<PAGE>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 June 30, 1996.
[ ] 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 (IRS Employer
jurisdiction of Identification No.)
incorporation or organization)
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: August 13, 1996
Title of Each Class Number of Shares Outstanding
- --------------------------------------------------------------------------------
Common Stock, $.01 Par Value 37,587,541
Non-Voting Common Stock, $.01 Par Value 1,096,610
<PAGE>2
Part I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in Thousands Except Per Share Data
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
---------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 3,553 $ 3,408
Notes and accounts receivable (less allowances of $9,521 and $10,376
June 30, 1996 and March 31, 1996, respectively) 40,280 52,069
Inventories:
Raw materials and supplies 32,587 31,981
Work in process 33,126 27,748
Finished goods 21,670 23,992
-------- --------
Total inventories 87,383 83,721
Prepaid expenses 2,252 2,077
Deferred income taxes 13,380 13,973
-------- --------
Total current assets 146,848 155,248
Property and equipment (less accumulated depreciation of $123,359 and
$116,021 at June 30, 1996 and March 31, 1996, respectively) 290,139 267,541
Intangible assets (less accumulated amortization of $11,067 and
$10,566 at June 30, 1996 and March 31, 1996, respectively) 63,032 63,533
Other assets 3,457 3,506
-------- --------
Total assets $503,476 $489,828
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of long-term debt $ 20,277 $ 270
Accounts payable, trade 44,522 73,030
Accrued expenses 28,960 35,063
Income taxes 11,862 13,877
-------- --------
Total current liabilities 105,621 122,240
Long-term debt, excluding current installments 95,850 78,072
Other non-current obligations 49,404 49,524
Deferred income taxes 30,135 28,052
-------- --------
Total liabilities $281,010 $277,888
Stockholders' equity:
Common stock, par value $.01, authorized 100,000,000 shares, issued
and outstanding 37,583,632 and 37,514,393 shares at June 30, 1996 and
March 31, 1996, respectively 376 375
Non-voting common stock, par value $.01, authorized 12,000,000 shares,
issued and outstanding 1,096,610 at June 30, 1996 and March 31, 1996 11 11
Additional paid-in capital 137,150 136,344
Retained earnings 84,943 75,218
-------- --------
222,480 211,948
Equity adjustments from foreign currency translation (14) (8)
-------- --------
Total stockholders' equity 222,466 211,940
-------- --------
Total liabilities and stockholders' equity $503,476 $489,828
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>3
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------
1996 1995
----- -----
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $125,726 $152,534
Operating costs and expenses:
Cost of goods sold, exclusive of depreciation 84,842 104,992
Selling, general and administrative expenses 11,201 10,091
Research, development and engineering 4,782 4,607
Depreciation and amortization 7,978 7,972
-------- --------
108,803 127,662
Operating income 16,923 24,872
Other expense:
Interest expense 1,253 1,301
Other 358 2,443
-------- --------
Earnings before income taxes 15,312 21,128
Income tax expense 5,587 8,387
-------- --------
Net earnings available for common shareholders $ 9,725 $12,741
======== ========
Per Common Share Information:
Net earnings per common share $0.25 $0.33
======== ========
Weighted average shares outstanding 39,210,818 39,028,114
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>4
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Thousands
<TABLE>
<CAPTION>
Three months ended
June 30,
---------------------------
1996 1995
----- -----
(unaudited) (unaudited)
<S> <C> <C>
Sources (uses) of cash:
Net cash from operating activities $(8,211) $27,467
Investing activities:
Additions to property and equipment (30,290) (23,505)
Proceeds from disposals of property 60 6
Other (6) (37)
-------- --------
Net cash used by investing transactions (30,236) (23,536)
Financing activities:
Proceeds from employees savings plan 537 260
Proceeds from exercise stock options including related tax benefit 271 201
Repayment of long-term debt (65) (4,259)
Net proceeds from revolving/swingline loan 37,850 -
-------- --------
Net cash provided financing transactions 38,593 (3,798)
-------- --------
Net increase in cash 146 133
Cash at beginning of period 3,408 4,181
------- --------
Cash at end of period $3,553 $4,314
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>5
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 ending March 31, 1996 Form 10-K. Net sales and
operating results for the three months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
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.
Note 2. Early Retirement Program
On June 5, 1996, the Company announced an early retirement incentive
program for its U.S. hourly and salaried employees. The Company will reduce the
U.S. hourly and salaried workforce by 409 people with annualized cost savings of
approximately $13 million. The total cost of the program is estimated to be $10
million and will be charged to earnings in the quarter ending September 30,
1996. The Senior Management of the Company is not eligible for the early
retirement incentive. This reduction in U.S. workforce reflects the ongoing
consolidation of leaded and military capacitor production in Mexico and
adjustments in the period and overhead costs consistent with current revenue
levels.
Note 3. Other Events
On June 26, 1996, the Company received a letter from Vishay
Intertechnology, Inc. (Vishay) pursuant to which Vishay was seeking to enter
into discussions to explore a business combination with the Company.
On July 1, 1996, in response to the letter, the Company advised Vishay that
it was not interested in engaging in discussion. The Company's Board of
Directors determined that the Company's strong future prospects as an
independent company made discussions with Vishay not in the best interests of
the Company, its stockholders, employees, customers and other stakeholders.
The Company also announced that its Board of Directors adopted a Preferred
Share Purchase Rights Plan and declared a dividend distribution payable to
stockholders of record at the close of business on July 1, 1996 (which is also
<PAGE>6
the payment date), of one Preferred Share Purchase Right on each outstanding
share of the Company's voting and non-voting common stock. The Rights will
initially be represented by the existing certificates for the voting and
non-voting common stock. Stockholders do not need to take any action in
connection with this distribution of Rights. Following certain events, each
Right will entitle stockholders to buy one one-thousandth of a share of a new
series of junior participating preferred stock for an exercise price of $85.
The Rights will be exercisable only if a person or group (with certain
exceptions, including Citicorp Venture Capital, Ltd. and the other parties to an
existing voting agreement), acquires, or announces a tender offer for, 15% or
more of the Company's common stock. In the event that a person or group (except
as previously described) acquires 15% or more of the outstanding common stock,
each holder of a Right (with certain exceptions) will be entitled upon exercise
of the Right to receive common stock having at the time of exercise a market
value of two times the exercise price of the Right. The Company may exchange
the Rights for the Company's common stock on a one-for-one basis at any time
after a person or group (except as previously described) has acquired 15% or
more of the outstanding common stock. The Company will be entitled to redeem
the Rights at $.01 per Right (payable in cash or common stock of the Company, at
the Company's option) at any time before public disclosure that a 15% position
has been acquired. The Rights will expire on July 1, 2006, unless previously
redeemed or exercised. The distribution of the Rights is not a taxable event to
stockholders.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three Month Period Ended June 30, 1996 and Three Month Period Ended June 30,
1995
Net sales for the three months ended June 30, 1996 were $125.7 million, a
decline of 18% from net sales of $152.5 million for the three months ended June
30, 1995. The decline in first quarter net sales reflect the effects of reduced
demand as a result of distributors and OEM's working off their excess
inventories of both components and finished goods. The Company experienced a
decline in sales in both leaded and surface-mount capacitors due to this weaker
demand and more competitive pricing. Sales of surface-mount capacitors were
$86.6 million for the first quarter of fiscal 1997 a decline of 13% from $100.1
million in the prior year's first quarter and sales of leaded capacitors
declined 25% to $39.1 million from $52.4 million. Sales also declined in both
the domestic and export markets with domestic sales declining 16% to $73.5
million and export sales declining 20% to $52.2 million as compared to the prior
year's first quarter.
Cost of sales, exclusive of depreciation, for the three months ended June
30, 1996 was $84.8 million compared to $105.0 million for the three months ended
June 30, 1995. As a percentage of net sales, cost of sales, exclusive of
<PAGE>7
depreciation, decreased to 67% from 69% primarily as a result of adjustments of
production levels, the implementation of overhead cost containment actions in
response to the reduced demand for capacitors and cost benefits realized from
the movement of production in fiscal year 1996 to lower cost manufacturing
facilities in Mexico.
Selling, general and administrative expenses for the three months ended
June 30, 1996 were $11.2 million, as compared to $10.1 million for the three
months ended June 30, 1995. The increase in selling, general and administrative
expenses is primarily due to the increase in selling and marketing expense of
approximately $0.9 million associated with sales office expansions in Europe,
Asia and South America coupled with the installation of a world-wide company
"intranet" communications system. The Company's marketing philosophy is unique
among capacitor manufacturers. KEMET employs a direct sales force to sell its
products versus independent manufacturers representatives, which results in
sales force expense being relatively constant. Since the Company's selling
expense is not directly related to volume changes in sales, as volume increases
the Company's marketing expense as a percentage of sales is lower, as volume
decreases it is relatively higher.
Research, development and engineering expenses for the three months ended
June 30, 1996 were $4.8 million compared to $4.6 million for the three months
ended June 30, 1995. The increase reflects the Company's continued investments
in new products and technologies and the enhancement of manufacturing
efficiencies.
Depreciation and amortization expense was $8.0 million for the
three months ended June 30, 1996, the same level for the three months ended June
30, 1995.
Operating income for the three months ended June 30, 1996 was $16.9 million
compared to $24.9 million for the three months ended June 30, 1995. The decline
resulted primarily from the decrease in net sales as discussed above.
Income tax expense was 36.6% and 39.8% of earnings for the three month
periods ended June 30, 1996 and 1995, respectively. The decrease in the
effective income tax rate was primarily the result of increased foreign sales
corporation benefits and the implementation of various state tax savings
strategies.
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 revolving credit facility and
amounts advanced under its foreign accounts receivable discounting arrangements.
Cash flows from operating activities for the three months ended June 30,
1996 amounted to a deficit of $8.2 million compared with a $27.5 million surplus
for the three months ended June 30, 1995. The decline in cash flow was
<PAGE>8
primarily a result of lower 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.
Capital expenditures were $30.3 million for the three months ended June 30,
1996 compared to $23.5 million for the three months ended June 30, 1995. The
Company is continuing to invest in key capital projects for the future. The
majority of capital expenditures during the first quarter of fiscal 1997
represents the completion of capital projects initiated during fiscal year 1996.
On June 17, 1996, the Company entered into an additional $10.0 million
Master Note Facility with Wachovia Bank of South Carolina, N.A. The initial
term of the loan is for a 30 day period with an interest rate of 5.71%.
On July 31, 1996, the Company entered into a $40.0 million credit
agreement with Wachovia Bank of North Carolina, N.A. The additional facility
bears interest at the Company's option at either the base rate (bank's prime
rate) plus the applicable margin, Eurodollar rate (Adjusted London Interbank
Offered Rate) plus the applicable margin, or the offered rate (which is a rate
quoted by the bank). The applicable margin is determined quarterly by the
Consolidated Cash Flow from Operations to Consolidated Funded Debt ratio as
defined in the $40.0 million credit agreement. The new credit facility has a
term of 364 days.
During the three months ended June 30, 1996 the Company increased its
indebtedness (long-term debt and current portion of long-term debt) by $37.9
million which consisted primarily of the financing of capital expenditures
initiated during the prior fiscal year. The Company had unused availability
under its revolving credit facility as of June 30, 1996 of approximately $39.2
million.
KEMET 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 utilization of its borrowings
under its bank credit facilities.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On July 8, 1996, the Registered Agent for the Company in Delaware received
notice of a lawsuit in the Court of Chancery in New Castle County, Delaware
filed against KEMET Corporation and the board of directors individually,
purportedly brought on behalf of its shareholders, that the Company did not
adequately consider the request by Vishay to enter into discussions, and the
suit alleges, among other things, that the Board breached their fiduciary duties
by adopting a preferred share rights plan. The plaintiffs are asking the court,
among other things, to order the Board to auction the Company and deploy the
<PAGE>9
rights plan in a fair and impartial manner. The suit also seeks unspecified
damages. The Company has stated that the suit is without merit and intends to
defend itself and its directors vigorously.
Other than as reported above and in the Company's fiscal year ending March
31, 1996 Form 10-K under the caption "Item 3. Legal Proceedings", 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.
On July 24, 1996, at the Company's annual meeting, shareholders
re-elected E. Erwin Maddrey, II and elected Terry R. Weaver as Directors of the
Company to serve three-year terms. The Company's shareholders also approved the
1995 Executive Stock Option Plan covering 1,950,000 shares of Common Stock, the
Executive Bonus Plan and ratified the appointment of KPMG Peat Marwick LLP as
independent public accountants for the year ending March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Original Master Note dated June 17, 1996, between KEMET
Corporation, as borrower, and Wachovia Bank of South Carolina, N.A., as lender.
10.1.1 Letter agreement dated June 24, 1996, between KEMET
Corporation, as borrower, and Wachovia Bank of South Carolina, N.A., as lender.
10.2 $40.0 Credit Agreement, dated July 31, 1996, between KEMET
Corporation, as borrower and Wachovia Bank of North Carolina, N.A., as lender.
10.2.1 Guaranty Agreement, dated July 31, 1996, between KEMET
Electronics Corporation, KEMET Services Corporation and KRC Trade Corporation,
as guarantors and Wachovia Bank of North Carolina, N.A., as lender.
11.1 Computation of Per Share Earnings.
(b) Reports on Form 8-K.
<PAGE>10
On July 8, 1996, Form 8-K was filed by the Company detailing the
adoption of a Preferred Share Purchase Rights Plan.
<PAGE>11
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: August 13,1996
KEMET Corporation
/S/ J.J. Jerozal
--------------------------
J.J. Jerozal
Chief Financial Officer,
Treasurer and Assistant Secretary
(Principal Accounting and
Financial Officer)
<PAGE>1
Master Note
Date June 17, 1996 $10,000,000.00
For Value Received, the undersigned (hereinafter called the
"Borrower") hereby promises to pay on demand but not 1ater than
the maturity date or dates determined as herein set forth to
the order of WACHOVIA BANK OF SOUTH CAROLINA, N.A (hereinafter
called the "Lender"), at its office where borrowed, the
principal sum of Ten Million and 00/100 Dollars or the aggregate
unpaid principal sum of all advances which the Lender actually
makes hereunder to the Borrower, whichever amount is less,
together with interest in arrears payable on each Interest Due
Date (as hereinafter defined) at a rate computed on the basis
of a 360-day year for the actual number of days in each interest
period, determined as herein set forth.
Lender, at its sole discretion, is hereby authorized to make
advances under this Note upon telephonic or written
communication of a borrowing request from any person
representing himself or herself to be the Borrower or, in the
event Borrower is a partnership or corporation, a duly
authorized officer or representative of Borrower. At the time
of each advance hereunder, the Borrower and the Lender shall
agree on the maturity date for the payment of the principal
amount of such advance (in the absence of earlier demand), the
interest rate for such advance and the dates interest on such
advance shall be payable (the "Interest Due Dates"). The Lender
or other holder shall be and is hereby authorized by the
Borrower to set forth on the reverse side of tbis Note, or on
an attachment hereto: (1) the amount and date of each advance
made hereunder; (2) the maturity date of each such advance
(absent earlier demand); (3) the interest rate for each such
advance; (4) the Interest Due Dates for each such advance; and
(5) each payment of principal received thereon and the date of
such payment; provided, however, any such notation or the
failure to make any such notation shall not limit or otherwise
affect the obligation of the Borrower with respect to the
repayment of all advances actually made hereunder. In the event
of a good faith dispute among the parties to this Note as to
rate, the rate shall be the Prime Rate.
After this Note or any advance of this Note shall become due,
whether on demand or otherwise, the unpaid principal of this
Note shall bear interest at a rate per annum equal to the Prime
Rate + 2%, or if greater, 2% above the rate applicable prior to
the due date, not to exceed the maximum rate permitted by
applicable law. As used herein, "Prime Rate" refers to that
interest rate so denominated and set by the Lender from time to
<PAGE>2
time as an interest rate basis for borrowings. The Prime Rate
is one of several interest rate bases used by the Lender. The
Lender lends at rates above and below the Prime Rate. Changes in
the Prime Rate shall be effective as of the day of each such
change.
Advances made hereunder shall not be used to purchase or carry
margin stock, such terms having the same meanings used in
Regulation U of tbe Federal Reserve Board.
All payments of any advance hereunder shall be applied first to
accrued interest and then to principal.
The Borrower may prepay any advance hereunder prior to the
maturity date specified for such advance only with the consent
or upon the demand of tbe Lender.
No waiver by the Lender of any provision of this Note shall be
effective unless in writing. All parties to this Note, including
makers, endorsers, sureties and guarantors, whether bound by
this or by separate instrument or agreement shall be jointly and
severally liable for the indebtedness evidenced by this Note and
hereby (1) waive presentment for payment, demand, protest,
notice of nonpayment or dishonor and of protest and any and all
other notices and demands whatsoever (2) consent that any time,
or from time to time, payment of any sum payable under this Note
may be extended without notice, whether for a definite or
indefinite time, and (3) agree to remain liable until the
indebtedness evidenced hereby is paid in full irrespective of
any extension, modification or renewal. No conduct of thc
holder shall be deemed a waiver or release of such liability,
unless the holder expressly releases such party in writing. In
the event the indebtedness evidenced hereby is collected by or
through an attorney, the holder shall be entitled to recover
reasonable attorneys' fees and all other costs and expenses of
collection. Time is of the essence.
This Note shall evidence all advances and payments of principal
made hereunder until it is surrendered to the Borrower by the
Lender, and it shall continue to be used even though there may
be periods prior to such surrender when no amount of principal
or interest is owing hereunder.
This Note, and the rights and obligations of the parties hereunder, shall be
governed by and construed in accordance with the laws of the State of South
Carolina.
<PAGE>3
IN WlTNESS WHEREOF, the Borrower has executed this Note under
seal the day and year set forth above.
Witness: Attest:
____________________________________ (Seal)
(Individual Borrower)
______________________________ ____________________________________ (Seal)
(Individual Borrower)
______________________________
Borrower:
Attest: KEMET Corporation
---------------------------------
(Name of Corporation or Partnership)
/S/ Michael W. Boone /S/ J.J. Jerozal
______________________________ By: _______________________________ (Seal)
Title: Assisant Treasurer Title: CFO & Treasurer
________________________ ______________________________
[Corporate Seal}
<PAGE>1
Wachovia Corporate Services, Inc.
Southeast Corporate Division
1401 Main Street
Columbia, South Carolina 29226
June 24, 1996
KEMET Corporation
2835 Kemet Way
Simpsonville, South Carolina 29681
Attention: Chief Financial Officer
Re: $10,000,000 Advance made to KEMET Corporation by Wachovia
Bank of South Carolina, N.A on June 17, 1996
Gentlemen:
Please refer to (i) that certain Credit Agreement dated as of
February 24, 1995 (the "Credit Agreement") among KEMET
Corporation (the "Borrower"), the Banks listed therein and
Wachovia Bank of Georgia N.A, as Agent (the "Agent"), and (ii)
that certain Master Note dated June 17, 1996 (the "Master Note")
executed by the Borrower in the principal amount of $10,000,000,
payable to the order of Wachovia Bank of South Carolina N.A.
(the "Lender").
In response to one or more Competitive Bid Invitations received
by the Lender from the Agent, each dated June 14, 1996,
delivered pursuant to Section 2.03 of the Credit Agreement, the
Lender submitted to the Agent a Money Market Quote (the "Quote")
dated June 17, 1996, containing an offer to make a Money Market
Loan to the Borrower on June 17, 1996 in the minimum principal
amount of S5,000,000 and in the maximum principal amount of
$15,000,000, at an interest rate of 5.71% for an Interest Period
ending July 17, 1996. Subsequent to the receipt by the Agent
from the Lender of the Quote, the Lender made to the Borrower on
June 17, 1996 an advance (the "Advance") in the principal amount
of $10,000,000, with an interest rate equal to 5.71% per annum,
maturing in its entirety on July 17,1996.
