Note 17. Subsequent Event
On August 28, 2012, the Company entered into an agreement, as amended on the same date (the “Agreement”), with an original equipment manufacturer (the “OEM”) pursuant to which the OEM agreed to advance KEMET $24.0 million (the “Advance Payment”). The Agreement provides that on a monthly-basis starting eight months following the receipt of the Advance Payment, the Company will pay the OEM an amount equal to a percentage of the aggregate purchase price of the capacitors sold to the OEM the preceding month, not to exceed $1.0 million per month. Pursuant to the terms of the Agreement, the percentage of the aggregate purchase price of capacitors sold to the OEM that will be used to repay the Advance Payment will double, and the total amount to be repaid will not exceed $2.0 million per month, in the event that (1) the OEM provides evidence that the price charged by us for a particular capacitor during any prior quarter was equal to or greater than 110% of the price paid by the OEM or its affiliates for a third-party part qualified for the same product, and shipping in volume during such period, and (2) agreement cannot be reached between the OEM and the Company for a price adjustment during the current quarter which would bring KEMET’s price within 110% of the third-party price. Thirty-two months after the date of the Advance Payment, the outstanding balance, if any, is due in full. Pursuant to the terms of the Agreement, the Company delivered to the OEM an irrevocable standby letter of credit in the amount of $16.0 million on October 8, 2012. On October 22, 2012 the Company received the Advance Payment from the OEM.
On October 26, 2012, the Company expanded the global restructuring plan to include additional headcount reductions which are expected to result in additional termination charges of approximately $4.0 to $5.0 million during the second half of fiscal year 2013. In addition, the Company is beginning a restructuring of its Evora, Portugal manufacturing facility, which is expected to be completed during the fourth quarter ending March 31, 2013. As a part of our ongoing commitment to expand our polymer capacity the Company will be moving certain Tantalum manufacturing equipment from the Evora, Portugal facility to a manufacturing facility in Mexico and the remainder of the equipment will be disposed. The Company estimates that it will write-off approximately $5.0 to $7.0 million in equipment and incur termination benefits in the range of $4.0 to $4.5 million. The Company will also have the manufacturing facility appraised to determine if there is an indicator of impairment. The expected future total cash expenditures are estimated to be $8.0 to $9.5 million for the termination benefits described above.