<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of The Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 14a-12
KEMET CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
--------
2) Aggregate number of securities to which transaction applies:
---------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
---------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule, or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
KEMET CORPORATION
P.O. Box 5928
Greenville, South Carolina 29606
June 24, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
which will be held on Wednesday, July 23, 1997, at 1:00 p.m., local time, at the
Hyatt Regency Hotel, 220 N. Main Street, Greenville, South Carolina 29601.
The notice of meeting, proxy statement and proxy are included with this letter.
The matters listed in the notice of meeting are more fully described in the
proxy statement.
It is important that your shares are represented and voted at the Annual
Meeting, regardless of the size of your holdings. Accordingly, please mark,
sign and date the enclosed proxy and return it promptly in the enclosed
envelope. If you attend the Annual Meeting, you may, of course, withdraw your
proxy should you wish to vote in person.
Sincerely,
/S/ David E. Maguire
David E. Maguire
Chairman and
Chief Executive Officer
<PAGE> 3
KEMET CORPORATION
P.O. Box 5928
Greenville, South Carolina 29606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 annual meeting of stockholders (the "Annual Meeting") of KEMET
Corporation (the "Corporation") will be held on Wednesday, July 23, 1997, at
1:00 p.m., local time, at the Hyatt Regency Hotel, 220 N. Main Street,
Greenville, South Carolina 29601, to consider and take action with respect to
the following
matters:
1. The election of two directors for a three-year term or until their
successors are duly elected and qualified.
2. The ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants for the year ending March 31, 1998.
3. The transaction of such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Holders of record of the Corporation's Common Stock at the close of business on
June 16, 1997, are entitled to receive notice of and to vote on all matters
presented at the meeting and at any adjournments or postponements thereof.
By order of the Board of Directors
/S/ Glenn H. Spears
Glenn H. Spears
Secretary
June 24, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON AND REGARDLESS OF THE
NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 4
Mailed to Stockholders on or about
June 24, 1997
KEMET CORPORATION
P.O. Box 5928
Greenville, South Carolina 29606
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PROXY STATEMENT
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1997 Annual Meeting of Stockholders
July 23,1997
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This proxy is being furnished to the holders of common stock, par value $0.01
per share (the "Common Stock"), of KEMET Corporation (the "Corporation") in
connection with the solicitation of proxies on behalf of the Board of Directors
of the Corporation (the "Board of Directors" or "Board") for the 1997 annual
meeting of stockholders (the "Annual Meeting") to be held on July 23, 1997, at
the Hyatt Regency Hotel, 220 N. Main Street, Greenville, South Carolina 29601,
and at any adjournments or postponements thereof.
When you sign and return the enclosed proxy, the shares represented thereby will
be voted FOR the directors described herein, FOR the proposal set forth in Item
2 in the Notice of Meeting, and, as to any other business as may properly be
brought before the Annual Meeting and any adjournments or postponements thereof,
in accordance with the judgment of the person or persons voting on such matter
or matters.
Returning your completed proxy will not prevent you from voting in person at the
Annual Meeting should you be present and wish to do so. In addition, you may
revoke your proxy any time before it is voted by written notice to the Secretary
of the Corporation prior to the Annual Meeting or by submission of a later-dated
proxy.
Each outstanding share of Common Stock entitles the holder thereof to one vote.
On June 16, 1997, the record date, there were 38,902,250 shares of Common Stock
outstanding. The presence in person or by proxy of a majority of such shares of
Common Stock shall constitute a quorum. A broker non-vote on a matter is
considered not entitled to vote on that matter and thus is not counted in
determining whether a matter requiring approval of a majority of the shares
present and entitled to vote has been approved.
PROPOSAL TO ELECT DIRECTORS
The Corporation's Restated Certificate of Incorporation provides that the Board
of Directors will consist of not more than nine nor fewer than three directors
with the number of directors to be established by the Board of Directors by
resolution. The Corporation currently has six directors: Messrs. David E.
Maguire, Terry R. Weaver, Charles E. Volpe, Stewart A. Kohl, Charles E.
Corpening and E. Erwin Maddrey, II.
<PAGE> 5
In connection with the acquisition of the outstanding common stock of Kemet
Electronics Corporation by the Corporation in 1990 (the "Acquisition"), Messrs.
David E. Maguire, James J. Jerozal, Glenn H. Spears, Kenneth L. Martin, D. Ray
Cash, Donald A. Adams, Donald J. Poinsette, Edwin H. Bost and Harris L. Crowley,
Jr. (the "Senior Managers") and Charles E. Volpe, John Piper, Brian G.
Hawthornthwaite, Bernd K. Scheumann and Robert A. Taylor, Jr. (retired "Senior
Managers" but still a part of this agreement), Citicorp Venture Capital, Ltd.
("CVC") and certain other investors, have entered into an agreement (the "Voting
Agreement") which provides, among other things, for the nomination of and voting
for up to seven directors of the Corporation by such stockholders, which as of
the record date own approximately 27% of all outstanding Common Stock. Under
the Voting Agreement, CVC has the right to designate up to two directors if the
Board of Directors consists of five directors, and up to three directors if the
Board of Directors consists of seven directors. The two directors designated by
CVC are currently Charles E. Corpening and Stewart A. Kohl.