By execution ofthis letter in the spaces provided below, the
Lender and the Borrower agree, and by its execution in the space
provided below, the Agent acknowledges, that the Advance was
intended to be made pursuant to, and was in fact made pursuant
to, the Master Note and not the Credit Agreement. Therefore, the
Advance is not a Money Market Loan under the Credit Agreement.
<PAGE>2
KEMET Corporation
June 24, 1996
Page 2
Please sign the two additional copies of this letter enclosed
in the space provided below, and return the same to the
attention of the undersigned (keeping the original of this
letter for your files).
Very truly yours,
WACHOVIA BANK OF SOUTH CAROLINA, NA
By:/S/ Suzanne Morrison
_______________________________________
Title: Banking Officer
Agreed to on June 24, 1996:
KEMET CORPORATION
By: /S/ J.J. Jerozal
__________________________
Title: CFO & Treasurer
Acknowledged on June 24, 1996:
WACHOVIA BANK OF GEORGIA, N.A.
as Agent
By: /S/ Mark D. Abrahm
__________________________
Title: Vice President
<PAGE>1
$40,000,000
CREDIT AGREEMENT
dated as of
July 31, 1996
between
KEMET CORPORATION
and
WACHOVIA BANK OF NORTH CAROLINA, N.A.
<PAGE>2
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions -1-
SECTION 1.02. Accounting Terms and Determinations -15-
SECTION 1.03. Use of Defined Terms -15-
SECTION 1.04. Terminology -15-
SECTION 1.05. References -15-
ARTICLE II
THE CREDITS
SECTION 2.01. Commitment to Make Loans -15-
SECTION 2.02. Method of Borrowing Loans -16-
SECTION 2.03. Alternative Funding Sources -17-
SECTION 2.04. Note -18-
SECTION 2.05. Maturity of Loans -18-
SECTION 2.06. Interest Rates -18-
SECTION 2.07. Fees -21-
SECTION 2.08. Optional Termination or Reduction of Commitment -22-
SECTION 2.09. Mandatory Termination of Commitment -22-
SECTION 2.10. Optional Prepayments -22-
SECTION 2.11. Mandatory Prepayments -22-
SECTION 2.12. General Provisions as to Payments -23-
SECTION 2.13. Computation of Interest and Fees -24-
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing -24-
SECTION 3.02. Conditions to All Borrowings -25-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power -26-
SECTION 4.02. Corporate and Governmental Authorization; No Contravention -26-
SECTION 4.03. Binding Effect -26-
SECTION 4.04. Financial Information -26-
SECTION 4.05. Litigation -27-
SECTION 4.06. Compliance with ERISA -27-
SECTION 4.07. Taxes -27-
SECTION 4.08. Subsidiaries -27-
SECTION 4.09. Not an Investment Company -27-
SECTION 4.10 Public Utility Holding Company Act -27-
SECTION 4.11. Ownership of Property; Liens -28-
<PAGE>3
SECTION 4.12. No Default -28-
SECTION 4.13. Full Disclosure -28-
SECTION 4.14. Environmental Matters -28-
SECTION 4.15. Compliance with Laws -29-
SECTION 4.16. Capital Stock -29-
SECTION 4.17. Margin Stock -29-
SECTION 4.18. Insolvency -29-
ARTICLE V
COVENANTS
SECTION 5.01. Information -29-
SECTION 5.02. Inspection of Property, Books and Records -31-
SECTION 5.03. Ratio of Consolidated Funded Debt to Consolidated Total
Capital -31-
SECTION 5.04. Minimum Consolidated Net Worth -31-
SECTION 5.05. Ratio of Consolidated Cash Flow from Operations to
Consolidated Funded Debt -31-
SECTION 5.06. Loans or Advances -31-
SECTION 5.07. Investments -32-
SECTION 5.08. Factor Receivables -32-
SECTION 5.09. Negative Pledge -32-
SECTION 5.10. Maintenance of Existence -34-
SECTION 5.11. Dissolution -34-
SECTION 5.12. Consolidations, Mergers and Sales of Assets -34-
SECTION 5.13. Compliance with Regulations G, T, U and X -35-
SECTION 5.14. Compliance with Laws; Payment of Taxes -35-
SECTION 5.15. Insurance -35-
SECTION 5.16. Change in Fiscal Year -36-
SECTION 5.17. Maintenance of Property -36-
SECTION 5.18. Environmental Notices -36-
SECTION 5.19. Environmental Matters -36-
SECTION 5.20. Environmental Release -36-
SECTION 5.21. Significant Subsidiaries -36-
SECTION 5.22 Sale, Transfer or Pledge of Industrial Revenue Bonds -37-
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default -37-
ARTICLE VII
[RESERVED]
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair -40-
SECTION 8.02. Illegality -40-
SECTION 8.03. Increased Cost and Reduced Return -40-
SECTION 8.04. Base Rate Loans or Offered Rate Loans Substituted for
<PAGE>4
Affected Euro-Dollar Loans -42-
SECTION 8.05. Compensation -42-
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices -43-
SECTION 9.02. No Waivers -43-
SECTION 9.03. Expenses; Documentary Taxes; Indemnification -43-
SECTION 9.04. Setoffs -44-
SECTION 9.05. Amendments and Waivers -44-
SECTION 9.06. [Reserved] -44-
SECTION 9.07. Successors and Assigns -44-
SECTION 9.08. Confidentiality -46-
SECTION 9.09. [Reserved] -46-
SECTION 9.10. [Reserved] -46-
SECTION 9.11. Survival of Certain Obligations -46-
SECTION 9.12. North Carolina Law -47-
SECTION 9.13. Severability -47-
SECTION 9.14. Interest -47-
SECTION 9.15. Interpretation -47-
SECTION 9.16. Consent to Jurisdiction -47-
SECTION 9.17. Counterparts -47-
SECTION 9.18. Knowledge of Borrower -48-
SECTION 9.18. Consequential Damages -48-
SCHEDULE 4.05 Description of Litigation
SCHEDULE 4.08A Existing Subsidiaries
SCHEDULE 4.08B Existing Domestic Significant Subsidiaries
SCHEDULE 4.08C Existing Foreign Significant Subsidiaries
SCHEDULE 4.14 A-1 Description of Environmental Liabilities
SCHEDULE 4.14 A-2 Properties on National Priorities or CERCLIS List
SCHEDULE 5.07 Existing Investments
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower and the
Guarantors
EXHIBIT C Form of Closing Certificate
EXHIBIT D Form of Secretary's Certificate
EXHIBIT E Form of Compliance Certificate
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Notice of Borrowing
EXHIBIT H Form of Designation Letter
<PAGE>5
CREDIT AGREEMENT
AGREEMENT dated as of July 31, 1996 between KEMET CORPORATION and
WACHOVIA BANK OF NORTH CAROLINA, N.A.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Affiliate" of any Person means (i) any other Person which directly,
or indirectly through one or more intermediaries, controls such Person,
(ii) any other Person which directly, or indirectly through one or more
intermediaries, is controlled by or is under common control with such Person, or
(iii) any other Person of which such Person owns, directly or indirectly, 20% or
more of the common stock or equivalent equity interests; provided that for
purposes of this Agreement, neither CVC nor KEMET Partners shall be deemed to be
an Affiliate of the Borrower or any of its Subsidiaries. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, together with all amendments
and supplements hereto.
"Applicable Facility Fee Rate" has the meaning set forth in Section
2.07(a).
"Applicable Margin" has the meaning set forth in Section 2.06(a).
"Assignee" has the meaning set forth in Section 9.07(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.07(c) in the form attached hereto as
Exhibit F.
"Authority" has the meaning set forth in Section 8.02.
<PAGE>6
"Bank" means Wachovia Bank of North Carolina, N.A. and its successors
and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate and the
Federal Funds Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan which bears or is to bear interest at a
rate based upon the Base Rate.
"Beneficial Ownership" shall have the meaning given to such term in
Rule 13-d of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
"Bond Issuance and Purchase Agreement" means that certain Bond
Issuance and Purchase Agreement dated as of December 22, 1994, among Greenville
County, South Carolina, Greenwood County, South Carolina and KEMET Electronics,
as it may be amended from time to time solely to provide for the issuance and
purchase of additional bonds thereunder.
"Borrower" means KEMET Corporation, a Delaware corporation, and its
successors and permitted assigns.
"Borrowing" means a borrowing hereunder consisting of a Loan made to
the Borrower by the Bank.
"Capital Stock" means any nonredeemable capital stock of the Borrower
or any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 12 months from the date of acquisition, (ii) Dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Euro-Dollar time
deposits, Euro-Dollar certificates of deposit of (A) any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
or (B) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with maturities
of not more than 12 months from the date of acquisition, (iii) commercial paper
and variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any commercial paper and variable or fixed rate notes issued
by, or guaranteed by, any domestic corporation rated A-2 (or the equivalent
thereof) or better by S&P or P-2 (or the equivalent thereof) or better by
Moody's and maturing within 12 months of the date of acquisition, and (iv)
interests in money market or mutual funds which invest solely in assets or
<PAGE>7
securities of the type described in clauses (i), (ii) and/or (iii) of this
definition.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq. and its implementing
regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Information System established pursuant to CERCLA.
"Change of Control" shall mean either (i) CVC or any Affiliate of CVC
or CVC together with any Affiliate of CVC (collectively, the "CVC Group") shall
have acquired Beneficial Ownership, directly or indirectly, of Voting Stock of
the Borrower (or other securities convertible into such Voting Stock)
representing 49% or more of the combined voting power of all Voting Stock of the
Borrower, or (ii) any Person or two or more Persons acting in concert (other
than the CVC Group) shall have acquired Beneficial Ownership, directly or
indirectly, of Voting Stock of the Borrower (or other securities convertible
into such Voting Stock) representing 35% or more of the combined voting power of
all Voting Stock of the Borrower; or (iii) during any period of up to 24
consecutive months, commencing after the date of this Agreement, individuals who
at the beginning of such 24 - month period were directors of the Borrower shall
cease to constitute a majority of the board of directors of the Borrower and
such event is the result (directly or indirectly) of the acquisition of 20% or
more of the combined voting power of the Voting Stock by a Person or Persons
that did not own at least 5% or more of the combined voting power of the Voting
Stock as of the Closing Date; or (iv) any Person or two or more Persons acting
in concert (other than the CVC Group) shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over Voting
Stock of the Borrower (or other securities convertible into such securities)
representing 35% or more of the combined voting power of all Voting Stock of the
Borrower.
"Change of Law" shall have the meaning set forth in Section 8.02.
"Closing Certificate" has the meaning set forth in Section 3.01(d).
"Closing Date" means July 31, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.
"Commitment" shall have the meaning assigned to it in Section 2.01.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
<PAGE>8
"Consolidated Cash Flow from Operations" means, for any period, the
sum of (i) Consolidated Net Income for such period, (ii) Depreciation for such
period, and (iii) amortization and other non-cash charges of the Borrower and
its Consolidated Subsidiaries for such period.
"Consolidated Funded Debt" means at any date the Debt of the Borrower
and its Consolidated Subsidiaries, without duplication, determined on a
consolidated basis as of such date.
"Consolidated Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis,
but excluding (i) extraordinary items, (ii) any equity interests of the Borrower
or any Subsidiary in the unremitted earnings of any Person that is not a
Subsidiary, and (iii) revenues received in connection with any Investment by
KEMET Electronics pursuant to clause (iv) of the definition of Permitted
Investments.
"Consolidated Net Worth" means, at any time, Stockholders' Equity.
"Consolidated Operating Profits" means, for any period, the Operating
Profits of the Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Consolidated Tangible Net Worth" means, at any time, Stockholders'
Equity, less the sum of the value, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries,
prepared in accordance with GAAP, of
(A) Any surplus resulting from any write-up of assets subsequent
to December 31, 1994 (excluding any write-ups of Inventory made in the ordinary
course of business);
(B) All assets which would be treated as intangible assets for
balance sheet presentation purposes under GAAP, including, without limitation,
goodwill (whether representing the excess of cost over book value of assets
acquired, or otherwise), trademarks, tradenames, copyrights, patents and
technologies, and unamortized debt discount and expense; and
(C) Loans or advances to stockholders, directors, officers or
employees (but only to the extent the aggregate outstanding amount of such loans
and advances exceeds the limit set forth in Section 5.06(i)).
"Consolidated Total Assets" means, at any time, the Total Assets of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis.
<PAGE>9
"Consolidated Total Capital" means, at any time, the sum of (i)
Consolidated Net Worth, and (ii) Consolidated Funded Debt.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"CVC" shall mean Citicorp Venture Capital, Ltd., a New York
corporation.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
other than those certain lease obligations of KEMET Electronics to Greenville
County, South Carolina and/or Greenwood County, South Carolina pursuant to the
Lease Agreement, (v) all obligations of such Person to reimburse any bank or
other Person in respect of amounts payable under a banker's acceptance, (vi) all
Redeemable Preferred Stock of such Person (in the event such Person is a
corporation), (vii) all obligations (absolute or contingent) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (viii) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, and
(ix) all Debt of others Guaranteed by such Person; provided, that Debt shall not
include (a) accrued expenses (including without limitation accrued salaries,
accrued vacation, deferred compensation, unfunded projected pension benefit
obligations and unfunded post-retirement medical plans), accrued dividends,
warranty reserves and accrued current and deferred income taxes, in each case
arising in the ordinary course of business, (b) operating leases (including
without limitation financing leases which constitute operating leases) and (c)
in the case of Factor Receivables sold on a "recourse" basis, the amount of such
recourse liability to the extent of cash deposits securing such liability; and
provided further, that Debt shall not include the obligation of a Person in its
capacity as the servicer, collection agent or similar party to forward amounts
collected with respect to Factor Receivables to the purchaser of such Factor
Receivables.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived in writing, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of
2% plus the then highest interest rate (including the Applicable Margin) which
may be applicable to any Loans hereunder (irrespective of whether any such type
of Loans are actually outstanding hereunder).
<PAGE>10
"Depreciation" means for any period the sum of all depreciation
expenses of the Borrower and its Consolidated Subsidiaries for such period, as
determined in accordance with GAAP.
"Designated Lender" has the meaning set forth in Section 2.03(a).
"Designated Lender Advance" has the meaning set forth in Section
2.03(a).
"Designated Lender Loan Agreement" has the meaning set forth in
Section 2.03(a).
"Designated Lender Note" has the meaning set forth in Section 2.03(a).
"Dollars" or "$" means dollars in lawful currency of the United
States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in North Carolina are authorized or required
by law to close.
"Domestic Significant Subsidiary" means any Significant Subsidiary
which is organized under the laws of any state or territory of the United States
of America.
"Environmental Authority" means any foreign, federal, state, local or
regional government that lawfully exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any violation of or liability
under any Environmental Requirements, whether or not entered upon consent or
written agreements with an Environmental Authority or other entity arising from
or in any way associated with any violation of or liability under any
Environmental Requirement, whether or not incorporated in a judgment, decree or
order.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
<PAGE>11
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising under any Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any violation of or
liability under any Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at
a rate based upon the London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.06(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means that certain Credit Agreement dated
as of February 24, 1995 among the Borrower, Wachovia Bank of Georgia, N.A., as
Agent and the banks listed therein, as amended by the First Amendment to Credit
Agreement dated as of August 1, 1996, without regard and without giving effect
to any subsequent amendments or waivers given with respect thereto.
<PAGE>12
"Existing Guaranty Agreement" means that certain Guaranty Agreement
dated as of February 24, 1995, executed by the Guarantors for the benefit of
Wachovia Bank of Georgia, N.A., as Agent and the banks listed in the Existing
Credit Agreement, without regard and without giving effect to any amendments or
waivers given with respect thereto.
"Existing Pledge Agreement" means that certain Pledge Agreement dated
as of February 24, 1995, executed by KEMET Electronics for the benefit of
Wachovia Bank of Georgia, N.A., as Agent for the banks listed in the Existing
Credit Agreement without regard and without giving effect to any amendments or
waivers given with respect thereto.
"Facility Fee Determination Date" has the meaning set forth in Section
2.07(a).
"Facility Fee Payment Date" means each March 31, June 30, September 30
and December 31.
"Factor Receivables" means the outstanding amount of those Foreign
Trade Receivables from time to time sold by KESA to Swiss Bank Corporation
pursuant to the Purchase Agreement or sold by KESA (or any other Subsidiary of
the Borrower) pursuant to any other agreement providing for the factoring of
Foreign Trade Receivables entered into with another bank or factor.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Bank on such day on such
transactions as determined by the Bank.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Foreign Trade Receivables" means those trade receivables from time to
time generated from the sale of goods or services by the Borrower and its
Subsidiaries to any Non-U.S. Person.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.
<PAGE>13
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantors" means the Domestic Significant Subsidiaries from time to
time party to the Guaranty Agreement.
"Guaranty Agreement" means that certain Guaranty Agreement of even
date herewith executed by the Guarantors for the benefit of the Bank,
guaranteeing the obligations of the Borrower under this Credit Agreement and the
other Loan Documents to which the Borrower is a party.
"Hazardous Materials" means (a) solid or hazardous waste, as defined
in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. Section 6901 et
seq. and its implementing regulations and amendments, or in any applicable state
or local law or regulation, (b) any "hazardous substance", "pollutant" or
"contaminant", as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product,
including crude oil or any fraction thereof, (d) toxic substances, as defined in
the Toxic Substances Control Act of 1976, or in any applicable state or local
law or regulation and (e) insecticides, fungicides, or rodenticides, as defined
in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any
applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"Hedging Transactions" means any interest rate swap, cap or collar or
currency transactions entered into by the Borrower or any Subsidiary solely in
order to provide interest rate protection or protection from fluctuations in the
values of currencies to the Borrower or such Subsidiary or to serve a similar
hedging purpose (but not for the purpose of investment or speculation).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (subject to clause (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be extended
<PAGE>14
to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall, subject
to clause (c) below, end on the last Euro-Dollar Business Day of the appropriate
subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (subject to clause (b) below) which would
otherwise end on a day which is not a Domestic Business Day shall be extended to
the next succeeding Domestic Business Day; and
(b) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(3) with respect to each Offered Rate Loan, the period commencing on the date
of the Borrowing including such Offered Rate Loan and ending on that number of
days, but in no event later than the 90th day, thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Domestic Business Day shall be extended to the next succeeding Domestic
Business Day; and
(b) any Interest Period which begins before the Termination Date and
would otherwise end after the Termination Date shall end on the Termination
Date.
"Inventory" shall mean inventory (as defined in Article 9 of the
Uniform Commercial Code) to the extent composed of materials, products or goods
of the type manufactured, sold or consumed by the Borrower or any of its
Subsidiaries in the ordinary course of business.
"Investment" means any investment in any Person (excluding the
purchase by the Borrower of common stock of the Borrower), whether by means of
purchase or acquisition of any capital stock, warrants, rights, options,
obligations or other securities of such Person, capital contribution to such
Person, loan or advance (but excluding deposits, progress payments and the like
to suppliers and service providers for property and services in the ordinary
course of business) to such Person, making of a time deposit with such Person,
Guarantee or assumption of any obligation of such Person or otherwise.
<PAGE>15
"KEMET Electronics" means KEMET Electronics Corporation, a Delaware
corporation, together with its successors and permitted assigns.
"KEMET Partners" means the South Carolina general partnership so named
and comprised of certain members of management of KEMET Electronics Corporation.
"KESA" means KEMET Electronics S.A., a corporation organized under the
laws of Switzerland, together with its successors and permitted assigns.
