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