Each party to the Voting Agreement has agreed to vote its shares in favor of the
nominees. A majority of the directors has the right to nominate the remainder
of the directors, including up to two directors who are not affiliated with the
Corporation or CVC. Each director nominated by parties to the Voting Agreement
may be removed only at the request of the party who nominated such director. The
Voting Agreement terminates upon the earlier of October 21, 2002, or at such
time as CVC and its affiliates cease to own at least 10% of the Corporation's
Common Stock. The stockholders who are parties to the Voting Agreement hold, in
the aggregate, a substantial amount of the voting power of the Corporation and
thus, if acting in unison or in various combinations, could likely be able to
elect all the directors even if the Voting Agreement were not in place.
The Board of Directors is currently comprised of six directors divided into
three classes. The term of each class expires in different years. The two
nominees for election to the Board of Directors this year to serve for
three-year terms or until their successors are duly elected and qualified are
Charles E. Volpe and Charles E. Corpening, who are currently directors of the
Corporation. Mr. Volpe is also currently a Vice President of the Corporation.
The Board of Directors expects the nominees named above to be available for
election. In case a nominee is not available, the proxy holders may vote for a
substitute, unless the Board of Directors reduces the number of directors.
The directors will be elected at the Annual Meeting by a majority of the votes
cast at the meeting by the holders of shares represented in person or by proxy.
There is no right to cumulative voting as to any matter, including the election
of directors.
The following sets forth information as to each continuing director and the
nominee for director, including age, as of June 16, 1997, principal occupation
and employment during the past five years, directorships in other publicly held
companies and period of service as a director of the Corporation.
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF MR. VOLPE AND
MR. CORPENING TO THE BOARD OF DIRECTORS.
NOMINEE FOR BOARD OF DIRECTORS
Charles E. Volpe, 59, Vice President and Director, was named a Director of the
Corporation in December 1990. Mr. Volpe also served as Executive Vice President
and Chief Operating Officer ("COO"), and most recently served as President and
COO from October 1995 until his retirement on March 31, 1996. Mr. Volpe was
originally elected as a director of the Corporation while he was an officer of
the Corporation. Under the Corporation's Amended and Restated By-laws, a
director of the Corporation who was elected while an officer of the Corporation
is no longer qualified to serve as a director upon such director's resignation
as an officer. Therefore, in order to allow Mr. Volpe to continue to serve as a
director of the Corporation, in March 1996, Mr. Volpe was elected as a Vice
President of the Corporation prior to his resignation as President and COO. In
connection with the 1997 Annual Meeting, Mr. Volpe will resign as a Vice
President immediately prior to the Annual Meeting and thus, if elected by the
stockholders, will no longer be subject to this particular By-law restriction.
Mr. Volpe had also served as Executive Vice President and Director of KEMET
Electronics since April 1987. From August 1966 until April 1987, Mr. Volpe
served in a number of capacities with the KEMET capacitor business of UCC, most
recently as General Manager. Mr. Volpe is also a director of Sinter Metals,
Inc., and Encad, Inc.
Charles E. Corpening, 32, Director, was unanimously elected by members of the
Board of Directors on January 29, 1995. Mr. Corpening is a Vice President of
Citicorp Venture Capital Ltd., a subsidiary of Citibank. Mr. Corpening joined
Citicorp Venture Capital, Ltd., in December 1994. Mr. Corpening was previously
a Vice President of Roundtree Capital Corporation, an investment company, since
1991. Mr. Corpening also serves on the board of directors of Chase Brass
Industries, Inc., Davco Restaurants, This End Up, Inc. and Pursell Industries,
Inc.
CONTINUING DIRECTORS
David E. Maguire, 62, Chairman, Chief Executive Officer ("CEO") and Director,
has served as Chairman of the Corporation since August 1992 and has served as
Chief Executive Officer, President and Director of the Corporation from December
1990 until October 1995. Mr. Maguire also served as Chairman, President and
Chief Executive Officer of KEMET Electronics since April 1987. From January
1959 until April 1987, Mr. Maguire served in a number of capacities with the
KEMET capacitor business of Union Carbide Corporation ("UCC"), most recently as
Vice President from June 1978 until April 1987.
Terry R. Weaver, 45, President and Chief Operating Officer and Director, has
served as President and Chief Operating Officer since March 1996 and was elected
a Director in July 1996. Mr. Weaver joined the Company in January 1996 as
Senior Vice President of Sales and Marketing and most recently served as
Executive Vice President from October 1996 until March 1997. Mr. Weaver was
previously a Vice President with Johnson Controls, Inc., a manufacturer of
facility management and control systems, automotive seating, automotive
batteries and plastic containers. During his tenure with Johnson Controls, Inc.
he served in a variety of positions, including Sales Engineer, Branch Manager,
Southeast Regional Manager, and VP/General Manager of the Electronic Systems
unit.