"KRC" means KRC Trade Corporation, a Delaware corporation, together
with its successors and permitted assigns.
"Lease Agreement" means that certain Lease Purchase and Millage Rate
Agreement, dated as of December 22, 1994, among Greenville County, South
Carolina, Greenwood County, South Carolina and KEMET Electronics, as it may be
amended from time to time to add or delete assets.
"Lending Office" means the office of the Bank located at its address
set forth on its signature page hereto (or identified on its signature page
hereto as its Lending Office) or such other office as the Bank may hereafter
designate as its Lending Office by notice to the Borrower.
"Letter Agreement" means that certain letter agreement, dated as of
July 23, 1996, between the Borrower and the Bank relating to the structure of
the Loans, and certain fees from time to time payable by the Borrower to the
Bank, together with all amendments and modifications thereto.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For
the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease (other than those certain lease obligations of KEMET Electronics to
Greenville County, South Carolina and/or Greenwood County, South Carolina
pursuant to the Lease Agreement) or other title retention agreement relating to
such asset.
"Loan" means a Euro-Dollar Loan, an Offered Rate Loan or a Base Rate
Loan and "Loans" means Euro-Dollar Loans, Offered Rate Loans or Base Rate Loans,
or any or all of them, as the context shall require.
"Loan Documents" means this Agreement, the Note, the Guaranty
Agreement, any other document evidencing, relating to or securing the Loans, and
any other document or instrument delivered from time to time in connection with
<PAGE>16
this Agreement, the Note or the Loans, as such documents and instruments may be
amended or supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.06(c).
"Margin Stock" means "margin stock" as defined in Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as in effect from
time to time, together with all official rulings and interpretations issued
thereunder.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, (a) the financial
condition, operations, business or properties of the Borrower and its
Consolidated Subsidiaries, taken as a whole, (b) the rights and remedies, taken
as a whole, of the Bank under the Loan Documents, or the ability of the Borrower
to perform its obligations under the Loan Documents to which it is a party, as
applicable, or (c) the legality, validity or enforceability of any Loan Document
as to or against the Borrower or any Guarantor.
"Multiemployer Plan" has the meaning set forth in Section 4001(a)(3)
of ERISA.
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.
"Net Proceeds of Capital Stock" means any proceeds (whether cash or
non-cash) received by the Borrower or a Consolidated Subsidiary in respect of
the issuance of Capital Stock (including without limitation, the conversion of
any Debt into Capital Stock), after deducting therefrom all reasonable and
customary costs and expenses incurred by the Borrower or such Consolidated
Subsidiary directly in connection with the issuance of such Capital Stock.
"Net Worth Change Amount" means, as of any day, an amount (which may
be positive or negative) equal to (a) Consolidated Tangible Net Worth as of such
day (determined on the basis of the quarterly unaudited financial statements of
the Borrower most recently delivered to the Bank pursuant to Section 5.01(b) for
the Fiscal Quarter ending prior to such date) minus (b) $59,652,470; provided
that as to the fourth and final Fiscal Quarter of any Fiscal Year, upon delivery
by the Borrower to the Bank of its annual audited financial statements for such
Fiscal Year pursuant to Section 5.01(a), for purposes of clause (a) of this
definition, Consolidated Tangible Net Worth shall be determined based upon such
annual audited financial statements.
"Non-U.S. Person" means any Person who is not a resident of any state
of the United States of America or the District of Columbia.
<PAGE>17
"Note" means the promissory note of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, together with all amendments, consolidations, modifications, renewals and
supplements thereto.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Officer's Certificate" has the meaning set forth in Section 3.01(e).
"Offered Rate Loan" means a Loan which bears or is to bear interest at
the Offered Rate.
"Offered Rate" shall mean a per annum interest rate offered by the
Bank as the rate of interest applicable to an Offered Rate Loan during the
applicable Interest Period of such Offered Rate Loan. The Offered Rate for any
Offered Rate Loan shall be set by the Bank at its discretion and may vary
depending, among other things, on the duration of the Interest Period for such
Offered Rate Loan.
"Operating Profits" means, as applied to any Person for any period,
the operating income of such Person for such period, as determined in accordance
with GAAP.
"Outstanding Principal Amount" has the meaning set forth in Section
2.03(b).
"Participant" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean Investments which are either (i)
cash and Cash Equivalents, (ii) receivables created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms, (iii) investments existing as of February 24, 1995 and
set forth in Schedule 5.07 (but without additional acquisitions thereof except
as otherwise permitted hereby), (iv) investments by the Borrower, KEMET
Electronics or any Guarantor in industrial revenue bonds issued from time to
time by Greenville County, South Carolina and/or Greenwood County, South
Carolina pursuant to the Bond Issuance and Purchase Agreement, or (v) capital
stock or other securities received by the Borrower or any Subsidiary in payment
of an account receivable where such capital stock or other securities are issued
in connection with a bankruptcy reorganization of the Person obligated to pay
such account receivable.
"Person" means an individual, a corporation, a partnership (including
without limitation, a joint venture), a limited liability company, an
unincorporated association, a trust or any other entity or organization,
<PAGE>18
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan, as defined
in Section 3(2) of ERISA, which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and is either (i)
maintained by a member of the Controlled Group for employees of any member of
the Controlled Group or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding 5 plan
years made contributions.
"Prime Rate" refers to that interest rate so denominated and set by
the Bank from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by the Bank. The Bank lends
at interest rates above and below the Prime Rate.
"Properties" means all real property owned, leased or otherwise used
or occupied by the Borrower or any Subsidiary, wherever located.
"Purchase Agreement" means the Purchase Agreement dated as of April
22, 1988 between Swiss Bank Corporation and KESA, as amended from time to time
(including any increases in the aggregate amount of Purchased Receivables (as
defined therein) that may be outstanding from time to time thereunder).
"Rate Determination Date" has the meaning set forth in Section
2.06(a).
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Reported Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis.
"Responsible Officer" means any of the president, chief executive
officer, executive vice president, chief operating officer, chief financial
officer and treasurer, assistant treasurer, senior vice president of human
resources and vice president of administration of the Borrower.
"Significant Subsidiaries" means (a) KRC and (b) on any date any
Subsidiary of the Borrower which has either (i) Total Assets on the last day of
the Fiscal Quarter most recently ended equal to or greater than 10% of
Consolidated Total Assets on the last day of the Fiscal Quarter most recently
ended, (ii) Operating Profits for the period of 4 consecutive Fiscal Quarters
most recently ended prior to such date equal to or greater than 10% of
Consolidated Operating Profits for such period of 4 consecutive Fiscal Quarters,
or (iii) gross revenues for the period of 4 consecutive Fiscal Quarters most
<PAGE>19
recently ended prior to such date equal to or greater than 10% of gross revenues
of the Borrower and its Consolidated Subsidiaries for such period of 4
consecutive Fiscal Quarters; provided that any Subsidiary of the Borrower that
is a "foreign sales corporation" as defined in Section 922(a) of the Code shall
not be deemed to be a Significant Subsidiary.
"Stockholders' Equity" means, at any time, the stockholders' equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries.
Stockholders' equity generally would include, but not be limited to (i) the par
or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various adjustments such as (A) purchases and sales
of treasury stock, (B) valuation allowances, (C) receivables due from an
employee stock ownership plan, (D) employee stock ownership plan debt
guarantees, and (E) translation adjustments for foreign currency transactions.
"Subsidiary" means any corporation, limited liability company or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Borrower.
"Taxes" has the meaning set forth in Section 2.12(c).
"Termination Date" means July 30, 1997.
"Test Amount" means, on any day, an amount equal to $37,000,000 plus
(only in the case where the Net Worth Change Amount is positive) the Net Worth
Change Amount as of such day or minus (only in the case where the Net Worth
Change Amount is negative) the absolute value of the Net Worth Change Amount as
of such day; provided that in no event shall the Test Amount be less than
$37,000,000.
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower's business and on a temporary basis.
"Total Assets" of any Person means, at any time, the total assets of
such Person, as set forth or reflected or as should be set forth or reflected on
the most recent balance sheet of such Person, prepared in accordance with GAAP.
"Transferee" has the meaning set forth in Section 9.07(d).
"Unencumbered Total Assets of any Person" means, at any time, Total
Assets of such Person which are subject to any arrangement specified in 12 CFR
Section 221.2(g)(1)..
"Unused Commitment" means at any date an amount equal to the Bank's
Commitment less the aggregate outstanding principal amount of its Loans.
<PAGE>20
"Voting Stock" shall mean, with respect to any Person, capital stock
issued by a corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar functions) of
such Person, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except (i) directors'
qualifying shares, and (ii) shares required by applicable law to be owned by any
Person other than the Borrower or any other Wholly Owned Subsidiary) are at the
time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Bank, unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other Loan
Documents: (i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Bank shall so object in writing within 30 days after the delivery of such
financial statements, in either of which events such calculations shall be made
on a basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made (which, if
objection is made in respect of the first financial statements delivered under
Section 5.01 hereof, shall mean the financial statements referred to in Section
4.04(a)).
SECTION 1.03. Use of Defined Terms. All terms defined in this
Agreement shall have the same meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall
otherwise require.
SECTION 1.04. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; and where the context so indicates the singular shall
include the plural and the plural shall include the singular. Titles of
Articles and Sections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 1.05. References. Unless otherwise indicated, references in
this Agreement to "Articles", "Exhibits", "Schedules", and "Sections" are
references to articles, exhibits, schedules and sections hereof.
<PAGE>21
ARTICLE II
THE CREDITS
SECTION 2.01. Commitment to Make Loans. The Bank hereby agrees, on
the terms and conditions set forth herein, to make Loans to the Borrower from
time to time before the Termination Date; provided that, immediately after each
such Loan is made and subject to Section 2.03(b), the aggregate outstanding
principal amount of Loans by the Bank shall not exceed $40,000,000 (as such
figure may be reduced from time to time as provided in this Agreement, the
"Commitment"). Each Base Rate Borrowing and Offered Rate Borrowing under this
Section shall be in an aggregate principal amount of $1,000,000 or any larger
multiple of $1,000,000 and each Euro-Dollar Borrowing under this Section shall
be in an aggregate principal amount of $5,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the amount of the Unused
Commitment). Within the foregoing limits, the Borrower may borrow under this
Section, repay or, to the extent permitted by Section 2.10, prepay Loans and
reborrow under this Section at any time before the Termination Date.
SECTION 2.02. Method of Borrowing Loans. (a) The Borrower shall
give the Bank notice in the form attached hereto as Exhibit G (a "Notice of
Borrowing") prior to 11:00 A.M. (Winston-Salem, North Carolina time) on the same
Domestic Business Day as each Base Rate Borrowing and each Offered Rate
Borrowing and at least 2 Euro-Dollar Business Days before each Euro-Dollar
Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing and an Offered Rate Borrowing
or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base
Rate Loans, Offered Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing or an Offered Rate
Borrowing, the duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period.
(b) If the Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from the Bank, the
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by the Bank to the Borrower or
remitted by the Borrower to the Bank as provided in Section 2.12, as the case
may be.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing or Offered Rate Borrowing may be made if
<PAGE>22
there shall have occurred a Default or an Event of Default, which Default or
Event of Default shall not have been cured or waived in writing.
(d) In the event that a Notice of Borrowing fails to specify
whether the Loan comprising such Borrowing is to be a Base Rate Loan, an Offered
Rate Loan or a Euro-Dollar Loan, such Loan shall be made as a Base Rate Loan.
If the Borrower is otherwise entitled under this Agreement to repay any Loan
maturing at the end of an Interest Period applicable thereto with the proceeds
of a new Borrowing, and the Borrower fails to repay such Loan using its own
moneys and fails to give a Notice of Borrowing in connection with such new
Borrowing, a new Borrowing shall be deemed to be made on the date such Loan
matures in an amount equal to the principal amount of the Loan so maturing, and
the Loan comprising such new Borrowing shall be a Base Rate Loan.
(e) Notwithstanding anything to the contrary contained herein, (i)
there shall not be more than six (6) different Interest Periods outstanding
applicable to Loans at the same time (for which purpose Interest Periods
described in different numbered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous) and (ii) the proceeds of any Base Rate Borrowing shall be applied
first to repay the unpaid principal amount of all Base Rate Loans (if any)
outstanding immediately before such Base Rate Borrowing.
SECTION 2.03. Alternative Funding Sources. (a) At the Bank's
option, a designated lender (the "Designated Lender") may be nominated by the
Bank, subject to the Borrower's acceptance, to provide from time to time
advances to the Borrower during the term of this Agreement to fund, for the
duration of any period mutually agreed by the Borrower and the Designated
Lender, all or a portion of the principal of the Loans (each such advance is
referred to herein as a "Designated Lender Advance"). Notice of the nomination
by the Bank of a Designated Lender and acknowledgment and acceptance by the
Borrower of such nomination shall be substantially in the form of the
designation letter attached hereto as Exhibit H. The terms and conditions of
the Designated Lender Advances will be agreed to between the Designated Lender
and the Borrower and will be set forth in a separate loan agreement executed by
the Borrower and the Designated Lender (the "Designated Lender Loan Agreement"),
and the Designated Lender Advances shall be evidenced by a single promissory
note of the Borrower to the Designated Lender (the "Designated Lender Note").
The obligations of the Borrower under the Designated Lender Loan Agreement and
the Designated Lender Note will be guaranteed by the Guarantors pursuant to a
guaranty agreement. The Designated Lender is not and shall not be a party to
this Agreement or any of the other Loan Documents and makes no representation or
warranty and assumes no responsibility or obligation under this Agreement or any
of the other Loan Documents. Designated Lender Advances to the Borrower
pursuant to the Designated Lender Loan Agreement shall reduce the Unused
Commitment by the amount of such Designated Lender Advances, but, except for
such reduction, the arrangements and agreements between the Designated Lender
and the Borrower will not change or affect the terms of this Agreement or the
duties and obligations of the Borrower or the Bank, one to the other, or the
duties of the Guarantors or the Bank, one to the other, pursuant to this
<PAGE>23
Agreement or any of the other Loan Documents. The Borrower and the Guarantors
shall deliver to the Bank, promptly after their execution, true and complete
copies of all the agreements executed between or among the Borrower, the
Guarantors and the Designated Lender.
(b) The Bank shall also have the right to fund all or any portion
of the Loans through alternative funding sources (including, without limitation,
bankers' acceptances) in addition to that described in paragraph (a) of this
Section. The Borrower hereby agrees to execute and deliver such other
documentation as the Bank may reasonably require to facilitate such alternative
funding. In no event and at no time shall the aggregate principal amount of the
Loans plus the aggregate principal amount of Designated Lender Advances used to
fund the Loans pursuant to the provisions of paragraph (a) of this Section plus
the aggregate principal amount of the Loans funded through alternative funding
sources pursuant to this paragraph (b) (collectively, the "Outstanding Principal
Amount") exceed the amount of the Commitment. The Outstanding Principal Amount
of the Loans may exceed the amount of the Commitment if and to the extent that
the proceeds of the Loans are being used to repay concurrently a maturing
obligation to the Designated Lender or to repay a maturing obligation under an
alternative funding source pursuant to this paragraph (b), provided that (i)
immediately after such repayment, the Outstanding Principal Amount shall not
exceed the amount of the Commitment, and (ii) in the case of any such maturing
obligation owing to the Designated Lender, the proceeds of such Loans shall be
remitted for the Borrower's account to the Designated Lender in satisfaction of
such maturing obligations (the Borrower hereby authorizing and directing the
Bank to do so).
The Borrower acknowledges that, if a bankers' acceptance or similar
facility is used by a Designated Lender or the Bank as an alternative funding
source under paragraph (a) or (b) of this Section for all or any portion of the
principal amount of the Loans, the face amount thereof may exceed the principal
amount of the Loans so funded by such means, although the discounted proceeds
thereof so used to fund such principal amount will not exceed such principal
amount.
(c) Notwithstanding anything in this Section 2.03 to the contrary,
the Borrower shall not be required to utilize any Designated Lender or other
alternative funding source described in this Section 2.03, and may instead
continue to borrow under Section 2.02.
SECTION 2.04. Note. (a) The Loans of the Bank shall be evidenced by
a Note payable to the order of the Bank for the account of its Lending Office in
an amount equal to the original principal amount of the Bank's Commitment.
(b) The Bank shall record, and prior to any transfer of its Note
shall endorse on the schedule forming a part thereof appropriate notations to
evidence, the date, amount and maturity of, and effective interest rate for,
each Loan made by it, the date and amount of each payment of principal made by
the Borrower with respect thereto and whether such Loan is a Base Rate Loan,
Offered Rate Loan or Euro-Dollar Loan, and such schedule shall constitute
<PAGE>24
rebuttable presumptive evidence of the principal amount owing and unpaid on the
Note; provided that the failure of the Bank to make, or any error in making, any
such recordation or endorsement shall not affect the obligation of the Borrower
hereunder or under the Note or the ability of the Bank to assign its Note. The
Bank is hereby irrevocably authorized by the Borrower so to endorse the Note and
to attach to and make a part of the Note a continuation of any such schedule as
and when required.
SECTION 2.05. Maturity of Loans. The Loan constituting any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. Interest Rates. (a) "Applicable Margin" shall be
determined quarterly based upon the ratio of Consolidated Cash Flow from
Operations to Consolidated Funded Debt (calculated as of the last day of each
Fiscal Quarter and in the manner set forth in Section 5.05), as follows:
Ratio of Consolidated Cash
Flow From Operations to
Consolidated Funded Debt Base Rate Loans Euro-Dollar Loans
Greater than .65 0% .305%
Greater than .50
but equal to or less than .65 0% .42%
Greater than .35
but equal to or less than .50 0% .535%
Equal to or less than .35 0% .70%
The Applicable Margin shall be determined effective as of the date (herein, the
"Rate Determination Date") which is 45 days after the last day of the Fiscal
Quarter as of the end of which the foregoing ratio is being determined, based on
the quarterly financial statements for such Fiscal Quarter, and the Applicable
Margin so determined shall remain effective from such Rate Determination Date
until the date which is 45 days after the last day of the Fiscal Quarter in
which such Rate Determination Date falls (which latter date shall be a new Rate
Determination Date); provided that (i) for the period from and including the
Closing Date to but excluding the Rate Determination Date next following the
Closing Date, the Applicable Margin shall be (A) 0% for Base Rate Loans, and (B)
.305% for Euro-Dollar Loans, (ii) in the case of each Applicable Margin
determined on the Rate Determination Date which is 45 days after the fourth and
final Fiscal Quarter of a Fiscal Year, such Applicable Margin shall be
redetermined based upon the annual audited financial statements for the Fiscal
Year ended on the last day of such final Fiscal Quarter and if such Applicable
Margin (as so redetermined) shall be different from the Applicable Margin
determined on the related Rate Determination Date, such Applicable Margin (as so
redetermined) shall be effective retroactive to the related Rate Determination
<PAGE>25
Date, and (iii) if on any Rate Determination Date the Borrower shall have failed
to deliver to the Bank the financial statements required to be delivered
pursuant to Section 5.01(b) with respect to the Fiscal Quarter most recently
ended prior to such Rate Determination Date, then for the period beginning on
such Rate Determination Date and ending on the earlier of (A) the date on which
the Borrower shall deliver to the Bank the financial statements required to be
delivered pursuant to Section 5.01(b) with respect to such Fiscal Quarter or any
subsequent Fiscal Quarter, or (B) the date on which the Borrower shall deliver
to the Bank annual financial statements required to be delivered pursuant to
Section 5.01(a) with respect to the Fiscal Year which includes such Fiscal
Quarter or any subsequent Fiscal Year, the Applicable Margin shall be determined
as if the ratio of Consolidated Cash Flow from Operations to Consolidated Funded
Debt was less than or equal to .35 at all times during such period. Any change
in the Applicable Margin on any Rate Determination Date shall result in a
corresponding change, effective on and as of such Rate Determination Date, in
the interest rate applicable to each Loan outstanding on such Rate Determination
Date.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period; provided that if any
Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition of
Interest Period, have an Interest Period of less than one month, such
Euro-Dollar Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan the rate per annum
determined on the basis of the rate for deposits in Dollars of amounts equal or
comparable to the principal amount of such Euro-Dollar Loan offered for a term
comparable to such Interest Period, which rates appear on the display designated
<PAGE>26
as Page "3750" of the Telerate Service (or such other page as may replace page
3750 of that service or such other service or services as may be nominated by
the British Bankers' Association for the purpose of displaying London Interbank
offered rates for deposits in Dollars) determined as of 10:00 a.m. (New York
time), 2 Euro-Dollar Business Days prior to the first day of such Interest
Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
the Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) Each Loan made as an Offered Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the applicable Offered Rate. Such
interest shall be payable for each Interest Period on the last day thereof. Any
overdue principal of and, to the extent permitted by law, overdue interest on
any Offered Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate. As provided in the
definition of the term "Offered Rate," the Offered Rate for any Offered Rate
Loan shall be set by the Bank at its discretion and may vary depending, among
other things, on the duration of the Interest Period for such Offered Rate Loan.
