466 82,408 $200,000 26,200 53,833 81,466 95,283 $500,000 68,200 140,833 213,466 249,783 $750,000 103,200 213,333 323,466 378,533 $1,250,000 173,200 358,333 543,466 636,033
(1) The compensation used to determine benefits under the Defined Benefit Plan and the DCKM Plan for Messrs. Maguire, Spears, Crowley, Culbertson and Cash was $823,250,$321,500, $241,417, $259,917, and $215,000 respectively. Included in the total estimated annual benefit is a payment from Union Carbide's Defined Benefit Plan in the form of annuity contracts on a single-life annuity basis. This benefit under that Plan is based on service up to April 27, 1987, and the highest three years of the preceding ten years of compensation prior to March 31, 1987. The offset payment from Union Carbide's retirement program could be as high as 64% of the annual benefit listed above. As of March 31, 1998, credited years of service under that Plan for Messrs. Maguire, Spears, Crowley, Culbertson and Cash were 39, 21, 23, 18, and 28 respectively. Termination Benefits In 1996, the Corporation entered into Change in Control Severance Compensation Agreements (the "Agreements"), with Messrs. Maguire, Spears, Crowley, Culbertson, and Cash and certain other officers. The Agreements were a result of a determination by the Board of Directors that it was important and in the best interests of the Corporation and its shareholders to ensure that, in the event of a possible change in control of the Corporation, the stability and continuity of management would continue unimpaired, free of the distractions incident to any such change in control. For purposes of the Agreements, a "change in control" includes (i) the acquisition by any person of 15% or more of the Corporation's voting securities, (ii) persons who were directors of the Corporation on the date of the Agreements ceasing to constitute a majority of the Board, unless the new directors were approved by a majority vote of the continuing directors, (iii) a consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's common stock would be converted into cash, securities or other property, other than a transaction in which at least 50% of the shares of the surviving corporation are held by the Corporation's stockholders and the proportionate ownership of the 15 common stock of the surviving corporation remains substantially unchanged, or (iv) a shareholder-approved plan or proposal for the complete liquidation or dissolution of the Corporation. Benefits are payable under the Agreements only if a change in control has occurred and thereafter the officer's employment is terminated involuntarily without cause or voluntarily by the officer for reasons such as demotion, relocation, loss of benefits or other changes. The principal benefits to be provided to officers under the Agreements are (i) a lump sum payment equal to up to one and one-half years' compensation (base salary), and (ii) continued participation in the Corporation's employee benefit programs or equivalent for up to one and one-half years following termination. The Agreements are not employment agreements, and do not impair the right of the Corporation to terminate the employment of the officer with or without cause prior to a change in control or absent a potential or pending change in control, or the right of the officer to voluntarily terminate his employment. Compensation Committee Report on Executive Compensation The Compensation Committee of the Board of Directors (the "Compensation Committee") is pleased to present its report on executive compensation. The Compensation Committee reviews and makes recommendations to the Board of Directors regarding salaries, compensation and benefits of executive officers and key employees of the Corporation and grants all options to purchase Common Stock of the Corporation. This Compensation Committee report documents the components of the Corporation's executive officer compensation programs and describes the bases upon which compensation will be determined by the Compensation Committee with respect to the executive officers of the Corporation, including the named executives. This Compensation Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. Compensation Philosophy. The compensation philosophy of the Corporation is to endeavor to directly link executive compensation to individual and team contributions, continuous improvements in corporate performance, and increases in stockholder value. The Compensation Committee has adopted the following objectives as guidelines for compensation decisions: - - Display a willingness to pay levels of compensation that are necessary to attract and retain highly qualified executives. - - Be willing to compensate executive officers in recognition of superior individual performance, new responsibilities, or new positions within the Corporation. - - Take into account historical levels of executive compensation and the overall competitiveness of the market for high-quality executive talent. - - Implement a balance between short- and long-term compensation to complement the Corporation's annual and long-term business objectives and strategy and to encourage executive performance in furtherance of the fulfillment of those objectives. - - Provide variable compensation opportunities based on the performance of the Corporation, encourage stock ownership by executives, and align executive remuneration with the interests of stockholders. 