Stewart A. Kohl, 41, Director, was named a Director of the Corporation in May
1992. Mr. Kohl has been a Managing Partner in The Riverside Company, an
investment company, since October 1993. Mr. Kohl was previously a Vice
President of Citicorp North America, Inc. and had been employed by various
subsidiaries of Citicorp North America, Inc. since 1988. Mr. Kohl also serves
<PAGE> 7
on the board of directors of Omega Polymer Technologies, Inc., QDS Components,
Inc., The South Florida Newspaper Network, Inc., Shore Bank and Trust Company
and Trend Holding, Inc.
E. Erwin Maddrey, II, 56, was named a Director of the Corporation in May 1992.
Mr. Maddrey has been President, Chief Executive Officer and a director of Delta
Woodside Industries, Inc., a textile manufacturer, and its predecessors since
1984. Prior thereto, Mr. Maddrey served as President and Chief Operating Officer
and director of Riegel Textile Corporation.
There are no family relationships among the foregoing persons.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held eleven meetings (exclusive of committee meetings)
during the preceding fiscal year. Each current director attended 100% of the
number of meetings held during the preceding fiscal year of the Board of
Directors and any committees on which such director served. The Board of
Directors has established the following committees, the functions and current
members of which are noted below.
Executive Committee. The Executive Committee of the Board of Directors consists
of Messrs. Maguire, Volpe and Kohl. The Executive Committee exercises the powers
of the Board of Directors during intervals between Board meetings and acts as an
advisory body to the Board by reviewing various matters prior to their
submission to the Board. The Executive Committee met three times during the
preceding fiscal year.
Compensation Committee. The Compensation Committee of the Board of Directors
consists of Messrs. Corpening, Kohl and Maddrey. The Compensation Committee
reviews and makes recommendations to the Board of Directors regarding salaries,
compensation and benefits of executive officers and key employees of the
Corporation and grants all options to purchase Common Stock of the Corporation.
The Compensation Committee met three times during the preceding fiscal year.
Audit Committee. The Audit Committee of the Board of Directors consists of
Messrs. Corpening, Kohl and Maddrey. The Audit Committee, among other duties,
reviews the internal and external financial reporting of the Corporation,
reviews the scope of the independent audit and considers comments by the
auditors regarding internal controls and accounting procedures and management's
response to those comments. The Audit Committee met twice during the preceding
fiscal year.
The Corporation does not have a standing nominating committee.
COMPENSATION OF DIRECTORS
The Voting Agreement provides that each director (other than directors that are
employed by the Corporation or CVC and its affiliates) is entitled to an annual
directors' fee of $20,000. Directors that are employed by CVC or its affiliates
are entitled to an annual directors' fee of $8,000, and directors that are
employed by the Corporation are not entitled to an annual directors' fee except
Mr. Volpe who received $15,000 in fiscal year 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Corporation's equity securities to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors and greater
<PAGE> 8
than ten-percent beneficial owners also are required by rules promulgated by the
SEC to furnish the Corporation with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Corporation, or written representations that no Form 5 filings were required,
the Corporation believes that during the period from March 31, 1996, through
March 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were complied
with.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation by the Audit Committee, has
appointed KPMG Peat Marwick LLP as independent public accountants to examine the
financial statements of the Corporation for the year ending March 31, 1998, and
to perform other appropriate accounting services.
A proposal will be presented at the Annual Meeting to ratify the appointment of
KPMG Peat Marwick LLP as the Corporation's independent public accountants. One
or more members of that firm are expected to be present at the Annual Meeting to
respond to questions and to make a statement if they desire to do so. If the
stockholders do not ratify this appointment by the affirmative vote of a
majority of the shares represented in person or by proxy at the meeting, other
independent public accountants will be considered by the Board of Directors upon
recommendation by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
At the date of this proxy statement, the Corporation has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should come before the Annual Meeting, the
proxies will be voted in the discretion of the proxy holders.
SECURITY OWNERSHIP
As of June 16 1997, the Corporation's issued and outstanding common stock
consisted of 37,805,640 shares of Common Stock and 1,096,610 shares of
Non-Voting Common Stock. The Non-Voting Common Stock generally is convertible
(subject to certain limitations) into an equal number of shares of Common Stock
at any time, at the option of the holder thereof.
<PAGE> 9
The following information with respect to the outstanding shares of Common Stock
beneficially owned by each director and nominee for director of the Corporation,
the four most highly compensated executive officers (including the Chief
Executive Officer), the directors and executive officers as a group, and all
beneficial owners of more than 5% of the Common Stock is furnished as of June
16, 1997. Except as otherwise indicated below, each of the persons named in the
table has sole voting and investment power with respect to the securities
beneficially owned by him as set forth opposite its or his name.
<TABLE>
<CAPTION>
Common Stock
----------------------
DIRECTORS, EXECUTIVE OFFICERS, No. of Percent
SELLING STOCKHOLDER AND 5% STOCKHOLDERS Shares of Class(8)
- --------------------------------------- ---------- -----------
<S> <C> <C>
Citicorp Venture Capital, Ltd.(1)(2) 5,713,910 14.7%
David E. Maguire(2)(3) 1,412,576 3.6
Terry R. Weaver(3) 0 *
James J. Jerozal(2)(3)(4) 391,564 1.0
Glenn H. Spears(2)(3) 244,921 *
Stewart A. Kohl(5) 0 *
Charles E. Volpe(2)(3) 575,266 1.5
E. Erwin Maddrey, II(6) 2,000 *
Charles E. Corpening(7) 0 *
All Directors and Executive Officers
as a group(8 persons) 2,626,327 6.8
</TABLE>
- ------------
(1) Includes 4,617,300 shares of Common Stock and 1,096,610 shares of
Non-Voting Common Stock beneficially owned by Citicorp Venture Capital, Ltd.