(e) Any overdue principal of and, to the extent permitted by law,
overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Default Rate.
(f) The Bank shall determine each interest rate applicable to the
Loans hereunder. The Bank shall give prompt notice to the Borrower by telecopy
of each rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(g) After the occurrence and during the continuance of an Event of
Default, the principal amount of the Loans (and, to the extent permitted by
applicable law, all accrued interest thereon) shall bear interest at the Default
Rate.
SECTION 2.07. Fees. (a) The Borrower shall pay to the Bank a
facility fee equal to the product of: (i) the aggregate of the daily average
amounts of the Bank's Commitment (irrespective of usage), times (ii) a per annum
percentage equal to the Applicable Facility Fee Rate. Such facility fee shall
accrue from and including the Closing Date to but excluding the Termination
Date. Facility fees shall be payable quarterly in arrears on the Facility Fee
<PAGE>27
Payment Date next following each Facility Fee Determination Date and on the
Termination Date; provided that should the Commitment be terminated at any time
prior to the Termination Date for any reason, the entire accrued and unpaid
facility fee shall be paid on the date of such termination. The "Applicable
Facility Fee Rate" shall be determined quarterly based upon the ratio of
Consolidated Cash Flow from Operations to Consolidated Funded Debt (calculated
in the manner set forth in Section 5.05) as follows:
Ratio of Consolidated Cash Flow
from Operations to Applicable
Consolidated Funded Debt Facility Fee Rate
Greater than .65 .07%
Greater than .50
but equal to or less than .65 .08%
Greater than .35
But equal to or less than .50 .09%
Equal to or less than .35 .10%
The Applicable Facility Fee Rate shall be determined effective as of the date
(herein, the "Facility Fee Determination Date") which is 45 days after the last
day of the Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal Quarter,
and the Applicable Facility Fee Rate so determined shall remain effective from
such Facility Fee Determination Date until the date which is 45 days after the
last day of the Fiscal Quarter in which such Facility Fee Determination Date
falls (which latter date shall be a new Facility Fee Determination Date);
provided that (i) for the period from and including the Closing Date to but
excluding the Facility Fee Determination Date next following the Closing Date,
the Applicable Facility Fee Rate shall be .07%; (ii) in the case of each
Applicable Facility Fee Rate determined on the Facility Fee Determination Date
which is 45 days after the fourth and final Fiscal Quarter of a Fiscal Year,
such Applicable Facility Fee Rate shall be redetermined based upon the annual
audited financial statements for the Fiscal Year ended on the last day of such
final Fiscal Quarter and if such Applicable Facility Fee Rate (as so
redetermined) shall be different from the Applicable Facility Fee Rate
determined on the related Facility Fee Determination Date, such Applicable
Facility Fee Rate (as so redetermined) shall be effective retroactive to the
related Facility Fee Determination Date, and (iii) if on any Facility Fee
Determination Date the Borrower shall have failed to deliver to the Bank the
financial statements required to be delivered pursuant to Section 5.01(b) with
respect to the Fiscal Quarter most recently ended prior to such Facility Fee
Determination Date, then for the period beginning on such Facility Fee
Determination Date and ending on the earlier of (A) the date on which the
Borrower shall deliver to the Bank the financial statements required to be
delivered pursuant to Section 5.01(b) with respect to such Fiscal Quarter or any
subsequent Fiscal Quarter, and (B) the date on which the Borrower shall deliver
<PAGE>28
to the Bank annual financial statements required to be delivered pursuant to
Section 5.01(a) with respect to the Fiscal Year which includes such Fiscal
Quarter or any subsequent Fiscal Year, the Applicable Facility Fee Rate shall be
determined as if the ratio of Consolidated Cash Flow from Operations to
Consolidated Funded Debt was less than or equal to .35 at all times during such
period.
(b) The Borrower shall pay to the Bank such fees and other amounts at
such times as set forth in the Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of Commitment. The
Borrower may, upon at least 3 Domestic Business Days' notice to the Bank,
terminate at any time, or proportionately reduce from time to time by an
aggregate amount of at least $5,000,000 or any larger multiple of $1,000,000,
the Commitment. If the Commitment is terminated in its entirety, all accrued
fees (as provided under Section 2.07) shall be payable on the effective date of
such termination.
SECTION 2.09. Mandatory Termination of Commitment. The Commitment
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.10. Optional Prepayments. (a) The Borrower may, on the
same Domestic Business Day's notice to the Bank, prepay any Base Rate Borrowing
in whole at any time, or from time to time in part in amounts aggregating at
least $1,000,000, or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment.
(b) The Borrower may not prepay all or any portion of the principal
amount of any Euro-Dollar Loan or Offered Rate Loan prior to the maturity
thereof unless all compensation due under Section 8.05 is paid in connection
with and at the time of such prepayment.
SECTION 2.11. Mandatory Prepayments. On each date on which the
Commitment is reduced or terminated pursuant to Section 2.08 or terminated
pursuant to Section 2.09, the Borrower shall repay or prepay (a) in the case of
a termination of the Commitment, the entire principal amount of the outstanding
Loans, or (b) in the case of a reduction of the Commitment, such principal
amount of the outstanding Loans, if any (together with interest accrued thereon
and any amounts due under Section 8.05(a)), as may be necessary so that after
such payment the aggregate unpaid principal amount of the Loans does not exceed
the aggregate amount of the Commitment as then reduced.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
facility fees hereunder, not later than 12:00 noon (Winston-Salem, North
Carolina time) on the date when due, in Federal or other funds immediately
available in Winston-Salem, North Carolina, to the Bank at its address referred
to in Section 9.01.
<PAGE>29
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or the Offered Rate Loans or of fees shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(c) All payments of principal, interest and fees and all other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any tax, imposts, levies, duties, deductions, or withholdings of any
nature now or at anytime hereafter imposed by any governmental authority or by
any taxing authority thereof or therein excluding taxes imposed on or measured
by the Bank's income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which the Bank is organized or any political subdivision
thereof and taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction of the Bank's applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, imposts, levies, duties,
deductions or withholdings of any nature being "Taxes"). In the event that the
Borrower is required by applicable law to make any such withholding or deduction
of Taxes with respect to any Loan or fee or other amount, the Borrower shall pay
such deduction or withholding to the applicable taxing authority, shall promptly
furnish to the Bank all receipts and other documents evidencing such payment and
shall pay to the Bank additional amounts as may be necessary in order that the
amount received by the Bank after the required withholding or other payment
shall equal the amount the Bank would have received had no such withholding or
other payment been made. If no withholding or deduction of Taxes are payable in
respect of any Loan or fee relating thereto, the Borrower shall furnish the
Bank, at the Bank's request, a certificate from each applicable taxing authority
or an opinion of counsel acceptable to the Bank, in either case stating that
such payments are exempt from or not subject to withholding or deduction of
Taxes. If the Borrower fails to provide such original or certified copy of a
receipt evidencing payment of Taxes or certificate(s) or opinion of counsel of
exemption, the Borrower hereby agrees to compensate the Bank for, and indemnify
it with respect to, the tax consequences of the Borrower's failure to provide
evidence of tax payments or tax exemption.
In the event the Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.12(c), it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided, however, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
(d) If the Borrower shall be required to pay additional amounts to
the Bank pursuant to Section 2.12(c), then the Bank shall use its best efforts
<PAGE>30
(consistent with legal and regulatory restrictions) to change the jurisdiction
of its Lending Office so as to eliminate any such additional payment by the
Borrower which may thereafter accrue if such change in the judgment of the Bank
shall not otherwise be disadvantageous to the Bank.
(e) The agreements and obligations of the Borrower contained in
Section 2.12(c) shall survive for ten (10) years after the termination of the
Commitment and the payment of all amounts payable under this Agreement.
(f) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.12 shall be applicable with respect to any Participant,
Assignee or other Transferee, and any calculations required by such provisions
(i) shall be made based upon the circumstances of such Participant, Assignee or
other Transferee, and (ii) constitute a continuing agreement and shall survive
the termination of this Agreement and the payment in full or cancellation of the
Note.
SECTION 2.13. Computation of Interest and Fees. Interest on Base Rate
Loans shall be computed on the basis of a year of 365 or 366 days, as
appropriate, and paid for the actual number of days elapsed (including the first
day but excluding the last day). Interest on Euro-Dollar Loans and interest on
the Offered Rate Loans shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed, calculated as to each Interest
Period from and including the first day thereof to but excluding the last day
thereof. Facility fees and any other fees payable hereunder shall be computed
on the basis of a year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation of the
Bank to make a Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in Section 3.02 and the following
additional conditions:
(a) receipt by the Bank (i) from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower, or a facsimile
transmission stating that the Borrower has duly executed a counterpart of this
Agreement and sent such counterpart to the Bank and (ii) from each of the
parties thereto, of a duly executed counterpart of the Guaranty Agreement signed
by such party, or a facsimile transmission stating that such party has duly
executed a counterpart of the Guaranty Agreement and sent such counterpart to
the Bank;
(b) receipt by the Bank of a duly executed Note complying with the
provisions of Section 2.04;
<PAGE>31
(c) receipt by the Bank of an opinion of Kirkland & Ellis (together
with any opinions of local counsel), counsel for the Borrower and the
Guarantors, dated as of the Closing Date, substantially in the form of Exhibit B
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Bank may reasonably request;
(d) receipt by the Bank of a certificate (the "Closing Certificate"),
dated the date of the first Borrowing, substantially in the form of Exhibit C
hereto, signed by a principal financial officer of the Borrower, to the effect
that (i) no Default has occurred and is continuing on the date of the first
Borrowing and (ii) the representations and warranties of the Borrower contained
in Article IV are true in all material respects on and as of the date of the
first Borrowing hereunder;
(e) receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower and each Guarantor,
the corporate authority for and the validity of this Agreement, the Guaranty
Agreement and the Note, and any other matters relevant hereto, all in form and
substance satisfactory to the Bank, including without limitation a certificate
of incumbency of the Borrower and each Guarantor (the "Officer's Certificate"),
signed by the Secretary or an Assistant Secretary of the Borrower or each
Guarantor, as the case may be, substantially in the form of Exhibit D hereto,
certifying as to the names, true signatures and incumbency of the officer or
officers of the Borrower or each Guarantor authorized to execute and deliver the
Loan Documents to which the Borrower or each Guarantor is a party, and certified
copies of the following items: (i) the Certificate or Articles of Incorporation
of the Borrower and each Guarantor, (ii) the Bylaws of the Borrower and each
Guarantor, (iii) a certificate of the Secretary of State of the State of
Delaware as to the good standing of the Borrower as a Delaware corporation and
similar certificates for each Guarantor from its jurisdiction of incorporation,
and (iv) the action taken by the Board of Directors of the Borrower and each
Guarantor authorizing the Borrower's and Guarantors' execution, delivery and
performance of this Agreement, the Note and the other Loan Documents to which
the Borrower and each Guarantor is a party; and
(f) receipt by the Bank of a Notice of Borrowing.
SECTION 3.02. Conditions to All Borrowings. The obligation of the
Bank to make a Loan on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Bank of Notice of Borrowing as required by Section
2.02;
(b) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the Borrower
contained in Article IV of this Agreement shall be true in all material respects
on and as of the date of such Borrowing; and
<PAGE>32
(d) the fact that, immediately after such Borrowing and taking into
account the application of the proceeds thereof the aggregate outstanding
principal amount of the Loans of the Bank plus the aggregate outstanding
principal amount of all Designated Lender Advances used to fund the Loans plus
the aggregate outstanding principal amount of alternative funding sources used
to fund the Loans pursuant to Section 2.03(b) will not exceed the amount of the
Commitment.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the truth and accuracy of the
facts specified in clauses (b), (c) and (d) of this Section; provided that such
Borrowing shall not be deemed to be such a representation and warranty to the
effect set forth in Section 4.04(b) as to any event, act or condition having a
Material Adverse Effect which has theretofore been disclosed in writing by the
Borrower to the Bank if the aggregate outstanding principal amount of the Loans
immediately after such Borrowing will not exceed the aggregate outstanding
principal amount thereof immediately before such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Note and the other Loan Documents (i) are within the Borrower's
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, except for any actions or filings which
have been taken or made, as the case may be, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Note and the other Loan Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations of the
Borrower enforceable in accordance with their respective terms, provided that
<PAGE>33
the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of March 31, 1996 and
the related consolidated statements of income, shareholders' equity and cash
flows for the Fiscal Year then ended, reported on by KPMG Peat Marwick LLP,
copies of which have been delivered to the Bank, and the unaudited consolidated
financial statements of the Borrower for the interim period ended June 30,1996,
copies of which have been delivered to the Bank, fairly present, in conformity
with GAAP, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such dates and their consolidated results of
operations and cash flows for such periods stated.
(b) Since March 31, 1996, there has been no event, act, condition or
occurrence having a Material Adverse Effect.
SECTION 4.05. Litigation. Except as set forth on Schedule 4.05,
there is no action, suit or proceeding pending, or to the knowledge of the
Borrower threatened, against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which could reasonably be expected to have or cause a Material Adverse
Effect.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each
member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability which has
not been extinguished to the PBGC or a Plan under Title IV of ERISA, other than
a liability to the PBGC for premiums not yet due or a liability to a Plan for
contributions not yet due.
(b) Neither the Borrower nor any member of the Controlled Group is
or, within the 5 years preceding the Closing Date, has been obligated to
contribute to any Multiemployer Plan.
SECTION 4.07. Taxes. There have been filed on behalf of the Borrower
and its Subsidiaries all Federal, material state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Borrower or any Subsidiary have been paid, except for those
taxes being contested in good faith with due diligence by appropriate
proceedings for which appropriate reserves have been maintained as required
under GAAP. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
<PAGE>34
SECTION 4.08. Subsidiaries. (a) Each of the Borrower's Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. As of the Closing Date, the Borrower has no
Subsidiaries except those Subsidiaries listed on Schedule 4.08A, which
accurately sets forth each such Subsidiary's complete name and jurisdiction of
incorporation.
(b) The Domestic Significant Subsidiaries in existence on the Closing
Date are listed on Schedule 4.08B, which accurately sets forth as of such date
each such Domestic Significant Subsidiary's complete name and jurisdiction of
incorporation.
SECTION 4.09. Not an Investment Company. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10 Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. Ownership of Property; Liens. Each of the Borrower and
its Consolidated Subsidiaries has title to or other rights in its material
properties sufficient for the conduct of its business, and none of such property
is subject to any Lien except as permitted in Section 5.09.
SECTION 4.12. No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could reasonably be expected to have or cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.13. Full Disclosure. All information heretofore furnished
by the Borrower to the Bank for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Bank will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. The Borrower has disclosed to the Bank
in writing any and all facts of which it has knowledge as of the Closing Date
which could reasonably be expected to have or cause a Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Except as set forth on
Schedule 4.14 A-1, neither the Borrower nor any Subsidiary is subject to any
Environmental Liability which could reasonably be expected to have or cause a
Material Adverse Effect and neither the Borrower nor any Subsidiary has been
<PAGE>35
designated as a potentially responsible party under CERCLA or under any state
statute similar to CERCLA if such designation could reasonably be expected to
have or cause, alone or in the aggregate a Material Adverse Effect. Except as
set forth on Schedule 4.14 A-2, none of the Properties has been identified on
any current or (to the best of the Borrower's knowledge) proposed (i) National
Priorities List under 40 C.F.R. Section 300, (ii) CERCLIS list or (iii) any list
arising from a state statute similar to CERCLA.
(b) No Hazardous Materials have been (at any time after the
Properties hereinafter referred to were owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary or, to the best knowledge of the
Borrower, at any time before the Properties hereinafter referred to were owned,
leased or otherwise used or occupied by the Borrower or any Subsidiary) or are
being used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, managed or otherwise handled at, or shipped or transported
to or from the Properties or are otherwise present at, on, in or under the
Properties, or, to the best of the knowledge of the Borrower, at or from any
adjacent site or facility, except for Hazardous Materials used in the
manufacturing process and other Hazardous Materials used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of, and
managed or otherwise handled in the ordinary course of business in compliance
with all applicable Environmental Requirements, except for such noncompliance
which could not reasonably be expected to have or cause a Material Adverse
Effect.
(c) The Borrower and each of its Subsidiaries has procured all
Environmental Authorizations necessary for the conduct of its business, and is
in compliance with all Environmental Requirements in connection with the
operation of the Properties and the Borrower's and each of its Subsidiary's
respective businesses, except to the extent failure to so procure or comply, as
the case may be, could not reasonably be expected to have or cause a Material
Adverse Effect.
SECTION 4.15. Compliance with Laws. The Borrower and each Subsidiary
is in compliance with all applicable laws, including, without limitation, all
Environmental Laws, except where any failure to comply with any such laws could
not reasonably be expected to have or cause, alone or in the aggregate, a
Material Adverse Effect.
SECTION 4.16. Capital Stock. All Capital Stock, debentures, bonds,
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance in all
material respects with all applicable laws, including, but not limited to, the
"Blue Sky" laws of all applicable states and the federal securities laws. The
issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are
owned by the Borrower or a Wholly-Owned Subsidiary free and clear of any Lien or
adverse claim (other than the Liens created pursuant to the Existing Pledge
Agreement or any Lien for taxes not yet due). At least a majority of the issued
shares of capital stock of each of the Borrower's other Subsidiaries (other than
Wholly Owned Subsidiaries) is owned by the Borrower or a Subsidiary free and
<PAGE>36
clear of any Lien or adverse claim (other than the Liens created pursuant to the
Existing Pledge Agreement).
SECTION 4.17. Margin Stock. No part of the proceeds of any Loan will
be used for any purpose which violates, or which is inconsistent with, the
provisions of Regulations G, T, U or X.