16 Compensation Program Components. The Compensation Committee regularly reviews the Corporation's compensation program to ensure that pay levels and incentive opportunities are competitive with the market and reflect the performance of the Corporation. The particular elements of the compensation program for executive officers are further explained below. Base Salary. The Corporation's base pay levels are determined by responsibilities of the position held and the experience of the individual and by comparing the salary scale with companies of similar size and complexity. Actual base salaries are kept within a competitive salary range for each position that is established through job evaluation and market comparisons and targeted at the 50th percentile or median for jobs of equal description and scope as determined by the Hay Management Consultants' National Industrial Job Database which is updated each year by the Hay Annual Salary Survey of Industrial Jobs ("Hay Survey"). Annual Bonus. The Executive Bonus Plan provides cash bonuses to the Corporation's top officers, including the Senior Managers, if certain targets are met. The objective of the bonus is to enhance management's contribution to stockholder value by providing competitive levels of compensation for the attainment of financial objectives. In particular, the Executive Bonus Plan focused corporate behavior on consistent and steady earnings growth by basing performance on a comparison of actual results to the Corporation's Annual Business Budget ("ABB"). Prior to the ninetieth day of each fiscal year, the Board will approve the ABB for the Corporation for such year. The Compensation Committee or such other committee as is designated by the Board (the "Committee") will then establish the base salary, the annual incentive base percent and the annual incentive base value for each participant in the Plan. The annual incentive base percent will initially be between 40% and 85%, and will be applied to the participant's base salary to determine the annual incentive base value for each participant. The annual incentive base percent increases with the level of responsibility of an officer, with the CEO at the highest level. The Compensation Committee will then set earnings before depreciation, amortization, interest and taxes ("EBDAIT") goals at several levels, including the base, target and maximum performance levels for the Corporation and will also set the Corporation performance multiplier (the "Multiplier") that corresponds to the applicable level of EBDAIT. The Multiplier will initially range from 0 at 75% of the target EBDAIT (base performance) to 1 at 130% of the target EBDAIT (maximum performance). In the event that the achieved EBDAIT is below the base level for such year, the Multiplier will be 0 and no incentive bonus will be payable. The Multiplier will be applied to the annual incentive base value to determine the bonus award for such year. For example, using the annual incentive base percent and maximum Multiplier for fiscal year 1998, if the Corporation achieved the maximum performance level, the Corporation's CEO would be entitled to an incentive bonus equal to 85% of his base salary. Each participant, including the CEO, will separately receive a guaranteed bonus payment which will initially be equal to .5 times the annual incentive base value. Within 90 days of the end of each fiscal year, the Committee will determine and approve the EBDAIT level achieved for such fiscal year and will approve the grant and payment of the bonus awards in the aggregate to all participants and to each of the executive officers including the CEO. Except in the case of death or total disability, a participant must be employed by the Corporation on the date the Committee approves the awards in order to receive an award under the Bonus Plan. The amounts that any participant in the Bonus Plan, including the Corporation's CEO, will receive is not determinable in advance prior to the completion of the Corporation's fiscal year and the determination by the Committee (as described above) of the actual performance level achieved by the Corporation for such year. For information regarding amounts received with respect to fiscal year 1998 by the Corporation's CEO and the other named executives officers, see the Bonus column of the Summary Compensation Table. 17 Stock Option Program. The Compensation Committee strongly believes that, by providing those persons who have substantial responsibility over the management and growth of the Corporation with an opportunity to increase their ownership of the Corporation's stock, the interests of stockholders and executives will be closely aligned. To that end, the Corporation adopted the 1995 Executive Stock Option Plan, pursuant to which certain officers of the Corporation, including the named executives, received options to purchase an aggregate of 152,000 shares of Common Stock at an exercise price equal to 100% of the fair market value of such Common Stock during fiscal year 1998. Stock Ownership. As a result of the Acquisition and stock option grants, the Senior Managers collectively own approximately 9% of the Corporation's outstanding Common Stock, which further serves to align stockholder and management interests. Compensation of Chief Executive Officer. The 1998 fiscal year compensation for Mr. Maguire, the Corporation's Chairman, Chief Executive Officer, and President, was set by the Board of Directors based on, among other factors, the results of the Hay Survey, at $434,000. Because of the level of performance of the Corporation in comparison to the ABB, Mr. Maguire was entitled to a bonus of $476,000 for fiscal year 1998, which was paid in May 1998 pursuant to the Executive Bonus Plan. The Committee set Mr. Maguire's base salary at $456,000 for fiscal 1999. The Omnibus Budget Reconciliation Act of 1994 signed by President Clinton on April 10, 1993, added Section 162(m) to the Internal Revenue Code of 1986, as amended. That Section limits the deductibility of compensation paid or accrued by the Corporation to the five most highly compensated employees in excess of $1,000,000, unless certain forms of compensation meet certain performance or other