The address for Citicorp Venture Capital, Ltd. is 399 Park Avenue, 14th Floor,
New York, New York 10043.
(2) All of these parties have entered into an agreement providing for the
election of directors. Each such party disclaims beneficial ownership of shares
of Common Stock owned by each other party.
(3) The address of these individuals is c/o KEMET Corporation, P.O. Box 5928,
Greenville, South Carolina 29606.
(4) Includes 164,675 shares held by a partnership in which Mr. Jerozal is a
general and limited partner. Mr. Jerozal disclaims beneficial ownership of such
shares. Mr. Jerozal retired from the Corporation effective April 10, 1997.
(5) The address of this individual is c/o The Riverside Company, The Terminal
Tower, 50 Public Square, Suite 3202, Cleveland, Ohio 44113.
(6) The address of this individual is c/o Delta Woodside Industries, Inc., 233
North Main Street, Greenville South Carolina 29601.
(7) The address of this individual is c/o Citicorp Venture Capital, Ltd., 399
Park Avenue, 14th Floor, New York, New York 10043.
(8) Percentages less than one percent are denoted by an asterisk.
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table specifies the components of the
compensation packages for the Corporation's four most highly compensated
executive officers (including the Chief Executive Officer) (the "named
executives") for the fiscal years ended March 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------- ---------------
All Other
Name and Fiscal Stock Compensation
Principal Position Year Salary($)(2) Bonus($)(3) Options(#)(4) ($)(5)
- -------------------------- -------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
David E. Maguire 1997 $411,000 $395,000 24,000 $56,037
(Chairman and Chief 1996 390,000 831,000 24,000 60,181
Executive Officer) 1995 326,000 300,000 0 5,183
Terry R. Weaver 1997 $289,000 $214,000 16,000 $22,887
(President and Chief 1996 240,000 300,000 16,000 10,216
Operating Officer) 1995 60,000 51,000 0 0
James J. Jerozal(1) 1997 $200,000 $114,000 12,000 $17,865
(Chief Financial Officer, 1996 190,000 238,000 8,000 13,260
Treasurer and Assistant 1995 161,000 137,000 0 5,220
Secretary)
Glenn H. Spears 1997 $200,000 $114,000 12,000 $18,973
(Senior Vice President 1996 190,000 238,000 8,000 14,194
and Secretary) 1995 161,000 137,000 0 5,220
-------
(1) Effective April 10, 1997, Mr. Jerozal has retired from the Corporation.
(2) Includes $93,150, $44,175, $32,850, $32,850 in fiscal year 1997 deferred by Messrs. Maguire, Weaver,
Jerozal and Spears, respectively, $50,266, $20,325, $24,056, and $24,056 in fiscal year 1996 and
$9,240,$0, $9,315 and $9,315 in fiscal year 1995 pursuant to a 401(k) account and personal investment
account.
(3) Pursuant to Corporation policy, bonuses for a fiscal year are paid in May
<PAGE> 11
of the following fiscal year. The amounts recorded above relate to the fiscal year for which the bonuses
were earned.
(4) All stock option grants were made pursuant to the Corporation's 1995
Executive Stock Option Plan.
(5) Represents payments made by the Corporation for the named executives
pursuant to a 401(k) account and personal investment account and for the payment of premiums on the term
portion of life insurance.
</TABLE>
Option Grant Table
The following table sets forth certain information with respect to stock
options granted during the fiscal year ended March 31, 1997, to the named
executives.
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED TO RATE OF STOCK PRICE
OPTION EMPLOYEES EXERCISE APPRECIATION FOR OPTION
GRANTED IN FISCAL PRICE EXPIRATION TERMS
NAME (#)(1)(2) YEAR ($/SH) DATE 5%($)(3) 10%($)(3)
- ---------------- -------- ---------- --------- ---------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
David E. Maguire 24,000 13.6 % $19.25 10/23/06 290,640 736,320
Terry R. Weaver 16,000 9.1% $19.25 10/23/06 193,760 490,880
James J. Jerozal 12,000 6.8% $19.25 10/23/06 145,320 368,160
Glenn H. Spears 12,000 6.8% $19.25 10/23/06 145,320 368,160
(1) These options are granted under the 1995 Executive Stock Option Plan to acquire shares of Common
Stock.
(2) These options were granted at fair market value at the time of the grant and are generally not
exercisable until two years after grant.