SECTION 4.18. Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this Agreement,
and any purchase of the Borrower's stock with the proceeds of the Loans, neither
the Borrower nor any Significant Subsidiary or Guarantor will be "insolvent,"
within the meaning of such term as used in North Carolina General Statutes
Section 23-3 or as defined in Section 101 of Title 11 of the United States Code
or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable
state law pertaining to fraudulent transfers, as each may be amended from time
to time, or be unable to pay its debts generally as such debts become due, or
have an unreasonably small capital to engage in any business or transaction,
whether current or contemplated.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as the Commitment is in effect
hereunder or any amount payable hereunder or the Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to the Bank:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of income, shareholders' equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified by KPMG Peat Marwick LLP or other
independent public accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not acceptable to the
Bank;
(b) as soon as available and in any event within 45 days after the
end of each Fiscal Quarter of each Fiscal Year, a consolidated unaudited balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of such
Fiscal Quarter and the related unaudited statement of income and unaudited
statement of cash flows for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case
in comparative form the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year, all certified (subject to
normal year-end adjustments and to the absence of footnotes) as to fairness of
presentation, GAAP and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
<PAGE>37
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate,
substantially in the form of Exhibit E (a "Compliance Certificate"), of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.03
through 5.05, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of annual financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements to the effect
that nothing has come to their attention to cause them to believe that any
Default related to accounting matters existed on the date of such financial
statements;
(e) within 5 Domestic Business Days after the Borrower becomes aware
of the occurrence of any Default, a certificate of the chief financial officer
or the chief accounting officer of the Borrower setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;
(h) promptly after the Borrower or any member of the Controlled Group
(i) gives or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which could
reasonably be expected to constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;
(i) promptly after the Borrower knows of the commencement thereof,
notice of any litigation, dispute or proceeding involving a claim against the
Borrower and/or any Subsidiary for $2,000,000 or more in excess of amounts
covered in full by applicable insurance; and
<PAGE>38
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the Bank
may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The
Borrower will (i) keep proper books of record and account in which full, true
and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to the business and activities of the Borrower and its
Consolidated Subsidiaries; and (ii) permit, and will cause each Subsidiary to
permit, representatives of the Bank at the Bank's expense prior to the
occurrence of an Event of Default and at the Borrower's expense after the
occurrence of an Event of Default to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants;
provided, prior to meeting with any officer, employee or independent public
accountant in order to discuss the affairs, finances or accounts of the Borrower
or any Subsidiary, the Bank shall give a Responsible Officer notice of and an
opportunity to attend such meeting. The Borrower agrees to cooperate and assist
in such visits and inspections, in each case at such reasonable times and as
often as may reasonably be desired.
SECTION 5.03. Ratio of Consolidated Funded Debt to Consolidated Total
Capital. The ratio of Consolidated Funded Debt to Consolidated Total Capital
will not at any time exceed .50 to 1.00.
SECTION 5.04. Minimum Consolidated Net Worth. Consolidated Net Worth
will at no time be less than $100,000,000 plus the sum of (i) 50% of the
cumulative Reported Net Income of the Borrower and its Consolidated Subsidiaries
during any period after March 31, 1995 (taken as one accounting period),
calculated quarterly but excluding from such calculations of Reported Net Income
for purposes of this clause (i) any quarter in which the Reported Net Income of
the Borrower and its Consolidated Subsidiaries is negative, and (ii) 50% of the
cumulative Net Proceeds of Capital Stock received during any period after March
31, 1995, calculated quarterly.
SECTION 5.05. Ratio of Consolidated Cash Flow from Operations to
Consolidated Funded Debt. At the end of each Fiscal Quarter, commencing with
the Fiscal Quarter ending June 30, 1996, the ratio of Consolidated Cash Flow
from Operations for the Fiscal Quarter then ending and the three Fiscal Quarters
immediately preceding the Fiscal Quarter then ending to Consolidated Funded Debt
as of such date shall not be less than .25 to 1.00.
SECTION 5.06. Loans or Advances. Neither the Borrower nor any of its
Subsidiaries shall make loans or advances to any Person except: (i) loans or
advances to employees not exceeding One Million Dollars ($1,000,000) in the
aggregate outstanding made in the ordinary course of business and consistent
with practices existing on the Closing Date; (ii) deposits required by
government agencies or public utilities; (iii) loans or advances to Subsidiaries
which are not Guarantors not exceeding Five Million Dollars ($5,000,000) in the
<PAGE>39
aggregate outstanding, (iv) loans or advances to Subsidiaries which are
Guarantors or from such Guarantors to the Borrower, (v) loans or advances by any
Subsidiary to the Borrower, (vi) advances in the nature of deposits, progress
payments and the like to suppliers and service providers for property and
services in the ordinary course of business, and (vii) other loans or advances
constituting Permitted Investments; provided that after giving effect to the
making of any loans, advances or deposits permitted by clause (i), (ii), (iii),
(iv), (v), (vi) or (vii) of this Section, no Default shall have occurred and be
continuing.
SECTION 5.07. Investments. Neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except (a) as permitted by
Section 5.06, (b) for Permitted Investments and Hedging Transactions, (c) that
the Borrower and any Subsidiary shall be permitted to acquire (whether through
the organization of a Subsidiary or otherwise) all or any portion of the capital
stock or securities of any Person engaged in the business or businesses
substantially similar to any business currently conducted by the Borrower or any
Subsidiary or make capital contributions to any Wholly-Owned Subsidiary which is
not a Guarantor, but only to the extent that (i) the cost of any such
acquisition or the amount of any such capital contribution, when aggregated with
the total cost of all such acquisitions occurring after the Closing Date and the
total amount of all such capital contributions made after the Closing Date, does
not exceed the Test Amount on the day such acquisition occurs or such capital
contribution is made, and (ii) after giving effect to such acquisition or
capital contribution no Default shall exist, and (d) Investments in Guarantors.
SECTION 5.08. Factor Receivables. Neither the Borrower nor any
Subsidiary shall at any time sell or otherwise factor any of its trade
receivables other than Factor Receivables (including without limitation
intercompany transfers or sales of Foreign Trade Receivables in anticipation of
their becoming Factor Receivables).
SECTION 5.09. Negative Pledge. Neither the Borrower nor any
Significant Subsidiary will create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except:
(a) Liens existing on February 24, 1995 securing Debt outstanding on
February 24, 1995 in an aggregate principal amount not exceeding $826,471;
(b) any Lien existing on any asset of any corporation or other entity
at the time such corporation or other entity becomes a Consolidated Subsidiary
and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or constructing
such asset, provided that such Lien attaches to such asset concurrently with or
within 18 months after the acquisition or completion of construction thereof;
(d) any Lien on any asset of any corporation or other entity existing
at the time such corporation or other entity is merged or consolidated with or
<PAGE>40
into the Borrower or a Consolidated Subsidiary and not created in contemplation
of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Consolidated Subsidiary and not created in contemplation of
such acquisition;
(f) Liens securing Debt owing by any Subsidiary to the Borrower;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that (other than as to clause (f) of this
Section) (i) such Debt is not secured by any additional assets, and (ii) the
amount of such Debt secured by any such Lien is not increased;
(h) Liens for taxes not yet due or Liens for taxes being contested in
good faith by appropriate proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which the property subject
to any such Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(i) Liens in respect of property imposed by law arising in the
ordinary course of business such as materialmen's, mechanics', warehousemen's
and other like Liens provided that such Liens secure only amounts not yet due
and payable or, if due and payable, are being contested in good faith by
appropriate proceedings for which adequate reserves determined in accordance
with GAAP have been established (and as to which the property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account thereof);
(j) pledges or deposits made to secure payment of obligations in
connection with worker's compensation insurance, unemployment insurance,
pensions or social security programs;
(k) Liens arising from good faith deposits in connection with or to
secure performance of tenders, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the ordinary
course of business (other than obligations in respect of the payment of borrowed
money);
(l) Liens arising from good faith deposits in connection with or to
secure performance of statutory obligations and surety and appeal bonds;
(m) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances with respect to any property not, in any material
respect, impairing the use of such property for its intended purposes;
(n) Liens with respect to property in Mexico securing Mexican customs
claims, but only to the extent such claims are not yet due and payable and are
not expected to become due and payable;
<PAGE>41
(o) any Lien on Margin Stock;
(p) Liens on stock in Subsidiaries of the Borrower or in deposit
accounts of the Borrower or any Guarantor created by the Existing Pledge
Agreement or the Existing Guaranty Agreement, or now or existing or hereafter
created pursuant to the Existing Credit Agreement;
(q) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt (other than indebtedness represented by the Note) in an
aggregate principal amount at any time outstanding not to exceed 10% of
Consolidated Tangible Net Worth; and
(r) interests of lessors under operating leases and precautionary
Uniform Commercial Code filings in respect thereof.
Provided, Liens permitted by the foregoing clauses (b), (c), (d), (e), (g) (to
the extent such Lien permitted by clause (g) arises out of a refinancing,
extension, renewal or refunding of any Debt secured by a Lien permitted by
clause (b), (c), (d) or (e) of this Section), (i), (j), (k), (l), (n), (o) and
(q) shall at no time secure Debt in an aggregate amount greater than 20% of
Consolidated Tangible Net Worth.
SECTION 5.10. Maintenance of Existence. The Borrower shall, and
shall cause each Significant Subsidiary to, maintain its corporate existence and
carry on its business in substantially the same manner and in substantially the
same fields as such business is now carried on and maintained (such fields
generally encompassing the passive electronics component industry).
SECTION 5.11. Dissolution. Neither the Borrower nor any of its
Significant Subsidiaries shall suffer or permit dissolution or liquidation
either in whole or in part, except through corporate reorganization to the
extent permitted by Section 5.12.
SECTION 5.12. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into, or sell, lease or otherwise transfer all or any substantial part
of its assets to, any other Person, or discontinue or eliminate any business
line or segment, provided that (a) the Borrower or its Subsidiaries may merge
with another Person if (i) the Borrower or such Subsidiary, as the case may be,
is the corporation surviving such merger and (ii) immediately after giving
effect to such merger, no Default shall have occurred and be continuing,
(b) Subsidiaries of the Borrower may merge with one another, and (c) the
foregoing limitation on the sale, lease or other transfer of assets and on the
discontinuation or elimination of a business line or segment shall not prohibit,
(i) during any Fiscal Quarter, a transfer of assets or the discontinuance or
elimination of a business line or segment (in a single transaction or in a
series of related transactions) unless the aggregate assets to be so transferred
or utilized in a business line or segment to be so discontinued, when combined
with all other assets transferred, and all other assets utilized in all other
business lines or segments discontinued, during such Fiscal Quarter and the
<PAGE>42
immediately preceding 3 Fiscal Quarters, either (A) constituted more than 10% of
Consolidated Total Assets at the end of the fourth Fiscal Quarter immediately
preceding such Fiscal Quarter, or (B) contributed more than 10% of Consolidated
Operating Profits during the 4 consecutive Fiscal Quarters immediately preceding
such Fiscal Quarter; (ii) any transfer of trade names and trademarks to KRC and
the license by KRC of such trade names and trademarks to the Borrower and its
Subsidiaries or in the ordinary course of business to other Persons; (iii) the
sale of Inventory in the ordinary course of business (including without
limitation transfers of raw materials and work-in-process Inventory to KEMET de
Mexico, S.A., de C.V., for purposes of completing production of such Inventory);
(iv) the sale or disposition of machinery and equipment by the Borrower or any
Subsidiary no longer useful for the conduct of the Borrower's or such
Subsidiary's business; (v) the transfer of assets among the Borrower and the
Guarantors (including equity contributions in Guarantors); (vi) the sale of the
Factor Receivables (including without limitation intercompany transfers of
Foreign Trade Receivables in anticipation of their becoming Factor Receivables)
and payments to purchasers of Factor Receivables (and, intercompany transfers in
anticipation of such payments) of amounts representing collections of Factor
Receivables; (vii) the sale of assets from time to time by KEMET Electronics to
Greenville County, South Carolina and/or Greenwood County, South Carolina
pursuant to the Bond Issuance and Purchase Agreement; (viii) transfers of assets
(including in the case of transfers to Subsidiaries which are Guarantors, equity
contributions) from any Subsidiary which is not a Guarantor to the Borrower or
to any Subsidiary which is a Guarantor; (ix) transfers permitted under Section
5.06 or 5.07; and (x) transfers of assets (including equity contributions) to
any Subsidiary which is not a Guarantor in exchange for cash in an amount at
least equal to the fair market value of the assets so transferred (but only to
the extent such cash is paid at or prior to the time of such transfer).
SECTION 5.13. Compliance with Regulations G, T, U and X. The proceeds
of the Loans shall be used for general corporate purposes and for the purchase
of the Borrower's common stock. No portion of the proceeds of the Loans will be
used by the Borrower or any Subsidiary in violation of (or in a manner so as to
cause the Bank to be in violation of) any applicable law or regulation,
including without limitation Regulations G, T, U and X. At no time will the
value of Margin Stock purchased or held by the Borrower (including, without
limitation, shares of common stock of the Borrower repurchased by and held by
the Borrower as treasury stock but excluding shares of common stock of the
Borrower repurchased by and immediately retired by the Borrower) exceed 25% of
Unencumbered Total Assets of the Borrower.
SECTION 5.14. Compliance with Laws; Payment of Taxes. The Borrower
will, and will cause each of its Subsidiaries and each member of the Controlled
Group to, comply with applicable laws (including but not limited to ERISA),
regulations and similar requirements of governmental authorities (including but
not limited to PBGC), except such noncompliance as could not reasonably be
expected to have or cause a Material Adverse Effect or where the necessity of
such compliance is being contested in good faith through appropriate proceedings
diligently pursued. The Borrower will, and will cause each of its Subsidiaries
to, pay promptly when due all taxes, assessments, governmental charges, claims
<PAGE>43
for labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of the Borrower or any Subsidiary, except liabilities
being contested in good faith by appropriate proceedings diligently pursued and
against which the Borrower shall have set up reserves as required by GAAP or
liabilities the nonpayment of which could not reasonably be expected to have or
cause a Material Adverse Effect.
SECTION 5.15. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of the Borrower or in
such Subsidiary's own name), with financially sound and reputable insurance
companies, casualty insurance on all its Property and commercial general
liability insurance, in each case in such amounts and against such risks as are
substantially in accordance with the Borrower's practices as of the Closing
Date.
SECTION 5.16. Change in Fiscal Year. The Borrower will not change
its Fiscal Year without the consent of the Bank.
SECTION 5.17. Maintenance of Property. The Borrower shall, and shall
cause each Subsidiary to, maintain all of its properties and assets in good
condition, repair and working order, ordinary wear and tear excepted,
satisfactory for the conduct of its operations.
SECTION 5.18. Environmental Notices. The Borrower shall furnish to
the Bank prompt written notice of any Environmental Liabilities, pending or (to
its knowledge) threatened Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on, in, under
or in any way affecting the Properties or any adjacent property if such
Environmental Liabilities, Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders and/or Environmental Releases could
reasonably be expected to have or cause, alone or in the aggregate, a Material
Adverse Effect.
SECTION 5.19. Environmental Matters. The Borrower and its
Subsidiaries will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate, store, dispose of, manage at, or
otherwise handle or ship or transport to or from the Properties any Hazardous
Materials except for Hazardous Materials used in the manufacturing process and
other Hazardous Materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed or otherwise handled in the
ordinary course of business in compliance with all applicable Environmental
Requirements (except for such noncompliance which could not reasonably be
expected to have or cause a Material Adverse Effect).
SECTION 5.20. Environmental Release. The Borrower agrees that upon
the occurrence of an Environmental Release at or on any of the Properties it
will act promptly to reasonably investigate the extent of, and to take any
remedial action required pursuant to any Environmental Requirement to eliminate,
such Environmental Release, whether or not ordered or otherwise directed to do
so by any Environmental Authority.
<PAGE>44
SECTION 5.21. Significant Subsidiaries. (a) The Borrower shall
cause any Person which becomes a Domestic Significant Subsidiary after the
Closing Date to become a party to, and agree to be bound by the terms of, the
Guaranty Agreement pursuant to an instrument in form and substance satisfactory
to the Bank executed and delivered to the Bank within 45 days after the last day
of the Fiscal Quarter in which such Person became a Domestic Significant
Subsidiary.
(b) Once any Subsidiary becomes a Significant Subsidiary and
therefore becomes a party to the Guaranty Agreement in accordance with Section
5.21(a) such Subsidiary thereafter shall remain a party to the Guaranty
Agreement without regard to the amount of its Total Assets on any day or
Operating Profits or gross revenues for any period.
(c) Notwithstanding anything to the contrary contained in this
Agreement or in the Guaranty Agreement, in the event that the Borrower or any
Significant Subsidiary sells or otherwise transfers all of the shares of capital
stock in any Guarantor which is no longer a Significant Subsidiary in a
transaction which does not result in the occurrence of a Default, the Bank
hereby agrees that upon the written request of the Borrower the Bank shall
release such Guarantor from the Guaranty Agreement.
SECTION 5.22 Sale, Transfer or Pledge of Industrial Revenue Bonds.
The Borrower shall not, nor shall it permit KEMET Electronics or any other
Guarantor to, sell, assign, transfer, pledge or otherwise encumber any right,
title or interest in or to the industrial revenue bonds issued and at any time
outstanding under the Bond Issuance and Purchase Agreement, other than any
transfer of such industrial revenue bonds to the Borrower or any Guarantor.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
or shall fail to pay any interest on any Loan within two Domestic Business Days
after such interest shall become due, or shall fail to pay any fee or other
amount payable hereunder or under the other Loan Documents within five Domestic
Business Days after such fee or other amount becomes due; or
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.03 to 5.13, inclusive, Section 5.16 or Section 5.22 of
this Agreement;
(c) the Borrower shall fail to observe or perform any covenant
contained in Section 5.02(ii) or Section 5.21 for 10 days after the earlier of
(i) the first day on which the Borrower has knowledge of such failure or (ii)
written notice thereof has been given to the Borrower by the Bank; or
<PAGE>45
(d) the Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement or any
covenant or agreement contained or incorporated by reference in any other Loan
Documents to which the Borrower is a party (other than those covered by clause
(a), (b) or (c) above) for 30 days after the earlier of (i) the first day on
which the Borrower has knowledge of such failure or (ii) written notice thereof
has been given to the Borrower by the Bank; or
(e) any representation, warranty, certification or statement made or
deemed made by the Borrower in Article IV of this Agreement or by any Guarantor
in the Guaranty Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement or the Guaranty Agreement shall
prove to have been incorrect or misleading in any material respect when made (or
deemed made); or
(f) the Borrower or any Subsidiary shall fail to make any payment in
excess of $20,000 in respect of Debt outstanding (other than the Note) in the
aggregate amount in excess of $5,000,000 when due or within any applicable
grace period; or
(g) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower or any
Subsidiary in the aggregate amount in excess of $5,000,000 or the mandatory
prepayment or purchase of such Debt by the Borrower (or its designee) or such
Subsidiary (or its designee) prior to the scheduled maturity thereof, or enables
the holders of such Debt or any Person acting on such holders' behalf to
accelerate the maturity thereof or require the mandatory prepayment or purchase
thereof prior to the scheduled maturity thereof, without regard to whether such
holders or other Person shall have exercised or waived their right to do so; or
(h) the Borrower or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(i) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
<PAGE>46
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
(j) the Borrower or any member of the Controlled Group shall fail to
pay when due any material amount which it shall have become liable to pay to the
PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member
of the Controlled Group, any plan administrator or any combination of the
foregoing, provided that such termination could reasonably be expected to have
or cause a Material Adverse Effect; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of
ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or at any time the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to Multiemployer Plans incurred
by the Borrower and members of the Controlled Group shall exceed $5,000,000 (for
purposes of this clause, the amount of withdrawal liability of the Borrower and
members of the Controlled Group at any date shall be the aggregate present value
of the amount, determined in accordance with Section 4201(b)(1) of ERISA,
claimed to have been incurred by the Borrower and members of the Controlled
Group in any notices received by any of them as of such date from any
Multiemployer Plan sponsor, less any portion thereof which the Borrower and
members of the Controlled Group have paid or as to which the Borrower reasonably
believes after appropriate consideration of possible adjustments arising under
Sections 4219 and 4221 of ERISA, it and members of the Controlled Group will
have no liability, provided that the Borrower shall obtain prompt written advice
from independent actuarial consultants supporting such determination); or
(k) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the Borrower
or any Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(l) a federal tax lien shall be filed against the Borrower under
Section 6323 of the Code or a lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 25 days after the date of filing;
or
(m) a Change of Control shall occur; or
(n) an "Event of Default" shall occur under Section 10.1(a) of the
Lease Agreement (but only to the extent such Event of Default results from a
failure to make any Payment-in-Lieu-of-Taxes (as defined in the Lease
Agreement)); or
<PAGE>47
(o) the Guaranty Agreement shall cease to be in full force and
effect; or
(p) any Guarantor or any Person acting on behalf of such Guarantor
shall deny or disaffirm such Guarantor's obligations under the Guaranty
Agreement;
then, and in every such event, the Bank may (i) by notice to the Borrower
terminate the Commitment and it shall thereupon terminate, and (ii) by notice to
the Borrower declare the Note (together with accrued interest thereon) and all
other amounts payable hereunder and under the other Loan Documents to be, and
the Note (together will all accrued interest thereon) and all other amounts
payable hereunder and under the other Loan Documents shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; provided that if
any Event of Default specified in clause (h) or (i) above occurs with respect to
the Borrower, without any notice to the Borrower or any other act by the Bank,
the Commitment shall thereupon automatically terminate and the Note (together
with accrued interest thereon) and all other amounts payable hereunder and under
the other Loan Documents shall automatically become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower. Notwithstanding the foregoing, the Bank
shall have available to it all other remedies at law or equity.