criteria mandated by law. The Committee structured the Executive Bonus Plan, approved by the Corporation's stockholders at the 1996 Annual Meeting, to comply with these tax law requirements, and believes that compensation under this Plan will be deductible for federal income tax purposes. Summary. After its review of all existing programs, the Compensation Committee continues to believe that the total compensation program for executives of the Corporation is focused on increasing values for stockholders and enhancing corporate performance. In particular, the Compensation Committee feels that providing a high proportion of compensation in the form of an annual bonus based on achieving certain targets based on the ABB will enhance corporate performance. The Compensation Committee currently believes that the compensation of executive officers is properly tied to stock appreciation through the 1995 Executive Stock Option Plan and through high levels of direct stock ownership. The Compensation Committee believes that executive compensation levels of the Corporation are competitive with the compensation programs provided by other corporations with which the Corporation competes. The foregoing report has been approved by all members of the Compensation Committee. COMPENSATION COMMITTEE Paul C. Schorr IV Stewart A. Kohl E. Erwin Maddrey, II 18 PERFORMANCE GRAPH The following graph compares the Corporation's cumulative total stockholder return for the past 5 fiscal years, beginning on March 31, 1993, with The Nasdaq Stock Market (National Market) Index, the Standard & Poor's 500 Index, and with a peer group comprised of certain companies which manufacture capacitors and with which the Corporation generally competes. The peer group is comprised of the following companies: AMP Incorporated, Amphenol Corp., CTS Corp., Molex Incorporated, Thomas & Betts Corp., and Vishay Intertechnology, Inc., which is the same as the preceding fiscal year with the exception of Augat Corp., which was acquired by Thomas & Betts Corp. in December 1996. Comparison of Total Return* KEMET Corporation, Nasdaq Index, S&P 500 Index and Peer Group
KEMET Corp. PEER Group S&P 500 Index NASDAQ Market ---------- ---------- -------------- ------------- 03/31/93 100.00 100.00 100.00 100.00 03/31/94 107.00 107.00 101.00 108.00 03/31/95 247.00 137.00 117.00 120.00 03/31/96 297.00 158.00 155.00 163.00 03/31/97 246.00 150.00 186.00 181.00 03/31/98 243.00 205.00 275.00 275.00
*Total Return assumes reinvestment of dividends. CERTAIN INTERESTS AND TRANSACTIONS Pursuant to the terms of a Registration Agreement, dated as of December 21, 1990, as amended (the "Registration Agreement"), among the Corporation and certain stockholders of the Corporation, CVC, the Senior Managers, and certain other investors have the right, under certain circumstances and under certain conditions, to require the Corporation to register shares of the Corporation's Common Stock held by them under the Securities Act of 1933. Under the Registration Agreement, the Corporation is required to pay certain expenses and provide certain indemnifications in connection with any such registration. The Corporation also agreed to reimburse certain of its existing stockholders for certain expenses associated with the ownership of Common Stock or Non-Voting Common Stock. STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING From time to time, stockholders present proposals which may be proper subjects for consideration at the Annual Meeting. To be considered for inclusion in the proxy statement, proposals must be submitted on a timely basis. Proposals for the 1999 Annual Meeting, which is expected to be held on July 21, 1999, must be received by the Corporation no later than February 19, 1999. In addition, the 19 Corporation's By-Laws establish advance notice procedures as to (1) business to be brought before an annual meeting of stockholders other than by or at the direction of the Board of Directors, and (2) the nomination, other than by or at the direction of the Board of Directors, of candidates for election as directors. Any stockholder who wishes to submit a proposal to be acted upon at next year's annual meeting or who proposes to nominate a candidate for election as a director must comply with such procedures. Any such proposals, as well as any questions related thereto, should be submitted in writing to the Secretary of the Corporation. ADDITIONAL INFORMATION This solicitation is being made by the Corporation. All expenses of the Corporation in connection with this solicitation will be borne by the Corporation. In addition to the solicitation by mail, proxies may be solicited by directors, officers and other employees of the Corporation by telephone, telex, in person or otherwise, without additional compensation. The Corporation will request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record by such persons and will reimburse such persons and the Corporation's transfer agent for their reasonable out-of-pocket expenses in forwarding such materials. The Corporation will furnish without charge to each person whose proxy is being solicited, upon the written request of any such person, a copy of the Corporation's Annual Report on Form 10-K for the fiscal year ended March 31, 1998, as filed with the Securities and Exchange Commission, including the financial statements and schedules thereto. Requests for copies of such Annual Report on Form 10-K should be directed to the Secretary of the Corporation at the address below. Please complete the enclosed proxy and mail it in the enclosed postage-paid envelope as soon as possible. By order of the Board of Directors /S/ Glenn H. Spears Glenn H. Spears Secretary KEMET CORPORATION P.O. Box 5928 Greenville, South Carolina 29606 June 22, 1998 -----END PRIVACY-ENHANCED MESSAGE-----