(3) The potential realizable value of the options, if any, granted in fiscal year 1997 to each of these
officers was calculated by multiplying those options by the excess of (a) the assumed market value, as of
October 23, 2006, of Common Stock if the market value of Common Stock were to increase 5% or 10% in each
year of the option's 10-year term over (b) the base price shown. This calculation does not take into
account any taxes or other expenses which might be owed. The assumed market value at a 5% assumed annual
appreciation rate over the 10-year term is $31.36 and such value at a 10% assumed annual appreciation
rate over that term is $49.93. The 5% and 10% appreciation rates are set forth in the Securities and
Exchange Commission rules and no representation is made that the Common Stock will appreciate at these
assumed rates or at all.
</TABLE>
<PAGE> 12
Option Exercises and Year-End Option Value Table
The following table sets forth certain information concerning the value of
unexercised stock options held by the named executives as of March 31, 1997.
Aggregated Option Exercises in Last Fiscal Year, and Year-End Option Values
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-
OPTION AT FY- THE-MONEY OPTIONS
SHARES END(#) AT FY-END($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZABLE($) UNEXERCISABLE UNEXERCISABLE
- --------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
David E. Maguire - - 0/48,000 $0/$0
Terry R. Weaver - - 40,000/36,000 182,480/0
James J. Jerozal - - 0/20,000 0/0
Glenn H. Spears - - 0/20,000 0/0
</TABLE>
Compensation Committee Interlocks and Insider Participation
The members of the Corporation's Compensation Committee are Messrs. Corpening,
Kohl and Maddrey. No officers of the Corporation serve on the Compensation
Committee.
Defined Benefit Plan
The Corporation maintains a noncontributory defined benefit plan (the "Defined
Benefit Plan" or the "Plan") for all U.S. employees in active employment with
the Corporation on or after April 27, 1987 who have met certain minimum service
requirements. The Defined Benefit Plan provides a full retirement pension with
an unreduced benefit to the following participants: participants who have
reached age 62 if they have at least ten years of service with the Corporation;
participants who have reached age 65 or older if they have at least five years
of service with the Corporation; and participants who have a combined age and
years of service with the Corporation equal to at least 85, as long as such
participants had a combined age and years of service with the Corporation equal
to at least 75 on April 26, 1988.
The Company also maintains a supplementary retirement plan in which key
managers, including the named executive officers, participate. Under the terms
of the Deferred Compensation Plan for key managers ("DCKM Plan") additions to a
participant's account are made to offset contributions to which each was
entitled under the Company's noncontributory defined benefit plan which was
limited by the Employee Retirement Security Act of 1974 and the Internal Revenue
Code.
The benefit provided under the Defined Benefit and the DCKM Plan is the
equivalent of a single life annuity for a participant's life commencing the
month following the participant's last day of employment with the Corporation in
a monthly amount equal to the sum of: (A) the greater of (1) 1.2% of the
participant's average monthly compensation (based on a participant's five
highest calendar year earnings (including certain bonuses) with the Corporation
over the last ten years worked or, if greater, the final 60 months prior to a
participant's retirement) multiplied by the participant's years of credited
service prior to April 27,1988, plus $12.00 per month; or (2)1.5% of a
participant's average monthly compensation multiplied by the participant's years
of credited service prior to April 27, 1988, less the product of (x) the
participant's estimated Social Security benefit based on the law in effect at
<PAGE> 13
actual retirement assumed to commence at the later of retirement or age 62, and
(y) a factor determined to be the least of: 1.5% multiplied by the participant's
years of credited service prior to April 27, 1988 (up to a maximum of 33 1/3
years), 50%, or the maximum offset based on Internal Revenue Service integration
rules in effect at actual retirement; or (3) $5.00 per month for each year of
credited service prior to April 27, 1988, for the first ten years, $7.00 per
month for each year of credited service prior to April 27, 1988, for the next
ten years, and $9.00 per month for each year of credited service prior to April
27, 1988, in excess of 20 years, plus 10% of a participant's average monthly
compensation reduced by 1% for each year by which credited service is less than
eight years, plus $12.00 per month; plus (B) .8% of a participant's average
monthly compensation multiplied by the participant's years of credited service
after April 26, 1988; plus (C) .6% of the excess of a participant's average
monthly compensation over a participant's covered compensation (defined as the
average of the Social Security Taxable Wage Base for the same period over which
the pay is averaged in calculating Social Security benefits under the Federal
Social Security Act in effect at the time of a participant's termination)
multiplied by the participant's years of credited service after April 26, 1988.
Notwithstanding the foregoing, the amount of a participant's monthly benefits
under the Defined Benefit Plan shall be offset and reduced by the amount of any
benefits payable to such participant or former participant under the Union
Carbide Retirement Program in effect on April 27, 1987, or under certain other
plans. Reduced benefits are payable in the case of early retirement and to
participants who terminate employment prior to retirement, provided they have
completed at least five years of credited service.
The following table shows the total estimated annual benefits payable under the
Defined Benefit Plan's Trust Fund and the DCKM Plan on a single-life annuity
basis upon normal retirement to participants in specified years of Corporation
service and average annual compensation. Annual benefits payable to the
Corporation's employees from Union Carbide's Retirement Program in effect on
April 27, 1987, will offset and reduce the annual benefit listed below.