ARTICLE VII
[RESERVED]
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(a) the Bank determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest Period,
or
(b) the Bank determines that the London Interbank Offered Rate as
determined by the Bank will not adequately and fairly reflect the cost to the
Bank of funding Euro-Dollar Loans for such Interest Period,
the Bank shall forthwith give notice thereof to the Borrower, whereupon until
the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make Euro-Dollar
Loans shall be suspended. Unless the Borrower notifies the Bank at least one
(1) Domestic Business Day before the date of any Borrowing of a Euro-Dollar Loan
for which a Notice of Borrowing has previously been given that it elects not to
<PAGE>48
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any existing or future
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof (any such authority, bank or
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by the Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for the Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans, the Bank shall so
notify the Borrower, whereupon until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligation of
the Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice
to the Borrower pursuant to this Section, the Bank shall designate a different
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of the Bank, be otherwise disadvantageous to the
Bank. If the Bank shall determine that it may not lawfully continue to maintain
and fund any outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon and any amount due the Bank pursuant to Section 8.05(a). Concurrently
with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate
Loan in an equal principal amount and the Bank shall make such Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after the
date hereof, a Change of Law or compliance by the Bank (or its Lending Office)
with any request or directive (whether or not having the force of law) of any
Authority:
(i) shall subject the Bank (or its Lending Office) to any tax, duty
or other charge with respect to Euro-Dollar Loans or Offered Rate Loans, the
Note or its obligation to make Euro-Dollar Loans or Offered Rate Loans, or shall
change the basis of taxation of payments to the Bank (or its Lending Office) of
the principal of or interest on Euro-Dollar Loans or Offered Rate Loans or any
other amounts due under this Agreement in respect of Euro-Dollar Loans or
Offered Rate Loans or its obligation to make Euro-Dollar Loans or Offered Rate
Loans (except for changes in the rate of tax on the overall income of the Bank
or its Lending Office imposed by the jurisdiction in which the Bank's principal
executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with
or for the account of, or credit extended by, the Bank (or its Lending Office);
or
<PAGE>49
(iii) shall impose on the Bank (or its Lending Office) or on the
London interbank market any other condition affecting Euro-Dollar Loans or
Offered Rate Loans, the Note or its obligation to make Euro-Dollar Loans or
Offered Rate Loans;
and the result of any of the foregoing is to increase the cost to the Bank (or
its Lending Office) of making or maintaining any Euro-Dollar Loan or Offered
Rate Loan, or to reduce the amount of any sum received or receivable by the Bank
(or its Lending Office) under this Agreement or under the Note with respect
thereto, by an amount deemed by the Bank to be material, then, within 15 days
after demand by the Bank, the Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such increased cost or
reduction.
(b) If the Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any existing or future law, rule or regulation, or any change
in the interpretation or administration thereof, or compliance by the Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any Authority, has or would have the
effect of reducing the rate of return on the Bank's capital as a consequence of
its obligations hereunder to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank's policies with respect to capital adequacy) by an amount deemed by the
Bank to be material, then from time to time, within 15 days after demand by the
Bank, the Borrower shall pay to the Bank such additional amount or amounts as
will compensate the Bank for such reduction.
(c) The Bank will promptly notify the Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle the Bank
to compensation pursuant to this Section and will designate a different Lending
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of the Bank, be otherwise
disadvantageous to the Bank. Notice by the Bank hereunder will be deemed to
have been delivered promptly if given within 45 days after the Bank shall have
determined it is entitled to compensation as a result of the occurrence of any
such event. The Borrower shall not be liable for compensation pursuant to this
Section for which prompt notice has not been given. A certificate of the Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.
SECTION 8.04. Base Rate Loans or Offered Rate Loans Substituted for
Affected Euro-Dollar Loans. If (i) the obligation of the Bank to make or
<PAGE>50
maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
the Bank has demanded compensation under Section 8.03, and the Borrower shall,
by at least 5 Euro-Dollar Business Days' prior notice to the Bank, have elected
that the provisions of this Section shall apply to the Bank, then, unless and
until the Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made as Euro-Dollar Loans
shall be made as Base Rate Loans or Offered Rate Loans; and
(b) after each of the Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar Loans
shall be applied to repay Base Rate Loans and Offered Rate Loans instead.
In the event that the Borrower shall elect that the provisions of this Section
shall apply, the Borrower shall remain liable for, and shall pay to the Bank as
provided herein, all amounts due the Bank under Section 8.03 in respect of the
period preceding the date of conversion of the Loans resulting from the
Borrower's election.
SECTION 8.05. Compensation. Upon the request of the Bank, delivered
to the Borrower, the Borrower shall pay to the Bank such amount or amounts as
shall compensate the Bank for any loss, cost or expense incurred by the Bank as
a result of:
(a) any payment or prepayment (pursuant to Section 2.09, Section 2.10,
Section 2.11, Section 8.02 or otherwise) of a Euro-Dollar Loan or an Offered
Rate Loan on a date other than the last day of an Interest Period for such
Euro-Dollar Loan or such Offered Rate Loan, as the case may be;
(b) any failure by the Borrower to prepay a Euro-Dollar Loan or an
Offered Rate Loan on the date for such prepayment specified in the relevant
notice of prepayment hereunder;
(c) any failure by the Borrower to borrow a Euro-Dollar Loan on the
date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part
specified in the applicable Notice of Borrowing delivered pursuant to Section
2.02; or
(d) any failure by the Borrower to borrow an Offered Rate Loan (with
respect to which the Borrower has accepted an Offered Rate) on the date for the
Offered Rate Borrowing of which such Offered Rate Loan is a part specified in
the Notice of Borrowing delivered pursuant to Section 2.02;
such compensation to include, without limitation, in the case of a Euro Dollar
Loan an amount equal to the excess, if any, of (x) the amount of interest which
would have accrued on the amount so paid or prepaid or not prepaid or borrowed
for the period from the date of such payment, prepayment or failure to prepay or
borrow to the last day of the then current Interest Period for such Euro-Dollar
Loan (or, in the case of a failure to prepay or borrow, the Interest Period for
<PAGE>51
such Euro-Dollar Loan which would have commenced on the date of such failure to
prepay or borrow) at the applicable rate of interest for such Euro-Dollar Loan
provided for herein over (y) the amount of interest (as reasonably determined by
the Bank) the Bank would have paid on deposits in Dollars of comparable amounts
having terms comparable to such period placed with it by leading banks in the
London interbank market.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given to such party at its address
or telecopy number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopy number specified in this Section and the telecopy machine used by the
sender provides a written confirmation that such telecopy has been so
transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, and (iii) if
given by any other means, when delivered at the address specified in this
Section; provided that notices to the Bank under Article II or Article VIII
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under any Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay (i) all out-of-pocket expenses of the Bank, including fees
and disbursements of counsel for the Bank, in connection with the preparation of
this Agreement and the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Default or alleged Default
hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses
incurred by the Bank, including fees and disbursements of counsel, in connection
with such Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing this Agreement
and the other Loan Documents.
(b) The Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Authority by reason
of the execution and delivery of this Agreement or the other Loan Documents
(other than any such amounts incurred in connection with the execution and
delivery of an Assignment and Acceptance.
<PAGE>52
(c) The Borrower shall indemnify the Bank and each Affiliate thereof
and their respective directors, officers, employees and agents from, and hold
each of them harmless against, any and all losses, liabilities, claims or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by the
Bank hereunder or breach by the Borrower of this Agreement or any other Loan
Document or from investigation, litigation (including, without limitation, any
actions taken by the Bank to enforce this Agreement or any of the other Loan
Documents) or other proceeding (including, without limitation, any threatened
investigation or proceeding) relating to the foregoing, and the Borrower shall
reimburse the Bank, and each Affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any reasonable expenses
(including, without limitation, legal fees) incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified.
SECTION 9.04. Setoffs. The Borrower hereby grants to the Bank a
contractual right of set off against all deposits and other sums credited by or
due from the Bank to the Borrower or subject to withdrawal by the Borrower; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of such obligations, the Bank may at any time upon or after the
occurrence of any Event of Default, and without notice to the Borrower, set off
the whole or any portion or portions of any or all such deposits and other sums
against such obligations, whether or not any other Person or Persons could also
withdraw money therefrom. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement, the Note or any other Loan Documents may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Borrower
and the Bank. Notwithstanding the foregoing, the Bank agrees to amend this
Agreement and the Guaranty Agreement pursuant to an instrument in form and
substance satisfactory to the Bank in its discretion to conform this Agreement
and the Guaranty Agreement to the Existing Credit Agreement and Existing
Guaranty Agreement, as amended by any amendment or waiver thereto entered into
or given after the date hereof and agreed to by the Bank in its capacity as a
bank under the Existing Credit Agreement.
SECTION 9.06. [Reserved].
SECTION 9.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.
<PAGE>53
(b) The Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to the Bank, the Note,
the Commitment or any other interest of the Bank hereunder provided that (i) no
participating interest shall be sold to any Person that is not then an Affiliate
of the Bank without the prior written consent of the Borrower, which consent
shall not be unreasonably withheld, and (ii) no consent of the Borrower will be
required for a participating interest sold after the occurrence and during the
continuance of a Default. The Bank may not have more than two (2) Participants
at any one time that are not then Affiliates of the Bank and participating
interests shall be in a minimum amount of $10,000,000. In the event of any such
sale by the Bank of a participating interest to a Participant, the Bank's
obligations under this Agreement shall remain unchanged, the Bank shall remain
solely responsible for the performance thereof, the Bank shall remain the holder
of the Note for all purposes under this Agreement, and the Borrower shall
continue to deal solely and directly with the Bank in connection with the Bank's
rights and obligations under this Agreement. In no event shall the Bank be
obligated to the Participant to take or refrain from taking any action hereunder
except that the Bank may agree that it will not (except as provided below),
without the consent of the Participant, agree to (i) the change of any date
fixed for the payment of principal of or interest on the related Loan or Loans,
(ii) the change of the amount of any principal, interest or fees due on any date
fixed for the payment thereof with respect to the related Loan or Loans,
(iii) the change of the principal of the related Loan or Loans, (iv) any change
in the rate at which either interest is payable thereon or (if the Participant
is entitled to any part thereof) facility fee is payable hereunder from the rate
at which the Participant is entitled to receive interest or facility fees (as
the case may be) in respect of such participation, (v) the release or
substitution of all or any substantial part of the collateral (if any) held as
security for the Loans, or (vi) the release of any guaranty given to support
payment of the Loans. The Borrower agrees that each Participant shall be
entitled to the benefits of Article VIII with respect to its participation in
Loans outstanding from time to time.
(c) The Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Note and the other Loan
Documents, and such Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
F, executed by such Assignee, the Bank and, in the case of an Assignee that is
not then an Affiliate of the Bank, by the Borrower; provided that (i) no
interest may be sold by the Bank pursuant to this paragraph (c) unless the
Assignee shall agree to assume ratably equivalent portions of the Commitment,
(ii) the amount of the Commitment subject to such assignment (determined as of
the effective date of the assignment) shall be equal to $10,000,000 (or any
larger multiple of $1,000,000), (iii) no interest may be sold by the Bank
pursuant to this paragraph (c) to any Assignee that is not an Affiliate of the
Bank without the consent of the Borrower, which consent shall not be
unreasonably withheld; provided that the Borrower's consent shall not be
necessary with respect to any assignment made after the occurrence and during
the continuance of a Default, and (iv) the Bank may not have more than two (2)
<PAGE>54
Assignees that are not then Affiliates of the Bank at any one time. Upon
(A) execution of the Assignment and Acceptance by the Bank, such Assignee and
(if applicable) the Borrower, (B) delivery of an executed copy of the Assignment
and Acceptance to the Borrower, and (C) payment by such Assignee to the Bank of
an amount equal to the purchase price agreed between the Bank and such Assignee,
such Assignee shall for all purposes be a party to this Agreement and shall have
all the rights and obligations of the Bank under this Agreement to the same
extent as if it were an original party hereto with a Commitment as set forth in
such instrument of assumption, and the Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by the Borrower or the Bank shall be required. Upon the consummation of
any transfer to an Assignee pursuant to this paragraph (c), the Bank and the
Borrower shall make appropriate arrangements so that, if required, a new Note is
issued to each of such Assignee and the Bank.
(d) Subject to the provisions of Section 9.08, the Borrower
authorizes the Bank to disclose to any Participant, Assignee or other transferee
(each a "Transferee") and any prospective Transferee any and all financial and
other information in the Bank's possession concerning the Borrower which has
been delivered to the Bank by the Borrower pursuant to this Agreement or which
has been delivered to the Bank by the Borrower in connection with the Bank's
credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 8.03 than the Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.02
or 8.03 requiring the Bank to designate a different Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(f) Anything in this Section 9.07 to the contrary notwithstanding,
the Bank may assign and pledge all or any portion of the Loans and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and Operating Circular issued by such
Federal Reserve Bank, provided that any payment in respect of such assigned
Loans and/or obligations made by the Borrower to the Bank in accordance with the
terms of this Agreement shall satisfy the Borrower's obligations hereunder in
respect of such assigned Loans and/or obligations to the extent of such payment.
No such assignment shall release the Bank from its obligations hereunder.
SECTION 9.08. Confidentiality. The Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is not publicly available, confidential from anyone other than persons
employed or retained by the Bank who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans; provided,
however, that nothing herein shall prevent the Bank from disclosing such
information (i) upon the order of any court or administrative agency, (ii) upon
the request or demand of any regulatory agency or authority having jurisdiction
<PAGE>55
over the Bank, (iii) which has been publicly disclosed unless such public
disclosure is known by the Bank to be in violation of this Section 9.08, (iv) to
the extent reasonably required in connection with any litigation to which the
Bank or its Affiliates may be a party (provided, that prior to such disclosure,
the Bank shall notify the Borrower to the extent reasonably practicable and
shall afford the Borrower an opportunity to contest such disclosure, unless the
Bank shall determine that such a contest would prejudice its rights or
interests), (v) to the extent reasonably required in connection with the
exercise of any remedy hereunder, (vi) to the Bank's legal counsel and
independent auditors and (viii) upon the prior written consent of the Borrower,
to any actual or proposed Participant, Assignee or other Transferee (other than
any Assignee or Transferee to which an assignment or transfer is being made
after the occurrence and during the continuance of a Default) of all or part of
its rights hereunder which has agreed in writing to be bound by the provisions
of this Section 9.08.
SECTION 9.09. [Reserved]
SECTION 9.10. [Reserved]
SECTION 9.11. Survival of Certain Obligations. Sections 8.03(a),
8.03(b), 8.05 and 9.03, and the obligations of the Borrower thereunder, shall
survive, and shall continue to be enforceable notwithstanding, the termination
of this Agreement and the Commitment and the payment in full of the principal of
and interest on all Loans.
SECTION 9.12. North Carolina Law. This Agreement and the Note shall
be construed in accordance with and governed by the law of the State of North
Carolina.
SECTION 9.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Note or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of interest due
or payable hereunder or under the Note exceed the maximum rate of interest
allowed by applicable law, and in the event any such payment is inadvertently
made to the Bank by the Borrower or inadvertently received by the Bank, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the Bank in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Bank not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.
SECTION 9.15. Interpretation. No provision of this Agreement or any
of the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
<PAGE>56
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16. Consent to Jurisdiction. The Borrower (a) submits to
personal jurisdiction in the State of North Carolina, the courts thereof and the
United States District Courts sitting therein, for the enforcement of this
Agreement, the Note and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of North Carolina for the purpose of litigation to enforce this
Agreement, the Note or the other Loan Documents, and (c) agrees that service of
process may be made upon it in the manner prescribed in Section 9.01 for the
giving of notice to the Borrower. Nothing herein contained, however, shall
prevent the Bank from bringing any action or exercising any rights against any
security and against the Borrower personally, and against any assets of the
Borrower, within any other state or jurisdiction.
SECTION 9.17. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.18. Knowledge of Borrower. Whenever this Agreement or any
other Loan Document refers to the knowledge, best knowledge or awareness of the
Borrower or any Subsidiary, it is referring to the knowledge of a Responsible
Officer.
SECTION 9.19. CONSEQUENTIAL DAMAGES. THE BANK SHALL NOT BE
RESPONSIBLE OR LIABLE TO THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
[The remainder of this page left blank intentionally]
<PAGE>57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, under seal, by their respective authorized officers as of the
day and year first above written.
KEMET CORPORATION
By: _/S/ J.J. Jerozal______ (SEAL)
Title: CFO & Treasurer
ATTEST:
__/S/ G.H. Spears__________________ KEMET Corporation
_______________ Secretary 2835 Kemet Way
Simpsonville, South Carolina 29681
Attention: Chief Financial Officer
Telecopy number: (864) 228-4161
Telephone number: (864) 963-6651
<PAGE>58
COMMITMENT WACHOVIA BANK OF NORTH CAROLINA, N.A.,
$40,000,000 as Bank
By: _/S/ Paul S. Grueber_______________ (SEAL)
Title: SVP
Lending Office
Wachovia Bank of North Carolina, N.A.
400 South Tryon Street
Charlotte, North Carolina 28231
Notices
Wachovia Bank of North Carolina, N.A.
c/o Wachovia Bank of South Carolina, N.A.
1401 N. Main Street, Suite 705
Columbia, South Carolina 29226
Attention: Suzanne L. Morrison
Telecopy number: (803) 765-3232
Telephone number: (803) 765-3049
<PAGE>59
SCHEDULE 4.05
Description of Litigation
1. Reference is made hereby to the matters disclosed under the caption "Item
3. Legal Proceedings" as reported in KEMET Corporation's Form 10-K for the
fiscal year ended March 31, 1996 (copy attached as Annex 1).
2. On July 8, 1996, the Registered Agent for the Company in Delaware
received notice of a lawsuit in the Court of Chancery in New Castle County,
Delaware filed against KEMET Corporation and the board of directors
individually, purportedly brought on behalf of its shareholders, alleging that
the Company did not adequately consider the request by Vishay to enter into
discussions, and the suit alleges, among other things, that the Board breached
their fiduciary duties by adopting a preferred share rights plan. The
plaintiffs are asking the court, among other things, to order the Board to
auction the Company and deploy the rights plan in a fair and impartial manner.
The suit also seeks unspecified damages. The Company has stated that the suit
is without merit and intends to defend itself and its directors vigorously.
Other than reported above and in the Company's fiscal year ending March 31,
1996 Form 10-K under the caption "Item 3. Legal Proceedings", the Company is
not currently a party to any material pending legal proceedings, other than
routine litigation incidental to the business of the Company.
3. Zirconia - Coated Furnace Hardware
KEMET Electronics Corporation uses zirconia surfaces for various holders of
ceramic chips during their firing. A company (Aerospace Coatings Corporation)
which coats materials with zirconia has threatened KEMET with regard to alleged
violation of its intellectual property. To the company's knowledge, no formal
action has been initiated. Aerospace Coatings Corporation has issued a U.S.
patent on this process. The patent was reviewed by the U.S. Patent Office, at
the request of KEMET, and disallowed based on relevant prior art. Aerospace
Coatings Corporation appealed this decision, and the patent was reinstated. The
matter is being handled for KEMET by attorneys experienced in intellectual
property matters.
<PAGE>60
ANNEX 1
ITEM 3. LEGAL PROCEEDINGS
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") and certain analogous state laws, impose
retroactive, strict liability upon certain defined classes of persons associated
with releases of hazardous substances into the environment. Among those liable
under CERCLA (known collectively as "potentially responsible parties" or "PRPs")
is any person who "arranged for disposal" of hazardous substances at a site
requiring response action under the statute. While a company's liability under
CERCLA is often based upon its proportionate share of overall waste volume or
other equitable factors, CERCLA has been widely held to permit imposition of
joint and several liability on each PRP. The Company has periodically incurred,
and may continue to incur, liability under CERCLA and analogous state laws with
respect to sites used for off-site management of Company-derived wastes. The
Company has been named as a PRP at the Seaboard Chemical Site in Jamestown,
North Carolina. The Company is participating in the cleanup as a "de minimis"
party and does not expect its total exposure to be material. In addition, Union
Carbide Corporation ("Union Carbide") the former owner of the Company, is a PRP
at certain sites relating to the off-site disposal of wastes from properties
presently owned by the Company. The Company is participating in coordination
with Union Carbide in certain PRP initiated activities related to these sites.
The Company expects that it will bear some portion of the liability with respect
to these sites, however, any such share is not presently expected to be material
to the Company's financial condition. In connection with the acquisition in
1990, Union Carbide agreed, subject to certain limitations and limits on the
time for filing a claim, to indemnify the Company for the off-site disposal of
hazardous substances generated prior to the acquisition.
On April 12, 1993, two wholly-owned subsidiaries of the Company, KEMET
Electronics Corporation and KEMET de Mexico, S.A. de C.V., were notified that
they had been named in an action filed in the District Court of Texas in Cameron
County, Texas, by a group of plaintiffs alleging that KEMET Electronics
Corporation, KEMET de Mexico, S.A. de C.V., and numerous other defendants
located in the surrounding area caused injuries to the plaintiffs arising out of
exposure to hazardous substances allegedly placed into the local environment
through the negligent acts and omissions of the defendants. No specific amount
of damages was set forth in the original petition. On July 28, 1995, the
Company announced that it had reached a settlement of the pending litigation
which required it to pay $1.275 million to the plaintiffs for a release of their
claims. Pursuant to the settlement, KEMET did not admit any responsibility for
any of the alleged injuries.
On January 30, 1995, the Registered Agent for the Company in Texas received
notice of a lawsuit filed in the District Court of Texas in Cameron County,
Texas naming KEMET Corporation, KEMET Electronics Corporation, KEMET de Mexico,
S.A. de C.V., and five other companies concerning allegedly unsafe working
conditions at the Company's Mexican facilities. On January 31, 1996, the
<PAGE>61
plaintiff's attorneys filed a Motion for Non-suit and entered an order of
non-suit. On February 13, 1996, this case was dismissed without prejudice.
The Company or its subsidiaries are at any one time parties to a number of
lawsuits arising out of their respective operations, including workers
compensation or work place safety cases, some of which involve claims of
substantial damages. Although there can be no assurance, based upon information
known to the Company, the Company does not believe that any liability which
might result from an adverse determination of such lawsuits would have a
material adverse effect on the Company's financial condition or results of
operations.
<PAGE>62
SCHEDULE 4.08A
Existing Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
KEMET Electronics Corporation Delaware
KEMET Services Corporation Delaware
KEMET Electronics, S.A. Switzerland
KEMET Electronics GMBH Germany
KEMET Electronics SARL France
KEMET Electronics Ltd. United Kingdom
KEMET Electronics Asia Limited Hong Kong
KEMET Electronics Marketing (S) Pte Ltd. Singapore
KEMET de Mexico, S.A. de C.V. Mexico
KEMET Electronics (Canada) Limited Canada
KRC Trade Corporation Delaware
KEMET International, Inc. Barbados
<PAGE>63
SCHEDULE 4.08B
Existing Domestic Significant Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
KEMET Electronics Corporation Delaware
KEMET Services Corporation Delaware
KRC Trade Corporation Delaware
<PAGE>64
SCHEDULE 4.14 A-1
Description of Environmental Liabilities
Reference is made hereby to the matters disclosed under the caption "Item
3. Legal Proceedings" as reported in KEMET Corporation's Form 10-K for the
fiscal year ended March 31, 1996 (copy attached as Annex 1).
<PAGE>65
ANNEX 1
Item 3. Legal Proceedings
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") and certain analogous state laws, impose
retroactive, strict liability upon certain defined classes of persons associated
with releases of hazardous substances into the environment. Among those liable
under CERCLA (known collectively as "potentially responsible parties" or "PRPs")
is any person who "arranged for disposal" of hazardous substances at a site
requiring response action under the statute. While a company's liability under
CERCLA is often based upon its proportionate share of overall waste volume or
other equitable factors, CERCLA has been widely held to permit imposition of
joint and several liability on each PRP. The Company has periodically incurred,
and may continue to incur, liability under CERCLA and analogous state laws with
respect to sites used for off-site management of Company-derived wastes. The
Company has been named as a PRP at the Seaboard Chemical Site in Jamestown,
North Carolina. The Company is participating in the cleanup as a "de minimis"
party and does not expect its total exposure to be material. In addition, Union
Carbide Corporation ("Union Carbide") the former owner of the Company, is a PRP
at certain sites relating to the off-site disposal of wastes from properties
presently owned by the Company. The Company is participating in coordination
with Union Carbide in certain PRP initiated activities related to these sites.
The Company expects that it will bear some portion of the liability with respect
to these sites, however, any such share is not presently expected to be material
to the Company's financial condition. In connection with the acquisition in
1990, Union Carbide agreed, subject to certain limitations and limits on the
time for filing a claim, to indemnify the Company for the off-site disposal of
hazardous substances generated prior to the acquisition.
On April 12, 1993, two wholly-owned subsidiaries of the Company, KEMET
Electronics Corporation and KEMET de Mexico, S.A. de C.V., were notified that
they had been named in an action filed in the District Court of Texas in Cameron
County, Texas, by a group of plaintiffs alleging that KEMET Electronics
Corporation, KEMET de Mexico, S.A. de C.V., and numerous other defendants
located in the surrounding area caused injuries to the plaintiffs arising out of
exposure to hazardous substances allegedly placed into the local environment
through the negligent acts and omissions of the defendants. No specific amount
of damages was set forth in the original petition. On July 28, 1995, the
Company announced that it had reached a settlement of the pending litigation
which required it to pay $1.275 million to the plaintiffs for a release of their
claims. Pursuant to the settlement, KEMET did not admit any responsibility for
any of the alleged injuries.
On January 30, 1995, the Registered Agent for the Company in Texas received
notice of a lawsuit filed in the District Court of Texas in Cameron County,
Texas naming KEMET Corporation, KEMET Electronics Corporation, KEMET de Mexico,
S.A. de C.B., and five other companies concerning allegedly unsafe working
<PAGE>66
conditions at the Company's Mexican facilities. On January 31, 1996, the
plaintiff's attorneys filed a Motion for Non-suit and entered an order of
non-suit. On February 13, 1996, this case was dismissed without prejudice.
The Company or its subsidiaries are at any one time parties to a number of
lawsuits arising out of their respective operations, including workers
compensation or work place safety cases, some of which involve claims of
substantial damages. Although there can be no assurance, based upon information
known to the Company, the Company does not believe that any liability which
might result from an adverse determination of such lawsuits would have a
material adverse effect on the Company's financial condition or results of
operations.
<PAGE>67
SCHEDULE 4.14 A-2
Properties on National Priorities or CERCLIS List
Neither the Borrower nor any of its Subsidiaries owns, leases or occupies any
Property which has been identified on any current or (to the best of Borrower's
knowledge) proposed (i) National Priorities List under 40 C.F.R. Section 300,
(ii) CERCLIS list or (iii) any list arising from a state statute similar to
CERCLA.
Reference is made to Schedule 4.14 A-1 hereto for Properties which (i) appear on
such lists and (ii) may involve the Borrower either directly or indirectly.
<PAGE>68
SCHEDULE 5.07
Existing Investments
1. Borrower, either directly or indirectly, owns all of the issued and
outstanding capital stock of each of the subsidiary companies listed on Schedule
4.08A hereto (except for those shares of capital stock owned by individuals as
listed on Attachment 1 to this Schedule 5.07).
2. Unsecured promissory notes evidencing advances aggregating less than U.S.
$200,000 made to certain employees transferred to Monterrey, Mexico to assist in
their home purchases.
3. Guarantees of unsecured promissory notes evidencing advances aggregating
less than U.S. $200,000 made to certain employees transferred to Monterrey,
Mexico to assist in their home purchases.
<PAGE>69
Attachment 1
to Schedule 5.07
Stock in Subsidiaries of KEMET Electronics Corporation owned by Individuals
Subsidiary Number of Shares Owner
KEMET Electronics, S.A. 1 D. Payne
1 P. J. Altwegg
1 A. Kaplun
KEMET Electronics Asia Limited 1 C. E. Volpe
1 D. J. Poinsette
KEMET de Mexico, S.A. de C.V. 1 D. A. Adams
1 D. R. Cash
1 C. E. Volpe
1 D. E. Maguire
<PAGE>70
EXHIBIT A
NOTE
$40,000,000 Charlotte, North Carolina
July __, 1996
For value received, KEMET CORPORATION, a Delaware corporation (the
"Borrower"), promises to pay to the order of WACHOVIA BANK OF NORTH CAROLINA,
N.A. (the "Bank"), for the account of its Lending Office, the principal sum of
Forty Million and No/100 Dollars ($40,000,000), or such lesser amount as shall
equal the unpaid principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below, on the dates and in the
amounts provided in the Credit Agreement. The Borrower promises to pay interest
on the unpaid principal amount of this Note on the dates and at the rate or
rates provided for in the Credit Agreement. Interest on any overdue principal
of and, to the extent permitted by law, overdue interest on the principal amount
hereof shall bear interest at the Default Rate, as provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds c/o
Wachovia Bank of South Carolina, N.A., 1401 Main Street, Suite 705, Columbia,
South Carolina 29226, or such other address as may be specified from time to
time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This Note is the Note referred to in the Credit Agreement dated as of
July __, 1996 between the Borrower and Wachovia Bank of North Carolina, N.A. (as
the same may be amended or modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment and
the repayment hereof and the acceleration of the maturity hereof.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
<PAGE>71
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officer as of the day and year first
above written.
KEMET CORPORATION
By: ______________________________ (SEAL)
Title:
<PAGE>72
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
______________________________________________________________________________
Type Amount Amount of
of Interest of Principal Maturity Notation
Date Loan Rate Loan Repaid Date Made By
- ----------------------------------------------------------------------
1 i.e., a Base Rate, Offered Rate or Euro-Dollar Loan.
<PAGE>73
EXHIBIT B
OPINION OF
COUNSEL FOR THE BORROWER AND THE GUARANTORS
[To be provided]
<PAGE>74
EXHIBIT C
CLOSING CERTIFICATE
OF
KEMET CORPORATION
Reference is made to the Credit Agreement (the "Credit Agreement")
dated as of July 31, 1996, between KEMET Corporation (the "Borrower") and
Wachovia Bank of North Carolina, N.A. Capitalized terms used herein have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 3.01(d) of the Credit Agreement,
___________________, the duly authorized ____________________ of the Borrower,
hereby certifies to the Bank that: (i) no Default has occurred and is continuing
on the date hereof; and (ii) the representations and warranties of the Borrower
contained in Article IV of the Credit Agreement are true in all material
respects on and as of the date hereof.
Certified as of the 31st day of July, 1996.
KEMET CORPORATION
_____________________________________
Name:
Title:
<PAGE>75
EXHIBIT D
[NAME OF BORROWER OR GUARANTORS]
SECRETARY'S CERTIFICATE
The undersigned, _____________, _______ Secretary of
_______________________, a ____________ corporation [(the "Borrower")] [(the
"Guarantor")], hereby certifies that he has been duly elected, qualified and is
acting in such capacity and that, as such, he is familiar with the facts herein
certified and is duly authorized to certify the same, and hereby further
certifies, in connection with the [Credit Agreement dated as of July 31, 1996
between the Borrower and Wachovia Bank of North Carolina, N.A.] [the Guaranty
Agreement dated as of July 31, 1996 made by the Guarantor and certain other
guarantors named therein for the benefit of Wachovia Bank of North Carolina,
N.A.] that:
1. Attached hereto as Exhibit A is a complete and correct copy of
the Articles of Incorporation of the [Borrower][Guarantor] as in full force and
effect on the date hereof.
2. Attached hereto as Exhibit B is a complete and correct copy of
the Bylaws of the [Borrower][Guarantor] as in full force and effect on the date
hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of
the resolutions duly adopted by the Board of Directors of the
[Borrower][Guarantor] on ___________ __, 19__ approving, and authorizing the
execution and delivery of, the [Credit Agreement, the Note (as such term is
defined in the Credit Agreement) and the other Loan Documents (as such term is
defined in the Credit Agreement) to which the Borrower is a party][Guaranty
Agreement]. Such resolutions have not been repealed or amended and are in full
force and effect, and no other resolutions or consents have been adopted by the
Board of Directors of the [Borrower][Guarantor] in connection therewith.
4. ____________, who as ________________________ of the
[Borrower][Guarantor] signed the [Credit Agreement, the Note and the other Loan
Documents to which the Borrower is a party][Guaranty Agreement], was duly
elected, qualified and acting as such at the time he signed the [Credit
Agreement, the Note and other Loan Documents to which the Borrower is a
party][Guaranty Agreement], and his signature appearing on the [Credit
Agreement, the Note and the other Loan Documents to which the Borrower is a
party][Guaranty Agreement] is his genuine signature.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
the 31st day of July, 1996.
________________________________
Name:
Title:
<PAGE>76
EXHIBIT E
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
PURSUANT TO SECTION 5.01(c) OF THE CREDIT AGREEMENT
For the fiscal [quarter][year] ended _______________, 19__.
I, ________________, [chief financial officer][chief accounting
officer] of KEMET Corporation (the "Borrower"), hereby certify that with respect
to that certain Credit Agreement dated as of July 31, 1996 (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) between the Borrower and Wachovia Bank of North Carolina,
N.A.:
a. Since ____________ (the date of the last similar certification, or,
if none, the Closing Date) no Default or Event of Default has occurred under the
Credit Agreement; and
b. Delivered herewith are detailed calculations demonstrating
compliance by the Borrower with the financial covenants contained in Sections
5.03, 5.04 and 5.05 of the Credit Agreement as of the end of the fiscal
[quarter][year] set forth above.
The undersigned represents and warrants that each of the calculations referred
to in clause (b) above is true and correct in all material respects.
This ___ day of __________________, 19___.
__________________________________
[Chief Financial Officer]
[Chief Accounting Officer]
KEMET Corporation
- -------------
1 If a Default or Event of Default shall have occurred during the applicable
period, a detailed explantation of such Default or Event of Default shall be
provided on a separate page together with an explantion of the action taken or
proposed to be taken by the Borrower with respect thereto.
<PAGE>77
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
Dated ________________ __, ____
Reference is made to the Credit Agreement dated as of July 31, 1996
(the "Credit Agreement") between KEMET Corporation (the "Borrower") and Wachovia
Bank of North Carolina, N.A., (the "Bank"). Terms defined in the Credit
Agreement are used herein with the same meaning.
_________________ (the "Assignor") and ________________________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, a ______% interest in and to all
of the Assignor's rights and obligations under the Credit Agreement as of the
Effective Date (as defined below) (including, without limitation, a ______%
interest (which on the Effective Date hereof is $_______________) in the
Assignor's Commitment and a ______% interest (which on the Effective Date hereof
is $_______________) in the Loans owing to the Assignor and a ______% interest
in the Note held by the Assignor (which on the Effective Date hereof is
$__________________)).
2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of the date hereof its Commitment (without giving
effect to assignments thereof which have not yet become effective) is
$_________________ and the aggregate outstanding principal amount of Loans owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $_________________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Note referred to in paragraph
1 above and requests that the Borrower exchange such Note for [a new Note dated
_______________, ____ in the principal amount of _________________ payable to
the order of the Assignee] [new Notes as follows: a Note dated
_________________, ____ in the principal amount of $_______________ payable to
the order of the Assignor and a Note dated ______________, ____ in the principal
amount of $______________ payable to the order of the Assignee].
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
<PAGE>78
in Section 4.04(a) thereof (or any more recent financial statements of the
Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Assignor and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is a bank or financial institution;
(iv) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; (v) specifies as its Lending Office (and address for
notices) the office set forth beneath its name on the signature pages hereof,
(vi) represents and warrants that the execution, delivery and performance of
this Assignment and Acceptance are within its corporate powers and have been
duly authorized by all necessary corporate action [, and (vii) attaches the
forms prescribed by the Internal Revenue Service of the United States certifying
as to the Assignee's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to the Assignee
under the Credit Agreement and the Notes or such other documents as are
necessary to indicate that all such payments are subject to such taxes at a rate
reduced by an applicable tax treaty].*
4. The Effective Date for this Assignment and Acceptance shall be
_______________ (the "Effective Date"). [Following the execution of this
Assignment and Acceptance, it will be delivered to the Borrower for execution by
the Borrower.]**
5. [Upon such execution and acceptance by the Borrower,]** [f]rom
and after the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent rights and obligations have been transferred to it
by this Assignment and Acceptance, have the rights and obligations of the Bank
thereunder and (ii) the Assignor shall, to the extent its rights and obligations
have been transferred to the Assignee by this Assignment and Acceptance,
relinquish its rights (other than under Section 8.03 of the Credit Agreement)
and be released from its obligations under the Credit Agreement.
6. [Upon such execution by the Borrower,]** [f]rom and after the
Effective Date, the Borrower shall make all payments in respect of the interest
assigned hereby to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to such execution by the
Borrower directly between themselves.
<PAGE>79
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
[NAME OF ASSIGNOR]
By:
Title:
* If the Assignee is organized under the laws of a jurisdiction outside the
United States.
** If the Assignee is not an Affiliate of the Assignor, and no Default has
occurred and is continuing.
<PAGE>80
[NAME OF ASSIGNEE]
By:
Title:
Lending Office:
[Address]
KEMET CORPORATION*
By:
Title:
* If the Assignee is not an Affiliate of the Assignor, and no Default has
occurred and is continuing.
<PAGE>81
EXHIBIT G
NOTICE OF BORROWING
__________, 199_
Wachovia Bank of North Carolina, N.A.