<TABLE>
<CAPTION>
Average Annual
Compensation of
Highest Five Years
Covered Renumeration
for Pension Purposes
in Ten Years
Preceding Normal
Retirement Age Annual Benefit for Years of Service Indicated (1)
- ------------------- ---------------------------------------------------------
10 YEARS 20 YEARS 30 YEARS 35 YEARS
-------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
$25,000 2,754 5,244 8,244 9,744
$50,000 6,384 11,424 17,424 20,424
$75,000 10,284 17,874 26,874 31,374
$100,000 14,184 24,928 37,608 43,947
$125,000 18,084 32,203 48,633 56,847
$150,000 21,984 39,478 59,658 69,747
$175,000 25,884 46,753 70,683 82,647
$200,000 29,784 54,028 81,708 95,547
$500,000 76,584 141,328 214,008 250,347
$750,000 115,584 214,078 324,258 379,347
$1,250,000 193,584 359,578 544,758 637,347
</TABLE>
(1) The compensation used to determine benefits under the Defined Benefit Plan
and the DCKM Plan for Messrs. Maguire, Weaver, Jerozal and Spears was
$1,236,750, $576,750, $435,500, and $435,500, respectively. Included in the
<PAGE> 14
total estimated annual benefit is a payment from Union Carbide's Defined Benefit
Plan in the form of annuity contracts on a single-life annuity basis. This
benefit under that Plan is based on service up to April 27, 1987, and the
highest three years of the preceding ten years of compensation prior to March
31, 1987. The offset payment from Union Carbide's retirement program could be as
high as 64% of the annual benefit listed above.
As of March 31, 1997, credited years of service under that Plan for Messrs.
Maguire, Weaver, Jerozal and Spears were 38, 2, 31, and 20, respectively.
Termination Benefits
In 1996, the Corporation entered into Change in Control Severance Compensation
Agreements (the "Agreements"), with Messrs. Maguire, Weaver, Jerozal, Spears and
certain other officers. The Agreements were a result of a determination by the
Board of Directors that it was important and in the best interests of the
Corporation and its shareholders to ensure that, in the event of a possible
change in control of the Corporation, the stability and continuity of management
would continue unimpaired, free of the distractions incident to any such change
in control.
For purposes of the Agreements, a "change in control" includes (i) the
acquisition by any person of 15% or more of the Corporation's voting securities,
(ii) persons who were directors of the Corporation on the date of the
Agreements, ceasing to constitute a majority of the Board, unless the new
directors were approved by a majority vote of the continuing directors, (iii) a
consolidation or merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of the
Corporation's common stock would be converted into cash, securities or other
property, other than a transaction in which at least 50% of the shares of the
surviving corporation are held by the Corporation's stockholders and the
proportionate ownership of the common stock of the surviving corporation remains
substantially unchanged, or (iv) a shareholder approved plan or proposal for the
complete liquidation or dissolution of the Corporation.
Benefits are payable under the Agreements only if a change in control has
occurred and thereafter the officer's employment is terminated involuntarily
without cause or voluntarily by the officer for reasons such as demotion,
relocation, loss of benefits or other changes. The principal benefits to be
provided to officers under the Agreements are (i) a lump sum payment equal to up
to one and one-half years' compensation (base salary), and (ii) continued
participation in the Corporation's employee benefit programs or equivalent for
up to one and one-half years following termination.
The Agreements are not employment agreements, and do not impair the right of the
Corporation to terminate the employment of the officer with or without cause
prior to a change in control or absent a potential or pending change in control,
or the right of the officer to voluntarily terminate his employment.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is pleased to present its report on executive compensation. The
Compensation Committee reviews and makes recommendations to the Board of
Directors regarding salaries, compensation and benefits of executive officers
and key employees of the Corporation and grants all options to purchase Common
Stock of the Corporation. This Compensation Committee report documents the
components of the Corporation's executive officer compensation programs and
describes the bases upon which compensation will be determined by the
Compensation Committee with respect to the executive officers of the
Corporation, including the named executives.
<PAGE> 15
This Compensation Committee report shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Corporation specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
Compensation Philosophy. The compensation philosophy of the Corporation is to
endeavor to directly link executive compensation to individual and team
contributions, continuous improvements in corporate performance, and increases
in stockholder value. The Compensation Committee has adopted the following
objectives as guidelines for compensation decisions:
- - Display a willingness to pay levels of compensation that are necessary to
attract and retain highly qualified executives.
- - Be willing to compensate executive officers in recognition of superior
individual performance, new responsibilities, or new positions within the
Corporation.
- - Take into account historical levels of executive compensation and the
overall competitiveness of the market for high-quality executive talent.
- - Implement a balance between short- and long-term compensation to complement
the Corporation's annual and long-term business objectives and strategy and to
encourage executive performance in furtherance of the fulfillment of those
objectives.
- - Provide variable compensation opportunities based on the performance of the
Corporation, encourage stock ownership by executives, and align executive
remuneration with the interests of stockholders.
Compensation Program Components. The Compensation Committee regularly reviews
the Corporation's compensation program to ensure that pay levels and incentive
opportunities are competitive with the market and reflect the performance of the
Corporation. The particular elements of the compensation program for executive
officers are further explained below.