____________________________________
____________________________________
Attention:____________________________
Re: Credit Agreement (as amended and modified from time to time,
the "Credit Agreement") dated as of July 31, 1996 between KEMET Corporation and
Wachovia Bank of North Carolina, N.A.
Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 2.02
of the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing][Base Rate
Borrowing] [Offered Rate Borrowing] in the aggregate principal amount of
$___________ to be made on ________, 19__, and for interest to accrue thereon at
the rate established by the Credit Agreement for [Euro-Dollar Loans] [Base Rate
Loans] [Offered Rate Loans]. The duration of the Interest Period with respect
thereto shall be [1 month] [2 months] [3 months] [6 months] [30 days] [1 to 90
days].
The Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer this ___ day of ____, 199_.
KEMET CORPORATION
By:______________________
Title:
<PAGE>82
EXHIBIT H
August __, 1996
KEMET Corporation
2835 Kemet Way
Simpsonville, South Carolina 29681
Attention: Chief Financial Officer
Ladies and Gentlemen:
In accordance with Section 2.03 of the Credit Agreement, dated as of July
31, 1996, between KEMET Corporation (the "Company") and Wachovia Bank of North
Carolina, N.A. (the "Bank"), the Bank hereby nominates Centric Funding
Corporation as the "Designated Lender" for advances to the Company.
The Company will obtain advances from the Designated Lender in accordance
with the terms of a loan agreement between the Company and the Designated
Lender. A copy of such loan agreement will be provided to the Bank promptly
upon the execution thereof.
Very truly yours,
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:
Name:
Title:
Agreed and Accepted on August ___, 1996
KEMET CORPORATION
By:
Name:
Title:
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty") is made as of the 31st day
of July, 1996, by the undersigned (hereinafter collectively referred to as the
"Guarantors" and individually as a "Guarantor"), to and for the benefit of
WACHOVIA BANK OF NORTH CAROLINA, N.A., a national banking association (the
"Bank"). The Bank has agreed to extend credit to the Borrower in the principal
amount of up to $40,000,000 upon the terms and conditions set forth in that
certain Credit Agreement dated as of July 31, 1996 between KEMET Corporation
(the "Borrower") and the Bank (as amended, modified or extended from time to
time, the "Credit Agreement"). As a condition to extending such credit, the
Bank has required the execution and delivery of this Guaranty. Capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in the Credit Agreement.
NOW THEREFORE, in consideration of the Loans extended by the Bank to
the Borrower under the Credit Agreement and for other consideration, the receipt
and sufficiency of which are hereby acknowledged, each Guarantor agrees as
follows:
1. Guaranty. Each Guarantor hereby unconditionally, absolutely,
jointly and severally, guarantees to the Bank and its successors and assigns
that (a) the Borrower will duly and punctually pay and perform, at the place
specified therefor, all indebtedness, obligations and liabilities, direct or
indirect, matured or unmatured, primary or secondary, certain or contingent, of
the Borrower to the Bank now or hereafter owing or incurred pursuant to the
Credit Agreement or any of the other Loan Documents (including without
limitation reasonable attorneys' fees and other costs and expenses incurred by
the Bank in attempting to collect or enforce any of the foregoing after an Event
of Default) accrued in each case to the date of payment hereunder (collectively,
the "Obligations" and individually, an "Obligation"); and (b) the Borrower will
perform in all other respects its obligations under the Loan Documents in
accordance with the terms of the Loan Documents.
2. Guaranty Absolute. This Guaranty is an absolute,
unconditional, continuing and unlimited guaranty of the full and punctual
payment and performance by the Borrower of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Bank first attempt to collect any of the Obligations from the Borrower, any
other Guarantor, or any other person, or resort to any security for the
Obligations or this Guaranty or to other means of obtaining payment of any of
the Obligations which the Bank now has or may acquire after the date hereof, or
upon any other contingency whatsoever, and the Bank may proceed hereunder
against any Guarantor in the first instance to collect the Obligations when due,
without first proceeding against the Borrower or any other person and without
first resorting to any security or other means of obtaining payment. The
obligations of each Guarantor hereunder are irrevocable, absolute and
unconditional, irrespective of genuineness, validity, regularity or
enforceability of the Obligations or any security given therefor or in
connection therewith or any other circumstance (except payment to, or express
written waiver, release or consent by, the Bank) which might otherwise
constitute a legal or equitable discharge of a surety or guarantor. This
Guaranty shall be in addition to any other guaranty or other security for the
Obligations, and it shall not be prejudiced or rendered unenforceable by the
invalidity of any such other guaranty or security. The liability of each
Guarantor hereunder shall in no way be affected or impaired by any acceptance by
the Bank of any direct or indirect security for, or other guaranties of, the
Obligations or any other indebtedness, liability or obligations of the Borrower,
any Guarantor or other person to the Bank or by any failure, delay, neglect or
omission of the Bank to realize upon or protect any Obligations or any such
other indebtedness, liability or obligation or any notes or other instruments
evidencing the same or any direct or indirect security therefor, or by any
approval, consent, waiver or other action taken or omitted to be taken by the
Bank (except payment to, or express written waiver, release or consent by, the
Bank). Upon the occurrence of any Event of Default, the liabilities and
obligations of the Guarantors hereunder shall, at the option of the Bank, become
forthwith due and payable to the Bank without demand or notice of any nature,
all of which are expressly waived by each Guarantor. Payments by the
Guarantors, or any of them, hereunder may be required by the Bank on any number
of occasions.
3. No Impairment. Each Guarantor agrees that its obligations
hereunder shall not be impaired, modified, changed, released or limited in any
manner whatsoever by any impairment, modification, change, release or limitation
of liability of the Borrower or its estate by reason of the commencement of any
case, proceeding or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of the Borrower or its
property under any law relating to bankruptcy, insolvency, reorganization,
relief of debtors or seeking appointment of a receiver, trustee, custodian or
similar official for the Borrower or for all or part of its property.
4. Guarantors' Further Agreement to Pay. Each Guarantor further
agrees to pay to the Bank forthwith upon demand, in funds immediately available
to the Bank, all costs and expenses (including court costs and reasonable
attorneys' fees) incurred or expended by the Bank in connection with the
enforcement of this Guaranty.
5. Termination of Guaranty. It is the intention hereof that the
Guarantors shall remain liable under this Guaranty until (i) all of the
Obligations have been fully paid and performed notwithstanding any act, omission
or thing (except payment to, or express written waiver, release or consent by,
the Bank) which might otherwise operate as a legal or equitable discharge of the
Guarantors, and (ii) the Bank's obligation to make further advances under the
Credit Agreement have terminated. Notwithstanding anything contained herein to
the contrary, each Guarantor agrees that to the extent all or any part of any
payment of any of the Obligations previously received by the Bank pursuant to
the Loan Documents or otherwise is subsequently invalidated, voided, declared to
be fraudulent or preferential, set aside, recovered, rescinded or is required to
be retained by or repaid to a trustee, receiver, or any other person under any
bankruptcy code, common law, or equitable cause, or otherwise required to be
returned by the Bank for any reason, whether by court order, administrative
order or settlement, this Guaranty and the obligation or part thereof intended
to be satisfied shall be revived and reinstated and continued in full force and
effect as to each Guarantor's obligations hereunder, and each Guarantor agrees
that it shall immediately pay to the Bank the amount of such payment,
notwithstanding any termination of this Guaranty or any cancellation of any of
the Loan Documents.
6. Security; Setoff. Each Guarantor hereby grants to the Bank a
contractual right of setoff against all deposits and other sums credited by or
due from the Bank to such Guarantor or subject to withdrawal by such Guarantor.
Regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Bank may at any time upon or after the
occurrence of any Event of Default, and without notice to any Guarantor, set off
the whole or any portion or portions of any or all deposits and other sums
credited by or due from the Bank to a Guarantor or subject to withdrawal by a
Guarantor against amounts payable under this Guaranty, whether or not any other
person or persons could also withdraw money therefrom.
7. Bank's Freedom to Deal with Borrower and Other Parties. The
Bank shall be at liberty, without giving notice to or obtaining the assent of
the Guarantors, or any of them, and without relieving any Guarantor of any
liability hereunder, to deal with the Borrower and with each other party who is
now, or after the date hereof becomes, liable in any manner for any of the
Obligations (including, without limitation, any co-guarantor), in such manner as
the Bank in its sole discretion deems fit and to this end each Guarantor hereby
gives to the Bank full authority in its sole discretion to do any or all of the
following things: (a) extend credit, make loans and afford other financial
accommodations to the Borrower or to any such other party at such times, in such
amounts and on such terms as the Bank may approve, (b) vary the terms and grant
extensions or renewals of any present or future indebtedness or obligation of
the Borrower or of any such other party to the Bank, (c) grant extensions of
time, waivers and other indulgences in respect thereof, (d) vary, exchange,
release or discharge, wholly or partially, or delay in or abstain from
perfecting and enforcing any security or guaranty or other means of obtaining
payment of any of the Obligations or any liability under this Guaranty, which
security or guaranty the Bank now has or acquires after the date hereof, (e)
accept partial payments from the Borrower or such other party, (f) release or
discharge, wholly or partially, any endorser or guarantor, and (g) compromise or
make any settlement or other arrangement with the Borrower or any such other
party. The Guarantors acknowledge that under the terms of the Credit Agreement,
the Borrower may borrow, repay and reborrow proceeds of the Loans from time to
time and that the outstanding principal balance of the Loans may be reduced to
zero and thereafter increased.
8. Representations and Warranties of Guarantors. Each Guarantor
represents and warrants that:
(a) The execution, delivery and performance of this Guaranty
(i) are within such Guarantor's corporate powers, (ii) have been duly authorized
by all necessary corporate action, (iii) require no action by or in respect of,
or filing with, any governmental body, agency or official, (iv) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or articles of incorporation
or by-laws of such Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon such Guarantor, and (v) do not result in
the creation or imposition of any Lien on any asset of such Guarantor.
(b) This Guaranty constitutes a valid and binding agreement of
such Guarantor enforceable in accordance with its terms except as such
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally, and (ii) subject to general legal and equitable
principles of good faith, fair dealing and equity, as well as considerations of
public policy as the same may be held or deemed to apply.
(c) Such Guarantor's guaranty pursuant to this Guaranty reasonably
may be expected to benefit, directly or indirectly, such Guarantor.
9. Waivers by Guarantors. Each Guarantor hereby waives: (a)
acceptance or notice of acceptance of this Guaranty by the Bank; (b) notice of
any action taken or omitted by the Bank in reliance hereon; (c) any duty on the
part of the Bank to disclose to the Guarantors, or any of them, any facts it may
now or hereafter know regarding the Borrower or any other Guarantor; (d) notice
of presentment and demand for payment or performance of any of the Obligations;
(e) protest and notice of dishonor or of default to the Guarantors, or any of
them, or to any other party with respect to the payment or performance of the
Obligations hereby guaranteed; (f) any and all other notices whatsoever from the
Bank to which the Guarantors, or any of them, might otherwise be entitled; and
(g) any requirement that the Bank be diligent or prompt in making demands
hereunder, giving notice of any default by the Borrower or asserting any other
right of the Bank hereunder. Each Guarantor also irrevocably waives, to the
fullest extent permitted by law, and agrees not to assert or take advantage of
any and all defenses which at any time may be available in respect of such
Guarantor's obligations to the Bank hereunder by virtue of: (i) the statute of
limitations in any action hereunder or for the collection or the performance of
any of the Obligations; (ii) the incapacity, lack of authority, death or
disability of any Guarantor or any other person or entity, or the failure of the
Bank to file or enforce a claim against the estate (either in administration,
bankruptcy, or any other proceeding) of the Borrower, any Guarantor or any other
person or entity; (iii) the failure of the Bank to give notice of any action or
non-action on the part of any other person whomsoever, in connection with any of
the Obligations; (iv) an election of remedies by the Bank which destroys or
otherwise impairs any subrogation rights of the Guarantors, or any of them, the
right of a Guarantor to proceed against the Borrower for reimbursement, or the
right of a Guarantor to seek contribution from any co-guarantor, or all or any
combination of such rights; (v) the failure of the Bank to commence an action
against the Borrower, any Guarantor, or any other person; (vi) any homestead
exemption, valuation, stay, moratorium law or other similar law now or hereafter
in effect; (vii) any defense based on lack of due diligence by the Bank in
collection, protection or realization upon any collateral securing the
Obligations; (viii) any and all rights the Guarantors, or any of them, may now
or hereafter have arising under North Carolina General Statute Section 26-7,
26-8 or 26-9, or any similar or subsequent law; (ix) the amendment of,
supplement to or waiver of any provision of the Credit Agreement, the Note or
any other Loan Documents, (x) the failure of any Guarantor to receive any
benefit from or as a result of its execution, delivery and performance of this
Guaranty; and (xi) any other legal or equitable defenses whatsoever to which the
Guarantors, or any of them, might otherwise be entitled.
10. No Contest with the Bank. So long as any Obligation remains
unpaid or undischarged, no Guarantor will, by paying any sum recoverable
hereunder (whether or not demanded by the Bank) or by any means or on any other
ground, claim any right of subrogation with respect to any of the Obligations
guaranteed hereby or to any collateral now or hereafter granted to secure the
Obligations or claim any setoff or counterclaim against the Borrower in respect
of any liability of the Guarantors, or any of them, to the Borrower or of the
Borrower to the Guarantors, or any of them, or, in proceedings under any federal
or state bankruptcy code or insolvency proceedings of any nature, proceed in
competition with the Bank in respect of payment hereunder or be entitled to have
the benefit of any counterclaim or proof of claim or dividend or payment by or
on behalf of the Borrower or the benefit of any other security for any
Obligation which, now or hereafter, the Bank may hold or in which it may have
any share.
11. Remedies Cumulative. Each right, privilege, power and remedy
of the Bank under this Guaranty, the Loan Documents or other agreement or
instrument signed by the Borrower or any Guarantors, or under any other
instrument of any other party securing or guaranteeing any of the Obligations or
under applicable laws shall be cumulative and concurrent and the exercise of any
one or more of them shall not preclude the simultaneous or later exercise by the
Bank of any or all such other rights, privileges, powers and remedies.
No failure or delay by the Bank to exercise any right, power or
privilege hereunder shall operate as a waiver of any such right, power or
privilege nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
12. Demands and Notices. All notices, requests and other
communications to the parties hereunder shall be in writing and shall be given
(i) to a Guarantor in care of the Borrower at the address for the Borrower set
forth in the Credit Agreement, and (ii) to the Bank at its address set forth in
the Credit Agreement. All notices shall be given in the manner specified in the
Credit Agreement.
13. Amendments, Waiver, Etc. No provision of this Guaranty can be
changed, waived or discharged or terminated except by an instrument in writing
signed by the Guarantors and by the Bank. No course of dealing or delay or
omission on the part of any party in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto.
14. Counterparts. This Guaranty may be executed in any number of
counterparts. Each of the counterparts will be considered an original, and all
counterparts constitute but one and the same instrument.
15. Pari Passu Obligations. Each Guarantor warrants and
represents that payment obligations and liabilities of such Guarantor under this
Guaranty shall at all times rank pari passu with all other unsecured and
unsubordinated payment obligations and liabilities (including contingent
obligations and liabilities) of such Guarantor (other than those which are
mandatorily preferred by laws or regulations of general application). Each
Guarantor shall assure that the representation set forth herein is true and
correct at all times.
16. Indemnity. Each Guarantor agrees to indemnify the Bank
against, and hold the Bank harmless from, any loss, cost, charge, expense
(including reasonable attorneys' fees), claims, demands, suits, damages,
penalties, taxes, fines, levies and assessments which may be asserted or imposed
against, or suffered or incurred by, the Bank as a direct or indirect result of
any representation or warranty of the Borrower in any of the Loan Documents or
of the Guarantors herein being untrue or inaccurate in any respect or as a
direct or indirect result of the failure by the Borrower or any Guarantor to
observe, perform or comply with any of its respective covenants, undertakings or
obligations set forth in the Loan Documents or this Guaranty.
17. Financial Information. The liability of each Guarantor under
this Guaranty shall be reflected in the consolidated financial statements (or
the notes thereto) of the Borrower and its Subsidiaries in accordance with GAAP.
18. Maximum Liability. Notwithstanding anything in this Guaranty
to the contrary, the maximum liability of each Guarantor under this Guaranty
shall in no event exceed such Guarantor's Maximum Obligated Amount. "Maximum
Obligated Amount" of any Guarantor shall mean the maximum amount which could be
paid out by such Guarantor without rendering this Guaranty, in whole or in part,
void or voidable under applicable law, including, without limitation, (i) the
Bankruptcy Code of 1978, as amended, and (ii) any applicable state or federal
law relative to fraudulent conveyances.
19. Subordination. In the event that Borrower is now or shall
hereafter become indebted to any of the undersigned, each of the undersigned
agrees that the amount of such indebtedness and all interest thereon shall at
all times be subordinate as to lien, times of payment (after an Event of
Default) and in all other respects to all sums at any time owing to the Bank or
under the Note or any security therefor or the Credit Agreement, and that after
an Event of Default, the undersigned shall not be entitled to enforce or receive
payment on account of such other indebtedness until all sums owing to the Bank
have been paid.
20. Miscellaneous Provisions. This Guaranty is intended to take
effect as a sealed instrument to be governed by and construed in accordance with
the laws of the State of North Carolina (but not including the choice of law
rules thereof). This Guaranty shall bind the successors and assigns of each
Guarantor and shall inure to the benefit of the Bank, its successors and
assigns. All words herein shall be deemed to refer to the singular, plural,
masculine, feminine or neuter as the identity of the person or entity or as the
context may require. The descriptive headings of the several paragraphs of this
Guaranty are inserted for convenience only and do not constitute a part of this
Guaranty.
21. Alternative Funding Sources. The Guarantors acknowledge the
possibility that funding of the Loans may be through alternative funding sources
pursuant to Section 2.03 of the Credit Agreement, and the Guarantors shall
execute such documents as the Bank or the Designated Lender (as defined in the
Credit Agreement) may reasonably request to evidence that payment of the
obligations of the Borrower pursuant to such alternative funding sources are
guaranteed by the Guarantors under terms and conditions substantially similar to
those contained in this Agreement.
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of
the day and year first above written.
GUARANTORS:
KEMET ELECTRONICS CORPORATION
a Delaware corporation
ATTEST:
/S/ G. H. Spears By:/S/ J.J. Jerozal (SEAL)
Its: Secrerary Title: CFO & Treasurer
[CORPORATE SEAL]
KEMET SERVICES CORPORATION
a Delaware corporation
ATTEST:
/S/ Raymond E. Burgess By: /S/ D.A. Adams (SEAL)
Its: Title:President
Secretary
[CORPORATE SEAL]
KRC TRADE CORPORATION
a Delaware corporation
ATTEST:
/S/ D.R. Cash By:/S/ J.J. Jerozal (SEAL)
Its:Secretary Title: Treasurer
[CORPORATE SEAL]
ACCEPTED:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /S/ Paul G. Grube (SEAL)
Title:SVP
<PAGE>1
EXHIBIT 11.1
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Three months ended
June 30,
------------------
1996 1995
--------- ---------
<S> <C> <C>
Primary:
Net earnings available for common and
common equivalent shares $9,725 $12,741
----------- ----------
Weighted average common and common
equivalent shares outstanding 39,210,818 39,028,114
----------- ----------
Primary earnings per common share $0.25 $0.33
=========== ==========
Fully Diluted:
Net earnings available for common and
common equivalent chares $9,725 $12,741
----------- ----------
Weighted average common and common
equivalent shares outstanding assuming
ending market price 39,210,818 39,083,276
----------- ----------
Fully diluted earnings per common share $0.25 $0.33
=========== ==========
</TABLE>