Base Salary. The Corporation's base pay levels are determined by
responsibilities of the position held and the experience of the individual and
by comparing the salary scale with companies of similar size and complexity.
Actual base salaries are kept within a competitive salary range for each
position that is established through job evaluation and market comparisons and
targeted at the 50th percentile or median for jobs of equal description and
scope as determined by the Hay Management Consultants' National Industrial Job
Database which is updated each year by the Hay Annual Salary Survey of
Industrial Jobs ("Hay Survey").
Annual Bonus. The Executive Bonus Plan provides cash bonuses to the
Corporation's top officers, including the Senior Managers, if certain targets
are met. The objective of the bonus is to enhance management's contribution to
stockholder value by providing competitive levels of compensation for the
attainment of financial objectives. In particular, the Executive Bonus Plan
focused corporate behavior on consistent and steady earnings growth by basing
performance on a comparison of actual results to the Corporation's Annual
Business Budget ("ABB"). Prior to the ninetieth day of each fiscal year, the
Board will approve the ABB for the Corporation for such year. The Compensation
Committee or such other committee as is designated by the Board (the
"Committee") will then establish the base salary, the annual incentive base
percent and the annual incentive base value for each participant in the Plan.
The annual incentive base percent will initially be between 40% and 85%, and
will be applied to the participant's base salary to determine the annual
<PAGE> 16
incentive base value for each participant. The annual incentive base percent
increases with the level of responsibility of an officer, with the CEO at the
highest level. The Compensation Committee will then set earnings before
depreciation, amortization, interest and taxes ("EBDAIT") goals at several
levels, including the base, target and maximum performance levels for the
Corporation and will also set the Corporation performance multiplier (the
"Multiplier") that corresponds to the applicable level of EBDAIT. The
Multiplier will initially range from 0 at 75% of the target EBDAIT (base
performance) to 1 at 130% of the target EBDAIT (maximum performance). In the
event that the achieved EBDAIT is below the base level for such year, the
Multiplier will be 0 and no incentive bonus will be payable. The Multiplier
will be applied to the annual incentive base value to determine the bonus award
for such year. For example, using the annual incentive base percent and maximum
Multiplier for fiscal year 1997, if the Corporation achieved the maximum
performance level, the Corporation's CEO would be entitled to an incentive bonus
equal to 85% of his base salary. Each participant, including the CEO, will
separately receive a guaranteed bonus payment which will initially be equal to
.5 times the annual incentive base value. Within 90 days of the end of each
fiscal year, the Committee will determine and approve the EBDAIT level achieved
for such fiscal year and will approve the grant and payment of the bonus awards
in the aggregate to all participants and to each of the executive officers
including the CEO. Except in the case of death or total disability, a
participant must be employed by the Corporation on the date the Committee
approves the awards in order to receive an award under the Bonus Plan.
The amounts that any participant in the Bonus Plan, including the Corporation's
CEO and executive officer, will receive is not determinable in advance prior to
the completion of the Corporation's fiscal year and the determination by the
Committee (as described above) of the actual performance level achieved by the
Corporation for such year. For information regarding amounts received with
respect to fiscal year 1997 by the Corporation's CEO and the other named
executives officers see the Bonus column of the Summary Compensation Table.
While the Corporation exceeded the targeted levels of the ABB for fiscal 1997
established at the beginning of the fiscal year, the overall bonus level was
reduced from fiscal 1996 to take into account the fact that fiscal 1996 was a
record year for the Corporation and the bonus levels for all employees reflected
those record results. For fiscal year 1997, Mr. Maguire received a bonus of
$395,000, which was paid in May 1997, compared to a bonus of $831,000 for fiscal
year 1996.
Stock Option Program. The Compensation Committee strongly believes that, by
providing those persons who have substantial responsibility over the management
and growth of the Corporation with an opportunity to increase their ownership of
the Corporation's stock, the interests of stockholders and executives will be
closely aligned. To that end, the Corporation adopted the 1995 Executive Stock
Option Plan, pursuant to which certain officers of the Corporation, including
the named executives, received options to purchase an aggregate of 176,000
shares of Common Stock at an exercise price equal to 100% of the fair market
value of such Common Stock during fiscal year 1997.
Stock Ownership. As a result of the Acquisition, the Senior Managers
collectively own approximately 12% of the Corporation's outstanding Common
Stock, which further serves to align stockholder and management interests.
Compensation of Chief Executive Officer. The 1997 fiscal year compensation for
Mr. Maguire, the Corporation's Chairman and Chief Executive Officer, was set by
the Board of Directors based on, among other factors, the results of the Hay
Survey, at $411,000. Because of the high level of performance of the
Corporation in comparison to the ABB, Mr. Maguire was entitled to a bonus of
$395,000 for fiscal year 1997, which was paid in May 1997 pursuant to the
Executive Bonus Plan. The Committee set Mr. Maguire's base salary at $434,000
<PAGE> 17
for fiscal 1998.
The Omnibus Budget Reconciliation Act of 1994 signed by President Clinton on
April 10, 1993, added Section 162(m) to the Internal Revenue Code of 1986, as
amended. That Section limits the deductibility of compensation paid or accrued
by the Corporation to the five most highly compensated employees in excess of
$1,000,000, unless certain forms of compensation meet certain performance or
other criteria mandated by law. The Committee structured the Executive Bonus
Plan, approved by the Corporation's stockholders at the 1996 Annual Meeting, to
comply with these tax law requirements, and believes that compensation under
this Plan will be deductible for federal income tax purposes.
Summary. After its review of all existing programs, the Compensation Committee
continues to believe that the total compensation program for executives of the
Corporation is focused on increasing values for stockholders and enhancing
corporate performance. In particular, the Compensation Committee feels that
providing a high proportion of compensation in the form of an annual bonus based
on achieving certain targets based on the ABB will enhance corporate
performance. The Compensation Committee currently believes that the
compensation of executive officers is properly tied to stock appreciation
through the 1995 Executive Stock Option Plan and through high levels of direct
stock ownership. The Compensation Committee believes that executive compensation
levels of the Corporation are competitive with the compensation programs
provided by other corporations with which the Corporation competes. The
foregoing report has been approved by all members of the Compensation Committee.
COMPENSATION COMMITTEE
Charles E. Corpening
Stewart A. Kohl
E. Erwin Maddrey, II
<PAGE> 18
PERFORMANCE GRAPH
The following graph compares the Corporation's cumulative total stockholder
return since the Common Stock became publicly traded on October 21, 1992, with
The Nasdaq Stock Market (National Market) Index, the Standard & Poor's 500
Index, and with a peer group comprised of certain companies which manufacture
capacitors and with which the Corporation generally competes. The peer group is
comprised of the following companies: AMP Incorporated, Amphenol Corp., Augat
Corp., CTS Corp., Molex Incorporated, Thomas & Betts Corp., and Vishay
Intertechnology, Inc. (1)
Comparison of Total Return*
KEMET Corporation, Nasdaq Index, S&P 500 Index and Peer Group
<TABLE>
<CAPTION>
KEMET Corp. PEER Group S&P 500 Index NASDAQ Market
---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
10/21/92 100.00 100.00 100.00 100.00
03/31/93 153.00 101.00 109.00 114.00
03/31/94 163.00 108.00 111.00 132.00
03/31/95 376.00 137.00 128.00 140.00
03/31/96 453.00 157.00 169.00 189.00
03/31/97 375.00 148.00 203.00 211.00
</TABLE>
*Total Return assumes reinvestment of dividends.
CERTAIN INTERESTS AND TRANSACTIONS
Pursuant to the terms of a Registration Agreement, dated as of December 21,
1990, as amended (the "Registration Agreement"), among the Corporation and
certain stockholders of the Corporation, CVC, the Senior Managers, and certain
other investors have the right, under certain circumstances and under certain
conditions, to require the Corporation to register shares of the Corporation's
Common Stock held by them under the Securities Act of 1933. Under the
Registration Agreement, the Corporation is required to pay certain expenses and
provide certain indemnifications in connection with any such registration. The
Corporation also agreed to reimburse certain of its existing stockholders for
certain expenses associated with the ownership of Common Stock or Non-Voting
Common Stock.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
From time to time, stockholders present proposals which may be proper subjects
for consideration at the Annual Meeting. To be considered for inclusion in the
proxy statement, proposals must be submitted on a timely basis. Proposals for
the 1998 Annual Meeting, which is expected to be held on July 22, 1998, must be
received by the Corporation no later than February 20, 1998. In addition, the
<PAGE> 19
Corporation's By-Laws establish advance notice procedures as to (1) business to
be brought before an annual meeting of stockholders other than by or at the
direction of the Board of Directors, and (2) the nomination, other than by or at
the direction of the Board of Directors, of candidates for election as
directors. Any stockholder who wishes to submit a proposal to be acted upon at
next year's annual meeting or who proposes to nominate a candidate for election
as a director must comply with such procedures. Any such proposals, as well as
any questions related thereto, should be submitted in writing to the Secretary
of the Corporation.
ADDITIONAL INFORMATION
This solicitation is being made by the Corporation. All expenses of the
Corporation in connection with this solicitation will be borne by the
Corporation. In addition to the solicitation by mail, proxies may be solicited
by directors, officers and other employees of the Corporation by telephone,
telex, in person or otherwise, without additional compensation. The Corporation
will request brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares held of record by such
persons and will reimburse such persons and the Corporation's transfer agent for
their reasonable out-of-pocket expenses in forwarding such materials.
The Corporation will furnish without charge to each person whose proxy is being
solicited, upon the written request of any such person, a copy of the
Corporation's Annual Report on Form 10-K for the fiscal year ended March 31,
1997, as filed with the Securities and Exchange Commission, including the
financial statements and schedules thereto. Requests for copies of such Annual
Report on Form 10-K should be directed to the Secretary of the Corporation at
the address below. Please complete the enclosed proxy and mail it in the
enclosed postage-paid envelope as soon as possible.
By order of the Board of Directors
/S/ Glenn H. Spears
Glenn H. Spears
Secretary
KEMET CORPORATION
P.O. Box 5928
Greenville, South Carolina 29606
June 24, 1997
